albania – water supply and sanitation

135 Pages·2004·3.07 MB·English

by  Gilbert Bushati

The World Bank Albania – Water Supply and Sanitation Sector Strategy

ALBANIA – WATER SUPPLY AND SANITATION

SECTOR STRATEGY

Final Draft

June 2003
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ALBANIA – WATER SUPPLY AND SANITATION SECTOR STRATEGY

TABLE OF CONTENTS

0. EXECUTIVE SUMMARY
1 Background ………………..…………………………………………………………………. i
2 Main Issues of the Water and Sanitation Sector in Albania……….……………………………. ii
3 Objectives and Main Reforms..…………………………………………………………………. iv
3.1 Objectives ……………………..……………………………………………………….…. iv
3.2 Main Reforms………………………………………………………………………….…. v
3.2.1 Management Reform……………………………………………………………..…. v
3.2.2 Legal and Institutional Reform………………………………………………………. v
3.2.3 Financial Reform………………..………………………………………..…………. v
3.2.4 Poverty Mitigation Reform……….………………………………………..………. vi
3.2.5 Technical Reform……………….…………………………………………………. vi
3.3 Short-Term Action Plan……..…………………………………………………….……… vi
3.4 Medium-Term Action Plan………………………………………………………………… vi
3.5 Targets and Indicators ……..……………………………………………………………… vii
3.6 Costs……………………………………………………………………………………….. vii

1. BACKGROUND ………………………………………………………………………… 1

2. WATER SUPPLY AND SANITATION SECTOR IN ALBANIA – CURRENT
SITUATION AND REFORM CHALLENGES …………………………………………. 4

2.1. POPULATION DISTRIBUTION, MIGRATION PROCESSES, AND POVERTY ……………… 5
2.1.1. An overview on population and the dynamics of rural-to-urban migration 5
2.1.2. Income, living conditions, and poverty 7
2.2. WATER RESOURCES AND ENVIRONMENTAL IMPACTS ………………………………. 10
2.2.1. General issues 10
2.2.2. Main surface water basins and aquifers of Albania 10
2.2.3. Use of groundwater and surface water resources 12
2.2.4. Environmental conventions to which Albania is a party 13
2.3. CURRENT CONDITIONS OF WATER AND SANITATION INFRASTRUCTURE ………….. 14
2.3.1. Drinking water coverage 14
2.3.2. Sanitation coverage 16
2.3.3. Drinking water demand 16
2.3.4. Reliability in water supply 17
2.3.5. Safety in water supply 19
2.4. REGULATORY, INSTITUTIONAL, AND FINANCIAL ASPECTS OF THE SECTOR ……… 21
2.4.1. A summary of the legal framework in the water sector 21
2.4.2. Organization and financial aspects in the water sector 25
2.4.3. Issues of cost accounting and tariff setting 30
2.4.4. Revenue collection and enforcement actions 33
2.4.5. Some institutional and regulatory shortcomings to be addressed 35
2.5. PRIVATE SECTOR GROWTH AND CLIMATE FOR INVESTMENTS IN WATER SUPPLY …. 36
2.5.1. Private sector development in Albania 36
2.5.2. Private sector’s involvement in the water services 36
2.5.3. Corruption and transparency of the public administration 36
II
2.6. GOVERNMENT’S POLICIES AND DEVELOPMENT STRATEGIES ……………………….. 39
2.6.1. Public sector governance and management 39
2.6.2. National Strategy for Socio-Economic Development (NSSED)…………….. 40
2.6.3. Policies and strategies related to the water and sanitation sector 41
2.7. GOVERNMENT’S PUBLIC INVESTMENT PROGRAM FOR 2000–2003 ………………… 44
2.7.1. PIP disbursement and resource allocation 44
2.7.2. Medium-term expenditure framework (MTEF) 45
2.7.3. Government’s budget for year 2003 46
2.8. ENVISAGED OBJECTIVES OF THE REFORM …………………………………………. 48
2.8.1. Consumer satisfaction and equity - Bridging the gap by serving the poor 48
2.8.2. Water resources management and environmental protection 49
2.8.3. Improvement of water utilities’ performance 50
2.9. DEFINING THE INSTRUMENTS FOR THE REFORM ……………………………………… 51
2.9.1. Legal and institutional reform 51
2.9.2. Technical reform 56
2.9.3. Demand management 58
2.9.4. Financial reform 59
2.9.5. Private sector participation in service provision 65
2.10. ESTABLISHING REALISTIC STANDARDS IN DESIGN AND SERVICE PROVISION ………… 73
2.10.1. Customer service standards and design criteria 73
2.10.2. Quality standards for drinking water and effluent discharge – Definition of 75
quality monitoring systems
2.10.3. Enforcing compliance with standards 77
2.11. BUILDING CAPACITIES AT GOVERNMENTAL AND OPERATIONAL LEVELS …………….. 79
2.11.1. Enabling local governments to address reform challenges 79
2.11.2. Enabling water utilities to act in a business-like manner 79
2.11.3. Training in capacity-building and support of water professional associations 80
2.12. FOSTERING EFFICIENCY AND ENVIRONMENTAL SUSTAINABILITY IN THE SECTOR …… 82
2.12.1. Development of water resources management plan 82
2.12.2. Benchmarking water utilities’ performance 85
2.12.3. Development of a national database system 87
2.13. INTERVENTIONS OF DONORS AND NON-GOVERNMENTAL ORGANIZATIONS – DONOR
COORDINATION MECHANISM ………………………………………………………… 88
2.14. CONSULTATION PROCESS FOR THE WATER SUPPLY AND SANITATION STRATEGY……. 90
2.15. MAIN ISSUES OF THE WATER AND SANITATION SECTOR IN ALBANIA ………………. 91

3. OBJECTIVES AND MAIN REFORMS …………..……………..……………………… 94
3.1. OBJECTIVES ….………………………………………………………………………… 95
3.2. MAIN REFORMS ….………………………………………………………………….… 95
3.2.1. Management Reform…………………………………………………………. 95
3.2.2. Legal and Institutional Reform……………………………………………….. 96
3.2.3. Financial Reform……………………………………………………………… 97
3.2.4. Poverty Mitigation Reform…………………………………………………… 97
3.2.5. Technical Reform……………………………………………………………... 97
3.3. SHORT-TERM ACTION PLAN…..………………………………………………………. 98
III
3.4. MEDIUM-TERM ACTION PLAN.….…………………………………………………….. 105
3.5. REFORM RISKS ………………………………………………………………………... 110

4. ANNEXES ……………………………………………………………………………. 111

5. REFERENCES …………………………………………………………………………….. 123

LIST OF FIGURES

Figure 2.1.1: Urban vs. rural population rate
Figure 2.1.2: Yearly unemployment rate
Figure 2.2.1: Use of groundwater resources during 1997 – 1998
Figure 2.3.1: Incidence of gastroenteritis in Albania
Figure 2.4.1: Organization of the Economic Department
Figure 2.7.1: PIP resource framework 1996 – 2003
Figure 2.7.2: PIP disbursement 2000 – 2003 by sector group
Figure 2.9.1: Components of the water price
Figure 2.10.1: The monitoring cycle
Figure 2.11.1: Training in capacity building and actors involved
Figure 2.12.1: Cyclic planning approach
Figure 2.12.2: Toward sustainable solutions
Figure 2.13.1: Donors’ intervention in the water sector
Figure 2.14.1: Main issues in the water sector and lines of responsibility

LIST OF TABLES

Table 2.1.1: Population growth in the main urban centers during 1990 – 1999
Table 2.1.2: Breakdown of the average monthly expenditure for households
Table 2.2.1: Characteristics of the main surface water basins of Albania
Table 2.3.1: Surveys in some rural areas on time and efforts spent in fetching water
Table 2.3.2: Comparison of some parameters of treated drinking water
Table 2.4.1: Depreciation rates applied by water utilities
Table 2.7.1: Past expenditures and projections for year 2003
Table 2.9.1: Expenditure for the water and sewerage 2001-2003 (million Lek)
Table 2.9.2: Comparison of PSP options
Table 2.9.3: Main features of PSP options with public ownership
Table 2.12.1: Water utilities’ performance indicators
Table 3.1.1: Reform priorities and areas of intervention

LIST OF TEXT BOXES

Box 2.1.1: Environmental impact of urbanization
Box 2.9.1: The MTEF and PIP documents serve different purposes
Box 2.9.2: Private sector participation in the world

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ABBREVIATIONS

BOO - Build-Own-Operate
BOOT - Build-Own-Operate-Transfer
BOT - Build-Operate-Transfer
CESS - Center for Economic and Social Studies
EC - European Commission
ECHO - European Commission Humanitarian Aid Office
EU - European Union
GDP - Gross Domestic Product
GoA - Government of Albania
HSC - High State Control
ICS - Institute for Contemporary Studies
IMF - International Monetary Fund
INSTAT - Institute of Statistics
KESH - Albanian Energy Corporation
KfW - Kreditanstalt für Wiederaufbau
MoE - Ministry of Economy
MoF - Ministry of Finance
MoH - Ministry of Health
MoLGD - Ministry of Local Government and Decentralization
MoTAT - Ministry of Territorial Adjustment and Tourism (formerly MPW)
MPW - Ministry of Public Works (renamed MoTAT)
MTEF - Medium Term Expenditure Framework
NEA - National Environmental Agency
NGO - Non-Governmental Organization
NSSED - National Strategy for Socio-Economic Development
PIP - Public Investment Program
PSP - Private Sector Participation
SI - Sanitary Inspectorate
USAID - United States Agency for International Development
WHO - World Health Organization
WRE - Water Regulatory Entity

AVERAGE EXCHANGE RATE

1 USD = 136 Albanian Lek

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The World Bank Albania – Water Supply and Sanitation Sector Strategy

EXECUTIVE SUMMARY

1. Background

Albania has abundant water resources, however, water supply in almost all urban areas is
intermittent because of the dire condition of Albania’s water infrastructure. Supply is provided
for two to four hours per day on average, with many customers getting less or no water at all. In
addition, drinking water quality is often compromised by lack of adequate treatment and
disinfection facilities, and unreliable supply of chemicals. Inadequate maintenance and repair,
and lack of metering and operational control, have resulted in excessive water losses, estimated to
be greater than 50 percent of water production in all cities.

The table below shows some of the main financial and operational indicators of four of the 54
water utilities, providing some indication of the severe situation in the water sector. The situation
in most of the other utilities is similar to the four shown in the table.

Indicator/City European Standards Durres Lezhe Fier Saranda
Working Ratio 0.75 4.60 6.90 4.90 6.10
Current Ratio >1.3 0.30 0.60 0.90 0.60
Collection Rate (%) >95% 34.00 33.00 33.00 33.00
Staff/1000 water 1.00 11.19 28.87 7.60 12.75
Connection
Staff/1000 water & 2.00 - 13.18 4.90 -
Sanitation Connections
Non revenue water (%) <12% 73.00 61.00 59.00 63.00
Hours of Supply 24.00 2.10 20.00 6.20 1.76
Customers receiving
minimum of 2 hours
supply per day (%) 100.00 38.00 95.00 88.00 45.60
Samples complying 99.00
with residual chlorine 56.40 5.80 28.80 21.00
standard (5)
Current Domestic Tariff 0.44 - 4.44 (av. 2.53) 0.15 0.11 0.14 0.11
USD/m3 (W&S)

In general the amount of water available and the water quality is higher in urban areas compared
to rural areas. The poorest segment of the population is hit the hardest; on average, its
accessibility to water is lower and the cost of access is higher (in relative and absolute terms). The
dilapidation of the water supply and sanitation facilities is a severe health threat and is believed to
be one of the major contributing factors to increased infant mortality in Albania.

The environment (rivers, wetlands, and coastal waters) is severely polluted because not a single
wastewater treatment plant exists in Albania.

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The World Bank Albania – Water Supply and Sanitation Sector Strategy

2. Main Issues of the Water and Sanitation Sector in Albania

Based on the analysis of the current status of Albania’s Water Supply and Sanitation Sector, the
following main fields for sector reform have been identified:

Demand Management

Demand management is identified as one of the key elements to improve water supply services in
Albania and increase the revenue generation for the company. Experience shows that in areas
where pipes are under pressure for 24 hours per day, water consumption goes up to 500 l/capita
per day, compared to 120 l/capita per day in other European countries. Not only does this impose
high operation costs on the systems, the water withdrawn by these customers increases the lack of
water in other parts of the network. The most important tool in demand management is the
introduction of metering accompanied by a water tariff based on the amount of water consumed,
which should at least gradually reflect the true cost of the service. Other important tools for
demand management are: efficient tariff collection, and disconnection of illegal and nonpaying
customer.

Legal and Institutional Framework

From 1992 onwards, there has been a process of gradual improvement of the existing legal and
institutional framework. A number of laws have been approved aiming to provide the legal basis
for the decentralization of authority to local level and to restructure the water sector for a better
performance. Despite important results achieved, many issues still need to be addressed: (i) the
assigning of administrative service, and regulatory powers to the local governments is not
completed as some bylaws are still missing; (ii) institutional structures such as the Ministry of
Environment and the Sanitary Inspectorate which have important monitoring, enforcement, and
regulatory role, are facing severe problems of understaffing, lack of financial resources, and
difficult enforcement practices; and (iii) the important support that the Water Regulatory
Committee could provide cannot fully materialize because of some deformation of its role and
lack of capacity.

The Statute of the water company establishes the obligations of the company, as well as the rights
and duties of the Supervisory Board. The Supervisory Boards are still dominated by
representatives from the Central Government, which prevents local government from taking
ownership for water and sanitation services at the local level.

Service agreements between the local authorities and the water companies establishing the
obligations and performance criteria of the water company on one side and the rights and
responsibilities of the local authorities on the other, are not in place. These service agreements are
of special importance because most of the water companies in Albania are regional companies,
covering several municipalities and communes.

Financial sustainability of the water utilities and governmental subsidies

In the last 10 years, water utilities have been struggling to cope with the system changes in
Albania – from central planning to a liberalized market economy. Even though progress has been
achieved, water utilities’ performance remains poor. Most utilities cannot recover the cost of
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The World Bank Albania – Water Supply and Sanitation Sector Strategy
operations and rely considerably on subsidies from the central government. In 2002 the
Government provided Lek762 million (USD5.5 million) of operational subsidies and the
Government together with Donors provided investment grants and loans to the water utilities
amounting to Lek6,710 million (USD48 million) or almost one percent of GDP. Most of these
subsidies are not provided in a direct and transparent manner, but through arrears towards
governmental institutions and state enterprises, mainly KESH, the national state-owned energy
company.

Lack of enforcement toward nonpaying customers, water tariffs well below cost recovery levels,
massive leakage, and a widespread occurrence of illegal connections have led to this difficult
financial situation for the water utilities. The revenue stream of the companies needs to be
improved substantially and the subsidies from the Central Government have to be provided in a
transparent manner linked to the needs and performance of the companies. The goal is to face out
the Government’s subsidies for operation and maintenance cost, which e.g. is targeted for the four
cities under the World Bank financed Municipal Water and Wastewater Project to be achieved
not later than 2007. To improve the sustainability of rural water supply, the participation of rural
communities needs to be increased by following the Demand Responsive Approach.

Serving the poor

The existing low tariffs which do not allow the utilities to cover their operation and maintenance
cost makes substantial increases in tariffs inevitable. Although water services will still remain
highly affordable for the vast majority of the customers, it may become unaffordable for the
extreme poor which make up less than five percent of the Albanian population. The increased
tariffs accompanied by a stricter enforcement policy towards nonpaying customer should not
exclude the poor from receiving improved services. To achieve this goal the Government is
piloting under the Municipal Water and Wastewater Project a lifeline tariff approach with a free
first consumption block to cover the minimum metabolic, hygienic and domestic requirements as
defined by the WHO (20 liters per capita per day).

Private Sector Participation (PSP)

Introduction of private sector participation in service provision is expected to improve the
management of the water utilities and thereby achieve better quality of service and higher
operating efficiency. In addition, private sector participation can also provide much needed
capital for infrastructure rehabilitation and extension, although the conditions in Albania have not
reached a level yet where private capital could be attracted on a larger scale. The most suitable
PSP option should be selected in each case and it must take into account political, legal,
institutional, financial, as well as technical characteristics of the water systems. Albania has a lot
of small towns which are not attractive to foreign operators because of their limited size; bundling
of towns and developing a market for Albanian operators could help to overcome this obstacle.

Monitoring and Benchmarking

The Government of Albania lacks a reliable overview of the performance of the water supply and
sanitation sector. Data is only collected on an ad hoc base, not comprehensive and seldom
checked. Data collection is very much limited to urban areas which are served by regional water
utilities. To stir sector reform and measure its impact on all customer, but especially on the poor,
it is essential that proper monitoring and benchmarking is introduced, including monitoring the
rural areas. The monitoring should include the indicators for achieving the sector’s Millennium
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The World Bank Albania – Water Supply and Sanitation Sector Strategy
Development Goals and other indicators of the National Strategy for Socio-Economic
Development (NSSED) as well as cross-cutting indicators from other sectors, such as health.
Benchmarking of water utilities’ performance is an important tool to promote competition among
companies to perform better and provides local governments with a tool to judge the performance
of their own company.

Public Awareness and Communication Program

The amount of information and awareness of the public regarding water and sanitation issues is
not sufficient. Many customers still find it strange to pay for drinking water, while most have
never heard of paying for wastewater treatment. There is a widespread attitude of in-house
drinking water wastage and misuse for irrigation. This lack of awareness explains in part the
difficulties in tariff collection and widespread illegal consumption. However, it is encouraging to
see that in recent years there is a mobilization in parts of the civil society, media, and NGOs for
the development of a general awareness. The media has publicized the GoA’s first steps to
disconnect illegal connections and indict offending consumers in the court, and has discussed the
environmental impact of untreated wastewater. This has contributed to increased awareness
regarding water issues. However, more needs to be done to communicate the Government’s
sector reform to consumers, water utilities and local governments.

Investments Needs

The drinking water and sewerage infrastructure in Albania is considerably aged, damaged, and
inefficient. Leakage in supply systems and sewers is substantial and health risk for the population
is significant. The demographic changes related to the uncontrolled rural-to-urban migration and
the subsequent sharp increase of the demand for drinking water and sewage disposal services has
exacerbated the already precarious situation of the water and sanitation infrastructure, which is
operating at its peak capacity. The weakness in urban planning and its enforcement puts another
strain on water service delivery. Widespread unlicensed borehole drilling is having an impact on
the water resources and the lack of environmental enforcement is another factor contributing to
increased pollution and degradation of the environment.

Qualification of the technical and managerial staff

The lack of well trained financial and technical personnel in the utilities has led to inefficiency in
financial management and technical operation. The technical and managerial staff will have to
get more exposed to training programs based on the management experience of other European
water utilities.

3. OBJECTIVES AND MAIN REFORMS

3.1. OBJECTIVES

The Government of Albania has applied a two-tiered approach to its Water Supply and Sanitation
Strategy, which includes: a short-term priority reform and investment program, and medium-term
reform and investment program to stabilize and improve water supply and sanitation services.
The long term objective of the Government’s Strategy for the water supply and sanitation sector
is to achieve sustainable water supply and sanitation services at the EU Standards in urban and
rural areas. The strategy presented in this report includes the short- and medium-term reform and
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The World Bank Albania – Water Supply and Sanitation Sector Strategy
investment program which will help Albania to reach its long-term development objectives in the
water sector, which is linked with the overall objectives of Albania to join the EU.

3.2. MAIN REFORMS

3.2.1 Management Reform

(cid:131) Demand Management: This includes a gradual approach towards universal metering and
volumetric billing, combined with enforcing tariff collection and disconnection of illegal
and non paying customers.
(cid:131) Monitoring and Benchmarking: This includes the development and implementation of a
monitoring and benchmarking program which comprises the creation of a Monitoring and
Benchmarking office in the MoTAT, coordinate with other sectors, publication of results,
and assistance to water utilities.
(cid:131) Qualification of personnel: This includes the implementation of training programs for
utility staff, local governments, supervisory boards, and staff of the Water Regulatory
Commission.
(cid:131) Capacity Building: This includes technical assistance to the General Directorate for
Water Supply and Sewerage, development of commercial & business capacity in the
water utilities, and support the Water Utility Association.

3.2.2 Legal and Institutional Reform

(cid:131) Institutional reform: This includes changing the role of Government from service
provider to policy maker, regulator and facilitator; supporting institutions in charge of
monitoring/enforcement; strengthening and enforcement of Urban Planning; reducing
unlicensed borehole drilling; creating community water associations; and establishing the
Rural Water and Sanitation Agency (RWSA). The RWSA will be under the MoTAT, but
governed by an independent Board. Its role will be to provide technical support and
investment funds to communes and communities.
(cid:131) Legal reform: This includes reviewing the legal framework and completion of any
missing bylaws necessary to empower local authorities; changing the statute of water
utilities to ensure local control over the water companies; and transferring the ownership
of water utilities to municipalities and communes.
(cid:131) Public Awareness and Communication Program: This includes creating customer
relations offices in the utilities to handle complains; developing a strategy to promote
environmental conservation and cost awareness; creating a public communications office
in the MoTAT; and creating local consumer panels.
(cid:131) Private Sector Participation (PSP) Reform: This includes promoting of service delivery
by Albanian companies; continuing support to PSP projects with foreign service provider;
and improving the legislation to facilitate private sector participation and investments in
the water sector.

3.2.3 Financial Reform

This includes increasing cost recovery; gradually adjustment of tariffs; introducing wastewater
tariffs in all cities, improving accounting and financial management; increasing collection rates;
and changing the Government’s subsidy policy to a performance-based, transparent scheme.

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