FILE COPY DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 70a-ET APPRAISAL OF AMIBARA IRRIGATION PROJECT ETHIOPIA April 24, 1973 Eastern Africa Projects Department !kgriculture Projects Division This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CULM,NCY EQUIVATENTS US*1 = Ethiopian dollars (Eth$) 2.07 Eth$1 us$o.48 Eth$1 million = TJS$482,539 'WEIGHTS AND MEASBRES (Metric System) I millimeter (mm) 0.039 inches 1 meter (mi) 3.28 feet 1 square meter (m2) 10.76 square feet 1 cubic meter (m3) 35.35 cubic feet 1 cubic meter per second (m3 per sec) 35.35 cubic feet per second . million cubic meters (tm3) 810.7 acre feet 1 liter per second (I per sec) 0.035 cubic feet per second 1 kilometer (km) 0.62 miles 1 square kilometer (km2) 0.386 square miles 1 hectare (ha) 2.47 acres 1 kilogram (kg) 2.205 pounds 1 metric ton (m ton) 2,205 pounds ABBBEVIATIO.TS AVit - Awash Valley Authority EET.?A - Ethiopian Electric Light and Power Authority SRwJSC - Victoria State Rivers and Water Supply Commission AIDB - Agricultural and Industrial Development Bank of Ethiopia lMtPITRIAT G'!VJI?ENT 0OT' ETHIOPIA FISCA.L YEAR July 8 to July 7 ETHIOPIA AMIBARA IRRIGATION PROJECT Table of Contents Page No. SUMMARY AND CONCLUSIONS ............................. . i-iii 1. INTRODUCTION ........................................ 1 II. BACKGROUND ...... .............. ............. ,. 3 Land Use ..................................... 4 Agricultural Production .......................... 4 Priorities and Pattern of Development ............ 4 Agricultural Inputs and Services ............ ..... 5 III. THE PROJECT AREA . .................. ...... ...... 5 General ................................... 5 Climate ............................... .. .... . 5 Soils, Topography and Drainage .................. 6 Population ............ 6 ogriculture ................................ 7 Transportation ................................ 7 IV. THE PROJECT..7 Description. . . .... 7 Proposed Works .............. ... ...... . 8 Water Supply, Demand and Quality 9 Water Rights ...... . . . ... ........ . . 10 Engineering Design ...11 Cost Estimates.. . . i....... 11 Financing ................................... . .. 12 Procurement .................................... 12 Disbursement ....... .... 0.0.0......... ...... ....... 13 Accounts and Audit .......... ..................... 13 Environment and Health ........................... 14 V. ORGANIZATION AND MANAGENENT .......1................... 15 Implementation of Project Works .................. 15 Consultants' Services ... ..................... 17 Operation and Maintenance .... .................... 18 Recovery of Costs .. ............. ..... * ..... . . . 19 Supporting Agricultural Services .......... 21 Credit .............. ................. 22 Land Leases . ....... * .. ...... 22 This report is based on the findings of two appraisal missions (in 1969 and 1971 respectively) and a follow-up mission. The 1971 appraisal mission consisted of Messrs. H. Adler, M.D. ffrench-Mullen, A.A. Meimaris and T. Husain of the Bank and Mr. D.E. Campbell of the FAO/IBRD Cooperative Program. The follow-up mission, in December 1972, consisted of Messrs,. M.J. Walden, Y. Pret and E.M. Sicely of the Bank and Mr. J.L. Robertson (consuiltant). Page No. VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARMERS' INCOME .............................................. 23 Production ...................................... & 23 Market Prospects and Prices ............... ....... 23 Farmers' Income ........ ................ ..... .*.. . 24 Government Revenues ............... ................ 25 VII. BENEFITS AND JUSTIFICATION .................. .... 25 Economic Benefits ................................ 25 Employment ..................................... 26 Income Distribution .... ...... ....... . 26 VIII. RECOMMENDATIONS * ........................ ...... ....... 26 ANNEXES 1. Soils 2. Project Works 3. Water Supply, Demand and Quality 4. Investigations and Studies 5. Cost Estimates 6. AVA Project Cash Flow 7. List of Equipment 8. Expenditure and Disbursement Schedules. 9. Organization and Management 10. Consultants' Services 11. Operation and Maintenance Costs 12. Financial Analysis 13. Market Prospects and Prices 14. Economic Analysis CHARTS Number 7412 Construction Schedule Number 7413 Existing AVA Organization Number 7414 Proposed AVA Organization Number 7411 Proposed AVA Functional Organization MAPS Number 2828 Ri Upper and Middle Awash Valley Number 10313 The Project ETHIOPIA AMIBARA IRRIGATION PROJECT SUMMARY AND CONCLUSIONS i. The Third Plan (1968-74) aims at increasing production of domestic and export crops through the development of peasant farming as well as large scale mechanized commercial farms, and at building up a cadre of trained and experienced personnel to facilitate further agricultural development. Although over the country as a whole there is only about 0.4 ha of cultivated land per person, extensive tracts of potentially arable lands stand virtually empty in the Awash Valley, used mostly as grazing grounds for about six months a year by nomadic herds. Some development has been carried out in the upper and middle valley (26,000 ha) and in the lower valley (10,000 ha) by commercial enterprises, but some 170,000 ha remain unexploited, a major constraint being the lack of adequate irrigation water. Government has therefore requested IDA assistance in financing an irrigation project in the middle Awash River Valley to bring a part of this area into production. ii. Bank/IDA lending in the agricultural sector totals US$21.6 million equivalent and includes two loans and six credits. The two loans, totaling US$4 million, were made in 1950 and 1961 to the Development Bank of Ethiopia for agricultural and industrial credit and have been repaid. Two credits were made in 1969 and 1970 for the Wolamo Agricultural Development Project (US$3.5 million) and for the Humera Agricultural Development Project (US$3.1 million) respectively; progress on both credits is satisfactory. One credit was granted in 1971 for the Addis Ababa Dairy Development Project (US$4.4 million), two in 1972 for the Coffee Processing Project (US$6.3 million) and for the Agricultural and Industrial Development Bank (US$11 million) of which US$5.3 million is for credit to agriculture, and one was signed in April 1973 for the Second Livestock Development Project (US$5 million). iii. The proposed project would develop 10,000 ha net in the Middle Awash Valley and would include: (a) a diversion weir on the Awash River; (b) irrigation, drainage and flood protection works to serve 10,000 ha of which 7,500 ha are presently undeveloped; (c) on-farm development works and roads; (d) service buildings and housing; and (e) procurement of operation and maintenance equipiment and farm machinery. - ii - Construction would be phased over five years. Under the project, a consult- ing firm would be employed to carry out additional investigations and pre- pare final designs, supervise construction, and provide technical assistance in operation and maintenance. It would also undertake a feasibility study for a second-stage project. iv. Of the 10,000 ha of developed land, about 7,600 ha would be leased as about 34 commercial farms, and 2,000 ha would be used for a pilot land set- tlement scheme to be occupied eventually by 800 Afar families, nomadic pas- toralists who presently graze their herds in the area. The remaining 400 ha would be occupied by the Melka Warer Agricultural Research Station. v. Estimated total project cost is US$22.8 million, with an estimated foreign exchange component of US$13.7 million, or 60% of the total. The pro- posed IDA credit of US$17 million would finance 75% of total project costs, including all the foreign exchange cost and US$3.3 million of local costs. Remaining local costs of about US$6.0 million equivalent would be provided by Government through budget appropriations. vi. Contracts totalling about US$17.6 million for civil works, on- farm development works and purchase of equipment would be awarded following international competitive bidding. Foreign exchange costs have been estimated in the expectation that foreign contractors would be the successful bid4ers. Contracts for bush clearing and for the construction of buildings and a 10-kIm link road, costing about US$1.6 million which would be needed before award of the main civil works contract, would be put to local tender. Rough levelling (about US$150,000) would either be put to local tender or done by force account. The remaining costs, US$3.4 million, would be for consultants and engineering and supervision. vii. The Awash Valley Authority (AVA), a government authority set up in 1962 to administer and develop the natural resources of the Awash River Basin, would be responsible for implementing the project. Shortage of qualified local staff experienced in project construction would necessitate the employ- ment of a consulting firm to construct and manage the project and to train countfrpart staff to take over the project. viii. At full development, the project would increase annual seed cotton production by about 22,800 tons. Assuming that only cotton would be produced, the economic return would be 16%. At full development, the annual net foreign exchange savings are estimated at US$5.7 million. The project is estimated to create regular employment for 2,000 workers and seasonal employment (3 months per year) for about 7,000 workers. ix. The revenues from the proposed charges would be sufficient to recover all project costs at 7%. If the opportunity cost of capital were assumed to be 10%, at a 10% discount rate the present value of revenues would cover 79% of the present value of costs, with an implied subsidy of Eth$7.1 million (US$3.5 million). The beneficiaries of this subsidy would be mainly the Afar settlers. - iii - x. The project would be suitable for an IDA credit of US$17 million. The borrower would be the Imperial Ethiopian Government, who would channel the proceeds of the credit to AVA. ETHIOPIA AMIBARA IRRIGATION PROJECT I. INTRODUCTION 1.01 The Imperial Ethiopian Government has requested an IDA credit of US$17 million t:o assist in the development of irrigated agriculture in the Amibara Plain in the middle Awash River Valley, some 175 km east of Addis Ababa. The project is given high priority in Ethiopia's Thnird Development Plan (1968-74). It would make a significant contribution towards meeting the Government's objectives to increase production of crops for domestic consumption, including import substitution, and to build up a cadre of trained, experienced personnel for further development of irrigation. 1.02 This would be the first irrigation project to be carried out by the Government and the ninth Bank Group lending for agricultural development in Ethiopia. Previous lending included two fully repaid Bank loans for agricul- tural and industrial credit, totalling US$4.0 million, made in 1951 and 1961 to the Development Bank of Ethiopia and six credits, which are as follows: (a) Credit 169-ET (November 1969, US$3.5 million). The Wolamo Agricultural Development Project is intended to improve both yields and quality of maize, wheat and livestock produced by 7,750 families in the Wolamo sub-province. In the highland area of the sub-province, about 6,000 farm families are re- ceiving the benefits arising from improved roads, markets, agricultural credit, and extension services. Progress on this project is good, particularly in regard to the devel- opment of cooperatives. (b) Credit 188-ET (May 1970, US$3.1 million). The Humera Agricultural Development Project aims at assisting farmers in the Humera region and promoting further development by constructing 120 km of all-weather road and bridging the Tekkezi river, by providing a water supply for the township of Humera and by establishing a demonstration farm, and by providing a feasibility study for the next stage of development in the region. Progress on this project is satisfactory and the feasibility study to prepare a FY 1974 project is proceeding well. (c) Credit 269-ET (August 1971, US$4.4 million). The Addis Ababa Dairy Development Project aims at increasing dairy production in the Addis Ababa area by providing loans to farmers for the development of 240 small and 110 medium sized dairy farms and for the development of 6 ranches for breeding dairy cattle, together with expansion of facilities for milk collecting, -2- processing, and marketing, and the provision of the necessary technical services. This project could not be made effective until May 1972 due to delays in recruiting personnel for key posts but since then progress has been satisfactory. (d) Credit 290-ET (March 1972, US$6.3 million). The Coffee Processing Project is expected to convert about 11,000 metric tons of coffee exports per year from an umnashed to a washed state thereby increasing Ethiopia's foreign ex- change earnings by about US$2.6 million annually. The project's beneficiaries include 33,000 farm families whose incomes are expected to increase by 10 to 15%. (e) Credit 304-ET (May 1972, US$11 million). The Agricultural and Industrial Development Bank Project is intended to cover the import portion of AIDB commitments for medium and long term financing for a period of about one and a half years ending December 1973. The credit provides US$5.5 million for industrial sub-projects and US$5.3 million for agricul- tural sub-projects. (f) Credit 365-ET (April 1973, US$5 million). The Second Live- stock Development Project is intended to provide integrated market and stockroute systems in three important livestock producing areas, slaughter facilities throughout the country, trucking services to connect cattle producing areas with consumer areas, and funds for the preparation of future live- stock projects. The credit is not yet effective. 1.03 A United Nations Development Program (UNDP) study of the Awash River Basin, carried out from 1961-1964, recommended the Melka Sadi and Amibara areas for early irrigation development. Such development was an important considera- tion in the appraisal of the Awash-Tendaho highway - a major element of the Fourth Highway Project (Loan 523-ET and Credit 111-ET; 1968) - and Government therefore undertook to have an irrigation project for these areas ready for appraisal by the end of 1969. Preparation work was entrusted to the Awash Valley Authority (AVA), a Government public authority which was created in 1962 to administer and develop the natural resources of the Awash River Basin. In 1968 AVA retained consultants (Italconsult, Italy) to carry out the feasi- bility study which was completed in 1969. 1.04 The Melka Sadi area of about 4,600 ha net, which lies immediately upstream of the Amibara Plain, has been leased by AVA to the Melka Sadi Agri- cultural Estate Company S.C. (I{AESCO) a private company with participation by the Agricultural and Industrial Development Bank. IDA has agreed (January 1973) to finance the 1,000-ha first stage of irrigated development of this area as a sub-project under Credit 304-ET. MAESCO have commenced planting bananas on the concession and intend to begin exporting fruit by end 1973. - 3 - 1.05 A project to develop -,.he Melka Sadi and Amibara areas jointly was first appraised by an IDA mission in October 1969. Howev,er, several important issues were raised concerning cropping patterns, soils an,d drainage, and further studies were required. The studies were carried out by AVA and its consultants and confirmed the area's suitability for irrigation development. Upon their completion, a new IDA mission, consisting of Messrs. TH. A. Adler, M. D. ffrench-Mullen, A. A. Meimaris, and T. Husain, assisted by Mr. D. E. Campbell of the FAO/IBRD Cooperative Program, re-appraised the joint project in October 1971. However in 1972 the Government requested IDA to consider restricting the development under the proposed project to the Amibara area alone. As a result a follow-up mission, consisting of Messrs. M.J. Walden, Y. Pret and E.M. Sicely and J.L. Robertson (consultant) visited Ethiopia in December 1972 for further discussions. This report is based on documents submitted by AVA, the feasibility studies, and the findings of the appraisal and follow-up missions. II. BACKGROUND 2.01 Ethiopia, covering an area of about 1.2 milliorn km 2, is the tenth largest country in Africa. Most of it consists of the hills and high plateau of the Ethiopian massif, which rises to a maximum of 4,620 m. To the west, the massif falls away to the foothills and clay plains along the frontier with the Sudan while, to the east, it drops abruptly into the desert along the Red Sea and the Somalia border. Although Ethiopia lies within the tropics (4° to 17° N), the differences in altitude provide a wide range of ecological conditions. 2.02 Ethiopia has a population of some 25 million, which is growing at approximately 2.5% per annum. Agriculture contributes about 60% of GDP and provides a livelihood for 90% of the population. The total urban population is about 2.2 million, with the capital, Addis Ababa (850,000), and Asmara (230,000) accounting for almost half. About 85% of the people live in the highlands at altitudes of 1,400 to 3,000 m; at higher alititudes, the climate is not suitable for subsistence crops and below 1,400 m, malaria is endemic. In the arid lowlands, below 900 m, where crops can be grown only with irri- gation, the heat and lack of irrigation have discouraged all but nomadic populations, whereas in the highlands, population density can exceed 210 per km2. There is only about 0.4 ha of cultivated land lper person in the country as a whole but in the Awash Valley extensive tracts of potentially arable land stand virtually empty. These areas are overgrazed by nomadic herds that traverse them for six months of the year and, consequently, are ravaged by wind and water erosion. With the development of irrigation, the Awash Valley could become a major source of commercial crops, cereals, fruits, and vegetables. The development of irrigated agriculture in the Awash Valley is supported by the Bank's 1971 agricultural sector mission to Ethiopia. -4- Land Use 2.03 Currently, about 11%.' of the land area of Ethiopia is under cultiva- tion, 52% is used for grazing, 11% is under swamps and forests, and the bal- ance (26%) is considered unsuitable for crop and/or livestock production. Although agricultural land provides about 2.5 ha for each of the estimated 4 million farm families, about 90% of them cultivate less than 2 ha and are not vet part of the monetary economy. Half the total area under crops is in the intensively cultivated Central Highlands, farmed mostly by subsistence farmers. Recently, however, commercial farming has emerged in the less densely settled areas of the highlands, in the Rift Valley and in the uninhabited plains of the northwest. Together with a few large estates owned mainly by foreign concessionaires, this commercial farming activity is producing most of the marketable crop surpluses, except for coffee. The land tenure sys- tem is complicated and uncertain and about half of the subsistence farmers are tenants without security of tenure, many of them share-cropping. Agricultural Production 2.04 During 1961-70, the value of agricultural production increased at an average of 2% per annum which is less than population growth, while GDP grew at 4.5%. Arabica coffee is Ethiopia's most important crop, providing about 58% (1970) of the country's total export earnings; other important products are oilseeds and cakes (10%), hides and slins (10%), and cereals and pulses (8%). The most important food crops are "teff" (an annual grass whose seed is used to prepare unleavened bread), which accounts for about 18% of the total cropped area; barley (13%); and wheat and sorghum (each about 10%). Until recently, Ethiopia was self-sufficient in staple foods but since 1967 imports of food and live animals have averaged about Eth$ 21 million annually or about 5% of total imports. Domestic production of cot- ton is inadequate to meet local demand and imports have increased from 2,700 tons in 1967 to 5,700 tons in 1970; the domestic demand for cotton is grow- ing rapidly and there is substantial potential for import substitution. Priorities and Pattern of Development 2.05 The Third Development Plan is giving priority to agricultural devel- opment, aiming at a 2.9% annual growth in agriculture. In particular, it is attempting to reduce Ethiopia's overwqhelming dependence on coffee for exports and to diversify into other crops, some of which would replace existing im- ports. Aside from aiming at increased production on small holdings, the plan also calls for the development of large-scale commercial farming. 2.06 In small-scale farming, Government has so far concentrated its efforts on a few intensive projects in high potential areas, such as the Chilalo Project (1967) financed by the Swedish International Development Authority and the Wolamo Project financed by IDA (169-ET; 1969). The results of these projects and the impact of a fertilizer program sponsored by FAO have been so encouraging that, in 1970, Government commenced a more widespread effort, the "Minimum Paclcage Program", with a lower input cost per family and level - 5 - of infrastructure. This program is expected to reach ultimately some 600,000 small farmers by the mid-1980's. An IDA project, prepared with the assistance of the Bank's Permanent Mission in Eastern Africa, which covers the second phase of this program, has been appraised and is currently being processed. Agricultural Inputs and Services 2.07 The consumption of fertilizers in Ethiopia has been increasing rapidly in recent years, increasing from 4,000 tons in 1968 to about 24,000 tons in 1971. Backed by research and multiplication programs, similar pro- gress has been made in the use of improved seed, mainly wheat, barley and maize, even though sales of such seeds - expected to be about 6,000 tons in 1971/72 - probably amount to only 5% of the total seeds used. Credit and marketing services have lagged. The lack of trained personnel to organize the distribution and use of inputs and the marketing of crops is still a major constraint to further development, although a beginning has been made under the second education project of 1971 (243-ET) to expand the training of agricultural teclnicians. 2.08 Commercial farmers, less constrained by inadequate extension and other services than traditional farmers, have been quick to realize the ad- vantages of farm mechanization. With less than 3,000 tractors in the coun- try, however, mechanization is still at an early stage. III. THE PROJECT AREA General 3.01 The project area is located in the middle valley of the Awash River, in the central part of eastern Ethiopia, about 175 km east of Addis Ababa and about 50 km downstream from Awash Station (see Map 2828 R1). With the exception of some 2,500 ha irrigated by pumping from the river, most of the land is savannah or covered by scrub. The Amibara Plain - about 10,000 ha net, located on the eastern bank of the river - has been selected for development at this time (see lMap 10313). A second-stage development may include the Bolhamo Plain on the western bank and the Angelele Plain down- stream of Amibara, totalling about 10,000 ha. Climate 3.02 The middle Awash Valley has a semi-arid climate, with an average rainfall of 580 mm occurring in two seasons. The "short rains", unreliable both in time and quantity, come in March/April, while the more reliable "long rains" ffall from July to September and account for about: 50% of the annual total. Mean monthly temperatures range from just under 220C in December/ January to 30°C in June. -6- Soils, Topography and Drainage 3.03 Soils are recent alluviums of considerable depth, with satisfactory rates of infiltration and a water table at about 10 m. About one-half of the soils consist of sandy loams to clay loams, with good permeability - Class I soils - which are suitable for a wide range of annual and perennial crops. The other half, consisting of loamy clays with restricted permeability - Class II soils - are better suited for cotton and forage crops. Soil salinity and alkalinity cause no problem under present conditions but could become critical under irrigation without adequate provision for drainage. Topography of the plains is generally flat, with slopes varying from 0.5 to 2%, and well adapted to gravity irrigation. Additional soil information is presented in Annex 1. Population 3.04 The population of the project area consists mainly of about 5,000 nomadic Afars (some 1,000 families) who occupy the area and its environs for about six months of eaclh year and graze some 12,000 head of camels, cattle, sheep and goats. A further 500 families with some 6,000 livestock inhabit intermittently the adjoining Nielka Sadi area, now under development. The remainder of the population consists of the labor force employed in existing farming enterprises occupying about one-quarter of the area. Land Utilization 3.05 Governraent policy calls for rapid land development and increased production of export and import substitution crops. In line with this policy, AVA has allocated land to the following uses up to the present time: (a) Farming concessions - 1,300 ha. (b) Melka Warer Agricultural Research Station - 200 ha. (c) AVA pilot land settlement area - 200 ha. (d) AVA farm - 800 ha. In all cases temporary pumping and irrigation systems have been installed. 3.06 The fanring concessions, occupied for the past three years under letters of intent that are subject to conversion to lease agreements when permanent irrigation facilities shall have been provided by AVA, are operated by groups of Ethiopian agricultural graduates. They comprise two farms of 500 ha each (the partnerships consisting of three and four members, respectively) and one farm of 300 ha, where the partnership consists of three members. Settlement 3.07 Settlement of the Afar population presents great difficulties be- cause of their total ignorance of farming and their reluctance to change their nomadic way of life. However AVA has successfully undertaken a pilot settlement scheme for 67 families on 2-1/2 ha holdings, with cultivation and -7- other supporting services provided by AVA. Settlement has been limited to the Afar people because people from the Ethiopian highlands show little indi- cation to settle in the harsh, arid Awash Valley amongst an alien nomadic people. Traditionally the highlanders may work for concessionaires for several months, unaccompanied by their families, before returning to their homes with their accumulated wages. 3.08 Grazing land for the nomads displaced by development in the pro- ject area is available in adjacent areas, mainly the Alledeghi Plain to the east, where AVA is drilling new wells as year-round watering points. Until these wells are functioning, AVA is keeping corridors open between farms, so that the Afar herds have access to the Awash River. Agriculture 3.09 The main crop being cultivated at present is cotton, the first crons having been planted in the 1966/67 season. Despite the unreliability of water supplies from the provisional irrigation works and crop damage during the river's annual floods, seed cotton yields have reached an average of 2.0 tons per ha. On limited areas cropped with maize, yields of over 3 tons per ha are being obtained. These yields are substantially below the area's potential. Transportation 3.10 The project area has good road and rail connections with the rest of the country. An all-weather road runs to Addis Ababa. The Bank-financed Awash-Tendaho highway, which lies about 5 km east of the area, is under construction. The Addis Ababa - Djibouti railway also serves the area from Awash Station, about 50 km away. Additionally, there are two earthen air- strips, suitable for light aircraft, within the project area. However trans- portation within the area is difficult, since there are flew service roads. IV. TIE PROJECT Description 4.01 The project would provide gravity irrigation by diversion from the Awash River for about 10,000 ha of land, mostly undeveloped. It would in- clude settlement of some 800 nomad families (^4,000 people) on 2,000 ha and the purchase of operation and maintenance equipment, including vehicles, and farm machinery for the settlement area. It would also include the provision of watering points to open up new grazing lands for the remaining inhabitants displaced from the project area by the irrigation development. A consulting firm would be engaged by AVA, the implementing agency for the project, to carry out additional investigations and studies, prepare final designs, supervise construction and provide technical assistance for project -8- management, operation and maintenance and agricultural extension. It would also conduct a feasibility study for a second-stage project. Works to be implemented under the project (described in detail in Annex 2) would include: (a) a diversion weir on the Awash River; (b) irrigation and drainage networks to serve 10,000 ha net; (c) flood protection dykes; (d) roads; (e) on-farm development for 10,000 ha; and (f) service buildings and housing. All project works would be completed in five years with construction begin- ning by mid-1973. A detailed construction schedule is given in Chart 7412. Proposed Works 4.02 Diversion Weir. The Melka Warer diversion weir on the Awash River would consist of a low concrete structure, about 14 m high, fitted with crest gates and incorporating a road bridge. 4.03 Irrigation System. A main canal, 21 km long, would receive its supply directly from the weir. Delivery to the irrigated area would be by gravity through earth canals, including control and water measuring struc- tures, turnouts and culverts. The capacity of the main canal has been so designed as to serve ultimately the anticipated second-stage development of the Bolhamo and Angelele Plains. Canal lining would be limited to very short stretches over permeable soils. The distribution network would deliver water to each block of about 64 ha. 4.04 Drainage Network. Two main drains, 46 km in total length, and an open drainage network would remove excess rain and irrigation water from the area. Field drains would be spaced at about 200 m to 400 m. Drainage waters would be conveyed by gravity to the Cadda Billen swamp, beyond the northern boundary of the Angelele area. This method of disposal would be satisfactory as long as the Angelele area remains undeveloped. The consul- tants would study the possibility of eventually returning the drainage ef- fluent to the river as part of their Bolhamo-Angelele feasibility study. 4.05 On the basis of present knowledge of ground water levels and soil permeability, it is likely that, after about five years from imple- mentation of irrigation, tile drainage for water table control may have to be installed. The design of main drains would take this into account. The -9- timing and area to be served by tile drains would be determined by drainage investigations and water table monitoring initiated under the project (Annexes 2 and 4). The cost involved would be about US$3.3 million (at 1972 prices) and it has been included in the economic analysis. The construction would be spread over five years. If required, the cost could be included as part of the second-stage project. However, assurances were obtained at nego- tiations that, should other sources of financing not become available, Gov- ernment would bear the cost of future tile drainage requirements. 4.06 Flood Protection Dykes. The project area is subject to annual flood- ing. A 37-km western dyke, to be constructed along the river, would protect the project area from flooding by the Awash River and its tributaries. An eastern dyke of about 22 km, to be constructed along the escarpment, would protect the project from run-off from the Alledeghi Plain. 4.07 Roads. Approximately 100 km of principal roads, Including the link road to the Awash-Tendaho highway, and 110 km of service roads along the main canals and drains, would be constructed under the project. To ensure all- weather transportation, these two types of roads would be gravel (scoria) surfaced to widths of 5 and 4 m respectively. In addition, about 100 km of unsurfaced tracks would be constructed as part of the tertiary irrigation network. 4.08 On-farm Development. On-farm works would include field canals and drains, small structures, bush-clearing, stone-removal anld land-leveling. Such works would be carried out mainly during the last three years of con- struction. Some on-farm works have already been done, on about 2,500 ha, by AVA, the research station, and the concessionaires. Most of these works, however, would have to be adapted to the new irrigation layout. 4.09 Buildings and Housing. The project would finance construction of project headquarters, a workshop, stores and 23 staff houses and related facilities for the project authority, the research station and the consultants. Water Supply, Demand and Quality 4.10 Water Supply. The project area would obtain its water supply from the Awash River system which has been partially regulated by the Koka Dam and hydroelectric plant, which commenced operation in 1961, and by the Awash II and Awash III dams and hydroelectric plants, constructed with the assis- tance of Bank Loan 375-ET (1964). These dams, which are controlled by the Ethiopian Electric Light and Power Authority (EELPA), have increased the dry season flows and reduced the intensity of floods. As a result several irrigation projects, totalling about 26,000 ha, have been undertaken upstream of the project area by private enterprise and quasi-governmental organizations (see Map 2828 Ri). - 10 - 4.11 On the basis of stream flowg records (1962-1968), it was found that the Awash regulated flow would be adequate to meet the irrigation re- quirements of the upstream schemes, the project area and the proposed second- stage development, with only minor deficits in severe drought years, provided that: (a) water diversion by all upstream users is properly controlled by AVA, and not permitted to exceed its present levels; and (b) EELPA agrees to continue to operate the Koka hydroelectric plant so as to release, during periods of anticipated low flow, discharges sufficient to meet irrigation requirements. Over the past ten years, EELPA has cooperated fully with AVA in drought periods to provide sufficient irrigation water for downstream users. This cooperation is expected to continue, especially since the construction of the Finchaa hydroelectric plant will give EELPA greater operating flexi- bility. This plant, on the Finchaa River, 170 km northwest of Addis Ababa, is expected to become fully operational in September 1973. AVA has commenced negotiations to obtain EELPA's formal agreement on releases sufficient to ensure that irrigation requirements are met the year round in future. To be able to quantify these requirements AVA has commenced to collect data on the diversion needs of all irrigation users. Assurances were obtained during negotiations that AVA would complete the collection of these data and within one year of the signing of the credit agreement would enter into firm arrangements with EELPA, under which EELPA would release water from the dam in accordance with diversion requirements, subject to the availability of alternative generating capacity and to any physical limitation imposed by the design of the Kokca Dam. Assurances were also obtained that, except as the Association shall otherwise agree, Government would not permit river flows at the Melka Warer weir to be depleted below the project's requirements by new diversions. 4.12 Water Demand. Irrigation water requirements have been calculated and the results correlated with the experience gained from existing irrigation systems in the area. Taking into account an overall efficiency of 56%, the total diversion requirements per annum would be about 97 Mm3, or, on average, 9,700 m3 per ha of net arable land, for a cropping intensity of 130%. 4.13 Water Quality. A comprehensive testing of water samples has indicated that the quality of the anticipated water supply would be satis- factory for sustained irrigation under conditions of adequate leaching and drainage. Details of water supply, demand and water quality are presented in Annex 3. Water Rights 4.14 In its charter, AVA is given responsibility for administering all water allocation and water rights in the Awash Valley and for controlling the - 11 - flow of water in the Awash River. However, the charter (para. 5.01) is so written that water rights embodied in land leases issued prior to 1962 are not subject to AVA's authority. Nevertheless, this is not a significant constraint on AVA's overall water control since the exemption from AVA's supervision applies only to one lessee - the HVA Wonji/Shoa estate which, with 5,500 ha of sugar cane, diverts about 12% of the available flows. AVA is demonstrating satisfactory progress towards quantifying and controll- ing all other irrigation use. Engineering Design 4.15 Preliminary designs based on field surveys have been completed by Italconsult (Italy) for the weir, main canal, drains and river dyke. Overall layout of the irrigation and drainage networks was plotted at 1:5,000 with 0.25 m contours, and on-farm works were designed for typical topographical areas of the project. The engineering desiLgn was adequate for appraisal, but additional geotechnical investigations, hydraulic model tests and mapping would have to be carried out prior to final design (Annex 4). During the final design stage AVA, assisted by the consultants, would review the design criteria of the weir, the dykes and the surface drainage system, ensuring also that full use was made of economically available construction material and labor. Detailed recommendations are presented in Annex 2. Cost Estimates 4.16 Overall project costs (excluding customs duties; and other taxes levied on imports, totalling about US$0.1 million), are estimated at US$22.8 million. Estimates for civil works and on-farm works are based on construction quantities presented in the feasibility study, as modified during appraisal. Unit prices presented in the feasibility study were updated on the basis of more recent information available in Ethiopia to bring them in line with 1972 costs, while equipment purchases have also been valued at 1972 CIF prices. The expected effects of the February 1973 currency realignments upon the prices of imported goods and services have also been taken into account. 4.17 The estimated foreign exchange component of the project, including contingencies, is US$13.7 million or 60% of total project costs. This amount was arrived at on the assumption that all equipment would be imported and that civil works contracts would be awarded to foreign contractors (para 4.20). Project costs include a physical contingency averaging 15% on all items, and price contingencies of 3% per annum on local costs and 6% per annum on foreign costs. The price contingencies are based on experience in recent years with cost increases for labor, materials, and services in Ethiopia and for goods imported, mostly from the U.S. and Europe. Details are given in Annex 5 and are summarized below: - 12 - (Eth$ million) (US$ million) Foreign Local Foreign Total Local Foreign Total Exchange Civil Works 8.83 10.87 19.7 4.26 5.25 9.5 55 On-farm Development 3.18 3.32 6.3 1.54 1.51 3.0 50 Buildings 1.20 0.09 t.3 --.58 0.04 0.6 07 Equipment & Vehicles 0.32 1.69 2.0 0.15 0.82 1.0 84 Consultants 1.57 5.48 6.7 0.76 2.49 3.3 77 Sub-Total 15.10 20.92 36.0 7.29 10.11 17.4 58 Contingencies Physical 2.27 3.14 5.4 1.09 1.44 2.6 58 Price 1.54 4.31 5.9 0.76 2.07 2.8 74 TOTAL 18.91 28.37 47.3 9.14 13.70 22.8 60 Financing 4.18 The proposed IDA credit of US$17 million would finance about 75% of the project cost. It would cover the estimated foreign exchange cost - US$13.7 million - and US$3.3 million of local costs on construction contracts. The balance of local costs - about US$6.0 million including duties and taxes - would be met by Government through annual budget allocations to AVA. The proceeds of the IDA credit would be channelled to AVA by Government, to be recovered through AVA's annual budget surpluses at 7% annual interest, repay- able over 50 years with eight years of grace on capital and interest, interest being accumulated. About US$1.2 million of the Government's contribution to project cost would be by grant to AVA and the remainder would be made avail- able to AVA at nil interest repayable through AVA's annual budget surpluses over 50 years with 12 years of grace. Government would also contribute a further total amount of about US$1.9 million in grants to support AVA's operating costs during the first 12 years of the project (see para. 5.03 and Project Cash Flow, Annex 6). It would be a condition of effectiveness that Government and AVA had signed a project financing agreement, on terms and conditions satisfactory to IDA, covering these arrangements. 4.19 Retroactive financing of about US$0.3 million equivalent is proposed, to meet any commitments entered into after March 1, 1973 for consultants' services and investigations. Procurement 4.20 All equipment and vehicles (estimated CIF cost about US$1.1 includ- ing contingencies - Annex 7) and civil works contracts for the construction of the irrigation systems, flood protection dykes, internal roads and on-farm - 13 - development (US$16.5 million including contingencies) would be tendered on the basis of international competitive bidding in accordance with the guidelines for procurement under IDA credits. Because of the isolation of the area and the high costs of mobilization and camp installation and to achieve betLer coordination during construction, all these civil works and on-farm works would be grouped into a single contract. As there is no domestic civil engineering contracting industry that could bid on any portion of these works, such a grouping would not be discriminatory. Contracts for bush clearing and for the construction of the link road to the Awash-Tendaho highway and of buildings and houses (Annex 5), the total value of which would be about US$1.6 million including contingencies, would be tendered locally, since these works would have to be completed prior to award of the main contract and the amount in- volved would not attract international competition. Procedures for local bidding are satisfactory and there is sufficient competition for works of this kind and size. It is likely that these locally-tendered contracts would be awarded to international contractora already engaged in other work in Ethiopia. Rough levelling (about US$150,000) which would also have to be completed before award of the main contract, would be done either by contract tendered locally or by AVA by force account. AVA, with the assistance of the consultants, would be responsible for the preparation of all contract documents, evaluation of bids and award of contracts. As far as international competitive bidding is concerned, there are no preferential import duties in Ethiopia or other discrimination that may affect international contractors or suppliers. Disbursement 4.21 The proposed IDA credit of US$17 million would be disbursed in six years against the CIF cost of imported equipment (US1.1 million), the foreign cost of consulting services (US$2.5 million), and about 77% of the cost of contracts for civil works and buildings. Any unused balance of the credit would be cancelled. All disbursements for civil works would be made against statements of work performed, certified by the consultants. Details of annual expenditures on the project and a quarterly disbursement schedule are presented in Annex 8. Accounts and Audit 4.22 AVA is subject to annual audit by the Auditor-General, who is responsible to Parliament. While these auditing arrangements are satis- factory to IDA, they provide only a limited degree of management advisory service. AVA has decided to appoint independent auditors in addition. During negotiations, assurances were obtained that: (a) separate accounts for the project would be established and maintained in a manner satisfactory to IDA; (b) these accounts would be audited annually by auditors accept- able to IDA; and - 14 - (c) within six months of the close of the financial year, certified copies of the audited financial staterments for thle project, and the auditors' reports, both on the project accounts and on AVA's general accounts, would be forwarded to IDA. It is probable that AVA would appoint the same auditors to audit both its general accounts and the project accounts. Environment and Health 4.23 The environmental changes which would be induced by the project would.have both positive and negative aspects. On the one hand, in an area where malaria and schistosomiasis are endemic, the introduction of flood con- trol, drainage and land levelling would substantially reduce swampy areas and so decrease the present naturally-occurring breeding areas for the disease vectors, mosquitoes and snails. On the other hand, although the design of the irrigation and drainage systems would take account of the necessity to create as far as possible a water environment unfavorable to the snail vec- tors of schistosomiasis, these systems would be likely to become nev health hazards because they would inevitably harbor these vectors unless preventive control measures were undertaken. Furthermore, the migration of project labor from the Ethiopian Highlands (where Schistosoma mansoni, the intestinaL form of schistosomiasis, is endemic), would increase the rate of introduction of this disease (already reported to be occurring) into the Awash Valley where in the past only Schistosoma haematobium, the urinary form of the dise e , was known. 4.24 AVA is fully aware of the importance of adopting satisfactory standards of environmental health from the inception of develop.,lunt and has adopted a form of lease agreement with concessionaires (exemplified by its, August 1971 lease of the Melka Sadi area to MAESCO) including pr'jvis2onb establishing the responsibility of the lessee for the maintenance of these standerds on his concession. According to this lease agreement, the lessee would; (a) provide, at his expense, housing accommodation and adequate medi- cal, sanitary, training and recreational facilities for all persons perm- -mently empl0yed by the lessee in conformance with any laws and regulations :n force in Ethiopia; (b) comply with all laws and regulations pertaining ac soti conservation, scil improvement, erosion, pest control and the in- vest.ation, use, control, protection, management or administration of water ; f E zes ; (c) take, at his own expense, all reasonable steps necessary to t,r.ent siltation and growth of aquatic weeds in artificial water courses areas covered by impounded water, and the existence and spread of ' carriers of diseases made possible by any works he constructs or activi- ttes h& carries on; and (d) comply with any standards promulgated by AVA or ,ther government authority for the treatment of effluent to prevent pollution ,' the Awash River. These lease conditions are adequate to take care of health, .';ani.tation and water pollution problems on concessions, as well as to cover the ?ossible need for molluscicide application, once the requirements are identifled and regulations promulgated. - 15 - 4.25 Despite the attention given to health in the lease conditions, early positive action to control the disease vectors has not so far been envisaged, largely because the importance of preventing the introduction of breeding colonies of snails into the new irrigation and drainage systems has not been fully realized. The techniques and costs involved have not been studied in sufficient detail to permit the inclusion of a control program in the project. However, it is intended that the project consultants should include a study of public health considerations in their feasibility study for the second-stage Bolhamo and Angelele development. Since this study would be completed about two years before first delivery of irrigation water under the project, ample time would be available for recommendations arising from the study to be implemented during the project construction period. Assurances were obtained during credit negotiations that: (a) the studies to be undertaken by the consultants would include a study of schistosomiasis in relation to the project; (b) except as AVA and IDA shall otherwise agree, AVA would undertake reasonable control measures in accordance with the recommendations of the consultants; and (c) clauses on health and anti-pollution no less stringent than the relevant clauses contained in the MAESCO lease would be included in all future project leases. 4.26 Since the Melka Warer village is expected to develop with the project, relevant government agencies would need to establish for it sani- tation facilities, a domestic water supply and other services such as police and education. Assurances were obtained during credit negotiations that these utilities and services would be established for the Melka Warer village and any other villages that may be developed in the project area. V. ORGANIZATION AND MANAGEMENT Implementation of Project Works 5.01 Project implementation would be the responsibility of AVA, a public authority, which was set up in 1962 to administer and develop the natural resources of the Awash River basin. AVA is also responsible under its charter (Annex 9) for coordinating the activities of other government agencies and of private enterprises concerned with the development of the basin. It is governed by a Board of eight Commissioners, comprising repre- sentatives of five ministries together with two appointed members and a General Manager. The General Manager directs the work of a deputy and a staff of about 22 professionals, including agriculturalists, economists and engineers, and some 12 sub-professionals. AVA has carried out a general survey of the Awash River basin; identified hydroelectric, irrigation and - 16 - livestock projects; and established a pilot settlement for Afars at Amibara (para 3.05), as well as an extension service in the lower valley. It has also leased some 36,000 ha to local and foreign investors. Details of AVA organization and activities are presented in Annex 9. 5.02 Three major problems have plagued AVA since its creation - lack of staff, inadequate funds and ineffective coordination with other government agencies. The organization lacks experienced senior professional and tech- nical staff and consequently has had to rely heavily on expatriate experts and consultants. AVA is also dependent on government budgetary allocations as its receipts from land leases are presently small. So far budgetary al- locations for investment purposes have been limited mainly because of the lack of sound development proposals for projects in the valley. Finally, in spite of the composition of the Board, coordination with other agencies is ineffective because representatives of key agencies often do not attend meetings and are generally not of the level required to ensure effective liaison. When AVA can actively undertake economic development in the Awash Valley and produce results, the other agencies are expected to take a more active interest in Board decisions and to participate therein. 5.03 In financial matters AVA operates essentially as a government de- partment. In accordance with the terms of its charter, any portion of its annual budget not covered by its own revenues is financed from the Govern- ment budget and any surplus annual revenues not required for its own opera- tions are turned over to the Central Treasury. In the light of these consid- erations, Government has decided to make its contribution to AVA's project costs as grants or interest-free loans (para. 4.18 and Annex 6). During negotiations AVA agreed to send its financial projections covering itg entire operations, including in particular its major investment plans, annual- ly to the Association for review and comment. 5.04 A UNDP/FAO project, initiated in 1966 and expected to last through 1975, is assisting AVA to develop its technical capability and provide in- service training of staff. Since 1970 FAO, by contract with the Victoria State Rivers and Water Surply Commission (SRWSC) of Australia, has provided foreign experts to strengthen AVA headquarters services and to assist in carrying out studies. Even with this help, however, AVA does not have sufficient experienced personnel to staff a project field office, which would be necessary for efficient implementation of the project. Consequently, consultants would be employed to assist AVA to construct and manage the proj- ect diħring the construction period and train Ethiopian staff, as well as condulet a feasibility study for a second-stage project. - 17 - 5.05 To meet the increased demands made upon it as its responsibilities expand, the Authority's own organization requires to be strengthened. A study by SRWSC has recommended changes (see Annex 9) which are currently under consideration by AVA. Assurances were obtained during credit negotia- tions that within two years of signing the credit agreement AVA would take such measures as may be necessary, after consultation with IDA, to adopt a revised organization. Consultants' Services 5.06 It would be a condition of credit effectiveness that AVA had em- ployed an experienced consulting firm acceptable to IDA, on terms and con- ditions satisfactory to IDA, to perform the following functions: (a) carry out additional investigations and topographical surveys, prepare detailed designs and tender documents for civil work contracts and equipment purchases, and analyze bids; (b) staff a project field office with qualified experts under a project manager to manage the project, supervise the execution of all civil work contracts and on-farm develop- ment, provide operation and maintenance and on--farm de- velopment expertise, train counterpart Ethiopian personnel, and certify applications for credit payments; and (c) prepare a feasibility study for a second-stage project. An outline of the consultants' terms of reference and manpower requiremenits is given in Annex 10. Staff and Training 5.07 Assurances were obtained during negotiations that AVA would appoint: (a) a project executive director satisfactory to IDA; (b) a qualified and experienced person, satisfactory to IDA, as counterpart to the project manager provided by the consultants, within six months of the signing of the credit agreement; and (c) counterparts to the members of the consultants' staff filling the positions of senior agriculturalist, three senior engineers and agricultural extension and training officer. The quali- fications required and the responsibilities would be defined in job descriptions to be sent to IDA for review not later than three months after the signing of the credit agreement. AVA would make the appointments upon receiving IDA's comments. - 18 - Operation and Maintenance 5.08 Since delivery of irrigation water to most of the project area would commence in mid-1977, an operation and maintenance service would be set up at the beginning of that year with the necessary equipment purchased under the project. The consultants would be responsible for the operation and maintenance service for the last year of the project and the training of counterpart staff, provided by AVA, to take over upon completion of the project. The operation and maintenance service would be responsible for all works, dowm to and including the turnouts for the 64-ha irrigation units. Concessionaires, settlement authorities and the research station would be responsible for operation and maintenance below the turnouts. 5.09 Upon completion of the project, the estimated annual operation and maintenance cost, including amortization of equipment, would be Eth$57,000 or about Etn$57 (US$25) per irrigated ha. Should the installation of tile drains prove to be necessary, the annual cost from the eleventh year onward would be increased by about Eth$7,000 per year. All costs are based on 1972 prices. Detailed operation and maintenance costs are shown in Annex 11. Land Utilization 5.10 2,000 ha would be utilized for settlement of 800 Afar families on 2-1/2 ha holdings, 400 ha would be devoted to agricultural investigations by the Agricultural Research Institute and the remaining 7,600 ha would be leased as farming concessions. Settlement 5.11 The conversion of illiterate, nomadic pastoralists into cash crop farmers is a long and difficult process. Holdings are prepared for cropping mechanically and the trainee settler is taught by the settleraent management to sow, weed, irrigate and harvest. New settlers are not recruited until the group undergoing training has acquired some farming skills. The training period is therefore protracted. Settlement is also subject to other severe constraints, arising not only from the reluctance of Afar nomads to adopt a settled way of life, but also from AVA's limited capacity to train them and provide supporting services. For these reasons, Government is not ready at present to allocate to settlement more than the proposed 20% of the project area. Ilowever, since the constraints will be lessened as experience is gained, Government expects to devote a higher proportion of any future project area to settlement and AVA has agreed to instruct the consultants to conduct their investigations of the Bolhamo-Angelele area area primarily on the basis of development through settlement and/or small-holdings. 5.12 Afars who do not become settlers or employees on farms would move to new grazing lands that wiould be opened up mainly on the adjacent Alledeghi Plain by the provision of watering points. AVA, assisted by its SRWSC con- sultants, has carried out surveys of the grazing potential of the plain and - 19 _ its groundwater resources, and has established a pilot farm to develop pasture management techniques and to check actual livestock production against estimated performance. Ample underground supplies of satisfactory water for stock and human use having been proved by the groundwater survey, AVA has begun the construction of seven deep wells at intervals of 15 km across the plain. These would be pumped by a mobile unit to provide a rotation of watering points to permit the grasslands to be utilized. Assurances were obtained during credit negotiations that AVA would: (a) continue to construct, in areas of the Awash ValLey determined after consultation with IDA, a number of deep weLls adequate to support the livestock that would be displaced from the project area; (b) provide these wells with adequate pumping equipment supported by standby equipment; and (c) make its best efforts to institute sound livestock management practices in these areas. Concessions 5.13 Government intends that the size of concessions will be limited to a maximum of 300 ha, and will average not more than 200 ha. However the three existing concessions will remain unaltered in size, in view of Government's prior undertakings to the concessionaires and the investments they have already made in good faith. AVA will continue to grant concessions only to groups of 3 or more individuals, or to share companies, for which the legal minimum number of shareholders is 5. There would therefore be a total of about 3'.gcnessions, involving about 100 - 150 participants. AVA intends to advertise for applicants for the new concessions shortly. In order to ensure that future concessionaires would possess the same capacity to bring about rapid and successful agricultural development as is being demonstrated by the members of the three pioneer groups, assurances were obtained during negotiations that AVA would adopt criteria satisfactory to IDA to evaluate applicants' technical, administrative and financial suitability. Recovery of Costs 5.14 Project investment costs subject to recovery amount to US$18.5 million, which cover all investment costs except (a) those for farm machinery and operation and maintenance equipment, the depreciation of which is included in annual production and operation and maintenance costs, respectively; (b) the cost of feasibility studies for the Bolhamo/Angelele pLains; (c) 30% of the cost of all roads, as (i) these would also serve non-project users and (ii) part of the cost would be recovered through gasoline tax and other charges; (d) price contingencies; and (e) the cost of tile drainage which, if found to be necessary, would be recovered through a special assessment. - 20 - 5.15 Concessionaires in the Awash Valley now pay an annual charge of Eth$ 5 per ha for water rights and use of undeveloped land and Eth$ 15 per ha for land under agricultural use. Under the project, concessionaires and settlers would be required to pay, as soon as land is irrigable, an annual operation and maintenance charge of not less than Eth$ 57 per ha. An as- surance to this effect was obtained during negotiations. With a view to recovering as much of the project costs as possible while providing ade- quate incentives to concessionaires, an annual water/land charge of not less than Eth$ 300 per ha is proposed from the beginning of the fourth year following, the introduction of irrigation. This charge would be raised from the ninth year onward to not less than Eth$ 500 per ha, provided AVA is satisfied that the incentives to the concessionaires are still maintained. However, the annual, wateip/land charge proposed for Afar settlers is Eth$ 100 per ha from the fourth year onwards following the introduction of irrigation, which is appropriate to the wxpected income level of Eth$ 1,500 per 2.5 ha farm. Assurances were obtained during negotiations that the above proposed water/land charges would be levied on concessionaires and settlers. In the event that tile drainage has two be installed, a special assessment to recover the cost would be levied on aL.]l beneficiaries. 5.16 These proposed water/land charges for concessionaires are high in comparison with other Bank Group financed projects, but considering the re- turns to concessions on equity (Annex 12) the charges are considered reason- able. In any case, such charges would cover the whole recoverable cost of the project. However, the concessionaires' returns would be very sensitive to declines in gross revenue. For example, with the water charge at Eth$500 per ha, if gross revenue is decreased by 10%, net annual income after taxes decreases from Eth$36,000 to Eth$18,000. If the charge were higher, say Eth$600 per ha, and gross revenue declined by 10%, net income would decline to about zero. Since the chance of a 10% decline in gross revenue is not sliglht, a water charge higher than Eth$500 per ha appears unreasonable. 5.17 The revenue from the above charges would recover all project costs at 7% (Annex 12, Table 5). If the opportunity cost of capital were assumed to be 10%, at a 10% discount rate the present value of revenues would cover 79% Qf the present value of costs, with an implied subsidy of Eth$7.i million (US$3.5 million). The beneficiaries of this subsidy would be mainly the Afar settlers, who would pay Eth$100 per ha, compared with Eth$500 per ha to be paid by concessionaires. 5.18 With the given assumptions, a 200-ha concession would produce a net income of Eth$36,000 per annum at full development (year 10 following the tntroduction of irrigation). This amount, split amongst the members of the partnership, would provide each with an income of between about Eth$7,000 (in the case of 5 partners) and Eth$12,000 (3 partners), plus a proportionate share of the (reputed) salary of Eth$12,000 provided for in management costs. The total income would range, therefore, from about EthS9,500 (for each of 5 partners) to about Eth$16,000 (for each of 3 part- ners). If he were in salaried employment, a prospective concessionaire might earn as much as Eth$12,000 per annum. - 21 - 5.19 AVA has the necessary legal powers to impose and collect water/land charges. To enable these charges to be revised at periodic intervals during the life of a concessionaire's lease, taking into account changing cropping patterns, price levels and taxes, which would affect income and profitability, an assurance was obtained during negotiations that AVA would review the charges in the twelfth year following the introduction of irrigation and at intervals of three years thereafter. Supporting Agricultural Services 5.20 Optimum production and crop diversification would require an in- tensified research program at the Melka Warer Agricultural Research Station on cotton, maize and groundnuts as well as on other possible crops, such as tobacco, fruit, vegetables, oilseeds and forage crops and on livestock; the application of these results by contessionaires and settlers; the strengthen- ing and expansion of AVA's extension service; and the provision of adequate credit. 5.21 The Agricultural Research Station at Melka Warer, which would serve all the project's research needs, is operated by the Agricultural Research Institute (an agency of the Ministry of Agriculture) with the assistance of foreign experts provided under an on-going UNDP/FA0 project. Research work at the Station is already being expanded to meet the project needs. A tobacco program has commenced; there are plans to strengthen the staff by adding an agronomist to work on maize, other coarse grains, and oilseeds, and a seed production specialist. A small cattle herd is being built up, and work on alfalfa is proceeding. The station also plans to have its Ethiopian counterpart staff, following training, provide intensified extension services to the project concessionaires. Assurances were obtained during negotiations that the Ministry of Agriculture would continue to employ qualified Ethiopian specialists as counterparts to all foreign experts working full - or part-time at the station and that adequate local finance would be provided over the next ten years to fund the proposed expansion of the station's research program and extension services. Under the project, miscellaneous agricultural and laboratory equipment and vehicles are provided for this program, amounting to US$50,000. 5.22 Extension and training services for the Afar settlers and displaced nomads would be provided by AVA, assisted during the construction period by the project consultants. The agricultural extension and training officer to be appointed by AVA (para. 5.07) would undertake this task, initially as a counterpart to a member of the consultants' staff. Following a period of training he would assume full responsibility. 5.23 There are no processing facilities in the vicinity of the project. In the initial stages, the cotton ginning and textile mills in Addis Ababa 6 would be adequate to handle the project needs. As production develops, - 22 - however, it is likely that concessionaires or other private enterprise would construct a cotton ginnery in the project area. The Government Grain Corporation and private enterprise would be capable of handling the maize and groundnut production of the project as well as other coarse grains and oilseeds should these crops be produced in the area. Credit 5.24 Credit would be available to concessionaires from the Agricultural and Industrial Development Bank of Ethiopia (AIDB) and from commercial banks. The annual requirement of operating credit at full development would be about Eth$ 0.5 million. In addition, about Eth$ 3 million of medium-term farm credit would be required initially for the purchase of farm machinery, im- plements, etc.. 5.25 Concessionaires applying to commercial banks for medium- and long- ternm credit must be able to mortgage their leasehold. This requirement is met in the IAAESCO lease (para. 5.26) and would be included in all future leases to be granted on the project. To grant short-term credit, commercial banks would need to rediscount crop loans with the National Bank of Ethiopia but, before this could be done, legislation would be necessary to permit banks to treat crop liens as negotiable instruments. This and other matters will be studied in the course of a credit survey financed under the AIDA Project (para. 1.02). It is intended that the survey will recommend methods of improving the provision of finance to farmers. Accordingly no specific assurances have been sought regarding measures to meet the short- and medium-terit credit needs of project farmers. Instead, during negotiations assurances were obtained that Government would take all necessary steps to ensure the avail- ability of agricultural credit to project beneficiaries, without specifying the accompanying institutional arrangements. Land Leases 5.26 In August 1971, AVA leased the Melka Sadi area to MAESCO for 30 years, with the possibility of renewal for a further 15 years by mutual agreement. The lease specifies the rate of land development, gives the lessee the right to use 5.5 m3 per sec of water for irrigation and - with AVA's consent - to mortgage the land, and requires that the land be farmed in aceordance with rules of good husbandry. Satisfactory termination clauses are embodied in the lease and provision is made to safeguard the tree cover within 100 in of the bank of the Awash River. With the exception of the length of the lease period (which AVA has agreed to consider reducing in future lease agreei4ents) the terms and conditions of this lease are satisfactory. Assur- ances were obtained during negotiations that terms and conditions similar to, but not limited by, those of the MAESCO lease would be included in all future leases. Assurances were also obtained that leases with the present three concessionaires now operating under letters of intent (para. 3.06) would be signed not later than the time of the first water delivery to the land. - 23 - VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARMERS' INCOME Production 6.01 Cotton is at present the main crop in the valley. Given the ex- pected prices and yields, it is highly likely that cottonL will remain the principal crop in the area for the foreseeable future. T'he project has therefore been analyzed as a cotton project. With the project, seed cotton yields are expected to increase from the present level of: 2.0 to about 3 tons per ha at full development (after 12 years). Expected incremental production is about 22,800 tons of seed cotton. 6.02 Other crops such as maize, groundnuts, fruit, vegetables and bananas may also be grown in the area and it is hoped that MAESCCI's example may even- tually facilitate diversification into the latter three. These crop alterna- tives have been only tentatively explored for the project, but the Melka Warer Agricultural Research Station's work program on crop diversification is already being expanded to take care of this need (para 5.21). In case diversification into higher value crops occurs, net returns per ha could increase to as much as three times those from cotton cultivation. 6.03 Improved seeds, fertilizers and pesticides are readily available and used extensively by the large commercial farms in the Awash Valley and credit for their purchase would be ensured by Government (para 5.25). Land preparation activities are largely mechanized under present conditions while harvesting and weeding are done by manual labor. This pattern of agricultural production is expected to continue. Labor requirements for cotton are es- timated to be 140 man-days per ha per year. Labor would be mostly imported from the highlands and no shortage is anticipated because of the high rate of unemployment that prevails there. Some seasonal labor, however, would also be provided by the Afars (para 7.04). Market Prospects and Prices 6.04 Current per capita consumption of cotton and artificial fibers in Ethiopia is 1.3 kg, of which about 60% is cotton. In 1970, about 12,500 tons of cotton lint were produced in Ethiopia and about 8,700 tons were imported, as was an additional 2,600 tons of synthetic fibers. Assuming an income elasticity of 0.62 and a per capita income growth rate of 2.5%, the total demand for cotton is estimated at 36,000 tons by 1985, exceeding local production forecasts by about 14,000 tons. The expected project production of about 10,000 tons of cotton lint is, therefore, likely to find a ready domestic market. A detailed analysis is presented in Annex 13. 6.05 During the last five years, the average price f'or medium staple cotton lint, CIF Djibouti, was about US$0.27 per lb, the corresponding price CIF Liverpool was about the same. The Bank's forecast fcr the next decade sets a price of US$0.26 per lb CIF Liverpool and this is the price used in the financial and economic analysis. - 24 - Farmers' Income 6.06 The beneficiaries of the project would be: (a) the owners of the 34 concessions; (b) 800 Afar families on the AVA settlement; and (c) wage labor on the settlement, the concessions and the Research Station. The income of concessionaires and settlers has been analyzed using two models: (a) a 200-ha commercial cotton farm; and (b) a 2.5-ha settler farm. Farm budgets and related analyses are given in Annex 12. Main aspects are summarized below: At Full Development (Year 12) 200-ha Concession 2.5-ha Farm (Eth$ '000) (Eth$) /3 A B-= Total Production (ton) 600 600 6.25 Gross Revenue 300X1 270 3125X4 Production Cost 137 - 137 1701- Net Revenue 163 133 1424 Less Operation & Maintenance Charge 11 11 143 Water Charge 100 100 250 Net Revenue after Charges 52 22 1031 Less Income Tax 1d2 4 2 Net Income after Tax 36 18 1080 Plus Family Labor Income - - 438 Net Income per Farm 36 18 1469 = =_ /1 Includes annual management cost of Eth$ 12,000 and annual depreciation charge of Eth$ 10,000. /2 At 20% of net income up to Eth$ 30,000 and 30% between Eth$ 30,000 and Eth$ 150,000. /3 Gross revenue decline by 10%. A Includes income from use of family labor on the farm = Eth$ 438 assuming 140 man-days of labor valued at Eth$ 1.25 per man-day. Also includes AVA annual management charge of Eth$ 206 per ha. - 25 - On the 200-ha concession the annual net income after taxes is EthS 36,000: the financial return on total investment is 54%. The financial rcrur, onr equity (25% participation) is 95% at full development but it is verv sensitive to a decline in gross revenue, as indicated above and in Annex 12, Table .3. 6.07 For the 2.5 ha farm, the annual farm income is estimated at Eth$ 1470 or an annual per capita income of Eth$ 294 (assuming a family ot five). This income compares favorably with the annual per capita income of Eth$ 76 and with the expected annual income of wage earners in the project of Fth$ 310 (250 days per year at $1.25 per day). On the existing settler farms, the current annual farm income level is about Eth$ 550. Government Revenues 6.08 Income tax is levied at a rate of 20% on annuaL net incomes below Eth$ 30,000 and at 30% between Eth$ 30,000 and Eth$ 150,000. Based on the pro-forma analysis (Annex 12) it is estimated that, at full development, each 200-ha concession would pay an anniual income tax of about Eth$ 16,000. For the total area under concessions, the estimated annual revenue from income tax would be about Eth$ 0.6 million. The loss of income from customs duty on fiber imports would be about Eth$ 0.3 million in 1985,, assuming that 10,000 tons of cotton lint would be imported, which would no doubt be partly offset by increased taxes paid by the processing industry which, however, cannot be quantified. VII. BENEFITS AND JUSTIFICATION Economic Benefits 7.01 The major purposes of the project are to open up the Middle Awash Valley - one of Ethiopia's most promising agricultural areas - and to provide better employment for the rural population, foreign exchange savings by import substitution for cotton and possibly diversification of agricultural exports. The potential for agricultural exports clearly exists but, due to inadequate data, a complete analysis of cost and returns was not possible. The project was therefore analyzed as a cotton project on the assumption that if the project is viable with cotton, it would have even higher returns with higher value crops. 7.02 As a cotton project, production is expected to be 10,000 tons of medium staple cotton lint per annum. The net annual foreign exchange savings at full development are estimated at US$5.7 million. Wit]h cotton as the only crop and a shadow wage rate of Eth$ 0.50 per day for unskilled labor, the economic rate of return from the project would be about 16%. Details of the analysis and assumptions are given in Annex 14. - 26 - 7.03 The analysis of the sensitivity of the economic rate of return wfas made for assumed variations in capital investment, revenue and shadow labor wages. An increase of 10% in capital investment would cause the rate of return to drop to 14% and a 10% decrease in gross revenue would result in a drop to 13%. Combining the above modifications would still give a rate of return of 11%. If market wage rates of Eth$ 1.25 per day for unskilled labor should apply instead of the shadow wages of Eth$ 0.50, the economic rate of return would be 13%. Employment 7.04 The project would create employment for the local Afars and for underemployed workers from the highlands. The AVA settlement would even- tuaily settle 800 families, and the settlement farms would also hire labor seasonally for cotton picking. At full development, it is estimated that regular employment for about 2,000 farm workers and seasonal employment (three months per year) for about 7,000 workers would be created by the settlement, theiresearch station and the concessions. During the construction period, about 750 workers would be employed on construction of the project. Income Distribution 7.05 The direct beneficiaries of the project would comprise the settlers on the AVA farms, wage earners, and the 100 - 150 partners in the 34 conces- sions. For the settlers, the per capita income for a family of five is ex- pected to rise from about Eth$ 76 to Eth$ 294 at full development. For fully- employed wage earners, assuming 250 working days per year. the annual income is expected to be about Eth$ 310 and for the seasonal workers, Eth$ 100. These incomes would accrue to the presently underemployed workers from the high- lands as well as some Afars from the Valley, whose incomes are at subsistence level. As to the concessionaires, some of whom currently earn Eth$ 12,000 per year in salaried employment, their incomes are expected to be between Eth$ 9,500 and Eth$ 16,000, including salary provided for in management costs. VIII. RECOMIENDATIONS 8.01 During negotiations, the following principal assurances were obtained from the Government: (a) the studies to be undertaken by the consultants would in- clude a study of schistosomiasis in relation to the project and, except as AVA and IDA shall otherwise agree, AVA would undertake the control measures recommended by the consultants (para. 4.25); and (b) within two years of the signing of the credit agreement AVA would take such measures as may be necessary, after consultation with IDA, to adopt a revised organization (para. 5.05). - 27 - 8.02 Conditions of effectiveness would be that AVA bad: (a) signed a project financing agreement with Government, on terms and conditions satisfactory to IDA, covering Government's transfer of the proceeds of the proposed credit to AVA and provision of the balance of project costs not financed from the proceeds of the proposed credit (para. 4.18); and (b) employed a consulting firm, acceptable to IDA (para. 5.06). 8.03 With the indicated assurances, the proposed project constitutes a suitable basis for an IDA credit of US$17 million. ANNEX 1 Page 1 ETHIOPIA MIIBARA IRRIGATION PROJECT Soils 1. During the course of the feasibility study, about 1,700 soil profiles were examined throughout the Amibara Plain and the adjoining Melka-Sadi Plain. The soils were classified and a land use classification was then developed from the information obtained. 2. The soils of the project area are recent alluviums of considerable depth in which two main phases of deposition are recognized. During the first phase, sandy loams to clay loams (the "brown" soils) with good permeability - Class I soils - were deposited, while in the second phase, loamy clays with restricted permeability - Class II - were deposited in the low lying areas along the estern and western edges of tiu brown soils. The thickness of these heavier "black" soils varies from a few centimeters to more than 3 m. 3. Following the 1969 appraisal mission, it was found that supplemen- tary work was required on the project land classification, including studies on soils, drainage, water quality, and economics. Italconsult was given the assignment and work was completed by September 1971. 4. During the course of these supplemental studies field investigations were carried out at more than 300 additional sites in the project area, soil samples from which were also analysed in the laboratory. As a result: a) the accuracy of the land classification was increased; b) the degree of salinity and alkalinity in project soils under existing conditions was determined accurately; c) additional information was obtained on soil permeability by carrying out tests on infiltration rates and hydraulic conductivity. Tests of salt leaching were also made; and d) the existing boron content of soils and Awash River water was determined and a judgement was made whether excessive boron would be likely to accumulate in the soils under irrigation. 5. The revised survey and land classification shows that salinity and alkalinity are not problems under present conditions and would not become critical under irrigation if adequate provision were made for drainage. Boron occurs in moderate concentration in certain areas under present conditions but would be expected to be leached under irrigation development, especially with the anticipated good quality irrigation water. ANNEX 1 Page 2 6. The arable soils of the area have satisfactory infiltration rates. The ,brown soils can be leached of soluble salts but, since the heavier blaok soils have low salt levels, their susceptibility to leaching was;not determined. Italconsult, the Institute of Agricultural Research, and Victoria State Rivers and Water Supply Commission (SRWSC) feel, however, that* the black soils in the arable area have sufficient vertical water per- colation to meet requirements for salt balance in the soil profile. Never- theless, the Melka Warer research station has undertaken to investigate the vertical hydraulic conductivity of the black soils in relation to leaching capacity. 7. On the basis of the supplementary investigations, about 56% (5,600 ha) of the net arable area of the project is regarded as Class I soils, with subsoils having hydraulic conductivity values in excess of 8 mm per hours. The remainder of the arable area, the black soil, (about 4,400 ha) is classified as Class II soils, in which there is some internal drainage constraint. February 19, 1973 AN,NIv 2 ?a' Re 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Pro ect 17orks Proi eCt Concept 1. Two alternative methods of diverting w.ster from tne Awash ;fiver were examined - gravity and pumpine. Tne consultants selected gravity diversion as tile more economical method and because of its deq!]ting and reregulating, ef- fects. The small pumps presently operated by the concessionaires and AVA to irrigate about 2,500 ha would be discarded whlen gravi.tv supvply becomes avail- able, by wnich time their value wotuld have been fully amortized. The Melka Warer Diversion Weir 2. The Melka W4arer diversion weir would have a storago capacity of about 600,000 m3. Foundation constructfon would pose some problems -- on the right side the structure would stand otl a basalt bed, while on the left side it would be set on compact clay. Foundation elevation woul(i be 724.0 m MISL, with the crest at 738.0 m, and maximum permissible hich flow would be 1,100 n3 per sec. The weir would have three spans, each 20 mn lon>z. The intake to the Amibara canal would have a capacity of 30 m3per sec, which would be suf- ficient to supply both the project area (10,000 ha) and the lolhamo and Angelele areas (another 10,000 ha) - Stage IT of the project. A road bridfge would be built over the weir. 3. A low reinforced concrete weir is proposed. It would include a mass concrete over-pour section, with gate-controlled gravel and silt bypasses and a gate-controlled canal intake on the right bank;. It is recommended, however, that this arrangement be reconsidered at final design and that, instead of the silt bypasses, self-operating crest gates (tilting shutter type) or alternatively radial gates be installed along the entire crest of the weir to reduce the back-up of the river during floods and consequently the heiglht of the flood protection dyke. With this arrangement, part of the silt would be evacuated at each flood and the reregulating capacity of the weir would be partly reinstated. It is also recommended that masonry be substittuted for concrete wherever possible. Substantial savings -- up to 30% -- would be realized if the above modifications were made, due to the low cost of labor in Ethiopia and to the availabilitv of good quality construc- tion material in the vicinity. These savings have alreadv been taken into account in the cost estimates. 4. An alternative spillway arrangement should also be considered at final desigrn. This would utilize a spillway chtannel excavated in one river banlk and permit concrete work to be carried out in the dry.. Savings in con- ANNEX 2 Page 2 struction, time, and costs may be achieved depending on site features and geological conditions. 5. The key problems are foundation conditions and desilting. Further geological investigations, sedimentation studies and, possibly, hydraulic model tests must therefore be carried out before preparing final designs. MIain Canal 6. The main canal (Amibara canal) would be unlined except for short, well-defined stretches. The canal would be close to 21 km long with an initial discharge of 12.6 3 per sec; it would be so designed that, after deepening, its capacity would be increased sufficiently to serve Stage II. Works would include secondary canal intakes, water measuring structures, regulating weirs and syphon outlets, with tail drain gates and bridges. At final design, masonrv should be used instead of concrete whenever possible. tain Drains 7. The network includes two main drains and three branch drains. The eastern main drain (22 km) follows the border of the project area and its capacity is designed to carry the drainage discharge of the whole Melka Sadi project area (4,600 ha). The western main drain (24 km) receives the flow of three branch drains (12 km) and joins the eastern main drain at the northern boundary of the project area; the combined drainage flows discharge by gravity into the Cadda Billen swamp. 8. Prior to final design, a study of drainage along the eastern border of the project would have to be made to determine the most economic methods for handling runoff from the escarpment located east of the project. The pos- sibility of diverting drainage water into the storage created by the Melka Warer diversion weir would also have to be studied; should this prove fea- sible, it would increase water availability during low flow stages of the river, and reduce the cost of the eastern main drain of the Amibara project. Flood Protection Dykes 9. The western dyke (37 km) would protect the project area from floods of the Awash River and its tributaries. It would start at the Melka Warer weir and have a height ranging from 1.5 m to 5 m. A 4-m top width is recom- mended. 10. The eastern dyke, about 22 km long with heights varying from 1.0 in to 2.5 m, would protect the area from the surface rtnoff from the Alledeghi Plains. A more refined study to determine its technical and economic justifi- cation prior to final design is recommended, but construction costs have been included in the cost estimates. ANNEX 2 Page 3 11. It is assumed that implementation of the Melka Sadi project will provide protection against floods from the Awash River overflowing the right bank upstream of the Melka Warer weir. However, if this should not be achieved in due time, a flood dyke in addition to the ones mentioned in the preceding paragraphs would have to be built across the plain along the link road which would separate the two irrigation projects, Melka-Sadi and Amibara. This dyke would be 2.3 km long and about 4.5 m high. Its cost is included in the estimate of project costs. Irrigation Networks 12. Irrigation networks consist of secondary and tertiary open earth canals conveying water to each block of about 64 ha. The total length of these canals would be about 20 m per ha of gross area (11,000 ha) and all would be fitted with intakes with measuring structures andl control gates, water control structures and tail drains structures. W4henever indicated, a contour layout is recommended to reduce land levelling c:osts. Design of the tertiary network, with canals spaced about 800 m apart, is based on a water duty of 1.1 liters per sec per ha, with 24-hour operation at peak pe- riods, which would be sufficient to meet water requirements for a cropping intensity of 130%. Drainage Networks 13. Secondary and tertiary drains, with sDacing similar to that of the irrigation network, would remove surplus surface water from the field drains and convey it to the main drains. The proposed design duty for tertiary drains (about 7 liters per sec per ha, which appears rather high) would be reviewed at final design. 24-hours submergence of the land, consistent with the recommended cropping pattern, would be acceptable for the removal of the maximum daily rainfall of 65 mm. 14. On the basis of present knowledge of groundwater level and soil per- meability, it is likely that, after about five years of actual irrigation, tile drainage may need to be installed to control the water table. Eventually, it may have to be extended over the entire project. The construction of tile drains would spread over five years: its cost was estimated at US$3.3 million at current prices. Drainage investigations and water table monitoring carried out under the project would determine the actual spacing of the tile drains and the area to be served. It is recommended that, at final design, the depth of the drains and, more important, the sill levels of the structures be so de- signed that the system can accommodate tile drains in the future. Roads 15. Approximately 100 km of principal roads, including the link road to the Awash-Tendaho highway, and 110 km of service roads would be constructed. Both types would be gravel-surfaced with scoria, locally available, and be 5 m and 4 m in width respectively, with 1 m wide shoulders. All roads would receive a 0.20 m thick stabilized finish. In addition, about 100 km of un- surfaced tracks would be constructed as part of the tertiary network. ANNEX 2 Page 4 On-Farm Development Works 16. On-farm works would include bush clearing on about 6,000 ha, removal of stones from some 300 ha, and land levelling of the entire area of 10,000 ha. This would be followed by the construction of field canals and drains spaced at intervals of about 200 m to 400 m, with intake structures on the tertiary irrigation canals only. The length of the field canals and drains would amount to about 40 m per ha for each category. The construction schedule would coordinate the completion of these works with the correspond- ing distribution system in order to achieve immediate use of water release. February 19, 1973 ANNEX 3 Page 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Water Supply, Demand and Quality Water Supply 1. The flow of the Awash River that would reach the storage created by the Melka Warer weir would depend upon the discharges from the Koka Dam and power plants (controlled by the Ethiopian Electric Light and Power Authority, EELPA) and inflows as well as water diversions between Koka Dam and Melka Warer weir. 2. Stream flow records from 1962 through 1968 were utilized to estimate the project water supply. Daily data are available for five stations on the Awash River upstream of the project and at Kesem the weir sites and for each of the main tributaries, consisting of Arba, Kesem and Kebena. Despite the fact that these data are neither totally concurrent with nor complete for the study period, they do correlate in the primary variations and depict typicallv low water conditions when shortages are most likely to occur, such as in the 1966/67 hydrological year. These data are acceptable for water availability analysis. 3. The commissioning of Koka Dam in 1961, with a reservoir capacity of 1.680 Mm3, changed the regime of the river to provide increased dry season flow. As a result, a series of irrigation schemes have been developed and are still in the process of being expanded upstream of the project. As forecast in the Third Five-Year Plan, these projects would irrigate a total of about 26,000 ha at completion. The:Lr annual water requirements with the present cropping pattern have been estimated at about 190 Mm3, with peak requirements of about 25 m3 per sec occurring during August and September. 4. The analysis of flow records in conjunction with the upstream uses of water show that the Awash regulated flow would be adequate to meet the irrigation requirements of both the upstream schemes and the project area, with only minor deficits in severe drought years, provided that (a) water diversion by all upstream users was controlled and limited to the fore- casted level and (b) EELPA agreed to continue to operate the Koka power plant to release, during periods of anticipated low flow, the discharges needed by downstream users. 5. AVA has advised that there has been no difficulty during the last 10 years and no difficulties are foreseen, since the Finchaa hydroelectric station will be commissioned in 1972/73 and another large hydroelectric project will be in operation in 1980, further increasing the flexibility of the FELPA system. ANNEX 3 Page 2 6. In order to ensure an adequate water supply for the project, AVA would enforce overall control of the flow of water in the Awash River on the basis of quantified water rights for upstream users based on the fore- casted level. It would also maintain records of stream flow and diversions to predict when low stream flow conditions would be likely to cause water shortages for the project. When such conditions were anticipated, AVA would advise EELPA to maintain adequate minimum daily releases from Koka Diam in accordance with project needs. Water Demand 7. Consumptive use requirements for crops were computed by the Blaney- Criddle method and correlated from existing irrigation experience in the area. In view of the low individual rainfall level, only 60% of the total rainfall was considered effectice in meeting consumptive requirements. Field irrigation efficiency was estimated at 70%. Considering peak demand, with a 24-hour-per-day operation for the highest water consuming cropping pattern and leaching requirement, the tertiary network was designed for 1.08 liters per sec per ha. Based on the prevailing soil types and an unlined system, canal losses were estimated to be 150 liters per day per m2 of wetted area and an overall efficiency of 56% was adopted for diversion. 8. On the basis of the assumptions, irrigation water requirements have been calculated by 10-day intervals for three cropping patterns: single cotton; cotton-maize; and cotton-maize-groundnuts. Monthly data are presented in Table 1. Total annual diversion at full development ranges from 75 Mm3 to 97 Mm3, or, on average, 7500 m3 to 9,700 m3 per cropped ha. The peak gross demand occurs during October with 11.5 m3 per sec. Project water supplies are adequate. Water Quality 9. A comprehensive analysis of 30 water samples, collected at five stations in 1970, indicated that the quality of the anticipated water supply would be satisfactory for sustained irrigation under adequate conditions of leaching and drainage. Boron would not be a significant factor under these conditions. The water contains moderate amounts of bicarbonate and possibly some carbonate, thereby tending to reduce the effectiveness of the beneficial calcium component. February 19, 1973 ETHIOPIA AMIBLRA_IRRIGATION PROJECT Irrigation Water Requirements Jan Feb Mar Ar MA June July Aug Sept Oct Nov Dec Total Crops Irrigation Requirements Cotton: Net 1/ _ 200 290 220 1,360 1,720 410 - 4,200 Field 2/ - - - 280 420 320 1,940 2,460 580 - 6,000 Maize: Net 610 1,260 1,470 190 - - - - _ _ - 380 3,910 Field 870 1,800 2,100 270 - - - - - _ - 540 5,580 Groundnuts: Net - - - - - 280 140 - 1,030 1,470 280 - 3,200 Field - - 4 _ - 00 200 - 1,470 2,100 400 - 4,570 ----------------------- (Project requirements in Mm3) ---------------------- Cropping Patterns Irrigation Requirements 1. lCotton Cro (10,000 ha) Field _ _ - _ - 2.8 4.2 3.2 19.4 24.6 5.8 - 60.0 Diversion i/ - - - - - 3.5 5.2 4.0 24.2 30.8 7.3 - 75.0 2. Cotton-Maize ( 10,000 ha - 3,000 ha) Field 2.6 5.4 6.3 0.8 - 2.8 4.2 3.2 19.4 24.6 5.8 1.6 76.7 Diversion 3.3 6.8 7.9 1.0 - 3.5 5.2 4.0 24.2 30.8 7.3 2.0 96.0 3. Cotton-Miaize-Groundnuts (7,000 ha - 3,000 ha - 3,000 ha) Field 2.6 5.4 6.3. 0.8 - 3.3 2.2 17.5 21.6 4.7 1.6 53.9 Diversion 3.3 6.8 7.9 1.0 - 3.6 4.2 2.8 21.3 27.9 6.3 2.0 68.1 ------------------_----------------- m3/s --------------------------------- Maximum foreseen diversion requirements . 1.3 2.8 3.0 0.4 - 1.4 2.0 1.5 9.4 11.5 2.8 0.8 - 1/ Consumptive use minus effective rainfall. 1-3 2/ Calculated at 70% efficiency. CD i/ Calculated at 80% efficiency. Febru:rv t 1 1971 ANNEX 4 ETPIOPIA AMIBARA IRRIGATION PROJECT Investigations and Studies 1. The following field investigations and studies would be carried out by the consultants, with assistance from AVA: (a) Prior to Final Design (i) additional exploratory drillings at the Melka Warer diversion weir site, including geological and soil mechanics studies; (ii) preparation of hydraulic models of the diversion weir; (iii) sedimentology studies to overcome desilting problems at the diversion site and in the irrigation and drainage networks; (iv) drainage study for the intercepting drain along the eastern border of the project area, including the technical and economic feasibility of the eastern dyke; (v) study of the possibility of diverting the main drain from the Melka Sadi area into the backwater area of the Melka Warer weir; and (vi) additional surveying and mapping. (b) During Project Construction (i) studies of schistosomiasis and other areas of public health; (ii) feasibility study for a second-stage project to develop the Bolhamo and Angelele areas of about 10,000 ha; and (iii) drainage study of the entire Amibara Project area to determine the timing and specifications of tile drainage installation, including the installation of piezometers for monitoring of groundwater levels. 2. The terms of reference of the proposed investigations and studies have been agreed upon between IDA and the Authority. February 19, 1973 l kIB3A-I?A lTiIGjiTI0:; PR0J,CT Cosi; Estimates Local Foreign Total Local Foreign Total Foreizn E-xchange -----3th$ million -------- -- US- million------- 1. Irrigation & Drainage (10,000 ha net) 11elka Warer Weir 1.57 1.81 3.38 0.76 0.87 1.63 54 Main Canal 0.67 0.87 1.54 0.32 0.42 0.74 56 Main Drains 1.63 1.95 3.58 0.79 0.94 1.73 54 Dykes 1.50 1.88 3.38 0.72 0.91 1.63 56 Distribution Networks 2.06 2.67 4.73 1.00 1.25 2.29 56 Sub-Total 17 TT 3 9 T.43 78772 55 2. Roads (210 km) liain Roads including Link Road 0.77 0.97 1.74 0.37 o047 0.84 56 Minor toads o.63 0.72 1.35 0.30 0.35 o.65 53 Sub-Total 1 .4 0 1T T 0.57 = 7T9 ~55 Total Civil Works 8.63 10.87 19.70 4.26 5.25 9.51 55 3. On-Farm Development 3.18 3.12 6.30 1.54 1.51 3.05 50 Total Contract Works 1b 1399 6.00 5 .00 77 12Z5 4 4. Consultants Engineering and Supervision o.65 2.59 3.24 0-32 1.25 1.57 80 Investigations and Studies (including feasibility study of Bolhamo and Angelele areas) 0.69 1.70 2.39 0.33 0.82 1.15 71 Technical Assistance for On-Farm Development and O&i 0.23 0.86 1.09 0.11 0. 2 0.53 79 Sub-Total 1 .57 -537ĥ 0.76 2.49, 3h7 77 5. Building and Housing 1.20 0.09 1.29 o.58 0.04 0.62 7 6. Equipment and Vehicles 0.32 1.69 2.01 0.15 0.82 0.97 84 Total Works 1i.1 = 3 2 7 1y 10.11 7 58 Contingencies Physical TI5)6) 2.27 3.14 5.41 1.09 1.52 2.61 58 Price (3% per year on local costs and 6% per year on foreign costs) 1.54 4.31 5.85 0.76 2.07 2.83 74 G.RAND TOTAL (without duties)1B.21 z T1 ;70 22.b9 60 fustoms duties, excise tax and municipal 0.25 0.25 0.12 0.12 19.16 2e.37 47.53 9.26 13.70 22.96 April 2, 1973 Table 2 ETHIOPIA AMIBARA IRRIGATION PROJFCT 2/ Buildings and Housing Description Units Total Cost --- Eth4L- Project Headquarters 1 120,000 Staff Houses 23 690,000 Guest House 1 60,000 Recreation House 1 40,000 Cormissary 1 50,000 Emergency Clinic 1 70,000 Workshops 1 30,000 Stores 4 140,000 Power Station 1 30,000 Water Supply System 1 50,000 Miscellaneous - 20,000 1 ,300, 000 1/ Refers only to construction costs, not including physical and price contingencies. All furniture and special equipment are in Annex 6 February 2, 1973 ETHIOPIA AMIBAEA IRRIGATION PROJECT AVA ProJect Cehb Flow Total Total Y.Ar 1 2 3 4 5 6 7 8 9 10 11 12 13-Onwards 14 -50 1 I50 Year ---EtS0 ) --------------------------------------------------------------- (Eth$ ' 000) ----------------------------------------------------------------------------------------- Sources Development Loan- 2,720 3,730 10,030 12,460 6,287 - - - - - - - - 35,227 Covernment Loan 772 926 3,938 4,244 - - - - - - - - - - 9,880 Go-rneent Gr-nt - for Project Invstent - - - 368 2,055 - - - - - - - - 2.423 Sub-Total 3.492 4.656 13,968 17,072 8,342 47_30 Governnt Gr-nt - for Oper.tionm, 163 173 183 193 120 100 100 (2,350) 1,340 1,340 1,340 1,340 - 4,042 Operation q,5Meintenamce Charg- - - - - 460 570 570 570 570 570 570 570 570 21,090 26,110 Water Charge- 37 37 37 37 120 150 150 2 600 2 6060 0 200 2 600 2 600 4.200 155.400 173 168 Total Source. 3,692 4,866 14,188 17,302 9,042 820 820 820 4,510 4,510 4,510 4,510 4.770 176,490 250,850 Uses In"eatna ts in ProJect 4/ 3,492 4,656 13,968 17,072 8,342 - - - - - - - - - 47,530 Development Loan - Annuity- - - - - - - - - 3.690 3,690 3.690 3,690 3,690 136,530 154,980 Govern,enet Lean - Annuity _- - - - - 260 9,620 9,880 Operation & Maintenance Expenditures - - - - 460 570 570 570 570 570 570 570 570 21,090 26,110 Ad.in.itrative Epen.es- 200 210 220 230 240 250 250 250 250 250 250 250 250 9.250 12.350 3,692 4,866 14,188 17,302 9,042 820 820 820 4,510 4,510 4,510 4,510 4,770 176,490 250,850 J/ IDA f'onda - 7% of total investment. - At Eth$57 per ha per aman fron the fifth year onward. 3 At EchS15 per ha (the current rate) free year 1-7. or concenelon iree at ELh$300 per ha per annum fron year 8-12 incl-sive and at Eth8500 per ha per onn fran year 13 n.ard. For settlera at Eth$100 per ho per -nn fr- year 8 onward. 4/ Proceeds of IDA credit would be relent to AVA by Government at 7% inttrest annoally repayable over 50 yearn with eight years of rare on capital and intareat, interest being accoulated. G-vsrsann'nt ,len montributi.n vould be lent to AVA at oil interest repayable over 50 yeare with 12 years of ro.e. E Estinated on the basi. of previou- AVA enpenditeres. April 9, 1973 ANTN X 7 ETHIGPIA AIMIBARA IRRIGATION PROJECT List of Eqgipment Unit Price Qnantitry CT' DWibouti Tlotal' Grand fotal . lpe>ation IMinV.enance Crawler Dragline - 3 C7177i yd. with face shovel attach- mrent 2 28,000 56,ooo Motor Grader-120 hp 1 39,000 39,000 Cr.awler Tractor-60-75 hp 2 20,000 40,000 viPeel Tractor-( i) hp front- end loao.er and backhoe 1 11,000 11,000 'railer--tipping 1 ,000 5,000 itr12Lfl.at-ic R0oller-10 ton 1 7,000 7,000 Concrete MLxer-200 liters 2 2,000 4,000 Diufip 'TLrucics-10 tons 2 12,000 24,000 tKater Trucks-8,000 liters 2 14,000 28,000 Piick-up :-z ton-4 wheel drive 3 4,500 13,500 Diesel Pumps-portable 4" 3 1,500 4,500 Miscellaneous - - 20,000 SiPare parts at 25, _ 68,000 320,300 ': . .ui lijngs and iousi.n Equipmen-tii Faurniture 140,000 Spare parts at 25- - 35,0 175,000 i. Earm Machinery for Set-tlement INLTeel Tractor.s-65 hp 18 5,000 90,000 ',fSorkshop Equiprnent - - 30,'000 1'ascellaneous Agricultural equi-pnent and vehicles - 50,000 Spare parts at 25- - 37,000 207,000 i;. Equipmen,, for Research Station Misc ellafleOla Agricultura and Laboratory Equipment and Vehicles -50,000 - 0,000 V Tehcies for ProJect AuthorEit Four wheel drive - passenger -ty1 ,e 5 4,5)0 22,50o Sh.:are s:arts aa 25, _ 5,500 28,00 GHULJD TOTAL 780,000 \pr-I 2, 1973 ETHIOPIA AMIBARA I RMIGATION PROJECT Schedule of Expenditure 1973/74 197L/75 1975/76 1976/77 1977/78 Total Irgton ad Drainape heLk War Wir 0.2 1-3 1.9 3.4 Main Canal - 0.6 0.9 -.5 Main Drain _ 0.2 1.7 1.7 3.6 Flood Dykes _ 0.2 1.2 1.4 o.6 3.4 Distribution NetworScs - 1.8 1.9 1.0 4.7 Sub-Total - o.6 6.6 7.8 1.6 16.6 Roads 0.2 0.4 0.9 0.9 ° 7 3.1 Total Civil Works 0.2 1.0 7.5 8.7 2.3 19.7 On-Farm Development - 0.4 1.9 1.9 2.1 6.3 Total Contract Works 0.2 1.4 9.4 10.6 4.4 26.0 Consultants 1.3 1.5 1.4 1.5 1.0 6.7 Building and Housing 1.0 0.3 - - - 1.3 Squipment and Vehicles 0.4 0.4 - o.6 0.6 2.0 Total Works 2.9 3.6 10.8 12.7 6.o 36.0 Contingencies Physical 0.4 o.6 1.6 1.9 0.9 5.4 Price 0.1 0.4 1.5 2.4 1.5 59 GRAND TOTAL (without duties) 3.4 4.6 13.9 17.0 8.h 7.3 IDA Credit 2.7 3.7 10.0 12.5 6.3 35.2 Goverrmenj Contribution without Customs Duties 0.8 0.9 3.9 4.6 2.1 12.3 -------------------- - --US$ million- ---____ --------------- IDA Credit 1.3 1.8 4.9 6.o 3.0 17.0 Government Contribution without Customs Duties 0.4 o.4 1.9 2.2 1.0 5.9 TOTAL EXPENDITURE 1.7 2.2 6.8 8.2 4.0 22.9 April 2, 1973 ADNNEX 8 Table 2 ETHIOPIA AMIBAIRA IRRIGATION PROJECT Estimated Schedule of IDA Disbursements IBID LrIsca1 Year Cumulative Disbursemen-t and Qjuarter at end ol' Quarter (US$ t000) 1 V73/74 1 - Sep-tember 30, 1973 200 2 - December 31, 1973 400 3 - Piarch 31, 1974 700 i - June 30, 1974 1,000 1274/75 1 - September 30, 1974 1,300 2 - December 31, 1974 1,700 3 - Ivarch 31 , 1975 2,100 4 - June 30, 1975 2,500 1 97T/76 1 - Septeember 30, 1975 3,100 2 - December 31, 1975 4,100 3 - March 31, 1976 5,300 ',- ure 30, 1976 6,600 1 97(,/77 1 - SepLem,ber 30, 1976 8 000 2 - December 31, 1976 9,5o0 3 - March 31, 1977 11 ,000 4 - June 30, 1977 12,500 1 '77/78 1 - ~September `0, 1977 14,000 2 - December 31, 1977 15,100 3 - March 31, 1978 16,QOO 4 - June 30, 1978 16,600 1M78/7q 1 - Septerber 30, 1978 17,000 frlio l3, 1973 ANNEX 9 Page 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Organization and Management Background 1, The Awash Valley Authority (AVA) was established by charter (Attach- ment 1) in 1962 and is a public body of the Imperial Ethiopian Government. In general terms, AVA's purpose is to administer and develop the natural resources of the Awash river basin, conducting resource surveys, preparing plans and programs for the utilization and development of the resources, and, where appropriate, coordinating activities of other government agencies and private enterprises concerned with resource utilizatiorn and develop- ment within the Awash river basin. In addition to the above, the Authority is also responsible for: (a) administration; (b) water management; (c) estate administration and management; (d) agricultural and industrial development; (e) financial administration; and (f) legislation. 2. AVA's present organization is shown in Chart 7413. A Board of Commissioners is charged with providing overall policy guidance to the Author- ity, while a General Manager directs day-to-day operations, subject to the general guidelines established by the Board. The General Manager is assisted by a Deputy, who supervises the work of three departments (Engineering, Agri- cultural Development and Administration). The Legal Adviser, Auditor, and the Secretary to the Board of Commissioners are directly responsible to the General Manager. 3. To carry out one of its major functions - coordinating the activities of government agencies concerned with the development of the Awash river basin - coordination is required at three disti nct but inter- connected levels; namely, policy, operational and technical. Within AVA, the General Manager, who is also a member of the Board, constitutes the link at policy level between the Board of Commissioners and the Deputy General Manager. At the operational and technical levels, the Deputy General Manager is the link with the Head of the Planning Unit and the Heads of Operational Departments. ANNEX 9 Page 2 4. The Board of Commissioners is made up of representatives of seven government agencies: Agriculture, Commerce and Industry, Finance, Interior, Planning Commission (Prime Minister's Office), Public Works and Water Resources and Communications. Individual members of the Board are responsible for effecting coordination between AVA and the agency they represent. Other government agencies concerned with the development of the Awash river basin, but not represented on the Board, coordinate their activities in the basin through the Ministry of Finance and the Planning Commission, as both have to approve the recurrent and capital budgets thereby controlling policy. Activities 5. At its inception in 1962, AVA commenced work assisted by UNDP with FAO acting as Executing Agency. A general survey of the river basin was completed by consultants (Sogreah, France) in 1965 and thereafter development projects in the fields of hydro-power, irrigation, and livestock were identi- fied. The Melka Sadi-Amibara irrigation project (the feasibility study for which was done by Italconsult, Italy) was one of these. AVA, also with UNDP/FAO assistance, has established a 1,000 ha settlement scheme in the project area. 800 ha of this area have been developed of which about 170 ha are being farmed by 67 Afar settlers under the guidance of AVA staff, each with 2.5 ha farms; the remainder (630 ha) is farmed directly by AVA. The Authority has also set up an extension service in the lower valley, carried out river training works and sociological and livestock studies, drafted water legislation and con- ducted some marketing studies. It has leased about 36,000 ha to local and foreign investors and the areas involved are already developed or In process of being developed. It estimates that an additional 30,000 ha might be im- proved in the valley in the coming five years, bringing the total area to some 66,000 ha by about 1976/77. Problems 6. Three major problems have plagued AVA since its creation -- lack of staff, inadequate finance, and ineffective coordination between govern- ment agencies, 7. The present staff amounts to about 22 professionals, including ag- riculturalists, economists, and engineers, and some 12 sub-professionals. Because there is a shortage of competent and experienced senior professionals and of staff at the technician level, AVA relies heavily on expatriate experts and consultants, both individuals and private firms. A UNDP/FAO project, in progress since 1966 and expected to last through 1975, is assist- ing AVA in developing its technical capabilities and in-service training of staff. 8. AVA depends for funds on receipts from land leases and other charges; borrowing from either local or foreign sources; and Government budgetary allocations. So far, it has not been able to raise funds through borrowing; receipts from land leases are presently small; and budgetary ANNEX 9 Page 3 allocations have been limited, mainly because of the lack of sound develop- ment proposals for projects in the valley. Additionally, there is a lack of effective coordination between AVA and interested government agencies, in spite of the composition of the Board. Representatives of key agencies often do not attend Board meetings and are generally not of the level required to ensure effective liaison. The fact is that ulntil AVA can actively undertake proper economic development in the valley and produce results, the authorities will probably not take any particular interest in Board decisions or participate therein. Further UNDP/FAO Assistance 9. Even though UNDP/FAO efforts to assist AVA to develop its technical and organizational capacity from 1966 to 1969 had rather poor results, the:y are determined to continue their efforts to strengthen the Authority. Since 1970 FAO, as Executing Agency, has provided a Liaison OffLcer, and, through a contract with the Victoria State Rivers and Water Supply Commission (SRWSC) of Australia, has supplied the services of a team of experts to: (a) strengthen AVA management, planning, overall procedures, and techniques; (b) assist in implementing development projects now being undertaken in the valley and in planning and preparing new development projects; and (c) engage experts and consultants' for feasibility studies, hydraulic engineering, preparation of land leases, super- vision of construction, water-borne diseases and pollution control. It is expected that this assistance will be provided for Eive years. 10. SRWSC experts are assigned to work with the folLowing departments: Land Management, Water Development, Agriculture, Finance and Budget, and Administration. Such assistance would not conflict with or duplicate the project organization proposed for the IDA project. Project Organization 11. The proposed project organization is designed to execute the project and build up AVA as a development organization. It would provide on-the-job training for AVA counterpart personnel assigned to the project and create and develop a permanent and fully equipped operation and mainte- nance unit for the irrigation, drainage, dykes, and road systems. It would be the first development project undertaken by AVA. The lproject organization would be integrated into AVA's framework but it would be given enough Independence so that it could operate as a compact and self-sufficient unit. ANNEX 9 Page 4 12. The consultants would provide the Project Manager, who would be responsible to AVA's Project Executive Director for all project implementa- tion activities. They would also provide a Chief Construction Engineer, the Agriculture Section Head, and other required specialists as well as the necessary support personnel to carry out scheduled studies including the Stage II feasibility study, prepare final design and cost estimates and provide technical assistances to AVA's management for operation and mainten- ance and for the resettlement of the Afar population. Consultant manpower requirements are given in Annex 10. 13. One of the main tasks of the various consultants and specialists recruited for project implementaticn and operation and maintenance would be to train Ethiopian counterpart personnel and thus to establish, within AVA, a sound pattern for development project implementation. 14. AVA's Future Organization At present the Authority is considering the future shape of its organization following a recent study by SRWSC It. The study comments on the need for improvement in the overall planning of valley development; the engineering control of activities such as the operation and maintenance of plant and machinery; the setting out of agricultural, horticultural and graz- ing areas; the design, planning, construction, operation and maintenance of irrigation systems; flood control, access roads, environmental control, con- servation and the planning and development of towns or settlements. It also places emphasis on the importance of improving managerial skills in all depart- ments. To achieve these objectives it recommends the adoption of a revised organization (Charts7414 and 7411) which would include a strengthened planning unit, the upgrading of regional offices, and the establishment of a new divi- sion responsible for the operation and maintenance of mechanical plant. 1/ UNDP/SF/Eth 25 Informal Technical Report No. 6, dated May 1972. ANNEX 9 Attachment 1 Page 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Charter of the Awash Valley Authority WHEREAS, the promotion of the economic development of Our Empire requires that the maximum use be made of its natura:l resources; and WHEREAS, the Awash Valley possesses natural resources which require orderly and efficient development; and WHEREAS, it has appeared expedient to Us to create a special body to administer and develop the Awash Valley; NOW, THEREFORE, on the advice of Our Council of Ministers, We hereby order as follows: 1. This General Notice may be cited as the "Awash Valley Authority Charter, 1962". 2. There is hereby created the Awash Valley Authority (hereinafter the "AVA") as an autonomous Public Authority of the Imperial Ethiopian Government (hereinafter the "Government"), to be governed by the provisions hereof. 3. (a) For the purposes of this General Notice, the limits of the Awash Valley, over which the AVA shall have exclusive jurisdiction for the purposes set forth herein, shall be the area comprising the watershed of the Awash Basin, as geographically defined. (b) As used herein, the term "Awash River" shalL be deemed to include all the tributaries thereof and all artificial means of controlling and diverting the flow of water which may be constructed within the Awash Valley. 4. The purpose of the AVA is to administer and develop the natural resources of the Awash Valley and shall include, without limiting the generality of the foregoing, the following: (a) to conduct and cause to be conducted surveys of the Awash Valley resources, either directly or through the intermediary of other domestic and international bodies; ANNZX.9 Attacbment 1 Page 2 (b) to establish plans and programmes for the use and development of the resources of the Awash Valley; (c) to co-ordinate the activities of all Government Ministries and Public Authorities in respect of the use and development of the resources of the Awash Valley; (d) to authorize third parties to construct, acquire, manage, administer and maintain dams, reservoirs, canals, power houses, power structures, transmission lines and incidental works in the Awash Valley; (e) to administer all water and water rights in the Awash Valley and to control the flow of water of the Awash River; (f) to assign waters of.the Awash River for irrigatiorn and other purposes and to fix and collect fees for the use of such water and other facilities; (g) in co-operation with other bodies, to promote, organize and authorize the establishment of co- operative and other agricultural and industrial enterprises in the Awash Valley; and (h) generally, to do all such things as may be necessrty to assure the best use and development of the resources of the Awash Valley. 5. The AVA shall have separate juridical personality, and, in particular the capacity: (a) to contract; (b) to use and be used in its own name; and (c) to acquire, own, possess and dispose of property. 6. In addition to all of the normal powers provided for in Article 5 hereof, the AVA shall have the following extraordinary powers: (a) to acquire such real and other property as may be necessary or convenient for the achievement of its purposes by expropriation in accordance with the law; ANNEX 9 Attachment 1 Page 3 (b) to fix fees and charges for the use of water, land and other facilities subject to its jurisdiction and to use fees and charges so collected in the carrying out of its operations in accordance with policies adopted by the Board of Directors; provided, however, that any surplus not required for such operations shall be turned over to the Central Treasury of the Government; (c) to borrow money in accordance with the law; (d) to issue regulations relating to the use of water, land and other facilities subject to the jurisdiction of the AVA; (e) in co-operation with appropriate Government Ministries and Public Authorities, to grant concessions for the use of land in the Awash Valley for agricultural, industrial and other purposes; (f) to receive and administer, as agent of the Government, international aid and credits; (g) when so requested, to act as agent for other Government Ministries and Public Authorities carrying out activities in the Awash Valley; and (h) to establish and invest in public companies and to create subsidiary executive and advisory bodies within the AVA. 7. The AVA shall ascertain land ownership in the Awash Valley and all State-owned land shall be transferred to the AVA by the Ministries and Public Authorities presently holding title thereto. 8. The AVA shall perform the functions entrusted to it hereunder for the most efficient and economic development and use of the resources of the Awash Valley. 9. Nothing herein contained shall be deemed to affect existing water rights in the Awash Valley which are embodied in agreements existing between the users of said water and any Ministry or Public Authority of the Government. 10. The AVA shall have an annual budget which shall be approved by the Board of Commissioners. That portion of said budget which is not financed by the AVA directly out of its resources shall be included in the budget of the Government. 11. The fiscal year of the AVA shall be the fiscal year of the Government. ANNEX 9 Attachment 1 Page 4 12. Within three (3) months of the end of each financial year, the AVA shall prepare and submit to the Office of the Prime Minister a report showing the results of operations carried out during said year. The AVA shall also at the same time submit a financial report for the same year to the Ministry of Finance and to the Office of the Auditor General. 13. The powers, responsibilities and functions of the AVA provided for herein shall be vested in the Board of Commissioners (hereinafter the "Board"). 14. The Board shall be composed of seven (7) members, comprising the General Manager, one representative each from the Ministries of Agriculture, Commerce and Industry, Interior and Public Works and Communications, all of whom shall be appointed by the Minister of said Ministries, and two (2) members to be appointed by Us. 15. The Chairman of the Board shall be the representative of the Ministry of Agriculture. The Board shall elect its own Vice Chairman from among its members. The Vice Chairman shall hold Office for one (1) year. 16. (a) The Board shall be convened under the chairmanship of the Chairman; provided, however, that the Vice Chairman shall act as Chairman in the absence of the Chairman; and provided, further, that in the absence of b7th the Chairman and Vice Chairman, the members present shall elect a Chairman. (b) The Board shall meet at least once each month. (c) Meetings of the Board shall be convened by the General Manager by notice to the other Commissioners. (d) The Chairman shall convene a meeting promptly at any time if two (2) other Commissioners so request. (e) Meetings of the Board shall be held at the principal office of the AVA, unless the members shall otherwise agree. 17. (a) Four (4) members of the Board shall constitute a quorum. ANNEX 9 Attachment 1 Page 5 (b) All formal decisions of the Board shall require the affirmative vote of a majority of the members present. In the case of a tie vote, the Chairman shall have a second or casting vote. In lieu of requiring the formal vote on a question before the Board, the Chairman may ascertain the sense of the meeting unless any member of the Board present shall require a formal vote. (c) Minutes of each meeting of the Board shall be recorded in such form as the Board may determine; provided, however, that formal decisions or resolutions of the Board shall be recorded verbatim. 18. (a) the General Manager shall be the Chief Executive Officer of the AVA, and, subject to the general direction of the Board, shall direct the management and operations of the AVA. (b) The General Manager shall be appointed by Us for such period as We shall determine. 19. (a) The General Manager shall keep the Board currently informed on matters which require the Board's attention, and shall provide the Board, as far as possible, with such data and advice as will facilitate the formulation of decisions and policies by the Board. The General Manager may at any time submit to the Board for adoption drafts or measures or resolutions which in his view are necessary to make the purpose and policies of the AVA effective. (b) The General Manager shall guide and supervise the administrations and operations of the AVA in accordance with the provisions hereof and with the decisions of the Board. He shall employ and dismiss all personnel and fix their salaries, wages and allowances, and shall make expenditure in accordance with tlhe budget and the programmes of the AVA. (c) The General Manager shall be the principal representative of the AVA and shall, in this capacity: (i) represent the AVA in all relations with other persons, including the Government; (ii) represent, either personally or through counsel, the AVA in any legal proceedings to which the AVA is a party; ANNEX 9 Attachment 1 Page 6 (iii) sign, individually or jointly with other persons, contracts and other agreements concluded by the AVA, annual reports, correspondence and other documents of the AVA. (d) The General Manager may delegate his power to represent the AVA, as provided in paragraph (c) of this article 19, to other officials of the AVA upon his own responsibility. (e) When, in the opinion of the General Manager, delay in taking action on any matter or in giving a decision would adversely affect the operations of the AVA, and it is impossible to convene the Board in time to present such matter to it, the General Manager shall have full power to act and give decisions on behalf of the Board, and such acts and decisions shall have the full authority of the Board. 20. The Board may adopt by-laws consistent with the provisions hereof and may fix the remuneration of its members. 21z This General Notice shall come into effect on the date of its publication in the Negarit Gazeta. Done at Addis Ababa this 23rd day of January, 1962. Janiuary 16, 1973 ANNEX 10 Page 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Consultants' Services 1. AVA would be required to retain a consulting firm to perform the following duties: (a) organize and execute all investigations and studies listed in Annex 4, including employing specialized consultants whenever necessary; (b) prepare design drawings and contract documents for all civil and on-farm works, including any additional studies or investigation not mentioned in (a) above; (c) prepare invitations to bid on all contracts, as well as prequalify bidders if necessary; assist AVA with bid analysis; and make recommendations on award of contracts; (d) supervise all construction and on-farm works and recommend acceptance of completed works; (e) prepare specifications, bidding documents, and contract forms including bid analysis for all equipment and spare parts to be purchased under the project; (f) establish and operate an operation and maintenance organization for the project and train counterpart staff provided by AVA; such responsibility would - include operation of earth moving equipment supplied under the credit and establishing a repair and mainte- nance workshop; (g) assist AVA in preparing reports and documents related to the progress of construction and financing of all works supervised by the consultants, as required by IDA; (h) certify all withdrawal applications from the IDA credit; and (i) train all Ethiopian counterpart staff. ANNEX 10 Page 2 Tie Schedule 2. The services described above would be completed by the consultants in-about 5 years (1973-1978). Investigations prior to final design, design drawings and contract documents for the main construction contract should be coxopleted by September 1974 in time to permit commencement of works early in 1975. The operation and maintenance organization would be established one year before the completion of the main irrigation works in order to become fully operational concurrently with the anticipated first water delivery to the- project area. Personnel 3. The consultants would provide the Project Manager and all necessary experts to staff the project field office and carry out the required investi- gation and studies. On arrival of each expert, AVA would appoint Ethiopian counterparts to work with, and be trained by, him. Consultants' man-power requirements 1/ are tentatively estimated as follows: Project Year: 1 2 3 4 5 Number 1972/73 73/74 74/75 75/76 76/77 77/78 Total …----- -Man-Months----- Proliect manager, engineer 1 2 12 12 12 12 10 60 Sen4or agriculturalist 1 - 12 12 12 12 10 58 Uinspecified experts 2/ - - 36 48 - - - 84 Engineer 1 - - 3 12 12 9 36 Surveyor, engineer 1 2 6 6 12 - - 26 Lahoratory expert 1 - - 5 12 7 - 24 Operation & maintenance engineer 1 - - - - 8 10 18 On-farm development s%pecialist 1 - - - 8 12 10 30 336 1/ Suitably qualified counterparts would be provided to all consultants' experts. 2/ Engineers, agronomist, pedologist, economist, public health specialist, etc. February 19, 1973 ANNEX 11 ETHIOPIA ANIBARA IRRIGATION PROJECT Operation and Maintenance Costs Per Year 1. Equipment Foreign costs from Annex 7, accrued with local costs and physical and price contingencies to a total amount of Eth$1.2 million. Amortization, 15% of capital costs 180,000 Repairs, 10% of capital costs 120,000 2. Salaries and Wages Project Manager, Engineer 18,000 Assistant, Engineer 12,000 Surveyor 10,000 Accoun-tant 10,000 Storeman 8,°000 Water Master 8,000 Ditch Riders 3 6,300 Watch Keepers 2 4,200 Works Foreman 5 7,200 Operators - 5 plant operators, 3 assistant operators, 7 drivers 56,300 Regular Labor Force 40 x 12 months 24,o0o Seasonal Labor 150 x 3 months 22,000 186,000 3. Fuel and Lubricants Plant - 5 x 1,000 hours x 20 1 per hour = 100,000 Dump Trucks - 2 x 10,000 km x 0.5 1 per km=10,000 Water Trucks - 2 x 5,000 km x 1.01 km = 10,000 Pickups - 3 x 15,000 km x 0.3 1 per km = 15,000 Miscellaneous = 15 000 at Eth$0.2 per liter 30,000 Lubricants 10% 3,000 4. Head Office Costs and Miscellaneous 51,000 Total Operation and Maintenance Costs 570,000 1/ At full development. February 6, 1973 ANNEX 12 Page 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Financial Analysis 1. The financial analysis is based on two pro-forma models: - Model I - 200 ha commercial (cotton) farm - Model II - 2.5 ha settler farm on the AVA settlement Assumptions Model I Model II 1. Wage - unskilled labor (Eth$) 1.25 per man-day 1.25 per man-day 2. Price - seed cotton (Eth$) 500 per m ton A 500 per m ton 3. Yield at full development - seed cotton (Tons) 3 per ha 2.5 per ha 14. Water Charge: Years 4-8 (Eth$) 300 per ha per 100 per ha per annum annum Years 9-4o (Eth$) 500 per ha per 100 per ha per annum annum 5. 0 & M Charge (Eth$) 57 per ha per 57 per ha per annum annum 6. Production cost at full development (Eth$) 688 per ha per 688 per ha per annum A annum 3 7. Tax rate % 30 A 0 8. Borrowing terms: Short term at 10% interest, N.A. one year to repay Medium term 75% financing at N.A. 9.5% interest, 1 year grace, 7 years to repay Other related (but less important) assumptions are given in Table 1. 1 About US$.28 per lb. of cotton lint. 2 Includes management cost and depreciation. Management at Eth$60 per ha per annum and depreciation at Eth$48 per ha per annum. /3 Management at Eth$83 per ha per annum and depreciation at Eth$48 per ha per annum. 4 For income between Eth$30,000 and Eth$150,000 per annum. ANNEX 12 Page 2 Analysis 2. Model I: Table 2 gives the pro-forma income/cash flow statements for the 200-ha concession. Under the assumptions the farm begins to operate at a profit from year 1 and by year 10 the net income after taxes is Eth$36,000 per annum. The financial return on total investment after taxes is 54%. However, if net revenue is decreased by 10%, the net income after taxes falls to Eth$18,000. Returns of this magnitude are consiaered a necessarxy inc:entive to induce concessionaires to go into the remote Middle Awash. The details of the computation are given in Table 3. 3. In order to assess the ability of the farmer to pay the proposed level of water charge under circumstances less favorable than expected, the effect of three alternative water charges: (a) Eth$300 per ha per annum (b) Eth$400 per ha per annum (c) Eth$600 per ha per annum on his income was evaluated (see Table 4). The adverse circumstance explored was a 10% decrease in gross income. With gross income 10% lower, and water chak7ge at the proposed level, the farmer's income after taxes drops to Eth$18,o00 per annum (a 50% decrease). If the water charge were at Eth$300, the income after tax would be Eth$43,000; with the charge at Eth$400 the income after tax would be Eth$29,000 per annum. 4. However, if the water charge were at Eth$600 per ha per annum, the net farm income would drop to only Eth$3,000. Since a 10% drop in gross income would be quite possible, a water charge higher than Eth$500 per ha per annum wolld act as a disincentive. A substantially lower charge (i.e. Eth$400 per ha per annudm) would involve an unnecessarily high level of subsidy. At the proposed level (i.e. Eth$300 per ha for the initial five years, and then Eth$500 per ha for the years beyond) the project cost is recovered fully at 8.5% over 40 years and the farmer is not making excessive profits. 5. Cost recovery computations for two alternative water charges are as follows: (a) at Eth$400 per ha per annum throughout. The cost is recovered at 7% in 40 years; and (b) at Eth$300 per ha per annum for the initial five years and then at Eth$600 per ha per annum subsequently, total cost is recovered at 9% over 40 years. The proposed water charge is based on the above considerations. 6. Model II: Table 6 gives the farm budget for the settler. The analysis ANNEX 12 Page 3 was less elaborate in this case. Two alternative water charges were evaluated: (a) Eth$100 per ha per annum throughout; and (b) Eth$300 per ha per annum throughout. Ulnder alternative "(a)", the settler farm nets a cash income of Eth$1,469 per year. On a per ha basis this is about Eth$600 per ha. On a per capita basis (assuming a family size of five persons), this anounts to Eth$294 per annum which compares very well with the per capita income of Eth$81 per annum in the subsistence sector. Under alternative "(b)", the cash income per farm falls to Eth$969 per annum or a per capita income of Eth$194 per annum. Even though this compares well with the per capita income in the subsistence sector, the settler is not well protected against adverse shortfalls. For example, if gross income declines by 10%, the settler's cash income declines to Eth$656 per farm or Eth$131 per capita. A water charge at Eth$100 per ha per annum is, therefore, proposed for the settler as although a higher charge between these two figures would still result in a substantial increase in income, it is considered that the Afar settler would need the incentive proposed during t]he early years of the project. ETHIOPIA MIIARA IRRIGATION PROJECT Financial Analysis (Basic Assuitlons) Year* 2 4 7 9 1D 11 12 13 14 15i30 Cotton With Project1 Concession (200 ha) Lend Available (ha) 50 100 200 200 200 200 200 200 200 200 200 200 200 200 Seed Cotton (ton/ha) 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.8 3.0 3.0 3.0 3.0 3.0 3.0 Total Productqon (ton) 100 210 440 460 480 500 520 560 600 600 600 600 600 600 Gross Revenue.& (Eth$ '000) 50 105 220 230 240 250 260 280 300 300 300 300 300 300 Total Production CostraEth$'000) 26 53 106 108 109 110 lit 114 116 116 116 116 116 116 Not Revenue (Eth$'000) 24 52 114 122 131 140 149 166 184 184 184 184 184 184 Without Proiect I/ Concession (300 ha) Land Available (ha) 50 100 150 200 300 300 300 300 300 300 300 300 300 300 Seed Cotton (tonlha) W 2.0 2.0 2.1 2.1 2.2 2.3 2.4 2.4 2.3 2.2 2.1 2.0 1.9 1.8 Total Productign (ton) 100 200 315 420 660 690 720 720 690 660 630 600 570 540 Gross Revenuet.(Eth$'000) 50 100 157 210 330 345 360 360 345 330 315 300 285 270 Total Production CostNEth$'000) 26 52 79 105 160 161 163 163 161 160 158 156 154 152 Set kevenue (Eth$'000) 24 48 78 105 170 184 197 197 184 170 157 144 131 118 1/The size of concessions "with project" is 200 ha; "without project" they are 300 ha because of lower profitability without flood protection drainage and reliable watr supplies. A direct comparison between the two cases is not attempted In this table because of this size difference. 2/At Eth$500 per ton. 3/Tatal Production Coat - (400 x Area under Cotton) SF (60 x Total Production). Eth$400 per ha is cost of land preparation, cultivation, and other fixed costs; Eth$60 per ton is the cost of harvesting and other variable costs. Costs are rounded. See Table 2, knnex 13, for details of production cost. 4/Yield increases from 2.0 ton/ha tn Year 2 to 2.4 in Year 8 but after Year 9 decreases due to absence of tile drainage. *Development work only in Year 1. AX122 AKIMAJLA S U SGfT $ Averages for less than twelve monLhs (or for less than eleven months for 1970/71 prices). 2 Frco 1967/68 on, shipment via Cape. Source: International Cotton Advisory Camuittee, Cotton - World Statistics, various issues. January 19, 1973 ANNEX 14 Page 1 ETHIOPIA AMIBARA IRRIGATION PROJECT Economic Analysis 1. The project comprises three parts: (a) AVA settlement - 2,000 ha (b) Research Station - 400 ha (c) Commercial farms of 200 ha average - 7,600 ha The main crop now grown in the area is cotton. Under present and expected price/yield conditions it is likely to be the main crop in the project area. High value crops such as vegetables, fruit and bananas can be grown in the area and are likely to be more profitable than cotton, provided the re- quisite marketing skills and outlets are available. The contiguous Melka Sadi area having been leased to a partly foreign-owned local company possessing such market outlets and skills and intending to grow high-value crops, farmers in the project area may profit in future from this example and the experience gained. However for the project analysis the conservative assumption has been made that high-value crops would not be grown. The analysis is based on cotton only. It therefore represents the minimum return possible from the project. If high value crops are grown, the economic re- turns would be substantially higher. 2. The economic analysis assumes a uniform cropping pattern on the entire 10,000 ha. While this assumption is valid for the concessions it is not quite appropriate for the settlement and the research station, for which lower yield levels have been assumed. However, this will influence the re- sults from the analysis only marginally and so the difference is covered in the sensitivity analysis. 3. Tables 1, 2 and 3 give the underlying assumptions. The major ones are: Cotton h-ith Project Without Project 1. Area Planted (ha) 10,000 5,000 A 2. Area harvested (ha) 10,000 4,000 3. Yield (seed cotton) (tons per ha) Initial 2.0 2.0 Final 3.0 2.4,reducing tq1 by year 1512 L Due to losses from flooding and/or irregularities in the water supply system. L:j Due to the absence of tile drainage. ANNEX 14 Page 2 Cotton (Cont'd.) With Project Without Proj e 4. Years to full development 9 7 5. Price cif Djibouti (us$ per lb lint) 0.26 0.26 6. Shadow wage rate (Eth$ per day) 0.50 0.50 4. In the subsistence sector, the average per capita product is Eth$80. With the underenmployment that exists in this sector, it is assumed that 160 days are worked annually, therefore labor has been ahadow priced at Eth$0.50 per map day. Economic Rate of Return 5. Based on these assumptions the economic rate of return is estimated as1:6% (Table 4). The sensitivity of the ra'te of return to different assumpttons on.costs and prices was also made: Alternative Rate of Return (a) Investment eost increased by 10% 14 (b) Gross revenue decreased by 10% 13 (c) Both of the above if (d) Shadow wage rate equals market wage rate 13 ETHIOPIA AMIBARA 7RRIGATION PROJECT Ecoonmtc Analysis (Basic A-.u.ptieoe) Dtffseoe bet-sa vith .adp s4thoot at WIl 1J,,,, 2 3 - 4 6 7 B 9 10 11 12 13 14 15 day i_elgst WmIt PBOJECT Load Av-il-blo (ha) 2,500 2,500 2,500 2,500 8,000 10,000 10,000 10,000 1D,000 10,000 10,000 10,000 10,000 10,000 10,000 10.000 5,000 Seed Cotott (tose/ha) 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.8 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 1.2 101.1 Prodeetjqo- (toe) 3,250 4,200 4,950 3,750 19,200 25,000 26,000 280,000 30,000 30,000 30.000 30.000 30.000 30.000 030,00 Z2,800 Gross 4venu_X(2thS 000) 1,625 2,100 2,475 2,875 9,600 12,500 13,000 14,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000 11,400 Total Prnd..tios Co.t-AEth$-OOO) 1,195 1,252 1,297 1,345 4,352 5,500 5,560 5,680 5,800 5,800 5,800 5,800 5,800 5,800 5,800 5,800 2,868 Net Ravenuy (Eth$'000) 430 648 1,178 1,530 5,248 7,000 7,440 8,320 9,200 9,200 9,200 9,200 9,200 9,200 9,200 9,200 8,532 Net tRoe-. por h. 172 339 471 612 656 700 744 832 920 920 920 920 920 920 920 920 786 WTSRODT PROJECT Lond A&.lable (ha) 2,500 3,000 3,500 4,000 4,500 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Se d Cotton (toes/bA) 2.0 2.1 2.2 2.3 2.3 2.3 2.4 2.4 2.4 2.3 2.2 2.1 2.0 1.9 1.8 1.8 Tot-l Prodooti?4/(toeo) 3.250 5,040 6,160 7,360 8,280 9,200 9,600 9,600 9,600 9,200 8,800 8,400 8,000 7,600 7.200 7.200 Gross R4ven- (EthS'OOO) 1,625 2,520 3,080 3,680 4,140 4,600 4,800 4,000 4,800 4,600 4,400 4,200 4,000 3,800 3,600 3,600 Total ProdootiOn Costl2EtWS'OOO) 1,445 1,802 2.120 2,442 2,747 3,052 3,076 3,076 3,076 3,052 3,028 3.004 2,980 2,956 2,932 2,932 Nlt oee.. (8th$'000) 180 718 960 1,238 1,393 1,548 1,724 1,724 1,724 1,548 1,372 1,196 1,020 844 668 668 Not faeou ptr ha 72 239 274 309 310 310 345 345 345 310 274 239 204 169 134 134 /Production - Yteld x Area. D1..g initi*l yaes 1. 2, d 3, it is saaoed that havested rsa .ill bh 1*. than plauted re. d. to losses fro; floods sd puMiog it-ffitcencitss Those los. .ill red.eo over ti-s The area Ios.s. ea .a.-ad to be 0.65, .8, aed 0.9 of planted seas i Yse- 1, 2 nd 3, rtsaertively. 2/At ethS500 per toe of seod cotto. I/Total Productitn Cost ftc. Table 2 - (eth1400 x Areo oda- cotton) + (Eth$60 a toes of se-d cotton produc4d); the adjustetnt fot shad price of -askillad labor is od In Table 4A,kAaosx 14. YEs.0 0* "f_t_tsl/ except thot the ratio of hsted to plooted area iL asuad to bh 0.65 for year I and 0.8 for yeax 2 aed oW rd. /S_ as "ffwtante 1l" except for a nt dditi,.nil pping. cost of EthS100 par ha per yer. Th. c.-.c t p=ping cost I. EthS120 petr ha sd i. astd to decrease to Eth$80 per ha. As averab of thses tee is Used is th eoeptatioss. ANNEX 14 Table 2 ETHIOPIA AMIRARA IRRIGATION PROJECT Annual Production Cost of Cotton Eth $ per ha Yield in m ton per ha2/ 3.02/ Cost of Production Land Preparation 53 Planting 17 Weeding, etc 58 Manuring 94 Irrigating 31 Pest and Disease 115 Harvesting 1801/ Post Harvest 32 Total 580 of which Labor (Eth$) 175 (man/days) 140 1/ At full development 2/ Seed cotton 3/ At Eth$60 per ton of seed cotton harvested ETHIOPIA AMIBARA IRRIGATION PROJECT Net Cash Flow and Cost Structure without Project and without Tile Drainagel Costs Project Major On-Farm Develop- Additional Diainage Operation and Productiorr Yields Gross Net Cash Year Works2/ ment Cost3. Network4 Maintenance Cost- Cost6/ ton/ha Revenue-7/ Flow -------------------------------------------------------------------_-- Eth$'000 -------- - - - - - - - 1 500 200 100 687 2.0 1,625 138 2 900 200 125 917 2.1 2,520 378 3 900 200 150 1,108 2.2 3,080 722 4 900 200 300 180 1,300 2.3 3,680 800 5 900 200 300 190 1,494 2.3 4,140 1,056 6 900 250 400 200 1,689 2.3 4,600 1,161 7 250 210 1,886 2.4 4,800 2,454 8 250 220 1,897 2.4 4,800 2,433 9 250 230 1,906 2.4 4,800 2,414 10 250 240 1,912 2.3 4,600 2,198 11 250 250 1,917 2.2 4,400 1,983 12 250 250 1,920 2.1 4,200 1,780 13 250 1,922 2.0 4,000 1,828 14 250 I,922 1.9 3,800 1,628 15-20 250 1,922 1.8 3,600 1,428 l/This alternative assumes (a) that only 5,000 hectares will be planted at full development; (b) that yields will increase initially to 2.4 tons per ha by year 7 but will decline to 1.8 tons per ha by year 15, due to poor drainage; and (c) the farmer will incur pumping costs. 2/Land development, pump installation, land clearing, levelling, drainage and irrigation network, etc. is estimated at Eth$2,000 per ha. About 2,500 ha are already developed; 2,500 ha will be developed. 3/On-farm investment in machinery, equipment and farm structure at Eth$500 per ha. 4/Additional drainage required in about nine years. 5/For operating and maintaining the distribution and surface drainage network at Eth$50 per ha. J/From Table 1, Annex 14 with unskilled labor priced at Eth$0.50 per man day instead of the market rate of Eth$1.25 per man day. 7/From Table 1, Annex 14. ETHIOPIA AMIBARA IRRIGATION PROJECT Economic Retur-n - Cotton hnlv Wi thout With Project Proltect sensitivitv Analysis - :ncreental et Cash Fiow Project Co at On-Farm Produc.Wion Gross Net Net Incremental Investment Gross Revenue Investment Cost Increased Unskilled L-bor and &HV Development Co. Revenue Cs Cash Net Cash Cost In- Decreased by 10% Gross Revenue at Market Wage Year an_6__ Dvlo7n Cos" !_ Reven Flow (A) F1ow4B) Flow . creased by 10% by 10% Decreased by 107, Rate -------------------------------------------------------------------------------------1ETHS'O00------------------------------- --- -_______________________________-___---__ I 2,200 1,063 1,625 1i,638) 138 (1,776) (1,996) (1,938) (2,158) (2,038) 2 3,000 1,063 2,100 (1,963) 378 (2,341) (2,641) (2,551) (2,851) (2,603) 3 12,100 1,500 1,063 2,475 (12,188) 722 (12,910) (14,270) (13,157) (14,517) (13,172) 4 14,000 2,500 1,063 2,875 (14,688) 800 (15,488) (17,138) (15,775) (17,425) (15,750) 5 7,000 1,000 3,405 9,600 (1,805) 1,056 (2,861) (3,661) (3,821) (4,621) (3,698) 6 570 4,252 12,500 7,678 1,161 6,517 6,460 5,267 5,210 5,467 7 570 4,252 13,000 8,178 2,454 5,724 5,667 4,424 4,367 4.674 8 570 4,252 14,000 9,178 2,433 6,745 6,688 5,345 5,288 5,695 9 2,470 4,252 15,000 8,278 2,414 5,864 5,617 4,364 4,117 4,814 10 2,470 4,252 15,000 8,278 2,198 6,080 5,833 4,580 4,333 5,030 - 11 2,470 4,252 15,000 8,278 1,983 6,295 6,048 4,725 4,548 5,245 12 2,540 4,252 15,000 8,208 1,780 6,428 6,174 6,808 4,674 5,378 13 640 4,252 15,000 10,108 1,828 8,280 8,216 6,780 6,716 7,230 14 640 4,252 15,000 10,108 1,628 8,480 8,416 6,980 6,916 7,430 15 640 4,252 15,000 10,108 1,428 8,680 8,616 7,180 7,116 7,630 16-40 640 4,252 15,000 10,108 1,428 8,680 8,616 7,180 7,116 7,630 Rate of Return (x) 16 14 13 11 13 Covers all costs except (a) farm machinery and equipment, (b) cost of feasibility study for B6lhamo and Angelele plains, (c) 30% of the cost of all roads since they would also serve non-project users, (d) price contingeoc'es. 2/On-farm investments in machinery, equipment and farm structures. 3/In the subsistence sector the average per capita product is about Eth$80 per annum with 160 working days per annum, the shadow wage rate for unskilled labor is thus Eth$0.50 per man day. The market vwae rate is Eth$1.25 per nan day. In addition. the opportunity cost of labor in the 2,000 ha Afar settlement is taken as smo and an the remaining 8,000 ha a deduction of about 127. has been made in the non-labor element of production cost for import duties etc.. 4/Prom table 3, Annex 14. 3/ A - B. Apr'l 16, 1973 ETHIOPIA AMIBARA IRRIGATION PROJECT Construction Schedule FISCAL: 1 2 3 4 5 1973 1974 1975 1976 1977 1978 CONSULTANTS /j'/ - INVESTIGATIONS AND SURVEYS _ f/* CONSTRUCTION / SUPERVISION- /// -- /f BIDDING DOCUMENTS AND FINAL DESIGN _ m _ /// . /f /// /f TECHNICAL ASSISTANCE TO /"/ / _ MANAGEMENT (O & M //f / '//f f/f TECHNICAL ASSISTANCE TO FARMERS / /f- ' - _ / iii BOLHAMO-ANGELELE FEASIBILITY STUDIES m m * D U /f ///CONTRACT " / BID ISSUE ~AWARDf/f/f/ff CONSTRUCTION //f 'A- /f f/f f/f f //f f /f.' f /f/ f/ f/f fa .l.~aOh._.200h. /f/l ON-FARM W)HKS | ~~~//f f/f f/f f/f4|t):|t//.T1 BUSH CLEARING 'ffff'/'"ff LINK ROAD i" '~ff,AE / f-/f D~~~ELIVERY BU ILD IN G S f /f /f-f f ME LKA WARER WEIR f/f "/''f- MAIN DRAINS RAN SE-fOf MAIN CANAL f f I Wr rld f-f-f DYKES f- / -- DIS-TRIRBUTION NETWORK fff f ROADS I "" I "f-f- i"' L -4-~~~~~~ ~ ~~3,000 ha. - 5,000ha. 20h* ON-FARM WORKS f-- I _ _ __ __ 1//jMAIN RAINY SEASONWnlBak-41 E1-HIOPIA WAIBARA IRRIGATION PROJECT AWASH VALLEY AUTHORITY PRESENT ORGANIZATION Icomm_a I DEUYGENERAL MANAGER LEGAL ADVISO mIIIGLWT^ETe Y TO . OEFtJTV GENERALlOlEfl PUSUL RELATIONS a LIRAriY ADMINISTRATION EEO NEGIERG DEPT~~~~~~~~~~~~~~~~~~~LP FINANCE DIVISION PROPERTY DIVISION GRENEROWT DIVISION ET YRLG SERVICE VS ov DIVISO COCSIN C ERATIVE ~~~NTANTER~~~~~~~~~AiING ES ~ ~ ~ ~ ~ ~~~~ECSUVEL 2 S STOR PERSONNEL SECRETDFIALGGARAG ASSAYITA BRANCH MDL WS jNqId Bs.k - 7413 AMLARA IRRIGATION PROJECT _AW VALLEY AUThORITY egapouO 0O1GANIZATION T Ll .J i I~ Eli I__ l [ :W ~~ ~~- - - -- ---- ------------------ e g -E - E 1 E F , . , .- AWASH VALLEY AUTHORITY PROPOSED FUNCTIONAL ORGANIZATION BOARD OF COMMiSSIONERS GENERAL MANAGER \ . _LAN_NG-N-T - --~----~ * ___ X | _ _ aI0I A DEUT AUDIO LEGALR FINA 9 S, r PLANAGER INFORMATION LEGEND: llnas ot rasponsibility~~~ ~ REIONA '~ * 0 ai a ---llcbon~~~~~~~~~~~~ c ndo t chncc di to LEGEND: w"lflow ot i1rmattonabIt < **'w afioo ofn n- 7411 L-.-.L-ord Bnk- 41 IBRD 2828RI ETHIOPIA 400 FEBRUARY 1973 UPPER AND MIDDLE AWASH VALLEY J-1. Roads ,,---4-4+ I Railways Rivers -100 0 Swamps Developed area Ca BCaJ1dda, ~ Project area S 6e c Future project areas 0 Melka Sadi area /ULHIAMO / eARA '< MELKA KESEM DAM 0 SADI t, q olg em AWARtA\ ^. y - Airstrips Future township area / / Railways International boundaries K' 2 - ~ ~ \ - - LL/OsJ 0~~~~~~~~~~~~~~~~~~~~~~~ lb ~ ~ ~ ~ ~ ~ ~ ~ ~ Ž KILOMETERS RCa MILES \\+ . ReseaIrch ,$%y 5 l__, ;f t ,j/_D w e D0~~~~~~~5 4 o 2 4 6 8 XA.VA. i :t / St ( \~~~~~~~~~~~~~~~~,SAOI AAtA IMassawo M I L E 5 AsearcN Aara\ kk /Assab Ter h ~ jibouti F Awash Rive KOALIA I ADDIS ABAB re Dewa r\NAwash Dams land if /Koka Dam 49 ' /oF6 ' E T H I O P I A 60 Future 'ir-Melka Sadi The houndanes shown on this map do not ,.JN\ -J' diversion weir imply endorsement or acceptance by the° SOMAA -~~~~~~~o ~~~~~~World Bank and its affiliates SOMALIA42