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STANDARD SUMMARY PROJECT FICHE
1. Basic Information
1.1 CRIS Number PHARE PHARE
2. Project purpose
The achievement of the overall objectives will be attained through the following components that have a sectoral orientation and have the following specific immediate objectives:
To support Romanian Government to develop and implement an integrated multi-annual capital investment programme in order to improve the standards of municipal water and wastewater services in small and medium towns together with creating efficient, financially viable and autonomous integrated regional service providers in the context of a process of consolidation in the sector, in line with National Development Plan (NDP) and EU policies and practices.
To support PCU located in the Ministry of Administration and Interior and PIU located at beneficiaries level in the management of the pilot phase of the SAMTID programme;
To support final beneficiaries (groups of local authorities) in order to equip them with tools to monitor performance of their services operators, emphasising efficiency, cost-control and loss reduction, thereby enhancing the capacity of the groups of towns to plan investment programmes and assume and service debts.
C. IB to support the SAMTID programme implementation
3.1. Background and Justification
After a period of more than four
decades of centralized management,
organize actions for attracting external investments in the benefit of local communities;
support and advise local public administration authorities in the process of attracting investments;
monitor the process of attracting investments and accomplishment of conditionalities;
support local public authorities in contracting internal or external loans and in providing financial guarantees.
Currently 17 municipalities, each with
more than 150.000 inhabitants, have been part of capital investment programs
for rehabilitation of their water and wastewater infrastructure. A significant
number of these municipalities also obtained funds through the ISPA Program to
continue the rehabilitation and modernization of the water supply and
comply with environment standards regarding drinking water quality and treatment of wastewater;
assure an adequate living standard to their inhabitants and a continuous water supply.
The “Strategy concerning the acceleration of the public administration reform”, approved through the Governmental Decision no. 1006/2001, established the fundamental objectives for the development of the local public services:
decentralization of public services and increasing responsibility of local authorities regarding the quality of the services supplied to the population;
extension of the systems for basic services (e.g. water supply, wastewater and sanitation) and increasing access of the population to these services;
extension of credit financing for local infrastructure;
proMoTCTion of sustainable development measures.
The “Strategy regarding the development of the local public services” foresees in chapters 4.2 and 4.7:
a)“Expansion of the services with major impact on public health and standard of life (water supply, wastewater and sanitation)'
The poor condition of existing infrastructure makes access of the population to these services difficult. The Government intends to improve the access of the population to these services through:
promoting investment programs for rehabilitation, extension and modernization of the water supply systems, wastewater, collecting, transport and disposal of domestic waste from urban area (ISPA, SAMTID);
implementing development programs for rural infrastructure (SAPARD, RDP).
b)“Promoting sustainable development measures'
Local public services have a special impact on the environment. On one hand they can be an important pollution factor, but on the other hand they also can contribute in an essential way to limit the degree of pollution (adequate treatment of wastewater and improved solid waste collection and disposal). Compliance with environmental requirements during the life cycle of local infrastructure (building – operating – maintaining – demolition) plays an important role in the concept of sustainable development. For this, the Government intends to:
provide financial support to those programs with measures for development of environmental infrastructure (ISPA, SAPARD, RDP, SAMTID, TECP2, etc.);
proMoTCTe special programs for small towns with the purpose of rehabilitating and modernizing local environmental infrastructure.
The Government views the transformation and modernization of the water and sanitation services in these towns as a long-term effort. Even with focusing on the most urgent needs to rehabilitate and upgrade water and wastewater systems, SAMTID may need a full decade to reach most of the towns. The government is committed to implementing this program in three phases in order to achieve the following coherent multi-annual specific objectives:
to commercialise the water and wastewater services provision of small and medium towns on a voluntary basis, through the creation of efficient and financially viable and autonomous integrated regional services providers, as free from political influence possible;
to improve the performance of the operators and raise the water and wastewater service standards through capital investment for rehabilitation and modernization and assistance programs, while proMoTCTing the application of cost recovery principles.
The SAMTID Program include three phases:
Phase 1: Pilot - Starts in 2003, a design stage to establish the foundation elements, followed by an application stage to test this elements on a pilot basis for five groups of municipalities, and prepared for future projects taking into account the lessons learned.
Phase 2: Expansion –Depending on the progress of the pilot phase, the program will be adjusted and expanded to a wider number of groups of municipalities within the context of the framework loans by the international banks that finance these first two phases.
Phase 3: Consolidation –This will built on the expertise gained during the pilot and expansion phases. A new framework facility can finance modernization in additional municipalities as well as other investments needs such as system expansions for the participants in the initial phases.
This project will have two components, each responding to a requirement of a sound management of SAMTID program:
Management support to national coordinating body, Project Coordination Unit established at this level and Project Implementation Units established at the level of final beneficiaries (groups of local authorities);
Financial and Operational Performance Improvement Program (FOPIP) directed as a first priority at the nine to twelve groups of towns selected for the current phase of SAMTID investment support and the operating companies that serve them. FOPIP will provide technical assistance to improve the capacity of the selected groups of towns to monitor the performance of their service operators, emphasising efficiency, cost-control and loss reduction, there by enhancing the capacity of the groups of towns to plan the investment programmes and assume and service debts. Appropriate training on management and operational issues will also be provided to services operators themselves. Following work with initial groups of towns, this project assists other groups of towns to establish FOPIP programmes as part of their preparations for receiving SAMTID support.
After the pilot phase started under Phare 2002 programming year, the program will be adjusted and expanded to a wider number of groups of municipalities within the context of the framework loans by the international banks that finance these first two phases. Subsequent requests for Phare resources will be made for this. IFI's will provide additional funding for investments from the framework loans they will put in place for these two phases.
3.2. Linked activities
See Annex 4.1.
Improved capacity of the national coordinating body to manage the implementation of SAMTID in the expansion phase;
Improved overall co-ordination of the SAMTID programme, by PCU;
Better management by the Project Implementation Units at the beneficiary level in implementing their projects, and monitoring the implementation at national and regional level by MIE and RDAs;
Shared knowledge and experience gained through the pilot & expansion phase of the program;
Enhanced capacity of the local authorities in monitoring the technical and financial performance of their operators and setting up tariffs in order to ensure full recovery of debt service through a Guarantee Fund/Reserve Account and requirements for a Maintenance Replacement and Development fund (MRD).
In order to implement this sub-component, the following activities will be undertaken:
Support to the Steering Committee;
Support to the PCU in Ministry of Administration and Interior;
Assistance in setting up and training the PIUs at the beneficiaries level;
Support for the PCU and PIU in monitoring and controlling the projects and in reporting to different levels;
Support to the Regional Development Agencies, MIE and Selection Committee in selection and monitoring of projects for an efficient implementation of SAMTID program.
In addition to setting plans and targets with operators, the Financial and Operational Performance Improvement Programme should equip associations of municipalities to monitor the performance of their service operators (Regional Operating Companies – ROC). This will build the chain of responsibility for repaying debt that extends from users to operator and further to borrowing associations of municipalities.
Under this sub-component the following activities will be undertaken:
Support local authorities to establish and monitor operational and financial performance requirements with their operators, in order to ensure the flow of funds to service debt and finance a MRD fund; Support local authorities to set up a set of operational and financial performance to be monitories in relationship with their operators, in order to ensure the flow of funds for debt service paying back and MRD fund;
Monitoring and reporting on the performance of the utilities and their compliance with conditions in their loan agreements, and recommending up-dating of these conditions;
Train PIUs’ and operators’ staff in FOPIP concepts and in practical implementation of these concepts;
Prepare and disseminate Guidelines on financial and operational performance improvement issues;
Share knowledge and experience gained through the project among all current and potential beneficiaries.
Tasks like “Reform and strengthening of the new ROCs (including detailed FOPIP)” and the Creditworthiness Enhancement Programmes should be performed by this TA project, based on the groundwork and guidelines for future institutional inputs that will be clearly defined under the TA for “SAMTID Project Preparation” RO 2002/000-586.05.01.04.03.
Groups of towns benefiting of SAMTID investment assume an obligation to undertake to closely monitor and seek to improve the performance of their service operators, and in this respect an element of self-financing should be introduced into training and human resource development for the towns and operating companies. FOPIP will require a partial contribution towards training costs on the part of the beneficiaries.
Utilise the expertise that has already been developed in the PIU’s that have been established for the implementation of MUDP, ISPA and RDP
ARA organises a programme to train and direct teams of executives from host utilities to establish FOPIP improvements for beneficiary utilities that request this assistance and contribute to defraying expenses. The host utilities donate the time of their executives.. One concept could be to use EU and/or USAID resources as seed capital to start a self-financing scheme institutionalising the QualServe approach as a permanent Romanian instrument of horizontal collaboration among water utilities that also can facilitate the work of local consultancies and training institutions.
From the previous municipal investment programmes, especially from MUDP II, some lessons have been learned:
MUDP I & II
Importance of municipalities assuming as much implementing responsibility as possible
Infrastructure Development Organizations of towns should take this responsibility.
Value and need for adequate technical assistance
Dimension according to experience and request Phare support.
The population accepts cost-recovery when they are involved in planning and company managers learn sound business principles.
Provide technical support and monitoring of a Financial and Operational Improvement Program, linked with the financial covenants of the loan component and the new regulatory framework.
Recommend the same role through open bid for a bank.
All these lessons learned will be incorporated into SAMTID programme and will be taken into account by the TA supporting the SAMTID programme.
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