Feature story

EBRD loan whets Tajik water supply

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Mountains supplying Khujand water

Water purity is questionable in the city

Syr Daria river, source of Khujand's water

Grassroots water committees to encourage consumers to pay

In the Central Asian Republic of Tajikistan, a $1.2 million EBRD loan coupled with just under $4 million in donor funds is set to improve reliability and quality of water supply in Khujand, the country's second largest city.

The success of this innovative social investment hinges on grassroots participation: local people will help manage the water service through their participation in new Water Users Committees. One of their tasks will be to convince their neighbours to start paying their water bills so that improvements in service can be maintained.

The investment is the EBRD's first loan for municipal infrastructure in Tajikistan, the Bank's poorest country of operation. Eight out of 10 people live below the national poverty line. Investments in public services are severely curtailed by the already high national debt.

Water a national priority

"From several discussions we had in Tajikistan, it was clear that in the municipal sector, the Khujand water supply was the highest priority for investment," says Paul Covenden, Principal Banker on the EBRD's Municipal and Environmental Infrastructure Team.

As it stands now, Khujand's water system is half a century old and has not been adequately maintained, particularly since the Soviet era ended. Insufficient pumps and defective pipes and connections mean a lot of water leaks out of the system. Most Khujand houses have water on tap for just three to six hours per day. In 30 per cent of houses, service can be as rare as once per week. Inadequate water treatment means the tap water is unsafe, so people end up paying extra for bottled drinking water.

The water that is available is not metered; the flat rate charged, coupled with erratic supply, leads customers to fill tubs and buckets in anticipation of shortage, encouraging waste. Also, much of the domestic supply is improperly used for agriculture, further burdening the urban system. Dissatisfaction with the service discourages from paying their water bills.

…but who will pay for improvements?

"This is the first time we have invested in a municipal project in a country with such low family incomes," says Mr Covenden. "In that context, the main challenge to investment is cost recovery."

In Khujand, nearly 70 per cent of the average $20 household monthly income is spent on food, leaving very little for public utilities such as electricity, gas and water.

Donor funds are vital to improving infrastructure in poor countries and will cover most of the Khujand water improvements. The Governments of the Walloon and Flanders Regions of Belgium funded project preparation. The Government of Norway is funding improvements to the water company's governance and managerial practices. A generous Swiss grant of $3 million is supporting capital investments and the stakeholder participation programme.

However, consumers have to start paying for water if improvements are to be sustained.

NGO helped in project design

To meet the challenges of this difficult operating environment, the EBRD worked with the International Secretariat for Water (ISW), a non-governmental organisation, to develop a project that was sensitive to customers' ability and willingness to pay. ISW's mission is to help improve drinking water infrastructure in developing countries. "This is the first time an NGO has participated with the Bank at such an early stage of project design," says Mr Covenden.

ISW conducted a stakeholder survey and social assessment in Khujand, supported by the Flanders-EBRD Technical Cooperation Fund. From the study came the design of a 'stakeholder participation programme' – including the Water Users Committees.

Past experience has demonstrated that consumers of public services are willing to pay for service improvements, especially if they are kept well informed and feel involved in the changes affecting them.

The committees will promote dialogue between consumers, the water company and government, and will ensure poverty and subsistence issues are taken into consideration as water tariffs are reformed.

"Most people will be happy to have the water, but they will not understand why they have to pay for it. That is why increased social awareness is so important," says Muzaffar Usmanov, Associate Banker in EBRD's Tajikistan Office.

Transition over profit

The Khujand water project is the first ever under EBRD's new Early Transition Countries initiative for the Bank's seven poorest countries of operation. The initiative hinges on close cooperation with donors and encourages EBRD investments below its established minimum of $6.2 million (€5 million). To face the common social and economic challenges of these countries, the Bank is ready to take more risks and favour transition over profitability.

"If we bring the Khujand Water Company to a level of economic sustainability, it means we have created an autonomous commercial entity. This will be a key achievement," says Mr Usmanov. The project addresses 15 per cent of Khujand's water system and will be expanded as revenues improve and stabilise. It may also be replicated in the south-western city of Kulyab.

Contact:  Municipal and Environmental Infrastructure banking team

2 August 2004