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2010 Water Financing Partnership Facility: Annual Report (January-December)

2010 Water Financing Partnership Facility: Annual Report (January-December)

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2010 Water Financing Partnership Facility: Annual Report (January-December)
2010 Water Financing Partnership Facility: Annual Report (January-December)

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ABBREVIATIONS

ADB DMC DMF FPF IED IWRM MFF PDA PES PPTA PRC RETA TA TALL WFP WFPF

– – – – – – – – – – – – – – – –

Asian Development Bank developing member country design and monitoring framework financing partnership facility Independent Evaluation Department integrated water resources management multitranche financing facility pilot and demonstration activity payment for ecological services project preparatory technical assistance People's Republic of China regional technical assistance technical assistance technical assistance attached to loan Water Financing Program Water Financing Partnership Facility

NOTES (i) In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgment as to the legal or other status of any territory or area. (ii) In this report, "$" refers to US dollars.

WFPFSteering Committee Chair WFPF Steering Committee Members

Xianbin Yao, Director General, Regional and Sustainable Development Department (RSDD)

Juan Miranda, Director General, Central and West Asia Department (CWRD) Klaus Gerhaeusser, Director General, East Asia Department (EARD) Robert Wihtol, Director General, Pacific Department (PARD) Philip Erquiaga, Director General, Private Sector Operations Department (PSOD) Sultan Rahman, Director General, South Asia Department (SARD) Kunio Senga, Director General, Southeast Asia Department (SERD) Amy Leung, Director, Social Sectors Division, EARD Michael Peter Barrow, Director, Infrastructure Finance Division 1, PSOD

Water Committee Chair and CoChair Water Committee Members

In-Ho Keum, Lead Urban Development Specialist, CWRD Maria Theresa Villareal, Unit Head, Portfolio Management, EARD-PRC Resident Mission Qingfeng Zhang, Principal Water Resources Specialist, EARD Steven Blaik, Senior Urban Development Specialist, PARD Siddharta Shah, Senior Investment Specialist, PSOD Sherwin Pu, Unit Head, Project Administration, PSOD Katsuji Matsunami, Senior Advisor, concurrent Practice Leader (Agriculture, Food Security, and Rural Development), RSDD Wouter Lincklaen Arriens, Lead Water Resources Specialist, RSDD Anand Chiplunkar, Principal Water Supply and Sanitation Specialist, RSDD Alan Baird, Water Supply and Sanitation Specialist, RSDD Kenichi Yokoyama, Principal Water Resources Specialist, SARD KyongAe Choe, Lead Urban Development Specialist, SARD Rudolf Frauendorfer, Principal Urban Development Specialist, SERD Ian Makin, Senior Water Resources Specialist, SERD Hubert Jenny, Principal Urban Development Specialist, SERD-Viet Nam Resident Mission Thomas Panella, Principal Water Resources Specialist, SERD-Indonesia Resident Mission Gil-Hong Kim, Director, Sustainable Infrastructure Division, RSDD

WFPF Facility Manager WFPF Secretariat

Maria Victoria P. dela Cruz, Assistant Sector Analyst, RSDD Ellen Pascua, Consultant, RSDD Tadashi Kondo, Head Hua Du, Director Karen Decker, Principal Financing Partnerships Specialist Toshimasa Dojima, Principal Financing Partnerships Specialist Heeyoung Hong, Financing Partnerships Specialist Lucila S. Chan, Financing Partnerships Officer

Office of Cofinancing Operations (OCO)

CONTENTS Page I. II. III. INTRODUCTION HIGHLIGHTS AND KEY ACHIEVEMENTS RESULTS FRAMEWORK A. Progress Towards Impact and Outcomes B. Output Performance C. Crosscutting Issues in WFPF Portfolio FINANCIAL STATUS A. Partner Contributions B. Resource Utilization C. Resource Allocation MANAGEMENT OF THE FACILITY A. Water Committee Evaluation of Applications B. Procedural Matters RELATIONSHIP WITH FINANCING PARTNERS LESSONS LEARNED, EXPERIENCES GAINED, AND KEY CONSTRAINTS EXTERNAL FACTORS RELEVANT TO THE FACILITY 1 1

5 7 12

III.

12 13 14

IV.

16 16 18 18

V. VI.

VII.

19 19

VIII. OVERVIEW OF 2011 ANNUAL WORK PROGRAM APPENDIXES 1. Overview and Governance Structure of WFPF 2. WFPF Design and Monitoring Framework 3. January-December 2010 Approved Allocations 4. Multidonor Trust Fund Disbursement Projections 5. Netherlands Trust Fund Disbursement Projections 6. Status of Grant for the Multi-Donor Trust Fund 7. Status of Grant for the Netherlands Trust Fund 8. Approved Allocations by Modality 9. Approved Allocations by Sector 10. Approved Allocations by Region

I.

INTRODUCTION

1. Established on 29 November 2006, the Water Financing Partnership Facility (WFPF) aims to provide additional financial and knowledge resources from development partners to support the implementation of Asian Development Bank's (ADB) Water Financing Program and help achieve the Program’s targeted outcomes as follows: 
   

200 million people with sustainable access to safe drinking water and improved sanitation 100 million people with reduced risks to floods 40 million people with more productive and efficient irrigation and drainage services integrated water resources management (IWRM) introduced in 25 river basins improved water governance through national water reforms and capacity development

2. Details on the Facility are provided in Appendix 1 (WFPF Overview and Governance Structure). 3. This Annual Report covers the period January to December 2010 and presents the performance for the year against the annual work program and the cumulative performance as of 31 December 2010 measured against its Design and Monitoring Framework (DMF) presented in Appendix 2. II. HIGHLIGHTS AND KEY ACHIEVEMENTS

4. Water Financing Program to continue beyond 2010. Launched in March 2006, the Water Financing Program was intended to be implemented during the period 2006-2010. The establishment of WFPF in November of that same year was aimed at supporting the Program implementation. As water remains a priority for ADB under Strategy 2020, the Program will continue during the period 2011-2020, guided by the following additional thrusts presented in the draft Water Operational Framework (2011-2020)       Increased water use efficiencies across the range of users Expanded wastewater management and reuse Flood and drought management Embedded IWRM Expanded knowledge development Enhanced partnerships with the private sector  

  5. The Facility is expected to remain in operation during the period 2011-2020 to continue supporting the Program implementation. Among the priority actions being taken parallel to the finalization of the Framework is the mobilization of additional support from partners to replenish WFPF resources. Other partnership modalities envisioned under the financing partnership facility (FPF) framework is also being explored such as knowledge partnership which is consistent with the recommendations from the independent review of FPF recently carried out by ADB’s Independent Evaluation Department (IED). Already, as the IED report has acknowledged, WFPF has made advances in such knowledge partnerships. 6. The succeeding presentations in paras 6 to 10 below provide a summary of what the Water Financing Program has achieved after the initial five years of implementation and how the WFPF has contributed to those achievements.

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7. Target increase in water investment level met. The Water Financing Program set a target of catalyzing over $10 billion in water investments during the period 2006-2010. ADB has been successful in encouraging governments to increase their investments and investment commitments for the water sector as evidenced by the $11.44 billion investments approved from 2006 to 2010, including approved projects and programs using the multi-tranche financing facility (MFF), as detailed in Table 1 below. However, much more work is needed to ensure that the investment commitments are sustained and materialize into economically, socially, and environmentally sustainable projects. WFPF partners’ continued support will be critical to making this happen. Table 1: Approved Water Investments in 2006-2010 (in US$ Billion)
Investments Water Supply, Sanitation and Wastewater Management Irrigation and Drainage Flood Management Water Resources Management, Wetlands, and Watershed Protection Hydropower Generation Total 2006 1.09 1.01 0.20 0.00 0.44 2.74 2007 0.86 0.05 0.12 0.00 0.00 1.03 2008 1.14 0.39 0.01 0.68 1.04 3.26 2009 1.62 0.06 0.00 0.15 0.26 2.09 2010 1.85 0.07 0.37 0.03 0.00 2.32 Total 6.56 1.57 0.71 0.86 1.74 11.44

8. WFPF contributing $3.4 billion in approved water investments. Increased investment level is the same target output indicated in the Facility’s DMF. By way of direct project support through project preparatory technical assistance (PPTA), grant component of investments, TAs attached to loans, and direct charges related to project development, the Facility has leveraged to date a total of $4.0 billion in water investments. Of this, $3.42 billion has been approved as of 31 December 2010, representing 30% of the $11.44 billion total approved water investments from 2006 to 2010. Table 2 below details the Facility’s leveraged investments and how it contributes to the overall Water Financing Program achievement. Table 2: Approved Water Lending for 2006-2010 and WFPF Contributions (in US$ Billion)
2006-2010 Total Approved ADB Investment Projects 6.56 1.57 0.71 0.86 1.74 11.44 2006-2010 Approved ADB Investment Projects with WFPF Funding 2.21 0.26 0.32 0.63 0.00 3.42

Investment Areas Water Supply, Sanitation and Wastewater Management Irrigation and Drainage Flood Management Water Resources Management, Wetlands and Watershed Protection Hydropower Generation Total

9. Substantial progress made to meet Water Financing Program targeted outcomes. The Water Financing Program has set a target of 340 million people being benefited by water investments as described in para 1 above. The number of people expected to benefit from 2006 to 2010 approved projects and programs reached a total of 223 million (as shown in Table 3 below). Additional investments are programmed and expected to meet the remainder. In the

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case of water supply and sanitation, the target is already expected to be met by 2012. ADB has also helped its clients to introduce the IWRM process in 25 river basins as per target. However, much more work is needed in the coming years to ensure that the IWRM process is embedded in institutions in these basins, and that it will result in the desired water security outcomes. Furthermore, in recent years it has become clear that the impact of climate change is making this work more challenging than before. Table 3: Water Financing Program Achievement Against Targeted Outcomes
Water Financing Program Target 200 million 100 million 40 million 340 million 25 river basins Expected No. of Beneficiaries of 2006-2010 Approved Water Projects 162 million 43 million 18 million 223 million 25 river basins

Measurement Number of people with access to safe drinking water and improved sanitation Number of people with reduced risk to floods Number of people with improved and efficient irrigation and drainage services Total Introduction of IWRM in river basins

10. WFPF leveraging benefits for 40 million people from 2006-2010 approved projects. The Facility’s DMF has set a target of at least 50 million people out of the 340 million targeted under the Water Financing Program attributable to WFPF resources. As of end-December 2010, the Facility has leveraged benefits for a total of 49 million people. Of this, 40 million will be realized from the investment projects already approved as of end-2010. Table 4 below shows how the Facility’s leveraged benefits are contributing to the overall expected outcome achievement of the Water Financing Program from approved investment projects to date. Table 4: Expected Outcomes from Approved Water Investments as of December 2010
Water Financing Program Target 200 million Expected No. of Beneficiaries of 2006-2010 Total ADB Approved Water Projects 162 million Benefits leveraged from WFPFSupported 2006-2010 Approved Projects 24 million

Measurement

Number of people with access to safe drinking water and improved sanitation Number of people with improved and efficient irrigation and drainage services Number of people with reduced risk to floods Total

40 million

18 million

3 million

100 million 340 million

43 million 223 million

13 million 40 million

11. The succeeding presentations in paras 12-17 below provide an overview of the Facility’s activities and accomplishments during the reporting period. 12. Partners and clients consulted on ADB’s draft Water Operational Framework 20112020. Following initial external consultations, a wider consultation with clients and partners on the draft Water Operational Framework (2011-2020) took place during the ADB and Partners Conference: Water Crisis and Choices, held in October 2010 and attended by more than 600

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participants from government, private sector, development partners, and NGOs. Finalization of the draft is now in progress and approval by management is targeted within 2011. 13. Activities set out in the 2010 Annual Work Program scaled down. The Facility was able to carry out the planned activities for 2010, however, when expected remittances remained uncertain, the Water Committee decided to scale down the resources being allocated to approved projects and came out with the following guidelines which governed the funding allocations during the second half of 2010:  Allocation for grant component of investments and cofinancing of TAs to be deferred until resources are replenished. Project support to be limited to smaller activities that can be financed through direct charges but can help the Facility leverage bigger results, and More resources allocated to activities that: (i) support demonstration of innovations to address priority issues, and (ii) facilitate compilation, sharing and dissemination of knowledge, particularly those that advocate new thinking, promote good practices, provide guidance to government decision makers, planners and implementers, and support capacity development within ADB and in developing member countries (DMCs).

  14. With respect to the second guideline, the approach taken by the Committee was to replenish the resources of WFPF-funded RETA 6498 (Knowledge and Innovation Support for ADB’s Water Financing Program) whose components are pilot and demonstration activities and knowledge development and dissemination. 15. Table 5 below summarizes actual accomplishments against what was planned for the year with respect to allocation of funding – one of the Facility’s major activities. The progress on other activities pertaining to the management of the Facility is presented in Section IV. Table 5: WFPF Progress Against 2010 Annual Work Program
Activity Planned Finance up to $3.1 million in project support Actual About $1.0 million allocated Output Planned Up to 7 PPTAs Up to 3 TAs attached to loans Up to 15 direct charges Finance up to $1.5 million in program quality A total of $3.0 million allocated 1 to 2 TAs Up to 4 direct charges Actual 1 PPTA 2 TALLs Outcome Planned About 6 million additional people are leveraged from WFPFsupported investment projects Policy and institutional reform measures set in motion Improved capacity of sector organizations Actual Around 5 million additional people

6 direct charges 2 RETAs 7 direct charges

Achieved (PRC, Mongolia)

Achieved (India, Mekong Region, Central Asia)

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16. How the approved allocations during the reporting period contribute to the Facility’s target outputs and outcomes is illustrated in Figure 1 below. Figure 1: WFPF Progress Towards Outputs and Outcomes January-December 2010
Activities (Project Development) Output (Increased Investment Level) Outcomes (No. of People to Benefit) 3 million people with access to safe water supply and improved sanitation 718,000 people with access to more efficient irrigation services Activities (Project Development)

Total as of December 2010
Output (Increased Investment Level) Outcomes (No. of People to Benefit) 32 million people with access to safe water supply and improved sanitation 4 million people with access to more efficient irrigation services

PPTAs $0.30 M

PPTAs $10.49 M

Grant Component of Loans/ TAs Attached to Loans $0.40 M

$ 1.0 billion in water investments

Grant Component of Loans / TAs Attached to Loans $9.66 M

$4.0 billion in water investments

Other Project Dev. Activities

   

 

$0.30 M

1 million people with reduced risk to floods

Other Project Dev. Activities $1.95 M

13 million people with reduced risk to floods

17. Support to sanitation sustained. The Water Committee’s commitment to allocate 20% of the Facility’s resources to sanitation has been sustained. Although the share from 2010 allocation was only 6%, its cumulative share as of end-December 2010 stood at 23%, still exceeding the 20% target, although slightly lower than the 2009 level which was at 26%. III. RESULTS FRAMEWORK

18. The succeeding subsections on progress towards impacts, outcomes, and output performance discuss the WFPF’s performance in 2010 and the cumulative performance to date against the targets set in the Facility’s DMF. This supplements the information provided in Section II above (Highlights and Key Achievements). 19. As has been explained in previous reports, the Facility’s DMF is targeted at the same impact, outcomes, and outputs as that of the Water Financing Program. A. Progress Towards Impact and Outcome

20. The Facility’s performance in 2010 and cumulatively as of end-December of that year with respect to the target impact and outcome is summarized in Table 6 below. The achievement towards output is presented in a separate table.

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Table 6: WFPF Progress Towards Impact and Outcome
WFPF and WFP Design Summary Performance Indicators WFPF Direct Contributions from 2010 Allocations 3 million people expected beneficiaries of WFPF-supported water supply and sanitation projects 1 country where IWRM implementation is being supported by WFPF 3 million people WFPF Cumulative Direct Contributions as of December 2010 32 million people

Impact Healthy people and environment

MDG goals on water and sanitation Reduction in the incidence of water related fatalities and diseases Increase in the number of countries implementing IWRM

9 countries

Outcome Improved coverage, quality and continuity of water service delivery within a framework of sustainable management of natural resources

200 million people with increased access to safe water supply and improved sanitation 100 million people with reduced risk to floods 40 million people with more efficient and effective irrigation and drainage services IWRM introduced into 25 river basins

32 million people

1 million people 718,000 people

13 million people 4 million people

9 river basins

22 rivers basins

  21. The Facility’s outcome achievement vis-à-vis Water Financing Program’s overall target is further summarized in Table 7 below for ease of comparison. Table 7: Contribution to Water Financing Program Targeted Outcomes of WFPF-Leveraged Benefits
Water Financing Program Measurement
Target Expected No. of Beneficiaries of 2006-2010 Approved Projects

Benefits leveraged by WFPF
From All Investment Projects Provided WFPF Funding From Investment Projects Already Approved as of Dec 2010

Number of people with access to safe drinking water and improved sanitation Number of people with reduced risk to floods Number of people with improved and efficient irrigation and drainage services Total Introduction of IWRM in river basins

200 million

162 million

32 million

24 million

100 million 40 million

43 million 18 million

13 million 4 million

3 million 13 million

340 million 25 river basins

223 million 25 river basins

49 million 22 river basins

40 million 22 river basins

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22. The benefits leveraged by the Facility for 40 million people from approved investments to date constitutes 18% of the number of expected beneficiaries of total approved water investments under the Water Financing Program covering the period 2006-2010. B. Output Performance

Output 1: Increased Levels of Water Investment 23. In 2010, the Facility leveraged over $1.0 billion in water investments through its funding support for a PPTA to prepare a $1 billion MFF loan for Viet Nam’s water sector development program and for TAs attached to irrigation and water resources management loans, both in PRC. Cumulatively up to end-December 2010, the Facility has leveraged approximately $4.0 billion in water investments. Table 8 below summarizes the leveraged investments in 2010 and the cumulative total to date. Table 8: WFPF Leveraged Water Investments (in US$ Billion)
Sub-Sector Water Supply, Sanitation and Wastewater Management Irrigation and Drainage Flood Management Water Resources Management Jan-Dec 2010 1.00 0.06 0.00 0.03 1.09 As of Dec. 2010 2.56 0.36 0.40 0.63 3.95

24. Out of the approximately $4.0 billion investments leveraged to date, $3.4 billion has already been approved as of December 2010 and the balance of about $0.6 billion is scheduled for approval in 2011 as detailed in Table 9 below. Table 9: Approved Water Lending for 2006-2010 and WFPF Contributions (in US$ Billion)
2006-2010 Approved ADB Investment Projects 6.56 1.57 0.71 0.86 Investment Projects with WFPF Funding
Investment Projects Approved as of Dec. 2010 Projects Scheduled for 2011 Approval

Investment Areas

Total 2.56 0.36 0.40 0.63

Water Supply, Sanitation and Wastewater Management Irrigation and Drainage Flood Management Water Resources Management, Wetlands and Watershed Protection Hydropower Generation Total

2.21 0.26 0.32 0.63

0.35 0.10 0.08 0.00

1.74 11.44

0.00 3.42

0.00 0.53

0.00 3.95

Output 2: Policy and Institutional Reforms Accelerated 25. During the reporting period, only one activity supporting policy and institutional reforms was funded by the Facility, using the direct charge modality. This was for enhancing the policy environment for increased private sector participation in Mongolia. Cumulatively to date, the

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Facility has supported a total of seven TAs and five direct charges that support the achievement of this output as summarized in Table 10 below. Table 10: WFPF-Supported Policy and Institutional Reform Activities
Modality TA Country Central Asia PRC Scope of TAs/Activities Improving regulation and institutional arrangements for transboundary water resources management in Central Asia Developing and implementing a flood management strategy Formulating urban wastewater reuse and sludge utilization Developing river basin water resources allocation and management Preparing national guidelines for ecological compensation in river basins Developing drought management strategy Developing benefits sharing mechanism for people adversely affected by hydropower generation projects Formulating water supply and sanitation strategy for the National Medium-Term Plan (2010-2014) Sector policy review and assessment for improved urban water supply and sanitation service delivery Enhancing enabling environment for private sector participation in urban water supply and sanitation Initiating policy study on the use of renewable energy for irrigation Developing sustainable water monitoring and payment for ecological services

Viet Nam Direct Charges Indonesia Mongolia

PRC

26. The table above shows that the Facility’s support for accelerating policy and institutional reforms has covered rural, urban, and basin water, and spread out across regions. The draft Water Operational Framework (2011-2020) recognizes the need for ADB to continue supporting the reform process and such support will vary from country to country in terms of their nature and range. The Facility expects to continue contributing resources in advancing such reforms within the limited resources available. 27. The Facility is also closely monitoring the Payment for Ecological Services outcomes of the support it has provided so far towards (PES) is a payment and incentive achieving this output. In PRC, for example, the ADB system that supports sustainable initiative on developing the national policy framework for ecosystems, and provides stable payment for ecological services (PES) and ecofinancing for conservation. PES compensation has gained the support of government. schemes generally refer to contractual arrangements involving In March 2010, the State Council included ecodirect payments between those who compensation regulation in its legislation plan. WFPF is provide and those who benefit from supporting an on-going advisory technical assistance ecosystem services. (ADTA) and has completed a short study specifically for eco-compensation in river basins. Results of these initiatives will contribute towards the development of the national PES policy framework being spearheaded by the National Development and Reform Commission (NDRC). The Government has also decided that PRC will organize an annual international PES conference, following two successful conferences in 2009 and 2010 which were both supported by the Facility.

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Output 3: Institutional Capacity Strengthened and Knowledge Base Expanded 28. Allocations were made during the reporting period for six activities supporting capacity development and knowledge dissemination. All were funded though the direct charge modality. In terms of capacity building, those allocated funding were targeted at key sector organizations on the following priority topics: (i) flood management and mitigation in the Mekong Region, (ii) IWRM for improved climate change adaptation in Sutlej River Basin in Himachal Pradesh in India, (iii) integrated urban water management in Nanning, PRC, and (iv) economics of sanitation in Central Asia. To date, the Facility has funded a total of eleven (11) activities supporting capacity development as summarized in Table 11 below. Table 11: WFPF-Supported Capacity Development Interventions
Modality TA Country India Regional Cambodia Central Asia and South Caucasus Indonesia India Mekong Region Nepal PRC Scope of TAs/Activities Empowerment of water users associations for improved irrigation management Supporting investments in water and climate change Capacity development support on rural water supply and sanitation Economics of sanitation initiative Performance benchmarking of river basin organizations Scoping study for capacity development on IWRM Improving capacity for climate change adaptation Strengthening capacity for flood management and mitigation Capacity building support to Kathmandu Valley water utility Strengthening capacity for managing climate change Training program on integrated urban water management

Direct Charges

29. In terms of knowledge product development and dissemination, the following major knowledge products were completed during the reporting period:  The Issues and Challenges of Reducing Non-Revenue Water. This publication provides an up-to-date introduction to the issue of non-revenue water (NRW), highlights the complexity of managing NRW, offers guidance on NRW assessment, and recommends appropriate performance indicators. Every Drop Counts. This publication provides a synthesis of case studies on good practices in urban water management in 8 cities in Asia: (a) Phnom Penh; (b) Manila; (c) Singapore; (d) Colombo; (e) Jamshedpur; (f) Bangkok; (g) Kuala Lumpur; and (h) Shenzhen. Expert-Based Sanitation Decision Support System. This knowledge product provides a tool to enhance capabilities of DMCs in evaluating different sanitation options, to enable the assessment of “what-if scenarios”, examine different technology options and financing arrangements, compare the costs and benefits of each option, and make a sanitation roadmap.

  30. In addition, the WFPF-supported International PES Conference held in PRC in 2010 (referred to in para 22 above) resulted in a twin publication as follows:

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An Eco-Compensation Policy Framework for PRC: Challenges and Opportunities. This provides a synthesis of the findings from the conference, discusses the evolution of eco-compensation policy within PRC, and provides policy recommendations (a Chinese version was also produced, and Payments for Ecological Services and Eco-Compensation: Practices and Innovations in PRC. This synthesizes the proceedings of the conference and provides the compilation of the case studies presented.

31. Allocation was made during the reporting period for two knowledge sharing events. To date, the Facility has supported a total of seven knowledge sharing events dealing with water supply, sanitation and wastewater management, and water resources management. 32. The Facility’s activities to date and how they are contributing toward the target outputs are summarized in Table 12 below. Owing to the fact that expected contributions into the Facility did not materialize (only $48.11 million out of the initial target of $100 million), some of the target outputs as shown below were only partially realized. On average, achievement as of end-2010 stood only at 78%. Table 12: Summary of WFPF Cumulative Activities Contributing to WFPF Outputs
WFPF Cumulative Activities as of 31 Dec 2010 WFPF Outputs (2008–2010) Total WFPF Allocations (In US$ M) Increased levels of investments Loans supported with grants Fundable investment proposals (PPTAs) Other project development support Policy and institutional reforms accelerated  TAs and direct charges or any nonlending assistance addressing reforms in the areas of: policy, legislation, regulation, institutional arrangements Institutional capacity strengthened and knowledge base expanded through:  Pilot and demonstration activities; water sector organizations capacity improvement; knowledge products; knowledge hubs; knowledge sharing events; regional cooperation/ water partnerships Targets
Grant Component of Investments/ TAs Attached to Loans

Technical Assistance $21.40 $10.64 16 1 $2.72 7

Direct Charges $3.81 $1.72 27 $0.53 5

Total Achieved to date $35.07 $22.22 13 16 28 $3.25 12

$9.86 At least 15 At least 30 At least 30 $9.86 13 At least 15 -

Targets are expressed in the DMF through qualitative indicators

$8.04

$1.56

$9.60

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33. The Facility’s DMF has also included performance indicators on the “added value of WFPF”. The achievement to date with respect to such added value is summarized in Table 13 below. Table 13: Achievement on the Added Value of WFPF
Added Value of WFPF Faster decision making by means of WFPF governance and approval process and the introduction of direct charge modality Performance Indicators Applications for TAs and GCIs are approved within 5 weeks Achievement to Date Achieved. Average duration of approval process was 4.5 weeks Achieved. Average duration of approval process was 5 days Partially achieved. In-country dialogues on Water Financing Program done in 2 out of 6 target countries. In-country sanitation dialogues done for 2 out of 6 originally targeted. However, a regional sanitation conference was convened covering countries in Central Asia and South Caucasus 98% achieved. Benefits leveraged for 49 million people as of end-2010. Achieved. Replication and scaling up occurring in at least 40% of completed pilot and demonstration projects

Greater assurance of outcomes by increasing country commitments through investment dialogues and use of knowledge products

Applications for direct charges are approved within one week Dialogues conducted in each of six priority countries that produce updated water priorities

Greater reach to underserved through more PPTAs, more knowledge products and more partners Boosting innovation pilot and demonstration activities, knowledge products, and knowledge events Being strategic by funding initiatives on:  Climate change

At least 50 million population of WFP targeted outcomes directly traceable to WFPF funding Post evaluation confirms new ideas, methods, technology and approaches taken up and applied

At least 15 projects demonstrating climate change adaptation measures At least 15 projects demonstrating increased investment in sanitation At least 15 projects demonstrating environmental protection and preservation At least 10 projects demonstrating gender mainstreaming At least 10 projects demonstrating greater involvement of civil society both at policy and project levels

60% achieved. 9 projects funded

Sanitation

Achieved. 19 projects funded

Environment

Achieved. 24 projects funded

Gender

10% achieved. Only 1 project funded

Partnership with civil society

60% achieved. 6 projects funded

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D.

Crosscutting Issues in WFPF Portfolio

34. All ADB projects receiving WFPF allocations follow ADB’s policy on social safeguards and environment policy. Overall, the projects that WFPF has supported to date will directly and indirectly benefit the poor, women and the environment as demonstrated in the sample project in para 27 below for which the TA attached to the loan was cofinanced by WFPF. 35. PRC: Risk Mitigation and Strengthening of Endangered Reservoirs in Shandong Province Project. Approved in November 2010, this Project is designed to (i) decrease the threat of reservoir failure and mitigate flood damage for a population of 1 million people, including 55,000 poor people; and (ii) increase irrigation water supply from 143.1 million m³ per year to 183.5 million m³ per year, and irrigation areas from 27,300 ha to 38,000 ha for 587,000 persons, including 33,000 poor people. The project will also improve water supply conditions for 180,000 persons, including 2,000 poor persons. During project implementation, 13,500 jobs will be created for local unskilled persons, including poor persons, with at least 5 months of temporary employment. No significant gender issues are associated with any of the project components but planned developments in irrigation and water supply would increase women’s income.

PRC: Risk Mitigation and Strengthening of Endangered Reservoirs in Shandong Province Project
The PRC has 87,085 reservoirs, of which 90% were built during the Great Leap Forward and the Cultural Revolution (1968-1976), using outdated and low technical standards and inadequate plans, surveys, designs, and construction. Most of these reservoirs have been used for 30-50 years, and many of the water-retaining dams and equipment are damaged and need to be repaired and strengthened. Many of these reservoirs do not meet modern safety standards. At present, these endangered reservoirs are not able to store water up to the design level because of leakage, instability of water retaining dams, and inadequate spillway capacity for emergency discharges of rapidly rising floodwaters. As a result, these endangered reservoirs cannot control floods, supply irrigation water, generate hydropower, or provide household water year-round to users. Strengthening these reservoirs will increase water supply at a lower cost and with less adverse impact on the environment and people than building new reservoirs. Strengthened reservoirs will also have potentially positive benefits downstream, especially on the environment by increasing reservoir releases for environmental flow.

IV. A. Partner Contributions

FINANCIAL STATUS

36. As of end-2010, the total committed contributions remained at $48.11 million or less than 50% of the initial target of $100 million - $28.36 million under the Multi-Donor Trust Fund and $19.7 million under the Netherlands Trust Fund. Of the $48.11 million, $37.0 million have been remitted to ADB. This represents 100% remittance of the total committed contributions to the multidonor trust fund and 44% for the Netherlands Trust Fund. Details are shown in Table 14 below.

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Table 14: Committed Partner Contributions as of 31 December 2010 (in US$ million)
Financing Partners Multi-Donor Trust Fund  Australia  Norway  Austria  Spain Netherlands Trust Fund Total
a

Amount Committed 28.36 8.69 4.67 5.00 a 10.00 19.75 48.11

Received by ADB as of end-2010 28.36 8.69 4.67 5.00 10.00 8.64 37.00

Receivable 0.00 0.00 0.00 0.00 0.00 11.11 11.11

Including the $0.5 million earmarked for the engagement of water expert

B.

Resource Utilization

37. For the Facility’s 2010 operation, it had $4.58 million available for allocation, out of which, $4.49 million was allocated (including for service fees) to a total of eighteen (18) projects and activities (please refer to Appendix 3 for the list of 2010 approved allocations). Thus, as of end-2010, a total of $35.07 million has been allocated out of the $37.0 million contributions received by ADB to date. 38. An overview of the status of contributions received by ADB is presented in Table 15 below, with respect to allocations, commitments, and disbursements as of 31 December 2010. Table 15: Status of Remitted Contributions as of 31 December 2010 (in US$ million)
Resources Available for Allocation to Projects 27.86 8.69 4.67 5.00 a 9.50 8.64 36.50 Allocatedb (WFPF Funding Approved) 26.60 Committedc (Project Approved) 25.06

Financing Partners Multi-Donor  Australia  Norway  Austria  Spain Netherlands Total
a

Agreement Signedd 24.63

Contractede

Disbursedf

23.03

13.95

8.47 35.07

8.47 33.53

8.43 33.06

7.63 30.66

4.53 18.48

Net of $0.5 million earmarked for water expert. Only $4.5 million is available for allocation to projects b Projects approved by Steering Committee for WFPF allocation (net of service fees) c Projects approved by Steering Committee for WFPF allocation and by ADB management for implementation, including those approved but not yet effective. d Agreement signed with Government e Contracts awarded to third parties f Inclusive of financial expense/bank charges

39. The above table shows a 60% disbursement rate for the entire facility against contracts awarded to date. Using allocated amount as basis, disbursement rate stands at 53%. Efforts to

14

accelerate disbursements are continuing, i.e. frontloading disbursement of WFPF funds in cofinanced TAs, close monitoring of payments and fund releases, and others. 40. The disbursement projections in 2011 for each of the two trust funds are shown in Appendixes 4 and 5. The projections indicate that by the end of 2011, based on allocations committed as of end-2010, disbursements are expected at 88% and 91% under the Multidonor Trust Fund and Netherlands Trust Fund, respectively, or a combined disbursement rate of 90%. C. Resource Allocation

41. As per Board Paper establishing the WFPF, about 70% of the resources should be allocated to project support window and about 30% to program quality support window. As of 31 December 2010, the actual ratio based on cumulative allocations stood at 64%-36% as compared to 69%-31% in December 2009. The higher share of program quality support is largely due to the Water Committee decision to replenish the budget for WFPF-funded RETA 6498 (Knowledge and Innovation Support for ADB’s Water Financing Program) which is designed to support program quality related activities. As ADB works towards becoming a knowledge bank and with the additional trusts that the Water Operational Framework 2011-2010 is seeking to achieve, more and more resources are needed to support program quality. The Facility therefore expects to keep this allocation ratio as flexible as possible to allow it to be more responsive to emerging priorities. Table 16 below summarizes the use of funds by window while Table 17 presents the detailed status of funds. Table 16: Summary of Use of Funds by Window (in $ Million)
Use of Funds Project Support Window Program Quality Window  Knowledge, Capacity and Innovation Services  Engaging Civil Society  Regional Cooperation Total Target Ratio 70% 30% Allocations 22.27 12.80 Actual Ratio 64% 36%

100%

35.07

100%

Table 17 – Detailed Status of Funds as of 31 December 2010 (in US Million)
Item Available Resources Available Interest Total for Earnings Allocation to Projects Projects Allocations Service Other a Fees/ Fees b Charges Balance Total

Multidonor Trust Fund Netherlands Trust Fund Total
a

27.86

0.53

28.39

26.60

1.10

0.03

27.73

0.66

8.64

0.19

8.83

8.47

0.28

0.0002

8.75

0.08

36.50

0.72

37.22

35.07

1.38

0.0302

36.48

0.74

Service fees prior to October 2009 were computed at: 5% for TA and 2% for grant component of investment. For contributions received after October 2009, the service fee for grant component of investment was increased to 5% b Other fees and charges include audit fees and bank charges

15

42. The unaudited Status of Grants as of 31 December 2010 for both the Multi-Donor Trust Fund and the Netherlands Trust Fund are presented in Appendixes 6 and 7, respectively. 43. The distribution of allocated resources by modality is shown in Figure 3 below and details are provided in Appendix 8. Technical assistance still registered the highest cumulative share and even increased to 61% from 58% in 2010. Of the 61% share, more than half constitutes PPTAs. Figure 2: Distribution of Approved Allocations by Modality

TA Attached to Loan 9% (0.4M)

Direct Charges 14% (0.6 M)

2010 Allocations
Direct Charges 11% (3.8M) TA Attached to Loan 9% (3.1M)

Cumulative Allocations as of 2010

Grant Component of Investment 0%

Technical Assistance 77% (3.3M)

Grant Component of Investment 19% (6.7M)

Technical Assistance 61% (21.4M)

44. The distribution of allocated resources by sector is shown in Figure 3 below and details are provided in Appendix 9. The cumulative share of urban water which currently stands at 50% dropped by 5% from last year but still got the highest share. Rural water remained at 7%, while basin water decreased from 26% in 2009 to 24% as of 2010. Multisector registered a 7% increase largely due to the approval of two regional TAs whose scope cuts across various subsectors. Figure 3: Distribution of Approved Allocations by Sector

2010 Allocations
Rural Water 6% (0.2M) Urban Water 15% (0.6M)

Cumulative Allocations as of 2010
Multisector 19% (6.6M) Rural Water 7% (2.3M)

Multisector 70% (3.0M)

Basin Water 9% (0.4M)

Basin Water 24% (8.5M)

Urban Water 50% (17.5M)

45. The distribution of allocated resources by region is shown in Figure 4 below and details are provided in Appendix 10. Although Southeast Asia received the highest share in 2010, its cumulative share dropped to 34% from 37% in 2009. Except for East Asia whose overall share

16

has remained at 13%, the share of all regions slightly decreased between 1% to 2%. Projects and activities that cut across various regions (inter-regional) increased to 22% from 16% in 2009. Again, this is mainly on account of the two regional TAs approved during the reporting period which have multiregional coverage. Figure 5: Distribution of Approved Allocations by Region

Central and West Asia 1% (0.025M)

2010 Allocations East Asia
11% (0.4M)

Pacific 2% (0.07M) South Asia 5% (0.2M)

Cumulative Allocations as of 2010
Inter-regional 22% (7.8M)

Central and West Asia 14% (4.8M) East Asia 13% (4.4M) Pacific .0038% (0.001M)

Southeast Asia 11% (0.4M)

Inter-regional 70% (3.0M)

Southeast Asia 34% (11.8M)

South Asia 17% (0.5M)

IV. A.

MANAGEMENT OF THE FACILITY

Water Committee Evaluation of Applications

46. The evaluation of applications in 2010 by the Water Committee continued to be carried out by circulation, with interactive deliberation on comments via email. 47. As explained in para 13 above, the non-receipt of expected remittances during the reporting period prompted the Water Committee to agree on a set of additional guidelines for screening and prioritization of applications. The same guidelines will govern the allocation of funds in 2011 considering that the available resources are even much lesser than what was available last year. 48. Proactive management of demand and expectations of user departments was also sustained by engaging more closely as early as during application preparation stage. B. Procedural Matters

49. The Secretariat continued to implement the spring cleaning exercise and maintained close collaboration with user departments and Controllers in facilitating prompt financial closure of completed activities, particularly those financed through direct charges. This exercise allowed the Facility to realize some $464,033 in savings from closed accounts and from scaled down allocations to approved projects. 50. Reporting by user departments on outcomes and results of activities funded through direct charge modality was complied with during the reporting period. Copies of these reports were made available to IED in connection with the recently concluded independent review of FPFs.  

17

51. Summarized in Table 18 below is the Facility’s performance on facility management based on activities outlined in the 2010 Annual Work Program. Table 18: Performance on Facility Management
Targets Set Under the 2010 Work Program Facility Activity Output Outcome Applications for TAs Timely approval of Approval of eligible approved by WFPF WFPF allocations applications Steering Committee within that meet the overall a maximum period of 5 project processing weeks timetable Application for direct charges approved by the Facility Manager within one week Notice of approval released to proponents within 2 days after Steering Committee or Facility Manager approval Disbursements monitored and disbursement schedule updated regularly in coordination with project officers Compliance with 70%-30% ratio between project support and program quality support monitored Closure of accounts for direct charges facilitated after release of final payments Achievement Achieved. Average duration of Steering Committee approval was 4.5 weeks Achieved. Average duration of Facility Manager approval was 5 days WFPF efficiently managed and responsive to client needs Achieved. Notice of approval released within set time

Implementation and Monitoring

Achieved. Disbursement report updated regularly

Partly achieved. Ratio as of end-2010 stood at 64%-36%

Achieved. 19 direct charges were financially closed during the reporting period Done

Review of progress of projects and activities financed from the Facility Reports on the Facility submitted based on agreed timetable WFPF webpage and marketing brochure updated regularly

Achieved

Continuing knowledge sharing and information dissemination on WFPF results

WFPF results shared and disseminated

Webpage updated regularly. Last update of marketing brochure was in 2009 Information on the Facility continued to be disseminated through the Water Community of Practice Catchment

Good practice papers prepared to disseminate WFPF results

18

Targets Set Under the 2010 Work Program Facility Activity Output Outcome

Achievement e-Newsletter (internal) and Water for All e-Newsletter (external) Done. Marketing brochure for the Facility included project examples. A knowledge product on PDA is being finalized as of this writing to disseminate the use of PDA as a good practice model.

  V. RELATIONSHIP WITH FINANCING PARTNERS

52. Coordinating on Schedule of Remittances. Through the Office of Cofinancing Operations (OCO), the Facility Secretariat coordinated closely with the Government of Netherlands to discuss options and provide documents needed to facilitate remittance of their remaining committed contributions. 53. Coordinating on Report Submission. All scheduled reports to financing partners due in 2010 were delivered. These included the following: (i) 2009 Annual Report, (ii) 2009 audited financial statements, (iii) 2010 Annual Work Program, and (iv) January–June 2010 Semiannual Progress Report. Comments were received on the January-June 2010 Semiannual Progress Report and have been incorporated in this Annual Report. 54. Independent Review of the Facility. The conduct of an independent review of FPFs was completed by IED in 2010 and the report is included in the agenda for the 2011 Annual Consultation Meeting scheduled on 23-24 March 2011. The WFPF Secretariat worked closely with IED throughout the review process, particularly in providing all required information and documents. VI. LESSONS LEARNED, EXPERIENCES GAINED, AND KEY CONSTRAINTS

55. Evaluation and Approval of Applications. The proactive management of user departments’ demand for resources allowed the Water Committee and the Facility Secretariat to continue allocating resources during the reporting period, albeit at a much scaled down level, but with good results, particularly in terms of leveraged investments and expected benefits. Furthermore, the formulation by the Water Committee of additional guidelines for prioritizing applications enabled the Facility to spread out the resources to several projects and activities. 56. Use of Direct Charge Modality for Accessing WFPF Resources. The use of direct charge modality was key to allowing the Facility to continue to be responsive to demands from user departments, particularly when the Water Committee decided to defer allocations for grant component of loans, TAs attached to loans, and PPTAs.

19

VII.

EXTERNAL FACTORS RELEVANT TO THE FACILITY

57. Global financial crisis. The impact of the global financial crisis on the financing partners capacity to support the Facility’s resource requirements continued to be felt. No additional or new commitments have been confirmed as of this writing although strong interest has been expressed by some. 58. Decline in annual per capita water endowments. The Facility is expected to continue to play an important role in supporting further improvement in the governance of water resources in the region, particularly in light of the declining annual per capita water endowments. In India, for example, endowment dropped from 13,570 cubic meters in 1951 to 1,620 cubic meters in 2009 and is forecast to drop further (large parts of the country are already below 1,000 cubic meters per capita per year). In the Philippines, the endowment has fallen to less than 1,700 cubic meters currently. Demand and supply gap is widening and it is forecast that at an aggregate level, it will reach 40 percent across Asia in 20301. 59. Water and climate change. In the face of declining annual per capita water endowments, there have been cases, in recent months, of severe flooding in many countries in the region, including in Australia, which shows how serious the unpredictability of weather patterns has become. The Facility’s support to sector work will have to continue looking into how climate change will be accorded priority. Flood management is certainly an area for which there is increasing support within ADB and the Facility can play a major role in pushing more investments. 60. Water and food security. The economic growth in Asia has also led to shift in diets generally toward food elements that require more water to produce and while food production has increased manifold, irrigation efficiencies have not increased as much. Without corresponding increase in the rate of water use efficiency in agriculture, the pressure on rapidly dwindling accessible freshwater resources continues to increase. The need for increased attention on the relationship between water and food security is an area that ADB’s support to irrigation investment will try to address and in which WFPF support will play an important role. VIII. OVERVIEW OF THE 2011 ANNUAL WORK PROGRAM

61. While discussion is in progress for the remittance of Netherlands remaining contributions, the Facility’s operation in 2011 will rely initially on very limited resources carried over from 2010 operation. Given the limited resources available against projected demand, applications for funding will continue to be strategically prioritized and selected based on the targets set under the Facility’s DMF and guided by the additional thrusts indicated in the draft Water Operational Framework (2011-2020) briefly discussed in para 4 above. 62. Climate change will continue to be a cross-cutting issue that the Facility will sustain focus on as it did in previous years. The allocation ratio of about 70% for project support and 30% for program quality will also serve as an overarching guideline. Based on approved allocations to date, the share of project support stands at 64% and program quality is at 36%. Considering this current ratio and since additional allocation was made in 2010 to replenish the budget for RETA 6498 (Knowledge and Innovation Support for ADB’s Water Financing Program), it is intended that most, if not all, of the currently available resources will be earmarked for project support while requirements for
1

Water Resources Group 2030: Charting our Water Future, November 2009

20

program quality that are eligible under RETA 6498 will be funded from that RETA. Moreover, as mentioned in the Annual Work Program, as ADB moves towards becoming a knowledge bank and with the additional trusts that the Water Operational Framework 2011-2010 is seeking to achieve, more and more resources are needed to support program quality. Thus, the Facility expects to keep the 70%-30% allocation ratio as flexible as possible to allow it to be more responsive to emerging priorities. 64. The major activities in 2011 will include the following:  Fine tuning of Facility’s operation. In light of the findings and recommendations of the independent review of FPFs and considering the uncertainty of additional cash contributions into the Facility, included in the priority activities of the Water Committee and the Facility Secretariat in 2011 are as follows: (i) review and updating of the DMF to reflect the recommendations of the FPF independent review and the emerging focus of the Water Financing Program in 2011-2020; discussion with relevant units within ADB and with financing partners of arrangements by which flow of contributions into the Facility could be further facilitated; and refinement of Water Committee guidelines in allocating very limited resources left based on updated DMF and additional options that may be adopted to smoothen the way for financing partners to participate (in the case of new partners) or to continue participating (in the case of existing partners).

(ii)

(iii)

Finalization and approval of the Water Operational Framework (2011-2020). Following consultations with clients and partners, finalization of the Water Operational Framework (2011-2020) is now underway and approval is scheduled within 2011.   Second ADB-DMC Dialogue on Sanitation and Wastewater Management. ADB has decided to hold a Sanitation Dialogue every two years, alternately with ADB Water Week. Having a separate event on sanitation is aimed at keeping its profile high enough in governments’ priorities. The first dialogue was convened in March 2009 which had over 100 high-level delegates from 18 DMCs. It was aimed at discussing the strategy for advancing sanitation action and for pushing the budget envelope to increase sanitation investments. The second dialogue planned for May 2011 will be more broadly based and will include substantial private sector participation and in-depth technical discussions. Around second quarter of 2011, ADB expects to start implementing a RETA on Promoting an Asia-Pacific Wastewater Management Revolution. This TA will support wastewater investment projects through knowledge management, packaging of technology options, incentives and financing mechanisms, and conduct of knowledge exchange and capacity development activities to change mindsets and expand the range and scale of the wastewater revolution in Asia. DMCs will be engaged in regional and in-country environmental sanitation dialogues. Although the RETA is not funded from WFPF, upcoming projects and activities to be funded by the Facility for advancing sanitation and wastewater management should find synergies

21

with this RETA and areas that present opportunities for convergence of resources should be maximized.  Mobilization of Resources. As mentioned in para. 5 above, one of the priority actions identified in the Water Operational Framework is to carry out resource mobilization campaign to replenish WFPF resources. In addition to keeping close contact with existing partners for any additional contributions, continuing marketing will also be carried out to attract new partners, including non-traditional sources such as foundations and private sector. Increased promotion of knowledge partnerships will also be a major activity in 2011. Through secondment of experts, existing partners can contribute additional resources to the Facility and new partners can use this as a modality for joining the Facility. Annual Consultation Meeting. The 4th Annual Consultation Meeting is scheduled in ADB Headquarters on 23-25 March 2011. A more detailed presentation on the Water Operational Framework (2011-2020) is expected to form part of ADB’s strategic approach to Asia’s water sector. Also included in the proposed agenda for discussion is the report on the independent review of FPFs.

22

Appendix 1

WATER FINANCING PARTNERSHIP FACILITY (WFPF) OVERVIEW AND GOVERNANCE STRUCTURE I. OVERVIEW

1. In December 2006, the Board of Directors of the Asian Development Bank (ADB) established the Water Financing Partnership Facility (WFPF) to provide additional financial and knowledge resources from development partners for the implementation of ADB’s Water Financing Program (WFP) to help achieve the targeted outcomes1. 2. The WFPF includes: a. A multidonor trust fund; b. Single-donor trust funds ; c. Framework agreements with partners for: (i) Cofinancing, i.e., parallel or joint financing of lending and non-lending assistance to ADB’s developing member countries (DMCs); (i) Knowledge sharing, i.e., secondments, networks, etc. (ii) Risk sharing, i.e., credit enhancement, performance guarantees, etc. d. Other forms of assistance. 3. The WFPF has two windows: (i) project support for which about 70% of the WFPF resources are to be allocated, and (ii) program quality support for which the balance of about 30% is to be utilized. 4. The WFPF's project support is provided for demonstration projects in the following three key areas of the WFP and which take place through in-country work on project preparation, and implementation: a. Rural Water Service Projects aim to improve health and livelihoods in rural communities. Projects may include investments in water supply and sanitation, irrigation and drainage, and multiple uses of water in rural communities. Urban Water Service Projects support sustained economic growth in cities, and may include investments in water supply, sanitation, and wastewater management, and environmental improvement. Basin Water Management Projects in River Basins promote integrated water resources management (IWRM) and healthy rivers. They may include investments in the infrastructure and management of multifunctional water regulation and hydropower facilities developed in a basin context, flood management, and the conservation and improvement of watersheds, wetlands, and ecosystems.

b.

c.

5. WFPF resources for program quality support are provided for facilitating reforms and strengthening capacity. They are aimed at helping ensure quality, synergy, and innovation in the implementation of the WFP, with priority given to reducing poverty, improving governance, and conserving the environment. The scope is outlined below:

1

200 million people provided safe drinking water supply and improved sanitation; 40 million people provided more efficient and productive irrigation and drainage services, and 100 million people with reduced risk to floods

Appendix 1

23

a.

Knowledge, Capacity, and Innovation Services. WFPF supports investment in (a) knowledge and policy services for ADB's operations departments and its clients, (b) expert services through a pool of contracted and seconded specialists to supplement ADB's own staff resources, (c) pilot and demonstration activities building on a similar program under the Cooperation Fund for the Water Sector, and (d) innovative approaches to empower water organizations. Engaging Civil Society. Engaging civil society organizations in water reforms and investment is an important part of the Agenda for Change adopted at ADB's Water Week in 2004. WFPF supports three ways for civil society organizations engagement in ADB-financed water projects in consultation with ADB's regional departments: (a) project preparation support, (b) independent monitoring of project progress and results by civil society organizations where appropriate, and (c) capacity development to improve collaboration between ADB and civil society organizations. Regional Cooperation. WFPF supports regional cooperation activities that increase water financing, catalyze reforms, share knowledge and experience, and build capacity in critical water sector organizations, including the introduction of performance benchmarking services and peer review processes. In supporting regional cooperation, ADB is partnering with the Asia-Pacific Water Forum (APWF), the Global Water Partnership, the United Nations Secretary-General's Advisory Board for Water and Sanitation, UN Habitat, the Water and Sanitation Program, and others. Partnerships are guided by the five key result areas of APWF: (a) developing knowledge and lessons on priority water sector topics through a network of knowledge hubs, (b) increasing local capacity through networking among practitioner organizations, (c) increasing public outreach and awareness, (d) monitoring water investments and results, and (e) organizing Asia-Pacific Water Summits. ADB has accepted the responsibility of serving as lead organization for APWF's theme of water financing and for its key result area of increasing public outreach and awareness.

b.

c.

6. All DMCs are eligible for project support2, and program quality support activities may be implemented in DMCs or in other countries as needed. Project proposals for WFPF support should: a. b. c. d. e. f.
2

be consistent with ADB’s Water for All policy; contribute significantly to WFP targets3; introduce innovative solutions; adopt a participatory approach; have high demonstration value in the sector; have good potential for replication in the country and/or region; and

For the Netherlands contribution under WFPF (through single donor trust fund), support for water supply and sanitation projects will be limited to ADF countries. The Netherlands support for other water projects is available to all DMCs. For the Australian contribution under WFPF (through multidonor trust fund), there are no country restrictions. However, Australia’s policy seeks to demonstrate that investments in IWRM will contribute to sustainable economic growth, especially in Southeast Asia and the Pacific. For the Austrian contribution under WFPF (through multidonor trust fund), there are no country restrictions. However, Austria would like to support activities in the listed Central Asian Republics and South Caucuses (Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan) as a priority. Through project implementation or through reforms or capacity development.

3

24

Appendix 1

g. link with CPS and results frameworks. II. GOVERNANCE STRUCTURE

7. The Financing Partners and ADB jointly steer the operation of WFPF and meet annually to review progress, administration matters, Annual Work Programs, and strategic directions of the Facility. 8. A Steering Committee for WFPF (WSC) provides strategic direction for WFPF. The WSC is the designated authority for approving the allocation of WFPF resources for specific projects. Chair: Director General, Regional and Sustainable Development Department (RSDD); and Members: Director Generals of user departments (UDs). 9. ADB’s Water Committee (WC) reviews and makes recommendations on project proposals for assistance from WFPF, and makes policy and procedural recommendations to the WSC regarding WFPF operations. 10. The Sustainable Infrastructure Division (RSID) of RSDD manages WFPF. Director, RSID or his/her designate acts as the Facility Manager for WFPF and oversees the day to day operations, monitoring and evaluation, and reporting of WFPF, with assistance from a team of consultants who have technical and administrative expertise serving in a management unit. The Facility Manager serves as the secretariat for WFPF operations, prepares semi-annual progress reports and annual reports and annual work programs for WFPF and serves as the focal point for WFPF partners for technical matters. 11. The Office of Cofinancing Operations (OCO) facilitates contributions to the WTF and WTFs, and act as the official channel of communication for financial issues between ADB and WFPF partners. OCO also leads negotiations and discussions with such partners on procedural agreements for contributions and framework agreements, where applicable. 12. The organization structure for WFPF governance is shown on the attached sheet.

Appendix 1

25

The WFPF Governance Structure Party Members: WFPF contributors Responsibilities Financing Partners (i) Provide strategic direction to WFPF (ii) Meet with ADB for Annual Consultation (iii) Review progress and administration and Annual Work Program

WFPF Steering Committee (SC) (i) Provide strategic direction to WFPF Chair: DG, RSDD (ii) DG, RSDD approves WFPF policy and Seretariat: RSID procedures Members: DGs of User Departments (iii) Approves allocation of funds to applications for (UDs) TAs and grant components of investments Water Committee (WC) Chair and Co-Chair: Directors, EASS and PSIF 1 Secretariat: RSID Members: Water specialists nominated by the Chair as members Facility Manager Manager: Director, RSID Assistant: A team of consultants

(i)

Review and endorse proposals for WFPF support (ii) Advise SC on strategic direction policy & procedures of WFPF to support WFP implementation

(i) (ii) (iii)

(iv) (v) (vi)

Serve as Secretariat and oversee WFPF dayto-day operations Oversee review process for applications Review applications for compliance with Implementation Guidelines for use of funds and eligibility criteria Prepare Annual Work Program and progress reports Serve as focal point for WFPF partners for technical matters Approve applications for direct charges

Contact: Designated by Head, OCO

OCO (i) Facilitate coordination with financing partners (ii) Communicate on financial issues among the partners (iii) Lead negotiations with partners on financial and procedural agreements for WFPF contributions and framework agreements

26

Appendix 2

WATER FINANCING PARTNERSHIP FACILITY DESIGN AND MONITORING FRAMEWORK Introduction 1. Since the Water Financing Partnership Facility (WFPF) was established to provide additional financial and knowledge resources for the implementation of ADB’s Water Financing Program, it is thought sufficient to have one design and monitoring framework (DMF) to cover the objectives of both the Program and one of its critical funding sources – the WFPF. This also avoids confusion in having two separate DMFs that are targeted ultimately at the same impacts and outcomes. 2. The key points to note are: a. The DMF for the Water Financing Program has been expanded to add more detail on specific outputs that fall within its three major output components as these outputs are financed from the WFPF; b. The target outputs indicated in the WFPF DMF were defined using as basis the $100 million expected total contributions from the WFPF financing partners and using 2008-2010 as the period covered since full operationalization of WFPF began in January 2008 and committed contributions to date are 2010. 3. The Water Financing Program aims to double ADB’s investments in water during the period 2006-2010, thus resulting in significant increase in the number of people in Asia-Pacific region with access to safe and water supply and sanitation services, higher productivity and efficiency of irrigation and drainage services, coupled with the integrated management of water resources in river basins for sustained economic growth and environmental improvement. With these as targeted outcomes, the activities to be supported by the resources from WFPF are those directly contributing to the achievements of such outcomes as described below. How WFPF Resources will help achieve WFP Targeted Outcomes: Rationale for Choice of Indicators 4. The specific output indicators used in the proposed DMF for WFPF are those that directly reflect the activities to be financed from WFPF resources and directly contribute to the following 3 major outputs of the Water Financing Program: a. Component 1: Increased levels of water investment – to be supported by WFPF in terms of additional resources to: (i) (ii) (iii) prepare projects (through PPTAs) resulting in fundable investment proposals, finance grant components of investments that support either works, goods and services designed to enhance project design and implementation, and finance specific activities that directly support project development

Furthermore, it is envisaged that the WFPF will not only provide additional resources to produce the outputs described above but also provide added value such as:

Appendix 2

27

(i)

greater assurance of outcomes by increasing country commitments through sector assessments and investment dialogues with government. greater reach to the underserved by facilitating preparation of additional projects and leveraging more resources from partners. faster decision making by means of: WFPF-financed activities such as water services expert pool that makes possible provision of incremental experts to help in project design and implementation; knowledge products and tools; or use of direct charge as a modality to access WFPF resources in addition to loans and TAs. boosting innovation and business unusual by supporting activities like pilot and demonstration, development of knowledge products and organization of knowledge events. being more strategic by addressing specific and priority issues such as gender, climate change, environment and sanitation.

(ii)

(iii)

(iv)

(v)

b. Component 2: Policy and institutional reforms accelerated – supported by WFPF in terms of additional resources to fund loans, TAs or other modalities that address policy, legislation, regulations and institutional; and related undertakings such as: support to reform assessments and studies; support to strengthening coordination mechanism and facilitating reform process such as assistance in establishing or strengthening national water sector apex bodies; and engagement of civil society. c. Component 3: Institutional capacity strengthened and knowledge base expanded – supported by WFPF in terms of additional resources for pilot and demonstrations that produce new and innovative approaches, strategies and technologies; capacity development interventions targeted at key water sector organizations such as water utilities, river basin organizations, water users associations/irrigators association and apex bodies as well as implementing/executing agencies, knowledge products development, establishment of knowledge partnerships, regional cooperation, and civil society participation.

28

Appendix 2

WFP Design Summary Impact Healthy people and environment

Performance Targets/Indicators

Data Sources/Reporting Mechanisms

Assumptions and Risks

MDG goals on water and sanitation Reduction in the incidence of water related fatalities and disease Increase in the number of countries implementing IWRM

Country-level and UN progress reports on MDGs. UNDP/WHO country reports. Country water sector strategies and reports of Global Water Partnership

Outcome Improved coverage, quality and continuity of water service delivery within a framework of sustainable management of natural resources

200 million with increased access to safe water and sanitation 100 million with reduced risk to floods 40 million with improved irrigation IWRM introduced into 25 river basins Improved water governance as demonstrated by the outcome achievement on policy and reform measures5 In terms of investments: Between 2006-2010, 25% of ADB lending is in water, $12 M in ADB funds invested in water, and $8 additional investments leveraged from other donors, government and private sector.

Country sector reports and analysis prepared by ADB (e.g. Water Utilities Data Handbook). Reports of UN and other agencies.

Reports of research bodies e.g. IWMI. Governance surveys in targeted countries

Assumptions  Governments make achievement of water MDGs a priority  Sustained emphasis on water investment to keep pace with increased demand population and economic growth  Financial mechanisms for sustainable maintenance programs in place  IWRM policies adopted in line with WSSD commitments Assumptions  Leadership of key agencies and utilities  Implementation of governance reforms for resource management and service delivery  Community involvement  Application of IWRM principles Risks  Intensified opposition to private sector involvement in water service delivery  Budgetary constraints

Project documents

Output Component 1 Increased levels of water Investment (infrastructure)  Fundable investment projects 70% or $70 Million of WFPF resources spent on project investment support At least 306 PPTAs either funded in full or cofinanced with other sources, of which no less than 50% translate to investment projects Published ADB data on past and future public and private sector investments and technical assistance.

Assumptions  ADB investment products are attractive to DMCs  Replenishment of OCR/ADF to support increased water investment  Internal resources allocated to deliver increased water program  WFPF contributions are received based on the

5 6

Governance indicators are under development 30 PPTAs is based on average cost of $800K per TA or a total of $24M during the period 2008-2010

Appendix 2

29

WFP Design Summary 

Performance Targets/Indicators
7 At least 15 loans provided grant support for either goods, works or services

Data Sources/Reporting Mechanisms

Assumptions and Risks

Loans supported with grants

Project development support

At least 308 applications for direct charges add value to project development through improved design and implementation, better communication with stakeholders, etc.

Water Information System using as source data CSPs, PPRs and reports of individual funded outputs. ADB databases

committed date of contirbutions Risks  Low DMC demand for increased investment in the sector

Such increase in investment level is supported by the added value provided by WFPF in terms of: Faster decision making by means of:  WFPF governance and approval processes, including use of templates and tools 

Applications for TAs and GCIs are approved within 1 month upon receipt of bimonthly applications that meet qualification criteria Applications for direct charges are approved within one week upon receipt of applications that meet qualification criteria

WFPF reports on approved applications WFPF financing proposals screening analyses

Use of direct charge modality support for shortterm and stand alone activities with specific outputs and outcomes is made possible without need for RETA

Assumption That ADB existing processes are not applied in each case but are able to be modified to enable these features to speed up processing

Greater assurance of outcomes by increasing country commitment  Investment Dialogues  Use of knowledge products

Dialogues conducted in each of six priority countries that produce updated water priorities

BTOR on dialogues ADB water database

Greater reach to underserved by  More PPTAs  More knowledge products  More partners Boosts innovation and business unusual  PDA financing  Knowledge products  Knowledge events  Take up of new products
7 8

At least 50 million population of WFP targeted outcomes directly traceable to WFPF funding

Post evaluation study of PPTAs and subsequent loan project design

Post evaluation confirms new ideas, methods, technology and approaches taken up and applied from WFPF financed initiatives

Post evaluation of approved technical assistance projects

15 grant component of loan is based on average cost of $1M per project or a total of $15M during 2008-2010 30 applications for direct charges is based on average cost of $100K each or a total of $3M during 2008-2

30

Appendix 2

WFP Design Summary

Performance Targets/Indicators

Data Sources/Reporting Mechanisms

Assumptions and Risks

Being more strategic by  Funding climate change At least 15 projects demonstrating climate change adaptation measures At least 15 projects demonstrating increased investment in sanitation At least 15 projects demonstrating environmental protection and preservation At least 10 projects demonstrating gender mainstreaming At least 10 projects demonstrating greater involvement of civil society both at policy and project levels ADB project documents (loans and TAs); WFPF application documents Project documents, WFP/WFPF reports

Funding sanitation

Funding environment

Project documents, WFP/WFPF reports

Funding gender initiatives

Project documents, WFP/WFPF reports

Funding initiatives that help strengthen partnership with or empower civil society

Project documents, WFP/WFPF reports

Component 2 Policy and institutional reforms accelerated  Nonlending assistance addressing reforms in the areas of:  policy,  legislation  regulation  institutional arrangements

At least 15% or $15M of WFPF resources allocated to this component At least 15 TAs (ADTAs, piggy-backed TAs, SSTAs, RETAs) and direct charge applications are designed to advance reform measures in each of the areas of policy, legislation, regulation or institutional arrangements At least 15% or $15M of WFPF resources allocated to this component TA documents, reports on sector work dealing with policies and legislation

Component 3 Institutional capacity strengthened and knowledge base expanded  Pilot and demonstration projects

80% of approved projects completed within schedule and replication /upscaling occurring for at least 40%

PDA Project Completion Reports

Water sector organizations capacity improvement  Water Utilities Improvement in utilities performance using as basis the adopted utility performance indicators Implementation of Reports and benchmarking activities

 River Basin Organizations (RBOs)

Benchmarking reports, Reports by NARBO

Appendix 2

31

WFP Design Summary

Performance Targets/Indicators benchmarking and peer review process in RBOs in Asia-Pacific Region

Data Sources/Reporting Mechanisms (Network of Asian River Basin Organizations) Benchmarking reports, project reports

Assumptions and Risks

 Irrigation Water Users Association (WUA)  Sector Apex Bodies

Program for benchmarking irrigation service providers developed and implemented Implementation of benchmarking and peer process in apex bodies completed for all regions. Capacity building of sector agencies supported either as part of loans and TAs or as stand alone activities Knowledge products developed on schedule and achieve targeted distribution levels

Benchmarking reports

 Water sector agencies

Water Committee and WFPF reports

Water Committee reports  Knowledge products

Water Committee reports   Knowledge hubs At least 5 regional knowledge hubs operational by end 2010 At least 2 annual major water events participated in, i.e. World Water Week, Singapore International Water Week. Events-related reports, back-to-office reports (BTORs)

Knowledge sharing events

Water Committee reports  Scheduled outputs completed Regional cooperation on time. engaging with selected regional entities such as Global Water Partnership, Netherlands Water Partnership, Asia Pacific Water Forum Activities Investment  Demonstrate expansion in 5 target countries  Mobilize private finance  Build momentum for water investments Reforms  Intensify support for national water sector reforms  Support development of regulatory frameworks  Extend support for IWRM into the targeted 25 basins Capacity Development  Develop new and innovative approaches, methodologies  Strengthen institutional capacity  Enhance the knowledge base and knowledge products  Strengthen regional partnerships

Inputs: ADB TA grant resources ADB Lending ADB staff resources Asia Financing Partnership Facility approx $100 million  Project Support Window (70%)  Program Quality Window (30%) Government resources Private sector resources NGO resources

32

Appendix 2

Acronyms ADF ADTA CASCWUA DMC DMF IWRM KP MDG NARBO OCR PDA PPTA RETA SAWUN SEAWUN SSTA TA UN UNDP WFP WFPF WHO WSSD WUA Asian Development Fund Advisory Technical Assistance Central Asia and South Caucasus Water Utilities Association Developing Member Country Design and Monitoring Framework Integrated Water Resources Management Knowledge Product Millennium Development Goal Network of Asian River Basin Organizations Ordinary Capital Resources Pilot and Demonstration Activities Project Preparation Technical Assistance Regional Technical Assistance South Asia Water Utilities Network Southeast Asia Water Utilities Network Small Scale Technical Assistance Technical Assistance United Nations United Nations Development Program Water Financing Program Water Financing Partnership Facility World Health Organization World Summit on Sustainable Development Water Users Association

Appendix 3

33

Water Financing Partnership Facility Project Database List of January-December 2010 Approved Allocations

34

Appendix 3

Appendix 4

35

Water Financing Partnership Facility - Multidonor Trust Fund Disbursement as of 31 December 2010 and Projected Disbursements in 2011

36

Appendix 4

Appendix 4

37

38

Appendix 4

Appendix 4

39

40

Appendix 5

Water Financing Partnership Facility - Netherlands Trust Fund Disbursements as of 31 December 2010 and Projections until 2011

Appendix 5

41

42

Appendix 7

Appendix 6

43

44

Appendix 6

Appendix 6

45

46

Appendix 6

Appendix 6

47

48

Appendix 6

Appendix 6

49

50

Appendix 7

Appendix 7

51

52

Appendix 7

Appendix 8

53

Water Financing Partnership Facility Project Database Approved Allocations - By Modality

54

Appendix 8

Appendix 8

55

56

Appendix 8

Appendix 8

57

58

Appendix 8

Appendix 8

59

60

Appendix 9

Water Financing Partnership Facility Project Database Approved Allocations - By Sector (Rural, Urban, Basin)

Appendix 9

61

62

Appendix 9

Appendix 9

63

64

Appendix 9

Appendix 9

65

66

Appendix 9

Appendix 9

67

68

Appendix 10

Water Financing Partnership Facility Project Database Approved Allocations - By Region

Appendix 10

69

70

Appendix 10

Appendix 10

71

72

Appendix 10

Appendix 10

73

74

Appendix 10

Appendix 10

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