Rural and Small Towns Water Supply and Sanitation Projects I, II (PRAGUAS I, II)

Timeframe:    PRAGUAS 1     2001 - 2006
                         PRAGUAS 2     2006 - 2010

Partners:       Ministry of Urban Development, Housing and Territorial Development
                        World Bank

Background

Ecuador’s water and sanitation (WSS) sector is characterized by (i) low coverage levels (particularly in rural areas); (ii) low service quality and efficiency; (iii) limited cost recovery through tariffs and a high level of dependence on financial transfers from national and sub national governments; and (iv) an incomplete legal and regulatory framework that leads to overlapping responsibilities both within the national government and between different levels of government.
In 2001, the government of Ecuador, with financing from the World Bank, started assisting municipalities and local communities to carry out the Rural and Small Town Water Supply and Sanitation Project (PRAGUAS). The town component of the project supports municipalities which are willing to make their utilities more autonomous and to raise tariffs to obtain quick service improvements and choose their own management models. PRAGUAS has become the government’s primary vehicle for addressing challenges in the water supply and sanitation sector.

Objectives

The development objective for phase I of the project is the execution of investments for increased water supply and sanitation service coverage and quality for about 350,000 rural and small town beneficiaries in about 40 rural municipalities as well as in about 6 municipal capitals. In addition, the project objective includes the improvement of sector performance through the application of coherent policies, and the strengthening of sector institutions at the central and local levels.

The development objective for phase II of the project is to (i) provide sustainable WSS infrastructure for approximately 500,000 rural beneficiaries and to promote its effective use; (ii) promote the delegation of water/sanitation and/or solid waste services to autonomous operators in 25 cantonal capitals and extend the coverage and quality of these services; and (iii) improve WSS sector performance by promoting performance-based investment financing by the national government and by strengthening sector institutions at the national and local level.

Description

PRAGUAS I had the following components

COMPONENT 1 Sector reform and institutional development
A.  Institutional Development and Policy Reform: including (i) major re-structuring in support of decentralization and (ii) creation of a new unit in charge of providing assistance to municipal governments for service planning and delegated management.
B. Strengthening of Municipal Governments, NGO's and private sector service providers: design and implementation of models for WSS service provision through autonomous (preferably private) operators in all interested municipalities in Ecuador. Municipal governments will also be strengthened to oversee sector activities in their jurisdiction. Small municipalities that choose to delegate service provision would become eligible for WSS investments in their urban capital under component 3. Assistance will be provided to help the private sector and NGOs at the municipal level organize small multi-disciplinary companies to provide community development and engineering services as well as to construct systems in rural communities, using demand-based approaches and participatory development strategies. Potential service operators will also be identified and encouraged to form operating companies in small towns.

COMPONENT 2 Water and Sanitation Subprojects in Rural Areas
2A. Subproject Promotion and Pre investment: PRAGUAS will be promoted in eligible municipalities and communities to stimulate interest in participating in the project.
2B. Civil works and Community Training in administration, operation, maintenance and hygiene education as well as continued municipal strengthening.

COMPONENT 3 Water and Sanitation Subprojects in Municipal Capitals
3A. Engineering studies: municipal capitals that take steps to transfer the operation of municipal water and sanitation services to autonomous public or private operators will become eligible for PRAGUAS funding for studies aimed at rehabilitating municipal WSS infrastructure.
3B. Civil works. PRAGUAS will finance the rehabilitation/expansion of urban WSS systems in eligible municipal capitals up to agreed investment limits.

PRAGUAS II is expected to comprise the following components

Component 1: Sector Reform and Institutional Development
A: WSS Sector Financial Policy
B: Sector Reform and Strengthening of the Sub-Secretary of Water Supply, Sanitation and Solid Waste (SAPSyRS) of the Ministry of Urban Development, Housing and Territorial Development

Component 2: Water Supply and Sanitation in Rural Areas
A: Promotion, Community Development, Hygiene Education, Designs and Supervision
B: Rural WSS Investments

Component 3: Promotion of new management models for water, sanitation and solid waste in cantonal capitals
A: Technical Assistance for the Delegation of Water, Sewerage and Solid Waste Services by Cantonal Capitals
B Water and Sanitation Investments in Cantonal Capitals
C Solid Waste Investments in Cantonal Capitals

Outcomes of the PRAGUAS I

1. PRAGUAS I has provided new water supply systems for 252,000 people and on-site sanitation for 127,000 people and coverage expansion is expected to increase rapidly under the second phase.
2. To address service quality, efficiency and cost recovery, PRAGUAS I has provided technical assistance and financial incentives to municipalities interested in delegating their municipally-run WSS services to autonomous (public, private, cooperative etc.) operators. Out of 219 municipalities nationwide, 23 are currently in the process of delegating and 11 have completed the transition. An initial evaluation shows that the municipalities, which have delegated their WSS services, have significantly increased their operational efficiency and raised their tariffs to cover at least operational and maintenance costs.
3. Finally, the government has taken a bold step to improve Ecuador’s incentive framework for WSS investments by adopting an Executive Decree (Decreto Ejecutivo No. 2562 published on 21 February, 2005) that links national government transfers to municipalities under a special tax on telephone calls that is earmarked for WSS investments to operator performance, service model and poverty indicators. In addition, a draft Water and Sanitation Sector Law has been prepared to further strengthen the institutional setup of the sector.

More information on the project and its outcomes is available at the World Bank's web site, under the topic Water Supply and Sanitation.