Ex-ante Evaluation
1. Name of the ProjectCountry: People’s Republic of Bangladesh
Project: Karnaphuli Water Supply Project
Loan Agreement: June 29, 2006; Loan Amount: 12,224 million yen; Borrower: The Government ofthe People’s Republic of Bangladesh
2. Necessity and Relevance of JBIC’s AssistanceDue to a lack of capital investment for waterworks in Bangladesh, the development of facilities
remains stalled in a state of inadequacy in both urban and rural areas. Even in major cities the watersupply is insufficient, and in Chittagong the water supply service coverage remains at 48%.
In Dhaka and Chittagong water supply and sewerage authorities carry out water supply and sewerage
projects. Although the water supply and sewerage authorities are furnished with a certain degree oftechnical capability, their capabilities in terms of management aspects is inadequate, and their fragile
financial structures impose difficulty for any investment, even on a small scale.
As a result, water supply services remain inadequate in terms of both quality and quantity, which
serves as a factor in keeping the living environment of residents to a low level. In addition, especiallyin Chittagong City, which is Bangladesh’s industrial base, a lack of industrial water has made theinstallation of private wells a must for large-scale factories, which also acts as a disincentive forprivate investment.
With contribution to the achievement of the Millennium Development Goals (MDGs) (reducing byhalf the proportion of people without sustainable access to safe drinking water) in mind, in 2001 theGovernment of Bangladesh formulated the National Water Management Plan. Through the plan, theGovernment sets the goal of enabling the entire populace access to safe water and sewerage services
by the year 2010 and raising the water supply diffusion rate in urban areas to 75% by 2010, and to90% by 2025. The improvement of water supply in major cities where the populations are rapidly
rising, particularly Chittagong with its notable gap between supply and demand, has been accorded ahigh level of priority.
The National Policy for Safe Water Supply and Sanitation which was formulated in 1998 laid out abroad framework for improving the policy structure on such items as setting water rates to reflect
cost, strengthening the autonomy of the water supply and sewerage authorities, and reducing
non-revenue water. However, specific measures are not being taken. The setting of water rates
requires approval by the government and delays in revising fees are becoming primary factors
placing pressure on finances. While explicit subsidies are not paid to the water service authorities,
there are years in which these authorities are unable to repay their debts to the government in full,
which come to serve as virtual subsidies.
The water supply and sewerage sector constitutes a part of “infrastructure development for1

sustainable growth,” which is one of the prioritized areas in the Japan Bank for International
Cooperation (JBIC)’s Medium-Term Strategy for Overseas Economic Cooperation Operations
established in April 2005, and is also coming to be one of the prioritized areas for the Country-BasedODA Task Force. As such, this project is in accord with JBIC’s assistance policy.
Based on the above, JBIC’s assistance in this project is highly necessary and relevant.
3. Project Objectives
This project aims to increase the supply of water for consumer and industrial use in Chittagong Cityby improving water supply facilities, and thereby aspires to improve the living environment of thelocal residents and the investment environment.
4. Project Description(1) Target Area
Chittagong City
(2) Project Outline
The project will carry out the procurement of the following necessary materials and equipment,construction, and the procurement of services in the target area mentioned above.
(a) Construction of a water treatment plant (production capacity of 136,000m3 per day) and awater intake facility(b) Construction of transmission pipes and distribution mains(c) Engineering consulting services (technical guidance on matters including detailed design,
construction management, and leakage control measures, as well as standardization oftechnical specifications)(d) Institutional development consulting services (assistance and training for the executing
agency to develop long-term business plans, reduce non revenue water based on GIS, andimprove billing and accounting using IT.)(3) Total Project Cost/Loan Amount
17,037 million yen (ODA Loan Amount: 12,224 million yen)
(4) Schedule
Planned for June 2006 – September 2010 (52 months in total)(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of Bangladesh(b) Executing Agency: Chittagong Water Supply and Sewerage Authority (CWASA)(c) Operation and Maintenance System: Same as (b)(6) Environmental and Social Considerations(a) Environmental Effects/Land Acquisition and Resident Relocation(i) Category: B(ii) Reason for Categorization2

This project does not fall under the category for sectors or attributes prone to producing
effects and areas which are easily affected as listed in the JBIC Guidelines for Confirmationof Environmental and Social Considerations (established April 2002). For this reason, andbecause it has been judged that undesirable effects on the environment will not be significant,this project falls into Category B.
(iii) Environmental Permit
An Environmental Impact Assessment (EIA) report related to this project gained the primary
approval necessary to begin construction work in January 2006 from the Department ofEnvironment (DoE) of the Ministry of Environment and Forests (MoEF) of the Bangladesh
Government. The final approval which is needed for the operation of facilities should beacquired prior to the start of operations.
(iv) Anti-Pollution Measures
The antiseptic substances and other items to be used at the water purifying plant will beproperly managed according to Bangladesh’s standards. It is expected that drainage from thewater treatment plant and noise and vibration from the pump station will meet Bangladesh’s
drainage standards as well as its noise and vibration standards.
(v) Natural Environment
Since the project target areas and the surrounding areas do not fall under the heading oflocations earmarked for conservation (such as national parks), nor as habitats for valuablespecies or similar designations, it is not foreseen that the project will have any particularly
negative impacts.
(vi) Social Environment
Approximately 16ha of land acquisition will be needed, and the appropriate procedures will
be taken based upon Bangladesh’s Land Acquisition Act. It is not expected that the relocationof residents will be required.
(vii) Others/Monitoring
The executing agency and others will monitor water quality as well as noise and vibration
during construction work and during the provision of services.
(b) Promotion of Poverty Reduction: Assistance for the formulation of a plan to expand futurewater supply to the city’s slum areas is being reviewed.
(c) Promotion of Social Development (e.g. Gender Perspective): The CWASA, which conducts
operation, maintenance, and management, is staffing female employees as meter attendants forthe first time ever.
(7) Other Important Issues
In coordination with this project, capacity-building through a JICA technical cooperation project in aform that supplements the consulting services is currently under review.
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)
Indicator
BaselineTarget (2013(2005)[three years after3completion ofproject])
Supplied by this project
Water produced (1,000m3/d)
Utilization ratio (%)
Water quality (turbidity [NTU])
Water quality (color)
Chittagong City overall
Population served (1,000 people)
Service Coverage (%)
Number of connections (individual)
Non-revenue water ratio (%)

−−−−

136
100
<151,280
48
39,55329

2,220
72
75,20028(2) Internal Rate of Return
Economic Internal Rate of Return: 11.4%,
Financial Internal Rate of Return: 1.9%(a) Costs: Project costs, operation and maintenance costs(b) Benefit: water revenue and connection fees (timesaving costs and the like are included in
EIRR)(c) Project life: 30 years
6. External Risk Factors(1) Delayed implementation of other projects which are being planned at the target area for thisproject.
(2) Deterioration of the financial status of the executing agency due to proper rate revisions of water
rates and overdue payments from the government sector.
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
(1) The project plan was formulated taking into consideration the water delivery and supply network
as a whole, based on the lesson that it is necessary to carefully examine the project scope outside ofthe ODA loan as well, such as repairing the existing water supply network, when increasing thewater purifying and delivering capacity.
(2) The lesson has been learned that to ensure the continuity and self-sustaining development ofprojects it is necessary to consider measures for strengthening management (education and training
for employees such as the implementation of management consulting services, follow-ups by JICA
experts, etc.) from the project formation stage. Based on this lesson, JBIC will be providing
assistance for improving management and capacity-building from the formation stage onward.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation(a) water produced (1,000m3/d), (b) utilization ratio (%) (c) water quality (turbidity [NTU]), (d)water quality (color), (e) population served (1,000 people), (f) service coverage (%), (g) number ofconnections (individual), (h) non-revenue water ratio (%)
4(2) Timing of Next Evaluation
After project completion5