Roadmap to Recovery of the Water Sector in Lebanon

Water Sector Recovery Plan FINAL 100522 ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 1 of 19 ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON May 2022 ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 2 of 19 Table of Contents EXECUTIVE SUMMARY ..................................................................................................................... 3 1 CURRENT SITUATION ............................................................................................................... 5 2 MAIN CHALLENGES FACING THE WATER SECTOR ..................................................................... 6 2.1 Commercial Challenges .................................................................................................... 6 2.1.1 Significant Negative Financial Balance ............................................................................ 6 2.1.2 Insufficient Collection & Subscription Rates ................................................................... 7 2.2 Financial Challenges ......................................................................................................... 8 2.2.1 Arrears due to Operators of WWTPs ............................................................................... 8 2.2.2 Lack of Money for Investments to Improve the Service .................................................. 8 2.3 Technical Challenges ........................................................................................................ 8 2.3.1 Inability to Calculate the Cost of Delivered Cubic Meter ................................................ 8 2.3.2 High Share of Non-Revenue Water and Aging Infrastructure ......................................... 8 2.4 Human Resources and Organizational Challenges ............................................................. 8 2.5 Contractual and Procurement Challenges ......................................................................... 9 2.5.1 Handing over the Wastewater Treatments Plants to the Water Establishments ........... 9 2.5.2 Lack of Adequate Contractual Modalities Between the Public and the Private Sector ... 9 2.6 Legal and Institutional Challenges .................................................................................... 9 2.6.1 Applicability of the Water Law ........................................................................................ 9 2.6.2 Insufficient Autonomy of WEs to Assume the Role of Commercial Utilities ................... 9 2.6.3 Ambiguity in the Role of Municipalities and the Public-Public Partnership .................... 9 3 PROPOSED PLAN .................................................................................................................... 11 3.1 Axis 1: Immediate & Progressive Financial Measures ...................................................... 11 3.1.1 Tariff Increase ................................................................................................................ 11 3.1.2 Adjustment of Salaries .................................................................................................. 11 3.1.3 Deficit Coverage ............................................................................................................ 12 3.2 Axis 2: Performance Optimization for Cost Recovery ...................................................... 12 3.2.1 Technical Improvements through Strategic Key Investments ....................................... 12 3.2.2 Commercial Improvements ........................................................................................... 13 3.3 AXIS 3: LEGAL & INSTITUTIONAL REFORMS ..................................................................... 14 3.3.1 Organizational Structure at WEs ................................................................................... 14 3.3.2 Legal & Institutional ...................................................................................................... 15 3.4 Axis 4: Political Support .................................................................................................. 15 4 SUCCESS FACTORS ................................................................................................................. 18 5 SUMMARY TABLE OF TOP PRIORITY COMMITMENTS OF THE GOVERNMENT OF LEBANON AND TIMEFRAME .................................................................................................................................. 18 6 SUMMARY TABLE OF TOP PRIORITY ENGAGEMENTS / ACTIONS TO BE MADE BY THE WE AND THE MOEW WITH THE SUPPORT OF DONORS ................................................................................ 19 ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 3 of 19 EXECUTIVE SUMMARY The water and wastewater sector is currently facing various challenges at multiple levels and a serious budget deficit, which became alarming with the devaluation of the Lebanese pound. A combination of inadequate tariff, low collection and subscription rates, unpaid arrears, and high non-revenue water undermine the financial viability of the four water establishments and impair their ability to cover operation and maintenance expenditures to ensure basic service to citizens. Consequently, water establishments are unable to improve the service and extend its geographical coverage. The current crisis in Lebanon and its implications on the salaries of public servants of the water establishments, which still lack sufficient specialized technical staff, exacerbate the ability of the WEs to even maintain normal functioning of their day-to-day operations. Additionally, incomplete and outdated legal and institutional framework impedes optimal functioning of the institutions, where the implementation of existing laws does not respond to the real definition of commercial entities delivering state services. Therefore, and in parallel to the national water and wastewater sector strategy, an urgent recovery plan targeting cost-recovery and key investments is an imminent need. It aims at breaking the vicious cycle of inadequate service and low collection and requires serious financial support and political commitment from the government of Lebanon, in coordination with the international community. The recovery plan relies on 4 complementary axes: 1. Immediate and progressive financial measures achieved through (i) a gradual yearly tariff increase starting at around 1 MLBP (equivalent to 48.5 USD on Sayrafa 1 ) in 2022 up to 3 MLBP (equivalent to 150 USD on Sayrafa) in 2026, (ii) adjustment of the salaries of public servants until eventual dissociation from the civil service council, (iii) provision of financial support to WEs (by MoF and donors, in addition to their own revenues from collection) for a period of 5 years until full cost recovery is achieved, (iv) payment of wastewater arrears till end of 2022 (36 MUSD) and (v) coverage of financial gaps by the GoL while engaging in discussions with donors to contribute to the settlement of the remaining gap pertaining to consumables and maintenance. 2. Performance optimization to increase cost recovery achieved through a first set of technical and commercial improvements: (i) increase of collection and subscription (ii) decrease of NRW at national level by 15% in 2026 by removing illegal connections and improving networks, (iii) increase of the power generated from solar PV by 20% by 2024, (iv) use of shallow underground sources & surface water where feasible, (v) connecting pumping station and wastewater treatment plants to EDL main service lines (vi) installation of metering at water sources (vii) raising awareness through public outreach campaigns. Other needed improvements, detailed in the plan, address performance upgrade and cost optimization. 3. Institutional and legal reforms achieved mainly through: (i) approval of the water and wastewater sector national strategy, (ii) appointment of a monitoring committee to follow up on the drafting of application decrees and bylaws of the water law 192/2020, (iii) renewal of the boards of directors of the WEs based solely on skills and qualifications, (iv) exceptional hiring of specialized technical staff for wastewater management while assessing the possibility of redeployment of public servants (until full autonomy in hiring reached), (v) adoption of the 1 Sayrafa exchange rate adopted for financial simulations is equal to 20,000.00 LBP/1.00 USD ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 4 of 19 application decrees of the water law, (vii) approval of a transparent recruitment policy based on skills and qualifications and (vii) separation of the recruitment of staff at the WEs from the Civil Service Council, (viii) adoption of new organizational structure at WEs and MoEW. 4. Political support materialized through the commitment of the different political actors and public institutions to the best interest of the water sector, according to the national strategy and recovery plan. This support shall go beyond policy level and extend to ensuring security reinforcements of water establishments in removing illegal connections and securing the water and wastewater assets from theft or damage. It should imperatively extend as well to allow the water establishments to properly function as commercial entities. The recovery plan is extended over 5 years, during which a series of performance improvements under best investment guidelines shall be able to change the paradigm into a reliable and cost-effective service to populations, with the aim of self-reliant water services in Lebanon. It shall be accompanied with targeted capacity building of the sector public actors. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 5 of 19 1 CURRENT SITUATION Since the surge of the Covid-19 pandemic, simultaneously with the financial crisis, additional economic hardships hinder the financial sustainability of the water and wastewater services while increasing the pressure on water establishments. Corresponding impacts vary between an increase in demand contributing to a lower service quality, a significant drop in collection rate and an incapability on the short and medium terms to maintain the operation and maintenance of the existing infrastructure. More specifically, the water & wastewater sector is facing a double problem of inability to cover the O&M expenditures and a lack of technical capacities at the WEs. The current tariffs are inadequate, while collection and subscription rates are insufficient, contributing to a huge gap between expenses and revenues, resulting in the inability of Water establishments to cover O&M. At the level of capacities, unavailability of sufficient specialized technical and administrative staff, compounded with the devaluation of salaries and loss of existing competent staff, exacerbate the ability of the WEs to maintain normal functioning of their operations. In reality, without the support of some donors for the procurement of fuel, diesel, consumables, and spare parts, even basic water supply services would had been severely impacted during the last two years. This paper draws the path towards a more stable and financially sound water sector in a 5-year management plan, based on a vision aiming at maintaining and improving the service to the citizens while building the technical and financial resilience of the WEs as well as the enabling legal and institutional setting. This plan shall hence bridge the gap between the emergency actions needed to maintain the services and the longer-term improvements in parallel with the reforms. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 6 of 19 2 MAIN CHALLENGES FACING THE WATER SECTOR 2.1 Commercial Challenges In order to identify the commercial challenges pertaining to the water sector, the figures of 2019 (pre- crisis) were used to establish the baseline. These values were then simulated for the period 2022-2026 with the following input data in the table below. These simulations are made available by the EU-AFD Water Reform Programme. Table 1: Input Data Used For Tariff Simulation As Per MoEW Recommendations (source: EU-AFD Water Reform Programme, 2021) 2.1.1 Significant Negative Financial Balance With an average tariff of 320,000 LBP/m 3 /yr. (as was the case in 2021 and earlier years) and with the Operational Expenditures (OPEX) incurred on each water establishment, the sector would still accumulate an additional total deficit of 120 Million USD in 2022 (total OPEX estimated to 128 MUSD while revenues would average around 8 MUSD). These calculations are based on the Sayrafa exchange rate at 20,000 LBP/1USD and accommodate the foreseen increase of the electricity tariff. Consequently, the energy bill would be the highest share of the OPEX with an overall average of 68%, followed by the maintenance with an average of 18% of the total cost of the operations of a water utility in Lebanon. Figure 1: Average Distribution of Operational Expenditures in the 4 Regional Water Establishments (source: EU-AFD TA Programme, 2021) 9% 68% 2% 18% 3% 2022 Average Simulated OPEX Distribution HR Power Consumables Maintenance Administrative ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 7 of 19 These expenditures are expected to upsurge furthermore with the increase of the price of diesel and the rise of the exchange rate if not maintained at 20.000 LBP for 1 USD. According to simulations provided by the EU-AFD Water Reform Programme, the financial balance is expected to remain negative even with the increase of the tariff to around 950,000 LBP/m 3 /yr effective on 1/1/2022, until a breakeven tariff is adopted in 2026. Figures simulated today indicate a breakeven tariff, different for each WE, varying between 3.4 MLBP (equivalent to 170 USD on Sayrafa) and 9.5 MLBP (equivalent to 475 USD on Sayrafa) as shown in table 2 below. Given that increasing the regional tariffs to breakeven would not be feasible in the current socio-economic context in Lebanon, a gradual increase is therefore recommended. Table 2: Cost Recovery Simulation Per WE Showing Deficit And Breakeven Tariffs (source: EU-AFD Water Reform Programme, 2022) 2.1.2 Insufficient Collection & Subscription Rates The currently collected amounts of billed water in the four regions covered by the water establishments are well below satisfactory to cover their expenditures. Many users do not pay the annual tariff but are still illegitimately having access to water. Progress made throughout 2018 and 2019 was rapidly met with a significant decline since the beginning of the financial crisis in 2020 and which shall be addressed as a matter of high priority. Similarly, the number of subscribers to the water services with respect to the resident population is low in the four WEs, especially in the North and the Bekaa as shown in the table below. Table 3: Collection and subscription rates per water establishment in 2019 (Source: EU-AFD TA Programme, 2021) ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 8 of 19 2.2 Financial Challenges 2.2.1 Arrears due to Operators of WWTPs Private operators running wastewater treatments plants on behalf of the CDR have not been paid during the past 3 years due to lack of funds. Operators of several plants stopped operations as they are not able to afford paying fuel to run the plants and are bypassing the incoming flow directly into the sea, posing a high risk of serious health and environmental hazards, and affecting the touristic summer season on the coastal areas. As these plants are to be handed over to the already financially weak water establishments, arrears standing at around 36 Million USD, including the operation and maintenance fees for 2022, shall be first settled. 2.2.2 Lack of Money for Investments to Improve the Service In the current financial context and the deficits incurred in the overall budget, the water establishments cannot invest in new or improved infrastructure to upgrade the service and extend its geographical coverage. The same applies at national level for key strategic infrastructure where the Ministry of Energy and Water cannot pursue investments. 2.3 Technical Challenges 2.3.1 Inability to Calculate the Cost of Delivered Cubic Meter Most of the water sources in Lebanon are not monitored for water volumes and production capacities. In addition, no district metering neither consumption metering are applied downstream, rendering the allocation of the water resources a very hard exercise, and the calculation of the cost of water production, treatment and delivery to the users not feasible. While improving the service and achieving average cost-recovery can be achieved progressively in the absence of the possibility to accurately quantify volumes across the value chain and the corresponding costs, reaching constant sustainability would still require accurate cost knowledge and control. 2.3.2 High Share of Non-Revenue Water and Aging Infrastructure In addition to the share of non-paying customers observed in the collection rates, an important portion is also attributed to illegal connections to the water networks and the leakages of the old or damaged infrastructure. Moreover, a significant portion of the existing infrastructure is now aged, resulting in lower efficiency. 2.4 Human Resources and Organizational Challenges Almost two decades after their creation, the Regional Water Establishments still lack many key expertise and capacities and are incapable of restructuring their organigrams. This situation is mainly due to their inability to hire and fire their staff despite their autonomous status as well as the limiting budget constraints justified by very low revenues. Consequently, the WEs suffer from a considerable lack of expertise in many areas such as wastewater management, operation and maintenance, digitalization, water quality, etc. With the severe financial and economic crisis and the devaluation of the national currency leading to the loss of purchasing power of the existing employees at the WEs, managing the daily operations with demotivated staff exacerbates the performance of operators and as well as the quality of the water and wastewater services. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 9 of 19 2.5 Contractual and Procurement Challenges 2.5.1 Handing over the Wastewater Treatments Plants to the Water Establishments Most of the operational wastewater treatment plants are managed by private operators contracted by the CDR, with fewer managed by the WEs and even less by some municipalities. These plants are to be handed-over to the WEs as the legal owners (upon law 221 of 2000). However, the establishments do not have the necessary technical, organizational and financial capacities to support these facilities, especially in the current economic and financial crises Lebanon is facing and due to the absence of proper wastewater tariff. 2.5.2 Lack of Adequate Contractual Modalities Between the Public and the Private Sector To date, the contractual relationship between the public and the private sector has been limited to basic contractual frameworks with no oversight on performance. This situation left the client and the service provider in an unstructured relationship with regard to the service itself. This is particularly the case of wastewater treatment plants operated by private entities, where the quality of the influent and that of the effluent, and therefore the performance in terms of protection of natural resources and that of public health, are not properly taken into account. Several efforts were made by MoEW to formalize performance based contracting frameworks which still need to be finalized and adopted by all stakeholders with clear distribution of roles and responsibilities. 2.6 Legal and Institutional Challenges 2.6.1 Applicability of the Water Law Despite the previous attempts to reform the water sector in Lebanon, many deficiencies still hamper its efficient and accountable governance, where the different dimensions of the sector and the ramified extent of impacts on other vital sectors such as health, agriculture, environment and industry still require clear distribution of roles and responsibilities. In fact, the new water law 192/2020 approved initially in 2018 (n°77) still lacks application decrees and provisions to enact the improvements brought to the sector. 2.6.2 Insufficient Autonomy of WEs to Assume the Role of Commercial Utilities By law, the Water Establishments are defined as legally and financially autonomous public institutions. Whereas this autonomy is dictated by the texts, it remains very theoretical with respect to the definition of a commercial entity, which delivers a paid service to the residents and is valued as the sum of its assets and performance in service delivery. Water establishments are bound to hire through the Civil Service Council where the recruitment of new employees has been frozen. Moreover, WE’s are exposed to political pressure and interventions at many levels, and do not obtain the needed political and security support when it comes to illegal connections and non-paying customers or even polluters, moving them further away from implementing sustainable commercial objectives. These public service providers see themselves stuck within a spiteful equation where service improvement and rule of law is extremely problematic, rendering the other two variables of trust and financial recovery tremendously farfetched. 2.6.3 Ambiguity in the Role of Municipalities and the Public-Public Partnership When it comes to Water Establishments and Municipalities, legal texts show many contradictions and duplications that need to be addressed properly within the application decrees and provisions of the ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 10 of 19 new water law. This reform constitutes a unique opportunity to establish a sound framework of collaboration between the local authorities and the public utilities and implement the public-public partnership model in the water sector. The most imminent example is the wastewater sector, where a clear identification of the roles and responsibilities of the municipalities and the water establishments (over networks and plants) is crucial and most urgently needed. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 11 of 19 Lebanon’s water sector would not be able to recover without a rescue plan addressing the challenges with concrete actions, which start first and foremost with credible decisions and commitments of the Government of Lebanon. Surely, many accompanying measures are crucial to enable technical, institutional and financial improvements with the help and support of the donors’ community. Therefore, a set of corrective decisions and good practices is presented below in an attempt to reach good governance, cost recovery and a resilient water sector within 5 years. 3 PROPOSED PLAN The success of the water sector in Lebanon relies mainly on its ability to break the vicious cycle of inadequate service and low cost recovery. Many accompanying measures are key to the success of this plan and require political engagement in the necessary reforms. Therefore, the plan relies on 4 complementary axes: 1. Immediate and progressive financial measures achieved through a gradual tariff increase and financial support from others, where needed 2. Performance optimization to increase cost recovery achieved through technical and commercial improvements 3. Institutional and legal reforms achieved through implementation of a set of corrective measures 4. Political support as key success factor accompanying the recovery plan The plan requires several initiatives to be implemented on the short and medium terms to maintain and possibly improve water and wastewater services to citizens. 3.1 Axis 1: Immediate & Progressive Financial Measures 3.1.1 Tariff Increase § Increase in revenues of the WEs through a gradual yearly raise in tariff starting at around 1 MLBP (equivalent to 48.5 USD on Sayrafa) in 2022 up to 3 MLBP (equivalent to 150 USD on Sayrafa) in 2026. These numbers shall be updated frequently and reported yearly to accommodate changes in the exchange rate and therefore adapt the annual tariff accordingly. This increase shall be accompanied with an improvement of the collection and subscription rates addressed in the commercial actions. Table 4: Proposed Tariff Increase (Source: EU-AFD TA Programme, 2021) Year 2019 2022 2023 2024 2025 2026 Tariff 213 USD (320 k LBP) 48.5 USD (970 k LBP) 75 USD (1.5 M LBP) 125 USD (2.5 M LBP) 125 USD (2.5 MLBP) 150 USD (3 MLBP) 3.1.2 Adjustment of Salaries § Adjustment of the salaries of public servants in the water sector is a key priority to re- engage them in their daily functions. This shall be applied until the dissociation from the civil service council is enacted and the WEs have a well-defined autonomy in hiring and wage policy. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 12 of 19 3.1.3 Financial Support to Cover the Deficit § Since the increase in the annual tariff would still result in negative financial balance until full recovery is attained in 2026, the following commitments have to be made: ð The Government of Lebanon commits to providing the necessary financial support to the Water Establishments on a yearly basis, as deemed necessary and feasible. ð The Water establishments commit to covering other expenses (such as HR, part of the maintenance and a share of power) during a period of 5 years, renewed yearly as feasible. ð The Government of Lebanon engages in discussions with donors to cover part of the remaining expenses (such as part of the maintenance including spare parts as well as consumables) and the wastewater treatment. ð The Government of Lebanon commits to paying the arrears to the private operators of the wastewater treatment plants as well as the fees covering the remaining of 2022. These payments are estimated at 36 MUSD. Table 5 : Financial and Commercial Plan 2022 - 2026 (Source: MoEW, 2021) Year Tariff (USD) Tariff (lbp/m3/yr) Subscription rate Collection rate Revenues (MUSD) OPEX (MUSD) Deficit (MUSD) • 2019 • 213 • 320,000 • (Baseline Scenario) • 55% • 62% • 103 • 137 • 41 (1) • 2022 • 48.5 • 970,000 • 55% • 62% • 23 • 61 (2) • 38 • 2023 • 75 • 1,500,000 • 59% • 65% • 41 • 127 (3) • 86 • 2024 • 125 • 2,500,000 • 63% • 70% • 79 • 130 • 51 • 2025 • 125 • 2,500,000 • 66% • 75% • 91 • 133 • 42 • 2026 • 150 • 3,000,000 • 70% • 80% • 126 • 136 • 18 (4) (1) The deficit is not the difference between revenues and Opex in this case, since BMLWE has a positive financial balance of 7.22 MUSD (2) Given electricity (EDL) tariff unchanged for 2022 (3) Given electricity (EDL) tariff at 0.21 USD/kwh (4) The deficit is not the difference between revenues and Opex in this case, since it is expected that BMLWE and NLWE would have a positive financial balance of respectively 4.53 and 4.26 MUSD. The deficit remaining in 2026 is therefore only for SLWE and BWE, due to an average national tariff, which could differ in each WE. However, this will be revised on yearly basis to make sure that in 2026 the deficit is zeroed. 3.2 Axis 2: Performance Optimization for Cost Recovery 3.2.1 Technical Improvements through Strategic Key Investments § Optimization of operational expenditures by reducing power usage through the following measures: ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 13 of 19 ð Increase the power generated from solar PV by an overall of 20% over 2 years (2023 and 2024) ð Favor pumping from shallow underground sources and the use of surface water where feasible ð Prioritize rehabilitation of energy inefficient or low-efficiency systems over new investments (such as replacement of equipment) ð Assess hydropower potential of existing systems and implement where feasible § Reduction of NRW by 15% by 2026 through the following measures: ð Prioritize investments in reduction of leakages from networks and installation of district metering ð Reduce illegal connections § Management of water production through the following measures: ð Prioritize investments in installation of metering at water sources and along water systems ð Set up a centralized data center and implement data transmission and storage § Implementation of pilot volumetric tariffs for water in fully metered areas § Ensuring continuous monitoring of water quality and prioritizing treatment through financing of consumables and rehabilitation works where necessary § Prioritizing the rehabilitation of existing infrastructure and the completion of small to medium unfinished systems with high impact on service continuity § Modernization, digitalization and automation of the WEs operations (fully or partially in a gradual manner ex: accounting and cost centers) § Implementation of a data center at the MoEW where information are centralized, treated and made public § Engagement and deployment of a national approach to sludge treatment and usage It shall be noted that a common approach to all interventions in the sector shall be adopted for the identification phase and throughout the appraisal phase. Acknowledging that right to access public water services should be guaranteed to all residents, projects shall be identified and appraised in close coordination with the water establishments. Projects that yield the highest social and economic returns shall be prioritized. Therefore, all new projects and/or interventions for the water and wastewater sector shall account for: § Return on investment (RoI) with specific focus on O&M cost vs. revenues § Energy sources and energy cost with a detailed analysis of alternatives § Staff and expertise needed for O&M § Minimum components where applicable ð Customer database ð DMAs ð Source Metering ð Users connection 3.2.2 Commercial Improvements § Increase of subscription rate to reach 70% by 2026 (progressive yearly increase), with a series of measures: ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 14 of 19 ð Communication campaigns ð Political support for the removal of illegal connections § Increase of collection rate to reach 80% by 2026 (progressive yearly increase), with a series of measures: ð Communication campaigns with the help of donors ð Political support to water establishments to encourage payment of fees ð Engage with municipalities within a public-public partnership With the financial interventions and the commercial improvements mentioned above, the sector shall be able to recover within a span of 5 years (2022-2026) as shown in the graph below: Figure 2: Cost Recovery Simulation With Corresponding Financial Interventions And Commercial Improvements (source: EU-AFD Water Reform Programme, 2021) 3.3 AXIS 3: LEGAL & INSTITUTIONAL REFORMS 3.3.1 Organizational Structure at WEs § Improvement of the organizational structure through the following actions: ð Approve the new organizational charts of the WEs in light of the recommendations issued by the experts (adopt new structure in light of today's challenges, WEs business plans and the orientations of the new water law) and approve the corresponding revision of decrees № 14913 to 14916 dated 5/7/2005 by February 2023. ð Allow exceptionally the WEs to hire a limited number of specialized technical staff for wastewater management while assessing the possibility of redeployment of public servants (until full autonomy in hiring reached) by October 2022. ð Approve a transparent recruitment policy based on skills and qualifications by January 2023. ð Implement targeted capacity building for the administrative and technical staff. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 15 of 19 3.3.2 Legal & Institutional § Appointment of a monitoring committee to follow up on the drafting and approval of application decrees and bylaws of the water law 192/2020 by June 2022. § Adoption of the application decrees and provisions of the new water law 192/2020 to enact the reforms and remove ambiguities and according to the identified priorities (priority 1 by January 2023, priority 2 by June 2023, priority 3 by September 2023) § Adoption of a public-public partnership model between municipalities and water establishments customized on a case by case basis with clear distribution of roles and responsibilities for both water and wastewater systems at financial and technical levels. § Adoption of a public-private partnership model between the private sector and water establishments based on clear performance obligations while improving contractual and monitoring capabilities at WEs. § Renewal of the board of directors of the water establishments based solely on skills and qualifications by July 2022. § Separation of the recruitment of staff at the WEs from the Civil Service Council by May 2023. § Empowerment of the WEs to reach effective administrative and financial autonomy as per their legal mandate according to laws 221/2000 and 192/2020 by enabling hiring outside of the civil service council and establishing wage policy and approving new tutelage relationship between the MoEW and the WEs, specifically on performance indicators, procurement, and financial reporting. § Improvement of the monitoring framework of the WEs at central level (performance monitoring of the WEs through KPIs, etc.). § Establishment and adoption of regional master plans and business plans at WEs in line with the national strategy by July 2023. § Adoption of the water and wastewater sector national strategy by May 2022. 3.4 Axis 4: Political Support No matter the attempts to reform the sector and empower its service providers, no achievement can be made without consistent, coherent and persistent political will. It is therefore crucial that the Government of Lebanon and the political parties provide full political support to this action plan and allow the water establishments to fulfill their full mandate for the ultimate satisfaction of the citizens. This support shall go beyond the policy level in supporting the reforms and extend to ensuring the enabling environment for the implementation of proposed measures on the ground, also with the support of municipalities and security forces. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 16 of 19 Table 6: Proposed Timeframe for the Sector Recovery Measure (source: EU-AFD Water Reform, 202 Axis of intervention Action Priority Action Lead Involved Stakeholders S1 S2 S1 S2 S1 S2 S1 S2 S1 S2 Gradual yearly increase of tariff 1 WE + MoEW N/A Payment of WW arrears till end of 2022 1 GoL (MoEW + MoF) N/A Coverage of financial gaps by the GoL & the donors until cost recovery 1 GoL + donors WE Provide financial support to WE's yearly as necessary and feasible 1 GoL (MoEW + MoF) WE Adjustment of the salaries of public servants by the GoL 1 GoL MoEW + WE Increase of the consolidated subscription rate at national level starting at 55% in 2022 up to 70% in 2026 1 WE MoEW + donors Increase of the consolidated collection rate at national level starting at 62% in 2022 up to 80% in 2026 1 WE MoEW + donors Decrease of NRW at national level by 15% in 2026 by removing illegal connections and improving networks 1 WE MoEW + donors Increase of the power generated from solar PV by 20% to optimise the operational cost 1 WE MoEW + donors Using shallow underground sources & surface water 1 WE MoEW + donors Rehabilitation of energy inefficient or low-efficiency systems 2 WE MoEW + donors Assessment of hydropower potential of existing systems and implementation 3 WE MoEW + donors Installation of metering at water sources 1 WE + MoEW Donors Setting up of a centralized data center 2 MoEW Donors Implementation of pilot volumetric tariffs for water in fully metered areas 2 WE MoEW Maintain water quality and treatment as priority 2 WE + donors MoEW Rehabilitation of existing aging and defectuous key infrastructure for better efficiency 2 WE + donors MoEW Completion of small to medium unfinished systems with high impact on service continuity 2 WE + donors MoEW Modernization / digitalization and automation of the WEs operations 3 WE + donors MoEW Engagement and deployment of a national approach to sludge treatment and reuse 2 MoEW + WE + MoA + MoEDonors Implementation of pilot areas (metering, pressure management, DMAs, customer database) 3 WE + donors MoEW Awareness raising through public outreach campaigns 1 WE + donors MoEW Approval of the updated national water sector strategy 2020 1 CoM MoEW Adoption of new organisational structure at WEs and MoEW 1 MoEW + WE N/A Implementation of targeted capacity building for the administrative and technical staff 2 Donors MoEW + WE Exceptionally hire WW technical staff at WEs 1 CoM + MoEW + WE N/A Adoption of a transparent recruitment policy based on skills and qualifications 1 WE MoEW Appointment of a monitoring committee for water law decrees 1 MoEW N/A Adoption of the application decrees of the water law 1 CoM MoEW Adoption of a public-public partnership model between municipalities and water establishments 2 MoEW + WE + MoIM N/A Adoption of a public-private partnership model between the private sector and water establishments 2 MoEW + WE N/A Renewal of the board of directors of the water establishments 1 MoEW + CoM WE Separation from the Civil Service Council 1 WE + MoEW + COM N/A Adoption of new monitoring framework / tutelage 1 MoEW + WE N/A Adoption of regional master plans and business plans where needed 1 WE MoEW P O LI T IC A L S U P P O R T Political support to this action plan 1 GoL + Political Parties MoEW + WE P E R F O R M A N C E O P T IM IZ A T IO N F O R C O S T R E C O V E R Y IM M E D IA T E & P R O G R E S S IV E F IN A N C IA L M E A S U R E S LE G A L & I N S T IT U T IO N A L R E F O R M S Short-term Medium-term 2022 2023 2024 2025 2026 ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 17 of 19 Remarks : 1- The cost and details of the above activities require further assessments, some of which are already being undertaken by stakeholders while others will need funding. 2- Working groups based on areas of intervention and interest of participants can be formed to follow up on the timely implementation of these activities. ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 18 of 19 4 SUCCESS FACTORS - Water Establishments should be committed to reach their performance targets within the proposed timeline; - Political empowerment, support and security support on the ground should be given by all political parties and the Council of Ministers to achieve the mandatory improvements; - Arrears and budget gaps should be paid by the Government of Lebanon in a timely manner; - Deficit should be covered over the upcoming 5 years to bridge the cost-revenue gap and ensure proper service continuity; - Specialized technical staff should imperatively be recruited at the WEs mainly for the wastewater sector; - Donors should be engaged in supporting clear financial measures and the optimization of performance to achieve cost recovery. 5 SUMMARY TABLE OF TOP PRIORITY COMMITMENTS OF THE GOVERNMENT OF LEBANON AND TIMEFRAME Commitments Description Timeframe Approve the Updated National Water Sector Strategy 2020 06/2022 Adjust salaries of public servants 06/2022 Engage in discussions with donors to cover part of the budget deficit 06/2022 Provide financial support on a yearly basis to partially cover the deficit, as necessary and feasible 12/2023 12/2024 12/2025 12/2026 Pay arrears to private operators of wastewater treatment plants till end of 2022 (36MUSD) 06/2022 Increase the water tariff yearly 12/2022 12/2023 12/2024 12/2025 Renew the boards of directors of the water establishments based solely on skills and qualifications 07/2022 Approve new organizational structures at WEs 03/2023 Adopt the application decrees of the new water law 192/2020 according to the identified priorities P1- 01/2023 P2- 06/2023 P3- 09/2023 Provide political and security support to reduce illegal connections 01/2023 Protect water and wastewater assets from theft or damage 05/2022 Allow exceptionally the WEs to hire a limited number of specialized technical staff for wastewater management 10/2022 Dissociate the water establishments from the civil service council 01/2023 ROADMAP TO RECOVERY OF THE WATER SECTOR IN LEBANON Page 19 of 19 6 SUMMARY TABLE OF TOP PRIORITY ENGAGEMENTS / ACTIONS TO BE MADE BY THE WE AND THE MOEW WITH THE SUPPORT OF DONORS Commitment description Targets & Timeframe Increase subscription rate at national level starting at 55% in 2022 up to 70% in 2026 59 % by 01/2023 70 % by 01/2026 Increase collection rate at national level starting at 62% in 2022 up to 80% in 2026 65 % by 01/2023 80 % by 01/2026 Decrease NRW at national level by 15% in 2026 by removing illegal connections and improving networks 5 % by 01/2024, 5 % by 01/2025 5 % by 01/2026 Increase power generated from solar PV by 20% to optimize the operational cost 10 % by 12/2023, 10% by 12/2024 Facilitate connection of pumping stations and wastewater treatment plants to service lines 07/2022 Use shallow underground sources & surface water S1 (2022) è S2 (2025) Install bulk meters at water sources S2 (2023) è S2 (2025) Awareness raising through public outreach campaigns S1 (2023) è S2 (2025) Appoint a monitoring committee to follow up on the drafting of application decrees and bylaws of the water law 192/2020 06/2022 Adopt a transparent recruitment policy based on skills and qualifications 01/2023 Adopt regional master plans and business plans where needed 07/2023 Adopt new tutelage relationship between the MoEW and the WEs 06/2023