Maldives: Tsunami Emergency Assistance Project

Transcription

1 Completion Report Project Number: Loan Number: 2160-MLD(SF) Grant Number: 0001-MLD December 2009 Maldives: Tsunami Emergency Assistance Project

2 CURRENCY EQUIVALENTS Currency Unit rufiyaa (Rf) At Appraisal At Project Completion 31 March August 2008 Rf1.00 = $ $ $1.00 = Rf12.80 Rf12.80 ABBREVIATIONS ADB Asian Development Bank EIRR economic internal rate of return EMM Extended Mission to the Maldives IA implementing agency JFPR Japan Fund for Poverty Reduction MOFT Ministry of Finance and Treasury PCR project completion report PMU project management unit RRP report and recommendation of the President SDR special drawing rights TA technical assistance UNDP United Nations Development Programme NOTES (i) (ii) The fiscal year (FY) of the Government and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 31 December In this report, "$" refers to US dollars.

3 ii Vice-President X. Zhao, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Directors K. Higuchi, Transport and Communications Division, SARD T. Kandiah, Energy Division, SARD H. Kim, Urban Development Division, SARD T. Matsuo, Agriculture, Natural Resources and Social Services Division, SARD B. Carrasco, Country Coordination and Regional Cooperation Division, SARD Team leader A. Jeffries, Senior Energy Specialist, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 CONTENTS Page BASIC DATA MAP ii ix I. PROJECT DESCRIPTION 1 A. Introduction 1 B. Rationale for Project 1 C. Main Objective 2 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 11 D. Disbursements 11 E. Project Schedule 11 F. Implementation Arrangements 12 G. Conditions and Covenants 13 H. Related Technical Assistance 13 I. Consultant Recruitment and Procurement 15 J. Performance of Consultants, Contractors, and Suppliers 16 K. Performance of the Borrower, Executing Agency, and Implementing Agencies 16 L. Performance of the Asian Development Bank 17 III. EVALUATION OF PERFORMANCE 18 A. Relevance 18 B. Effectiveness in Achieving Outcome 18 C. Efficiency in Achieving Outcome and Outputs 19 D. Preliminary Assessment of Sustainability 21 E. Impact 21 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 21 A. Overall Assessment 21 B. Lessons 22 C. Recommendations 24 APPENDIXES 1. Design and Monitoring Framework Project Costs and Financing Plan Allocation, Contract Amounts, and Actual Disbursements Project Implementation Schedule Project Organization Structure Status of Compliance with Loan Covenants Summary of Contract Details Economic Analysis 49

5 ii BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Grant Number 4. Project Title 5. Borrower Maldives 2160-MLD(SF) 0001-MLD Tsunami Emergency Assistance Project Republic of the Maldives 6. Executing Agency Ministry of Finance and Treasury (MOFT), National Disaster Management Center, and responsible line ministries (i.e., Ministry of Housing, Transport and Environment for water supply, sanitation, and solid water management; power; and transport sectors; and Ministry of Fisheries and Agriculture for fisheries and agriculture sectors). 7. Amount of Loan 8. Amount of Grant 9. Technical Assistance (3) 10. Project Completion Report Number B. Loan Data 1. Appraisal Date Started Date Completed 2. Financing Negotiations Date Started Date Completed SDR1.188 million ($1.77 million equivalent); $20.0 million (from the Asian Tsunami Fund) $1.65 million PCR: MLD 1134 Fact-finding in February 2005 was upgraded to appraisal during the Management Review Meeting. 25 February February Date of Board Approval 31 March Date of Signing Financing Agreement 5. Date of Loan and Grant Effectiveness In Loan and Financing Agreement Actual Number of Extensions 6. Closing Date In Loan/Financing Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) 21 April May May September 2007 Project completion: 31 August 2008 (final closing pending finalization of accounts) 2 1% per annum, and repayment of principal at 2% per annum for the first 10 years after the grace period, and 4% per annum thereafter. 40 years 10 years

6 iii 8. Terms of Relending Not applicable. 9. Disbursements a. Dates (Loan) (Grant) (Loan and Grant) Initial Disbursement 31 May October 2005 Effective Date 23 May 2005 Final Disbursement 8 February 2006 (still to be determined) Original Closing Date 30 September 2007 Time Interval 8 months (still to be determined) Time Interval 28 months Cat. No. b. Amount (Loan) 1,188,000 1,800,000 (in SDR) (US$ equivalent) Category or Subloan Original Allocation Partial Cancellations Last Revised Allocation Amount Disbursed Undisbursed Balance a [1] [2] [3] [4] = [3] - [5] [5] [6] [7] = [5] - [6] Quick Disbursing Component 1,188, ,188,000 1,188,000 0 Total (in SDR) 1,188, ,188,000 1,188,000 0 Total ($ equivalent) 1,800, ,774,183 1,774,183 0 a b c d e Cat. No. (Grant) 20,000,000 20,000,000 (in US$) (US$ equivalent) Category or Subloan Original Allocation Partial Cancellations Last Revised Allocation Amount Disbursed Undisbursed Balance a [1] [2] [3] [4] = [3] - [5] [5] [6] [7] = [5] - [6] Quick Disbursing Component 4,700, ,700,000 4,700, Equipment and Materials 9,640,000 1,424,000 8,216,000 4,412,662 3,803,338 2 Civil Works 3,860,000 (471,000) 4,331,000 5,519,403 (1,188,403) 3 Extension Services 1,000,000 85, ,000 22, ,138 4 Consulting Services 800,000 (1,038,000) 1,838,000 1,725, ,896 Total (in USD) 20,000, ,000,000 17,872,452 2,127,548 Total ($ equivalent) 20,000, ,000,000 17,872,452 2,127,548 a b c d e a For final cancellation after final reconciliation of imprest account balance. ( ) = negative a = US dollar equivalent according to the report and recommendation of the President b = US dollar equivalent as of the date of approval of the cancellation c = d + e d = actual US dollar equivalent; disbursed amount included the unliquidated imprest advance of $1,492,421. e = US dollar equivalent at the time of report preparation.

7 iv 10. Local Costs (Financed) - Amount ($ million) Percent of Local Costs 31.77% - Percent of Total Cost 26.62% C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost Total Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed ADB Financed Total ADB = Asian Development Bank.

8 v 3. Cost Breakdown by Project Component ($ million) Component Appraisal Actual Foreign Local Total Foreign Local Total A. ADB Financing 1. Quick-Disbursing a. Grant Financing b. Loan Financing Project Components (Grant Financing) a. Equipment and Materials i. Water Supply, Sanitation, and Solid Waste Management ii. Transport iii. Power iv. Fisheries v. Agriculture b. Civil Works i. Water Supply, Sanitation, and Solid Waste Management ii. Transport iii. Power iv. Agriculture c. Extension Services i. Fisheries ii. Agriculture d. Consulting Services Subtotal (A) B. Government Financing a 1. Administrative Expenses a. Water Supply, Sanitation, and Solid Waste Management b. Transport c. Power d. Fisheries e. Agriculture Taxes and Duties a. Water Supply, Sanitation, and Solid Waste Management b. Transport c. Power d. Fisheries e. Agriculture Beneficiaries b Subtotal (B) Total Project Cost ADB = Asian Development Bank. a Actual costs were not available. b Beneficiary contribution will be in kind, covering labor costs for civil works.

9 vi 4. Project Schedule Item Appraisal Estimate Actual A. Date of Contract with Consultants 1. Contract Date 2. Completion April 2005 June 2007 May 2005 March 2007 B. General Milestones Establish project management unit April 2005 Requirement waived. Subproject management by sector line ministries agreed by ADB Select four projects in each subsector May 2005 Complete survey and design, prepare cost estimates and bidding documents May 2005 July 2005 C. Component Milestones Water, Sanitation, and Solid Waste Management Conduct detailed assessment of damage to May 2005 September 2005 environmental structure Complete bidding and contract awards May June 2005 June 2006 (for Guraidhoo Island), and March October 2007 (for Kulhudhuffushi Island) Construction, delivery, and installation July 2005 March 2007 Guraidhoo Island sewer was completed by June 2008 Transport Complete bidding and contract awards May June 2005 Only Dhidhdhoo Island s harbor was done, bidding by April 2007, and Rehabilitate damaged maritime navigation aids, provide emergency interisland transport capacity for reconstruction works, and dredge and repair causeways Rehabilitate damaged jetties, repair sea and quay July-December 2005 July 2005 December 2006 award by June Dhidhdhoo Island s harbor completed by June Other works completed by other donors. walls, and rehabilitate Male airport Power Survey and detailed design May 2005 November 2005 Complete bidding and contract awards June 2005 April 2006 Construction, delivery and installation July 2005 March 2007 July 2006 August 2008 Fisheries Identify cottage processors March 2005 Needs assessment: May September 2005 Prepare guidelines for community-based organization operations May 2005 September 2005

10 vii Select community-based organizations and island June 2005 October 2005 development committees Complete bidding and contract awards May June 2005 Fisheries kits: November 2005 July 2006 Item Appraisal Estimate Actual Supply and deliver equipment July December 2005 Training: March December 2007 Distribute cash grants to community-based organizations July December 2005 ADB did not agree to cash grants. Distribute microcredit to beneficiaries July December 2005 June 2007 August 2008 Agriculture Identify affected farmers May 2005 July November 2005 Select community-based organizations and island June 2005 December 2005 development committees Complete bidding and contract awards May June 2005 For infrastructure works: January 2008, canceled Supply and deliver equipment July 2005 March 2007 June September 2007 Distribute cash grants to community-based organizations July December 2005 ADB did not agree to cash grants. Distribute microcredit to beneficiaries July December 2005 June 2007 August 2008 D. Other Milestones Reallocation of funds 10 November 2006 (all sectors) 30 October 2007 (agriculture component); 17 Jul 2008 (energy component) First extension of loan and grant closing date Second extension of loan and grant closing date Final cancellation of undisbursed loan and grant balance 29 January June 2008 (pending final reconciliation of imprest account balance) 5. Project Performance Report Ratings Development Objectives Ratings Implementation Progress Implementation Period From 31 March 2005 to 31 December 2005 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 August 2008 Satisfactory Satisfactory

11 viii D. Data on Asian Development Bank Missions Name of Mission Division Date No. of Persons No. of Person- Days Specialization of Members a Fact-Finding 3 10 February a Appraisal (Fact-finding was upgraded to appraisal at the Management Review Meeting) Inception b SANS 3 9 May a, g Inception SAOC May a, b, c, d, e, f, g Disbursement SAEN June a, h Mission Review 1 SANS 9 12 August a Review 2 b SAOC 29 August I September 2005 Review 3 b SAEN 20 September a, g, j October 2005 Review 4 SAUD 6 14 November 3 24 a, g, k 2005 Review 5 SATC November 1 2 a 2005 Review 6 b SANS December 3 18 a, e, g 2005 Review 7 SANS March e Review 8 SAUD May a Review 9 SATC 9 10 August a, f Review 10 b SAEN August a Review 11 SANS 26 September a October 2006 Review 12 SAUD 5 9 November a, l Review 13 SAEN 4 7 December a Review 14 SANS 4 8 March e, g Review 15 b SAUD April a, g Review 16 b SAUD 27 June 6 July a Review 17 SAEN 1 5 July e, m Review 18 SAEN November 1 2 e 2007 Review 19 b SAUD 2 4 December a, g Review 20 b SAUD 6 10 April a Review 21 b SAEN 2 5 June e Review 22 SANS July e, g Review 23 b SAEN 3 6 November e, g Project Completion Review c SAEN May e, n, o, p SAEN = Energy Division; SANS = Agriculture, Natural Resources, and Social Services Division; SAOC = Country Coordination and Regional Cooperation Division; SARD = South Asia Department; SATC = Transport and Communications Division; SAUD = Urban Development Division. a a project specialist; b principal economist; c financial management specialist; d procurement specialist; e project economist; f project officer (national); g assistant project analyst; h financial control specialist; i country programs specialist; j senior project specialist (finance); k environment engineer (consultant); l safeguards specialist; m head, Project Administration Unit; n implementation expert (consultant); o evaluation and economic expert; p project analyst (consultant). The Extended Mission to the Maldives senior resident adviser provided assistance and support to all review missions. b c Concurrent with other missions. The project completion report was prepared by A. Jeffries, Senior Energy Specialist, Energy Division, South Asia Department.

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13 I. PROJECT DESCRIPTION A. Introduction 1. The Tsunami Emergency Assistance Project (the Project) in the Maldives responded to the widespread destruction caused by the Indian Ocean basin tsunami that struck on 26 December It was approved by the Asian Development Bank (ADB) on 31 March 2005, made effective on 23 May 2005 with an original closing date of 30 September 2007, and extended until 31 August The Project, based on a joint needs assessment prepared by ADB, bilateral Red Cross organizations, United Nations agencies, and World Bank included rehabilitation of high-priority infrastructure and facilities; provision of equipment and materials; creation of livelihood programs; and provision of associated consulting services. Final outputs included a sewerage system on one island, harbor reconstruction, new power stations and electricity distribution systems on six islands, pilot demonstration farms, training and a microcredit program for farmers, fisheries development training program, distribution of fishing equipment, and a microcredit program for fishers. The design and monitoring framework is summarized in Appendix ADB provided a grant of $20 million from the Asian Tsunami Fund and a loan of SDR1.188 million ($1.77 million) from its Special Funds resources to finance about 86% of total project costs. 2 The loan funds for a quick-disbursing component were reallocated from loan savings under ongoing projects at the time of the tsunami, so this loan did not represent increased indebtedness of the Government (or the Borrower). This loan helped fund the import of essential goods on an emergency basis, retroactive to the immediate aftermath of the tsunami. The description and financing amounts for each component, as described in the report and recommendation of the President (RRP) 3, are in Appendix Due to the Project s emergency nature, subprojects were not identified during appraisal. They were subsequently selected based on detailed discussions with the implementing agencies (IAs) during planning of the physical components as well as on subproject selection criteria included in the RRP. Several proposed activities in the RRP were later funded by other donors, and some had to be redesigned during implementation, particularly for the agriculture sector component. ADB also provided three technical assistance (TA) grants, totaling $1.65 million. 4 B. Rationale for the Project 4. The tsunami had a devastating impact on several islands in the Maldives. The Maldives was particularly vulnerable, as it consists of 1,190 small islands spread across 20 low-lying coral atolls. In fact, the highest point in the country is only 2 meters above sea level. Eighty-three 1 There were similar projects in India, Indonesia and Sri Lanka. 2 The grant and loan covered the entire foreign exchange cost of $16.5 million and $5.3 million equivalent of local currency cost. 3 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Grant and Loan to the Republic of the Maldives for the Tsunami Emergency Assistance Project. Manila. 4 ADB Technical Assistance to the Maldives for Promoting Sound Environmental Management in the Aftermath of the Tsunami Disaster. Manila (from the Cooperation Fund for the Water Sector, TA MLD, for $400,000); ADB Grant Assistance to the Maldives for Restoration of Livelihoods of Tsunami-Affected Farmers. Manila (from the Japan Fund for Poverty Reduction [JFPR], TA MLD, for $1 million); and ADB. ADB Proposed Technical Assistance for the Poverty and Environment Program. Manila (RETA 6150, for $3.92 million, of which a portion funded technical assistance to the Maldives for saving tsunami-affected trees in 2005).

14 2 people died in the disaster, 25 others remain missing, and more than 1,300 suffered injuries. Thirty-nine islands were heavily damaged, and nearly one third of the country s total population of about 370,000 was affected. About 7% (21,000 people) were displaced, and thousands more had their livelihoods destroyed. Due to the major impact on the gross domestic product, grants were the preferred mode of external assistance for financing post-tsunami rehabilitation and reconstruction. The Project was sound in rationale and design, and an integral part of rebuilding the country. C. Main Objective 5. The Project s main objective was to contribute to sustainable economic growth by minimizing the tsunami s devastating impact. To attain this goal, economic recovery on the worst-affected islands was to be accelerated through reconstruction of damaged infrastructure and restoration of livelihoods, especially of the poor. The Project consisted of a quick-disbursing component to provide immediate assistance to the Government to purchase materials and equipment required for emergency assistance and livelihood restoration, and a project component focusing on (i) water supply, sanitation, and solid waste management; (ii) transport; (iii) power; (iv) fisheries; and (v) agriculture sectors. In addition, the Project provided substantial consulting support for implementation, capacity building, and participatory processes in affected communities. II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 6. Project design and formulation were in line with tsunami recovery requirements as determined by the joint needs assessment. Based on this assessment and ADB s own loan appraisal, the Project focused on sectors with which ADB was most familiar (e.g., power, sewerage, and water) a logical decision considering that ADB had financed several projects in these sectors and had good working relationships with the respective ministries, which were ultimately responsible for implementing the Project. In regard to the fisheries sector the second-largest contributor to the country s gross domestic product after tourism ADB s involvement was requested by the Government. Other donors also supported the fisheries sector. In addition, ADB decided to also support the agriculture sector, where it had recently completed a study on its commercialization. 7. Due to the need for urgent action, project design and formulation did not finalize specific subprojects, as allowed for in emergency loans. 5 Subproject were ultimately selected by the IAs, with input from ADB through headquarters staff and the Extended Mission in the Maldives (EMM), based on need and guided by eligibility criteria. The Project was to be implemented through a central project management unit (PMU), which would second staff members from various government agencies. Recognizing that the country had limited technical capacity, ADB also provided three TA grants to help build capacity and train IA staff, local island governments, and community-based organizations implementing the livelihood programs. The Maldives had experienced problems with timely use of ADB funds in past and ongoing projects, and this Project with additional pledged assistance from other donors represented a very large commitment. 5 ADB Operations Manual. D7/BP and D7/OP: Disaster and Emergency Assistance. Manila.

15 3 8. As outlined in the RRP, ADB funds were divided among the five sectors (i.e., agriculture; fisheries; power; transport; and water supply, sanitation, and solid waste management), with agriculture receiving some additional funds due to supplementation by three associated TA grants. The decision to provide equal fund distribution was based on the joint needs assessment and the Government s request. Because subprojects under each sector had yet to be determined and designed at the time of project appraisal, detailed costs were difficult to estimate at this stage. 9. The project focus was based on ongoing ADB involvement in the Maldives, the joint needs assessment, and specific government requests. 6 Scope decisions were made under difficult circumstances, including (i) lack of time for full evaluation due to the Project s emergency nature, (ii) the Government facing an overload of urgent undertakings involving rapid recovery, and (iii) the large number and diverse set of donors trying to provide meaningful support without duplication. As time passed, better information on actual needs became available, resulting in ADB resources for the livelihood programs becoming less than estimated in the joint needs assessment due to some duplication of programs by various donors. At the same time, the actual costs of infrastructure restoration became available as detailed designs were completed and initial tenders were issued. This led to major cost increases, necessitating changes in scope or more funding. All of these factors were common to donors and led to adjusting of the project scopes. Regarding the Project, major changes included those in the transport component (restoring and improving one harbor instead of three) and sewerage component (restoring and improving one system instead of two). 10. At the time of appraisal, implementation arrangements required that a centralized PMU be established, headed by an experienced project manager and staffed by people seconded from various departments. This approach is commonly followed for ADB loans, and requires that the Government dedicate the necessary personnel. However, since the Government was already short staffed, it requested that the various project components be implemented by the responsible agencies under the line ministries. ADB subsequently accepted this arrangement. Further, the EMM performed certain functions of a PMU. While these changes did cause some initial delays in implementation and an extension of the closing date, the completed works have been done satisfactorily. The various project performance reports summarize the progress of the various works and confirm that the loan covenants, with one exception, were achieved. 11. The Project as envisaged at appraisal and as actually implemented was generally consistent with (i) ADB s operational strategy for Maldives, to promote economic efficiency and higher sustainable growth to improve employment and reduce poverty 7 ; and (ii) ADB s Disaster and Emergency Assistance Policy. 8 The Project rehabilitated damaged infrastructure and provided support for livelihood rehabilitation. The rehabilitated facilities enabled beneficiaries to resume normal lives by restoring basic services and income-generating opportunities, particularly in the fisheries sector. B. Project Outputs 12. As mentioned above, the emergency nature of the TEAP meant that subproject identification was not finalized until the implementation phase, and several proposed activities in 6 The same logic was followed by other donors. 7 ADB Country Strategy and Program Update Manila. 8 ADB Disaster and Emergency Assistance Policy. Manila.

16 4 the RRP were subsequently funded by other donor agencies and some TEAP activities had to be redesigned. These changes are detailed in Appendix Quick-Disbursing Component 13. This component, totaling $6.5 million, aimed to finance imports identified as necessary for an effective recovery program, thus assisting the Maldives in purchasing items in the face of high and unexpected expenditures associated with addressing this disaster. 9 The Government and ADB agreed on a list of imported eligible items retroactively to 1 January The grant provided $4.7 million, and an additional $1.8 million was made available through transfer of unallocated, ongoing ADB loan funds. By November 2005, two liquidations totaling $4.400 million were submitted to ADB. About $1.940 million was used for retroactive financing ($1.410 million from the grant and $0.531 million from the loan). In late 2005, ADB noted a problem with the time required for verification of payments; capacity constraints were precluding the timely submission of withdrawal applications and supporting documents. However, the problem was addressed, and an understanding was reached among ADB, Maldives Customs Service, and Ministry of Finance and Treasury (MOFT), so the Government was able to assign staff members, fully use the funds, and thus achieve the component's objectives. 14. By the third quarter of 2006, $6.47 million ($4.70 million from the grant and $1.77 million from the loan) was fully disbursed and liquidated. There were no major problems associated with this component, except MOFT took longer than expected to compare customs forms and lists of imported items, cross-check them against the list of eligible items, and submit the requisite documentation. 2. Water Supply, Sanitation, and Solid Waste Management Component 15. The Project hoped to fund an estimated $4 million equivalent of the most urgent water supply and sewerage subprojects, out of the more than $45 million identified in the joint needs assessment. As there were other donors interested in the water supply subsector, the Government asked ADB to focus on sewerage, originally through the Maldives Water and Sanitation Authority, later through the Ministry of Energy, Environment and Water, which has since been replaced by the Ministry of Housing, Transport and Environment. 10 ADB did not consider a solid waste management subcomponent, as the International Committee for the Red Cross had already offered to provide solid waste centers throughout the country. Since ADB was already involved in financing water supply and sewerage through one completed loan 11 and its second phase, 12 it was able to mobilize consultants quickly to assist in project planning and design, as the Government requested that the Project finance construction of sewerage systems for Guraidhoo and Kulhudhuffushi islands. 16. However, progress subsequently stalled, due to the need to adopt new environmental pollution standards, which were necessary before the project design phase could commence, and the Government s 9-month delay in deciding on project design standards (i.e., whether to install low-cost or conventional sewerage systems). Subsequently and based on a feasibility 9 This is in accordance with ADB's Disaster and Emergency Assistance Policy (footnote 8). 10 Only the current government ministries are referred to in the remainder of this report. 11 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives For the Regional Development Project. Manila (Loan 1695-MLD, for $8.0 million). 12 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives For the Regional Development Project, Phase II Environmental Infrastructure and Management. Manila (Loan 2170-MLD, for $6.0 million).

17 5 study prepared with ADB's support the Government decided that Kulhudhuffushi Island s sewerage system should be a conventional system, resulting in a much higher cost than was allotted in the Project. It was thus decided that the Project would only finance the detailed design and preparation of tender documents for this system and fund the construction of a sewerage system only on Guraidhoo Island. These designs and documents for Kulhudhuffushi Island, however, have helped build a new sewerage system there via government funds. The actual disbursement of ADB funds for this component was $1.47 million. The related consulting services were charged to the consultancy line item under the Project. 17. Guraidhoo Island s sewerage system consists of two-compartment septic tanks providing primary treatment for individual plots, with effluent discharge to a 200 millimeter-diameter pipe gravity collection system. The effluent is then pumped through three lift stations to a facultative pond for secondary treatment before discharging to the sea through an outfall, located in deep water about 30 meters from the shore. The sewerage system was designed to provide screening and primary treatment in the two-compartment septic tanks and polishing (i.e., secondary treatment) through a facultative storage pond with 30-day retention. The system has been completed satisfactorily as determined by ongoing EMM inspections during construction, various review missions, and site visits. The workmanship is excellent. 18. However, the secondary treatment pond is currently being bypassed. In 2008, there was an outbreak of dengue fever on some islands, including Guraidhoo. The Ministry of Health instructed the Ministry of Housing, Transport and Environment and local island development committee to drain the treatment pond to avoid the breeding of mosquitoes, as recently constructed houses are now located near the treatment pond. Because the treatment pond is not being used, the collected wastewater is discharged directly to the sea. However, as the outfall line does extend into deeper water and the volume of wastewater is only about 400 cubic meters of treated and/or primary effluent per day, the dilution with tidal flows and wave action is very high. Therefore, the wastewater may, in fact, be supporting marine life on and near the reef. 19. Local island leaders have reported that since the installation of the sewerage system, odor problems common in groundwater have disappeared, and its quality has improved. There have been no complaints about the quality in the vicinity of the outfall, and the project completion review (PCR) mission found no noticeable environmental problems. However, the water quality and reef condition should be tested. As several new houses are under construction immediately across the road from the treatment pond, it is unlikely that the pond will be used again. 20. There is no tariff or user fee arrangement for sewerage in the Maldives. The local island development committee is paying power fees to operate the three pump stations in Guraidhoo Island s sewerage system, but other operation and maintenance costs including those of operations staff are not being recovered from end-users, despite the project participatory preparation of an operation and maintenance program, which included cost recovery. While the Government is considering incorporating a sewage fee in water bills on islands with piped water supplies, this does not apply to Guraidhoo Island, which has individual wells on each plot. 21. The Government's solution is a new plan to establish regional utility companies for each province. 13 This plan will bundle power, sewerage, solid waste, and water management into new utilities being considered at the provincial levels, and result in a monthly fee being charged by 13 The PCR mission from 11 to 26 May 2009 was informed of this plan.

18 6 these utilities. A presidential decree has established them legally, and three entities have already become registered companies. However, acceptance of these proposed utilities and related tariffs will require extensive public consultations and time. In the meantime, the island development committee may require budgetary support from the Government to carry out normal preventative maintenance. 3. Transport Component 22. The joint needs assessment estimated $25.0 million of transport sector damage from the tsunami, and the Project sought to finance $2.9 million equivalent of the most urgent reconstruction works. ADB had recently helped complete a draft maritime transport plan for the Maldives, so it was already involved in upcoming projects in that sector. Originally, ADB was to finance the reconstruction of three harbors, following conventional specifications. Yet after more detailed evaluations and incorporation of higher standards than those pre-tsunami, the cost was substantially higher. Therefore, only the reconstruction of one harbor could be funded. 23. The Government then asked ADB to finance reconstruction and upgrading of Dhidhdhoo Island s harbor. The harbor is an essential component of the island s infrastructure, supporting economic activity, especially fishing, and supporting several new resort islands under development in the area. The construction incorporated environmental protection measures, such as long lasting rock in the seawalls (as compared to gunny sacks filled with cement that decompose after a few years), steel piling for the quay, and reinforced concrete for the docking areas. The works progressed on schedule, and were completed by June The quality of workmanship is excellent. The actual disbursement of ADB funds for this component was $2.73 million, with the related consulting services being charged to the consultancy line item. 24. The island development committee had requested that an additional seawall be added to the original contract at a cost of $125,000. The seawall would protect the entrance from the eastern monsoons and provide navigational lighting at the entrance. The island development committee reported that there had been five accidents at the entrance, which it claimed resulted from the lack of an eastern seawall (though the previous harbor also did not have an eastern seawall). Although reviewed and agreed to by ADB, the Government did not approve these additional works. However, the benefits originally envisaged were achieved as reported by the island development committee and harbor users. Larger supply vessels can now dock at the quay to unload, whereas before they had to be unloaded onto smaller vessels. The improved harbor also provides a storm-safe, clean harbor for many fishing boats, coast guard vessels, and speedboats serving nearby resort islands. 4. Power Component 25. The Project aimed to fund an estimated $2.5 million equivalent of the $5.0 million of power sector damages that were estimated by the joint needs assessment. After detailed studies and as ADB was already involved in an outer island electrification project 14 the Government requested that ADB finance rehabilitation of electrical power systems on seven islands. This number was later reduced to six, as Kulhudhuffushi Island was unable to complete the related necessary reclamation works for the new power station. 14 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Republic of the Maldives on the Outer Islands Electrification Sector Project. Manila (Loan 1887-MLD, for $8 million).

19 7 26. The Project funded works consisting of new power generation plants, new electrical distribution systems, related buildings, and miscellaneous infrastructure. However, the $2.5 million allocated was insufficient to fund the six subprojects, a situation exacerbated by increases in the prices of aluminum, copper, electrical equipment, and steel during The bid price from the lowest bidder for the six stations was $3.62 million, well above the allotted amount. The work was thus split into two packages, and the first was for four islands, bringing the bid price down to $2.60 million. The IA 15 decided it would slightly reduce the scope of the contract to bring it down to the $2.5 million allocation amount. The second package for the remaining two islands was later awarded, after an additional $1.3 million of project funds were reallocated from the water supply, sanitation, and solid waste management component. The actual total disbursement of ADB funds for this component was $3.6 million, with the related consulting fees being charged to the consultancy line item. 27. The works were successfully completed, and the systems are operating on five islands. The PCR mission visited the power system on Filladhoo Island in Haa Dhaalu Atoll, finding that the system had been well constructed and is in full operation with no major issues. The island development committee is pleased with the new system and noted that the benefits envisaged had been achieved. It did indicate that although it had requested that the subproject include street lighting, this was not added to the scope. It also noted that several minor items, such as fans in the buildings, window coverings, and a computer, were requested but not added to the scope. 28. The PCR mission also visited Madifushi Island in Thaa Atoll, where the Project financed a power generation station. However, despite it having been fully completed for about 1 year, the station is not being operated. This island suffered severe damage from the tsunami, and the entire population about 1,100 persons was classified as displaced. Under the Government s provision for displaced persons, they were provided with temporary shelter and are given electric power free of charge. This free power provision will continue until they can take possession of their new houses, which are not yet completed The new power generation station did not become operational until 3 years after the tsunami. The island s economy has largely recovered, and electricity demand is higher than originally estimated by the Government. This higher-than-expected demand is also due to the continued supply of electric power, free of charge. As there is no incentive to conserve free power, there has reportedly been irrational use of electricity by some customers, creating a spike in demand. These factors have resulted in insufficient capacity of the power generation system on the island to meet current (albeit distorted) demand. Moreover, as the population has refused to operate the power generation system until the Government completes the promised housing and enlarges the power station s capacity, the island is still using its old tsunami-damaged generating system. 30. Another ongoing issue in the outer islands, including those with project-funded stations, is that the cost of generating electricity is higher than the rates paid by domestic consumers, the 15 This decision was made in June 2006 by the IA, the Ministry of Environment, Energy and Water, which later became the Ministry of Housing, Transport and Environment in 2008 due to government reorganization. 16 While 54 new houses constructed by the British Red Cross have been completed and owners have taken possession, the other 78 houses have not been built, and 49 houses are to be repaired by the Government. Sixty families are still living in temporary shelters.

20 8 majority of consumers. 17 Furthermore, the cost of generation is higher than that in Male, 18 and since Male enjoys higher per capita incomes, it is politically difficult to charge higher tariffs to outer island domestic users. The lack of full cost recovery leads to funding major maintenance and spare parts on an ad hoc basis. As mentioned previously, the Government is working to shift the responsibility for operation and maintenance and setting of tariffs to new, provincial-level utility companies. This, however, may take time, as many have refused to pay a tariff higher than that paid in Male. In the meantime, proper operation and maintenance of the project-funded systems remain a concern. 5. Agriculture Component 31. The RRP allocated $2.8 million for rehabilitation of agricultural facilities and restoration of associated activities, as part of an estimated $11.0 million in damages to the sector. The tsunami was particularly destructive to standing crops, fruit trees, and arable land, and destroyed farming equipment and agricultural infrastructure. Because several donors are active in this sector, the Ministry of Fisheries and Agriculture agreed with ADB that the Project should (i) rehabilitate and expand the facilities at the Mendhoo Agricultural Research Station, (ii) develop pilot demonstration farms by establishing agricultural cooperative societies, (iii) provide agricultural kits (i.e., fertilizer, seeds, and tools), (iv) improve road access and development, (v) develop a farmer s handbook, agriculture training, and associated courses, and (vi) provide microcredit to individual beneficiaries. The ministry also requested that ADB support a cash grant scheme to provide immediate assistance to farmers to reestablish their income-generating activities, 19 but ADB did not accept this proposal due to potential issues regarding transparency and accountability. 32. Mendhoo Agricultural Research Station. The major works related to the Mendhoo Agricultural Research Station ($1.5 million estimated cost) were not carried out, as the planning and design process was lengthy, and when finally ready for tendering, the work could not be completed within the original loan closing date. Since the Government was uncertain if ADB would extend the loan closing date, it dropped these works. 33. Development of pilot demonstration farms. Although the Ministry of Fisheries and Agriculture assessed the pilot farm approach by establishing cooperative societies as not sustainable, cooperatives of 8 10 farmers were formed on eight islands, in consultation with local communities. 20 These groups were provided with funds for land clearing, seeds for various types of crops (mostly vegetables), construction of wells and piping for irrigation, and simple structures for storage. Capacity for crop rotation, fertilizer use, and marketing of their produce was also built. Initially, there was some success, but once the support from international consultants was completed, local consultants were unable to keep the programs going. The farmer groups have all dispersed, and the pilot farms have been abandoned. 34. The Ministry of Fisheries and Agriculture, as confirmed by the PCR mission, asserted many reasons for this failure. There was little concept of community cooperation, and the 17 The cost is in the range of Rf6 ($0.47) per kilowatt-hour. However, tariffs are generally set at Rf4 ($0.31) per kilowatt-hour for domestic consumers, which is not sufficient to meet all operation and maintenance and fuel costs, even with higher rates often paid by government facilities and commercial users. 18 Outer island electric systems are very small, stand-alone systems of less than 500 connections, with fixed costs spread over a small number of end-users, and with high transport costs for fuel and spare parts. In contrast, Male has more than 30,000 connections, including numerous commercial and government consumers who pay substantially higher tariffs, thus allowing lower tariffs for domestic users. 19 The Government's assessment identified 2,280 beneficiaries. 20 This approach had been considered under earlier studies and was proposed by the Government.

21 9 farmers ended up disagreeing on the work. Some did not do a fair share, leaders resigned or took a disproportionate share of profits or credit, and, in some cases, nonparticipating islanders vandalized the facilities. Moreover, local consultants were unable to assist with marketing efforts, and there was difficulty in selling the produce. Although the farmers were very pleased with the international consultants, they felt that the local consultants did not interact with them well. The pilot farms were comparatively small, and shipping produce to population centers basically Male 21 is very costly. The farmers felt that they were overly dependent on boat operators. The cost of power and maintenance to operate the irrigation pumps was also prohibitive, and many ended up hauling water by hand. Further, funds for seeds and delivery of materials were not always provided in a timely manner, requiring the farmers to fund such items themselves. 35. The PCR mission visited two pilot farms and found them largely abandoned, land mostly overgrown, irrigation systems broken, and storage structures collapsed. The pilot farm on Gan Island, while initially successful, had fallen into disuse within a few months of the departure of the international consultant. According to island officials and farmers interviewed, complicated cultural attitudes and lack of profit contributed to the abandonment. The PCR mission was advised that Maldivian culture is family-oriented and independent, and the members had little experience with the group dynamics experienced under the cooperative societies. Once leadership from ADB consultants was removed, individuals and families began quarrelling about sharing work, costs, and profits. The nature of farming in the Maldives requires high input costs for importing fertilizer and mulch from India, as well as high transport costs across hundreds of kilometers of ocean. Also, the cooperative societies ended up hiring laborers from outside the Maldives to do the field work. Wages paid to the laborers, plus additional costs for their passage and housing, reduced profits. The farmers also felt that they were neglecting their own fields. This situation was further complicated by a drop in produce prices as the Government liberalized importation of fresh produce, making the outer island farmers less competitive. A research facility and nursery project sponsored by CARE International on Gan Island, which was turned over to a local nongovernmental organization, ended up failing for similar reasons. 36. Farmer's handbook and training. ADB funded consultants to develop a farmer s handbook, provide training courses, and strengthen extension services. The agricultural handbook, Agriculture in an Atoll Environment, 22 was prepared, tested with farmers, and printed in English and translated into local languages for distribution. Curricula for formal education to agriculture certificate levels I and II were developed and accredited by the Maldives Accreditation Board. Courses were offered from 24 April to 28 June 2008, with 16 students in course I and 14 students in course II. Additional training included (i) appropriate farming approaches that enhance sustainability and increase income-generating opportunities, and (ii) record keeping and basic accounting practices to help develop and support commercial agriculture initiatives. This subcomponent is considered successful by the Lamoo Atoll counselor and Gan Island officials. They indicated that it was helpful in informing and training farmers on better farming techniques. The farmers involved in the pilot farms and cooperative societies used their new knowledge to improve production and profits on their own farms. There is now a stronger interest in agricultural activities, and the Government is actively supporting the sector more than in the past, when most of the focus was on fisheries. 37. Microcredit. The microcredit scheme was ultimately canceled due to the lack of use. The scheme was slow to proceed, as there was disagreement about the Government s 21 While there are numerous resort islands, they do not purchase local produce, preferring instead to import from year-round sources with a wide variety of produce from Thailand or Australia. 22 5,000 copies were translated into local languages and distributed among atoll and island government offices.

22 10 requested procedure, which involved a more complicated process than some other grant-based programs. By the time this was resolved, several donors including CARE International, Food and Agricultural Organization, International Fund for Agricultural Development, Japan International Cooperation Agency, and United Nations Development Programme (UNDP) had already begun providing microcredit and other agricultural sector support. 38. A further complication was that according to Lamoo Atoll and Gan and Fonadhoo islands officials, the Ministry of Fisheries and Agriculture did not work though local officials to locate eligible beneficiaries. Farmers had also been promised grants by the Government, and thus were reluctant to sign up for loans if they could receive grant funds instead. Lastly, ADB loan terms were not as attractive as some alternates, and as the farmers were only eligible for one such loan, they opted first for larger loans with better terms. ADB-funded loans were a maximum of Rf8,000 ($650) with a 2-year repayment period. In the meantime, the Government had organized credit from other sources, with loans up to Rf25,000 ($2,000) and a 10-year repayment period. The microcredit under the Project was subsequently canceled due to slow disbursement, but the $1 million TA grant from the JFPR (footnote 4) and administered by ADB successfully provided loans. 39. The actual disbursement under the agriculture component was only $0.37 million or 15% of that envisaged at appraisal. 6. Fisheries Component 40. The fishing industry constitutes the most important gross national product source after tourism, and the tsunami caused widespread damage to this sector. The joint needs assessment estimated that more than $25 million would be required to rehabilitate the fisheries sector to repair or replace fishing vessels; boat engines; fishing gear and accessories; seafood-processing equipment; and basic infrastructure such as storage buildings, docks, and access roads. ADB declined to support a cash grant scheme due to potential lack of transparency and accountability. The RRP allocated a total of $2.3 million, later increased to $2.715 million equivalent, to support the sector s rehabilitation. Activities included (i) strengthening community-based organizations; (ii) developing social mobilization trips; (iii) providing processing kits; (iv) consultancies to develop seafood-processing curricula, training of fishers, regulatory frameworks, and establishment and registration of fishing cooperatives on 15 islands; and (v) $800,000 committed to MOFT for microcredit. 41. Community-based organization strengthening and fisheries training. Community consultations were completed in December 2005, followed by social mobilization visits. Cooperative development training in Male and exposure visits to Bangladesh were held from February to March In addition, about 560 fishers participated in fisheries development training programs related to seafood processing and market courses by the end of In-kind assistance. Under this subcomponent, 488 kits were distributed out of 1,369 identified beneficiaries by the end of the third quarter of Each kit, worth about Rf6,000 ($467), consisted of fish finders, global positioning systems, nets, and small generators. 43. Microcredit. The Ministry of Fisheries and Agriculture worked through local island governments to identify eligible fishers for microcredit, which then passed the list to the local branch of the Bank of Maldives, which made loans and monitored repayment. The microcredit 23 Other donors also supported the fisheries sector.