Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-2816-YDR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN FOR A GREATER ADEN WATER SUPPLY PROJECT May 15, 1980 This document has a restricted distribuon and may be used by recipients only In the performance of their oficial duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Calendar 1979 March 1980 Currency Unit Yemeni Dinars (YD) YD US$1 = YD 0.345 0.345 YD1 = US$ 2.90 2.90 Fiscal Year April 1 to March 31 (prior to 1975) April 1 to December 31 (1975) January 1 to December 31 (from 1976) GLOSSARY OF ABBREVIATIONS FAO - Food and Agriculture Organization OPEC - Organization of Petroleum Exporting Countries PDRY - People's Democratic Republic of Yemen PWC - Public Water Corporation UNDP - United Nations Development Programme WHO - World Health Organization LNI.2740-MA MALAYS IRpcTET5 PfiR SECOND wESTERN JOHOR AGRICULTURAL DEVELOPMENT PROJECT JUNE i9. i986 CRRD I OF £ \J .1 JL - L IL LLL IJ (f|AtK a CEND W Ll0U -x LJLLJJL FOR OFFICIAL USE ONLY PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN GREATER ADEN WATER SUPPLY PROJECT A CREDIT AND PROJECT SUMMARY Borrower: People's Democratic Republic of Yemen (PDRY) Beneficiary: Public Water Corporation (PWC) Amount: $13.2 million, including a $1.2 million engineering credit (S-21-YDR) to be refinanced under the proposed credit. Terms: Standard Relending Terms: Twenty years including 5 years of grace, at an interest rate of 8.25 percent per annum. Foreign exchange risk would be borne by the Borrower. Project Description: The project, which constitutes the first construction stage of a long-term water supply master plan, seeks to increase the critically short supply of potable water, and meet the maximum demand up to 1987, in Aden, the capital and largest agglomera- tion of PDRY, and to rehabilitate the existing system which is fast deteriorating. It provides for the expansion of the distribution network into the poorer districts of Greater Aden to allow low-income residents to be directly connected to the public system. The project also provides for technical assistance aimed at improving PWC's management capability. Part A of the project includes the construction of wells, rehabilitation works, studies, management assistance to PWC and training of its staff; Part B covers the well equipment and water transmission to Aden; and Part C includes the construction of reservoirs, the installation of water disinfec- tion equipment, and the expansion of the distribution network. A total of 328 man-months of consulting services, at an estimated average cost of $8,200 per man-month, is required. The project faces some risks stemming from PWC staff's in- experience in project management, and the possible adverse impact on PWC's financial condition due to slow payment by public agencies for water charges. Provisions have been made in the project to minimize these risks. This document has a restricted distribution and may be used by recipients only in the performance of their omcial duties. Its contents may not otherwise be disclosed without World Bank authorization. Estimated Cost: /1 Local Foreign Total …------ $ Million----------- Part A Construction o; Wells 0.2 0.1 0.3 Rehabilitation Works 0.1 1.4 1.5 Management Assistance, Training & Studies 0.3 1.4 1.7 Sub-total 0.6 2.9 3.5 Part B Equipment for the Wells 0.3 2.5 2.8 Transmission Pipeline 1.6 11.9 13.5 Sub-total 1.9 14.4 16.3 Part C Reservoirs and Other Equipment 0.3 1.3 1.6 Distribution Network 0.5 3.8 4.3 Sub-total 0.8 5.1 5.9 Construction Supervision 0.1 1.1 1.2 Physical Contingencies 0.4 3.2 3.6 Price Escalation 0.7 6.8 7.5 Refinancing of Credit S-21-YDR - 1.2 1.2 Total Project Cost 4.5 34.7 39.2 /1 Not including duties and taxes from which the project is exempt. Financing Plan: Local Foreign Total -----------$ Million----------- Government 4.5 - 4.5 IDA - 13.2 13.2 Arab Fund - 12.0 12.0 Islamic Bank - 5.5 5.5 OPEC Fund - 4.0 4.0 Total 4.5 34.7 39.2 - iii - Estimated Disbursements: IDA FY: 1981 1982 1983 1984 1985 1986 ---------------$ TMillion------------- Annual 1.7 3.3 3.2 3.5 1.3 0.2 Cumulative 1.7 5.0 8.2 11.7 13.0 13.2 Rate of Return: 11 percent Staff Appraisal Report: No. 2910a-YDR of May 7, 1980 INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN FOR A GREATER ADEN WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed development credit of US$13.2 million equivalent including US$1.2 million to refinance the Engineering Credit (S-21-YDR) approved on June 29, 1978, on standard IDA terms, to the People's Democratic Republic of Yemen (PDRY), to help finance a Greater Aden Water Supply project. The Arab Fund for Economic and Social Development and the OPEC Special Fund, have expressed their interest, in principle, in co-financing this project together with the Association and the Government has requested the Islamic Development Bank to also participate. PART I - ECONOMY 2. An economic mission to review the second Five-Year Plan 1/ visited PDRY in March-April 1979 and its report entitled "People's Democratic Republic of Yemen: Special Economic Report--The Second Five-Year Plan (1979-83)" (2683-YDR), dated January 25, 1980, was distributed to the Executive Directors on February 6, 1980. A country data sheet is attached as Annex I. Development Objectives and Constraints 3. Over the past decade, the Government of PDRY has consistently pursued a strategy of developing the country within the context of a socialist society. The principal objectives of the Government have been (a) to satisfy the basic needs of the population for food, essential consumer goods, shelter, employment, health care and other social services; (b) to develop the produc- tion capacity of the economy, especially in agriculture, fisheries, industry, construction and minerals; (c) to strengthen the infrastructure sectors, i.e., transport, power and telecommunications; (d) to raise education standards, emphasizing technical and higher education; and (e) to increase exports of domestic products. 4. In pursuing these objectives, the Government relied primarily on a strong public sector and on cooperatives. Major institutional reforms were initiated with the nationalization of foreign properties in 1969 which brought the bulk of the modern service activities in and around Aden (banking, insurance, shipping, trading) under Government control. Subsequent investment in manufacturing, power, construction and mineral exploration has given the public sector a dominant influence over industrial activities. Two agrarian reform laws enacted in 1968 and 1970 have fundamentally changed the land 1/ This plan has recently been revised (see paras. 6 and 7). - 2- tenure conditions, breaking up large feudal holdings. Simultaneously, new farm organizations--state farms and production cooperatives--were created to facilitate the introduction of modern cultivation and marketing techniques. Fishing and consumer cooperatives were also established. More recently, two of the remaining foreign-owned installations--the Aden Refinery (British Petroleum) and an international communications facility (Cable and Wireless)-- were transferred by mutual consent to the Government of PDRY. 5. Private enterprises have been allowed to exist mainly in trade, manufacturing and construction. But the private sector was given a subsidiary role and private entrepreneurs are expected to follow the lead of the public sector. Cooperation between public and private enterprises is encouraged in some areas, such as light industries, and a limited number of joint ventures are now active. Foreign private investors have been encouraged to participate in oil exploration. 6. Increasingly comprehensive economic and social planning is being used as the principal tool to implement PDRY's development objectives. In 1971 the Government launched its first development program, covering the three-year period of 1971/72-1973/74. The program focussed largely on a number of public sector projects which were to be carried out with the help of foreign capital and technical assistance. It was followed by a more detailed Five-Year Plan (1974/75-1978), which in addition to the investment program, introduced specific targets for the major economic and social sectors. Work on the Second Five-Year Plan (SFYP) originally envisaged to cover the 1979-83 period had started in early 1979. However following a recommendation by the Council on A::ab EconoTic Unity asking Arab countries to synchronize their five-year economic plUns, the SFYP will now cover the 1981-85 period with 1979 and 1980 serving as transitional years. Thus, the revised SFYP is expected to be finalized and approved by the end of 1980. It consists of a macro-economic framework, sector analyses and investment objectives. In addition to infra- structure and productive sectors the Plan covers such areas as foreign and domestic trade, manpower development, social sectors, and production planning. While still relying on technical assistance from foreign experts the Government has substantially strengthened its own planning capability. Plan preparation and execution has thus become increasingly the responsibility of Yemeni staff in the Ministry of Planning, in technical ministries, and in public enterprises and cooperatives. 7. The revised second Five-Year Plan continues to pursue the overall development objectives outlined in paragraph 3 above. It proposes a total investment of $1,200 million (in 1977 prices) for 1981-85 of which 38 percent is allocated for infrastructure (including electric power), 24 percent for agriculture and fishing, 14 percent for industry including oil and mineral exploration, 5 percent for education, 9 percent for housing, and 10 percent for other services. The Plan assumes that about $948 million (79 percent) will be financed through foreign capital, and the remaining $252 million from domestic resources. 8. In implementing the Plan the Government faces a number of constraints, the most important ones being limited natural resources, insufficient tech- nical and managerial skills, and low levels of productivity. A harsh climate -3- severely limits the area available for cultivation, although substantial increases in agricultural output could be achieved through higher yields, and by substituting cash crops for subsistence agriculture. The narrow domestic market and few known raw materials limit the scope for industrial development. These constraints are compounded by the rugged topography which creates severe difficulties for internal transportation resulting in increased domestic transport cost. 9. Lack of adequately trained manpower is another major constraint. The Government has tried to fill the gap with bilateral and multilateral technical assistance, including UNDP which maintains a large program in PDRY. In addition, again with foreign assistance (including IDA), a large education and training program was launched and in recent years has become increasingly technically oriented. Supported by scholarships for higher education abroad, and the establishment of technical training institutions in PDRY the country is now generating a growing flow of technically trained people who could gradually reduce the shortage of skilled manpower. 10. Low productivity in the public and cooperative sectors is one of the principal problems faced by the Government. The reasons for this can be traced largely to inadequate incentive systems, weak management, shortage of trained manpower, lack of spare parts, and inadequate maintenance. The revised Plan recognizes these constraints and gives priority to measures aimed at increasing productivity. In this context, the Government has recently been engaged in the review of the structure of domestic prices aiming at selective price increases as incentives for agricultural producers and fishermen. Following this, farm gate prices of some agricultural products were raised by up to 50 percent in June 1979 and producer and consumer prices for fish were increased in September 1979, and the consumer prices again in March, 1980. Recent Economic Developments 11. The Government's emphasis on the public sector has led to a rapid increase in public spending. Priority was given to public investment which increased from $4 million in 1970 to $214 million in 1979. The allocation of investment funds appears to have been well chosen: half of all public sector investments during the first Five-Year Plan (1974/75-78) went to the commodity producing sectors with agriculture and fishing receiving 35 percent, and industry and mineral exploration 15 percent. A large share (32 percent) was invested in infrastructure (including electric power) while the remaining 18 percent was spent for education and other social services. The sharp increase in public investment was accompanied by a major expansion of current government spending on education, health and other public services. 12. High levels of investment and other public spending have accelerated the rate of economic growth. GDP at constant prices grew at an annual average rate of about 7 percent during 1973-78, compared with only 2 percent per annum during 1970-73. The major growth sectors were fishing, industry, construction, trade, transport and government services. Agricultural output increased only slowly, reflecting the productivity problems mentioned above. More recently -4- industrial production has picked up mainly as a result of increased oil refining. GNP rose at a faster rate than GDP (12 percent p.a. during 1973-78) due to a rapid increase in workers' remittances. 13. Substantial progress has been made in achieving a balanced income distribution, and in the development of social services. State ownership of production facilities and egalitarian wage/salary structures have reduced income differentials in the growing public sector. Supplies of basic food- stuffs and other essential consumer goods are readily available to the urban population. School enrollment has risen sharply, and health services have been significantly improved. However, large differences still persist in the standard of living between urban and rural areas. Rural incomes are estimated to be only about one-third of average urban incomes, although in some regions rural incomes are supplemented by remittances from family members working abroad. The basic reasons for rural poverty appear to be low productivity of the agricultural and fisheries sectors and possibly adverse terms of trade between these sectors and the rest of the economy. Solutions to the problem can therefore only be found in tackling these basic issues. 14. To sustain the massive increase in public spending for development (para. 11), the Government had to make a major effort in mobilizing financial resources. With a low per capita income, there were severe limitations on raising domestic resources. The principal instrument used in mobilizing domestic funds was taxation and until recently containment of Government employee salaries. However, these were increased in September 1979. New taxes have been introduced and tax collection improved. As a result, total govern- ment receipts rose from a level of 12 percent of GNP in 1969/70 to 21 percent in 1978. Government revenue continued to increase in 1979, especially self- financing by public enterprises from their retained profits which increased from $4.9 million in 1978 to $12.5 million in 1979. 15. To supplement the insufficient domestic resources, the Government turned for help to friendly nations and international agencies. Increasing amounts of foreign aid were provided, largely by socialist countries, and more recently by Arab nations. In addition, PDRY received support from regional and international organizations, including IDA and the IMF. The exact amount of all foreign resources put at the disposal of the country is not known since some of the commodity aid has not been recorded either in the budget or in the balance of payments. But, on the basis of identifiable aid, it is estimated that aggregate disbursements including transfers rose from an average level of some $8 million per annum during 1969/70-1971/72 to about $131 million in 1978, and is estimated to have further increased to about $160 million in 1979. 16. The rapid expansion of the public sector, especially the growth in investment, has induced a considerable flow of additional imports. The value of imports has more than quadrupled since the beginning of the decade, from an average of $89 million per annum during 1970/71 to an estimated $387 mil- lion in 1978. Besides the devaluation of the US dollar, this mainly reflects -5- price increases for foodstuffs and petroleum products and the growing capital goods imports necessitated by the country's ambitious development program. The growth in import value has placed a heavy burden on PDRY's foreign exchange budget, all the more so as the country exports relatively little and thus bene- fits only marginally from price rises in the world markets. 17. Indigenous exports, mainly fish and cotton, have been able to cover only a minor share of the import bill. In 1978, they were estimated to be about $18 million or some 5 percent of commodity imports. Much more important than commodity exports are PDRY's invisible earnings which are dominated by workers' remittances. The latter rose rapidly since the mid-1970's, increas- ing from $56 million in 1975 to $258 million in 1978 and an estimated $320 million in 1979. This has been due to rising wage levels in the oil surplus countries, to some additional emigration, and to new incentives which liberal- ized "own exchange" imports, allowed the construction of private dwellings, and offered higher interest rates to non-resident bank depositors. Foreign Aid and External Debt 18. Fast growing exchange earnings and increasing disbursements from foreign aid (para. 15) have enabled PDRY in recent years to cover its import requirements and to strengthen its foreign reserves. The latter rose from $55 million at end 1975 to $187 million at end 1978, equivalent to almost half of the imports of that year. 19. The large inflow of foreign loans led to a rapid accumulation of PDRY's external public debt even though part of the aid was provided in the form of grants. Total debt outstanding (including undisbursed) as of end 1979 amounted to $915 million, of which $372 million was disbursed. Bilateral sources accounted for $665 million or 73 percent of total commitments with the USSR providing the bulk ($369 million), followed by China ($142 million), other Eastern European countries ($104 million), Arab countries ($48 million) and by Denmark ($2 million). Multilateral aid amounted to $250 million including $175 million from Arab Funds, and $63 millon from IDA. The average terms of all loans are highly concessionary giving a grant element of about 58 percent. In addition, PDRY has received about $180 million (until the end of 1979) in grant assistance, mostly from Arab countries. 20. The soft terms of PDRY's external debt has resulted in relatively small debt service obligations. Debt service payments in 1979 were $5 mil- lion or 1.4 percent of total exchange earnings from exports of goods and services (including workers' remittances). However, PDRY's debt service obligations are projected to increase steadily in future years, which will exert additional pressure on its balance of payments. Therefore, in view of the above and the limited resources of the country, the Bank's assistance to PDRY should continue to be on IDA terms. For the same reason, local cost financing by IDA is justified. -6- 21. In 1969, under Nationalization Law No. 37, the Government nation- alized most of the foreign-owned enterprises (para. 4). This law provided for compensation in the form of 20-year Government bonds bearing interest of 2 percent. Twenty-five percent of the net annual profits of all the nation- alized companies were to be used for servicing these bonds. In response, some of the foreign banks which were nationalized froze substantial Yemeni deposits which they had transferred abroad. Immediately after the promulgation of Law No. 37, the Government appointed a British firm of accountants of international repute to audit the accounts of all the nationalized companies and evaluate their assets. The audit report was submitted to the Government in September 1971. Settlements were reached soon after with three of the foreign banks involved. Agreements were finalized with three additional banks in 1977, with the oil companies in late 1977, early 1978, and in 1979 and with a development finance company in mid-1978. Contacts with other former owners have been maintained with a view to reaching mutually acceptable settlements. Dialogue with debtors has, however, been very slow since they have only recently responded to the Government's efforts to settle claims. The Government professes its desire to reach a mutually satisfactory solution with all claimant companies, and has expressed its willingness to consider such settle- ment outside the terms of the 1969 Nationalization Law. PART II - WORLD BANK OPERATIONS 1/ 22. To date, the Association has 12 operations 2/ in PDRY, for a total IDA commitment of $63.2 million. PDRY joined the Bank in 1969 and IDA in 1970, but is not a member of IFC. Assistance to PDRY commenced in 1971 and, after a hiatus of about two years (February 1976 to February 1978) because IDA funds allocated to PDRY for this period had been committed more rapidly than envisaged, resumed again in 1978. Of the present total IDA commitment, about $20.3 million was for assistance in building up physical infrastructure and strengthening institutions in the transportation sector, through the provision of three highway credits and a credit for the reha- bilitation and modernization of the Aden port. One of the highway projects was successfully completed in December 1975. An engineering credit was refinanced under the credit for the second highways (Mukalla-Seiyun road) project now under way. Agriculture (including fisheries) employs about 43 percent of PDRY's labor force and contributed about 20 percent to the coun- try's GDP in 1977. Although the cultivable area is severely limited by difficult terrain and harsh climatic conditions, the potential for increas- ing agricultural output through use of improved inputs and modern practices is considerable. IDA has assisted in the development of agriculture and 1/ Part II of this report is substantially unchanged from the previous President's Report for the Second Fisheries Development project (P-2571- YDR), considered by the Executive Directors on June 12, 1979. 2/ In addition, a $9 million credit for a Petroleum Exploration Promotion project is scheduled for consideration by the Executive Directors in June 1980. -7- fisheries through the provision of five credits amounting to $27.3 million. The first fisheries project was beset by cost overruns and as a result a supplementary credit was approved in FY1975 to provide the additional financ- ing needs. A second fisheries development project for $10.0 million was approved in FY1979 which will seek to improve the economic well-being of the Al Gheida Governorate, one of the poorest and remotest regions in PDRY. Two agricultural credits approved in FY1976 and FY1978 respectively focus primarily on increasing yield through the introduction of modern inputs and agricultural practices in Wadi Hadramout and Wadi Tuban. A credit of $5.0 million was approved in FY1978 to help finance a power project in Wadi Hadramout which, upon completion, will provide an impetus to agricultural development by providing electricity to drive the ground water irrigation pumps. An IDA credit of $5.4 million approved in FY1975 for an education project will assist in alleviating the problems of inadequate facilities and shortage of suitably qualified teachers. Another credit of $4.0 million approved in FY1979 for a second education project will concentrate on training urgently needed skilled and semi-skilled workers in the agricultural, industrial and commercial sectors. An engineering credit of $1.2 million was approved in FY1978 to finance the preparation of a water supply master plan and feasibility studies for the rehabilitation and expansion of the water supply systems in the two largest cities of Aden and Mukalla. The proposed project (Part IV of this report) is based on these studies. Annex II contains a summary statement of IDA Credits as of March 31, 1980, and notes on the execution of ongoing projects. 23. The Association's lending program in PDRY aims mainly at supporting the Government's long-range economic objective of broadening the base of a service-oriented economy centered around Aden, by developing the productive capacity of the other sectors of the economy and promoting investments in the outlying regions. Efforts have been directed towards projects in the trans- port sector, which would not only help to integrate the disparate regions of PDRY, but, more importantly, link production areas with the main markets. Other sectors where the Association has assisted and will continue to assist, are in the fields of agriculture, including the key fisheries subsector, and education. Technical assistance and institution-building will continue to be an integral feature in the Association's projects in PDRY. 24. Future operations are both in the preparation and study stages. A follow-up agricultural project in Wadi Hadramout is expected to result from an ongoing study by consultants financed under the first Wadi Hadramout project. A third highway project prepared with funds provided under the second highway project has been appraised. A study by consultants, financed through bilateral assistance, which could possibly lead to an IDA financed agricultural project in Wadi Beihan, has been completed and project prepara- tion work started. As in the recent past, the costs of future projects are expected to be substantially higher than the funds the Association can provide to PDRY. Therefore, efforts will be continued to encourage other development agencies to join the Association in the financing of suitable projects. The Association has, between FY1971 and FY1979, successfully played a catalytic role through its projects in securing about $59 million of co-financing from other aid donors (UNDP $0.7 million; Kuwait Fund $15.3 million; Arab Fund -8- $34.2 million; Islamic Development Bank $5.5 million and EEC $3 million), thus assisting in increasing the inflow of development aid to the country. 1/ PART III - THE WATER SUPPLY AND SEWERAGE SECTOR Water Resources 25. Water is a scarce resource in PDRY which is located in one of the world's most arid regions. The mean annual rainfall does not exceed 50 mm in the country's coastal areas but is much higher in the interior. The land is rugged in configuration, with sparse vegetation and few natural resources, and temperatures in summer peak to 430C. The rate of evaporation is high and runoff is limited even in the irrigated areas. The majority of the population resides in the narrow coastal plain along the Gulf of Aden. Farther inland to the north, the country becomes very mountainous, and beyond the mountains, flattens again to form the high plateaux and the Northern Desert, which extend into Yemen Arab Republic and Saudi Arabia. 26. PDRY relies essentially on underground water resources for its supply, as few perennial water streams exist in the country. There are seven major catchment areas which drain into eleven wadis of which the most impor- tant are the Hadramout with a drainage area of 23,300 km2, the Bana with 9,600 km2, and the Tuban with 5,000 km2. Since 1970 various studies of the major groundwater aquifers have been made by FAO. The Association has assisted in this area by financing a study of the underground water resources in Wadi Hadramout, as part of an agricultural project (Credit 615-YDR). This study was completed at the end of 1979. The IDA financed Wadi Tuban Agricultural Devel- opment Project (Credit 768-YDR) also includes a water management study of the Wadi Tuban Aquifer which supplies water to Greater Aden and irrigation works in the Tuban Delta. This study is expected to be completed by May 1981. The proposed project includes a water management study of the Wadi Bana Aquifer which has been identified as the next supply source for Greater Aden. 27. The Ministry of Agriculture manages all water resources in the country. A national authority, the Public Water Corporation (PWC), is respon- sible for the planning, design, construction and operation of public water supply systems in PDRY. Because of the climatic conditions and low and irregular rainfall, agriculture in PDRY is dependent on irrigation with groundwater and seasonal floods. Given its objective of bringing additional land under cultivation, the Ministry of Agriculture has concentrated its efforts on providing sufficient water for agricultural use. But the increas- ingly larger claim by the agricultural sector on the scarce groundwater has resulted in declining quantity and quality available for urban use and in the overexploitation of the aquifers. This problem has reached an alarming 1/ In addition, $16.0 million is to be obtained for the Second Fisheries Development project (CR. 932-YDR). -9 - proportion in Wadi Tuban which supplies potable water to Greater Aden, and which will be rapidly depleted unless effective measures are taken soon to share the resources between urban and agricultural uses. Recognizing this problem, the Government recently set up a Water Committee whose functions are to regulate the collection and allocation of water resources, and to establish usage priorities. This Committee is made up of representatives of the Ministry of Agriculture, the Ministry of Planning and PWC. The Association is assisting the Committee in preparing a work agenda and a water code for the country. Public Water Corporation 28. The Public Water Corporation (PWC) was created in 1970 by Public Law No. 19 to replace the Aden Water Authority. The latter was responsible during the British protectorate for providing public water supply services which existed only in Greater Aden and Mukalla. PWC is an autonomous public enter- prise which operates under the tutelage of the Prime Minister's office and functions as a commercial undertaking. In addition to Greater Aden, PWC provides water supply services in nine other locations which contribute less than 20 percent of its revenues. A Board of eight members, chaired by the General Manager, manages PWC's operations. Six members of the board are employees of PWC, representing various departments in the corporation and two members are representatives of the Ministries of Planning and of Finance. However, the Government exercises strict control over the corporation's activities. It appoints the General Manager and other departmental chiefs and also approves PWC's operational budgets, investment program, tariff levels and borrowings. As a result of a study carried out by consultants financed under the Water Supply Engineering Credit (S-21-YDR) (para. 371, certain revisions have been proposed to PWC's organizational structure. PWC's management has approved the revised structure which would be implemented gradually as staff for the proposed management positions become available. Service Levels 29. PDRY's estimated population of 1.8 million (mid-1978) is one-third urban and two-thirds rural including nomads. Of the estimated 600,000 urban population, almost half is concentrated in Greater Aden, the nation's capital and largest agglomeration. The second largest city Mukalla has a population of about 55,000. The remaining urban population is distributed in cities with less than 10,000 people. Of the approximately 1.2 million rural population, about half resides in scattered places that are not large enough to warrant the installation of public utilities and would have to continue to rely on private installations for its water supply. Given this population distribu- tion, it appears that about two-thirds of the total population comprising all those who live in urban areas and about half of those in rural areas could be served by public water systems. 30. Based on recent data provided by PWC, it is estimated that about 47 percent of the population that could be served by public systems already has access to them. However, only 20 percent of the people served are supplied through direct service lines. About 60 percent of the urban population is served by public systems, while only 20 percent of the rural population is - 10 - provided with such services. In addition to Greater Aden, public water supply systems exist in nine towns along the coast and in the interior: Mukalla, Ghail Bawazir, Shihr, Lahej, Jaar, Zinjibar, Dhala, Nisab and Saber. Most of the population living in the inner limits of these towns have house connec- tions; but public supply through standpipes is very common in the outskirts where the absence of sewerage make individual supply undesirable. 31. The current per capita consumption is very low due to supply short- ages and is inadequate for the harsh dry climate prevailing in PDRY. It is estimated that the average household in Greater Aden consumes less than 18 m3/month (less than half of the average consumption observed in countries with similar climate). The quality and safety of water served in Greater Aden and the interior towns are considered satisfactory. The same cannot be said of the rural areas where open wells and ponds are still being used for supply. Villagers living in remote areas must still spend substantial time to reach the nearest watering point to fill a few goat skins. Local Councils which report to the Ministry of Local Governments are responsible for providing basic services including water supply to rural areas. With PWC and the Ministry of Agriculture's assistance, the Local Councils implement and operate a program of well construction in the rural areas, aiming at progressively reducing the distances travelled to fetch water. The UNDP has extended assis- tance for this program by contributing to the installation of about 45 water- ing points in the Northern Desert. 32. Collection and disposal of solid and liquid wastes in PDRY are the responsibility of municipal authorities. Only five of the eight towns forming Grea;er Aden -re at present sewered. The population in other parts of the country uses septi.c tanks, dry pits, and in some cases relies on night soil collection. Sewerage charges are not levied in the towns provided with such services. Constraints to Sector Development 33. The lack of adequate financial resources is a major constraint to an accelerated development of the sector. Because of lack of funds and the obvious needs of the country, the Government has until now given priority to the development of agriculture and transportation. Between 1968 and 1978 investments in potable water supply amounted to only $14 million (about $9 per capita), and were mostly financed by government funds. At the same time PWC has not been able to generate sufficient funds from its operations to cover its operating and maintenance expenses, mainly because of both low tariffs and the small percentage of population served outside of Greater Aden. The Government had in the past sought to charge low water rates, due to the low income levels in the country and the social character of water supply services. Water tariffs which average $0.16/m3 in Aden and about $0.45/m3 in other towns (compared to $1.26/m3 in Yemen Arab Republic, and $0.80/m3 in Jordan), have remained unchanged in the last ten years. 34. Another major constraint to the sector development is the scarcity of convenient water sources, which are already extensively exploited for agriculture. This situation is further compounded by the remote and unfavor- able location of the urban centers from the major aquifers. As examples, - ii - Greater Aden is located at more than 50 kms from the Wadi Bana Aquifer, a possible supply source for the metropolitan area; waters from the Wadi Bana Aquifer and the Wadi Hadramout Aquifer must be elevated more than 1,200 meters to reach urban settlements in the high plateaux. 35. A third constraint stems from the present population distribution in the country. Most of the agglomerated population of 1.2 million is dis- tributed in small towns, for which convenient water sources are difficult to find and high per capita investments are required. There are only two agglomerations with sizeable populations: Greater Aden with 290,000 inhab- itants and Mukalla with 55,000. 36. Finally, a fourth issue related to the sector development is the acute shortage of adequately qualified personnel. The staff who presently manages PWC is young, inexperienced and insufficient in number for the entire country. There are only five engineers in PWC, but no graduate accountants or administrators. PWC's management weakness is further compounded by the Gov- ernment's excessive control of its operations and the absence of any require- ments to achieve given financial goals. Sector Development Strategy and Program 37. As a first step in assisting with the improvement of the water supply situation in PDRY, the Association provided a credit of $1.2 million (S-21-YDR) in June 1978 to help finance a Water Supply Engineering and Tech- nical Assistance project, whose objectives were to formulate a phased program of works to meet long-term urban water needs in Greater Aden, Mukalla and Laboos. The Association also emphasized the need for the Government to reorganize PWC and to plan more comprehensively the use of the country's scarce water resources. The engineering project has now been completed and the requested work programs established for the above mentioned locations. 38. Based on the recommendations of the engineering study and the urgent need to save the fast deteriorating Aden system, the Government has decided to give its first priority to Greater Aden where the infrastructure to some extent already exists and where almost half of the urban population resides. Moreover, it is essential that rehabilitation of the Aden system begin soon to prevent it from deteriorating to a level beyond which rehabilitation might prove impossible. Depending on the availability of financial resources, the Government also intends to improve the water supply systems in the second largest city, Mukalla, and in other urban locations. Parallel to that, it will try to pursue its program of well construction in the rural areas. To meet the 1990 water demand, it is estimated that the Government and PWC need to invest (at mid-1979 prices) about $60 million in water supply works in Greater Aden, $17 million in Mukalla and $28 million in the remaining towns. These are indeed large investments that the Government might not be able to make without commensurate external financial assistance. 39. One of the Association's major objectives in formulating the pro- posed project is to increase awareness among other international aid agencies of the sector's plight and to encourage them into providing badly needed financial assistance to PDRY for the sector's development. There is no doubt - 12 - that the Government has neither the financial means nor the technical capab- ility to carry out such development by itself. The proposed IDA financing would assist the Government in achieving its first logical priority objective of providing decent water supply services in the nation's capital and largest city, and in reducing the institutional constraints which have hampered the sector development, by training PWC's staff, setting out a model ror optimum use of water resources, and increasing the sector's financial resources through the implementation of more effective tariffs. PART IV - THE PROJECT 40. The proposed development credit of $13.2 million would be the Association's second operation in the sector. The project was identified during the appraisal of the Technical Assistance Project (Credit S-21-YDR) (para. 37), which included funds for its preparation. A French engineering consulting firm, SOGREAH, submitted a water supply master plan for Greater Aden in September 1979, on the basis of which the project was appraised in November 1979. Negotiations were held in Washington in April 1980. The Yemeni delegation was headed by Dr. Farag Bin Ghanem, the Minister of Planning, and included representatives of PWC. A Staff Appraisal Report entitled "Greater Aden Water Supply Project", No. 2910a, dated May 7, 1980, is being distributed to the Executive Directors separately. A map of the project area and a layout of the proposed water supply facilities are attached. Project Concept and Objectives 41. Greater Aden is presently supplied with water from three well fields known as Sheikh Othman, Bir Nasir and Bir Ahmed, located in the Wadi Tuban Delta. The total maximum available production of 570 1/sec is about 30 percent lower than the present estimated demand of 820 1/sec and cannot be increased, as the Wadi Tuban Aquifer is already overexploited at the current rate of extraction for domestic, industrial and agricultural uses. Any additional mining of the aquifer would only result in faster degradation of the water quality with intrusion of sea water in the aquifer. Thus,to meet water requirements in Greater Aden, new supply sources should be identified. 42. The proposed project constitutes the first construction stage of a long-term water supply master plan for Greater Aden, involving the collection and transport of water from a new source, the Wadi Bana Aquifer, which among various feasible alternatives, including flash distillation of sea water and reverse osmosis of brackish water, has been identified as the least-cost solution to increase supply to Greater Aden. The objective of this stage is to make up the current production deficit and to provide additional supply to meet the maximum demand of 1000 1/sec up to 1987. The proposed project also calls for the expansion of the distribution network into the newly developed districts of Aden and the rehabilitation of the existing system. - 13 - 43. On the institutional side, expert assistance and staff training would be provided to PWC to help in strengthening management capability. Management experts will in particular assist PWC in implementing a new orga- nization structure and improved administrative procedures that management consultants have designed for PWC under the Association's Technical Assistance Project (Credit S-21-YDR). Project Description 44. The project includes: Part A (i) the construction of wells in Wadi Bana to yield a maximum flow of 430 1/sec.; (ii) a program of immediate improvements in the existing system, and the supply of operational equipment; (iii) final design of the well field in Wadi Bana and transmission facilities to Greater Aden, and a management study of the Wadi Bana Aquifer to assess the potential capacity of the water resources and to determine their allocation between urban supply and irrigation; (iv) management assistance and training of PWC's staffs; and (v) refinancing of the water supply engineering and technical assis- tance credit (S-21-YDR). Part B (a) equipping the Wadi Bana Well Field including the installation of disinfection equipment and standby generators; (b) the supply and laying of a 32-in transmission pipeline between the new well field and the existing facilities at Bir Nasir, and the construction of a service track along this pipeline; and (c) consulting services for construction supervision. Part C (i) the construction of reservoirs in Wadi Bana and Bir Nasir, and the installation of disinfection equipment and pipe connections at Bir Nasir; (ii) the supply and laying of a 32-in pipeline between Bir Nasir and Sheikh Othman; - 14 - (iii) improvement and expansion of the distribution network, including the installation of a new 12-in and 10-in pipeline to supply water to ships at the Aden Port; and (iv) consulting services for construction supervision. 45. As part of the project, a unit will be set up in PWC to be in charge of repairing house plumbing systems which are now defective and leaky, particu- larly in flats that were built prior to the country's independence in 1967. The Government now owns more than 90 percent of the housing in PDRY. Some breakdown repairs have been made in such housing by tenants but with no significant improvement. Under current legislation, PWC is authorized to enter premises, inspect their plumbing systems for possible leaks and waste, and summon owners or tenants to make necessary repairs. The Government has decided that repair charges, in all cases whether owner or tenant occupied, will be borne by the occupants. Plumbers needed for the repair task will be trained under the proposed project (para. 52). 46. The objective of the management study of water resources in Wadi Bana (para. 44) is to determine the long-term water balance in the aquifer, the permissible level of water extraction and the optimum allocation of these resources between domestic, industrial and agricultural uses. Terms of reference for this study have been prepared by the Association in cooperation with PWC. Project Execution 47. Implementation of Part A (para. 44) of the project started in January 1980 with the final design of the Wadi Bana Facilities. This design is being carried out by the same consultants who prepared the master plan for Greater Aden. The execution of Parts B and C would begin during the second half of 1981. PWC would be responsible for project execution. Since its staff has limited construction experience and consequently needs assistance, PWC has agreed to employ by January 1, 1981 qualified engineering experts under terms and conditions satisfactory to the Association (Project Agreement, Section 2.02). Except for the Wadi Bana Facilities, bid documents are avail- able for the other project items. Bidding preparation for the Wadi Bana Facilities is included in the contract for final design of the production system in Wadi Bana. The construction of the new production facilities is scheduled to be completed by the end of 1983. The expansion program of the distribution network would be completed in 1984. Project Costs and Financing 48. The estimated total cost of the project, exclusive of duties and taxes which are not levied on development projects in PDRY, is $39.2 million, with a foreign exchange component of $34.7 million or 88.5 percent of the total cost. Major items of expenditures are $3.1 million for the Wadi Banga Well Field; $13.5 million for the Wadi Bana-Bir Nasir Transmission Pipelinel $5.8 million for distribution and improvement works; $1.7 million for studies, management assistance and staff training; $1.6 million for reservoirs and - 15 - equipment; $1.2 million for construction supervision; $3.6 million for physical contingencies; $7.5 million for price escalation; and $1.2 million to refinance the engineering credit (S-21-YDR) (para. 37). An estimated 328 man-months of consulting services is required for the final design of the Wadi Bana Facilities, management assistance to PWC, staff training, the management study of water resources in Wadi Bana and construction supervision of the proposed works, at an average cost of $8,200 per man-month including salary, travel and subsistence. 49. The proposed IDA credit of $13.2 million (34 percent of total project cost) would cover the foreign exchange cost of Parts A and C of the project, 34 percent of the foreign exchange costs of construction supervision and the amount of the engineering credit. The Arab Fund for Economic and Social Development and the OPEC Special Fund have expressed interest in financing respectively $12 million and $4 million of the foreign exchange cost of Part B of the project including 66 percent of the construction supervision costs. Further, the Government has requested a loan of $5.5 million from the Islamic Development Bank to cover the remaining portion of the foreign cost of Part B. Overall, the additional external financing would cover about 55 percent of the total project cost. The remaining 11 percent or the entire local cost would be financed by the Government. As expenditures have already been incurred for the project engineering design and the drilling of test wells in Wadi Bana, it is proposed that an amount not exceeding $550,000 be financed under the credit retroactively to cover expenditures made after January 1, 1980 but before the date of the signing of the development credit agreement. Onlending Arrangements 50. The Government would onlend $12 million from the proceeds of the proposed credit to PWC, at an interest rate of 8.25 percent for a term of 20 years including a 5-year grace period (Development Credit Agreement, Section 3.01(c)). It is also expected, pending further discussions with the co-financiers, that similar maturity and grace period would be applied for their loans, but at lower rates. The foreign exchange risk on the credit and loans would be borne by the Government. It is estimated that the resulting average rate of the overall lending for the project would be about 4.6 percent per annum. The government contribution of $4.5 million equivalent would be passed to PWC as equity (Development Credit Agreement, Section 3.01(b)), which is necessary at this stage of PWC's development to help build its capital structure. Execution of a subsidiary loan agreement between the Government and PWC, with terms and conditions satisfactory to the Association, would be a condition of effectiveness of the proposed IDA credit (Development Credit Agreement, Section 5.01(a)). Management Assistance and Staff Training 51. Like other corporations in PDRY, PWC suffers from a shortage of qualified experienced staff. There are only five young graduate civil engineers in the Technical Department and no graduates in the Administrative and Finance Department. The Government and PWC recognize this staff con- straint and have agreed to appoint, by not later than January 1, 1981, three - 16 - advisors in the fields of water supply planning and engineering, administra- tion and finance, and operation and maintenance of water supply systems, to assist the corporation in day-to-day management and operation for a period of about three years (Project Agreement, Section 3.02(a)). 52. In addition to the above management assistance, an intensive train- ing of PWC staff is proposed to be carried out in the years 1981 through 1983. Some 200 staff members or about one-fourth of the personnel would participate in the training program which would include seminars and discussions on manage- ment techniques in general and operation of water supply systems in particular, in-service training by consultants, and participation in selected specialized courses abroad. The seminars would be prepared and given by consultants. The special training in house plumbing (para. 45) would be given by the technical staff of PWC, with the assistance of a consultant. The foreign exchange cost of the training program would be financed by the IDA credit. PWC has agreed to finalize and furnish to the Association for its comments the training program for its staff by December 31, 1980 and thereafter carry out such a program with the assistance of consultants on terms and conditions satisfactory to the Association (Project Agreement, Section 3.02(b)). Procurement 53. Except for the well construction and' the purchase of materials and equipment for the improvement program, all contracts financed by the Associa- tion will be awarded following international competitive bidding, in accord- ance with the World Bank's Guidelines for Procurement. The contract for well construction has been given to a government agency following receipt of quotations from international drillers, which were twice the price asked by this agency. Materials and equipment needed for the improvement program, costing less than $15,000 each and aggregating to not more than $1.2 million, would be procured through quotations from at least four suppliers in member countries of the Bank and Switzerland. Items in Part B of the project financed by the co-financiers would be procured in accordance with their own guidelines. The construction supervision contract would be financed by the Association and the co-financiers. Disbursement 54. The credit would be disbursed for items of Parts A and C of the project against: (i) the full CIF cost of all direct imports; (ii) 57 percent of total expenditures for civil works construction; (iii) 100 percent of foreign expenditures for consulting services other than construction super- vision; and (iv) 34 percent of foreign expenditures for construction supervi- sion, which represents the prorata project costs to be financed by the Association. Disbursements to refinance the engineering credit (S-21-YDR) would be against 100 percent of foreign expenditures. The first disbursements for Part A of the project are scheduled for 1980, while those for Parts B and C are expected in the second half of 1981. Part A of the project is needed in preparation of Parts B and C and will bring substantial benefits to PWC. It is estimated that the rehabilitation works, included in this part of the project, would result in recovering 5 to 8 percent of the volumes of water produced, - 17 - which are now lost through the system. The Government has indicated that it expects the commitment of the co-financing funds by the end of the first quarter of 1981 and their disbursement by not later than July 1981. 55. Accordingly, it is proposed that upon effectiveness of the credit, disbursement be allowed for Part A of the project. Disbursement for Part C should be conditional upon the effectiveness of the co-financing loan agree- ments (Development Credit Agreement, Schedule 1, para. 3). Provision for cross-suspension and cross-cancellation with these loans have also been set forth in Section 4.01 of the Development Credit Agreement. Past Finances 56. PWC's financial performance during the last three years has been poor. The corporation recorded in 1977 a deficit of about $270,000, which more than tripled in 1979. The consolidated operating ratio (operating expenses including depreciation as a percentage of total revenues) increased from 111 percent in 1977 to 134 percent in 1979, as the operating expenses continued to rise during that period, while the revenues remained unchanged. However, PWC operations in Greater Aden during that period, which accounted for 80 percent of the total revenues, showed a profit which nevertheless was not enough to cover the deficit of the branches outside Aden. During the same period, the corporation's effectiveness in revenue collection showed no improvement. As of June 30, 1979, accounts receivable from private customers and government agencies stood at seven months of water sales. To lower receivables from private customers, PWC has promised to strengthen its collection procedures by disconnecting unpaid services maore rapidly. With regard to the public agencies, the Government has agreed that it will take all actions necessary to ensure that beginning with January 1, 1982, all its public entities will make full payment for water consumed to PWC within three months of the billing date (Development Credit Agreement, Section 3.02(a)). Tariffs 57. Presently a single rate of $0.16/m3 is applied to all sales in Greater Aden, irrespective of the type of usage, volume used and class of customers. Rate schedules distinguishing classes of consumption are applied in the provincial towns where the domestic tariffs are much higher than in Aden. The present tariff system in Greater Aden is unfair to low-income consumers, who by paying the same rate actually subsidize large domestic customers and other users, as only the latter are responsible for extra capacity costs incurred by PWC. 58. To correct this inequitable situation, a tariff schedule which takes into account the water usage and costs to meet peak demand of special users is proposed. The new rate structure would have four classes of customers (domestic, industrial/commercial, public and shipping), and three usage blocks within the domestic class. Under the proposed schedule the tariff for large domestic consumption and industrial and public usage would be twice that of low domestic consumers; the tariff for shipping would be three times higher. - 18 - Future Performance 59. Substantial tariff increases are needed to eliminate PWC's operating deficit. At this time tariffs can only be increased in Greater Aden and not in the provincial towns where the standard of living is lower and tariff levels are alreaay much higher than in Aden. However, Greater Aden is already subsidizing the provincial towns and it is not realistic to expect tariff to be increased immediately by the full amount needed. Nevertheless, it is appropriate to expect the corporation to cover at least its full operating and maintenance costs. The Government and PWC have agreed that as a minimum financial performance, PWC,on a consolidated basis, should be able, through charges for its services, to secure a revenue sufficient to cover not less than its operating and maintenance costs, including depreciation, interest and (to the extent not covered by depreciation) PWC's obligations for amortization of loan debts (Development Credit Agreement, Section 3.02(b); Project Agree- ment, Section 4.04). 60. At negotiations, PWC advised that it expects to increase the average tariff in Greater Aden to $0.38/m3, which should be sufficient through the end of 1984 to achieve at least the above performance level. For such an average, low-income consumers would be charged about $0.23/m3, or about 45 percent increase over the current rate of $0.16/m3, and water supply services would account for less than 3 percent of their income, below the internationally accepted norm of 5 percent. With the proposed tariff PWC is expected to move from an operating deficit in 1979 to an operating surplus in 1982 which would result in a -:eturn of about 8 percent on its net fixed assets in operation. The implemencation of a tariff structure acceptable to the Association and of an average tariff suf.icient to enable PWC to meet its financial obligations would be a condition of effectiveness of the proposed credit (Development Credit Agreement, Section 5.01(b)). Other technical and financial performance indicators relating to the efficient operation and management of the water supply system will also be monitored by PWC during project implementation and five years thereafter and appropriate actions taken to achieve an agreed upon level of performance (Project Agreement, Section 3.03(b)). Justification 61. The need for improving and increasing water supply to Greater Aden is critical. The current supply is 30 percent short of the demand and the system itself is deteriorating rapidly and will soon reach a level beyond which its rehabilitation might become impossible. The proposed project aims at rehabilitating the system and increasing water production to the level required to eliminate the current supply deficit and to meet the 1987 demand. Moreover, the project would help improve water supply services in the develop- ing and poor districts of Greater Aden, where the lowest income people live and where the Government is planning future industrial development. These people are now inadequately served by standpipes. The proposed distribution works iould be executed in these districts to allow residents there to connect their premises to the public network. 62. The proposed project is the least-cost alternative to provide urgently needed additional potable water supply in the country's major urban - 19 - agglomeration. If the projected water sales accruing from the proposed project, and those maintained by halting the system's deterioration, which otherwise would be lost, both based on the proposed average tariff, are taken as benefits, the internal rate of return on the proposed investments would be about 11 percent. This is a minimum measure of economic benefits from the proposed investments. A more meaningful economic rate of return is difficult to calculate, but is certainly much higher, in view of the unquantifiable health and environmental benefits which accompany improved water supply. Since no consumers surplus is taken into account in the calculation of the rate of return it understates the consumers' willingness to pay for PWC's water services. The rate of return is significantly sensitive to the levels of water sales and to substantial increases in capital investments. But even in the unlikely event of a 10 percent decrease in water sales and a 20 percent increase in investment costs, the rate of return would be about 7 percent, which would be still acceptable considering the social character of the project. Environmental Impact of the Project 63. Provision of safe water in adequate quantity to large segments of the urban poor in Greater Aden should help to reduce the incidence of waterborne diseases, provide better living conditions in the metropolitan area and foster its economic growth. It should be noted that as a result of the project, the volume of wastewaters in Greater Aden would increase. But the existing sewer system has the capacity to carry the increased volume and no sewerage works appear to be necessary in the immediate future. Risks 64. There are some risks involved in the execution of the proposed project and in attaining the project goals. Similar work has not previously been executed in PDRY, and PWC's staff is young and inexperienced. Slow payment by public agencies for water charges might have an adverse impact on PWC's financial condition. However, the measures proposed to be taken in the course of project execution, and the provisions of the credit and project agreements, such as (i) the services of consultants for management assistance and construction supervision; (ii) the proposed training of PWC's staff; (iii) the Government's undertaking to ensure timely payment for water consumed by public agencies; and (iv) the Association's monitoring of PWC's key performance indicators, should minimize the project risks. The risk associated with co-financing not materializing is considered low. PART V - LEGAL INSTRUMENTS AND AUTHORITY 65. The draft Development Credit Agreement between the People's Democratic Republic of Yemen and the Association, the draft Project Agreement between the Association and the Public Water Corporation (PWC), and the Recommendation of - 20 - the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 66. Features of special interest in the Development Credit Agreement and the Project Agreement are summarized in Section III of Annex IlI. Section 5.01 of the draft Development Credit Agreement sets forth the following additional conditions of effectiveness: (i) the execution of a subsidiary loan agreement between the Government and PWC; and (ii) the implementation in Greater Aden of a tariff structure acceptable to the Association and of an average tariff sufficient for PWC to meet its financial obligations. 67. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 68. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments May 15, 1980 Washington D.C. - 21 - ANNEX I Page 1 of 5 TABLE 3A YEMEN PDR - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AyERAGES LADAREA (THOUSAND SQ. KM.) YEEN PDR - MOST RECENT ESTIMATE ) TOTAL 333.0 SAME SA ME NEXT 'AIEGHR AGRICULTURAL 92.3 MDST RECENT GEOGRAPHIC INCOME INCOME 1960 lb 1970 /b ESTIMATE lb REGION !c GROUP /d GROUP /e GNP PER CAPITA (USS) .. .. 42O.O 1532.5 209.6 .67.5 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALEXT) 299.0 463.0 324.0 838.1 83.9 262.1 POPULATION ANt VITAL STATISTICS POPULATION XID-YEAR (MILLIONS) 1.3 1.5 1.7 URBAN POPULATION (PERCENT OF TOTAL) 28.0 32.1 34.3 49.0 16.2 24.2 POPULATION PROJECT-ONS POPULATION IN TEAR 2000 (MILLIONS) 3.0 STATIONARY POPULATION (NILLIONS) 7.0 YEAR STATIONARY POPULATION IS REACHED 2125 POPULATION DENSITY PER SQ. 101. 4.0 4.5 5.0 19.9 49.4 45.3 PER SQ. Kti. AGRICULTURAL LAND 14.0 16.0 18.0 99.0 252.0 149.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 43.3 44.1 45.0 45.6 43.1 45.2 15-64 YRS. 54.0 53.2 52.0 51.4 53.2 51.9 65 YRS. AND ABOVE 2.7 2.7 3.0 2.8 3.0 2.8 POPULATION GROWTH RATE (PERCENT) TOTAL 1.9 1.9/f 1.9/f 3.0 2.4 2.7 URBAN *- 3.2 3.2 5.2 4.6 4.3 CRuDE BIRTH RATE (PER TdOUSAND) 50.0 49.0 49.0 43.7 42.4 39.4 CRUDE DEATH RATE (PER THOUSAND) 29.0 24.0 19.0 13.5 15.9 11.7 GROSS REPRODUCTION RATE .. 3.5 3.5 3.2 2.9 2.7 FA.MILY PLANNING ACCEPTORS. ANNUAL (THOUSANDS) .. .. .. USERS (PERCENT OP MARRIED WOMEN) .. .. .. 12.2 13.2 POOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71.100) 94.9 92.0 102.0 90.8 98.2 99.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 84.0 84.0 84.0 99.0 93.3 94.7 PROTEINS (GRAMS PER DAY) 56.3 56.0 57.0 63.6 52.1 54.3 OF WHICH ANIMAL AND PULSE .. 37.011 .. 16.0 13.6 17.4 CHILD (AGES 1-4) MORTALITY RATE 5.0 38.0 31.0 15.9 18.5 11.4 HEALTH LIFE EXPECTANCY AT BIRTK (YEARS) 36.0 43.0 47.0 53.8 49.3 54.7 INFANT MORTALITY RATE (PER THOUSAND) .. .. .. .. 105.4 68.1 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 24.0 56.4 26.3 34.4 URBAN .. .. 30.0 83.4 58.5 57.9 RURAL *- *- 5.0 34.3 15.8 21.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. .. .. 59.1 16.0 40.8 URBAN .. .. .. 78.2 65.1 71.3 RURAL .. .. .. 26.4 3.5 27.7 POPULATION PER PHYSICIAN .. 32380.0 9210.0 3677.0 11396.4 6799.4 POPULATION PER NURSING PERSON .. .. 1650.0 1730.6 5552.4 1522.1 POPULATION PER HOSPITAL BED TOTAL *- 1980.0 860.0 577.0 1417.1 726.5 URBAN .. .. .. .. 197.3 272.7 RURAL .. .. .. .. 2445.9 1404.4 ADMISSIONS PER HOSPITAL BED .. .. .. 21.8 24.8 27.5 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. .. 3.8 5.3 5.4 URBAN .. .. .. 5.5 4.9 5.1 RURAL .. .. .. 6.0 5.4 5.5 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. .. URBAN .. .. .. RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. 22.0/h 45.1 22.5 28.1 URBAN .. .. .. 67.9 17.8 45.1 RURAL .. .. 1.6/h .. .. 9.9 ANNEX I - 22 - Page 2 Of 5 TABLE 3A YEMEN PDR - SOCIAL INDICATORS DATA SHEET YZMEN ?DR REFZRENCE GROUPS (ADJUS-ZD AVJRAGES - MOST RECENT ESTIMATE) - SAME SAM.E NEXT HIGHER .YOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b EST7IMATE /b ZEGION /c GROUP id GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMtRY: -OTAL 13.U 61.0 78.0 85.0 63.3 82.7 MALE 20.0 96.0 107.0 103.7 79.1 87.3 FEMALE 5.0 24.0 48.0 66.0 48.4 75.8 SECONDARY TOTAL 5.0 10.0 19.0 27.6 16.7 21.4 M.ALE 8.0 15.0 30.0 39.2 22.1 33.0 FEMALE 2.0 4.0 8.0 20.8 10.2 15.5 VOCATIONAL ENROL. (7 OF SECONDARY) 5.0 3.0 2.0 4.3 5.6 9.8 PUPIL-TEACHER RATIO PRIMARY 29.0 31.0 30.0 32.6 61.0 34.1 SECONDARY 21.0 20.0 23.0 23.4 21.7 Z3.4 ADULT LITERACY RATE (PERCENT) .. .. 27.1/1 41.4 31.2 54.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 9.0 7.0 6.9 16.7 2.8 9.3 RADIO RECEIVERS PER THOUSAND POPULATION 52.0 104.0 .. 147.9 27.2 76.9 rV RECEIVERS PER THOUSAND POPULATION .. 16.0 18.0 36.0 2.4 13.5 NEWSPAPER ("DAILY GENERAL INTEPREST") CIRCULATION PER THOUSAND POPULATION .. 1.0 .. 17.9 5.3 18.3 CINEMA ANNUAL ATTENDANCE PER CAPITA .. 2.4 .. 2.9 1.1 2.5 LABOR FORCE T0TAL LABOR FORCE (THOUSANDS) 300.0 310.0 416.0 FEMALE (PERCENT) 4.2 4.8 5.0 8.6 24.8 29.2 AGRICULTURE (PERCENT) 70.5 64.7 62.0 43.0 69.4 62.7 INDUSTRY (PERCENT) 14.6 17.6 20.0 23.7 10.0 11.9 PARTICIPATION RATE (PERCENT) TOTAL 28.2 27.4 26.6 26.7 36.9 37.1 MALE 53.4 51.5 49.8 46.4 52.4 48.B FEMALE 2.3 2.7 2.7 5.1 18.0 20.4 ECONOMIC DEPENDENCY RATIO 2.3 2.1 1.9 1.8 1.2 1.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. .. .. 21.4 .. 15.2 HIGHEST 20 PZRCENT OF ROUSEHOLDS .. .. .. 48.6 *- 48.2 LOWEST 20 PERCENT OF HOUSEROLDS .. .. .. 5.3 .. 6.3 LOWEST 40 PERCE2NT OF HOUSEHOLDS .. .. .. 15.0 .. 16.3 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) UR8AN .. .. .. 201.3 99.2 241.3 RURAL .. .. 140.0 134.2 78.9 136.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 90.0 288.6 91.9 179.7 RURAL .. .. 87.0 170.0 54.8 103.7 ESTIMATED POPtLATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. .. 22.9 44.1 24.8 RURAL .. .. 20.0 31.2 53.9 37.3 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-.eighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators dopends on availabiliry of data and is not uniform. /b Unless otherrise noted, data for 1960 refer to any year bet.een 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, beteen 1974 and 1977. /c North Africa & Middle East; /d Lov Income (S280 or less per capita, 1976); /e Lower Middle Income ($281-550 per capita, 1976); /f Due to migration to neighboring countries population sro-th rate is lower than rate of natural increase; /R Av. 1964-66; /h 2 population; /i ages 10 and over. Mont Recent Estimate of GNP per capita is for 1978. August. 1979 -23- ANNEX I -Page 3of 5 DEFINITIONS OF SOCIAL INDICATORS Nots; The adjusted group averages for each indicator are pnpolatlos-wighted geometric means, -cluding the otr-ee values of th indicator and the o populaced cun.try in each _roup. lverasg of .u. ries eases th indicators depends a uvail aility of data sod -s not unifo-o. Due to .lck of data., group ave rags for Capital Surplus Oil Experters and indicators of acc ss to water and ecrets dioprsal, ho-sing, ijcoe distribution and poverty are oipyl populartln-weighted geometric sear aithout tha saclusion of strme. values. LAND AREA (thousaad sq. kc) Paptlatior per hospital hed - natal, urbua. and rural - Popul-tios (total. Total - Totol surfare area tocprising land area and inland caters. urban, and rural) divided by their rospective naber of hospital beds Agri-ltural - Mont retest entinate of agriaitureal area used temporarily av-ilabl in publio and prioate general und specialized hospital and re- or permanently for crops, pa-toree, markt nd kitobee gurdees or to habilit.tioe ent-es. Hospitals are estublishments permasootla stuffed by lie faliaw. at least one physician. Establishme.nt previding poincipally custodial iara are oritclded. fRcal hospitals, ho ver, iciude health and mcd,- GlO PEI CAPITA (Lol -I GcP par napira ertianes at current machat p-t1as, cal cecters rat pecranently staffed by a physici- (but by a adinl as- calc.losed by sace conver-ionts hd as W.orld Bash atias (1975-77 hoste; esise nc, nurs, =idtife, -tc.) ehiih offer i-paleti- -c-coeda--oacd 1960, 1970, and 1977 data. provid. a limited range of =ed-cul facilitis. Odmnsatocs Per hoepirel had - Tocal -ombsr of udmindoens n or di-chirgac ENERGY CONSUMPTION PER CAPITA - Annual conssurption of cremerciul esergy free bosyitals divided by the euhbr of beds. (coal and lignite, petrlesi, natural gas and hydre-, nuclear and geo- thermal rielcetrityl Isn kilgrams of cai equivalent per capita. hOUSING Average sie of household (persons per household) - tocal,_urban, ad rural - POPULATION A.NI VITAL STATISTIC5 A household ce-osits vf a group of individuals rho shore living quartets Total popsatilor, mid-rear (millEaes - As of July 1; if sot vailahle., and their eati reasi. A boarder or loda rnay or ciay not ho isci,de cl .vecage of tea e nd-pear esttmates; 1960, 1970, and 1977 dana. the hoaseld foe st-atstical purposes b S atstical defo lons of house- Urban pupulatiat (cercent ef totul) - Ratio of urban tn total pepuIw- hold v-vy. rio.; differen defisitions of urbee ar. sap asffes -copa-ubiliey hoeraemsueber of persons er roor- total, urbun, and curd - ucerasa nu=- of data ame=g -oustries. bar of persors per roe=to all, urban, and rural oc upied carvertional Pocuaatton dansity dellinge, respecrively. -nvell iegs ec lud n.o-percareent srucrures srd Pcr sq. kh. - pid-year population pear squar kilometr (100 hectares) .nstoupied parts. Of toral ara. Acuess to elsctricity (pfrecet of dwelliegs) - rta.t urbho_ and rural - Per nq. kh. agriculture land - Cemputed as abov for agriecltural land Conveetional dwellings with electricity is livine quarters as perceotage only. of total, urban, and rual dellings resp-ctivelv. Poue-ation ae structure (p Ccest) - Childres (0-14 years), esrhleg-ag (15-64 years;, aed retired (65 years and over) as percentages of mid- EUCATION year p_ palation. Adjusted enrull=ent atios Population arowth eats (cerent) - total. and urban - CoIpound anneal Prinary school - total, and female - Total and female nroll=ent of u1l ageu gr-ot ratrs of total and urhas mid-year pepulutiaca for 1950-60, as the peiherey evel as percentages of cetpecoiveit priest7y aho-l age 1960-70, and 1970-75. populations;s arally includes children agad 6-11 tes hut adjusted tor Crude birth rate (ler sthessed) - Ana-l live births pee thossand of differeet le-gths of primary educotion; fee countci-e ith -uo -vertul edu- mid-year popalatioe; nee-year arithmetic averages ending is 1960 -nd canios esrelleet mar eceed 100 perce--t sice sacs popils arc beloa cr 1970 wed five-year average ending is 1975 far meat recent estimate. abov rho official school age. _usde death rate (per thousand) - Ansual deaths per thousaad of mid- Secondary school - totul end fenale - Coeputed as above; -scoodaro doca- year population; tee-year arithmetic averages ending in 1960 and 1970 tion requiree at least fese years of approved pricary icottiutian; pro- and five-pear average ending is 1917 far nest rarest estimate, video generel vecattoal, or teacher training insrruct-os tar " upuil hross reproduoton rate- Averaga number at daughters a w lmas atll bear usually of 12 to 17 years cf age; correspondence corses Ott ge-erally in her carnal reproductive pertsd if she eaperieuces presect age- ec,Iuded. specific fertility rates; usually five-year averages ending in 1960, Yocational e..cilment (percent of secondary) - Vocational institutions in- 1970, ad 1975. clude `atahicai, industrial, oe other p-eg-acs uhich op-rute -dep-ede-tly faily claneina - acceptors. annua4 Ithussa ds) - Annual ncmber of or as depart.ente of secondary institutions. acapete- of birth-control devices under auspices of national family Pu-ti-tewoher ratto - erte-ey. and secondart- Toeta rude- ts d enolled it planning program. prinary and secondary levels divided by numbars of teachero in thc carte- '..ill planning - users (percent of earied yemen) - Percentage of speeding levels. married woeno of child-hearing age (15-44 years) whe use birth-control Adt- literacy eate (Percent) - Literate edulte (able to read and write) as devices to all married wenr inE same age group. a pere.ntage of total adult populatien aged 15 yours and coer. FOOD AwIE NUTRITION CONSUM5PTION Indes of teed preduo -tos err -spits (1970-1AE) - Index unubee ci par Pessner oars ler thous.nd papulatios) - Passenger cars comprie motor cars napta anoal productien of all food rcmdities. seating less than eight persons; excluden ambulanoce hear and elliro.c Per -wntia suvPir of calories (peereet of oesairee,sntnf - Computed from vehiclas. energy equivale.t of mnt feed supplies available in tountry per a.pita Radio receicere (per theousad pocplattoo) - All types of rececvers irt radio yrr day. Available supplies cempelse d.e..tic productio, imports less broadcasts to general public per thousand of popula i xrludos onlncecsed enports, and chaeges in stck. Net supplies exclude anital feed, seeds, receiers is cr-ntries a-d in years wher reglatrantie of rad,c sets tao it atit!nes used in feed processing, and lasses ei distribotion. RN- effect; data for recent years may not be -orparable siote moot cuc.trien qluiremenro were esnimared by FAO based on physilolgica1 needs for ner- abolished lioensing. eel activity and health considering envirnmentral teeperatuen, body TV receivers (per thousand popclaties) - TV receivers fur broadcast no gerorai -eighto, age end sea distribstiane of popaunion, and allowing 10 per- public per thoussed pepulumian; secludes unlicensed TVreceicers if coun- cast for waste at household level. tries and io years when regisrration tf TV setsownso effeot. fer ouiri surely of erotei (srams eeo day) - Prourn tanest ci par N-sper circulation (ear thousand ppcelas-os) Shise the -arage circola- capita net sapply of food per day. Net supply of foed ia defined we tioe of "daily general interest newspaper"e defioad as a yridic.l pubic- abos-. Requir.ents for a11 countries established by USDA provide for catten devoted primarir to recording genera 1 evs. I Ir i corsidered to a mieimu= allowance of 60 grant of total poitein per day and 20 grams ha daily if it appears at least four ti-esaweak. of animal wad pulse pr-tein, of whibh 10 grums should be animal preoein. finama annual attendanre per oApitper wyar - Based to tht camber of ticketi These standards are lever than these of 75 grams of total prctein and sold during the year, including admlnsio- u to drive-ic cine_at and mobilo 23 grams cf aninal protein as as average fur the esr1d, proposed by units. FAO in the third World F.ed .Sr.ey. Per capita protein suppEy from animal and pulae - Protein supply of food EiMPLOlENT derived from anissl. and pulses he g.seS per day. Tlaln lahar icrce fthoudel - Ecoecauall y acute yocsus, iucludiog aroed Child (ages 1-4) mertaliny rate (per thousand) - Annual deaths per thous- farces and unemployed but e-cluding housewives stud.ts, etc. Def(ni- aed to ge group 1-A years, to children in chia age groue. tiots in var-ous .ou.tries era net c- eparable. PeFale (percent) - Fe..le labor fer.. as perase.t.ae I total laboteros. HEALTH Agricultu-e feercen) - Ltabor forte in far=ing. forustry, hocting and fcsihig Life expectancy at birth (yeers) - Average somber of years of life as percentage of total Eabor force. remaiong ant birth; usuaIly five-year averages ending in 1960, 1970, Industry (Pe_tent) - Labor force In miuing, or.ruct-ti, masia. turiog aid and 1975. electrioity, eater and gas as percentage of total Eahor force. lnfant mertality rate (per thousand) - Annual deaths of infants under P'utioleatias rate (cerceet) - total, sale and female - Tocal, mle and ane yaea =f age per thausaed live hiebte. ema e lahor orr- a. percentaget of their -reyp-ctJI poyofati'ul. cAoees to safe water (sercent of mspblahtia) - total. urban, and rural - these ore ILOIs adiusted perticipetiin rates retr-co1tr.e. Comber of pops (total, urban, and r-al) with .easanable baCess no a truc-ire of toe populotion. nnd rop, time crend. safe wAter supply (includes treated surface waters or untreated but Econorio drerndentc ratio - antio of populat-on und-r 1. urd h5 sod .eve Lc uno-ntasinated water sach as that fr-e protected bereheles. springs., the labor forte is age gecup of 15-64 fteat. and sanitary wells) as percennagee of their rcepective populatioss. In so urban area a public fountain or standpost lassoed not rece INCOME DISTRIBUTtON thac 200 meters from a bhuse may be considered as being within tea- Percentage of private income (both is cash and kind) es-etied by richest 5 sasableaccees of that house. ln rural areas re...sable access would peroen, riohent 2D percent, poorast 20 perent, and poorest 40 percent imply thot the housewife or nembees of ths household de not have to of hbuseholds. spend a disproportionaste part of the day in fetching the family's water needs. POVERTi TARGET GROUPS Acesn tno eceets disP.saI (percent of Peoulatien) - total, urban. and Estimated abselute ceverty income level (US5 pea capita) - utbh and rural - rural - Nber of cpeola (total. urbans and raral) served by oceeta Abseluts poverty i-ose level is thst incme level belov which a inimal disposal as percentages of theicr repes tivs pupalationa. lacceta nserinionally adequate diet plEs essential noo-food cequiremects is eat disposal ea. inclode the eallectiss sed disposal, with or without affordabl. t-eta-eet, of human eacreta sad waste-water by waner-borne 5y5t-c5 Estimated -eIative pove.rt itcore level foil pen -apita) - urban and rural - ar tha use of pit privies and sieilar installations. Relative poverty in-eme level is that income level less thus use-third copulation peer phyeeias - Population divided by eumber of practicing per capita personal iE.coe of the oo.etry. physioiaso qualified free a nedisal aehoal at university leveE. Estimated pgpelanien below peverty income loyal (Deroent) - urbac and rural - Poculatioc per narsing person- Population divided by nehber cf Persest of population (urban wed nrual) who are sithee "abelate pose 0r practicing male and female graduate nurses, prectiEal nusese, and "reltice peor" ohithaver is greater. assistanEt ras... icnei nd Leria Data Division fon cOAlyt and PrJectioa Depur--- ANNEX I Page 4 of 5 - 24- PDRY: ECONOMIC INDICATORS NATIONAL ACCOUNTS 1978 - US$ mln % GNP at market prices 792 100 Gross Domestic Investment 240 30 Gross National Savings 171 22 Exports of goods & NFS 93 12 Annual Rate of Growth (%) Imports of goods & NFS 427 54 (constant prices) 1973-78 1978 GDP at factor cost 497 100 7 14 of which: Agriculture & Fisheries 78 16 3 -1 Industry 2/ 62 12 10 27 Infrastructure 32 126 25 16 12 Trade, Real Estate, Finance 124 25 7 3 Other Services 107 22 4 14 GOVERNMENT FINANCE 4/ Preliminary (in millions Yemeni Dinars) 1974/75 - 1975 4/ 1976 1977 1978 1979 Total receipts 23.1 17.0 32.1 43.4 56.0 62.7 Current expenditures 27.6 25.6 39.2 47.4 61.4 72.0 Current deficit -4.5 -8.6 -7.1 -4.0 -5.4 -9.3 Development expenditures 20.7 19.1 39.2 56.9 59.9 73.9 Overall deficit -25.2 -27.7 -46.3 -60.9 -65.3 -83.2 Borrowing from Banking Syst7m 11.4 10.1 15.6 18.5 17.4 25.5 Other Assets and Accounts 6 -15.0 12.5 -2.0 -1.4 -6.7 2.6 External Financing 28.8 5.1 32.7 43.8 54.6 55.1 MONEY AND CREDIT 1974 1975 1976 1977 1978 1979 (million Y.D., Outstanding, end Period) Money and quasi-money 55 67 98 140 168 217 Bank credit to Government 24 37 62 72 87 110 Bank credit to non-Gov't. Sector - 19 24 31 49 59 61 1/ Provisional. 2/ Includes petroleum refining and mining. 3/ Includes electricity and water, construction, transport and communications. 4/ The fiscal year was April 1-March 31 until March 31, 1975 when it became April 1- December 31, 1975 and thereafter is on a calendar year basis. 5/ Includes current & development revenues from domestic sources and self-financing of public enterprises. 6/ Includes the change in the Balance of the Development Fund (- increase). 7/ Includes public sector agencies. - 25 - ANNEX I Page 5 of 5 BALANCE OF PAYMENTS (US$ million) 1974 1975 1976 1977 1978 Exports /1 8 8 26 25 18 Imports /1 -190 -179 -268 -364 -387 Trade Deficit -182 -171 -242 -339 -369 Non-factor Services, net 22 17 24 18 17 Factor Services, net 48 59 122 187 265 Workers' Remittances (41) (56) (115) (180) (258) Investment Income (7) (3) (7) (7) (7) Current Account Deficit -112 -95 -96 -134 -87 Official Transfers 1 10 46 55 36 Official M & LT Capital, net 60 47 72 70 94 Gross Disbursements (60) (48) (74) (71) (95) Repayments (-) (-1) (-2) (-1) (-1) Miscellaneous Capital (incl. errors & omissions) 43 25 5 28 43 Change in Official Reserves (- = increase) 8 13 -27 -19 -86 Memo Item: Gross Official Reserves (end year) 68 55 82 101 187 MERCHANDISE EXPORTS Average 1977-78 US$ Million Percent Fish & Fish Products 12 60 Agricultural 5 25 Industrial 1 5 Other 2 10 20 100 EXTERNAL DEBT (DECEMBER 31, 1979) US$ Million External Public Debt Outstanding 915 Of which: Disbursed 372 Debt Service Payments in 1979 5 Debt Service Ratio (Exports of Goods 2/ and Services, Including Remittances) - 1.4 Percent RATE OF EXCHANGE Prior to December 1971 As of December 1971 As of February 1973 US$ 1.00 = YD 0.42 US$ 1.00 = YD 0.38 US$ 1.00 = 0.34 YD 1.00 = US$ 2.40 YD 1.00 US$ 2.61 YD 1.00 = US$ 2.90 /1 Net of re-exports. /2 Based on preliminary estimates of exports of goods and services. April 19, 1980 - 26 - ANNEX II Page 1 of 5 THE STATUS OF BANK GROUP OPERATIONS IN THE PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN A. Statement of IDA Credits (As of March 31, 1980) / ----------$ Million-------- Credit Amount (less cancellations) No. Year Borrower Purpose IDA Undisbursed Credit 240 YDR fully disbursed 1.6 - 370-YDR 1973 PDRY Fisheries /1 5.1 0.12 494-YDR 1975 PDRY Education I 5.4 1.74 560-YDR 1975 PDRY Highways II /2 15.5 2.66 584-YDR 1976 PDRY Aden Port. Rehab. 3.2 1.14 615-YDR 1976 PDRY Wadi Hadramout 7.0 3.26 768-YDR 1978 PDRY Wadi Tuban 5.2 4.50 829-YDR 1978 PDRY Power 5.0 4.73 S21-YDR 1978 PDRY Water Supply Eng. Credit 1.2 0.53 865-YDR 1978 PDRY Education II 4.0 4.00 932-YDR 1979 PDRY Fisheries II /3 10.0 10.00 Total 63.2 32.68 of which has been repaid - - Total now held by IDA 63.2 Total undisbursed 32.68 B. Statement of IFC Investments (As of March 31, 1980) PDRY is not a member of IFC. /1 Including Supplementary Credit of $1.6 million of February 6, 1975. /2 Including $0.6 million of Credit S12-YDR of November 17, 1972 refinanced under Credit 560-YDR. /3 Approved June 12, 1979: Credit not yet effective. NOTE: Exchange adjustment not included. - 27 - ANNEX II Page 2 of 5 C. Projects in Execution 1/ Cr. No. 370-YDR - Fisheries Project: $3.5 Million Credit of April 12, 1973; Effective Date: February 14, 1974; and $1.6 Million Supplementary Credit of February 6, 1975; Effectiveness Date: April 29, 1975; Closing Date: August 31, 1980. The project is now nearing completion. The major component, the fish cold store and freezing facility at Mukalla became operational, after a two-year delay, in June 1978. The delay was primarily due to the difficul- ties encountered in finding a suitable project manager and cost overruns requiring supplemental financing, which was approved by the Association in January 1975. The smaller receiving station at Shihr is now fully opera- tional, and the 100 fishing vessels financed under the credit have all been delivered. Cr. No. 494-YDR - Education Project: $5.4 Million of July 12, 1974; Effectiveness Date: February 5, 1975; Closing Date: December 31, 1980. This credit will assist the Government in making qualitative improvements in the educational system and meet priority manpower needs. Implementation is proceeding satisfactorily but is about 2 years behind appraisal estimate due to (i) initial delays in declaring the credit effective and in the negotiations of contracts with UNESCO and the consultant architects and (ii) more recent delays arising from curricula revisions affecting design completion. Civil works on the construction of new premises, and extension and rehabilitation of the existing schools are expected to be completed by September 1980 in time for the start of the academic year 1980/81. Deliveries of furniture and about 80 percent of equipment are completed. The fellowship program is proceeding well except that three candidates for agricultural training have yet to be found. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 28 - ANNEX II Page 3 of 5 Cr. No. 560-YDR - Second Highway Project: $15.5 Million Credit of June 20, 1975; Effectiveness Date: September 17, 1975; Closing Date: December 31, 1981. This project is financed jointly with the Kuwait Fund for Arab Eco- nomic Development. Since international competitive bidding for the construc- tion element of the project produced no responsive bids, arrangements were made for the works to be carried out by a government construction unit which is assisted by the UK Crown Agents. Because of the remoteness of the project area and the concomitant logistic problems, the severe shortage of domestic skilled manpower and the lower than expected output from construction equip- ment due to particularly harsh construction conditions, implementation of the civil works is about 2 years behind the appraisal estimate. However, considering these difficulties, construction of the road (358 km) started in March 1976 is making satisfactory progress and is approximately 55 percent complete. Likewise, total project cost is now estimated to be about 20 per- cent over the appraisal estimate as a result of the extra quantities of rock that had to be excavated, the additional drainage and protective works needed because of floods and the general increase in the price of construction equip- ment and materials. Construction and road maintenance equipment have been procured. Consultants (Dorsch-Germany) have completed the economic studies and the final engineering of the Naqabah-Beihan road. Consultants (Sotechni- Italy) have completed the technical assistance component and the overseas training program is underway with six Yemeni engineers having completed 9-12 months training courses (4 in the UK and 2 in West Germany). Candidates remain to be nominated for the remaining four fellowships programmed. Cr. No. 584-YDR - Aden Port Rehabilitation Project: $3.2 Million Credit of September 8, 1975; Effectiveness Date: February 3, 1976; Closing Date: March 31, 1981. The project which is being co-financed by the Arab Fund for Economic and Social Development will assist the PDRY Government in rehabilitating the port of Aden to reattract traffic passing through the reopened Suez Canal. The project provides for (a) the procurement of floating craft, cargo-handling, workshop and navigation equipment, spares and stocks; (b) rehabilitation of the slipway for the National Dockyard Company; and (c) technical assistance. All equipment except some navigational items have been received and most are already in use. A cost accountant and a marine engineer have been appointed. Cr. No. 615-YDR - Wadi Hadramawt Agricultural Project: $7.0 Million Credit of April 22, 1976; Effectiveness Date: September 16, 1976; Closing Date: December 31, 1981. The project aims at increasing agricultural production on about 8100 ha of irrigated land in the wadi through the adoption of improved cultural practices and the provision of agricultural equipment and supplies, construc- tion of feeder roads and extension services. It also includes provision of - 29 - ANNEX II Page 4 of 5 a date packaging plant and a rural water supply component. The start of project implementation was delayed because of the difficulties encountered in locating suitable expatriate candidates for the position of project manager, irrigation engineer and an extensionist. The completion of the project is, therefore, not expected until June 1981, about two years behind the appraisal estimate. All expatriate staff have now been appointed and are on site. All agricultural machinery and supplies have been procured. Cr. No. 768-YDR - Wadi Tuban Agricultural Project: $5.2 Million Credit of March 22, 1978; Effectiveness Date: April 25, 1979; Closing Date: June 30, 1983. The project seeks to increase water use efficiency and raise agri- cultural production and farm income in Wadi Tuban through the use of modern inputs and improved practices. It provides for credit to cooperatives and state farms, construction of feeder roads, a village water supply scheme and improved irrigation system; a water management study; an agricultural policies study; and technical assistance and training. The Government, with assistance from FAO has recruited all the expatriate experts except the farm machinery specialist who will be appointed later. The Arab Fund which is co-financing this project, approved its loan of $6.1 million in February 1980. Cr. No. 829-YDR - Wadi Hadramout Power Project: $5.0 Million Credit of July 14, 1978; Effectiveness Date: September 18, 1979; Closing Date: December 31, 1984. The project would provide an impetus to agricultural development in Wadi Hadramout by electrifying all irrigation water pumping in the Wadi through the erection of a 16-MW diesel generating plant and the construction of about 1,000 km of related transmission and distribution networks. Insti- tution-building objectives would be achieved through technical assistance comprising training abroad of PCEP's personnel, and consultants' services for a tariff study, and a power development study. Soil testing of the project site has been completed, and contracts for equipment and materials (with the exception of construction equipment) have been awarded. Work on the tariff study is underway. Cr. No. S21-YDR - Water Supply Engineering and Technical Assistance Project: $1.2 Million Credit of July 14, 1978; Effectiveness Date: November 14, 1978; Closing Date: September 30, 1980. The project consists of studies to assist the Government in the preparation of water supply master plans for the two largest urban agglomera- tions, Aden and Mukalla; the assessment of potential water resources in other populated areas of the country; and the elaboration of the first con- struction phase of projects for the improvement and expansion of water supply services in the areas under consideration. Technical assistance comprises - 30 - ANNEX II Page 5 of 5 the formulation of appropriate administrative structures and financial poli- cies for the national water authority and a tariff study. The feasibility study has been completed, with the exception of the water supply master plan for Mukalla, and as a result, the proposed project to rehabilitate the Aden water system is being processed. Cr. No. 865-YDR - Education II Project: $4.0 Million Credit of December 22, 1978; Effectiveness Date: June 18, 1979; Closing Date: June 30, 1982. The project will assist the Government in establishing three voca- tional training centers (VTCs) which would be the forerunner of a number of additional VTCs to be constructed in other parts of the country to train urgently needed skilled and semi-skilled workers. The project consists of construction of an industrial, an agricultural and a commercial training center, and the procurement of furniture and equipment. Arrangements for fellowships to be financed from bilateral funds have been completed. In spite of the project's initial satisfactory progress, implementation is now about 10 months behind appraisal estimates due mainly to the delay in finalizing designs and tender documents. Construction is expected to start by May 1980. Contracts for furniture and equipment are expected to be awarded around April 1980. Cr. No. 932-YDR - Fisheries II Project: $10.0 Million Credit and $3 million EEC Special Action Credit of August 10, 1979; Effectiveness Date: (Not Effective); Closing Date: June 30, 1987. The project seeks to increase income and economic well being in the Sixth Governorate, which is one of the poorerst and most remote regions of PDRY, and consists of the construction of a fisheries-cum-general cargo port together with supporting infrastructure at Nishtun; the construction of fish receiving, processing and storage facilities together with the develop- ment of an efficient system for exploiting fish; and the construction of a 19 km road to provide a link between the new port and the nine fishing villages which would supply fish under the project. The project also includes tech- nical assistance comprising consultants' services to assist with project implementation and operation; experts to assist the Ministry of Fish Wealth in fleet management, cold store operations and export marketing; and a national study to assess nutritional deficiencies for a possible future IDA-financed project. The credit is not yet effective because of delays encountered in finalizing co-financing arrangements with the cofinancier which had been identified earlier; alternative arrangements may have to be made. - 31 - ANNEX III Page 1 PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN GREATER ADEN WATER SUPPLY PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Project first presented to IDA: March 1978 (b) Time taken by PDRY to prepare the project: One Year (September 1978 through September 1979) (c) Agency which prepared the project: Public Water Corporation (PWC) with the assistance of consultants (d) First IDA mission to review project: August 1979 (e) Departure of Appraisal Mission: November 18, 1979 (f) Completion of negotiations: April 24, 1980 (g) Planned date of effectiveness: October 31, 1980 Section II: Special IDA Implementation Action None Section III: Special Conditions 1. Conditions of Effectiveness: (a) the execution of a subsidiary loan agreement between the Government and PWC for onlending $12 million from the proceeds of the IDA credit, under terms and conditions satisfactory to the Association (paragraph 50), and (b) the implementation in Greater Aden of a tariff structure acceptable to the Association and an average tariff sufficient for PWC to meet its financial obligations (paragraph 60). 2. Condition of Disbursement for Part C of the Project: Effectiveness of the co-financing loan agreements (paragaph 55). - 32 - ANNEX III Page 2 3. Measures to be Undertaken by the Government and PWC include: (a) Government contribution of $4.5 million for the project to be passed to PWC as equity (paragraph 50); (b) appointment by not later than January 1, 1981 of three advisors to PWC (paragraph 51); (c) PWC to finalize training program for its staff by December 31, 1980 (paragraph 52); (d) payment to PWC for water consumed by all public entities within three months of the billing date (paragraph 56); (e) through charges for its services, PWC to earn revenues sufficient to cover not less than its operating and maintenance costs, includ- ing depreciation, interest and (to the extent not covered by depre- ciation) amortization of loan debts (paragraph 59); and (f) PWC to monitor technical and financial performance indicators and take appropriate actions to achieve an agreed upon level of per- formance (paragraph 60). 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