Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00002582 IMPLEMENTATION COMPLETION AND RESULTS REPORT ON THE GRANTS IN THE AMOUNT OF US$6.00 MILLION TO THE PALESTINE LIBERATION ORGANIZATION FOR THE BENEFIT OF THE PALESTINIAN AUTHORITY FOR THE GZ-WATER SECTOR CAPACITY BUILDING ( P117443 ) June 11, 2018 Water Global Practice Middle East And North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 30, 2018) Currency Unit = US$ SDR 0.687212= US$1 US$1.45516 = SDR 1 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS AF Additional Financing AFD French Development Agency (Agence Francaise de Development) CoM Cabinet of Ministers DFID U.K. Department for International Development EQA Environmental Quality Authority EU European Union IBNET International Benchmarking Network ICR Implementation Completion and Results Report IFR Interim Financial Report IWSR Institutional Water Sector Review GDP Gross Domestic Product GoI Government of Israel GIZ German Agency for International Cooperation (Deutsche Gesellschaft für internationale Zusammenarbeit) KPIs Key Performance Indicators M&E Monitoring and Evaluation MDTF Multi-Donor Trust Fund MOA Ministry of Agriculture MOH Ministry of Health MOLG Ministry of Local Governments NGO Non-Governmental Organization NRW Nonrevenue Water NWC National Water Council PCBS Palestinian Central Bureau of Statistics PA Palestinian Authority PAD Project Appraisal Document PDO Project Development Objective PDG Program Development Goal PID-MDTF Partnership for Infrastructure Development of the Multi- Donor Trust Fund PMU Project Management Unit PSC Project Steering Committee PWA Palestinian Water Authority RWU Regional Water Utility SIDA Swedish International Development Cooperation Agency SP Service Provider TA Technical Assistance TOR Terms of Reference TPAT Technical Planning Advisory Team TTL Task Team Leader VFM Value for Money WRIS Water Regulator Information System WSP Water Service Provider WSRC Water Sector Regulatory Council WUA Water User Association Regional Vice President: Hafez M. H. Ghanem Country Director: Marina Wes Senior Global Practice Director: Guang Zhe Chen Practice Manager: Carmen Nonay Task Team Leader(s): Iyad Rammal ICR Main Contributor: Lars Anders Jagerskog TABLE OF CONTENTS DATA SHEET ....................................................................... ERROR! BOOKMARK NOT DEFINED. I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 9 A. CONTEXT AT APPRAISAL .........................................................................................................9 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ..................................... 14 II. OUTCOMES................................................................................................................... 15 A. RELEVANCE OF PDOs ............................................................................................................ 15 B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 16 C. EFFICIENCY ........................................................................................................................... 21 D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 23 E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 23 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 24 A. KEY FACTORS DURING PREPARATION ................................................................................... 24 B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 25 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 26 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 26 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 27 C. BANK PERFORMANCE ........................................................................................................... 27 D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 28 V. LESSONS AND RECOMMENDATIONS ............................................................................. 28 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 30 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 47 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 49 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 50 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 57 ANNEX 6. CLIENT ICR REPORT - WATER SECTOR REGULATORY COUNCIL ............................... 61 ANNEX 7. CLIENT ICR REPORT - PALESTINIAN WATER AUTHORITY ........................................ 65 The World Bank GZ-Water Sector Capacity Building ( P117443 ) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P117443 GZ-Water Sector Capacity Building Country Financing Instrument West Bank and Gaza Investment Project Financing Original EA Category Revised EA Category Not Required (C) Related Projects Relationship Project Approval Product Line Supplement P153889- Water Sector 24-Jun-2015 Recipient Executed Activities Capacity Building Project Additional Financing Organizations Borrower Implementing Agency Ministry of Finance Palestinian Water Authority Project Development Objective (PDO) Original PDO The Project’s development objective is to strengthen the capacity of the PWA to more effectively plan, monitor, and regulate water sector development in the West Bank and Gaza. PDO as stated in the legal agreement The objective of the Project is to strengthen and improve the capacity of the Palestinian Water Authority to effectively plan, monitor, and regulate water sector development in the West Bank and Gaza. Page 4 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing P117443 TF-99491 3,000,000 3,000,000 3,000,000 P117443 TF-15756 3,000,000 2,852,452 2,852,452 Total 6,000,000 5,852,452 5,852,452 Non-World Bank Financing Borrower 0 0 0 Total 0 0 0 Total Project Cost 6,000,000 5,852,452 5,852,452 KEY DATES Project Approval Effectiveness MTR Review Original Closing Actual Closing P117443 31-Mar-2011 29-Jul-2011 22-Apr-2013 31-Dec-2015 31-Dec-2017 P153889 24-Jun-2015 08-Jul-2015 31-Dec-2017 30-Oct-2015 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 18-Feb-2014 2.67 Change in Results Framework Change in Loan Closing Date(s) Reallocation between Disbursement Categories 24-Jun-2015 3.20 Additional Financing Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Reallocation between Disbursement Categories Page 5 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) KEY RATINGS Outcome Bank Performance M&E Quality Moderately Satisfactory Moderately Satisfactory Modest RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 25-May-2011 Satisfactory Satisfactory 0 02 01-Jan-2012 Satisfactory Satisfactory .31 03 21-Aug-2012 Satisfactory Moderately Satisfactory .75 04 04-Feb-2013 Satisfactory Moderately Satisfactory 1.69 05 07-Jul-2013 Moderately Satisfactory Moderately Satisfactory 1.94 06 30-Dec-2013 Moderately Satisfactory Moderately Satisfactory 2.48 07 16-Jun-2014 Moderately Satisfactory Moderately Satisfactory 2.79 08 22-Nov-2014 Satisfactory Moderately Satisfactory 3.07 09 22-Apr-2015 Moderately Satisfactory Moderately Satisfactory 3.13 10 09-Oct-2015 Moderately Satisfactory Moderately Satisfactory 3.40 11 06-Jun-2016 Satisfactory Moderately Satisfactory 3.63 12 28-Nov-2016 Moderately Satisfactory Moderately Satisfactory 3.82 13 01-Jun-2017 Moderately Satisfactory Moderately Satisfactory 4.18 14 22-Dec-2017 Moderately Satisfactory Moderately Satisfactory 5.16 Page 6 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) SECTORS AND THEMES Sectors Major Sector/Sector (%) Water, Sanitation and Waste Management 100 Public Administration - Water, Sanitation and Waste 50 Management Other Water Supply, Sanitation and Waste 50 Management Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Public Sector Management 20 Public Administration 20 Administrative and Civil Service Reform 6 Municipal Institution Building 14 Urban and Rural Development 50 Urban Development 30 Urban Infrastructure and Service Delivery 30 Rural Development 20 Rural Infrastructure and service delivery 20 Environment and Natural Resource Management 30 Water Resource Management 30 Water Institutions, Policies and Reform 30 ADM STAFF Role At Approval At ICR Regional Vice President: Shamshad Akhtar Hafez M. H. Ghanem Country Director: Mariam J. Sherman Marina Wes Page 7 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Senior Global Practice Director: Laszlo Lovei Guang Zhe Chen Practice Manager: Francis Ato Brown Carmen Nonay Task Team Leader(s): Richard W. Pollard Iyad Rammal ICR Contributing Author: Lars Anders Jagerskog Page 8 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. The economic situation in the West Bank and Gaza changed dramatically from the late 1990s, when the peace process was initiated, and has been in a negative spiral after the collapse of the peace process in 2000 and the onset of the second intifada. The West Bank and Gaza’s economy had earlier been characterized by economic growth spurred by foreign direct investment and private sector involvement, but at the time of appraisal (2010–2011) was mainly led by government spending and heavy reliance on foreign aid. During the first five years of the peace process (1994–1999), the West Bank and Gaza’s economy grew by 6 percent annually on average. The second intifada largely put on hold the economic growth as well as investment and private sector activity. Unemployment in the West Bank, as reported by the Palestinian Central Bureau of Statistics (PCBS), rose from 17.7 percent in 2007 to 20.7 percent in the third quarter of 2008. Unemployment in Gaza, however, increased from 29.7 percent to nearly 41.9 percent. Although data on poverty are limited, there are clear indications that overall poverty in both the West Bank and Gaza has risen since 2000. The PCBS reported that poverty rates increased in Gaza from 47.9 percent in 2006 to 51.8 percent in 2007. 2. The project was prepared under challenging circumstances, following the end of the peace process, internal Palestinian division in the West Bank and Gaza, and a Government of Israel (GoI) military operation in Gaza between December 2008 and January 2009. The political situation at appraisal was one characterized by political division, leading to increasing isolation and a deteriorating economic and social situation particularly in Gaza as the GoI imposed heavier economic and security restrictions. In early 2006, a Hamas-led government won the elections in the West Bank and Gaza through what is widely regarded as a fair and transparent process. In response, many donors withdrew their assistance to the Palestinian Authority (PA), while the GoI intensified its economic and security restrictions. In June 2007, President Abbas dissolved the Hamas-led government. In response, Hamas took complete control of Gaza by force. In the West Bank, a caretaker government of technocrats was sworn in until new presidential and parliamentary elections are held. The caretaker government, headquartered in Ramallah, runs the West Bank and continues to provide basic services in Gaza through the PA civil servants who report to and are paid by the caretaker government. The international community restored full cooperation with the PA in Ramallah. 3. The continued deterioration in operational conditions in Gaza is also leading to a widening political, social, and economic gap between the West Bank and Gaza. Following these developments, Gaza had been isolated by a strict closure policy by the GoI, crippling the local economy and leading to deterioration of public infrastructure and services. Under the closure, only basic foodstuffs and other necessities could enter Gaza and there were no exports. The lack of spare parts and materials necessary for maintenance of infrastructure has severely affected the PA’s ability to deliver services. This deterioration has been exacerbated by the GoI’s military operation in Gaza between December 2008 and Page 9 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) January 2009 that resulted in a large loss of life and over US$1.3 billion in total damages according to the Palestinian National Early Recovery and Reconstruction Plan. 4. At project appraisal, at the sector level, water resources management and service delivery were considered as a key humanitarian and economic outcome and also as a political outcome, as one of five key areas to be negotiated (including Palestinian water rights) in the final status negotiations of the Oslo peace process. Because of restrictions accompanying Israeli control of the territory and obsolescence of the 1995 Oslo II interim accord water provisions (Article 40 Water and Sewage), Palestinians were set to cope with one of the lowest levels of per capita water resource availability in Middle East and North Africa and effectively in the world. In the West Bank, development of water uses and infrastructure was (and to a large degree still is) subject to Israeli veto power under the Joint Water Committee. In Gaza, it was (and still is) curtailed by the security blockade. These restrictions, along with inefficient Palestinian institutions and operators1 and rapid demographic growth, perpetuated water supply and sanitation infrastructure and service deficits as well as operational inefficiencies.2 These resulted in heavy reliance on water trucking, makeshift arrangements for desalination of brackish water, and treatment of other non-potable water supplies, while also increasing dependence on the Israeli bulk water utility, Mekorot. The impacts of this situation were strongest in Gaza, in area C of the West Bank, and on the poor. The lack of wastewater treatment also contributes to widespread aquifer contamination. Furthermore, irrigation was estimated to consume 60–70 percent of water resources in the West Bank and Gaza mainly using inefficient practices and deteriorating infrastructure. Irrigated agriculture is an important economic sector, which was contributing around 12 percent to gross domestic product (GDP) and employing about 117,000 people. However, with the restrictions on movement and export of goods, dwindling water availability, inefficient irrigation practices, and almost no new or replacement water sources receiving permits, the economic cost of foregone opportunity in irrigated agriculture was deemed significant. Furthermore, at the institutional level, planning and regulation of water resources was deemed to be very weak, and the potential of the irrigation sector remained largely underdeveloped. 5. At project appraisal, the water sector was one of the key sectors in the West Bank and Gaza in need of institutional and capacity development. The following four key sector issues in need of enhancement were identified: • Lack of sovereign control over West Bank and Gaza water resources and water infrastructure development • Major water supply and sanitation infrastructure deficits and inefficiencies in the West Bank and Gaza 1 World Bank.2009. Assessment of Restrictions on Palestinian Water Sector Development, report 47567-GZ (also known as Water Restrictions Study). 2 At the time of appraisal around 90 percent of the population and 64 percent of communities had access to a water network, service discontinuity was resulting in, on average, consumptions as low as 50 liters per capita per day, dropping to a crippling 15 liters per capita per day in some areas. All the while, water loss and bill collection rates hover around 35 percent and 50 percent, respectively. Page 10 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) • Impending environmental and public health collapse in Gaza • Governance and capacity weaknesses in the Palestinian water sector 6. The project aimed to address the challenges at the institutional level, in terms of structure and capacity of the sector and followed on from a comprehensive audit in 2008 that led the Palestinian Water Authority (PWA) to start engaging in a significant reform effort of the sector. The audit found that the existing water sector programs and institutions did not sufficiently address the needs of the Palestinian people. The Water Law establishing the PWA and the National Water Company (NWC) failed to identify the roles of other institutions, in particular, municipalities and service providers (SPs), and define a sector architecture which the NWC and PWA must lead, support, and regulate. Policy and strategy development in the sector was deemed highly inadequate; ongoing projects appeared to have been developed in a largely donor-driven, ad hoc emergency fashion, distorted by Israeli restrictions. The audit called for a major strategy and institutional refocusing effort. 7. The World Bank had established itself as a key partner in assisting the PA responding to water emergencies and was requested to support the PWA in their efforts to reform the sector. This included operations such as the (a) Gaza Water and Sanitation Services Improvement Project (1996), (b) Water Sector Strategy Planning Study (2000), (c) Emergency Water Project in southern West Bank (completed in 2008), (d) North Gaza Emergency Sewage Treatment Project (since 2004), (e) Gaza Emergency Water Project (since 2004), and (f) Hebron Wastewater Management Project. Following the governance turnaround at the PWA and the release of the Water Restrictions Study, the PA had requested greater World Bank involvement in institutional support to the PWA, which was supported by key sector donors. 8. This project was developed to complement ongoing and planned infrastructure-focused World Bank projects. This project was designed and developed within the context and lessons learned of previous World Bank engagement, which had demonstrated the importance of strengthening key water sector players as crucial to ensure lasting water sector change. The capacity building was one program among several others complementary to ongoing water sector reforms, and it was intended to play a role in keeping the process of reform running. 9. Additional financing was sought in 2015. As the project progressed and led to reforms of the water sector, additional financing (AF) was sought for the following two activities: (a) institutional building of the Water Sector Regulatory Council (WSRC) to monitor and regulate the service provision in the West Bank and Gaza and (b) enhanced capacity of the PWA in planning and policy formulation and implementing the water sector reform process. The AF was taking the reforms from the original project and aimed at further institutionalizing the reform efforts already achieved during the original financing. Theory of Change (Results Chain) 10. The underlying logic of the project expressed in the theory of chain is shown in figure 1. Two sets of activities contributed to the intermediate results and achievement of the outcomes. A first set of activities were carried out directly by the Technical Planning Advisory Team (TPAT) and they resulted in Page 11 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) key results such as (a) a detailed reform planning document for all sector reform processes, (b) an Action Plan to ensure appropriate transition of the sector, approved and adopted by the sector institutions, and (c) monitoring tools necessary for an efficient management interface with SPs. A second set of activities included studies, training, and capacity building for the WSRC. These activities mainly helped support sector regulatory oversight. Figure 1. Causal Chain Page 12 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Project Development Objectives (PDOs) 11. The PDO was to strengthen the capacity of the PWA to more effectively plan, monitor, and regulate water sector development in the West Bank and Gaza. Key Expected Outcomes and Outcome Indicators 12. Three key expected outcomes were identified at the preparation stage. These include the following: • Progress of the water sector reform process as measured by the delivery of key contributions from the TPAT. These expected contributions from the TPAT to the water sector reform process include (a) a detailed reform planning document for all sector reform processes, (b) an Action Plan to ensure appropriate transition of the sector, approved and adopted by the sector institutions, and (c) monitoring tools necessary for an efficient management interface with SPs. • Comprehensive updating of the PWA policies, strategies, and guidelines and technical planning tools. • Increased capacities of the PWA as measured by data collected in semiannual progress reports. Components 13. The project had three main components, as summarized in table 1. At approval, the total project cost was estimated at US$6 million, with US$2.1 million from the Trust Fund for Gaza and West Bank, plus US$2.8 million co-financing from the French Development Agency (Agence Française de Developement AFD) and Swedish International Development Cooperation Agency (SIDA). The first component focused on capacity building and advisory support. The second component supplemented some of the work of Component 1 with AF for studies and training. The third component relates to project management. At restructuring in 2015, the project received additional funds of US$2 million and US$0.3 million from the Multi-Donor Trust Fund (MDTF) and German Agency for International Cooperation (Gesellschaft für Internationale Zusammenarbeit, GIZ), respectively. Table 1. Project Components (All costs in US$, millions) Original Costs Changes with AF Revised Costs AFD PID MDTF Total Activity AF PID AF GIZ TFWBG (Parallel (Actual Total with AF MDTF (Parallel) Financing) Planned Actual Cost) Component 1: Advisory services, 2.1 1.4 1.4 0.8 4.3 0.7 0 5 technical assistance, and capacity building Page 13 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Original Costs Changes with AF Revised Costs AFD PID MDTF Total Activity AF PID AF GIZ TFWBG (Parallel (Actual Total with AF MDTF (Parallel) Financing) Planned Actual Cost) Component 2: Supplementary Assistance for Studies, 0.1 0 0.2 0.2 0.2 0.6 0.3 1.2 Training and Institutional Building of the WSRC Subcomponent 2a: Studies and Training 0.1 0 0.2 0.2 0.3 0 0 0.3 Fund Subcomponent 2b: Institutional 0 0 0 0 0 0.6 0.3 0.9 Building of the WSRC Component 3: Project 0.8 0 0 0 0.8 0.7 0 1.5 Management Original project 0.8 0 0 0 0.8 0.3 0 1.1 Additional financing 0 0 0 0 0 0.4 0 0.4 Total 3 1.4 1.6 1 5.4 2 0.3 7.7 Note: TFWBG = Trust Fund for West Bank and Gaza. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 14. There have been no changes to the PDO but changes to the project design were introduced in May 2015. The changes were applied to the project design and restructured Component 1 to focus on advisory support and capacity building for the PWA to strengthen the institution as a policy and planning entity, develop its internal system, and support the reform process. In Component 2, the project focused on strengthening the newly established WSRC to perform the monitoring and regulatory function effectively. Revised PDO Indicators 15. New indicators were added to the Results Framework to reflect the scaling up of the project concerning the institutional building of the WSRC. Additional outcome indicators related to the scaling up of the project include (a) the WSRC is strengthened (physical and institutional set up, including defining vision, mission, and objectives, hiring of key staff, and developing of working procedures), (ii) Strategic Development Plan and business plan is completed, approved, and implemented; and (c) Related legal framework and documents developed and approved. Page 14 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Revised Components 16. Under the restructuring, some components were scaled up to respond to the need to operationalize a functional WSRC. The major changes proposed under the AF are restructuring and scaling up of Component 1 (advisory support, technical assistance, and capacity building) and Component 2 (supplementary assistance for studies and training), corresponding changes to Component 3 (project management), and an extension of the end implementation date by 24 months from December 31, 2015, to December 31, 2017. Rationale for Changes and Their Implication on the Original Theory of Change 17. The proposed changes were implemented to respond to an already existing financing gap. This project was designed to improve the PWA’s capacity and support its attempt to reform the water sector. At project design in 2011, the estimated project cost was US$6.0 million with the World Bank financing US$3.0 million and AFD and SIDA contributing US$1.4 million (parallel) and US$1.6 million (co-financing) equivalent, respectively. However, SIDA funding was delayed due to processing time of the MDTF. This meant that the AF following the restructuring only covered the originally agreed SIDA funding to the MDTF. 18. In addition to closing this financing gap, the PWA and team recognized the need for additional changes to be made to the project to support the institutional building of the WSRC. The WSRC is part of the new water sector structure, which constitutes one of the main outputs of the water sector reform process. The project changes aimed to ensure its functionality and integration within the Palestinian water sector and ensure compliance with the Water Law, in particular, to achieve proper division of labor between the PWA and the independent regulator. Therefore, due to the addition of a new implementation entity (WSRC), a change was made to the disbursement arrangement by creating a second designated account dedicated to the WSRC. II. OUTCOMES A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 19. The PDO remains highly relevant for the West Bank and Gaza and the World Bank. The project’s objectives are strongly aligned with the Palestinian Authority’s sector goals and strategies. Thus, the medium-term Strategic Development Plan (2017–2022) instituted by the PWA to improve the water sector focuses on institutional development as a main pillar to sustain the development process and achieving its objectives in improving water security by enhancing the water and wastewater services delivery. It also supports the continuation of the reform process by establishing sustainable and financially viable water service delivery institutions, strengthening their institutional set up, and adjusting the policies and strategies. Page 15 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 20. The project is also aligned with the World Bank Assistance Strategy for West Bank and Gaza FY18–21 (Report No. 115201-GZ) which notes that inadequate resources such as water and power supply and deficiencies in the institutional framework regulating these sectors are holding back economic development. The project is closely linked with Pillar 1 on increased private sector investments and job creation through, among others, institutional arrangements to improve efficiency and accountability of basic service provision, including water and sanitation services; as well as with Pillar 3 on the needs of the vulnerable and institution strengthening for improved citizen-centered service delivery. 21. The project’s objectives were and remain extremely relevant to the priorities of Palestinian institutions. Water services continue to be perceived as a key element of the social contract and a key area to improve the lives of Palestinians, as highlighted in the Palestinian Authority’s National Policy Agenda. This agenda emphasizes, among other aspects, the need to invest in strategic infrastructure, manage resources sustainably, and achieve financial sustainability of water utilities as key aspects to develop citizen-centered institutions. Future financial viability of water and wastewater service delivery, as set out in the 2014 Water Law, is predicated on a combination of (a) increasing cost recovery, (b) increasing SP efficiency, and (c) ring-fencing water sector revenues. Achieving this financial viability objective will require carefully coordinated actions for increasing municipal revenues (for example, from block grants or property taxes) so as not to undermine the delivery of other municipal services. Thus, effective institutional and regulatory reform of the water sector is closely interlinked with the broader reform agenda of the municipal and energy sectors toward more inclusive service delivery. 22. Rating. The overall relevance of the project is rated high. Strengthening of water sector institutions is identified as a priority area to improve the water security of the Palestinian people and support broader reforms to improve the inclusiveness of urban services. B. ACHIEVEMENT OF PDOs (EFFICACY) 23. Although a single PDO was presented, this evaluation examines three subcomponents of the PDO statement. The PDO aims to strengthen and improve the capacity of the PWA in three functions: (a) effectively plan water sector development, (b) effectively monitor water sector development, and (c) effectively regulate water sector development. 24. The outcomes are measured by the development and issuance of the Water Law, Sector Reform Planning Document, Water Sector Policy and Strategy, as well as the functionality of the WSRC, and the Annual Monitoring Reports on SPs. The outcome indicators were revised at the AF stage to add more granularity to the proposed reforms and strategic documents, but essentially remained within the same vein. With the project’s support, the PWA was able to revamp the strategic policies, institutional set up of the water and sanitation sector in West Bank and Gaza, as well as develop implementation action plans and various monitoring and administration tools to improve efficiency of the sector. Although some of the proposed bylaws are still pending the approval by the Cabinet of Ministers (CoM) (most noteworthy, WSRC licensing and National Water Company bylaws), overall, the project largely achieved the PDOs according to the agreed outcome and intermediate results indicators. Page 16 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Assessment of Achievement of Each Objective/Outcome 25. PDO 1: Strengthen and improve the capacity of the PWA to effectively plan water sector development. The planning capacity was envisioned to be improved through the development of the Sector Planning Document, Water Sector Policy, plans, and planning support tools and procedures, which were all developed and informed strategic water management decisions. Objectives related to the capacity improvement in planning of the water sector development were largely achieved, as outlined in paragraph 29. The PWA has modified its organizational structure and jobs descriptions to cope with the new mandates. It redeployed many of its staff according to the new organizational structure, however, this needs to be approved by the CoM, which was not completed during the project implementation due to the long review process before approval. Nevertheless, this approval will not affect the implementation mechanism of the PWA and its leadership for the sector development. 26. The Water Sector Reform Planning Document and Reform Plan that were to guide the implementation of the water sector reform, including its goals and principles, indicators, and targets over the coming three years, was developed and endorsed by the CoM. The PA and PWA have adopted the plan and regularly provide any needed updates to it. Under the project, four reform program updates were developed and published, the latest one being the Reform Plan 2016–2018. 27. Development and implementation of a number of policies, strategies, and regulations in a consultative manner with relevant stakeholders and ministries strengthened the PWA’s strategic planning capacity and created the platform for the development of different legislations. One of the key achievements was the Water Sector Policy and Strategy 2012-2032 that was developed by the PWA. Based on this Policy and Strategy, the Water Sector Strategic Development Plans for 2014-2017 and 2018-2021 were adopted and are under implementation. The separate Strategic Development Plan for 2016–2018 is under implementation and serves an important role in the PWA’s investment planning activities, whereby all the public and donor investments are distributed based on the priorities identified in these plans. The Strategic Development Plan also allows the PWA mobilize donor funding for its various planned programs, like, for instance, recent mobilization of 80 percent of the required funding for the desalination plant. 28. The PWA also developed several other water sector strategies: (a) Policy and a Strategy on Capacity Development of the Water Sector; (b) National Water Awareness Strategy; (c) General Policy for Water Demand Management Concepts and Principles; (d) Strategic Plan for Water Information System; (e) ten policies for the Water Sector (Water Policy Equity in Water Distribution, Alternative Water Resources Policy, Non-Revenue Water Policy, Improving Sanitation Services Policy, Polluter Pays Policy, Financial Sustainability Policy, Transparency and Accountability Policy, Community Participation Policy, Partnership with Private Sector Policy, and Promotion for Water Sector Policies); (f) Trans-boundary Water Resources Strategy and Action Plan; (g) Gender Mainstreaming Guidelines for Palestinian Water Sector; (f) water safety plans; (g) financial sustainability strategy (h) non-revenue water strategy; (i) drinking water quality standards; (h) climate change mitigation measures; and (j) strategic water resources and transfer plan. These policies have been approved and implemented by the PWA and are put into action for sector development. Page 17 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 29. PDO 2: Strengthen and improve the capacity of PWA to monitor water sector development. The monitoring capacity was envisioned to be improved through the development and regular updating of the annual performance monitoring reports on the water service providers (WSPs), quarterly status memoranda on sector reform, and development of the information system. The objectives related to monitoring capacity improvement were achieved to a large extent. 30. The WSRC has put in place a transparent performance monitoring database along with mechanisms to disseminate and discuss the emerging analysis . This system contributed to the (a) improvement of data availability and accuracy as well as knowledge about the overall situation and development of the water sector; (b) introduction of a first benchmarking system for WSPs; and (c) increased transparency and accountability with the issuing of the annual reports on WSPs’ performance and their ranking (for each indicator). There is still, however, a need to strengthen the feedback loop between the WSRC’s monitoring of SP performance and the evolution of reform instruments (laws, policies, plans, and so on) that should continuously strengthen the enabling environment for SPs. 31. Monitoring reports on the WSPs’ performance are developed and published annually, and an online system on WSPs is live and operational. The WSRC has developed a methodology and carries out yearly monitoring and reporting on the WSPs’ performance on a number of technical and other indicators. The WSRC has published annual performance monitoring reports for 2013–2016. Also, the WSRC has established an online database for 86 municipalities that allows WSPs to access and upload their data, which subsequently feeds into the World Bank International Benchmarking Network (IBNET) for Water and Sanitation Utilities database3 and avails WSRCs information internationally. The WSRC plans to expand this option to all WSPs. There is still a need to strengthen the links and integration to PWA, which has also developed a system to monitoring the development and performance of water sector institutions (for instance, a water supply distribution system and a water quality control system). 32. Improved data accuracy and transparency on the performance of the WSPs and the water sector overall has improved the monitoring function of the water sector and capacity of WSPs. The annual reports serve an important purpose of providing consistent and comparable information on the participating SPs, which has resulted in improved and data-driven management decisions on the WSPs’ performance improvement, especially regarding the investment decisions and focus areas for donor support. It has also fostered healthy comparative competition and iteration among the WSPs, peer-to- peer learning, and improved capacity of the WSPs with increased focus on cost calculation and data collection, which led to tariff adjustment applications (described further in paragraph 40). 33. Higher transparency and accountability has fostered dialogues with key partners , like the PWA, WSPs, WSRC, civil society, and donors, on important topics like financial sustainability, private sector participation, governance, equity, environmental and social safeguards, nonrevenue water (NRW), and so on. Active participation with the mass media supports transparency and accountability and helps restore the social contract between the WSPs and civil society. For instance, as the WSRC annual reports started 3 https://www.ib-net.org/ . Page 18 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) to include the information on the unresolved complaints, the WSPs have increased their attention on customer satisfaction and improving turnaround of customer complaints and service delivery overall. 34. PDO 3: Strengthen and improve the capacity of PWA to regulate water sector development. It was envisioned that this would be achieved by establishing, operationalizing, and transferring the regulatory function to the WRSC as the regulatory body for the WSPs, developing or updating a number of legislations, like the Water Law, National Water Company Bylaw, and Regional Water Utilities Bylaw, and revising the institutional set up in the water sector and the PWA. 35. Within its three years of existence, the WSRC has achieved remarkable progress establishing itself as a credible and solid institution in the water sector and resulting in many improvements in the water service delivery. The WSRC was established in August 2014 by a presidential decree, with the organizational structure, job descriptions, and bylaws approved by the CoM; office set up and key positions (chief executive officer, procurement, financial, monitoring and evaluation [M&E], communications, and others) staffed; board of directors set up; private sector representatives and experts appointed; and business plan drafted. Performance monitoring guidelines that lay out the methodology and standards for benchmarking of the WSPs were developed. Going beyond the previous monitoring practices that were limited to water quality parameters, the guidelines now also encompass a wide range of technical, financial, quality standards, and other key performance indicators (KPIs), such as consumption, NRW, collection efficiency and operating costs, staff productivity index, and customer complaints. These standards were adopted as national standards that are now applicable countrywide. 36. As mentioned in paragraph 35, using its methodology, the WSRC has been producing the annual reports on the WSPs’ performance for the last three years, which ranks the WSPs according to their performance against the set standards. Starting from 16 participating WSPs and 13 KPIs in 2013, the WSRC has increased its coverage to 40 WSPs using 22 KPIs in 2016 and plans to further expand the WSPs and KPI coverage in the subsequent annual reports. This process has contributed to (a) Increased customer orientation of the WSPs; (b) Improved capacity at the WSPs due to peer-to-peer-learning; (c) Orientation for cost calculation, including operations and maintenance and data collection which led to tariff-setting procedures and adjustment applications; (d) Improved sector dialogue among the PWA, WSPs, the regulator, civil society, and donors, whereby the WSRC established itself as the information focal point; (e) Development of a more coherent water sector framework that includes issues on financial sustainability, private sector participation, transparency and governance, equity, safeguarding of environment through improved sanitation services, NRW, integrity, and; and (f) The WSRC participation in the sector conferences and mass media that also support transparency and accountability. Page 19 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 37. Despite the great achievements at the initial stage, the WSRC has not yet achieved financial sustainability and is dependent on outside sources for financing. The Licensing Bylaw, which would allow the WSRC to collect licensing fees from the WSPs to cover its costs was drafted and discussed at the government level but has not yet been approved by the CoM. The likelihood of its approval (expected to be by the end of 2018) is high due to strong interest from the key government stakeholders. Nonetheless, its current lack of long-term financing mechanisms means that the full objective of improving regulatory capacity with associated financial independent sustainability was only partly achieved. 38. Although lacking stable financial sustainability, the WSRC is a well-established institution that is recognized at the regional and international fora as a good practice example for the Middle East and North Africa region. The WSRC is regularly invited to other regional countries to share their experiences and the United Nations Special Report on Human Rights for Safe Drinking Water and Sanitation cited it as a best practice case.4 It is also considered a good practice in the Middle East and North Africa region as one of the very few fully autonomous entities responsible for performance monitoring and regulation of the water and wastewater utilities. 39. The regulatory capacity was also improved owing to the improved legislative framework that creates a better platform for the water sector institutional framework. The important achievement was the issuance of the new Water Law which, defined the new institutional structure and supported the sustainability of the water services was approved in 2014 and is under implementation. It separated roles and responsibilities between the water sector institutions (policy making, regulatory, and service provision) and defined roles, responsibilities, mandates, and interrelations between institutions working in the water sector. Alongside the water law, the publication of other important policies, regulations and actions plans (such as the non-revenue water strategy, the financial sustainability strategy and the water demand policy) guided the adoption of regulations for water tariffs, connections and water users associations as well as other regulations currently under approval (licensing regulation for wells drilling and abstraction). 40. According to the Water Law, the PWA is responsible for ministerial policy functions for water resources, water supply and wastewater, and for regulatory functions for water resources, whereby the WRSC is responsible for regulatory functions and monitoring the water supply and wastewater services, and the West Bank Water Department, currently responsible for bulk supply, is to be transformed into an independent public company, National Water Company (NWC). As mentioned earlier, the setup and operationalization of the WSRC was completed with the exception of the licensing fees collection, whereas the establishment of the NWC is at the stage of completion and the draft bylaw will need to be approved by the CoM. At the local level, the PWA is also responsible for reducing a large number of WSPs responsible for water supply (over 300) that will be subject to a process of horizontal integration, including the merging into a limited number of Joint Service Councils and Regional Water Utilities (RWUs), and being responsible for the provision of water supply and wastewater services. The PWA has developed a road 4 WSRC. 2017. Water Sector Regulatory Council Annual Report. Al-Bireh, West Bank. Page 20 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) map for this process and has identified pilot areas that are planned to be supported by the follow-on operation in the West Bank and Gaza. Justification of Overall Efficacy Rating 41. Efficacy rating: Substantial. Overall, the project has substantively achieved most of its objectives and targets. The project has improved the PWA’s capacity in its planning, legislative, and sector reform functions, as well as through the establishment and operationalizing of the WSRC, improved the government capacity to monitor and regulate the sector. The project has also supported development of a number of important strategies, policies, and tools many of which were implemented and applied and contributed to stronger institutions within the legal framework that clearly defines their roles, responsibilities, and the interface relationship between them, while providing improved efficiency and cost recovery of more effectively regulated water operators. Although the approval of some of the bylaws by the CoM (like the WSRC licensing and NWC bylaws) got delayed due to reasons beyond the project’s control, the likelihood that these will be adopted and implemented is high. A road map to assist the achievement of the implementation of water law and related approval of the NWC by-law was recently adopted by the PWA. The visible impact of the technical assistance (TA) and capacity-building type of activities takes time to demonstrate tangible effects, but the policies and reforms developed under the project are being implemented and have provided a foundation for continued reform that is supported under the ongoing and future donor support like the World Bank Water Sector Development Program that is under preparation. C. EFFICIENCY 42. The nature of the activities does not lend itself to traditional cost-benefit analysis. This was already noted in the original Project Appraisal Document (PAD) and the AF’s appraisal summaries: “The nature of the activities to be financed by the Project does not lend itself to the standard quantitative cost- benefit analysis [and that] the benefits of these activities cannot be reliably estimated in monetary terms.� It is, however, useful to assess whether value for money (VFM) was achieved by comparing this project with similar water sector reform projects in other countries (see annex 4 for full analysis). 43. Global experience in water sector reform projects in fragile contexts can be used to benchmark this project’s results and inform the efficiency evaluation. Over the past few years there have been sector reform projects in Papua New Guinea, Sierra Leone, and Zimbabwe, all of which are countries that have experienced fragility and are of comparable population sizes. The analysis separately examined two distinct sets of outputs of these projects: • Reform instruments. The package of laws, policies, strategies, regulations, and plans that direct the reform; and • Utility performance reports. The SP performance data and analysis that monitor the progress and outcomes of the reform. Page 21 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 44. The following observations relating to VFM were drawn first on the reform instruments and then the utility performance reports. At US$6.7 million, the reform instrument part of the project was at the upper end of the range of comparator projects (US$3.7 million to US$6.7 million). Other differences between the four cases were mainly in the implementation arrangements. In two of the cases (West Bank and Gaza and Sierra Leone), much of the TA was provided by an external consulting firm as a single large contract. There were also differences in the balance of the World Bank-executed and recipient-executed activities. These differences in implementation arrangements influenced (a) the clarity of reform objectives at the start of the recipient-executed reform process and (b) how adaptable (or responsive) the external TA was to changes in the reform environment. The challenges and opportunities that the implementation arrangements for this project presented were threefold. 45. First, external TA was designed without certainty on the reform objectives. There were two critical reviews that had not been concluded at the point of project appraisal. These were the Institutional Water Sector Review and the Legislative Review which were funded by other donors. This meant that the reform objectives were unclear at the time the recipient had to draft the terms of references (TORs) for the external TA contract. In turn, that led to an ill-defined external TA contract. In the other three country cases there was greater ex ante clarity on the reform objectives before contracting an external TA. 46. Second, the outsourcing of the TA as a single large firm contract limited responsiveness to the reform environment. When sector stakeholders tried to redirect the TA to be more responsive to the reform needs, the incumbent firm, reasonably, referred back to their contract to limit variance in the scope (but leading to unnecessary outputs). Breaking the external TA into more phases or with clearer milestones would have created more space for course corrections and adaptability. 47. Third, a combination of World Bank-executed and recipient-executed TA could have provided greater clarity in reform objectives and adaptability to reform environment. In other countries, the World Bank-executed TA, foundational to defining the reform objectives, was provided and encouraged south-south learning and innovation. The recipient-executed TA then focused on realizing the institutional and policy direction set out in the reform objectives. This partitioning between the World Bank-executed and recipient-executed components also supported adaptability to the reform environment, with for example, the World Bank carrying out complex analysis of sector investment requirements to support recipient decision making. 48. Efficiency was also challenged by the contract characteristics and the extension. The contract was extended because given the endorsement of the Water Law, it became clear that the process of water sector restructuring needed support. In addition, there were two other reasons for the extension. First, the contract was extended to allow the PWA to complete the reform. Many activities were not completed under TPAT 1 (the time-based contract) as the PWA worked to slowdown part of the implementation and agreed with the consultant to use local staff rather than international staff to save funds. Essentially, the PWA decided not to extend the contract and thereby saved funds for TPAT 2 (lump-sum contract). Second, the project was extended to support the establishment of the WSRC, which was established under the same project. Page 22 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 49. VFM of the utility performance monitoring reports was comparable both in its tangible and intangible outputs. However, sustainability of the WSRC—and so of performance monitoring—is threatened by the lack of a sustainable source of domestic financing even though a provision for this was made (Licensing Bylaw) in the 2014 Water Law. 50. The following emerging lessons on VFM are for both the reform instruments and the utility performance reports, as well as the link between the two sets of outputs: • Break reform TA into small parts to ensure that TA can iteratively adapt to the reform environment as it evolves and avoid funding unnecessary outputs. • Avoid outsourcing reform TA as large firm contracts, particularly where the anchor reform document (law or policy) has not been endorsed by cabinet (or equivalent). • Partition TA to the reform between the World Bank and recipient execution depending on the (a) level of expertise, (b) flexibility, and (c) country ownership required for different tangible and intangible parts of the reform. • The institutionalization of functions (for example, utility performance monitoring) needs to be supported with revenue assignments to finance those functions. • The reform instruments and the performance monitoring of service provision should be integrated to ensure that there is a feedback loop to drive the evolution of reform instruments and that reform instruments support performance improvements. Assessment of Efficiency and Rating 51. The efficiency is rated Modest for three reasons. First, the cost of the TA for the reform instruments was at the high end of comparator projects and progress modest. Second, the Licensing Bylaw to fund the regulator is not yet in place. Third, there is limited evidence of a positive feedback loop between the reform process at the PWA and the utility performance monitoring. D. JUSTIFICATION OF OVERALL OUTCOME RATING 52. The overall outcome is rated Moderately Satisfactory. The project achieved substantial efficacy against the revised PDO. The project remained highly relevant throughout its duration. Efficiency is rated Modest. E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 53. The PWA has developed a gender mainstreaming strategy for the water sector. It has consulted this strategy with the different stakeholders. The SPs are supposed to include it in their next strategic Page 23 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) planning. Building on these advances, the proposed Water Security Development Program that the World Bank is preparing now includes gender mainstreaming at the service delivery level as one of its targets. Institutional Strengthening 54. The project focused on institutional strengthening of the water sector. This was addressed both through building capacity at the PWA as well as, after the AF, providing for the establishment of an independent regulator—the WSRC. In addition, it provided for institutional strengthening through the adoption of many policies and regulations, following up on the Water Law that was adopted, and thus focusing the efforts on supporting the PWA action plan for reform. 55. The project enhanced the policy and regulatory environment, benefitting actors and institutions involved in addressing Palestinian water sector issues. The Coastal Municipalities Water Utilities and other SPs throughout the West Bank and Gaza benefitted from the improved institutional environment, including the possibility of carrying out benchmarking exercises through the WSRC. Similarly, the creation of a legal framework allowed utilities to concentrate more on their own operations and improve service delivery outcomes. It also served the purpose of maintaining the institutional setup, which is deemed important in fragile settings such as the one in the West Bank and Gaza. Mobilizing Private Sector Financing 56. The Water Law supports sustainable water service delivery and private sector engagement in the service delivery. Accordingly, the PWA has developed financial sustainability and public-private partnership policies. The PWA’s plan is to pave the way for private sector engagement through the establishment of financially sustainable water utilities. To get support in building financially sustainable utilities, the PWA has requested the World Bank to engage under the proposed Water Security Development Program. Poverty Reduction and Shared Prosperity 57. The project laid the foundations for poverty reduction. The project was initiated to continue the reform process of the Palestinian water sector and thereby increase efficiency and performance in the sector for the benefit of poor people. III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 58. The background analysis for the project was sound. The underlying challenges and needs for reform were firmly established by earlier work in the sector supported by, among others, Norway.5 The key aspects for the reform to continue were present, with the new Water Law having been adopted. The 5Audit Environmental, An Audit of the Operations and Projects in the Water Sector in Palestine: The Strategic Refocusing of Water Sector Infrastructure in Palestine, Final Report, November 18, 2008. Page 24 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) background analysis also acknowledged the special situation of the water sector in West Bank and Gaza resulting from the occupation (in the case of the West Bank) and the overall Israeli-Palestinian conflict which restricts the ability of the sector to fully develop and mature.6 However, within the operating space for the project and building on the earlier sector work, the background analysis was comprehensive. 59. The analysis of the risks was relevant and sound. Both the initial project as well as the AF had the same implementation risks and mitigation measures as the original project (country political context, macro-economy, institutional capacity for implementation, and sustainability), with an additional risk associated with the institutional building of the WRSC. The risks related to the political context (rated high) materialized in terms of conflict but were effectively mitigated through proactive engagement both by the client and the World Bank team that was engaged. The institutional risks associated with the institutional capacity partly materialized but was mitigated primarily through proactive engagement, in particular, during the preparation of the AF to allow for the WSRC to be set up. 60. The project was designed to be well in line with and support the relevant national development plans. The reform process was ongoing in the water sector in which a healthy decentralization and clearer division of labor was devised. The project was well in line with the Palestinian National Development Plan focused on building national institutions and infrastructure; to the PWA reform efforts of clarifying roles and responsibilities of the PWA with an independent regulator. After the AF and restructuring of the project, the creation of the independent regulator was added as an objective. B. KEY FACTORS DURING IMPLEMENTATION 61. The 2014 Gaza-Israel conflict created a challenging environment. The 2014 war has reduced Gaza’s GDP by about US$460 million. Construction, agriculture, manufacturing, and electricity sectors were hit the most with output reductions of 83 percent in the construction sector in the second half of 2014 and roughly 50 percent in these other sectors. This conflict is just the last in a long series that have damaged Gaza’s economy, infrastructure, and development potential. 62. The lack of agreement on how best to carry out the reform and of coordination to implement some aspects of the Water Law also affected project implementation. In addition, the political divide between the West Bank and Gaza may have created additional internal challenges when it comes to implementing the Water Law and coordinating capacity-building efforts. The lack of coordination appears to be a binding constraint to the implementation of projects in the West Bank and Gaza and creates uncertainty with respect to outcomes. 63. The project also faced challenges relating to project design. The use of a time-based contract instead of a results-based contract meant that the project had to face some delays. The use of a time- based contract meant that some of the consultants hired by the PWA only partially delivered the expected outputs. Furthermore, the PWA’s ability to follow up on the work under this type of contract and under the consultant Terms of Reference was limited, adding to challenges. The Terms of Reference were very 6 World Bank.2009. Assessment of Restrictions on Palestinian Water Sector Development. Report No 47657-GZ. Page 25 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) general and dependent on progress of other reform programs. The contract setup was changed through the engagement of the task team leader (TTL) to a lump-sum contract, responding much better to the needs of the project and the ability of the PWA client to follow up. 64. The need for AF and restructuring added some delays during the implementation of the project. The World Bank acted swiftly in responding to requests and questions from the client regarding the AF. The challenges posed by the restructuring were addressed by the World Bank, as also highlighted in the client Implementation Completion and Results Reports (ICRs) (see annexes 7 and 8). 65. Despite these challenges during implementation, the borrower achieved significant results. The borrower was responsive to these factors and adapted to them. Carrying out water reform, passing laws and establishing a regulatory authority such as the WSRC was not an easy task, demonstrating the commitment and proactivity of the borrower. IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) 66. M&E design. The project’s Result Framework and indicators were not clearly formulated during project preparation. The Results Framework in the PAD mostly included output-based indicators for both PDOs and intermediate results. Thus, the result chain toward the contribution to capacity improvement and behavioral transformation of the PWA in planning, monitoring, and regulating the water sector was not clear. At the preparation stage, the project’s activities were not identified clearly. The activities were mainly based on indicative action plans of the TPAT, which were written in generic terms. Therefore, the PAD did not clearly define a unit of measure for almost all indicators. The Results Framework was revised in the AF Project Paper, which specified more clearly the PDO and intermediate result indicators. However, the weakness of the output-based indicators (including lack of unit of measure) was not addressed. 67. M&E implementation. The detailed design and implementation of the M&E system was done by an M&E expert. Three M&E missions were conducted by the consultant, the first one aimed at having direct M&E for the program. The other two missions were oriented to build capacity of the monitoring unit to implement M&E. The monitoring role expanded to the PWA’s strategic plan and implementation plan as well. 68. M&E utilization. The PWA closely monitored all outputs produced and used the developed technical regulations, guidelines, and standards in their daily work. The Project Steering Committee (PSC) headed by the PWA Minister was formed at the beginning of the program. The PSC was reviewing and validating the project progress and providing needed support. Upon endorsement of the Water Law and change of the PWA head, the PSC followed up to the reform on a daily basis. The WSRC’s monitoring reports on SPs’ performance are developed and published annually. The WSRC information system, a localized version of IBNET, was prepared. However, the operations of monitoring reports and information systems relied on donors’ financing, which raised questions about their long-term sustainability. Page 26 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 69. Rating for quality of M&E. As there were some shortcomings in the M&E system’s design, implementation, and utilization, the overall quality of the M&E is rated Modest. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 70. Environmental and social safeguards. The project was classified as environment category C and did not trigger any environmental safeguards or any social safeguards. 71. Financial management. The project performance in financial management was rated Satisfactory during the life of the project mainly due to the PWA’s familiarity with financial management systems of the project and satisfactory performance of the financial management specialist at the Project Management Unit (PMU). Regular supervision missions have confirmed that the project has complied with the obligations of financial reporting and auditing: audit reports and interim financial reports (IFRs) were submitted to the World Bank on time and there were no overdue external audit reports and IFRs at the time of the project closing date. All audit reports and IFRs were reviewed by the World Bank and comments provided to the Government. 72. Procurement. Procurement did not have any issues reported during the project period. Procurement performance was rated Satisfactory throughout project implementation, as the client complied with the World Bank procurement policies and procedures. The PWA and the WSRC procurement capacity has improved throughout project implementation, with the World Bank team providing continuous support and hand-holding. C. BANK PERFORMANCE Quality at Entry 73. The strategic relevance of the project was well-articulated at entry and built upon earlier World Bank engagement in the sector and was also well in line with the client’s interest. It built on earlier work in the sector and the reform process supported by other donors (primarily Norway). However, certain aspects relating to the project formulation of the Results Framework, objectives, and indicators were not well-articulated and the PAD mostly included output-based indicators for both the PDO and intermediate results. The Results Framework also comes across as somewhat optimistic in what can be achieved in terms of reforms. In addition, the TPAT’s setup was not well-articulated, which provides a challenge when the client is still developing, as the PWA was, and hampered the movement toward concrete results as the consultant working with the PWA was hired under a time-based contract. Quality of Supervision 74. The World Bank team remained responsive to the changing circumstances during implementation. The World Bank responded to requests and questions from the client. As highlighted by both the PWA and WSRC, in the client ICRs the quality of supervision was considered good. As noted by the WSRC, the TTL provided, through close engagement, an improved dialogue between the PWA and Page 27 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) WSRC. After the AF was approved and the process of establishing the WSRC started, one TTL enabled close follow-up and the building of relationships between the World Bank and the client. 75. The World Bank team was also responsive to the needs of client. In particular, the World Bank team acted after having recognized that the time-based consultancy contract that the PWA had set up was inadequate. Through the engagement of the TTL, the contract was changed to a lump-sum contract, responding much better to the needs of the project and the ability of the client to follow up. The risks associated with a time-based contract were highlighted upfront especially given the PWA’s weak contract management capacity. However, given that the technical team could not define a set of outputs, a lump- sum contract could not be used, initially. Justification of Overall Rating of Bank Performance 76. Rating of overall World Bank performance and underlying justification. For the reasons outlined in the previous paragraphs, the overall rating is Moderately Satisfactory. The World Bank team’s performance at entry was Moderately Satisfactory for reasons outlined earlier, while during supervision it was Satisfactory as it was quick in responding to requests and questions from the client and worked with them as a partner and also helped the client reform the project through the AF and restructuring. D. RISK TO DEVELOPMENT OUTCOME 77. There is a significant risk that development outcomes will not be sustained without outside support. While the reform process has been moving forward at a relatively steady pace it is far from certain that the outcomes envisaged in the design of the project—many of which have been achieved (or are in the process of being achieved)—can be sustained without significant outside support. 78. Sustainability of the regulator—WSRC—and of performance monitoring is threatened by the lack of a sustainable source of domestic financing even though a provision for this was made (Licensing Bylaw) in the 2014 Water Law. Given the very low levels of private and foreign direct investment, the near-term economic outlook for the West Bank and Gaza remains worrying with project growth levels likely to be insufficient to meet the financing needs of the water sector. 79. The conflict and stalled peace process make it more difficult for Palestinians to mobilize resources to sustain efforts and implement reforms. Conflicts hinder progress in institution building, reversing previous gains, and threatening the development outcomes of the project. The combined effect of conflict, Israeli restrictions, and fragmented Palestinian governance undermines the sustainability of the development outcomes. V. LESSONS AND RECOMMENDATIONS 80. Political will is key for a reform-oriented program to succeed. Since the project focused on ‘soft’ objectives such as establishment of regulators and implementation of law(s) and regulations, political will Page 28 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) was essential for its success. Political will needs to be sustained and the broader governance environment needs to provide enabling conditions for capacity-building projects to succeed. 81. While precautions relating to a fragile situation can be projected, wars are hard to plan for. In the planning for the project, it was clear that the task team as well as the client understood the challenges stemming from the civil armed conflict in late 2008 and early 2009 and took that into account. However, the war of 2014 was hard to foresee. In conflict situations flexibility and active engagement is imperative and flexibility in being able to adapt and change are key. 82. Working closely with the partner to see reform efforts through is imperative. Close collaboration among project partners was crucial to ensure implementation and achievement of objectives. The longer- term nature of policy and reform investments means that to fully see them come to fruition, lasting partnerships with clear responsibilities are needed. The World Bank Water Security Development Program (under development) will be important in taking the reforms forward. 83. Breaking reform TA into small parts ensures that TA can iteratively adapt to the reform environment as it evolves and avoid funding unnecessary outputs. Similarly, outsourcing reform TA as large firm contracts should be avoided, particularly, where the anchor reform document (law or policy) has not been endorsed by the cabinet (or equivalent). 84. Partitioning TA to the reform between World Bank and recipient execution ensures improved efficiency. This partitioning should depend on the (a) level of expertise, (b) flexibility, and (c) country ownership required for different tangible and intangible parts of the reform. The institutionalization of functions (for example, utility performance monitoring) needs to be supported with revenue assignments to finance those functions. The reform instruments and the performance monitoring of service provision should be integrated to ensure that there is a feedback loop to drive the evolution of reform instruments and that reform instruments support performance improvements. . Page 29 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Strengthen the capacity of PWA to effectively plan water sector development Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Sector Reform Planning Yes/No N Y Y Y Document developed, Updated yearly approved yearly by PWA 01-Jan-2011 03-Mar-2011 31-Dec-2017 29-Dec-2017 and COMSC Comments (achievements against targets): Target achieved 100%, as the Sector Planning Document has been developed and is updated yearly. During project implementation four reform programs were developed and published, the latest one is for the Reform Plan for 2016-2018. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Water Sector Policy and Yes/No N Y Y Y Strategy approved by PWA 01-Jan-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Page 30 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Comments (achievements against targets): Target over-achieved. The PWA has developed the Water Sector Policy and Strategy for 2012-2032 which included the water sector strategic development plans (2017-2022 and 2013 – 2032) and developed the following water sector polices, which are under implementation: 1. Policy and a Strategy on Capacity Development of the Water Sector; 2. National Water Awareness Strategy; 3. General Policy for Water Demand Management Concepts and Principles; 4. Strategic plan for Water Information System; 5. Water Sector Strategic Plan and action plan; 6. 10 policies for the Water Sector (Water Policy Equity in Water Distribution, Alternative Water Resources Policy, Non-Revenue Water Policy, Improving Sanitation Services Policy, Polluter Pays Policy, Financial Sustainability Policy, Transparency and Accountability Policy, Community Participation Policy, Partnership with Private Sector Policy, Promotion for Water Sector Policies); 7. Trans-boundary Water Resources Strategy and Action Plan; 8. Development of many Regulations; 9. Gender Mainstreaming Guideline for Palestinian Water Sector. Within the reform at PWA level the following was completed: PWA Strategic plan and implementation plan 2017-2019, PWA Training and Development Strategy, and Training Guidelines, PWA Administrative and Financial Guidelines. Objective/Outcome: Strengthen the capacity of PWA to effectively monitor water sector development Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Monitoring Reports on Service Text None Not in the original Annual report is Annual report is Providers performance are operation, indicator developed. published developed, published developed and published was added at the AF. and disclosed and regularly disclosed annually 03-Mar-2011 31-Jul-2014 31-Dec-2017 02-Nov-2017 Page 31 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Comments (achievements against targets): Target achieved: 100%. The WSRC is doing regular monitoring of SPs performance and they published the Annual Performance Monitoring Reports from 2013-2016.The are being constantly further improved to expand on the performance monitoring indicators and to more Service Providers (SPs) and geographic areas. The WSRC has also built online water database, where most SPs can access and upload their data, which is linked to the World Bank IBNET database. Objective/Outcome: Strengthen the capacity of PWA to effectively regulate water sector development Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Water law is updated and Yes/No N Y Y Y consulted with stakeholders and approved by responsible 01-Jan-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Authorities Comments (achievements against targets): Target achieved - 100%. The New Water law was approved in 2014 and is under implementation. The new law defined the new water structure and supported the sustainability of the water services. It also separated roles and responsibilities between water sector institutions (policy making, regulatory, service provision) and defined roles, responsibilities, mandates and interrelations between institutions working in the water sector. The institutional framework within the New Water Law was developed based on four main levels, namely: (i) Decision making and policy level, (ii) Regulatory level, (iii) Bulk supply level, (iv) Operational level. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion WSRC is strengthened and Text Government decree Not in the original 1. WSRC staffed, office WSRC has been fully Functional issued. BOD operation, indicator set up, org structure established, staffed, appointed. was added at the AF. and job description strategy and business Page 32 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) developed; HR plan developed and guidelines drafted; approved by the BOD, Roadmap to complete licensing by law establishment developed but not yet development and approved; Public approved by BOD. awareness campaigns 2. Org structure, job developed and description and HR partially implemented. guidelines approved by BOD; all staff appointed Licensing bylaw developed and approved; public awareness campaign is planned; 3. Licensing fees started to be collected, public awareness campaigns to SPs are conducted. 24-Jun-2015 31-Jul-2014 31-Dec-2017 02-Nov-2017 Comments (achievements against targets): Target achieved: 90%. WSRC was established in August 2014 , with the organizational structure, job descriptions and by-laws approved by the Cabinet of Ministers, key positions (CEO, procurement, financial, M&E, communications, and others) fully staffed and operational, public awareness campaigns developed and partially implemented. The Project was able to achieve all the targets under this indicator except for collection of the licensing fees from SPs. The draft licensing bylaw is under the review by the Cabinet of Ministers and is expected to be approved within the coming months. Page 33 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) A.2 Intermediate Results Indicators Component: Component 1: Advisory Support, Technical Assistance and Capacity Building for PWA Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Quarterly Status Memoranda Yes/No N Y Y Y on Sector Reform produced 01-Jan-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Comments (achievements against targets): Quarterly status memorandum were issued for the period (March- May 2012), (June- August 2012), (September- December 2012), (January- June 2013), (July- December 2013), (January- March 2016), (April- September 2016), and were disseminated to relevant stakeholders. At later stage, summary reports of progress was presented in meetings or workshops as needed. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion New PWA organizational Text No No Yes Org.structure, job structured established and the description developed, redeployed staff implement its staff redeployment functions based on the took place at higher developed job descriptions level staff, but the org. structure is pending Cabinet of Ministers approval. Page 34 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 01-May-2011 31-Jul-2014 31-Dec-2016 29-Dec-2017 Comments (achievements against targets): - Organization Structure for PWA is completed from the DIWAN Committee. - PWA Job description is developed considering the new Organization structure and completed. - Redeployment took place at PWA for some high level staff during the reporting period. - Organization Structure is pending Cabinet of Ministries approval. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Technical regulations, Number 0.00 0.00 14.00 14.00 guidelines, standards, are reviewed/ updated/, 01-May-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 developed Comments (achievements against targets): 1. Technical Guidelines for PMU - Developed and partially implemented (staff is needed for full implementation); 2. Financial Guidelines for PMU - Developed and implemented; 3. Drinking water quality standards - Developed and adopted; 4. PWA regulation on water tariff - Approved and adopted since 2013; 5. PWA regulations on House connection - Approved and adopted; 6. PWA guidelines produced on Planning & Design - Developed by PWA but needs approval by PWA Head; 8. Licensing of SPs - Developed as final draft; 9. Guidelines on Financial & Administration - Completed and implemented at PWA; 10. Water & WW Tariff & Connection Services Fees - Unified tariff regulation is developed after a lot of deliberations with key stakeholders. It is considered as top priority to the Minister and is expected to be raised very soon to the CoM approval. 11. Water & WW Sector Specifications & Design Guidelines - Draft finalized. PWA has formulated a team comprising of different stakeholders that are Page 35 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) responsible for finalizing the document. 12. Standard Operation Procedure to PWA - Developed according to new structure, and implemented. Although SoP is based on new structure which is still pending CoM approval, PWA managed to implement it considering functions. 13. Guideline for Pricing Services - Developed and completed. Guideline for prices might be subject to modifications based on the unified tariff regulation. 14. Water Resources and facilities protection - Developed but needs to be approved by PWA head and submitted to the CoM for final approval. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion National Water Company Text No Not part of the Yes Road map developed Bylaw developed original operation; and bylaw in draft indicator added as part of the AF. 01-Jan-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Comments (achievements against targets): PWA has developed a road map for the establishment of the National Water Company (NWC) responsible for the bulk water supply. It has also drafted its bylaw, but it was not yet approved by the CoM, which should result in the establishment of the NWC. The establishment of the NWC is major step in the reform agenda of the water sector. Recently, the bulk water supply is done by the West Bank Water Department, an old and inefficient institution, which shall be replaced by the NWC as of the new water law of 2014.There are important step that need to take place (i.e. assets valuation, settlement of the debts with the service providers, which account around US$240M, existing staff, etc.), along the establishment of the NWC. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Regional Water Utilities Bylaw Text No Not part of the Yes Yes. Approved by the original operation; PWA and forwarded Page 36 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) developed indicator added as to the cabinet of part of the AF. Ministers for approval 01-Jan-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Comments (achievements against targets): Target fully achieved. PWA has developed a road map for the establishment of the Regional Water Utilities (RWUs), which is responsible for the domestic water and wastewater services, and has identified pilot areas to start implementations. PWA has also developed its bylaw and made consultations with stakeholders, and has forwarded it to the CoM for approval, but not yet approved. The establishment of the RWUs is part of the reform agenda for the water sector, which may need several years to be accomplished. The road map suggested some scenarios to achieve the establishment starting from corporatization through establishment of independent utilities and then amalgamation of utilities toward the RWUs. The bylaw is expected to be approved in the coming six months, as it has been discussed and consulted with relevant stakeholders. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Strategies produced and Number 0.00 0.00 9.00 9.00 consulted 01-Apr-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Comments (achievements against targets): target fully achieved, all strategies were produced and consulted, as outlined below. Many of them have taken them further and are under implementation depending on resource availability. 1. Sustainable Financing - Produced and published at PWA website, and is utilized by different stakeholders. 2. Revenue Water - Produced and published at PWA website, and utilized by different stakeholders (e.g. KfW program fund). 3. Communication - Produced and published at PWA website. Under implementation depending on fund availability. 4. Sludge disposal - Desk study was produced and implemented. It served as the basis for the development and the endorsed “Obligatory Technical Instructions No. 59 for year 2015 : Treated Sludge for Agricultural Reuse� 5. Capacity development - Developed and partially implemented depending on fund availability. Further support is needed for the implementation. 6. PWA Strategic Plan (2016 -2018) - Developed, implemented Page 37 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 7. General Policy for Water Demand Management Concepts and Principals - Developed and finalized from PWA. Dissemination is yet to take place. 8. Strategies covering-Public Awareness and civil engagement - Completed recently, further support is needed for implementation. 9. Transboundary Water Resources Strategy - developed, and adopted by PWA Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Plans and planning support Number 0.00 0.00 16.00 16.00 tools developed 01-May-2011 31-Jul-2014 31-Dec-2015 29-Dec-2017 Comments (achievements against targets): 1. Climate change mitigation measures - Produced and utilized by PWA and relevant stakeholders. 2. Evaluation of surface water and groundwater surface models - completed and utilized, e.g. by Water Resources Directorate within PWA. 3. Assessment of Hydro monitoring equipment, and specifications - Produced and follow up actions were undertaken accordingly. Procurement of equipment needed based on the assessment 4. Standard Formats and Methodology for Planning - produced and is utilized by the Planning directorate within PWA. 5. ToR for Master Plan N-NE West Bank - Completed. A comprehensive study was conducted based on the ToR and utilized by PWA and relevant stakeholders. 6. Communication Plan produced and under implementation by PWA 7. PWA Implementation (business) Plan for 2015 - Produced and endorsed, and was implemented and monitored accordingly. 8. Water Information System - Developed and under implementation. Replaced by 2 systems considering MIS recommendation with the main objective having appropriate foundation for decision systems. 9. Improved PWA Human Resource System - Developed, implemented and being utilized by PWA which has improved the performance of PWA significantly in this regard. 11. PWA Implementation (business) Plan for 2016 - Developed and endorsed, and implemented and monitored accordingly. 12. Public Awareness Action Plan - Developed and finalized, implementation hinges on fund availability. 13. Licensing for drilling and abstraction data base system - Developed. The system was considered in the EDMAS system. Further improvements to it might take place upon endorsing the drilling and abstraction regulation. Page 38 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 14. National Water Safety Plan - Completed, and pilot was developed. Safety plan was adopted and implementation took place in pilot areas (e.g. Qalqiliah municipality) 15. PWA implementation (business) plan for 2017 - Developed and is being implemented. 16. Complains System is developed - For PWA it is incorporated as part of the government system. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Relevant Studies conducted Number 0.00 0.00 3.00 3.00 01-May-2011 31-Jul-2014 31-Dec-2015 29-Dec-2017 Comments (achievements against targets): Target achieved. Assessment of Acquired Regional Experience on Wastewater Treatment, Reuse and Sludge Management Studies - Completed. Results have been utilized upon need by relevant directorates within PWA. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion PWA’s improved capacities are Number 0.00 0.00 85.00 95.00 effectively applied as measured by (i) 85 Staff Trained; Among 01-Jan-2011 31-Jul-2014 31-Dec-2017 02-Nov-2017 which 18 females, and (ii) 14 TrainingCourses conducted Comments (achievements against targets): Target over-achieved. 95 staff was trained and 28 Training Courses were conducted to improve PWA capacities on the following topics: - Training on Etiquette & Protocol on January 2017 Page 39 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) - Training for PWA personnel involved in communication and Public relation on December 2016 - Training on the objectives and use of Sops on January 2016 - Training on Water Resource Programs to PWA Staff - Training on Finance for Non Finance for High level Staff - Excel Training for different Staff - Advance level Financial Training - Project life cycle Training - SoP Training - Risk Management training - On job training to the library - Communication training - Training on the development of Strategic Plan and Implementation Plan to around - Reports writing training - Etiquette and Protocol for PWA staff - Advanced English language training - Training on advanced archiving systems - Human Resources management and planning - Public private partnership - Assets evaluation and management - Training on budgeting and financial reporting - Leadership skills and change management training - Etiquette and Protocol training for office boys - GIS training - Proposal writing and fund raising - Risk management - Training on Strategic Planning. Component: Component 2: Improved Capacity of WSRC - Supplementary Assistance for studies, training and institutional building of the WSRC Page 40 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Water Regulatory Council Text No Not part of the Yes Yes establishment action Plan and original project; Bylaw developed indicator added at AF. 01-Jan-2011 31-Jul-2014 31-Dec-2017 29-Dec-2017 Comments (achievements against targets): Strategy and action plan document and bylaw developed and approved. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Plans and planning support Number 0.00 0.00 16.00 16.00 tools developed 01-May-2011 31-Jul-2014 31-Dec-2015 29-Dec-2017 Comments (achievements against targets): 1. Climate change mitigation measures - Produced and utilized by PWA and relevant stakeholders. 2. Evaluation of surface water and groundwater surface models - completed and utilized, e.g. by Water Resources Directorate within PWA. 3. Assessment of Hydro monitoring equipment, and specifications - Produced and follow up actions were undertaken accordingly. Procurement of equipment needed based on the assessment 4. Standard Formats and Methodology for Planning - produced and is utilized by the Planning directorate within PWA. 5. ToR for Master Plan N-NE West Bank - Completed. A comprehensive study was conducted based on the ToR and utilized by PWA and relevant stakeholders. 6. Communication Plan produced and under implementation by PWA 7. PWA Implementation (business) Plan for 2015 - Produced and endorsed, and was implemented and monitored accordingly. 8. Water Information System - Developed and under implementation. Replaced by 2 systems considering MIS recommendation with the main objective Page 41 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) having appropriate foundation for decision systems. 9. Improved PWA Human Resource System - Developed, implemented and being utilized by PWA which has improved the performance of PWA significantly in this regard. 11. PWA Implementation (business) Plan for 2016 - Developed and endorsed, and implemented and monitored accordingly. 12. Public Awareness Action Plan - Developed and finalized, implementation hinges on fund availability. 13. Licensing for drilling and abstraction data base system - Developed. The system was considered in the EDMAS system. Further improvements to it might take place upon endorsing the drilling and abstraction regulation. 14. National Water Safety Plan - Completed, and pilot was developed. Safety plan was adopted and implementation took place in pilot areas (e.g. Qalqiliah municipality) 15. PWA implementation (business) plan for 2017 - Developed and is being implemented. 16. Complains System is developed - For PWA it is incorporated as part of the government system. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion WSRC strategy and Yes/No N Y Y Y implementation plan developed and implemented 03-Mar-2011 31-Jul-2014 30-Jun-2017 29-Dec-2017 Comments (achievements against targets): Target achieved. Strategy and action plan document was completed. ****IS IT IMPLEMENTED?**** Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion WSRC Information system Yes/No N Y Y Y created and maintained 03-Mar-2011 31-Jul-2014 30-Jun-2017 29-Dec-2017 Page 42 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Comments (achievements against targets): Target achieved 100%. WSRC information system developed and operational. Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion WSRC Technical regulations, Number 0.00 0.00 11.00 11.00 guidelines, standards, and systems are reviewed/ 03-Mar-2011 31-Jul-2014 30-Jun-2017 02-Nov-2017 updated/, developed Comments (achievements against targets): Target mostly achieved fully completing 10 out of 11 regulations, standards, systems, with the exception of operational systems some of them still in draft and/or pending approval. 1. WSRC Financial and Admin Completed and approved by the Cabinet of Ministers. 2. Internal regulations - completed. 3. Regulations on promotion - completed. 4. Financial System - In place, bylaw approved by the Cabinet of Ministers, manual completed. 5. Human Resource System - completed; may require some modifications based on the Cabinet of Ministers approach with independent institutions definitions. 6. Administrative System - completed; may require some modifications based on the Cabinet of Ministers approach with independent institutions definitions. 7. Standard operation procedures - completed. 8. Procurement Procedures - completed. 9. Operational systems (licensing, complains, etc.) - Licensing is pending the issuance of licensing bylaw by PWA, Licensing procedures draft is prepared, Complaints manual under preparation. 10. Public information system - Communication plan completed. 11. Complain System - Survey completed. Page 43 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) B. Key Outputs by Component Objective/Outcome 1: Strengthen the capacity of PWA to effectively plan water sector development • Sector Reform Planning document developed, updated, and approved yearly Outcome indicator • Water Sector Policy and Strategy approved by PWA • Strategies produced and consulted • Plans and planning support tools developed Intermediate results indicator • Relevant studies conducted • PWA with improved capacities Under component 1: 1. Seven quarterly status memoranda issued between Mar 2012 and Sep 2016; 2. Organization structure of PWA was completedand is pending approval; 3. Nine strategies were produced and consulted, helping PWA to strengthen its planning capacity on the following aspects: a. Sustainable financing b. Revenue water c. Communication Key outputs by component d. Sludge disposal e. Capacity development f. PWA Strategic plan (2016-2018) g. Water demand management h. Public awareness and civic engagement i. Transboundary water resources management 4. Three relevant studies were conducted on wastewater treatment, reuse, and sludge management. Page 44 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 5. 95 staff trained and 28 training courses conducted to improve capacity Under component 2: 1. sixteen plans and planning support tools were developed Objective/Outcome 2: Strengthen the capacity of PWA to effectively monitor water sector development • Monitoring reports on service providers performance are developed and Outcome indicator published annually • Quarterly Status Memoranda on Sector Reform produced; Intermediate results indicator • Technical regulation, guidelines, standards are reviewed, updated and developed Under component 1: 1. Annual Performance Monitoring Reports have been published annually Key outputs by component since 2013; Under component 2: 2. WSRC information system has been created and maintained. Objective/Outcome 3: Strengthen the capacity of PWA to effectively regulate water sector development • Water law is updated, consulted with stakeholders and approved; Outcome indicator • WSRC is strengthened and functional; • National Water Company bylaw is developed; • Regional water utilities bylaw is developed Intermediate results indicator Under component 1, 1. Seven regulations were approved and implemented: • Financial guidelines for PMU; Key outputs by component • Drinking water quality standards; • PWA regulation of water tariff; • PWA regulations on house connections; • PWA regulations on planning and design; Page 45 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) • Licensing of SPs; • Guidelines on financial and administration; 2. Regional Water Utilities by law approved 3. A road map for the NWC bylaw has been developed and a draft produced Under component 2: 1. WSRC strategy and implementation plan was developed and implemented. 2. 10 out of 11 WSRC technical regulations were reviewed, updated and developed. Page 46 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Richard W. Pollard Task Team Leader(s) Lina Fathallah Rajoub Procurement Specialist(s) Riham Hussein Financial Management Specialist Helen Z. Shahriari Social Safeguards Specialist Fifi Z. Antar Team Member Zeyad Abu-Hassanein Environmental Safeguards Specialist Natalia Robalino Counsel Khaled Mohamed Ben Brahim Team Member Adnan Farouq Saad Aldin Ghosheh Team Member B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY10 11.254 76,780.11 FY11 18.567 95,306.26 Total 29.82 172,086.37 Supervision/ICR Page 47 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) FY12 21.371 82,778.46 FY13 19.835 67,257.83 FY14 16.850 63,809.28 FY15 10.285 43,454.59 FY16 14.375 81,430.31 FY17 28.539 234,995.34 FY18 15.103 106,379.97 Total 126.36 680,105.78 Page 48 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) ANNEX 3. PROJECT COST BY COMPONENT Actual at Project Amount at Appraisal Revised costs Percentage of Components Closing (US$, (US$, Million) (US$, Million) appraisal Million) Technical Planning and Advisory Team 4.90 4.30 5.00 102.0408 (TPAT) Supplementary 0.30 0.30 1.20 400 Studies and Training Project 0.80 0.80 1.50 187.5 Management Total 6.10 5.40 7.70 126.2295 Page 49 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) ANNEX 4. EFFICIENCY ANALYSIS 1. Economic and financial analysis for the Water Sector Capacity Building Project. In both the original PAD and the AF, it was pointed out in the appraisal summary that “The nature of the activities to be financed by the Project does not lend itself to the standard quantitative cost-benefit analysis [and that] the benefits of these activities cannot be reliably estimated in monetary terms.� Retrospectively, however, it is possible to critically examine whether VFM was achieved by the project’s various components and subcomponents. 2. VFM analysis. The VFM analysis examines the relationship between reform inputs and reform outputs using comparator projects for similar size fragile countries and situations. It takes as a starting point two distinct sets of outputs: (a) Reform instruments. The package of laws, policies, strategies, and plans generated by the PWA and the consulting firm, and; (b) Utility performance reports. The SP performance data and analysis generated by the WSRC. 3. Both are fairly standard packages of outputs associated with a combination of tangible outputs (reports) and intangible outputs (for example, capacity improvements, ownership, and so on) set out in table 4.1. Table 4.1. Project Inputs and Outputs by Package of Outputs Institutions Inputs (US$, million) Tangible Outputs Intangible Outputs Responsible PWA + consulting firm 5.3 World Bank + Reform instruments: Reform ownership, 1.4 AFD laws, policies, strategies, consensus building, capacity = 6.7 and regulations improvements, WSRC 1 Utility performance Learning and experience reports: SP performance sharing platform for SPs reports Source: World Bank project accounts and client ICR. 4. Reform instruments and VFM. Over the past few years, there have been similar types of sector reform projects in Papua New Guinea, Sierra Leone, and Zimbabwe all of which are countries that have experienced fragility and are of comparable population sizes. All of these projects have involved getting high-level endorsement (by a cabinet or council of ministers) of an anchor document (a law or policy) that sets out a reformed institutional framework and policy principles for sector management. The projects also all aimed at realizing the institutional vision set out in the anchor document over a period of around five years (see table 4.2). Costs across these projects ranged from US$3.7 million in Zimbabwe to US$6.7 million in West Bank and Gaza. Each project spanned a similar combination of outputs: law/policy, strategies, institutional framework, investment plans, and regulatory mechanism—albeit with some variation at the margin. Three of the projects (West Bank and Gaza, Sierra Leone, and Zimbabwe) involved setting up an independent regulator, while the fourth (Papua New Guinea) only involved setting up of a mechanism to monitor the performance of services providers. Page 50 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Table 4.2.West Bank and Gaza Water Sector Capacity Building and Comparator Projects Country Input Costs (US$, Implementation Tangible Outputs Intangible Outputs million) Arrangements Reform Documentation West Bank and 5.3 + 1.4 AFD = 6.7 RE project led by Laws, strategies, Reform ownership, Gaza a RE PWA supported by a institutional stakeholder consulting firm framework, consensus investment plans, building, and and setup of capacity regulator improvements Sierra Leone 5.6 DFID-funded Policy, strategies, Reform ownership, (£3.95 million consulting firm institutional stakeholder budget) b supporting Ministry framework, consensus of Water investment plans, building, and and setup of capacity regulator improvements Papua New Guinea 0.4 BE + 5.4 RE = BE + RE project led by Policy, strategies, Reform ownership, c 5.8 Water Papua New institutional stakeholder Guinea framework, consensus investment plans, building, and and regulatory capacity mechanism improvements Zimbabwe d 2 BE + 1.7 RE = 3.7 BE + RE project Policy, strategies, Reform ownership, working with institutional stakeholder Ministry of Water framework, consensus and Zimbabwe investment plans, building, and National Water and setup of capacity Authority (ZINWA) regulator improvements Note: RE = Recipient Executed; BE = Bank Executed. a. US$4.2 million from Water Sector Capacity Building Project (P117443 and P153889) + US$1.4 million AFD parallel financing b. DFID (U.K. Department for International Development)-funded Sierra Leone Hygiene, Sanitation, and Water Supply Programme. c. US$0.44 million Water and Sanitation Policy Development in Papua New Guinea (P144823) + US$5 million from Water Supply and Sanitation Development Project (P155087) d. US$1.5 million from Technical Assistance for Zimbabwe Water and Wastewater (P126703) + US$0.25 million from Delivering Water Supply and Sanitation in Fragile States: The Transition from Emergency to Development (P131964) + US$0.25 million from United Nations Children’s Fund + US$1.7 million from Zimbabwe National Water Project (P154861). 5. While sector reform may start with an anchor reform document such as a law or policy, the end of the reform process is never as clear. Equally, evaluations of the quality of reforms are few and far between. In all these specific country cases it is too early to evaluate effectiveness—indeed the reform projects in Papua New Guinea and Zimbabwe are still ongoing. However, initial observations comparing VFM can usefully be drawn from across these four countries. Page 51 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 6. While there was a range of costs across these projects (US$3.7 million to US$6.7 million), these projects are of the same order of magnitude and linked to similar outputs. Supervision and completion reports from across the projects raise a number of common challenges to the reform process, including the following: • Though outputs were delivered, reforms were slow to be realized due to delays in decision making, institutional inertia, and unforeseen funding gaps. • That reforms were only selectively implemented—for example, only some institutional changes set out in the anchor document were made while others were not. Only some policy principles and bylaws were acted upon. • Though all these projects had capacity-building components, they also highlight that the capacity to implement them was constrained. 7. Differences between the four cases, relevant to the analysis of VFM, were mainly in the implementation arrangements. In two of the cases (West Bank and Gaza and Sierra Leone), much of the TA was provided by an external consulting firm. There were also differences in the balance of the World Bank-executed and recipient-executed activities. These differences in implementation arrangements influenced (a) clarity of reform objectives at the start of the recipient-executed reform process and (b) how adaptable (or responsive) the external TA was to the reform environment. 8. In the West Bank and Gaza project, clarity of the reform objectives was obscured by the fact that the design of the project (at the PAD stage) had to be done before the Institutional Water Sector Review and the Legislative Review (which were funded by other donors) had been completed (see figure 4.1) and before the anchor reform document (the law) was enacted. This meant that key reform objectives were not yet determined during the design phase or even at the beginning of project. This led to the TORs for the first TA consulting contract (TPAT 1) being based on a very long and unfocused list of outputs and payments being time based rather than output based. While this could have made the TA responsive to the reform environment, it led to ambiguity for at least two reasons. First, it left the outputs of the consulting firm to be directed by the PWA—whose capacity the consulting firm was meant to be building. Second, when PWA with the support of the World Bank and other donors tried to redirect the TA to be more responsive to the reform needs, the firm, reasonably, referred back to their contract to limit variance in the scope. Third, TPAT started before finalizing the Institutional Water Sector Review and adapting its results at policy-making level, resulting in delays in the formulation and adoption of the Water Law. This ambiguity of direction (a basic principal-agent problem) undermined achieving good VFM. The first US$1.7 million TA contract was then extended. The TORs for the second TA contract (TPAT 2) were tightened with payments more clearly linked to outputs. While this did improve clarity and the link between inputs and outputs it naturally constrained adaptability to the reform environment. 9. In the other three country cases, there was greater ex ante clarity on the anchor reform document. In Zimbabwe and Papua New Guinea, this greater clarity was achieved by breaking the scope of the reform TA into smaller packages of outputs with some parts being World Bank executed and other parts being recipient executed. For example, the TA to the anchor reform document was provided though Page 52 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) World Bank-executed TA in both these countries. The anchor reform document then received cabinet endorsement before designing a recipient-executed TA component around realizing the institutional and policy direction set out in it. This breakdown of reform TA and partitioning between the World Bank- executed and recipient-executed components also supported adaptability to the reform environment. In Zimbabwe, for example, the complex analysis for the sector investment framework was World Bank executed, in order that it could inform the recipient-executed reform components. In Sierra Leone, though the anchor reform document was in place before TA was designed and TA was contracted to a consulting firm as a large predefined output. As in West Bank and Gaza, there were significant cost escalations during the implementation of the TA contract, principally associated with the firm requiring originally unforeseen extensions of scope to be matched with additional funding. Page 53 of 64 Figure 4.1.PWA Action Plan for Reform Page 54 of 64 10. Utility performance reports and VFM. All the above projects also supported performance monitoring of SPs. The most directly comparable outputs were in Zimbabwe where three years of SP benchmarking reports were generated. In the case of Zimbabwe, these were for 32 SPs, compared to the West Bank and Gaza where the WSRC covered 16 in 2013, expanded to 33 in 2014 and 65 in 2015 and 2016. The costs and outputs of the utility performance monitoring and reporting process in the West Bank and Gaza (US$1 million) and Zimbabwe (US$0.75 million) were comparable. 11. The implementation arrangements were different in the West Bank and Gaza and Zimbabwe. In the West Bank and Gaza, the performance monitoring process was carried out but the newly set up WSRC (recipient executed), while in Zimbabwe it was World Bank-executed working closely with the Urban Councils Association of Zimbabwe. In the West Bank and Gaza, there was very strong institutional ownership of the performance monitoring process by the WSRC. In Zimbabwe, while there was a high level of engagement and enthusiasm among stakeholders in the process, the lack of an ‘institutional home’ for the process threatens to dampened momentum. 12. In both cases, financial support for performance monitoring was from external donors with sustainability of the process challenged by the absence of a reliable domestic revenue stream. In the case of the West Bank and Gaza, there was potentially a mechanism for domestic financing, but at the time of the ICR, the Licensing Bylaw has not been enacted though the broader sector reform process. 13. The utility performance reports in both countries were of similar breadth and depth as well as being associated with an equivalent horizontal learning process promoting exchange among SPs. The learning processes in both cases led to incremental improvements in SP performance such as reducing NRW that showed promise of short-to-medium-term improvements in cost recovery and financial stability of SPs. 14. Across all cases, there has been a lack of connection between the reform instruments and the performance monitoring components. There should be much greater opportunities for performance monitoring to generate feedback that will guide the sector reform process, for example, on constraints to bulk water supply or cost recovery as well as for the sector reform process to enable the performance improvements. Most obviously, the fact that the sector reform process in the West Bank and Gaza has not put in place the Licensing Bylaw to finance the WSRC. This connection between the reform instruments and performance monitoring might have been addressed better in the West Bank and Gaza, had Component 2 been refocused on the Water Services Regulatory Council at the point of restructuring. 15. Conclusions and lessons on VFM. Reflecting on this comparative analysis of the water sector reform initiative in the West Bank and Gaza against the experience in the other three countries, the following conclusions can be drawn on VFM. While the reform instrument part of the project was within the range of comparator projects, it was at the upper end. The VFM of TA to reform instruments was challenged by • The anchor reform document not being in place before the start of the recipient-executed project; • The outsourcing of TA to a single large firm contract without clear phasing or milestones; and Page 55 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) • Packaging the whole reform process as in a recipient-executed project rather than a combination of World Bank-executed and recipient-executed parts—particularly as the trust fund supporting the project can be used for World Bank-executed and recipient-executed work 16. VFM of the utility performance monitoring reports was comparable with at least one other project, both in its tangible and intangible outputs. However, the WSRC’s sustainability—and performance monitoring—is threatened by the lack of a sustainable source of domestic financing even though a provision for this was made (Licensing Bylaw) in the anchor reform document (the 2014 Water Law). 17. The following emerging lessons on VFM are for both the reform instruments and the utility performance reports as well as the link between the two sets of outputs: • Break reform TA into small parts to ensure that TA can iteratively adapt to the reform environment as it evolves and avoid funding unnecessary outputs. • Avoid outsourcing reform TA as large firm contracts particularly where the anchor reform document has not been endorsed by cabinet (or equivalent). • Partition TA to the reform between World Bank and recipient execution depending on the (a) level of expertise, (b) flexibility, and (c) country ownership required for different tangible and intangible parts of the reform. • The institutionalization of functions (for example, utility performance monitoring) needs to be supported with revenue assignments to finance those functions. Page 56 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS Comments from PWA to the GZ- Water Sector Capacity Building Program with World Bank responses 1. Page 8 figure 1 Causal Chain: The suggested classification under the Activities/outputs needs to be revised considering the following: o strategic studies (transboundary, and climate change) and develop regulations , policies, procedures and standards for the sector are under TPAT Component not the Supplementary assistance for studies, training and institutional building of the WSRC . ➢ Thank you, the figure has been modified accordingly. o What is the difference between “Staff training� and “Capacity and training of WSRC� under the Supplementary assistance for studies, training and institutional building of the WSRC? ➢ The figure has been updated to avoid this repetition 2. Section B Achievement of PDOs (Efficacy) o In general, we would like to highlight the fact that sector regulation implies laws, legislations, guidelines, monitoring tools and other instruments that help improve the overall accountability, as well as performance of the water sector. While, economic regulation is represented by rules and organizations that should monitor and enforce certain tariffs, services and other standards for water and sanitation service providers . ➢ We agree, and have tried to modify the text in places to reflect this notion. o PDO1: effectively plan water sector development: (a) point 27 page 13needs to be revised: Many Policies, strategies and plans were developed and adopted. One of the key achievements (that the ICR report has referred to) is the Water Sector Policy and Strategy 2012-2032. Based on this Policy and Strategy, Water Sector Strategic Plan 2014-2017, and 2018-2021, and Action Plans were developed and adapted by the cabinet as well. On the other hand, PWA has developed its strategic plan and Implementation plan for 2016- 2018, (b) point 28 page 13 : in addition to was mentioned its worth highlighting plans and strategies ; such as water safety plans, Financial Sustainable Strategy, Non-Revenue water strategy, Strategic water resources and transmission plan, Drinking Water quality Standards, Climate change mitigation measures . On the other hand, PWA preparation of its organizational structure and job descriptions, and the standard operation procedures… ➢ Thanks for the clarification and addition, the text has been modified accordingly. o PDO 2: effectively monitor water sector development: (a) point 31 page 14: It is excellent that an online database is developed for WSP and feeds into the World Bank International Benchmarking Network for Water and Sanitation Utilities (IBNET) database, but this system should also have been linked and integrated to PWA for maximum benefit and utilization of the outputs for water sector development (b) it is worth mentioning that PWA has developed several systems and measures for monitoring the development and performance of water sector institutions (e.g. Water supply and distribution information Page 57 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) system, advanced billing system for the bulk supplier, water quality control system, updating Water & WW Sector Specifications & Design Guidelines, Evaluation of surface water and groundwater surface models,… ); to assure efficiency of service provision. ➢ Thanks this has been added. o PDO 3: effectively regulate water sector development: (a) Point 39 page 16, the policies, strategies, regulations and action plans developed to improve the regulatory capacity were not highlighted (e.g. Non-revenue Strategy, Financial sustainable Strategy, water demand policy, water sector policies (10 policies), adapted regulations such as; water tariff regulation, connection fee regulation , Water User Association Regulation , and other regulations that are in process of approval (such as the unified water and wastewater tariff regulation, licensing regulation for wells drilling and water abstraction,…) ➢ Thanks this has been added. o PWA achievements related to the rehabilitation of WBWD and establishment of NWC, studying bulk water prices and setting police to reduce the government subsidy, and to the establishment of RWUs were not reflected although they are core items in the reform process ➢ This is discussed in paragraph 40. 3. Point 41 page 17: The delay in the approval of the NWC Bylaw is due to the fact that according to the Water law this regulation aims at Rehabilitating the WBWD and Establishing a NWC, therefore, road man was developed to feed in the mentioned Bylaw that was developed and finalized recently. ➢ Thanks for this clarification. We have included text in the ICR that highlights that the reform and approval or laws etc are a process and we have noted that the likelihood of them being adopted is high. 4. Point 48 page 18: The main reason for the extension was the fact that the Water Law was endorsed. Therefore, vision to proceed with the reform process and restructuring the Water Sector became clear and needed support ➢ Thanks for clarifying this, we have modified the text accordingly. 5. Point 51 page 19: Concerning the licensing Regulation: we would like to highlight the fact that there are more than 13 regulation and Guidelines that are important to the Water Sector. Some have already been endorsed such as the Water User Association Regulation, Tariff Regulation, Connection regulation and other are still in endorsement process. However, the process of endorsing regulations takes time not only in West Bank and Gaza but worldwide. We would have appreciated if this has been considered in the ICR report as your point concerning the regulation have been repeated and overstated in many sections of the report such as point 24,37,38, 40,41,49,51,79,annex1, annex4 , annex 6. ➢ We agree that putting in place regulation takes time, but the licensing bylaw is an output of the project and this is why it cannot be taken out of the assessment of efficiency. 6. Section E Other Outcomes and Impacts: Many important outputs were produced that will have important impact on developing the Water Sector such as the process and actions taken for Page 58 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) the Rehabilitating the WBWD and establishing the NWC, Road map for establishing RWW, studying water prices at Bulk level and setting polices to reduce the Government subsidy,… ➢ This is a good point which we have elaborated upon under ‘institutional strengthening’ [paragraphs 54-55]. 7. Point 62 page 21Statment needs to be revised: (a) the political will to develop the water sector is there, for sure. However, the question of how the Reform shall be done may have different view from different perspectives and at different level. While, PWA is taking the lead based on a clear road maps and plans. (b) The Political divide may have created challenges. However, PWA in Gaza have played important role in the development of many outputs related to the reform. The Head of the RCU was the Deputy Head of PWA (from Gaza) and some workshops related to polices and regulation development were held in Gaza, and the monitoring report included data of Gaza Strip Service Provider. ➢ Thank you for pointing this out, the text has been revised accordingly. 8. Point 63 page 21: “…the consultants hired by PWA didn’t deliver the outputs expected. Furthermore, PWA’s ability to follow-up on the work under this type of contract was severely limited, adding to challenges.� Please revise considering the following facts: the statement (a) “consultants hired by PWA didn’t deliver the outputs expected� is exaggerated. (b) “…type of contract was severely limited…� this was not the main problem; the problem was with the fact that ToR is very general and was dependent on progress of other reform programs such as the legislative review which took longer time that what is expected. ➢ We will tone-down the language to more appropriately reflect these points and also specify that the ToR was very general. 9. Point 66 Page 22: “However, the weakness of output-based indicators was not addressed.� Not clear ➢ We have clarified that this weakness arose from lack of units of measure. 10. Point 69 page 22: “Rating for quality of M&E and underlying justification. As there were some shortcomings in the M&E system’s design, implementation and utilization, the overall quality of the M&E is rated as modest�: the reasons highlighted are not clear ➢ The reasons for this rating are provided in the preceding paragraphs. 11. Annex 1: page 38 comments related to the Strategy and implementation plan has uncompleted statement ➢ Thanks. We will update the document. 12. Annex 4 – (a) Table A4.1Division of fund is the Input (US $ ) needs to be revised considering what has been reflected in Table 1 of the same report , (b) it’s difficult to make comparison of the reform between countries as the context, institutional set up , political situation, needed legislations upon, availability of needed expert in the local market…, therefore, Im not sure to what extend the proposed comparison can provide tentative results or indicators . ➢ Thanks for pointing this out. We agree that it is difficult to make cross country comparisons and this limitation has been described in the text. 13. Point 8 page 45: “…While this could have made the TA responsive to the reform environment it led to ambiguity for at least two reasons. First, it left the outputs of the consulting firm to be directed by the PWA – whose capacity the consulting firm was meant to be building. Second, when the Bank and other donors tried redirect the TA to be more responsive to the reform Page 59 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) needs the firm, reasonably, referred back to their contract to limit variance in the scope�. (a) The ambiguity was mainly due to the fact that TPAT started before finalizing the Institutional Water Sector Review (IWSR) and adapting its results at policy making level. This has resulted in delays in formulating the Water Law and adapting it. On the other hand, according to the reform plan the water Law should have been endorsed in one year, which was optimistic considering world wide experience in the endorsement of similar legislation (see figure below). (b) As for the Second point mentioned , I would like to rephrase it to the following: “ when PWA with the support of the Bank and other donors tried redirect the TA to be more responsive to the reform needs the firm, reasonably, referred back to their contract to limit variance in the scope� ➢ Thanks for pointing this out, the text has been modified accordingly. 14. Annex 6 and 7 (a) There is only one ICR report for the program and that is the comprehensive report that was submitted by PIU officially, (b) it is not clear why Annex 6 includes executive summary of Achievements while Annex 7 includes Assessment of outcomes. ➢ Thanks for the comment. We have received the official PWA ICR client report and also an additional one from the WSRC focusing on their part of the project. We intend to include summaries of both as they are input to the process. Page 60 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) ANNEX 6. CLIENT ICR REPORT - WATER SECTOR REGULATORY COUNCIL Executive Summary of Achievements 1. In 2016 and 2017, the WSRC achieved the following milestones: • Establishment of a regulatory information system based on a software (digitalized), which had now for the first time, provisions to verify data provided by the WSPs. The number of WSPs that annually report on their performance increased from 12 (previously reported to the PWA) to 65 (40 WSPs in the West Bank and 25 WSPs in Gaza). In addition, the data for 2012 to 2016 has been entered into the new information system. This allows a follow-up of sector progress over the years. In addition, the information system was complemented with key modules such as water balance, cost calculations, and so on. • Elaboration and publication of sector performance reports showed that the number of WSPs as well as the number of indicators to be monitored have gradually increased. These reports are a first step toward a benchmarking system (comparative competition among WSPs) which is elaborated as part of a major regulatory tool. It offers a comparison between the performance of WSPs and a development of the sector progress over time. • Establishment of an inventory of WSPs (281) by carrying out a national tariff survey. This included the collection of basic data for each WSP, which were entered into the new database of the WSRC. • Publication of a comparative report for the WSPs to observe their own (and other WSPs’) progress over 2 years. • Analysis of tariffs and tariff review for around 30 WSPs. • Elaboration of guidelines such as cost calculation manual, tariff setting, achievement of cost recovery, and so on. • Orientation of WSPs on regulatory tools such as reporting, data collection, and tariff calculation. • Organization and support of peer-to-peer-learning between WSPs. • Establishment of communication channels with national and international key stakeholders through the WSRC website to allow access to data and information, Facebook, personal visits, participation in workshops, steering committees, and input to international conferences. • Elaboration of a (provisional) licensing concept including a categorization system for WSPs, minimum standards for operation, and so on and commenting of the Licensing Bylaw. Page 61 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) • Elaboration of a concept for inspections with a dynamic categorization system for WSPs based on their performance as well as inspection procedures and indicators. • Implementation of the first nationwide survey on the situation of wastewater and desalination management resulting in the first performance monitoring report on wastewater and desalination SPs. This included an inventory of existing systems and SPs as well as testing of relevant indicators. • Elaboration and implementation of legal documents such as bylaws (financing, procurement) and internal procedures for the development of the organization of WSRC, subject to endorsement by the CoMs. • Elaboration of a strategic plan for the WSRC. • Commencement of the elaboration of concepts for incentive regulation, communication (plan), governance and integrity of WSP as well as survey for the status of consumer complaints and their resolution, and so on. 2. It must be noted that for the first time most activities not only covered the West Bank, but also the Gaza strip. It is said that the regulator, cooperating with all WSPs, was the only public entity which worked equally in both territories since its establishment in 2014. This cooperation of WSPs across internal borders facilitated by the regulator might be a good practice example to support the reconciliation process in the West Bank and Gaza. 3. In addition, the work of the regulator carried out in the last two years included a significant contribution to the sector framework development by advising and participating in policy dialogues, steering committees and the elaboration of bylaws such as licensing, tariff adjustments, (regional) clustering of WSPs, and so on. Furthermore, the regulator commissioned a review of the sector framework concentrating on the legal status and existing overlaps and gaps in legislation of several sectors with the Water Law 2014 and consequently with the mandate of the WSRC. Many of the listed activities were carried out with the help of external specialists (consultant) financed by donors and supervised by the regulator who elaborated or commented on the TOR and accompanied the experts during their work. This ownership of the regulator which also went beyond commissioning of the work allowed the integration of the produced outputs in the stepwise development of a coherent regulatory regime. Issues of Concern and Risks to Development Outcome 4. Despite the notable progress the WSRC has achieved, there are substantial challenges remaining to be overcome. The most important is the financing of the operational budget of the regulator through the licensing fees by SPs to secure sustainable operation and safeguard the regulator’s autonomy. It is not unusual that institutions driving modern reform processes are mainly financed by donors in the start-up phase. One example is the Water Sector Reform Support Unit in Zambia, which was financed for several years by donors until the sector institution could cater to its own operational budget. However, it is time for the WSRC to gradually phase out of this start-up phase which can only be secured with the support of Page 62 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) the Prime Minister’s office and the PWA submitting the relevant bylaw to the CoM and initiating the necessary consultation process. 5. Another crucial intervention area is closely linked to the endorsement of a Licensing Bylaw because it establishes a legal relationship between the WSPs and the regulator: the establishment of a follow-up and enforcement system. This is largely outstanding and requires the consolidation of the ongoing activities and an enlargement of the staff with relevant specialists. Only strengthened enforcement (incentives and pressure) will sustainably direct the sector toward better performance and the achievement of the Sustainable Development Goals. 6. In addition, it is crucial that the council and the PWA find common ways and improve their cooperation by being aware that the sector needs their combined and intertwined efforts to achieve the policy goals of the Palestinian Government. A unified and supportive donor community, especially the World Bank, can facilitate the improvement of this cooperation. Lessons Learned (a) Flexibility is needed. The project was designed with two other funding sources in mind, namely, the GIZ support and the income from licensing fees. Therefore, a number of key activities were scheduled either on the program or on the other sources and had to be shifted afterwards. (b) Delays have to be expected and mitigated through different measures such as additional pressure from the World Bank. The project was designed with the assumption that a number of bylaws and policies will be completed within a given period. (c) Clear roles, responsibilities, and cooperation mechanisms. Establishing a straightforward framework for the relationship with all stakeholders at the early stages of the project could have minimized conflicts especially with the PWA. Having clear cooperation mechanisms with other stakeholders is important for a comprehensive understanding of the water sector status; this includes the PCBS, Ministry of Local Governments (MOLG), Ministry of Health (MOH), Ministry of Agriculture (MOA), and Environmental Quality Authority (EQA). (d) Key change agents to support the reform and the establishment of an autonomous regulator (in the West Bank and Gaza) have to be mobilized. Focus on communication through which all stakeholders understand the added value of a regulator is important at the early stages of establishment. Capacity building of WSRC staff and the board of directors is equally important. To start governance assessment, knowledge of the municipal councils is crucial to be able to introduce changes on working systems. Given the status of regulatory systems in other Arab countries, having an autonomous regulator was very much appreciated on several occasions and publications. (e) Many problems in the water sector are internal. Looking into current water sector problems in the West Bank and Gaza, not all of them are related to Israeli control of the groundwater resources. Some are related to internal financial, institutional, or technical shortcomings. Page 63 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) Strategies to address them should be based on verified data and the WSRC’s annual performance reports rather than a shopping list prepared by SP. The WSRC is fostering performance-based investment together with other key stakeholders. Page 64 of 64 ANNEX 7. CLIENT ICR REPORT - PALESTINIAN WATER AUTHORITY Assessment of Outcomes 1. Relevance of objectives. The objectives of the program were deemed relevant to the PA priorities where the CoM of the Palestinian National Authority in 2009 endorsed an ‘Action Plan for Reform’ toward the definition and implementation of a comprehensive program of institutional and legislative reform in the Palestinian water sector. As the central body in the sector, the PWA has the mandate to lead the reform process. The overall reform included the reorganization of the water sector and the institutions within, capacity building, and the revision of strategies and policies. The capacity-building program aimed to provide technical assistance and capacity building during the transition period, in an effort to assist in the implementation of the reform, serving as a stopgap for capacity during the transition period, and ultimately building capacity within the PWA. 2. Relevance of design and implementation. The planned activities are strongly aligned with the PDO and the outcome and intermediate outcome indicators. The different components were designed to address key issues of the sector reform. The capacity-building program clearly had a positive effect on the water sector. The program has helped in the reform of the water sector by supporting the PWA to lead the reform process; building capacity of the PWA staff; preparation of needed legislation for the water sector (policies, strategies, regulations, Guideline Strategic Plans Establishment of the WSRC); rehabilitation of the West Bank Water Department; and establishing the NWC. World Bank and Borrower Performance 3. World Bank performance. The World Bank team was continuously engaged throughout the project preparation and implementation and demonstrated good professionalism, and they provided support and follow-up during the implementation of the program, and the reform process. The World Bank performance through the project implementation was satisfactory due to accumulated knowledge and commitment of the World Bank team. 4. Quality of supervision. The main strength of the supervision is the proactive supervision team of the World Bank that has substantive integrated experience in water sector reforms and institutional development. The World Bank team has provided the WSRC team with continuous leadership and guidance at the early implementation stages. This has included technical, financial, and procurement guidance. This was provided by the TTL who was highly skilled and strongly motivated to achieve the project outcomes and supported the WSRC team in addressing implementation issues as well as in improving dialogue between main sector stakeholders (WSRC and PWA). For the WSRC, there was no TTL change in the entire duration of the project. This stability in leadership helped cement strong relationships between the WSRC team and the World Bank team. The strong relationship was evident in the rich discussions about the project activities and outcomes. 5. Borrower performance. The PWA took strong leadership in the reform process, accelerating the development process of water sector institutions (internal reform of the PWA, external for the establishment of RWUs and the NWC), which required enormous efforts. Looking back at the status of the PWA before the reform and now, the progress and improvements are clearly visible. The performance of WSRC staff was efficient and effective in terms of achieving the PDOs and the intermediate outcome indicators and to work around the various severe challenges in the implementation of the developed Page 65 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) regulatory regime. Given the project financial, and staff number limitations, the amount of work they had to do, required intensive internal coordination, strong knowledge, and work commitment. Lessons Learned 6. A holistic approach in project design and implementation, as well as strong coordination between stakeholders and donors is essential for successful implementation. Capacity building was one of several programs complementary to the reform, and it played an important role in keeping the process of reform running. 7. The project objective should be closely tailored to the capacity of the Government and related agencies to implement the project to the conditions of the enabling environment existing at the time of project preparation. One of the challenges that the program faced at the beginning is the absorption capacity to the support provided through the TPAT project. As the Water Law was endorsed, the provided support became a request and requirement to strengthen the PWA internally and provide needed support to lead the reform process. 8. Political willingness and commitment is the key factor for the success and sustainability of the reform process plans. Furthermore, strong leadership is an important factor for successful reform of the water sector. The concept of change faced lots of resistance from staff within the PWA and some stakeholders. However, the reform has imposed facts on the ground that have led to more responsiveness and cooperation from all parties. 9. Importance of having consensus with all relevant stakeholders. Within the reform, the PWA engages stakeholders at different stages and for different purposes: • For every significant outcome within the reform process (policies, strategies, strategic plans, plans, and so on), the PWA assures to hold interactive workshops and meetings with all involved agencies and institutions to discuss the outcomes and the ongoing plans and receive feedback. • Developing task force teams to develop certain activities from different relevant institutions, for example ‘the sector reform plan document’ was developed by the task force team comprising representatives from the PWA, EQ, MOA, civil society, donors, Ministry of Finance and Planning, • The Sound Board Committee, with the aim of consultation and advice on draft outputs comprising all relevant experts from different institutions. For example, there is a Sound Board Committee following the development of the Regional Water Utility Roadmap. The PWA ensures the participation of all stakeholders in the decision-making process to have consensus and support at different scales. Page 66 of 64 The World Bank GZ-Water Sector Capacity Building ( P117443 ) 10. Success of some institutions might be dependent on sustainability of others (for example, NWC establishment is dependent on strong SPs). Private sector can play an important role in improving performance of some institutions. However, an enabling environment is needed. 11. Real reform requires in-depth analysis of problems and obstacles, and strategic solution for successful implementation and achievements. For example, the successful establishment of the NWC required several actions to be considered for having sustainable efficient institutions. 12. Having clear cooperation mechanisms with other stakeholders is important for a comprehensive understanding of the water sector status; this includes the MOLG, MOH, MOA, and EQA. 13. Focus on communication through which all stakeholders understand the added value of a regulator is important at the early stages of establishment. Capacity building of WSRC staff and board of directors is equally important. To start governance assessment, knowledge of the municipal councils is crucial to be able to introduce changes on working systems. Given the status of regulatory systems in other Arab countries, having an autonomous regulator was very much appreciated on several occasions and in publications. 14. Reform is a complex costly process, as in many cases, the institutional development requires investment for infrastructure development. For example, establishing the RWU will require working on both institutional and infrastructure development. It is important to have a clear framework and long- term objectives to avoid fragmentation of efforts (water sector strategy and strategic plan). Page 67 of 64