Gaza Strip Water and Wastewater Treatment Services

concluded

The Palestinian Water Authority (PWA) signed a 4-year management contract with Lyonnaise des Eaux Khatib & Alami (LEKA) in July 1996 to provide water and wastewater services for the Gaza Strip area. There were 52 expressions of interest, of which eight bidders were short listed. The basic goals pursued under the contract were to enhance efficiency and rapidly improve service quality, quantity and overall management of water supply and wastewater services in local‎, ‎municipal and village council water departments‎. The situation of the water sector in Gaza at the time of the initial contract signing was critical, as good quality resources were extremely limited, over-utilized and badly contaminated. Under this back drop, the Palestinian Water Authority (PWA) was created in April 1995 as the institution responsible for policy-making and regulation of the sector. It was concluded that private sector involvement was the only way to rapidly improve the water supply and wastewater disposal services. Since any long-term arrangement posed significant risks to both the Palestinian Authority (PA) and potential private investors, a management contract was considered most appropriate, as it would allow the Palestinians to assess the advantages of private sector management without committing to a long-term relationship. LEKA was a 50-50 joint venture between Lyonnaise des Eaux (Suez since 2001) and a local Palestinian company, Khatib and Alami. The partners received a management fee of US$9.5 million (US$6 million as a basic fee and $0.75 million/year for meeting performance targets). They also received US$12 million in working capital. The project involved a World Bank investment of US$25 million through a special trust fund created for this project in 1995. The EIB also provided funds for the project: a loan of US$30 million in 1996 and of US$30 million in 1998 (both loans were granted to the Palestinian Authority). The funds were committed to finance the management fees, provide operating investment funds, and support the project through technical assistance. In June of 2001, the World Bank approved a Supplemental Credit of US$6.0 million while the Palestinian Authority contributed US$0.8 million. The contract was due to expire in August 2000, but was extended until September 2003 to enable a seamless transition into Gaza II, which had aimed to rehabilitate, upgrade and expand the existing water and sanitation facilities and services in Gaza. However, all the companies short listed for the eight-year management contract declined to bid because of the deteriorated security situation. The PWA was negotiating with the World Bank, which was to fund the original contract, to transform the project into a three-year emergency scheme. The proposed plan entailed the PWA forming an operating management unit in place of the previously-envisaged private operator. The new state-owned company, Coastal Municipalities Water Utility (CMWU), took over in September of 2003 at the conclusion of the management contract. Despite extremely difficult circumstances, the initial project achieved its key development objective of improving water and sanitation services. After a somewhat slow first year, almost all the performance indicators as agreed upon in the management contract were attained from the second year onwards until the project concluded. In particular, the per capita use of water was reported to have increased from a level of 70 liters per capita per day (lcd) in 1996 to about 100 lcd by 2000. By the end of the project, close to 100% of the water delivered was chlorinated which reduced considerably the health hazards associated with poor water quality. However, following the outbreak of renewed hostilities in October 2000, this improving trend was no longer sustainable and by the end of the project in September 2003, per capita usage had declined to around 80 lcd. None None