Document of The World Bank FOR OFFICIAL USEONLY Report No:42193-EG PROJECT APPRAISAL DOCUMENT ON A PROPOSEDLOAN INTHE AMOUNT OF US$120.0MILLION TO THE ARAB REPUBLIC OF EGYPT FOR THE INTEGRATED SANITATION & SEWERAGE INFRASTRUCTURE PROJECT February25,2008 SustainableDevelopmentDepartment Middle East and North Africa Region This document has a restricted distributionand may be usedby recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (ExchangeRateEffectiveFebruary21,2008) CurrencyUnit = EgyptianPound(LE) EgyptianPounds 5.47 = US$l.OO FISCALYEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS ABR Anaerobic BaffledReactors AGOSD AlexandriaGeneralOrganizationfor Sanitary Drainage ASBR Advanced SequentialBatchReactors BCM Billion Cubic Meters BD Bidding Document BOD Biological OxygenDemand BWADC BehiraWater & Drainage Company CAESB BrasiliaWater and SanitationCompany CAS Country Assistance Strategy CAWPO Cairo & AlexandriaWater & Wastewater Projects Organization CBA Cost Benefit Analysis CCTV Closed Circuit Television CDA Community DevelopmentAssociation CFAR Country FinancialAssessment Report CPAR Country Procurement Assessment Report CPPR Country Portfolio PerformanceReview DALY Disability Adjusted LifeYear DO Development Objective DissolvedOxygen EC EuropeanCommission EEAA EgyptianEnvironmentalAffairs Agency EFS EnvironmentalField Supervisor ERO EnvironmentalRegionalOfficer ERR EconomicRate of Return ESA EnvironmentalSite Assessment ESAIF Environmentaland Social ImpactAssessment Framework ESMMF Environmental& Social Management & MonitoringFramework ESW EconomicSector Work EU EuropeanUnion EWRA EgyptianWater RegulatoryAgency FC FecalColiform FDI ForeignDirect Investment FM FinancialManagement FMR FinancialMonitoring Report FMS FinancialManagement Specialist FSL Fixed Spread Loan FOROFFICIAL USE ONLY FY FiscalYear GDP Gross DomesticProduct GHWSC Gharbeya Water and SanitationCompany GIS Geographic InformationSystem GOE Government of Egypt GOSD General Organizationfor Sanitary Drainage GPOBA Global Partnership on Output BasedAid GTZ GermanTechnical Cooperation HCWW HoldingCompany for Water and Wastewater IBRD InternationalBank for Reconstructionand Development ICB InternationalCompetitiveBidding IDA InternationalDevelopmentAssociation IEC Information, Education& Communication IFR InterimFinancialReport IIIMP IntegratedIrrigation Improvementand Management Project IP ImplementationProgress ISDS Integrated Safeguards Data Sheet ISR ImplementationStatus Report ISSIP IntegratedSanitation and Sewerage Project IWRM IntegratedWater ResourceManagement IWSP IntegratedWater and SanitationProgram KfW Kreditanstaltfuer Wiederaufbau (GermanDevelopmentBank) KWSC Kafr El Sheikh Water and SanitationCompany LAU Local Administrative Unit LE EgyptianPound LVU Local Village Unit M&E Monitoring andEvaluation MALR Ministry of Agricultureand LandReclamation MCM Million Cubic Meters MDG Millennium DevelopmentGoals MIS Management InformationSystem MM Mitigating Measures MOHP Ministry of Healthand Population MOHUUD Ministry of Housing, Utilities andUrbanDevelopment MOIC Ministry of InternationalCooperation MOLD Ministry of Local Development MOSA Ministry of Social Affairs MOU Memorandum of Understanding MPN Most ProbableNumber MSEA Ministry of State for EnvironmentalAffairs MWRI Ministry of Water Resourcesand Irrigation NCB NationalCompetitiveBidding NDC Netherlands Development Cooperation NGO Non-GovernmentalOrganization NOPWASD NationalOrganizationfor Potable Water and Sanitary Drainage NPV Net PresentValue NPSEV NationalProgramfor Sanitationof EgyptianVillages NWRC National Water ResearchCentre NWRF' NationalWater ResourcesPlan OBA Output BasedAid O&M OperationandMaintenance This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. OP OperationalPolicy ORDEV Organizationfor Reconstructionand Developmentofthe EgyptianVillage ORS Oral RehydrationSalts PAD ProjectAppraisal Document PAP ProjectAffected Persons PBC PerformanceBasedContracting PCN ProjectConcept Note PER Public ExpenditureReview PFS ProjectFinancialStatements PIC Public InformationCenter PID ProjectInformationDocument PIP ProjectImplementationPlan Pnl Project ImplementationUnit PMCF ProgramManagementConsultingFirm PMU ProjectManagementUnit PO Private Operator PS PumpingStations QA Quality Assurance QC Quality Control QUAL2K Water Quality Software R&R Replacement & Renewal RAP Resettlement Action Plan RBC RotatingBiological Contractor RPF ResettlementPolicyFramework RSU Rural SanitationUnit SA Social Assessment / Special Account SBD StandardBidding Documents SBR SequentialBatchReactor SIL Specific Investment Loan SOE Statement of Expenditures SRDP SohagRuralDevelopment Project SWM SolidWaste Management TA TechnicalAssistance TBD To be determined TDS Total DissolvedSolids THM Trihalomethane TOR Terms of Reference TSS Total Suspended Solids TTL Task Team Leader UASB Up flow Anaerobic Sludge Blanket USAID United StatesAgency for InternationalDevelopment USEPA United States EnvironmentalProtectionAgency WA Withdrawal Application WB Water Board World Bank WHO World HealthOrganization Water Quality wsc WQ Water and SanitationCompany wscu Water and SanitationCompany ISSIPUnit wss Water Supply and Sanitation WTP Willingness to Pay WUA Water Users' Association WUO Water Users' Organization WW Wastewater WWTP Wastewatertreatment plant Vice President: DanielaGressani CountryDirector: EmmanuelE.Mbi Sector Director: IngerAndersen Sector Manager: Vijay Jagannathan Task Team Leader: Ayat Soliman EGYPT. ARAB REPUBLIC OF IntegratedSanitation& Sewerage InfrastructureProject CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ...................................................................... 1 1. Country and sector issues .................................................................................................... 1 2. Existing situation inthe project area ................................................................................... 2 3. Institutional reform context ................................................................................................. 3 4. Rationale for Bank involvement.......................................................................................... 3 5. Higher level objectives to which the project contributes .................................................... 4 B. PROJECT DESCRIPTION..................................................................................................... 4 1. Lending instrument.............................................................................................................. 4 2. Program objective and phases ............................................................................................. 4 3. Project development objective and key indicators .............................................................. 4 4. Project components............................................................................................................. - 5 5. Lessons learned and reflected inthe project design ............................................................ 6 6. Alternatives consideredand reasons for rejection............................................................... 7 C. IMPLEMENTATION ............................................................................................................ - 8 1. Partnership arrangements.................................................................................................... 8 2. Institutional and implementation arrangements .................................................................. 8 3. Monitoring and evaluation of outcomeshesults .................................................................. 9 4. Sustainability ..................................................................................................................... 10 5. Critical risks andpossible controversial aspects ............................................................... 12 6. Loadcredit conditions and covenants ............................................................................... 13 D APPRAISAL SUMMARY.................................................................................................... . 13 1. Economic and financial analyses....................................................................................... 13 2 . Technical ........................................................................................................................... 15 3. Fiduciary............................................................................................................................ 18 4. Social .................................................................................................................................20 5. Environment ...................................................................................................................... 21 6. Safeguardpolicies.............................................................................................................. 22 7. Policy Exceptions and Readiness...................................................................................... 22 Annex 1: Country and Sector or Program Background................................................................. 23 Annex 2: Major RelatedProjects Financed by the Bank and/or other Agencies .......................... 27 Annex 3: Results Framework and Monitoring.............................................................................. 28 Annex 4: Detailed Project Description.......................................................................................... 32 Annex 5: Project Estimated Costs................................................................................................. 41 Annex 6: Implementation Arrangements ..................................................................................... -48 Annex 7: Financial Management and DisbursementArrangements............................................. 55 Annex 8: ProcurementArrangements ........................................................................................... 69 Annex 9: Economic and Financial Analysis.................................................................................. 82 Annex 10: SafeguardPolicy Issues ............................................................................................... 94 Annex 11: Water Quality Modeling............................................................................................ 107 Annex 12: Project Preparation and Supervision.......................................................................... 112 Annex 13: Documents inthe Project File.................................................................................... 114 Annex 14: Statement of Loans and Credits ................................................................................ -115 Annex 15: Country at a Glance ................................................................................................... 117 Annex 16: Maps- IBRD33785 and non-Bank maps................................................................... 119 ARAB REPUBLICOF EGYPT INTEGRATEDSANITATION& SEWERAGEINFRASTRUCTUREPROJECT PROJECTAPPRAISAL DOCUMENT MIDDLEEASTAND NORTHAFRICA MNSSD Date: February 25, 2008 Team Leader: Ayat Soliman Country Director: EmmanuelMbi Sectors: Sanitation(50%); Sewerage(30%);Sub- Sector ManagedDirector: IngerAndersen nationalgovernment administration(20%) Themes: Rural services and infrastructure (P);Municipal governance and institution building (P);Water resource management (P);Access to urban services and housing(S) Project ID: PO94311 Environmentalscreening category: Partial Assessment LendinnInstrument: Specific InvestmentLoan For Loans/Credits/Others: Total: 180.00 21.50 201.50 Borrower: Ministry of Housing, Utilities and New Communities. 12 IsmailAbaza Street Cairo, Arab Republicof Egypt ResponsibleAgency: NationalOrganizationfor Potable Water and Sanitary Drainage(NOPWASD) Arab Republicof Egypt Holding Company for Water and Waste Water (HCWW) Arab Republicof Egypt Expectedeffectiveness date: June 15, 2008 ExDectedclosine:date: June 30. 2014 Does the projectdepart from the CAS in content or other significant respects?Re$ PAD A.3 No Does the projectrequireany exceptions from Bank policies? ReJ PAD D.7 [ ]Yes [XINO Havethese been approved by Bank management? I s approvalfor any policy exceptionsought from the Board? [ ]Yes [ ]No Doesthe project include any critical risks rated"substantial" or "high"? ReJ PAD C.5 [XIYes [ ]No Does the projectmeet the Regionalcriteriafor readiness for implementation?Re$ I PAD D. 7 [XIYes [ ]No 1 AM U.I D A n n 7 I Projectdevelopment objective Re$ PAD B.2, TechnicalAnnex 3 The main objectiveof the project is to contributeto the sustainable improvementin: (i) sanitationand environmentalconditions for the resident communitiesand (ii)the water quality inthe selecteddrainage basinswithin the served areas. Projectdescription[one-sentence summary of each component] Re$ PAD B.3.a, TechnicalAnnex 4 The project intendsto achieve its objectivethroughthe following activities: Component 1: Provisionof sanitationsystems within selecteddrainage basinsthroughplanning, designingand constructingsanitationsystems for village clusters inthe selectedpriority area within the two command areas of Mahmoudeyaand Mit Yazid, falling within the Governorates of Beheira, Gharbeyaand Kafr El Sheikh inthe Delta. Component 2: Establishment of a local result-basedmonitoringand evaluationsystemthat linksthe improvements in sanitationcoveragewith anticipatedenvironmentalandhealth impacts. Component 3: Institutionaldevelopment and capacity buildingto promote institutionaldevelopment within the nationaland local public institutionsresponsible for sanitationimplementationto enhancetheir capacity to plan, design, construct and operate the rural sanitationinvestments,monitor outputs and outcomes, as well as promote hygiene practices and social mobilizationas a close accompaniment. Which safeguardpoliciesare triggered, ifany? Re$ PAD 0.6, TechnicalAnnex 10 The proposedprojectfalls under the World Bank environmentalcategory B classification, accordingto the Bank's OperationalPolicy 4.01 (OP 4.01) on EnvironmentalAssessment and Involuntary Resettlement (OP/BP4.12) are triggered.By virtue ofthe projectgeographic extent, the feasible approach for environmentaland social assessmentwas to follow the "Framework Approach". The partial assessmentrequired, accordingto OP4.01 is presented in details inthe "Environmental and Social Assessment Framework(ESAF)" report, which describesthe evaluationof impacts, and presents an environmentalmanagement plan(EMP) which includes mitigation measures, monitoringplan, and institutionalaspects. A Resettlement Policy Framework(RPF) establishingoverallresettlementobjectives and principlesis beingprepared, as there may be land acquisition under component 1 (provisionof sanitation infrastructure). Significant,non-standardconditions, ifany, for: Re$ PAD C.7 Boardpresentation: Loadcredit effectiveness: Covenants applicable to project implementation: (a) Establishment ofNOPWASDISSIPUnit (dated covenant) (b) Signature o f InteragencyAgreement betweenNOPWASDandHCWW "the implementingagency" (dated covenant) (c) Establishment of ISSIP PIU(dated covenant) A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues 1. The Government of Egypt (GOE) has taken several measures to safeguard the quantity and quality of water in the country. To this end, it has spent about LE 18 billion on wastewater managementprojects over the past two decades. Operation and maintenance (O&M) costs for the water supply and sanitation sector alone constitute 4% of GOE total recurrent budget. Yet water quality in the country continues to degrade, impacting health, agricultural competitiveness and the quality of life. This degradation also frustrates Government plans for downstream reuse of drainage water, a key component in Egypt's water resources strategy. Damage costs from poor water quality are estimated at 1.8% of national GDP. Moreover, previous Government programs on sanitation have been planned and implemented in isolation, often leading to expensive, geographically fragmented infrastructure projects with limited improvement to the ecosystem. 2. Muchof the organic pollution load reaching the country's water bodies inthe Nile Delta comes from rural areas, where 57% of the people live. The present national system for water supply and sanitation has a strong urban bias, while rural areas suffer from weak or non-existent institutional structures for sustainable service delivery and operation, particularly sanitation. Recent improvements in drinking water supplies to the rural areas did not include facilities to safely dispose of the consequent increases in wastewater flows. Statistics on high levels of sanitation coverage mask many inefficiencies and problems inthe system. For example, existing household toilets cannot cope with the increased wastewater flows. In addition, many areas in Egypt have high water tables, which render many types of conventional low-cost, on-site sanitation technologies inappropriate. The result is spillage of wastewater into streets, irrigation drains, and even into nearby canals. 3 . Facing increasing water resource limitations and the economic costs from water resource degradation and health impacts, the GOE recognizesthe needto address rural sanitation issues in a broader institutional and planning context. Over the past three years, the Ministry of Housing, Utilities and Urban Development has embarked on an ambitious reform agenda, with the following highlights for rural sanitation: (a) Integrated water resources management: The institutional coordination structures betweenthe Ministriesof Water Resourcesand Irrigation (MWRI) and the Housing, Utilities and Urban Development (MOHUUD) were historically limited to data exchange with limited planning across both sectors. In the past decade however, the country has been progressively moving towards integrated water resources planning with the issuance of the National Water Resources Plan (2004) and the Integrated Water Resources Management Action Plan (2005) under the Ministry of Water Resources, both emphasizing the need for enhanced cross-sectoral mechanisms to address the compounding challenge of water quality deterioration with a special focus on the sanitation agenda. (b) National program for village sanitation: Within the context of the Presidential program, the Government has been mandated with addressing rural sanitation as a priority program and declared the allocation o f LE 20 billion over the period of 5 years (2007-2012) to this end, an 1 unprecedented 120% increase in annual investment funding to the sector with a focus on rural areas. The aimi s to increasesewerage coverage from the current 4% to about 40% in5 years. (c) Utility corporatization & regulation: Over the last two and a half decades the financial problems of water utilities have been compounding, as a result of lack of managerial and financial autonomy, lack of incentives to improve performance and continued overstaffing. Cost recovery is among the lowest in the region. By the end of FY 2003 the total accumulated deficit of the companies had reached $1.3 billion. A strong move towards reforming sector structure was initiated in 2004 with the issuance of two presidentialdecrees: Presidential Decree 135 was issued to form a water and waste water sector holding company (HCWW) and transformed the 16 largest water and wastewater utilities into subsidiaries of that company. At the same time, Decree 136 created the Egyptian Water Regulatory Agency (EWRA), responsible for monitoring and regulating sector performance and setting benchmark to improve efficiency and quality of service delivery to reach international standards. In the past three years, sector performance has witnessed a gradual improvement, with 3 out of the 16 subsidiary companies making profit or breaking even, with avision towards gradual overall sector financial sustainability. 2. Existingsituationin the projectarea 4. The project area inthe three Governoratescan be characterizedas mostly flat agricultural land with a high water table (less than 5 meters). Most development is fairly recent in origin and rights of way, other than through roads, are not raised much above the natural ground surface. The high water table is likely to be a problem when considering the options for sewerage. Annual rainfall i s low, ranging from about 50mm per year inthe south of Gharbeya to lOOmm or more per year inthe northof Kafr El Sheikh and Beheira. 5. Villages in Gharbeya tend to be urban in character with many buildings rising to three stories or more. In Kafr El Sheikh and Beheira villages are more rural in character but even there many buildings have more than one storey and are occupied by more than one household. Rights of way tend to be narrow, often less than 3 meters, with houses built up to the road. 6. Water use varies considerably betweenvillages but is often in the range of 100-140 l/cd. Most households in the three Governorates covered by the project already have water-flushed sanitation although few are currently connectedto sewers. Most houses that are not connected to sewers discharge wastewater to cesspits with a small percentage discharging directly to nearby drains. In some locations where the water table is high cesspits are emptied 2-4 times a month, suggesting either that these are true closed cesspits or, more probably, that infiltration i s poor. Some villages have installed a rudimentary wastewater collection system (erroneously identified as a groundwater lowering system) which dischargesinto the closest agricultural drain. There are also some 15 wastewater treatment plants in the three Governorates, serving the largest agglomerations. Flows to many of the existing WWTPs are currently well below design flows, offering possibilities for connecting both additional households within already seweredareas and new areas to existing works. 2 3. Institutional reform context 7. Planning for and serving scattered smaller communities has not beenundertakenin Egypt on a large scale yet. This i s why it i s important that the technical solutions and related implementation arrangements adapt to strike the right balance between centralized planning and guidance and decentralized implementation and community participation. The project i s set within a transforming sector, where the role of the WSCs under the overall supervision of the HCWW i s being redefined. Beyond mere operation and maintenance o f facilities that have been constructed by NOPWASD, the Ministry i s delegating increasing investment implementation authority to the local level. This includes in the past two years the full transfer o f the rehabilitation and renewal budget (LE 1.4 billion), as well as the urgent water supply program (LE 1.5 billion). In addition, HCWW is positioning itself as the key planning and oversight institution, and has launched the National and Governorate level Masterplans to assist indefining the investmentand operational needs over the coming 30 years. The project is fully aligned with this vision, and therefore has the following key contributions within the sector reformprocess: 0 Delegating significant design and construction responsibilities to the WSCs for better management o f investmentallocations and related operation. 0 Providing a model for rural sanitation planning that can feed into the National Masterplan and guide the National Program for Village Sanitation 0 Creating national capacity within HCWW and EWRA to utilize results-based performance information for management and regulatory purposes. 0 Building local capacity for engaging communities in rural sanitation service provision and combining social and technical skills inplanningand implementation 0 Creating local private sector capacity for operating wastewater treatment plants and associated supervision and control measures within the WSCs and at the H C W W 0 Creating a platform for cross-sectoral coordination in monitoring rural sanitation inputs and outcomes to demonstrate IWRMframework inpractice. 4. Rationale for Bank involvement 8. The rationale for Bank involvement is based on three main principles: (i)building on areas where GOE commitment i s strong, (ii)the opportunity for influencing the broader rural sanitation and water quality management agenda in the country, and (iii)capitalizing on Bank and other donor long term engagement and experience in the water resources sector. The proposed project addresses all of the above principles. First, the commitment to rural sanitation has been emphasized by GOE and manifested by additional local funding allocations o f LE 2 billion during the current fiscal year. However, GOE recognizes the challenge in ensuring that these large planned financial allocations are translated into visible results on the ground. It i s therefore seeking Bank support through this project to distill global experience, and develop rural sanitation planning and implementation processes that are relevant to rural areas o f Egypt. 9. The Bank has been at the forefront o f the policy dialogue to address the rural sanitation agenda within the IWRM context, emerging from its decades o f engagement with GOE inwater resources management. A number of sector studies conducted in the past two years, including a the IWRM Action Plan and Water PER, as well as a dedicated ESW on rural sanitation, have shed the light on the weaknesses in the existing financial and service delivery models. An approach has been developed that linked, for the first time in the Egyptian context, access to investment inrural sanitation to quantifiable water quality (and health) improvements in a given hydraulic basin. This project has been designed in close conjunction to the IIIMP project of the Bank, serving the same geographic area, to pioneer a cross-sectoral implementation model that capitalizes on institutional and donor coordination efforts across the board. The opportunity i s also ripe based on the GOE reform signals in the water supply and sanitation sector, to expand the long-term collaboration with other donor partners towards a reform vision across the sanitation sector and to create an investmentplatform to support it. 5. Higher level objectives to which the project contributes 10. The project is consistent with the overall Government objective to reconcile economic development with environmental and social sustainability, through better public services for all, especially the poor. The project i s also aligned with one o f the three CAS (2005) pillars for the Arab Republic o f Egypt, namely enhancing the provision o f public services, including through promoting public investments, increasing the involvement o f the private sector and an overall focus on improving water resources management. 11. The project design further supports the Government efforts in advancing the overall sector reform, through (i) promoting a model for integrated cross-sectoral planning o f sanitation along IWRM principles, (ii)increasing decentralized management o f WSS investments and enhancing the capacity o f the subsidiary utilities to address the related planning and management aspects, and (ii)enhancing the role o f the private sector in service provision using out-put based performance contracting. B. PROJECT DESCRIPTION 1. Lendinginstrument 12. The proposed loan will be Fixed Spread with 30 years o f maturity including 5 years of grace period and level repayment o f principle. 2. Programobjectiveand phases 13. The Government has pledged LE 20 billion to address rural sanitation over the coming five years under the National Village Sanitation Program, and is seeking cost effective implementation mechanisms with greater accountability. This project i s seen as a first large scale pilot to operationalize the larger national program. 3. Project developmentobjectiveand key indicators 14. The main objective o f the project i s to contribute to the sustainable improvement in: (i) sanitation and environmental conditions for the resident communities and (ii) water quality in the the selected drainage basins within the served areas. 4 15. The development objective outcome will be measured by the following indicators: e Improved access to sustainable sanitation services (% increase in coverage and no. of households connected). e improvement in environmental and hygiene conditions in villages (beneficiary satisfaction surveys, reduced sewageponding, hygiene evaluationprocedures). e reduction in pollution loads of the receiving water bodies (ambient fecal coliform and BOD/ DO). Details o f the intermediate outcome indicators are available inAnnex 3. 4. Project components The following project components are proposed to achieve the above objective: 16. Component 1: Provision of sanitation systems within selected drainage sub-basins (totalcost US$181millionof which, IBRD portion US120 million) - This component aims to plan, designand construct sanitation systems for a total o f 14 clusters inthe selected priority area within the two command areas o f Mahmoudeya and Mit Yazid, falling within the Governorates o f Beheira, Gharbeya and Kafr El Sheikh in the Delta. The component will be divided into three sub-components: Centralized sanitation systems construction: includes the construction o f complete sanitation systems for an estimated 222 larger villages (>1500) within 14 clusters, including: (1) Construction o f treatment plants, and (2) Construction o f collection network consisting o f house connection, transmission lines, and pumping stations; Decentralized sanitation system construction/ rehabilitation: will serve an estimated 120 individual villages/ hamlets with population size less than 1500 inhabitants, providing them with a decentralized system consisting of shallow sewers and anaerobic baffled reactors, and relying on delegated community management for subsequent O&M. It will also include the upgrading and rehabilitation o f existing networks in some villages to acceptable designstandards, iffeasible; and GTZ pilot decentralized systems: this sub-component builds on and replicates the implementedGTZ pilot model inKafr El Sheikh inan estimated 20 villages inthe project area, based on the communities' expressed willingness to engage. The model serves villages o f up to 5000 inhabitants and depends heavily on community participation and commitment for the O&M of these systems based on simple (natural system) technology. Component 2: Establishment of a local results-based monitoring and evaluation system (totalcost US$1.1millionofwhich, IBRD portionis US$O, NetherlandsCooperation will fund the entire US1.1 million) This component will establish a results-based monitoring - system within the HCWW that links the improvements in sanitation coverage with anticipated environmental and water quality impacts. The component will include technical assistance support for expertise in designing the system, identification o f monitoring sites, data collection and analysis, results review, finalization, and communication. It will coordinate among national institutions within the IWRM framework, particularly the M&E system established under IIIMP, 5 as well as among the local organizations (incl. WSC's, CDAs, WUA's and Water Boards) to develop their capacity to engage in monitoring water quality and improved environmental conditions and hygiene practices and share results regularly with relevant stakeholders. 18. Component 3: Institutional development and capacity building (total cost US$19.5 millionof which, IBRD portion is US$O, Netherlands Cooperationwill fund US15.5 million and GTZ will fund US$4,0 million) - This component aims to promote institutional development within the national and local public institutions responsible for sanitation implementation to enhance their capacity to plan, design, construct and operate the rural sanitation investments, monitor outputs and outcomes, as well as promote hygiene practices and social mobilization. Through grant donor co-financing, technical assistance will be provided to each o f the implementing agencies (HCWW, NOPWASD and the three WSC's), consisting of: (a) A technical assistance contract to provide specialist support to the implementing units in their mandates, covering technical, procurement, social and financial aspects; (b) Capacity building for contract management at the H C W W and the three WSC's to serve inprocurement and supervision of performance based O&M contracts, including through the demonstration of 2 pilots inthe project area; (c) Training to the implementing unit staff and CDAs in technical and social mobilization aspects of the sanitation service implementation and O&M; and (d) Implementation o f the Environmental and Social Management and Monitoring Framework (EMMSF). 5. Lessonslearned and reflectedin the projectdesign 19. The conceptual approach and design o f the project draws on the experience o f GOE and various donors in implementation o f sanitation projects over the past two decades. The key lessons learned are outlined below: (a) The main challenge is to ensure that the constructed systems will continue to operate sustainably after the construction phase. Most of the sanitation technologies have beentested in Egypt, however systems have failed to continue operating efficiently mainly due to lack o f adequate O&M funding, limited management capacity at the local level and lack o f incentive to enhance performance. A primary aim of the design should therefore be to ensure that the financial, social and institutional settings support long term sustainability o f operation to achieve the desiredoutcomes; (b) There is a need to plan alonghydraulicboundariesfor visible resultsto be achieved. Despite the large investments in waste water treatment in the past three decades, impact on the recipient water body quality has been quite limited. The fragmented, top-down and urban-biased approach to planning and sequencing o f investment often yields scattered interventions that do not systematically address the priority water basins and more importantly are not able to demonstrate to the communities the value-added o f proper treatment on their environment; (c) Engagement of local communities is necessary for sustainability. Several pilot sanitation programs demonstrated that community participation inplanning and operation contributes to increased confidence at the village level o f their ability to manage their resources and enhance O&M cost recovery. It also reduces the pressure local utilities face 6 in managing a large number of scattered systems. Building on strong local CDA's and WUA's is key to enabling this utility-community partnership, and should be further supported within the legal framework o f the sector; There is a significant willingness to pay by the communities that can enhance financial sustainability. Communities have indicated, and in some pilots actually demonstrated their willingness to pay for enhanced sanitation services. This willingness to pay i s primarily for safe disposal and reaches up to LE 10/ household/ month, particularly for areas with high ground water levels. This should be matched with an equal willingness to charge by the utilities for sustainable O&M coverage; Implementationthrough a decentralized system should be coupledwith streamlined procedures and guiding central oversight Experience from several World Bank operations show that multiple authorities particularly at the local level often resulted in significant implementation delays. To mitigate against this, the project should provide streamlined operational procedures and assign strong monitoring role at the central level; and Lessons from Country Portfolio Performance Review (CPPR): A recent CPPR exercise has taken which has provided very useful lessons particularly with regard to procurement, financial management and readiness for implementation which have been reflected inthe project designand preparation. Alternatives consideredand reasons for rejection Addressing solid waste management (SWM) within the same pro-iect area: Addressing SWM within the same context would demonstrate the impact o f a fully integrated system, and exploring the linkages that could be built on addressing both simultaneously. During project preparation three pilot solid waste management systems were designed in the project area. However, the proposed institutional set-up, in this case through the local units and the Governorates, i s different than that for sanitation services. It was therefore recommended that SWM be undertaken as a parallel activity to avoid creating a complex institutional structure given that the mandates fall with different agencies, and the scope i s limited to a pilot. This can be liaised with the envisaged national-level SWM project currently under preparation, and with IIIMP under its environmental mainstreamingcomponent. 21. Addressing one complete command area instead o f the first priority in both. This option was discussed with GOE, and it was decided that given that this i s a pilot project to demonstrate the approach, it would be better to cover the first priority for the two command areas to put in place the implementation model at the level o f the three utilities with different typographies. Additional local and donor funding can then be programmed to cover the subsequent priority areas inthe context o f the larger National Village Sanitation Program. 22. Division of responsibilities among the implementing agencies. The project considered two options for allocating works implementation between NOPWASD and the three WSCs. Following consultation, the Minister o f Housing decided to delegate increased responsibility for infrastructure implementation, consisting o f all networks and decentralized systems, to the local companies. This i s in line with the overall Government emphasis on decentralization, and supportsthe assessment with other donor agencies o fthe institutional capacities involved. 7 23. Subsidizing; house connections for the poor. An extensive study was undertaken to assess the feasibility of structuring an output based subsidy for the poor to cover the cost of house connections in Gharbeya. The final design suggested an affermage contract to a private sector contractor for building new house connections and operating 2 treatment plants in the area. Unfortunately, the grant financing did not materialize due to lack o f funding from the Global Partnership on Output Based Aid (GPOBA). However, the study was very useful in determining WTP in the area, and finalizing the 2 proposed output based contracts for WWTP operation included under the project. C. IMPLEMENTATION 1. Partnershiparrangements 24. Strong partnership between development partners, GOE institutions, and stakeholders and beneficiary institutions has beenemphasized from the onset in the project design. The Bank has mobilized extensive effort to seek active participation in ISSIP by other international development agencies, and has succeeded in securing the agreement in principle for partnerships with: (i) Netherlands Cooperation for supporting the institutional development related to the The subsidiary companies, the national level planning and M&E systems, and (ii)GTZ for institutional development related to the scaling up o f the GTZ decentralized model in the three target Governorates. At the national level, strengtheningthe partnership betweenMOHUUDand MWRI is envisaged, through the implementation o f a results-based monitoring system across the two sectors, and closer engagement in upstream planning and prioritization. Finally, at the local level, ISSIP implementation aims at securing the future sustainability through effective and appropriate partnerships between the communities, CDAs, WUAs, the private sector and the subsidiary utilities inthe three Governorates. 2. Institutionaland implementationarrangements 25. The project serves a large number o f small and scattered communities in the rural areas. The implementation model is therefore tailored to provide the balance between centralized planning and construction support, and decentralized implementation with a strong focus on social mobilization and community involvement in management and cost recovery. The project will be implementedthrough the following institutions at the national and local levels: 8 A Project Steering Committee will provide coordination, oversight, and overall direction. The Steering Committee will be headed by the Minister o f Housing, Utilities, and Urban Development or his delegate, and will be made up o f representatives o f HCWW, NOPWASD, Beheira, Gharbiya, and Kafr el-Sheikh WSCs, EWRA, MWRI, MOHP and representatives o f the local popular councils from each of the three Governorates. The Director o f the PIU will act as the Secretary. The Project Implementation Unit (PIU), will be housed in the HCWW, headed by a PIU Manager and supported by financial management and procurement staff from HCWW, as well as a team o f long-term and short-term technical assistance specialists who will work closely with NOPWASD and WSC counterparts to manage the project and build national and local capacity for rural sanitation programming, including 8 integrated planning, technology and social intermediation guidelines, O&M contract management and overall monitoring and reporting, rn A NOPWASD ISSIP Unit will be responsible for designand implementation of all new wastewater treatment works. This unit will be headed by a senior NOPWASD official, supported by a team o f specialists covering technical, procurement and financial management aspects o f wastewater treatment plant design and construction, and supported by technical assistance inthe above fields as needed. rn Rural Sanitation Units (RSU) will be created within each o f the three WSC's, responsible for implementation o f centralized wastewater collection systems and the small scale decentralized systems, subsequent O&M management including procurement and supervision o f private sector O&M services as well as in-house O&M. The RSUs will also be responsible for ISSIP hygiene promotion and communication activities. Each unit will be headed by a Unit Head and include a team o f five specialists covering wastewater management, social intermediation, environmental management, procurement and financial management. This team will also be supported by long and short-term technical assistance inthe different fields. 26. Inaddition, the project will establishpartnerships with: rn Community DevelopmentAssociations (CDAs) will be the points of WSC/community articulation for the decentralized systems. The CDAs will be responsible for meetingthe prerequisites for investment in decentralized wastewater systems, and for subsequent O&M and cost recovery. The program will adopt a community selection approach which requirestarget communities to demonstrate demand inorder to be selected for the project. rn Local Administrative Units (LAUs) are the lowest level in the local administration system in Egypt. The primary roles o f LAUs under the project are to provide forums and venues for social marketing and hygiene promotion activities associated with the small community wastewater program, since each village council area may include several target small communities. LAUs can also serve as communication points for the program invillage council areas inwhich CDAs needto be established. rn Water User Associations (WUAs)/ IIIMP RMCs are being actively developed in the project area under the World Bank/KfW/Netherlands financed IIIMP Project. They are principal beneficiaries o f ISSIP water quality improvements and can be involved in social marketing and in environmental monitoring. Coordination with the Regional Management Committees (RMCs) o f the IIIMP project will be established to align planning and implementation. 3. Monitoringand evaluation of outcomes/results 27. demonstrate the link between inputs in terms of sanitation investments and positive The monitoring o f project outcomes and impacts is a key focus o f this project to improvements inwater quality and environmental conditions inthe project area. Visible results if adequately documented and properly disseminated can act as strong incentives for communities 9 to demand and pay towards sanitation services and for Government to direct its funding allocations. To this effect, a dedicated component has beenincluded under the project that allows for setting up a well designed monitoring system, based on a solid baseline and systematic sampling/ community surveys to assess the outcomes. This results-based M&E systemwill be set up in the HCWW, will complement regular output monitoring, and will build on the extensive MWRImonitoring programs for water quality, NOPWASD and MOH data and the M&E system established under IIIMP. Local community organizations such as CDAs and WUA's will be engaged in data collection and dissemination. Annex I11provides further details on the proposed responsible entities and overall M&E framework. 4. Sustainability 28. The challenge to efficient long term sustainable sanitation systems operation relates to two aspects: 29. Institutional and Managerial Sustainability: the project adopted a number o f features specifically designed to enhance institutional sustainability. The majority o f the infrastructure works will be implemented by the WSCs, who are in closer proximity to the communities and are responsible for subsequent O&M. This will enhance accountability and the focus on quality o f the investments. Recognizing the management burden that a large number o f smaller systems will place on the WSCs, management responsibility for the smaller systems will be delegated to active CDAs that meet agreed criteria. Last, but not least, introducing well structured performance based O&M contracting o f the local private sector i s a key element to demonstrating effective management set-ups based on clear targets. All o f these features are important in shaping the evolving rural sanitation sub-sector. 30. Financial Sustainability: The project covers a sanitation agenda as well as a water quality agenda. The latter has a larger public good dimension than the former. The project design i s working at the intersection o f these two agendas. As part o f the public good aspect o f sanitation, the Government i s bearing capital cost o f the constructed systems. However, financial sustainability will depend on how well the O&M or recurrent liabilities are handled. For the smaller villages benefiting from decentralized systems, low cost technology options and community participation in selecting and implementing the systems i s expected to reduce O&M costs. Communities benefiting from the project will pay for the cost o f O&M o f decentralized systems to the managing CDAs, therefore ensuringtheir long-term financial sustainability. 31. Concerning centralized systems, the cost recovery will be managed by the three WSCs under the supervision o f the HCWW. It is envisaged that the following actions will support the improved financial sustainability o f the constructed systems: (a) Agreement with HCWW on realistic tariff increase projections over the life of the project coupled with continued targeted subsidy allocation to close the gap; (b) introduction o f private performance based O&M contracting for 2 pilot plants with ring- fenced allocation o f associated costs to test out risk allocation, cost structuring and benchmarking o f operational efficiency, feeding back into the national policy dialogue on cost recovery and sector financial sustainability; and 10 (c) establishment of a local results-based monitoring and evaluation system that creates public disclosure and information sharing mechanisms supporting a national policy dialogue concerning subsidy allocation for public benefits, related primarily to treatment. 11 5. Criticalrisks and possiblecontroversialaspects 1 Risk RiskMitigationMeasure RiskRating" From Outputsto Obiective Delay intariff restructuring for drinking Agree on a vision with HCWWI S water and related wastewater surcharge to MOHUUD for tariff restructuring that (i) atreachingfinancial aims sustainability by end of project life, (ii) takes into account political realities, (iii) inadecliningtransparent factors GOE subsidyto the companies. Support enhancedprivate sector involvement inO&M through performance based management contracts as a means of ensuring reliable service provisionand reducing staffing costs to companies Create public disclosure mechanism of water quality impact that provides local incentives for enhanced performance and supports possible tiiff increase External sources of pollution impair Strong M&E system, including a water S positive project outcomes quality modeling component, to guide the planning andtargeting of Phase 11. Coordination under NVSP to promote coverageinlarger upstreamtowns. FromComponents to Output Lack of capacity at the level of the RSUstaffing to includebothstrong M subsidiary companies for implementing a technical and social staff, supported large number of small subprojects and with TA during project life. addressingsocial aspects o f planning and Successful transfer of knowledge from mobilization. similar settings, includingsocial mobilization programs from Brazil and India. Lack of coordination among the national National Sanitation Strategy currently agencies limits replicationpotential being developedby HCWW adopts M betweenISSIP and the National Village ISSIP approachfor wider Sanitation Program implementation Steering Committee, already functioning, has played an important role incoordination and guidance. Higher than necessarytreatment levels WQ modeling will be usedto verify M demandedby stringent effluent legislation resulting ambient water quality of for smaller systems proposedtreatment levels. Resistanceby the communities served to Implementedpilots indicate high WTP. M pay, particularly under the decentralized Conditions mecedent for CDA 12 schemes, and limitedCDA capacity for I engagement to ascertain demand. O&M. CDA capacity building, community mobilization and communication framework i s essential. Delays on counterpart and donor funding Assure project has nationalbudgetcode M commitment and counterpart fund allocation as o f 2007. Final commitment from donor partners by negotiations 6. Loadcredit conditions and covenants 32. The main dated covenants include signature o f the inter-agency agreement between NOPWASD and HCWW, establishment o f the NOPWASD unit, PIU and three RSU's and the finalization and endorsement o f the P I M .by the main implementingagencies. D. APPRAISAL SUMMARY 1. Economic and financial analyses 33. Economic: The project will expectedly bring about public benefits (e.g., to public health and ambient water quality downstream the interventions) as well as private benefits (household wellbeing). Therefore, the economic feasibility o f the project has been assessed via a Cost- Benefit-Analysis (CBA) approach, rather than the Cost-Effectiveness approach commonly applied with sanitation projects. The CBA has been conducted by factoring in the following considerations: e For phase 1 under ISSIP, the average per capita capital cost i s around $130 (year 2040). Hence, the (amortized) capital cost per household/month i s around 45 LE/month/family at maximum. O&M costs are about 10 LE/month/family. e The private benefits are estimated at the non-income-constrained willingness to pay (WTP), per the "contingent valuation" method. A proxy for this WTP is current payments which households make to empty the cesspits in the project area, around 50 LE/month/family . e The per-capita public benefits from improving rural sanitation have been estimated at about 80 LE/month/family. This estimate corresponds to the expected reduction o f BOD, Fecal Coliforms, Ammonia, and Dissolved Oxygen, towards their ambient and user- specific standards (refer to Annex 3 on M&E and Annex 9 on details). 34. From the aforementioned (capital plus running) unit costs and (private plus public) unit benefits, the project's ERR in the low-case scenario has been estimated at about 10%. It is interestingto note that the replication benefit to the upstream areas, as indicated under the high- case scenario, results in an increase o f the ERR upward o f 15%. Individual switching values ("flags") have been calculated for a number o f key uncertain parameters that would reduce the ERR to the cut-off rate of 10%. These have been subjected to the strategic low scenario explained above, regarding the water quality benefits. The results are as follows: 13 e Investmentunit cost could go uptill USD $140 per capita. e O&M cost could go up to LE 13 per family per month. e Total (private plus public) benefitscould decrease to LE 68 per family per month. e If the project aims only at meeting the private (sanitation) benefits, the ERR would decrease to 7%. This signifies the relative importance o f addressing the water quality aspects o f the project. e In case o f delayed project implementation, that takes four years instead of the assumed three years, the ERR would still be around 10%. 35. Financial: The project will provide financing for the construction o f sanitation systems using both decentralized and centralized approaches in the Governorates o f Beheira, Gharbiya and Kafr el-Sheikh. 36. The decentralized sewerage systems are planned to cover up to 150 villages, using a demand driven approach that will require: (i)up-front community organization through the CDA, and (ii)a demonstrated willingness to collect user charges and manage the operations and maintenance o f the sewerage systems. The O&M costs o f these facilities will vary from village to village, but are estimated to cost on average LE 7 to 10 per month per household. This estimated cost i s in line with the willingness to pay verified in areas where pilot CDA approaches have been implemented. As such, it i s expected that the communities benefiting from the project, will be able to pay for the cost o f O&M for the facilities constructed, therefore ensuring their long-term financial sustainability. 37. The centralized sewerage systems planned to be constructed for a total o f 14 village clusters will be entrusted to the management o f the Beheira, Gharbiya and Kafr el-Sheikh WSCs. A review of the financial performance o f the Beheira, Gharbiya and Kafr el-Sheikh WSCs to assess their future financial sustainability was undertaken during preparation. Details o f this review are available inAnnex 9. 38. Overall the, financial and operational Performance o f these utilities i s weak, mainly due to low tariff levels and lack o f incentives to improve efficiencies within the companies' operations. For the three WSCs under the project, the level o f cost recovery on average i s 60%. Households pay LE 0.23 per m3for consumption o f water up to 20 m3and LE 0.65 per m3for consumption above 20 m3. Wastewater charges are set at 35% o f the water charge. As o f 2006, the Ministry of Finance has undertaken a transparent system for the transfer of O&M subsidy to the HCWW to be distributed among the subsidiaries to cover the cost-revenue gap. The current low tariff levels are envisaged to be gradually increased within an overall Government framework to switch to direct targeting o f the poor, while lifting blanket subsidies over basic services. 39. As subsidiaries of the HCWW, the Beheira, Garbiya and Kafr el-Sheikh WSCs will be part of the HCWW's near-term program for the improvement o f the sector's performance. Key elements o f this program include: 14 a Strengtheningof billing and collection systemsand procedures. a Financial Planning. a Implementationo f an adequate performance monitoring system. e Decentralization and streamlining of utility organization structures. a Corporatizing utility services inthe remaining fifteen governorates. a Buildingcapacity for investmentplanning and programming, including the preparation of mater plans. 40. Inthe long-term, business plans prepared for each of the subsidiary WSCs will serve as the basis for setting up improvement targets in annual performance contracts between the subsidiaries and the Holding Company, under an adequate incentive framework. 41. The government is committed to improving the level o f efficiency within the WSCs; however, the change i s expected to be gradual. The project will be supporting the Government in its efforts, as it will finance the establishment of a local results-based monitoring and evaluation system that links the improvements in sanitation coverage with anticipated environmental and health impacts. This system, in addition to the business plans, will be used to set targets for improvement, and to differentiate between public benefits, related primarily to treatment, and private benefits, related mainly to collection, for the allocation o f subsidy. In addition, during implementation, the project team will coordinate with other donors supporting the three utilities in terms of preparing and implementing an action plan for improvement of collection rates, and support the Government's plans for gradual tariff increases, which should contribute to the improvement o f the performance o f the Beheira, Gharbiya and Kafr el-Sheikh's wscs. 2. Technical 42. The project i s the first large scale effort to address rural sanitation in Egypt. The design therefore presents an approach that i s tailored to serving a large number o f small settlements, emphasizing intermediate and low-cost options and creating incentives for sustainable management. Best practices from around the world have been incorporated, including through exchange o f experience with leading water and sanitation service providers in B r a d and India. 2.1 Technical design aspects: 43. Sewers. The designs would aim at bringing sewers as close as possible to houses and minimize their depth, thus reducing the cost o f connection. The latter will be particularly important where the groundwater table i s less than 2 meters below ground level. Options such as shallow and small-bore sewers will be considered where applicable. The condominia1 system adopted in Brazil provides valuable lessons on coupling low cost technical design with social field work to arrive at the best sewer routes and enhance community ownership. Needless to say, theses sewer types would require proper use by the residents and regular maintenance by the communities. Community mobilization activities are, therefore, essential to ensure sustainability o f these components. 15 Wastewater treatment. There are various low cost treatment technologies suitable for rural setting with flow rates in the range o f 3,000 to 9,000 m3/day. Various methods, including Upflow Anaerobic Sludge Blanket (UASB); Advanced Rotating Biological Contactors (RBCs) and Advanced Sequential Batch Reactors (SBRs) have been successfully tested in rural Egypt. These methods have a low footprint and reduced energy consumption when compared with other mechanically aerated systems. During implementation, a menu o f appropriate technologies will be provided based on technical, operational, and financial merits.The evaluationwill be done on a case by case basis, to reach the optimal Design-Buildprocess. For isolated smaller villages and ezbas with 500 to 1500 people, simpler technologies, delivering an enhanced level o f primary treatment are proposed. Because o f their small footprint and simplicity, the preferred option i s baffled reactors and anaerobic filters, typically with a 48-hour retention time. These will require little maintenance other than regular desludging. 44. Pilot Performance Based O&M Contracting. The sector has historically suffered from failures to provide sustainable quality operation o f the construction systems. The HCWW, consistent with current industry trends intends to launch performance based contracting for the O&M o f WWTPs to enhance accountability within the right incentive framework. The project will support this initiative for 2 facilities inthe area to demonstrate effective PBC arrangements with local private sector. It will also support the companies in structuring and supervising these deals. These 2 pilots will provide valuable lessons in risk allocation, cost structuring, technical considerations (boundaries o f the contract) and benchmarking o f operational efficiency, that would feed into the larger policy dialogue on cost recovery and sector financial sustainability. The final selection of the two candidate plants and the review ofthe current draft contract models will be undertaken inthe first 6 months o f implementation. The HCWW PIUwill retain technical and contractual expertise to guide the subsidiaries on technical and legal issues o f contract management in coordination with national efforts on public-private partnerships. 2.2 Planningand implementationprinciples: 45. The planning and implementation methodology incorporates for the first time in Egypt innovative features that are tailored to the rural setting, bearing in mind that it should be easily replicable to serve as a model for the NVSP throughout the nation: 46. Hydraulic Basin and IWRM approach: The project operates intwo hydraulic basins, Mit Yazid and Mahmoudeya, in which irrigation improvement activities are being carried out under another Bank-funded project. The objective o f selecting the same target areas as the irrigation project i s to demonstrate a novel integrated basin improvement approach for the environmental sanitation problems in the Delta based on integrated water resources management principles. Planning the clustering and M&E systems along the sub-basin boundaries' allows for a closer link betweeninput and impact. Furthermore, the project will benefit from the presence of WUAs in monitoring and social mobilization, which are formed along irrigation canals and supported through the IIIMP project. 47. Clustering approach: The cluster is considered as the unit o f planning for the project. Each cluster i s centered around one treatment plant located at an optimal central location to serve ' Sub-basinsareprimarily defined aroundsecondary drains, with reaches inthe range of 15-20 km. 16 the maximum number of villages. A number of smaller villages will not be feasible to connect to the centralized treatment plant, and will therefore obtain a decentralized sanitation solution. The concept o f clustering considers a comprehensive and cost effective solution for all villages falling within, based on economies o f scale, pollution abatement objectives and demand responsiveness for smaller settlements. In selecting cluster boundaries, consideration was made to maximizing use o f existing underutilized WWTPs, avoiding expensive crossings o f barriers such as main canals and railways, covering one or two administrative units rather than smaller portions o f a larger number o f units, and maximizing impact upon water quality in receiving drains. 48. Determination o f cluster size was carried out so as to optimize the technical and financial aspects. Too small a cluster would result in very large number o f such units, which would be unwieldy once the project concept is expanded nationwide, and would defeat the economies of scale concept. Too large o f a cluster, on the other hand, would lead to crossing large number o f administrative boundaries, and would render the solutions for rural setting not usable, as this would bring the scale closer to urbanized settings. Maps for the final clusters selected under the project are included in Annex 14. Within clusters, the villages/settlements will be provided one o f four types o f sanitation services dependingon the optimal solution for its specific conditions: Categories of Sanitation Services A. Centralized svstem: for villages with population B. Decentralized svstem: for settlements with between higher than 1,500 inhabitants and smaller villages in 500 and 1,500 inhabitantsnot locatedalongthe networks their proximity. These villages will be served by serving larger villages. Because of their small size, sewerage collectionnetworks, leadingto a single central expressed communitydemand to receive the service and WWTP. Smaller villages should be connected ifthe cost undertake community managementthrough a CDA will o f doing so does not exceed the cost o f decentralized be a precondition for serving them. The schemes will treatment. Overallresponsibility for centralized schemes incorporate local collection systems discharging to will lie with the subsidiary water and sanitation simple treatment works providing enhanced primary companies (WSCs), who may contract out O&M to local treatment, typically consisting of a communal septic private sector operators. tank followed by a series of baffled reactors. Pumping shouldbe avoided ifpossible. C. GTZ Dilot decentralized svstem: for villages D. On site system: for settlements with less than 500 between 1,000 and 5,000 inhabitants, which because of inhabitants. These will continue to use on-site sanitation their size and distance from other villages may be systems, based on cesspits or septic tanks. The project suitable for implementation of a decentralized has incorporated the resulting septage in the design of community managed approach and natural treatment the treatment capacity within the cluster and will aim to technologies. Preconditions for adopting this approach coordinate with LAUs to enhance desludging efforts. will be that communities are committed to provide the land needed for treatment and/or pumpingworks and to take full management and financial responsibility for the scheme, financing 100% of operating costs. This approach will be tested for replicationunder the overall guidance of GTZ and following the model already successfully developedin Moufti Koubravillage. 49. Prioritization; Given the limited funds available inrelation to the overall sanitation needs o f the selected project areas, it was decided early on that a methodology for selecting priority village clusters should be developed based on multi-criteria analysis o f most relevant factors, 17 including population served, reuse potential, location in relation to main drains and canals, potential health benefits, water quality and the proximity to water treatment works. These factors are implicitly based on the key principle that interventions should target areas in which largest impacts can be achieved. The result o f the analysis constitutes the Strategic Sanitation Plan with a prioritized ranking o f areas within each o f the two command areas. The project will serve the identified first priority area, which are along the Mahmoudeya Canal and inthe center o fthe Mit Yazid Command Area. 50. The pilot water quality modeling work carried out shows that the greatest beneficial impacts on receiving water quality will be achieved if schemes are developed around drains that originate within the project area and do not carry heavily polluted flow from large towns. This will be further used when finalizing the strategy for Phase I1 o f the project. The Phase I prioritized areas do include some schemes that will link to heavily polluted main drains but all will also bring about significant improvements in conditions in smaller, less heavily polluted drains. 51. Implementation Phasing: The first phase o f the project (first two years investment program) consisting o f 4 clusters has beenselected to maximize the use o f existing facilities and demonstrate different cluster models in the three Governorates. The total cost o f this 2-year investment program covering 4 clusters in the two command areas is estimated at about $50 million, or 25% o f the total project cost. The second phase will cover the years 3-6, and will allow for incorporation o f lessons learned from the first phase implementation and adaptation o f the final plan according to the results on the ground. This includes: (i)revising the overall Strategic Sanitation Plan, (ii)adjusting the proportion o f centralized versus decentralized and GTZ model systems in subsequent clusters, and (iii)assessing the efficiency o f the adopted institutional setting and adjusting allocation o f works among the implementing agencies if needed. 3. Fiduciary 3.1 FinancialManagement 52. A financial management assessment was conducted to identify the adequacy o f the implementing entities' financial management capacity for the project. While NOPWASD will have the overall responsibility for the project implementation, it was agreed that NOPWASD will enter into an interagency agreement with HCWW (dated covenant) by virtue o f which HCWW will be responsible for implementing parts A2, A3, A4, B and C o f the project (as per the identification of parts inthe loan agreement). Inthis context, visits to NOPWASD, HCWW and its three affiliates involved with the project implementation (Beheira, Gharbeya and Kafr El- Sheikh Water and Wastewater Companies) have taken place to agree upon the project implementation model and the associated financial management arrangements required to support the project activities. 53. The projets has three major components. The Bank will finance Component 1 (Provision o f sanitation systems within selected drainage sub-basins). However, there i s a high degree o f interdependence between this component and the other two components that are financed 18 through both the counterpart financing as well as the Dutch co-financing (a letter was issuedby the Netherlands Cooperation agreeing in principle on supporting the project institutional development needs). The proposed financial management arrangements took into consideration this specific design. 54. The involvement o f different players in the project implementation poses an additional challenge inrelation with the coordination among the implementing entities. The implementation arrangements tried to avoid potential overlaps among them with clear responsibilities for specific activities assigned to each party (NOPWASD, H C W W and the three WSCs). The implementation manual i s currently being drafted with the support o f the consulting firm contracted to support the project preparation activities. A first draft was received in early February 2008. 55. The lack o f recent Bank experience with the implementing entities poses additional risk when it comes to project implementation. In addition there exists varying levels o f capacities across the different entities. For example, the automation o f accounting information systems in Beheira and Gharbeya Companies i s more advanced than that in Kafr El-Sheikh Company. Accordingly the level of TA support to institutional capacity will be tailored to each entity's status and needs. 56. NOPWASD will have the overall implementation responsibility and accordingly will ensure that proper books o f accounts are maintained, periodic Interim Financial Report and annual project financial statements are issuedand submittedto the Bank. NOPWASD will ensure that the annual project financial statements are audited by an auditor acceptable to the Bank and that an annual audit report issued according to standards acceptable to the Banks, i s submittedto the Bank within 6 months after the closing of the fiscal year. 57. The disbursement of the loan funds will follow transaction based disbursement model using direct payments to contractors/consultants and/or advances to designated accounts to be opened by NOPWASD (the legal counterpart entitled to receive the loan funds). Accordingly NOPWASD will use the loan financing to implement the wastewater treatment works under the project. It will also make funds available to H C W W to implement its affiliates' respective activities. To accommodate a smooth and clear flow o f funds process, the Bank will finance the project through two designated accounts to be opened by NOPWASD. Account A will cover NOPWASD's managed activities while Account B will cover the three WSCs managed activities. To speed up implementation, the management o f Account B should take into account the decentralized nature of implementation (through the 3 WSCs) and the consequential efficiency requirements. 58. Based upon the above, the overall residual FMrisk i s assessedto be "Significant". Annex 7 describes in details the identified risks, the mitigating measures as well as the detailed project FMarrangements. 3.2 Procurement 59. An assessment o f the capacity of implementing agencies to undertake procurement actions for the project has been undertaken. Since the implementation model i s designed to 19 provide the balance between centralized planning and construction support, along with decentralized implementation and management, the assessment reviewed the organizational structure for implementingthe project and the interaction betweenthe project's staff responsible for procurement with the "management" units responsible for administration and finance in NOPWASD and HCWW as well as WSCs. Annex 8 explains the outcome of the assessment and identifies the risks associated with the implementation o f procurement activities. Consequently, it establishes the necessary requirements the Borrower needs to undertake as corrective measures. The procurement arrangements for the project address these identifiedrisks and weaknesses. 60. The overall implementation o f the project will be managed by a Project Implementation Unit housed at HCWW. The PIUwill be headed by a senior HCWW officer and supported by a team o f specialists who will work closely with ISSIP Unit at NOPWASD and RSUs at WSCs. The whole procurement program containing main investment contracts will be procured by a centralized and decentralized implementation process as explained in Annexes 6 and 8. To reinforce implementation capacity, funds are made available through grant donor co-financing to ensure technical assistance for each o f the implementingagencies (HCWW, NOPWASD and the three WSC's). The TA consists o f a team of specialists to support the PIU and RSU's in their mandates mainly inprocurement. 4. Social 61. The project will have substantial social benefits. Inparticular, it responds to a strong user demand for improved sanitation services. It will provide environmental and economic benefits through improved sanitation. Lastly, social cohesion will be strengthened through the organizational activities o f the community development associations (CDAs) and water user associations (WUAs) and the capacity buildingthey receive. The project will use a participatory, demand-driven approach, helping to ensure sustainability through putting in place systems that users want and are willing to pay for and maintain. The social mobilization and community participation approaches will thus be essential for project success. Accordingly, a Community Participation Framework has been prepared which contains village participation criteria, along with principles of community participation, responsibilities of stakeholders, social mobilization techniques, and plans for capacity building. The framework contains elements which promote the community participation o f both women and men. The possibility o f credit mechanisms for poor families will be explored, to facilitate their repayment o f house connections, 62. Hygiene promotion is recognized as an essential activity to maximize the health benefits o f the project's investments in infrastructure. Following the hygiene promotion scoping study conducted in 2006, a formative research study was conducted to determine the essential information for design o f hygiene promotion activities to accompany the social mobilization efforts within the project. The formative research study thus identified (i) those hygienepractices which should be priorities for behavior change, (ii)the most appropriate channels and agents for communication and influence on behavior, and (iii) the most promising motivators for change in behavior. At the outset, a large number o f focus group discussions were held with community members to identify high risk practices suitable for change. In the second stage, a structured observation, household and school survey was designed and conducted in 140 households and 20 20 schools in the project area. The results will serve as an unusually strong basis for design o f the elements o f the hygiene promotion activities in support o f project goals. 63. Loans for household toilet provision. Social surveys show that most households in villages to be served by the project already have household sanitation facilities. There i s some variation betweendifferent surveys but on average at least 90% of households have access to an in-house toilet. There remain some who have to make alternative arrangements. The ISSIP's full healthand environmental benefits will only berealized ifthese households have access to in- house sanitation. Awareness raising exercises carried out by RSUs and their consultants can also be used to identify toilet-less households start to promote the benefits o f improved sanitation. Further promotion activities will probably be required, possibly alongside arrangements to provide small loans for in-house sanitation improvements. The project will coordinate with existing programs such as the Social Fund which could develop a system o f small loans for sanitation and general house improvements, to be implemented in coordination with rather than directly through ISSIP. 5. Environment 64. The proposed project falls under the World Bank environmental category B classification, according to the Bank's Operational Policy 4.0 1 (OP 4.01) on Environmental Assessment i s triggered. By virtue of the project geographic extent, the feasible approach for environmental and social assessment was to follow the "Framework Approach". The partial assessment required, according to OP4.01 i s presented in details in the "Environmental and Social Impact Assessment Framework (ESIAF)" report, which describes the evaluation of impacts, and presents an Environmental and Social Management and Monitoring Framework (ESMMF) which includes mitigation measures, monitoring plan, and institutional aspects. The main issues raised are included inAnnex 10. 65. The ESAIF found the project to have major positive environmental and social impacts, resulting from the overall improvement o f the water quality in a number o f drains and canals in the project command area. This will result from stopping the discharge of the untreated wastewater to these canals and drains, once the centralized and decentralized sanitation services are provided to the village clusters which are responsible for water quality degradation. The improvement of water quality will have a far reaching improvement on the health o f the residents, who currently have elevated incidence o f water borne diseases (such as diarrhea and gastroenteritis). This results in a considerable overall improvement in people's quality o f life. Furthermore, the project i s expected to create employment and business opportunities for the local population, especially related to unskilled labor, during the construction phase o f the sewerage systems. The project will also stimulate the private contractor sector, likely to operate the newly construed, and/or existing, wastewater treatment plants. 66. The ESMMF outlines the various mitigation measures which would respond to the potential negative environmental impacts which may result from the improper construction and/or operation practices. The ESMMF, furthermore, assesses the institutional capacity o f the implementingagencies, inregards to environmental and social safeguards, and proposes capacity building measures. The ESMMF finally proposes a monitoring plan to ensure environmental impacts are accounted for and are within the national and international standards. 21 6. Safeguard policies 67. A Resettlement Policy Framework (RPF) establishing overall resettlement objectives and principles has been prepared, as there may be involuntary land acquisition under component 1 (provision o f sanitation infrastructure). The RPF discusses legal aspects o f land acquisition, and how the law has actually been applied in similar cases in Egypt in the past. As the extent o f potential involuntary land acquisition becomes known, Resettlement Action Plans (or abbreviated RAPSdepending upon scale and severity o f impacts), will be prepared before any physical worWconstruction i s initiated. The RPF includes criteria for the screening o f subprojects, guidelines for mitigation and compensation, implementation arrangements for the RPF and assessmento f the capacity for its implementation, and the identification o f the source o f funding for any resettlement activities. 7. Policy Exceptions and Readiness Criteria Status Fiduciary Boththe procurement and FM assessmentshave resultedin specific action plans. The Project ImplementationManual identifiesthe roles andresponsibilitiesfor fiduciary and safeguardimplementation, anda first draft ofthe PIMwas receivedby the Bank on February 13,2008. Staffingand consultants The NOPWASDISSIP Unit Director, as well as the WSC RSUstaff have been nominated, hiring ofthe HCWW PIU Director is currently underway. Tender Documents Draft Bidding Documentsfor the first phase clusters are currently underway and will be reviewedprior to effectiveness Disclosure requirements The final ESMMF was disclosedboth in Egypt and the Banks Info shop on December 13,2007. Monitoring/ Evaluation M&E Indicators havebeenpreparedand incorporatedinto the project design and implementation arrangements,a separate componenthas been dedicatedto ensuring full scale input/outcome monitoring. Parallelfinancing - II I Initial indicationof commitments for parallelfinancinghas beenprovidedby NetherlandsCooperationand GTZ, and will be finalized prior to projecteffectiveness. I * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination ofthe parties' claims on the disputed areas 22 Annex 1: Countryand Sector or ProgramBackground 1. Key macroeconomiccountryissuesand Challenges 1. Egypt's GDP growth rate decelerated between 2000 and 2003, averaging around 3.2 percent per annum. The loss o f growth momentum was accompanied by a decrease in both private and public investments.This slow down has however reversedinthe past three years, due to several factors, including increased world economic growth, flotation o f the Egyptian pound and a related increase in the demand for key Egyptian exports and the increase in oil prices and related earnings. The Egyptian economy grew by an average o f close to 7% in the past year. Growth continues to be driven by the gas, construction, tourism and Suez Canal sectors (each up by 10%to 15%). The balance-of-payments surplus increased from 0.7 o f GDP inQ2-06 to 1.6% in Q2-07 to reach US$1.8 billion. FDI almost trebled in Q2-07 to reach US$4.1 billion. This more than offset the significant drop in portfolio investmentsto just US$ 19 million in Q1-07 as Gulf investments were significantly withdrawn, a phenomenon seen across the region. The exchange rate has remained within a band o f less than 0.2% during the last few months, and stands currently at LE 5.71/US$ from an average o f around LE 5.72 in January. The level o f external debt and its share o f GDP declined to US$ 28.9 billion and 25% in Q1-FY07, and external debt service was still low at around 6.7% o f current receipts. 2. The key challenge remains to ensure that this high growth is well distributed both geographically and among the different segments o f society. The Government has declared that the equity agenda is of highestpriority. Among the issues that it intends to tackle inthe coming year i s reforming the subsidy system to ensure a more efficient and targeted allocation o f subsidiesto the poor. 11. Key EnvironmentalIssues and Challenges 3. Surface water contamination i s among the most significant environmental issues currently besetting Egypt. In general, surface water quality exhibits deterioration as we move downstream with the worst pollution occurring at the northern lakes. The domestic water demands result into about 3.8 BCM/yr o f waste water being discharged into the Nile, out o f which not more that 35% are treated. Pathogenic pollution o f surface water has been recorded to increase during the 1980s and to decrease gradually throughout the 1990s and in all cases it exists in restricted localized areas. The government comprehensive plans to extend sanitation coverage and waste water treatment to rural areas are expected to eliminate significant pathogenic pollution by year 2017. Industrial effluents contribute to about I.3 BCM/yr o f untreated waste water being discharged to surface waters. Food industries contribute to 45% of total effluent discharge and to 67% o f the total BOD load introduced. BOD levels in the Nile, at mid stream, are still below 6 mg/l. The Nile branches experience more Oxygen depletion which may reach a Dissolved Oxygen value of 3 at downstream end presenting potential hazard to aquatic organisms. Industrial effluents contribute to the increased levels o f trace elements especially after the construction o f the high dam where the potential for flushing the contaminated sediments during the flood period was eliminated. Drainage return flow to the Nile result into an increase in salinity o f the water from 130 mg/l at Aswan (far upstream) to 250 mg/l near the delta barrage. Nitrogen fertilizers whose consumption has doubled between 1980 and 1993 present another source o f pollution. Water hyacinth flourishing at the downstream o f 23 water ways due to increased nutrients lead to clogging of canals and is combated with mechanical and biological technologies. Despite of the flourishing fish production in Egypt, only 17 species remain as of 1995 out of 47 species which used to be available in 1948. A national water quality monitoring program is launched by MRWI comprising more than 300 observation sites. 111. InstitutionalFrameworkof the Sector 4. Several ministries are involved in managing the water sector. The Ministry o f Housing, Utilities and New Communities (MOHUUD), provides water supply and sanitation services to the municipaland industrial subsectors.The Ministry of Water Resourcesand Irrigation(MWRI) i s in charge of development, distribution and management of water resources, and development and O&M of the associated waterworks. The Ministry i s also responsible for collection and disposal of agricultural drainage water, monitoring and assessment of water quality of the various water sources, and protecting the coastal lakes and the shoreline. Some other ministries participate by different degrees in auxiliary management and operation of part of the irrigation and drainage systems such as Ministry of Health and Population (MoHP), the Ministry of State for Environmental Affairs, andthe Ministry of Local Development (MOLD). Ministryof Housing;,Utilities andUrbanDevelopment (MOHUUD') 5. Under the Ministry of Housing, Utilities, and Urban Development (MHUUD), the National Organization for Potable Water and Sanitary Drainage (NOPWASD) is responsible for planning, designing, and overseeing construction of water and waste water systems. NOPWASD has an independent annual budget that comprises all investments in potable water and waste water at the national level, excluding those appropriations of Cairo and Alexandria, which are managed by the sister organization, Cairo and Alexandria Water and Wastewater Projects Organization (CAWPO). MHUUDNOPWASD has the mandate to expand water supply and sanitation, including through the recently launchednational program for village sanitation. 6. Apart from few privately owned systems built to service resort areas, all water and wastewater utilities in Egypt have been traditionally state-owned. Currently, this sector is experiencing a process of reform. Among Egypt's 26 governorates, plus Luxor, there are now several basic forms of organization for the water and wastewater sector. The government has been keen to establish self-sustained "companies" in most of the governorates, with the goal of reducing recurrent fiscal burden on the government, while improving efficiency and sustainability of operation and maintenance (O&M) services. In 2004, two presidentialdecrees were issued, regulating the water supply and sanitation under the responsibility of the MHUUD. The first decree (no.135 for 2004) i s concerned with creating a holding company for drinking water and waste water and its affiliated companies, and transformed the General Economic Authorities for Drinking Water and Wastewater, operating in the governorates, into affiliated companies under the Holding Company for Water and Wastewater (HCWW). The company will seek new financial resources to sustain the O&M budget and relieve the burden on the Government. The Government's role will be limited to setting national policies for improving potable water and wastewater services and expanding the coverage of these services according to each governorate Master Plan which i s currently being implementedby local consultants. These governorates and companies include Alexandria, Aswan, the Beheira Water Company, Beni 24 Suef, Cairo, Dakahlia, Damietta, El Minia, Fayoum, Gharbia, Kafr Elsheikh, Sharkia and Qena. The second presidential decree (no. 136 for 2004) covers the creation of the Egyptian Water and Wastewater Regulatory Agency (EWRA). It focuses on regulation and monitoring for quality control and tariff adjustment. It reports to MHUUD and will be the liaison between the Government, the customers, and the HCWW. Another presidential decree in 2006 authorized HCWW to establish WSCs inthe rest of the governorates. Ministryof Water Resourcesand Irrigation(MWRI): 7. The Ministry of Water Resources and Irrigation is the government body responsible for water resources management in the country. These water resources include the Nile, the High Aswan Dam reservoir, the groundwater reservoirs, flash floods, and the coastal lakes. The MWRI's main mandate is regulation and distribution of water resources throughout Egypt as well as water quality management to serve all water users. The Ministry has recently issued the National Water Resources Management Plan which effectively calls for the implementation of Integrated Water Resources Management (WRM) across the water using sectors, and identifies key pillars for action to ensure sustainable utilization and abstraction for different purposes. The Ministry also presides over the National Water Research Center (NWRC), consisting of twelve research institutes and is responsible for all research activities in the field of water management and development. 8. Recently, the MWRI has promoted the decentralized approach for managing the irrigation systems. Farmers, as major water users, have formed Water User Associations (WUAs). WUAs are organized at the tertiary canals (mesqa) level and are legally supportedby the modification of Law 12 in 1994(known as Law 213). Since thenmore that 2500 WUAs have been established. A new modification of the Law 12 is sought to allow for higher level water user organizations to be established and legally recognized. IV. Legislative framework 9. Several laws and decrees have beenapproved by the Egyptian Parliament, the Cabinet of Ministers and the President to organize the distribution of water among different users and recently to protect the environment and water system from pollution. The main laws of relevance to the water sector legislative framework are: Law 93 for the year 1962 for the discharge to open streams and its modifications for the years 1962, 1982, and 1989, Law 27 for the year 1978 for Regulation of water resources and Treatment of Wastewater, Law 12 for the year 1984 for the Irrigation and Drainage, Law 48 for the year 1982 Regarding the Protection of the River Nile and Waterways from Pollution, The Decree 380 for the year 1982 for the Industrial Water Pollution Control, Law of Local Administration no. 43 of 1979, and Law 4 for the year 1994 for the Environment protection. The NWRP includes a detailed description of all water-related legislation and their current status. Finally, MOHUUD is currently in the process of drafting a special law to govern water and wastewater services in Egypt, defining institutional mandates of the different entities under the sector, the potential role of the private sector and governing principles, and the rights and responsibilities of the consumer. 25 V. Financingthe Water Supply and Sanitation Sector 10. The analysis o f the budgets o f authorities and utilities under MOHUUD showed that the total annual budget increased from L.E. 4.73 billion in year 1997/98 to L.E. 8.45 billion in 2003/04. During the period 1982 - 2004, a total o f LE 25.0 billion worth o f investments have beenchanneled by the state budgetto potable water supply services. Moreover, a total o f LE 40 billion has been investedin sanitation services. The potable water production increased from 5.8 million m3/day in 1982 to 18.2 million m3/day by year 2000. The per-capita rate o f potable water use increased from 130 liter/da in 1981 to 275 liter/day in 2000. Productivity o f sanitary stations increased from 1.O million m /day in 1982, to 8.3 million m3/dayin2000, and planned to Y reach 20.0 million m3/dayby 2017. As o f today, rural sanitation still presents a major challenge and an impeding factor along the track o f environmental sustainability. Table 1. 1 Investment and O&M Costs for the Water Supply and Sanitation Sector All values are in Investmentsin Operation and Total Billion L.E.per Stakeholder Water Projects Maintenance Costs Year (Budget Provision) 97/98 03/04 97/98 03/04 03/04 Water Water Supply and MHUNC Supply 0.991 1.65 0.580 1.027 2.677 SanitationSector Sanitation 1.490 2.480 0.870 1.54 4.020 Sub-total 2.481 4.130 1.450 2.567 6.697 Environmental Degradation State Budget Damagecost -1.62-3.24% ofGDP 11. The NWW predicts a total o f 145 billion Egyptian Pounds worth o f investments within the water sector during the period 2003 - 2017. The Ministry of Housing, Utilities and Urban development i s foreseen to contribute to 63% o f the latter investments and the Ministry of Water Resources and Irrigation will provide 32%. The private sector, based on current scenarios, will take care o f about 5% o f these investments. 12. The total recurrent costs in the same period 2003-2017 are estimated at LE 44 billion. These costs include the operation and maintenance costs o f the system but exclude the personnel costs o f the government agencies. The municipalities (Ministry of Local development) and the subsidiary companies take by far the biggest share o f the O&M costs (70%) for the operation and maintenance o f the drinkingwater treatment plants and the waste water treatment plants. 13. Insummary, the costs for water services for the next fifteen years will be more than triple the current expenditures. Future allocation of such high costs presents a heavy burden for the government state budget. Alternative scenarios for financial sustainability o f the water sector needto be addressed. 26 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies The following related projects, which are financed by the World Bank and other development agencies, are ongoing, plannedor recently completed. Latest Supervision(Form 590) Ratings (Bank-financed ProjectsOnly) Sector issues Project Implementation Development Progress(IP) Objective (DO) - Moderately Satisfactory Irrigation ImprovementProject Satisfactory Ongoing SecondNational Drainage Satisfactory Satisfactory Project Integrated Irrigation Moderately Improvement & Management Satisfactory Satisfactory Project West Delta Water Conservation Satisfactory Satisfactory & Irrigation Rehabilitation Project European Union Budget Support NA NA Programme for Water Sector GTZ Decentralized Water NA NA Management Project in Kafr El Sheikh USAID Water and Wastewater NA NA Sector Policy Reform Programme - Solid Waste Management Planned Planned Project 27 Annex 3: ResultsFramework and Monitoring 1. Inter-agencyCoordinationand M&E process 1. The results-based M&E system will focus on monitoring outcomes and reporting on impacts of the implemented sanitation services. This will, for the first time in Egypt, allow for the quantification of benefits occurring due to improved sanitation and feed into the decision making process on allocating new funds and prioritizing investments. Much of the M&E activities will make use of the M&E tools, laboratories, and analysis results already existing per the mandate of the Ministries of Water Resources and Irrigation, Health, and Housing (as illustrated in the Figure below). The M&E team should also be able to utilize one of the water quality modeling/management systems existing at the MWRI's Drainage ResearchInstitute or at MWRI's Planning Sector, then connect this system to the unit's own Management Information System. 2. To evaluate impacts against the PDO, the M&E team will coordinate with the Water Boards Project and with IIIMP (including their respective regional inter-ministerial committees, involving Ministry of Water Resources and Irrigation, Ministry of Health, and Ministry of Environment). To monitor intermediate outcomes under component #I, unit will coordinate the with NOPWASD and the three subsidiary WSC's as concerns the progress of implementation. As for monitoring intermediate outcomes under component #3, the unit will coordinate with the three WSCs/RSUs and with the respectiveCDAs. Figure3.1: GOE entities entrustedwith water quality monitoringand compliance management Water quality management I Legal aspects Prevention MoHUNC (Law 93-1962) Inland: NWRC and EHD agro-chemicalsMALR MWRI (Law 48-1982) Coastal:EEAA licencing MWRI env.action plan EEAA Emuents Treatment Inland water MWRI Compliance:MoHP Municipal:NOPWASD/GOSD/ Drinking water MoHP AGOSD/Governorates/ORDEV Coastal water EEAA -I- Industrial:GOFIBaciIities DistributiodReuss MWRVMin.of Interior - MWRI EEAA/ WaterPoke 28 Table 3.1. ResultsFramework Use of Project Outcome PDO Project Outcome Indicators Information Contribute to the sustainable% increase in coverage and no. of * Evaluatesuccess or failure of improvement in: (i) sanitation and households connected. project. environmental conditions for the resident communities and (ii) the water % of target population expressing * Adjust schedulingand targeting of quality in the selected drainage basins satisfaction with local environmental differentphysicaland TA within the servedareas. conditions associated with improved wastewater management. (local interventions. ponding, canalwater quality, etc.). % households practicing improved * Designof/ advocacy for scale-up hygiene behavior as measured ofproject beyond current area. through qualitativeresearch. Ambient Fecal Coliform, and BOD measurements, plus site and user- specific DO and Ammonia measurements, compared with national standards, in canals and drains aroundaffectedcommunities. Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring Component 1 No of additional working * Monitor progressof physical Provisionof Sustainable Sanitation wastewater connections. works; performanceof contractors; Servicesto rural populations in project design, sequencing and use of area. % number and discharge(m3/day) works achieving design effluent abatementinterventions. quality. Component 2 M&E system in place no later than * Adjust performance of TA Establishment of a local result-based six months after projecteffectivess consultants as needed. monitoringand evaluation system Semi-annual M&E reports prepared * Adjust focus of communication with the above contents by HCWW program. for the Steering Committee and local * Revise design, planningand stakeholders. targetingof later interventions. **Inform water quality planning. Component 3 % (in value) of ISSIP bidding Monitor training program and Institutionaldevelopment and capacity documents fully prepared and methods selectedto train the building implemented by the subsidiary companies and the communities. companies. * Review or adjust decentralization Number of signed agreements of strategy. decentralized system management * Adjust performanceof TA delegatedto CDAs. needed. YO community contribution to *consultants as Assess financial sustainabilityand O&M. revise strategy ifnecessary. 29 3 v) & 00 3 m D. 2 * 2 * x2 N n m b- s 00 0 h 3 m Annex 4: DetailedProjectDescription A. Context 1, The Integrated Sanitation and Sewerage Infrastructure Project (ISSIP) aims to provide sanitation services to people living inpriority village clusters in Beheira, Gharbeya and Kafr-El- Sheikh Governorates in the Nile Delta. The project i s linked to parallel efforts under the IIIMP project to improve irrigation systems in the three governorates and is thus linked to two specific irrigationcommand areas, the Mit Yazid Canal command area that straddles Gharbeya and Kafr- el-Sheikh and the Mahmoudia Canal command area in Beheira. This arrangement offers significant economies of management, demonstrates the implementation of IWRM on the ground and builds on the experience with the institutions and communities of the area. Existingsituation in the projectarea 2. The project area inthe three Governorates can be characterizedas mostly flat agricultural land with a high water table (less than 5 meters).Most development is fairly recent in origin and rights of way, other than through roads, are not raised much above the natural ground surface. The high water table is a significant problem for sewerage design and implementation. Annual rainfall i s very low, ranging from about 50mm per year in the south of Gharbeya to lOOmm or more per year inthe north of Kafr El Sheikh and Beheira. 3. Villages in Gharbeya tend to be urban in character with many buildings rising to three stories or more. InKafr El Sheikh and Beheira villages are more rural incharacter but even there many buildings have more than one storey and are occupied by more than one household. Rights of way tend to be narrow, often less than 3 meters, with houses built up to the road. 4. Water use varies considerably between villages but i s often inthe range of 100-140 l/cd. Most households in the three Governorates covered by the project already have water-flushed sanitation although few are currently connected to sewers. Most houses that are not connected to sewers discharge wastewater to cesspits with a small percentage discharging directly to nearby drains. 5. Field reports indicate that in some locations where the water table is high cesspits are emptied 2-4 times a month, suggesting either that these are true closed cesspits or, more probably, that infiltration is poor. Some villages have installed a rudimentary wastewater collection system (erroneously identified as a groundwater lowering system) which discharges into the closest agricultural drain. There are also some 15 wastewater treatment plants in the three Governorates, serving the largest agglomerations. Flows to many of the existing wastewater treatment plants (WWTPs) are currently well below design flows, offering possibilities to connect both additional households within already-sewered areas and add new areas to existing works without requiring additional investment in WWTP capacity. Such connections could, at the same time, offer relatively low-cost sanitation arrangements to the new customers, improve revenues for the service provider, and insome cases improve performance at the treatment works. 32 6. Existing WWTPs mostly use activated sludge or extended aeration technology, the latter in the form of oxidation ditches. While these technologies can produce good effluent quality if operated correctly, their demands for operational skill and energy are high, increasing operational costs, and they require considerable back-up generator capacity to cater for periods when there are power cuts. Oxidation ditches have the added disadvantages of a relatively large footprint and the need to dewater large volumes o f watery sludge. Recognizing these disadvantages, NOPWASD has experimented with some other treatment processes. These include an Upflow Anaerobic Sludge Blanket (UASB) plant at Nahtay in Gharbeya, a modified Rotating Biological Contactor (RBC) plant at Fisha Selim, also in Gharbeya, and Advanced Sequential Batch Reactors (ASBRs). ASBRs use activated sludge processes which take place sequentially inthe same reactor rather than in a series o f reactors. ASBRs have a small footprint and can use less energy than conventional activated sludge B. ProjectDescriptionby Component 7. ProjectDevelopmentObjective: The mainobjective o fthe project is to contribute to the sustainable improvement in: (i)sanitation and environmental conditions for the resident communities and (ii) water quality inthe selected drainage basins within the served areas. the 8. Project Area: The project area falls within the two command areas of Mit Yazid and Mahmoudeya, with a total population o f about 1.35 million. The project area represents the first priority ranked areas for sanitation services within the command areas, based on multi-criteria ranking undertaken as part o f the feasibility study. This first priority area covers about half o f the total command area, and includes a total o f around 870 villages and hamlets, with a current population o f close to 1 million inhabitants. Project components: 9. Component 1: Provision of sanitation systems within selected drainage sub-basins (totalcost US$181millionof which, IBRD portionUS$120million) - This component aims to plan, design and construct sanitation systems for a total o f 14 clusters inthe selected priority area within the two command areas o f Mahmoudeya and Mit Yazid, falling within the Governorates o f Beheira, Gharbeya and Kafr El Sheikh in the Delta. The component will be divided into three sub- components: (a) Centralized sanitation systems construction: includes the construction o f complete sanitation systems for an estimated 222 larger villages (>1500) within 14 clusters, including: (1) Construction o f treatment plants, and (2) Construction o f collection network consisting o f house connection, transmission lines, and pumpingstations; (b) Decentralized sanitation system construction/ rehabilitation: will serve an estimated 120 individual villages/ hamlets with population size less than 1500 inhabitants, providing them with a decentralized system consisting of shallow sewers and anaerobic baffled reactors, and relying on delegated community management for subsequent O&M. It will also include the upgrading and rehabilitation o f existing networks in some villages to acceptable design standards, iffeasible; and (c) GTZ pilot decentralized systems: this sub-component builds on and replicates the implementedGTZ pilot model inKafr El Sheikh inan estimated 20 villages inthe project 33 area, based on the communities' expressed willingness to engage. The model serves villages of up to 5000 inhabitants and depends heavily on community participation and commitment for the O & M o f these systems based on simple (natural system) technology. 10. Component 2: Establishment of a local result-based monitoring and evaluation system (totalcost US$1.1 million ofwhich, IBRD portionis US$O, NetherlandsCooperation will fund the entire US1.l million) This component will establish a results-based monitoring - system within the H CWW that links the improvements in sanitation coverage with anticipated environmental and water quality impacts. The component will include technical assistance support for expertise in designing the system, identification o f monitoring sites, data collection and analysis, results review, finalization, and communication. It will coordinate among national institutions within the IWRM framework, particularly the M&E system established under IIIMP, as well as among the local organizations (incl. WSC's, CDAs, WUA's and Water Boards) to develop their capacity to engage in monitoring water quality and improved environmental conditions and hygiene practices and share results regularly with relevant stakeholders. 11. Component 3: Institutionaldevelopment and capacity building (total cost US$19.5 million of which, IBRD portionis US$O, NetherlandsCooperationwill fund US15.5 million and GTZ will fund US$4.0 million) -This component aims to promote institutional development within the national and local public institutions responsible for sanitation implementation to enhance their capacity to plan, design, construct and operate the rural sanitation investments, monitor outputs and outcomes, as well as promote hygiene practices and social mobilization. Through grant donor co-financing, technical assistance will be provided to each o f the implementing agencies (HCWW, NOPWASD and the three WSC's), consisting o f (a) A technical assistance contract to provide specialist support to the implementingunits in their mandates, covering technical, procurement, social and financial aspects; (b) Capacity building for contract management at the H C W W and the three WSC's to serve inprocurement and supervisionof performance based O&M contracts, including through the demonstration of2 pilots inthe project area; (c) Training to the implementing unit staff and CDAs in technical and social mobilization aspects o f the sanitation service implementation and O&M; and (d) Implementation o f the Environmental and Social Management and Monitoring Framework (ESMMF). 12. Technical assistance through grant co-financing will be provided to each o f the five investment implementingagencies (HCWW, NOPWASD and the three WSCs), to complement in-house capacity, consisting o f a team of specialists to support the PIU and RSUs in their mandates. A summary o f the scope o f work for each unit i s included under Annex 6, while the detailed TOR i s included inthe Project Implementation Manual. C. OverallProject Design 13. The following are the key elements o fthe project design: 34 PlanningPrinciples: 14. The planning and implementation approach of the project is both innovative and practical. The project is innovative as it incorporates a number of fundamental planning principles (outlined below) for the first time in Egypt, and yet i s practical in its simplicity and replicability in order to serve as a model for other areas under the National Village Sanitation Program. The planning innovations include: 15. Hydraulic Basin and IWRM approach: The project will provide sanitation services (sewage collection and treatment) to selected villages in Beheira, Gharbeya and Kafr-El-Sheikh Governorates in the Nile Delta. The project has targeted the Mit Yazid Canal command area (straddling Gharbeya and Kafr-el-Sheikh) and the Mahmoudia Canal command area (in Beheira) in which irrigation improvement activities are being carried out under another Bank-funded project. The objective o f selecting the same target areas as the irrigation project is to demonstrate a novel integrated basin improvement approach for the environmental sanitation problems inthe Delta area based on integrated water resources management principles. Planning the clustering and M&E systems along the sub-basin boundaries allows for a closer link between input and impact. Furthermore, the project would benefit from the presence of WUAs in monitoring and social mobilization, many o f which will be formedhtrengthened through the IIIMP project. 16. Village clustering: the concept o f clustering defines geographical units (clusters) o f planning and implementation that provides comprehensive and cost effective sanitation solution for all villages falling within the unit; cluster boundaries are determined by economies o f scale, pollution abatement objectives and demand responsiveness for smaller settlements. Each cluster i s centered around one treatment plant located at an optimal central location to serve the maximum number o f villages at least cost. In selecting cluster boundaries, consideration was given to such issues as: (a) maximizing use o f existing underutilized WWTPs, (b) avoiding expensive crossings o f barriers such as main canals and railways, (c) covering one or two administrative units rather than smaller portions of a larger number o f units, and (d) maximizing impact upon water quality in receiving drains. Cluster size was thus determined to optimize technical, financial and institutional aspects in order to allow management at the smallest appropriate level. Too small a cluster would result in an excessive number o f such units, which would be unwieldy once the project concept i s expanded nationwide, and would defeat the economies o f scale concept. Too large a cluster, on the other hand, would lead to crossing a large number of administrative boundaries, and would be technically and financially inappropriate for the dispersedrural setting. 17. Transmission main lengths for the selected clusters range from about 5km to just over 16km, depending on the population density within the cluster. Maps o f the village clusters inthe project area are included in Annex 16. Within clusters, the villageshettlements will be provided one o f the following four types o f sanitation services depending on the best fit for its specific conditions: 18. Centralized system: for villages with population higher than 5,000 inhabitants and smaller villages lying close to these larger villages. These villages will be served by sewerage collection networks, leading to a single central WWTP. Smaller villages should be connected if 35 the cost of doing so does not exceed the cost of decentralized treatment. Overall responsibility for centralized schemes will lie with subsidiary water and sanitation companies (WSCs), with management responsibilities for pumping stations and WWTPs contracted out to the private sector. 19. Decentralized system: for settlements with between500 and 1,500 inhabitants not located along the networks serving larger villages. Because o f their smaller size and hence lower pollution loads, these villages will be served based on expressed demand for receiving the service and assuming subsequent O&M responsibility and costs. These should be served by schemes incorporating local collection systems discharging to simple treatment works providing enhanced primary treatment, typically consisting of a communal septic tank followed by a series o f baffled reactors. Pumping should be avoided if possible. The preferredmanagement option for these schemes i s community management by a CDA or other local legally recognized organizations. Local communities should be involved in oversight, monitoring the contractor's performance and reporting any problems to the water company. 20. GTZ model decentralized system: for certain villages between 1,000 and 5,000 inhabitants. These villages, because o f their size and distance from other villages may be suitable for implementation o f a decentralized community managed approach and natural treatment technologies. Preconditions for adopting this approach will be that communities are committed to provide the land neededfor treatment and/or pumpingworks and to take full management and financial responsibility for the scheme, financing 100% o f operating costs. This approach (which proved successful in Kafr El-Sheikh) will be tested for replication under the overall guidance o f GTZ and following the model already developed in Moufti Koubra. GTZ have identified 20 villages that they believe can be served through this approach. O f these, work could start in 5 villages in Kafr El Sheikh as soon as project funding i s available. These are Ezbet El Kherregeen 3, Ezbet El Kheregeen 5, Kobry El Zawya, Ezbet El Kheregeen 6, and A1 Kafr El Sharky. 21. The approach developed by GTZ is simple in concept. A scheme serves one village and incorporates one pumping station and a series o f waste stabilization ponds for sewage treatment. The village must contribute the land for the works works (which, for waste stabilization ponds, is likely to be substantial.). It is likely to be most appropriate inlower-density areas, where villages are smaller and the distances between villages are greater. The approach will only work where village communities are willing to form a CDA and take overall responsibility for the operation o f the scheme, contracting out O&M responsibilities to a local contractor. The institutional model developed by GTZ and its consultant requires that the Village Unit (LAU) provides support in management and enforcement while the Kafr a1 Sheikh Water Company i s responsible for supervision and monitoring. The sustainability o f the model, including long term commitment of the different stakeholders as the GTZ support i s withdrawn needs to be monitored. 22. On site system: for settlements with less than 500 inhabitants. These will continue to use on-site sanitation systems, based on cesspits or septic tanks. The project has incorporated the resulting septage inthe design o f the WWTP capacity within the cluster and will coordinate with LAUs to enhance desludging efforts. 36 23. Prioritization: Giventhe limited funds available inrelation to the overall sanitation needs o f the selected project areas, it was decided early on that a methodology for selecting priority village clusters should be developed based on multi-criteria analysis o f most relevant factors. The factors that were chosen relate to population served, location inrelation to main drains and canals, potential health benefits, water quality and the proximity o f water treatment works: These factors are implicitly based on the key principle that interventions should target areas in which largest impacts can be achieved. The analysis has yielded a prioritized ranking o f areas within each o f the two command areas. The project will serve the identified first priority area, which are along the Mahmoudeya Canal and inthe center o f the Mit Yazid Command Area. 24. Implementation Phasing; The first phase o f the project (first two years investment program) has been selected to maximize the use o f existing facilities; focus on areas with the largest populations within the overall area, and demonstrate different cluster models in the three Governorates. The total cost o f this 2-year investment program covers 4 clusters in the two command areas and i s estimated at about $55 million, or 26% o f the total project cost. The second phase will cover the years 3-6, and will allow for incorporation o f lessons learned from the first phase implementation and adaptation o f the final plan according to the results on the ground. This includes, inter alia: (i)revising the overall Strategic Sanitation Plan, (ii)adjusting the proportion of centralized versus decentralized systems in subsequent clusters, and (iii) assessing the efficiency o f the adopted institutional setting and adjusting allocation o f works among the implementingagencies ifneeded. 25. Maximizing use of existingfacilities: The scheme for Cluster AH-2 will make use of the considerable spare capacity available in the existing `AbuHommos treatment. Both schemes in the Meet Yazid Command Area will utilize land that is available at existing treatment plants. The only scheme requiringa completely new works on a newly acquired site will be that serving Cluster MH-2 in the Mahmoudia Command Area. Making use o f existing works i s particularly appropriate in the case o f works that are operated by private sector contractors under contracts agreed on the basis o f the design capacity o f the works rather than measured flows. In such cases, any increase in the number o f connections will reduce the gap between the water and sewerage company's income and expenditure. Its income will increase with the number o f customers, regardless o f the tariff level, while its expenditure on wastewater treatment will remain constant since it is governed by the contract. There will be some increase in expenditure on sewer maintenance as the size of the system expands. 26. Focus on areas upstream of WTPs: There i s a strong need to prevent the discharge o f untreated wastewater into canals, particularly at locations upstream o f drinking water abstraction points. In Beheira, a number o f small treatment works are clustered in the eastern part of the canal command area but the main Abu Homus and Kafr el Dawar WTPs are located further west, roughly in the centre o f the command area. Both draw water from the Mamhoudia Canal. The `Priority 1' area identified in the Draft Strategic Plan consists o f a strip on either side of the Mahmoudia Canal, reflecting the importance attached to protecting water supplies. Most of the village clusters identified for inclusion in Phase Ilie upstream o f the major WTPs on the canal. At these sites, particular attentionmust be paid to the quality o f effluentdisinfection. 37 Expected project coverage by Governorate No. of WWTPs No. of Communities Served Total De- No. of Population NW Extension Tie-in to Centralized centralized GTZ Governorate Clusters Served Construction to existing Existing Treatment Treatment Model Total Gharbiya 3 232,143 1 1 1 29 12 0 41 Kafr El- Sheikh 3 305,137 1 1 1 59 20 20 99 Beheira 8 621,279 3 5 134 88 0 222 Total: 14 1,158,559 5 2 7 222 120 20 362 TechnicalDesignAspects: 27. Collection system: the designs would aim at bringing sewers as close as possible to houses and minimize their depth, thus reducing the cost o f connection. The latter will be particularly important where the groundwater table i s less than about 2 meters below ground level. It was further agreed that options such as shallow and small-bore sewers would be considered where applicable. The Brazilian experience with condominia1 system will also be tested, to optimize the path o f sewers and ensure community ownership and engagement in implementation. Table 4.2 below summarizes the key design parameters for sewers under the project. Table 4.2. Key sewer design criteria Parameter Current standard Comments and agreed modification if any MinimumCover 600 mm 550 mmbased on an agreed depth to invert o f 700mm MinimumSlope 1 in 167 for 1 in 300 at critical lengthsat the head o f the system to 15Omm minimize pumping(to be verified inthe detailed sewer 1 in 250 for design) 200mm Use o f interceptors should be investigatedto allow for flatter slopes Minimum 200 mm 150 mm diameter 100 mm for connections serving one householdor one buildingwith upto 5 apts Treatment 28. There are various low cost treatment technologies suitable for rural setting with flow rates in the range o f 3,000 to 9,000 m3/day. NOPWASD has recently tested various methods, including Upflow Anaerobic Sludge Blanket (UASB) (UASB); Rotating Biological Contactors (RBCs) and Advanced Sequential Batch Reactors (ASBRs). These methodshave a low footprint and reduced energy consumption when compared with other mechanically aerated systems. Duringimplementation, a menuof appropriate technologies will be provided based on technical, operational, and financial merits. The evaluation will be done on a case by case basis, to reach the optimal Design-Build process. For isolated smaller villages and ezbas with 500 to 1500 38 people, simpler technologies, delivering an enhanced level o f primary treatment are proposed. Because o f their small footprint and simplicity, the preferred option i s baffled reactors and anaerobic filters, typically with a 48-hour retention time. These will require little maintenance other than regular desludging. Performance Based O&M contracting 29. The project will support the water companies in the structuring and supervision o f performance based O&M contracts with the private sector for 2 facilities in the area to demonstrate effective public-private partnership arrangements with the small scale private sector. These 2 pilots will provide valuable lessons in risk allocation, cost structuring, technical considerations (boundaries o f the contract) and benchmarking o f operational efficiency, that would feed into the larger policy dialogue on cost recovery and sector financial sustainability. The identification o fthe two candidate plants and the reviewo fthe current draft contract models will be undertaken prior to project effectiveness. Technical support will be provided within the HCWW to guide the subsidiaries on technical and legal issues o f contract management in coordination with national efforts on public-private partnerships. Payment to the contractor will be based on the following key considerations, to be finalized based on the selected pilot specifications: (a) Improved eficiency of the wastewater treatment plant: Payments directly linked to recorded through-flow at the plant (which i s directly related to the proper operation o f the network) encourage the network to be well run. To ensure that the plant i s operated properly and that routine maintenance is carried out (to prevent contractors from minimizing costs and simply `running down' the plants) these payments would be subject to two performance criteria, namely: a effluent quality (directly related to the proper operation of the plant); and a the proper implementationof anagreed program o froutine maintenance. (3) Appropriate disposal of effluent from on-site systems: Incases where on-site options remain operators can also be incentivised to encourage proper disposal o f such wastes at the treatment plant by permitting the construction o f sullage stations for the proper collection o f sludge. This can then be processed through the plant, and thus count towards the measured performance of the contractor. In cases where disposal o f on-site sludge i s likely to be a significant element o f the service provided an incentive payment may be added in recognition o f the greater concentration o f BOD in such wastes. This payment could be structured as an additional fixed % o f the fee per m3of treated wastes for each m3o f waste which is sourced from on-site locations, which are disposed appropriately and for which evidence can be provided that households requested the service and that it was carried out satisfactorily at the household. 30. To avoid too much complexity inthe bid, this item should be part o f the bid but not used as criteria for bid evaluation. To ensure that incentives remain to connect new customers, the total payments to be made for such an itemwould be capped. Community Mobilization Framework 31. The project will use a participatory, demand-driven approach, helping to ensure sustainability through putting in place systems that users want and are willing to pay for and 39 maintain. The social mobilization and community participation approaches will thus be essential for project success. Accordingly, a Community Participation Framework has been prepared which contains village participation criteria, along with principles o f community participation, responsibilities o f stakeholders, social mobilization techniques, and plans for capacity building. The details are includedinthe Project ImplementationManual. 32. Criteria for CDA engagement: To ensure existence o f capacity and commitment to the role o f decentralized management o f the smaller systems, the project will adopt a selection process based on agreed criteria to be met by CDAs who wish to apply on behalf o f communities for the sanitation service intheir village. While the hllqualification procedure will be set out in the ISSIP Project Implementation Manual, it is expected that there will be a staged selection process; at each stage the community will have to meet defined benchmarks. A possible two- stage qualification process might be structured as follows. Inthe first stage, after an initial round o f WSC social marketingvisits, the community submits an Application, which might include: (a) certification o f CDA registration; (b) names of members of CDA wastewater project committee, including chairman, secretary and treasurer; (c) a map showing one or more sites for the community septic tank, plus copies o f legal title and statement o f owners' willingness to sell and final asking price; (d) a list o f households willing to pay at least LE 1O/month for the service; (e) a map showing the location and layout o f any and all informal sewers inthe community; ( f ) a statement by the CDA chairman that all the information submitted i s true; 33. Communities whose applications are accepted enter the second stage of the program, in which a preliminary design i s prepared in consultation with the CDA, and an estimate o f construction and O&M costs are prepared. Inreturn, the CDA: (g) prepares by-laws for household participation in the scheme, including incentives for proper use o f the system (e.g., to ensure exclusion o f solid waste, etc); (h) prepares its policies and procedures for billing and collection, together with an estimate o f the monthly change for each household, signed by the household head; (i) prepares the financial, procurement, and administrative by-laws o f the system; and (i) opens a special bank account and sources it with two or three months worth of collected user changes, to be forfeited to the WSC in case the CDA proves incapable o f managing the systemor the systemis intentionally damaged. 34. Once these conditions are met, construction would begin. Prior to the completion o f construction, a formal delegation agreement i s signed between the WSC and the CDA, setting out the nights and obligations o f each party, the standards for O&M, O&M procurement, and accounting, and the penalties for violations o f the terms o f the agreement. 40 Annex 5: ProjectEstimatedCosts A. Costs by Component Provisionof sanitation systemswithin 154.93 selected drainage sub-basins I 17.47 I 172*40 Component 2: Establishmentof a local results-based 0.72 0.3 1 1.03 monitoringand evaluationsvstem Component 3: Institutionaldevelopmentand capacity 15.75 2.78 18.53 building 171.40 20.56 191.96 Total Project Costs** 201.56 41 B. Costs by Sub-Componentand FinancingSource Cost an1 Financin Netherlands Component IBRD GOE Total Component 1: A1:Centralized Sanitation Systems- 15.01 7.57 22.58 Treatment Plants A2: Centralized Sanitation Systems- 86.00 44.49 130.49 Collection Networks B: Decentralized Sanitation Systems 11.99 5.96 17.95 construction /rehabilitation C: GTZ- Model decentralized sanitation systems construction 7.00 3.OO 10.00 Component 1 Sub-Total 120.00 61.02 181.02 Component2: Establishmentof a local results-based 1.08 monitoring and evaluation system I ComDonent2 Sub-Total 1.08 1.os Component3: A: Technical Assistance & Engineering 14.35 3.48 17.83 support B: Pilot Performance-basedO&M 0.74 0.74 Contracting C: Training and Capacity Building 0.26 0.52 0.78 D: ESMMF Implementation Cost 0.11 ComDonent 3 Sub-Total 15.46 19.46 TOTAL 120.00 61.02 16.54 201.56 (including contingencies) 42 C. Detailed Baseline Costs by Subcomponent r- Phase 1 Treatment Plant 3,543,736 700,704 8,077,195 Cluster ABR I Septic Tank 175,000 1,518.192 Piped Network (house connections, gravity pipes and force mains) 7,021,160 Cluster KSH-2 - - Cluster ABR I Seotic Tank 1,312,500 AH-2 42,875 I CentralizedIPumping Stations IPined Natwnrk lhniiso rnnnectinns aravitv ninoq and force mains) 5 606 400 483,000 I I Phase 1 Land Acquisitions 687,085 Phase 1 GTZ Model de-centralized sanitation systems: 3,000,0001 Phase 1 Subtotal: 52,835,192) 43 Phase 2 Centralized Cluster ABR I Septic Tank 560,000 9,800 Piped Network 759,250 Cluster OH-I Subtotal II,098,803 I ]Treatment Plant 2,874,706 Decentralized Cluster ABR I Septic Tank 686,000 17,150 Piped Network 886,161 Cluster KSH-I Subtotal 20,493,119 I ITreatment Plant Treatment 1,994,650 3 854,909 Cluster ABR / Septic Tank 693,000 ABR / Septic Tank 12,250 567,299 Cluster AH-I Subtotal 7,387,930 44 Phase 2 Land Acquisitions: 1,469,423 Phase 2 GTZ Model de-centralized sanitation systems: 7,000,0001 Phase 2 Subtotal: 119,660,7231 45 Component 2 IEstablishment of a local results-based monitoring and evaluation system 1,031,000 Component 3 HCWW ISSIP PIU Technical assistance support to the HCWW ISSIP PIU 744,000 NOPWASD ISSIP Unit Technical assistance support to the NOPWASD ISSIP Unit 480,000 Kafr El-Sheikh ISSIP Unit Technical assistance support to the Kafr El-Sheikh WSC 1,800,000 Beheira ISSIP Unit Technical assistance supportto the Beheira WSC 1,800,000 Gharbiva ISSIP Unit Technical assistance support to the Gharbiya WSC 1,800,000 Engineering Deslgn 8 Supervision 7,542,186 Pilot Performance-Based OBM Contracting 700,000 Training and Capacity Building 750,000 ESMMF Implementation Cost 103,636 GTZ Social B Technical Assistance Support 2,810,000 ISSIPComponent 3 Subtotal: 18,529,8221 ISSIP Project Total Baseline Cost: 191,956,7371 46 Notes on Costs: 1. De-centralized Sanitation Systems. For sub-component 1B (Decentralized Sanitation Systems construction /rehabilitation) it has been assumed that about 35% o f total number o f villages falling within this size category in the project area will be eligible and able to engage in implementingsuch systems. 2. Land Acquisitions. Based on preliminary surveys, it has been assumed that 35% of the land required for pumping stations and WWTPs will need to be purchased through ISSIP financing (included under GOE contribution to Component 1). The remaining required land will either be obtainable government-owned land (30%) or will be donated from the local beneficiaries (30%). 3. ForeignCosts. The foreign share ofthe cost for component 1is calculated based on: a 50% o f the centralized systems' WWTPs cost a 30% o fpumpingstations cost for centralized sanitation systems. a 20% o f pumping stations cost for non-GTZ model de-centralized sanitation systems (the lower percentage relative to centralized systems i s due to the smaller size o f the pumping unitsand higher availability o flocal components). a For components 2 and 3 foreign costs have beenestimated at 30% and 15% respectively. 4. ESMMF Implementation. Total cost of ESMMF implementation amounts to US$l,OlO,OOO, as per the details provided in Annex 10. Of these, costs for training, equipment, environmental construction supervision and other environmental aspects are subsumed under their respective categories. 47 Annex 6: ImplementationArrangements 1. The project will be implementedthrough the coordinated efforts of five agencies: the Holding Company for Water and Wastewater (HCWW) and its three subsidiary water and sanitation companies (WSCs) in Beheira, Gharbiya, and Kafr el-Sheikh, and the National Organization for Potable Water and Sanitary Drainage (NOPWASD). All of these agencies are affiliated to the Minister of Housing, Utilities, and Urban Development (MOHUUD) who will head the ISSIP Steering Committee. Through this committee, the project will also coordinate closely with the Ministry of Water Resources and Irrigation (MWRI), within the framework of Integrated Water Resources Management (IWRM), with the Ministry of Health and Population (MOHP) and with local community representatives. The division of implementation responsibilities between NOPWASD and HCWW will be detailed in an Interagency agreement to be entered into between the two institutions (dated covenant). The Project Implementation Unit (PIU) will be housed in the HCWW headquarter in Cairo. Community development associations (CDAs) in target villages will be involved in articulating demand and organizing their communities to qualify for decentralized wastewater scheme construction by WSCs under the project. InstitutionalReformContext 2. Planning for and serving scattered smaller communities has not beenundertaken inEgypt on a large scale yet. This i s why it is important that the technical solutions and related implementation arrangements adapt to strike the right balance between centralized planning and guidance and decentralized implementation and community participation. The implementation arrangement promote a multi-sectoral and decentralized approach to rural sanitation management, involving NOPWASD, HCWW and three of its companies, and CDAs as implementing agencies, and a larger stakeholder community which includes MWRI, MOHP, WUA's and the Governorates. But it also reflects o f the current institutional transitions in the municipal water and sanitation sector. 3. The project i s set within a transforming sector, where the role of the WSCs under the overall supervision of the HCWW is being redefined. Beyond mere operation and maintenance of facilities that have been constructed by NOPWASD, the Ministry is delegating increasing investment implementation authority to the local level. Within the past two years, this includes the full transfer of the rehabilitation and renewal budget (LE 1.4 billion), as well as the urgent water supply program (LE 1.5 billion). In addition, HCWW is positioning itself as the key planning and oversight institution, and has launched the National and Governorate level Masterplans to assist in defining the investment and operational needs over the coming 30 years. The ISSIP project is fully aligned with this vision, and therefore offers the following key contributions withinthe sector reform process: a Assigns significant design and construction responsibilities to the WSCs for better managementof investment allocations and related operation. a Provides a model for rural sanitation planning that can feed into the National Masterplan and guide the National Program for Village Sanitation 48 0 Creates national capacity within H C W W and EWRA to utilize results-based performance information for management and regulatory purposes. 8 Supports building local capacity for engaging communities in rural sanitation service provision and combining social and technical skills inplanning and implementation 0 Creates local private sector capacity for operating wastewater treatment plants and associated supervision and control measures within the WSCs and at the HCWW 8 Effects more coordination between NOPWASD as the key investment agency and the WSC's to ensure timely implementation with the cluster as the unit o f monitoring 0 Creates a platform for cross-sectoral coordination in monitoring rural sanitation inputs and outcomes to demonstrate IWRMframework inpractice. InstitutionalAssessment 4. A full institutional assessment has been undertaken o f the main agencies involved. The main findings are summarized hereunder: The past institutional structure o f splitting investment planning and implementation from O&M creates disincentives interms o f efficiency o f budget allocation and accountability. This becomes more prominent when the need to serve rural settlements requires a stronger focus on community participation for longterm sustainability. NOPWASD recognizes the need to delegate rural works investment to the local companies given the strong link to communities. This has already taken place in the Urgent Plan, and a mechanism by which NOPWASD can transfer State Budget funds to HCWW for capital works has beenoperationalized. The mandate o f the HCWW and the companies should be expanded in planning and oversight o f rehabilitation and expansion works, and the companies' familiarity with and closeness to local conditions gives them a comparative advantage in planning and design o f water and sewer networks. HCWW has commissioned thirty-year master plans for water and wastewater facilities in the companies, and has embraced its Urgent Planresponsibilities. However, HCWW and its companies have less experience than NOPWASD in investment program management tasks such as design, procurement, and project management, but several donors (USAID, GTZ, EUIWSP) are planning or providing relevant institutional support. There are variations in CDA representation, capacity, and dynamism. To ensure that CDA management represents a sustainable option, project implementation arrangements will incorporate screening processes and construction conditions precedent to mitigate this risk. ImplementationFramework 5. The overall ISSIP program framework includes NOPWASD, HCWW and the three WSCs, and CDAs as implementingentities, and a range o f ministriesand agencies with stakes in ISSIP outcomes or regulatory responsibilities with regard to ISSIP implementing entities. The allocation o f ISSIP implementation responsibilities among these agencies i s depicted in Figure 6.1. 49 . HCWW PIU NOPWASD ISSIP Unit Set up results basedM&E systemto monitor 1 Undertakedetailed design, construction, & and evaluate ISSIPoutcomes and activities(for constructionsupervision for ISSIP centralized expansionto nationalvillage sanitation treatment works incoordinationwith collection program) * networks within the same cluster 1 Prepare ISSIP Phase2 strategic sanitationplan 1 Supervisecommissioningand hand-over of and relatedinvestmentiprocurementplans. completedtreatment systems 1 Guide and supervise WSC implementationof 1 Ensure coordinationbetween ISSIP plansand assigned works (collection& decentralized nationalvillage sanitationprogrampriorities systems) 1 Maintainproject accounts and asset registers as 1 Develop policiesand strategy for WSC support per World Bank requirements. of community-basedwastewater systems, 1 Report physicalprogressto central M&E/ PIU performancebased O&M contracting, and and steeringcommittee communication& hygiene promotionactivities 1 Ensure compliance with World Bank procurement & financial managementrules. I CDAs,LAUs, WUAs CDAs WUAs/ IIIMPRCUs 1 Provide fora for WSC social marketing& Assist in monitoringactivities with a focus hygiene IEC on water quality monitoring . .. 1 Assist in survey work & participatein scheme Assist in survey work & participatein planning scheme planningwith a focus on priority Meet conditions-precedentfor ISSIP areas for maximumwater quality benefits construction 1 Participate in communicationand 1 Assist in construction supervision informationdissemination activities 1 Comply with rules of the WSCKDA scheme delegation agreement 1 Manage O&M and collect user charges. 50 6. A Steering Committee will be established to provide coordination, oversight, and direction to the project stakeholders, as described above. The Steering Committee will be headed by the Minister o f Housing, Utilities, and UrbanDevelopment or his delegate, and will be made up of representatives of all agencies which are involved in implementation directly or which have a legal or regulatory stake inproject outcomes or implementation. These agencies include: 0 HCWW, responsible for the municipal wastewater utilities in the three ISSIP governorates and innine other governorates. 0 Beheira, Gharbiya, and Kafr el-Sheikh WSCs, responsible for wastewater service provision inthe three ISSIP governorates. 0 E W M , responsible for monitoring the quality and cost o f public wastewater services and advising the Minister o f HUUDon tariffs 0 NOPWASD, responsible for State Budget-funded planning and implementation o f water and wastewater treatment plants inEgypt's eighteen rural governorates. 0 MWRI, responsible for monitoring canal and drain water quality and for setting and enforcing effluent quality standards. 0 MOHP, responsible for sampling and testing drinking water and effluent from publicly- owned treatment plants. 0 One popular (Le., elected) council representative from each o f the Governorates o f Beheira, Gharbiya, and Kafr el-Sheikh. 7. The World Bank's Task Team Leader will participate in Steering Committee meetings as an observer. Embassy and contractor representatives o f related donor projects inthe project area may also be invited to attend meetings as the circumstances warrant. 8. The ProjectImplementationUnit (PIU) will be housed in the HCWW headquarters in Cairo. The PIU will be headed by a PIU Manager and supported by a financial management and procurement specialist who will work closely with appropriate H C W W and WSC counterparts to manage the Project and build capacity for rural sanitation programming. The PIU will be further supported by a team o f long term and short term specialists through the technical assistance component under the project. 9. The PIU will provide scale-economic ISSIP services to the three WSCs. These services include the preparation o f model TORSand tender documents for ISSIP works, development of standard operating procedures and maintenance planning guidelines for the various wastewater system components (treatment unit processes, pump stations, sewers, sludge removal trucks, etc.), design o f cost accounting and billing system improvements, etc. The PIU will also manage the preparation o f the ISSIP Phase 2 investment program, in coordination with the WSCs and NOPWASD and under the guidance o fthe ISSIP Steering Committee. 10. The HCWW PIU will procure a consulting firm to design the ISSIP M&E system, collect inputs from the data sources, apply appropriate QNQC procedures, and prepare the M&E reports. 11. A NOPWASDISSIP Unit will be responsible for design and implementation of all new wastewater treatment works. This unit will be headedby a senior NOPWASD official, supported 51 by a team o f specialists: a wastewater treatment projects engineer, a procurement officer, and a financial manager. This team o f specialists will be supported through the technical assistance component under the project and will work closely with counterpart NOPWASD staff. 12. A Rural Sanitation Unit (RSU) will be established in each of the three WSCs, responsible for implementation o f "centralized" wastewater collection systems, and O&M for the completed systems. This includes procurement and supervision o f private sector O&M services as well as in-house O&M. This also covers operational performance monitoring and accounting and billing of O&M costs in a manner which generates useful management and regulatory information. These latter improvements are understood as indicators of the GOE's commitment to increased cost recovery for wastewater services. 13. Each RSU will also be responsible for developing and implementing a demand- responsive small community wastewater management program which will construct decentralized schemes in small villages which are organized, willing, and able to manage O&M o f the scheme and collect charges for O&M and replacement and renewal (R&R) from scheme beneficiaries. The WSCs will provide technical and procurement assistance in decentralized scheme design and construction management, ensure sludge removal and disposal from decentralized WWTPs, and monitor CDA operational and financial performance on completed schemes. 14. Finally, the RSU will be responsible for ISSIP hygiene information, education, and communication (IEC) activities, as well as the implementation o f the Environmental and Social Management and Monitoring Framework (ESMMF). 15. The RSUs will be headed by a Unit Head and include a team o f five full-time dedicated specialists: WW specialist, social specialist, environmental specialist, procurement specialist and financial management specialist. This team of specialists will be supported through the technical assistance component under the project. Unit personnel will be expected to work closely with counterpart staff throughout the Company, including Branch staff as appropriate. 16. Community Development Associations (CDAs) will be the points of WSC/community articulation for the ISSIP small communities program. The CDAs will be responsible for meeting the prerequisites for ISSIP investment in decentralized wastewater systems, and they will be responsible for subsequent O&M and cost recovery. Because H C W W and the WSC have few means by which to compel a community to manage its ISSIP system after construction, the program will adopt a community selection approach which requires target communities to demonstrate demand, in order to be selected into the project. 17. Local administrative units (LAUs), Le., local village council units, are the lowest level in the local administration system in Egypt. The primary roles of LVUs in ISSIP are to provide forums and venues for social marketing and hygiene IEC activities associated with the small community wastewater program, since each village council area may include several target ISSIP small communities. LVUs can also serve as communication points for the program in village council areas inwhich CDAs need to be established. 52 18. Water User Associations (WUAs) are being actively developed inthe project area under the IIIMP-Water Boards Projects. As WUA boundaries are based on farm contiguity rather than residential contiguity, they are not appropriate units for wastewater scheme planning or management. But they are principal beneficiaries of ISSIP water quality improvements and can be involved in social marketing and in monitoring environmental compliance by households and sludge vacuum trucks. It is also possible that interested WUAs could seek alliances with specialized NGOs or university research departments to assist WUAs in developing and operating co-composting schemes adjacent to decentralized treatment facilities. Sequence of implementationfor a representativecluster 19. The below table provides the expected sequence of implementation for one cluster as an illustrationof the respective roles and interactions among different agencies: Activity Activity Details Incl. estimated mamower By Whom Strategic Planning Reviewthe schematizationof clusters for HCWW PIU in including WQ sampling/ Phases 2 and later coordinationwith RSU modeling& prioritization Collect the necessary WQ samples, and technicaland social teams carries out the modelingstudy for the clusters considered Integratethe findings ofthe WQM into the in-clusteroptimization Undertake social mobilizationto get feedback of communities on solutions proposed Produce strategic sanitation planfor Phase I1taking into account Phase Iresults Communication, Social Design overall communicationstrategy RSUs under the guidance Mobilization and Hygiene Undertake communication, mobilization of HCWW PIU Promotion and hygiene promotionactivities inthe areas to be servedwith sanitation Design Conduct the design for the cluster works NOPWASDunit for new Undertake social field work to include WWTP feedback from communities infinal sewer WSC's RSU for networks, design and locations of PS and WWTPs pumpingstations, and extension of existing WWTPs; and for decentralized systems WSC social team Issue RFP for environmentaland social RSUs under guidance from assessment for the cluster in question PIU Procure the services ofthe consultant based Environmentaland Social on the Bank's guidelines Safeguards Coordinate with the consultant to complete the ESIA (Form B) for the seweragework inthe cluster(s) inquestion Liaise with EEAA to securetimely approval 53 Activity Activity Details Incl. estimatedmanpower By Whom Tendering of works BiddingDocument Preparation NOPWASDunit for new Tendering WWTP Contracting WSC's RSUfor networks, Construction pumpingstations, and ConstructionSupervision extension of existing Hand Over WWTPs; and for decentralized systems FM Arrangements Recordingof contractor invoices RSUs andNOPWASD Reviewand verification Unit Disbursement Processingand settlinginvoices. NOPWASDPIUfor WWTP works & TA WSC's RSU for all other works and TA Replenishment of DA or Preparewithdrawal applications,send them NOPWASD requesting direct payments to WB, and monitor their statusthroughthe client connection website. Overall FM Reporting - Producemonthly reports for management, PlLT quarterlyfinancial reports and annual -financialquarterly and annual FS to HCWW statements. Send for consolidation. 54 Annex 7: FinancialManagementand DisbursementArrangements A. ExecutiveSummary 1. A financial management assessment was conducted to identify the adequacy of the implementing entities' financial management capacity to implement the project. While NOPWASD will have the overall responsibility for the project implementation, it was agreed that NOPWASD will enter into an interagency agreement with HCWW , by virtue of which HCWW will be responsible for implementing parts A2, A3, A4, B and C of the project (as per the identification of parts inthe loan agreement). Inthis context, visits to NOPWASD, HCWW and its three affiliates involved with the project implementation (Beheira, Gharbeya and Kafr El- Sheikh Water and Wastewater Companies) have taken place to agree upon the project implementation model and the associated financial management arrangements required to support the project activities. 2. Under the project implementation arrangements, NOPWASD will be in charge of tendering the treatment plants under the centralized systems. On the other hand, the collection networks for these centralized systems as well as the decentralized systems for small villages (less than 1,500 persons) will be implemented by the respective sanitation affiliate of the HCWW. These affiliates are envisaged to be in charge of recovering the cost of operations and maintenance of existing and new treatment plants whether through direct billing to users or indirectly through CDAs. 3. The project has three main components and the Bank will finance Component 1 (Provision of sanitation systems within selected drainage sub-basins). However, there is a high degree of interdependence between this component and the other two components that are financed through both the counterpart financing as well as the Dutch co-financing (a letter was issued by the Netherlands Cooperation agreeing in principle on supporting the project institutional development needs). The proposed financial management arrangements took into consideration this specific design. The involvement of different players inthe project implementation poses an additional challenge inrelation with the coordination among the different implementing entities. The implementation arrangementstried to avoid potential overlaps among them with clear responsibilities for specific activities assigned to each party (NOPWASD, HCWW and the three WSCs). The implementation manual is currently being drafted with the support of the consulting firm contracted to support the project preparation activities. A first draft was received by the Bank in February 2008.. 4. The lack of recent Bank experience with the implementing entities poses additional risk with regard to project implementation requirements. In addition there exists varying levels of capacities across the different entities. For example, the automation of accounting information systems in Beheira and Gharbeya Companies is more advanced than that in Kafr El-Sheikh Company. Accordingly the level of TA support to institutional capacity will be tailored to each entity's status and needs. 55 5. NOPSWAD will have the overall implementation responsibility and accordingly will ensure that proper books o f accounts are maintained, periodic Interim Financial Report and annual project financial statements are issued and submitted to the Bank. NOPSWAD will ensure that the annual project financial statements are audited by an auditor acceptable to the Bank and that an annual audit report issued according to standards acceptable to the Banks, i s submittedto the Bank within 6 months after the closing ofthe fiscal year. 6. NOPWASD will use the loan financing to implement the wastewater treatment works under the project. It will also make funds available to HCWW to implement its affiliates' respective activities. To accommodate a smooth and clear flow o f funds process, the Bank will finance the project through two designated accounts to be opened by NOPWASD. Account A will cover NOPWASD's activities while Account B will cover the three WSCs activities. To speed up implementation, the management of Account B should take into account the decentralized nature of implementation (through the 3 WSCs) and the consequential efficiency requirements. B. RiskAssessment and Mitigation 7. InherentRisks Risk Risk Before After Risk MM Mitigating Measures (MM) MM Country level The IFMCA for the water sector S The project will be ring fenced M identified generic and systemic throughproject unitsat NOPWASD, weaknesses inthe centraland sectoral HCWW andthe WSCs. systems that relateto capacity in Institutionalcapacity development budget preparation and executionas initiativesare taking place at HCWW well as reportingand auditing. and its affiliates with donors' s u ~ ~ o r t . Project level The involvementof different players H NOPSWADwill enter into S (NOPWASD, HCWW and its three interagency agreement to define WSCs) may result is coordination HCWW duties andresponsibilities.A problems, flow of funds' bottlenecks, draft project implementationmanual and reportingdelays. was completed before negotiations clarifying the interrelationshipsand the responsibilitiesof each party. A single TA will be secured to support all of the implementingentities to ensurethe highest possible levelof coordination. 56 Risk Risk Before After Risk MM MitigatingMeasures(MM) MM Implementingentities do not have H Close Bank supervisionwill be S recent experience with implementing planned and conducted at the project Bank financedprojects, which may early stages of implementation. result in slower implementation. A team of specialists will support the implementationand will be financed by NetherlandsCooperationand GTZ under component 3 (Institutional Developmentand CapacityBuilding). InherentRiskBeforeMM H InherentRiskafter MM S 57 ControlRisks Risk Risk Before After Risk MM Mitigating Measures (MM) MM A- NOPWASD Counterpart Funding - The unavailability/delayofthe S - The government has allocatedEGP M counterpart fundingcan result in project 20 billion to the rural sanitationover 5 delaved imdementation. vears Deriod(2007-20121. Accounting & Reporting The current system is not designed to H -A separatechart of accounts will be S account and report on the projectdetailed activities level.The currentreports -used. TA The support under component 3 submittedto MOF are mainly aggregation will support the set up and of budget chapters' expenditures. implementationofthe project accountingand reportingsystem. B- HCWW and its affiliate WSCs Reporting Varying levelsof reportingefficiency at H - HCWW PTUwill ensuretimely S WSCs can result in delayed consolidated reporting. -consolidatedreporting. The recruitmentof one consulting firm to provideTA activities will support standardizedand timely reporting. Internal control The nature of disbursements to contractors H - The implementationmanualwill S implementingactivities throughout small clarify the roles within the different and scatteredcommunitiesposes involved implementingentities. monitoringand controlrisks. Written procedures, and control processes will be includedin the -manual Different layers of monitoringof implementationprogress will be in place (site engineers, supervision consultants, and project external auditors). 58 Risk Risk Before After Risk MM MitigatingMeasures (MM) MM The use of advancesto sub-accountsat the H - The WSCs are successfully S WSCs level requires capacity to manage implementingEGP 1.5 billion urgent them as well as close monitoring. water plan under a similar funding -mechanism and financialreview from NOPWASD. A technical committeefrom NOPWASDand HCWW will review the WSCs implementationprogress and payments before releasingadditional funds to WSCs sub-accounts. The revolvingmethodwill be usedto managethe sub bank accounts C- Cross Cutting Issues Financingand implementationsequence The interdependencebetween components H As per official letter received, the S means that any shortage in financing Netherlands Cooperation agreed in components 2 or 3 from co-financierswill principle on supporting the project negativelyaffect the overall project implementationand its results institutional development needs. measurement. Final commitment will be secured upon the approval of its annual program inMarch 2008. Auditing The decentralizednature of the project S The projectauditor's terms of M activitiesand the numerous involved reference will ensure incorporating parties call for a special andtailoredaudit field visits with clear mandatesto terms of reference. verify physical progress.Inthis context, auditors should use relevant technicalspecialists as needed.The audit TORSwill be submitted to the Bank for approval ImdementationManual Absence of firmed up arrangementson the H The first draft ofthe implementation S flow of funds can raise disagreements manualwas received in February 2008 amongthe implementingentities. Control Risk BeforeMM H Control Risk After MM S Based on the above detailed analysis, the overall FM risk is assessed as high. The successful implementation of the mitigationmeasureswould reduce the risk to significant. 59 C. ImplementingEntities NOPWASD ImplementingEntity and Staffing 8. While NOPWASD will have the overall responsibility for the project implementation, it was agreed that NOPWASD will enter into an interagency agreement with HCWW (dated covenant) by virtue o f which HCWW will be responsible for implementingparts A2, A3, A4, B and C o f the project (as per the identification o f parts in the loan agreement). The day to day management o f the wastewater treatment works (part Al) will be the responsibility o f a NOPWASD ISSIP Unit. Its head (senior NOPWASD official) i s already nominated and will be supported by a team o f officers to be seconded from within NOPWASD covering technical, procurement and financial management aspects. Given the lack o f NOPWASD experience with the Bank guidelines and other requirements, the unit will receive support from a technical assistance consultant team financed under component 3 o f the project. In addition, a program management consulting firm (PMCF) i s currently being recruited for 5 years to assist NOPWASD in the program management and supervision functions o f the national rural sanitation infrastructure program. Overall management support for implementation o f the first and second phase ISSIP investmentplans has been included as part o f the PMCF responsibilities. Financingand Budgeting 9. As per article 8 o f its establishing law no. 197/1981, NOPWASD depends upon financing from the state budget, revenuesfrom its activities or fees due to consultancy works for others and loans and grants approved by its board o f directors. 10. For the implementation o f works and infrastructure by NOPWASD under the project, NOPWASD will allocate local budget to finance part o f these costs along with the IBRD loan financing and the Netherlands Cooperation grant. The government has allocated 20 billion to the rural sanitation over 5 years period (2007-2012). Netherlands Cooperation has issued a letter agreeing in principle on supporting the project institutional development needs. Final commitment i s expected upon the approval o f its annual program in March 2008. Detailed budgets for the wastewater treatment plants were estimated and distributed between IBRDand GOE financing as outlined inAnnex 5. AccountingSystem 11. The current accounting system at NOPWASD follows the governmental accounting system. Given the nature o f the project and the required detailed reporting on the project level, a separate system will be maintained to account for the project activities, handle loan disbursements,and report on the project performance in details. A financial management officer from NOPWASD will be seconded to NOPWASD ISSIP Unit who will be in charge o f the financial management aspects for the project activities carried out by NOPWASD. Technical assistance will be also be secured under component 3 to support the FM implementation as well other implementationareas. The nature o f the project activities to be carried out by NOPWASD i s less demanding with regards to information system requirements. NOPWASD implementation 60 will represent less than 15% o f the total project costs. In addition, it will be limited to a few number o f centralized wastewater treatment plants as opposed to the WSCs activities that are spread through decentralized systems in a large number o f small and scattered villages and hamlets. Nevertheless, NOPWASD will retain the final overall responsibility for the project accounts. HCWWand WSCs ImplementingEntity and Staffing: 12. HCWW was established by virtue o f presidential decree no. 135/2004 under the public business law no. 203/199 1. This decree has transformed the previous economic authorities and public sector companies in governorates to companies affiliated to HCWW. The project day to day implementation o f the wastewater collection systems and O&M for the completed systems will be the responsibility o f the respective WSC in each governorate. Each company will be responsible for the planning, social mobilization, tendering, construction supervision, O&M management and contract supervision. To achieve the above, each company will establish a Rural Sanitation Unit (RSU) comprised o f a team o f technical, social, financial management and M&E specialists, which will be responsible for the above mentioned tasks. The same TA contract supporting NOPWASD will also support HCWW and its affiliates in the project implementation. The draft terms o f reference for the TA package are already prepared. Financingand Budgeting: 13. The HCWW paid in capital amounts to almost EGP 10.1 billion which represents the total capital o f its affiliates. The WSCs main source of funding i s the consumers' billings in addition to other revenues generated from extra services or sales. For the projects investments implementedby the WSCs (collection systems infrastructure), the costs will be financed through NOPWASD, the IBRD loan, and the Dutch grant. 14. For the project budget, each WSC will develop its own budget and disbursement plan in accordance with the project procurement plan forecasted dates for activities completion and timing of payments. These will be consolidated at the HCWW PIU level. The financial management team in each company will be responsible for enteringthe cost estimates along with the disbursementtimeline into the project accounting information system. This information will be used to compare the actual performance to the estimates, monitor deviations, and prepare periodic reports to management and to the Bank. AccountingSystem 15. While some variance was noted among the financial management information systems in the WSCs, they have all shown consistent ability to generate timely periodic reports. The sample reports checked provide detailed information on financial performance, physical progress and procurement monitoring. The review o f the three WSCs systems has indicated that Beheira and Gharbeya information systems are a bit more advanced than that in Kafr El-Sheikh. The TA support needs will be considered inthe TA contract to be financed under component 3. For Kafr El Sheikh company, the TA support would includethe implementation of accounting software. 61 D. Internal Control 16. Payments for the design and construction activities under the networks and treatment plants construction contracts will depend upon different layers o f control whether ex ante or ex post to review the project progress and the validity o f payments. These control layers are represented by the site engineers, supervision consultants, H C W W review committee as well as the project external auditors. The site engineers and the supervision consultants will provide ex ante controls through the review o f the physical progress and the approval o f contractors' invoiceshilling. In addition, networks post reviews will be conducted at the HCWW level through review committees including technical and financial representatives from HCWW and NOPWASD. Finally the project auditor's terms o f reference will ensure incorporating field visits with clear mandates to verify physical progress. In this context, auditors should use relevant technical specialists as needed to verify physical progress. 17. The project information system will incorporate detailed cost estimates of the project activities. It will also provide linkage between the physical progress and the corresponding payments to enable the monitoring and control o f the project disbursements to date at any given time. 18. The project implementation manual will have a section on financial management. This will include detailed roles and accountability as well as control processes for a sound control environment. The FM section o f the manual will cover, inter alia, budget preparation procedures, the update of the project disbursement plans, accounting policies to be adopted, project chart of accounts, main accounting treatments, procedures and steps for the flow o f funds between NOPWASD, HCWW and WSCs, management o f the two designated accounts and the three WSCs sub-accounts (signatories, criteria for advances and replenishments, periodic reconciliation and reporting), filing system and retention o f supporting documents, and audit terms o f reference tailored to the project specific needs. E. Flow of Funds and DisbursementArrangements 19. The disbursement o f the loan funds will follow transaction based disbursement model using direct payments to contractodconsultants and/or advances to designated accounts to be opened by NOPWASD (the legal counterpart entitled to receive the loan funds). Accordingly NOPWASD will use the loan financing to implementthe wastewater treatment works under the project. It will also make funds available to H C W W to implement its affiliates' respective activities (centralized network collection systems and decentralized systems). To accommodate a smooth and clear flow o f funds process, the Bank will finance the project through two designated accounts to be opened by NOPWASD. Account A will cover NOPWASD's activities while Account B will cover the three WSCs activities. To speed up implementation, the management o f Account B should take into account the decentralized nature o f implementation (through the 3 WSCs) and the consequential efficiency requirements. 20. Upon receiving duly approved payment packages the following disbursement processes will take place: 62 I n case of NOPWASD activities: 1- NOPWASD submitsapplicationsto the World Bank for direct payments, or 2- NOPWASD issues checks or bank transfers from its designatedaccount "A" and then prepares withdrawalapplicationsfor its replenishment. In case of WSCs: 1- WSCs requests HCWW PIU to submit through NOPWASD applications to the World Bank for direct payments to the WSCs contractors, or 2- NOPWASDadvances funds from designatedaccount "B" to HCWW baseduponthe aggregate cash needs of the three WSCs for the initial three months.HCWW inturn advances these funds to WSCs' bank accounts exclusively opened for the project expenditures purpose. WSCs issue checks or bank transfers from their respective bank accounts and then request replenishments from HCWW. HCWW then requests replenishments from NOPWASD whose authorized signatories in turn submit withdrawal applications to the World Bank for replenishingdesignated account "B". Since the WSCs will issue the payments to the contractors, WSCs will retain the original documents and submit copies to the review committee, which includes NOPWASD and HCWW representatives,for reviewand replenishmentpurposes. 63 Figure7.1: Flow of Documents .Contractors submit Contractors submit invoices to NOPWASD invoices to WSCs for ISSIP Unit for networks, decentralized wastewater treatment systemsprogress and plants' progress O&M Site engineers and construction supervision consultants review and approve the invoices I NOPWASD ISSIP RSUsFMstaff UnitF Mofficer review the reviews the payment payment package packagesand file and file original original documents documents NOPWASD ISSIP RSUs submit copies Unit Headapproves of payment packages the payment to review committee at HCWW to support their payment requests 64 Figure 7.2: Flow of Funds . World Bank Loan Funds I NOPWASD DA "B" for NOPWASD wscs DA "A" for activities NOPWASD activities 1 H C W W bank account Payments to i +treatmentplants contractors from DA "A" or through direct payments Payments from WSCs bank accounts to contractors 1 Replenishments ofWSCsbank accounts 1 Direct payments to contractors 65 E. Financial Reporting 21. The ongoing implementation o f the EGP 1.5 billion urgent water plan by the WSCs is considered to be a good pilot to test the WSCs implementationand reportingcapacities. So far, the WSCs were able to generate timely periodic reportsthat are reviewed by a committeeat the HCWW with technical and financial representatives from HCWW and NOPWSASD which reviewthe WSCs implementationprogressand expendituresbefore releasingadditional tranches of the urgent water planfinancing. 22. NOPWASD will have the ultimate final and legal responsibility to ensure the timely submission of the IFRs and PFSs to the Bank. NOPWASD and each of the WSCs will prepare the reports for their respectiveparts ofthe project, andNOPWASDwill ensure that consolidated financial situation is preparedon regularbasis.This will enable the provisionof a comprehensive picture on the project progressand costs. NOPWASDwill define inthe inter agency agreement, HCWW'sthe issuing of quarterly interim financial reports (IFR),and annual project financial statements (PFS) Building upon of its involvement with the five implementing entities, the TA consulting firm will fully support the HCWW to ensure the timely consolidation of comprehensiveprojectreporting. 23. The following table summarizedthe differentrequiredfinancialreports underthe project: Report Frequency DueDate By Sent to: Language FR Monthly 10 days from end of NOPWASD Internally to Arabic or month. ISSIP Unit and management English WSCs RSUs IFR Quarterly 2 weeks from end of NOPWASD WB by English quarter ISSIP Unit, NOPWASD WSCs RSUs and HCWW PIU PFS Annually 1 month from end NOPWASD of fiscal year (FY). ISSIP Unit, NOPWASD WSCs RSUs and HCWW PKJ (a) Monthly un-auditedFR. Monthly financial reports (FR) will bepreparedby NOPWASD and WSCs on a monthly basis. They will not be sent to the World Bank. They will be reviewed and reconciled with the monthly withdrawal applications and quarterly IFRs sent to the Bank. The Bank will follow up during supervision missions. The format of the reports should be quite simple (a trial balance listing all sources and uses of funds and bankreconciliation (s)); (b) Quarterly IFRs. The format and content of the IFRs, which will be producedwithin two weeks from the end o f each quarter, were agreed before negotiationsand attachedto the minutes of negotiations, and will be included in the financial management manual. These reports will be complemented by the semiannual progress reports that will be 66 prepared and submittedto the Bank. They should allow for establishing proper linkage with the physical progress reports; and (c) Annual PFS. The PFS should be ready within one month after the end o f fiscal year to enable the submission o f the audit report within 6 months after the closing date o f the fiscal year. The PFS would have to include: (i) statement o f sources and uses o f funds a indicating funds received from various sources, project expenditures, assets and liabilities; (ii)schedules classifying project expenditures by components, sub- components, and category; (iii)a DA reconciliation statement; and (iv) detailed statement o f withdrawals made on the basis o f SOEs. G. ExternalAudit 24. The financial statements for HCWW for the year ended June 30, 2006 and their respective audit report were received and reviewed in accordance with the Bank's fiduciary requirements. The audit report was qualified regarding loans and interest due to the National InvestmentBank that were converted to capital. 25. NOPWASD will have the ultimate final and legal responsibility to ensure the hiring o f the auditor and the submission of the project audit reports to the Bank. For the project purposes, annual audits of the project financial statements will be conducted by independent private auditors acceptable to the Bank. NOPWASD will ensure that the annual project financial statements are audited by an auditor acceptable to the Bank and that an annual audit report issued according to standards acceptable to the Banks. 26. The audit will be performed for the project as a whole (Le., all components and sources o f funds). The audit report, accompanied by a management letter, will cover the project's financial statements, reconciliation and use o f the DAs, use of direct payments, and withdrawal based on SOEs. The report should be submitted by NOPWASD to the Bank no later than six monthsfollowingthe closing ofthe fiscal year subject ofthe audit fiscal year July 1to June 30). 27. In addition, the project semiannual IFRs will be subject to limited review by the project external auditor in accordance with the International Standard on Review Engagements (2400). 28. Since H C W W will be responsible for more than 75% o f project implementation, NOPWASD will require HCWW per the interagency agreement, to submit to NOPWASD its annual audit reports to monitor its financial viability and capacity to implement. Since they are governed by the Egyptian law, such audits will be conducted by the Egyptian Central Audit Organization. NOPWASD will ensure that certified copies of these annual financial statements and their respective audit reports are made available to the Bank. 67 Report I DueDate Responsibility I Sentto: I Language I Scope PFS FY acceptableto the Bank Review of 45 days from end of External Private Auditor World Bank English Review Semiannual semester Acceptable to the Bank Project IFRs HCWW `s 6 months from end o f FY Central Audit Organization NOPWASD English Audit auditedFS H. SupervisionPlan 29. Given the project high level o f risk, the Bank FMS will conduct three supervision missions per year with closer support throughout the early stages o f the project life. Among the priorities at the early stage are the following; (i) ensuringthat staff at the different implementing entities are taking full charge o f the project FM arrangements and are adequately supported by the TA consulting firm; (ii)reviewing the issuance of interim financial reports in accordance with loan covenants while tracking and reporting on all project-related transactions; and (iii) reviewing adherence to the project implementation manual procedures and the stated internal controls. 68 Annex 8: ProcurementArrangements A. General 1, Public sector procurement in Egypt i s governed by a legal framework anchored inPublic Tender Law No. 89 for the year 1998. Further information about the country procurement systemis detailed inthe Country Procurement Assessment Report (CPAR) o f December 2003, 2. Procurement for the proposed project will be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised October 2006; and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 and revised October 2006, and the provisions stipulated inthe Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements,and time frame are agreed betweenthe Borrower and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as requiredto reflect the actual project implementation needs and improvementsininstitutional capacity. 3. Procurement of Works: Works procured under this project would include: (i) Centralized sanitation systems construction ($163 M): includes the construction o f complete sanitation systems for selected village groups, including house connection, transmission lines, pumping stations and centrally located treatment plants for an estimated 222 villages within 14 clusters, (ii) Decentralized sanitation system construction/ rehabilitation ($16.2M): will serve an estimated 150 individual villages/ hamlets with population size less than 1500 inhabitants, providing them with a decentralized system consisting o f shallow sewers and anaerobic baffled reactors, and relying on delegated community management for subsequent O&M. It will also include the upgrading and rehabilitation of existing networks in some villages to acceptable design standards, if feasible, and (iii)GTZ model decentralized systems ($1OM): this sub- component builds on and replicates the implemented GTZ pilot model in Kafr El Sheikh in an estimated 20 villages in the project area, based on the communities' expressed willingness to engage. The model serves villages o f up to 5000 inhabitants and depends heavily on community participation and commitment for the O&M o f these systems based on simple (natural system) technology. 4. The design identified the size of works contracts of clusters comprising networks for number of villages related to a central WWTP that is either existing or to be constructed. For centralized treatment, clusters will be tendered with a single responsibility contract for the WWTP while WSCs might procure the construction o f the associated networks. The treatment plant portion will be procured using a design-build approach whereas the networks will be procured on a traditional bid-design-buildapproach based on a conceptual design. 5. The estimated contract value for a centralized treatment system ina cluster is estimated to cost around US$10 million which i s within the capacity o f local contractors. The implementation o f these activities by WSCs i s meant to empower their role in the implementation o f the National Rural Sanitation Program. Consequently, N C B method will be II 69 adopted for these packages. However, as per the agreed N C B procedures annexed inAttachment 2 below, foreign contractors from eligible countries will have the right to bid. 6. The BD for the construction o f new WWTP will be based on Bank's design-buildmodel for solid waste. Other contracts o f simple WWTP o f smaller value as well as those for networks and house connections will be procured using the Arabic translation o f Bank's SBD for smaller work contracts. In general, no prequalification of contractors will be requiredand all contracts will be subject to post-qualification process. However, ifprequalification of bidders is required, Bank's Standard PrequalificationDocumentswill be used. 7. To ensure proper O&M o f treatment plants, construction companies will be encouraged to subcontract the O&M, required for the one year maintenance period, to specialized private operators who may continue their services through separate contracts financed by funds administrated by CDAs/WSCs. Two pilot performance-based O&M contracts will be tendered out during the life o f the project to support national and local capacity in managing and supervising this type o f contract in the rural setting. This task would be carried out by the TA consulting firm. The BD and contract form can be based on Bank's SBD for non-consulting services. 8. For other smaller value work contracts, including construction o f de-centralized treatment systems, N C B procedures will be followed. Further project-specific N C B requirements are provided inAttachment 2 to this Annex. 9. Procurement of Goods: Goods procured under this project would include IT equipment, furniture for the PMU, and environmental monitoring equipment. The procurement of goods will be done using the Bank's SBD for all ICB and NCB packages. An Arabic translation o f Bank's SBD and a local shopping form can be usedfor small contracts to beprocured locally. 10. Selectionof Consultants:the consulting services financed will include but not limited to the following packages (summary of the assignments is included in Annex 6 and detailed packages for the first phase are detailed in the project procurement plan annexed in Attachment 1): a Contracts for consultancy services to provide technical assistance to the PIU at HCWW, NOPWASD ISSIP Unit and the three RSUs to undertake procurement, planning, design, social mobilization, hygiene promotion, and communication. a Consulting service package to establish the result based M&E system and provide monitoring on project impacts including water quality modeling, analysis and dissemination; a Multiple engineering and construction supervision packages to accompany the works packages a Multiple environmental studiesand training; a Training services to staff at the national and local levels, CDA's, community and stakeholder engagement, contract management, and other areas as defined by the training and capacity building plan to be developed for the project 70 11. The selection o f firms or NGOs will be done using Bank's standard Request for Proposals and contract forms as well as standard evaluation forms. The consultants may be firms, NGOs, or individuals. Short lists o f consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. B. Assessment of the agency's capacity to implementprocurement 12. The project implementation model relies on the existing institutional structure o f the sector. It is tailored to provide the balance between centralized planning and construction support, along with decentralized implementation and management with a strong focus on social mobilization and community involvement in management and cost recovery. The overall implementation o f the project will be managed by a Project Implementation Unit housed at HCWW. The PIU will be headed by a senior H C W W officer and supported by a team o f specialists who will work closely with ISSIP Unit at NOPWASD and RSUs at WSCs. The whole procurement program containing main investment contracts will be procured by a centralized and decentralized implementation process as explained in Annexes 6. To reinforce implementation capacity, funds are made available through grant donor co-financing to ensure technical assistance for each o f the implementing agencies (HCWW, NOPWASD and the three WSC's). The TA consists o f a team o f specialists to support the PIU and RSU's in their mandates mainly in procurement. 13. During the preparation o f the Project, a Dutch Grant financed the recruitment o f international consulting firms to provide to develop the conceptual studies for the different components and carry out the design o f ISSIP. To further the implementation readiness of the project, the consultant has prepared BDs for a first phase o f $ 55 million related to first Priority areas inthe three Governorates. 14. An assessment o f the capacity o f the implementing agencies to undertake procurement actions for the project was carried out in May, 2007. Since the implementation model i s designed to provide the balance between centralized planning and construction support, along with decentralized implementation and management, the assessment reviewed the organizational structure for implementingthe project and the interaction between the project's staff responsible for procurement with the "management" units responsible for administration and finance in NOPWASD and HCWW as well as WSCs. The key issues and risks concerning procurement for implementationo f the project have been identifiedand include: 8 Fundsto finance technical assistance are not part o fthe loan; a Lack o f procurement specialists familiar with Bank's procurement procedures; 8 Broad regulations not always sufficiently clear for consistent application; 0 Inadequate planning and record keeping; 0 Lack o f experience inoutput performance-based contracts; and 8 Lack of computerized system. 71 15. The corrective measures which have been agreed are: 8 Since funds to finance technical assistance are not part o f the loan, the Borrower has agreed to ensure sufficient resources through co-financing by other donors (Dutch and GTZ) to finance TA and consultancy services contracts ; 8 Establish implementing units (PIU at HCWW, ISSIP Unit at NOPWASD, RSUs at WSCs) and select appropriate staffing for them; 8 Hire a consulting firm or firms to support the mentioned implementing agencies in handling project technical responsibilities, fiduciary responsibilities (procurement and financial management), and contract management responsibilities; 8 Consultant to prepare and operations manual o f the project and also draft bidding documents for the Design BuildApproach o f WWTP. 8 Use Bank's standard BDs, RFPs, and evaluation forms for the procurement o f all contracts financed by ISSIP; 8 Construction supervision will have to be ensured by private consultants; and. 8 Train procurement officers in PIUs to be provided either by the TA consulting firms or by special training program. 16. The overall project risk for procurement is HIGH. 17. To advance implementation preparedness o f the project, the following activities will be completed prior to negotiations: (i)Finalization o f the Project Implementation Manual, including detailed Implementation Plan and Procurement plan, (ii)recruit TA consultant, (iii)establish implementingagencies in HCWW, NOPWASD unit and 3 RSUs inthe WSC's, (iii) preparation and review o f bidding documents for the first Phase o f the project prior to effectiveness. C. ProcurementPlan 18. The Borrower developed a procurement plan for the first two years of project implementation which provides the basis for the procurement methods (attachment 1). Activities can be added during the first two years as a result o f subprojects designs to be carried out by the TA consulting firm. However, the procurement plan can be updated inagreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. D. Frequency of Procurement Supervision 19. In addition to the prior review and supervision to be carried out from Bank offices, the capacity assessment o f the ImplementingAgency has recommended 2 supervision missions per year to visit the field to carry out post review o f procurement actions. 72 . . . . -4 -4 CA CA - 0 - 0 B 00 CA & -. 3 . . 9 . 9 5 o o . . N O - 0 0 N O -. 4 . 4 b o o N O b o o CJO r3 4 +., 9Q . . B 2 B 2 F c, - o o - 0 0 . I B 2 - w 2 -8 , -- m E! a Y 83N 83N z"wE E Q * U E Y 6 ' O N J W $ 2 2 1 20 . W eu W - . VI B 4 e4 . . 00 - m e4 W m VI 2 I W P3 00 e4 2 . VI 10 N 4: . 00 P3 4 Q T PI b o o N O $ 1 . . -7 k 1 . N W woo r4O N O iI . 4 CI - 0 . V I W VI00 - 0 . 2 e $.3 - 0 0 moo - 0 V I W - 0 - w aSVMdON . 8 W a" 0 - vi 00 8Q 80 . W N v, vi N 8Q b o o . . 8 .0 0a 0 a v, v, b o o b o a e Pa =! 3 2 N c1 N W N W P3 2 $ 5 vi - 0 0 - 0 O N -3 2 $5 1000 - 0 - 0 O N B@ -4 -3c -4 Y +I tl 3 cd a Y -a aSVMdON H8 nSrl HEI nsrl .lO!.ld 83N 83N W zm W z a 4 % ? O $ g D h O N - 0 O N 0 $ g A & 3 ? O o m - 0 o m B -a c Y*2 d -2 C cd -28 w a Y* 2 L r T 1 : 41 2 a g.00 m c . . c 0 e 5J 00 . 00 .. 00 00 0 00 - z 0 0 8 8> 0 - - - 8 vl 4 2 2 42 0 3 - - . e 00 $ 2 . 8m 2 m CI a B .-a"8 .C a"8 f 3 u 3 3 I+ 3. Use of Statement of Expenditures (SOEs) Prior Review Thresholds: Goods: US$150,000 plus the first three contracts Works: US$400,000 plus the first three contracts Services: US$lOO,OOO 20. All applications to withdraw proceeds from the Loan will be fully documented, except for: (i) expenditureo f Contracts for Civil Works with an estimatedvalue equivalent to $ 400,000 or less; (ii) expenditure of Contracts for Goods with an estimated value equivalent to $ 150,000 or less; (iii) expenditureso f Contractsfor ConsultingFirmswith an estimatedvalue equivalentto $100,000 or less and (iv) expenditure of Contracts for Consultants with an estimated value equivalent to $ 50,000 or less. Documentationsupporting expenditure claim against SOEs will be retained by the PMU and will be available for review when requested by Bank supervision missions and Project Auditors. All disbursements will be subject to the conditions of the Loan Agreement andthe proceduresdefinedinthe DisbursementLetter. 79 Annex 8 Attachment2 - PROVISIONS FORNATIONAL COMPETITVEBIDDING (NCB) UNDER BANK-FINANCEDPROJECTS Bidding procedures for goods and works procured under NCB shall comply with the following requirements: 1. Any prospective bidder from a country eligible under the Guidelines who proposes to provide goods procuredin, or works providedfrom any such country shall be eligible to bid for suchcontracts underNCB procedures. 2. Qualificationcriteria such as: (i)experience and past performance on similar contracts; (ii)capabilities with respect to personnel, equipment and construction or manufacturing facilities; and (iii) financial positionshall be statedinthe biddingdocuments. 3. Bidding opportunities shall be advertised in local publications, with not less than 30 (thirty) days allowed for bid preparation.Bidding documents shall be providedto all prospective bidders at their request.A record o f prospective bidders who received bidding documents shall be maintainedby the procuringentity. 4. Any extension o f the time period to prepare bids shall be granted no later than five working days before the scheduled bid opening date mentioned originally in the bidding documents and all bidders who requested the bidding documents shall be advised in writing concerningthe new bid openingdate. 5. Government-ownedenterprisesshall be eligible, providedthey are legally and financially autonomous, operate under commerciallaw, and are not selectedor hiredb the same supervising or reportingauthority to which the procuringentity belongs. 6. No preferenceo f any kind (price, or other terms and conditionsof contract) shall be given to any government-ownedenterprise or state-controlledcompany. 7. Biddersmay deliver bids, at their option, either inpersonor by courier service or by mail. Bids may also be deliveredat the bid openinglocationup to the time set for bid opening. 8. Bids shall be openedinpublic, that is, biddersor their representativesshall be allowedto be present at the place where bids are to be opened and both envelopes, if two are submitted, shall be opened simultaneously. The time for the bid opening shall be the same as for the deadline for receipt o f bids or immediately thereafter, and shall be announced, together with the place for bid opening, in the invitation to bid. Minutes o f the bid opening shall be prepared, signedby all the bidders attendingthe openingand sent free of charge to all bidders. 80 9. A prospectivebidder requiringany clarification of the biddingdocumentsmay do so only by writing to the address statedinthe invitation for bids. The response from the procuring entity shall similarly also be in writing only. Written copies of the request for clarification (without identifying the source of inquiry) and the response shall be sent to all prospectivebidders who receivedbiddingdocuments. 10. Bids shall be evaluated based on price and on evaluation criteria, as disclosed in the biddingdocuments and quantifiedinmonetary terms. No provision for preferentialtreatment for domestic companiesor domesticallymanufacturedgoods shall be appliedinthe bid evaluation. 11. During the evaluation of bids, the evaluation committee may ask any bidder for clarifications.The request for clarifications and the response from the bidder shall be inwriting. No change in the price or substance o f a bid shall be sought, offered or permittedas part of the clarificationprocess duringthe evaluationof bids. 12. The contract shall be awardedto the successful bidder whose bid has beendeterminedto be substantially responsive and determined to be the lowest evaluated bid, providedfurther that the procuring entity also has determined that the bidder is qualified to perform the contract satisfactorily. The contract price, unit prices and other terms and conditions o f the contract shall not be negotiatedwith the bidder. 13. The Borrower shall publishthe following informationon contract award ina government public procurement bulletin or on a free and open access website or on any other means o f publication acceptableto the Bank, including: (a) name o f each bidder who submitted a bid; (b) bid prices as read out at bid opening; (c) name and evaluated price o f each bid that was evaluated; (d) name of bidder whose bids were rejected and the reasons for their rejection; and (e) name of the winning bidder, price it offered as well as the durationand summaryscope ofthe contract awarded. 14. The Arabic translation of the Bank's StandardBidding Documents, suitable modified for NCB shall be used. 81 Annex 9: Economicand FinancialAnalysis EconomicAnalysis 1. Inadequate water, sanitation and hygiene account for considerable "private" as well as "public" forgone benefits and avoided damage costs. The project will expectedly bring about public benefits (e.g. to public health and ambient water quality downstream the interventions) as well as private benefits (households wellbeing). Thus, the economic feasibility of the project has been assessed via a Cost-Benefit-Analysis (CBA) approach, rather than the Cost-Effectiveness approach commonly applied for assessing sanitation projects. In this annex, a summary of the analysis i s presented,together with the final results. The related details of the water quality modelling work are presentedinAnnex 11. Total PublicBenefits 2. The CBA attempted to quantify and monetize the public benefits that would accrue to each beneficiary subsector, if ambient/defused water pollution from maltreatedhntreated sewage i s curbed. The analysis started with a generic case assuming that the pollutants concentration i s considerably reduced toward meeting the national standards (thus, by calculating the incremental benefits and avoided damage costs when in-streampollution from untreated/maltreated sewage is considerably curbed). The public benefits include: 0 Reduction inmortality and morbidity 0 Reduction inhealth costs 0 Reduction indrinking water treatment costs 0 Increasedfisheries 0 Eliminationof private costs 3. Other benefits may include reduction in mosquitoes and flies and a related reduction in the need for spraying insecticides, and removal of stench. Also the property values within the project area will likely increase. The benefits results are summarized as follows (LE/person/month): Mortality and morbidity 3 1.67 Health costs 32.28 Drainage water reuse 13.50 Drinking water 0.10 Fisheries 3.38 Total LE per family per month 80.93 Private benefits 4. The project will generate private benefits constituted by the sums that the beneficiary households would be willing to pay for solving their wastewater problem. This is a non-income- constrained willingness-to-pay approach as per the "contingent valuation method". The current cost for vacuum trucks can be used as a proxy for this willingness to pay. The content of the cesspit is usually dumped (illegally) in canals or drains instead of WWTPs, causing a health hazard. The monthly costs for a family of five persons of using vacuum trucks for cesspit evacuation are LE 20- 82 40. Incase o f affordability, it can safely be assumed that families would be willing to pay LE 50 per month for a system that i s hassle-free and that actually solves the pollution and health problems related to the absence o f proper sanitation in semi-urban areas. Families connected to the WWTP in El Mufty El Kubra pay LE 10 per month, of which LE 7 is required for actual O&M (including de- sludging o f the collectors) and the remaining LE 3 i s used for minor repairs. As part o f the project feasibility study, willingness to pay surveys has been conducted in potential project villages. Communities have indicated their willingness to pay LE 10 per month, covering the O&M cost o f the intervention. Insummary, the willingness to pay is higher than the willingness to price. Impact of the water quality modellingon public benefits 5. The subsequent part o f the analysis aimed to rationalize the above-listed public benefits by subjecting them to the results o f the water quality modelling work that has been undertaken during project preparation. The modelling work assessed project impact on the in-stream water quality within the drainage system. The Table A9.1 below shows the expected concentration of the water pollutants at the effluent, for the "without-project", "with-decentralized" system, and "with- centralized" systemrespectively. Parameters Sources DO BOD TSS Fecal Bacteria (mg/l) (mg/l) (mg/l) MPN/100 ml Agriculture' 4.0 10 30 0 Week Raw Sewage` 0.0 400 400 1o6 II Medium Raw Sewage3 0.0 600 600 0.5 * lo7 I 1 1I Strong Raw Sewage4 II 0.0 II 800 II 800 II 1o7 I TreatedCentralized (Secondary I 1 Treatment) 2.0 90%reduction reduction 90% 5000 ~ ~ ~ Treated Decentralized(average, with Advanced PrimaryTreatment) 0.0 60% reduction reduction 60% 50% Reduction ~ TreatedDecentralized(maximum reduction, with Advanced Primary 0.0 70% reduction 70% 65% Reduction Treatment) reduction 6. Notwithstanding the ambient water quality legislation, as a gradual approach, decision makers can accept the decentralized treatment systems introduced by ISSIP as long as: 83 A "free zone" of domestic-wastewater point sources is enforced along the drain, downstream the ISSIP-introduced treatment point (with a free length of about 5 to 8 km for most drains). This will enable the self purificationto function as modelled. Predominance of the diffuse source, the agricultural drainage water, is maintained. The modelling results showed that the agriculture drainage water, overall, provided "net dilution" factor along the drain. This requires a typical drainage catchment for third-order drains of 5,000 10,000 Feddans. Another necessary factor is to have discharge flows along the drains no less than the following range: 0.6 mdday (from Cairo up to Tanta City) to 7.5 mdday (north from Tanta City up towards the coastal areas). There is minimal upstream pollution load (headwater quality): with DO no less than 5 mg/l, BOD not exceeding 12 mg/l, and Coliform bacteria not exceeding 8000 MPN/lOOml. The point-sourcevillages and hamletsare of small sizes, up to 500 to 1,500 capita each, in which case domestic wastewater would be quite smaller than the agricultural drainage water, hence enabling sufficient dilution by the latter. An acceptable ratio between domestic and agricultural returnflow would be 1to 10 (or, safe side, 1to 20). The project is expected to result in improvement in the quality of the receiving water ways, either from the secondary treatment (which is expected to meet Law 48/1982 effluent standards), or from advanced primary treatment. The latter is expected to reach Law 48 ambient quality in receiving drains, assuming that the above mentioned criteria are met. The two types of treatments, combined, are expected to improve the quality of at least 40% of the drains inthe project area, by at least 60%. 8. Unit cost: A weighted average of $ 13O/capitafor the centralized and decentralized systems has been used for the "cost stream" in the economic analysis, according to the cost details provided inAnnex 5. 9. CBA analysis: The analysis was carried out at the level of one household, making it independent from the scale of investment. The following assumptions were used: Investment unit cost: USD$130 per capita (weighted average, as above). Exchange rate LE 5.5/USD (year 2008). Family size is five persons on average. Investments are carried out inthree years at ratios of 0.3, 0.4 and 0.3. Lifetimeof the project is 31years (2009-2040). Replacement of mechanical parts carried out every 10 years at 20% of initial investment, O&M costs: LE 10 per family per month, payable starting from completion of construction and onwards. Private and public benefits being 50 and 81 LE per family/month respectively, thus totalling 131 per family/month. The public benefits are subjected to the low and high strategic scenarios as explained below, inrelation to the water quality impacts of the project. Benefit build-up starts year following completion of construction at ratios 0.2, 0.4, 0.6, 0.8. 1. 84 10. The low case scenario: This scenario assumes a slow down on the implementation o f the Government's country wide rural sanitation programs. In this case, the only improvement in water quality i s expected to result from the project interventions. It i s assumed that 60% improvement o f the water quality index (in 40% of the drains) would result in a 70% improvement in the public benefit. This translates to a 40% X 70%=28% improvement in public benefit. Hence, the project's contribution to public benefit i s equal to 28% X 81 LE = 23 LE/person/month. Adding the above- estimated private benefits (50 LE/person/month), the combined benefits would be 73 LE/person/month. The resulting ERR would be around 10%. 11. The high case scenario: This scenario assumes a fulfilment o f the Government's country wide program of rural sanitation, thus resulting in improvement of the water quality in all drains within the project area. This would result in accomplishing the full 70% improvement in public benefit o f the project. In that case, the incremental benefits would be the product o f 70% and 81 LE/person/month, hence 56 LE/person/month. The total (public and private) benefits would therefore be 106 LE/person/month. The resulting ERR will therefore increase to upward of 15%. 12. The sensitivity test: The impact o f uncertainty o f individual parameters on the ERR was evaluated, to assess the possibility o f the ERR dipping below the cut-off rate o f 10%. These have been subjected to the strategic low scenario explained above, regarding the water quality benefits. The results are as follows: a Investment unit cost could go up to USD $140 per capita. a O&M cost could go up to LE 13 per family per month. 0 Total (private plus public) benefitscould decrease to LE 68 per family per month. a Ifthe project aims only at meetingthe private (sanitation) benefits, the ERRwould decrease to 7%. This signifies the relative importance of addressingthe water quality aspects of the project. 0 Incase o f delayedproject implementation, that takes four years instead o f the assumed three years, the ERR would still be around 10%. 13. Conclusion The economic analysis o f the project exhibits an ERR centering around 10%. The scenario analysis and the sensitivity tests demonstrate that the project interventions are economically viable. This economic viability is relatively robust and has some limited scope of accommodating cost escalation, benefits reduction, and delays in implementation. This is on the basis that both the sanitation benefits and the water quality benefits will be sought. Financial Analysis 14. The project will provide financing for the construction of sanitation systems using both decentralized and centralized approaches in the Governorates of Beheira, Gharbiya and Kafr el- Sheikh. 15. Decentralized Sewerage Systems are planned to cover up to 150 villages, using a demand driven approach that will require: (i) up-front community organization through the CDA, and (ii)a 85 demonstrated willingness to collect user charges and manage the operations and maintenance o f the sewerage systems. 16. The CDA will be responsible for the O&M o f the decentralized facilities financed under the project, including the collection o f user charges. This will be done through a MOU that will be signed between the CDA and the utilities responsible for water and sanitation services. The O&M costs o f these facilities will vary from village to village, but are estimated to cost on average LE 7 to 10 per month per household. This estimated cost i s inline with the willingness to pay verified inthe el-Moufty pilot. 17. The el-Moufty pilot is a decentralized system, built with GTZ financing using the CDA approach, in which O&M costs b e being paid for by the community. This pilot i s considered a model for the implementation o f decentralized systems in Egypt, including the ones financed under the project. As such, it i s expected that the communities benefiting from the project will be able to pay for the cost o f O&M for the facilities constructed, therefore ensuring their long-term financial sustainability. 18. CentralizedSewerage Systems are planned to be constructed for a total o f 222 villages in 14 clusters, consisting o f mother villages and their surrounding hamlets. These will be entrusted to the management o f the Beheira, Gharbiya and Kafr el-Sheikh WSCs. A review o f the financial performance o f these WSCs to assess their future financial sustainability was undertaken during preparation. 19. Beheira. The Beheira WSC serves about 4.2 million people. In2005/06 Beheira had about 530,015 connections with an average consumption o f 379.2 m3per year. The company produces about 257 million m3o f water on an annual basis, and water losses are estimated to be 24%. In 2005/06 the Beheira WSC, had a net operating profit o f about LE 44 million (before depreciation), this is mainly due to the fact that the company has not yet taken over the operation and maintenance o f sewerage assets from the Governorate, something that i s planned for the short-term. Levels of accounts receivable are high, at about 14.4 months o f revenues, but they represent an improvement, as the total amount o f accounts receivable decreased by half from the previous two years (from LE 120 million to LE 60 million). This improvement is mainly due to efforts by the company to increase payment o f overdue receivables from government entities. 20. Gharbiya. The Gharbiya WSC serves about 5.25 million people. In2005/06 Gharbiya had about 655,181 connections with an average consumption o f 191.8 m3per year. The company produces about 239 million m3o f water on an annual basis, and water losses are estimated to be 26%. In2005/06 the Gharbiya WSC, had a net operating loss o f LE 38 million (before depreciation). The utility has prepared projections for the next five years whereby it begins to show net profit in 2010, if it able to introduce some tariff adjustments (as per the attached profivloss table). The levels o f accounts receivable are high, at about 56.7 months o f revenue. 21. Kafr el-Sheikh. The Kafr el-Sheikh WSC serves about 2.6 million people. In2005/06 Kafr el-Sheikh had about 324,856 connections with an average consumption o f 440.2 m3per year. The company produces about 206 million m3o f water on an annual basis, and water losses are estimated to be 31%. In 2005/06 the Kafr el-Sheikh WSC, had a net operating profit o f LE 11 million (before 86 depreciation) but i s projected to show losses inthe near future - unless tariff increases and efficiency gains are instituted. Levels o f accounts receivable are high, at about 23.1 months o f revenue. 22. The weak financial and operational performance o f these utilities i s mainly due to low tariff levels and lack o f incentives to improve efficiencies within the companies' operations. For the three WSCs under the project, the level o f cost recovery i s on average 60%. On average, households pay LE 0.23 per m3for consumption ofwater up to 20 m3and LE 0.65 per m3for consumption above 20 m3. Wastewater charges are currently set at 35% of the water charge. As of 2006, the Ministry of Finance has undertaken a transparent system for the transfer o f O&M subsidy to the H C W W to be distributed among the subsidiaries to cover the cost-revenue gap. The current low tariff levels are envisaged to be gradually increased within an overall Government framework to switch to direct targeting o f the poor, while lifting blanket subsidies over basic services. 23. As subsidiaries o f the HCWW, the Beheira, Garbiya and Kafr el-Sheikh WSCs will be part o f the HCWW's near-term program for the improvement of the sector's performance. Key elements o f this program include: 0 Strengthening o f billing and collection systems and procedures. 8 Financial Planning. 0 Implementation o f an adequate performance monitoring system. 0 Decentralization and streamlining o f utility organization structures. 8 Corporatizing utility services inthe remaining fifteen governorates. 0 Building capacity for investment planning and programming, including the preparation o f mater plans. 24. With regards to improved operational performance, currently there is a performance incentive program in place between the H C W W and the subsidiaries, which has had limited results inproviding appropriate incentivesto improve the performanceo fthe utilities. 25. USAIDand GTZ have a technical assistance program at the Holding Company level that has already put in place some o f the foundations for business planning in all o f the subsidiaries. The business plans were used to provide input into the level o f subsidies in the sector that is required from the Ministry o f Finance. Inthe long-term, it i s envisaged that these businessplans can serve as the basis for setting up improvement targets in annual performance contracts between the subsidiaries and the Holding Company, under an adequate incentive framework. 26. The government is committed to improving the level o f efficiency within the WSCs; however, the change i s expected to be gradual. The project will be supporting the Government in its efforts, as it will finance the establishment o f a local results-based monitoring and evaluation system that links the improvements in sanitation coverage with anticipated environmental and health impacts. This system, in addition to the business plans, could be used to set targets for improvement. Inaddition, during implementation, the project team with work with the three utilities in terms of preparing and implementing an action plan for improvement of collection rates, and support the Government's plans for gradual tariff increases, which should contribute to the improvement o f the performance o f the Beheira, Gharbiya and Kafr el-Sheikh's WSCs. 87 Annex 9 Appendix 1 - (a) Al-Behira ProfitLoss Statement Revenues 2006 2007 2008 2009 2010 2011 Water Sales 77,857,523 80,000,839 95,105,447 103,287,130 104,646,171 111,824,468 Other Revenues from Water 38,500,000 42,996,755 45,748,830 48,776,113 52,106,125 55,769,137 Other Receivables 20,695,000 4,466,000 4,466,000 4,466,000 4,466,000 4,466,000 Revenuefrom Tariff Increase 0 0 37.416.917 63,026.869 90.686,769 115,269,820 Total Revenues II137,052,523II127,463,594 I 182,737,195 219,556,112 I II I251,905,065I287,329,425 I O&M Expenses Wages 33,569,546 39,529,183 45,656,207 52,732,919 60,906,521 70,347,032 Operating Expenses 32,552,152 36,411,968 49,081,910 54,181,019 55,806,449 62,799,266 Other Expenses 10,266,935 16,530,748 18,016,960 18,740,287 18,970,861 19,962,818 AdministrativeExpenses 15,969,682 16,317,901 18,217,900 20,412,399 22,947,046 25,874,563 Total O&M Expenses 92,358,315 108,789,800 130,972,976 146,066,624 158,630,877 178,983,678 Net Operating Income Before Depreciation and Interest I 44,694,208 l 18,673,794 l 51,764,219 i 73,489,489 l93,274,188 l108,345,747 Depreciation 30,000,000 31,000,000 40,001,634 55,185,113 55,185,113 65,488,188 Operating Income Before Interest 14,694,208 (12,326,207) 11,762,585 18,304,376 38,089,075 42,857,559 Interest Expenses 6,000,000 6,000,000 5,937,239 5,937,239 5,937,239 5,937,239 Operating Income After Interest 8,694,208 (18,326,207) 5,825,346 12,367,137 32,151,836 36,920,320 Other Expenses 500,000 600,000 277,000 284,700 293,170 302,487 Net Operating Profit (Loss) 8,194,208 (18,926,206) 5,548,346 12,082,437 31,858,666 36,617,833 88 Al-Behira :Current Tariff and ProposedTariff Increaseson Water and Wastewater Services Current Tariff I LEh3 2008 2009 2010 2011 Household 10:1 0.23 0.0% 0.0% 0.0% 0.0% Household 20:1 0.23 7.0% 7.0% 7.0% 7.0% Household 30:20 0.35 7.0% 7.0% 7.0% 7.0% Household>30 0.35 10.0% 10.0% 10.0% 10.0% Commercial 0.85 20.0% 20.0% 20.0% 20.0% Government 1 0.45 20.0% 20.0% 20.0% 20.0% Government 2 0.65 20.0% 20.0% 20.0% 20.0% Other 1 0.45 20.0% 20.0% 20.0% 20.0% Other 2 0.65 20.0% 20.0% 20.0% 20.0% I I I I I 1 Current Tariff LEh3 2008 2009 2010 2011 Household 10:1 35% 0.08 50.0% 50.0% 50.0% 50.0% Household 20: 1 35% 0.08 50.0% 55.0% 60.5% 66.6% Household 30:20 35% 0.12 50.0% 55.0% 60.5% 66.6% Household>30 35% 0.12 50.0% 55.0% 60.5% 66.6% Commercial 35% 0.30 90.0% 117.0% 152.1% 197.7% Government 1 60% 0.27 90.0% 117.0% 152.1% 197.7% Government 2 60% 0.39 90.0% 117.0% 152.1% 197.7% Other 1 60% 0.27 90.0% 117.0% 152.1% 197.7% Other 2 35% 0.23 50.0% 52.5% 55.1% 57.9% 89 (b) Al-Gharbeya ProfitLossStatement Revenues I 2006 I 2007 I 2008 1 2009 I 2010 I 2011 Revenues from Water Water Sales 42,435,577 5 1,199,893 60,663,373 76,744,953 78,126,362 79,532,637 Fees from New Subscriptions 2,927,949 2,927,949 3,220,744 3,542,818 3,897,100 4,286,8 10 Other Receivables 11,425,000 11,425,000 11,425,000 11,425,000 11,425,000 11,425,000 Revenue from Tariff Increase 0 0 9,468,177 26,569,418 45,259,995 68,947,595 Revenues from Sanitation SanitationSales 10,836,750 13,074,889 18,157,360 18,438,015 23,657,242 35,120,029 Other Receivables 1,657,546 1,657,546 1,657,546 1,657,546 1,657,546 1,657,546 Revenue from Tariff Increase 0 0 13,321,075 27,472,022 63,518,592 161,686,174 Total Revenues from Water and Sanitation 69,282,822 80,285,277 117,913,274 165,849,773 227,541,838 362,655,791 O&M Expenses Water Production and Distribution Expenses Wages 40,244,997 42,928,420 44,680,374 45,924,364 48,815,781 52,003,365 OperatingExpenses 14,216,881 17,146,159 21,011,501 28,641,290 29,500,529 30,385,545 Service Expenses 494,779 10,349,181 10,395,164 10,477,354 10,495,196 10313,573 wage Collection and Net Operating Income Before Depreciation & Interest (38,751,371) (36,762,083) (5,788,763) 26,995,394 81,680,160 211,029,958 , Depreciation 27,108,903 30,363,261 41,3 16,564 46,870,464 46,870,464 46,870,464 Operating Income Before Interest (65,860,274) (67,125,344) (47,105,328) (19,875,070) 34,809,695 164,159,493 Interest 0 88,904 0 0 0 0 Operating Income After Interest (65,860,274) (67,214,248) (47,105,328) (19,875,070) 34,809,695 164,159,493 Other Expenses 0 1,257,634 1,257,634 1,257,634 1,257,634 1,257,634 Net Operating Profit (Loss) (65,860,274) (68,471,882) (48,362,962) (21,132,704) 33,552,061 162,901,859 90 Al-Gharbeya: Current Tariff and ProposedTariff Increases on Water and Wastewater Services Current Tariff and Proposed Tariff Increases on Water Services Proposed Sanitation Percentage Share Based on Water Tariffs Current O hof Tariif Water LE/m3 2008 2009 2010 2011 Households<10 m3 35.0% 0.08 50.0% 50.0% 50.0% 50.0% Households 10-30 m3 35.0% 0.11 50.0% 55.0% 160.5% I66.6% Households>30 m3 35.0% 0.00 50.0% 55.0% 160.5% I66.6% Building and Construction Works 35.0% 0.18 90.0% 117.0% 152.1% 197.7% Services 1: (mosques, youth centers, etc) 60.0% 0.21 90.0% 117.0% 152.1% 197.7% Services 2: (recreation centers,embassies, etc) I 60.0% I 0.30 I90.0%I117.0% 1152.1%I197.7% Services 3: (exclusive recreationcenters) I 60.0% I 0.24 I90.0%I117.0% 1152.1%I197.7% Commercial 60.0% 0.30 90.0% 117.0% 152.1% 197.7% Industrial 60.0% 0.32 90.0% 117.0% 152.1% 197.7% Tourismand Development 60.0% 0.51 90.0% 117.0% 152.1% 197.7% Government 60.0% 0.24 90.0% 117.0% 152.1% 197.7% Special Connections(fixed flow) 35.0% 0.08 50.0% 50.0% 50.0% 50.0% 91 (c) Kafr ElSheikh ProfitLoss Statement Revenues 2006 2007 2008 2009 2010 2011 Revenues from Water Water Sales 37,323,156 37,929,000 39,932,852 53,448,623 54,199,306 54,949,989 Other Receiveables from Water 10,149,754 15,683,334 16,733,198 17,888,048 19,158,383 20,555,752 Other Receiveables 26,826,230 6,046,439 6,046,439 6,046,439 6,046,439 6,046,439 Revenues from Tariff Increase 0 1,554,580 9,841,928 27,222,910 45,869,890 70,293,915 Revenues from Sanitation Sanitation Sales 3,300,401 4,112,698 4,518,053 5,973,731 5,996,696 6,013,684 Revenues from Tariff Increase 0 351,003 4,005,196 11,069,793 20,884,740 37,477,577 Total Revenues from Water and Sanitation 77,599,541 65,677,053 81,077,664 121,649,544 152,155,454 195,337,356 O&M Expenses Water Production and Distribution Expenses Wages 16,207,958 18,701,05 1 19,894,148 21,208,024 21,632,936 23,796,230 OperatingExpenses 20,935,969 21,570,544 23,386,922 3 1,772,834 32,726,019 33,707,799 Service Expenses 3,538,625 5,576,957 5,734,162 6,303,003 6,367,661 6,434,258 Net Operating Income Before Depreciation 11,643,806 (8,718,934) (9,784,884) (1,948,390) 17,461,649 47,785,588 Depreciation 22,5 14,445 22,900,000 45,029,185 56,453,034 72,134,480 77,614,555 Operating Income After Depreciation (10,870,639) (31,618,934) (54,814,069) (58,401,424) (54,672,831) (29,828,967) Other ExDenses I 6.289.000 I 0 0 0 0 0 92 Kafr ElSheikh: Current Tarrif Levels and Proposed Tariff Increases on Water and Wastewater Services Current Tarrif Levels and Proposed Tariff Increases on Water Services Public Government Agencies - 0.62 30.0% 1 30.0% Public - Government Industries 0.85 30.0% 30.0% 30.0% 30.0% Public Government Mosques 0.35 30.0% 30.0% 30.0% 30.0% Public OtheriGeneral -- 0.40 II1 30.0% III 30.0% II1 30.0% 1II 30.0% ProposedSanitationPercentageShare Based on Water Tarijjfs 2008 2009 2010 2011 Households 30 m3 0.11 50.0% 1 55.0% 60.5% I 66.6% 93 Annex 10: SafeguardPolicy Issues 1. The assessment of impacts, environmental management plan, and monitoring recommendations are included in details in the "Environmental and Social Impact Assessment Framework (ESUF)" report, and the related Environmental and Social Management and Monitoring Framework (ESMMF). This Annex provides the main highlights and most relevant issues. Analysis of Alternatives 2. The objective of analyzing different project alternatives is to evaluate some project options from the environmental perspective. In the following, each of these alternatives is provided with a summary of its mainfeatures. N o Project Alterative 3. The environmental and social benefits expected from ISSIP, over the existing situation (termedthe no project alternative) include: Improving surface water quality in the project areas. Although there are risks of discharging noncompliant effluent to drains as discussed earlier the expected discharged loads to surface water will be much less than the loads dischargedinthe current situation Improve the quality of groundwater and the high water table in most of the project areas, through preventing infiltrationof sewage to groundwater Although there may be odor problems associated with operation of WWTP and PSs, the impacts of odors and vectors problems are expected to significantly improve comparedto the existing situation The socioeconomic benefits of the project significantly overweigh the expected impacts as the beneficiaries from the project are muchmore than possibly affected people The potentially negative impacts expected by ISSIP include: All impacts expectedduring construction Risks associatedwith handling of chlorine and the impact of disinfection by-products Air emissions of standby generators inPSs and WWTPs Possible loss of agriculture land for construction of PSs and WWTPs Economic difficulties for poor people to contribute inthe project's costs The overall environmental and social advantages are believed to significantly overweigh the disadvantages; therefore the "no project alternative" i s not favored from environmental perspective. Alternativesof Piping Materials 6. There are no direct preferences for piping materials from the environmental and social point of view related to the direct impacts of the ISSIP. However, the preferences will be based on the life cycle analysis of these piping materials. Asbestos piping should be completely banned from ISSIP, inorder to preventproduction ofhazardousasbestos waste duringthe operation of the project. 94 Alternatives Techniques for BiologicalTreatment 7. The options considered inFirst PhaseImplementationPlan include: e Extended aeration activated sludge process e Trickling filters e Rotating Biological Contactors 0 Up-flow Anaerobic Sludge Blankets (UASB) e Stabilization ponds 8. With the exception o f minor environmental concerns associated with methane venting or flaring in the USAB process, no specific preference between the first four alternatives. The experience o f implementing these methods in Egypt should be considered during the technical evaluation o f different bid price. Multi-criteria analysis, including capital and operational costs, and environmental and social aspects, will weighthe merits and demerits o f each o f these technologies. 9. The stabilization ponds alternative i s the most discouraged, because o f the associated large area requirements. However, if by applying all mitigation measures and screening criteria recommended in the ESMMF it i s found to still be feasible, there shouldn't be environmental objections to that option. DisinfectionAlternatives 10. The proposed design o f the project includes disinfection o f the final effluent using chlorination. The chlorination o f final effluent will cause production of trihalomethanes (THMs) and haloacetic acids (TAASs), which are reported to be carcinogenic. However, the disinfection concept i s believed to achieve direct environmental benefits in enhancing the protection o f people in direct contact with surface water from pathogens, such as bathers and villages who use the water for irrigation, while the disadvantages are secondary. On the other hand, using ultraviolet (UV) disinfection will prevent the problems associated with disinfection byproducts but it i s believedto be more expensive than chlorination/dechlorination4. UV disinfection will the preferred alternative if proven to be feasible, otherwise undertaking the chlorination, associated with pre-chlorination and de-chlorination after effective bacteria kill, i s the second preferredalternative. Alternatives of Utilization of DecentralizedTreatment Works Effluent 11. Two alternatives are available for discharging the effluent from decentralized system serving less than 1,000 capita Izbas: Discharging the final effluent to a drain or reusing the final effluent in irrigating wood trees5. 4 The HCWW is interestedto investigatethe feasibility of the UV system, therefore suchfeasibility assessmenthas been consideredinthe ESMMF In case a wood tree field is feasiblynearby 95 12. The advantages o fthe first alternative over the second are: a Low cost o f construction as there will be no need for pumping or long irrigation pipelines a Ease o f operation, which does not needhuman input except for undertaking simple repairs a Avoid possible risks associated with violating safety precautions for using the effluent in irrigation, such as buffer zones, crop limitations and contact limitations. 13. The advantages o fthe second alternative over the first are: a No problems about law compliance a Achieving water savings and better water resources management a Increase green areas 14. The irrigation reuse scenario will not be self sustainable unless safety precautions mentioned above are violated. Furthermore, the newly publishedEgyptian Code o f Practice for Effluent Reuse only allows the reuse in specific designated locations, which may not be relevant to the project area. The first alternative is therefore recommended. Alternativesof Utilizationof Sludge 15. The generated sludge from WWTP will either be utilized in conditioning agricultural lands, further stabilizedthrough co-composingwith domestic solid waste, or land disposed. 16. The utilization o f sludge in agriculture land i s indeed the preferred option from environmental point o f view, if safe heavy metals concentration, safe biological properties, and safe land application rates were followed according to the specifications o f Law 93/1962, and the further guidelines o f USEPA. The reason for this preference i s that volume o f waste received in disposal sites will be reduced and an equivalent quantity o f chemical fertilizers, that i s associated with environmental cost for producing, will be saved. On the other hand, the sustainability for using sludge as land conditioner will be doubtful if the costs o f sludge analysis, for quality control, are not covered by revenues from selling the sludge. The PIU should investigate the cost benefits from selling the sludge as land conditioner against the associated quality control costs, before starting the project operation. 17. Ifreusingthe sludge is not feasible, two alternatives will remain: co-composting the sludge with domestic solid waste, as recommended by AAW-AEC inthe project plan, or disposal inland. 18. Again the co-composting o f sludge with solid waste will achieve environmental benefits of recovery; however, the main disadvantage will be that the handling o f the sludge will not be within the control of the project. Furthermore, the mixing with solid waste may cause degradation o f the sludge quality as a land conditioner, because most of the existing solid waste composting plants are not separating impurities, especially glass, efficiently. On the other hand land disposal o f sludge, although will be practiced by a waste contractor as mentioned in the ESMMF, will only need daily coverage in certain location, a process which could be easily monitored to check its compliance with the waste disposal contract. Therefore, the disposal alternative is preferred over the co-composting alternative with municipal solid waste, in case the direct selling o f sludge from the WWTP has proven not to be feasible. 96 PositiveEnvironmentaland SocialImpacts 19. The following environmental and social benefits are expected from ISSIP: a Reduction o f health risks associated with exposure o f villagers to improperly drained sewage intheir surroundings a Reduction o f water borne diseases resulting from possible microbial pollution o f drinking water obtained from shallow contaminated wells, or through suction o f contaminated water inwater supply pipesthrough accidental negative pressures inwater pipes a Improving the water quality in drains and irrigation canals, which currently receive raw sewage evacuated from individual cesspits and collected from private sewerage networks in some villages a Improving groundwater quality through preventing infiltration of sewage from porous cesspits a Alleviating high groundwater table problem inthe project areas a Improving the living conditions for villagers in the served communities through achieving the above environmental benefits, upgrade their real state values and contribute inalleviating poverty conditions through work opportunities in construction and operation o f the project achieve economic benefits by saving some healthcare expenses, improving people's productivity and improving water resources management a Strengtheningcommunity participation in environmental protection through involving CDAs inproject operation and social mobilization activities 20. The environmental benefits are expected to overweigh possible negative impacts associated with project activities, as the current rural sanitation situation causes many environmental and health impacts. 111. Environmentaland Social Managementand MonitoringFramework(ESMMF) 21I The potentially negative impacts and their mitigation measures, and monitoring plans during construction and operation phases are developed in details in the Environmental and Social Impact Assessment Framework (ESIAF) document. Furthermore, training and capacity buildingrequiredfor the implementing agencies is given. Finally, cost estimate ofthe ESMMFis presented. 22. The Environmental and Social Management and Monitoring Framework (ESMMF) developed for the project includes (a) a set o f mitigation measures to minimize the impacts during the construction and operation phases, (b) a monitoring program for ensuring impacts are within acceptable standards, and (c) institutional arrangements for the implementation o f the management plan, including the necessary staffing and the requiredtraining program. The ESMMFwill be part o f the Project Implementation Plan. Table A10-1 shows the required human resources for Environmental Management staff o f ISSIP. Table A10-2 shows the required training courses for the successful implementationo f the ESMMF. 97 'ci b a b a 3 3 0 0 8 2 d c-4 I l l EstimatedBudget for the ESMMF 23, The accurate level for environmental and social intervention cost for safeguarding against possible unacceptable impacts could not be reached at this stage. Therefore for estimating a preliminary budget for the ESMMF, realistic assumptions have been made. These assumptions were based on knowledge o f the project components and project area, as well as previous experience o f similar projects and settings. Along with the project development, these assumptions should be reviewed by the PIU and modified according to project progress. The estimated budget for ESMMF i s around $1 million, as shown in the breakdown presented in Table A 10-3. 24. The presented costs do not include the following expenses, for certain measures recommended inthe ESMMF, because they are already included inthe main project budget: e Survey o f existing WWTPs and the correspondent improvements for these WWTPs to qualify them for receiving ISSIP wastewaters Geotechnical investigations for PSs Establishment o f anaerobic modules in remote clusters to receive dewatering liquid and contaminated water e Installation o f dechlorination systems, including dechlorination chemicals, and correspondent facilitation o f extra aeration to safeguard raise in BOD/COD after dechlorination e Installation o f additional treatment facilities for decentralized systems in case no consent was given for the UASBreactor Installationo f oil/solid separators at commercial unitsto preventsewers clogging Annual efficiency assessment for WWTPs Subsidies for unaffordable groups o f community Compensations for land acquisition ' 100 F F Public Consultation First PublicConsultation: 25. The first public consultation for this project was held over two days; the first day was June 13th 2007 for Kafr El Sheikh and Gharbeya Governorates in Kafr El Sheikh Water & Sanitation Company (KWSC) conference room. The second day was June 14th 2007 for Behera Governorate in Behera Water and Drainage Company (BWADC) conference room. Official invitations by HCWW and the three WSC were directed to representatives from Local Units, Directorates o f Health, Departments o f Environment and NGOs. There were 71 attendees present, inthe two days, including representatives from: KWSC GHWSC BWADC Heath Directorates inthe Governorates Environmental Departments inthe Governorates Local Councils and Villages Administrations Local NGOs Local press 26. The main issues raised during the first public consultations and the actions taken by the study team i s shown inthe following: RaisedIssue Actions taken by ESIAF Team Many existing WWTPs are not complyingwith The mitigationmeasuresinthe ESMMF includes Law 48/1982 introductionof adequate modificationsto existing WWTPs before utilizing them inthe ISSIP Many conferences, workshops and public Importance of consulting the community has been consultations were held without physical emphasized inthe two public consultation implementation Most people will be willing to pay Willingess to pay has beenaddressed inthe ESMMF Environmental impacts of water reuse in Taken into consideration inthe ESMMF agriculture and protection of dirking water intakeshould be considered Many sanitation projects started and not - The following issues were clarified in the second completed, why not complete these projects public consultation: before startinga new one - The ISSIPaims at coveringcertain deprivedareas with the sanitation services to improve water quality conditions, such objective could not be -achievedby strategy existingprojects The ISSIP i s to maximize the use of existing WWTPs which could not be achieved by existingprojects - The ISSIP integrated with the IIIMP project i s in areas, the existing projects could not achieve such - HCWW was told about this issue to investigate the integratedapproach 102 RaisedIssue Actions taken by ESIAF Team status of existing projects supervisedby them Importanceof awareness campaign Regardedinthe ESSMF Using stabilization ponds as fish farms Communicated to AAW-AEC who appreciated the increases its efficiency concept but mentioned that stabilizationponds will be avoided for area savings Second Public Consultation: 27. The second public consultation was on July 1lth 2007, in one collective event for the three Governorates. Official invitations by HCWW and the three WSC were directed to representatives from Local Units, Directorates of Health, Departments of Environment, and NGOs. A flyer was also distributed among inhabitants of different villages in the project areas, along with short description for the Public Consultation objectives. At the end of the Second Public Consultation, the local TV of the Delta area, covering the three Governorates, made interviews with the ESIAF Environmental Consultant and Social Consultant in which about 10 minutes brief about the ISSIP andthe ESA was presented.The interview was broadcastedon the same night o f the Public Consultation. 28. An Arabic version of the executive summary of the ESIAF was distributed to officially invited people few days before the Public Consultation. Also the executive summary was distributed to attendees with registration. There were 85 attendees present, in the two days, includingrepresentativesfrom: HCWW KWSC GHWSC BWADC HeathDirectorates inthe Governorates Environmental Departments inthe Governorates EEAA Branch Office inTanta Ministry of Endowment and religious affairs Health InsuranceDepartments Universities Local Councils and Villages Administrations LocalNGOs Local TV 29. The main issues raised during the second public consultations and the actions taken by the study team is shown inthe following: 103 ISSIP should make use of existinggroundwater - Communicatedwith AAW-AEC who has confirmed RaisedIssue Actions taken by ESIAF Team loweringand sewerage networksinvillages that such investmentswill be utilized ifthey comply with technical specs Accurate infrastructuremaps should be - Integratedin ESMMF obtained Priority should be givento villages locatedon -- HCWW will provide availablemaps to ISSIP Explainedthat this aspect is already integrated in freshwater canals selection criteria Anaerobic stabilizationof sludge is more Includedas an optionfor further feasibility analysis efficientthan lime by the WWTP designer Transportingdewateringliquid to WWTPs is - Risks of landdisposal and disposal in watercourses very expensive was clarified - ESMMF includesmeasuresfor handlingwater that couldnot be feasibly transported De-chlorinationwith sodium thiosulphateis - Both options includedinthe ESMMF for the safer than SO2 considerationof WWTP designer Religiouspreachers should participate in - The recommendationto be presentedfor AAW-AEC awareness to include inthe social mobilizationcomponent Implementationshould not be delayed - Clarified that there will betimetable and staged approachthat will be followedby the PIU ResettlementPolicy Framework(RPF) 30. A Resettlement Policy Framework (RPF) establishing overall resettlement objectives and principles has been prepared, as there may be involuntary land acquisition under component 1 (provision of sanitation infrastructure). The policy framework establishes resettlement objectives and principles, as well as organizational arrangements and funding mechanisms for any resettlement operation and/or involuntary land acquisition that may be necessary during implementation. The RPF is the instrument used because the exact expropriation requirements are not known at appraisal. 31. As the extent of potential involuntary land acquisition becomes known, Resettlement Action Plans (or abbreviated RAPS depending upon scale and severity of impacts), will be preparedbefore any physical worWconstruction is initiated. Background 32. Inaccordancewith Article 34 of the Constitution ofthe Arab Republic of Egypt: "Private ownership shall be safeguarded and may not be placed under sequestration except in the cases defined by law and in accordance with ajudicial decision. It may not be expropriated except for the general good and against a fair compensation as defined by law. The right of inheritance shall be guaranteed in it." According to this article, it is understood that procedures for private property expropriation are considered to be exceptional. 33. Other relevant laws governing expropriation and consequent compensation procedures include: 104 I Law 577/54, which was later amended by Law 252/60 and Law 13/162, lays down the provisions pertaining to the expropriation o f real estate property for public benefit and improvement, I Law No. 27 o f 1956, which stipulates the provisions for expropriation o f districts for re- planning, upgrading, and improvement, and I The amended and comprehensive Law No.10 of 1990 on the expropriation of real estate for public interest. Institutional and Organizational Context 34. The Holding Company for Water and Waste water has formed a commission to be responsible for dealing with any land acquisition. This commission i s working directly with the Community Development Council6 (responsible for estimating land prices). The H C W W can expropriate land and provide fair compensation to its owners through this council. The WSC's social focal points will be responsible for handling any resettlement issues that may arise, and they will receive any capacity building needed for this task. 35. Once the sub-project's areas have been identified, they will be screened to determine whether or not there will be any involuntary land acquisition. In case of involuntary land acquisition, a socioeconomic survey will be prepared, followed by a resettlement action plan. The RPF outlines what the survey and RAP should contain. Compensation 36. Compensation will be provided to all individuals whose assets or access to assets i s severely affected or damaged, as a consequence o f involuntary land acquisition or any other related activities undertaken by sub-projects. The compensation for the loss o f physical and non- physical assets will vary depending on the type o f loss, severity o f the loss, and eligibility o f the Project Affected Persons (PAPs). Compensation may come in the form o f cash compensation, in-kindcompensation, and/or assistance. The RPF includes an entitlement matrix that outlines possible losses arising from sub projects and respective entitlement benefits. Grievanceredress: 37. PAPs can address any grievances to the relevant WSC office and local authorities either verbally or in writing (in case legal claims or land acquisition issues need to be settled). The WSC ISSIP unit and in particular the unit's social focal point will collect and review the grievances (in coordination with the representative local public official) on a monthly basis, and a decision will be taken about appropriate action. Ifthe PAPs disagree with the action suggested, the two parties may resort to legal action in local government court. However, all the aforementioned grievances and procedures are mainly due to grievances from the initial land acquisition process. Hence, it i s recommended to have a complete and binding agreement with individuals to avoid any potential grievances. 6This is a governmentalorganization that is responsiblemainly for developing local areas. Inaddition, people and companies ask for its permission before the installation of any infrastructure services. 105 Monitoring and Reporting 38. The WSC's social focal points will undertake internal monitoring o f the implementation o f any RAPS, and this will be documented in project progress reports. The internal report will mainly cover resettlement policies and compensation standards, resettlement progress, delivery o f resettlement compensation, provision o f development and transitional assistance to PAPs (especially vulnerable groups), the implementation schedule, fund disbursements, land or structure allocation, and grievances and redress. An independent agency (most likely a Non Governmental Organization) will be required to conduct external resettlement monitoring and evaluation, if there i s any resettlement or involuntary land acquisition under the project. The rationale behindhiring an external institution i s to ensure that the overall objective o f the resettlement plan i s achieved in an equitable and transparent manner. In addition to reviewing the issues covered by the internal monitoring progress report, the external agency shall also evaluate and assess: 0 Adequacy o f compensation, development and transitional assistance techniques provided to the PAPs, 0 Ability to reach the most vulnerablePAPs, 0 Consultation and public disclosure o f the RAP, 0 Effectiveness o f the grievance redress mechanism 39. The table below provides a list of some verifiable indicators for monitoring and evaluating the implementation o f RAPs. Table 5: Verifiable Indicators for Monitoring and Evaluation Implementation of RAPs: Monitoring Evaluation Percentage of individualsselectingcash or a Proposeduse of payments combinationof cash and in-kind compensation Payment of compensationto PAPs in various Conformance to compensation policiesdescribed categories in the RAP Numberof grievances Timelinessand quality of decisions made on grievances Public informationdisseminationand consultation Timeliness,quality, and effectivenessof procedures consultationand informationdisclosure Completiondates of the RAP activities Actual completionof resettlement activities compared with the RAP time schedule 40. Budget The budget for any land acquisition activities will come from the Holding Company for Water and Wastewater. 106 Annex 11: Water Quality Modeling Introduction 1. To support the planning and design process of the project, water quality modeling activities were carried out for a sub-set of relevant drains in the project area to accomplish the following objectives: e Evaluate the expected level of water quality improvement inthe receiving water bodies in the project areaas aresult ofthe proposedproject interventions, e Identify the necessary level of wastewater treatment (e.g. primary, advanced primary, or secondary) in the studied clusters, to ensure that the ambient water quality in the receiving streams are of acceptable quality, as stipulated by article 63 of Law 48 for the year 1982. e Set acceptability criteria for the proposed level of wastewater treatment, in terms of the conditions of the receiving drains, such that the impact of the proposed level of treatment i s acceptable, per the relevant articles inLaw 48/1982. e Develop a monitoring framework for the first-phase implementation plan, in terms of water quality parameters, location and frequency of monitoring. 2. The clusters selected were MH-6 in the Mahmoudya Catchment, and GHR-1 in the Mit Yazied Catchment. These were chosen according to a number of criteria, including (a) inclusion in the first phase investment plan, (b) fair geographical distribution among Mit Yazied and Mahmoudya catchments, (c) minimal industrial waste discharging into the receiving water body, (d) ability to define the impact of the proposedtreatment interventions, and (e) accessibility for the receiving water body to conduct field measurementsand investigation. 3. The drains in the study area are as follows. Sharaf drain in Mahmoudia Command Area receives discharges from the Kom A1Nasr Cluster, including Kom A1Nasr itself and 14 smaller villages and hamlet.Nishil drain inMit Yazid Command Area receives discharges from Isbet Mt El Sheikh, Izbets Maher and Arab and six smaller villages and hamlets. Samatay drain, also in the Mit Yazid Command Area receives discharges from Samatay and four smaller villages and hamlets. Samatay drain did not meet the stated selection criteria in that it was already highly polluted at the point where it entered the study area, with wastewater generated in and around Tanta. As will become clear, it neverthelessprovided useful information. Model Assumptions 4. The model QUAL2K was used to carry out the modeling activities. QUAL2K is a steady state one dimensional model, with moderate data requirements which is available free of cost. For these reasons, it was considered the most appropriate model for ISSIP requirements. Water quality variables consideredinthe model were BOD, TSS, DO, and Coliform bacteria. 107 Simulated Scenarios 5. The following scenarios were considered: (a) present condition of discharging untreated wastewater to the drains, (b) advanced primary treatment using communal septic tanks using anaerobic baffled reactors for smaller villages and ezbas while providing secondary treatment for larger villages above 1000 capita (centralized clusters), (c) collecting the wastewater from the smaller villages and ezbas and providing secondary treatment along with that for larger villages. The centralized schemes would reduce BOD and TSS by 90% and coliform bacteria to 5000MPN/1OOml while decentralized schemes would reduce BOD and TSS by 60% and coliform bacteria by 50%. The results in terms o f BOD and D O are shown graphically in Figure 1, and shown insummary form in Table 1. 6. MH-6 Catchment (Kom A1Nasr Cluster -Sharaf Drain) With advanced primary treatment, there is a remarkable improvement for D O o f sharaf drain especially for the last reach (from km 10 to km 15), with DO concentration at the end o f the drain reaching 4.5 mg/l (law 48/82 limit i s 5.0 mg/l). There i s a reasonable improvement for BOD of sharaf drain especially for the middle and last reach (from km. 8 to km. 15), with the BOD concentration at the end o f the drain reaching 11.8 mg/l (law 48/82 limit id 10.0 mg/l). Asignificant improvement was also found for coliform bacteria o f most o f sharaf drain especially after Kom A1 Nasr where the WWTP located, with coliform bacteria at the end o f the drain reaching 6100 MPN/100 (law 48/82 limit i s 5000 MPN/lOOml). The water quality improvement by providing secondary treatment is not extensive. The additional cost and technical and administrative complications are, therefore, unwarranted. 7. GHR-1 Catchment (Nishil Drain) The improvement for D O can be noticed for the last reach (from km. 12 to km. 15), with the D O concentration at the end o f the drain reaching 4.8 mg/l. There i s a reasonable improvement for BOD drain especially for the last seven kilometers (from km. 8 to km.15), with BOD concentration at the end o f the drain reaching 11.O mg/l. A remarkable improvement was also found for coliform bacteria o f most o f Nishil drain especially after the eight villages located along the drain. The coliform bacteria at the end o f the drain reach 8300 MPN/l00. The water quality improvement by providing secondary treatment (at km 5) is not extensive. The additional cost and technical and administrative complications are, therefore, unwarranted. 8. GHR-1 Catchment (Samatay Drain) There is no improvement for D O o f Samatay drain over the studied reaches (7.0 kilometers). There is a negligible improvement for BOD. Minor improvement was found for coliform bacteria o f Samatay drain especially after the proposed WWTP at Samatay village. There i s no appreciable water quality improvement by providing secondary treatment. It should be recalled that this drain receives a heavy pollution load upstream the studied area, the impact o f which i s quite extensive. 108 Table 1. Water Quality Characteristics For The Simulated Cases for (a) Sharaf and (b) Nishil Drains Case DO(mgjl) BOD(mg/l) Coliformbacteria MPN/lOOml) ExistingConditions 3-27 21.4 35130 Advanced Primary (small 4.50 11.8 6128 villages) + Secondary (large villages) Secondarv 5.10 9.40 3800 ExistingConditions 2.64 22.60 18087 Advanced Primary (small 4.78 10.91 8350 villages) + Secondary (large villages) Secondary 5.70 7.50 3200 61 60 7 50 - Law 48 Standards -FF40 - 0 30 - i F:; 3 ..... * . . _ . _... 0 m 20 ..... . . * * - 10 Law 48 Standards 21 0 4 I I , I , I , , I I , I I , I 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 " , , , , , , , , , , I , , , I I Distance (krn) 0 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 Distance (km) (a) 100 6 Law 48 Standards - 90 80 5 P 70 E - 60 m 50 E 3 - , 40 30 20 1 - 10 0 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 Distance (km) Distance (krn) (b) 6.0 I10 5.0 Law 48 Standards 100 90 - Q 4.0 Q 80 5m 3.0 70 60 0 50 0 2.0 40 I.o 20 301 Law 48 Standards I I" I 0.0 0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8 Distance (km) Distance (krn) (C) 109 Figure 1. BOD and DO for (a) Sharaf, (b) Nishil, and (c) Samatay Drains. Circles: existing conditions, solid lines: advanced primary treatment, dashed line: secondary treatment Recommended Monitoring 9. For practical reasons it i s recommended to start with a selection o f those parameters that serve as general indicators o f the water quality. As the monitoring procedures continue, and more sophisticated equipment and expertise becomes available, more detailed analyses can be done if requiredfor particular reasons. For in-situmeasurements, the following parameters are proposed: (a) temperature, (b) pH, (c) EC/TDS, and (d) DO. As for laboratory analysis, the proposed parameters are: (a) TSS, (b) BOD or COD, and (c) fecal coliform bacteria. The annual estimated cost to carry out the proposed monitoring program i s 56,500 LE, and i s detailed in the final modeling report. Main Conclusions 10. The following conclusions can be made inlight o fthe findings o fthe modeling exercise: The sanitation services proposed in ISSIP will improvethe mainwater quality parameters (BOD, DO, TSS, and fecal coliform) inmost o f the receiving water bodies. Advanced primary treatment (anaerobic baffled reactors in communal septic tanks) o f scattered villages and ezbas i s an economic and simple alternative to the collection o f wastewater from these villagedezbas to a centralized secondary treatment plant near the mother village. Although the advanced primary treatment may not meet all the effluent standards o f Law 48/1982, the self purification capacity o f some drains allows the ambient standards to be met downstream. The probability o f meeting ambient standards o f Law 48 in-stream is maximized when the receiving drains receive agriculture runoff from third order drain catchments, and when those drains (a) have free zone o f point source (domestic wastewater), (b) receive predominantly diffuse source (agriculture drainage water), (c) receive minimal or non upstream pollution load (headwater quality), and (d) are overlaid by smaller villages and ezbas (Table 2). Heavy pollution load from upstream activities diminishes the water quality improvement o f the project. The only solution to meet the ambient water standard in these cases i s to improve the water quality o f the headwater by treating wastewater inupstream towns and villages. Mathematical modeling o f water quality inthe receiving water bodies i s an indispensable tool inplanning and decision making o f future sanitation investment phases and designo f water quality monitoring program (which i s an integral part o f the M&E component). Overall, the main impacts on water quality will be achieved by full treatment o f flows from towns and larger villages. Nevertheless, partial treatment o f flows from smaller villages can bring about worthwhile improvements at a significantly lower cost than would be required to link these villages into centralized systems. Decentralized systems 110 can thus bring about immediate improvements, with further improvements achieved in the future when funds becomeavailableto link them into centralizedsystems. Table 2. Criteria Determining Probability of Success of Self Purification of Drains llnlJrrt Free reachof point Predotniunntirof diffuse rpstream potlotion Smallervillages and Acceptability of source source Ezbns Deceutrrlized Headmnter qnatit;v(BOD) (domestic disrhnrge to Moderate imonct I kln Major impact 7 kin Ratio 1 to 20 111 Annex 12: ProjectPreparationand Supervision Planned Actual PCN review 0613012005 0613012005 Initial PIDto PIC 08/01/2005 08/01/2005 Initial ISDS to PIC 09/22/2005 09/22/2005 Appraisal 08/21/2007 1211512001 Negotiations 09/04/2007 02/12/2008 Board/RVPapproval 12/12/2001 0312012008 Planneddate of effectiveness 06/15/2008 Planneddate of mid-termreview 06/15/2011 Plannedclosingdate 06/30/2014 Kev institutions responsible for preparation o f the proiect: Ministry of Housing, Utilities and Urban Development (MOHUUD) Holding Company for Water and Wastewater (HCWW) National Organization for Potable Water and Sanitary Drainage (NOPWASD) Beheira Water and Sanitation Company Gharbeya Water and Sanitation Company Kafr El Sheikh Water and Sanitation Company Bank staff and consultants who worked on the project included: Name Title Unit Ayat Soliman Senior EnvironmentalSpecialist, TTL MNSSD Alexander Bakalian Lead Water and Sanitation Specialist MNSSD Wendy Wakeman Senior Social Development Specialist MNSSD Maged Hamed Senior EnvironmentalSpecialist MNSSD LizmaraKirchner FinancialAnalyst MNSSD Ahmed Shawky Senior Water ResourcesSpecialist MNSSD MohamedMehany Operations Analyst M N S S D Zakia Chummun LanguageProgramAssistant M N S S D Enas Shaaban Team Assistant MNC03 Abdulgabbar HasanAI Qattab Senior Procurment Specialist MNAPR MohamedYehia Abd El Karim FinancialManagement Specialist MNAFM Ghada Youness Senior Counsel LEGMS Peter Kolsky Senior Water & Sanitation Specialist ETWWA Kevin Tayler SanitationTechnology Specialist Consultant Klaus Neder Technical Manager, CAESB, Brasilia Consultant Bank funds expended to date on project preparation: 1. Bank resources: $421,250 2. Trust funds: $0 3. Total: $421,250 112 EstimatedApproval and Supervisioncosts: 1, Remainingcosts to approval:$25,000 2. Estimatedannual supervisioncost: $100,000 113 Annex 13: Documents inthe ProjectFile Project ImplementationPlan(under preparation) BankStaffAssessments i) Project Concept Note (June 21/2005) ii) Draft Project Appraisal Document - QER version (June 2007) Other i) Operational Framework for Rural Sanitation Service Delivery inEgypt, July 2005 ii) PuttingIWRMintoPracticeinEgyptusingConceptualPerformance-BasedMonitoring and Benchmarking Approach - July, 2005 iii) SummaryforDesignStudyforHygienePromotioninIntegratedSewerageandSanitation Infrastructure Project (ISSIP) within the Governorates o f Kafr El Sheikh, Garbeya and Beheira, June 2006 iv) Assessment o f Existing Situation, February 2007 V I Support to ISSIP inTechnology, Economics and Finance, April 2007 vi) First Phase Investment Plan, April 2007 vii) Strategic Sanitation Plan and Solid Waste Pilot Plan, May 2007 viii) Water Quality Modeling Report, September 2007 ix) Institutional Assessment and TOR Implementing Agencies, November 2007 114 Annex 14: Statementof Loansand Credits Difference between expected and actual Original Amount in US%Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO93470 2007 EG-MORTGAGE FINANCE 37.10 0.00 0.00 0.00 0.00 37.61 1.23 0.00 PO91945 2006 EG-EL TEBBIN POWER 259.60 0.00 0.00 0.00 0.00 249.75 -0.28 0.00 PO90073 2006 Second Pollution Abatement Project 20.00 0.00 0.00 0.00 0.00 18.00 -1.83 0.00 PO88877 2006 EG- FINANCIAL SECTOR REFORM 500.00 0.00 0.00 0.00 0.00 500.00 500.00 0.00 DPL PO82952 2005 EG-Early Childhood Education 20.00 0.00 0.00 0.00 0.00 19.90 6.86 0.00 Enhancement PO73977 2005 Integratedlrrig Improv. & Mgmt. 120.00 0.00 0.00 0.00 0.00 119.40 12.73 0.00 PO49702 2004 EG-SKILLS DEVELOPMENT 5.50 0.00 0.00 0.00 0.00 4.34 4.08 0.00 PO82914 2004 EG-AIRPORTS DEVELOPMENT 335.00 0.00 0.00 0.00 0.00 176.35 77.45 0.00 PROJECT PO56236 2002 EG-HIGHER EDUCATION 50.00 0.00 0.00 0.00 0.00 16.61 16.61 7.07 ENHANCEMENT PROG PO45499 2000 Egypt NATIONAL DRAINAGE I1 50.00 0.00 0.00 0.00 0.00 6.44 5.77 0.00 Po414I O 1999 EG PumpingStation RehabIll 120.00 0.00 0.00 0.00 20.00 16.98 36.98 0.00 PO40858 1999 EG SOHAG Rural Dev - 0.00 25.00 0.00 0.00 0.00 3.96 1.96 1.95 PO50484 1999 EG Secondary EducationEnhancement 0.00 50.00 0.00 0.00 0.00 25.88 22.33 6.57 Proj PO49166 1998 EG East Delta Ag. Sew. 0.00 15.00 0.00 0.00 0.62 7.70 6.73 5.97 PO45I75 1998 EG-HEALTH SECTOR 0.00 90.00 0.00 0.00 0.00 8.94 0.72 0.56 Total: 1,517.20 180.00 0.00 0.00 20.62 1,211.86 691.34 22.12 EGYPT, ARAB REPUBLIC OF STATEMENT OF IFC's Heldand Disbursed Portfolio InMillions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1996 ANSDK 1.33 0.00 0.00 0.00 0.56 0.00 0.00 0.00 2004 Alexandria Fiber 8.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2001 Amreya 4.69 0.00 0.00 0.00 4.69 0.00 0.00 0.00 2006 CIB LLC 0.00 0.72 0.00 0.00 0.00 0.48 0.00 0.00 I999 CIL 0.00 0.74 0.00 0.00 0.00 0.74 0.00 0.00 2004 CIL 0.00 0.15 0.00 0.00 0.00 0.15 0.00 0.00 1992 Carbon Black-EGT 0.00 1.48 0.00 0.00 0.00 1.48 0.00 0.00 I997 Carbon Black-EGT 0.00 1.48 0.00 0.00 0.00 1.48 0.00 0.00 1998 Carbon Black-EGT 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00 2000 Carbon Black-EGT 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 CeramicaAI-Amir 3.33 0.00 0.00 0.00 3.33 0.00 0.00 0.00 2006 Cmrcl lntl Bank 0.00 23.28 0.00 0.00 0.00 23.03 0.00 0.00 115 2006 EFG Hemes 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 EHF 0.00 1.70 0.00 0.00 0.00 1.70 0.00 0.00 2005 Egypt Factors 0.00 3.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 Gippsland 0.00 4.61 0.00 0.00 0.00 2.03 0.00 0.00 2001 IT Wont 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00 2004 Lecico Egypt 8.94 0.00 0.00 0.00 8.94 0.00 0.00 0.00 1986 Meleiha Oil 0.00 8.62 0.00 0.00 0.00 0.00 0.00 0.00 1988 Meleiha Oil 0.00 9.20 0.00 0.00 0.00 0.00 0.00 0.00 1992 Meleiha Oil 0.00 13.00 0.00 0.00 0.00 0.94 0.00 0.00 2005 Merlon Egypt 1.oo 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Metro 10.50 0.00 0.00 0.00 10.50 0.00 0.00 0.00 I992 Misr Compressor 9.70 0.00 0.00 0.00 9.70 0.00 0.00 0.00 Orix LeasingEGT 4.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1996 Orix LeasingEGT 0.00 0.53 0.00 0.00 0.00 0.53 0.00 0.00 200I Orix LeasingEGT 1.09 0.00 0.00 0.00 1.09 0.00 0.00 0.00 200I Port Said 41.07 0.00 0.00 132.53 41.07 0.00 0.00 132.53 2002 SEKEM 4.18 0.00 0.00 0.00 4.18 0.00 0.00 0.00 2006 SONUT 10.00 0.00 4.00 0.00 0.00 0.00 0.00 0.00 2004 SPDC 18.40 0.00 0.00 0.00 18.40 0.00 0.00 0.00 2001 SUEZ GULF 40.40 0.00 0.00 129.07 40.40 0.00 0.00 129.07 1997 UNI 2.05 0.00 0.00 0.00 2.05 0.00 0.00 0.00 200I UNl 2.06 0.00 0.00 0.00 2.06 0.00 0.00 0.00 2005 Wadi Grow 15.00 0.00 0.00 0.00 7.50 0.00 0.00 0.00 Total portfolio: 214.74 70.51 4.00 261.60 165.47 34.56 0.00 261.60 ~ ~~ ~ Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2004 ACB Acrylic 0.00 0.00 0.00 0.00 2004 Merlon Egypt 0.00 0.00 0.00 0.02 2000 ACB Expansn111 0.00 0.00 0.00 0.00 2006 Rally Energy 0.01 0.00 0.00 0.00 Total pending commitment: 0.01 0.00 0.00 0.02 116 Annex 15: Country at a Glance M . East Lower. P O V E R T Y and SOCIAL h North mlddle. Egypt Africa Income 2005 Population mid-year(millions) 74 0 305 2,475 GNIper capita (Atlas method US$) 1250 2,241 1,98 Life epectancy GNI(Allas method US$ billions) 92 5 685 4,747 Average annual growth, 1999-05 Population(966 19 19 10 Laborforce (%) 2 6 35 14 GNI Gross per primary M o s t recent ertlmate (latest year avaliable, 1999-05) capita enrollment Poverty(%of population belownationalpovertyline) R Urbanpopulation (%of totalpopulation) 43 57 50 Life expectancyat birth(rears) 70 69 70 Infant mortality (per 1000live births) 26 44 33 Child malnutntion (%ofchildren under5) 9 13 P Access lo improvedwatersource Access to an improvedwatersource (%ofpopulation) 98 89 82 Literacy (%ofpopulationage rS+J 71 72 89 Gross primaryenrollment (%ofschool-age population) 0 1 0 3 ll4 -^_11 Egypt,ArabRep Male 0 3 'D6 ns LOwr-middle-incomegroup Female 98 1)O m KEY E C O N O M I C R A T I O S and LONG-TERM T R E N D S 1985 1995 2004 2005 Economic ratloo' GDP (US$ billions) 347 802 788 89 3 Gross capital formationIGDP 267 R 2 '66 7 3 Exports of goods and serviceslGDP 8 9 225 28 6 317 - Trade Gross domestic savingslGDP 145 P 2 152 172 Gross nationalsavingslGDP 8 4 210 22 0 T Current account balance/GDP -93 06 4 3 4 8 Interest payments/GDP 2 6 2 1 08 Domestic Capital Total debt1GDP 0 4 2 557 384 savings formation Total debt serviceleuports 258 134 88 Present value of debt1GDP 340 Present value of debt/ekports 013 Indebtedness 1986.95 1995-05 2004 2005 2005-09 (averageannualgrowth) GDP 3 9 4 7 4 2 4 9 58 -----Egypt, Arab Rep GDP percapita 17 2 7 2 2 2 9 4 8 Eports of goods and services Lover-middle-income group 7 6 5 1 276 22 2 118 STRUCTURE o f the E C O N O M Y 1986 1995 2004 2006 (%of GDP) Growth o f capltal and G D P (Oh) Agriculture 200 6 8 151 139 10 Industry 286 323 369 38 7 5 M anufactunng 135 174 8 3 8 2 0 SeNlCeS 515 509 48 0 47 4 5 Household final consumption expenditure 882 773 714 70 2 10 Generalgov't final consumption ependiture l72 0 5 124 Q 7 lmpofls of goads and sewices 320 275 28 9 319 ----GCF -GDP 1986-96 1995-Ob 2004 2006 (averageannualgrowth) Growth o f exports and imports (Oh) Agnculture 27 35 19 3 4 30 Industry 46 4 3 25 3 5 Manufactunng 20 5 0 5 7 29 33 services 34 4 7 6 1 6 4 10 Householdfinal consumption expenditure 4 4 4 4 32 4 5 0 Generalgov't final consumption expenditure -10 2 8 27 3 0 -10 03 04 05 Gross capital formation -47 41 29 89 lmpofls of goods and services -02 37 22 0 22 9 Nota 2005data are preliminaryestimates This table was producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators inthecountry(in bold)comparedwithits income-groupaverage Mdataaremissing lhediamondwll be incomplete 117 Egypt,Arab Rep. PRICES a n d G O V E R N M E N T FINANCE 1986 1995 2004 2005 Domestic prices Inflation (Oh) 1 (%change) Consumer prices 0 1 157 113 4 9 Implicit GDP deflator 9 0 114 115 5 4 Government finance (%of GDP.includes current grants) Current revenue 22 2 25 9 25 9 24 1 Current budget balance -13 7 2 6 2 0 -13 Overall surolusldeficit -216 -12 -2 4 -60 I -.GDPdeflator &CPI I T R A D E 1985 1996 2004 2006 (US$ millionsj Export and Import levels (US$ mlll.) Totaleqorts (fob) 4,957 0,453 14 000 174 """r cotton 2,76 3.9a 5 000 Other agriculture 306 202 06 20 000 Manufactures 1,655 3.972 5 529 15 000 Totalimports (cif) P.811 6,286 23 0 0 Food 10 000 2,760 1,877 2 371 Fueland energy 721 2,639 3 363 5 000 Capital goods 3.08 3,506 4 792 0 Eqort price index(2000=WOJ 99 0 8 138 @ @ 00 01 02 03 04 05 Import pnce index(20OO=WO) 115 9 2 P8 mExporls gln-Qorta Terms of trade (2000-WOJ 86 u 5 0 8 B A L A N C E o f P A Y M E N T S 1986 1995 2004 ZOO5 (US$ miLonsJ EQOrtS Of goods and SeNICeS 6,866 r2.887 22,948 28 900 Imports of goods and services 2,606 6,840 23.258 29 0 0 Resource balance -5,741 -3,952 -309 -200 Net income -991 141 -207 -a0 Net current transfers 4,198 3,934 4 600 Current account balance -3,209 386 3,418 4 300 Financing items (net) 3,022 368 -3,576 -329 Changes in net reserves 187 -754 158 -3 971 Memo: Reserves tncludinggold (US$ rnii1ionsJ 6367 Conversionrate (DEC local/US$J 10 3 4 6.2 60 EXTERNAL DEBT and RESOURCE FLOWS 1985 1996 2004 2006 (US$ millions) Composltlon o f 2004 debt (US$ mill.) Totaldebt outstanding anddisbursed 36,U7 33,499 30,292 IBRD 1,048 1,320 503 492 I A 503 I IDA 802 1035 1465 1420 G 2,939 B 1,465 Totaldebt service 2 815 2.381 2,37 IBRD 147 3t? 99 98 IDA 8 21 50 52 Composition of net resource flows Officialgrants 734 1006 1.389 Officialcreditors 1,634 60 -868 Pnvate creditors 573 411 -228 J Foreigndirect investment (net inflows) 1I78 598 1,253 Portfolio equity(net inflows) 0 0 26 E 22 365 World Bank program Commitments 59 80 670 Disbursements 269 t?5 0 0 6 5 A . IBRD E- Bilda-al D. Other ~11ild6f3 F . Private Principal repayments 70 2t? 16 118 B .IDA C . IMF G. Short-ier Net flows 198 -87 -6 48 Interest payments 84 t?l 33 32 Net transfers 114 -208 -49 6 Note This table was producedfrom the Development Economics LDB database 8/P/06 118 IBRD 33785R Mediterranean ARAB REPUBLIC OF EGYPT Sea IRRIGATION IMPROVEMENT PROJECT Area of map IMPLEMENTATION AND COMPLETION REPORT Cairo PROJECT AREA BOUNDARIES Nile I I I I I CANALS LIBYA ARAB R. COMMAND AREA BOUNDARIES PERENNIAL RIVERS AND LAKES REPUBLIC OF EGYPT SUB PROJECTS: INTERMITTENT RIVERS AND LAKES IIIMP (WB/KfW/NTC follow up project 2006) MARSH MAHMOUDIA DELTA AREA MANAIFA SELECTED CITIES AND TOWNS GOVERNORATE CAPITALS WASAT NATIONAL CAPITAL CHAD SUDAN USAID PILOTS GOVERNORATE BOUNDARIES 0 25 50 75 KILOMETERS INTERNATIONAL BOUNDARIES 30° Mediterranean Sea 31° 32° WASAT MANAIFA Baltim SUB-PROJECT MEET YAZID SUB-PROJECT COMMAND MAHMOUDIA Lake Burullus AREA COMMAND Rosetta Damietta Nile KAFR EL SHEIKH AREA R. DAMIETTA PORT SAID Abu Qir (Rosetta Lake Manzala Port Said Alexandria Lake Idku Shirbin Branch) I I Kafr ad Dawwar El Dikheila Kafr el Sheikh Branch) DAGAHLIYA I Suez I I Damanhur I I 31° I II El Mansura I Talkha 31° I I (Damietta Canal I I I I I I I EL I Nubariya R. GHARBIYA I I I I I I I I I Itya el Barud I I I I I I I I I Canal Nile I Kafr el Zaiyat I I I I I I Tanta I I ALEXANDRIA I I I SHARGIYAH I I I I I I I Zifta I BEHEIRA I MAHMOUDIA I I Shibin el Kom IZagazig Ismailia I I I SUB-PROJECT I I I I I I I I I I I I I I I I I I I I I I I MENOUFIYA I I I I I ISMAILIA I Great I Benha CanalI I I I I I I Bitter I I I QALIUBIY IsmailiaI I Lake I I I I I I I I I I I I I I I I I I I I I I I I A I I I I I I 10th of I I I I I I Ramadan Imbaba IShubra el Kheima I (new city) Giza CAIRO 30° Suez 30° 6th of Tourah CAIRO October Helwan (new city) MARSA MATRUH Tebbin SUEZ Gulf GIZA of Suez Lake Oarun El Fayoum EL FAYOUM This map was produced by I the Map Design Unit of The I I I I I Beni Suef I I I I I I I World Bank. The boundaries, Arabah 29° colors, denominations and I I Wadi 29° any other information shown BENI SUEF I on this map do not imply, on I I the part of The World Bank I I Group, any judgment on the Beba I legal status of any territory, I EL BAHR EL AHMAR I or any endorsement or I a c c e p t a n c e o f s u c h I boundaries. 30° I 31° 32° I MARCH 2007 Annex 16: Maps The Project Area 1 Project Area in Mit Yazid 2 Project Area in Mahmoudia 3