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Water Financing Partnership Facility

RETA 6498: Knowledge and Innovation Support for ADB’s Water Financing



February 2016

Timor-Leste: Designing Sanitation

Output-Based Aid Pilot for Vulnerable

Prepared by Joao Piedade, Director, National Directorate for Basic Sanitation Services, Ministry of Public
Works Transport and Communications.

The Pilot and Demonstration Activity Report is a document of the proposer. The views expressed herein do not
necessarily represent those of ADB’s Board of Directors, Management, or staff, and may be preliminary in
nature. 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.
Water Financing Partnership Facility
RETA 6498: Knowledge and Innovation Support for ADB’s Water Financing


Application Form

Activity Title: Designing Sanitation Output-Based Aid Pilot for Vulnerable Households
Proposer (Name, Organization): Joao Piedade, Director, National Directorate for Basic Sanitation
Services, Ministry of Public Works Transport and Communications
Request Date: 5 February 2016
Country: Timor-Leste Region: Pacific
Activity Proposed Start Date: 01 July 2016 Activity Proposed Duration: 4 months

Cost Estimate $50,000

Implementing Organization Contact: Joao Piedade,
ADB Activity Officer – name, Allison Woodruff
position, division, telephone and e- Urban Development Specialist, PAUS
mail: 5520

1. Background and Rationale:

The urban population of Timor-Leste with access to improved drinking water sources increased from
67.4% in 2001 to 91.1% in 2010, while the proportion of the urban population with access to improved
sanitation increased from 68.5% to 80.9% over the same period. Diarrheal disease is one of the leading
causes of infant mortality in Timor-Leste, which is linked to inadequate water supply, sanitation and
hygiene. Neonatal mortality (child death within 28 days after birth) is high at 22 deaths for every 1,000 live
births and has remained un-changed since 2003.Neonatal-related conditions, pneumonia, diarrhea and
malaria are major immediate causes of child death.

A social assessment in Manatuto and Pante Makasar Municipalities was undertaken in 2011 as part of
the design of Grant 0258-TIM: District Capitals Water Supply Project. The survey collected information on
the proportion of households with latrines. According to the survey 40% of households in Manatuto had
no private household toilet. When asked about the reasons for not having their own private toilets, the
main reason cited was affordability (70% of households), followed by a lack of adequate space,
satisfaction with arrangements using neighbor’s toilets, and the lack of water supply.

The Government has committed ensuring that all households have access to improved sanitation by
2030. Furthermore, the National Sanitation Policy adopts a health promotion approach, which focuses on
promoting sanitation behavior change and puts responsibility on individual households for investing in,
and maintaining, adequate sanitation facilities. Under this policy, subsidies for the construction of
sanitation facilities are permitted only in the case of vulnerable households.

Recent progress in Timor-Leste in poverty targeting for vulnerable households have made the piloting of
output-based aid approaches to expanding access to sanitation among vulnerable households possible.
The Government, through the Ministry of Social Solidarity (MSS), implements conditional cash transfer
program for vulnerable female-headed households, and elderly and disabled people. MSS provides also a

World Health Organization and United Nations Children’s Fund. 2014. Progress on Drinking Water and Sanitation:
2014 Update. WHO and UNICEF. Geneva.
rice subsidy to poorer income households, and assistance to households that suffer natural disasters.
Currently it is piloting a social customer service in Dili. MSS has a central database and is now in the
process on consolidating the information of all its programs, and define the concept of vulnerability.

The Ministry of Public Works Transport and Communications, with an $11 million grant from the ADB, is
implementing the District Capitals Water Supply Project. The project will expand access to a safe and
reliable 24-hour water supply to a large proportion of households in Manatuto and Pante Makasar towns.
Under this project, local NGOs have also been engaged to undertake an intensive hygiene promotion
campaign in 2014-2015, including activities to increase demand for improved sanitation.

To fully leverage the benefits of improved water supply and reduce the burden of water-borne disease in
Manatuto, the National Directorate of Basic Sanitation (DNSB) proposes an output-based aid pilot to
deliver improved sanitation to low-income households using explicit performance-based subsidies.

Under this output-based aid (OBA) modality, with an urban focus, sanitation is defined beyond toilet, with
a focus on household waste water management. The best mechanism on how to implement an OBA will
be assessed during the design phase. It is proposed that sanitation facilities include appropriate systems
to deal with the safe disposal of both excreta and greywater. This mechanism will enhance access to
basic sanitation among low-income households without compromising the financial sustainability of
service delivery.

2. Goals & Objectives:

The objective of the proposed pilot and demonstration activity (PDA) is to design the urban sanitation
OBA pilot project in the municipality of Manatuto.

3. Scope and location of Work / Description of Activities:

The scope of work includes the design of a transparent and workable OBA mechanism which ensures
that vulnerable households in Manatuto have access to basic sanitation. The PDA will also provide
general recommendations for all towns, if the OBA approach is successfully demonstrated and
considered for scaling-up to other urban centers in Timor-Leste in the future.

Location of the project

Manatuto district is in the central region of Timor-Leste to the west of Dili. The district has a population of
43,346 (2010 Census) living in 7,208 households. With an area of 1,782 km that is divided into six sub-
districts and 29 sucos, four of which are in the urban area, Manatuto is both the smallest (by population)
and the least densely populated district in Timor-Leste. The town of Manatuto is 47 km from Dili and of
7.8 square km and is situated by the Strait of Wetar in the Laclo River Valley. The basis of the Manatuto
district economy is fisheries, salt and lowland irrigated rice production in the fertile Laclo River valley.
Average household size in Manatuto is 7.4. While no recent income data is available, a recent socio-
economic survey found that 41% of households live in homes with a dirt floor, which is a good proxy for
poverty. Floor material has been found to be strongly corrected with income levels. The same socio-
economic survey found that that 54% of households reported income levels of $50 or less.

Description of activities

The PDA will undertake the following:

Assessment of Target Population Access to sanitation. Review existing socio-economic data

including information collected as part of the social assessment carried out under TA 7649 TIM, and
subsequent baseline surveys carried out by NGOs contracted under the District Capitals Water Supply
Project to assess the sanitation situation in Manatuto, particularly, access rates among low income

(i) Review available data on poverty rates and vulnerable households in the pilot town.
Review existing poverty studies such as household income and expenditure surveys, and Ministry
of Social Solidarity databases, and estimate the vulnerable population in Manatuto. In absence of
detailed poverty data, use of other proxies for poverty, such as household floor and roofing
material, may be considered.

(ii) Definition of vulnerability. Work with Ministry of Social Solidarity, DNSB, local leaders and other
stakeholders to agree on an accepted definition of ‘vulnerability’, which can be used as the basis
for the development of eligibility criteria.

(iii) Refine estimates of the vulnerable populations in the target town through consultations with
national government, municipal officials, NGOs, and community representatives to develop
estimates of the vulnerable population.

(iv) Needs and preferences of target vulnerable population. Based on information collected on
the vulnerable population, undertake consultations, surveys and/or focus groups with vulnerable
households to assess sanitation needs, as well as preferences for meeting these needs.
Information on ability and willingness to pay for improved sanitation should also be collected.

Formulation of Eligibility Criteria

(i) Based on an assessment of vulnerable households in Manatuto, propose clear and appropriate
eligibility criteria to select pilot project participants. Eligibility criteria should be fair, transparent,
and as simple as possible to administer, at minimal time and cost.

(ii) Confirm the appropriateness of proposed eligibility criteria through consultations with national
government, municipal officials, NGOs, and community representatives

Development of Basic Sanitation Options

(i) Identify appropriate basic sanitation options for the pilot town in consultation with stakeholders,
taking into consideration available low-cost technologies, public health and environmental risks,
population densities, soil conditions, water table, social preferences, and ease of maintenance.
Basic sanitation options should consider both the disposal of excreta and grey water. The
adequacy of existing sludge collection and treatment facilities in the town should also be
considered, to ensure proper desludging of waste water provided under the project in the future.

(ii) Assess the costs of designing and constructing proposed sanitation systems in the pilot town,
based on engineering designs and cost estimates already prepared under the BESIK project.
Overhead costs in managing the program should also be considered. Compare the costs of the
proposed sanitation options with assessed levels of affordability and willingness to pay among
target beneficiaries, to determine required subsidy levels, and feasible household contributions to
these costs. Coordinate with National Directorate for Building from the Ministry of Public Works,
Transport and Communications, to determine appropriate construction standards for sanitation
facilities to be provided under the OBA pilot.

(iii) Determine subsidy and household contribution requirements based on a proposed menu of
excreta and greywater disposal systems to be offered to eligible households.

(iv) Propose an unambiguous definition of outputs against which subsidy is to be paid, in a manner
that can be easily verified during implementation with measurable indicators.
Assessment of Service Providers

(i) Identify possible service providers with the capacity to: (i) design and implement public
awareness campaigns to promote the pilot project, as well as continuation of hygiene behavior
change campaigns (ii) screen and register beneficiaries, (iii) prepare detailed designs for the
sanitation facilities to be provided to beneficiary households, (iv) sub-contract and train local
contractors to install sanitation facilities, (v) carry out or sub-contract construction supervision, (vi)
undertake quality assurance, and (vii) preparation of regular progress reports are the basis for
payment claims.

(ii) Assess service providers’ ability to pre-finance upfront cash requirements for the provision of
sanitation facilities. If OBA grants are reimbursed to service providers in a timely manner, the
provision of sanitation facilities to eligible households can be implemented in batches. Propose
alternative approaches, if necessary, to enable pre-financing of sanitation system costs.

Formulation of Implementation Arrangements, including Monitoring and Verification

(i) Propose institutional and financial/disbursement arrangements of the OBA mechanism. Roles
and responsibilities of service providers, OBA beneficiaries, Ministry of Public Works Transport
and Communications/DNSB as the executing agency, and independent verification agents.

(ii) Propose appropriate entities who could be engaged as independent verification agents (IVAs).

(iii) Detail a monitoring process, including, but not limited to what entity, and in what interval, would
be responsible for monitoring, how disputes would be resolved, and how beneficiaries would be
involved in certifying outputs.


The output will be an OBA sanitation design report for Manatuto, which will describe in detail each of the
items outlined above. DNSB intends to implement the pilot designed through the PDA in 2017.

4. Implementation Schedule, Institutional Management Arrangements, and Proponent


Implementation Schedule

The PDA activity will be carried out over a period of 7 months, following PDA approval. The final report is
expected to be submitted by 31 October 2016.

Activities Mar Apr May Jun July Aug Sep Oct
PDA approval
Consultant recruitment
Design of pilot
Submission of draft report
Submission of final report
Institutional management

The National Directorate of Basic Sanitation Services (DNSB) will be responsible for overseeing and
monitoring the progress of the PDA activity. The agencies will work closely with Manatuto District
authorities in the implementation of the pilot. DNSB will engage the following experts to assist them to
design the sanitation OBA pilot:

(i) Sanitation Specialist/OBA Expert (international, 1,5 person-months, intermittent)

(ii) Social Development Specialist (national, 1.5 person-months, full-time)

Proponent Qualifications

The international expert to be engaged to support DNSB will have at least 7 years’ professional
experience designing and implementing water supply and sanitation projects in developing countries. The
expert will also have experience designing output-based aid schemes, and should be familiar with
available low-cost sanitation options. The national expert will have at least 5 years’ experience carrying
out community consultations, conducting household surveys, liaising with diverse groups of stakeholders,
as part of externally-financed water and sanitation projects.

5. Expected Results (outputs/outcomes/effects/impacts):

Output: Design of an OBA sanitation pilot for Manatuto.

Outcome: DNSB agrees to implement an OBA pilot to improve access to sanitation among low-income
households in Manatuto.
Impact: Improved health of Manatuto’s population

6. Measurable Performance Indicators:

Output indicators: OBA design work plan prepared; OBA design report finalized and submitted to
Outcome indicators: Ministry of Public Works allocates budget to DNSB for OBA pilot implementation in
Impact indicators: reduction in poor sanitation-related diseases in Manatuto.

7. Stakeholders Participation:

Communities in Manatuto will be involved in the design of the pilot, particularly to better understand
aspects of vulnerability of target beneficiaries including ability to make household contributions towards
the cost of sanitation systems, as well as stakeholder needs and preferences in the provision of low-cost
sanitation options. A number of community consultations and focus groups with vulnerable households
will be carried out during PDA implementation. DNSB will also work closely with the Manatuto District
Authorities in the preparation of the OBA design.

8. Scope for Replication/Use in Other DMCs:

OBA approaches have been successfully applied in many countries around the world. The results of the
proposed PDA activity can be used to inform the design of similar activities to expand access to improved
sanitation in smaller secondary towns around the region. DNSB has already indicated that if the OBA pilot
is successful, it will consider expanding the OBA approach to sanitation to all 13 districts in Timor-Leste.
9. Cost Estimates:

Cost Estimates and Financing Plan

1. Consultants
a. Remuneration and per diem
i. International consultants 31
ii. National consultants 6
b. International and local travel 8
c. Reports and communications 1
2. Consultations and surveys 1.5
3. Contingencies 2.5
Total 50.0