Report No. PID7447 Project Name Armenia-Dam Safety Project (+) Region Europe and Central Asia Sector Agriculture (Irrigation) Project ID AMPE64879 Borrower Government of Armenia Implementing Agency Ministry of Agriculture Project Implementation Unit (Irrigation Rehabilitation Project) Address: 13 Vardanants Yerevan, Republic of Armenia Environmental Category B Date of This PID Prepared March 1999 Date Initial PID Prepared December 1998 (for Irrigation Development Project, with Dam Safety as a component) Project Appraisal Date March 1999 Project Board Date June 1999 Country and Sector Background 1. Since 1994, Armenia has made significant progress in reforming its economy by launching a stabilization program which aims to target economic crisis translated into collapse of public finances, dramatic deterioration of industry and agriculture, collapse of social services and crucial infrastructure, and severe increase of poverty. 2. Problems in agriculture related to lost FSU markets for high value products, and lack of public finance for operation and maintenance (O&M) of infrastructure have resulted in significant infrastructure deterioration. The absence in particular of an effective mechanism for O&M of existing water sector infrastructure has led to continuing degradation of irrigation, drainage and dam reliability. 3. In response, IDA in 1995 financed an Irrigation Rehabilitation Project (IRP) which includes a combination of interventions as follows: (i) rehabilitation works on irrigation networks, primary and secondary canals, to reduce water losses, and on drainage canals to help evacuate excess water; (ii) strengthening of the institutional capability of O&M organizations aimed to clarify their role, responsibility and accountability through reforming the enterprises responsible for O&M and establishing and empowering Water User Associations (WUAs); (iii) conversion of selected pumping schemes into gravity schemes, and; (iv) rehabilitation works on dams to improve their safety. 4. The Government of Armenia delegated the responsibility for operation and maintenance of irrigation systems to: (i) Operation and Maintenance Enterprise (OME) for primary and secondary irrigation canals; (ii) Dam Maintenance Enterprise (DME) for dams; (iii) the Drainage Industrial Enterprise (DIE) for the drainage system, and; (iii) Water Users Associations (WUAs) for water distribution, collection of charges and maintenance of tertiary and quaternary canals. Objectives 5. The primary objective of the project is to protect the population and the socio-economic infrastructure down- stream of the dams facing the highest risk of failure. Achieving this objective will also enhance the sustainability of the dam-based economic activities in Armenia. Progress towards the project objective would be measured in terms of: (i) the reduction in the number of people living under threat of high probability of dam failure ( Armenian population downstream of unrepaired dams would be reduced from about 460,000 to about 100,000 ); (ii) the increase in the volume of water which can be reliably supplied to serve the economic purpose for which individual dams were constructed (improved reliability of supply for 53,000 hectares of irrigated land ); and (iii) the improvement of the risk profile for the totality of the dam system in Armenia. Description 6. The project will constitute a five-year program for improving the safety of priority dams, and establishing an effective system for monitoring the safety of all dams along with an emergency warning system. The project will have three components: (i) The first component would support the rehabilitation of the 20 primary irrigation dams, including, design, site investigations, equipment for operation and maintenance, and the necessary civil works. These dams are of the embankment type; (ii) the second component would strengthen the institutional capacity of the Dam Maintenance Enterprise, it would support the completion of Emergency Action Plans and the establishment of Emergency Warning Systems, it would investigate on needs of emergency interventions on 50 Secondary Irrigation Dams and 6 Energy Dams and it will provide an emergency fund to allow DME to intervene in cases where further deterioration of any of these dams pose an imminent threat to human life; and (iii) the third component will provide for the incremental operating cost of the existing Project Implementation Unit throughout the duration of the project. Financing 7. Project costs are estimated at US$30 million. The project would be financed from budgetary resources from the Government (US$ 4.5 million) and IDA (US$ 25.5 million). Implementation 8. Project management will be the responsibility of the existing PIU established under the IRP which will work under the leadership of the existing Project Management Board (PMD) chaired by the Minister of Agriculture. The PIU would be in charge of designing and coordinating all project interventions, contracting out detailed designs and construction works, and supervising and monitoring project activities. The existing PIU has proven, during the last - 2 - two years of IRP implementation, that it can effectively discharge these duties. Sustainability 9. Arrangements will be agreed with Government on effective modalities for the Dam Maintenance Enterprise to be paid by OME at a rate that will ensure that the maintenance requirements of dams are met, or that any underpayment by OME is met from the state budget. Provision is also made under the project for strengthening the DME to ensure that they acquire and maintain the necessary technical and management capability to effectively operate and maintain the rehabilitated dams. An agreement has been reached with Government under the IRP to achieve full O&M cost recovery by the year 2005. Assurances to the effect that Government intends to abide by this time table will be obtained during credit negotiations. To ensure adequate O&M financing for the dams in the interim period, the project will finance the expected deficit. Lessons Learned from past operations 10. The main lessons learned from the Bank's involvement to date are attributed to the development of the previous IRP, which included the need to increase implementation capacity and to strengthen institutional capabilities to achieve sustainability of irrigation and drainage infrastructures. The IRP PIU has made continuous progress in developing its capacity in procurement and supervision of works. Areas which will need further attention during the preparation and implementation of the Dam Safety Project relate primarily to cost estimates and to design standards. 11. Little progress has been achieved so far in strengthening the public organizations in charge of O&M for the main irrigation systems. In parallel with the current policy dialogue ( now being formalized under Structural Adjustment Credit III conditionality) directed at ensuring sufficient and sustainable financial resources, new institutional mechanisms are being explored, which would introduce accountability and improve cost efficiency of resources earmarked for system maintenance. Environmental Aspects 12. The project has been rated as Environmental Category "B" taking into account that it was initially conceived as part of the larger IDP that was indeed "B" rated. The only foreseeable environmental problem, however, is the one potentially associated with the disposal of construction debris. Mitigating measures are in place for the implementing agency to deal with this issue. The contract documents in effect for all civil works stipulate that contractors get permits from the local government concerned which specify the location and method of disposing of construction debris in conformity with the country's environmental guidelines. In addition the government is committed to abiding by the recommendations of the IDP Environmental assessment (expected to be ready in July/August, 1999) in dealing with this issue. Social Aspects -3- 13. No negative social impact is foreseen. Enhancing the safety of dams will have a favorable impact on the population as a whole. Benefits and Risks 14. Benefits: (i) severe safety risk reduced for 360,000 people living downstream of very dangerous dams. The number of population at risk per dam varies from 1,000 to 157,000; (ii) risk reduced of potential flooding for an agricultural area up to 680 KM2; (iii) risk of potential destruction of private buildings and public infrastructure downstream reduced, especially in the case of some dams like Azat where important factories and public infrastructure would be affected in case of failure; and (iv) security of water supply enhanced for 20% of total irrigable area in Armenia generating a total value of agricultural production of about $US 23 million. 15. Risks: (i) future inadequate governmental resources for O&M thus the proposed project ensures financing of any shortfalls over the next five years; (ii) cost overruns during implementation in response to which lower priority dams may be deferred; (iii) limited in-country construction capability thus foreign expertise is included in the project; and (iv) insufficient management and construction supervision capability in DME thus in initial years these functions will be assessed by the proven IRP PIU. Contact Point: The InfoShop The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 5454 Fax No. (202) 522 1500 Salem Gafsi The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone no.: (202) 458-5328 Fax No.: (202) 522-3147 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending March 19, 1999. - 4 - Annex Because this is a Category B project, it may be required that the borrower prepare a separate EA report. If a separate EA report is required, once it is prepared and submitted to the Bank, in accordance with OP 4.01, Environmental Assessment, it will be filed as an annex to the Public Information Document (PID) . If no separate EA report is required, the PID will not contain an EA annex; the findings and recommendations of the EA will be reflected in the body of the PID.