Completion Report

Project Number: 39099 Loan Number: 2160-MLD(SF) Grant Number: 0001-MLD December 2009

Maldives: Tsunami Emergency Assistance Project

CURRENCY EQUIVALENTS

Currency Unit – rufiyaa (Rf)

At Appraisal At Project Completion 31 March 2005 31 August 2008

Rf1.00 = $0.078125 $0.078125 $1.00 = Rf12.80 Rf12.80

ABBREVIATIONS

ADB – Asian Development Bank EIRR – economic internal rate of return EMM – Extended Mission to the Maldives IA – implementing agency JFPR – Japan Fund for Poverty Reduction MOFT – Ministry of Finance and Treasury PCR – project completion report PMU – project management unit RRP – report and recommendation of the President SDR – special drawing rights TA – technical assistance UNDP – United Nations Development Programme

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 31 December.

FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 31 December 2000.

(ii) In this report, "$" refers to US dollars.

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Vice-President X. Zhao, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Directors K. Higuchi, Transport and Communications Division, SARD T. Kandiah, Energy Division, SARD H. Kim, Urban Development Division, SARD T. Matsuo, Agriculture, Natural Resources and Social Services

Division, SARD B. Carrasco, Country Coordination and Regional Cooperation

Division, SARD Team leader A. Jeffries, Senior Energy Specialist, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA ii MAP ix I. PROJECT DESCRIPTION 1

A. Introduction 1 B. Rationale for Project 1 C. Main Objective 2

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 11 D. Disbursements 11 E. Project Schedule 11 F. Implementation Arrangements 12 G. Conditions and Covenants 13 H. Related Technical Assistance 13 I. Consultant Recruitment and Procurement 15 J. Performance of Consultants, Contractors, and Suppliers 16 K. Performance of the Borrower, Executing Agency, and Implementing Agencies 16 L. Performance of the Asian Development Bank 17

III. EVALUATION OF PERFORMANCE 18

A. Relevance 18 B. Effectiveness in Achieving Outcome 18 C. Efficiency in Achieving Outcome and Outputs 19 D. Preliminary Assessment of Sustainability 21 E. Impact 21

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 21

A. Overall Assessment 21 B. Lessons 22 C. Recommendations 24

APPENDIXES

1. Design and Monitoring Framework 25 2. Project Costs and Financing Plan 36 3. Allocation, Contract Amounts, and Actual Disbursements 38 4. Project Implementation Schedule 39 5. Project Organization Structure 40 6. Status of Compliance with Loan Covenants 41 7. Summary of Contract Details 46 8. Economic Analysis 49

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BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Grant Number 4. Project Title 5. Borrower

Maldives 2160-MLD(SF) 0001-MLD Tsunami Emergency Assistance Project Republic of the Maldives

6. Executing Agency Ministry of Finance and Treasury (MOFT), National Disaster Management Center, and responsible line ministries (i.e., Ministry of Housing, Transport and Environment for water supply, sanitation, and solid water management; power; and transport sectors; and Ministry of Fisheries and Agriculture for fisheries and agriculture sectors).

7. Amount of Loan 8. Amount of Grant 9. Technical Assistance (3) 10. Project Completion Report Number

SDR1.188 million ($1.77 million equivalent); $20.0 million (from the Asian Tsunami Fund) $1.65 million PCR: MLD 1134

B. Loan Data 1. Appraisal – Date Started – Date Completed

Fact-finding in February 2005 was upgraded to appraisal during the Management Review Meeting.

2. Financing Negotiations – Date Started – Date Completed

25 February 2005 27 February 2005

3. Date of Board Approval 31 March 2005

4. Date of Signing Financing Agreement

21 April 2005

5. Date of Loan and Grant Effectiveness

– In Loan and Financing Agreement – Actual – Number of Extensions

23 May 2005 23 May 2005 0

6. Closing Date – In Loan/Financing Agreement

– Actual

– Number of Extensions

30 September 2007 Project completion: 31 August 2008 (final closing pending finalization of accounts) 2

7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

1% per annum, and repayment of principal at 2% per annum for the first 10 years after the grace period, and 4% per annum thereafter. 40 years 10 years

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8. Terms of Relending

Not applicable.

9. Disbursements a. Dates

(Loan) (Grant)

Initial Disbursement 31 May 2005

31 October 2005

Final Disbursement 8 February 2006

(still to be determined)

Time Interval 8 months (still to be

determined)

(Loan and Grant)

Effective Date 23 May 2005

Original Closing Date 30 September 2007

Time Interval 28 months

b. Amount (Loan) 1,188,000 1,800,000

(in SDR) (US$ equivalent)

Cat. No. Category or Subloan

Original Allocation

Partial Cancellations

Last Revised Allocation

Amount Disbursed

Undisbursed Balance a

[1] [2] [3] [4] = [3] - [5] [5] [6] [7] = [5] - [6]Quick Disbursing Component 1,188,000 0 1,188,000 1,188,000 0Total (in SDR) 1,188,000 0 1,188,000 1,188,000 0

Total ($ equivalent) 1,800,000 0 1,774,183 1,774,183 0a b c d e

(Grant) 20,000,000 20,000,000 (in US$) (US$ equivalent)

Cat. No. Category or Subloan

Original Allocation

Partial Cancellations

Last Revised Allocation

Amount Disbursed

Undisbursed Balance a

[1] [2] [3] [4] = [3] - [5] [5] [6] [7] = [5] - [6]Quick Disbursing Component 4,700,000 0 4,700,000 4,700,000 0

1 Equipment and Materials 9,640,000 1,424,000 8,216,000 4,412,662 3,803,3382 Civil Works 3,860,000 (471,000) 4,331,000 5,519,403 (1,188,403)3 Extension Services 1,000,000 85,000 915,000 22,862 892,1384 Consulting Services 800,000 (1,038,000) 1,838,000 1,725,104 112,896

Total (in USD) 20,000,000 0 20,000,000 17,872,452 2,127,548

Total ($ equivalent) 20,000,000 0 20,000,000 17,872,452 2,127,548a b c d e

a For final cancellation after final reconciliation of imprest account balance. ( ) = negative a = US dollar equivalent according to the report and recommendation of the President b = US dollar equivalent as of the date of approval of the cancellation c = d + e d = actual US dollar equivalent; disbursed amount included the unliquidated imprest advance of $1,492,421. e = US dollar equivalent at the time of report preparation.

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10. Local Costs (Financed) - Amount ($ million) 5.76 - Percent of Local Costs 31.77% - Percent of Total Cost 26.62% C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost 16.40 12.37 Local Currency Cost 8.90 9.26 Total 25.30 21.63

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 3.50 3.50 ADB Financed 21.80 18.13 Total 25.30 21.63 ADB = Asian Development Bank.

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3. Cost Breakdown by Project Component ($ million)

Component Appraisal Actual Foreign Local Total Foreign Local Total A. ADB Financing 1. Quick-Disbursing 6.50 0.00 6.50 6.47 0.00 6.47 a. Grant Financing 4.70 0.00 4.70 4.70 0.00 4.70 b. Loan Financing 1.80 0.00 1.80 1.77 0.00 1.772. Project Components (Grant Financing) a. Equipment and Materials 8.94 0.70 9.64 4.41 0.00 4.41 i. Water Supply, Sanitation, and

Solid Waste Management 3.74 0.00 3.74 0.40 0.00 0.40

ii. Transport 0.30 0.00 0.30 0.00 0.00 0.00 iii. Power 1.50 0.00 1.50 1.94 0.00 1.94 iv. Fisheries 1.50 0.40 1.90 1.88 0.00 1.88 v. Agriculture 1.90 0.30 2.20 0.16 0.00 0.16 b. Civil Works 0.00 3.86 3.86 0.00 5.51 5.51 i. Water Supply, Sanitation, and

Solid Waste Management 0.00 0.26 0.26 0.00 1.05 1.05

ii. Transport 0.00 2.60 2.60 0.30 2.42 2.72 iii. Power 0.00 1.00 1.00 0.00 1.65 1.65 iv. Agriculture 0.00 0.00 0.00 0.00 0.76 0.76 c. Extension Services 0.50 0.50 1.00 0.022 0.00 0.022 i. Fisheries 0.30 0.40 0.70 0.002 0.00 0.002 ii. Agriculture 0.20 0.10 0.30 0.020 0.00 0.020 d. Consulting Services 0.52 0.28 0.80 1.47 0.25 1.72Subtotal (A) 16.46 5.34 21.80 12.37 5.76 18.13 B. Government Financinga 1. Administrative Expenses 0.00 1.28 1.28 0.00 1.28 1.28 a. Water Supply, Sanitation, and Solid

Waste Management 0.00 0.08 0.08 0.00 0.08 0.08

b. Transport 0.00 0.30 0.30 0.00 0.30 0.30 c. Power 0.00 0.20 0.20 0.00 0.20 0.20 d. Fisheries 0.00 0.30 0.30 0.00 0.30 0.30 e. Agriculture 0.00 0.40 0.40 0.00 0.40 0.402. Taxes and Duties 0.00 1.92 1.92 0.00 1.92 1.92 a. Water Supply, Sanitation, and Solid

Waste Management 0.00 0.62 0.62 0.00 0.62 0.62

b. Transport 0.00 0.40 0.40 0.00 0.40 0.40 c. Power 0.00 0.40 0.40 0.00 0.40 0.40 d. Fisheries 0.00 0.30 0.30 0.00 0.30 0.30 e. Agriculture 0.00 0.20 0.20 0.00 0.20 0.203. Beneficiariesb 0.00 0.30 0.30 0.00 0.30 0.30Subtotal (B) 0.00 3.50 3.50 0.00 3.50 3.50Total Project Cost 16.46 8.84 25.30 12.37 9.26 21.63ADB = Asian Development Bank. a Actual costs were not available. b Beneficiary contribution will be in kind, covering labor costs for civil works.

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4. Project Schedule Item Appraisal Estimate Actual A. Date of Contract with Consultants

1. Contract Date 2. Completion

April 2005 June 2007

May 2005 March 2007

B. General Milestones Establish project management unit April 2005 Requirement waived.

Subproject management by sector line ministries agreed by ADB

Select four projects in each subsector May 2005 Complete survey and design, prepare cost estimates and bidding documents

May 2005 July 2005

C. Component Milestones Water, Sanitation, and Solid Waste Management Conduct detailed assessment of damage to environmental structure

May 2005 September 2005

Complete bidding and contract awards May–June 2005 June 2006 (for Guraidhoo Island), and March–October 2007 (for Kulhudhuffushi Island)

Construction, delivery, and installation July 2005–March 2007 Guraidhoo Island sewer was completed by June 2008

Transport Complete bidding and contract awards May–June 2005 Only Dhidhdhoo

Island’s harbor was done, bidding by April 2007, and award by June 2007.

Rehabilitate damaged maritime navigation aids, provide emergency interisland transport capacity for reconstruction works, and dredge and repair causeways

July-December 2005

Rehabilitate damaged jetties, repair sea and quay walls, and rehabilitate Male airport

July 2005–December 2006

Dhidhdhoo Island’s harbor completed by June 2008. Other works completed by other donors.

Power Survey and detailed design May 2005 November 2005 Complete bidding and contract awards June 2005 April 2006 Construction, delivery and installation July 2005–March 2007 July 2006–August

2008 Fisheries Identify cottage processors March 2005 Needs assessment:

May–September 2005

Prepare guidelines for community-based organization operations

May 2005 September 2005

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Select community-based organizations and island development committees

June 2005 October 2005

Complete bidding and contract awards May–June 2005 Fisheries kits: November 2005–July 2006

Item Appraisal Estimate Actual Supply and deliver equipment July–December 2005 Training: March–

December 2007 Distribute cash grants to community-based organizations

July–December 2005 ADB did not agree to cash grants.

Distribute microcredit to beneficiaries July–December 2005 June 2007–August 2008

Agriculture Identify affected farmers May 2005 July–November

2005 Select community-based organizations and island development committees

June 2005 December 2005

Complete bidding and contract awards May–June 2005 For infrastructure works: January 2008, canceled

Supply and deliver equipment July 2005–March 2007 June–September 2007

Distribute cash grants to community-based organizations

July–December 2005 ADB did not agree to cash grants.

Distribute microcredit to beneficiaries July–December 2005 June 2007–August 2008

D. Other Milestones Reallocation of funds First extension of loan and grant closing date Second extension of loan and grant closing date Final cancellation of undisbursed loan and grant balance

10 November 2006 (all sectors) 30 October 2007 (agriculture component); 17 Jul 2008 (energy component) 29 January 2007 19 June 2008 (pending final reconciliation of imprest account balance)

5. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 31 March 2005 to 31 December 2005 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 August 2008 Satisfactory Satisfactory

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D. Data on Asian Development Bank Missions

Name of Mission Division Date No. of

Persons

No. of Person-

Days Specialization of Membersa

Fact-Finding 3–10 February 2005 1 7 a Appraisal (Fact-finding was upgraded to appraisal at the Management Review Meeting) Inceptionb SANS 3–9 May 2005 2 14 a, g Inception SAOC 16–23 May 2005 8 71 a, b, c, d, e, f, g Disbursement Mission

SAEN 14–16 June 2005 2 6 a, h

Review 1 SANS 9–12 August 2005 1 4 a Review 2b SAOC 29 August–1

September 2005 1 3 I

Review 3b SAEN 20 September–2 October 2005

3 29 a, g, j

Review 4 SAUD 6–14 November 2005

3 24 a, g, k

Review 5 SATC 20–21 November 2005

1 2 a

Review 6b SANS 12–18 December 2005

3 18 a, e, g

Review 7 SANS 20–27 March 2006 1 7 e Review 8 SAUD 17–21 May 2006 1 5 a Review 9 SATC 9–10 August 2006 2 4 a, f Review 10b SAEN 28–31 August 2006 1 4 a Review 11 SANS 26 September–5

October 2006 1 10 a

Review 12 SAUD 5–9 November 2006 2 10 a, l Review 13 SAEN 4–7 December 2006 1 4 a Review 14 SANS 4–8 March 2007 2 10 e, g Review 15b SAUD 10–24 April 2007 2 7 a, g Review 16b SAUD 27 June–6 July 2007 1 1 a Review 17 SAEN 1–5 July 2007 2 10 e, m Review 18 SAEN 14–15 November

2007 1 2 e

Review 19b SAUD 2–4 December 2007 2 6 a, g Review 20b SAUD 6–10 April 2008 1 1 a Review 21b SAEN 2–5 June 2008 1 2 e Review 22 SANS 28–31 July 2008 2 4 e, g Review 23b SAEN 3–6 November 2008 2 8 e, g Project Completion Reviewc

SAEN 10–25 May 2009 3 32 e, n, o, p

SAEN = Energy Division; SANS = Agriculture, Natural Resources, and Social Services Division; SAOC = Country Coordination and Regional Cooperation Division; SARD = South Asia Department; SATC = Transport and Communications Division; SAUD = Urban Development Division. a a – project specialist; b – principal economist; c – financial management specialist; d – procurement specialist; e

– project economist; f – project officer (national); g – assistant project analyst; h – financial control specialist; i – country programs specialist; j – senior project specialist (finance); k – environment engineer (consultant); l – safeguards specialist; m – head, Project Administration Unit; n – implementation expert (consultant); o – evaluation and economic expert; p – project analyst (consultant). The Extended Mission to the Maldives senior resident adviser provided assistance and support to all review missions.

b Concurrent with other missions. c The project completion report was prepared by A. Jeffries, Senior Energy Specialist, Energy Division, South Asia

Department.

I. PROJECT DESCRIPTION A. Introduction 1. The Tsunami Emergency Assistance Project (the Project) in the Maldives responded to the widespread destruction caused by the Indian Ocean basin tsunami that struck on 26 December 2004.1 It was approved by the Asian Development Bank (ADB) on 31 March 2005, made effective on 23 May 2005 with an original closing date of 30 September 2007, and extended until 31 August 2008. The Project, based on a joint needs assessment prepared by ADB, bilateral Red Cross organizations, United Nations agencies, and World Bank included rehabilitation of high-priority infrastructure and facilities; provision of equipment and materials; creation of livelihood programs; and provision of associated consulting services. Final outputs included a sewerage system on one island, harbor reconstruction, new power stations and electricity distribution systems on six islands, pilot demonstration farms, training and a microcredit program for farmers, fisheries development training program, distribution of fishing equipment, and a microcredit program for fishers. The design and monitoring framework is summarized in Appendix 1. 2. ADB provided a grant of $20 million from the Asian Tsunami Fund and a loan of SDR1.188 million ($1.77 million) from its Special Funds resources to finance about 86% of total project costs.2 The loan funds for a quick-disbursing component were reallocated from loan savings under ongoing projects at the time of the tsunami, so this loan did not represent increased indebtedness of the Government (or the Borrower). This loan helped fund the import of essential goods on an emergency basis, retroactive to the immediate aftermath of the tsunami. The description and financing amounts for each component, as described in the report and recommendation of the President (RRP)3, are in Appendix 2. 3. Due to the Project’s emergency nature, subprojects were not identified during appraisal. They were subsequently selected based on detailed discussions with the implementing agencies (IAs) during planning of the physical components as well as on subproject selection criteria included in the RRP. Several proposed activities in the RRP were later funded by other donors, and some had to be redesigned during implementation, particularly for the agriculture sector component. ADB also provided three technical assistance (TA) grants, totaling $1.65 million.4 B. Rationale for the Project 4. The tsunami had a devastating impact on several islands in the Maldives. The Maldives was particularly vulnerable, as it consists of 1,190 small islands spread across 20 low-lying coral atolls. In fact, the highest point in the country is only 2 meters above sea level. Eighty-three 1 There were similar projects in India, Indonesia and Sri Lanka. 2 The grant and loan covered the entire foreign exchange cost of $16.5 million and $5.3 million equivalent of local

currency cost. 3 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Grant and Loan

to the Republic of the Maldives for the Tsunami Emergency Assistance Project. Manila. 4 ADB. 2005. Technical Assistance to the Maldives for Promoting Sound Environmental Management in the

Aftermath of the Tsunami Disaster. Manila (from the Cooperation Fund for the Water Sector, TA 39129-MLD, for $400,000); ADB. 2005. Grant Assistance to the Maldives for Restoration of Livelihoods of Tsunami-Affected Farmers. Manila (from the Japan Fund for Poverty Reduction [JFPR], TA 39108-MLD, for $1 million); and ADB. ADB. 2003. Proposed Technical Assistance for the Poverty and Environment Program. Manila (RETA 6150, for $3.92 million, of which a portion funded technical assistance to the Maldives for saving tsunami-affected trees in 2005).

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people died in the disaster, 25 others remain missing, and more than 1,300 suffered injuries. Thirty-nine islands were heavily damaged, and nearly one third of the country’s total population of about 370,000 was affected. About 7% (21,000 people) were displaced, and thousands more had their livelihoods destroyed. Due to the major impact on the gross domestic product, grants were the preferred mode of external assistance for financing post-tsunami rehabilitation and reconstruction. The Project was sound in rationale and design, and an integral part of rebuilding the country. C. Main Objective 5. The Project’s main objective was to contribute to sustainable economic growth by minimizing the tsunami’s devastating impact. To attain this goal, economic recovery on the worst-affected islands was to be accelerated through reconstruction of damaged infrastructure and restoration of livelihoods, especially of the poor. The Project consisted of a quick-disbursing component to provide immediate assistance to the Government to purchase materials and equipment required for emergency assistance and livelihood restoration, and a project component focusing on (i) water supply, sanitation, and solid waste management; (ii) transport; (iii) power; (iv) fisheries; and (v) agriculture sectors. In addition, the Project provided substantial consulting support for implementation, capacity building, and participatory processes in affected communities.

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 6. Project design and formulation were in line with tsunami recovery requirements as determined by the joint needs assessment. Based on this assessment and ADB’s own loan appraisal, the Project focused on sectors with which ADB was most familiar (e.g., power, sewerage, and water)—a logical decision considering that ADB had financed several projects in these sectors and had good working relationships with the respective ministries, which were ultimately responsible for implementing the Project. In regard to the fisheries sector—the second-largest contributor to the country’s gross domestic product after tourism—ADB’s involvement was requested by the Government. Other donors also supported the fisheries sector. In addition, ADB decided to also support the agriculture sector, where it had recently completed a study on its commercialization.

7. Due to the need for urgent action, project design and formulation did not finalize specific subprojects, as allowed for in emergency loans.5 Subproject were ultimately selected by the IAs, with input from ADB through headquarters staff and the Extended Mission in the Maldives (EMM), based on need and guided by eligibility criteria. The Project was to be implemented through a central project management unit (PMU), which would second staff members from various government agencies. Recognizing that the country had limited technical capacity, ADB also provided three TA grants to help build capacity and train IA staff, local island governments, and community-based organizations implementing the livelihood programs. The Maldives had experienced problems with timely use of ADB funds in past and ongoing projects, and this Project—with additional pledged assistance from other donors—represented a very large commitment.

5 ADB. 2004. Operations Manual. D7/BP and D7/OP: Disaster and Emergency Assistance. Manila.

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8. As outlined in the RRP, ADB funds were divided among the five sectors (i.e., agriculture; fisheries; power; transport; and water supply, sanitation, and solid waste management), with agriculture receiving some additional funds due to supplementation by three associated TA grants. The decision to provide equal fund distribution was based on the joint needs assessment and the Government’s request. Because subprojects under each sector had yet to be determined and designed at the time of project appraisal, detailed costs were difficult to estimate at this stage. 9. The project focus was based on ongoing ADB involvement in the Maldives, the joint needs assessment, and specific government requests.6 Scope decisions were made under difficult circumstances, including (i) lack of time for full evaluation due to the Project’s emergency nature, (ii) the Government facing an overload of urgent undertakings involving rapid recovery, and (iii) the large number and diverse set of donors trying to provide meaningful support without duplication. As time passed, better information on actual needs became available, resulting in ADB resources for the livelihood programs becoming less than estimated in the joint needs assessment due to some duplication of programs by various donors. At the same time, the actual costs of infrastructure restoration became available as detailed designs were completed and initial tenders were issued. This led to major cost increases, necessitating changes in scope or more funding. All of these factors were common to donors and led to adjusting of the project scopes. Regarding the Project, major changes included those in the transport component (restoring and improving one harbor instead of three) and sewerage component (restoring and improving one system instead of two). 10. At the time of appraisal, implementation arrangements required that a centralized PMU be established, headed by an experienced project manager and staffed by people seconded from various departments. This approach is commonly followed for ADB loans, and requires that the Government dedicate the necessary personnel. However, since the Government was already short staffed, it requested that the various project components be implemented by the responsible agencies under the line ministries. ADB subsequently accepted this arrangement. Further, the EMM performed certain functions of a PMU. While these changes did cause some initial delays in implementation and an extension of the closing date, the completed works have been done satisfactorily. The various project performance reports summarize the progress of the various works and confirm that the loan covenants, with one exception, were achieved. 11. The Project—as envisaged at appraisal and as actually implemented—was generally consistent with (i) ADB’s operational strategy for Maldives, to promote economic efficiency and higher sustainable growth to improve employment and reduce poverty7; and (ii) ADB’s Disaster and Emergency Assistance Policy. 8 The Project rehabilitated damaged infrastructure and provided support for livelihood rehabilitation. The rehabilitated facilities enabled beneficiaries to resume normal lives by restoring basic services and income-generating opportunities, particularly in the fisheries sector. B. Project Outputs 12. As mentioned above, the emergency nature of the TEAP meant that subproject identification was not finalized until the implementation phase, and several proposed activities in

6 The same logic was followed by other donors. 7 ADB. 2003. Country Strategy and Program Update 2004-2006. Manila. 8 ADB. 2004. Disaster and Emergency Assistance Policy. Manila.

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the RRP were subsequently funded by other donor agencies and some TEAP activities had to be redesigned. These changes are detailed in Appendix 1.

1. Quick-Disbursing Component 13. This component, totaling $6.5 million, aimed to finance imports identified as necessary for an effective recovery program, thus assisting the Maldives in purchasing items in the face of high and unexpected expenditures associated with addressing this disaster.9 The Government and ADB agreed on a list of imported eligible items retroactively to 1 January 2005. The grant provided $4.7 million, and an additional $1.8 million was made available through transfer of unallocated, ongoing ADB loan funds. By November 2005, two liquidations totaling $4.400 million were submitted to ADB. About $1.940 million was used for retroactive financing ($1.410 million from the grant and $0.531 million from the loan). In late 2005, ADB noted a problem with the time required for verification of payments; capacity constraints were precluding the timely submission of withdrawal applications and supporting documents. However, the problem was addressed, and an understanding was reached among ADB, Maldives Customs Service, and Ministry of Finance and Treasury (MOFT), so the Government was able to assign staff members, fully use the funds, and thus achieve the component's objectives.

14. By the third quarter of 2006, $6.47 million ($4.70 million from the grant and $1.77 million from the loan) was fully disbursed and liquidated. There were no major problems associated with this component, except MOFT took longer than expected to compare customs forms and lists of imported items, cross-check them against the list of eligible items, and submit the requisite documentation.

2. Water Supply, Sanitation, and Solid Waste Management Component 15. The Project hoped to fund an estimated $4 million equivalent of the most urgent water supply and sewerage subprojects, out of the more than $45 million identified in the joint needs assessment. As there were other donors interested in the water supply subsector, the Government asked ADB to focus on sewerage, originally through the Maldives Water and Sanitation Authority, later through the Ministry of Energy, Environment and Water, which has since been replaced by the Ministry of Housing, Transport and Environment.10 ADB did not consider a solid waste management subcomponent, as the International Committee for the Red Cross had already offered to provide solid waste centers throughout the country. Since ADB was already involved in financing water supply and sewerage through one completed loan11 and its second phase,12 it was able to mobilize consultants quickly to assist in project planning and design, as the Government requested that the Project finance construction of sewerage systems for Guraidhoo and Kulhudhuffushi islands. 16. However, progress subsequently stalled, due to the need to adopt new environmental pollution standards, which were necessary before the project design phase could commence, and the Government’s 9-month delay in deciding on project design standards (i.e., whether to install low-cost or conventional sewerage systems). Subsequently—and based on a feasibility

9 This is in accordance with ADB's Disaster and Emergency Assistance Policy (footnote 8). 10 Only the current government ministries are referred to in the remainder of this report. 11 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Republic of the Maldives For the Regional Development Project. Manila (Loan 1695-MLD, for $8.0 million). 12 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Republic of the Maldives For the Regional Development Project, Phase II – Environmental Infrastructure and Management. Manila (Loan 2170-MLD, for $6.0 million).

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study prepared with ADB's support—the Government decided that Kulhudhuffushi Island’s sewerage system should be a conventional system, resulting in a much higher cost than was allotted in the Project. It was thus decided that the Project would only finance the detailed design and preparation of tender documents for this system and fund the construction of a sewerage system only on Guraidhoo Island. These designs and documents for Kulhudhuffushi Island, however, have helped build a new sewerage system there via government funds. The actual disbursement of ADB funds for this component was $1.47 million. The related consulting services were charged to the consultancy line item under the Project. 17. Guraidhoo Island’s sewerage system consists of two-compartment septic tanks providing primary treatment for individual plots, with effluent discharge to a 200 millimeter-diameter pipe gravity collection system. The effluent is then pumped through three lift stations to a facultative pond for secondary treatment before discharging to the sea through an outfall, located in deep water about 30 meters from the shore. The sewerage system was designed to provide screening and primary treatment in the two-compartment septic tanks and polishing (i.e., secondary treatment) through a facultative storage pond with 30-day retention. The system has been completed satisfactorily as determined by ongoing EMM inspections during construction, various review missions, and site visits. The workmanship is excellent. 18. However, the secondary treatment pond is currently being bypassed. In 2008, there was an outbreak of dengue fever on some islands, including Guraidhoo. The Ministry of Health instructed the Ministry of Housing, Transport and Environment and local island development committee to drain the treatment pond to avoid the breeding of mosquitoes, as recently constructed houses are now located near the treatment pond. Because the treatment pond is not being used, the collected wastewater is discharged directly to the sea. However, as the outfall line does extend into deeper water and the volume of wastewater is only about 400 cubic meters of treated and/or primary effluent per day, the dilution—with tidal flows and wave action—is very high. Therefore, the wastewater may, in fact, be supporting marine life on and near the reef. 19. Local island leaders have reported that since the installation of the sewerage system, odor problems common in groundwater have disappeared, and its quality has improved. There have been no complaints about the quality in the vicinity of the outfall, and the project completion review (PCR) mission found no noticeable environmental problems. However, the water quality and reef condition should be tested. As several new houses are under construction immediately across the road from the treatment pond, it is unlikely that the pond will be used again. 20. There is no tariff or user fee arrangement for sewerage in the Maldives. The local island development committee is paying power fees to operate the three pump stations in Guraidhoo Island’s sewerage system, but other operation and maintenance costs—including those of operations staff—are not being recovered from end-users, despite the project participatory preparation of an operation and maintenance program, which included cost recovery. While the Government is considering incorporating a sewage fee in water bills on islands with piped water supplies, this does not apply to Guraidhoo Island, which has individual wells on each plot. 21. The Government's solution is a new plan to establish regional utility companies for each province.13 This plan will bundle power, sewerage, solid waste, and water management into new utilities being considered at the provincial levels, and result in a monthly fee being charged by

13 The PCR mission from 11 to 26 May 2009 was informed of this plan.

6

these utilities. A presidential decree has established them legally, and three entities have already become registered companies. However, acceptance of these proposed utilities and related tariffs will require extensive public consultations and time. In the meantime, the island development committee may require budgetary support from the Government to carry out normal preventative maintenance. 3. Transport Component 22. The joint needs assessment estimated $25.0 million of transport sector damage from the tsunami, and the Project sought to finance $2.9 million equivalent of the most urgent reconstruction works. ADB had recently helped complete a draft maritime transport plan for the Maldives, so it was already involved in upcoming projects in that sector. Originally, ADB was to finance the reconstruction of three harbors, following conventional specifications. Yet after more detailed evaluations and incorporation of higher standards than those pre-tsunami, the cost was substantially higher. Therefore, only the reconstruction of one harbor could be funded. 23. The Government then asked ADB to finance reconstruction and upgrading of Dhidhdhoo Island’s harbor. The harbor is an essential component of the island’s infrastructure, supporting economic activity, especially fishing, and supporting several new resort islands under development in the area. The construction incorporated environmental protection measures, such as long lasting rock in the seawalls (as compared to gunny sacks filled with cement that decompose after a few years), steel piling for the quay, and reinforced concrete for the docking areas. The works progressed on schedule, and were completed by June 2008. The quality of workmanship is excellent. The actual disbursement of ADB funds for this component was $2.73 million, with the related consulting services being charged to the consultancy line item. 24. The island development committee had requested that an additional seawall be added to the original contract at a cost of $125,000. The seawall would protect the entrance from the eastern monsoons and provide navigational lighting at the entrance. The island development committee reported that there had been five accidents at the entrance, which it claimed resulted from the lack of an eastern seawall (though the previous harbor also did not have an eastern seawall). Although reviewed and agreed to by ADB, the Government did not approve these additional works. However, the benefits originally envisaged were achieved as reported by the island development committee and harbor users. Larger supply vessels can now dock at the quay to unload, whereas before they had to be unloaded onto smaller vessels. The improved harbor also provides a storm-safe, clean harbor for many fishing boats, coast guard vessels, and speedboats serving nearby resort islands. 4. Power Component 25. The Project aimed to fund an estimated $2.5 million equivalent of the $5.0 million of power sector damages that were estimated by the joint needs assessment. After detailed studies—and as ADB was already involved in an outer island electrification project14—the Government requested that ADB finance rehabilitation of electrical power systems on seven islands. This number was later reduced to six, as Kulhudhuffushi Island was unable to complete the related necessary reclamation works for the new power station.

14 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Republic of the Maldives on the Outer Islands Electrification Sector Project. Manila (Loan 1887-MLD, for $8 million).

7

26. The Project funded works consisting of new power generation plants, new electrical distribution systems, related buildings, and miscellaneous infrastructure. However, the $2.5 million allocated was insufficient to fund the six subprojects, a situation exacerbated by increases in the prices of aluminum, copper, electrical equipment, and steel during 2005–2006. The bid price from the lowest bidder for the six stations was $3.62 million, well above the allotted amount. The work was thus split into two packages, and the first was for four islands, bringing the bid price down to $2.60 million. The IA15 decided it would slightly reduce the scope of the contract to bring it down to the $2.5 million allocation amount. The second package for the remaining two islands was later awarded, after an additional $1.3 million of project funds were reallocated from the water supply, sanitation, and solid waste management component. The actual total disbursement of ADB funds for this component was $3.6 million, with the related consulting fees being charged to the consultancy line item.

27. The works were successfully completed, and the systems are operating on five islands. The PCR mission visited the power system on Filladhoo Island in Haa Dhaalu Atoll, finding that the system had been well constructed and is in full operation with no major issues. The island development committee is pleased with the new system and noted that the benefits envisaged had been achieved. It did indicate that although it had requested that the subproject include street lighting, this was not added to the scope. It also noted that several minor items, such as fans in the buildings, window coverings, and a computer, were requested but not added to the scope. 28. The PCR mission also visited Madifushi Island in Thaa Atoll, where the Project financed a power generation station. However, despite it having been fully completed for about 1 year, the station is not being operated. This island suffered severe damage from the tsunami, and the entire population—about 1,100 persons—was classified as displaced. Under the Government’s provision for displaced persons, they were provided with temporary shelter and are given electric power free of charge. This free power provision will continue until they can take possession of their new houses, which are not yet completed.16 29. The new power generation station did not become operational until 3 years after the tsunami. The island’s economy has largely recovered, and electricity demand is higher than originally estimated by the Government. This higher-than-expected demand is also due to the continued supply of electric power, free of charge. As there is no incentive to conserve free power, there has reportedly been irrational use of electricity by some customers, creating a spike in demand. These factors have resulted in insufficient capacity of the power generation system on the island to meet current (albeit distorted) demand. Moreover, as the population has refused to operate the power generation system until the Government completes the promised housing and enlarges the power station’s capacity, the island is still using its old tsunami-damaged generating system. 30. Another ongoing issue in the outer islands, including those with project-funded stations, is that the cost of generating electricity is higher than the rates paid by domestic consumers, the

15 This decision was made in June 2006 by the IA, the Ministry of Environment, Energy and Water, which later

became the Ministry of Housing, Transport and Environment in 2008 due to government reorganization. 16 While 54 new houses constructed by the British Red Cross have been completed and owners have taken

possession, the other 78 houses have not been built, and 49 houses are to be repaired by the Government. Sixty families are still living in temporary shelters.

8

majority of consumers.17 Furthermore, the cost of generation is higher than that in Male,18 and since Male enjoys higher per capita incomes, it is politically difficult to charge higher tariffs to outer island domestic users. The lack of full cost recovery leads to funding major maintenance and spare parts on an ad hoc basis. As mentioned previously, the Government is working to shift the responsibility for operation and maintenance and setting of tariffs to new, provincial-level utility companies. This, however, may take time, as many have refused to pay a tariff higher than that paid in Male. In the meantime, proper operation and maintenance of the project-funded systems remain a concern. 5. Agriculture Component 31. The RRP allocated $2.8 million for rehabilitation of agricultural facilities and restoration of associated activities, as part of an estimated $11.0 million in damages to the sector. The tsunami was particularly destructive to standing crops, fruit trees, and arable land, and destroyed farming equipment and agricultural infrastructure. Because several donors are active in this sector, the Ministry of Fisheries and Agriculture agreed with ADB that the Project should (i) rehabilitate and expand the facilities at the Mendhoo Agricultural Research Station, (ii) develop pilot demonstration farms by establishing agricultural cooperative societies, (iii) provide agricultural kits (i.e., fertilizer, seeds, and tools), (iv) improve road access and development, (v) develop a farmer’s handbook, agriculture training, and associated courses, and (vi) provide microcredit to individual beneficiaries. The ministry also requested that ADB support a cash grant scheme to provide immediate assistance to farmers to reestablish their income-generating activities,19 but ADB did not accept this proposal due to potential issues regarding transparency and accountability. 32. Mendhoo Agricultural Research Station. The major works related to the Mendhoo Agricultural Research Station ($1.5 million estimated cost) were not carried out, as the planning and design process was lengthy, and when finally ready for tendering, the work could not be completed within the original loan closing date. Since the Government was uncertain if ADB would extend the loan closing date, it dropped these works. 33. Development of pilot demonstration farms. Although the Ministry of Fisheries and Agriculture assessed the pilot farm approach by establishing cooperative societies as not sustainable, cooperatives of 8–10 farmers were formed on eight islands, in consultation with local communities.20 These groups were provided with funds for land clearing, seeds for various types of crops (mostly vegetables), construction of wells and piping for irrigation, and simple structures for storage. Capacity for crop rotation, fertilizer use, and marketing of their produce was also built. Initially, there was some success, but once the support from international consultants was completed, local consultants were unable to keep the programs going. The farmer groups have all dispersed, and the pilot farms have been abandoned. 34. The Ministry of Fisheries and Agriculture, as confirmed by the PCR mission, asserted many reasons for this failure. There was little concept of community cooperation, and the 17 The cost is in the range of Rf6 ($0.47) per kilowatt-hour. However, tariffs are generally set at Rf4 ($0.31) per

kilowatt-hour for domestic consumers, which is not sufficient to meet all operation and maintenance and fuel costs, even with higher rates often paid by government facilities and commercial users.

18 Outer island electric systems are very small, stand-alone systems of less than 500 connections, with fixed costs spread over a small number of end-users, and with high transport costs for fuel and spare parts. In contrast, Male has more than 30,000 connections, including numerous commercial and government consumers who pay substantially higher tariffs, thus allowing lower tariffs for domestic users.

19 The Government's assessment identified 2,280 beneficiaries. 20 This approach had been considered under earlier studies and was proposed by the Government.

9

farmers ended up disagreeing on the work. Some did not do a fair share, leaders resigned or took a disproportionate share of profits or credit, and, in some cases, nonparticipating islanders vandalized the facilities. Moreover, local consultants were unable to assist with marketing efforts, and there was difficulty in selling the produce. Although the farmers were very pleased with the international consultants, they felt that the local consultants did not interact with them well. The pilot farms were comparatively small, and shipping produce to population centers—basically Male21—is very costly. The farmers felt that they were overly dependent on boat operators. The cost of power and maintenance to operate the irrigation pumps was also prohibitive, and many ended up hauling water by hand. Further, funds for seeds and delivery of materials were not always provided in a timely manner, requiring the farmers to fund such items themselves. 35. The PCR mission visited two pilot farms and found them largely abandoned, land mostly overgrown, irrigation systems broken, and storage structures collapsed. The pilot farm on Gan Island, while initially successful, had fallen into disuse within a few months of the departure of the international consultant. According to island officials and farmers interviewed, complicated cultural attitudes and lack of profit contributed to the abandonment. The PCR mission was advised that Maldivian culture is family-oriented and independent, and the members had little experience with the group dynamics experienced under the cooperative societies. Once leadership from ADB consultants was removed, individuals and families began quarrelling about sharing work, costs, and profits. The nature of farming in the Maldives requires high input costs for importing fertilizer and mulch from India, as well as high transport costs across hundreds of kilometers of ocean. Also, the cooperative societies ended up hiring laborers from outside the Maldives to do the field work. Wages paid to the laborers, plus additional costs for their passage and housing, reduced profits. The farmers also felt that they were neglecting their own fields. This situation was further complicated by a drop in produce prices as the Government liberalized importation of fresh produce, making the outer island farmers less competitive. A research facility and nursery project sponsored by CARE International on Gan Island, which was turned over to a local nongovernmental organization, ended up failing for similar reasons. 36. Farmer's handbook and training. ADB funded consultants to develop a farmer’s handbook, provide training courses, and strengthen extension services. The agricultural handbook, Agriculture in an Atoll Environment,22 was prepared, tested with farmers, and printed in English and translated into local languages for distribution. Curricula for formal education to agriculture certificate levels I and II were developed and accredited by the Maldives Accreditation Board. Courses were offered from 24 April to 28 June 2008, with 16 students in course I and 14 students in course II. Additional training included (i) appropriate farming approaches that enhance sustainability and increase income-generating opportunities, and (ii) record keeping and basic accounting practices to help develop and support commercial agriculture initiatives. This subcomponent is considered successful by the Lamoo Atoll counselor and Gan Island officials. They indicated that it was helpful in informing and training farmers on better farming techniques. The farmers involved in the pilot farms and cooperative societies used their new knowledge to improve production and profits on their own farms. There is now a stronger interest in agricultural activities, and the Government is actively supporting the sector more than in the past, when most of the focus was on fisheries. 37. Microcredit. The microcredit scheme was ultimately canceled due to the lack of use. The scheme was slow to proceed, as there was disagreement about the Government’s

21 While there are numerous resort islands, they do not purchase local produce, preferring instead to import from

year-round sources with a wide variety of produce from Thailand or Australia. 22 5,000 copies were translated into local languages and distributed among atoll and island government offices.

10

requested procedure, which involved a more complicated process than some other grant-based programs. By the time this was resolved, several donors—including CARE International, Food and Agricultural Organization, International Fund for Agricultural Development, Japan International Cooperation Agency, and United Nations Development Programme (UNDP)—had already begun providing microcredit and other agricultural sector support. 38. A further complication was that according to Lamoo Atoll and Gan and Fonadhoo islands officials, the Ministry of Fisheries and Agriculture did not work though local officials to locate eligible beneficiaries. Farmers had also been promised grants by the Government, and thus were reluctant to sign up for loans if they could receive grant funds instead. Lastly, ADB loan terms were not as attractive as some alternates, and as the farmers were only eligible for one such loan, they opted first for larger loans with better terms. ADB-funded loans were a maximum of Rf8,000 ($650) with a 2-year repayment period. In the meantime, the Government had organized credit from other sources, with loans up to Rf25,000 ($2,000) and a 10-year repayment period. The microcredit under the Project was subsequently canceled due to slow disbursement, but the $1 million TA grant from the JFPR (footnote 4) and administered by ADB successfully provided loans. 39. The actual disbursement under the agriculture component was only $0.37 million or 15% of that envisaged at appraisal. 6. Fisheries Component 40. The fishing industry constitutes the most important gross national product source after tourism, and the tsunami caused widespread damage to this sector. The joint needs assessment estimated that more than $25 million would be required to rehabilitate the fisheries sector to repair or replace fishing vessels; boat engines; fishing gear and accessories; seafood-processing equipment; and basic infrastructure such as storage buildings, docks, and access roads. ADB declined to support a cash grant scheme due to potential lack of transparency and accountability. The RRP allocated a total of $2.3 million, later increased to $2.715 million equivalent, to support the sector’s rehabilitation. Activities included (i) strengthening community-based organizations; (ii) developing social mobilization trips; (iii) providing processing kits; (iv) consultancies to develop seafood-processing curricula, training of fishers, regulatory frameworks, and establishment and registration of fishing cooperatives on 15 islands; and (v) $800,000 committed to MOFT for microcredit. 41. Community-based organization strengthening and fisheries training. Community consultations were completed in December 2005, followed by social mobilization visits. Cooperative development training in Male and exposure visits to Bangladesh were held from February to March 2006. In addition, about 560 fishers participated in fisheries development training programs related to seafood processing and market courses by the end of 2007. 42. In-kind assistance. Under this subcomponent, 488 kits were distributed out of 1,369 identified beneficiaries by the end of the third quarter of 2006. 23 Each kit, worth about Rf6,000 ($467), consisted of fish finders, global positioning systems, nets, and small generators. 43. Microcredit. The Ministry of Fisheries and Agriculture worked through local island governments to identify eligible fishers for microcredit, which then passed the list to the local branch of the Bank of Maldives, which made loans and monitored repayment. The microcredit

23 Other donors also supported the fisheries sector.

11

for fishers was Rf16,000 ($1,300). Similar to the situation in the agriculture component, other sources of loans allowed up to Rf25,000 ($2,032), and the beneficiaries could only qualify for one loan. As a result, the uptake of microcredit was modest—about 600 beneficiaries—with some allotted funds unused. 44. The total disbursement of project funds for this component was only about $1.8 million, mainly due to the lack of interest in the microcredit. C. Project Costs 45. The status of the project costs for the grant of $20 million and loan of SDR1.188 million ($1.77 million equivalent) is detailed in Appendix 2. The costs for the Project were revised in July 2008 to $19.9 million. D. Disbursements 46. Regarding the $20 million grant, $17.872 million has been disbursed. In addition, the SDR1.188 million ($1.77 million equivalent) loan was provided by reallocating these funds from several ongoing loan projects, of which the full amount has been disbursed. Allocation, contracts, and actual disbursements are shown in Appendix 3. E. Project Schedule 47. The Project was to be completed in 30 months from the date of Board approval, by 30 September 2007. However, the project completion date was extended twice, the first time to 30 June 2008, then to 31 August 2008. Appendix 4 provides a graph comparing the actual implementation schedule and the schedule at appraisal. While the Project did take 11 months longer to complete than planned at appraisal, implementation progress proceeded faster than regular ADB loan projects in the Maldives. Furthermore, tsunami emergency assistance projects in three other countries (India, Indonesia, and Sri Lanka) are still being completed (although it must be noted that each of these programs had different factors and circumstances that can affect implementation time lines). Due to the short time for preparation, there were no detailed feasibility studies or pre-designs, as would be done for normal project preparation. As such, the RRP was an indicative document only in regard to particular subprojects. 48. Once approved, ADB's program had to be aligned with other donor-funded works. In the early stages of reconstruction, this was difficult as the commitments by various donors were translated into actual funding over time. Only once the Government and ADB finalized actual support could preparation commence for detailed planning, detailed designs, and tender documents. Delays also occurred due to changes in government structure in 2005 and the national election process in 2007. Because of the Government’s staff shortages, line agencies were limited to only a few persons each. Moreover, the tsunami works were in addition to regular programs and commitments; therefore, much project work had to be handled by consultants and the EMM. As actual restoration costs became known after the detailed designs were completed and initial tenders were issued, adjustments in scope were necessary as costs for some subprojects increased above what was envisaged at appraisal. These actions all took time and were reasons for the extension of the project completion date. 49. While the Operations Manual and Procurement Guidelines (2007, as amended from time to time) allows for some flexibility in recruitment of consultants and procurement, the Government’s procedures negated much of the related potential savings in time. As for regular

12

loan projects, all ADB requirements for economic and financial viability, community participation, social inclusion, and environmental protection had to be incorporated. For regular loans, this work—including for tender document preparation—is completed prior to loan approval. However, in the Project, this work could not commence until post-approval, once detailed designs were finalized, further reasons for delays in start-up of physical works. Therefore, the main contracts did not get underway until 18–24 months after loan approval, and many of these required 12–18 months to complete. Compared to regular projects, this is still a relatively speedy timeframe, but it did result in the cancellation of the Mendhoo Agricultural Research Station works. 50. While the fisheries and agricultural components were completed by the second extension of 31 August 2008, the JFPR TA grant, which was set up to support the agricultural sector with further capacity building and microcredit, had a completion date of 4 May 2009. There were also delays in detailed subproject preparation and planning related to the Government’s decision, supported by ADB, to rebuild tsunami-damaged infrastructure to current standards rather than merely replace facilities to specifications and standards of 10, 20, or 30 years ago when the facilities were originally built. This led to higher costs than envisaged at the time of appraisal, especially for the sewerage and transport components, for which the scope and budgets had to be adjusted. F. Implementation Arrangements 51. Within 1 month after the tsunami, the Government adopted a long-term framework to oversee reconstruction, the National Recovery and Reconstruction Plan,24 and established the National Disaster Management Center to support the international community with collection of data and coordination. As envisaged in the RRP, a central PMU was to be established under MOFT, staffed by a full-time project director to oversee and coordinate implementation. Various ministries were then expected to assign staff members to work at the PMU to address matters in their respective areas. However, due to severe staff constraints, the Government had no personnel available to assign to the PMU and decided that the only practical alternative was to rely on line ministries for decisions and oversight of their respective components. This was subsequently approved by ADB but did cause some delay in the early stages of implementation. The revised project organizational structure is in Appendix 5. 52. During the initial planning and approval stage, the National Disaster Management Center was very active in organizing meetings with various ministries and donors to refine programs, determine actual needs for each sector, and decide which donor agency would provide financial and technical support. To ensure transparency, UNDP assisted MOFT in establishing a development assistance database that provided up-to-date information regarding damage assessments on each island as well as funds committed to each sector by the Government and donors. ADB also provided assistance for the database.25 This was the first comprehensive information system to be operating in the tsunami-affected countries. As the tsunami reconstruction was completed, it was modified to provide data on ongoing development needs. 53. By mid-2005, the donor community had established technical working groups for each sector and held regular meetings to discuss issues and arrive at a consensus. It was obvious during the initial meetings that policies, standards, and guidelines were not well developed in the country. Donors eventually agreed with the Government on standards for the environment

24 Government of Maldives. 2005. National Recover and Reconstruction Plan. Male. 25 ADB. 2005. Regional Technical Assistance for Support for Strengthening the Tsunami Development Assistance

Database. Manila (TA 6331-REG, for $800,000).

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(e.g., sanitation, solid waste management, and water), housing, and transport, as well as the build–back–better policy.26 The EMM was a key member of the United Nations country team, and it and consultants made dozens of visits to various islands during implementation. ADB Headquarters staff members conducted 23 review missions, basically every 2 weeks during the first 2 years of implementation. G. Conditions and Covenants 54. The first covenant was to establish a full-time dedicated PMU. ADB approved a change in the implementation arrangements so that line ministries were responsible for their respective works, which did not affect the Project overall. In fact, these agencies were strengthened because their staff members were involved in day-to-day implementation. Covenants 2, 3, 4, and 5, regarding selection criteria, the environment, social safeguards, and identification of beneficiaries, respectively, were all complied with. Covenants 6 and 7 addressing displaced persons and resettlement were complied with, as no persons were displaced or had to be resettled because of the Project. Covenant 8 on gender was complied with, and covenants 10 and 11 requiring financial records and independent audits were complied with. 55. Covenant 9 required the Government to establish a formal grievance procedure. While the Government did not establish a special unit to receive and hear complaints, grievances were accepted and acted on by the responsible ministry, island governments, and/or island development committee. This was considered acceptable by the EMM, because island governments and/or island development committees were responsive to concerns and complaints. However, covenant 9 is rated as only partially complied with. 56. Covenants 12 and 13 required the Government to generate monthly and quarterly reports and a final project completion report. However, without a dedicated PMU, the Government could not provide the numerous reports that were required by each donor. The Government relied on ADB and the EMM to help monitor project progress and prepare these reports. UNDP did assist MOFT with setting up a development assistance database (with ADB funding), which tracked contracts and expenditures on various components. This system was placed on the internet for public viewing. However, covenants 12 and 13 are rated as only partially complied with. 57. The status of compliance with the covenants as of the end of the Project is shown in Appendix 6. H. Related Technical Assistance

1. Promoting Sound Environmental Management in the Aftermath of the Tsunami Disaster

58. The objective of the TA was to improve environmental sustainability and help achieve Millennium Development Goal targets. The TA, implemented through extensive consultations with local communities and government agencies, (i) formulated a strategy for rehabilitating and reconstructing the water and sanitation sector, (ii) built capacity for environmental assessment, (iii) tested and promoted innovative environmental education and public awareness programs, and (iv) promoted community mobilization and localized operation and management of the new

26 "Build-back-better" refers to replacing damaged infrastructure with upgraded, state-of-the-art technology rather

than to the same specificiations as before the disaster.

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facilities provided under the Project. The TA was completed on schedule and was rated as successful. Its most significant outputs included (i) community tool kits for solid waste management, monitoring of beach erosion, water quality monitoring, and community environmental action; (ii) rapid assessment of perceptions into environmental management and education strategies; and (iii) guidelines for community mobilization. A total of $361,720 was disbursed.

2. Restoration of Livelihoods of Tsunami-Affected Farmers

59. This JFPR TA was implemented in conjunction with the Project’s agricultural component. Its objective was to enable farmers in the 26 most tsunami-affected agricultural island communities to restart their agricultural livelihood activities, with a longer-term view to raise their quality of life above pre-tsunami levels. This took place through a revolving fund mechanism for microcredit, as a flow-on to the canceled component under the Project and further training activities. It also aimed to increase the participation and training of community-based organizations. Main activities included (i) provision of agriculture inputs and equipment (e.g., fertilizers, pesticides, seeds, and tools); (ii) provision of working capital to complement the provision of inputs, tools, and equipment; (iii) training and extension services (i.e., training, workshops, seminars, and local transport); and (iv) consulting services. The TA was approved on 29 April 2005, became effective on 5 May 2005, with closing date of 30 April 2007, which was extended to 4 May 2009. The Executing Agency was MOFT, and the Ministry of Fisheries and Agriculture was the IA. The TA includes 36 person-months of domestic consulting services. 60. The TA was slow to disburse funds for similar reasons as was the Project; other donors provided microcredit with a higher credit ceiling and more relaxed repayment requirements. By the end of 2005, the main activity carried out was the engagement of domestic consultants to assist the Ministry of Fisheries and Agriculture in a needs assessment on the 26 mainly agricultural islands to prepare the activity matrix and funding amounts. Further to the Government’s request, ADB approved extension of the closing date to provide further opportunity for farmers to access credit, basically to assist those who were missed under the other programs. 61. The PCR mission visited one farmer, a local government official, who had used microcredit to start a successful farm. To date, he has repaid half the loan and is confident of continuing to make a profit. He indicated that the ADB microcredit was too small and that he and his family had to provide their own funds to meet the start-up costs. He also stated that farmers without another source of income would not have access to such funds. 62. As of the closing date, more than $440,000 of the $800,000 allocated for microcredit remains undisbursed. More than $35,000 of the consulting fees and $25,000 of the project management fees were not used. Under the TA, disbursement was $421,126 and the undisbursed balance, as of 4 May 2009, was $212,495.

3. Saving Tsunami-Affected Trees through the Poverty and Environment Program

63. The Poverty and Environment Program (footnote 4) was to promote environmental interventions that contribute to poverty reduction and improve the environment through pilot interventions, targeted analytical studies, and information dissemination in the following three prioritized areas: (i) protection, conservation, and sustainable use of natural resources and ecosystem services to maintain the livelihoods of the poor; (ii) reduction of air and water

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pollution and waste that directly impacts the health and productivity of poor; and (iii) reduction of vulnerability to natural hazards and disaster prevention. Participation in the TA was open to all developing member countries with a condition that all proposed projects may not exceed $250,000. The TA was implemented over 4 years, commencing in April 2004 and ending in March 2008. The selected support to the Maldives funded by this TA was to work on saving tsunami-affected trees, with a budget of $250,000. The IA was the Ministry of Fisheries and Agriculture. 64. The TA was initiated in March 2005 when six consultant arborists were recruited. The consultants found that there had been substantial destruction to standing grain crops and perennial crops such as fruit and timber trees on many islands. Soil and groundwater were contaminated by salinity caused by seawater intrusion. Larger mango and breadfruit trees on eight tsunami-affected islands were treated by technical teams in March 2005. Unfortunately, these efforts were unsuccessful, and many salt-sensitive trees died, likely because the trunk injection treatments were done too late after the tsunami. Fortunately, the salinity in household wells and soil improved with the advent of the 2006 monsoons. Banana and papaya trees had recovered, with new shoots noticed after an initial die-back period. Delivery of TA-financed dragon fruit, guava, jackfruit, mango and star fruit saplings occurred in May 2006. The TA’s closing date was extended to 31 May 2006 to process the payment of the fruit trees to suppliers. The TA was carried out in a satisfactory manner, and a total of $217,837 was expended. I. Consultant Recruitment and Procurement 65. International and domestic consultants were engaged, following ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time), to assist ministries with the planning, design, and implementation of the Project. The consultants assisted in the preparation of feasibility studies, environmental assessments, economic analyses, design and tender documents, bid evaluations, and construction supervision. Community organizers were also engaged to assist the Ministry of Fisheries and Agriculture with needs assessments, community awareness, and implementation of livelihood restoration programs. The summary of contracts is included in Appendix 7.

66. The Project was to provide funding for about 27 person-months of international consultants and 63 person-months of domestic consultants, at an estimated cost of $800,000. However, a significant amount of additional consulting services was required to replace the lack of government staff members for planning, design, and construction supervision of the sanitation component and for the revised agricultural program. Based on the revised estimates and reallocation of funds approved on 10 November 2006, the consulting costs were increased to $1.75 million, of which $1.72 million was disbursed. 67. Procurement of civil works and materials conformed to ADB’s Procurement Guidelines and was in agreement with methods prescribed in the Financing Agreement (Schedule 4) of the RRP and the Government’s Tsunami Relief and Reconstruction Fund Operations Manual, issued by MOFT on 30 March 2005. All civil works contracts were awarded through national competitive bidding, although international bidders were allowed to participate. The works were tendered through the tender evaluation board of MOFT, and the bid evaluation reports were prepared with the assistance of domestic consultants and the EMM. Most equipment supply contracts were awarded through direct purchases for computer and other minor equipment, seafood-processing kits, and miscellaneous materials from local suppliers in Male. All payments to contractors and suppliers were made through imprest accounts.

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J. Performance of Consultants, Contractors, and Suppliers 68. Consultants. More consultants were required than envisioned at appraisal primarily because the Government could not provide sufficient staff members to plan and manage the Project. Furthermore, there is limited consultancy capacity at the national level in the Maldives. All consultants worked closely with the EMM, particularly in developing concepts, plans, designs, and tender documents; evaluating bids; preparing bid evaluation reports for civil works; and supervising construction. The PCR mission found that some design aspects were not addressed by domestic consultants; the additional seawall and harbor entrance lighting on Dhidhdhoo Island, and the fans, window covers, and computers for the power stations. The location of the treatment pond for Guraidhoo Island’s sewerage system also turned out to be problematic, but the new housing encroachment into the vicinity had not occurred at the time of subproject design. The Government’s final assessment report for the agriculture component identified only one domestic consultant about whom a complaint was raised by farmers in the cooperative societies. These farmers were also appreciative of the work and support from the international consultants. The performance of the domestic consulting services could have been better and is rated as partially satisfactory while the performance of the international firms and individuals was generally satisfactory. The consultants were not the cause of the 11-month loan extension. 69. Contractors and suppliers. The various contractors and suppliers performed their services in a generally satisfactory and timely manner. All of the major eight civil works subprojects (i.e., harbor works, sewerage system, and six power systems) were constructed using international standards and are of good quality as confirmed by EMM reports, project officer and consultant site visits and completion reports, and PCR mission site visits. Quality assurance was provided by domestic consultants and the EMM. Civil works contracts were completed on time as per the contractual agreements, and were not the reasons for the need to extend the project completion date. The aide-mémoires and back-to-office reports of ADB’s project review missions raised no issues with contractor performance and procurement, and the project performance report shows this as satisfactory. K. Performance of the Borrower, Executing Agency, and Implementing Agencies 70. The performance of the Executing Agency, Borrower, and IAs was generally satisfactory. Delays were due to government staff shortages, and lack of basic environmental regulations hampered design efforts. The Government was overwhelmed by the extent of the damage and the high measure of demands by atoll and island officials and of the numerous international donors. At the initial planning stage, regular meetings were held by the IAs to discuss the various problems that arose during implementation, which were moderated by MOFT. Working groups were formed to adopt suitable standards and guidelines on which to design project facilities. While the 11-month extension of the project completion date is a concern because it was an emergency program, 27 the delays should be considered within the context of the Government’s very limited staff resources as well as program works by several donors in addition to regular, ongoing programs. To complicate matters, there was a major reorganization of government departments in 2005, followed by democratic elections and a new government starting in 2007, resulting in another reorganization in 2008. In this context, the Project could be considered implemented within a reasonable time frame, as compared to previous and ongoing ADB-financed projects in the Maldives.28

27 Much longer extensions on regular loan projects are common. 28 The tsunami programs are still ongoing as of June 2009 in the other three affected countries ADB is supporting.

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71. Access to staff members at the Executing Agency and at concerned ministries was excellent. In mid-2005, the Government decided to realign its ministries, which caused lengthy delays in making decisions, plaguing the project design stage. ADB staff missions noted in their aide-mémoires that government agencies were severely understaffed, with only some qualified and trained personnel, which slowed the approval process, as there was no dedicated staff for ADB’s programs nor dedicated PMU. In most instances, the review and approval of each subproject was done at the deputy minister level, which is normal in the Maldives. Implementation was delayed again in 2007 when many senior government officials were seconded for election duties. The 11-month loan extension was mainly due to lack of government staff members, an already limited resource further constrained by the need to look after multiple donor projects simultaneously. The project implementation schedule is in Appendix 4. 72. The Government’s failure to establish a formal grievance procedure did not materially impact the quality of the programs or works. The island beneficiaries are quite independent and, if not satisfied with the Government’s performance, have no hesitation in voicing their concerns. An example is the refusal by the island development committee on Madifushi Island to accept the turnover of the project-funded power station. Additional funds could have been used to hook up the larger generator set provided by the Government, which has prevented the power system from operating. This was particularly unfortunate, as the project funds were on a grant basis and $1.8 million remained unutilized at loan closing. L. Performance of the Asian Development Bank 73. The Project was prepared based on ADB’s Disaster and Emergency Assistance Policy. The tsunami occurred on 26 December 2004, and ADB prepared the Project within 3 months, with Board approval on 31 March 2005. ADB participated in the joint needs assessment within 2 weeks of the disaster. ADB’s Disaster and Emergency Policy was effective in getting financial assistance approved quickly, and also helped reduce the time frame of ADB’s processing and approval procedures for consultants and contractors. Once the emergency assistance moved to the detailed planning, design, and implementation stage, the nature of infrastructure restoration after the disaster was basically the same as upgrading and expanding infrastructure under normal loan projects. Therefore, the time requirements and procedures during these stages tend to be the same as for normal projects. 74. The EMM was fully operational by August 2005 and was overseen by the Country Coordination and Regional Cooperation Division. ADB engaged an international consultant intermittently for 17 months over the original project completion period and a domestic administrative assistant for the office. To save costs and encourage donor coordination, the EMM and World Bank shared the same office facility. The EMM liaised with the Government, other donors, and beneficiary islands and supported ADB missions to the Maldives for the Project and others. The international consultant was a member of all working groups established during the first year of tsunami rehabilitation programs and was a member of the United Nations country team. The Government relied on the EMM to assist with implementation. 75. ADB staff members responsible for the five sectors made regular review missions to the Maldives to review their respective loan components, and provided timely responses and decisions on various administrative matters including contract approvals, reallocation of funds, and engagement of consultants. ADB conducted 23 review missions to the Maldives over the project life. ADB's overall performance was satisfactory.

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III. EVALUATION OF PERFORMANCE A. Relevance 76. The Project was relevant and designed to meet the requirements of the tsunami recovery as determined by the joint needs assessment and as requested by the Government. The sectors chosen for ADB assistance and ensuing subproject designs were in support of the Government’s overall development priorities, as identified in the Sixth National Development Plan, 2001–200629, and the recently developed Seventh National Development Plan, 2007–2012.30 ADB had recently completed or ongoing loan projects in the infrastructure sectors, and had completed a study on the commercialization of agriculture, so general sector issues were known at the time of project design. The reconstructed harbor, new power systems, and sewerage system were successfully completed and are in full use as envisaged at the design stage.31 77. As mentioned earlier, the PCR mission found that some design aspects could have further enhanced certain subprojects, such as the additional seawall and harbor entrance lighting on Dhidhdhoo Island, and fans, window covers, and computers for the new power stations. Further, ADB’s contribution to the fisheries sector, while less than envisaged, was substantial. Regarding the design of the agricultural component, the general support to capacity building and training was relevant and successful, although the specifics of ADB's microcredit scheme were not competitive and thus were unused. The approach to set up agricultural cooperative societies to improve farming practices, marketing of produce, and profits was a new idea in the Maldives, which has a cultural history of family oriented as opposed to cooperative farming. However, it had no local mechanisms in place to support this, was experimental, and ultimately proved unsustainable. B. Effectiveness in Achieving Outcome 78. The outcome of the Project was to restore economic activities and livelihoods on tsunami-affected islands. Due to the Project’s emergency nature, the actual targeted works to achieve this outcome were substantially different from those envisaged at appraisal, though the changes were necessary to respond to the changing circumstances and realities of planning and design in an emergency situation. The restoration activities were generally assigned to each donor during the joint needs assessment, and there was much overlap. Moreover, the project grant and loan formulation were completed in just 2 months and were indicative only. Once the Government was able to finalize what would be provided by each donor, it requested ADB to adjust its work programs accordingly. The Government requested that all donors follow a build–back–better policy, which led to increased costs for the infrastructure works as compared to appraisal, substantial related adjustment in scope, and required reallocation of funds, which took time and resulted in additional consulting costs. 79. The revised outputs resulting from the adjustments were mostly achieved, and they contributed to achieving the single outcome of restored economic activities and livelihoods.

(i) Transport component. The rebuilt harbor on Dhidhdhoo Island is fully functional and provides better service than pre-tsunami, assisting fishers and allowing for

29 Government of Maldives. 2000. Sixth National Development Plan, 2001-2006. Male. 30 Government of Maldives. 2006. Seventh National Development Plan, 2007-2012. Male. 31 The one exception is the one power station, which was fully constructed but is not in use because of local issues.

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the transport of goods and people, which is critical to the island's economic activity.

(ii) Power component. Six island power systems have been rebuilt and upgraded, resulting in excellent and reliable power services, enabling improved quality of life and economic activity. However, the project-funded power station at Madifushi Island, though fully constructed, is still not in operation due to disagreements between the island development committee and the Government.

(iii) Water supply, sanitation, and solid waste management component. Guraidhoo Island’s new sewerage system is fully functional, and its benefits have been achieved—protection of groundwater quality, improved public health, and reduction of odors. The design and bidding documents for the system on Kulhudhuffushi Island have been put to productive use as that subcomponent is currently under implementation via government funds.

(iv) Agricultural component. The capacity building, training, and handbook produced under the agricultural component have resulted in improving the profits of hundreds of farmers. However, the microcredit program did not proceed as more competitive programs were provided. Also, the pilot farms were not sustainable.

(v) Fisheries component. Under the fisheries program, 488 fishers received kits with basic equipment that helped restore their livelihoods, and in conjunction with the capacity-building and training programs that helped a further 500 fishermen, have made their operations more sustainable and profitable. Similar to the agriculture component, the microcredit scheme competed with other donor and government programs, but about $800,000 was disbursed to 600 fishers, though many were the same individuals who received kits and training.

80. The two advisory TA grants fully achieved their objectives and tasks, and the JFPR TA grant was generally successful, as the initial reluctance of farmers to apply for loans (due to earlier government promises of grants) was overcome. The microcredit is being disbursed, and hundreds of farmers have benefited in terms of better methods, crop diversity, marketing skills, and improved profits. C. Efficiency in Achieving Outcome and Outputs 81. The projected economic benefits for the Project were generally achieved (see Appendix 8). The higher costs of construction related to the build–back–better policy are either partially offset by the increased number of consumers, as compared to the situation at the time of the appraisal, or were otherwise not substantial enough to deem the projects uneconomic. However, the financial rates of return for the infrastructure components will not be achieved in the short term, primarily due to a lack of adequate cost recovery mechanisms. ADB's Disaster and Emergency Assistance Policy (footnote 8) is to not insist on stringent cost recovery practices in these circumstances, as the main purpose of emergency assistance loans is the immediate restoration of damaged basic structures, infrastructure, and productive activities. 82. Transport component. The harbor at Dhidhdhoo Island also experienced a substantial increase in capital cost, as compared to the cost used in the original economic analysis in 2005. However, this resulted in a larger, much improved harbor, resulting in more than triple the number of fishing boats using the harbor as compared to 2005. The economic internal rate of return (EIRR) is estimated at 17.4%, with further details described in Appendix 8. Currently, there are no tariffs being charged for use of the harbor, so operating and maintenance costs, which include dredging every 5 years, must be covered via the island budget.

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83. Power component. Economic benefits of a sample subproject on Filladhoo Island are calculated at 12.2%, though this ignores a noticeable increase in economic activity that was difficult to quantify and thus not included in the analysis. However, the financial returns are near zero as the power tariffs, averaging Rf4 per kilowatt-hour, are insufficient to meet full operating costs as well as return on capital. However, during the PCR mission, the island was considering a proposition to increase the tariff for certain consumer categories (while leaving the domestic consumer tariff unchanged). If implemented, such a proposal would improve the financial internal rate of return to a viable level. 84. Water supply, sanitation and solid waste management component. The EIRR for Guraidhoo Island’s sewerage system is estimated to be 18.7%. At the time of appraisal in April 2006, the EIRR was 32.1%. The primary reason for the reduction in EIRRs from appraisal to analysis for the PCR was the higher actual capital and operating costs as compared to the earlier estimations. The current EIRR of 18.7% still establishes the economic viability of the Project. 85. However, the financial internal rate of return is estimated to be around zero, primarily due to the lack of a user fee system. There are no regulations in place regarding user fees for sewerage systems and no designated funds for operation and maintenance or staff. The new sewerage system, while currently operating well, will eventually require some maintenance, so arrangements should be made for such in the related budget. Currently, there is one staff member assigned, which is inadequate for full and proper maintenance. MOFT indicated that it is in the process of recruiting 11 staff members for a core operations group for sewerage systems in the country. These would presumably provide support to the island development committees with operation and maintenance, budgets, and setting up a user fee system. However, the regulations for sewerage user fees will likely await the outcome of the current process of establishing and operationalizing the provincial-level utility companies. In the meantime, any repairs and maintenance on Guraidhoo Island would be on an ad hoc basis, with the island development committee requesting funds from the Government. 86. Agricultural component. The economic benefits of an agricultural component are inherently difficult to calculate, but are not as high as envisaged since the pilot farms proved unsustainable. This pilot program would have benefited about 80 farmers and their families, or about 500 people. However, there was some direct benefit as these 80 farmers—while not willing to work in the cooperative society modality—did use their newly acquired knowledge in their personal plots. In the training program, thousands of other persons did benefit from training, agricultural kits, and knowledge transfer provided by the Project. While the component was modest in terms of expenditures, with basically no microcredit, there were positive benefits to individuals who did participate. An indirect benefit of the Project was that it helped bring agriculture into the mainstream, as reportedly the Government had traditionally paid more attention to fisheries. 87. Fisheries component. For fisheries, economic benefits to beneficiaries and their families were provided by 480 kits, each worth about Rf6,000 ($467), as well as 569 microcredit loans. Furthermore, 560 fishers participated in training programs. Though difficult to quantify, this assistance helped restore their livelihoods. The component was smaller than anticipated at appraisal as several other donors and the Government were active in this sector.

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D. Preliminary Assessment of Sustainability 88. Sustainability of the infrastructure constructed under the Project is of concern. For the power sector projects, the main concern is the lack of full cost recovery through the tariffs charged to end-users. This is a difficult issue for outer islands, since each small island's stand-alone electrical system does not benefit from the economies of scale that can be obtained in Male, and thus the cost of their power generation is more expensive than in Male. The Government collects power tariffs at the same rate as in Male, and thus full cost recovery is usually not achieved. For the sewerage component, there is currently no regulation or provision to collect user fees. Detailed operation and maintenance manuals and costs were provided to the Government and island development committees, but with little revenue from users, there are insufficient funds for full maintenance and cleaning, flushing, and checking septic tanks, pumps, and piping. Sustainability is less of a concern for the harbor component, as construction generally consisted of heavy-duty items such as large boulders for breakwater walls, sheet piling with a 50-year lifespan driven 3 meters into the seabed, a reinforced concrete cap and loading area, and stainless-steel mooring rings. 89. To address the issue in the power and sewerage components, the Government is working to establish more local autonomy, grouping the atolls into seven provinces, each proposed to have a multisector utility company, which will have the autonomy to set user fees and tariffs based on a formula related to actual cost of capital, works, and operation and maintenance. However, this will take time, and there is concern that without specific provision for preventative maintenance, the new power systems and sewage facility may require higher costs for maintenance in the future. The Government will need to put this new system and tariffs in place through an extensive public consultation and information campaign. In lieu of this, the Government should work with island development committees to ensure ongoing preventative maintenance of the new project facilities, as detailed in the operation and maintenance manuals. E. Impact 90. The Project’s impact is contribution to sustainable economic growth by minimizing the devastating impact of the tsunami. In the immediate and short term, the successful construction of new infrastructure subprojects provided benefits to thousands of Maldivians on the islands addressed by the Project, improving their standards of living and economic opportunities. The involvement of the island communities from the initial meetings, through construction, to eventual turnover of the new facilities has resulted in stronger ownership of the new facilities by the local communities. However, he agricultural component had limited impact, with the cooperative societies and microcredit programs being unsuccessful. The fisheries component was successful, even if the allotted funds were not fully used. With respect to the longer-term and more sustained impacts of infrastructure, effective policies for cost recovery and operation and maintenance of the new facilities need to be resolved between the Government and island development committees.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment 91. It is proposed that the Project be rated as generally successful, particularly with respect to the infrastructure components. The Project met the Government’s objectives for recovery from the tsunami's impacts, and it closely followed ADB’s country strategy. The infrastructure

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works were constructed to current international standards and are of excellent quality. The agriculture component was only partially successful, however, as most of the proposed investments were canceled, though the training and kits provided positively influenced the farmers. The fisheries component was generally successful. However, the sustainability of the infrastructure is of concern as the cost recovery is not enough to provide proper operation and maintenance. The extension of the Project by 11 months was essential to complete the new works. B. Lessons 92. There were some lessons learned from the Project, based on the problems experienced with planning and implementation. These are discussed below, and they all apply equally to future emergency loans and grants. 93. The multidonor joint needs assessment of the physical damage and impact on livelihoods was an important and necessary exercise, similar to that used for assessing other recent disasters. It should be noted, however, that such an exercise cannot be the final decision maker on the scope of works for the required reconstruction after a major disaster, as final decisions can only be made once detailed designs and actual costs are known. Instead, the assessment should be considered a planning and overall financing exercise by the Government and multiple donors. Although no overall agency was responsible for the implementation of all sectors, the donors did hold weekly meetings joined by the responsible government agencies to coordinate works and programs and to address any gaps. The EMM was an initiator and leader of these meetings. 94. During the joint needs assessment, better identification of donors should be done to reduce duplication of support. ADB ended up reallocating millions of dollars as the scope provided by various donors became known. However, this may be difficult to achieve, as the Government tends to ask all donors for assistance to ensure there are no gaps, and each donor's program varies in the length of time to finalize. 95. The joint needs assessment should identify and address emergency program implementation problems such as lack of government staff, regulations, and design standards for various physical works. With respect to the build–back–better policy, current international standards for all infrastructure works should be applied, as many works to be rehabilitated had been designed and constructed based on 10-, 20-, or perhaps even 30-year-old standards, likely why they failed in the tsunami. Building to current standards should therefore be a prerequisite, and consulting requirements and cost of works should be planned accordingly at appraisal. 96. However, in tandem with the improved standards, ADB should ensure that the Government has regulations in place to operate new facilities. If such regulations are not in place, ADB should offer to assist the Government in developing these through TA and policy dialogue. Otherwise, the advantage of the better technology will be lost. Even good-quality equipment will deteriorate if routine maintenance is not provided. 97. ADB’s microcredit programs ended up competing with several other donors, with the result that substantial time, effort, and costs were lost in first attempting to make the programs work, and then in reallocating funds and having to design additional works. ADB should only consider supporting microcredit where there are no other donors, when other donors fail to

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provide promised funds, or where there is a mechanism already in place to deliver such programs. 98. Introduction of new ideas and approaches to economic growth, such as the cooperative society approach under agriculture, should not be tried under emergency loans, as insufficient time is allotted to plan, build capacity, and support such programs long enough to bring about the required change that would mainstream the activities. Also, under emergency conditions, the Government is overstretched and may not be able to provide sufficient support to such programs. 99. The tight time frame for project completion meant that some plans, designs, and works were either rushed, leading to some design inadequacies, or were dropped due to the inability to complete them within the loan closing date. The Project was prepared in 2 months, without the benefit of the planning and pre-design normally done during the typical 12-month project preparatory TA stage. All detailed planning and design had to be done after the Project was approved. Once the detailed designs were completed, the Project had to follow the same government and ADB procedures as for regular loan projects. There was also a need to establish standards and specifications and to put in place environmental and socioeconomic evaluations prior to construction, as the Government did not have these in place. Furthermore, allowance needs to be made for the stress on limited government staff resources in an emergency situation, especially in a small country like the Maldives, as the Government has to deal with multiple donor emergency projects simultaneously. There is, therefore, little logic in assuming that the Government can complete an emergency loan or project any faster than a regular project. 100. The EMM was essential in helping the Government with project implementation, particularly in the early stages, and because the Government elected not to set up a centralized PMU due to staff shortages. The EMM ended up acting as the stand-in for the PMU, liaising with the various responsible government agencies, other donors, and ADB staff members, thereby facilitating project planning, design, and implementation. Furthermore, unlike most developing member countries, the Maldives does not benefit from a permanent ADB resident mission with dedicated staff members to liaise with the Government daily. 101. There are underlying systemic challenges associated with project implementation in the outer islands of the Maldives that must be considered in project design, as these conditions are different from other South Asian developing member countries.

(i) Direct project oversight is more difficult due to transport issues unique to the geography of the Maldives.32

(ii) It is not possible to form a typical PMU due to lack of staff at ministries. A particular ministry may have a handful of officers; thus, ADB's project is only a portion of their full-time duties.

(iii) A subproject on a particular outer island is very small in nature. The cost of hiring international consultants for long periods of time means that such consultant costs are disproportionately high as compared to direct project costs such as civil works.

(iv) However, local consultants, though more cost-effective, are often scarce resources, particularly in an emergency program being implemented

32 The outer islands are often remote and isolated from each other, with transport involving lengthy, infrequent, and

irregularly scheduled boat trips. The only alternative is hiring private transport at a very high cost.

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simultaneously with various other emergency programs from other donors, also hiring such consultants.

C. Recommendations 102. When supporting emergency loans, ADB should focus on its strengths in the recipient country. In the Project, for example, ADB was able to focus on sectors where it had previous involvement, which facilitated project design. While ADB understandably wishes to assist with direct economic recovery as well, there are other donors who may be better placed with more flexibility to provide livelihood programs, as was proven in the Project. 103. It is recommended that ADB evaluate the Government's staff resources realistically, and provide additional consulting support as required. Implementation requirements, including oversight, monitoring, and reporting requirements, should be reviewed and discussed with the Government. ADB and the Government must then jointly find a solution and balance among available government officers, international consultants, and local consultants to ensure all requirements are covered and proper budget allocations are included upfront, prior to commencement of implementation. 104. Introduction of a new approach to pilot farms and cooperative societies in the outer islands requires considerable time to set up, build capacity, and mainstream. The Project’s emergency setting inherently has less time for these activities, as compared to a nonemergency loan situation. Required time frames for such capacity-building activities in an emergency setting should be carefully considered at the time of emergency project design. 105. ADB should review its time frame for completion of emergency loans. The current time frame of 24–30 months is short, particularly since consultant selection and procurement as per ADB guidelines can take many months. A significant portion of the overall time frame can be consumed before actual work commences, thus necessitating added urgency and rushed implementation. The context of the Maldives further exacerbates this issue. The capacity of the Government to provide counterpart support must be incorporated in the completion schedule. Perhaps emergency loans could be set up in two phases: phase I for livelihood restoration, interim repairs to essential infrastructure, and detailed designs to be completed in 24 months. Phase II could follow, focusing on implementation of major infrastructure works with a completion time of a further 2–3 years. There is a difficult balance between rapid emergency rehabilitation and reconstruction and ensuring well-designed projects and proper construction of major works. 106. It is recommended that feedback channels from local island development committees be improved to allow appropriate time early enough in implementation to facilitate scope changes, as such changes are logical considering the rushed nature of planning, design, and tendering of works under emergency loans. 107. ADB should ensure that the Government has proper arrangements in place to generate sufficient funds to operate and maintain the new facilities, either from user charges or from established subsidies. If it is felt that this will not be the case, ADB should consider requiring the Government to use some of the funds to ensure proper maintenance for 5–10 years, by depositing such funds in an escrow account, with specific arrangements in place with a private contractor to provide regular inspections and maintenance.

Appendix 1

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DESIGN AND MONITORING FRAMEWORK

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements Impact Contribute to sustainability of economic growth by minimizing the devastating impact of the tsunami

Economic recovery, and increase in economic activity in affected islands

Restoring damaged infrastructure vital to economic activities and to an improved standard has benefited the recipient islands and thus minimized the tsunami’s impact. Calculated economic benefits from the infrastructure components all reflected economic viability and sustainability.

Monitoring Mechanisms Atoll-specific economic data and indicators Atoll statistics and data; surveys, including poverty reduction and gender Surveys

General information was collected as part of PCR economic analysis on selected power component islands and on the islands containing the harbor and sewerage components. Baseline surveys were completed July–November 2005.

Outcome Restore economic activities and livelihoods on tsunami-affected islands

Rehabilitated public infrastructure, and adoption of appropriate design standards in water supply, sanitation, solid waste management; power; and transport sectors Improved incomes and self-reliance

The infrastructure works taken up by the Project—power, sewerage, and transport—were designed to meet current international standards, were constructed with good-quality workmanship, and are fully operational, bringing major benefits to thousands of people. The livelihood programs under the Project provided support to farmers and fishers through provision of kits consisting of basic tools and equipment, training, development of curriculum courses, handbooks, and hands-on learning to support their reentry into their professions. This was successfully completed. Microcredit was also provided for eligible beneficiaries. This was modestly successful for fisheries but was canceled for agriculture (though later provided by a JFPR TA grant). The establishment of pilot farms and cooperative societies to improve farmers’ productivity, access to markets, and profits, was not sustainable. Fishers and farmers have recovered their livelihoods and incomes to pre-tsunami levels. Those receiving training and improved equipment have enjoyed additional benefits.

Monitoring Mechanisms Government progress reports Audit reports Project progress reports Project review missions

Without the PMU, and with the Government’s severe staff constraints, reporting was done by the various project consultants, EMM, and ADB review missions. Audit reports were completed through FY2006.

Appendix 1

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Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements Surveys The Government did not conduct a

post-project baseline survey, but a brief review and analysis was done by the PCR mission.

Assumptions and Risks Implementation could be hampered by slow approval procedures and lack of adequate capacity in the implementation agencies. Governance-related issues, including corruption, constitutes another risk. Complementary post-tsunami recovery assistance provided by the Government and development partners. Strong government commitment Institutional capacity is strengthened in selecting, designing, and implementing subprojects.

The project completion date was extended by 11 months, basically because of severe staff constraints in Government agencies. Corruption did not seem to be a major issue, and no specific instances were reported or found by the PCR mission. While the Government did request specific assistance from the Project based on the joint needs assessment, there was some overlap in the livelihood, agriculture, and fisheries components. While the Government was committed, the severe staff shortages meant that it had less involvement. This was complicated by whole-scale reorganization in 2005, and pending elections that seconded senior government staff to election duties in 2007. This was achieved, especially since the various components were implemented by the line agencies, rather than a PMU.

Outputs 1. Quick-Disbursing Component. Partially finance the unusually high and unexpected expenditures that were undertaken by the Government on account of tsunami-related rehabilitation and reconstruction efforts.

Imports of high-priority items as listed undertaken by December 2005.

Budgetary support for the Governments foreign reserves provided to the Government based on funding imports based on a list if eligible items. By the third quarter of 2006, the full $6.47 million was disbursed and liquidated, and verified by ADB.

Monitoring Mechanisms Customs data Government's progress reports

A mechanism for verification of payments was agreed between MOFT and ADB.

Assumptions and Risks Timely import of essential goods and services required for tsunami-related rehabilitation and reconstruction

Initial liquidations for $4.40 million were achieved by November 2005 and the remainder by September 2006. The delay was due to discussions on MOFT’s request for ADB to use $2.07 million to finance a public accounting system, to which was not agreed. The $2.07 million was subsequently used to fund critical imports for tsunami recovery.

2. Project Components.

Water Supply, Sanitation, Solid Waste Management. Rehabilitate rural infrastructure, including rainwater-harvesting

Baseline indicators and performance targets will be

As many donors provided support for water supply, ADB was requested to finance the

Appendix 1

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Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements schemes, sanitation infrastructure, and services, and develop solid waste management systems to cope with tsunami debris.

developed prior to implementation for monitoring purposes as well as for checking against selection criteria. Rehabilitation completed by 31 March 2007.

design and construction of Guraidhoo Island’s sewerage system, using a low-cost approach. This system has been installed and is operating well, with benefits accruing related to improved water supply and public health. However, the storage pond to provide secondary treatment was located quite close to residential areas, and there were complaints about odor, flies, and mosquitoes. A commonly used international standard is to have a 500-meter separation from residences to avoid such complaints, but due to limited space, this was not possible. ADB did not have sufficient funds to finance the Government's intention to construct a higher-cost conventional sewerage system on Kulhudhuffushi Island (estimated to be $9 million–$10 million). It was agreed that only final designs and tender documents for a conventional sewerage system would be provided for Kulhudhuffushi Island. These designs were adopted, and the new system is now under construction, with government funds. The total disbursement of this component was $1.468 million as compared to an appraisal cost of $4 million.

Assumptions and Risks Timely award of civil works contracts Adequate performance by contractors Communities' acceptance and full involvement in project implementation

Delays were experienced during the planning and pre-design stage as the Government reviewed various options for the sewerage systems through September 2007, but once finalized, the works were tendered by June 2007 and construction completed by June 2008. The quality of the works is good. The island development committee is operating the new sewerage system. Due to concerns about an outbreak of dengue fever in 2008, the Ministry of Health instructed it to shut down operation of the sewage storage pond to help control mosquitoes. The pond remains closed, and the primary effluent is being pumped directly to the ocean outfall, without secondary treatment. To date, there have been no complaints about negative environmental impacts, and fishing in the area is still occurring.

Transport. Rehabilitate maritime aids, navigational infrastructure, and interisland transport emergency capacity, and repair causeways and Male airport.

Baseline indicators and performance targets will be developed prior to implementation for monitoring purposes as well as for checking against selection criteria.

As other donors provided funds for repairs to Male airport, maritime navigational aids, and some smaller harbors, ADB was requested to fund the design and reconstruction of the harbor at Dhidhdhoo Island, which is the atoll capital. The original designs were completed by the third quarter of 2005 considering two options: (i) seawalls and quays constructed

Appendix 1

28

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements Rehabilitation completed by 31 March 2007.

with gunny bags filled with cement and sand, which was common in the Maldives; or (ii) imported rock for the seawalls and either reinforced concrete T-sections with tie-backs or steel sheet piling for the quay wall. Based on the Government’s build–back–better policy, the technically better option of rock and steel pilings was selected. Construction was completed by May 2008. The quality of construction is good, and the island development committee and harbor users agree that it is a major improvement, facilitating unloading of larger cargo vessels and supply boats. A number of new resort islands are planned in the region (the first will open in November 2009), and these will result in increased use of the only major port in the atoll. The island development committee requested additional works to improve the harbor entrance, worth $125,000, which was approved by ADB. However, the Ministry of Transport, Housing and Environment did not approve this work. The total disbursement of this component was $2.726 million, compared to $2.9 million envisaged at appraisal.

Monitoring Mechanisms Government's progress reports Audit reports Project progress reports Project review missions Surveys

As ADB agreed to the Government’s request to have the line ministry oversee the implementation of the harbor, progress reports were completed by the subproject consultants and checked by the EMM. The EMM conducted monthly reviews of the subproject, and ADB staff members carried out quarterly review missions. Audit reports through FY2006 have been received by ADB.

Assumptions and Risks Timely award of civil works contracts Adequate performance by contractors Communities' acceptance and full involvement in project implementation

Delays were experienced during the planning and pre-design stage as the Government reviewed various options for the seawall and quay specifications, but once finalized, the works were tendered by April 2007 and construction completed by June 2008. The quality of the work is good. The island development committee is now operating the new harbor system, but regret that the ministry refused to approve the variation to the harbor entrance.

Power. Rehabilitate power supply system facilities, including

Baseline indicators and performance targets will be

The Government requested ADB to finance seven power stations and distribution

Appendix 1

29

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements supply and installation of generators, switchboards, cables, distribution boxes, streetlights, and consumer connections, and construct power houses.

developed prior to implementation for monitoring purposes as well as for checking against selection criteria. Rehabilitation completed by 31 March 2007.

systems on seven islands. Designs and tender documents were finalized in the third quarter of 2005 with the assistance of international and domestic consultants. The contractor was awarded the contract for six of the power stations and mobilized in August 2006. However, due to the higher-than-expected bid prices, the contract was split into two packages. The first package for four power systems was awarded, while the second for two more systems had to wait until funds were reallocated from the agriculture; fisheries; and water supply, sanitation, and solid waste management components. One island under the first package was dropped funding because the preparatory work (i.e., reclamation of the site area in the lagoon) did not occur. The six power stations were completed by August 2008. The disbursement for the power component was $3.60 million, compared to $2.5 million envisaged at appraisal.

Monitoring Mechanisms Government's progress reports Audit reports Project progress reports Project review missions Surveys

As ADB agreed to the Government’s request to have the line ministry oversee the implementation of the power systems, progress reports were completed by the subproject consultants and checked by the EMM. The EMM conducted monthly reviews of the subproject, and ADB staff members carried out quarterly review missions. Audit reports through FY2006 have been received by ADB.

Assumptions and Risks Timely award of civil works contracts Adequate performance by contractors Communities' acceptance and full involvement in project implementation

Delays were experienced during the planning and pre-design stage as the Government reviewed various options for design capacity and specifications, but once finalized, the works were awarded by April 2007, and construction was completed by August 2008. The quality of the work is good. The island development committee is now operating the new power systems on five islands. Due to disagreements with the Government about capacity and replacement housing, the committee on Madifushi Island has refused to take over the power generating system, though they are using the new distribution system. The Government has delivered an additional generating set with 125-kilowatt capacity—but without funds for installation. The committee has requested

Appendix 1

30

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements $40,000 be provided, but this has not yet been approved by the Government.

Agriculture. Provide farm inputs, tools, equipment and working capital to restore the farms and livelihoods of farmers. Strengthen institutional capacity of MFAMR.

Baseline indicators and performance targets will be developed prior to implementation for monitoring purposes as well as for checking against selection criteria. Rehabilitation completed by 31 March 2007.

The provision of livelihood support to tsunami-affected farmers had a high priority with ADB and the Government at the time of appraisal. From May to September 2005, the Ministry of Fisheries and Agriculture carried out a rapid socioeconomic assessment on 42 tsunami-affected islands. The findings identified activities that would be most useful, and 2,280 beneficiaries were identified. The findings were used to develop an activity matrix, identify responsible parties, define expected inputs and outputs, and estimate funds required for each. Activities included (i) training in simple business development, entrepreneurship, and financial management; (ii) introduction of new farming technology and crop protection via island extension services; (iii) training and support workshops; and (iv) microcredit. However, many donors had similar programs in this sector and had established them on the outer islands before the Project became active. All of these programs included the provision of farm inputs and farm implements. Because of the duplication of programs, project funds were not used for these activities. ADB did not agree to give cash grants for working capital or to fund the procurement of speedboats for farmers as they were considered unsustainable. At a very early stage, ADB had recommended channeling working capital to the farmers using a microcredit facility, but this required several changes and passing of a draft public finance act. Project assistance had to wait until the draft was ratified. By the end of the second quarter of 2006, the ministry and ADB had agreed on the activity matrix and cost allocations for the agriculture component as well as the modality for microcredit through the Bank of Maldives. Outputs that were completed included a farmer’s handbook (5,000 copies printed in local languages) and curriculum for agriculture courses The handbook was popular with farmers, and copies should continue to be distributed through the atoll and island offices. Also, by mid-2006, a detailed agriculture assistance program was approved by ADB that included construction of new facilities and repairs to existing buildings at the Mendhoo Agricultural

Appendix 1

31

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements Research Station, crop field trials and field demonstrations on eight pilot islands, classroom training, and farmer field schools. The eight pilot islands were selected for crop demonstrations through a screening process and involved direct participation. However, by the time the Mendhoo Agricultural Research Station works, estimated at $1.5 million, were designed and tendered, there was insufficient time in the project closing date to allow for a 12-month construction period. As the Government was unsure if ADB would approve an extension, this subproject was dropped. The microcredit program was not utilized as there were other credit programs available to the farmers with better terms. The microcredit under the Project—Rf8,000 ($670)—as considered too small to be attractive, and the 2-year repayment period was much less than the 8–10 years offered by others. The total disbursement under this component was $0.377, compared to the $2.8 million envisaged at appraisal.

Monitoring Mechanisms Government's progress reports Reports from community-based organizations and island development committees Audit reports Project progress reports Project review missions Surveys

As ADB agreed to the Government’s request to have the line ministry oversee the implementation of the agricultural component, progress reports were completed by subproject consultants and checked by the EMM. The EMM conducted monthly reviews of the subproject, and ADB staff members carried out quarterly review missions. Audit reports through FY2006 have been received by ADB.

Assumptions and Risks Adequate and timely distribution of inputs, tools, equipment, and working capital to farmers identified by community-based organizations and island development committees Capacity of the Ministry of Fisheries and Agriculture strengthened.

The microcredit was canceled due to lack of demand caused by more competitive terms from other donors. Also, the infrastructure works could not be completed due to time constraints. The capacity-building activities were completed, and the farmer’s handbook is being used by a number of beneficiaries. Island officials report an increase in farming activities, as many of the 2,280 beneficiaries have improved their farming practices. The pilot farms on eight islands and the cooperative societies developed to operate them were not sustainable, and once the international consultants left, they disbanded within a few months, as profits from the initial crops were not as high as expected.

Appendix 1

32

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements Fisheries. Provide processing equipment, working capital, and extension services to fish processors to restart their livelihoods. Strengthen institutional capacity of MFAMR.

Baseline indicators and performance targets will be developed prior to implementation for monitoring purposes as well as for checking against selection criteria. Rehabilitation completed by 31 March 2007.

The fisheries component has performed in a relatively satisfactory manner, although the microcredit was not fully used. At the time of appraisal, beneficiary islands had already been identified. Needs assessments were carried out from May to September 2005 on the 24 most severely affected islands. The critical needs identified were (i) training in simple business development and financial management, (ii) development of a fishing technology curriculum for value added in fish processing aimed at the overseas market, (iii) support workshops, and (iv) microcredit. Similar to agriculture, many donors committed substantial funds to this sector, and by early 2005, had provided numerous kits consisting of fishing nets, gear, poles, engines, boats, pumps, drying racks, and related materials. The Project provided seafood-processing kits to 488 fishers. Consultants prepared and delivered a three-stage education curricula for a seafood processing technology certificate, which was accredited by the Maldives Accreditation Board in July 2006. Cooperatives on 15 affected islands registered with the Ministry of Economic Development and Trade, and 557 fishermen were provided training on cooperative management and administration through 23 courses in fish processing; 13 courses in 2006 and 10 courses in 2007. ADB did not agree to provide cash grants for working capital due to lack of transparency. Microcredit from the Project was set up through the Bank of Maldives but was not fully used, for the same reasons as under the agriculture component—several other programs were active, and ADB’s loans were too small with short repayment periods. The disbursement for this component was $1.775 million, compared to $2.3 million envisaged at appraisal.

Monitoring Mechanisms Government's progress reports Reports from community-based organizations and island development committees Audit reports Project progress reports Project review missions

As ADB agreed to the Government’s request to have the line ministry oversee the implementation of the agricultural component, progress reports were completed by the subproject consultants and checked by the EMM. The EMM conducted monthly reviews of the subproject, and ADB staff members carried out quarterly review missions.

Appendix 1

33

Design Summary Appraisal Performance

Targets/Indicators Actual Results/Achievements Surveys

Audit reports through FY2006 have been received by ADB.

Assumptions and Risks Adequate and timely distribution of equipment and working capital to the affected fish processors identified as needing help by community-based organizations and island development committees. Capacity of the Ministry of Fisheries and Agriculture strengthened.

The microcredit assistance was achieved although not fully used because of more competitive programs from other donors.

Consultancy. Timely recruitment Satisfactory performance and provision of services Government's progress reports Audit reports Project progress reports Project review missions

The consultants performed their services acceptably. There were no complaints against the international consultants, and only one issue was raised regarding one of the dozens of domestic consultants. The need for consulting services was underestimated at appraisal, but as the severe government staff constraints became apparent and the proposed PMU was not established, the need for increased consulting support was recognized. In November 2006, this component was increased to $1.753 million. This was for the grant of $20 million, as the loan funds for the quick-disbursing component had no consulting input and the three TA grants provided their own consulting budget. The actual disbursement was $1.725 million compared to $0.8 million envisaged at appraisal.

Appendix 1

34

Actual Achievements Activities: General Milestones

1. Establish project management unit by April 2005. 2. Select and recruit consultants by April 2005. 3. Select four projects in each subsector by May 2005.

4. Complete survey and design, prepare cost estimates and

bidding documents by May 2005.

Not done, as agreed by ADB. May 2005–March 2007 Water supply, sanitation, and solid waste management (2), transport (1), power (6) July 2005–September 2007

Water, Sanitation, and Solid Waste Management 1. Conduct detailed assessment of damage to environment

structure by May 2005. 2. Complete bidding and contract awards by May–June

2005.

3. Completed construction, delivery, and installation July 2005–March 2007.

May–September 2005 June 2006 for Guraidhoo Island; March–October 2007 for Kulhudhuffushi Island Guraidhoo Island sewerage system completed by June 2008.

Transport 1. Complete bidding and contract awards by May–June

2005. 2. Rehabilitate damaged maritime navigation aids, provide

emergency interisland transport capacity for reconstruction works, and dredge and repair causeways July–December 2005.

3. Rehabilitate damaged jetties, do priority repairs of sea and quay walls, and rehabilitate Male airport July–December 2006.

Only Dhidhdhoo Island’s harbor was done, bidding by April 2007 and award by June 2007. Other works completed by other donors.

Power 1. Complete survey and detailed design by May 2005. 2. Complete bidding and contract awards by June 2005. 3. Conduct construction, delivery, and installation July

2005–March 2007.

June–November 2005 April 2006 July 2006–June 2008

Fisheries 1. Identify cottage processors by May 2005.

2. Prepare guidelines for community-based organization

operations by May 2005. 3. Select community-based organization and island

development committee by June 2005. 4. Complete bidding and contract awards by May-June

2005. 5. Supply and deliver equipment July 2005–December

2005. 6. Distribute cash grants to community-based organizations

by July 2005–December 2005 7. Distribute microcredit to beneficiaries by July 2005–

December 2005

Needs assessment May–September 2005 September 2005 October 2005 Fisheries kits from November 2005–July 2006 Training March–December 2007 ADB did not agree to cash grants. June 2007–August 2008

Agriculture 1. Identify affected farmers by May 2005. 2. Select community-based organization and island

development committee by June 2005. 3. Complete bidding and contract awards by May–June

2005. 4. Supply and deliver equipment July 2005–March 2007. 5. Distribute cash grants to community-based organizations

July–November 2005 December 2005 For infrastructure works, January 2008 Canceled June–September 2007 ADB did not agree to cash grants

Appendix 1

35

by July–December 2005. 6. Distribute microcredit to beneficiaries by July 2005–

December 2005.

June 2007–August 2008

Inputs: Grant of $20 million from the Asian Tsunami Fund, including consulting services for project supervision. Loan of $1.77 million from ADB's Special Funds resources.

Used: $17.872 million $1.77 million

ADB = Asian Development Bank, EMM = Extended Mission to the Maldives, FY = fiscal year, JFPR = Japan Fund for Poverty Reduction, MFAMR = Ministry of Fisheries, Agriculture and Marine Resources, MOFT = Ministry of Finance and Trade, PCR = project completion review, PMU = project management unit, TA= technical assistance.

Appendix 2

36

PROJECT COSTS AND FINANCING PLAN

Table A2.1: Project Costs by Category ($ million)

ADB = Asian Development Bank, WSS = water supply and sanitation. a Actual costs were not available. b Beneficiaries contribution will be in kind, covering labor costs for civil works. Sources: ADB estimates.

Appraisal Actual Item Foreign Local Total Foreign Local Total A. ADB Financing 1. Quick Disbursing 6.50 0.00 6.50 6.47 0.00 6.47 a. Grant Financing 4.70 0.00 4.70 4.70 0.00 4.70 b. Loan Financing 1.80 0.00 1.80 1.77 0.00 1.77 2. Project Components (Grant Financing) a. Equipment and Materials 8.94 0.70 9.64 4.41 0.00 4.41 i. WSS 3.74 0.00 3.74 0.40 0.00 0.40 ii. Transport 0.30 0.00 0.30 0.00 0.00 0.00 iii. Power 1.50 0.00 1.50 1.94 0.00 1.94 iv. Fisheries 1.50 0.40 1.90 1.88 0.00 1.88 v. Agriculture 1.90 0.30 2.20 0.16 0.00 0.16 b. Civil Works 0.00 3.86 3.86 0.00 5.51 5.51 i. WSS 0.00 0.26 0.26 0.00 1.05 1.05 ii. Transport 0.00 2.60 2.60 0.30 2.42 2.72 iii. Power 0.00 1.00 1.00 0.00 1.65 1.65 iv. Agriculture 0.00 0.00 0.00 0.00 0.76 0.76 c. Extension Services 0.50 0.50 1.00 0.022 0.00 0.022

i. Fisheries 0.30 0.40 0.70 0.002 0.00 0.002

ii. Agriculture 0.20 0.10 0.30 0.020 0.00 0.020

d. Consulting Services 0.52 0.28 0.80 1.47 0.25 1.72

Subtotal (A) 16.46 5.34 21.80 12.37 5.76 18.13 B. Government Financinga 1. Administrative Expenses 0.00 1.28 1.28 0.00 1.28 1.28 a. WSS 0.00 0.08 0.08 0.00 0.08 0.08 b. Transport 0.00 0.30 0.30 0.00 0.30 0.30 c. Power 0.00 0.20 0.20 0.00 0.20 0.20 d. Fisheries 0.00 0.30 0.30 0.00 0.30 0.30 e. Agriculture 0.00 0.40 0.40 0.00 0.40 0.40 2. Taxes and Duties 0.00 1.92 1.92 0.00 1.92 1.92 a. WSS 0.00 0.62 0.62 0.00 0.62 0.62 b. Transport 0.00 0.40 0.40 0.00 0.40 0.40 c. Power 0.00 0.40 0.40 0.00 0.40 0.40 d. Fisheries 0.00 0.30 0.30 0.00 0.30 0.30 e. Agriculture 0.00 0.20 0.20 0.00 0.20 0.20 3. Beneficiariesb 0.00 0.30 0.30 0.00 0.30 0.30

Subtotal (B) 0.00 3.50 3.50 0.00 3.50 3.50

Total Project Cost (A + B) 16.46 8.84 25.30 12.37 9.26 21.63

Appendix 2

37

Table A2.2: Project Costs by Component ($ million)

Source: Asian Development Bank.

Table A2.3: Financing Plan ($ million)

a Includes cost of consulting services. Source: Asian Development Bank estimates

Appraisal Actual Item Foreign Local Total Foreign Local Total Quick-Disbursing Component Grant 4.70 0.00 4.70 4.70 0.00 4.70 Loan 1.80 0.00 1.80 1.77 0.00 1.77 Project Components Supply, Sanitation, and Solid

Waste Management

3.74

0.26

4.00

0.40

1.05

1.45 Transport 0.30 2.60 2.90 0.30 2.42 2.72 Power 1.50 1.00 2.50 1.94 1.65 3.59 Agriculture 2.10 0.70 2.80 0.18 0.76 0.94 Fisheries 1.80 0.50 2.30 1.88 0.00 1.88 Consultancy 0.52 0.28 0.80 1.47 0.25 1.72

Total 16.46 5.34 21.80 12.37 5.76 18.13

Appraisal Actual Source Foreign Local Total Percent Foreign Local Total Percent A. Quick-Disbursing Component

6.5 0.0 6.5 100 6.4 0.0 6.4 100

Asian Development Bank Grant 4.7 0.0 4.7 72 4.7 0.0 4.7 73 Asian Development Bank Loan 1.8 0.0 1.8 28 1.7 0.0 1.7 27 Government 0.0 0.0 0.0 0 0.0 0.0 0.0 0 B. Project Componentsa 9.9 8.9 18.8 100 5.97 9.26 15.23 100 Asian Development Bank 9.9 5.4 15.3 81 5.97 5.76 11.73 77 Government 0.0 3.5 3.5 19 0.0 3.50 3.50 23 Total 16.4 8.9 25.3 100 12.37 9.26 21.63 100 Asian Development Bank 16.4 5.4 21.8 86 12.37 5.76 18.13 84 Government 0.0 3.5 3.5 14 0.0 3.50 3.50 16

Appendix 3

38

Last ActualOriginal Revised Contract Amount Undisbursed

Category Allocation Allocation Amount Disbursed BalanceLoanQuick-disbursing Component 1.188 1.188 1.188 1.188 0Total (loan currency) 1.188 1.188 1.188 1.188 0Total (US dollars) 1.800 1.774 1.774 1.774 0Source: Asian Development Bank estimates.

Last ActualOriginal Revised Contract Amount Undisbursed

Category Allocation Allocation Amount Disburseda BalanceGrantQuick-disbursing Component 4.700 4.700 4.956 4.700 0.000

Subtotal 4.700 4.700 4.956 4.700 0.000

Equipment and MaterialsWater Supply, Sanitation, Solid Waste Management 3.740 1.630 0.897 0.409 1.221Transport 0.300 0.000 0.000 0.000 0.000Power 1.500 2.825 1.964 1.949 0.876Fisheries 1.900 2.015 2.691 1.887 0.128Agriculture 2.200 1.746 0.349 0.166 1.580

Subtotal 9.640 8.216 5.901 4.411 3.805

Civil WorksWater Supply, Sanitation, Solid Waste Management 0.260 0.260 1.058 1.058 (0.798)Transport 2.600 2.900 2.726 2.726 0.174Power 1.000 1.000 1.657 1.657 (0.657)Agriculture 0.000 0.171 0.079 0.076 0.095

Subtotal 3.860 4.331 5.520 5.517 (1.186)

Extension Services Fisheries 0.400 0.700 0.002 0.002 0.698Agriculture 0.600 0.215 0.047 0.020 0.195

Subtotal 1.000 0.915 0.049 0.022 0.893

Consulting Services 0.800 1.838 1.813 1.724 0.114

Total (US dollars) 20.000 20.000 18.239 17.866 2.134( ) = negative.a Disbursed amount included the unliquidated imprest advance of $1,492,421.Source: Asian Development Bank, Loan Financial Information System.

Allocation, Contract Amounts, and Actual Disbursements(SDR million)

Allocation, Contract Amounts, and Actual Disbursements($ million)

Appendix 4 39

ParticularsA. Recruitment of Consultants by ADB

Short-listing of consultants

Contract signing

Fielding of consultants

B. PreparationSelection of subprojects

Identification of cottage processor (fisheries)and affected farmers (agriculture)

Survey and design

Preparation of cost estimates

Preparation of bidding documents

C. Transport ComponentBidding and contract awards

Construction

D. Water Supply, Sanitation, andSolid Waste ManagementBidding and contract awards

Construction, delivery, and installation

E. Power ComponentBidding and contract awards

Construction, delivery, and installation

F. Fisheries ComponentBidding and contract awards

Supply and delivery of equipment

Distribution of cash grant (ADB did not agree to cash grants.)

Distribution of microcredit to beneficiaries

G. Agriculture ComponentBidding and contract awards

(cancelled)Supply and delivery of equipment

(cancelled)Distribution of cash grant (ADB did not agree to cash grants.)

Distribution of microcredit to beneficiaries (cancelled)

Appraisal ActualSource: Asian Development Bank estimtes.

Q1 Q2

PROJECT IMPLEMENTATION SCHEDULE

Q1 Q22005

Q3 Q4 Q3 Q42006 2007

Q1 Q2 Q3 Q42008

Q1 Q2 Q3 Q4

40 Appendix 5

Project Coordinating Committee

ADB = Asian Development Bank; MHTE = Ministry of Housing, Transport and Environment; MOFA = Ministry of Fisheries and Agriculture; MOAD = Ministry of Atolls Development; MOFT = Ministry of Finance and Treasury; MPND = Ministry of Planning and National Development.Source: Asian Development Bank and Government of Maldives.

PROJECT ORGANIZATION STRUCTURE

Procurement Monitoring and Evaluation

CommunitiesContractors

Civil Societies

Extended Mission

National Economic Recovery and Reconstruction Program

Headquarters,

Consultants

MHTE

Power

Implementing Agencies

MHTE

Transport

MOFA

Fisheriesand

Agriculture

MOAD

Executing

(MOFT)

Water Supply,Sanitation, and

MPNDAgency

AtollCoordination

Recovery - MOFT Redevelopment - MPND

Management

National Economic Housing and Infrastructure

Solid Waste

ADB

Accounting ProgrammingTechnical and

Implementation

MHTE

LINE MINISTRIES(MHTE and MOFA)

Financial and Planning and

Appendix 6

41

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant

Reference in Financing Agreement

Status of Compliance Sector 1. The central PMU to be established for the NERRP shall be responsible for day-to-day implementation of the Project in accordance with the provisions of this Financing Agreement and the Operations Manual. A full-time Project Manager for this Project shall be appointed and supported by five sections of the PMU: (i) planning and programming; (ii) procurement; (iii) financial and accounting; (iv) monitoring and evaluation; and (v) technical and implementation. The PMU shall be responsible for (i) consolidation of subproject proposals from the Implementing Agencies to be submitted for approval by the PCC; (ii) preparation of bidding documents and conducting procurement of civil works, equipment, goods and related services for infrastructure reconstruction; (iii) recommendations to release grant funds under working capital schemes to the affected communities; (iv) disbursements and maintenance of accounts, including preparation of the financial reports; (v) preparation and submission of progress reports to the PCC and ADB; and (vi) maintenance of the website for the Project. 2. The Maldives shall ensure that all subprojects meet, to the satisfaction of ADB, the agreed selection criteria and implementation arrangements, and that all subprojects are properly monitored to the satisfaction of ADB. Implementing Agency, through the PMU, shall propose a list of subprojects to be implemented. The PMU shall compile and conduct initial screening of the proposals and shall submit these to the PCC for final selection and approval in accordance with the criteria described in paragraph 8 of this Schedule. All subproject proposals shall be submitted by the PMU in a format to be agreed between the Maldives and ADB. First subproject for each Component shall e subject to prior review and approval by ADB before its commencement. Each subsequent subproject estimated to cost more than equivalent of $500,000 must be submitted to ADB for prior review and approval. Subproject proposals shall be selected on the basis of the following criteria: (i) Each subproject must rehabilitate or restore damaged infrastructure and facilities caused by the

Schedule 6, para. 3 Schedule 6, paras. 6 to 8

Complied with change in implementation arrangement. MOFT indicated that a central PMU was not necessary; the implementation was to be delegated to the responsible line ministries. On 10 May 2007, ADB agreed to MOFT’s request for this change in implementation arrangement. For the WSS component, a major change in scope was introduced modifying the implementation arrangements under the project. MEEW/MHTE was then appointed as IA for the Sewerage component. Complied with. Subproject selection criteria were generally followed. But in the Water Supply and Sanitation subproject for Kulhudhuffushi Island, the Government’s preferred option did not represent the least-cost option, and ADB did not fund this work.

Appendix 6

42

Covenant

Reference in Financing Agreement

Status of Compliance tsunami based on the needs assessment. The subproject must not include relief work and long term development needs; (ii) Each subproject must be technically feasible and a least-cost alternative, financially viable and sustainable, and cost-effective, while at the same time incorporating disaster resistant parameters, where necessary and feasible; (iii) Each subproject must, to the extent possible, involve local communities and beneficiaries in the selection, design, implementation, and operation and maintenance (O&M) process; (iv) Each subproject can be completed within the project implementation period; (v) Each subproject must not be financed by another agency; (vi) Subprojects shall be prioritized on the basis of their social and economic direct impact; priority will also be given to subprojects that rehabilitate ongoing or completed ADB-financed projects; 3. Environmental (vii) Each subproject must be in compliance with the environmental requirements of the Maldives, ADB's Environment Policy (2002) and the Environmental Assessment Framework in Attachment 1 to this Schedule. For subprojects that require initial environmental examination (IEE), the IEE is included in the subproject proposal, and the clearance of appropriate environmental agency of the Maldives shall be obtained prior to award of subproject contract. Any subproject deemed by ADB to be environmental category A (i.e. could have adverse environmental impacts) shall not be eligible for ADB financing; and (viii) Subprojects shall avoid involuntary resettlement, whenever feasible. In the event involuntary resettlement is unavoidable for any subproject, it shall be conducted in accordance with the applicable laws and regulations of the Maldives, ADB's Policy on Involuntary Resettlement (1995), and the Resettlement Framework in Attachment 2 to this Schedule prior to the award of the subproject contract. 4. The Maldives shall ensure that the Project Executing Agency and each Implementing Agency shall actively seek community participation in the selection, design, implementation and O&M of all works carried out under the Project. The Maldives shall engage, to the extent possible, CBOs, IDCs and

Schedule 6, para. 8, (vii) Schedule 6, para. 9

Complied with. Projects categorized as A under ADB’s environmental classification were declined as per subproject selection criteria. Water Supply and Sanitation component: In compliance with national law, an EIA was prepared for the sanitation scheme for Guraidhoo Island, and a Government clearance was issued. For Kulhudhuffushi Island, an EIA was prepared along with the detailed engineering design, but ADB did not fund/finance construction. Power component: IEEs were completed and approved. Transport component; an IEE was prepared for the harbor works on Dhidhdhoo Island. Complied with. Water Supply and Sanitation component: Feasibility study consultants undertook extensive community consultation on both Guraidho and Kulhudhuffushi

Appendix 6

43

Covenant

Reference in Financing Agreement

Status of Compliance NGOs in the Project monitoring. 5. The Maldives shall ensure that cash and in-kind assistance provided to individual beneficiaries under the Agriculture Component and Fisheries Component shall be made after identification and verification in accordance with arrangements agreed between ADB and the Maldives. All records, receipts, certificates and other documents related to such cash and in-

Schedule 6, para. 18

islands. Community engagement and ownership were further strengthened and the IDC on Guraidho Island is operating the new system. Power component: Community consultation was conducted by consultants during the design stage, and on 5 islands the IDC are operating the new power systems. But on Madifushi Island, the IDC has not yet accepted their new power station, related to unresolved issues regarding capacity of the power system and replacement housing. Transport component: the project consultants and ADB staff held extensive consultations with local community and IDC on Didhdhoo Island during the planning and pre-design phase, but the IDC indicated they were not given an opportunity to review the detailed design drawings and works schedule, with the result that the harbor entrance was not properly rebuilt. Fisheries and agriculture component: Social mobilization and consultation were carried out with CBOs, IDCs and Women Development Committees identify the needs of beneficiaries. The CBOs were strengthened and provided with equipment and computers. The community participated in training and extension services, awareness workshops, and exposure visits. Complied with. All records are kept by the EA. ADB did not support cash grants. Distribution of kits to fisher folk were recorded, and only those names on the approved list that

Appendix 6

44

Covenant

Reference in Financing Agreement

Status of Compliance kind assistance shall be properly maintained and made available to ADB at any time. 6. The Maldives shall ensure that the relocation of the displaced persons will be completed as per the Maldives’' policy framework and procedural guidelines applicable to the Project, which are outlined in the Resettlement Framework. 7. The Maldives shall ensure that, to the extent possible, subprojects will avoid involuntary resettlement. In the event involuntary resettlement is unavoidable for any subproject, then the Maldives shall prepare a resettlement plan in accordance with the applicable laws and regulations of the Maldives, ADB's Policy on Involuntary Resettlement (1995) and the Resettlement Framework; and submit it to ADB for review and approval before resettlement is initiated. The resettlement plans shall be disclosed to affected persons and project reporting shall provide information on resettlement. 8. The Maldives shall ensure that in accordance with ADB's Policy on Gender and Development (1998), (a) project interventions take into account the different impacts and needs of women and men; (b) special features are built into subproject’s design to facilitate and encourage women’s participation and to ensure tangible benefits for women; (c) project reporting reflects gender specific issues and gender disaggregated data, where applicable; and (d) women will be given equal opportunities for employment and equal pay for equal work under the Project. 9. The Maldives shall establish a grievance review mechanism within existing PCB to address complaints and grievances related to the Project. Such mechanism shall be in the form of quasi judicial proceeding to facilitate access to justice in respect of grievances submitted by individual or communities with assistance of Facilitation Units, island based magistrates, IDCs, CBOs and NGOs. Financial 10. The PMU shall maintain separate records and accounts for each Component, adequate to identify the goods and services financed by the Loan and Grant proceeds, financing source received, expenditures incurred, and the use of local funds.

Schedule 6, para. 10 Schedule 6, para. 11 Schedule 6, para. 12 Schedule 6, para. 22 Schedule 6, para. 16

the IDC provided to MOFT, received kits Not applicable. None of the works funded by ADB involve resettlement or loss of land, such that there was no displacement as a result of ADB's subprojects. Not applicable. None of the works funded by ADB caused resettlement or loss of land. Complied with. Consultations and beneficiaries included both women and men. Many of the farmers benefiting from the project were women. Partially complied with. While the Government did not establish a special unit to receive and hear complaints, grievances were accepted and acted on by either responsible ministry or island governments/IDCs. Complied with. MOFT set up a new public accounting system with funding and advice from the EU as administered by the World Bank.

Appendix 6

45 Covenant

Reference in Financing Agreement

Status of Compliance The accounts shall be set up in accordance with sound accounting principles. Consolidated project accounts and related financial statements will be audited annually by independent auditors acceptable to ADB. The audited reports and related financial statements in English will be submitted to ADB not later than six (6) months after the end of the fiscal year (31 December) to which they relate. 11. All project activities shall be subject to independent performance audit to ensure transparency and objective and independent assessment of such activities. The performance audit shall be conducted annually and randomly during project implementation and be carried out by external auditors to be selected by the Maldives in consultation with ADB. In addition, ADB may conduct project procurement audits during implementation as part of its regular reviews. Others 12. The PMU shall prepare brief progress statements and submit these to the PCC and ADB at the end of each month. In addition, the PMU shall submit quarterly report to the PCC and ADB. 13. Within three (3) months of the physical completion of the Project, the Maldives shall provide ADB through the PCC an overall project completion report providing detailed evaluation of project design, costs, contractor and consultant performance, social and economic impact and other details requested by ADB.

Schedule 6, para. 17 Schedule 6, para. 19 Schedule 6, para. 19

Audited reports have been received for 2006. Complied with. Annual audits were funded by the World Bank. Project audits were carried out by ADB project officers and EMM. Partially complied with. It was not possible for the Government to provide the numerous reports that would have been required for all the various donors. The Government relied on ADB and EMM to help them monitor and report. The UNDP did assist MOFT with setting up a development assistance database which tracked contracts and expenditures on various components. This information was placed on the internet for public viewing. Partially complied with. The Government did not have the staff resources to prepare an overall project completion report. ADB’s EMM advisor did prepare his consultant completion report, as of end 2007 when 95% plus of the ADB funded works were complete. This report provided a good summary of TEAP.

ADB = Asian Development Bank; CBO = community based organization; EA = executing agency; EIA = environmental impact assessment; EMM = Extended Mission in the Maldives; EU = European Union; IDC = island development committee; IEE = initial environmental examination; MEEW = Ministry of Environment, Energy and Water, MHTE = Ministry of Housing, Transport and Environment; MOFT = Ministry of Finance and Treasury; NGO = nongovernmental organization; O&M = operation and maintenance; PCC = project coordination committee; PMU = project management unit; RP = resettlement plan.

Appendix 7

46

SUMMARY OF CONTRACT DETAILS $ Equivalent

Category

Contract

No.

Contract

Value

Disbursed

Undisbursed

Description

Contractor

A. Quick Disbursing Component

4801 G00011 1,410,000.00 1,410,000.00 0.00 Liquidation of the Imprest Fund Various

4801 G00012 2,521,191.17 2.264,870.69 256,320.48 Liquidation of the Imprest Fund Various

4801 G00106 1,025,129.31 1,025,129.31 0.00 Liquidation of the Imprest Fund Various

B. Agriculture Component

3605 G00287 166,485.55 166,485.55 0.00 Liquidation of the Imprest Fund Various

3902 G01946 47,500.00 20,685.91 26,814.09 Consultancy Sheladia Associates

3204 G02022 79,217.69 76,663.00 2,554.69 Various Expenses Various

3605 G02460 130,237.97 0.00 130,237.97 Various Expenses Various

3605 G02461 52,408.77 0.00 52,408.77 Various Expenses Various

C. Fisheries Component

3604 G01786 113,890.70 113,890.70 0.00 Supply of Goods SJ Construction and Trade Pvt Ltd

3604 G02147 72.42 0.00 72.42 Various Expenses Various

3604 G00038 913,931.84 913,931.84 0.00 Liquidation of the Imprest Fund Various

3604 G00136 245,489.77 241,746.54 3,743.23 Liquidation of the Imprest Fund Various

3604 G00321 245,719.93 245,514.13 205.80 Liquidation of the Imprest Fund Various

3604 and 3901 G00581 1,174,229.63 374,229.62 800,000.01

Liquidation of the Imprest Fund Various

D. Power Component

3603 and 3203 G00147 1,275,894.37 1,275,894.37 0.00

Design, Supply, Install, Test and Commission Power Supply System in four islands: Dh. Meedhoo, Th. Madifushi, N. Maafaru, and Sh. Maroshi

Static Company Pvt. Ltd.

3603 and 3203 G00329 792,822.78 778,178.25 14,644.53

Design, Supply, Install and Commissioning of Various

Appendix 7

47

$ Equivalent

Category

Contract

No.

Contract

Value

Disbursed

Undisbursed

Description

Contractor Power Supply System in 2 islands: H.A. Filadhoo and Nolhivaranfaru

3203 G00474 244,439.87 244,439.87 0.00 Liquidation of the Imprest Fund Various

3203 G01167 1,078,087.38 1,078,087.38 0.00 Liquidation of the Imprest Fund Various

3203 G01168 1.00 0.00 1.00 Liquidation of the Imprest Fund Various

3203 G01169 230,852.17 230,852.17 0.00 Liquidation of the Imprest Fund Various

E. Transport Component

3202 G00711 2,726,383.80 2,726,383.80 0.00

Reconstruction and Rehabilitation of H.A. Dhidhoo Harbour

Maldives Transport Contracting Company Ltd.

F. Water Supply, Sanitation, and Solid Waste Management Component

3201 and 3601 G00687 1,956,551.00 1,467,942.27 488,608.73

Construction of Sewerage System and Sewerage Treatment Plant for Th. Guraidhoo Island

Shin Nippon Air Technologies Co. Ltd.

G. Consulting Services Component

1100 S05307 47,186.19 47,186.19 0.00 Consultancy Dirk Rietveld Frans

1100 S05312 15,633.27 15,633.27 0.00 Consultancy Adam Haleem

1100 and 1400 S05356 135,639.85 135,639.85 0.00 Consultancy Michael L. Green 1100 S06488 12,563.97 12,563.97 0.00 Consultancy John R. Spurr

1100 S06585 27,364.22 27,364.22 0.00 Consultancy William C. Hopper

1100 S06797 39,446.33 39,446.33 0.00 Consultancy Ahmed Fayaz Shareef

1100 and 1400 S06831 9,467.57 9,467.57 0.00 Consultancy Hussein Zahir

1100 S06942 233682.95 233,682.95 0.00 Consultancy

Willibrordus J.M.M. (WILCO) Liebregts

1100 S06949 18,202.00 13,303.48 4,898.52 Consultancy Sofoora Kawsar Usman

1100 S07299 33,302.42 33,302.42 0.00 Consultancy Abdulla Ziyad

1100 S07380 7,398.45 7,398.45 0.00 Consultancy Ibrahim Hussain

1100 S07645 41,552.44 41,552.44 0.00 Consultancy Ruben M, Salgado

Appendix 7

48

$ Equivalent

Category

Contract

No.

Contract

Value

Disbursed

Undisbursed

Description

Contractor

1100 and 1400

S07690 70,411.12 70,411.12 0.00 Consultancy

Marine Institute, Memorial University of Foundland

1100 S07691 11,988.94 11,988.94 0.00 Consultancy

Marine Institute, Memorial University of Foundland

1100 S07692 20,483.90 20,483.90 0.00 Consultancy

Marine Institute, Memorial University of Foundland

1100 S07975 10,974.80 10.974.80 0.00 Consultancy Zaahi Engineering Services

1100 S07977 9.699.18 9,699.18 0.00 Consultancy Zaahi Engineering Services

1100 S08176 9,099.18 9,099.18 0.00 Consultancy Zaahi Engineering Services

1100 S08421 37,546.23 37,546.23 0.00 Consultancy Tofail Ahmed

1100 S08494 3,510.98 3,510.98 0.00 Consultancy Ibrahim Mahfooz

1100 S08855 4,411.80 4,411.00 0.00 Consultancy Mariyam Shenin

1100 S09699 37,096.83 37,096.83 0.00 Consultancy Heshan V.A, Wickramasuriya

1100 S10576 199,950.00 199,950.00 0.00 Consultancy Zaahi Engineering Services

1100 S10601 28,520.60 28,520.60 0.00 Consultancy Power Systems Pte. Ltd.

1100 S10726 36,450.00 36,450.00 0.00 Consultancy Zaahi Engineering Services

1100 S12411 19,667.23 19,667.23 0.00 Consultancy Ahmed Nazim

1100 S12603 37,741.67 37,741.67 0.00 Consultancy Zaahi Engineering Services

1100 S12627 51,200.00 51,200.00 0.00 Consultancy Zaahi Engineering Services

1100 S13519 17,126.93 17,126.93 0.00 Consultancy Aminath Jameel

1100 S14077 58,758.72 58,758.72 0.00 Consultancy Gerardo Alora Santos

1100 S14078 38,898.56 38,898.56 0.00 Consultancy Harihar Prasad Acharya

1100 S14087 24,317.70 24,317.70 0.00 Consultancy Ravishankar Thupalli

1100 S15631 2,304.55 2,304.55 0.00 Consultancy Mohamed Niham 1100 and 1400 S70050 378,384.96 378,384.96 0.00 Consultancy

Wilbur Smith Associates, Inc.

Total 18,160,520.66 16,380,010.42 1,780,510.24 Source: Asian Development Bank estimates.

Appendix 8

49

ECONOMIC ANALYSIS

A. General 1. The economic internal rate of return (EIRR) was calculated for the infrastructure-related components of the Tsunami Emergency Assistance Project in the Maldives. B. Water Supply, Sanitation and Solid Waste Management Component 2. Guraidhoo Island had a land area of 34 hectares and a population of 1,864 (325 households) as of July 2009. The island is generally low-lying, and all of its infrastructure was severely damaged by the tsunami. As a result, water salinity dramatically increased in some areas, and groundwater was polluted with contaminants from existing household septic tanks. Hence, the availability of a proper sanitation and sewerage system was a basic requirement for every household on the island, on which this component focused. The economic analysis of this component has been conducted and compared to the analysis done at appraisal. 3. Capital cost. At appraisal in April 2006, the economic analysis included two options. The more expensive option (option 2) was chosen for construction. At appraisal, the capital cost for the chosen option was estimated to be Rf18,566,015 ($1,450,470). The actual capital costs, used in the follow-up analysis as part of the project completion review (PCR), are Rf24,928,447 ($1,939,957). These costs were divided into local and foreign components and the appropriate conversion factors applied. 4. Operating costs. At appraisal, the estimated operating costs for the chosen option, including labor, consumables (e.g., power and fuel), and spare parts had a total annual cost of Rf275,200 ($21,500). An updated estimate of actual operating costs used in the PCR analysis, based on a site visit and inspection of the facility and including spare parts, consumables, maintenance, and staff and administrative costs, is Rf684,000 ($53,230). As with the capital costs, these costs were divided into local and foreign components and appropriate conversion factors applied. 5. Benefits. Economic benefits include the improvements in the sanitation and sewerage services available to the island’s population. These benefits include an estimate of the value placed on the service resulting from a consumer willingness-to-pay survey.1 Additional benefits include improved health by reducing diarrhea and other ailments associated with poor sanitation and calculated based on estimates of savings on medical expenses and from foregone wages from illnesses no longer experienced.2 Environmental benefits are calculated using the benefit transfer approach suggested by Guidelines for the Economic Analysis of Projects (2001).3 6. Conclusion. The EIRR at the time of appraisal was an extremely robust 32.1%. This calculation included 10 years of operation and an assumed terminal value of 25% of the original

1 Figures taken from household survey willingness-to-pay data conducted in April 2006. 2 Based on survey data, 3.4% of people had suffered diarrhea within the last 3 months, and of those, 36.4% had it

more than once. Also, 1 of every 162 people had suffered from waterborne diseases, spending an average of Rf284 per person ($22.19). Forgone wages were estimated at Rf152 ($11.88) per day, based on an average monthly wage rate of Rf3,333 ($260.39) and 22 working days per month.

3 This involves determining appropriate reference values from the appropriate literature, adjusting these values to the location-specific conditions, and finally adjusting them from financial to economic prices to be consistent with the rest of the economic analysis. Reference values used were for species and land habitat preservation, avoiding water pollution, groundwater values, as well as general health benefits.

Appendix 8

50

capital cost. The updated EIRR based on the PCR analysis is 15.3% when also assuming 10 years of operation and an assumed terminal value of 25% of capital cost. However, as it was difficult to verify the soundness of the terminal value assumption, the analysis also included 20 years of operation and no terminal value. In this scenario, the EIRR is 18.7% as shown in Table A8.1. The primary reason for the reduction in the EIRR from appraisal to analysis for the PCR is the higher actual capital and operating costs as compared to the earlier estimations. Nevertheless, the results indicate the economic viability of this component.

Table A8.1: Economic Internal Rate of Return – Sanitation Component ($'000)

Fiscal Capital O&M Total Economic Benefits Total Net Year Cost Cost Cost WTP Other Benefits Benefits

-1 (1004) (1004) 0 (1004)0 (1004) (1004) 0 (1004)1 (49) (49) 30 441 472 4232 (50) (50) 31 443 474 4233 (52) (52) 32 444 476 4244 (54) (54) 32 446 478 4245 (55) (55) 33 447 480 4246 (57) (57) 33 449 482 4257 (59) (59) 34 450 484 4258 (61) (61) 35 452 486 4259 (63) (63) 35 453 489 426

10 (65) (65) 36 455 491 42611 (68) (68) 37 457 493 42612 (70) (70) 38 458 496 42613 (72) (72) 38 460 498 42614 (75) (75) 39 462 501 42615 (77) (77) 40 464 503 42616 (80) (80) 41 466 506 42617 (83) (83) 41 467 509 42618 (86) (86) 42 469 512 42619 (89) (89) 43 471 514 42620 (92) (92) 44 473 517 425

EIRR: 18.7%NPV (12%): 931

( ) = negative, EIRR = economic internal rate of return, NPV = net present value, O&M = operation and maintenance, WTP = willingness-to-pay.

Source: Asian Development Bank estimates. C. Transport Component 7. Dhidhdhoo Island is large compared to other outer islands, has a land area of 50.6 hectares, and a population of 3,250 (525 households) as of July 2009. Infrastructure on the island includes the harbor, a secondary school, a health center, mosques, and a desalination plant. The roads are unpaved, and there is no central freshwater supply system or waste management system. The population is mainly involved in fishing, government jobs (as it is the capital island of an atoll), and general construction works and carpentry. The island suffered considerable damage from the tsunami, including to the breakwater and harbor quay walls, so boats could not dock. The component, therefore, focused on harbor reconstruction. The

Appendix 8

51

economic analysis of the component has been conducted and compared to the analysis done at appraisal. 8. Capital cost. The economic analysis conducted in October 2005 included an estimated capital cost of Rf12,163,358 ($946,565). However, additional works were later included, so the actual capital costs, used in the follow-up analysis as part of the PCR, are Rf34,825,823 ($2,710,181). The final harbor design was a much improved harbor, and included two breakwaters at the reef side of the harbor basin, a 545-meter quay wall constructed with sheet piles and concrete capping works, a fully dredged harbor basin to around 3 meters deep at low tide, and a revetment of rock boulders around an area reclaimed from erosion. These costs were divided into local and foreign components and appropriate conversion factors applied. 9. Operating costs. In the October 2005 analysis, the estimated operating costs, including labor, administrative costs, repair and maintenance, and periodic dredging (once every 5 years) totaled Rf333,677 ($25,967).4 An updated estimation of actual operating costs used in the PCR analysis, based on a site visit and inspection of the facility, is Rf813,793 ($63,330). As with the capital costs, these costs were divided into local and foreign components and appropriate conversion factors applied. 10. Benefits. Economic benefits due to the repaired and improved harbor include the reduction in damage costs to fishing and cargo boats related to the need to moor offshore in open waters, time and labor savings for eliminating the need to offload all goods (including cargo and fish) to smaller boats for transfer to the island, and ability to run more cargo trips per year and fish more days per year. 11. The 2006 analysis noted seven fishing boats and two cargo ships in operation, and based on surveys with boat owners, the average damage per fishing boat was assessed as Rf2,500 ($195)–Rf3,500 ($272) due to offshore mooring and ocean swells from a faulty entrance. Also considered was the time lost due to the need for boat repairs. With the rehabilitated harbor, boats have not been damaged as determined during interviews with island authorities during the PCR process. Furthermore, the number of boats has increased considerably, with 25 fishing boats and 3 cargo boats. 12. The 2006 analysis also calculated the savings in unloading costs, based on cost per boat, as well as the cost of additional crew that were required. These benefits have increased due to the additional fishing and cargo boat traffic in the harbor, all of which can directly moor against the quay for easy cargo offloading onto transport vehicles. 13. Increased revenue to fishers, net of additional processing costs, was calculated in the initial analysis based on a consultant questionnaire. The updated analysis determined that these estimates are reasonable, and are held constant for inclusion in the updated analysis of benefits. This is considered conservative, as there are 25 fishing boats regularly using the harbor rather than 7 at the time of the initial analysis. Also not included in the updated analysis are the benefits from increased connectivity and activity associated with additional boat traffic (other than the fishing and cargo boat additions mentioned above) that has occurred since the completion of the new harbor. The updated study notes additional boat traffic, including two new government speedboats, at least 10 private speedboats, and a once-per-month tourist safari boat that now use the harbor. 4 This includes an annualized figure for dredging costs, which actually would be carried out once every 5 years.

Appendix 8

52

14. Conclusion. The EIRR at the time of appraisal was an extremely robust 53.9%. This calculation included 25 years of operation. The updated EIRR, based on the PCR analysis, is 17.4% as shown in Table A8.2. This is considered conservative due to the increased boat traffic, including a more than 357% increase in fishing boats using the harbor, and not including the additional nonfishing and noncargo uses now noted. These results still indicate the economic viability of this component.

Table A8.2: Economic Internal Rate of Return – Transport Component ($'000)

Fiscal Capital O&M Total Total Net Year Cost Cost Cost Benefits Benefits

-1 (1,409) (1,409) (1,409) 0 (1,409) (1,409) (1,409) 1 (50) (50) 601 551 2 (50) (50) 601 551 3 (50) (50) 601 551 4 (50) (50) 601 551 5 (117) (117) 601 485 6 (50) (50) 601 551 7 (50) (50) 601 551 8 (50) (50) 601 551 9 (50) (50) 601 551

10 (117) (117) 601 485 11 (50) (50) 601 551 12 (50) (50) 601 551 13 (50) (50) 601 551 14 (50) (50) 601 551 15 (117) (117) 601 485 16 (50) (50) 601 551 17 (50) (50) 601 551 18 (50) (50) 601 551 19 (50) (50) 601 551 20 (117) (117) 601 485 21 (50) (50) 601 551 22 (50) (50) 601 551 23 (50) (50) 601 551 24 (50) (50) 601 551 25 (117) (117) 601 485

EIRR: 17.4%NPV (12%): 1,117

( ) = negative, EIRR = economic internal rate of return, NPV = net present value, O&M = operation and maintenance.

Source: Asian Development Bank estimates. D. Power Component 15. Introduction. The power component consisted of the construction of six new power stations on six outer islands: Filladhoo, Maafaru, Madifushi, Maroshi, Meedhoo, and Nolhivaranfaru. Each island received a new power house (including new diesel engine generator sets and a control room with a synchronizing switchboard), fuel system (including fuel storage tanks and pumps), and low-voltage distribution network. All six facilities were built by

Appendix 8

53

the same contractor, and each underwent economic and financial analysis at the appraisal stage. As each island is similar in size and population (with larger islands receiving larger generating sets), and with the same equipment, the EIRRs for all six islands were very similar. Post-completion, the EIRRs are expected to remain similar. The system on Filladhoo Island was examined in detail and described below. 16. Filladhoo Island, one of the largest islands in Haa Dhaalu Atoll (the most northern atoll), is located about 300 kilometers from Male. The land area is 225.6 hectares, and the island had a population of 988 (156 households) as of July 2009. The island is generally low-lying, does not have a harbor or sewerage system, and does not have a central fresh water system. It has a secondary school, a health center, mosques, and a desalination plant. The population is mainly involved agriculture, carpentry, fishing, or government jobs. 17. Capital cost. At appraisal in February 2006, the capital cost was estimated at Rf7,419,000 ($577,354). The actual capital costs, used in the follow-up analysis as part of the PCR, are Rf8,912,938 ($693,614). These costs were divided into local and foreign components and appropriate conversion factors applied. 18. Operating costs. At appraisal, the estimated operating costs (in 2006 constant prices), including fuel consumption and cost, lube oil consumption and cost, and maintenance and employee costs, totaled Rf805,873 ($62,714) annually. This included an assumed fuel oil cost of Rf8 ($0.62) per liter. The PCR analysis used an updated estimation of actual operating costs. As with the capital costs, these costs were divided into local and foreign components and appropriate conversion factors applied. Also, only incremental costs were included in the analysis to offset incremental benefits. 19. Benefits. Economic benefits include the additional units of electricity sold with the new system, fuel cost savings due to increased fuel efficiency, and cost savings from reduced distribution losses and maintenance costs. At present, consumers are increasing rapidly by around 30 per year, and the island's electricity demand also keeps rising. Before the subproject was completed, most commercial consumers, such as carpenters and shops, were using their own generator sets due to the unreliability of the power system. After completion, with all such consumers connected to the power system, the use of such generators is no longer required. 20. Further benefits, though difficult to quantify and thus not included in the analysis, include improved public services due to the rehabilitation of the power system. For example, a computer lab in a school is now under operation. In addition, a health center laboratory is under construction, now that a reliable power supply makes it feasible. The laboratory equipment will be installed later this year, and the laboratory will become operational by the end of the year. The new system is also improving the quality of life on the island. At present, the power system is reliable, so domestic consumers are importing computers, refrigerators, televisions, and VCRs. 21. Conclusion. The EIRR at the time of appraisal was 18%, and only included the quantifiable benefits of cost savings and incremental electricity supplied. The updated EIRR, based on the PCR analysis and 2009 constant prices, is 12.2% as shown in Table A8.3. The primary reason for the change is the higher-than-estimated capital and operating costs. These calculations do not account for increased economic activity that is difficult to quantify and thus excluded from the analysis. Nevertheless, the results still indicate the economic viability of the subproject.

Appendix 8

54

Table A8.3: Economic Internal Rate of Return – Power Component (Ha. Filladhoo) ($'000)

Fiscal Capital Incremental Total Economic Benefits Total Net Year Cost O&M a Cost WTP Other Benefits Benefits

0 (664) (664) 0 (664)1 (24) (24) 46 15 61 362 (28) (28) 56 16 72 443 (33) (33) 67 18 85 534 (37) (37) 79 20 99 625 (43) (43) 92 22 114 726 (48) (48) 107 24 131 837 (54) (54) 122 27 149 958 (58) (58) 132 28 160 1029 (62) (62) 142 30 171 110

10 (66) (66) 152 31 183 11711 (70) (70) 163 33 195 12512 (75) (75) 174 34 208 13313 (79) (79) 185 36 221 14214 (84) (84) 197 38 235 15115 (89) (89) 210 40 250 16116 (95) (95) 223 42 265 17017 (100) (100) 237 43 280 18018 (105) (105) 251 46 296 19119 (111) (111) 266 48 313 20220 (116) (116) 278 49 327 211

EIRR: 12.2%NPV (12%): 12

( ) = negative, EIRR = economic internal rate of return, NPV = net present value, O&M = operation and maintenance, WTP = willingness-to-pay. a Based on incremental sales. Source: Asian Development Bank estimate.