Public Disclosure Authorized

Document of
The World Bank
FOR OFFICIAL USE ONLY

Report No: ICR00004925

IMPLEMENTATION COMPLETION AND RESULTS REPORT

Public Disclosure Authorized

(Credit number: 4734-BD and 6093-BD)

ON

A CREDIT

IN THE AMOUNT OF SDR112.50 MILLION

(US$170.00 MILLION EQUIVALENT)

AND
Public Disclosure Authorized

AN ADDITIONAL CREDIT

IN THE AMOUNT OF SDR34.70 MILLION

(US$47.49 MILLION EQUIVALENT)

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR THE
Public Disclosure Authorized

CHITTAGONG WATER SUPPLY IMPROVEMENT AND SANITATION PROJECT

June 23, 2021

Water Global Practice

South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
 CURRENCY EQUIVALENTS

(Exchange Rate Effective December 31, 2020)

Currency Unit = Taka

Taka 84.65 = US$1
US$ 1.44 = SDR 1

FISCAL YEAR
July 1 - June 30

Regional Vice President: Hartwig Schafer

Country Director: Mercy Miyang Tembon
Regional Director: John A. Roome
Practice Manager: Takuya Kamata
Task Team Leader: Arif Ahamed
ICR Main Contributor: Phyrum Kov
 ABBREVIATIONS AND ACRONYMS

AF Additional Financing
BCR Benefit Cost Ratio
BDT Bangladesh Taka
BWDB Bangladesh Water Development Board
CAG Controller and Auditor General
CAS Country Assistance Strategy
CCC Chittagong City Corporation
CDA Chittagong Development Authority
CWASA Chittagong Water Supply and Sewerage Authority
CWSISP Chittagong Water Supply Improvement and Sanitation Project
CPF Country Partnership Framework
DPHE Department of Public Health Engineering
EIRR Economic Internal Rate of Return
EMF Environmental Management Framework
ESIA Environmental and Social Impact Assessment
GDP Gross Domestic Product
GoB Government of Bangladesh
GP Global Practice
ICR Implementation Completion and Results Report
IDA International Development Association
IDTF Institutional Development Task Force
IFR Interim Un-audited Financial Report
INT Integrity Vice Presidency
IO Intermediate Outcome
IPF Investment Project Financing
IRR Internal Rate of Return
ISR Implementation Status and Results Report
IUFR Interim Unaudited Financial Report
JICA Japan International Cooperation Agency
KPI Key Performance Indicator
LGD Local Government Division
LICs Low Income Communities
M&E Monitoring and Evaluation
MDG Millennium Development Goals
MIS Management Information System
MLD Million Liters per Day
MLGRD&C Ministry of Local Government, Rural Development and Cooperatives
MLY Million Liters per Year
MTR Mid-Term Review
NGO Non-government organization
NPV Net Present Value
NRW Non-Revenue Water
O&M Operations and Maintenance
PAC Project Audit Committee
PAD Project Appraisal Document
PDO Project Development Objective
PMU Project Management Unit
PPE Personal Protective Equipment
RPF Resettlement Policy Framework
SDG Sustainable Development Goals
SDP-WSSB Sector Development Program – Water and Sanitation Sector in Bangladesh
SDR Special Drawing Rights
SIL Specific Investment Loan
TA Technical Assistance
TOC Theory of Change
TTL Task Team Leader
US$ United States Dollar
WASA Water Supply and Sewerage Authority
WASH Water, Sanitation and Hygiene
WHO World Health Organization
WSS Water Supply and Sanitation
WTP Water Treatment Plant
 TABLE OF CONTENTS

DATA SHEET ........................................................................................................................... I

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 1
A. CONTEXT AT APPRAISAL .........................................................................................................1
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .......................................4
II. OUTCOME ...................................................................................................................... 8
A. RELEVANCE OF PDOs ..............................................................................................................8
B. ACHIEVEMENT OF PDOs (EFFICACY) ........................................................................................9
C. EFFICIENCY ...........................................................................................................................14
D. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................15
E. OTHER OUTCOMES AND IMPACTS (IF ANY)............................................................................16
III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 17
A. KEY FACTORS DURING PREPARATION ...................................................................................17
B. KEY FACTORS DURING IMPLEMENTATION .............................................................................18
IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 20
A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................20
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................21
C. BANK PERFORMANCE ...........................................................................................................23
D. RISK TO DEVELOPMENT OUTCOME .......................................................................................25
V. LESSONS AND RECOMMENDATIONS ............................................................................. 25
ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 28
ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 43
ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 45
ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 46
ANNEX 5. IMPLEMENTING AGENCY COMMENTS .................................................................. 52
ANNEX 6. CALCULATION OF SPLIT RATING ........................................................................... 54
ANNEX 7. ENVIRONMENTAL AND SOCIAL SAFEGUARD MANAGEMENT ................................ 55
ANNEX 8. FIDUCIARY COMPLIANCE ...................................................................................... 62
 The World Bank
BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

DATA SHEET

BASIC INFORMATION

Product Information
Project ID Project Name

BD Chittagong Water Supply Improvement and Sanitation

P103999
Project

Country Financing Instrument

Bangladesh Investment Project Financing

Original EA Category Revised EA Category

Partial Assessment (B) Partial Assessment (B)

Organizations

Borrower Implementing Agency

Chittagong Water Supply and Sewerage Authority

PEOPLE'S REPUBLIC OF BANGLADESH
(CWASA)

Project Development Objective (PDO)

Original PDO
The objective of the Project is to increase the sustainable access to safe water and improved sanitation, as well as
support theestablishment of a long term water supply, sanitation and drainage infrastructure development and
operational management program inChittagong.

Revised PDO
The revised PDO is to increase access to safe water and improve CWASA’s institutional capacity and investment
planning forsanitation and drainage in Chittagong City.

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)

World Bank Financing
170,000,000 145,521,928 131,783,910
IDA-47340
47,490,000 37,490,005 29,492,298
IDA-60930
Total 217,490,000 183,011,933 161,276,208
Non-World Bank Financing
0 0 0

Borrower/Recipient 16,762,000 52,330,000 35,160,000

Total 16,762,000 52,330,000 35,160,000
Total Project Cost 234,252,000 235,341,933 196,436,208

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing

23-Jun-2010 27-Oct-2010 14-Dec-2013 31-Dec-2015 31-Dec-2020

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions

01-Apr-2014 6.98 Change in Project Development Objectives
Change in Results Framework
Change in Components and Cost
Change in Financing Plan
Reallocation between Disbursement Categories
Change in Legal Covenants
Change in Procurement
Change in Implementation Schedule
11-Jun-2015 23.05 Change in Loan Closing Date(s)
Change in Financing Plan
Change in Procurement
Change in Implementation Schedule
18-Aug-2019 127.00 Change in Components and Cost
Cancellation of Financing
Reallocation between Disbursement Categories
Change in Legal Covenants
05-Mar-2020 148.23 Change in Loan Closing Date(s)
09-Jun-2020 148.23 Change in Loan Closing Date(s)
31-Dec-2020 161.13 Change in Components and Cost
Cancellation of Financing
Reallocation between Disbursement Categories

KEY RATINGS

Outcome Bank Performance M&E Quality

Moderately Satisfactory Satisfactory Modest

RATINGS OF PROJECT PERFORMANCE IN ISRs

Actual
No. Date ISR Archived DO Rating IP Rating Disbursements
(US$M)
01 20-Dec-2010 Satisfactory Satisfactory 0
Moderately
02 05-Jul-2011 Unsatisfactory 0
Unsatisfactory
03 14-Jun-2012 Moderately Satisfactory Moderately Satisfactory .51

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

Moderately
04 08-Jan-2013 Moderately Satisfactory .51
Unsatisfactory
Moderately
05 08-Sep-2013 Moderately Unsatisfactory 1.62
Unsatisfactory
06 10-May-2014 Unsatisfactory Unsatisfactory 6.98
07 01-Dec-2014 Unsatisfactory Moderately Unsatisfactory 7.57
Moderately
08 10-Jun-2015 Moderately Satisfactory 23.05
Unsatisfactory
09 22-Jun-2015 Moderately Satisfactory Moderately Satisfactory 23.05
10 21-Dec-2015 Moderately Satisfactory Moderately Satisfactory 45.32
11 24-Mar-2016 Moderately Satisfactory Moderately Satisfactory 57.39
Moderately
12 17-Nov-2016 Moderately Satisfactory 66.31
Unsatisfactory
13 22-Mar-2017 Moderately Satisfactory Moderately Satisfactory 87.29
14 17-Nov-2017 Moderately Satisfactory Moderately Satisfactory 101.91
15 25-May-2018 Moderately Satisfactory Moderately Satisfactory 106.13
16 25-Nov-2018 Moderately Satisfactory Moderately Satisfactory 112.99
17 23-May-2019 Moderately Satisfactory Moderately Satisfactory 122.86
18 05-Dec-2019 Moderately Satisfactory Moderately Satisfactory 132.92
19 09-Jun-2020 Moderately Satisfactory Moderately Satisfactory 148.23
20 02-Dec-2020 Satisfactory Moderately Satisfactory 158.77

SECTORS AND THEMES

Sectors
Major Sector/Sector (%)

Public Administration 0
Other Public Administration

Transportation 0
Other Transportation

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 The World Bank
BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

Water, Sanitation and Waste Management 100

Sanitation 4
Water Supply 89
Public Administration - Water, Sanitation and Waste
6
Management
Other Water Supply, Sanitation and Waste
1
Management

Themes
Major Theme/ Theme (Level 2)/ Theme (Level 3) (%)
Private Sector Development 10
Public Private Partnerships 10

Urban and Rural Development 100

Urban Development 100
Urban Infrastructure and Service Delivery 75

Services and Housing for the Poor 25

ADM STAFF
Role At Approval At ICR

Regional Vice President: Isabel M. Guerrero Hartwig Schafer

Country Director: Ellen A. Goldstein Mercy Miyang Tembon

Director: John Henry Stein John A. Roome

Practice Manager: William D. Kingdom Takuya Kamata

Task Team Leader(s): Fook Chuan Eng Arif Ahamed

ICR Contributing Author: Phyrum Kov

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 The World Bank
BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context
1. At the time the Chittagong Water Supply Improvement and Sanitation Project (CWSISP) was approved in 2010,
access to water and sanitation services in urban areas was limited. About 42 million people of a total population of
149.8 million (28 percent) in Bangladesh lived in urban areas. Although the country enjoyed economic growth of an
average of 5.8 percent per year during 2000–2009, access to basic service remained a challenge. Only 71 percent of
urban residents had access to improved water sources, of whom 39 percent had access to piped water and 32 percent
had access to handpump tube wells. Services reach only a small proportion of low-income neighborhoods. Access to
improved sanitation services was limited, with only 50 percent of urban residents having access in 2010. Dhaka was
the only city that had a sewerage system, which served about 25 percent of residents. Inadequate drainage systems
in urban areas contributed to poor urban sanitation. Raw sewage in open drainage is a common sight.

2. While various policies and strategy documents related to water supply and sanitation were in place, the sector
was facing operational and institutional challenges. Urban water supply was suffering from inefficient operation,
excessive and poorly targeted subsidies, and inequitable access among poorer population. Meeting targets set forth
in various policies, which were more ambitious than the Millennium Development Goals in terms of both scale and
timeline, presented a huge challenge to the Government in terms of financing and improving institutional capacity.

3. The responsibility for water supply and sanitation sector lied with the Ministry of Local Government, Rural
Development and Cooperatives (MLGRD&C) through its Local Government Division (LGD). The Water Supply and
Sewerage Authority (WASA) Act was enacted in 1996 which permitted operational autonomy under a corporate
management structure as well as decision-making authority for the utilities in extending urban water supply and
sanitation services. Dhaka, Chittagong and Khulna have water supply and sewerage authorities (WASAs). In other
urban centers, the respective Water Supply and Sewerage Sections of city corporations or pourashavas
(municipalities) were responsible for water supply and sanitation (WSS) services. 1

4. Chittagong was Bangladesh’s second largest city and a major seaport with a population of 2.6 million,
compared with 600,000 in 1980. The population of Chittagong’s metropolitan area was estimated to be about 3.8
million people, second only to Dhaka. However, since the completion of Bank-financed project in 1988, little
investment had been made in water production facilities or in network expansion. The city’s water production
infrastructure met only 35 percent of the total demand. The piped network was in a state of disrepair, and only 7.5
percent of households were connected to piped water supply, while the rest depended on alternative sources
including shallow tube wells with questionable water quality. Under a 2008 gazettement under the WASA Act (1996),
the CWASA became responsible for providing water, sewerage and stormwater drainage services in Chittagong. This
represented a significant step to improve the CWASA’s governance and institutional arrangements. 2 The move

1 Due to capacity constraints in these urban centers as well as continued centralized management of the sector, the central
government’s Department of Public Health Engineering (DPHE) carried out infrastructure development and rehabilitation works and
transfer these to the pourashavas.
2 It should be noted that the precedent set by similar governance and institutional changes in the Dhaka Water Supply and Sewerage

Authority (DWASA) has enabled CWASA to proceed relatively smoothly along this path of change.

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

allowed the CWASA to manage its facilities and operate with a high degree of autonomy. It provided for an
autonomous corporate management structure intended to improve the clarity of roles and responsibilities among
sector institutions and strengthened the CWASA’s accountability for delivering on its mandates. At the time of
appraisal, it was anticipated that the CWASA would undergo a significant institutional transition requiring political
commitment and institutional development support to fully exercise its operational autonomy. The relationship
between the CWASA and the Government of Bangladesh (GoB) has been underpinned by a performance contract
between the two parties.

5. The project, which was prepared in the context of Bank’s reengagement in the Chittagong water sector after
more than two decades of absence, aimed at supporting CWASA to fill its infrastructure investment gaps caused
by the lack of development financing between 1988 and 2005, and to strengthen its institutional capacity to
embrace the expanded water and sanitation services in Chittagong. The project followed an incremental approach
to institutional development to achieve capacity gains in a phased manner, with a view towards addressing issues in
realistic scopes and timeframes. For new areas where CWASA did not have prior experience, such as sanitation, the
project aimed at introducing the concept through pilot before any major investment. The project scope was
consistent with the Country Assistance Strategy (CAS) FY11-14 (Report No. 54615-BD) dated July 30, 2010 which
recognized the importance of improving urban services in Bangladesh including water supply and sanitation. The
project was also consistent with the Sector Development Program – Water and Sanitation Sector in Bangladesh (SDP-
WSSB), the National Policy for Safe Water Supply 1998 and other associated policies and strategies. At the time of
appraisal, the magnitude of the Bank’s investment in CWASA (US$170 million) was significant considering the support
that CWASA had received from other development partners with the financial amount equivalent to US$142 million.

Theory of Change (Results Chain)

6. A Theory of Change (ToC) was not required at the project’s appraisal and was reconstructed for this ICR, on the
basis of the original Results Framework in the Project Appraisal Document and changes which were formally
introduced through project restructurings.

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

Project interventions Intermediate Outcomes/PDO Long term

Outputs results outcomes

Construction of water Water treatment plant and Increased

production, transmission, storage facilities constructed supply of safe Increased sustainable
and storage facilities potable water access to safe water
New water supply pipes installed
Rehabilitation, replace- Increased
ment and extension of delivery of Improved
Water pipeline Increased sustainable
water supply pipes safe potable access to improved health and
replaced/rehabilitated
water and sanitation productivity
sanitation to of the
Piloting water supply and Selected low income communities underserved population
sanitation services for provided with WSS service areas
low-income communities Long-term water
supply, sanitation and
Septic management system piloted Management drainage infrastructure
of existing on- development and
Piloting septic sludge site sanitation operational
handling system Drainage canals rehabilitated as a facilities management program
result of identification of improved in Chittagong
investment priority established
Updating/confirming
sewerage and drainage
masterplan for Chittagong Sewerage and drainage strategy Improved
and identification of and masterplan developed, and CWASA’s investment sustainability
priority investments priority investment identified planning for sanitation of water
and drainage for supply and
Chittagong improved
Training conducted and capacity sanitation
development program developed service
for CWASA staff
CWASA’s Institutional
capacity improved
Capacity building to Decentralized management model, Operational
CWASA including SOPs, O&M Manual developed processes
modernization of upgraded and
CWASA’s operational institutional
systems and facilities MIS plan, Commercial Management structure of
Plan, Customer Services CWASA clarified Carried out throughout project
Improvement Plan developed
Newly added or revised during
restructuring in 2014
Improvements on CWASA
organogram and associated job Dropped during restructuring in 2014
description recommended

Project Development Objectives (PDOs)

7. The original PDO was to increase the sustainable access to safe water and improved sanitation, as well as support
the establishment of a long-term water supply, sanitation and drainage infrastructure development and operational
management program in Chittagong.

Key Expected Outcomes and Outcome Indicators

8. The following outcomes were expected to be achieved by the completion of the project:

Outcome 1: Increase the sustainable access to safe water. The indicators for this outcome were:
• Number of people provided with access to improved water sources under the project.
• Number of people in project area ward slums with access to safe water and improved sanitation.

Outcome 2: Increase the sustainable access to improved sanitation. The most relevant indicators that measure
the achievement of this outcome were:

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

• Number of people in project area ward slums with access to safe water and improved sanitation.
• Pilot septic sludge handling system established.

Outcome 3: Support the establishment of a long-term water supply, sanitation and drainage infrastructure
development and operational management program. The indicators that were related to this outcome were:
• Clarified institutional mandates and responsibilities for sewerage and drainage.
• CWASA maintains operations and maintenance (O&M) cost coverage from total revenues. 3
• CWASA achieve O&M cost coverage from direct water sales revenues. 4

Components
9. Component 1: Water supply and sanitation (IDA: US$150.87 million). This component was to (i) support the
CWASA in the construction of the Modunaghat water treatment plant (WTP), the construction of transmission pipes
from Modunaghat WTP to two service blocks in Chittagong, the rehabilitation of the Kalurghat and Patenga booster
pumping stations (BPSs), the rehabilitation and extension of the water distribution system, and the extension of
water supply and sanitation services to selected urban slums; (ii) finance procurement of water supply operational
equipment and spare parts; (iii) finance a pilot septic sludge handling system; (iv) support technical assistance aimed
at improving operations and maintenance (O&M), contracts management, engineering design reviews, supervision
for WTPs and distribution systems, and delivery of water supply and sanitation services to urban slums; and (v)
support studies related to the saline intrusion of the Halda river, including analysis, recommendations, and designs
for options for future source of raw water for Modunaghat WTP and Mohara WTP.

10. Component 2: Sewerage and drainage (IDA: US$8.80 million). This component supported (i) studies to update
and/or confirm the sewerage master plans and drainage master plans for Chittagong; (ii) technical assistance for the
identification and design of priority investments in sewerage and drainage; (iii) with finance for limited works in canal
rehabilitation, including engineering and construction supervision support; and (iv) technical assistance,
consultations, and training to develop a responsibility and coordination framework for the various stakeholder
agencies involved in O&M of drainage and sewerage services.

11. Component 3: Institutional and operational development, and project management support (IDA: US$10.33
million). This component supported (i) comprehensive institutional development of CWASA through modernization
of the operational system and capacity building for CWASA staff; and (ii) project management support to the CWASA
in the implementation of the project and assisted the CWASA in preparing follow-on investment project for future
Bank’s support.

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)

12. The project underwent seven formal restructurings and one Additional Financing (AF) during its ten years of
implementation. One restructuring was done to revise the PDO, update result targets and indicators, adjust project

3 Ratio of total revenue to the sum of expenses from water production, billing and collection, operations and administrations, and
general expenses.
4 Ratio of water sales revenue to the sum of expenses from water production, billing and collection, operations and administrations,

and general expenses.

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

components and costs, and cancel some of the funds. Two other restructurings also involved cancellations of funds,
while other three restructurings were to extend project end dates. One of the seven restructurings, which adjusted
project end date and targets, was processed with the AF.

Revised PDOs and Outcome Targets

13. The PDO underwent one change during the first restructuring approved on April 1, 2014. The revised PDO was to
increase access to safe water and improve CWASA’s institutional capacity and investment planning for sanitation and
drainage in Chittagong City.

14. The outcome indicators were revised during the 2014 restructuring to reflect the changes in the PDO. All
indicators related to improved access to sanitation were dropped. Two new indicators were introduced: (i) utility
maturity level to measure the institutional capacity of CWASA; and (ii) value of priority sanitation and drainage
investments identified, prepared, and ready for financing to measure improvements in investment planning for
sanitation and drainage in the city. Targets were revised both during the 2014 restructuring and the Additional
Financing which was approved by the Bank’s Board on June 23, 2017. Table 1 presents the changes in PDO indicators,
the rationale for the changes, and revisions to the PDO targets.

Table 1: Original and Revised Outcome Indicators and Targets

2017
2014
PDO indicators at 2014 restructuring Additional
Restructuring
Financing
Target – Target – Target –
Indicator Name December Status Rationale for change December December
2015 2018 2020
Number of people in urban areas
provided with access to Improved 100,000 No change 150,000 648,000
Water Sources under the project
Number of people in project area Physical investments in sanitation no longer
ward slums with access to safe 250,000 Dropped be supported under the project and the
water and improved sanitation scope for WSS provision to LICs was reduced
Not considered an outcome level indicator.
Clarified institutional mandates
Mandate Institutional roles and mandates to be
and responsibilities for sewerage Dropped
clarified clarified as part of strategy and master plan
and drainage
preparation.
Establishment of a pilot septic sludge
Pilot septic sludge handling system System
Dropped handling system no longer be supported
established established
under the project.
Relying on total revenue beyond water sales
CWASA maintains O&M cost to cover O&M cost is not sustainable for
100% Dropped
coverage from total revenues CWASA in the long run. Indicator below is a
more appropriate measure of cost recovery.
CWASA achieve O&M cost
coverage from direct water sales 100% No change 85% 85%
revenues
To measure institutional capacity
Water Utility Maturity Level New 3 3
development at the outcome level
Total value of priority sanitation
and drainage investments To measure improvements in investment US$150 US$150
New
identified, prepared and ready for planning at the aggregate level million million
financing

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

Revised Components
15. The project’s components were revised as part of the 2014 restructuring. Component 1 (water supply
improvement) was amended to focus physical infrastructure investment only on water supply, while proposed pilot
septage sludge handling system was dropped. The scope of the water distribution network investments was to focus
only on the priority investments which were determined through a hydraulic analysis of the network. The scope of
water supply improvement in low-income communities (LICs) was reduced to focus only on six pilot slums selected
by CWASA based on a city-wide rapid assessment of water supply concerns in slums. 5 Component 2 (investment
planning for sanitation and drainage) was revised to focus only on technical assistance for strategic and investment
planning for sanitation and drainage in Chittagong city. The proposed pilot physical investments in priority storm
water drainage canals were not pursued. Component 3 (institutional capacity development and project management
support) did not undergo major changes. It was renamed to focus on development of institutional capacity. The nature
and scope of activities to promote development of institutional capacity were better defined. Technical assistance
(TA) for preparation of a follow-on project was dropped.

Other Changes
16. Additional Financing. In June 2017, IDA additional financing of US$47.49 million (SDR34.7 million) was approved
for the project.

17. Cancellation of Funds. The project has cancelled funds three times. Some US$14.48 million (SDR9.45 million) was
cancelled as part of 2014 restructuring. An additional US$10 million (SDR7.19 million) was cancelled through a
restructuring approved on August 27, 2019. Finally, US$10 million (SDR6.94 million) was cancelled through a
restructuring approved on December 31, 2020 at project close.

18. Extension of credit closing dates. In total, the project closing date was extended four times resulting in a total of
five years extension. The project closing date was extended by three years, from December 31, 2015 to December 31,
2018 through a restructuring approved in June 2015. The closing date was extended for second time to March 31,
2020 during the June 2017 restructuring which was done along with AF. The closing date was extended by 2.5 months
to June 15, 2020 through a restructuring approved in March 2020. The closing date was extended by 6.5 months to
December 31, 2020 through a restructuring approved in June 2020.

19. Reallocations of funding among components. Due to fund cancellations and AF, the fund allocation over different
project components have been revised throughout the implementation period. The revised allocation is provided in
annex 3. The overall project cost at closing was US$225.01 million including IDA US$173.36 million 6 (SDR123.62
million), compared to original project cost of US$186.76 million (IDA US$170 million, SDR112.50).

Rationale for Changes and Their Implication on the Original Theory of Change

5 A rapid assessment of slums in Chittagong was carried out with the support of the Water and Sanitation Program of the World Bank.
As part of this exercise, a slum typology was developed, issues related to water and sanitation service were assessed, and practical
challenges to provision of water to LICs were identified leading to a re-evaluation and reduction in scope of this activity.
6 Due to exchange rate variation, the IDA net commitment of US$183.01 million (which is the net calculation of IDA commitment

considering the additional financing and all cancellations) is equivalent to US$173.36 million at project closing.

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BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

20. The revisions in PDO and project components were done to refocus the project on key activities which were
expected to deliver results on time and within client’s capacity. The project experienced significant delays the first
three years of implementation with disbursements recorded at one percent of the original credit amount by mid-term
review (MTR). No progress had been made on sanitation and drainage investments, and the lack of clear institutional
and coordination framework did not create enabling environment for such investment to be pursued provided that
other agencies (e.g. CCC) were providing the same service. CWASA also lacked the required funds and functionaries
to operate and maintain drainage and sanitation infrastructure towards their long-term sustainability. Therefore,
proposed pilot related to septic sludge handling system, rehabilitation of existing storm water drainage canals were
dropped (2014 restructuring), and the renewed focus was skewed towards developing a strategy and identifying the
institutional and policy actions (‘prerequisites’) to make way for sustainable implementation of sanitation and
drainage improvements in Chittagong. In pursuit of the two-stage course of action i.e. institutional prerequisites and
design of priority investments based on updated sanitation and drainage master plans, it was deemed that the
originally planned pilot interventions, which were considered transformational in the context of Chittagong, would
have taken long time for execution. There were little possibilities that any progress could be made on these activities
within the original project closing date. Accordingly, the PDO was revised to reflect this change.

21. The project had provision of around US$5 million worth of investments in improving water and sanitation services
(WSS) in LIC areas of Chittagong city. However, at the time of appraisal, the nature of these investments, the type of
slums to be targeted and mode of engagement were not fully conceived. The pilot WSS provision to LICs was therefore
reduced in scope (i.e. dropping sanitation service in slums) and scale (i.e. number of targeted slums) to minimize
potential project implementation risks. This decision was informed by a rapid assessment of LICs which manifested
the challenges including: (i) limited availability of water; (ii) limited experience of CWASA in executing alternative
sustainable management models for LIC services; and (iii) a lack of technical expertise in identifying and designing
appropriate sanitation interventions for LICs.

22. The changes in the PDO and project components affected the original Theory of Change (TOC) of the project.
The outcome on increased access to improved sanitation was dropped. The outcome on establishing long-term WSS
and drainage infrastructure development and operational program in Chittagong were revised into two parts: (i)
CWASA’s improved investment planning for sanitation and drainage; and (ii) CWASA’s improved institutional capacity.
The impact of revised PDO on the original TOC is illustrated in the diagram above.

23. The target number of people gaining access to safe water supply (by the original end date) was adjusted during
the 2014 restructuring considering the slow progress in this area during the early years of implementation, and
assuming an extension of the project closing date by two years. The target for this outcome was raised during the
June 2017 restructuring for the AF, reflecting the extension of the project closing date by 15 months. The O&M cost
coverage target was revised downward setting a realistic target for the utility given the constraints faced by the
CWASA in improving its commercial performance as assessed in the MTR (66 percent at MTR against the target of 100
percent).

24. Additional Financing was approved by the Bank to cover the cost overrun resulted from increase in cost of water
supply infrastructure and exchange rate variations related to the construction of the transmission pipeline.

25. The cancellation of IDA funds during first project restructuring reflected the dropping of the sanitation and
drainage works with remaining funds assessed to have a high chance of being committed during the remaining project

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implementation period. The subsequent cancellations of IDA funds in August 2019 (out of credit for the AF) and
December 2020 (from the original credit) were based on competitive bid prices for the major works contract than had
been previously estimated and on various factors contributing to project savings, such as exchange rate variations
and underutilization of the contingencies in works contracts.

26. Extensions of project closing dates. The first extension of loan closing date by three years was to allow for full
implementation of all major works contracts and technical assistance services that were critical to achieve the revised
project objectives but were significantly delayed at the beginning. The second extension was done to allow the full
implementation of the installation of transmission pipeline from Kalurghat WTP to Patenga BPS financed by the AF.
The third extension was done to recoup the delay caused by the stoppage of works implementation by the
government during the national election and by heavy rain in 2019 the slowed implementation of works. The fourth
extension was to compensate for the delay in works implementation during March–June arising from by restrictions
in movement imposed by the government to minimize the spread of COVID-19.

27. Funds were reallocated among components to reflect the revised scope of the project, including more focus on
water supply investment under component 1, dropping physical investments under component 2, and increasing
activities for institutional development under component 3.

II. OUTCOME

A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

Rating: Substantial

28. The relevance of the PDOs is Substantial. They reflect the importance of increasing access to water services in
Bangladesh’s second largest city. The revised PDO was fully consistent with the Bank’s Country Assistance Strategy
(CAS) for Bangladesh 2011–2014, discussed by the World Bank’s Board of Directors on July 8, 2010. The CAS (Report
number 54615-BD) had four strategic objectives: (i) increase transformative investments and enhance the business
environment; (ii) reduce environmental degradation and vulnerability to climate change and natural disasters; (iii)
improve social service delivery; and (iv) enhance accountability and promote inclusion. The project supported all four
strategic objectives. It helped to enhance the business environment by increasing the availability of water for use of
businesses that depend on reliability of supply. It set the stage for supporting the country in reducing environmental
degradation by laying out foundation for the future sanitation and drainage investment in a strategic manner. It
helped to improve social service delivery by providing better access to improved water sources, including people in
LICs. Finally, it helped to enhance accountability with support to strengthen the institutional capacity and governance
of the CWASA.

29. The project objectives remained consistent with the Bank’s Bangladesh Country Partnership Framework (CPF)
2016–2020, discussed by Bank’s Board on April 5, 2016. The CPF (Report number 103723-BD) emphasizes the need
to improve the delivery of basic services in urban areas to promote growth and competitiveness of the country and

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recognizes strong linkage between access to water and sanitation and nutrition outcomes. The CPF had three focus
areas: growth and competitiveness, social inclusion, and climate and environmental management. The project
contributed to all three focus areas, including enhanced growth and competitiveness by improving access to water
supply for businesses and people in Chittagong, improved social inclusion by bringing water to LICs, and the prepared
investment plan for future improvements in sanitation and drainage, which will overall improve urban service and
environment quality. Moreover, the fact that the project has addressed institutional capacity challenges in CWASA
directly contributes to the fundamental weaknesses raised in the CPF related to the institutional capacity of the local
institution in providing services.

30. The project’s objectives were also consistent with a range of national policies and strategies. This includes the
GOB’s seventh Five-Year Plan (2016-2020), which denoted the country’s long-term vision for inclusive growth and
eradication of poverty and included water and sanitation strategies and targets.

B. ACHIEVEMENT OF PDOs (EFFICACY)

Assessment of Efficacy and Rating
Rating for the original PDO: Modest
Rating for the revised PDO: High

31. As discussed in Section I, the PDO and outcome targets were revised in April 2014. One core objective was
maintained (to increase access to safe water), one was dropped (increase access to improved sanitation), and one
was revised into two parts (to improve CWASA’s institutional capacity, and to improve CWASA’s investment
planning for sanitation and drainage in Chittagong City). For this reason, the ICR uses a split assessment to assess
the PDO achievement considering both the original and revised PDOs and the project restructuring of 2014. 7 The
following section will first assess the original PDO, followed by the assessment of the revised PDO.

Achievement of the Original PDO

32. The original PDO contains three objectives which are (i) to increase sustainable access to safe water, (ii) to
increase sustainable access to improved sanitation, and (iii) to support the establishment of a long-term water
supply, sanitation and drainage infrastructure development and operational management program in Chittagong.
Table 2 provides summary of the achievements of each objective of the original PDO.

Table 2: Achievements of the original PDO

Original Actual
Objectives PDO Level Result Indicators Achieved
Targets Results

Actual/Original:
Objective 1: To increase Number of people in urban areas provided with 790%
sustainable access to safe access to Improved Water Sources under the 100,000 a 790,400 b
water Project Actual achieved
rate: 121.6% c

7 95% of the project disbursement took place after restructuring

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Number of people in project area ward slums

Objective 2: to increase with access to safe water and improved 250,000 16,642 6.6%
sustainable access to sanitation
improved sanitation System
Pilot septic sludge handling system established None None
established

Objective 3: To support CWASA achieve O&M cost coverage from direct

100% 86% 86%
the establishment of a water sales revenues
long-term water supply,
sanitation and drainage CWASA maintains O&M cost coverage from total
100% 92% 8 92%
infrastructure revenues
development and Mandate
operational management Clarified institutional mandates and Mandate
partially Partially achieved
program in Chittagong responsibilities for sewerage and drainage clarified
clarified
Notes: a. based on the estimate of 4 people per connection; b. based on the status at project completion - each connection supported 26
people (data indicated in Census 2011); c. calculated by adjusting the target using the same criteria of 26 people per connection. In the case
of 26 people per connection, the original target would be 650,000. Therefore, the actual achieved rate is 121.6% (see paragraph 40 and
footnote 9 for more information).

33. The first objective was fully achieved. The number of direct beneficiaries with access to improved water
sources have exceeded the original target by 21.6 percent (Table 2). The beneficiaries served were resulted from
the overachievement of water connections totaling 30,500, comprising 13,300 new and 17,200 rehabilitated
connections, against the combined connection target of 27,000. The connections provided under the project was
equivalent to 40 percent of the total registered customers of CWASA. Specifically, the project supported the (i)
construction of the Modunaghat WTP to provide 90 million liters per day of treated water to the city; (ii)
construction of 111 kilometers of new transmission and distribution pipelines; (iii) construction of the Kalurghat
and Patenga BPS; (iv) rehabilitation of 69 kilometers of transmission and distribution pipelines, and (v) construction
or rehabilitation of 160 community water points. Despite the delay at the beginning of the project implementation,
nearly all intermediate results targets related to this objective have been met or exceeded (see annex 1), indicating
significant achievement of project’s physical interventions which are the backbone infrastructure for facilitating
improved services. In addition, water quality testing results undertaken by CWASA at the production facilities
suggested that water quality met the standards at the point of production. Aside from water quality aspect, the
continuous improvement in operational systems and processes along with financial performance suggested that
sustainable access can be ensured, once piped water provided by CWASA is connected. Besides, the CWASA
implemented Quality Management System (QMS) for production facilities, improved maintenance management
program, customer outreach, grievances management system and standard operating procedures for water supply
have all supported sustainable services for the consumers.

34. The project measured people’s access to safe water through access to improved water sources which,
according to WHO-UNICEF Joint Monitoring Programme (JMP), are sources that, by nature of their construction or
through active intervention, are protected from outside contamination, particularly fecal matter. These include
piped water in a dwelling, plot or yard, and other improved sources. The project has provided dwellers of
Chittagong with improved water supply coverage by way of rehabilitating existing dilapidated connections as well
as installing new connections to unserved population. Therefore, the project’s development objective with regards

8 Based on financial analysis in annex 4.

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to access to safe water has been equated with access to Improved Water Sources which was made consistent with
the core sector indicator during the Millennium Development Goals (MDG) era.

35. The Objective 2 was negligibly achieved. The project has not been able to increase access to improved
sanitation among the population in Chittagong City and no tangible progress has been made on sanitation
intervention. Providing service to slum areas has focused only on the provision of safe water, and no intervention
is made on improved sanitation. The indicator on people in LICs receiving access to improved water source only
achieved 6.6 percent of its original target. Piloting septic sludge handling system which was intended to set a model
for scaling up fecal sludge management in the city was not initiated. None of the sanitation related indicators had
progress.

36. The Objective 3 was partially achieved. This objective had two parts: (i) establishment of the infrastructure
development program for water supply, sanitation, and drainage infrastructure in Chittagong; and (ii)
establishment of the operational management program for water supply, sanitation and drainage infrastructure in
Chittagong. Under the first part of this objective, two masterplans, one for sanitation and one for drainage, were
developed for Chittagong. However, the development program for water supply was not established. Mandates
and responsibilities for sanitation and drainage in Chittagong City were clarified, as noted above. A mutually agreed
institutional responsibility framework was achieved through a memorandum of understanding between the
CWASA and the CCC in which CWASA took responsibility for development and O&M of the sanitation system, and
CCC was responsible for the drainage system. However, the roles and responsibilities related to fecal sludge
management were not achieved.

37. The second part of Objective 3 was partially achieved for water supply, and not achieved for sanitation and
drainage. The operational management program for water supply was set up and supported by the project’s TA
under the utility modernization activities. However, the indicators related to this objective, i.e. “CWASA achieves
O&M cost coverage from direct water sales revenues” and “CWASA maintains O&M cost coverage from total
revenues” were not achieved at project closing. The achievements were recorded at 86% and 92% respectively
against the original target of 100%. In addition, the operational management program for sanitation and drainage
was not completed, aside from the development of masterplans.

38. The efficacy rating for the original PDO is Modest. Objective 1 of the original PDO was fully achieved, objective
2 was negligibly achieved, and objective 3 was only partially achieved.

Achievement of the Revised PDO

39. The revised PDO also consists of three objectives (i) to increase access to safe water, (ii) to improve CWASA’s
institutional capacity, and (iii) to improve CWASA’s investment planning for sanitation and drainage in Chittagong
City. Table 3 provides summary of the achievements of each objective of the revised PDO against the latest revised
targets.

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Table 3: Achievements of the revised PDO

Revised Actual
Objectives PDO Level Result Indicators Achieved
Targets Results
Objective 1: Increase access Number of people in urban areas provided with access
648,000 790,400 122%
to safe water to improved water sources under the Project

Objective 2: Improve CWASA achieve O&M cost coverage from direct water
85% 86% 101%
CWASA’s institutional sales revenues
capacity Water utility maturity level 3.00 3.06 102%
Objective 3: Improve
Total value of priority sanitation and drainage
CWASA’s investment US$150 US$476
investments identified, prepared and ready for 317%
planning for sanitation and million million
financing
drainage in Chittagong City

40. The first objective was fully achieved. The first objective of the revised PDO is equivalent to the Objective 1 of
the original PDO, although the term “sustainable” was not in the revised objective. The target was revised following
approval of AF based on new figure 9 with regards to number of beneficiaries per connection. Compared against
the revised target of 648,000 beneficiaries, this objective fully achieved its objective.

41. The second objective was fully achieved. O&M cost coverage—a measure of financial performance—reached
86 percent at closing, above the target of 85 percent presented in the 2014 Restructuring Paper. The target was
revised at project restructuring making it consistent with the achievement recorded at mid-term review as O&M
costs covered from direct water sales reduced significantly since appraisal (estimated as 66% against a target of
100% at MTR). The utility’s maturity level, a measure of institutional capacity of a water utility, was 3.06 (as
confirmed by an independent audit conducted in October 2019), slightly exceeding the target of 3.00 included in
the 2014 Restructuring Paper. This maturity level 10 indicates that actions to realize strategies and policies are in
place in CWASA to sustainably execute its mandate and achieve its organizational objectives and outputs. The
graduation in utility maturity was underpinned by successes across multiple attributes namely strategic and
customer orientation, technical operations, commercial orientation, financial management, and the like. The
achievements were the result of the project’s significant investment in TA on strengthening the operations and
institutional structure of CWASA emphasizing on increasing the sustainability and accountability of operations of
the utility. Significant progress was made since the start of CWASA’s in-house change management initiative named
“Go-Ahead Program” in July 2012 which aimed to strengthen the utility’s performance. The project has played an

9 Beneficiary numbers for improved water supply had been increased to account for revised figure regarding beneficiary numbers that
each connection supported 26 people compared to 4 at the time of appraisal. This revised figure on beneficiary number per connection
was in line with the figure reported in 2011 CWASA’s Management Information System where 45,570 connections served an estimated
1.19 million people. Based on Census 2011, the number of people with piped water is 1.4 million, making the number of beneficiary
figure per connection higher than 26. Thus, adopting the figure of 26 for calculating the total number of beneficiaries throughout the
project represented a conservative estimate, which is acceptable to the ICR team.
10 Based on Water Utility Maturity Model in Kayaga et al (2013) Evaluating the institutional sustainability of an urban water utility: a

conceptual framework and research directions, Utilities Policy (27) 2013, pp 15-27. The WUM model emphasizes institutional
sustainability to be a capacity rather than a financial issue and proposes a generic assessment framework that can be used to track the
development of institutional capacity. The maturity level was determined by five broad institutional dimensions: (a) organizational
behavior, (b) structure/processes, (c) capabilities, (d) organizational tools, and (e) influence. Each dimension is defined by four or five
attributes adding up to a total of twenty-two.

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important role in the institutional development of CWASA by (a) conducting an institutional diagnosis in March
2012 (under a Bank-executed activity) to identify institutional and operational gaps and challenges which served
as foundations for formulating the Go-Ahead Program, and (b) supporting TA for institutional development for a
period of two and a half years to modernize CWASA’s operational structure, systems and processes, and provide
training of staff at all levels. Nearly all the targets for the specific activities supporting the strengthening of the
utility’s institutional capacity have been met or exceeded (see annex 1).

42. Strategic orientation in the organization has developed during the project period. A five-year strategic plan
(2015-2020) was prepared and is in place. However, the process of strategic planning is not fully participative.
CWASA has systematically solicited for complaints and feedback from customers, through introduction of a call
center and regular customer satisfaction surveys. Processes, procedures and systems for enhanced
commercialization have been put in place including the setup of a customer service center at headquarters and
piloting decentralization of commercial operations to zonal offices. Internal autonomy and accountability have also
improved from before. Accountability for performance is improving, through a phased decentralization of
responsibilities, and rolling out of the commercial management plans. CWASA has also made significant
improvements in enhancing effectiveness of key technical operational processes with the development of standard
operating procedures (SOPs) and Operation and Maintenance (O&M) manuals for all network facilities, plant and
equipment. These initiatives yielded some early results in service improvement in regard to supply reliability, water
pressure and customer service as demonstrated in the Customer Satisfaction Survey conducted in December 2018.

43. The third objective was fully achieved. Priority investment of up to US$476 million for sanitation and drainage
in the masterplans has been identified, prepared and approved by CWASA Board. This is triple the target of US$150
million set forth in the 2014 Restructuring Paper. The strategic investments for sanitation and drainage in
Chittagong City are contained in two masterplans approved in June 2017: the sanitation masterplan and the
drainage masterplan. These specify the priority investments up to 2030, and long-term investments to 2065 with
detailed conceptual levels of services for sanitation services. The drainage masterplan, to be implemented by
Chittagong City Corporation (CCC) was developed for the catchment covering approximately 260 square kilometers
corresponding to CCC boundary. The sanitation masterplan, to be implemented by CWASA, was prepared for a
much larger area covering 690 square kilometers corresponding to CCC boundary and adjacent municipalities.

44. The project has supported the achievement of this outcome by helping to clarify the institutional framework
for O&M of sewerage and drainage systems for Chittagong City. Roles and responsibilities of the CWASA and the
CCC with respect to sanitation and drainage services in the city have been clarified, setting the foundation for
successful implementation of the masterplans. Already, three projects identified in the masterplans have secured
investment funding from the government, indicating the start of the implementation of the masterplans.

Efficacy rating for the revised PDO

45. The efficacy rating for the revised PDO is High. The rating reflects the achievement of the objectives of
increasing access to safe water, improving CWASA’s institutional capacity, and improving CWASA’s investment
planning for sanitation and drainage in Chittagong City. PDO-level indicators overachieved the targets, and nearly
all the intermediate results have also been attained.

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C. EFFICIENCY

Rating: Modest

Economic Analysis

46. The operation’s economic viability at completion was assessed using the same approach adopted at appraisal
which is the cost-benefit analysis using “with” and “without” methodology. To ensure comparability, the analysis
focused only on Component 1 of the project which covers more than 90 percent of total project costs, and no
additional analysis was undertaken for other components.

47. Using the same discount rate of 10 percent, the analysis shows a positive final net present value (NPV) of
US$127.6 million (10,761 BDT million) and an economic internal rate of return (EIRR) of 22.7 percent, assuming
the scheme life of 25 years. These are higher than the NPV and EIRR presented in the PAD and in the AF Project
Paper. This indicates substantial economic and social benefits the project has brought to the people of Chittagong,
and the water supply investment under the project is economically viable. The main contributor to the noticeable
increase in EIRR, despite five-year extension in project implementation, was the substantial increase in labor costs
in urban areas between appraisal and now, which led to higher time cost saving benefits 11 (one of the most
significant benefits identified for the project based on the analysis). Table 4 shows the NPV and EIRR for the water
supply investment under Component 1 at appraisal, AF and closing. The details are provided in annex 4.

Table 4. NPV and EIRR for the project

Water Supply
Appraisal AF ICR
Improvement
Estimated EIRR (%) 18.5% 16.7% 22.7%

NPV (US$ million) 127.6**

79.0 * -
10% discount rate
* converted by exchange rate of 2010; ** converted by exchange rate of 2020.

48. The analysis does not include potentially significant but not readily quantifiable benefits. These include the
reduction of expenses associated with water borne diseases (that is, cost savings of medical health care and
improvement of overall productivity). Thus, the estimation of the EIRR is very conservative for the true economic
values of the investment.

Aspects of Design and Implementation

49. The institutional strengthening of the CWASA in the areas of investment identification and planning,
procurement, and the like is likely to have resulted in adequate value for money of investments. The project
provided significant TA and capacity building support to the CWASA in core areas of investment planning, strategic
planning, organizational structure, procurement, financial management, contract management, commercial
management, information system management, standard operating procedures, O&M, customer service

11 Bangladesh Household Income and Expenditure Survey 2016.

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improvement, and the like. Thus, priority investments were identified through the CWASA’s development plan,
discussions with staff of the CWASA, who in turn consulted with residents of their service areas to assess demand
and willingness to pay for services. Procurement was done through international and national competitive bidding
procedures to ensure value for money in investments. Moreover, both the city government and the utility maintain
complaints handling mechanisms to allow for citizens to bring suspected cases of fraud and corruption to the
attention of the authorities. Collectively, these procedures provide reasonable assurance that investments in city
are providing value for money.

50. Administrative efficiency was modest. The final disbursement of the IDA funding was US$161.27 million being
equivalent to 93 percent of the total revised committed amount available at closing, 12 and all major infrastructure
activities under the project were completed. However, the delays in project implementation have reduced the
efficiency of the project. The project not only experienced delays start-up during the first three years, it has also
undergone procurement delays of major consultancies and works packages, and delays in completing all the major
contracts (seven out of 84 contracts remained open at project closing). The delays have prompted multiple project
extensions with cumulative extended period of five years, doubling its implementation period. While these
extensions were necessary to achieve the project objectives, time overruns detract from efficiency, given the
opportunity cost of capital and the service fee that borrowers continue to pay on Bank loans.

Financial Assessment

51. Although financial profits and returns were not a main objective of the project, financial assessment was
prepared at appraisal to demonstrate that the CWASA’s financial position from an operational view was
adequate for implementing and operating the assets under the project. An assessment of total revenues and
expenses reveals that the utility has maintained operational level profitability (income before depreciation and
interest) throughout the review period with a positive, although declining, operating cost coverage ratio above
1.00. However, the operating cost coverage ratio in 2020 dropped to 0.92, as the fee collection rate dropped in
part due to the impacts of the Covid-19 pandemic. Overall operational sustainability was supported during 2010–
2020 by tariff increases by an average of 9 percent per year, increases in water sales by an average of 11 percent
per year, and by maintaining an average of 94 percent fee collection efficiency per year. A financial forecast was
produced at project closure to investigate the financial sustainability of CWASA’s operations for the next few years.
The forecast shows that the operations will be financially stable with the expected level of cost recovery. However,
any debt repayment is not likely to happen in the short term. Detailed results of the financial analysis are presented
in annex 4.

D. JUSTIFICATION OF OVERALL OUTCOME RATING

52. As discussed in Efficacy section, the ICR applies split rating for the overall outcome rating to account for the
PDO and outcome target changes in 2014 restructuring. Detailed split rating calculation is provided in annex 6. A
rating of Substantial for the Relevance of the PDOs, a split rating of Modest / High for Efficacy (with 4.3 percent
weighting assigned to the former and 95.7 percent assigned to the latter), and a rating of Modest for Efficiency
justify an Overall Outcome rating of Moderately Satisfactory (Table 5). Albeit with time overrun in implementation,
there were notable achievements in access to safe water, improved CWASA’s institutional capacity, and investment

12 Ibid, p.6

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planning for sanitation and drainage in Chittagong City. Most indicators, introduced post 2014 restructurings, have
achieved and surpassed the targets, and these achievements account for more than 95 percent disbursement. The
project objectives also remained substantially relevant to the CPF.

Table 5: Calculations for the overall outcome ratings before and after the restructuring

Without restructuring With restructuring

Relevance of objective Substantial
Efficacy (PDO) Modest High
Efficiency Modest
1 Outcome ratings Moderately Unsatisfactory Moderately Satisfactory
2 Numerical value of the outcome
3 4
ratings
3 Disbursement US$6.98 million US$154.29 million
4 Share of disbursement 4.3% 95.7%
5 Weighted value of outcome
0.13 3.83
rating
6 Moderately Satisfactory
Final outcome rating
(0.13 + 3.83 = 3.96)
*Note: Highly Unsatisfactory (1); Unsatisfactory (2); Moderately Unsatisfactory (3); Moderately Satisfactory (4); Satisfactory (5);
Highly Satisfactory (6)

E. OTHER OUTCOMES AND IMPACTS (IF ANY)

Gender
53. Although the project did not include a gender tag 13, in LICs the project has facilitated women’s participation and
representation at the community level water user groups. With women and girls in most households responsible for
fetching and carrying water, bringing safe water closer to or within household compounds is likely to reduce this
daily burden. However, such outcomes have not been measured under the project’s monitoring and evaluation
(M&E) framework.

Institutional Strengthening
54. The project has had specific activities on institutional strengthening of the CWASA to improve its operational
performance to strengthen its sustainability and accountability. Informed by institutional analysis conducted by the
Bank, the CWASA’s Go-Ahead Program was launched in July 2012. The program has become a platform where
institutional development support from different partners, such as the Japan International Cooperation Agency (JICA)
and the Bank, can be provided. The project specifically focuses on modernization of the CWASA. As a result, the
utility’s O&M cost coverage from water sales improved, its maturity score rose from 2 (basic level) to 3 (proactive
level) on the scale of 1–5 at closing. 14 The CWASA also became the first utility in Bangladesh to receive the ISO
9001:2015 Certificate for quality management system indicating its achievement in improved reliability in delivery

13 The project design did not conduct specific analysis to identify gaps between men and women related to project activities, did not
include specific actions to address gender gaps, nor did it initially include specific indicators in the Results Framework (results
framework) to measure gender relevant progress. Therefore, it did not include a gender tag.
14 Based on Water Utility Maturity Model in Kayaga et al (2013) Evaluating the institutional sustainability of an urban water utility: a

conceptual framework and research directions, Utilities Policy (27) 2013, pp 15-27.

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of water service. Ten out of 12 institution-related indicators in the results framework were achieved (annex 1). More
importantly, the CWASA’s management agreed to implement suggested follow-up actions from the utility
modernization TA. A focal point to coordinate utility capacity building efforts has been appointed, indicating the
CWASA’s commitment to continue institutional strengthening activities and embark on long-term utility reform.
Poverty Reduction and Shared Prosperity
55. The operation has had positive impacts on poor households. Water supply services have been provided to six
LICs through Social Intermediary Model benefiting around 16,642 people. Community water points connected to the
piped network supplied by tube wells were installed throughout LICs to improve access to safe water by residents of
LICs. The provision of water to LICs saves people time from collecting water from far away sources and money as
water is available at a tariff which is nearly 10 times lower than that from informal water vendors (that is, BDT16.8
versus BDT170).

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

56. The project objectives were defined with a forward-looking perspective, yet the stated objectives were
ambitious on sanitation. The project objectives balanced the need for short-term interventions to fill the
immediate water supply service gaps in Chittagong City with long-term institutional development to sustain the
operation of the investment. They also appropriately supported the establishment of a framework to identify and
plan development of sanitation and drainage infrastructure to address the higher volume of wastewater arising
from increased water supply in the city. However, the project objective on increasing access to improved sanitation
was not realistically defined considering the institutional challenges 15 and low readiness of the client with regard
to sanitation identified during preparation. This resulted in the sanitation objective being dropped during
implementation.

57. The project was designed with due consideration of the lessons learned from past engagements in the water
sector in Bangladesh, where institutional development needed to be embedded in the project and infrastructure
investment needed to be carried out in a phased manner in tandem with the institutional strengthening
activities. The project design adopted a phased approach to carefully sequence project activities where any major
infrastructure investment, for areas where client had no prior experience, was to only follow clarified institutional
framework and proven concept through pilot. The project components were properly structured to include (i) the
investment in key water supply infrastructure, (ii) technical assistance for institutional development for the CWASA
and for investment planning for sanitation and drainage, and (iii) the development of proof of concept of some
new initiatives or areas where the client had no experience—such as fecal sludge management and provision of
service to LICs—for future scale-up. Nonetheless, one of the shortcomings in the design was that the activity that
could directly contribute to the increased access to sanitation, as stated in a PDO objective, was minimal.

15 There was no clear strategy and institutional framework for sanitation provision in the city, and there was no clear coordination

framework with other agencies (e.g. CCC) who were providing the same service.

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58. Risks to the operation were adequately assessed and extensive mitigation measures were identified during
project preparation. Institutional sustainability risks and financial management risks were mitigated through
provisions of legal covenants in the Project Agreement. Safeguard risks related to resettlement were also mitigated
by allowing the loan proceeds to be used for compensation to project affected people, in addition to standard
requirements for safeguard compliance.

59. Shortcomings in implementation readiness during preparation negatively affected the implementation
progress during the first three years of implementation. Specifically:
• The Project Management Unit (PMU) within the CWASA, which was responsible for undertaking day-to-day
project implementation, was not set up prior to Board approval, contributing to the start-up delay.
• The design of some key project interventions was based on weak diagnostics. These include: (a) lack of a
technical assessment of the water supply network, which resulted in a limited understanding of the scope of
the required investments in the distribution network; (b) no assessment of the nature and scope of institutional
development activities, leading to challenges in formulating relevant interventions; and (c) lack of knowledge
on water supply and sanitation service provision to LICs in Chittagong, exacerbated by lack of experience of the
CWASA in pro-poor service delivery, leading to the activity not being robustly conceived.
• The procurement approach selected for major works package for the construction of Modunaghat WTP, that
is, Design-Build-Operate, was done without careful analysis of different procurement options in consideration
of client capacity and the marketability of the model.

B. KEY FACTORS DURING IMPLEMENTATION

Factors Subject to the Control of Implementing Agency

60. The absence of a strong and efficient PMU delayed progress during the early years of implementation. The
project did not have a capable PMU for the first one and a half years of the implementation, and a dedicated Project
Director who steered project implementation almost single-handedly, was made available only until the end of
2011. The lack of technical staff at the CWASA prevented the early establishment of a strong PMU and the gaps in
requisite technical staff in the PMU lasted till the closure of the project. The PMU developed into a capable and
efficient delivery unit only when the project was in its third year of implementation, with more adequate staffing
and stronger leadership. This was key to turn around the project to deliver results for the remaining
implementation period.

61. One of the key successes in the project was the strong commitment of the CWASA to institutional reform.
The launch of the CWASA’s Go-Ahead Program in July 2012 indicated the seriousness of the CWASA management
to improve the utility’s operational and financial performance. Formulated based on identified institutional gaps
and weaknesses, the Go-Ahead Program has been a common platform for support from various partners, such as
the Bank and JICA. The establishment of an Institutional Development Task Force (IDTF) as a change agent within
the CWASA was a key action on the part of management to coordinate and implement its institutional development
program. The involvement of the CWASA’s Board in approving deliverables produced under the project’s utility
modernization TA was crucial, although time consuming, in instilling ownership of the anticipated reform, which
ultimately ensures implementation.

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62. Client capacity in contract management has been a challenge. Weaknesses in the PMU’s contract
management contributed to weak enforcement of contract terms of both consulting firms and contractors. This
caused delay and non-optimal quality in completion of works and services. Disputes related to three major works
contracts were not timely settled during implementation. These affected the disbursement projection, and
consequently the undisbursed amount (US$11.86 million) could not be promptly cancelled at project closing.

63. Making land available for the construction of the Modunaghat WTP took a long time. The delay in transferring
land from the Bangladesh Water Development Board (BWDB) for constructing key facilities, including the drainage
tank, thickener, and chlorination tanks for the Modunaghat WTP, delayed completion by more than one and half
years from the date of scheduled completion.

64. Government-led donor coordination played a key role in integrated planning and investment. At the start of
project implementation, no clear coordination framework for key development partners, JICA and the Bank, was
in place, posing the risk of fragmented planning and investment. The CWASA’s Technical Cooperation Committee
was set up in 2014 to address this weakness and to optimize complementarity of investments supported by JICA
and the Bank. As a result, coordination and information exchange improved for both physical investment and
institutional capacity strengthening of the utility. Effective coordination of the planned institutional development
activities was implemented under the JICA-funded Technical Cooperation Project and the institutional capacity
development activities under the CWSISP. The CWASA’s IDTF facilitated this coordination. Following the CWASA’s
network-wide hydraulic modelling, which was conducted in close collaboration with JICA, project investments in
the distribution network were identified, bringing optimal performance to the whole network supported under
both development partners.

Factors Subject to the Control of the Bank

65. Informed by diagnostic studies, the project’s restructuring following the mid-term review (MTR) provided
relevant, helpful, and timely modifications. Considering project’s slow start, the project progress and
implementation bottlenecks were reviewed during the MTR. Diagnostic studies were conducted prior to the MTR
to improve understanding of various aspects that were not well defined at preparation stage. This resulted in Level
1 Restructuring in April 2014, during which the scope was modified to increase the chance of successful completion
of the project. Implementation improved significantly following the restructuring.

66. Project extensions, provision of AF, and cancellation of unused funds were undertaken proactively to enable
the project to achieve its intended results. Altogether, the project underwent seven restructurings during its ten
years of implementation. Each restructuring has been supported by clear rationale backed up by rigorous analysis
of the status of each contract with due considerations to endogenous factors (allowing time for committed
contracts to be fully implemented and noting potential cost savings in contract execution allowing for possible
cancellations) and exogenous factors (work stoppage caused by national election and Covid-19 pandemic).

Factors Outside the Control of Implementing Agency

67. Performance of the contractors have not been optimal. In addition to the client’s limited capacity in contract
management, there were shortcomings in the performance of works contractors and supervision consultants.
There were delays in nearly all works contracts. Contractors demonstrated weaknesses in internal manpower

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arrangements, Joint Venture coordination, and work planning. Supervision engineers did not adequately monitor
and enforce contract provisions. In addition, lack of proactive coordination with local authorities to get permission
to cut roads also delayed implementation. Works defects were identified in the rehabilitation of Kalurghat BPS.
The issue was exacerbated by inadequate contract supervision by the specialist technical firm, compounded by
frequent turnover of key staff including the team leader.

68. National elections and the Covid-19 pandemic interrupted implementation of works. The works on the
installation of transmission mains financed under the AF was stopped twice in response to GoB restrictions around
national and local elections in 2018 and a nation-wide lockdown amid Covid-19 outbreak in 2020. These
interruptions further delayed implementation.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E)

M&E Design
69. The arrangement for monitoring and reporting was appropriate, but there were shortcomings in the original
PDO indicators. The M&E arrangement was developed to largely optimize the use of the routine monitoring and
reporting system of the implementing agency (i.e. CWASA’s Management Information Report) complemented with
other project management reports. All the indicators could be collected within the CWASA’s capacity and authority.
The PAD for the original project included a results framework with PDO and intermediate results indicators, and with
baseline, interim, and final values for most indicators. However, none of the outcome indicators was explicitly related
to one of the PDO objectives “To increase the sustainable access to sanitation”. The indicators that were identified as
most relevant to this objective were not directly attributable to the objective due to the following:
• Indicator 1.b: Number of people in project area ward slums with access to safe water and improved sanitation.
Although this indicator includes the term “improved access to sanitation”, the explanation provided in the PAD
(p.31) suggested that it was only related to safe water in slum areas.
• Indicator 2.b: Pilot septic sludge handling system established. Although a sanitation intervention, this indicator
did not directly contribute to an increase in sustainable access to improved sanitation.

70. The shortcomings of the original M&E design were addressed at the 2014 restructuring along with the
alignment with the revised PDO, yet inconsistencies were found in the revised M&E. The results framework and
indicators (as well as indicator targets) were adjusted to reflect the changes in the PDO during the revision in 2014.
The indicator target value for number of people gaining access to improved water source was revised twice during
project period – first one at the time of restructuring in 2014 and second time at the time of Additional Financing. For
the latter, the target was revised upward by more than four times the revised target of 2014 for a slight increase in
number of water connections. This was due to revisions reported by CWASA for the unit of measurement, i.e. number
of beneficiaries per connection, 16 even though there was a decrease in target values for total number of water
connections and communities water points which were the main facilities directly linked to providing access to water
supply. This reflected weakness in the M&E design for the original and restructured project, and the AF.

16 Ibid. p. 12.

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M&E Implementation
71. The revised results framework of the project was consistent with the utility level data collection protocol that
the management information system (MIS) unit of the CWASA practices, making data collection during
implementation consistent with the CWASA’s routine data collection and monitoring. However, tracking and
reporting on indicators faced challenges with the lack of dedicated M&E staff for the PMU, resulting in irregular project
progress reporting against the requirement stated under the project covenants. Hence, information provided from
the monitoring system could not be validated with regard to its authenticity and reliability through intercalibration
between different data sources. Nonetheless, actual progress of each results indicator was provided to the Bank in
timely manner during implementation support mission, and was recorded in all mission aide memoires and
implementation status and results reports (ISR). The CWASA has been relying largely on the MIS for data reporting
and project progress monitoring.
M&E Utilization
72. The strategic use of the M&E by the client to timely inform or modify the course of project implementation
was not achieved. The lack of progress shown in the M&E results at early stage of implementation did not prompt
any appropriate remedial actions, and some foundational issues such as the delayed establishment of a capable PMU
has persisted for quite some time. Besides, the weakness in the implementation of the M&E system has hampered
the PMU ability to use the information to inform decision making and meet project deadlines. This was well
demonstrated by the fact M&E data was not used in contract management processes to flag issues and stimulate
preemptive action to address selected poor performing contracts. However, the utilization of the project M&E was
limited to providing update on the project progress during Bank’s implementation support missions. Nevertheless,
the MTR used to a large extent the progress reported through the M&E system to assess the achievability of original
project objectives, leading to the 2014 restructuring.
Justification of Overall Rating of Quality of M&E

73. The overall rating of quality of M&E is Modest. There were shortcomings in the M&E design and weaknesses in
both the implementation and utilization of the M&E.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

Safeguards

74. The project was designated as Category B project. The project triggered two safeguard policies, Environmental
Assessment (OP/BP 4.01) and Involuntary Resettlement (OP/BP 4.12). Two policy frameworks were developed: The
Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF), which
provided guidelines to identify any potential environmental and social issues and to prepare and implement mitigation
plans if and where they arise. Both the ESMF and the RPF were cleared by the Bank’s Regional Safeguards Advisor and
disclosed to the public in English and Bangla (local language) prior to project appraisal. Environmental Impact
Assessment (EIA) documents for the construction of Modunaghat WTP and rehabilitation of BPS and installation of
pipeline contracts were prepared. The provisions in the ESMF and the EIAs complied with the OP/BP 4.01 and outlined
the framework and structure of the field level environmental management regime. Annex 7 provides the details on
safeguard management.

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75. Compliance with the project’s environmental and social safeguards was satisfactory during the project’s
implementation period. Routine safeguards activities in the project were implemented through inclusion in the
contract provisions of all works. Contractor of each works package prepared Contractor’s Environmental and Social
Management Plans (c-ESMP) to manage environmental and social issues under each contract. Contractors for
Modunaghat WTP paid particular attention to compliance with both mitigation measures and occupational health and
safety (OHS) procedures. They rigorously checked environmental parameters of the worksite for the entire period.
Mandatory use of personal protective equipment (PPE) by construction workers was consistently observed, and
construction sites and labor camps were reasonably tidy and clean.

76. As for social safeguards, mitigation measures stipulated in the RPF were fully implemented. The possible sources
of adverse impacts were anticipated, from routing of the main supply pipelines to the city, and the extension and
rehabilitation of the distribution network along with the renovation of the existing Kalurghat BPS, and construction of
the Patenga BPS and Modunaghat WTP. Throughout the project, no private land acquisition was required. The
Modunaghat WTP, the largest piece of infrastructure, used lands that belonged to the Ministry of Land and Bangladesh
Water Development Board. The lands, which were free of encumbrances, were obtained through intergovernmental
transfers.

77. The civil works for both transmission pipeline and distribution network were implemented in a manner to
minimize disruptions to the business and other activities along the roads, and the small-scale trading activities
locating on sidewalks and road shoulders. The project has adopted a nightly works schedule (works were carried out
between 10:00 pm and 6:00 am) to minimize traffic and business disruptions, as most of the pipelines were following
very busy roads in the heart of Chittagong. The public was properly notified in advance through local newspaper and
leaflets around the worksites. The displacement of two small makeshift structures from the road shoulder (affecting
three households), which was the only resettlement impact throughout the project, was done in accordance with the
Abbreviated Resettlement Plan reviewed and cleared by the Bank’s Regional Safeguards Advisor.

78. During the Covid-19 outbreak, the Bank’s Covid-19 interim guidance note was implemented to the extent
possible. Extra and safer labor camps were provided on the CWASA’s vacant stockyard, daily temperature and other
symptom checks were done twice on all workers and contractor staff, and consistent handwashing and wearing of
facemasks on site were reportedly practiced. However, there have been challenges in practicing social distancing
among workers due to the nature of works.

Fiduciary

79. Despite some issues, procurement was generally conducted in accordance with the Procurement Guidelines
and Consultant Guidelines (for original project) and Procurement Regulations (for Additional Financing) specified
in the Financing Agreements. The procurement plan was promptly prepared to adequately reflect the project scope.
The main issues faced were related to procurement capacity in the PMU caused by the delay in providing procurement
staff and consultants for the PMU. This contributed to delays in advancing procurement packages for all works and
consultancies at the beginning of the project. This issue was later addressed with the provision of dedicated staff in
the PMU in charge of procurement, along with Bank’s capacity building support. CWASA successfully completed the
procurement processes for the five large value works contracts with adequate quality. Other issues with respect to
oversight of procurement and controls in contract management were illustrated by a case conducted by the Integrity

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Vice Presidency (INT) during the second half of project implementation. Specifically, INT substantiated allegations that
an international consulting firm and its subconsultant firm engaged in corrupt and fraudulent practices in relation to
a supervision contract under the project. INT found that the firms, alone or together, made corrupt payments to key
officials over the course of the procurement process and implementation of a consultancy contract and also engaged
in various forms of fraud, which included the undisclosed replacement of key staff, subcontracting survey work to an
undisclosed firm and claiming reimbursement for expenses it did not incur.

80. The project complied with the financial management arrangements as set out in the Financing Agreement
throughout the implementation. There were, however, initial delays in the submission of Interim Un-audited Financial
Report (IUFR), and challenges due to turnover of financial management staff and delay in engaging an internal auditor.
With respect to institutional capacity building, the huge lag in submission of entity audit reports was reduced to an
acceptable level. See annex 8 for details.

C. BANK PERFORMANCE

Quality at Entry
81. The Bank ensured that the PDO aligned with relevant GoB’s priority development agenda and the Bank’s
Country Assistance Strategy. In addition, the Bank also facilitated the adoption of more poor-inclusive and
comprehensive approach by (i) giving attention to providing service to LIC in the city, and (ii) addressing sanitation
and drainage issue (although at planning and institutional level) which was in very poor condition and could be
exacerbated by increased water supply in the city. A long-term view was embedded in the project design, laying the
foundations for the Bank’s subsequent engagement beyond this operation, such that institutional clarity on and
planning for sanitation and drainage started to be conceived which could guide development of physical
infrastructure. The project followed a phased support approach principle anchored by a set of priority investments in
water infrastructure consistent with CWASA’s development plans. Pilot activities were planned to test and
demonstrate concepts and principles that were not established e.g. water supply and sanitation services to slums and
pilot septic sludge management while technical assessments and design activities were planned to identify and
prepare the next set of priority investments.

82. The Bank’s appraisal of the operation was done with due consideration on sustainability of the investment by
balancing the physical interventions and institutional development in the project. Financial analysis and debt
sustainability of the CWASA was conducted to understand the financial health of the CWASA to inform its ability to
service its debt and run as a viable utility. The analysis has informed the formulation of the project outcome indicators
and legal covenants on utility financial performance, which conveyed the Bank’s firm position on financial
sustainability of the CWASA’s operation. The Bank also undertook extensive risk identification, assessment, and
mitigation measures relevant to the operation given the Bank’s lack of engagement with the CWASA over the previous
two decades.

83. The Bank’s support in project preparation however had at least two important shortcomings. First, the design
of interventions for some activities was based on incomplete diagnostics, which, coupled with a weak PMU, led to an
extremely slow start at the beginning of the implementation. Detailed feasibility studies of major infrastructure
including the WTP and the precise scope related to the CWASA’s institutional development, distribution network
investments, and service delivery modality to LICs were not clearly defined at appraisal. Second, the M&E deficiencies

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which did not clearly align the indicators to measure all expected outcomes, especially for sanitation, made it difficult
to link the proposed project interventions with the anticipated sanitation outcomes. This inadvertently created the
scope for dropping the outcomes and their related activities during the implementation.
Quality of Supervision
84. While the project experienced significant delays at the beginning of the implementation, the Bank’s close
supervision of the project, and timely support to the client was important to keep the project on track and achieve
its development outcomes. The Bank conducted regular implementation support missions and clearly communicated
project progress, observed issues, and made recommendations in aide memoires and ISR. The Bank team consistently
follow-up implementation status between implementation support missions. The progress of actions from each
mission were thoroughly reviewed, and the Bank team has been firm on key issues, and provided advice that was
crucial for project implementation, such as technical quality of sub-projects, contract management, expedition of
administrative steps to keep up with the implementation schedule, and strengthening and staffing of the PMU, all of
which were key factors delaying the project at early stage of implementation. Hands-on support, coaching, and
training by Bank specialists have also been provided throughout implementation. Procurement and financial
management training were provided to the CWASA team on a need basis to address specific needs and circumstances
of the PMU. Moreover, the Bank’s specialist support in reviewing technical design and bidding documents for works
packages and reviewing consultancy deliverables have also been crucial in ensuring technical quality of the project.
Equally important, the project ratings in the Implementation Status and Results Reports were candid, with PDO ratings
ranging from “unsatisfactory” to “satisfactory” during the implementation. Following the 2014 restructuring,
implementation progress was consistently rated “moderately satisfactory” throughout the rest of implementation
period. The close support provided by the Bank team has enabled the project to achieve and exceed its intended
results.

85. The Bank’s mid-term review identified the adjustments needed for the project to achieve its outcomes setting
realistic targets even compromising with benchmarks. The April 2014 restructuring reduced the credit to US$157.8
million and the project scope to a selected critical works and technical assistance activities that had a high chance of
completion with a two years extension beyond the original project closing date. Targets for all revised PDO indicators
were adjusted to reflect the revised scope of the project and considering capacity constraints especially lagging
financial performance of CWASA. The target value for O&M cost coverage from water sales, which was the only PDO-
level outcome indicator measuring institutional sustainability, was also revised to less than the full O&M cost coverage
and to a level which was lower than the original baseline.

86. The Bank’s timely support to the client in addressing project weaknesses has helped turn around the project
after startup delays. Three critical Bank-executed TA services were provided to the client to inform and better define
the scope of project interventions. These included (i) institutional assessment of CWASA which served as the basis for
the institutional development program; (ii) LIC assessment by the Bank’s Water and Sanitation Program, which
defined a LIC service delivery model; and (iii) a hydraulic modelling of the distribution network which helped CWASA
to rationalize network investment. The results of the TA enabled the project to move forward with those planned
interventions in a strategic manner. The Bank’s timely and candid analysis at MTR in late 2013, the 2014 restructuring,
and subsequent restructurings also demonstrated the Bank’s flexibility and agility in identifying the needed
adjustments for the project to achieve its objectives at closing.

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Justification of Overall Rating of Bank Performance

87. Considering the good quality of supervision and implementation support provided by the Bank, the overall rating
of Bank Performance is Satisfactory despite shortcomings in quality at entry. The Bank has consistently focused on
development impact by addressing project’s key weaknesses and managed to turn the project around during
implementation through hands-on support, provision of strategic TA, and timely restructurings.

D. RISK TO DEVELOPMENT OUTCOME

88. O&M risks. The CWASA’s revenues from direct sale of water (excluding license and other fees) cannot cover the
total expenditure (excluding depreciation and interest cost) and the O&M cost coverage ratio has only reached around
0.86. In the long run, this could have detrimental effects on O&M of water supply system in the utility, and the CWASA
will continue to rely on other sources of income, which are not the core service of the utility.

89. Financial risks. The increased long-term liabilities in the past seven years combined with low profitability has
weakened the debt equity ratio to an unsatisfactory low level. The future high increase in debt repayment including
the principal repayments, which will start from the year 2024, will have a negative impact on the CWASA’s financial
prospects. This could adversely impact the operational performance of the CWASA in expanding and maintaining
quality water supply services and defeat the objective of making the CWASA a viable utility.

90. Institutional development risks. Although the CWASA’s commitment was strong in putting in place key elements
for utility reform as part of utility modernization, many activities required continued commitment for the
implementation beyond project closing. There are risks that implementation of the planned institutional development
activities can be hampered by resource constraints along with diminishing commitment. This will impact the long-
term institutional development of the CWASA, and its maturity as a utility.

91. Sustainability risks for service delivery models for LICs. Critical to the success of the sustainable management
models for LIC services is the long-term viability of the adapted Social Intermediation Model that the CWASA has
piloted to deliver water supply services under this project and the ability of CWASA to develop their capacity to
effectively fulfil their oversight roles. The approach provided a clear role for community-based organizations as a
central stakeholder in the process, with the aim of supporting long-term sustainability of services. If the community-
based organizations are no longer able to maintain and manage the operation within LICs, the service provision will
come under pressure which will affect the prospect of possible scale-up of services to other LICs in future.

V. LESSONS AND RECOMMENDATIONS

92. Defining the scope of interventions based on incomplete diagnostics can affect project performance. The
principle concern for project implementation was the amount of preparatory work that needed to be accomplished
to allow the project’s large infrastructure investments to be initiated and finalized before project closing. Hence,
successful project launching should be underpinned by robust preparations and analytical works particularly for the
nature and scope of major infrastructure investments.

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93. The delay in establishment of a strong PMU responsible for day-to-day project implementation critically affects
the project implementation. Although the Project Agreement required the establishment of a PMU staffed with full-
time Project Director and other key staff three months after project Effectiveness, it took more than one and a half
year for the PMU to be reasonably staffed and turned into an efficient delivery unit to lead the implementation.
Establishing an adequately staffed PMU could be made a prerequisite for loan negotiation to minimize
implementation start-up delay. In addition, project management staff shall be selected from the regular staff of the
water utility and the project management functions should be supported by a competent and experienced consulting
firm

94. While remedial actions were taken to navigate the project to a successful closure by achieving project objectives,
the remedies could also be perceived as over accommodative, if the context is overlooked. While remedial actions
were taken to navigate the project to a successful closure by achieving project objectives, the remedies could also be
perceived as over accommodative if the context is overlooked. The project has undergone changes through project
restructurings including change of PDO and change in project scope, additional financing to cover the project expenses,
closing date extensions and loan cancellations. The total implementation period reached ten years. The restructurings
suggested the Bank’s adaptiveness to shape and encourage the nascent water utility to face the implementation
challenges and deliver results and be one of the best water utilities in South Asia. The absence of proactive actions
could leave a huge criticism from the stakeholders and that would have posed a severe reputational risk to the
Bank. Nonetheless, more prudence, for example through effective contract management by CWASA, could have
reduced the number of required restructurings particularly project closing date extensions and contributed to
implementation efficiency.

95. Key Performance Indicators should be judiciously balanced promoting efficiency improvement of the utility. The
project at restructuring in 2014 had set the target for operational sustainability indicator measured by O&M Cost
Coverage from direct water sales at level lower than the benchmark. While it is comprehendible that the revised target
was set in response to the failing financial performance during the first three years of the project, targets should be
fixed at levels which can promote efforts for efficiency gains without compromising much on sustainability. It is
important to nurture the momentum of reforms allowing transformational utility modernization activities to help attain
a modest target.

96. The operation has been crucial in building the foundation for addressing long-term challenges in water supply
and sanitation in Chittagong. Chittagong was facing not only the issue of access to water supply, but also waterlogging
and poor sanitation due to poor drainage and sewerage infrastructure. Although the project adequately focused on
water supply services, it also addressed key foundational issues related to sanitation and drainage through
development of strategy and masterplans for a medium-term horizon. Further engagement in the city should turn more
attention to the downstream side of the service, which is sanitation and drainage, and should be built on the
masterplan developed under the project to ensure strategic coherence.

97. Institutional development of a utility is a long-term process and should build on client’s own program/platform.
The CWASA’s “Go-Ahead Program” of organizational restructuring and institutional capacity development was a useful
platform signaling its commitment to utility reform. It was through this platform that utility modernization supported
by the Bank-funded project and capacity building program supported by JICA have been undertaken, bringing together
synergy for institutional reform. Thus, supporting the client in establishing its own institutional development program

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while complementing these with utility modernization activities could secure their commitment, which is crucial for
successful implementation and long-term sustainability.

98. Imposing long-term liabilities on a water utility during the process of utility turn-around could add financial
burden to the utility. The GOB has on-lent funds to the CWASA for the project. Water tariffs are however too low for
the CWASA to fully service the debt and to cover asset depreciation. As a result, the CWASA’s equity has slowly
deteriorated over time and stressed its level of solvency. Awareness of the limitations to tariff revisions may lead to
consideration of an alternative strategy, such as injecting equity capital instead of providing a loan. The debt allocation
strategy is therefore recommended in conjunction with tariff analysis investigating government’s willingness to revise
tariffs while keeping the level of the affordability for the users. In general, the reform initiatives, including financial
sustainability, should be addressed through rationalization of the tariff structure, customer orientation, stakeholder
consultations, and policy dialogue, and devising advanced financing options to mobilize financing for investments and
improve efficiency of operations such as Build-Operate-Transfer in the future.

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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS

A.1 PDO Indicators

Objective/Outcome: Increase access to safe water

Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion

Number of people in urban Number 0.00 100000.00 648,000.00 790,400.00

areas provided with access to
Improved Water Sources 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020
under the Project

Comments (achievements against targets):

The beneficiary target was overachieved by 22%.

Objective/Outcome: Improve CWASA institutional capacity and investment planning for sanitation & drainage in Chittagong
Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion

CWASA achieve O&M cost Percentage 93.00 100.00 85.00 86.00

coverage from direct water
sales revenues 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

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Comments (achievements against targets):

The indicator fully achieved its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Water utility maturity level Number 2.00 3.00 3.00 3.06

31-Jul-2012 31-Dec-2020 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The maturity level was fully achieved, denoting proactive institutional level of CWASA.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Total value of priority Amount(USD) 0.00 150000000.00 150,000,000.00 476,000,000.00

sanitation and drainage
investments identified, 30-Apr-2014 31-Dec-2020 31-Dec-2020 30-Nov-2020
prepared and ready for
financing

Comments (achievements against targets):

The indicator achievement has tripled the target.

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A.2 Intermediate Results Indicators

Component: Water Supply Improvement

Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion

Length of new pipelines Kilometers 0.00 65.00 60.00 111.00

installed
23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The indicator has achieved its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

New piped household Number 0.00 25000.00 10,000.00 13,300.00

connections that are
resulting from project 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020
intervention

Comments (achievements against targets):

The indicator has achieved its target.

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Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Length of pipeline replace / Kilometers 0.00 65.00 73.00 69.00

rehabilitated
23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The indicator has achieved 95% of its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Piped household water Number 0.00 15000.00 17,000.00 17,200.00

connections that are
benefiting from 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020
rehabilitation works
undertaken by the project

Comments (achievements against targets):

The indicator has achieved its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

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Improved community water Number 0.00 1000.00 150.00 160.00

points constructed or
rehabilitated under the 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020
project

Comments (achievements against targets):

The indicator has achieved its revised target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Number of water utilities Number 0.00 1.00 1.00 1.00

that the project is supporting
23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The indicator has achieved its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Number of other water Number 0.00 10.00 2.00 2.00

service providers that the
project is supporting 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

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Comments (achievements against targets):

The indicator has achieved its revised target.

Component: Investment Planning for Sanitation and Drainage

Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion

Sanitation and drainage Yes/No No Y Yes Yes

strategy and master plan
prepared and approved by 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020
CWASA board

Comments (achievements against targets):

The indicator has achieved its revised target.

Component: Institutional Capacity Development and Project Management Support

Formally Revised Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target
Target Completion

Volume of safe water Number 172.00 262.00 360.00 360.00

produced by CWASA (Million
liters per day - MLD) 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

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The indicator has achieved its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Volume of safe water Number 45,554.00 73000.00 105,120.00 92,471.00

sold/billed by CWASA
(Million liters per year # MLY) 23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The indicator has slightly fall short of its target achievement. It achieved 88% of its target.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

CWASA's bill collection ratio Percentage 99.00 99.00 99.00 83.00

23-Jun-2010 31-Dec-2015 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

Bill collection ratio remains lower than the target.

Actual Achieved at
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Completion

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Target
Institutional capacity Yes/No No Y Yes Yes
development program
prepared and approved by 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020
CWASA approved

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Percent of instituional Percentage 40.00 60.00 60.00 98.00

capacity development
activities supported by the 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020
project that are completed

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

New organogram prepared Yes/No No Y Yes Yes

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and approved by CWASA 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020

board

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Staff training and Yes/No No Y Yes Yes

development program
prepared and approved by 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020
CWASA Board

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Number of staff trained as Number 0.00 300.00 350.00 469.00

per approved staff training
and development program 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

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The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Standard operating Yes/No No Y Yes Yes

procedures and O&M
manuals prepared and staff 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020
trained in their use

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Commercial management Yes/No No Y Yes Yes

plan prepared and approved
by CWASA Board 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The indicator has been achieved.

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Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Management information Yes/No No Y Yes Yes

systems plan prepared and
approved by CWASA Board 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Customer services Yes/No No Y Yes Yes

improvement plan prepared
and approved by CWASA 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020
Board

Comments (achievements against targets):

The indicator has been achieved.

Formally Revised Actual Achieved at

Indicator Name Unit of Measure Baseline Original Target
Target Completion

Number of zonal offices Number 0.00 1.00 4.00 4.00

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refurbished and equipped 30-Apr-2014 31-Dec-2018 31-Dec-2020 30-Nov-2020

under the project

Comments (achievements against targets):

The indicator has been achieved.

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B. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1: Increase access to safe water

Number of people in urban areas provided with access to Improved
Outcome Indicators
Water Sources under the Project
1. Length of new pipelines installed
2. New piped household connections that are resulting from project
intervention.
3. Length of pipeline replaced / rehabilitated
4. Piped household water connections that are benefiting from
rehabilitation works undertaken by the project.
Intermediate Results Indicators
5. Improved community water points constructed or rehabilitated
under the project.
6. Number of water utilities that the project is supporting
7. Number of other water service providers that the project is
supporting.
8. Volume of safe water produced by CWASA

Key Outputs of Component 1 – Water Supply Improvement 1. Water treatment plant constructed
2. New water supply pipes installed
3. Water pipeline replaced/rehabilitated
(linked to the achievement of the Objective/Outcome 1) 4. Selected LICs provided with WSS service
Objective/Outcome 2: Improve CWASA’s institutional capacity

1. CWASA achieve O&M cost coverage from direct water sales

Outcome Indicators revenues.
2. Water utility maturity level
1. Volume of safe water sold/billed by CWASA
Intermediate Results Indicators
2. CWASA’s bill collection ratio

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3.Institutional capacity development program prepared and approved

by the CWASA Board
4. Percentage of institutional capacity development activities
supported by the project that are completed
5. New organogram prepared and approved by CWASA Board
6. Staff training and development program prepared and approved by
CWASA Board.
7. No. of staff trained as per approved staff training and development
program
8. Standard operating procedures and O&M manuals prepared, and
staff trained in their use
9. Commercial Management Plan prepared and approved by CWASA
Board
10. Management Information Systems plan prepared and approved by
CWASA Board.
11. Customer services improvement plan prepared and approved by
CWASA Board.
12. No. of zonal offices refurbished and equipped under the project
1. Training conducted and capacity development program developed
for CWASA staff
Key Outputs of Component 3 – Institutional Capacity Development
2. Decentralized management model, SOPs, O&M Manual developed
and Project Management
3. MIS plan, commercial management plan, customer services
improvement plan developed
(linked to the achievement of the Objective/Outcome 2)
4. Improvements on the CWASA organogram and associated job
description recommended
Objective/Outcome 3: Improve CWASA’s investment planning for sanitation and drainage in Chittagong City
Total value of priority sanitation and drainage investments identified,
Outcome Indicators
prepared and ready for financing.

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Sanitation and drainage strategy and master plan prepared and

Intermediate Results Indicators
approved by the CWASA Board
Key Outputs of Component 2 – Investment Planning for Sanitation and Sewerage and drainage strategy and masterplan developed, and
Drainage priority investment identified

(linked to the achievement of the Objective/Outcome 3)

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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role
Preparation
Supervision/ICR
Arif Ahamed Task Team Leader(s)
Ishtiak Siddique Procurement Specialist(s)
Yukiko Inoue Senior Financial Specialist
Hasib Ehsan Chowdhury Financial Management Specialist
Phyrum Kov Water Supply and Sanitation Specialist
Qiong Lu Water Resources Management Specialist
Shyamal Sarkar Team Member
Teen Kari Barua Team Member
Taskin Hafiz Team Member
Sabah Moyeen Social Specialist
Md. Shehab Uddin Team Member
Md Istiak Sobhan Environmental Specialist

B. STAFF TIME AND COST

Staff Time and Cost

Stage of Project Cycle
No. of staff weeks US$ (including travel and consultant costs)
Preparation
FY08 5.430 7,467.19
FY09 32.175 111,956.67
FY10 70.290 304,429.32

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Total 107.90 423,853.18

Supervision/ICR
FY11 22.583 95,090.00
FY12 31.960 264,255.23
FY13 34.434 277,801.85
FY14 47.314 395,819.45
FY15 46.747 228,202.64
FY16 29.970 117,132.22
FY17 26.424 138,320.78
FY18 32.375 202,106.72
FY19 18.948 107,553.43
FY20 17.000 134,980.50
Total 307.76 1,961,262.82

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ANNEX 3. PROJECT COST BY COMPONENT

The total project cost by component from both IDA and counterpart fund throughout implementation period is provided in the table below.

Original Component Revised Component Original cost Revised cost at Level 1 Additional Financing Revised cost at closing (US$
name name Restructuring in 2014 (US$ (US$ million) million)
(US$ M) million)

IDA GOB Total IDA GOB Total IDA GOB Total IDA GOB 17 Total

Component 1: Water Component 1: Water 150.87 13.53 164.4 145.40 13.53 158.93 46.00 35.56 81.56 160.58 49.11 209.69
supply and sanitation supply improvement

Component 2: Component 2: 8.80 0.67 9.47 3.13 0.67 3.80 1.49 0.00 1.49 4.22 0.00 4.22
Sewerage and Investment planning
drainage for sanitation and
drainage

Component 3: Component 3: 10.33 2.56 12.89 9.34 2.56 11.90 0.00 0.00 0.00 8.56 2.54 11.10
Institutional and Institutional capacity
Operational development and
Development and project management
Project Management support
Support

Total (US$ million) 170.00 16.76 186.76 157.88 18 16.76 174.63 47.49 19 35.56 83.05 173.36 20 51.65 225.01

Total (SDR million) 112.50 103.05 34.70 123.62

17 Based on CWASA Project Completion Report, December 2020

18 Data from the 2014 restructuring paper. At the beginning of the project, based on the applicable exchange rate, the IDA Credit of SDR112.5 million equaled US$170 million.
Due to variation in the SDR to US Dollar exchange rate, SDR112.5 million equaled US$172.36 million at the time of 2014 restructuring.
19 Data from AF Project Paper.
20 Ibid, p.6

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ANNEX 4. EFFICIENCY ANALYSIS

A. Economic Analysis

1. Following the approach adopted at appraisal, a benefit-cost framework using a “with” and “without” project
methodology has been used to reassess the economic viability at the completion for a total water supply
investment under Component 1 (including the both IDA financing and counterpart financing, covering more than
90 percent of the entire project costs). To remain consistent, no additional analysis was undertaken for the
sanitation and drainage investment planning and institutional capacity development components (component 2
and 3) for the ICR analysis.

2. The analysis was conducted based on the best available information on project status, which involves factual
project related data provided by the PMU, macro data on inflation, exchange rates gathered from WB and IMF
website, estimates of potential growth rates based on local conditions, and so on. For the purpose of
understanding the project’s impacts under a broader range of the variables, a sensitivity analysis was also
conducted at the ICR stage, using the same methodology as that for the appraisal.

3. While calculate the project costs and benefits, a time horizon of 25 years project life and a discount rate of
10 percent were used. Throughout the analysis, all the costs and benefits are valued in local currency in the
calculation. For most elements in the cost benefits analysis, it was assumed their economic value do not vary
much with their market prices. Therefore, market prices were applied directly in most cases.

Economic Costs

4. In the analysis, the economic costs of the project involve the capital investments for water production and
distribution, regular O&M costs for the new investments, and re-investment costs during the project life. The
detailed O&M and re-investment (mechanical and electrical equipment) costs for the new investments were not
available. To be consistent with the assumptions made at the appraisal, they were assumed to be 25 percent of
the annual operating expenses of the utility and 3 percent of capital costs respectively. The detailed project
expenditures by years as well as the annual O&M costs were provided by the Project Management Unit (PMU)
of the CWASISP. The economic costs are converted to a 2019 base year prices using the historical Bangladesh
Taka inflation rate deflators.

Economic Benefits

5. The main quantifiable benefits identified in the analysis include: (i) incremental consumption due to the
project: economic value of the project’s improvement in water access; (ii) non-incremental water that replaces
existing water production or supply, (iii) time cost saved by bringing water sources closer to the households, and
(iv) improvement in unaccounted for water with the rehabilitation of the piped network.

6. Incremental consumption due to the project. The economic value of improved water access was directly
computed from the incremental consumption, which consists of both increased consumption by those already
with access to piped water and those new consumers who have no access to piped water before the project. The
increased consumption was estimated by assuming that 35% of existing consumers would increase their
consumption after the new project. The volumes of the incremental consumption were assumed to grow over

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time and will reach the full capacity of the newly constructed systems by 2023 (assumption validated with CWASA
PMU). The incremental consumption was valued at the prevailing water tariff rates during the project life. But it
is important to recognize that the water tariff in Bangladesh is determined by both the willingness to pay and
people’s affordability, therefore is generally set at low levels.

7. Cost savings on non-incremental water. The values of the non-incremental water were estimated by
calculating the resources cost savings gained in replacing the water outside of pipe network (tube wells, bowsers,
etc.) with safer and more reliable water supply resulting from the project. According to the data provided by
CWASA, the costs of the alternative water sources are still significantly higher than the tariff charged by CWASA
for piped water in 2019. It was estimated that there are around 218,000 people purchasing water through bowser
and more than 1 million people rely on tube wells for water supply. These customers are readily replacing their
existing water source with the piped water. In the analysis, a conservative assumption that 50% of these
customers would switch to using piped water from the project (by 2023) was made.

8. Time cost saving by bringing piped water to households. Following the PAD, the benefits of time cost saving
is estimated by calculating the opportunity cost of labor or the income foregone in other income generating
activities that is benefits to the households and society. This is one of the most significant benefits from the
project. In Chittagong, large amount of people, no matter with or without water connections, still spend time to
access their daily water needs from stand posts, tube wells, or bowser water delivery. The project has established
around 13,300 water connections which would bring direct benefits to around 65,245 households. 21 It was
estimated that around 84,377 householders among the existing consumers could also benefit from the project
for time saving. The average daily household wage used to estimate the economic value of time saving were
updated to TK 900 based on the latest Bangladesh Household Income and Expenditure Survey (2016).22 The
estimation of the economic values for time saving had been reviewed and approved by the PMU of the CWASISP
during the ICR virtual mission.

9. Reduction in unaccounted for water. The project supported the rehabilitation and extension of the CWASA’s
distribution network. Following the PAD, it was assumed that project had contributed to 0.5 percent of
improvement in unaccounted for water. According to the data reported by the CWASA, the current level of
unaccounted for water (2019) was estimated at 27 percent, which is even higher than the value reported in 2008.
Although the unaccounted for water has not been improved after the project, it is considered that the
rehabilitation of the network still generated some levels of reduction in the losses of unaccounted for water.
Without the project, the level of unaccounted for water could be even higher. The savings on the unaccounted
for water were valued with the tariff rate on a yearly basis.

10. Other Benefits. in addition to the identified benefits, the project also brings significant indirect benefits, such
as: (i) savings in cost of medical care for water borne diseases, (ii) quality of life improvement, (iii) improvement
of overall productivity, etc. But as they are difficult to quantify, these benefits were not captured in the analysis.
Therefore, the estimation is very conservative for the true economic values of the investment.

Benefit-cost Analysis Results

21 It was assumed that each household would spend one hour on water collection before the project (for both new and existing
consumers).
22 The analysis adopted the reported average household wage in 2016 for urban area in the estimation for time cost savings,

which is around 22,565 TK per month/900 Tk per day. The labor costs in Bangladesh are continuously growing and therefore,
using the 2016-year data in the estimation for economic values of time saving is conservative.

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11. Updating the economic analysis with the value at the project closing, an economic internal rate of return
(EIRR) of 22.7 percent were generated with a net present value (NPV) of around 10.7 billion TK, indicating the
water supply investment is economically viable. The corresponding EIRRs estimated at appraisal and AF were
18.5 to 16.7 percent. The results also showed that the net benefits continue to grow over a longer period of time.
To further test the robustness of the analysis, a serious of sensitivity analysis was conducted. Even with a cost
overrun by 20 percent, the EIRR for the restructured project is estimated to be 19.3 percent. However, if the
O&M costs and reinvestment costs were increased by 30%, the EIRR would be reduced to 11.5 percent only. In
the case of a 20 percent decrease in claimed economic benefits, the EIRR was revised to 18.5 percent.

Subcomponent Appraisal AF ICR

Estimated EIRR (%) 18.5 16.7 22.7

Water Suppl
Investment NPV
5,531 - 10,761
(@ 10% net benefit discounted) BDT million

B. Financial Analysis of CWASA

12. Background. Financial analysis was prepared at appraisal to demonstrate that CWASA had a financial status
to carry the project implementation. The project was expected to bring sizable economic and social benefits to
the people of Chittagong. Financial profits and returns were not the main objectives of the project. At project
closure CWASA’s financial position was assessed to determine the project’s financial impact on the company’s
status.

13. Overall Profitability from Water Supply Operations. An assessment of total revenues and expenses from
water supply operations reveals that CWASA has maintained operational level profitability (earnings before
interest payment, income tax, depreciation, and amortization) throughout the review period except in the recent
year. The income after depreciation and interest has however declined over the period and is in recurring deficit.

Income Statement
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
(BDT millions)
Total Revenues 574 648 732 747 807 831 1,052 1,076 1,275 1,248
Total Expenses 351 385 498 589 623 744 973 1,069 1,215 1,359
EBITDA 222 263 233 157 184 86 79 6 60 -111
Depreciation 50 61 52 53 145 388 701 66 71 90
Interest 61 91 91 29 29 29 29 0 0 0
Income before tax 111 111 90 76 10 -330 -651 -60 -11 -201
Source: Audited Annual Reports (till 2016-17) and unaudited MIS reports (FY 2018-20) of CWASA

14. Core Operating Level Performance. While the total revenues have grown at a CAGR of 9 percent during FY
2010-2020, the core revenues from direct water sales have grown on average 11 percent and achieved total
increase at around 150 percent since FY 2010. The income from tubewell license fee has remained steady and
accounts for a lesser share of total revenues after the commissioning of the new water treatment plant.

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Operational Efficiency
2010-11 2011-12 2012-13 2013-142014-152015-16 2016-17 2017-18 2018-19 2019-20
(BDT millions)
Revenues
Revenues from sale of water 406 452 473 489 509 525 753 804 996 1,000
Tubewell license fee and other income 92 92 138 132 174 168 181 177 183 153
Interest income 75 105 121 126 123 138 117 95 95 95
Total revenues 574 648 732 747 807 831 1,052 1,076 1,275 1,248
Expenses
Operational expenses 206 228 332 419 450 477 594 1,069 1,215 1,359
Collection expenses 19 21 22 25 22 36 45 0* 0* 0*
Admin & general expenses 126 137 144 145 151 231 334 0* 0* 0*
Total Expenses 351 385 498 589 623 744 973 1,069 1,215 1,359
Income before depreciation and interest 222 263 233 157 184 86 79 6 60 -111
Operating cost coverage ratio (OCCR) 1.63 1.68 1.47 1.27 1.29 1.12 1.08 1.01 1.05 0.92
Source: Audited Annual Reports (till 2016-17) and unaudited MIS reports (FY 2018-20) of CWASA
*Note – Expenses towards collection, admin & general are not available separately in MIS reports and are accounted in operational
expenses.

15. While the core revenues from sale of water have grown at a rate of 11 percent, the expenses have increased
at 16 percent indicating concerns over future operating profit. The average operating cost coverage ratio (OCCR)
has seen a declining trend since 2010. As shown in the table below, the unbilled volume of water has increased in
the last years, which negatively impacted on the OCCR.

Unbilled Water 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Total Water Produced (million
68,431 63,721 64,800 63,806 63,125 62,442 89,549 104,146 119,197 128,662
litre/yr)

Total Water Sold (million litre/yr) 51,715 53,271 55,055 54,092 53,007 52,130 68,631 77,871 897,12 92,471

Unbilled Water 24% 16% 15% 15% 16% 17% 23% 25% 25% 28%

16. Water Tariffs. CWASA has been able to continue to revise water tariffs for residents by annually 5 percent
with higher increases in FY 2017 and 2020 of total 18 percent and 25 percent. The overall tariff level has increased
by 78 percent since FY 2010, with an average annual tariff increase of around 9%. This is above the average
inflation rate of 6.7 percent in the same period.

Water Tariff (BDT/ m3) 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Domestic 5.96 6.26 6.57 6.90 7.25 7.61 9.00 9.45 9.92 12.40
Tariff Increase 5% 5% 5% 5% 5% 18% 5% 5% 25%
Non-domestic 16.89 17.73 18.62 19.55 20.53 21.56 25.00 26.25 27.56 30.30
Tariff Increase 5% 5% 5% 5% 5% 16% 5% 5% 10%
Source: CWASA

17. Until FY 2017, the average water tariff levied was mostly falling short of the unit production cost. However,
due to the latest adjustments in the recent years, the average water tariff has now exceeded the unit production
costs.

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2010- 2011- 2012- 2013- 2014- 2015- 2016-

Tariff Sufficiency 2017-18 2018-19 2019-20
11 12 13 14 15 16 17
Expenses (excl. dep & int.) (BDT millions) 412 476 589 618 652 773 1,002 1,069 1,215 1,359
Total water produced (million litre) 68,431 63,721 64,800 63,806 63,125 62,442 89,549 104,146 119,197 128,662
Production cost (BDT/m3) 6.02 7.48 9.10 9.69 10.33 12.38 11.19 10.27 10.19 10.56
Weightage avg. tariff (BDT/m3) 7.05 7.41 7.77 8.16 8.58 9.00 10.60 11.76 12.05 14.35
Source: Audited Annual Reports (till 2016-17) and unaudited MIS reports (FY 2018-20) of CWASA

18. An assessment of revenue collection efficiency shows that CWASA has maintained an average collection
ratio of 94 percent. The collection efficiency reduction in FY 2020 is due to the impact of the COVID-19
pandemic as informed by CWASA.
Billing/ Collection
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
(BDT millions)
Billed Amount 406 448 473 489 509 533 813 925 1,088 1,199
Collected Amount 402 436 464 471 497 507 788 805 996 1,000
Collection Efficiency (%) 99% 97% 98% 96% 98% 95% 97% 87% 92% 83%
Source: MIS Reports of CWASA

19. Operational Sustainability. With the regular revisions of water tariffs over time, increased water sales,
and reasonable fee collection efficiency level, CWASA has overall maintained operational level profitability
except for the last year mainly due to COVID-19.

20. Financing. Long-term liabilities have increased significantly in the past seven years due to project
investments. The increase in debt, combined with low profitability, has weakened CWASA’s degree of solvency
when measured at the ratio of debt to equity.
Balance Sheet
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
(BDT millions)
Assets
Total Non-Current Assets 2,585 6,436 8,077 13,241 16,958 22,765 35,462
Total Current Assets 2,390 3,006 4,080 4,140 3,879 6,539 7,625
Total Assets 4,975 9,442 12,158 17,381 20,838 29,304 43,087
Liabilities & Equity
Total Current Liabilities 1,208 1,502 1,566 2,042 2,308 3,129 4,642
Long Term Liabilities 1,692 5,786 8,357 13,030 16,148 24,023 36,098
Total Liabilities 1,900 7,288 9,923 15,072 18,456 27,152 40,740
Total Equity 2,075 2,154 2,235 2,309 2,382 2,152 2,347
Total Liabilities & Equity 4,975 9,442 12,158 17,381 20,838 29,304 43,087

RATIOS 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Current Ratio 1.98 2.00 2.61 2.03 1.68 2.09 1.64
Quick Ratio 0.92 0.91 0.93 1.12 0.94 0.89 0.73
Debt Ratio 0.34 0.61 0.69 0.75 0.77 0.82 0.84
Debt Equity Ratio 0.82 2.69 3.74 5.64 6.78 11.16 15.38
Source: Audited Annual Reports of CWASA

21. Financial projections. With a new 143 million liters per day WTP (under JICA project) operation in 2021,
water production is expected to increase significantly. With average 9 percent increase in tariff and the steady

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proportional O&M expenses, operational sustainability in terms of OCCR is forecasted to return to above 1.1
in the coming years. However, CWASA will not fully be able to sustain its debt service obligations, which we
see a high increase from 2023.

Income Statement 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
(BDT millions) Actual Forecast
Revenues 1,065 2,064 2,245 2,443 2,830 3,080 3,352 3,649 3,972 4,324
Revenues from direct sale of
1,000 1,998 2,178 2,374 2,760 3,009 3,280 3,575 3,897 4,247
water
Other revenues (excl.
65 66 67 69 70 71 73 74 76 77
tubewell)
Opex 1,359 1,864 1,999 2,144 2,300 2,468 2,649 2,845 3,056 3,283
Personnel Cost 421 455 491 531 573 619 668 722 780 842
Electricity 494 733 774 818 863 912 963 1,017 1,074 ,1134
Chemicals 68 101 106 112 119 125 132 140 148 156
Other operating cost 284 440 484 532 585 644 708 779 857 943
Other O&M 91 135 143 151 159 168 178 188 198 209
EBITDA -294 200 247 299 531 612 703 804 916 1,041
Depreciation 1,283 1,299 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315
EBIT (1,577) (1,099) (1,068) (1,016) (784) (703) (612) (511) (399) (274)
Less Interest 128 212 220 3106 518 502 486 471 455 439
EBT (1,705) (1,311) (1,288) (4,122) (1,302) (1,205) (1,099) (982) (854) (714)
Less tax 0 0 0 0 0 0 0 0 0 0
EAT (1,705) (1,311) (1,288) (4,122) (1,302) (1,205) (1,099) (982) (854) (714)

Sustainability 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
(BDT millions) Actual Forecast
Cash flow for debt service -294 200 247 299 531 612 703 804 916 1,041
Debt service commitment 431 699 736 4,673 2,085 2,069 2,054 2,038 2,022 2,007
DSCR - 0.29 0.34 0.06 0.25 0.30 0.34 0.39 0.45 0.52
OCCR 0.92 1.11 1.12 1.14 1.23 1.25 1.27 1.28 1.30 1.32

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ANNEX 5. IMPLEMENTING AGENCY COMMENTS

Thanks for a comprehensive ICRR on CWSISP. Almost all issues are addressed in this report. However, we want
to highlight two more issues given below:

1. Additional loading to CWSISP due to inclusion of investments resulting from integration & coordination
between WB-financed and JICA-financed investments in the CWASA Network :

The interfaces with the JICA funded projects (KWSP-1 and KWSP-2) were very important in 2013. Without an
urgent intervention, it was likely that KWSP-1 water could not be managed & controlled when it came on line
in 2016/2017, simply because the majority of the extra water was leaked away. Furthermore, the JICA
supported projects assumed that all the water production from Karnaphuli WTP was directed to a dedicated
area in central Chittagong, called the “KSA” area. The intention of JICA project was that this area eventually
will be isolated from the other areas of the CWASA Network.

In view of this scenario, during 2013, in partnership with CWASA, WB provided technical assistances to
prepare and calibrate a hydraulic model of the complete water supply network in Chittagong. The hydraulic
model was used as basis for an overall analysis of the water supply system, to divide the system into sectors
and subsequent proposals for interventions. These interventions were the so called “No Regret Investments”.
The purposes of the “NR” Investments were (as described in “Short Hydraulic Study – Rehabilitation Plan,
December 2013) on how to control and reduce the water loss defining necessary steps to ensure that the
network capacity was sufficient to supply the increased water production and to create water supply
provisions to the outside area of KSA when it will be isolated. This hydraulic study incorporated additional
pipelines to allow the KWSP-1 water to be distributed as uniformly as possible through the existing network
and to limit the leakage as well.

CWSISP were pressed to include above infrastructure investments for distributing safe water, coupled with
the rehabilitation of water distribution network which was not the case at the inception stage of CWSISP.

The above-mentioned integration & coordination between WB-financed and JICA-financed investments in the
CWASA Network had increased the project cost & time.

2. Poor performance of the design and supervision consultant of Package S3

The consultant’s JV of Grontmij-DHI performance was also greatly impacted the progress of the project. Due
to limited presence of foreign key staffs specifically team leader & water /civil engineer since the inception,
the consultant was mostly relied on poor staffing of their sub-consultants, Aqua. For this reason, the project
was suffered delay. PMU had issued many letters to the consultant indicating their poor performance.
However, no improvement was noticed by CWASA. Furthermore, preparation of bid documents by the
consultant with some unclear technical issues, terms & conditions were also added many complexities during
implementation stage.

The above issues may be highlighted somewhere in key factor during implementation or in lessons learned or
in other part of ICRR. Among other factors, we have highlighted these two issues as the project had delays &
cost increase during design & implementation of the investments. We do not have any other comments on

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ICRR. Thanks for your efforts to CWSISP.

Kind regards,
Mohammed Ariful Islam
Project Director
CWSISP, CWASA
Chittagong, Bangladesh.

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ANNEX 6. CALCULATION OF SPLIT RATING

Since the PDO and outcome targets were formally revised, split rating is applied for the calculation of the
overall outcome rating of this project. While single rating is provided for relevance and for efficiency
throughout project lifetime, the rating for efficacy is separately provided taking into consideration the
achievement of the original PDO and the revised PDO. The overall rating is weighted against actual
disbursement prior and after the formal revisions.

The IDA disbursement against the original project was US$6.98 million (SDR4.55 million) before PDO revision
in April 2014, and US$124.80 million (SDR89.38 million) after PDO revision. 23 The disbursement under AF was
US$29.49 million (SDR21.21 million). This brought total disbursement to US$161.12 (SDR115.14 million) and
4.33 percent of total actual disbursement was achieved prior to the PDO revision. Rating of the overall
outcome is undertaken as per table 1 below:

Table 1: Overall rating of outcome

Without restructuring With restructuring

Relevance of objective Substantial
Efficacy (PDO) Modest High
Efficiency Modest
1 Outcome ratings Moderately Unsatisfactory Moderately Satisfactory
Numerical value of the
2 3 4
outcome ratings
US$154.29 million (US$124.80
3 Disbursement US$6.98 million
million + US$29.49 million)
4 Share of disbursement 4.3% 95.7%
Weighted value of outcome
5 0.13 3.83
rating
Moderately Satisfactory
6 Final outcome rating
(0.13 + 3.83 = 3.96)
*Note: Highly Unsatisfactory (1); Unsatisfactory (2); Moderately Unsatisfactory (3); Moderately Satisfactory (4);
Satisfactory (5); Highly Satisfactory (6)

23 Based on actual disbursement extracted from the portal.

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ANNEX 7. ENVIRONMENTAL AND SOCIAL SAFEGUARD MANAGEMENT

Environmental Management

Introduction

1. The environmental (including safeguards) program in the CWSISP was defined in the PAD as the
implementation of the EMF (Environmental Management Framework); as details of the sub-projects in
the CWSISP were not known in detail at the time of the project preparation. The EMF provided the general
policies, guidelines, codes of practice and procedures for the management of environmental issues to be
integrated into the implementation of the project. More specifically, the objectives of the EMF were:
• To establish clear procedures and methodologies for the environmental review, approval and
implementation of subprojects to be financed under the Project.
• To specify appropriate roles and responsibilities, and outline the necessary reporting procedures,
for managing and monitoring environmental concerns related to subprojects.
• To determine and implement the training and capacity building needed to successfully implement
the provisions of the EMF; and
• To establish the project funding areas required to implement the EMF requirements.

2. The initial plan was quite ambitious; which included (i) technical assistance for environmental
analysis and GIS mapping, (ii) provision for goods and equipment including laboratory equipment, fixtures,
and spares, (iii) chemicals / consumables, office equipment and book / journals, (iv) environment
management / safeguards related training and workshops, (v) provision of additional floor space for the
CWASA central environment laboratory, and (vi) a knowledge component for a study to determine the
potential for sustainable non-saline water production and recharge mechanism groundwater aquifers in
the Halda basin. However, things did not quite happen as planned. The report on the activities in the
environmental component that actually happened during the project period are given below along with
the lessons learned.

Description of the Environmental safeguards related Activities during project period

3. Environmental Impact Assessment (EIA) for Modunaghat WTP. The site clearance certificate from
the Department of Environment was issued for the Modunaghat WTP in December 2013, based on the
Initial Environment Examination document prepared in-house by the CWASA. An EIA report for the plant
was also drafted in-house by the PMU and shared with the Bank team. The document was up-graded by
the Institute of Water Modelling, Dhaka for compliance with World Bank OP4.01 by incorporating impacts
of water withdrawal and on fisheries in Halda river. The ESIA document received clearance from the World
Bank Regional Safeguards Advisor in September 2014 and it was also cleared by Department of
Environment .

4. EIA for pipelines contracts. This document was also prepared by the Institute of Water Modelling,
Dhaka. As the larger diameter pipes (diameter>315 millimeters) were to be laid in the right-of-way of the
roads (that is, for contracts W4, W7 and W8) using open trench method, a provision for prompt temporary
restoration of the roads to pliable condition was included in the ESIA as recommendation. This provision
was included in the same works contract for pipelaying. The restoration consisted of a 20 centimeters
layer of macadam consisting of 75 percent stone chips and 25 percent sand and completed with a layer

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of bricks on top. This reduced the suffering of the road users, albeit at the slightly increased cost. These
works were included in the bill of quantities of the contract. Usually, the road restoration after damage
by project activities are left to the City Corporation, as it charges the project for the road damage.
Unfortunately, this causes unnecessary sufferings for the road users, as restorations are not done with a
defined timeline. During inspection after work completion, people were found driving on the repaired
section of the road in many cases, as other section deteriorated badly.

5. Implementation of safeguards measures during construction. The implementation of the

safeguard measures was the responsibility of the contractors, with supervision by the PMU. The Bank
team observed the implementation during ISR missions, through site visits. The safeguard measures
implemented at the construction sites of Madunaghat WTP (W1) and Kalurghat Booster Pump station
(W7) were found to be satisfactory. Workers were found working with PPE (for example, boots and hard
hats, and the like) and the sites were found to be reasonably tidy. The Modunaghat site was found to be
not too dusty even during dry seasons, due to water spray on the exposed grounds and unpaved streets.
There were no reported incident of injuries. The workers’ accommodations were found to be reasonably
hygienic. NJS consultants and its local HICC were responsible for SG work at Modunaghat and Kalurghat
sites; and a manager was appointed to implement the EHS/OHS issues.

6. Capacity building. The ESMF prepared during the project preparation identified gaps and
weaknesses in different areas including institutional capacity of CWASA. The remedial measures to
address these gaps were planned and budget provisions were made to implement the plan. CWASA was
to set up an environment cell to address the environmental issues. The specific components of this plan
to support included (i) technical assistance for environmental analysis and GIS mapping, (ii) goods and
equipment including laboratory equipment, fixtures, and spares, (iii) chemicals / consumables, office
equipment and book / journals, (iv) environment management / safeguards related training and
workshops, (v) provision of floor space for the CWASA central environment laboratory, and (vi) finally a
knowledge component (that is, a safeguards plus activity) on the study of the water resources in the
Karanafuli-Halda basin including groundwater hydrology for aquifers near the Halda River; to determine
the potential for sustainable non-saline water production in the Modunaghat WTP.

7. Most of the sub-components could not be implement due to various reasons, which are discussed
here in brief. Management apparently didn’t see the need for an environment unit in the system and
project related activities were managed through additional assignments to existing staff. To develop a
central analytical laboratory in the CWASA, the hiring of a consultant to prepare plan for the laboratory
and evaluate the requirements of necessary equipment for the laboratory was initiated; and even a
contract was signed but management approval could not be obtained. The resources allocated for the
laboratory including for laboratory floor space lapsed. The training program also did not make any
headway.

8. Water resources study. A potential major threat to Modunaghat WTP operation is the rising
salinity of the source water from the Halda River during the dry season (i.e., January to May) which is to
be used for CWASA’s new WTP for drinking water under the project and others as well. Contingency plans
must be prepared based on realistic assessment of all potential low salinity raw water sources for blending
during high-salinity periods, which are likely to increase with time as per available information. This study
was conducted on contract jointly by the Institute of Water Modelling, Dhaka and by the Bangladesh
Atomic Energy Commission, Dhaka. The Bank team provided strong support to the study though

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comments on interim reports and through discussions from time to time. This study is a so-called
safeguards plus study and not part of routine safeguards work.

9. Based on modelling simulation of flow in the Karnafuli-Halda river system, the potential options
for salinity management at the intake of WTPs on Halda river were evaluated. The study results indicate
that interventions affecting the seasonality of flow from Kaptai dam on Karnafuli river, the salinity at the
WTP intakes on Halda can be maintained at desired levels for all the current and planned water
withdrawals up to 2030. To this end interactive water release from the dam based on salinity information
will be needed and some adjustments of the rule curve for dam operation can help achieve this. GOB has
now acted by instructing the Kaptai dam authority to release enough water and keep two generators
running at all times.

10. The groundwater part of the study has identified a well-field area for 60 MLD production capacity
near Modunaghat for low salinity groundwater, which is likely to remain salt free. The report provides
logging data (i.e., Gamma ray, Spontaneous Potential and Resistivity) with orientations of lithologies for
some of the exploratory wells. The analyses of the data to find the aquifers boundaries and groundwater
quality have also been provided. The borehole logs reflect the lithological units in the boreholes. The
gamma logging has identified the position of aquifer and clay boundary in the boreholes.

11. These studies are an important works including generation of primary baseline data and the
findings will have potential use for many years to come. If these studies are locked in the CWASA archive,
these may never be used. Thus, the findings should be published, so that knowledge garnered remains
accessible for future use.

Lessons learned

12. The routine safeguards activities in the project were implemented in the project through inclusion
in the contract provisions by including these in the contract bill of quantities. However, the
implementation of the “Capacity Building and Technical Assistance” part of the environmental activities
was poor and most of the resources allocated for the purpose could not be utilized. The implementation
experience in the project shows that the agreement at the project preparation phase, cannot be
implemented without continuing commitment on the part of the management. Personnel changes at the
management level is often the reason. It usually happens that the persons who were involved in project
preparation and persons involved in the implementation phase are not the same. Due lack of
communication between the two groups, the commitments at the preparation stage are not transmitted
to the persons involved in the implementation and the implementation group may also have different
perception on the environmental issues. At the present time in Bangladesh, most people involved in
project management (that is, not only in the CWASA) are unaware of the value addition that comes from
the implementation of environmental measures. To remedy the situation peer to peer learning for the
management personnel through visits and participation in knowledge activities were proposed from the
Bank team, but without much success. So, it appears that without commitment from the higher-level
management in an organization, substantive environmental agenda in a project can’t be implemented.

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Management of Social Safeguard Issues

Introduction

13. The Chittagong Water Supply and Sewerage Authority (CWASA) undertook the Chittagong Water
Supply Improvement and Sanitation Project (CWSISP) with the objective to increase sustainable access to
safe water supply and improved sanitation, as well as to support establishment of a long-term water
supply, sanitation and drainage development and operational management program in the Chittagong
metropolitan area. During project preparation the Chittagong metropolitan area population was
estimated to be 3.8 million, and about 45,000 of the households were directly connected to treated piped
water by the CWASA. 24 The largest proportion of the metropolitan households were dependent on
shallow tube wells. But the underground water often contains high levels of salt and iron (and possibly
arsenic in some locations), that pose health risks to the public.

14. To improve the situation the project was designed to address the various 25 institutional and
management issues within CWASA, and undertake development of water supply infrastructures by
building a new WTP at Madunaghat for the water drawn from the river Halda; renovation/improvement
of the Kalurghat and Patenga Booster Stations; as well as rehabilitation / extension of the water
distribution networks by installing new transmission pipelines from the treatment plant into the selected
parts of the city. On a pilot basis the project also provided piped water supply to six selected urban slums.
Among the proposed capacity building measures, there was one to support management of the
environmental, and social safeguard aspects like land acquisition and resettlement. The project went into
implementation in October 2010.

Social Safeguards Implications

15. Based on review and screening of the proposed activities, the project was designated as Category
B, which is consistent with the provisions of OP/BP 4.01 on Environmental Assessment. As to social
safeguards, the possible sources of impacts were routing of the main supply pipelines to the city, and the
extension and rehabilitation of the distribution network along with the Kalurghat and Patenga Booster
Stations and construction of the new WTP at Maduna Ghat. It was also possible that routing of the

24 It was actually unknown how many households were there in the Chittagong metropolitan area. But according to an estimate

by Chittagong City Corporation (CCC), which is a part of Chittagong metropolitan area, there were some 600,000 households
within its jurisdiction. This meant that the number of households in Chittagong metropolitan area was much larger and piped
water supply was available to a very small proportion of the households. In any case, the largest proportion of the households
living in the Chittagong metropolitan area were dependent on shallow tube wells. To make the situation worse, the quality of
the underground water is questionable, with high salt and iron levels (and possibly with arsenic contamination at some wells),
posing health risks to the public.

25 Initially the project proposed to implement this subcomponent in 32 LICs. But it became gradually apparent that CWASA did

not have the experience required to manage the work at the community level. At restructuring of the project after the mid-term
review in 2014, the initial target was drastically reduced to eight LICs. To implement the program CWASA signed memorandum
of understanding with three NGOs (DSK, PSTC and SUIT) which already had the experience of working with the selected LICs. As
planned, the NGOs established the CBOs and Water User Monitoring Groups (WUMG), facilitated CWASA’s access to the sites to
install the necessary infrastructure. On its part, CWASA would monitor water quality; install and read the master meters; address
any mechanical and technical issues that might arise during operation; and collect tariff from the WUMG representatives. This
intervention would help CWASA mainstream some 4,461 households with an estimated population of 16,640 low-income
residents into its customer base. As seen during visit of the slums near the Foy’s lake, the beneficiary communities and the CBOs
appeared to be quite happy with the services. Reportedly, women accounted for majority of the CBOs members.

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pipelines, which would follow the existing road alignments, could affect the roadside small businesses --
many of which might have encroached into the public lands – as well as small traders operating in the
open on the sidewalks and road shoulders.

16. Considering these possibilities, the project triggered the OP/BP 4.12 on Involuntary Resettlement
and CWASA prepared a Resettlement Policy Framework (RPF) which was consistent with the provisions of
Bangladesh land acquisition ordinance and the Bank’s OP/BP 4.12. The RPF contained resettlement
principles and guidelines; definition of project-affected persons (PAPs); impact identification criteria and
mitigation measures and standards, plus a Grievance Redress Mechanism (GRM) with guidelines for the
hearing process and specification of memberships for the Grievance Redress Committee (GRC). The RPF
provided the basis to identify the adverse impacts, and prepare and implement Resettlement Plans /
Abbreviated Resettlement Plans (RPs / ARPs) if and where a subproject caused adverse impacts on the
people.

17. According to the Social Assessment undertaken during project preparation, there were no peoples
in the subproject localities who belonged to the Small Ethnic Communities (akin to the Bank’s Indigenous
Peoples) living in settlements or in any manner that could be distinguished from the mainstream peoples.

Social Safeguard Impacts and Mitigation

18. There was no need for private land acquisition, or resumption of public lands from authorized /
unauthorized private uses. The WTP at Maduna Ghat has been built on a parcel of land adjacent to
Chittagong-Kaptai road and the river Halda. A part of the site was khas (under the Ministry of Land) and
the rest belonged to the BWDB, under the Ministry of Water Resources), but remained unused for years.
CWASA obtained the lands, which were free of private uses and any other encumbrances, through inter-
governmental transfer. The extension / renovation works at Kalur Ghat and Patenga Booster Stations were
all carried out within its existing compounds.

19. The water transmission pipeline from WTP at Maduna Ghat to the BPS and then to the selected
parts of the city were laid in manners to minimize disruption to the various business activities along the
roads including various small-scale trading activities conducted in the open on sidewalks and road
shoulders. Depending on actual situation on the ground, transmission pipes were laid either by the
sidewalks and / or dividers in the middle of the roads. At some stretches of the roads, sidewalk traders
had to move temporarily to nearby locations where civil works were already completed -- without having
to lose their livelihood income. They returned to the previous locations after completion of the civil works.
The project as a whole temporarily displaced two small businesses housed in two small makeshift
structures from the road shoulder affecting three (one was a tenant) households. As required, CWASA
prepared and implemented an Abbreviated Resettlement Plan which was cleared by the Bank’s Regional
Safeguard Advisor.

20. It is important to note that CWASA/contractors laid the transmission pipelines at night to ensure
least inconveniences to the roadside businesses and residents, as well as to the pedestrian and vehicular
traffic. The civil works for laying the pipelines generally began around 11:00 pm and ended around 6:00
am after the roads were restored / cleared to an extent to allow pedestrian and vehicular movement. It
is also to be noted that CWASA published notifications in the local newspapers and distributed leaflets

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about the work schedule to the people who lived and operated businesses in the vicinity of the individual
worksites.

21. In the wake of Covid-19 outbreak, the CWASA suspended all construction / civil works at all
worksites and restarted the work in a limited scale with local workers in the middle of June 2020 after the
lockdown was withdrawn. As a measure for worker safety, CWASA instructed the contractor to use one
of its vacant stockyards to set up additional labor camps and provide all amenities as suggested in the
Bank’s interim guidance notes. The workers and project staff were tested twice a day for temperature
and other symptoms as they came to the worksites, and before they returned home after the day’s work.
Reportedly, while the guidelines about washing hands, using face masks, and the like were followed, the
practice of “social distancing” turned out to be very difficult. The very nature of the works often required
the workers to be in close proximity of one another.

Lessons Learned

22. Without a need for private land acquisition and resumption of public lands from private uses,
CWASA’s overall performance with social safeguard compliance requirements has always been rated
satisfactory. But there are some issues that should be noted as lessons for use in similar (possibly more
complex) projects in the future. Some of the lessons that have been learned are as follows:

• Nightly Work. Implementation of the construction / civil works at night was a pragmatic decision to
ensure least inconveniences to roadside businesses and residents, and to pedestrian and vehicular
movement. Publication of work schedule in the local newspapers and distribution of leaflets to the
local residents and businesses were also helpful for gaining confidence of the local communities.
• Lack of Awareness. Although an SIA and a RPF were prepared for the project, there was a clear lack of
awareness and understanding about their contents and implications. The PMU did not have a
professional like social development specialist to formally confirm if a particular subproject or the
activities included in a Contract package would involve any safeguard and other social issues that were
to be addressed prior to the contract package was cleared by the Bank.
o In this respect, it is important to note that the project authority itself is responsible for
identification of adverse social impacts, and preparation and implementation of the required
mitigation measures. In the absence of inhouse expertise, services of an experienced social
development specialist were absolutely necessary.
o Additionally, to raise awareness each of the consultants preparing the Feasibility Study, ESIA
/ SIA, and RPF should be required to prepare brief notes on social issues, including safeguards,
and formally present them to the PMU and others who would be involved in project
implementation, explaining what are to be done to fulfill the Bank’s safeguard compliance
requirements.
• Land Availability. Although the WTP at Maduna Ghat used public lands, the portion that belonged to
the BWDB took a long time to conclude the inter-governmental transfer. As also seen under some
other projects, such transfers often caused delays where the required public lands were not under
the Ministry of Land. It is imperative that the project authorities find ways to avoid such delays caused
by inter-governmental transfers. It is important that the implementing agency has all the required
lands – to be obtained thru transfers and acquisitions -- under its ownership at project appraisal stage.
• Grievance Redress Mechanism (GRM). The project adopted a GRM and formed a Grievance Redress
Committee (GRC) to address grievances / complaints from individual project- affected persons and

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other stakeholders, about any irregularities in application of the RPF stipulations. But the project
beneficiaries were unaware of the GRM and the redress process that the GRC would have to follow.
GRM was not a notable topic at community consultations undertaken during preparation of the SIA.
As a critical component of citizen engagement, GRM should receive widespread publicity in the
project localities.
• Review of Terms of Reference. Starting with terms of reference for feasibility study, the Bank should
review all terms of reference to ensure that all social issues, including safeguards, are studied in depth
not only to fulfill the ESF requirements, but also to identify the operational difficulties during
implementation. As noted above, the TORs should include preparation of brief notes to be presented
to the PMU and others explaining the social issues that are expected to arise under the project.

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 The World Bank
BD Chittagong Water Supply Improvement and Sanitation Project (P103999)

ANNEX 8. FIDUCIARY COMPLIANCE

Shortcomings in financial management compliance included:

• There were initial delays in submission of quarterly Interim Un-audited Financial Report (IUFR) in few
occasions due to turn over of Financial Management Specialist (FMS) in the PMU. Later, in-house capacity
was built to ensure timely submission of IUFRs.
• Annual external audits for the project were conducted on a regular basis and audit reports were duly
submitted to the Bank for review. However, there are still some pending audit observations which need
to be resolved with the auditors.
• No internal audit was conducted during the first three year of the project as internal auditor was not
available until after MTR. Upon Bank’s recommendations, a chartered accountant firm was hired to
undertake internal audit. The firm has submitted the Internal Audit report at the far end of the project. It
was advised that the recommendations of the internal audit report be taken forward in the follow up
project so as to improve risk management and control.
• There was a lag in submission of annual the CWASA entity audit during the first four years of
implementation. During the later years, with the persuasion of the Bank’s Task Team, the initial lag of four
to five years has been brought down to one year which is a remarkable progress in addressing institutional
capacity development. This thrust for timely completion of entity audit report should be followed up in
the ensuing project as well.
• There was two-year delay in setting up the Project Audit Committee who was tasked to review the audit
reports.

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