lao people s democratic republic water supply...
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Lao People’s Democratic Republic
Water Supply and Sanitation Sector Review
Final dated December 15, 2010
Sustainable Development Department
East Asia and Pacific Region
This volume is a product of the staff of the World Bank. The findings, interpretations, and
conclusions expressed herein do not necessarily reflect the views of the Board of Executive
Directors of the World Bank or the governments they represent.
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CURRENCY EQUIVALENTS (Exchange Rate Effective September 13, 2010)
Currency Unit = Lao Kip (LAK)
LAK 1,000 = US$0.122
LAK 8,196.7 = US$1
FISCAL YEAR
October 1 – September 30
ACRONYMS AND ABBREVIATIONS
ADB Asian Development Bank NPNL Nampapa Nakhon Luang
AFD Agence Française de NPSEs Nam Papa State Enterprises
Developpement NRW Non revenue water
BOT Build-Operate-Transfer NSEDP National Socio-Economic
DHO District Health Office Development Plan
DHUP Department of Housing and NT Nam Theun
Urban Planning NUSDSIP National Urban Sector
DPWT Department of Public Works Development Strategy and
and Transportation Investment Plan
GDP Gross Domestic Product O&M Operation and Maintenance
GFS Gravity Fed System OBA Output-Based Aid
GRET Group of Research and ODA Official Development
Technological Exchange Assistance
HH Households PM Decree Prime Minister Decree
IMT Implementation and PPP Public-Private Partnership
Maintenance Team PRF Poverty Reduction Fund
IWG Infrastructure Working Group SNV Netherlands Development
JICA Japan International Organization
Cooperation Agency UDAAs Urban Development
JMP Joint Monitoring Programme Administration Authorities
JV Joint Venture UDD Urban Development
Lao PDR Lao People’s Democratic Division
Republic UNICEF United Nations Children's
LDC Least Developed Country Fund
lcd Liters per Capita per Day WASA Water Supply Authority
MDGs Millennium Development WASH Water, Sanitation, and
Goals Hygiene
MIREP Mini-Réseaux d’Eau Potable WASRO Water Supply Regulatory
Programme (Small Scale Water Office
Supply) WHO World Health Organization
MoH Ministry of Health WREA Water Resource and
MPWT Ministry of Public Works and Environment Administration
Transportation WSD Water Supply Division
Nam Saat National Center for WSP Water and Sanitation
Environmental Health and Program
NGO Non Government WSRC Water Supply Regulatory
Organization Committee
NORAD Norwegian Agency for WSS Water Supply and Sanitation
Development Cooperation
2
ACKNOWLEDGEMENT
This report was prepared by Ms. Mariles R. Navarro and Mr. Alexandre Bui (Consultants)
with assistance from Mr. Klas Ringskog (Consultant). Ms. Julia Fraser was the Task Team Leader for
the study to which Messrs./Mmes. Sudipto Sarkar, Sombath Southivong (WB), Joseph Gadek,
Viengsamay Vongkhamsao (WSP), Lulu Baclagan, and Xuan-Dung (IFC) also contributed. Ms.
Chutima Lowattanakarn helped format the report. The study team gratefully acknowledges financial
support from AusAID and the support of the Government of Lao PDR, including the Ministry of
Public Works and Transport, Department of Housing and Urban Planning, Water Supply Division and
Ministry of Health and Nam Saat.
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LAO PEOPLE’S DEMOCRATIC REPUBLIC
Water Supply and Sanitation Sector Review
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................... 5
COUNTRY CONTEXT............................................................................................................. 8 LAWS AND REGULATION, AND STRATEGIES ................................................................ 8
1.1 Main Laws and Regulations .................................................................................... 8
1.2 Water Supply Sector Policy and Strategy .............................................................. 10 1.3 Current WSS Models in Practice in the Lao PDR ................................................. 16
SECTOR PERFORMANCE .................................................................................................... 18 2.1 Access .................................................................................................................... 18 2.2 Quality of services ................................................................................................. 20
2.3 Tariffs .................................................................................................................... 21
2.4 Affordability .......................................................................................................... 23 INVESTMENT PRIORITIES AND FINANCING ................................................................. 23 KEY ISSUES AND RECOMMENDATIONS ........................................................................ 27
Annex 1: Map on Status of Water Supply Systems in Urban Centers ..................................... 32
Annex 2: Water Sector Organizational Chart .......................................................................... 33 Annex 3: Linkage between central and local government institutions in the provision of water
supply services ........................................................................................................ 34 Annex 4: Percentage of households with access to safe water source, dry season, 2003 – 2008
................................................................................................................................. 35 Annex 5: Percentage households with access to improved sanitation, 2003 - 2008................ 36 Annex 6: Service Coverage by NPSE, 2008 ............................................................................ 37
Annex 7: NRW estimates by NPSE, 2008 ............................................................................... 38 Annex 8: Financial performance data by NPSE, 2006 - 2008 ................................................. 39
Annex 9: Water tariffs by province (2008), kip/m3
(LAK 1000=US$0.122) .......................... 40 Annex 10: Expectations and Achievements of the 2008 – 2010 Tariff Review ...................... 41
Annex 11: Urban Wastewater Investment Plan, 2009-2020 (Draft) ........................................ 42 Annex 12: Urban Wastewater Investment Plan, Proposed Funding Sources .......................... 43 Annex 13a: Aggregate sector specific cost estimates of meeting MDGs ................................ 43
Annex 13b: Aggregate ministry/authority specific cost estimates of meeting MDGs ............ 44 Annex 14: Review of Current WSS Services Delivery Models in the Lao PDR .................... 45
Annex 15: Goals for Urban Water Supply Sector Road Map……………………………… 59
REFERENCES ........................................................................................................................ 61
4
LIST OF TABLES, FIGURES AND BOXES
Table 1: Urban Centers by Population Size ............................................................................. 10
Table 2: UN Coverage Estimates of MDGs for Water and Sanitation .................................... 18
Table 3: Access to Household Connections and Improved Drinking Water Sources ............. 19
Table 4: Sanitation Coverage (%) ............................................................................................ 19
Table 5: Urban Water Supply Targets – Coverage & Population Served (2004 – 2020) ........ 24
Table 6: Sector Investment Plan for Urban Water Supply Projects (2005 – 2020) ................. 24
Table 7: Summary of Key Issues, Recommended Policy Actions and Intended Outcomes ... 27
Figure 1: Investments in Urban Water Supply 1999 – 2014 ................................................... 13 Figure 2: Investments in Urban Water Supply by Source of Financing (1999 – 2014) .......... 13 Figure 3: Capital Expenditure for Rural Water Supply & Sanitation, 2000 – 2009 (in US$
million) ..................................................................................................................................... 14 Figure 4: Capital Expenditure for Rural Water Supply & Sanitation, 2000 – 2009 (in %) ..... 15
Box 1: The MIREP Programme ............................................................................................... 14
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EXECUTIVE SUMMARY
(i) The Lao PDR targets under the Millennium Development Goals (MDGs) are to
provide 69% of the total population with access to an improved drinking water source and
63% with access to improved sanitation by 2015, using the 1995 service level estimates as the
basis. According to the 2010 WHO-UNICEF Joint Monitoring Programme (JMP), the urban
sector is on track to meet the MDG targets since access to improved water supply had
reached 72% and access to improved sanitation had risen to 86% in the year 2008. However,
the sector risks not meeting the rural MDG targets since access to improved water supply was
51%, and access to improved sanitation trailed at 38% in the year 2008. Although the MDG
targets refer to the total population, the discrepancy between the urban and rural sectors is
cause for concern in a country where 70% of the population resides in rural areas.
(ii) According to the World Bank’s Poverty and Environment Report (2009), the cost to
the country of inadequate water and sanitation services is estimated to have been at least
5.6% of GDP in 2006 and possibly as high as 10% of GDP if all costs related to the
detrimental effects of child malnutrition are included. About 30 percent of child mortality
under the age of five has been attributed to inadequate water supply, sanitation and hygiene
which combine to reduce school attendance. Coverage of services is low, and service quality
often does not meet government standards. It is not uncommon for households to receive
non-potable water for only a few hours a day at low water pressure. Lack of funds explains
inadequate disinfection and irregular water quality monitoring. Many households living in
Vientiane capital and the secondary cities have invested in wells and individual water tanks to
supplement public water supplies.
(iii) The Government targets are to provide 24-hour access to safe drinking water for 80
percent of the urban population by the year 2020 and ensure equitable service coverage for all
regions of the country. As for sanitation, on-site1 treatment will be pursued and the
implementation and management of the facilities shall be the responsibility of the individual
owner. To meet these targets, an estimated US$510 million would be required by 2020 to
meet the targets through: (a) providing an additional 1.95 million urban population with water
at an estimated cost of about US$270 million, of which 48% is programmed for Vientiane
capital, 38% for small towns and the 14% for secondary towns and provincial capitals; (b)
urban wastewater investments at a cost of US$140 million of which 54% for Vientiane city,
17% for secondary towns, 8% for provincial capitals, 20% for district centers, and the rest for
capacity building and emerging small towns; and (c) rural water supply and sanitation
investments at a cost of US$100 million. The implied annual investment levels 2011-2020
would be about US$18 million for urban water supply, US$12 million for urban sanitation,
and US$10 million for rural water and sanitation. These annual investment needs could be
compared to historical investment levels of US$8 million for urban water supplies, nil for
urban sanitation, and US$3 million for rural water and sanitation. It is unlikely that past
investment levels could be quadrupled, given that about 90% of past investments were funded
by international donors, and donor financing levels may not be easily expanded.
(iv) It is recommended that the Government focus on actions and reforms in three areas to
improve service quality in existing systems and to expand coverage in urban and rural areas:
1 In urban areas, a large majority of on-site sanitation is composed of pour flush toilets with infiltration pits
(simple or double) although septic tanks are also used. In rural areas, latrines are implemented most of the time.
6
(a) to streamline and make operational the present institutional arrangements and policies; (b)
to increase coverage of water supply services; and (c) to increase revenue collections through
a combination of higher operational efficiency and tariff increases that match improved
service which may also require targeted subsidies for the lowest income households.
(v) The streamlining of institutional arrangements is necessary to use efficiently the
country’s scarce skilled sector staff. First, it is recommended that the Ministry of Public
Works and Transportation (MPWT) become solely responsible for infrastructure
development and that the Ministry of Health (MoH) concentrate on hygiene promotion to
improve health and sanitation practices. The streamlining would give MPWT economies of
scale and the ability to retain and develop skilled staff. By the same token, MoH could
capitalize on its comparative advantages of educating the urban and rural population in safe
habits of water consumption and sanitation habits, including the promotion of rural on-site
sanitation. Second, conditions must be created in the sector to attract private operators whose
main remuneration would best come from improved cash flows. Until policies, practices and
political support allow for financial autonomy of service providers, including the right to
retain funds collected in order to generate financial surpluses from operations, public utilities
will remain inefficient and unattractive for private sector participation. Third, regulation
must be strengthened to monitor the performance of both public and private operators.
Reliable regulation requires validation of the data that service providers furnish to the
regulator, the Water Supply Regulatory Committee (WSRC) and Water Supply Regulatory
Office (WASRO) as its secretariat. Service providers must be trained ingenerating accurate
primary data for calculating performance indicators, and the Regulator must be trained in
validating information received.
(vi) Increasing coverage of water services is the highest priority in order to meet the
population’s basic needs and approach economies of scale that could help financial
sustainability. First, investments must be selected to ensure that scarce funding will result in
the highest possible number of households connected in the short term. The Mini-Rèseaux
d’Eau Potable (MIREP) program for small-scale private operators could guide the drive to
design and invest efficiently but technical specifications might have to be upgraded to ensure
long-term sustainability. MIREP systems are designed to provide 70 lcd of continuous water
services to households with chlorinated water. Second, house connections should be
facilitated by reducing and financing connection charges to allow their full recovery by
spreading them over a longer time period. Third, output-based aid (OBA)-schemes might be
attempted to give incentives to small-scale service providers to connect more households.
(vii) Increasing revenue collections through a combination of higher tariffs and improved
operating efficiency is the third cornerstone towards financial sustainability in the sector. The
majority of NPSEs are not performing well financially despite the fact that government
policy requires them to operate like corporations. NPSEs need internal systems and reforms
that support financial autonomy tied to accountability. Affordability calculations indicate that
tariff levels could rise in real terms. In order to gain acceptance for higher tariffs, they must
be matched by service improvements. In addition, targeted subsidies for both connection
costs and service provision may be required to ensure the poorest could afford services. It
also becomes necessary to educate consumers of the benefits from safe public water supplies
as contrasted to their use of non-potable water sources in order to make them accept higher
tariffs.
7
(viii) Sector reforms are unlikely unless they are supported with rising investment levels.
Three external donor agencies (Asian Development Bank, JICA, and Agence Française de
Development (AFD) have accounted for almost the entire financial assistance over the 1999-
2010 period. Notably, the project levels of financial assistance are projected to drop
substantially from 2010 and beyond worsening the gap between historical averages and
planned investment needs. This highlights the unlikely increase of future investments
necessary to reach the 2020 goals.
(ix) Investment projects should concentrate on (a) raising effective coverage, starting with
providing house connections to already existing distribution networks and educating
consumers in safe practices of drawing water and of sanitation; (b) giving incentives to public
and prospective private service providers to become financially autonomous by allowing
them to retain revenue collected and adopting the principle that the full costs of service
should be recovered from tariffs, starting with recovering the costs of operations and
adequate maintenance; and (c) concentrating on the effective implementation and
streamlining of the existing legislation in order to make for a predictable enabling
environment for public and private service providers. The paper suggests that investment in
Vientiane, perhaps through a public-private partnership model, offers the greatest chance of
helping the Government meets its sector objectives such as higher coverage, efficiency, and
sustainability.
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LAO PEOPLE’S DEMOCRATIC REPUBLIC
Water Supply and Sanitation Sector Review
COUNTRY CONTEXT
1. Geography and demographics. The Lao People’s Democratic Republic (Lao PDR)
occupies a land area of 236,800 km2
and borders on China, Vietnam, Cambodia, Thailand and
Myanmar. Almost half of its population of about 6 million (2008) are ethnic groups
concentrated in the upland areas. Some 70% of the population is rural, while 17% reside in
larger urban centers and the remaining 13% in small towns. Annual population growth rates
in small towns are reported to be 4 to 5 percent compared to the national average of 2.5
percent. The country is divided into northern, central and southern regions, and has 16
provinces and Vientiane Capital, including 143 districts and more than 9,000 villages. The
five largest urban centers (Vientiane, Luang Prabang, Kaysone Phomvihane, Pakse and
Thakhek) account for some 45% of the total urban population and are all situated along the
Mekong river.
2. Economy. Average annual GDP growth was about 7% from 2006 to 2009. Its low
per capita income of US$740 (2008) defines the country as one of the poorest in East Asia.
Agriculture accounts for 32% of GDP (2009), industry for 28%, and services for the
remaining 40%. The country exports mainly minerals and electric energy following the
successful launch of the Nam Theun (NT) 2 hydropower project. Poverty declined from 33%
in 2003 to 28% in 2008.2
LAWS AND REGULATION, AND STRATEGIES
1.1 Main Laws and Regulations
3. Prime Minister (PM) Decree no. 37 on the Management and Development of Water
Supply and Wastewater Sector, issued in 1999, establishes the key institutions in the sector.
At the central level, the Ministry of Public Works and Transportation (MPWT) is responsible
for urban water supplies. The MPWT mandate includes planning and programming,
mobilizing financing, developing guidelines for design, construction, and operation and
maintenance of urban water supply facilities, and technical assistance to NPSEs. Within
MPWT, this responsibility is lodged with the Department of Housing and Urban Planning
(DHUP), and further delegated to the Water Supply Division (WSD). WSD has currently
nine (9) technical staff and has relied on development partners to help prepare the country’s
urban water supply sector strategy and investment program, and to develop technical
guidelines for the urban sector.
4. PM Decree 37/1999 assigns responsibility for development of urban sanitation to
MPWT. This involves developing the sector strategy, investment plans and technical
regulations relating to urban wastewater and wastewater management in collaboration with
2 Poverty in Lao PDR, 1992/93 to 2007/08, Department of Statistics, Ministry of Planning and Investment,
Government of Lao PDR
9
the Water Resources and Environment Administration (WREA). Within MPWT, the Urban
Development Division (UDD) under DHUP is responsible for this task as well as for other
urban services such as drainage systems and solid waste management. UDD has six (6)
technical staff.
5. The Ministry of Health (MoH), through its National Center for Environmental Health
and Hygiene (Nam Saat), is responsible for rural water services, and for promoting
environmental health and hygiene in urban and rural areas. Its mandate includes planning
and programming, mobilizing financing, capacity building and technical assistance for
community mobilization. Nam Saat has 45 staff with nine (9) technical staff, six (6) medical
doctors, and nurses, laboratory technicians and administrative staff. Its capacity for design
preparation and construction supervision of rural water supply facilities is considered low,
and its effectiveness suffers from limited budgets.3
6. Implementation, operation and maintenance of public water supply systems are
decentralized and reassigned from the former national water utility, Nam Papa Lao, to 17
provincial water utilities (also known as Nam Papa State Enterprises or NPSEs). NPSEs are
supposed to operate along commercial principles, but this rarely happens. The Local
Administration Law created the provincial Urban Development Administration Authorities
(UDAAs) to provide urban infrastructure services, including drainage, solid waste and
wastewater management.
7. The following legislations define sector governance:
Prime Minister (PM) Decree no. 57 on Water Supply Tariff Policy, issued in 2004,
prescribes water tariffs sufficient to ensure financial sustainability of water supply
systems;
The Law on Enterprise issued in 2005 requires NPSEs to be transformed into state
companies with a corporate structure and financial autonomy; and
Prime Minister (PM) Decree no. 191 on the Regulation of Water Supply Operations
from 2005 widens the regulator WASA’s mandate to include private water providers,
in addition to public water utilities.4
8. More recently, the Water Supply Law, enacted in 2009, provides the policy
framework for the water supply sector. The Water Supply Law addresses: (a) the planning,
construction, and maintenance of facilities which are to be according to government technical
standards and regulations and in compliance with water resource and environment related
laws; (b) private sector participation; (c) the establishment of a water supply infrastructure
development fund, and of tariff policies; (d) rights and obligations of service providers and
users; (e) dispute resolution mechanisms; and (f) overall arrangements for sector oversight.
The law is adequate but implementation is still pending since the implementation decree has
not yet been issued.
3 In 2009, the allocation for water and sanitation under the health sector was 1% of the budget (source:
Sanitation Financing Study, Draft, May 2010, WSP Lao office). 4After WASA was reorganized in 2008, the regulator was renamed the Water Supply Regulatory Committee
(WSRC), with the Water Supply Regulatory Office (WASRO), formerly WASA, serving as its secretariat.
10
9. The Water and Water Resources Law of 1996 and the Environmental Protection Law
of 1999 are also relevant. The effectiveness of the Water Resources Law has also suffered
from a lack of implementing guidelines.5 The Environmental Protection Law guides the
preparation of environmental impact assessments of water-related projects.
Urban and Rural Demographics
10. Previously, urban and rural areas were defined administratively rather than by size or
density of population. The Government has now redefined ‘urban’ areas as those with (a) at
least 2,000 inhabitants, and (b) a population density of more than 30 persons per hectare. All
areas with less than 2,000 people are considered rural. Table 1 shows the distribution of
urban areas and small towns based on size of population.
Table 1: Urban Centers by Population Size
Urban Categories Number of
Towns
No. of Piped WS systems as of
2009 managed by NPSEs and
private operators
% of urban
population
Vientiane (>500,000) 1 1
45%
4 secondary towns (20,000-60,000)
Luangprabang, Kaysone Phomvihane,
Pakse, Thakhek
4 4
12 other provincial centers (4,000-
20,000) 12 12 13%
Small towns/districts centers (<2,000 –
15,000) 125 49 42%
Total 142 66a/ 100%
Source: Lao PDR, Private Sector Mapping: Building Consensus, Vientiane, 2004; World Bank, 2007; updated
with information from MPWT
1.2 Water Supply Sector Policy and Strategy
11. The targets of the urban water supply strategy are to provide coverage to 80% of the
urban population by 2020, equivalent to serving an additional 1.95 million people. At
present, there are 76 urban centers without water supply system out of a total of 142 urban
centers (see Annex 1). The 7th
Five-Year National Socio-Economic Development Plan
(NSEDP) for the period 2011 to 2015 assigns priority to piped water and individual on-site
sanitation to achieve the Millennium Development Goals (MDGs). The quality targets are to
provide urban centers and small towns with continuous water supply that meets national
drinking water quality standards with a service pressure of at least 10 meters. Consumers
should be metered and pay tariffs that recover costs, provided the payment is no more than
3% to 5% of average monthly household income. Households are obliged to pay a fee for
connecting to the water supply system. Finally, the service providers, the NPSEs, should
operate as financially autonomous corporations.
5 The implementation decree is expected to include guidelines on allocation of water resources among
competing users including domestic water supply, agriculture (irrigation), and mining and hydropower, as well
as on the determination of raw water extraction charges.
11
12. An urban wastewater strategy and investment plan was prepared in June 2009 and is
currently under consideration by the Government.6 It comprises (a) institutional and legal
reforms; (b) a strategy for improved access to sustainable wastewater through appropriate
technology in wastewater management and appropriate toilets in schools, public markets and
buildings; (c) capacity building and awareness raising at the central and local levels; and (d)
financial sustainability.
Rural Water Supply Strategy
13. The National Strategy for Rural Water Supply and Environmental Hygiene from 1997
envisages improved access to basic water supply facilities but without necessarily connecting
households or providing potable water.7 Sanitation is expected to be in the form of latrines.
In 2004, MoH revised the strategy based on demand and willingness to pay for maintenance
costs. The National Rural Water Supply Strategy comprises best practices, but recent
studies8 have highlighted its poor implementation and lack of sustainability. It is believed
that about half of built systems may be non operational.9 In order to restore service in non-
operational systems, availability of spare parts at the local level must be improved, and
appropriate technical and financial training must be provided to the community-based water
and sanitation committees that manage the systems.
Role of WSRC and WASRO as service regulator
14. Regulation was reorganized in 2008 with the creation of the Water Supply Regulatory
Committee (WSRC) and Water Supply Regulatory Office (WASRO) as its secretariat.10
WSRC regulates both public and private service providers. It is chaired by MPWT’s Vice
Minister and has eight members representing government, the private sector industry,
consumers, and water operators.11
WSRC relies on technical assistance and capacity building
from development partners in undertaking its functions. Annex 2 presents the water sector
organizational chart.
15. WSRC’s regulatory work has focused on tariff reviews and the preparation of annual
performance reports of NPSEs. Tariff reviews are done every two years by WASRO, as the
technical secretariat to WSRC; the first one covering the period 2005 to 2007 and the latest
6 Prepared as part of the National Urban Sector Development Strategy and Investment Plan (NUSDSIP), a
requirement under the National 6th
Five-Year Socio-Economic Plan (2006-2010). Preparation was funded by
Norwegian Agency for Development Cooperation (NORAD), in support of the ADB funded the Northern and
Central Water Supply and Sanitation Project. 7 That is, water quality in rural water supply systems is below national drinking water standards.
8 Lao PDR Sector Review, World Bank, 2007, Final Report: Review of the National Strategy for the Rural
Water Supply and Environmental Heath Sector, Lao PDR, Andy Robinson, UNICEF, September 2009, as well
as based on feedback from sector professionals. 9 In the Lao PDR WSS Sector Review, World Bank, 2007, the estimate was about 30% of rural water supply
facilities being non-operational. 10
By virtue of Prime Minister Decree no. 191 issued in 2005, and MPWT Decisions 13265 and 13266 issued in
2008. 11
The government representatives are DHUP Director, Director of the Business Promotion Office, Director-
General of the Department of Financial Management of State-owned Enterprises, Director-General of Hygiene
and Disease Prevention Department, and WASRO Director. Private sector industry is represented by the
Chamber of Commerce and Industry. Customers are represented by Women’s Union (although current
representative is also DHUP Deputy Director). Water operators are currently represented by Vientiane CC Nam
Papa.
12
for the period 2008 to 2010. These reviews currently cover only NPSEs. The preparation of
annual performance reports began in 2000 and covers only NPSEs; plans to include private
providers are underway. The quality of data from NPSEs has been questioned by WSRC and
WASRO themselves as they acknowledge that NPSEs have a serious lack of understanding
of the reporting requirements which often lead to inconsistencies and errors in data
submissions. Also, analyses on performance are based on unaudited/unverified data provided
by NPSEs.
16. WSRC is currently developing five performance guidelines and two standard
agreements to improve monitoring and regulation of water utilities. The performance
guidelines cover (a) compliance monitoring and performance auditing, (b) regulation for non-
payment customers, (c) enforcement of payment by customers including service
disconnection procedures, (d) water leakage detection and management, and (e) formulation
of an action plan and regulatory reports. The standard agreements are for (a) water supply
operation license setting out the obligations of water service providers including defining
service areas, service standards, etc., and (b) performance targets. These performance
guidelines and standard agreements have yet to be issued to the public. A major concern of
WSRC and WASRO is the lack of capacity of its staff and those of the NPSEs, and
eventually private providers subject to WSRC regulation, to undertake their respective
functions and responsibilities.
Role of provinces and districts
17. Provincial governors are in charge of all provincial affairs in their province.12
With
regard to water and sanitation, the provincial Department of Public Works and Transportation
(DPWT) and provincial office of Nam Saat are responsible for planning and coordinating the
implementation of programs and projects. Provincial authorities give the final approval of
tariffs prior to their implementation and issue licenses to private operators without necessarily
securing approval from central authorities. DPWT and the provincial Nam Saat offices have
one to two staff each to deal with water supply. The DPWT staff help WSRC and WASRO
execute its functions at the local level. Annex 3 shows the linkages between central and
provincial government institutions.
Investment Financing
18. Urban water supply. The government, official development assistance (ODA) and
foreign NGOs finance investments and technical assistance in the urban water supply
sector.13
For the period 1999 to 2014, total funding commitments amount to about US$125
million, or an average of about US$8 million a year. Of this amount, 97% were funded by
development partners and the remaining 3% by provincial governments (see Figures 1 and
2). In terms of distribution across provinces, more than 40% was invested in projects
benefiting Vientiane province (both the city and surrounding areas) and the rest in secondary
12
The objective of the policy on decentralization is to transform the provinces into strategic units, the districts
into planning and budgetary units, and the villages into implementing units. Provincial administration officials
are appointed by the central government. 13
Main donors are ADB, Japan, France, Germany, UNDP, UNICEF, EU, Norway, World Bank, Sweden, UK,
Belgium and recently, South Korea.
13
cities and small towns. Government in kind counterpart funding normally complements
foreign funding.
Figure 1: Investments in Urban Water Supply 1999 – 2014
Source: WSD, DHUP, MPWT
Figure 2: Investments in Urban Water Supply by Source of Financing (1999 – 2014)
Source: WSD, DHUP, MPWT
19. Private sector investment is minimal. The only official program on private sector
participation is the MIREP Programme (Program for Small Scale Water Supply Systems),
launched in 2004. This Programme involves provision of urban water supply in small towns
14
not currently served by NPSEs. It has so far mobilized US$1.2 million in financing from
foreign non-government sources, private investors and household beneficiaries (see Box 1).
Sustainable private sector participation will remain limited until such a time that incentives
for prospective private operators improve with emphasis on creating sustainable financial
autonomy. This will also require stronger tariff policies, predictable laws, access to credit,
and perhaps targeted subsidies to the poor.
20. Urban sanitation. In urban areas, the majority of on-site sanitation is composed of
pour flush toilets with infiltration pits (single or double) although septic tanks are also used.
Practically no investments have been made by the government in sewerage and wastewater
treatment plants, save for a few kilometers of sewerage pipe and a stabilization pond in
Vientiane city.
21. Rural water supply and sanitation investments amounted to about 230,000 million
kip (US$27.5 million) in the 2000-2009 periods, or an average of US$2.7 million a year (see
Figure 3). The water supply share was 80% and the sanitation share 20%. About 65% were
funded by development partners, 25% by households and 10% by government both at the
central and local levels (see Figure 4).
Figure 3: Capital Expenditure for Rural Water Supply & Sanitation, 2000 – 2009 (in US$ m)
Source: Central Nam Saat
Box 1: The MIREP Programme
The MIREP Programme pilots Public-Private Partnership (PPP) schemes in water and sanitation
services. Financial support is provided by donor organizations with technical assistance by the Group
of Research and Technological Exchange (GRET), a French based professional cooperation
organization. So far MIREP has funded eight small towns in Vientiane and Bolikhamsay provinces.
Total investments mobilized under the Programme are about US$1.2 million, of which MIREP
subsidizes 20%, private sector investment is 60% and consumer connection costs the remaining 20%.
Of the private sector investment, 85% is equity invested upfront and the remaining 15% is financed by
credit guaranteed by the provincial government with Vientiane NPSE. Phase 3 is being designed based
on lessons learned from the earlier phases.
15
Figure 4: Capital Expenditure for Rural Water Supply & Sanitation, 2000 – 2009 (in %)
Source: Central Nam Saat
22. Urban water supply operations. NPSEs operate almost 150,000 urban water supply
connections (2008), serving about 14% of the country’s population.14
NPSE assets are owned
by the provincial governments. Each NPSE is headed by a managing director appointed by
the provincial governor and governed by a Water Administration Board which is composed
of government representatives and civil society groups representing consumers.15
23. The Enterprise Law requires NPSEs to register as state companies and reach financial
autonomy, but this has not happened in practice. NPSEs remain dependent on government
operational and investment subsidies. NPSEs usually remit their revenues to the provincial
treasury which reduces incentives for NPSE management and staff to improve performance
since the benefits from better performance do not accrue to the NPSEs but rather to the
provincial government. Allowing service providers the right to retain whatever revenue they
manage to collect is a prerequisite for improving performance and attracting private
operators. The Asian Development Bank (ADB) is assisting a selected number of NPSEs in
setting up financial management systems in the areas of billing and collection, accounting,
stock inventory management and depreciation of accounts, and the preparation of three-year
rolling corporate plans.
24. NPSEs follow government administrative procedures, such as government
remuneration policies, which make it difficult for NPSEs to attract capable personnel, all the
more since there is a dearth of professional staff in the country to start with.
14
Based on data provided by MPWT. 15
Specific representation is as defined in the Enterprise Law.
16
25. Private water providers serve only a small segment of the market but might be scaled
up in the future. In the eight MIREP schemes, about 30,000 inhabitants are projected to be
served. Private operators under this Programme are mainly local private construction
companies. Reportedly, small scale private piped water supply systems barely break-even.16
26. Urban sanitation operations. The country has no operational urban sewerage system
or wastewater treatment plants at present, although one MIREP sanitation project and two
UN Habitat projects are under construction. It is not yet clear how the sanitation projects will
be operated, once commissioned.
27. Rural water supply operations are operated and maintained by village water and
sanitation committees. The Nam Saat program requires the creation of Watsan committees
that are headed by the village chief with members appointed by the latter, or directly elected
by the communities. In general, capacity is low with no technical support provided after
commissioning.
1.3 Current WSS Models in Practice in the Lao PDR
28. The government has been piloting alternative management models for water supply
and wastewater systems, some of which represent hybrids of public and private involvement.
The experience from such pilot schemes are fully analyzed in Annex 14 and are summarized
as follows:
Vientiane capital
29. Vientiane capital’s water supply system (75,000 connections) is run by the capital
water supply state enterprise (Nampapa Nakhon Luang - NPNL) but presents interesting
combination of different investment and management systems. NPNL is supported by foreign
investments (JICA, AFD, ADB) but has also mobilized a local private loan to finance the
expansion of a water treatment plant. NPNL is also the first state enterprise in Lao PDR to
implement a Build-Operate-Transfer (BOT) model in order to meet the industrial and
commercial demand through a Lao-Vietnamese joint venture for a 20,000 m3/day water
treatment plant in a greenfield industrial zone. The BOT Company sells water to NPNL,
based on an agreed cubic meter tariff (1,270 kip/m3) and the contractually agreed average
water needs/ production capacity of the plant.
Kaysone Phomvihane Town
30. The Savannakhet provincial water supply state enterprise (NPSE – SVK) is currently
exploring, through a provincial government initiative (MOU signed), the possibility of a joint
venture with a Malasian investor in order to finance investment around US$15 million. The
water supply system would be operated by the investor, and profits would be shared in
proportion to the investments made. The private investor is scheduled to finance 75% of
costs.
16
Annex 14 provides details on the different delivery models applied in Lao PDR
17
Pakse Town
31. Champasack provincial water supply state enterprise (NPSE – CPS) is exploring the
possibilities of attracting investors to finance additional water production works. These
investors may enter under models such as BOT, Joint ventures, and with foreign grant.
Community managed systems with NGOs
32. In 2004, three villages, Phine district, Savannakhet province were provided with piped
water supply systems (boreholes, elevated tanks, pipes distribution system). A French NGO
provided design, management training and funding. The three villages are located in the same
poor district (Phine) and have around 1,000 inhabitants each. The systems are fully operated
and managed by a committee appointed by the head of village. Connections are metered with
a uniform water tariff. Local authorities are involved through the district as tax collectors.
However, the three systems do not seem to be sustainable, because of low tariffs, high
material costs and very low consumption levels. Insufficient water resources have created
shortages of water in two of the three villages. The management committee does not seem
accountable to the communities.
Community financed assets
33. Nathad village (Outhoumphone district, Savannakhet province), with around 1,000
inhabitants, is an example of four villages which benefited from a loan provided by the local
Thad-inghang temple. The loan, made in 2003 and repaid in 2005, financed wells, pumps,
elevated service reservoirs and a distribution system. The loan was reimbursed through
connection fees from the benefiting households. The system is managed by a committee
elected by the community, outside of head of village’s authority. The tariff level was adopted
by the villagers themselves. The system is sustainable, although it doesn’t produce any profit.
Water resources were poorly assessed and there are water shortages during protracted dry
spells.
MIREP schemes with Private Assets combined with External Grants
34. The MIREP schemes allow private investors to support water schemes under a BOT
contract signed with the district governor’s office. The project supports 25% of total
investment besides design, business plan elaboration and three years technical assistance.
MIREP systems are fully operated by the contractor with tariffs based on surveys to assess
affordability and willingness to pay. Initially the systems have been sustainable, but require
long-term sustainability since private investments will only be recovered over 14 years as
expected.
The Poverty Reduction Fund Program
35. The Poverty Reduction Fund (PRF) Program has World Bank funding and an
independent organization with a direct line of communication to the Prime Minister’s office.
The project is demand driven and provides funds at the Zonal level. Community
contributions, in kind or in cash, finance an average 30% of investments. The water assets
(comprising small gravity fed systems, piped networks, wells and boreholes) are managed by
a water committee under the village head. The community supports the entire cost of the
18
distribution system. However, the PRF systems are reportedly not sustainable because of the
very low tariffs. They also suffer frequent breakdowns due to lack of spare parts.
Common Problems with the Systems Surveyed
36. Without external subsidies, water schemes cannot generate profits and therefore fail to
attract private investors. Water resources seem to have poorly assessed in most schemes. The
MIREP project seems to be the most successful PPP project implemented in Lao PDR but
illustrates the weaknesses of local financing for water supply schemes. The availability of
spare parts seems to be a general problem in rural areas.
SECTOR PERFORMANCE
2.1 Access
37. Coverage for water and sanitation.17
The WHO-UNICEF Joint Monitoring
Programme (JMP) considers Lao PDR to be on track to meet water and sanitation MDG
targets in urban areas but off track in rural areas.18
It is believed that meeting the MDG
targets for water and sanitation can be achieved, although it would still leave 31% of the total
population without clean water supply and 46% of total population without access to basic
sanitation by 2015 (see Table 2).
Table 2: UN Coverage Estimates of MDGs for Water and Sanitation
Population (in ’000)
Population using improved
drinking water sources
Population using an improved
sanitation facilities
Year Urban Rural Total Urban Rural Total Urban Rural Total
1990 649 3,558 4,207 - - - - - -
1995 836 3,973 4,809 78% 37% 44% 56% 10% 18%
2000 1,187 4,216 5,403 77% 40% 48% 62% 16% 28%
2005 1,610 4,270 5,880 74% 47% 54% 77% 30% 43%
2008 1,915 4,290 6,205 72% 51% 57% 86% 38% 53%
2015 2,732 4,296 7,028 69%* 63%*
* MDG estimates are based on the Joint Monitoring Programme 1995 coverage estimates
Source: WHO/UNICEF Joint Monitoring Programme for Water and Sanitation
17
The MDG for water aims to halve by 2015 the proportion of people without sustainable access to safe
drinking water in 1990. The MDG for sanitation aims to halve by 2015 the proportion of people without
sustainable access to basic sanitation in 1990. The Joint Monitoring Programme measures coverage as (a) the
proportion of population with sustainable access to an improved drinking water source, urban or rural; and (b)
the proportion of population with access to improved sanitation, urban and rural. Improved drinking water
sources, in turn, are defined as the population with (i) piped water into dwelling, plot or yard; (ii) public tap or
standpipe; (iii) tubewell or borehole; (iv) protected dug well; (v) protected spring; and (vi) rainwater collection.
Improved sanitation facilities are defined as (i) flush or pour-flush to (i) piped sewer system; (ii) septic tank; (iii)
pit latrine; (ii) ventilated improved pit latrine; (iii) pit latrine with slab; and (iv) composting toilet. As a
consequence, MDG coverage comprises a wide range of service levels of varying convenience and benefits to
individual consumers and to a community.
18
MDG Road Map for Lao PDR, WHO and UNICEF, February 2010
19
38. Since the year 2000 access to improved drinking water sources19
has decreased in
urban areas but risen in rural areas. In terms of piped connections to households, there is an
increasing trend in urban areas but decreasing in rural areas, and still at very low levels in
both urban and rural areas (see Table 3). This shows that there are significant needs in both
urban and rural areas in terms of providing safe and reliable water through piped water
supply systems.
Table 3: Access to Household Connections and Improved Drinking Water Sources
Urban Rural
Year Total Household
connections
Other improved
sources Total
Household
connections
Other improved
sources
1990 - - - - -
1995 78% 30% 48% 37% 5% 32%
2000 77% 35% 42% 40% 5% 35%
2005 74% 48% 26% 47% 4% 43%
2008 72% 55% 17% 51% 4% 47%
Source: Joint Monitoring Programme, WHO and UNICEF, March 2010
39. The Government estimates that dry season access to safe water source almost doubled
between the period 1992/93 to 2007/08, from less than 40% of the population to over 70% for
the entire country.20
Big improvements have been made in the poorest districts and across
ethnic groups (Annex 4). As shown by the UN and government estimates, government
subsidies for water are regressive, since they favor those already connected who tend to be
wealthier than poor unconnected households. On average, NPSEs serve 69% of the
population within their service areas (2008) which is confined to the core urban centers but
only 12% when compared to provincial populations and 14% of the country’s population
(Annex 6). Coverage of piped water supply in Vientiane capital utility is 80% of its existing
service area which in turn covers 50% of the entire city, i.e. 40% of the entire city has water
supply networks.
40. Access to improved sanitation has risen in both urban and rural areas. Coverage in
2008 for improved sanitation is estimated at 86% in urban areas and 38% in rural areas.
Open, unsanitary defecation is still being practiced by 52% of the rural population (Table 4).
The government estimates that access to improved sanitation rose from 50% in 1992/93 to a
little over 60% in 2007/08, which lags the MDG targets. (Annex 5).
Table 4: Sanitation Coverage (%) Urban Rural
Year Improved Shared Unimproved Open
defecation Improved Shared Unimproved
Open
defecation
1990
1995 56 3 11 31 10 1 8 81
2000 62 4 8 26 16 1 8 75
2005 77 5 5 13 30 2 7 61
2008 86 5 3 6 38 2 8 52
Source: Joint Monitoring Programme, WHO and UNICEF, March 2010
19
Improved drinking water sources refer to household connection, public standpipe, borehole, protected dug
well, protected spring, bottled water and rainwater collection. Unimproved drinking water sources are
unprotected well, unprotected spring, vendor provided water and tanker truck water. 20
Poverty in Lao PDR, 1992/93 to 2007/08, Department of Statistics, Ministry of Planning and Investment,
Government of Lao PDR
20
41. The cost to the country of inadequate water and sanitation services is estimated to
have been at least 5.6% of GDP in 2006 and possibly as high as 10% of GDP if all costs
related to detrimental effects of child malnutrition on cognitive development and education
outcomes as well as increased risks of respiratory illness transmission and child pneumonia
are included.21
The health costs comprise diarrheal morbidity and mortality and the effect of
diarrheal infections on malnutrition in young children and consequent increases in child
mortality and morbidity. About 30 percent of child mortality under the age of five has been
attributed to inadequate water supply, sanitation and hygiene. The lack of water and
sanitation also reduces school enrolment.22
2.2 Quality of services
42. Urban water supply service quality generally does not meet government standards. It
is not uncommon for households to receive non-potable water for only a few hours a day at
low water pressure. Lack of funds explains inadequate disinfection and irregular water
quality monitoring. Many households living in Vientiane capital and the secondary cities
have invested in wells and individual water tanks to cope with intermittent water supply and
low pressure.
43. With regard to privately managed systems under the MIREP, the first one was
commissioned in 2006, and performance is still tentative. In terms of design of the water
supply systems, distribution pipeline networks are designed to respond to water demand for
90% of the population in the service area in 15 years, and the transmission lines and main
pipes for 100% of population in 25 years. Systems are designed to provide continuous water
services to households with chlorinated water. Minimum water pressure is five meters at the
most distant points of the network, i.e. below the government standard of at least 10 meters.
44. For small scale, unregulated privately provided systems water supply service is
reported to be 24 hours a day. However, in practice wells often dry up periodically. Water is
rarely potable but households buy bottled water for drinking. Water pressure is between 5
and 10 meters.23
In rural areas, the objective is to bring water closer to communities
through gravity fed systems, spring catchments, and boreholes. However, quality of services
is generally below what is defined as safe and reliable water supply.
Sanitation
45. Sanitation facilities in urban areas are mainly on-site, built by households, but the
design and construction of septic tanks are unregulated, and septic tanks are not regularly
desludged. The practice could pollute the ground water from which the community draws
water.24
Sludge disposal is normally untreated in rice fields and open spaces and is not
regulated.
21
Poverty and Environment Report, World Bank, 2009 22
Final Report: Review of the National Strategy for the Rural Water Supply and Environmental Heath Sector,
Lao PDR, Andy Robinson, UNICEF, September 2009 23
This is based on information from the case studies in Annex 14 24
A rapid assessment of household sanitation facilities in Vientiane was carried out with assistance from WSP
in 2010.
21
Efficiency
46. Non revenue water (NRW) is estimated as 23% (2008) on average. The low NRW
might be explained by the fact that water supply systems are relatively new (Annex 7).
However, WSRC reports that daily water losses per connection among NPSEs rose from 193
liters in 2007 to 233 liters in 2008. Vientiane loses three times as much, or 600 liters per day
per connection. As a consequence, WSRC has raised doubts on the accuracy and reliability
of NRW data since NPSEs do not meter production and lack the technical capacity to monitor
NRW. Private and community managed village water supply systems generally do not have
production meters, and NRW cannot therefore be measured.
47. Staff productivity is measured in terms of number of staff per thousand water
connections. WSRC estimates staff productivity ranging from 4.2 to 17 in 2007 and from 7.6
to 28.5 in 2008. International benchmarks are2 staff per thousand connections, although such
high productivity includes much outsourcing. Only six NPSEs improved productivity while
11 worsened (Annex 8). The MIREP schemes have two to three staff managing the water
supply schemes with an average 500 connections, or about 5 staff per thousand connections.
Small privately or community-managed systems have about five staff managing systems with
100 to 200 connections. A critical issue is the low skills level of staff.
48. Collection efficiency is measured by WSRC in terms of the level of accounts
receivable, expressed in days of average turnover. Accounts receivable were 113 average
turnover days in 2008 (Annex 8) compared to a WSRC target of 60 to 90 days. A major
factor contributing to low collection efficiency is the difficulty to collect water bills from
government institutions. In rural water supply schemes, money is only collected when there
is an acute need for money for repairs. Allowing service providers the right to retain whatever
revenue they manage to collect is the starting point for improving the collections efficiency.
Profitability
49. WSRC measures profitability in terms of return on net assets. In general, NPSEs have
not been profitable. The average return on capital employed in 2008 was negative 1.4%, an
improvement over 2007 of negative 2.7%. Of the 17 NPSEs, only five had slightly positive
returns. In contrast, cash flows have been positive but at the price of deferred maintenance.
This practice will produce premature deterioration of assets which costs more than
appropriate maintenance. Financial working ratios, that is, the proportion of cash operating
expenses to cash operating income, range from 0.52 (Savannakhet) to 0.92 (Luangnamtha)
and average 0.68, but the high ratios are likely explained by inadequate maintenance. The
international benchmark for working ratio is 0.50. Only five NPSEs fully recovered
depreciation costs in 2008 (Annex 8). The MIREP schemes seem to be more profitable than
NPSEs. 25
2.3 Tariffs
50. Urban water supply. About half of the NPSEs charge uniform rates and half slightly
increasing block rates (Annex 9). Average tariff levels are LAK 2,350 (US$ 0.29) per cubic
meter but the average hides substantial differences between provinces. The official tariff
25
See MIREP Financing Policy Review – Final Report, MIREP Laos, October 2009
22
policy is to recover operation and maintenance costs as a minimum, plus an increasing
portion of depreciation depending on affordability and willingness to pay. All NPSEs have
long term debt (Annex 10). To reach full cost recovery WSRC estimates that tariffs would
need to increase by 20% on average in real terms, and another 35% to achieve real return on
capital of at least 5%. Connection charges normally range from US$50 to US$60 but reaches
US$150 in Vientiane.
51. Every two years, WSRC recommends an average tariff for each NPSE subject to final
approval by the respective provincial authority. On the basis of the recommended tariffs by
WSRC, NPSEs recommend the tariff structure and present it to the provincial authorities for
final approval.
52. For MIREP schemes, the tariff policy is to recover operation and maintenance costs,
the private investment and produce a rate of return of 10%. The subsidy from MIREP is not
recovered. Typical water tariffs are about 2,200 kip per cubic meter for domestic users and
2,500 per cubic meter for non domestic users. MIREP schemes charge a minimum
consumption per month of three cubic meters as compared to 10 cubic meters in some
NPSEs. An additional fixed amount is charged as ‘maintenance fee’, which equals in most
cases so far to 1,860 kip per month per connection. The connection charge is 500,000 kip, or
about US$60. Tariffs are designed to be adjusted annually for inflation starting within two
years from commencement of the concession contract. However, some concessionaires have
deferred tariff increases to encourage consumers to connect. Connection fees can be paid in
installment. Identified poor households are connected for free and financed by the MIREP
grant.
53. In privately managed rural systems in rural areas, the private owners set tariffs and
connection fees at a level sufficient to recover their investment and operating costs. For
community provided and managed systems, tariffs are agreed between the Watsan
committees and the beneficiaries to cover operating costs, depreciation and return on
investment. No fee is charged for connections.
54. Sanitation. One of the most adverse impacts accompanying the advancement in
economic growth, industrialisation, and urbanisation is the increasing rate of wastewater
generation. In general, urban wastewater management falls under the responsibility of the
Urban Development and Administration Authority (UDAA) and 12 other districts/small
urban towns. In the case of Vientiane capital, the government has provided subsidies for
wastewater management. The arrangement is that Nam Papa Na Khone Luang deducts the
amount of Kip 112,152,000 per month (56,076 water meters at a flat rate of Kip 2,000 per
meter per month) from its payable turnover tax and remits the same amount to the Vientiane
Urban Development Administration Authority (VUDDA)26
. However, in some provinces the
wastewater management cost is charged directly to consumers by applying a flat rate of 1,000
Kip per month per water connection. Desludging costs about 300,000 kip per trip by private
companies. The tipping fee to dispose of sludge in a landfill costs about 30,000 kip per
truck.27
26
Base on the Prime Minister’s Decision number 052/PMO, dated 25/5/2009. 27
Data for Xay district in Oudomxay province.
23
2.4 Affordability
55. The average NPSE tariff is 2,350 kip (US$0.29) per cubic meter. In 2008 all
provincial service providers had financial working ratios (the ratio between cash operating
costs and cash operating revenue collected) below unity indicating that most can be assumed
to cover the cash operating costs with revenue collected. However, financial working ratios
can look deceptively good if utilities do not spend sufficient amounts for maintenance.
Assuming an average consumption level per household of about 20 cubic meters per month,
the average monthly water bill is close to 50,000 kip, or about 2% to 3% of the average
monthly household income. The moderate portion would indicate there is room for tariff
increases to match service improvements. It is not uncommon though for households to
purchase bottled water for drinking and to maintain private wells and storage to cope with
intermittent service and low pressure. These represent additional costs to the households and
could amount to as much as 50,000 kip a month, doubling water expenditures and increasing
the percentage to household income to about 4% to 6%. In some areas without a water
supply system, non domestic users pay as much as 8,000 kip (US$1) per cubic meter for
untreated water from rivers.
56. The MIREP varies the level of grants to strike a balance between affordability and
return of investment of the concessionaire. Based on a sample of cases of other private and
community managed piped water supply systems, tariffs range from 1,000 to 2,000 kip per
cubic meter for domestic users and 2,000 to 3,000 kip per cubic meter for businesses.
Consumption ranges from 12 to 58 liters per capita per day and the monthly water bill is
about 2% to 5% of household income.28
INVESTMENT PRIORITIES AND FINANCING
57. Urban water supply. The thrust of the government program to supply water to 80%
of the urban population by 2020 is threefold: (a) to invest in those small district centers that
do not have a piped water supply, (b) to invest in special small district centers such as border
posts, and (c) to continue to invest in Vientiane capital city, the four secondary towns and the
provincial centers to keep pace with demand. With an additional 1.95 million population
(Table 5) estimated to be served at an average of US$135 per capita, the urban water supply
investment needs for the period 2005 to 2020 are estimated at US$267 million, of which 48%
is programmed for Vientiane capital, 38% for small towns and the remaining 14% for
secondary towns and provincial capitals (see Table 6).
28
See case studies in Part 2 of this study.
24
Table 5: Urban Water Supply Targets – Coverage & Population Served (2004 – 2020)
Category No.
Urban
Population WS Coverage
Population
Served
Increase in
Pop. Served
2004 -2020
2004 -
000’s
2020-
000’s 2004 % 2020 %
2004
000’s
2020
000’s 000’s %
Vientiane Capital 1 500 810 62.8 83.0 252 672 421 30
Secondary Towns 4 186 350 83.7 89.0 155 311 156 11
Provincial
Capitals
13 182 312 76.4 84.0 139 262 123 9
WSSSP Towns* 15 121 179 0.0 80.0 0 143 143 10
NCWUD District
Towns*
11 69 104 0.0 80.0 0 83 83 6
Other District
Centers
94 366 551 0.0 70.0 0 385 385 27
Other towns 11 83 137 0.0 70.0 0 96 96 7
Total 149 1507 2443 38.9 80.0 546 1952 1407 100
Source: WSIP including TA 3903-LAO consultant’s estimates / * - ADB Project.
Table 6: Sector Investment Plan for Urban Water Supply Projects (2005 – 2020)
No. Province/Project Town
Expected
Completion
Date
Investment
US$M
Target Pop
Served
2020
Funding Source
1 Vientiane capital 2007-2015 132.7 672,000 JICA
2 Secondary Towns 2006-2015 20.7 311,000 Not yet
identified
3 Provincial Capitals 2008-2016 14.6 262,000 Not yet
identified
4 Small Towns Water 2010-2020 102.5 564,000
ADB and others
TOTAL 270.5 1,953,000
Source: Urban Water Sector Reform Regulation in Lao PDR: Reform, Key Measures, Successes and
Challenges, DHUP, MPWT, March 2010
58. In the updated investment program for 2006 to 2020, MPWT grouped the towns into
three levels of priority mainly based on availability of funding. High-priority towns were to
be implemented in 2006 to 2010, medium-priority towns in 2011 to 2015, and lower-priority
towns in 2016 to 2020. At present, there are still about 76 urban centers without urban water
supply facilities. Also, an undefined number of existing urban centers and small towns
require their water supplies to be expanded and improved.
59. The required estimated investment of US$18 million annually is significantly higher
than the historical level of US$8 million annual average. While the sector has relied on
external assistance for at least 90% of its funding requirements, it is uncertain whether past
levels of assistance could be maintained. AFD is finishing up its program, JICA is not
anticipating increasing their funding levels, and the result is that only the Asian Development
Bank remains in the sector as a significant financier. It, therefore, becomes necessary to
mobilize additional resources.
60. Urban wastewater. Based on the draft urban wastewater strategy and investment
plan for 2009 to 2020, total urban wastewater investments would require about US$140
million which would include institutional support and capacity building (0.5%), facilities for
Vientiane city (54%), secondary towns (17%), provincial capitals (8%), district centers
25
(20%), and emerging small towns (0.3%) (Annex 11). Possible funding sources identified
are from government budgetary allocations at all levels, domestic and foreign private sector
investment, and development partners such as donor governments, funding agencies,
international and national NGOs (Annex 12). It is also estimated that about US$8.4 million
would be needed to establish a revolving fund to help the poor connect. Using official
definitions it is estimated that about 10% of the urban population or about 190,000 people is
considered poor. The investments for improving access of the poor to improved sanitation
assumes that 10% will be included in communal systems, 50% will install pour flush
facilities, and 40% will install dry latrines.
61. Rural water supply and sanitation. Rural investment needs for the period 2011 to
2015 would amount to some US$ 50 million, of which 80% is allocated to water supply
facilities and projected to benefit about 1.8 million people, and the remaining 20% for
sanitation, capacity building and other soft interventions, and infrastructure development for
central Nam Saat. This translates into an annual investment of US$9.6 million, again
significantly higher than historical levels of expenditures of US$2.7 million.
62. Required budgetary allocation for water and sanitation. In the MDG costing to
meet the targets for the five year period from 2010/2011 to 2014/201529
, the estimate for
water and sanitation in both urban and rural areas is US$391 million, or an average of US$78
million annually. The estimated cost for NPSE urban water investments is US$206 million or
US$41 million annually. With regard to rural water and sanitation under MoH, the estimated
cost is US$185 million or US$37 million annually (see Annex 14b). These figures are
significantly higher than historical levels of investments and are unlikely to materialize.
63. According to the Sanitation Financing Study of 2009 funded by WSP, expenditures
on basic sanitation and hygiene promotion were about LAK 50,000 million (US$6.0 million)
in 2008/09, with approximately 13% funded by government (largely in terms of staff
time/salaries and administrative expenses), 35% from development partners, and 52% from
household financing of latrine construction. The report suggests that annual expenditures for
sanitation and hygiene should increase by about 2.5 times if a scenario of 60% coverage were
to be met by 2015, and should be increased by about four times to reach 70% coverage by
2015. The composition of support among the government, development partners, households
and the private sector would be a key variable.
64. Guidance to Government on Investment Priorities. In order to meet its objectives
the Government has a strategic choice to invest, with its own budget funds or with external
financial assistance, in four segments: (i) in the main urban centers (Vientiane and possibly
Luang Prabang); (ii) in secondary towns and provincial capitals; (iii) in small towns; and (iv)
in rural areas. The following table analyzes the impact in each population segment with
respect to three sector objectives and indicates the likelihood of external financing (that in the
past has financed 97% of sector investments).
29
MDG Costing for Lao PDR, March 2010, Ministry of Planning and Investment of Lao PDR, supported by the
United Nations, Lao PDR
26
Population
Segment/
Sector Objective
Increased
MDG
coverage
Higher
efficiency*
Sustainability** Likely external
financing
Vientiane, Luang
Prabang,
High impact Highest
investment
efficiency
Greatest chances
of financial
sustainability
and PPP interest
AFD is exiting,
and no JICA or
PPP funding is
planned.
Secondary towns &
Provincial capitals
Medium
impact
Medium
investment
efficiency
Medium to Low
chances
ADB is active
and plans to
continue
Small towns Low impact Low
efficiency
Low chances No significant
source
Rural areas Low impact Lowest
efficiency
Lowest chance No significant
source *Higher efficiency to make services more affordable to consumers and to maximize investment efficiency.
**Sustainability to minimize operating subsidies from Government budget and to enable Nam Papa service
providers to generate a surplus for maintenance of the existing infrastructure.
65. The ratings for the respective population segments and sector objectives follow from
the characteristics of water supply investments and operations. In particular, due to the
economies of scale of water supply operations, per capita investments are approximately
inversely proportionate to the square root of the population size, i.e. the larger the system, the
lower per capita investment costs. As a consequence, the contribution towards higher service
coverage and investment efficiency could be expected to be the highest for Vientiane and
then decrease in the other population segments. By the same token, the operating efficiency
could also be expected to be the highest in Vientiane and then decrease with population size.
Finally, sustainability would be more easily reached in Vientiane since it offers better
chances for economic growth.
66. At the present time, the only significant external financier in the sector is ADB which
is active in provincial capitals and smaller towns. Vientiane appears to have no identified
prospects of external financing. The private sector offers no significant financing for the
distribution and connection of unserved households. The Vietnamese BOT investor in
Vientiane has built a water treatment plant that sells bulk water to the Vientiane public utility
at a unit cost that is above the public utility average sales tariff. There does not seem to be
any interest in private concessions where the private partner would finance investments in
distribution and connections. There might be possibilities for a lease contract or a
management contract, but it is the public sector that is obliged to arrange for the investment
funding under these PPP options.
67. Therefore, Vientiane appears to offer the greatest chances of helping the Government
meet its sector objectives such as higher coverage, efficiency, and sustainability.
Paradoxically, at the same time Vientiane has no identified or prospects of investment
financing.
27
KEY ISSUES AND RECOMMENDATIONS
68. In summary, the water and sanitation sector of Lao PDR suffers from low coverage
particularly of piped water supply to households, and poor quality of services. The sanitation
sector is still embryonic. To put the sector on a sustainable growth path towards higher
access and quality of services, two areas of reform are recommended – institutional and
financial. Table 7 provides a summary of the key issues, recommended policy actions and
intended outcomes. Those reforms that are considered of the highest priority have been
highlighted. It is noted that these key issues and recommendations are consistent with the
urban water supply roadmap adopted by the MPWT which sets forth seven specific goals (see
Annex 15). Some of the key strategic objectives identified under each goal have been
achieved, notably the enactment of the national water supply law and the establishment of
WRSC.
Table 7: Summary of Key Issues, Recommended Policy Actions and Intended Outcomes
Issue(s) Recommended policy action(s) Outcome(s) Proposed
timeframe
Institutional issues
(a) Fragmentation in the
planning and delivery of
water services including
lack of complete,
accurate sector data to
inform planning
- Consolidate and streamline
responsibilities for planning and sector
oversight
- Develop a sector data base, and a
consistent monitoring and evaluation
framework, and centralize data
management
- Implement a donor coordination
mechanism dedicated to water and
sanitation
- Better coordination of
sector policies and
planning of investments,
focused sector
development and more
efficient use of limited
resources
Short to
medium
term
(b) Unsustainable
investments
- Conduct appropriate due diligence of
investments in order to (a) provide water
service levels based on what consumers
want and are willing to pay subject to
technical and financial viability and (b)
adopt designs that are appropriate to local
conditions
- Include connection fees in the
investment cost for households willing to
connect during project implementation
- Undertake sustained social marketing
on the benefits of safe and reliable water
supply
- Sustainable
investments; operations
not dependent on
government subsidies;
maximum utilization of
distribution networks
- Financially viable
operations
Medium to
long term
(c) Lack of institutional
support for operators of
rural water supply
systems and small scale
providers of piped water
supply
- Develop institutional arrangements for
better accessibility to spare parts in the
market
- Develop capacities for operations and
maintenance, including helping instill
community ownership of facilities
- Fewer system
breakdowns and non
operational facilities
Medium to
long term
(d) Lack of an
implementing
framework for private
sector participation
- Develop a strategy to encourage more
private sector participation
- Provide support to developing
transactions/feasibility studies and
overseeing procurement of private
providers
- Develop appropriate procurement
templates that are in line with global best
practices, e.g., procedures that promote
transparent and competitive bidding for
- Potentially lower
prices of services
- Wider participation in
competing for the
market of water services
Short to
medium
term
28
water providers
(e) Weak regulation - Strengthen capacities of
WSRC/WASRO in regulation and
public/private providers in complying
with regulatory requirements
- Institute benchmarking of performance
for all service providers
- Streamline the issuance of operating
licenses so service providers can be
regulated under a single consistent
framework
- Stronger regulation,
enhanced competition,
better services
- Better accountability of
providers
Short to
medium
term
(f) Lack of sanitation
services
- Implement the urban wastewater
strategy and promote adequate
technologies and investments in urban
wastewater and septage management
- Cleaner environment
both physically and
aesthetically
- Healthy and productive
population
Medium to
long term
(g) Sustainable water
resource management
Develop knowledge and human resources
capacities about underground water and
water resources assessment.
Financial issues
(a) Low water tariffs - Implement full cost recovery tariffs in
Vientiane, secondary cities and
provincial capitals - Implement tariff policy consistently
across all types of consumers including
government and military institutions
- Less government
subsidies; financial
viability of operations;
more resources made
available for developing
the sector
Short to
medium
term
(b) Weak governance of
NPSEs
- Continue to implement corporatization,
and promote management and financial
autonomy of NPSEs
- Strengthen capacities of staff to improve
operational efficiencies
- Financially viable
operations
Short to
medium
term
(c) Lack of access to
formal sources of
financing by private
providers and
communities willing to
invest in water supply
operations
- Raise awareness of the financial sector
on the water supply business
- Capacity building of private
investors/operators to make them eligible
to borrow from formal sources
- Increased financing for
developing the sector
Short to
medium
term
(d) Lack of policy on
sanitation tariffs
- Develop a policy on sanitation tariffs
and pilot implementation in Vientiane
capital and the secondary cities
- Investments in urban
sanitation
Medium to
long term
Institutional issues
69. The main institutional issues identified are as follows:
(a) Fragmentation in planning and delivery of water services. The current set up of
having both the MPWT and MoH responsible for overseeing infrastructure provision of water
supply facilities inhibits efficient planning and use of resources. It is recommended that
MPWT become solely responsible for infrastructure development in order to build economies
of scale and allow it to attract and retain skilled staff. By the same token, it is recommended
that MoH concentrate on hygiene promotion to improve health and sanitation since this
would capitalize on its comparative advantages and address the important task of
disseminating safe habits of water consumption and sanitation. The clear demarcation of
responsibility would enable consistent standards for design, construction and operation of
urban and rural water supply facilities and an efficient utilization of scarce technical and
professional resources. It would also make it easier to create a coherent system of data
29
collection, monitoring and evaluation of standards and water services can be developed and
implemented, with sector data centralized in one agency. The establishment of a donor
coordination mechanism dedicated to water and sanitation should also be pursued to ensure
consistency in the implementation of policies and programs.
(b) Unsustainable investments. The tendency has been to adopt engineering designs
implemented in more developed countries that may be inappropriate to local conditions. In
previous studies30
, it has been reported that the costs of urban water supply facilities in Lao
PDR are significantly higher than in neighboring countries. The reasons cited are (a) low
population density, (b) high cost of construction in remote areas, (c) inappropriate service
levels bordering towards overdesigned facilities, (d) mostly imported equipment and
materials, and (e) high subsidies from government and international donors which have acted
as perverse incentives not to adopt least cost solutions. For example, per capita investment
cost of donor funded projects is over US$100 to US$20031
while for MIREP schemes it is
US$50. The MIREP schemes have applied simple standards (e.g., per capita consumption is
assumed at 70 liters per day as against 130 lcd and higher for NPSEs). The cost per capita for
private and community led investments (for smaller schemes – about 1,000 inhabitants) is
between US$10 and US$20 per capita.
(c) The planning of investments and service levels should consider what prospective
beneficiaries are willing to pay for based on informed choices that are technically and
financially viable. Actual demand has at times been lower than anticipated, in part, due to a
common preference among the local population of not drinking from piped, treated water and
instead continue to use traditional sources of water supply. This requires raising awareness on
the health benefits of clean water, undertaking a willingness to connect survey prior to
implementation with information provided to consumers on technical options, service levels
and corresponding costs as well as required tariff levels. In addition, connection costs could
be integrated into the investment costs for households willing to connect during the
construction stage. The poor normally are unable to benefit from formal water supply
systems because of high connection costs but once connected, they are able to pay for
recurrent water bills. Increasing connections enhances the viability of operations. It is also
one a way of addressing equity considerations in the design of water supply projects. There
should also be sustained social marketing on the benefits of safe and reliable water supply
highlighting on the health and economic benefits to the consumers. This should be
undertaken during project preparation, construction and implementation, as well as during
operations. The value is to educate consumers and to enhance viability of the operations
through increased water consumption.
(d) Lack of institutional support for small scale and community based operators. The
high percentage of rural water supply facilities (about 40% to 50%) breaking down is in part
due to the unavailability of spare parts. It is reported that this affects about 85% of the
facilities in the northern and southern provinces that use groundwater. Also, there are issues
on the lack of capacity of Watsan committees and a lack of community ownership of the
facilities. This needs to be addressed through capacity building as well as providing for a
mechanism to allow for regular technical and institutional support to these small scale
operators whenever needed with assistance provided by either a central institution or through
30
Investment Analysis of Water Supply Projects in Lao PDR, Draft June 2008, MPWT/ADB/NORAD,
Northern and Central Regions Water Supply and Sanitation Sector Project 31
Ibid.
30
a mentoring program linking them to the more developed and better performing NPSEs. This
could lead to fewer system breakdowns and non operational facilities.
(e) Lack of an implementing framework for private sector participation. While the new
Water Supply Law supports greater private sector participation, the conditions for expanding
PSP beyond the pilot schemes hardly exist in Lao PDR. The priority would surely be to
create the conditions of sustainable operational cash flows that could guarantee private
operators compensation for their risks and effort. It is advisable to have different models for
service delivery to enhance competition and incentivize good performance. Part of the
implementation strategy should be to provide support for the development of transactions and
oversight of the procurement process, and to promote transparency in procurement to
generate wide interest in competing for the market of water services; procurement templates
are available that can be adapted or optimized to fit Lao PDR requirements. In addition, the
implementation strategy should ensure that if tariffs cannot be set to allow a reasonable return
on investments due to affordability issues, then local authorities should be able to compensate
for the gap from other municipal revenues, in effect, for government to subsidize the gap to
achieve financial viability of the investments.
(f) Weak regulation. WSRC was reorganized in 2008 and needs to be strengthened to
improve the quality of its regulation and to be able to enforce agreed upon performance of
service providers. First, tariff setting has to be linked with improvements in services and
water providers monitored as to their compliance. Second, performance indicators submitted
by service providers must be validated, and performance indicators and their measurement
should be aligned with internationally accepted norms. A system of benchmarking
performance should be instituted to enhance competition. With respect to operating licenses,
these should be standardized and subject to approval by WSRC so interests of operators and
consumers are appropriately protected. Renewal of licenses should be subject to review and
audit by WSRC of the license conditions.
(g) Lack of sanitation services. The urban wastewater strategy prepared with ADB and
NORAD assistance should be reviewed and implemented as soon as it is finalized. Priority
investments should include urban wastewater and most of all septage management and
directed initially to the more urbanized cities (Vientiane capital and the four secondary
cities). Designs and technologies should be carefully considered to ensure that these are
appropriate to the situation and that the costs are affordable to both the government and the
consumers. Addressing sanitation would lead to cleaner environments and a more healthy
and productive population.
Financial issues
70. The main financial issues are the following:
(a) Low water tariffs. Tariff increases should be conditioned on improved services. In
raising awareness for the need to increase tariffs, all explicit and implicit costs of inadequate
and poor water supply should be disseminated to consumers including coping costs for
households that invest in private wells and storage to supplement supply from the systems,
costs of boiling water, health related costs and the cost of inconvenience. Tariffs should also
be enforced on all types of consumers including government and military institutions which
are major users. The priority to create positive financial incentives is to allow all operators
31
financial autonomy that would start with retaining all revenue that they manage to collect
through better service quality and higher operational efficiencies.
(b) Weak governance of NPSEs. Majority of NPSEs are not performing well financially
despite the fact that government policy requires them to operate like corporations and be
financially autonomous units being a revenue generating operation. To put NPSEs towards a
path of growth and sustainability, they have to be assisted in instituting internal systems and
reforms that support financial autonomy tied to accountability. ADB is assisting in this
respect and to ensure that these reforms are institutionalized within the NPSEs, any assistance
for new projects should be conditioned on good financial and technical performance based on
prior agreed upon parameters. To complement reforms in the financial management of
NPSEs is capacity building in improving operational efficiencies such as managing non
revenue water, operations of pumping stations and treatment plants, and the like. These
reforms will ultimately result in more viable and sustainable operations where there would be
less need for subsidies from government and where freed up government resources can be
allocated to other priority programs that are non revenue generating such as in environmental
sanitation or social programs.
(c) Lack of access to adequate sources of financing by service providers. Private
providers including communities willing to invest in water supply operations generally lack
access to formal sources of financing; source of financing is often limited to personal/family
savings or informal sources. A survey of the financial sector and the market of potential
water service providers could be done to identify issues and gaps that need to be addressed to
open up opportunities on both the supply of and demand for financing for water supply
services. Also needed would be capacity building of water providers to make them eligible to
access financing from the formal sector. This will support efforts in promoting more private
sector participation in the sector.
(d) Lack of policy on sanitation tariffs. There is currently no policy on sanitation tariffs.
The government should start developing a policy towards mobilizing financing from
consumers for sanitation development. This could be in the form of a surcharge equivalent to
a certain percentage of the water bill. The rationale is that water consumption generates
wastewater that has to be collected and treated prior to disposal to avoid polluting the
environment. The collections could be put into a sanitation fund for use in sanitation-related
programs. Contrary to water supply, the benefits of sanitation are less visible to households
and therefore willingness to pay is often low or nonexistent. Thus, this requires raising
awareness of consumers on the health impacts of sanitation and private benefits such as
higher property values and increased incomes from livelihood. Implementation could be
piloted in Vientiane and the secondary cities where incomes are higher and there is higher
capacity to pay.
32
Annex 1: Map on Status of Water Supply Systems in Urban Centers
At present there are 76 urban centers out of 142 that are without water supply systems.
33
Annex 2: Water Sector Organizational Chart
Source: Urban Water Sector Reform Regulation in Lao PDR: Reform, Key Measures, Successes and
Challenges, DHUP, MPWT, March 2010
34
Annex 3: Linkage between central and local government institutions in the provision of
water supply services
Source: Lao PDR WSS Sector Review (Draft), World Bank, 2007 – Updated 2010.
*SSIPs = small scale independent providers
Provincial Governor
Water Supply Regulatory Committee
(WSRC)
Water Supply Regulator Office
technical line administrative line
Urban
Prime Minister Office Rural
Water Resources Coordination Committee
Water Resource and Environment Administration
District Nam Papas (34)
Water Administrative Board
Provincial Nam Papas (17)
Water Supply
Division
Minister
Ministry of Public Works and Transportation (MPWT)
Department of Housing and Urban Planning
Minister
Ministry of Health
Department of Hygiene and Disease Prevention
National Centre for Environmental Health and Water Supply (Nam Saat)
Department of
Health
District Division of
Health
Provincial Nam Saat
District Nam Saat
District Governor
Department of
DPWT
Urban Development Administrative
Authority
Division of
DPWT
Private SSIPs*
35
Annex 4: Percentage of households with access to safe water source, dry season, 2003 – 2008
Source: Poverty in Lao PDR, 1992/93 to 2007/08, Department of Statistics, Ministry of Planning and Investment, Government of Lao PDR
36
Annex 5: Percentage households with access to improved sanitation, 2003 - 2008
Source: Poverty in Lao PDR, 1992/93 to 2007/08, Department of Statistics, Ministry of Planning and Investment, Government of Lao PDR
37
Annex 6: Service Coverage by NPSE, 2008
No. Province
Population Service Area Coverage
No. of Villages.
No. of Houses No. of
Population No. of Villages
No. of Houses
No. of Population
Population Served
% coverage of service
area population
% coverage
of provincial population
1 Attapeu 174 20,447 116,417 15 2,593 13,250 10,762 81% 9%
2 Bokeo 292 27,520 156,173 25 3,646 19,246 14,943 78% 10%
3 Borikhamxay 356 41,127 241,265 39 8,039 43,055 19,760 46% 8%
4 Champasack 637 108,568 624,730 44 12,910 76,604 63,244 83% 10%
5 Houphan 738 44,658 285,766 20 3,612 21,475 15,500 72% 5%
6 Khammouane 601 66,297 353,636 44 9,198 49,905 38,686 78% 11%
7 Luang Namtha 357 28,831 154,655 39 5,456 34,079 16,769 49% 11%
8 Luangprabang 797 71,163 404,988 77 12,292 67,513 57,580 85% 14%
9 Oudomxay 490 44,923 275,926 30 4,434 28,168 20,275 72% 7%
10 Phongsaly 563 28,453 163,300 31 2,930 13,162 10,679 81% 7%
11 Saravane 631 56,815 348,792 39 5,697 40,656 20,381 50% 6%
12 Savannakhet 1,006 139,191 857,581 67 20,521 134,502 84,900 63% 10%
13 Sekong 239 15,200 95,249 19 3,246 25,031 22,531 90% 24%
14 Vientiane Capital 500 128,464 681,323 249 121,291 428,376 343,640 80% 50%
15 Vientiane Province 524 83,017 450,006 48 12,794 70,697 33,907 48% 8%
16 Xayabury 448 66,575 351,927 44 8,810 47,523 28,227 59% 8%
17 XiengKhouang 502 39,029 249,818 39 7,727 44,267 22,717 51% 9%
Total/Average 8,855 1,010,278 5,811,552 869 245,196 1,157,509 824,501 69% 12%
Source: WSD, MPWT
38
Annex 7: NRW estimates by NPSE, 2008
No. Province Name
Capacity as
Designed (M
3/d)
Water Production (m
3)
Water Sales (m
3)
Non Revenue
Water
Under (Over)
Capacity
Ave. Water Consumption
(lpcd)
No. of Connections
% Growth
2007 2008
1 Attapeu 2,560 850,812 584,572 31.29% 91% 148.82 1,930 2,100 9%
2 Bokeo 2,350 967,322 793,797 17.94% 113% 145.54 2,390 2,594 9%
3 Borikhamxay 4,660 1,133,890 981,786 13.41% 67% 136.12 2,997 3,597 20%
4 Champasack 17,540 4,981,543 3,981,717 20.07% 78% 172.49 9,628 10,566 10%
5 Houphan 2,600 765,579 580,981 24.11% 81% 102.69 2,859 3,100 8%
6 Khammouane 6,156 2,703,360 2,175,916 19.51% 120% 154.10 6,156 6,281 2%
7 Luang Namtha 2,100 789,851 593,419 24.87% 103% 96.95 2,786 2,935 5%
8 Luangprabang 17,160 6,432,244 5,136,642 20.14% 103% 244.41 9,583 10,484 9%
9 Oudomxay 3,800 1,473,541 1,044,115 29.14% 106% 141.09 4,035 4,226 5%
10 Phongsaly 3,050 265,660 171,357 35.50% 24% 43.96 2,320 2,467 6%
11 Saravane 4,200 1,088,075 929,789 14.55% 71% 124.99 3,468 3,725 7%
12 Savannakhet 20,482 6,644,431 5,426,868 18.32% 89% 175.13 13,943 14,795 6%
13 Sekong 2,160 725,023 507,434 30.01% 92% 61.70 2,191 2,743 25%
14 Vientiane Capital 121,300 49,781,245 36,177,870 27.33% 112% 288.43 59,799 63,989 7%
15 Vientiane Province 8,910 2,120,036 1,828,983 13.73% 65% 147.78 5,222 6,303 21%
16 Xayabury 6,200 1,095,208 917,601 16.22% 48% 89.06 4,082 4,621 13%
17 XiengKhouang 8,018 1,186,494 863,917 27.19% 41% 104.19 3,453 4,008 16%
Total/Average 233,246 83,004,314 62,696,764 22.55% 82.56% 139.85 136,842 148,534 11%
Source: WSD, MPWT
39
Annex 8: Financial performance data by NPSE, 2006 - 2008
No. Province Staff per
1,000
connections
Accounts
Receivable (no.
days turnover)
Return on Capital Return on Equity Depreciation
recovery
Debt Service
Coverage
Working Ratio a/
2007 2008 2006 2007 2008 2006 2007 2008 2006 2007 2008 2006 2007 2008 2006 2007 2008 2006 2007 2008
1 Attapeau 14.0 14.8 138 139 142 (4.0%) (6.6%) (3.1%) (5.8%) (9.3%) (4.8%) 0% 0% 22% 0.0 0.0 0.50 1.45 1.82 0.87
2 Bokeo 14.2 28.5 65 23 77 (2.7%) (3.9%) (2.1%) (3.9%) (4.8%) (3.5%) 36% 9% 53% 1.12 0.45 1.47 0.72 0.93 0.76
3 Borikhamsay 17.0 16.1 60 61 66 (2.5%) (3.3%) (1.3%) (3.3%) (4.0%) (1.9%) 41% 5% 68% 1.77 0.24 2.96 0.78 0.97 0.68
4 Champasack 15.5 13.4 193 337 259 (0.6%) (1.3%) 1.5% (0.8%) (1.8%) (2.0%) 83% 67% 100% 4.42 3.0 1.35 0.74 0.79 0.62
5 Huaphanh 4.2 11.0 17 72 50 (3.7%) (3.3%) (2.2%) (6.0%) (4.3%) (3.2%) 35% 21% 50% 0.95 0.80 1.66 0.73 0.83 0.68
6 Khammuane 9.6 9.9 102 142 127 (0.9%) (1.0%) 0.4% (1.8%) (2.0%) 0.2% 74% 74% 100% 1.29 1.39 2.49 0.60 0.66 0.65
7 Luangnamtha 9.0 15.7 42 35 28 (8.0%) (5.5%) (4.7%) (14.1%) (10.0%) (9.1%) 0% 0% 14% 0.0 0.1 0.28 1.33 1.0 0.92
8 Luangprabang 9.5 7.6 113 94 99 (1.3%) 1.6% 1.9% (2.2%) 1.1% 1.6% 73% 100% 100% 3.08 6.46 7.59 0.73 0.64 0.63
9 Oudamxay 8.9 16.8 186 128 117 (3.7%) (1.6%) 0.3% (8.2%) (5.0%) 0.7% 20% 53% 100% 0.31 0.51 1.28 0.88 0.81 0.68
10 Phongxaly 13.4 13.4 82 182 158 (5.0%) (4.3%) (4.1%) (7.3%) (6.1%) (5.6%) 0% 4% 8% 0.0 0.14 0.28 1.42 0.86 0.78
11 Saravane 13.6 9.1 230 72 235 (2.7%) (1.5%) (1.0%) (3.6%) (3.0%) (1.7%) 26% 27% 81% 1.01 0.52 2.89 0.86 0.82 0.64
12 Savannakhet 12.3 16.0 61 77 90 (3.7%) (4.1%) (1.9%) (4.1%) (4.3%) (2.2%) 27% 26% 64% 3.76 6.01 10.62 0.70 0.73 0.52
13 Sekong 8.2 8.0 23 19 25 (1.8%) (1.9%) (1.4%) (2.2%) (2.4%) (1.8%) 47% 47% 63% 3.46 2.89 4.23 0.62 0.66 0.60
14 Vientiane
capital city 7.9 7.6 76 94 86 (1.7%) 0% (1.0%) (3.1%) (1.0%) (2.3%) 61% 100% 78% 1.44 2.16 1.75 0.78 0.69 0.78
15 Vientiane
province 12.6 11.7 116 110 120 (4.6%) (4.1%) (2.7%) (5.1%) (4.6%) (3.3%) 16% 25% 47% 1.50 2.27 3.31 0.81 0.75 0.58
16 Xayabury 8.6 17.1 96 222 86 (2.6%) (3.0%) (2.3%) (3.1%) (3.8%) (2.9%) 34% 26% 40% 2.04 1.18 1.89 0.69 0.77 0.66
17 Xienghuang 9.8 10.7 46 154 152 (3.0%) (2.5%) 0.3% (5.2%) (8.6%) (3.2%) 17% 47% 100% 0.30 0.59 1.07 0.92 0.75 0.57
a/ Estimated using WSRC data. Working ratio is the ratio of cash operating expenses to cash operating income.
Note: Figures in parentheses indicate negative values.
Source: 2008 Annual Performance Report, WSRC
40
Annex 9: Water tariffs by province (2008), kip/m3
(LAK 1000=US$0.122)
Province 0-10 m3 11-20 m
3 21-30 m
3 >30 m
3
Attapeu 2950 2950 2950 2950 Bokeo 2880 2880 2880 2880 Borikhamsay 2550 2550 2550 2550 Champasack 3000 3000 3000 3000 Huaphanh 2116 2116 2116 2116 Khammuane 2300 2300 2300 2300 Luangnamtha 900 900 900 900 Luangprabang 1000 1100 1100 1250
Oudamxay 1494 1808 1808 2121
Phongsaly 3500 3500 3500 3500
Saravane 1500 2500 3000 3000
Savanakhet 1400 1700 2200 3000
Sekong 1900 2650 3500 3500
Vientiane capital
city
420 685 685 1060
Vientiane province 2050 2700 2700 3000
Xayabury 2500 2500 2500 2500
Xieng Khouang 1400 2350 3850 3850
Average 1612 1819 1978 2070
Source: WASRO, MPWT; Lao PDR Economic Monitor, November 2008, World Bank Vientiane
Water tariffs by province (2008), US$/m3
(LAK 1000=US$0.122)
Province 0-10 m
3 11-20 m
3 21-30 m
3 >30 m
3
Attapeu 0.3599 0.3599 0.3599 0.3599 Bokeo 0.3514 0.3514 0.3514 0.3514 Borikhamsay 0.3111 0.3111 0.3111 0.3111 Champasack 0.3660 0.3660 0.3660 0.3660 Huaphanh 0.2582 0.2582 0.2582 0.2582 Khammuane 0.2806 0.2806 0.2806 0.2806 Luangnamtha 0.1098 0.1098 0.1098 0.1098 Luangprabang 0.1220 0.1220 0.1220 0.1220 Oudamxay 0.1823 0.1823 0.1823 0.2588
Phongsaly 0.4270 0.4270 0.4270 0.4270 Saravane 0.1830 0.3050 0.3660 0.3660
Savanakhet 0.1708 0.2074 0.2684 0.3660
Sekong 0.2318 0.3233 0.4270 0.4270
Vientiane capital
city
0.0512 0.0836 0.0836 0.1293
Vientiane province 0.2501 0.3294 0.3294 0.3660
Xayabury 0.3050 0.3050 0.3050 0.3050 Xieng Khouang 0.1708 0.2867 0.4697 0.4697
Average 0.1967 0.2219 0.2413 0.2525
41
Annex 10: Expectations and Achievements of the 2008 – 2010 Tariff Review
2007 (Actual)
<50 % depreciation
recovery
>50% depreciation
recovery
Full cost recovery +
return on capital < 3%
Full cost recovery +
return on capital > 3%
Attapeu
Bokeo
Borikhamxay
Huaphanh
Luangnamtha
Phongsaly
Saravane
Savannakhet
Sekong
Vientiane Province
Xayabury
Xiengkhuang
Champasack
Khammuane
Oudomxay
Vientiane CC
Luangprabang
2008 (Projected)
<50 % depreciation
recovery
>50% depreciation
recovery
Full cost recovery +
return on capital < 3%
Full cost recovery +
return on capital > 3%
Attapeu
Huaphanh
Luangnamtha
Phongsaly
Vientiane Province
Bokeo
Borikhamxay
Oudomxay
Saravane
Savannakhet
Sekong
Xayabury
Xiengkhuang
Champasack
Khammuane
Luangprabang
Vientiane CC
2008 (Actual)
<50 % depreciation
recovery
>50% depreciation
recovery
Full cost recovery +
return on capital < 3%
Full cost recovery +
return on capital > 3%
Attapeu
Huaphanh
Luangnamtha
Phongsaly
Vientiane Province
Xayabury
Bokeo
Borikhamxay
Saravane
Savannakhet
Sekong
Vientiane CC
Champasack
Khammuane
Luangprabang
Oudomxay
Xiengkhuang
2010 (Projected)
<50 % depreciation
recovery
>50% depreciation
recovery
Full cost recovery +
return on capital < 3%
Full cost recovery +
return on capital > 3%
Attapeu
Huaphanh
Luangnamtha
Phongsaly
Savannakhet
Vientiane Province
Xayabury
Bokeo
Oudomxay
Saravane
Sekong
Xiengkhuang
Borikhamxay
Champasack
Khammuane
Luangprabang
Vientiane CC
Source: 2008 Annual Performance Report, WSRC
42
Annex 11: Urban Wastewater Investment Plan, 2009-2020 (Draft)
U$ millions U$ millions U$ millions U$ millions
Institutional and legal reforms 230000 230 000
Urban sector management 200000 200 000
Sector monitoring 20000 10000 30 000
Awareness raising 20000 10000 30 000
Management and Technical
Guidelines
180000 180 000
Capacity building 75000 75 000
Sub-total 725 000 20 000 0 745 000 0,5 %
Centralised sewerage system 54 900 000 54 900 000
Decentralised systems 3 900 000 3 900 000
On-site wet systems 10 120 000 0 10 120 000
On-site dry systems 0
Treatment facilities 6 380 000 6 380 000
Sub-total 16 500 000 3 900 000 54 900 000 75 300 000 54 %
Centralised sewerage system 9 310 000 9 310 000
Decentralised systems 2 900 000 2 900 000
On-site wet systems 6 151 000 1 000 000 7 151 000
On-site dry systems 0
Treatment facilities 4 622 000 4 622 000
Sub-total 10 773 000 3 900 000 9 310 000 23 983 000 17 %
Centralised sewerage system 0
Decentralised systems 0
On-site wet systems 6 209 000 1 730 000 7 939 000
On-site dry systems 0
Treatment facilities 3 660 000 3 660 000
Sub-total 9 869 000 1 730 000 0 11 599 000 8 %
Centralised sewerage system 0
Decentralised systems 0
On-site wet systems 22 452 000 4 732 000 27 184 000
On-site dry systems 0
Treatment facilities 0
Sub-total 22 452 000 4 732 000 0 27 184 000 20 %
Centralised sewerage system 0
Decentralised systems 0
On-site wet systems 0
On-site dry systems 33 000 8 000 41 000
Treatment facilities 0
Sub-total 33 000 8 000 0 41 000 0,03 %
Total for All Towns 60 352 000 14 290 000 64 210 000 138 852 000 100 %
% of
Total
Total
Vientiane
Capital City
Secondary
Towns
Category Sub-sector 2009-2015 2020 -
Provincial
Capitals
District
Centers
Emerging
Small Towns
2016-20
Central
authorities
Source: Draft Urban Wastewater Strategy and Investment Plan for 2009-2020, prepared in June 2009,
MPWT/ADB/NORAD
43
Annex 12: Urban Wastewater Investment Plan, Proposed Funding Sources
Source Type of Investment Investments size (ref. to
Investment Plan)
Government budgetary
allocations at all levels Institutional and legal reforms
Services to the poor, start capital
revolving fund
Public sanitation (schools, markets
etc)
Sector monitoring
Awareness raising
Technical guidelines
Capacity building
745,000 USD (central
authorities)
8.4 mill USD (services to the
poor)
Domestic and foreign private
sector investment Household toilet facilities and
septic tanks (private households)
Treatment facilities (private sector
operation including sludge removal
services)
44 mill USD (household
toilets)
14.7 mill USD (treatment
facilities)
Foreign Government
investment Sector monitoring
Awareness raising
Technical guidelines
Capacity building
Communal systems
Treatment facilities
Centralized systems
Start capital for a revolving fund
Parts of the above
6.8 mill USD (communal
systems)
64.2 mill USD (centralized
systems)
National and multi-national
development
partners/funding agencies
(incl. NGOs)
Start capital for a revolving fund
Wastewater improvements
Services to the poor
Parts of the above
Remarks: It is expected that several of the activities will be implemented with combined funding, e.g.
government subsidies together with foreign government investments.
Source: Draft Urban Wastewater Strategy and Investment Plan for 2009-2020, prepared in June 2009,
MPWT/ADB/NORAD
Annex 13a: Aggregate sector specific cost estimates of meeting MDGs
Sector Total 2010-2015
(US$M)
% of
Total
Annual Average
(US$M)
Agriculture and rural development 1,635 26% 327
Education 726 11% 145
Energy 559 9% 112
Environment 114 2% 23
Gender 61 1% 12
Health 788 12% 158
Roads, waterways, kumban planning, and urban
development
2,050 32% 410
Water and sanitation (rural + urban) 391 6% 78
Total 6,324 100% 192.3
Note: Kumban is a sub district grouping of villages composed of 6 to 10 villages.
Source: MDG Costing for Lao PDR, March 2010, Ministry of Planning and Investment of Lao PDR, supported
by the United Nations, Lao PDR
44
Annex 13b: Aggregate ministry/authority specific cost estimates of meeting MDGs
Ministry/authority Total 2010-2015 (US$ M)
Annual
Average
(US$M)
Ministry of Agriculture and Forestry 1,635 (agriculture & RD) - 20 (forestry) +
210.23 (RD) = 1,444.48
288.9
National Committee on Rural Development
and Poverty Eradication
210.23 (off farm and non farm occupations 42.05
Ministry of Education 726.13 145.21
Ministry of Energy and Mining 558.95 111.79
Water Resource and Environment
Administration
114.44 (environment) – 20 (forestry) = 94.44 18.89
Lao Women’s Union/National Commission
for the Advancement of Women
60.91 12.18
Ministry of Health 788.37 (health) + 185.14 (rural water &
sanitation) = 973.51
194.7
Ministry of Public Works and Transport 1,724.93 (roads) + 125.47 (urban planning) +
200 (water transport) + 205.63 (NPSEs) =
2,256.03
451.21
Total 6,324 192.3
Source: MDG Costing for Lao PDR, March 2010, Ministry of Planning and Investment of Lao PDR, supported
by the United Nations, Lao PDR
45
Annex 14: Review of Current WSS Services Delivery Models in the Lao PDR
Background
1. In an attempt to improve WSS services over the past 15 years, the Government of the
Lao PDR and its development partners have considered and implemented many different
modalities for the financing and delivery of WSS infrastructure and services. This part of the
report will attempt to highlight the primary types of financing and services delivery models
used, providing some analysis of the recognized advantages and disadvantages of each
outlined.
2. During the French colonial rule in Laos the WSS sector was completely government
financed, constructed, and operated & maintained. As the service population bases expanded
and there was a need for increased financing and improved and more efficient services
delivery, the government has over the past 20 – 25 years been working with its development
partners in the WSS sector to identify different ways and means of: (i) decentralizing the
delivery of WSS infrastructure and services and (ii) involving the private sector more in the
financing, construction, and operations and maintenance of WSS infrastructure and services.
Based on these deliberate decisions and efforts by government to move away from the
monopolistic public sector involvement in the WSS services, several models have developed in
the sector which is to be cataloged in order to better assess the best modalities for the delivery
of WSS services in the future.
Current WSS Models in Practice in the Lao PDR
Vientiane Capital City
3. Vietnamese Maidong Company (Maidong) established a joint venture company (Ha
Dao) with the Vientiane Capital NPSE in order to reinforce water supply production up to an
additional 20,000 m3/day. Maidong invested 100% of the necessary funds to build a compact
water treatment plant. The build-operate-transfer (BOT) consists of a 20 year contract during
which the company sells to NPSE water at the current “production” cost calculated by Ha Dao.
It is noted that this production cost (1,340 kip/m3) is over the current average sales cost (1,270
kip/m3 for the 2009 year). With this scheme, the goal for NPNL is to cover the needs of the
eastern industrial zone with this facility, making the sales costs over the current average.
Tariffs are no longer by customer category, but by consumption block as follows:
Consumption in m3 Fees (Kip/m
3)
0 – 10 500
11 – 30 1,000
31 – 100 1,350
Over 100 2,700
4. Over the past five years, the Japanese (JICA) investment support has enabled the water
production to increase from 100,000 m3/day to 140,000 m
3/day. NPSE also managed to secure
a loan from a Lao private enterprise (LWG) to build an additional pumping and treatment
station in Dongmakhai (20,000 m3/day).
46
5. Currently it is estimated that 55% of the Vientiane population has access to safe water.
The total extension, reinforcements and production investment needs are estimated to be
US$50,000,000. French AFD support to the Vientiane water supply is about US$3 million.
NPSE is currently seeking foreign investors support as loan, grants, and/or private investment
(BOT, joint venture, management contract).
6. Observations Regarding the Vientiane WS Model – The most interesting aspect of the
Vientiane WS is the BOT model with an output covering roughly 15% of the total production.
It is interesting to note that the average sales cost per m3 is roughly the cost of what is
estimated to be the actual production costs of 1,340 Kip/m3 although these appear to be very
low, i.e. approximately US$0.16/m3. With BOTs, it is important to see the contract details
spelling out issues such as whether it is a “take or pay” contract and if so, what are the
threshold output levels, i.e. if the utility is only using 50% of the threshold production output,
the full threshold volume must be paid, consumed or not consumed.
Kaysone Phomvihane Town
7. The Kaysone Phomvihane water supply system is currently investigating the
possibilities of a joint venture (JV) with a Malaysian investor. The initiative comes from the
province. Current assets are evaluated to be US$5,000,000. Reinforcement and extensions
needs are evaluated to be approximately US$15,000,000 (the production should be raised up an
additional 50% of the current capacity, pipe extensions should be done in southern area,
resettlement villages, Xeno special economic zone, northern axis) in order to insure full
coverage of Kaysone Phomvihane town and the special economic zone.
8. The joint venture company would fully operate the provincial capital water supply
system. Tariff structures and increases would be ratified by the provincial board (Provincial
Governor’s Office, DHUP and NPSE) under WASRO guidance. NPSE is considering its
human resources reorganization as the investor will not necessarily take over the current NPSE
staff. The current employees, who would not be hired by the JV, would be shifted to other
Governments institutions.
9. Profits would be 70% for the Malaysian investor, and 30% for the NPSE. Operating
and maintenance costs would be 100% covered by the investor.
1st semester 2009 2nd semester 2009 2010
HOUSEHOLD
0 to 10 m3 1,600 1,700 1,700
11 to 20 m3 1,800 2,000 2,000
21 to 30 m3 2,500 2,700 2,700
over 30 m3 3,300 3,600 3,600
GVNMT
per m3 2,200 2,500 2,500
HOTELS
per m3 3,800 4,300 4,300
COMMERCIAL
per m3 5,000 5,500 5,500
47
10. Observations Regarding the Savannakhet WS Model – The fact that the Savannakhet
Province has taken the initiative in identifying and attracting a firm to invest in the urban WS
system is a very positive indicator of the recognition by the provincial authorities that other
options to the publicly owned and operated model exist and may prove to be more cost
effective. It is still unclear what level of the capital investments the JV will participate in and
the length of contract which is being considered. This model is particularly vulnerable to the
issue of whether the proposed tariff above will generate enough revenues to allow for the
projected revenues which will keep the operator on a firm financial footing.
Pakse Town
11. In comparison to the two previous described WS services delivery models, the Pakse
provincial capital water supply system is struggling to meet the demand, mainly because of its
reliance on traditional public sector financing (donor granted schemes) and provincial
management. The Pakse NPSE does not allow any further connections as the current
production design capacity is 15,000 m3/day and the actual average daily production is 12,107
m3/day. The average pumping time is 13 hours per day, peak can reach 15 hours. The state
company started to make profits in 2003 as a result of applying the tariff recommendations
from WASA (current WASRO). These profits cover the operation and maintenance (O&M)
costs - US$480,000 per year for electricity which is reimbursed by a US$25,000 fee per month
while the average bill is around US$16,000 per month and the ADB loan reimbursement
US$208,000 /year. Sixty percent of the net profit is transferred to the government through
provincial authorities.
12. The following are the options that Pakse NPSE have been considering to improve the
poor WS situation:
a. JICA is planning to reinforce the treatment facility (a JICA team gathered data, no
feedback provided yet).
b. Considering JV or Build-Own-Operate (BOO) with private companies for the Pakse
water supply systems (no contact made yet).
c. The province already declared no support was available at provincial level.
d. ADB support for Paksong extensions in progress.
1st semester 2009 2nd semester 2009 2010
HOUSEHOLD AND GVNMT
2008 2009 2010
0 m3 5400 5500 5600
1 to 5 m3 1100 1200 1300
6 to 15 m3 2500 2600 2700
16 to 30 m3 3200 3400 3500
Over 31 m3 3700 4000 4100
HOTELS
2008 2009 2010
0 m3 7500 7600 8000
1 to 5 m3 3200 3300 3700
6 to 15 m3 3700 3700 4200
48
16 to 30 m3 4500 4500 4700
Over 31 m3 5500 5600 5700
COMMERCIAL
2008 2009 2010
0 m3 7800 8000 9100
1 to 5 m3 3500 4700 4800
6 to 30 m3 4500 4700 5800
Over 31 m3 5500 6700 6800
Smaller Urban and Rural Water Supply Systems
13. The cases analyzed comprise those with:
Fully provided assets (NGO’s)
Community investment and owned assets
Privately provided and operated assets - 100%
NGO and private provided assets, private operated
As best as possible, the report attempts to group the schemes under the same water demand,
socio- economic and available resources contexts.
NGO Provided Assets
14. For this scenario, all 3 surveyed villages (Nathalang, Nakahan and Nongnang) are
situated in Savannakhet province, Phine district along the road number 9. The three villages
have similar population, close to 1000 inhabitants. In Phine district, outside of the currently
implemented water scheme in the district capital (UN Habitat funding, NPSE operated) they
are the only existing water schemes.
15. In 2004 three piped water supply schemes were provided to the 3 villages which size
and socio economic profile are close. A French NGO provided full design, surveys, as well as
assets and technical assistance for management on a 1 year scale time frame. After the water
supply systems were provided, the NGO did monitor on a monthly base the management and
accounting system in all of these villages. The assets were handed over to the village with no
involvement of the Namsaat. District authorities are involved as tax receivers only.
16. Management Organization: The committee runs and operates the water supply system.
It is presided by the head of village as he was the one to name committee members. There is
no knowledge on what the committee may become when a new head of village is elected. The
committee was initially composed by 4 persons:
Head of committee (head of village)
Accountant
2 operators (operating the pump and collecting monthly the water fees)
49
The committee was supposed to share 30% of the benefits after running fees paid and 70%
were supposed to be placed in a bank account in the district capital. In the three villages it was
decided unilaterally by the committee itself, the committee is composed and shares benefits as
follows:
Village NONGNANG NAKAHAN NATHALANG
Composition
1 Chief (accountant)
1 Accountant
2 Operators
3 Technicians
1 Chief
1 Deputy Chief
1 Accountant
2 Operators + Technicians
1 Chief
1 Deputy Chief (accountant)
1 Accountant
2 Operators + Technicians
Benefit share
40% for the 2
Accountants
30% for the 2 Operators
30% for the village fund*
15% are shared equally within
the committee members
85% for the village fund*
30% are shared between
Accountants and Operators
5% for the Chief
65% for the village fund*
*For the village funds, they are now exclusively managed by the committee, it is not placed in the bank account
anymore. In Nongnang, for example, this fund is used to provide loans (20% annual interest) to individuals.
17. Meters are read monthly, fees are collected when meter are read and handed over to the
committee accountant.
18. Technical Analysis: The 3 water supply systems are run by electricity through a
submerged electric pump exploiting water from a borehole, pumping the water in an elevated
tank. Distribution is then by gravity from elevated tanks to the households. No treatment
systems is installed, not even chlorination. The consumers are advised by the utility to boil
their water before consuming. Water is delivered through water metered household water
connections.
19. The boreholes were tested (although the long-term sustainability of the aquifer as not
tested), therefore the pump running hours and flow may not fit the resource capacity on long
term basis. The fact is that the three systems face resources problems during dry season.
Severe problems have been experienced in Nathalang as the pump has been changed twice
already and that the system was not functioning for 2 months (which may explain the very little
consumptions as an average).
20. For Nathalang, poor pump dimensioning as well as malfunctioning is illustrated by the
fact that 55% of operating costs are due to electrical consumption versus 21% and 36% in the
two other cases (total dynamic head values are similar in the 3 villages). The pumps run an
average 5 to 6 hours a day.
21. The villagers, managed to involve the District Health Office (DHO) in order to get a
new borehole for facing the water shortages. Poverty Reduction Fund (PRF) provided a new
borehole that the villagers decided to drill at the same location as the former one. The system
is operated manually by a technician who usually fills the tanks during morning hours, and
again in the evening as well if the tanks happened to be empty during day time.
22. Management and Financial Analysis: The established tariffs fit the affordability to pay
for water for this area. The consumption figures are nevertheless under average and standards
when compared to the regional figures. A socio and economic survey, including water use
analysis was carried nearby – 7 Km, showing that average water needs stage between 50 to 60
liters per day per capita and the affordability to pay for water, reaches 15,000 kip/months,
50
fitting the 50 liters per capita per day (lcd) value with a tariff settled to 1,500 kip/m3. This may
be due to villages situated next to rivers, so that part of consumption is shifted to that resource,
although the former service situation of the village (with no access to water, very little
individual facilities) still affects the habits of consuming water.
23. The three systems are not sustainable on a financial point of view, O&M and
depreciation costs are not covered due to low tariffs and very low demand.
24. The managing committee is not answerable to the community as only the head of
village appoints and manages committee members. This is illustrated by the fact that the initial
bank-saving system is not used anymore (or in a very small proportion) and therefore cash is
kept at water committee level.
Community Self Provided Assets
25. Nathad village is in Outhoumphone district, Savannakhet province. In Outoumphone
district (total of 69 villages, 12,685 households) the current coverage of metered water supply
system is described as follows:
Seno zone
No. Village System Situation
1 Nathad Running (community), 124 meters
2 Nongkhon Running (private), 100 meters
3 Keu Khao Kad Running but severe resources problems (private), 60 meters
4 Seno Running (NPSE) 1,752 meters
Phondue Zone
No. Village System Situation
1 Phongnanang No water (community) , closed, 4 year operating
2 Phontoum Running (community) ,there are 173 meters
Sompat vilay Zone
No. Village System Situation
1 Nakou Running (community) ,there are 76 meters
All community operated systems benefit from the same loan arrangements as our example,
Nathad.
26. Nathad village managed to get a loan from the monks. The loan was advertised during
the Thadihang religious festival. The loans were committed to 4 villages, on a demand driven
basis. The loan was obtained by the monks through BCEL bank, as a non interest Loan.
27. The loan was taken out in 2003 and paid back in 2005. In 2003, only 35 households
(HH) out of 120 got connected, whereas today 100% of the population is connected. The
extensions were financed with the connection fees (US$180/ connection) which are higher than
average approached but do include participation to the whole infrastructure. The loan was also
used by 3 other communities.
28. The water supply system was designed and implemented by a contractor (Vietnamese)
after selection by the committee.
51
29. Management Organization: The water committee is elected by villagers; the head of
village is not part of the committee. Backstopping is done by the head of zone. Elections take
place at the same time head of village is elected (every 5 years). The committee was renewed
(by election under head of zone mediation) 2 years ago, the former one been accused of
corruption, data (accounting) is therefore only available since 2 years. The committee is
composed by 3 volunteers (1 responsible, 1 accountant, 1 deputy) and 2 fixed salary
technicians in charge in meter reading, operating the system and installing new connections.
The salaries represent 34% of total incomes. First step, meters are read on a monthly base;
second step, bills are prepared at the accountant level; and third step, money is collected by
technicians and transferred to the committee.
30. Technical Analysis: The system is run by electrical energy. The pump specifications
were provided by a pump provider in the local market (Xeno). One pump is exploiting 4 wells
situated in a low point and transmitting water to a buffer underground tank from which water is
sent to an elevated tank by a second pump set. The pumps run an average 6 hours a day. The
water is distributed to households by gravity. No water treatment and or disinfection, water is
boiled before using.
31. There are no production meters, therefore NRW cannot be calculated with any
accuracy. Electric fees are very high, probably witnessing low pump efficiency (wiring rods,
quality of the pump purchased on the local market) and weak design inputs (the diameter of the
transmission line is too small, generating too much head loss and causes excessive power
consumption).
32. The system is operated manually and the average pumping hours are typically from 6 to
10 AM and from 4 to 6 PM, which are the regular peak consumption hours. The system suffers
of water shortages during the dry season (shallow wells get dry). The aquifer was not tested
during the design phase.
33. Management and Financial Analysis: Tariffs were settled “by the villagers for the
villagers”. The tariff is the same as the systems described above (1,000 kip/month), but there is
a lump sum to be paid every month, outside of consumption fees: 7000 kip/month / HH.
Consumption is 58 lcd as an average, which fits what has been surveyed in similar contexts.
34. Electricity fees are here also very high (45% of total revenues) and therefore emphasis
can be made on the quality of the pumps and the design of the system. Despite there was no
real financial survey of operating, return on investment and depreciation costs, the system
(because of tariff and consumption) seems close enough to a sustainable state but does not
allow any net profits.
35. The committee election system makes the committee liable to the community, which
may explain why, despite that socio economic status of this village is comparable to socio
economic status of villages described above, the gross benefits are much higher because
management is done under a double regulatory board. The first regulation comes from grass
roots through consumer as a community; the second under the head of zone which’s authority
is over the head of village.
36. Interesting point in this model is that the community separated the water committee
from the head’s of village authority.
37. Final remark concerns the presence of a loan from the monks. Rural communities may
find it neither difficult nor impossible to invest when credit is unavailable.
52
Private Investor Provided Assets
38. This water scheme was provided by a private investor (partnering with another
provincial capital based investor) who in 2003 invested in 4 other villages. The current
investor and operator were in charge in 2 of the villages of Outomphone zone. The second
village scheme has already been sold to another private operator because of scarce resource and
red colored water.
39. The investor carried survey and designs and construction (by hiring manpower) by
himself. A contract was signed with the village only for implementation authorization
purposes as the investment are 100% private, the assets are considered belonging to the private
investor.
40. First year the water supply system connected 50 HH, whereas today after 7 years, a 100
HH were connected. The 86 remaining HH had individual small boreholes before the water
supply system was implemented and do still not see any reason in shifting to the piped facility.
41. One of the reasons may be that the water supply system has resource problems during
the dry season, as do the individual boreholes. The electric fees necessary to run individual
assets are higher than the average monthly water supply fees. Therefore, there may be a lack of
marketing / information issue here. A free credit between 10 to 20 months can be used by
households willing to connect.
42. Management Organization: The investor relies on members of his family in order to
help him run the water supply system. He or his relatives operate the system on daily basis.
The meters are read monthly and bills addressed to the households. The provider holds
accountability by himself.
43. Technical Analysis: The system is close to the system described above. Electricity
provides energy to the pumps. One of them extracts water from a deep well (26m) and sends it
to a first elevated tank which distributes to southern part of the village, whereas a booster pump
sends water to a second elevated tank deserving by gravity the northern part of the village. No
water treatment or disinfection, water is boiled before use for consumption. There are no
production meters, therefore NRW cannot be assessed. The pumps run an average 12 hours a
day but each one of them have an average lifetime of 1 year. The pumps are purchased on the
Xeno local market (Chinese brands).
44. The electricity consumption fees reach an average of 33% of the total incomes. Water
shortage is recurrent and particularly severe this year as the system was unable to cover the
needs for a month. The aquifer was not tested during the design phase.
45. Management and Financial Analysis: The private owner declared settling the tariffs
according to business plan calculations and means of the targeted population. The tariff are
here settled as consumptions blocks:
1,500 kip/m3 up to 10 m
3 (as described above, this amount and consumption block
is very close to affordability calculated in similar contexts in Lao PDR)
2,000 kip/ m3 over 10 m
3
3,000 kip/m3 for commercial uses and business
53
Consumption is here also 58 lcd which fits what has been surveyed in similar contexts. The
owner declared that his return on investment was already fulfilled but that he couldn’t consider
he made any benefit of it especially regarding to the scarcity of the water resources therefore
limiting consumptions and number of connections. Here, the system reaches sustainable state,
which has to be compared to the above community managed systems when full assets are
provided.
Private Investor and External Grant Provided Assets
46. Two French assisted MIREP schemes are reviewed in this section. They were chosen
because they have been operating a longer time than the others and therefore present analyzable
data. On the whole eight schemes are currently been implemented through the MIREP project.
47. Both of the surveyed schemes are in Vientiane province, and are implemented in the
district capitals of Hinheup and Feuang, respectively of 2,805 and 4,780 inhabitants, which
make size and therefore approach quite different from the “community” scale models assessed
before.
48. The MIREP project enables private investors to support water schemes under a
concession contract signed with the district governor’s office. The BOT contract has a length
of 25 years after what the assets should be handed over to the district authorities. Regulation,
especially on tariffs is assured by WASRO. The sites were chosen (within provinces and
districts proposed by MPWT) through preliminary socio economic assessments leading to
identify sites where population had enough revenues to cover water tariff and connection fees.
49. Poor households shall benefit of free connection fees supported by the project. The
private investor after an information campaign is chosen through a bidding process.
50. GRET, a French NGO, piloting these implementation phases provides subsidy through
the number of household connected (vs the initial business plan). GRET also provides all
preliminary surveys and designs as well as a 3 year length technical assistance on technical,
management and accounting aspects through regular missions and monitoring.
51. Hinheup scheme was implemented in 2008 and today covers 66% of the entire
population. GRET participated to 25% of the whole investment.
52. Feuang (5 villages in the whole) scheme was implemented in 2007 and covers 40% of
the population in 2010. In 2007 and 2008, the coverage concerned only 2 villages (100% of
connections) whereas in 2009 the network spread to the 3 remaining villages where today 20%
of the population is connected. GRET participated to 32% of the total investments.
53. Management Organization:
Hinheup
The investor has appointed members of his family in order to run the system:
1 administrator + accountant
1 technician in charge of meter reading.
Wage labors for punctual assignment
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The meters are read monthly, billing is done by the accountant and money is collected by the
technician. All profits are sent to the investor after cutting electricity fees and salaries.
Feuang
Here also, the investor has appointed members of his family in order to run the system:
1 administrator + accountant + technician
3 technicians in charge of meter reading, money collecting and new connections
Here also, meters are read monthly, billing is done by the accountant and money is collected by
the technicians. After cutting electric fees and salaries from the gross incomes, the remaining
money is transferred to a bank account managed by the investor.
54. Technical Analysis:
Hinheup
Two deep boreholes (90 m) force water to a tank installed on a high point. The water is
chlorinated by a constant quantity of chlorine HTH injected in a mixing compartment. The
pumps work by automatic shift box, making the pumps work alternately. The stop command is
by an ultrasonic sensor installed in the tank, high level of water. The start command is the same
ultrasonic sensor, low level of water. The water is then distributed by gravity through a piped
network. Up to this day there are no known problems of resources.
Feuang
Four boreholes, average deepness 26 m force the water in 2 compartmented buried tank
installed on a high point. The pumping system is organized in 2 sets of 2 boreholes pumping
independently in the 2 compartments of the tank. One of the set face electric problems and
disconnects often, probably due to bad wiring system (the electric rods diameter are too small).
The pump start and stop system is commanded by water level sensors high and low level.
Chlorination is insured by constant dosage from a chlorine pump after mixing chlorine (HTH)
in a separated tank. Water is distributed to connections by gravity through a piped system.
There are water shortages problems getting more and more severe as the number of
connections increase. This may be due to electric problems as described above.
55. Management and Financial Analysis: The private owner declared that the tariffs
followed the business plan calculations and means of the targeted population. The tariff is a
uniform volumetric charge plus a maintenance fee.
Hinheup
The tariffs are settled according to affordability and willingness to pay for water survey, done
prior to technical design. These tariffs are submitted to and validated by WASRO as well as the
business plan.
Domestic users: 2,200 kip/m3
Commercial users: 2,500 kip/m3
Consumption is 48 lcd (design considered a 61 lcd)
The cash flow generated over 25 years, following the business plan should be around US$
1,500 on a monthly base, return on investment 14 years, based on assets costs.
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Feuang
The tariffs are set following the same scheme as in Hinheup.
Domestic users: 2,000 kip /m3
Commercial users: 2,400 kip / m3
Consumption is 51 lcd which may be compared to the 57 lcd calculated after the
affordability and willingness to pay survey
The cash flow generated over 25 years following the business plan are around US$ 2,000 on a
monthly base. Return on investment would take approximately 14 years based on total assets
costs. Whereas in Hinheup the owner did not subscribe any credits, the investor in Feuang
subscribed to a Bank Loan with 13% of annual interest (by comparison, current saving
accounts generate 12% of annual interest benefit). This means that the Feuang cash flow is
negative for the year 2009 and close to null in 2010, explaining why the current technical
problems (limiting the number of new connections and therefore benefits) cannot be faced.
The Poverty Fund Reduction Program
56. The Poverty Reduction Fund (PRF) currently implements projects in 21 out of the 47
poorest districts of Lao PDR in eight provinces. Close to 1,100 water schemes have been
implemented by the PRF to date. The project (mainly funded by the World Bank) is an
independent organization, directly dependant and therefore back-stopped by the Prime
Minister’s office. The implementation scheme skips (for funds transfers only) the Provincial
and District authorities and concentrates on Zonal level (administrative grouping of 10 villages
to mitigate potential funds misappropriation.
57. The project is community demand driven. PRF provides funds to the Zonal level after
assisting communities in formulation of priorities and reinforcing the Zonal and district level
by training members of the implementation and maintenance team (IMT). Design is driven by
the IMT members. The IMT are present at village level (water committee technician), Zonal
level (head of zone may be assimilated to project manager) and district level (where concerning
water and sanitation, Namsaat staff will be trained to monitor implementation process).
58. Once the communities demand is formulated, a competitive formulation within
communities of the same zone is piloted by the PRF technical assistants. Multi criteria
selection leads to identify communities which will be supported. Communities participate to
the project either in-kind or cash participation. In-kind participation will be valorized as labor
and material costs. Average participation is 30% of the total costs.
59. Management Organization: Water committees are settled at village level:
Direction is insured by head of village
Accountability and administration is insured by the Lao women union
representative
Technician position is fulfilled by the IMT member trained by PRF
60. Water fees are settled on a community participative method during training but in most
of cases, fees are event driven, meaning that they are collected in order to face break downs.
This concerns mainly wells and boreholes. For gravity fed system (GFS), water taps are
56
implemented to meet the water demand of 10 HH as an average. Here, fees (500 to 1,000/
months/ HH) are collected monthly by District Namsaat who insures operation and
maintenance and has ownership of the assets.
61. Technical Analysis: The water schemes under PRF consist mainly in small GFS, dug
wells and drilled borehole. 2 pump + piped systems have been implemented at communities
demand in the south of Lao. PRF supports transmission pipes, pumps, boreholes and elevated
tanks to the community which after this invests in the distribution and water meters.
62. The executives in charge with infrastructure declared that the biggest sustainability
problem concerned the drilled boreholes, mainly because spare parts were unavailable and
pumps difficult to import (Tara and Afridev pumps exclusively produced in India are VLOM
pumps without copyrights). According to the PRF infrastructure managers, Wells and GFS are
for a large majority of them still functioning. (still waiting for evaluation and monitoring
reports on the current state of former implemented schemes by PRF)
Model Comparison Outputs
Large Urban Systems
63. Investment needs are not fully covered by government and donors. The trends lead to
BOT and JV through local initiatives to fill the gaps, representing 70 to 80% of the investments
needs. Regulation (on tariff) is still maintained as in the cases surveyed as tariffs still follow
WASRO (central government) guidelines and are implemented by the provincial authorities
through local decrees.
Large Rural Systems (metered water supply):
64.
Demand and participation driven implementation schemes should be a baseline, insuring
better management and sustainability. Schemes should be implemented after communities
formulate demand for it and show financial as well as management capacity to sustain the
model. Financial capacity of the community could be assessed through affordability and
willingness to pay for water fees, connections and/or main assets investments. Election of
the water committee could be the first necessary step to assess management capacities of the
community. In case management capacity is weak but nevertheless demand is formulated
and financial capacity is proven, private investors could be identified through bidding
process.
Community managed systems: Water committee should be established out of the head of
village authority, by election under higher authority (head of zone, for example). This
insures committee liability to the community.
Based on information from the schemes surveyed, capital subsidies of less than about 50%
could be insufficient to allow a profitable return to investors. However, there was evidence
of some private sector schemes still moving forward, but the motivation for investment was
more social in nature as opposed to profit as they were investing in their home towns and
villages.
57
Credit systems have to be developed as part of project implementation in order to attract
either private investors, or community participation.
The local banking system charges interest rates which are too high to allow an acceptable
return on investment, and therefore jeopardizes the sustainability of the scheme.
Because of the either technical or financial weaknesses of responsible authorities (Namsaat
MoH), the implemented model should rely on local resources (community and/or private)
piloted by external operators (NGO).
Resources assessments have to be supported prior to scheme design.
Technical assistance has to be provided during the design phase in order to avoid technical
malfunctioning.
Small urban systems:
65. The MIREP schemes highlighted earlier again highlight the weaknesses of the credit
system in Lao PDR. To make these projects attractive to private investment, credit systems
need to be developed (borrowing at 13 to 14% interest does not match generated incomes) and
subsidy increased in proportion after simulation and comparison once the minimum net benefit
value is settled in order to make it attractive. Nevertheless and until now, MIREP project is the
only known successful PPP project implemented in Lao PDR, outside of local initiatives. A
close collaboration should be settled with ADB, supporting many schemes for small to medium
towns.
Small and remote rural systems
66.
20% of communities do not have road access in Lao PDR.
For poor and remote communities, the implementation scheme should not necessarily rely
on the concerned departments (Namsaat). Namsaat does not always have the qualified
human resources to carry technical work in this field (most of Namsaat members are trained
as nurses) and the MoH does not provide budgets for hardware, meaning that support from
Namsaat outside of quickly accessible areas may be difficult. Moreover, there is still not a
clear view of the MoH’s budget to cover the needs in water supply.
There is still no clear knowledge of available data on rural water supply and sanitation
coverage status as this information is not consolidated at the provincial and central level,
although it may be partially consolidated at district level from zonal and village level data.
The PRF cannot implement dedicated water and sanitation driven projects as its
participatory and demand drive approach concerns all aspects of community development.
The spare part issues could be solved by supporting local and/or state operated factories.
The supply chain can be settled by using the existing district markets (through local
provider) where all communities, even remote ones do link regularly. Namsaat in this case
could provide technical assistance at district level. Local provider exists for items necessary
to build and sustain GFS and wells but not for hand pumps.
58
Implementation should rely on demand driven bases and unfortunately once again rely on
nongovernmental operators (associations, private companies). The PRF fund, is supported at
100% by external funds, showing the lack of Government of Lao PDR financial capacity to
support such projects although PRF schemes do include community level participation.
Therefore, community participation (outside the fact that it will reinforce ownership) is also
a a requirement as no other local sources of funding are known to be available.
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Annex 15: Goals for Urban Water Supply Sector Road Map
GOAL 1: Appropriate policy and legal framework
Strategic Objective 1.1: National Water Supply Laws developed and enacted
Strategic Objective 1.2: Necessary decrees, regulations and guidelines issued
Strategic Objective 1.3: Other existing laws amended to harmonize with new Water
Supply Law
Strategic Objective 1.4: Raised public awareness on compliance with water supply
laws and their regulations
GOAL 2: Effective Regulatory System
Strategic Objective 2.1: WSRC/WASA established as an effective, sustainable sector
Regulator
Strategic Objective 2.2: Tariff determination guidelines established and operating
Strategic Objective 2.3: Licensing and monitoring systems in place and operating
GOAL 3: Water Supply Integrated with Urban Development
Strategic Objective 3.1: Coordinated planning of urban development and water supply
Strategic Objective 3.2: Data bases for urban and water supply development
established
Strategic Objective 3.3: Systems in place for integrating urban and water supply
construction
Strategic Objective 3.4: Improved coordination between MPWT central and local
offices and with other concerned agencies
GOAL 4: Efficient, Sustainable, Customer-oriented Public Water Supplies
Strategic Objective 4.1: NPNL operating as a leading example of a strong, sustainable
water supply business
Strategic Objective 4.2: SOE water supply systems (PNPs) operating as independent,
financially viable, sustainable water supply businesses
Strategic Objective 4.3: Enterprise and Agency Corporate Planning in place and
aligned with the Sector Strategic Plan
GOAL 5: Sector Environment Conducive to a Wide Range of Investors
Strategic Objective 5.1: Environment created to encourage private sector investment,
including incentive mechanisms
Strategic Objective 5.2: Networking to help private/public partnerships in water supply
enterprises
Strategic Objective 5.3: Policies and mechanisms in place to promote and mobilize
local private investment in water supply development
GOAL 6: Raise Status & Boost Capacity of Sector Organizations and Personnel
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Strategic Objective 6.1: Organization structures aligned with strategic plan
Strategic Objective 6.2: Staffing aligned with organizational structure and strategic
needs
Strategic Objective 6.3: Capacity building programs in place as required under strategy
GOAL 7: Meet Government MDG Targets for Urban Water Supplies32
Strategic Objective 7.1: Align WSIP with MDG targets and establish plan and
approach to fill gaps in funding and other resources
Strategic Objective 7.2: System set up for encouraging private investment in sector to
help fill gaps
Strategic Objective 7.3: M&E system established to track progress against MDG
targets and WISP
32 As per Lao government policy statement in Decision 37/PM -- to provide 80% of the urban population with 24-hour water
supply by 2020.
61
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Poverty and Environment Report, World Bank, 2009
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