PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Public Disclosure Copy Report No.: PIDC2337 Project Name Emergency Employment Investment Project (P146143) Region MIDDLE EAST AND NORTH AFRICA Country Egypt, Arab Republic of Sector(s) Other social services (99%), Public administration- Other social services (1%) Theme(s) Social safety nets (60%), Improving labor markets (25%), Other social protection and risk management (15%) Lending Instrument Investment Project Financing Project ID P146143 Borrower(s) Government of Egypt Implementing Agency SOCIAL FUND FOR DEVELOPMENT Environmental B-Partial Assessment Category Date PID Prepared/ 15-Jan-2014 Updated Date PID Approved/ 20-Jan-2014 Disclosed Estimated Date of 31-Jan-2014 Appraisal Completion Public Disclosure Copy Estimated Date of 06-Mar-2014 Board Approval Concept Review Track I - The review did authorize the preparation to continue Decision I. Introduction and Context Country Context The proposed Emergency Employment Investment Project (EEIP) is a grant in the amount of €67.60 million (USD92.53 million equivalent) to be financed by the European Union, as stand-alone complementary financing to the World Bank-funded Emergency Labor Intensive Investment Project (ELIIP; $200 million). Although not processed as an emergency operation under World Bank procedures, the proposed project does respond to the growing economic crisis in Egypt that has disproportionately impacted poor households and the unemployed. The EEIP supports the creation of short-term employment opportunities through labor-intensive community service and small scale infrastructure projects in selected areas in Egypt; and improves employability of young men and women in urban and rural areas through wage and self-employment programs. Since the revolution, Egypt’s political instability has contributed to economic turmoil where Page 1 of 6 prospects remain uncertain. Since the ouster of President Morsi in July 2013, a new political road- map has been set in motion with an ambitious timeline of 12 months that includes amendments to the suspended 2012 constitution, holding a referendum to approve the amended constitution, and Public Disclosure Copy conducting parliamentary and presidential elections. The uncertain outcomes of these political developments, therefore, affect the economic outlook despite progress realized so far. A referendum on the amended constitution was carried out on January 14-15. However, there are some unconfirmed news that a likely switch in the political roadmap sequence will take place, with presidential elections preceding parliamentary elections. The amended constitution left the decision to the interim president, yet it sets a celling of up to 6 months to run both elections (mid July 2014). Although financial market uncertainty has been partly mitigated by a package of financial assistance pledged by Arab Gulf states, expected economic growth remains weak. An unprecedented series of aid packages totaling US$16 billion have been earmarked in support of Egypt. These include cash grants of US$3 billion, in-kind transfers of US$4 billion, interest-free deposits of US$6 billion with the Central Bank of Egypt (CBE), and project financing of US$3 billion. The impact of such packages can be seen in the short-term fiscal planning where a stimulus approach has been signaled by the current government. Economic performance continues to underperform in the short-term while prospects remain uncertain. Output growth remained subdued during FY13 at 2.1 percent, similar to the year before (about 2.2 percent). This has pushed the unemployment rate higher, reaching over 13.3 percent as of June 2013. Sizeable stimulus packages totaling about 3 percent of GDP are being implemented or have been announced (though not all additional spending relative to the FY14 budget), mainly a sharp increase in public investment and a near doubling of minimum wages for public sector workers. These commitments would entail substantial additional fiscal costs and could cause spill- over to negatively impact private sector growth. Against a back-drop of shrinking investments and growth in real terms, the employment and poverty Public Disclosure Copy picture is expected to deteriorate and human capital indicators are at risk of worsening. As has been the case in Egypt, the working poor make up the majority of poor people in Egypt. Those who are vulnerable (~17 percent) are dependent on unreliable sources of income and seasonal work. This is especially true during crises. During the fuel and food crisis in 2008/2009, as many as 5.1 million Egyptians were severely food deprived. Furthermore, 31 million (around 40 percent of the population) were poor or near poor. The Government of Egypt (GoE) aims to smooth consumption for the poor and vulnerable, increase skills and employability of low-skilled labor, and promote social inclusion. The Government aims to increase human capital through training programs and increasing labor productivity. The GoE has initiated a program for short-term employment creation in poor areas to increase access to income opportunities and maintain social stability during the transition period. This programmatic approach has already begun through the ongoing Bank-financed ELIIP. The ELIIP supports the implementation of a public works and community services program which adopts labor-intensive methods to address Egypt’s short-term employment needs. The proposed EEIP w ill similarly support the creation of short-term employment opportunities for unemployed workers in selected locations in Egypt, as well as the creation of more sustainable jobs. This will be carried out through the creation and/or maintenance of community services and infrastructure using labor-intensive techniques, and employability programs for youth in urban and rural areas. Page 2 of 6 Sectoral and Institutional Context Egypt’s social protection system, broadly defined, accounts for a substantial share of public Public Disclosure Copy spending, but does not have a commensurate impact on poverty reduction and human capital development. Energy subsidies, although not strictly considered as social protection measures, are available for all consumers and producers, and account for the largest share of spending at around 6 percent of GDP, followed by food subsidies at around 2 percent of GDP. Spending on ration card subsidies comprised about 0.5 percent of GDP, while expenditures on cash transfers to the poor were about 0.1 percent of GDP in 2010. Despite this, Egypt’s human development indicators remain poor and a large share of the population is either poor or vulnerable. Even before the food, fuel and financial crises hit, the Government had taken strong measures to improve its cash transfer programs; however, policies aimed at helping households withstand the effects of the crises were not sufficient to prevent an increase in poverty. The Government increased both the number of beneficiary households in the social solidarity program (the unconditional cash transfer program) and the value of their monthly cash payment. It also extended additional cash assistance to beneficiary families with children enrolled in school (EGP 20/child for a maximum of four children). However, the number of beneficiaries remained much below the estimated poverty headcount, and the amount of the cash transfers was well below what was needed to lift many of the recipients out of poverty. Further, the targeting accuracy (which is largely a mixture of self- targeting, income and categorical targeting) does not address inclusion (leakage) and exclusion (under-coverage) errors. More recently, Egypt introduced other important innovations in targeted social transfer programs. Egypt’s labor market continues to face many difficulties. Official unemployment figures in Egypt have reached 13.3 percent in June 2013—more than four percentage points higher than the level in the second quarter of 2010. Out of the 3.6 million currently unemployed persons in Egypt, around 74 percent are youth aged 15- 29 years. Male and female unemployment rates increased to 9.8 Public Disclosure Copy percent and 25 percent, respectively, in June 2013. Further, the informal sector is estimated at 58 percent of total private sector employment and has risen sharply between 1998 and 2006. Although it can be assumed that the impact is larger on the informal sector given that it is private, less information is available on the extent to which the sector and the informally self-employed are impacted. This is further exacerbated by the difficulty in accessing information on labor market statistics in Egypt. The proposed EEIP supports the scaling-up of Egypt’s labor intensive public works and community services programs, and implementation of programs that would complement the cash-for-work activities by facilitating transitions into wage and self-employment. Even though the majority of the project activities are aimed at meeting the needs of the emergency situation, the project will also pilot programs to support the employability of unemployed rural and urban youth. In addition, the project will build the institutional capacity for labor intensive public works and community service programs in Egypt, tools that are likely to be used frequently in the medium term and as an important social protection instrument. The inclusion of public works programs as an essential part of Egypt’s safety net system was recommended in 2005, to be scaled up or down quickly to respond to shocks based on the country’s situation and continues to be an excellent tool for smoothing consumption, providing temporary income to the working poor, and an opportunity for skill development. Relationship to CAS Page 3 of 6 The project will contribute to the Government's and the Bank’s strategic objective of reducing poverty through activities supporting employment creation and income generation for the poor. This will contribute to stronger economic and social cohesion. The project directly supports the second Public Disclosure Copy pillar of support (job creation) of the Interim Strategy Note (ISN). In addition, the project supports the ISN’s objective of “creating opportunities for short-term productive job-creation and initiating steps to improve the environment for longer-term private sector job creation.” II. Proposed Development Objective(s) Proposed Development Objective(s) (From PCN) The project objectives are to: i) create short-term employment opportunities for the unemployed, unskilled and semi-skilled workers in selected locations in Egypt; ii) contribute to the creation and/ or maintenance of community infrastructure and services; iii) improve access to basic infrastructure and community services among target population; and iv) to improve the employability of young men and women through short-term training or other support services to facilitate transitions to wage and self-employment. Key Results (From PCN) Beneficiaries: The main project beneficiaries will be unemployed poor and vulnerable, including youth and women. The proposed outcome indicators include: a. Direct project beneficiaries (number) of which are women b. Beneficiaries of labor market programs (number) c. Beneficiaries of safety nets programs (number) d. Number of beneficiaries enrolled in Cash-for-Work programs e. Number of direct job opportunities created through the project, gender and age disaggregated f. Number of indirect job opportunities created through the project, gender and age disaggregated Public Disclosure Copy g. Number of beneficiaries enrolled in the youth employability program who found a job or started a business, six months after successful completion of the program, gender disaggregated Intermediate indicators, listed in Annex I, include: a. Percentage of infrastructure subprojects completed with high technical quality b. Percentage of quality subprojects completed as measured by client satisfaction c. Number of individuals who participated in the youth employability programs, disaggregated by age group and gender d. Short-term employment generated (Number of person days) e. Timeliness of wages received; among others. Targets for the above indicators will be identified during appraisal. III. Preliminary Description Concept Description The project has four components: Component 1: Employment-intensive Small-scale Infrastructure Subprojects (€ 1 million); Page 4 of 6 Component 2: Intensive Community Service Sub-projects and Youth Employment Activities (€ 57.3 million); Public Disclosure Copy Component 3: Improving Workers’ Employability through Youth Employment and Entrepreneurship Programs to Facilitate Transitions into Wage Employment or into Self- Employment in Urban and Rural Areas (€ 6 million); Component 4: Project Implementation, Horizontal, and Capacity Building Activities (€ 3.5 million). IV. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ V. Financing (in USD Million) Total Project Cost: 92.53 Total Bank Financing: 0.00 Public Disclosure Copy Financing Gap: 0.00 Financing Source Amount Borrower 0.00 MNA VPU Free-standing Trust Funds 92.53 Total 92.53 VI. Contact point World Bank Contact: Afrah Alawi Al-Ahmadi Title: Senior Human Development Specialist Tel: 458-4158 Email: aalahmadi@worldbank.org Borrower/Client/Recipient Name: Government of Egypt Contact: Eng. Mohamed Hammam Page 5 of 6 Title: Assistant to the Minister of International Cooperation Tel: 202-390-8819 Email: Public Disclosure Copy Implementing Agencies Name: SOCIAL FUND FOR DEVELOPMENT Contact: Ghada Waly Title: Managing Director Tel: 202-376-222-55 Email: ghada.waly@sfdegypt.org VII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy Page 6 of 6