Ppiaf assistance in_djibouti_april_2011

1. April 2011
1
PPIAF Assistance in Djibouti
Technical Assistance for Djibouti’s Energy, Water, and Sanitation Sectors
PPIAF has completed one activity in Djibouti that assessed the institutional options to manage urban
electricity, water supply, and sanitation and wastewater services. The activity was focused on how to
restructure these services to make them more competitive in order to reduce service delivery costs,
improve sustainability, and enable the sectors to approach financial self-sufficiency with the subsequent
positive fiscal impact on the government budget. The activity was sought in the context of the Presidency
of Ismail Omar Guelleh, elected in 1999, who named privatization, economic reform, and increased
foreign investment in the country’s infrastructure as key government priorities.
The PPIAF activity was requested by the government of Djibouti in 2004 following the finalization of its
Poverty Reduction Strategy Paper (PRSP). The PSRP revealed that without planned institutional reforms,
future investments would not achieve their intended objectives. At the time of the request, three separate
organizations were responsible for the management of electricity, water, and sanitation: Electricité de
Djibouti (EdD), Office Nationale des Eaux de Djibouti (ONED), and Ministère de l'Habitat, de l'Urbanisme,
de l'Environnement et de l'Aménagement du Territoire (MHUEAT).
All three organizations had significant operational issues. EdD was vulnerable to fluctuations in oil prices,
charged high tariffs while only reaching 50% of urban residents, and was suffering from a capital shortfall
due to the continued failure of state-owned enterprises and private businesses to pay their bills. ONED
suffered from a lack of water resources, particularly in Djibouti city, inadequate tariffs to recover costs,
and a water supply system that only reached 43% of urban residents. MHUEAT was also not performing,
and only 20% of residents of Djibouti city had access to sanitation services. All three organizations were
also beset by political interference that had stalled earlier privatization efforts (in contrast to the
successful entry of the private sector into the ports, airports, and telecommunications sectors).
The PPIAF study analyzed administrative, economic, financial, fiscal, historical, legal, political, and
technical aspects of the institutional arrangements for the provision of the three services to determine
recommendations for their optimal restructuring.
The study recommended regrouping the three organizations into one enterprise as the optimal
institutional structure. This structure was also chosen due to its attractiveness to the private sector.
Following dialogue with domestic and international private sector counterparts, the PPIAF study
recommended that the government introduce the private sector to the three organizations, initially through
management contracts that could then be eventually adapted to affermage contracts.
The PPIAF recommendations have been partially adopted by the government of Djibouti. On June 1,
2006 a law was passed that merged the responsibility for water and sanitation, Loi n°145/AN/06/5ème C
Portant Création de l'Office National de l'Eau et de l'Assainissement de Djibouti (ONEAD). ONEAD,
attached to the Ministry of Agriculture, has been in operation since 2007 and is responsible for the
production and distribution of water and for the rendering of sanitation services.
A follow-up World Bank activity, financed by an International Development Association (IDA) credit worth
$13 million, is currently ongoing and aims to contribute to structural reform and improved performance of
the electricity sector. Djibouti is currently in the process of trying to attract the international private sector
to invest in Djibouti’s energy sector—specifically geothermal, wind, and solar—as EdD struggles to cope
with a widening gap between production and consumption needs.

2. 2
Results of PPIAF’s Activities in Djibouti
Category Outputs
Enabling environment reform
Plans/strategies prepared
 Options de Reformes Institutionnelles pour l’Electricité, l’Eau et
l’Assainissement, 2004
Category Outcomes
Enabling environment reform
Plans/strategies adopted
 Strategy to optimize restructuring of management of electricity,
water, and sanitation was adopted partially
Policies adopted, legislation
passed/amended, or regulations
issued/revised
 On June 1, 2006 a law was passed that merged together
responsibility for water and sanitation: Loi n°145/AN/06/5ème C
Portant Création de l'Office National de l'Eau et de
l'Assainissement de Djibouti (ONEAD)
Institutions created or
strengthened
 In 2007, following the passing of the law, ONEAD began
operations responsible for the production and distribution of
water and sanitation
Looking Ahead: PPIAF and the Public-Private Partnership (PPP) Agenda in Djibouti
PPIAF has enjoyed significant success supporting the PPP agenda in middle-income countries in the
Middle East and North Africa. A renewed focus on low-income countries and fragile states has reinforced
PPIAF’s interest in supporting the PPP agenda in countries such as Djibouti. PPIAF expects to play a
leading role in shaping this agenda in Djibouti through technical assistance to support enabling
environments for private sector participation in infrastructure.