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Parliament Inquiry Slams ‘Misuse’ Of $30M Water Supply Loan

30.03.2004

By Atom Markarian

A $30 million project to improve supplies of drinking water in Yerevan has failed to achieve its main objectives to due a serious misuse of the funds provided by the World Bank, a parliamentary inquiry claimed on Tuesday.

The negative conclusion is contained in an interim report issued by an ad hoc commission of the Armenian parliament that was set up last September to investigate the use of nearly $3 billion in external loans, grants and other assistance received by Armenia since independence. Presenting its findings to the National Assembly, commission chairman Vahan Hovannisian challenged government claims that the situation with water supplies in the capital has markedly improved since the launch of the scheme in 1999.

According to the State Committee on Water Resources, the average Yerevan household currently has running water for more than nine hours a day and will enjoy the round-the-clock supplies by the end of the year. But Hovannisian, who is also one of the two deputy speakers of the assembly, said the official figure is grossly exaggerated.

He cited the example of the city’s Davitashen district where $5.8 million of the World Bank loans has been spent. The authorities were supposed to ensure 24-hour supplies there by the beginning of this year. The commission report says most local residents have running water for between 10 and 12 hours a day, despite having installed water meters.

The introduction of the meters has been a key element of the government’s sweeping reform and restructure the country’s obsolete water and sewerage network. Most Armenians have already bought and installed them at their expense. A typical urban household needed two such devices in their apartments and paid an equivalent of $15 apiece. Hovannisian said a water meter was in fact worth between $5 and $6, accusing the government’s water agency and Yerevan’s utility operator of making $6.5 million in “unjustified” profits from their sale.

The commission report also criticizes the fact that 27 percent of the World Bank funds have been spent on project management, overheads and logistics. That includes $5 million paid to the Italian firm A-Utility that has run Yerevan’s water and sewerage network since the launch of the project.

Hovannisian said the commission will recommend that the government does not extend its management contract with A-Utility after the project’s completion this summer. He said the network has failed to reduce continuing huge leaks of drinking water.

Government officials admit that as much as 60 percent of the water is being lost before reaching households. They say substantial capital investments are needed to reconstruct the aging Soviet-era network of pipes.

The publication of the parliamentary report follows last week’s sacking of Gagik Martirosian, the longtime head of the State Committee on Water Resources. It is not clear if there is any connection between the two developments.

There was no immediate reaction to the report from the government. Officials at the World Bank’s Yerevan office declined a comment, saying that they have not yet received the document. They had earlier praised the implementation of the infrastructure project.

(Photolur photo)

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