Innovative Solution

PPP, Irrigation Management, Operation and Maintenance

policy

Institutional

An innovative institutional model for sustainable irrigation management of new large scale irrigation schemes was developed in Ethiopia by the Ministry of Water and Energy (MoWE). This model associates empowered water users associations responsible for the Operation and Maintenance (O&M) of the tertiary block units and a private operator competitively contracted by the Ministry to manage the primary and secondary infrastructures for a limited period of time, during which an autonomous O&M entity will be established for the long term sustainable management of the scheme. The Government retains responsibility for financing the construction of the schemes, setting the irrigation service fee and delivering extension services to the beneficiary farmers.

The main features of this model reside in (i) the development of a management contract to transfer targeted operational risks and responsibilities from the public to the private sector and (ii) the establishment of a strong legal framework for the empowerment of water users associations and a clear allocation of responsibilities.

This solution is currently been tested in the Amhara Region in northern Ethiopia. Two irrigation and drainage schemes are currently being developed: Megech Seraba on 4,000 ha and Ribb on 13,300 ha.

The project was initiated by the Ethiopian Government with financing from the World Bank. The main responsibilities are allocated as follows.

Ministry of water and Energy (MoWE): procurement and financing of construction contractor and private operator; setting up of IWUAs following regulation developed for that purpose; Irrigation Service Fee definition; monitoring of the whole process.

Irrigation water Users Associations (IWUAs): operation and maintenance of tertiary irrigation and drainage system under the provisions of a specific regulation prepared in 2010

Private operator: competitively contracted to implement the management contract encompassing design review and endorsement (lumps sum), construction supervision (time based), capacity building and O&M (performance based) during a limited period (8 to 9 years). The performance based remuneration includes incentives related to the quality of administrative and financial services, scheme operation and adequacy of maintenance.

Regional public entities are in charge of land redistribution before construction, support to agriculture development and environmental and social monitoring.

The implementation of this solution is going on with preparatory activities completed (detailed design, environmental and social assessment etc.) and procurement of construction and management contracts for Megech Seraba scheme at an advanced stage. Ribb scheme will follow.

The construction is scheduled over 3 years for Megech Seraba and 5 years for Ribb, with progressive establishment and capacity building of IWUAs. The total duration of the management contract will be 8 years for Megech Seraba and 9 years for Ribb.

There are interesting lessons learnt related to the design of the management contract. The risk allocation and incentive remuneration was very carefully crafted with a view to maximize the value for money of the management contract while making it attractive to private operators.

The Solution proposes an answer to the long standing question of sustainable management of medium and large irrigation schemes. In Ethiopia, there is limited experience for management of public irrigation schemes. The delegation to a private operator takes profit of competencies available on the market. The establishment of IWUAs and related capacity building activities will help transferring these responsibilities to a local autonomous entity after 8 to 9 years. In addition, the association of construction supervision and operation and maintenance responsibilities in one contract is an incentive for the operator to ensure high level of construction quality. Finally, incentives related to water management efficiency are also built into the contract.

This Solution will therefore contribute to ensure a high level of standard for irrigation scheme construction and operation and maintenance which is a key concern under both Target 2.2.2 and 2.2.3. It will specifically contribute to optimizing the risk allocation between government, private operator and farmers with each of these stakeholders involved where it can bring the most value for money.

The substantial and innovative outputs of this institutional scheme resides in (i) the clear and comprehensive IWUA proclamation transferring appropriate powers to the associations while clearly allocating responsibilities to the parties (Government, Associations and Service Provider) using a contractual approach; and (ii) the carefully crafted management contract aiming at transferring key operational risks to the private sector using a performance based approach while keeping with the public sector the key responsibilities of financing the entire scheme and setting the irrigation service fee. This approach was driven by the level of risk the private sector was willing to take in the context of new, medium and large public irrigation schemes for smallholder farmers.

Key performance indicators are built into the management contract and linked to the performance remuneration. There are 5 areas of performance including:

1. Staffing and labour
2. Administrative and finance (User and WUA registration; Billing and fee collection)
3. Capacity building and customer services (demonstration plot , establishment of IWUAs, long term O&M entity)
4. Operation (irrigation service delivery, efficiency)
5. Maintenance (irrigation and drainage service disruptions, access roads)

In addition, the private operator will be in charge of monitoring a number of economical and environmental parameters linked to the scheme O&M.

The development of Public Private Partnership in irrigation sector is expected to be one of the means to both accelerate development of irrigated areas and improve the quality of Irrigation and Drainage Services in a sustainable manner.

A number of countries are embarking on initiatives of PPP transactions in irrigation sector (pre‑feasibility, feasibility or even implementation). These countries (Morocco,Peru,Brazil,Ghana,Malawi,Egypt,Zambia, etc.) are testing different transaction models (concession, BOT, etc.). This Ethiopian experience will bring an original transaction model (with management contract) that could be replicated in other contexts, where the project includes high risks (new schemes with low presence of commercial farming, low capacity and willingness to pay, etc.) and could not be transacted as a concession (or other transaction model that allows to transfer investment risks to the private sector).

Elements of this solution could also inspire the reform of large public irrigation bureaucracies where they exist. In particular the empowerment of water users associations and the use of performance remuneration for operation and maintenance services may hugely contribute to foster transparency and higher service quality in existing schemes, resulting in improved O&M cost recovery.

This solution could be implemented in various countries and situations but it needs to be tailored to the actual context with due consideration given to the private sector appetite for this type of innovative transaction. The design of the PPP contract needs to receive the appropriate level of attention and expertise for the transaction to work.

The cost of establishing a new regulation for water users associations and designing a new and complex transaction shall not be underestimated. It needs to be done in parallel with the engineering studies and accompanying consultative process with the beneficiary users. The consultative process needs to be extended to potential private sector partners who shall be given the opportunity to comment on the risk allocation.

More specifically on the management contract, the proposed transaction has to be adapted to each specific context and appropriate technical and transaction advisory expertise has to be mobilized for that aim. The level of input depends on the size and complexity of the scheme. Two-year duration may be necessary to complete the contract design and procurement. It is of utmost importance to pre-identify potential bidders and then maintain close contact with them all along the process, with various opportunities for them to comment on the terms of the contract (before and during bidding, and even at negotiation to a limited extent).

With regard to water users associations, lessons learnt from the review of international experience show that:

1. A strong political backing for WUA is a key condition of success
2. Unclear sharing of responsibilities between WUAs and administration is a common reason for failure
3. Capacity building and empowerment of institution at all levels including water user association and local government as part of a comprehensive “irrigation package” is a valuable approach
4. Provision of a satisfactory and cost effective irrigation service shall be the purpose of establishing WUAs with the aim to insuring high on-farm productivity of irrigated agriculture, so that farmers are capable and willing to pay for the water services
5. The transfer of dilapidated or badly designed infrastructure that needs major improvement is another common reason for for failure of IWUAs

The management contract for Megech Seraba was already awarded and negotiated. Implementation is expected to start as soon as the procurement for the construction contract will be completed. The contract will be disclosed on the Public Private Infrastructure Advisory Facility (PPIAF) after effectiveness.

The proclamation for IWUAs is still in the process of being enacted. It was submitted to the Council of Ministers.

This solution has already attracted a lot of interest in and outside the Africa Region.

Ministry of Water and Energy (MoWE) ofEthiopia

Address: Ministry of Water and Energy

Haile G/Silase Street

Room No. 102

Addis Ababa

Ethiopia

Telephone: +251-(0)11-6637048

Financing institution : World Bank

1818 H Str. NW

Washington,DC,20433

USA

Operator : BRLingénierie

1105 av Mendes France

30 000 Nimes

France

Detailed PowerPoint presentation will be prepared for presentation in Marseille.