Capacity Building Assistance for Managing Water Supply and Sanitation | Asian Development Bank

Capacity Building Assistance for Managing Water Supply and Sanitation

Evaluation Document | 31 March 2003

This evaluation reviews ADB's capacity building assistance for managing water supply and sanitation.

Between 1975 and 2002, ADB assistance for water supply and sanitation to Fiji Islands, Kiribati, Papua New Guinea (PNG), and the Republic of the Marshall Islands (RMI) amounted to about $66 million for seven loans and about $7 million for 15 technical assistance (TA) grants. The assistance was conceived separately for each country, and there was no regional water supply and sanitation program.

The loans and TA projects had similar aims:

  • improving the operational and financial performance of water utilities, and
  • enabling them to provide better services to their clients and to become less dependent on government subsidies.

These were to be achieved through a combination of institutional changes and investments in infrastructure.

In the Fiji Islands, two TAs were provided to develop a corporatization plan for the utility, while Kiribati, PNG, and the RMI received loans and TAs to overcome infrastructure bottlenecks and to introduce institutional changes. Together, they formed the capacity development assistance reviewed in this evaluation.

Summary of findings

  • Capacity building was an explicit goal for each of the water utilities, but a strategy for doing this had not been developed for any of them. Institutional diagnostics to identify problems had been carried out to varying degrees but without a uniform approach to ensure analytical standards.

  • The design of capacity development assistance was not specified in the loan or TA documents, but was to be determined with the help of TA-financed consultants. However, the terms of reference of consultants emphasized technical tasks, thus creating an incentive to get the technical job done rather than to develop capacities.

  • The study gives further specific findings for each of the four study countries.

Lessons identified

  • Setting up a board of directors (BOD) in the utility companies was a good first step, but needs to be complemented with training for board members to fulfill requisite functions.

  • Performance-based principles were introduced to the utilities, generating the required data, but more needs to be done to ensure that data are used in decision making and that they are acted upon when performance falls short of targets.

  • Efforts to change operational procedures can be effective only if the utility-its management and staff-takes full ownership of necessary changes

  • Stakeholders need to support corporatization plans to build politically acceptable solutions, increase transparency, and ensure sustained implementation of institutional changes.

  • Private ownership is not a precondition to efficient operations. However, corporate structure is an important ingredient for defining the identity of utilities, and developing corporate goals and institutional culture. Corporatization needs to be accompanied with commercialization, which instills a drive to minimize costs and generate revenue.


  • Management functions should pay attention to
    • how demand management impacts on scarce water resources and on the revenue base of the utility;
    • learning how to develop commercial operations, with a focus on putting measures into practice for revenue optimization and cost control; and
    • the use of management information to measure and monitor performance and to effect performance improvements based on available information
  • A capacity development strategy should be based on a systematic institutional diagnostic, including
    • external parameters (e.g., water resources and their management, stakeholders and political pressures, and legal context);
    • internal management structures and practices (strategic goals, commercial aims, financial management, structure, reporting channels, human resources [policies, issues, and incentives]); and
    • operations (client focus, investment choices, service delivery, operation and maintenance programs, leak detection and other factors).
  • Capacity building should include an analysis of human resources.
  • Systematic institutional analysis should be undertaken before a decision is made on the areas and direction of change.
  • A medium-term strategy for capacity building should be developed with interim milestones.
  • Terms of reference of consultants should be clearly defined to emphasize their capacity-building roles.


  • Executive Summary
  • I. Background
  • II. The Process
  • III. Changing Institutional Performance
  • IV. Conclusions
  • Appendixes