Document of The World Bank Report No: 20720-YEM PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF SDR 16.2 MILLION (US$21.3 MILLION EQUIVALENT) TO THE REPUBLIC OF YEMEN FOR THE FIRST PHASE OF AN IRRIGATION IMPROVEMENT PROJECT August 9, 2000 Rural Development, Water and Environment Department Middle East and North Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective July 10, 2000) Currency Unit = Yemeni Rial (YR) YR 1 = US$ US$0.00625 US$ 1 = YR 160 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan CAS Country Assistance Strategy EMP Environmental Management Plan FAO Food and Agriculture Organization GDI General Directorate of Irrigation GOY Govermnent of Yemen IC Irrigation Council IDA International Development Association IMT Irrigation Management Transfer LWCP Land and Water Conservation Project MAI Ministry of Agriculture and Irrigation M&E Monitoring and Evaluation MIS Management Information System MOPD Ministry of Planning and Development NWRA National Water Resources Authority PCD Project Concept Document PIP Project Implementation Plan PIM Participatory Irrigation Management PIU Project Implementation Unit PMU Project Management Unit PPU Project Preparation Unit PSMAC Public Sector Management Adjustment Credit PY Project Year O&M Operation and Maintenance SA Social Assessment SC Steering Committee SWUF Scheme Water Users Federation ROY Republic of Yemen WBI World Bank Institute WUA Water Users Association WUG Water Users Group Vice President: Jean-Louis Sarbib Country Manager/Director: Inder Sud Sector Manager/Director: Doris Koehn Task Team Leader/Task Manager: Usaid El-Hanbali REPUBLIC OF YEMEN IRRIGATION IMPROVEMENT PROJECT CONTENTS A. Program Purpose and Project Development Objective Page 1. Program purpose and program phasing 3 2. Project development objective 4 3. Key performance indicators 4 B. 'Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 4 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 6 4. Program description and performance triggers for subsequent loans 6 C. Program and Project Description Summary 1. Project components 6 2. Key policy and institutional reforms supported by the project 8 3. Benefits and target population 9 4. Institutional and implementation arrangements 9 D. Project Rationale 1. Project alternatives considered and reasons for rejection 11 2. Major related projects financed by the Bank and other development agencies 13 3. Lessons learned and reflected in proposed project design 14 4. Indications of borrower comnmitrnent and ownership 14 5. Value added of Bank support in this project 15 E. Summary Project Analysis 1. Economic 15 2. Financial 16 3. Technical 18 4. Institutional 18 5. Environmental 20 6. Social 21 7. Safeguard Policies 23 F. Sustainability and Risks 1]. Sustainability 24 2. Critical risks 24 3. Possible controversial aspects 25 G. Main Conditions 1. Effectiveness Condition 25 2. Other 25 H. Readiness for Implementation 26 I. Compliance with Bank Policies 26 Annexes Annex 1: Project Design Summary 27 Annex 2: Project Description 31 Annex 3: Estimated Project Costs 44 Annex 4: Cost Benefit Analysis Summary 52 Annex 5: Financial Summary 59 Annex 6: Procurement and Disbursement Arrangements 70 Annex 7: Project Processing Schedule 83 Annex 8: Documents in the Project File 84 Annex 9: Statement of Loans and Credits 86 Annex 10: Country at a Glance 88 Annex 11: Institutional Arrangements 90 Annex 12: Environment Aspects 109 Annex 13: Social Assessment 114 Annex 14: Implementation Schedules 120 MAP(S) IBRD No. 30790 IBRD No. 30791 IBRD No. 30792 REPUBLIC OF YEMEN IRRIGATION IMPROVEMENT PROJECT Project Appraisal Document Middle East and North Africa Region MNSRE Date: August 9, 2000 Team Leader: Usaid I. El-Hanbali Country Manager/Director: Inder K. Sud Sector Manager/Director: Doris Koehn Project ID: P062714 Sector(s): AI - Irrigation & Drainage Lending Instrument: Adaptable Program Loan (APL) Theme(s): Water Poverty Targeted Intervention: Y lProgram Financing Data . ~~~~~~Estimated APL Indicative Financing Plan Implementation Period Borrower ________ ______________ _________ __________ (Bank_FY) IDA Others Total Commitment Closing US$ m % US$ m US$ m Date Date APL 1 21.30 83.2 4.30 25.60 10/15/2000 06/30/2006 Government of Yemen Loan/ Credit _ _ _ _ __ _ _ _ _ _ APL 2 23.70 54.2 20.00 43.70 12/31/2004 06/30/2011 Govermnment of Yemen Loan/ C redit __ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ APL 3 Loan/ Credit APL 4 Loan/ C redit _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Total 145.00 1 24.30 169.30 __________________________ Project Financing Data II Loan N Credit El Grant FEl Guarantee El Other (Specify) For LoanslCreditslOthers: Amount (US$m): $21.3 Million Equivalent Proposed Terms: Standard Credit Grace period (years): 10 Years to maturity: 40 Commitment fee: Standard Service charge: 0.75% Financing Plan: Source Local FoOnTotal GOVERNME NT 3.101 0.001 3.10 IDA 8.10 13.20 21.30 BENEFICIAIRIES 1.20 0.00 1.20 Total: 12.40 13.20 1 25.60 Borrower: GIOVIERNMENT OF YEMEN ~Responsible agency: MINISTRY OF AGRICULTURE AND IRRIGATION1 Address: Ministry of Agriculture, Sana'a, Republic of Yemen Contact Person: Mr. Farid Mujawwar, Deputy Minister Tel: 967-1-282-445 Fax: 967-1-282-445 Email: SIIP@Y.net.ye Estimated disbursements (Bank FY/US$M): Annual 0.0 3.5 5.0 6.0 5.0 1.3 Cumulative 0.5 4.0 9.0 15.0 20.0 21.3 Project implementation period: 5 Expected effectiveness date: 01/01/2001 Expected closing date: 06/30/2006 OCSAPL PAD F- R. 1h. 20DO -2 - A. Program Purpose and Project Development Objective 1. P'rogram purpose and program phasing: The Program, of which the proposed project is the first phase, seeks to ensure sustainable water resources management in the seven main spate irrigation schemes in Yemen, contributing thereby to improved agriculture productivity and smallholder income in these areas. To achieve this, the schemes would be rehabilitated and improved, intensive agriculture demonstration program implemented, and institutional changes would be introduced. These changes would include: (i) passage of an irrigation law and decrees providing for user participation and cost recovery in irrigation; (ii) increased Government technical and financial support for operation and maintenance of the irrigation schemes; and (iii) increased farmer participation in irrigation management at all levels, leading ultimately to transfer of management of the schemes to water user associations (WUAs) and their federations. The Program would be implemented over a period of about 10 years in two phases following a progressive geographic coverage: (a) Phase I (over five years): supported by the proposed project, covering two of the country's seven main spate irrigation schemes: Zabid (in Hodeidah Govemorate) and Tuban (in Lahej Govemorate), with a total command area of about 26,000 ha; and (b) Phase II (over a further five years): covering the country's five other main spate irrigation schemes of Bana, Hassan, Mawr, Rima and Siharn, with a total command area of about 64,000 ha. Other smaller spate irrigation schemes (Hijr, Ahwar, Meifa'a, Surdud, Harad and Rasyan) may be included if they meet the criteria used to select the above seven main schemes. The proposed Program lends itself to the Adaptable Program Lending (APL) approach. The second phase would build on the experience and progress of the first phase and would only start after certain milestones are met during Phase I implementation. Appendices 1 and 2 of Annex 2 show those milestones and outcomes which would be used to monitor development and implementation progress of Phase I and to trigger the start of Phase II. In summary, before the decision is taken at the end of Project-Year (PY) 4 to proceed with Phase II , the following would have to be true: (a) transfer of irrigation management from the field turn-out up to the branch canal level in Wadi Zabid is complete; establishment of WUAs from the tertiary level up to the main canal level for Wadi Tuban is complete; and farmers have paid their share of O&M cost for PY3; (b) agreed Government share of O&M costs has been paid on schedule in PY3; (c) Irrigation Council (IC) in Wadi Tuban is initiated; (d) implementation of rehabilitation works has reached target (about 80% completion in the Tuban and 60% completion in Zabid); (e) formation of Scheme Water User Federations (SWUFs) at scheme level is underway; and (f) Irrigation Law has been enacted. -3 - 2. Project development objective: (see Annex 1) In line with the above-stated goal of the Program, the main objective of the proposed Phase I project would be to ensure: (i) sustainable and efficient water conveyance, distribution and use in the two spate irrigation schemes of Tuban and Zabid through rehabilitation and participatory irrigation management (PIM); and (ii) increase in agricultural productivity and rural incomes through implementation of an intensive demonstration program. The second phase project would complete the process of rehabilitation and PIM for the remainder of the spate irrigation schemes, drawing from the experience of the proposed Phase I project. 3. Key performance indicators: (see Annex 1) Progress towards Program and Project development objectives would be measured by monitoring and evaluating key performance indicators. Some of these indicators would be provided by the achievement of the implementation milestones (indicated in Appendix I of Annex 2). Others would require broader monitoring of outcomes and impacts as detailed in Appendix 2 of Annex 2. These would include: (i) adequate financing of O&M of the spate irrigation schemes through increased Government budgetary allocations and through farmers' contributions under cost-sharing arrangements; (ii) decentralization of Government services, farmer participation in management, and progressive transfer of management responsibility for irrigation systems to farmers; (iii) increased water availability and area cropped under spate irrigation; and (iv) increased agricultural productivity and farmers income. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex I) Document number: 19073-YEM Date of latest CAS discussion: 05/25/99 The main areas of focus in the FY99 CAS are: (i) public administration modernization; (ii) support to private investment; (iii) improving water management for sustainability; and (iv) social improvements targeted at poverty alleviation. The proposed project is fully consistent with the CAS as it would support its objective (iii) regarding improved water management. It would also contribute to achieving objective (i) of the CAS through the restructuring of public irrigation services and the progressive transfer of responsibility for managing and financing operation and maintenance from Government to farmers. In addition, the project's focus on improving the reliability of irrigation water, together with an intensive agricultural demonstration program, would help increase agricultural productivity and would have a poverty reduction impact on small farmers, relevant under Objective (iv) of the CAS. The CAS focus on improved water management and water use efficiency in agriculture is built on the extensive sector dialogue carried out between the Government of Yemen and the Bank over the last three years. The main thrusts of this dialogue are summarized in three recent World Bank reports: (i) Towards a Water Sector Strategy ( August 13, 1997, Report No. 15718-YEM); (ii) the Agriculture Strategy Note (September 15, 1998, Report No. 17973-YEM); and (iii) the Irrigation Sector Note (issued in January 1999). 2. Main sector issues and Government strategy: Irrigated agriculture is estimated to use more than percent 90 of Yemen's water and it provides most of rural income (nearly 85 percent of the value of crop production - $600 million or some 8 percent of total GDP). However, irrigated agriculture in Yemen faces a number of challenges, including: sustainability of spate irrigation, sustainability of groundwater irrigation, low productivity of irrigated agriculture and the need for change in Government's role in the irrigation sector. Government strategy for dealing with these challenges is set out in the National Water Strategy, adopted by the Council of Ministers in 1998 and in the - 4 - National Irrigation Strategy, adopted by the Council of Ministers in 1999. The main lines of this strategy are as follows: (a) Sustainability of Public Spate Schemes. Spate irrigation covers 120,000 ha (of which the major modem schemes cover about 90,000 ha) and accounts for about 25 percent of the total irrigated area and 11 percent of the total farmed area in Yemen. Up to the mid-eighties, Government made large investments in developing the major modem schemes, and subsequently assumed responsibility for their management, with little user involvement or cost recovery. Now, the capacity of the public sector to manage the schemes has been eroded by the crisis in public budget resources. Most of the spate irrigation infrastructure is deteriorating due to poor maintenance caused by these budgetary constraints. Government strategy is now to improve the cost-effectiveness of management, and to involve users in managing and paying for operation and maintenance. This would involve decentralization of responsibility to scheme level, promotion of user associations and cost sharing, and selected investments to rehabilitate the irrigation systems and improve the efficiency of water use. The ultimate goal is for users to take responsibility for entire schemes, and for Government to withdraw. (b) Sustainability of Groundwater Irrigation. Rapid overdraft of aquifers is endangering the future of agriculture, and making urban water supply increasingly difficult and expensive to develop and manage. Government strategy is to apply macroeconomic measures (diesel price increases, increasing import duties on drilling rigs, etc.) that are progressively putting up the effective cost of water, together with a package of rules and incentives designed to get stakeholders themselves involved in reducing the overdraft and applying water in its highest value use. (c) Low Productivity of Irrigated Agriculture. By regional standards, returns to water in irrigation in Yemen are low. Government strategy is, first, to eliminate distortions in relative prices and move towards the scarcity pricing of water that will provide incentives to water use efficiency. Second, Government policy is to promote the adoption of improved irrigation technology. Finally, Government proposes a reinforced effort to develop research on water use efficiency and conservation in agriculture and to disseminate results through a Farmer Services Project (proposed for IDA financing in FY02). (d) Need for Change in Government's Role. Government institutions for irrigation were set up when policy was for Government to develop and manage modem irrigation schemes. Now public policy is to reduce Government role to the essential minimum and to involve users more and more in investment and management. The challenge is, therefore, to restructure public institutions to focus on planning and support to users and to concentrate further public investment on projects where there is ownership and cost sharing by the beneficiaries, and which advance Government's goal of progressively withdrawing the public sector from direct involvement in irrigation management. - 5- 3. Sector issues to be addressed by the project and strategic choices: Amongst the various strategic objectives in the irrigation sector (see B2 above), Government is now giving priority to actions on the spate irrigation sector over other possible investments in irrigation and agriculture for the following reasons: (i) spate irrigation is an important economic sector in rural Yemen, which provides a livelihood for about half a million people in the relatively poorer coastal districts of Yemen; and (ii) restructuring of public interventions in irrigation forms a principal component of Government's overall restructuring plans for the agriculture sector (the "Aden Agenda"), within the administrative and fiscal reform program being supported by IDA (under the ongoing IDA-supported Public Sector Management Adjustment Credit - PSMAC). For these reasons, the first sector issue to be addressed under the project is the unsustainability of the existing major spate irrigation schemes managed within the public sector. Following recent studies and workshops, including a national workshop organized with WBI in 1999, Government has decided to adopt the concept of participatory irrigation management (PIM). This would involve farmers taking a growing share of the responsibility for operation and maintenance (O&M) of spate schemes. On this basis, the Governnent has made the folloving strategic choices to deal with the above problems: (a) to rehabilitate and improve the physical infrastructure in spate irrigation schemes in order to improve water distribution in those schemes and to capture those parts of flood flows that are lost to the sea; (b) to decentralize responsibility for management of spate schemes to local management organizations in line with the principle that management should be at the lowest feasible level. A joint Irrigation Council (IC) at scheme level comprising representatives of both Government and farmers would be responsible for the overall coordination of spate irrigation in a given scheme; (c) to promote user participation and create the conditions for ultimate financial self-sufficiency of schemes by progressively supporting the development of water user associations (WUAs) and their federations and their participation in O&M and financial management; and (d) to finance operation and maintenance costs of the schemes at an efficient level and to phase out public financing progressively as users contribute more. The second sector issue to be addressed under the project is the restructuring of irrigation institutions in line with the changing role of Government in the sector. This issue is discussed below (Section C2). 4. Program description and performance triggers for subsequent loans: See Section A above. C. Program and Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The description of the Program is summarized in Section Al. As for the Phase I project's concerned, the following components are proposed: -6- A. Rehabilitation, Improvement and Protection of Spate Irrigation Infrastructure Component (Tuban and Zabid Schemes, totaling about 26,000 ha) (a) topographical survey, detailed design, hydraulic models testing and supervision for high priority works in Tuban and Zabid spate irrigation schemes; (b) rehabilitation and improvement of irrigation systems at canal level (e.g. at the tertiary canal and/or branch, and main levels), as well as at headwork and wadi levels; and (c) construction of flood protection works and rehabilitation of roads. B. Irrigation and Environment Management and PIM Component (a) formation of PIM (Participatory Irrigation Management) organizations - Establishment of WUAs, SWUFs and joint management mechanisms (ICs) at Tuban and Zabid (including management facilities, supplies and equipment) as well as institutional support to them; (b) improvement of spate irrigation management - Development and testing of water management information systems (MIS), flood warning system, spate management model, and hydrological monitoring for wadis in the Phase II project; (c) provision of O&M equipment - Provision of equipment and spare parts for operation and maintenance of the schemes, which will be leased to WUAs (to the government institutions during initial periods on a declining basis) by PIUs, as well as of incremental recurrent costs; and (d) environmental mitigation and enhancement measures - Groundwater and hydraulic monitoring and awareness for sustainable water resources management, upper watersheds study, and soil salinity/sodicity mapping (Tuban). C. Intensive Agriculture Demonstration Component (a) implementation of an intensive agriculture demonstration program covering about 5,000 ha in Tuban and Zabid to make farmers familiar with new varieties and improved agricultural practices; (b) extension services, on contractual basis, to transfer existing, proven technologies from the research stations to farmers' fields; and (c) local and international technical assistance to support the extension services. D. Institutional Strengthening and Capacity Building and PMU Component (a) support to Government irrigation sector - Institutional assessment including GDI and other relevant irrigation institutions, preparation of guidelines for the PIM program, and training/technical assistance for supporting the activities; (b) support to legal framework development including new irrigation law; (c) preparatory studies and preliminary design for the irrigation schemes to be rehabilitated and improved under the second phase of the program; and (d) establishment of project management unit (PMU) in Sana'a with two small project implementation units (PIUs) in Zabid and Tuban as well as institutional support to them. -7 - Cost Summary Indicative Bank- % of Conmonent Sector Costs % of finiain ti Ba nk- _________ _________ _______ _ _________ _ (US$M) TOta ~ (U S$ M!) financing A. Rehabilitation, Improvement and Irrigation & 12.40 48.4 10.50 49.3 Protection of Spate Irrigation Drainage Infrastructure B. Irrigation and Environment Irrigation & 8.80 34.4 6.80 31.9 Management and PIM Drainage C. Intensive Agriculture Agricultural 0.60 2.3 0.50 2.3 Demonstration Program Extension D. Institutional Strengthening, Institutional 3.80 14.8 3.50 16.4 Capacity Building and PMU Development Total Project Costs 25.60 100.0 21.30 100.0 Total Financing Required 25.60 100.0 21.30 100.0 The project financing plan provides for an IDA Credit of US$21.3 million equivalent, for Government financing of US$3.1 million and for beneficiary share in capital and recurrent costs of US$1.2 million. The Government of Netherlands has expressed interest in financing part of the technical assistance. It is expected that this interest will be confirmed by the Royal Dutch Embassy in Yemen by October 2000. The financing plan will be adjusted if this extra financing is confirmed. 2. Key policy and institutional reforms supported by the project: (a) Achieving Sustainability of Spate Irrigation Schemes through Decentralization and User Participation. MAI is presently responsible for operation and maintenance down to and including the secondary canals in the main spate irrigation systems of the country while the farmers take care of the tertiary and field systems. However, Government capacity to finance and manage the schemes has dwindled, and it is now public policy to progressively withdraw from activities better done by the private sector or by beneficiaries. The strategy for doing this is to decentralize responsibility for management of spate schemes to scheme level organizations, and to promote user participation in the financing and management of scheme operation and maintenance, with the ultimate objective of scheme autonomy and financial self-sufficiency (see details in Section E2). Therefore, the project would support a program of decentralization and user participation according to the following institutional model: (i) at the level of the canal system (up to and including primary canals), water user associations (WUAs), based on existing informal water users groups (WUGs), would take responsibility for operation and maintenance; (ii) at the scheme level, the WUAs would be federated into a Scheme Water Users' Federation (SWUF) that would ultimately take responsibility for O&M of the whole scheme except the headworks; and (iii) a scheme level Irrigation Council (IC) would act as a joint farmer/Government forum for ensuring public interest aspects of water management and for setting water charges. Details are shown in Annex 11. (b) Restructuring of Regional/National Irrigation Institutions in Line with the Aden Agenda (see B-3). As responsibility for irrigation management is progressively decentralized and passed to users, the role of official irrigation agencies has to change, as is already foreseen in principle under the Aden Agenda. These changes will take place at two levels: (i) at the level of the regional -8 - agencies like the Tihama Development Authority (TDA) which is currently responsible for Zabid scheme, and the Lahej Agriculture Department, which is currently responsible for Tuban scheme; and (ii) at the central level, where the recently created General Directorate of Irrigation (GDI) has focused hitherto on small dams and has had virtually no role in planning irrigation development. As the decentralization and participation program proceeds, it is envisaged that the regional agencies like TDA and the Lahej Irrigation Department will reorganize to play a smaller technical support role whilst their scheme level staff may join the scheme management team that will be employed and paid for by the SWUFs. At the central level, the GDI is expected to take on a role in overall planning of the sector, beginning with the spate improvement program. As the GDI is currently very weak and focused almost exclusively on the small dams program, it is expected that during the project period only a progressive and quite modest development of its mandate would take place. This will comprise a development of GDI's overall planning role, beginning with the spate improvement program (where GDI will prepare guidelines and policies for irrigation improvement nationwide) and further support to its current core function of small dam development, including follow on to support in dam design currently being provided under another project, and inventory of small dams, beginning with those in the catchments of wadis Zabid and Tuban (see Annex 11, Chapter 4 D). The project will assist the GDI in preparing guidelines and policies for participation, management transfer and improvement (in close collaboration with the PMU). As these institutional changes depend on the initial experience with user organizations and on the development of the Aden Agenda, it is proposed that the future of irrigation institutions as a whole would be the subject of analysis and dialogue with stakeholders during the first two years of the project. The consequent restructuring would fit within the larger processes of the Aden Agenda and the national administrative reform program. 3. Benefits and target population: The benefits would derive from: (i) improved diversion efficiencies and installation of canal control structures, resulting in improved dependability and availability of distribution and use of spate flows to expand the irrigated areas; (ii) agronomic improvements to increase returns to water; (iii) halt of the decline in, the area cropped and crop yields that would otherwise happen, due to continuous deterioration of the spate infrastructure; (iv) decrease the risks of damage from flood events; and (v) possible reduction of groundwater pumping. The target population are the farmers, farm workers and their families who would benefit from the program over a total area of 90,000 ha (covering the seven main spate irrigation systems in Yemen), of which an area of 26,000 ha would be covered under the proposed Phase I project. Many of this target population are poor (28 percent of families live below the poverty line in Tuban, and 35 percent in Zabid - see E6 below). 4. Institutional and implementation arrangements: The institutional and implementation arrangements for project management would be as follows: (a) At the Government Level The Ministry of Agriculture and Irrigation (MAI) would have overall authority for project implementation, and would be responsible for formulating and enforcing any administrative and legal arrangement to be agreed upon under the project. To this effect, a Steering Committee (SC) would be established under MAI to oversee implementation of the project. The committee would be chaired by the Minister of MAI and include the Deputy Minister of MAI, the Deputy Minister of MOPD, the Deputy Minister of Finance (MOF), the Project Director of PMU, and the General Director of the General Directorate of Irrigation. -9 The project would be coordinated and its implementation supervised from a main PMU office in Sana'a, with project implementation units (PIUs) in both Zabid and Tuban to be established before project start. The main task of the PMU would be coordination of project implementation activities including: (i) procurement of goods, civil works and consultant services; (ii) management of technical assistance; (iii) verification and processing of statements of expenditure and withdrawal applications; (iv) reporting, accounting and auditing arrangements; (v) preparation of periodic progress reports for review by the SC, MAI and IDA; and (vi) monitoring and evaluation of project impact. Also, the PMU would be responsible for supervising and coordinating support to the establishment and development of WUAs and SWUFs. The PMU would report to the Chairman of SC. The PMU staff would consist of the following key personnel: director, engineer, procurement officer, institutional specialist; communication specialist, finance and administration officer, and a monitoring and evaluation officer. The two PIUs would be responsible for supervising implementation of project activities in the Tuban and Zabid schemes. During project implementation, the PIUs would work closely with the existing regional irrigation/development agencies (TDA for Zabid, Lahej Irrigation Department for Tuban). Staff would be recruited and managed according to the PMU guidelines agreed with IDA. The PIU staff would be largely recruited on competitive basis from MAI's Tihama Regional Development Authority (for the Zabid Scheme) and from the MAI's Lahej and Aden regional irrigation departments (for the Tuban scheme). Also, the LWCP PIU staff would be given priority in the competitive selection of the Tuban PIU. Each PIU would include the following key personnel: director, engineer, agriculturist, institutional specialist and accountant. Investment works would be carried out on contract by the PIU according to a program agreed and coordinated with TDA and the Lahej Irrigation Department. The formation of WUAs would be carried out through the staff of the PMU and PIU working with the regional irrigation agency and the extension service. Operation and maintenance would remain the task of the regional agency until such time as the WUAs are able to take over. Support to GDI would be implemented through contracts led and supervised by the PMU according to a program agreed between GDI and the PMU. (b) At Farmers' Level The institutional model for farmers participation is set out at C2 (a) above. The milestones set out in Appendix 1 of Annex 2 show the timetable for development of these institutions. The milestones would be used to monitor progress in the development of this institutional structure at the end of each project year and to trigger adjustments and, ultimately, the Phase II investment. Farmers and their organizations would be involved in implementation at two levels. At the level of investment, the creation of a working farmer organization at the relevant level (WUGs at the tertiary canal level, WUAs at secondary/primary level, and SWUFs at scheme level) would be a precondition for project investment, and farmers would be involved in identification, design, construction, supervision and cost sharing. At the level of management, user organizations would participate in operation and maintenance, leading to eventual system management transfer. (c) Implementation Aspects The PMU and the two PIUs will be responsible for implementing all project components. The PMU will prepare, with the help of the technical assistance, necessary procurement documents while PIUs will supervise the construction of the civil works. Also, PMU will recruit the project consultants and oversee their works. The PMU and PIUs will also oversee the organization and establishment of WUAs and provide the necessary training for PIUs staff and farmers. The extension staff of regional agencies, NGOs, or private consultants could be contracted to assist in user mobilization and organization activities under the project. - 10- Implementation of the intensive agriculture demonstration component would be undertaken through contractual services between the PMU and qualified local public or private sector institutions. These institutions would include AREA, TDA, RDA-Lahej, the General Seed Multiplication Corporation, NGOs etc. The PMU would prepare the TORs and letters of invitation for proposals, prepare a short list of contractors and evaluate proposals. The lowest bidder would be awarded a one-year contract within the framework of a multi-year program with the stipulation that future annual contracts would be conditional on the satisfactory implementation of previous contracts. In order to expedite project implementation, it was agreed to carry out some pre-project activities before project effectiveness, including a socio-economic baseline survey, a communication campaign to initiate the establishment and organization of WUAs, and recruitment of project consultants. (d) Conditions to be Met Before Project Start Given the importance of the institutional issues (described above) for the success of the Project and the Program, Government has provided the following before Negotiations: (i) a Policy Statement has been sent to IDA reflecting Government's commitment to the principles of user participation and cost sharing, to a program of scheme rehabilitation and upgrading linked to effective participation (including the principle that financing of any rehabilitation works would be conditional upon the prior formation of the concerned WUAs), and to progressive irrigation management transfer and restructuring of public irrigation agencies (condition of Negotiations) (see Annex 11); and (ii) that each year, Government would provide a specified (declining) share of O&M budget for the schemes (covenant). Also, the Government has agreed that, before Board Presentation: (i) a decree would be issued providing for the initial establishment of WUAs under the existing cooperative Law No. 39 of December 27, 1998; (ii) the Project Steering Committee (SC) has been set up; and (iii) the Project Management Unit (PMU) has been established and that the staff of the existing preparation unit is converted to the PMU. All the above conditions have been met. D. Project Rationale 1. Project alternatives considered and reasons for rejection: The following alternative approaches were considered: (a) Not Using the APL Approach. In the absence of the Adaptable Program Lending (APLj instrument, IDA would have had to choose between: (i) limiting its support to one or two spate irrigation schemes; or (ii) providing support for a larger scope program dimensioned to cover most - 1 1 - of the country's spate irrigation schemes. The former alternative would have prevented a longer term perspective on key development issues of the sector and limited the leverage to support program expansion in a progressive and flexible way. The latter would have implied a larger financial commitment and would have faced risks and uncertainties of achieving sustainability in the management of the spate irrigation schemes within the life span of the project. Farmer participation, which is needed to ensure sustainability, is a complex process which would need time to be successfully adopted on a large scale in most irrigation schemes of the country. Under the APL, Phase I would allow the Government to establish strong foundations for the national development program. Its expansion to Phase II would be based on the satisfactory results and the lessons learned from Phase I. (b) Including Construction of Major Upstream Watershed Management Works. Government originally proposed that this project would include a major component to deal with all upstream problems of watershed and basin management in the wadis concerned in order to address problems of flooding and siltation. This component would have included a thorough study of the watershed regime, the identification of problems and construction of the upstream protection works needed - erosion control structures, spate breakers, terrace rehabilitation, mechanical and biological watershed protection works, small dams, hill lakes, earth embankments and dikes. During preparation, it was agreed to limit this component to the study aspect only and to the improvement of flood warning systems, on the grounds that little or no significant link with, or impact on, the spate irrigation improvement components has been identified. Moreover, in terms of implementation, the upstream areas are remote and far off, and implementation would have been technically, institutionally and socially difficult and slow. In the event that the studies establish causal relationships that can be corrected in an economically justified way, the follow-on Phase II project of the program could include some investments. (c) Including Small Dams Construction Program. Government had suggested that, in addition to the needed capacity building support to GDI in the area of small dams and preparation of IIP guidelines included in the project, a component should be added to provide for the financing of a few "trial" dams on which the skills acquired might be further developed. However, this component was dropped because: (i) it would complicate the project and add another executing agency for civil works; and (ii) abundant financing is already available to the small dams program. (d) Including Community Development. The rehabilitation of spate irrigation and transfer of management responsibilities to users will primarily benefit farners, although farm laborers should also benefit. As such, the project would not directly have an impact on the significant number of poor landless households living in the project area. For this reason and to improve the poverty alleviation impact of the project, a community development component (social infrastructure and off-farm income generation) was proposed at preparation. The problem would be the risk of overloading the PMU and of duplicating existing implementation capacity. Therefore, it was decided not to include this component in the project. - 12 - 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). I ~Latest Supervision Sector Issue Project (PSR) Ratings __________________________ _______________________j (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) IDA-financed - Improved water use efficiency - Wadi Hadramawt S S through optimization of spate flows Agricultural Development Project III [closed] - Tihama V Agriculture S S Development Project [closed] - Sustainability of spate investments -Southern Region Agricultural S S & possible beneficiary participation Development Project in O&M (piloting WUAs) (SRADEP), [closed] - Eastern Region Agricultural S S Development Project (ERADEP), [closed] - Reducing groundwater - Land and Water Conservation S S over-exploitation and introducing small Project (LWCP) [on going] spate irrigation schemes - Mitigation of floods and rehabilitation - Emergency Flood Rehab. S S of damaged works [on-going] Other development agencies IFAD - Flood Mitigation and Improved Spate - Eastern Region Agricultural conveyance with beneficiary Development Project participation [on-going] - Protection of Spate and well irrigated - Tihama Environmental areas from sand dune encroachment Protection Project (on-going) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) - 13 - 3. Lessons learned and reflected in the project design: The most important lesson in irrigation development worldwide is that sustainability of irrigation systems requires beneficiary participation in all stages, starting from identification and design right through to the operation and maintenance of constructed facilities. Sustainability is achieved through the involvement of farmers in investment and management decisions and, subsequently, through their involvement in operation and maintenance activities. This lesson is incorporated in the design of the proposed project, which lays emphasis on involvement of beneficiaries throughout and on the development of beneficiary and joint beneficiary/agency institutions. In addition, the physical works program is linked to the concurrent development of the capacity and participation of farmer institutions. Moreover, global good practice suggests that we avoid "blueprints" and take into account local conditions and traditions. Thus, the proposed WUAs build on the informal existing water user groups, and the proposed Irrigation Councils are a renewal of currently existing joint farmer-Government institutions (as in Tuban). A second lesson from previous successful IDA projects in Yemen is that simple design is likely to make for a successful project. Thus the present project incorporates a simple project design focused on improving rehabilitation and O&M of two existing spate irrigation schemes and building on existing user organizations and institutional capacity to implement the institutional reforms sought. A third lesson that has been particularly learned from projects in Yemen with spate irrigation components, is that timely availability of operating budget is vital. Otherwise, the structures quickly deteriorate and yields and productivity fall off. Risks from flood damage also increase. The means by which this problem will be tackled were defined during project preparation. The needs have been determined, and a financial plan worked out that will require Government to pay more for an interim period, until the financing ability of WUAs can be developed (see E2 below). 4. Indications of borrower commitment and ownership: Government commitment to water sector reform and to the project concept is shown: (a) at the water sector policy level, by the development of the National Water Strategy over the last three years, culminating in its adoption by the Council of Ministers in December 1998; (b) at the macroeconomic level, by the series of pricing reforms (e.g., the rise of municipal water tariffs, the adoption of full O&M cost recovery as a principle for rural water supply, and the successive rises in the price of diesel) that are aiming at removing the distortions in the incentive structure for water use; (c) at the level of water resources management and planning, by the creation of NWRA in 1995, by the preparation of a draft water law for presentation to parliament, and by the implementation of a series of planning and monitoring exercises to improve management of water in key areas; (d) at the irrigation sector level, by joint work with IDA on the report "Irrigation Strategy Note", by the development of a national irrigation policy adopted by the Council of Ministries in 1999, by the preparation of a draft irrigation law, and by the implementation of the Land and Water Conservation Project, designed to pilot a wide range of water conservation measures in both surface and groundwater irrigation; and (e) specifically in the spate irrigation sector, by joint work between Government, FAO and WBI in 1997/8 to identify issues and to develop a series of studies, workshops and seminars on the scope for rehabilitation of the spate schemes and for the involvement of users in operation and maintenance; and by the joint work between Government, FAO and the Bank in 1999/2000 on project preparation. - 14 - 5. Value added of Bank support in this project: IDA would bring to the proposed project a series of advantages, i.e.: (a) a strong dialogue with Government on water resources management, irrigation and agriculture sector policies, exemplified in the partnership approach during the preparation of the Water Strategy, the Agriculture Strategy and the Irrigation Strategy Notes. IDA is the preferred partner for Government on policy dialogue in these sectors; (b) a long history of involvement in spate irrigation, including financing over 25 years of the construction of many of the schemes; (c) strong technical involvement in the preparation of the spate irrigation reform agenda and involvement in the development of the participatory irrigation management (PIM) agenda, in partnership with the WBI team; and (d) strong IDA involvement in the restructuring program for the Ministry of Agriculture (Aden Agenda) and in the larger administrative reform program (PSMAC). E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): * Cost benefit NPV=US$ 1.17 million; ERR = 11.2 % (see Annex 4) O Cost effectiveness o Other (specify) Economic evaluation methodology: Lx ] Cost benefit [ ] Cost effectiveness [ Other [specify] The detailed economic analysis is included in Annex 4. The main points are summarized below: A cost-benefit analysis was carried out to estimate the net present value (NPV) and the internal rate of return (IRR) of the project. Quantified benefits are the incremental value in agricultural production stemming from: (i) the expansion of the area that will be irrigated annually after rehabilitation of the scheme (10 percent more in Zabid and 35 percent more in Tuban); (ii) a modest improvement in crop yields (2 percent) due to the rapid speed with which spate flows will be able to move from one part of the scheme to the next following rehabilitation; and (iii) the adoption by farmers of improved technology, which is available but remains to be demonstrated. The corresponding costs included in the analysis are: (i) project investment costs for the rehabilitation/ modernization of irrigation infrastructure, O&M equipment, and agricultural demonstration; (ii) the incremental agricultural production costs; and (iii) the incremental O&M costs of irrigation infrastructure. The overall project is economically viable as it has a rate of return of 11.2 percent, above the opportunity cost of capital. Expected returns in Wadi Tuban (9.6 percent) are lower than in Zabid (12.9 percent) and do not reach the threshold of 10 percent. Despite its lower return, Wadi Tuban sub-project is justified, as the area and beneficiaries are particularly poor, and the scheme represents the best opportunity for testing and developing the model of participation and user management that can subsequently be extended to other schemes. Moreover, additional benefits not quantified in the analysis are expected to occur. They include: (i) a possible increase in the share of higher-value crops (i.e. cotton in Tuban) after rehabilitation of the - 15 - scheme and a more reliable supply of water; (ii) an increase in the value of land; (iii) a possible increase of groundwater recharge through deep percolation from the irrigated fields; (iv) improved equity in water distribution and hence incomes; (v) the prevention of rural migration, the creation of jobs for the landless farmers as seasonal workers; (vi) the improvement of food security for the local population that often suffers from malnutrition; and (vii) the savings in transportation costs after rehabilitation of rural roads. 2. Financial (see Annex 5): NPV=US$ million; FRR = % (see Annex 4) Financial analysis of the project is shown in Annex 5, while Government commitment for financial and institutional policies are shown in Annex 11. The following are the main points: Farmers Participation in Capital Investments and Cost Recovery Beneficiaries are expected to contribute to about 30 percent of the costs of civil works, or about US$3.3 million (US$1.8 million in Tuban and US$1.5 million in Zabid). The total contribution is about US$127/ha of Net Command Area (NCA) over 30 years (constant prices), and would be collected in two stages: (a) a contribution during implementation of the works of about US$740,000 (US$28/ha) (US$415,000 for Wadi Tuban and US$325,000 for Wadi Zabid) which is about 7 percent of civil works costs. This share would be provided either as labor, materials or in cash; and (b) an annual cash repayment, starting 5 years after completion of the works, of about US$6.4 and US$3.8/ha of NCA in Wadi Tuban and Zabid respectively. This annual repayment is set to recover, over a twenty-year period, about 25 percent of the civil works expenditures for the improvement and rehabilitation of the schemes. Farmers Contribution to O&M Costs and Government Subsidy O&M Costs Requirements. The O&M costs were estimated according to the maintenance loads required between PYI - PY7. The unit O&M costs (per ha of Net Command Area) for Wadi Tuban, including staff costs, operation and maintenance costs of equipment, depreciation of newly purchased costs, and structural maintenance costs, will vary from US$12/ha to US$19/ha over the years and will stay at about US$17/ha after PY7. The unit O&M costs per hectare for Zabid will also vary from US$13/ha to US$16/ha and stay at about US$15 ha after PY7. The annual maintenance loads are expected to decrease during the project intervention periods as well as after the completion of the rehabilitation. Beneficiaries Contribution to O&M Costs. The suggested general principle for O&M costs sharing is that the WUAs should cover all O&M costs corresponding to those portions of the system that would be fully under their jurisdiction while the Government pay the balance of the O&M costs. Accordingly, WUAs' contribution to O&M costs increases over time while Government's share decreases. In practice, water users would pay O&M fees to the WUA and federation. Fees would remain with the WUA/federation for use directly on scheme operation and maintenance activities. The target would be 90 percent financing of the scheme O&M by the WUAs by PY7. Government Financing. The Government is required to provide about US$300,000 for the two schemes in PYI, which will be gradually decreased to about US$40,000 in PY7. The total amount of the - 16 - Government subsidies will be about US$1.7 million from PYI to PY7, during which period the O&M handover from the Government to WUAs will be completed. In aLddition, the O&M costs for other wadis to be implemented in the Phase II project, namely Wadi Mawr, Rima'a, Bana, and Hassan, need to be allocated annually from 2001 by the Government to prevent further deterioration before the Phase II project starts. The annual O&M costs were estimated at about US$550,000 based on the unit rate of US$8/ha for the total area of about 69,000 ha and the Government will[ have to provide a total of about US$2.8 million during the first five years of the proposed Phase I project. Affordability of Capital and O&M Costs by Beneficiaries Beneficiaries (farmers and landowners) capacity to pay for capital investment and O&M costs is analyzed in this section. As shown in the graphs and tables included in Annex 5, average incremental farm incomes are expected to be higher than both O&M and capital repayment contributions. In PYI 1, when repayment of capital costs starts, average farm benefits, after contribution to capital and O&M costs, would be about US$28/ha in Wadi Tuban and US$4/ha in Wadi Zabid. However, this will not be true in all situations. Incremental farm incomes vary depending on the amount of water received, which determines the type of crops than could be cultivated and their performance. Actual charges for O&M would be weighted towards those farmers deriving the most benefit, in particular towards fanners enjoying perennial flow, so that charges to poorer farmers would be correspondingly less. It is therefore realistic to propose that water user fees commensurate with water allocations. More specifically, the actual payment could take into account the following criteria: (a) the type of flow: separate fees to cover perennial base flow, spate flow, and spate flow with groundwater, should be derived. Farmers receiving base flow would likely need to pay at least double the fee for spate flow; (b) the actual area cropped should be accounted for in the charges; and (c) the type of crop grown: farmers growing crops with high gross margins should expect to pay higher fees than those growing subsistence crops alone. Refinements will be needed to set charges depending on local circumstances during project implementation. The PIUs and their technical assistance team will propose to the WUAs options for fair O&M charges that could be mutually agreed with farmers. Fiscal Impact: The project will not pose any overall fiscal problem. The project cost would be borne by the budget (12 percent of the costs), the IDA credit (83 percent) and the contributions (in kind or financial) of beneficiaries (5 percent). Over the 5-year implementation period of the project, Government will have to provide US$3.1 millions counterpart funds, an average of about US$600,000 a year. This is about 6 percent of capital budget for the agricultural sector (YR 1,458 millions in 2000) and less than I percent of the total Government capital budget. Government will provide incremental recurrent funds for a total of US$930,000 over 5 years, or an average of US$186,000 a year. This would include a total of US$870,000 for the O&M of Tuban and Zabid Irrigation schemes and PMU and US$60,000 for the operation of the spate warning system. - 17 - On the benefits side, since agriculture is exempt from taxation, increases in tax revenues will be negligible. However, savings are expected in recurrent expenditures, as the costs of required maintenance will decrease following the rehabilitation/improvement of the schemes and will be, for the most part, taken over by beneficiaries. It has been proven that transferring the responsibility of O&M tasks to beneficiaries increase the life of infrastructure. As a result, savings are also expected in replacement/rehabilitation costs. Finally, Government's contribution to capital investments will be lower than it has been for similar projects in the past as beneficiaries will contribute about 30 percent of civil works costs of spate irrigation schemes rehabilitation/improvement, some of it by direct contribution, some by cost recovery over time. In the long-run, improved incomes, food security and productivity of rural populations would add to national income, which in turn would have a positive fiscal impact. 3. Technical: Project technical issues are: (a) the project would mainly finance rehabilitation of spate irrigation facilities, such as water diversion structures, distribution canals and turnouts. Whilst these pose no substantial technical challenge, the key issue will be to identify improvements that are economically justified and cost effective and which simplify the maintenance task and lower its cost. This issue will be dealt with using criteria developed during project preparation which identified the higher priority works needed and provide simple economic rules of thumb for each engineering decision; and (b) sedimentation upstream of the diversion weirs and in the irrigation canals is an issue causing maintenance problems. It will be studied further in detail during project implementation using a hydraulic model and design modifications will be incorporated in the proposed rehabilitation and improvement works. 4. Institutional: 4.1 Executing agencies: As described in Section C-4, the project executing agency will be the Ministry of Agriculture and Irrigation (MAI). The project steering committee (SC) will include also representatives of the Ministry of Planning and Development (MOPD), Ministry of Finance (MOF), in addition to representatives of MAT's concerned departments. 4.2 Project management: MAI has long experience with implementing IDA-financed projects and has good technical capacity in irrigation at the regional and scheme levels. The performance of MAI and its Project Preparation Unit (PPU) during preparation has been particularly good. The PMU and PIU models have been implemented in other projects in Yemen with success and it is expected to work successfully under the proposed project provided that: (i) good staff are appointed; (ii) adequate management autonomy is provided; and (iii) top policy level support is available through an effective Steering Committee. 4.2.1 Institutional/Legal Aspects As described in Section C2 and C4, the project would include institutional reforms in irrigation improvement at two levels: (i) at the farmer level, the development of WIUAs as the basic management building block; and (ii) at scheme level, the establishment of water user federations (SWUIFs) and a joint - 18- management mechanism (IC) that will provide a forum for Government and water users to undertake joint decisions. There is an issue regarding the legal statute for WUAs and SWUFs. There is currently no law especially providing for formal user organizations. Alternatives such as the cooperative law and the NGO law were assessed for their relevance and acceptability at preappraisal. It was agreed that the cooperative law provided an adequate framework for the initial set up of WUAs. Based on that, a decree by the Minister of MAI has been issued (before Board Presentation) containing model articles for the establishment of WUAs. It was also agreed that the draft irrigation law currently under discussion would be reviewed and specific provisions made for WUAs and SWUFs and for the conversion of WUAs set up under the cooperative law to migrate to the new statute. This approach has the advantage that the initial lessons from setting up WUAs can still be reflected in the new irrigation law, which will be finalized and submitted to Parliament by June 30, 2001. A second issue is whether WUAs can function as representative and effective management units when they may include both larger and smaller fanners, and both landlords and tenants or sharecroppers. Extensive consultations during the social assessment confirm interest in cooperation from all types of farmers. Initial efforts to organize farmers have been carried out and detailed implementation steps have been developed. However, progress in Zabid, in particular, will need careful monitoring to ensure that all groups have representation in WUAs and that they participate in key decisions. 4.3 Procurement issues: The procurement assessment that has been conducted for the Ministry of Agriculture and Irrigation and the existing Project Preparation Unit (PPU) showed that the Ministry and the PPU have previous experience with Bank financed projects and procurement guidelines. However, and in order to strengthen the Ministry, the PMU and PIUs in procurement, on-job training program would be provided under the project including recruitment of a short-term procurement specialist, and conducting several seminars and workshops on procurement (Annex-6). 4.4 Financial management issues: Accounting, Financial Reporting and Auditing Arrangements: The central PMU will handle all financial matters of the project including procurement, financial transactions and treasury functions, accounting and periodic and annual financial reporting. It is being constituted through the conversion of the existing PPU, which has been (since June 1999) handling the management of the project preparation. The PPU's financial functions are undertaken by an experienced, qualified accountant (Financial Officer), assisted by an accounting clerk; the PPU General Director, who reports directly to the Minister of MAI, heads the PPU and has overall responsibility of PPU's day-to-day operations. The financial management procedures used by PPU are acceptable and adequate in terms of the size of the its mandate, except for its reporting procedures and certain weaknesses in the internal control arrangements. Remedial action is underway as agreed with IDA mission (Annex 6). The transition of the PPU's financial functions into a full fledged unit capable of undertaking the project financial management, is currently underway and coordinated by the PPU's Financial Officer. In a first step, the PPU has decided to acquire a locally-developed accounting software that is available to, and is being used by PIUs in charge of implementation of IDA-financed projects. It is based on generally acceptable accounting principles, adequate internal control procedures and a PMR-based capabilities. In a - 19 - next step, the PPU - as it transforms into a PMU - will acquire the services of a consultant who will complete the development of the financial management (FM) systems and the project's FM procedures Manual in accordance with TORs and schedules to be agreed with IDA. A plan of Action to ensure that systems are ready by Credit Effectiveness is being agreed with the PPU. The cost of this assignment will be financed from the project preparation funds. The PMU will provide IDA with regular quarterly financial reporting on the project activities to the Government and to IDA, in addition to project's annual financial statements. A quarterly project management reports (PMR) will be generated from the new system and will be submitted to IDA regularly within 45 days after the close of each quarter; the first PMR will be made available by November 15, 2001. The project financial statements will be audited annually by independent, private auditors acceptable to IDA, and in accordance with TORs and terms and conditions acceptable to IDA. Annual audited financial statements and audited reports will be submitted to IDA within 6 months after the end of the Government fiscal year. The cost of the audit will be financed from the credit. 5. Environmental: Environmental Category: B (Partial Assessment) 5.1 Summarize the steps undertaken for environrnental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. There are no major environmental issues. The proposed project is expected to have beneficial impacts on the environment as it would increase the reliability of spate irrigation water, and reduce overdrafl of the groundwater aquifers. However, due to changes in the pattern of water distribution as a result of rehabilitation of spate irrigation infrastructure, reduction of recharge to certain areas may occur. On the other hand, improved water distribution should result in reduction of groundwater use in those areas. These benefits are expected to outweigh any minor adverse environmental impacts (soil quality, waterlogging, water quality) arising as a result of the agricultural activities in the improved areas. 5.2 What are the main features of the EMP and are they adequate? The Environmental Management Plan (EMP) aims at establishing the conditions required for sound environmental management in the project area. It incorporates three main components. (a) Environmental Awareness and Participatory Management. This covers: (i) promoting (through participation and capacity building) local knowledge and awareness of the major issues threatening the well-being of wadi populations, particularly in terms of sustained water availability; and (ii) encouraging participatory management of natural resources by the institutions established under the project. This approach will be supported by systematic monitoring of water characteristics, information campaigns, training and support to the fledgling water management institutions. (b) Groundwater. In order to minimize groundwater depletion (which although barely to be linked to the project is nonetheless the most significant environmental problem in the Zabid area), the EMP would support a groundwater management system which would rely on data collected from the monitoring of water levels and quality in the project area. In order to monitor any changes to quality or quantity of groundwater in the Zabid area, where there is currently overpumping, detailed analysis and modeling of water resources and water quality monitoring would be carried out. An awareness campaign would also be included to inform the users about the impact of groundwater use, and measures to sustain that use. These actions have been included in project - 20 - costs. Most of the problems can be mitigated through technically simple measures that can be implemented through the involvement of the Water User Associations and Irrigation Councils once they are aware of the limits to the use of groundwater resources. Involvement of the water users and studies in monitoring the impact during the project would help improve overall water resources management in the project areas. (c) Building the Knowledge Base. The EMP incorporates three studies (of which numbers (i) and (ii) are already programmed under other components of the project): (i) soil salinity/sodicity mapping study to avoid soil sodicity occurrence and advise farmers on irrigation practices will be undertaken for the Tuban area; (ii) upper watershed management study will be carried out to assess the status and trends of erosion, review experience of watershed management so far and. formulate a strategy and a program to reduce erosion in the catchment areas of the wadis; and (iii) sand dune fixation study, if is not implemented through Land and Water Conservation Project (LWCP), to assess the need for further action to arrest sand dune movement and protect project farming areas. The above measures represent an adequate response to the environmental aspects of the project, and also contribute to the improvement of the general environment of the regions, outside of the strict remit of the project. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: March 21, 2000 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? EA team consulted stakeholders through participatory field assessment. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? See 5.2 above. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. A social assessment (SA) was carried out as part of project preparation. The SA is in the project files, and its findings are summarized in Annex 13 to the PAD. The SA highlighted three social issues related to the project, namely: (a) Poverty. More than 28 percent of families live below the poverty line (US$203) in Tuban, and more than 35 percent in Zabid. Many people visibly suffer from extremely poor hygiene, the absence of sanitation facilities, and inappropriate knowledge of hygienic measures for food and water. The rural population also suffers from limited access to food, and malnutrition and anemia are widespread; (b) Farmer Organization as the Key to Sustainability. The SA highlights water users' long-standing tradition of self-reliance and analyses how current dependence on Govenmuent for - 21 - O&M is at the root of the present poor prospects for sustainability of the schemes. The SA found positive farmer attitudes toward overcoming this dependence by forming autonomous WUAs with responsibility for O&M, ultimately up to the level of scheme management. The project therefore proposes to facilitate the formation of WUAs with advice and technical support, and to provide assistance in bringing about the necessary institutional and legal changes to give the WUAs the authority they need to manage the schemes sustainably; and (c) Reconciling Different Interests within the User Associations. The SA expressed concern that WUAs need to ensure that poor farmers have a voice and that they would not be captured and dominated by large landholding interests. The challenge is to facilitate the cooperation of rich and poor members under what might, at times, be difficult circumstances. The project approach is to work through democratic and inclusive WUAs, with intensive coaching and monitoring of this risk. In this regard, consultation of water users, in particular, downstream farmers at every stage of the scheme improvement process is crucial. The consultations that have already taken place as part of project preparation will continue throughout the project period. 6.2 Participatory Approach: How are key stakeholders participating in the project? As described above, the primary beneficiaries are to be grouped into user organizations at each hydraulic level. The WUAs are to be involved at every stage of the project development and implementation. The intensity of participation would gradually increase from consultation to assumption of management responsibilities, thus enhancing the water users' sense of ownership, ensuring adequate O&M, and minimizing disputes in water distribution. This participatory strategy was agreed during the preappraisal mission of February/March 2000. The SA documents the following main points: (a) the Government agreement in principle that the project would be based on the principle of users' participation in operation and maintenance (O&M) of the spate irrigation schemes; (b) users consulted were ready to participate in designing, implementing, and managing the schemes; (c) once the project approach had been explained to them, users and landowners consulted said that they were ready to organize themselves into formal water users' associations (WUAs) as a way of working cooperatively to overcome past problems, and to have more leverage in negotiating with the Ministry of Agriculture and Irrigation over equitable water distribution. Both groups requested assistance in this effort, and agreed on the principle of cost-sharing; and (d) the Government agreed that WUAs should be established before any physical works are implemented to ensure their agreement on scheme design, and their commitment to managing the schemes once construction is completed. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? Several groups of formal and nonformal organizations were consulted during project preparation. These included the political leadership, technical experts, universities, cooperatives, NGOs active in Yemen, and a wide range of farmer groups. A national PIM workshop was held with WBI collaboration in 1998. During implementation, the whole project approach will be structured around stakeholder organizations, from the WUG through the WUA and the SWUF up to the IC. - 22 - 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? The project would concentrate on the range of activities required to develop an appropriate process for transferring management of the spate schemes from Government to user groups. These activities would be concerned with: (a) building on the traditions of local cooperation and self-reliance, including partial user financing of improvement works; (b) supporting the formation of democratic associations of users, with equitable representation of all user groups; (c) following a logical sequence from initial awareness campaigns through user mobilization and physical system improvements, to final participatory management of schemes; and (d) building institutional capacity in the WUAs through training in participatory management. The detailed methodology and process for helping farmers to organize themselves in WUAs effectively are described in Annex 11. The project would recruit specialists attached to the PMU and PIUs, who would work with fanners and the local extension service. In addition, there would be PIM study tours, training and preparation of a manual. 6.5 How will the project monitor performance in terms of social development outcomes? Project M&E will track implementation and impacts on a participatory basis. Starting from a baseline survey, M&E will focus particularly on three main parameters: (i) the creation of efficient and sustainable water users' associations; (ii) ability to work as a group in the associations including the tribal elites, as well as the lower and disenfranchised groups; and (iii) changes in income and social welfare status amongst the target population. 7. Safeguard Policies: 7.1 lo any of the following safeguard policies apply to the project? Policy Applicability L Environmental Assessment (OP 4.01, BP 4.01. GP 4.01) [3 Yes L3 No El Natural habitats (OP 4.04, BP 4.04, GP 4.04) C3 Yes Z No El Forestry (OP 4.36, GP 4.36) O Yes Z No El Pest Management (OP 4.09) Yes Z No El Cultural Property (OPN 11.03) LI Yes Z No El Indigenous Peoples (OD 4.20) El Yes Z No El Involuntary Resettlement (OD 4.30) Cl Yes Z No El Safety of Dams (OP 4.37, BP 4.37 El Yes Z No El Projects in International Waters (OP 7.50. BP 7.50. GP 7.50) CI Yes Z No El P:rojects in Disputed Areas (OP 7.60, BP 7.60. GP 7.60) C3 Yes Z No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. The proposed project will follow the World Bank guidelines OP 4.01 on environmental assessment and will adhere to the requirements of the Government of Yemen for such projects, as outlined in the Environmental Protection Law, No. 26 enacted by the Parliament in 1995 and the National Environmental Action Plan (NEAP) prepared by the Environmental Protection Council (EPC) in 1996. - 23 - F. Sustainability and Risks 1. Sustainability: The project aims to promote the development of a policy and institutional framework for technically, environmentally and financially sustainable irrigation management. The project would: (a) select schemes to be rehabilitated and improved where there is evident potential for farner involvement; (b) establish a structure of farmer-owned and managed associations that would progressively take over responsibility for scheme management and financing; (c) associate farmers in all stages of engineering and institutional development, so that the two go hand in hand - this linking of engineering and institution building will increase the sense of ownership of the irrigation facilities among farmers and give incentives to subsequent participation in management; (d) improve water use efficiency of spate irrigation by improving distribution system and provide needed control devices, allowing more flows to be diverted and distributed to the irrigated areas and allowing recharge of nearby groundwater aquifers, thus reducing the exhausting of groundwater supply; (e) support scheme management by providing them with equipment, training and support to recurrent budget to enhance their capacity for management of irrigation system; and (f) develop a nationally replicable model for PIM and support preparation of PIM Guidelines through institutional support to GDI. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): _isk Risk Rating Risk lIMinimizan Measure From Outputs to Objective Farmers do not contribute adequately to S Project design reflects results of study of farmer recurrent and capital costs, and the incentives and likely motivations through social objective of ultimate scheme handover to and financial assessments. Constant training farmers cannot be achieved. and monitoring are built in to the project, and altemative O&M and handover strategies will be studied if the basic model proves unlikely to work. Failure to establish sufficient Water User S Project incorporates extensive support including Association capacity to operate and training, technical assistance and equipment. maintain transferred facilities. - 24 - From Components to Outputs Insufficient capacity in planning, M Adoption of the cost effective "PMU" impleimentation, supervision, and implementation model, together with specialized monitoring and evaluation. support for participation, M&E and planning with internationally recruited advisers, private consultants. Overall Risk Rating S Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: None G. Main Credit Conditions 1. Effectiveness Condition The PMU will establish a Financial Management System. 2. Otther [classify according to covenant types used in the Legal Agreements.] * Dated Covenants: - The Borrower shall prepare by June 30, 2001 a suitable legal framework, satisfactory to IDA, for the establishment of WUAs and submit it to the Borrower's Parliament for enactment. - The Borrower shall establish by March 31, 2002 a suitable system, acceptable to IDA, to recover an appropriate portion of the capital costs for the irrigation schemes in Tuban and Zabid. * Disbursement: - No disbursement shall be made for civil works (Category 2 of the Development Credit Agreement) under any sub-project unless WUAs for that sub-project are duly established, and engineering designs relative to that sub-project are prepared and are found satisfactory to IDA. * Monitoring and Reportingi: - The PMU will submit to IDA consolidated semi-annual progress reports at the end of January and July of each year. It will also complete a mid-term review of project progress by September 30, 2003 and submit to IDA a final evaluation report of project achievements by December 31, 2006. - 25 - H. Readiness for Implementation Z 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. C 1. b) Not applicable. C: 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. Z 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 0I 4. The following items are lacking and are discussed under loan conditions (Section G): 1. Compliance with Bank Policies Z 1. This project complies with all applicable Bank policies. F 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Usaid I. El-Hanbali Doris Koehn Inder K. Sud Team Leader Sector Manager/Director Country Manager/Director - 26 - Annex 1: Project Design Summary REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Key Perfonnance Hierarchy of Objectives Indicators Monitoring & Evaluation Critical Assumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) Improved water management Spate schemes managed Economic reports and Public Government and IDA remain and sustaiinability. autonomously without recourse to Expenditure Review. committed to the program over 10 Government budget. years. Program Purpose: End-of-Program Indicators: Program reports: (from Purpose to Goal) To ensure sustainability of spate Government budget contribution MAI data on yields. Normal climatic conditions. irrigation in Yemen. reduced to zero. Individual scheme and MOF Stable commodity prices and accounts and data. adequate returns to farmers from farming. Farmer-owned organizations Monitoring reports. manage the schemes. Fair sharing of incremental Increase agricultural productivity. Crop yields and cropped area in costs and benefits between spate schemes increased. farmers/sharecroppers and landowners. Project Development Outcome I Impact Project reports: (from Objective to Purpose) Objective: Indicators: 1. Effective spate water control Head-works and main canals of Projects reports. Government commitment to and conveyance infrastructure. spate schemes rehabilitated . reform of the irrigation sub-sector Project accounts. and its continued support to scheme O&M budgets. 2. Effective PIM institutions. WUA established for sub-scheme Project reports Farmers understanding of project level water management and IC WUAs reports and accounts. concept and acceptance of PIM. for scheme level management. Agreed cost shares paid. ICs reports and accounts. Active participation of farmers in WUAs. 3. Improved agricultural incomes. Agricultural productivity of spate Extension reports and survey Demonstrated packages and schemes improved. data. practices adopted by farmers. - 27 - Hierarchy of Objectioo lXdIo0wirs Mnto IEvaluation Criticai Assumptions Output from each Output Indicators: Project reports: (from Outputs to Objective) component: 1. Rehabilitation of facilities All rehabilitation works in Tuban Project reports. No major climatic calamity. (diversion weirs, canals, gates and rehabilitation works on etc.) in wadis Tuban and Zabid. headworks of diversion 3 and 4 in Zabid as well as all canal improvement and gate repair Project accounts. Continued Government replacement completed by end of commitment to reform in line Phase I (MS12). with the Aden Agenda 2. WUAs and ICs established, WUAs formed in Tuban at Procurement records. Farmer acceptance of PIM and capacity developed and irrigation primary/secondary level by PYI willingness to contribute to management transfer to users (MS 1) and participate in choice rehabilitation and O&M costs. effected. of works and design by PYI (MS2) and in procurement process by PY2 (MS4 and WUAs formed in Zabid at primary/secondary level by PY2 (MS4) and participate in choice of works and design by PY2 (MS5) and in procurement process (MS7). Decision on formation of ICs Disbursement records. Reform process accepted by taken by PY3 (MS3) in Tuban society at large (legislators and and in Zabid by PY4 (MS] 6), ICs staff of agencies as well as constituted by PY5 (MS 16) in farmers). Tuban and PY6 (MS 16) in Zabid and fully functioning by PY5 (MS 16) in Tuban and PY6 (MS 16) in Zabid. Irrigation management transfer of primary/secondary system completed by PY4 (MS 11) in Tuban and Zabid. - 28 - Key Pirformance Hierarchy of Objectives Indktors Monitoring & Evaluation Critical Assumptions Project Components I Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) 1. Rehabil.itation & ImDrovement Works 1.1 Wadi Tuban Works completed. Project reports. Good project management and coordination. 13 sub-projects (US$6.8 million) 13 diversion structure improved / rehabilitated with 48 radial gates Canals disilted/reshaped including sediment basins (580,000 ni3) as well as 1,031 canal control gates repaired/ replaced 47 km roads rehabilitated Protection works for 11 villages 1.2 Wadi Zabid Works completed. Project accounts. 5 sub-proi cts (US$5.6 million) 2 diversion structure improved/ rehabilitated with sediment sluices Canals disilted/reshaped including sediment basins (550,000 m3) as well as control structure built! improved (10 cross regulators, 26 turnouts) 33 km roads rehabilitated Protection works for I village and I diversion structure 2. Irrization and Environment Project audit reports. Timely availability of counterpart Manazement ImDrovement funds and beneficiary Formation of PIM organizations No. of WUA formed at different contributions. Establish ICs levels. Prepare O&M manual No. of ICs established. Institute MIS Manual prepared. Establish flood warning system MIS system operational. Develop Spate flow model Flood warning system Produce Soil salinity map established. Establish Groundwater Model developed. monitoring system Soil map prepared. Commence environmental Monitoring system operational. extension No. of extension messages delivered . (US$8.8 million) 3. Aericultural Developmenr Area covered by demonstrations. Project supervision. Implement a high intensity demonstration program in Tuban (US$0.6 million) and Zabid - 29 - 4. Institution Strenetheninz and Legal framework prepared. Capacity Building Assist with legal framework Sector institutional assessment review and reform process made. Conduct institutional assessment (US$0.9 million) of sector institutions 5. Prolect Management PMU PMU established and running MTR report. (US$2.4 million Phase 2 Studies Studies for phase 2 completed. (US$0.5 million) - 30 - Annex 2: Project Description REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT By Component: Project Component 1 - US$12.40 million Rehabilitation and ImDrovement of Spate Irritation Infrastructure Component This component would fund rehabilitation and improvement of spate irrigation infrastructures, including headworks, canals, flood protection works and access roads in Tuban (l1,000 ha) and Zabid (15,000 ha) schemes totaling 26,000 ha, which were selected for the Phase I project. The following th.ree major components would cover: (a) topographical survey, detailed design, hydraulic models testing and supervision for high priority works; (b) rehabilitation and improvement works of the irrigation systems at the canal levels (e.g. at the tertiary and/or branch and main canal levels), as well as at headworks and wadi levels; and (c) construction of flood protection works and rehabilitation of roads. Wadi Tuban (US$6.8 million) In Wadi Tuban, a total of 13 sub-projects have been identified. The secondary and tertiary canal system exist only in the modernized area in Al Arais, Ras Al Wadi and Beizag sub-project areas, which account for about 3,250 ha out of the corresponding command area of about 4,000 ha. The remaining schemes in Wadi Tuban, Kabier and Saghier, which about 7,000 ha, are all traditional spate schemes. The basic main works to be funded under the project in Tuban includes rehabilitation of modem and traditional irrigation scheme by replacing the broken or vandalized gates, the number of which is more than 1,000,, and removing the accumulated sedimentation deposits in the canal system. It is expected that the risk of vandalism or damaged on rehabilitated structures, including gates in canals, will be minimum as these gates and structures will be managed by the WUAs. Also, sedimentation basins will be built at the entrance of the main canals in order to improve the efficiency of the sedimentation exclusion. The sedimentation basins will greatly reduce the regular maintenance loads allowing for the efficient use of machinery. The main rehabilitation and improvement works would comprise the following: (a) Repair or replacement of 48 radial gates at diversion structure; (b) Repair or replacement of 1024 gates in canal control structures; (c) Improvement or rehabilitation of 13 diversion and canal structure (concrete placement 5,600 m3, stone masonry work 4,700 m3, gabion work 1 1,000 m3, etc.); (d) Desilting and reshaping of main, secondary, and tertiary canals (170,000 m3 embankment and - 31 - 580,000 m3 excavation) including sediment basins installment at the head of the main canals; (e) Rehabilitation of 47 km of roads, mainly in the form of shaping and gravelling; and (f) Wadi protection works for 11 villages extending over 2.8 km. Wadi Zabid (US$5.6 million) In Wadi Zabid, five sub-projects corresponding to five diversion weirs, two of which will cover both headworks and canal works (diversion III and IV), have been identified. The canal system in Zabid is not modernized and water is taken directly from turnouts along the canals and then distributed from field to field in a traditional manner. Since no cross regulators are available at present, farmers build earth bunds to divert water to their fields during floods and cause breaching and overtopping to the embankment of the canal system. The accumulated sedimentation and debris in the canals have also aggravated the water distribution efficiency. The rehabilitation of canal sections and installation of cross regulators, as well as enlarged field turnouts, will improve the water distribution significantly to the end of the canal system and fields. The improved design will reduce the need for repeated water supply to the field turnouts where the downstream fields were not irrigated by the previous flood. The rehabilitation concept of the headwork aims to reduce the maintenance loads by improving the efficiency of the sediment excluders as well as to increase water intake efficiency by raising the weir crest for increasing the water head. The project proposal is to construct skimming weirs separating the approach to the inlet and scouring gates beside the main diversion weirs, which will allow for effective exclusion of the coarse bed loads from the diverted flows. In addition, the head over the scouring gates will increase the scouring capacity by raising the crest of the weirs. However, a full-scale test in addition to a hydraulic modeling should be carried out at diversion III, which would allow for the modification of the design for the subsequently built diversion IV and others planned in Phase II. Moreover, a proper operation of the regulator and scouring gates is critical to reduce the sedimentation influxes to the canal system. Farmers tend to close scouring gates to take as much as water possible, which resulted in heavy bed load deposits in canals. A phased approach will check and secure the implementation of an effective operation and maintenance procedure. For all diversion systems including diversion 1, 2, and 5, sedimentation basins are to be built at the entrance of the main canals immediately after the regulators' inlets in order to reduce the maintenance loads for the sedimentation removal significantly. The sections of the sedimentation basins are to be constructed wide enough to allow for the efficient use of heavy machinery. The main rehabilitation and improvement works would comprise the following: (a) Improvement of 2 existing diversion structures (diversion No. 3 and 4), including improving of silt exclusion arrangements at the intakes, raising weir crests repairs and alterations to intake gates, 2 new head regulators and 1 new sluice; (b) Linking of traditional ogma systems in wadi Nasery through new canals to diversion No 4; - 32 - (c) Desilting and reshaping of the canal systems totaling 550,000 m3 including construction of new canals and sediment basins at the head of the primary canals; (d) Improvement of canal structure including 10 cross regulators, 26 turnouts, and 32 drop structure; (e) Rehabilitation of 33 km roads, mainly in the form of shaping and gravelling; and (fl Wadi protection works for a new "splitter" weir upstream of diversion No 4 and for one village between diversion No 3 and 4. Project Component 2 - US$8.80 million Irrigration and Environment Mana!ement and PIM Component (1) Formation of PIM Organizations (US$3.0 million) The institutional support for establishing the participatory irrigation management (PIM) organizations, i.e. WUAs, SWUFs and ICs, in both wadis would be provided under the project including technical assistance, transportation facilities, training, and preparing and printing manuals. The proposed technical assistance comprises inputs by four intemational specialists to direct activities in the areas of institutional development, communication, irrigation management and training, respectively. Then, at each wadi scheme, a national community development expert and a national irrigation management expert, supported by local facilitators and field staff, would coordinate and undertake the mobilization and capacity building activities on a full-time day-to-day basis. Transportation facilities commensurate with this effort would be provided for. Envisaged training and other capacity building activities include PIM study tours and in-country training activities, WUA formation catalyst activities, training of facilitators and WUA leaders, training equipment and materials, and preparation of manuals for facilitators (program implementation) and WUAs (irrigation management). (2) Improvement of Spate Irrigation Management (US$0.9 million) (a) Management Information Systems (MIS) (US$0.2 million) A management information system (MIS) will be provided to make water distribution efficient and equitable, as well as to facilitate proper and timely maintenance works. The system would include the following features: (i) providing timely hydrological information enabling efficient and equitable water distribution linked with flood monitoring system; (ii) monitoring and recording information on actual water distribution patterns and volumes, which would be the basis to refine the allocation rule; and (iii) recording machinery and equipment operation, financial expenditures under specific O&M budget headings, and water charge collection rates. (b) Flood Warning System (US$0.1 million) The flood warning system would provide and install simply telemetered hydrological monitoring equipment at a number of designated sites in the upper and middle catchments, as well as at the main diversion weir sites in each wadi. The early warning information would help operate the gates at diversions weirs more efficiently. - 33 - (c) Spate Management Models (US$0.2 million) Spate flow management models, including water diversion and distribution system, would be developed for the following objectives: (i) providing the information on the water distribution and irrigable lands based on some flood sizes/patterns and seasons; (ii) providing guidance to establish a criteria as to how much water should be diverted at each weir for different size and patterns of floods under each diversion weir; and (iii) providing information on the impacts by the changes of the operation rule of diversion wiers. (d) Hydrological Monitoring for Phase II (US$0.4 million) Hydrological monitoring would be carried out for the wadis to be implemented during phase II in order to collect adequate data (rainfall, wadi flow, groundwater) for the improved planning, design, and O&M. Required site and office equipment, technical assistance for the analysis, and minimum recurrent costs will be provided for the monitoring in these wadis. (3) Provision of O&M Equipment (US$3.8 million) The operation and maintenance equipment would be provided for the two wadis, including limited but necessary spare parts and incremental recurrence costs for adequate operation and maintenance. The total investment costs for the purchase of equipment account for US$2.5 million (US$1.1 million for Tuban and US$1.4 million for Zabid) and the total incremental recurrent costs account for US$1.3 million (US$0.6 million for Tuban and US$0.7 million for Zabid). PIUs would manage the equipment. When necessary, they would lease the equipment to users. (4) Environmental Management Plan (EMP) (US$1.1 million) This component would provide support for environmental mitigation and enhancement measures: soil salinity/sodicity mapping in wadi Tuban, upper watersheds study, monitoring and awareness activities for the sustainable water resources management. (a) Monitoring and Awareness Activities for Sustainable Water Resources Management (US$0.6 million) The status of groundwater is gradually deteriorating due to increasing water pumping. The project aims to restore spate irrigation facilities, thus reducing groundwater pumping. However, the groundwater monitoring would be funded to check the groundwater depletion trend and sea water intrusion in the lower reaches of wadi Tuban and Zabid. Also, awareness activities through WUAs for the sustainable water resources management would be supported. (b) Upper Watersheds Study (US$0.3 million) The status of the upper catchments has a major effect on water and sediment management aspects in the lower wadi spate irrigation schemes. This component would support a study for upper catchment in Wadi Tuban and wadi Zabid, including aerial photography and/or satellite imagery, preferably at two time points so that trends in catchment characteristics can be identified. Rainfall and streamflow data would also be collected over the same timeframe. - 34 - (c) Soil Salinity/Sodicity Mapping in Wadi Tuban (US$0.2 million) The soil survey of the lower wadi Tuban would be conducted to determine the extent of saline, sodic, and saline-sodic soils. The survey would aim to determine appropriate soil and water management measures for each soil type and whether some areas should be excluded from project interventions. Project Component 3 - US$ 0.60 million Intensive A2riculture Demonstration Prop-ram Component The objective of the proposed agriculture development component is to increase agricultural production in the Tuban and Zabid irrigation schemes. This objective would be achieved through the implementation of an intensive on-farm demonstration program aimed at increasing crop yields. Progress towards the achievement of this objective would be monitored essentially through the evolution of crop yield in the project areas. The agriculture development component would capitalize on the rehabilitation and upgrading of the spate irrigation infrastructure to help foster greater agricultural development and bring about increased value. Under this component, the SIIP would finance an innovative Saturation and Localized High Impact Demonstration Program (SLHIDP) that would have a rapid impact on the yields of major crops cultivated in the Tuban and Zabid schemes. The proposed SLHIDP would cover about ten percent of the cultivated area of each of the Tuban and Zabid schemes annually. This is much higher than the usual 2 to 4 percent area coverage used in other demonstration programs. Hence, the name "saturation" demonstration program was adopted. The SLHIDP would target not only the farms that are irrigated from spate water but also those farms within the scheme that use underground water exclusively or in conjunction with spate water. The SLHIDP would transfer existing, proven technologies from the research stations to farmers fields by using the successful Rapid Impact Program (RIP) of the Agricultural Research and Extension Authority (AREA) as a model. The SLHIDP would demonstrate a number of proven technologies, which would include the introduction of superior varieties (for cotton, sorghum, sesame, etc.), the usage of quality seeds, better leveling of cropped parcels, improved on-farm water management (where ground water is used), better crop husbandry techniques (near optimal seeding dates, better weeding and crop protection from pests and diseases, etc.), and the introduction of new crops, as well as inter-cropping of compatible crops. Implementation of the SLHIDP would be undertaken through contractual services between PMU and qualified local public and private sector institutions. These institutions might include AREA, TDA, RDA-Lahej, the General Seed Multiplication Corporation (GSMC), NGOs, and the Almaz Co. The PMU will draft Terms of Reference and an invitation for proposals based on IDA standard procurement documents. The TORs and the letter of invitation should be sent to a short list of institutions no later than project Board approval. The PMU would evaluate the submissions of interested bidders. In the short listing and selection process, the PMt should encourage joint ventures between agencies that have complementary mandates such as research, extension and seeds production and distribution skills. The successful bidders would be awarded a one-year contract within the framework of a multi-year program with the stipulation that fiature annual contracts would be conditional on the satisfactory implementation of previous contracts. The successful bidders is required to conduct annual farmer surveys to: (i) ascertain the validity of the technological package proposed for the site; and (ii) identify constraints that farmers think should be resolved as a matter of priority. - 35 - After contracts are signed, the PMU in collaboration with TDA and RDA-Lahej would designate a SLHIDP supervisor for each of Tuban and Zabid. The supervisor would: (i) monitor the programming and implementation of the program; (ii) follow-up and monitor execution of the contracts; (iii) supervise and evaluate the performance of the agencies implementing the contracts; and (iv) monitor and gather data on the implementation and impact of the SLHIDP in farmers yields and productivity. Project Component 4 - US$3.80 million Institutional StrenLthenine and Capacitv Building and PMU Component (1) Support to Government Irrigation Sector (US$0.6 million) This component would provide the institutional assessment of the irrigation institutions, including GDI and relevant institutions, the action plan to be formulated within the framework of the Aden Agenda, and assistance for GDI in developing, planning and preparation guidelines for the PIM program in Yemen, including training and technical assistance in these areas and for other irrigation agencies based on the results of the assessment. The component will also include inventory and assessment for dams in upper wadis Tuban and Zabid, which would affect the performance of the spate irrigation facilities downstream. (2) Support to Legal Framework Development (US$0.3 million) This component would provide technical assistance to help the Government advance the draft irrigation law, which would be critical for the long term institutional reform. (3) Project Preparation Studies for Other Wadis in Phase II (US$0.5 million) This component would include the preparatory studies and preliminary design for other wadis to be implemented in Phase II of the project. (4) Support to Project Management Unit (US$2.4 million) The project would establish and support the Project Management Unit (PMU) in Sana'a and a small Project Implementation Unit (PIU) in both Tuban and Zabid. The total investment costs would be US$2.1 million, which is broken down for PMU in Sana'a account for US$1.1 million, as well as US$0.5 million each for PIUs in Tuban and Zabid. The total recurrent costs would be US$0.3 million, including the PMU in Sana'a and the two PIUs in Tuban and in Zabid. The PMU staff would consist of a project director, a project engineer, a project institutional specialist, finance and administration officer, a procurement specialist and a monitoring and evaluation officer. The Tuban and Zabid PIU offices would have an assistant engineer and an assistant institutional specialist. Support staff, office equipment and vehicles are also included. Key staff would receive training in project management. - 36 - Annex 2: Appendix 1 REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Table 1.1 Implementation Milestones for Phase I and Phase II Milestone Timing Action iiated Phase I of the Tuban Zabid Program -MS I End of first year of -Formation and training of Water -Formation and training of Water implementation. User Associations (WUAs) at User Associations (WUAs) at primary/secondary level based on primary/secondary level based on existing informal Water User existing informal Water User Groups Groups (WUGs). (WUGs) is initiated. -MS2 -Participation of WUAs in the -Agreement on cost-sharing concept and design of arrangements for capital cost rehabilitation works. recovery. -MS3 -Increased contribution of GOY to -Increased contribution of GOY to O&M cost for the main spate O&M cost for the main spate irrigation schemes. irrigation schemes, -MS4 End of second year of -WUAs participate in procurement Formation and training of Water User implementation. process of main packages. Associations (WUAs) at primary/secondary level based on existing informal Water User Groups (WUGs) is complete. -Irrigation management transfer -MS5 (IMT) of secondary systems to -Participation of WUAs in the WUAs initiated. concept and design of rehabilitation works. -Design and agreement on -MS6 cost-sharing arrangements for -Design and agreement on O&M. cost-sharing arrangements for O&M. -MS7 End of third year of -Irrigation management transfer -WUAs participate in procurement implementation. (IMT) of primary systems to process of main packages. WUAs is initiated. -MS8 -Irrigation management transfer -Irrigation management transfer (IMT) of secondary systems to (IMT) of primary/secondary systems farmers is complete. to WUAs is initiated. -MS9 -Scheme Water User Federations (SWUF) and joint management mechanisms (Irrigation Council) are initiated. -MS 10 -Farmers start paying their share of -Farmers start paying their share of O&M cost. O&M cost. - 37 - -MSI I End of fourth year of -Irrigation management transfer implementation. (IMT) of primary systems to farmers is complete. -MS12 -Formation of Scheme Water User -Scheme Water User Federations Federations (SWUF) is completed. (SWUF) is initiated. -Enactment of Irrigation Law. -MS13 Enactment of Irrigation Law. -Decision on whether to proceed or -MS 14 not with Phase II program (based -Decision on whether to proceed or on performance against MS 1 to not with Phase II program (based on 11). performance against MS1 to 11). -MS 15 End of fifth year of -Irrigation management transfer implementation. (IMT) of primary/secondary systems to farmers is complete. -MS16 -Rehabilitation of works for Phase -Rehabilitation of works for Phase I is I is complete. complete. -MS17 -Preparation for sub-projects under -Preparation for sub-projects under Phase II has started. Phase II has started. -Irrigation Council (IC) is fully -Irrigation Council (IC) is initiated, functioning. and formation of Scheme Water User Federations (SWUF) is completed. Phase 11 of the Program -MS1 8 End of sixth year of -Implementation of rehabilitation -Implementation of rehabilitation implementation. works for Phase II has started. works for Phase II has started. -MS9 -Irrigation Council (IC) is fully functioning. -MS20 -Complete formation and training -Complete formation and training of of WUAs for primary systems in WUAs for primary systems in Phase Phase II schemes. II schemes. -MS21 End of seventh year of -SWIUFs and ICs for Phase II -SWUFs and ICs for Phase II implementation. schemes are formed. schemes are formed. - 38 - -MS22 End of eight year of -All rehabilitation works for Phase -All rehabilitation works for Phase II implementation. II are completed. are completed. -MS23 -WUAs and SWUFs for Phase II -WUAs and SWUFs for Phase II are are functional. functional. -MS24 -Joint management mechanisms -Joint management mechanisms for for Phase II schemes are fully Phase II schemes are fully functional. _________________ ____________________ functional. - 39 - Annex 2: Appendix 2 REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Program Context What Will be done What will be Done Full Program Phase I Major Issues (Phases I & II) (To cover 90,000 ha in the following seven (To cover 26,000 ha in the following two spate main spate irrigation schemes in Yemen: irrigation schemes: Tuban and Zabid; over a Tuban, Bana, Hassan, Mawr, Zabid, period of five years). Siham, and Rima'a (over a period of ten years). - Financial Government to provide enough O&M Government to provide enough O&M budget sustainability of O& M budget (Government) by year 2001 for (Government) by year 2001 for all main all main schemes. schemes. Establish a mechanism for O&M Establish a mechanism for 0 & M cost-sharing cost-sharing by which users would by which users would contribute to O&M cost. contribute to O&M cost. Government Government contribution would be provided on contribution would be provided on a a decreasing basis in relation to the expected decreasing basis in relation to the increasing farmer contributions. expected increasing farmer contributions. Implement the cost-sharing * Implement the cost-sharing mechanism for mechanism for O&M cost for all the O&M cost for the two schemes by year 2002. seven spate irrigation schemes by year 2007. Provide incremental O&M budget to cover new activities of O&M in the two schemes starting year 2002 and through the life of the project (Phase I). -Week institutions and Decentralize management of the seven Decentralize management of the two spate poor management of spate irrigation schemes to scheme irrigation schemes to scheme level, and spate irrigation systems level, and establish all seven joint establish two joint Irrigation Councils (ICs) Irrigation Councils (ICs) and Scheme and Scheme Water User Federations (SWUFs) Water User Federations (SWUFs) at at that level with the participation of the users that level with the participation of the (year 2004). users (year 2008). Establish xxx Water Users' Establish 29 Water Users Associations Associations (WUAs) in the country (WUAs) at the tertiary and branch canal levels seven main schemes at the tertiary and to be responsible for operation and branch canal levels to be responsible maintenance of the two spate irrigation for operation and maintenance of the schemes. seven spate irrigation schemes. -40 - Redefine the role of the Government Redefine the role of the Government Institutions by year 2003 for irrigation Institutions by year 2003 for irrigation including: including: Restructuring those institutions to Restructuring those institutions to focus on focus on planning and support to planning and support to users (Study). users (Study). Decentralization of responsibilities (WUAs Decentralization of and ICs). responsibilities (WlUAs and ICs). * Training for WUAs, SWUFs, ICs and Training for WUAs, SWUFs, ICs and Government staff of the country seven Government staff of the 2 project schemes. schemes. - Poor O&M service Provide O&M equipment and spare Provide needed O&M equipment and spare parts for irrigation systems in all parts for the two project schemes (Zabid and seven schemes. Tuban). Development and implementation of Development and testing of water information water information system (MIS) in all system (MIS) in the two schemes. seven main schemes. Training and TA. Training and TA. - Deteriorating Rehabilitation and improvement of Rehabilitation and improvement of infrastructure infrastructure in the seven irrigation infrastructure in the two project irrigation systems at tertiary, branch and main systems at tertiary, branch and main canal and canal and headworks levels, including headwork levels, including wadi protection. wadi protection. - 41 - Annex 2: Appendix 3 REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT New Equipment for Tuban Type Unit cost (US$) New Equipment Total Costs (US$) Number Bulldozer (D6) 165,000 1 165,000 Bulldlozer (d4) 137,000 1 137,000 Front-end loader 108,300 1 108,300 Hydraulic excavator 150,000 1 150,000 Dump truck (15 tons) 60,000 2 120,000 Water tanker 100,000 1 100,000 Crane 110,000 1 110,000 Flat bed truck(3 tons) 30,000 1 30,000 Total Machine 9 920,300 Pick up 4WD 18,000 1 18,000 Landcruiser4WD 20,000 2 40,000 Total Vehicle 3 58,000 Total 12 978,300 Note: New equipment will be procured considering the O&M loads estimated for each year and replacement schedule of the existing equipment over years. Existing Equipment in Tuban Type Maker Model Year Owner Condition Bulldozer D6 Fiat Hitachi FD175 1987 Lahej overhaul+spare+chain Bulldozer D6 Fiat Hitachi FD175 1987 Lahej overhaul+spare+chain Bulldozer D6 Komatsu Komatsu 65 1985 Lahej overhaul+spare+chain Bulldozer D6 Komatsu Komatsu 66 1985 Lahej overhaul+spare+chain Bulldozer D4 Caterpillar 1987 Lahej overhaul-spare+chain Front end loader Fiat Hitachi FR100 1996 Lahej Excavator Fiat Hitachi FH200 LC-3 1996 Lahej repair Landcuiser Toyota 1990 Lahej spairs Landcuiser Toyota 1987 Lahej spairs Bulldozer D6 Catapillar DGE 1994 LWCP PIU Front end loader Hundai HL17 1994 LWCP PIU Back hoe Case 580SK 1995 LWCP PIU Flat bed truck Iveco ML120E 1994 LWCP PIU Pick up 4WD Mitsubishi K32TJ 1995 LWCP PIU Pick up 4WD Mitsubishi K32TJ 1995 LWCP PIU Pick up 4WD Mitsubishi K32TJ 1995 LWCP PIU Note: The equipment will be refurbished by the allocated maintenance budget in the project. - 42 - Annex 2: Appendix 4 REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT New Equipment for Zabid Type Unit cost (US$) Number Total Costs (US$) Bulldozer (D6) 165,000 1 165,000 Front-end loader 108,300 2 216,600 Hydraulic excavator 150,000 1 150,000 Dump truck (15 tons) 60,000 3 180,000 Back hoe 70,000 1 70,000 Flat bed truck(3 tons) 30,000 1 30,000 Water tanker 100,000 1 100,000 Crane 110,000 1 110,000 Generators (350KVA) 50,000 2 100 ,000 Total Machine 13 1,121,600 Pick up4WD 18,000 2 36,000 Landcruiser 4WD 20,000 2 40,000 Total Vehicle 4 76,000 Total 17 1,197,600 Note: New equipment will be procured considering the O&M loads estimated for each year and replacement schedule of the existing equipment over years. Existing Equipment in Zabid Type Maker Model Year Owner Condition Bulldozer Cat D6D 1987 TDA overhaul+spare+chain Bulldozer Komatsu D6H 1986 TDA overhaul+spare+chain Front end loader Komatsu WA180 1989 TDA repairs Hydraulic excavator Komatsu PC220 1989 TDA spares Flat bed truck Nissan TM80F 1983 TDA overhaul+spares Flat lbed truck Nissan CM80F 1983 TDA overhaul+spares Water tanker Nissan 198 1987 TDA overhaul+spares Water tanker Nissan 199 1987 TDA overhaul+spares Crane Nissan CK20L 1987 TDA overhaul+spares Generator (350 KVA) TDA Back hoe * Case SK580 1995 LWCP PIU Back hoe * Case SK580 1998 LWCP PIU Notet: 1) * Back hoe is part-time available only due to its continuous activities for pipe distribution system, but would be used to ease peak O&M loads during flood seasons. 2) The equipment will be refurbished by the allocated maintenance budget in the project. -43 - Annex 3: Estimated Project Costs REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Local Foreign Total Pr o osct 0 t4 B oponet US$million U $ion US $nillion A. Rehabilitation and Improvement of Spate Irrigation 6.40 4.10 10.50 Infrastructure B. Irrigation and Environment Management and PIM 2.00 6.00 8.00 C. Intensive Agriculture Demonstration Program 0.20 0.30 0.50 D. Institutional Strengthening and Capacity Building and PMU 2.10 1.20 3.30 Total Baseline Cost 10.70 11.60 22.30 Physical Contingencies 0.90 0.90 1.80 Price Contingencies . 0.80 0.70 1.50 Total Project Costs 12.40 13.20 25.60 Total Financing Required 12.40 13.20 25.60 -44- Detailed Cost Table Project Cost by Component Local Foreign Total _ _____________________________________S VSS Us$ USS A. Rehabilitation and Improvement of Spate Irrigation Infrastructure 1. Wadi Tuban Topographical Survey Investigation 14,000 56,000 70,000 Detailed Design for Main Contracts 186,500 186,500 373,000 Supervision of Construction 80,000 80,000 160,000 Rehabilitation Works 3,328,136 1,821.272 5.149,408 Subtotal Wadi Tuban 3,608,636 2,143,772 5,752,408 2. Wadi Zabid Topographical Survey Investigation Detailed Design for Main Contracts 35,000 35,000 70,000 Supervision of Construction 146,000 146,000 292,000 Hydraulic Model Testing 62,480 62,480 124,960 Rehabilitation Works 16,000 64,000 80,000 Subtotal Wadi Zabid 2,555.135 1,610,226 4,165.361 Subtotal Rehabilitation and Improvement of Spate Irrigation 2,814,615 1,917,706 4.732.321 Infrastructures 6,423,251 4,061,478 10,484,729 B. Irrigation and Environment and Participatory Irrigation Management (PIM) 1. Formation of PIM Organizations 498,000 2,206,500 2,704,500 2. Improvement in Spate Irrigation Management Monitoring for Phase II 93,850 305,150 399,000 Management Information System (MIS) 76,700 68,300 145,000 Flood Warning System (incl. O&M) 20,100 80,900 101,000 Spate Management Model 49,000 132,000 181,000 Subtotal Improvement in Spate Irrigation Management 239,650 586,350 826,000 3. Improved O&M Equipment 887,704 2,539,687 3,427,391 4. Enviromnent Oriented Operations 337,234 639.437 976,671 Subtotal Irrigation and Environment and Participatory 1,962,588 5,971,974 7,934,562 Irrigation Management (PIM) C. Intensive Agricultural Demonstration Program 185,000 285,000 470,000 D. Institutional Strengthening and Capacity Building and PMIJ' 94,500 150,000 244,500 Improved Legal Framework 110,000 365,000 475,001 Support to Government Irrigation Issues 95,000 380,000 475,000 Other Wadis Project Preparation Studies 1,841,390 339.010 2,180,400 PMU 2,140,890 1,234,010 3,374,901 Subtotal Institutional Strengthening and Capacity Building and PMU TOTAL BASELINE COSTS 10,711,729 11,552,463 22,264,191 Physical Contingencies 890,446 878,303 1,768,750 Price Contingencies 799,731 740,755 1,540,486 TOTAL PROJECT COSTS 12,401,906 13,171,521 25,573,427 a/ Main office in Sana'a with two branch offices respectively in Wadi Tuban and Wadi Zabid. -45 - Yemen Spate Irriation Improvement Project (SIIP) Components Prolect Cost Summay (YR 000) (USS) % %Total % Total Foreign Base ForeIgn Base Local foreign Total Exchange Costs Local ForeIgn Total Exchange Costs A. RehabIlltatlon and Improvement of Spate IrrigatIon Intrastructure 1. Wadl Tuban Topogaphicat Swvey vwestigatron 2.212 8,848 11,060 80 14,000 56,000 70,000 80 - Detailed Design for Main Contracts 29,467 29,467 58,934 50 2 186.500 186,500 373,000 50 2 Supervision of Constnrdion 12,640 12.640 25,280 50 1 80,000 80,000 160,000 50 1 Rehabitilation Works 525.845 287,761 813.606 35 23 3,328,136 1,821,272 5,149,408 35 23 Subtotal Wadi Tuban 570,164 338,716 908,880 37 26 3,608,636 2,143,772 5,752,408 37 26 2. Wadi Zabid Topographical Survey Investigation 5,530 5,530 11.060 50 - 35,000 35,000 70.000 50 Detailed Desin for Main Contracts 23,068 23,068 46,138 50 1 146,000 146,000 292,000 50 1 Supervision of Consinxubon 9,872 9.872 19,744 50 1 62,480 62,480 124,960 50 1 Hydraulc Model Testing 2,528 10,112 12,640 80 16,000 64,000 80,000 80 Rehabriltation Works 403,711 254.418 658,127 39 19 2.555,135 1.610,226 4.165.361 39 19 Subtotal Wadl Zabid 444,709 302,998 747,707 41 21 2,814.615 1.917,706 4,732.321 41 21 Subtotal RehabiltatWon and Improvement of Spate Irrigation Infrastructure 1.014,874 641,714 1,656,567 39 47 6,423,251 4,061,478 10,484,729 39 47 B. Participatory Irrigation Management (PIM I. Formalion of PIMOrganisalions(WWUAsand SMUs) 78,684 348,627 427,311 82 12 498,000 2,206,500 2,704,500 82 12 2. Improvement In Spate IrrigatIon Managemen Moniloring for phase I 1t4,828 48,214 63,042 76 2 93.850 305,150 399,000 76 2 Management lInformalion System (MIS) 12,119 10,791 22,910 47 1 76,700 68.300 145,000 47 1 Spate Warning System 3,176 12,782 15,956 Be - 20,100 80,900 101,000 80 CD Spate Management Model 7,742 20,850 28,598 73 1 49,000 132,000 181,000 73 1 Subtotal Improvement In Spate Irrigation Menagemen 37,865 92.643 130,508 71 4 239,650 586,350 826.000 71 4 3. Improved O8M on Irrigalion Inlrasniudures 140,257 401.271 541,528 74 15 887,704 2,539,687 3.427.391 74 15 4. Environment Oriented Operations 53,283 101,031 154,314 65 4 337,234 639,437 976,671 65 4 Subtotal Participatory Irrigation Management (PIM 310,089 943,572 1,253,661 75 36 1,962,588 5,971,974 7,934,562 75 36 C. tnstluttonal StrengthenIn£ Inmproved Legal Framework 14,931 23,700 38,631 61 1 94,500 150,000 244,500 61 1 Support to Government Irrigation Retated Institutions (MAt. GDI, TDA...) 17.380 57,670 75,050 77 2 110,000 365,000 475,001 77 2 Other Wadis Preparation Studies 15,010 60,040 75,050 80 2 95.000 380,000 475.000 80 2 Subtotal Instiuttional Strenglhentnt 47,321 141.410 188,731 75 5 299,500 895,000 1.194,501 75 5 0. Intensive Agricultural Demonstration Programme 29,230 45.030 74,260 61 2 185,000 285,000 470,000 61 2 E. Prolect Management Unit (PMU) la 290,940 53,564 344,503 16 10 1,841,390 339.010 2.180,400 16 10 Total BASEUNE COSTS 1.692,453 1,825,289 3,517,742 52 100 10,711,729 11,552,463 22.264,191 52 100 Physical Contingencies 140,691 138,772 279,462 50 8 890,446 878,303 1,768,750 50 8 Price Contingencies 248,580 229,976 478,U3_ 48 14 799,731 740,755 1,540,486, U 7 Total PROJECT COSTS 2,081,711 2,194.037 4,275,748 51 122 12.401,906 13,171,521 25,573,427 52 115 \a Main office in Sanasa with two branch-ofices respectivety in Wadi Tuban and Wadi Za%hd Yemen Spate Irrigation Improvement Project (SIIP) Expenditure Accounts Project Cost Summary (YR '000) (US$) % % Total % % Total Foreign Base Forelgn Base Local Foreign Total Exchange Costs Local Foreign Total Exchange Costs l. Investment Costs A. Civil Works Headworks 282,999 182,681 465,680 39 13 1,791,132 1,156,212 2,947,344 39 13 Earthworks 366,451 199,266 565,717 35 16 2,319,308 1,261,180 3,580,488 35 16 Canal Structures 58,474 37,271 95,745 39 3 370,089 235,892 605,981 39 3 Roads 74,289 31,838 106,126 30 3 470,18i 201,506 671,687 30 3 Other Civil Works 136,680 91,120 227,800 40 6 865,062 576,708 1,441,770 40 6 Subtotal Civil Works 918,892 542,177 1,461,069 37 42 5,815,771 3,431,498 9,247,269 37 42 B. Machinery 80,620 241,859 322,478 75 9 510,250 1,530,750 2,041,000 75 9 C. Vehicles 20,975 62,924 83,898 75 2 132,750 398,250 531,000 75 2 D. Equipment 19,924 78,273 98,197 80 3 126,100 495,400 621,500 80 3 E. Training Abroad 8,058 15,642 23,700 66 1 51,000 99,000 150,000 66 1 In Country 3,237 9,387 12,624 74 20,490 59,410 79,900 74 4 Subtotal Training 11,295 25,029 36,324 69 1 71,490 158,410 229,900 69 i F. Technical Assistance International TA 1,580 334,960 336,540 100 10 10,000 2,120,000 2,130,000 100 10 National TA 48,585 55,300 103,885 53 3 307,500 350,000 657,500 53 3 Subtotal Technical Assistance 50,165 390,260 440,425 89 13 317,500 2,470,000 2,787,500 89 13 G. Studies 122,984 240,094 363,078 66 10 778,380 1,519,580 2,297,960 66 10 H. Others 326,220 62,566 388,786 16 11 2,064,684 395,988 2,460,671 16 11 Total Investment Costs 1,551,074 1,643,180 3,194,254 51 91 9,816,925 10,399,876 20,216,800 51 91 II. Recurrent Costs A. National Stalf Salaries 73,395 - 73,395 - 2 464,525 - 464,525 - 2 B. Operation & Maintenance O&MonEquipement 6,115 15,215 21,330 71 1 38,700 96,300 135,000 71 1 O&M on Vehicules 36,160 36,340 72,500 50 2 228,858 230,002 458,860 50 2 O&Mon Machinery 17,444 119,823 137,267 87 4 110,408 758,372 868,780 87 4 O&M on Irrigation Infrastructures 1,849 4,313 6,162 70 - 11,700 27,300 39,000 70 Subtotal Operatlon & Maintenance 61,567 175,692 237,259 74 7 389.666 1,111,974 1,501,640 74 :7 C. Others 6,417 6,417 12,834 50 40,613 40,613 81,226 50 Total Recurrent Costs 141,379 182,109 323,488 56 9 894,804 1,152,587 2,047,391 56 9 Total BASELINE COSTS 1,692,453 1,825,289 3,517,742 52 100 10,711,729 11,552,463 22,264,191 52 100 Physical Contingencies 140,691 138,772 279,462 50 8 890,446 878,303 1,768,750 50 8 Price Contingencies 248,568 229,976 478,543 48 14 799,731 740,755 1,540,486 48 7 Total PROJECT COSTS 2,081,711 2,194,037 4,275,748 51 122 12,401,906 13,171,521 25,573,427 52 115 Yemen Spate Irrigation Improvement Progect (SIIP) Components by Financiers (US$) Benlticlarles IDA The Government Total Local (Ercl. Dutfes S Amount % Amount % Amount % Amount % For. Exch. Taxes) Taxes A. Fehabiltlatlon and Improvement of Spate Itrrigation Intrastructures 1. Wadi Tuban Toporgrapical Survey investigation - 79,008 100.0 0 79,008 0.3 63,206 15,802 Delailed Design for Main Conracts - 424,249 t000- 424,249 1 7 212,124 212.124 Supervision ci Construction - 189,546 100.0 - 189,546 0.7 94.773 94,773 Rehabfiitation Works_ 415,874 6.9 5,023,419 03.0 613,030 te1O 6.052,323 23.7 2,142,957 3,607,183 302,183 Subtotal Wati Tuban 415.874 62 5.716.221 84.7 613,030 9.1 6,745,125 26.4 2.513,060 3,929,882 302.183 2. Wadt Zabid Topographial Survey Investigation - 80,636 100.0 0 80,636 03 40,318 40,318 - Detailed Design tlo Main Contracts 334,848 100.0 * 334,848 1.3 167,424 167,424 Supervision ot Construction 48,310 100.0 - 148.310 0.6 74,155 74,155 Hydrautic Model Testing * 89,128 100.0 89,126 03 71,30t 17,825 Flehabiitalion Works 326,058 6.5 4,099.1 t9 82.2 562,092 1 .3 4,987.269 19.5 1,930,346 2.811,080 245.843 Subtotal Wadi Zabid 326.058 5.8 4,752,039 84.3 562,092 10.0 5.640,189 22.1 2,283,544 3,110,802 245,843 Subtotat Rehabilitation and Improvement o1 Spate trrlgalton Intrastructures 741,932 6.0 10,468,260 84.5 1,175,122 9.5 12.385.314 48.4 4.796.604 7,040,684 548,026 B. ParticIpatory Irrigation Management (PIM) 1. Foornalionot PIM Organsatiorts (WtAs ani SMUs) 85.033 2.8 2,426.256 81.0 484,212 16.2 2,995,500 11 7 2,437,496 537,056 20,948 2. tmptovement In Spate Irrigation Management Monitoringtfor phase It - 442,347 97.7 1D,347 2.3 452,693 1.8 347,114 105,579 Management Inormnafion System (MIS) 122,833 75,6 39,571 24.4 162.404 0.6 76,408 85,996 Spate Warning System 92,749 80.7 22.168 193 114.917 04 91.727 23,190 Spate Managemont Mode _ '94,032 99.6 836 0.4 194.867 0.8 141.539 53,328 Subtotal tmprovement In Spate irrigation Management - * 851.961 92.1 72,921 79 924,882 3.6 656,789 268,093 1 3. frniproved OM oan Irrigalion Intrastructuros 385,400 t0.0 2.475,139 642 997,070 258 3,857,610 is 1 2,865,326 819,426 t72,858 Z.- 4 Environment Oriontei Operations 1,077.618 99.2 8,889 08 1.086,507 42 7t3,739 372.768 tX Subtotal Patlicipatory Irrigatlon Management (PIM) 470Q433 5.3 6,830,974 77.1 1563,092 17.6 8,864,499 347 6,673,349 t,997,344 193,806 C. tnstlullonal Strengitening Improved Legal Framewort 264.991 100.0 264,991 1.0 161.606 103,385 Suppod toGovemmentIrrigationFolatledlnstilutons (MAI,GDI.TDA...) * - 542,748 100.0 0 542.748 2.1 416,131 t 26,617 Other Wadis Preparation Stuties - 535,694 100.0 0 . 535,694 2.1 428.555 107,139 Subtotal Institutlonal Strenglhentng - - 1,343.433 1000 0 - 1.343,433 5.3 1.006.292 337,141 D. Inlensive Agricullural Demonstralion Programme 547,572 100.0 - 547,572 2.1 328.923 218,649 - E. Proqeci Management Init (PMU) /a - . 2.130,711 87.6 301,899 12.4 2.432,610 9.5 366,353 2,048,008 18.249 Total dCsbursement 1,212,365 4.7 21,320,949 83.4 3,040,112 11.9 25,573,427 1000 13,171,521 11,641,825 760,081 ba Main oflice in Sanaa avth two branch-doices respectively in Wack Tuban and Wacb Zabid Yemen Spate Irrination Improvement Project (SilP) Expenditure Accounts by Financiers (US$) Benificlaries IDA The Government Total Local (Excl. Duties & Amount % Amount % Amount % Amount % For. Exch. Taxes) Taxes I. Investment Costs A. Civil Works Headworks - 3,187,081 90.0 354,120 10.0 3,541,201 13.8 1,390,039 1,974,101 177,060 Earlhworks 424,405 10.0 3,395,236 80.0 424,405 10.0 4,244,045 16.6 1,496,910 2,534,933 212,202 Canal Structures 71,688 10.0 573,502 80.0 71,688 10.0 716,877 2.8 279,191 401,842 35,844 Roads 76,196 10.0 609,571 80.0 76,196 10.0 761,964 3.0 228,589 495,277 38,098 OtherCivil Works 169,644 10.0 1,357,148 80.0 169,644 10.0 1,696,435 6.6 678,574 933,039 84,822 Subtotal Civil Works 741,932 6.8 9,122,538 83.2 1,096,052 10.0 10,960,522 42.9 4,073,303 6,339,193 548,026 B. Machinery * 2,148,769 95.0 113,093 5.0 2,261,862 8.8 1,696,396 452,372 113,093 C. Vehicles - - 547,375 95.0 28,809 5.0 576,184 2.3 432,138 115,237 28,809 D. Equipment - 670,207 95.0 35,274 5.0 705,481 2.8 562,010 143,471 E. Training Abroad - 1 163,697 100.0 0 163,697 0.6 108,040 55,657 In Country * - 88,590 100.0 0 88,590 0.3 65,840 22,749 Subtotal Training - 252,286 100.0 0 - 252,286 1.0 173,880 78,406 F. Technical Assistance International TA * 2,346,076 100.0 - - 2,346,076 9.2 2,335,163 10,913 National TA * - 730,859 100.0 - - 730,859 2.9 387,072 343,787 Subtotal Technical Assistance 3,076,935 100.0 - - 3,076,935 12.0 2,722,235 354,700 G. Studies - 2,607,872 100.0 0 - 2,607,872 10.2 1,718,865 889,007 H. Others 2,715,946 97.2 79,070 2.8 2,795,016 10.9 462,306 2,332,710 - Total Investment Costs 741,932 3.2 21,141,928 91.0 1,352,298 5.8 23,236,158 90.9 t1,841,133 10,705.096 689,928 11. Recurrent Costs A. National Stall Salaries 49,089 9.5 54,797 10.5 415,545 80.0 519,431 2.0 - 519,431 - S. Operation & Maintenance O&M on Equipement - - 29,838 20.0 119,351. 80.0 149,188 0.6 106,200 42,988 - O&M on Vehicules 54,197 10.3 51,108 9.7 421,220 80.0 526,526 2.1 266,352 241.891 18,282 O&M on Machinery 353,340 35.0 - - 656,204 65.0 1,009,544 3.9 882,341 80,663 46,540 O&M on Irrigation Infrastructures 13,807 30.0 - - 32,215 70.0 46,022 0.2 32,215 11,505 2,301 Subtotal Operation & Maintenance 421,344 24.3 80,946 4.7 1,228,990 71.0 1,731,280 6.8 1,287,109 377,048 67,123 C. Others - - 43,279 50.0 43,279 50.0 86,558 0.3 43,279 40,249 3,030 Total Recurrent Costs 470,433 20.1 179,022 7.7 1,687,814 72.2 2,337,269 9.1 1,330,388 936,728 70,153 Total Disbursement 1,212,365 4.7 21,320,949 83.4 3,040,112 11.9 25,573,427 100.0 13,171,521 11,641,825 760,081 Yemen Spate Irrigation Improvemei Disbursement Accounts t (US$) Beniticlarles IDA The Government Total Local (Excl. Duties & Amount % Amount % Amount % Amount % For. Exch. Taxes) Taxes 1. Civil Works 741,932 6.7 9,122,538 82.6 1,175,122 10.6 11,039,592 43.2 4,073,303 6,418,263 548,026 2. Goods - 3,292,649 95.0 173,297 5.0 3,465.947 13.6 2,627,205 696,840 141,902 3. Services - 8,671,036 100.0 3,879 - 8,674,915 33.9 5,096,062 3,578,853 4. Miscellaneous 470,433 19.7 234,726 9.8 1,687,814 70.5 2,392,974 9.4 1,374,951 947,869 70,153 Total 1,212,365 4.7 21,320,949 83.4 3,040,112 11.9 25,573,427 100.0 13,171,521 11,641,825 760,081 (' 0 Yemen Spate Irrigation Improvement Project (SIIP) Project Components by Year - Totals Including Contingencies (US$) Totals Including Contingencies 2001 2002 2003 2004 2005 Total A. Rehabilitation and Improvement of Spate Irrigation Infrastructures 1. Wadi Tuban Topographical Survey Investigation 38,993 40,015 - - 79,008 Detailed Design tor Main Contracts 167,112 171,492 85,645 - 424,249 Supervision of Construction 34,298 66,874 69,830 18,544 189,546 Rehabilitation Works 192,179 1,483,860 2,328,620 1,745,035 302,631 6,052,323 Subtotal Wadi Tuban 398,284 1,729,664 2,481,138 1,814,865 321,174 6,745,125 2. Wadi Zabid Topographical Survey Investigation 11,141 34,298 35,197 - 80,636 Detailed Design for Main Contracts 77,986 137,193 119,669 334,848 Supervision of Construction 5,570 30,868 37,543 38,527 35,801 148,310 Hydraulic Model Testing 89,126 - - 89,126 Rehabilitation Works 109,080 525,088 1,115,572 1,773,442 1,464,087 4,987,269 Subtotal Wadi Zabid 292,903 727,448 1,307,980 1,811,969 1,499,888 5,640,189 Subtotal Rehabilitation and Improvement of Spate Irrigation Infrastructures 691,186 2,457,112 3,789,119 3,626,834 1,821,063 12,385,314 B. Participatory Irrigation Management (PIM) 1. Formation of PIM Organisatlons (WUAs and SMUs) 727,874 1,026,585 732,437 384,559 124,045 2,995,500 c.n 2. Improvement In Spate Irrigation Management Moniloring for phase 11 - 261,499 71,673 119,521 - 452,693 Management Information System (MIS) - 4,677 97,591 33,164 26,972 162,404 Spate Warning System 97,179 5,759 5,910 6,069 114,917 Spate Management Model 144,324 37,105 13,439 - - 194,867 Subtotal Improvement In Spate Irrigation Management 144,324 400,459 188,462 158,596 33,041 924,882 3. Improved O&M on Irrigation inlrastructures 1,374,966 269,215 232,143 1,698,107 283,179 3,857,610 4. Environment Oriented Operations 515,913 267,267 118,709 156,297 28,321 1,086,507 Subtotal Participatory Irrigation Management (PIM) 2,763,077 1,963,526 1,271,751 2,397,559 468,586 8,864,499 C. Institutional Strengthening Improved Legal Framework 113,332 116,302 35,357 - - 264,991 Support to Govemment Irrigation Related Institutions (MAI, GDI. TDA ... I 362,077 - 58,661 60,198 61,812 542,748 Other Wadis Preparation Studies 26,586 27,283 251,976 229,849 - 535,694 Subtotal Institutional Strengthening 501,995 143.585 345,994 290,047 61,812 1,343,433 D. Inlensive Agricultural Demonstration Ptogramme 41,221 151,224 142,173 126,417 86,537 547,572 E. Project Management Unit (PMU) /a 674,748 423,667 433,826 444,232 456,137 2,432,610 Total PROJECT COSTS 4,672,227 5,139,115 5,982,862 6,885,088 2,894,134 25,573,427 \a Main office in Sanea awith two branch-offices respectively In Wadi Tuban and Wadi Zabid Annex 4: Cost Benefit Analysis Summary REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT This annex details the results and the methodology followed in the financial and economic analyses of the Yemen - Irrigation Improvement project - IIP. The analyses are carried out for both Wadi Tuban (in Lahej Govemorate) and Wadi Zabid (in Hodeidah Governorate) and for the overall project. Summary of Benefits and Costs: Base Case Scenario - Net Present Values (million US$) Base case scenario Wadi Tuban Wadi Zabid Overall project Incremental Agricultural Benefits 6.61 7.41 14.02 Project Investment costs 5.38 4.63 10.01 Incremental O&M costs 1.43 1.40 2.83 Net Present Value @ 10% -0.21 1.38 1.17 Economic Rate of Return 9.6% 12.9% 11.2% Main Assumptions: 1. Back2round. The project seeks to ensure sustainable water resources management in both wadi Tuban and Zabid, contributing thereby to increase agricultural production, household incomes and food security in the project areas. Sustainable and efficient water conveyance, distribution and use in the two spate irrigation schemes will be achieved through the rehabilitation, improvement and protection of spate irrigation infrastructure, covering an area of about 26,000 ha, and institutional changes based on the concept of Participatory Irrigation Management (PIM). In addition, an intensive on-farm demonstration program will be introduced to enhance the economic viability of the proposed works and to improve the long-term sustainability of agriculture in the wadis by increasing farmers' capacity to pay for O&M charges. The demonstration program aims to increase crop yields through the transfer to farmers of existing, proven improved varieties and technological packages. 2. Beneficiaries are farmers, farm workers and their families whose livelihood depends on the 26,000 ha of Net Command Areas in both wadi Tuban and Zabid. A total of 27,000 households (150,000 people) live in both wadis. Many of these beneficiaries are poor. More than 28% of families live below the poverty line (US$203) in Tuban and more than 35% in Zabid. Most of the poor are landless, laborer or small-scale subsistence farmers. They suffer from limited access to food and water. Malnutrition and anemia are widespread. The project will improve their situation by increasing agricultural production, thereby household income and food security. -52 - Basic Social Data in Project Areas Wadi Tuban Wadi Zabid Net Command Area (ha) 11,046 15,215 Population (people) 75,000 76,000 Number of Households 13,000 14,000 Number of Spate scheme users 8,100 7,100 % of households landless (seasonal agricultural workers) 25% 50% % of households below the poverty line 28% 35% 3. Cost-Benefit Analysis. A cost-benefit analysis was carried out to estimate the net present value (NPV) and the internal rate of return (IRR) of the project. First, financial flows were calculated for both the "with" and "without" project scenarios. Then, conversion factors were used to translate the financial flows into economic values, and the economic NPV and IRR were calculated. The main distortion is caused by a high subsidy on fuel. Agricultural inputs are not subsidized except for cotton. Labor has been shadow priced at 50% in recognition of the high unemployment rate that prevails in the project area. No residual values were included in the analysis. It was assumed that the shadow exchange rate equals the market exchange rate (US$1 = YR 160). The period of analysis is 35 years, starting in 2001. Based on IDA norms for project in Yemen, a 10% discount rate was used. (a) Quantified Economic Benefits Based on the findings of the preparation studies revised during pre-appraisal, detailed crop budgets and farm models were estimated for both the "with" and "without" project scenarios. Both crop budgets and farm models are available in the project files. Benefils quantified are the incremental value in agricultural production. Improved agricultural production will materialize in three ways: (i) The first will be through the expansion of the area that will be irrigated annually after rehabilitation of the scheme. This expansion is modest in wadi Zabid, where the system is still generally in good condition of operation, more substantial in wadi Tuban, where the structure are older and have suffered from violent flood episodes and long deferred maintenance. It is anticipated that after completion of the rehabilitation works, the amount of water saved through these works would allow to irrigate under spate 10% more area annually in wadi Zabid and 35% in wadi Tuban. This translates into much less increase in cropping intensities for both wadis since total cropped area include groundwater irrigated areas which will not be modified; - 53 - Share of the Land Under Various Crops (% of Net Command Area) Before Rehabilitation of (First Year of After Rehabilitation (At Project Project Implementation) Comr letion) Crops Tuban Zabid Tuban Zabid Cotton 15 10 19 11 Sorghum Grain 7 24 9 27 Sorghum Fodder 14 19 19 21 Sesame 5 9 7 10 Other 3 7 4 9 Total Field Crops 44 70 58 77 Banana 8 8 Fruits 2 1 2 1 Vegetables and Okra 17 15 17 15 Total Hortic. Crops 19 24 19 24 Total Cropped Area 63 94 77 101 Cropping Intensity 63 103 77 110 Remarks: The increase in irrigated area only concerns the crops that we irrigated under pure spate, namely field crops. The increase in the area irrigated will follow by one year the schedule of rehabilitation of the works. Scheduling of Schemes' Rehabilitation (% of the Net Command Area Rehabilitated) 2002 2003 2004 2005 2006 Wadi Tuban 3% 29% 68% 95% 100% Wadi Zabid 2% 13% 36% 72% 100% In addition, the future without-project situation assumes that the irrigated area under pure spate (field crops) will further decrease by an average of 2% per year over 25 years as a result of reductions in the amount of water reaching the cultivated land. (ii) The second factor is also the result of scheme's rehabilitation and would come through the very modest improvement in crop yields due to the increased speed with which spate flows will be able to move from one part of the scheme to the next. This will unable farmers to seed their crops a few days closer to the optimal seeding dates and hence would improve their crop yields by an average of 2%. The future without-project situation assumes that crop yields would decrease on average by 2% over 10 years. This will only concern the crops irrigated under pure spate; and (iii) The third and most significant factor that is expected to improve agricultural production will come from improved technology, which is available but remains to be demonstrated to farmers. This component will concern both spate and groundwater crops. Improved, proven technologies include superior varieties, the usage of quality seeds, better leveling of cropped parcels, improved on-farm water management, better crop husbandry techniques and the introduction of new crops and inter-cropping of compatible crops. It is assumed that the improved farming practices will be adopted on 45% of the cropped area in wadi Tuban and 35% in wadi Zabid at project completion. - 54 - Yield Increases Due to the Adoption of Improved Farming Practices Wadi Tuban Wadi Zabid Cotton 15% 13% Sorghum Grain 3% 3%-5% Sorghum Fodder 8% 3%-5% Sesame 10% 10% Maize - 18% Cucurbits 3% Tomatoes 20% 20% Onions 20% 20% Eggplant 20% Red Chilies 20% Banana - 10%-15% Mango 10% Okra 15% Note: Increase in yields for traditional subsistence crops (sorghum) would be more difficult to achieve, as farmers showed a strong preference for their traditional cereal crops. The build-up of yield increases on the area concerned would be as follows: Share of the Cropped Area that will Adopt the Improved Farming Practices Cumulative 2001 2002 2003 2004 2005 Tuban 2% 9% 20% 31% 45% Zabid 2% 7% 16% 25% 35% Economic Prices. Input and output prices were converted into their economic values, when required. Agcultural produce. Based on commodity price data published by the World Bank, import parity prices, adjusted to the point of the farmgate, were calculated for sorghum and export parity prices for cotton and bananas. Market prices for Saudi Arabia were used to calculate export parity prices for onions and tomatoes. All other crops including by-products are valued at their local market prices. Inputs. Import parity prices were calculated for fertilizers. Labor has been shadow priced at 50% in recognition of the high unemployment or under-employment rates that prevail in the region. For energy, a conversion factor of 150% has been applied, in recognition of the subsidy on diesel. The economic costs of machinery and pumped water were calculated based on their constituents in energy, labor, depreciation and the machine owner margin. (b) Quantified Economic Costs The expansion of the irrigated area and the adoption of more intensive farning practices are made possible by the combination of several factors: (i) the rehabilitation/modernization of irrigation infrastructure with the results of improving water use efficiency, equity and timing; (ii) the transfer to and adoption by farmers of improved farming practices; and (iii) a better access to inputs and outputs markets through the rehabilitation of access rural roads. All these aspects are insured by different components of the project. - 55 - Accordingly, the costs included in the analysis are: (i) project investment costs for the rehabilitation/ modernization of irrigation infrastructure; (ii) O&M equipment, and agricultural demonstration; (iii) the incremental agricultural production costs; and (iv) the incremental O&M costs of irrigation infrastructure. Detailed calculation of the economic capital and recurrent costs are available in the project files. The translation of financial costs into economic costs involves removing taxes and taking into account the opportunity cost of labor and energy. Project Economic Costs Included in the Analysis Tuban Zabid Total Capital costs (US$ million) 6.5 5.7 10.15 - Irrigation infrastructure rehabilitation 5.3 4.2 9.7 - O&M equipment 1.0 1.3 2.3 - Agriculture Demonstration 0.2 0.3 0.5 Av. Annual Incremental recurrent costs (US$ per of NCA) 10.1 8.5 Notes : the incremental agricultural production costs are already taken into account in the crop budgets and farm models used to calculate project's agricultural benefits. The costs of the participatory irrigation management (US$8.8 million), the cost of institutional strengthening component (US$1.3 million) and the PMU costs (US$2.4 million) were excluded from the analysis, as their benefits are difficult to quantify and do not contribute directly to the increase in agricultural production. They total more than 50% of project costs. (c) Economic Returns Base Case Scenario - Net Present Values (million US$) Base case scenario Wadi Tuban Wadi Zabid Overall project Incremental Agricultural Benefits 6.61 7.41 14.02 Project Investment costs 5.38 4.63 10.01 Incremental O&M costs 1.43 1.40 2.83 Net Present Value @ 10% -0.21 1.38 1.17 Economic Rate of Return 9.6% 12.9% 11.2% The overall project is economically viable as it has an expected rate of return of 11.2%, above the opportunity cost of capital. Expected returns in wadi Tuban are lower than in Zabid and do not reach the threshold of 10%. The difference in returns between the two wadis is explained by: (i) a higher cost of rehabilitation per ha in wadi Tuban as the scheme is more complex and in a poorer state of repair due to recent flood damage and differed maintenance; and (ii) lower incremental agricultural benefits per ha in wadi Tuban as the wadi has a higher share of field crops for which expected benefits are lower. Indeed, additional benefits not quantified in the analysis are expected to occur. Accordingly and despite its low return, Wadi Tuban sub-project should be implemented. Other Benefits. Additional benefits of the schemes rehabilitation and improvement and agricultural demonstration components that are not accounted for in the economic analysis include: - 56 - (a) a decrease in soil salinity after rehabilitation of the schemes; (b) an increase in the value of land; (c) a possible increase of groundwater recharge through deep percolation from the irrigated fields; (e) a relative decrease in the reliance on groundwater resources and decrease in pumping; (d) improved equity in water distribution and hence incomes; (e) rehabilitation of the infrastructure will benefit the farmers, thus facilitating the introduction of reforms such as Participation Irrigation Management and Institutional Strengthening. It will ultimately contribute to the empowerment of the local communities; (f) the prevention of rural migration, the creation of job for the landless farmers as seasonal workers, the improvement of food security for the local population that often suffers from malnutrition; and (g) the savings in transportation costs after rehabilitation of access rural roads. Sensitivity analysis / Switching values of critical items: Several risks that would jeopardize the successful implementation of the project and affect its EIRR were identified. They include: (i) a reduction in benefits because assumptions regarding yields and irrigated areas were over-estimated; (ii) an increase in costs because of unexpected expenditures; and (iii) a lag in benefits because of unexpected delays. The table below presents the project's critical risks and how these risks could affect the NPV and EIRR. Critical Risks Parameters - Farmers do not contribute adequately to recurrent and Reduction or delayed in agricultural benefits capital costs, and the objective of the ultimate scheme 1. Benefits brought about by the agricultural component: handover to farmers cannot be achieved. - Adoption rate of the improved technology by farmers; -Failure to establish sufficient Water User Association - Adoption schedule of the improved technology by capacity to operate and maintain transferred facilities. farmers; and - Yield increase after adoption of the new technology. -Farmers are not interested in the improved technology. 2. Benefits brought about by scheme rehabilitation: - Increase in cropped area following rehabilitation; - Yield increase after rehabilitation of the scheme; - Decrease in cropped area in the without project scenario; and - Yield increase in the without project scenario -Insufficient capacity in planning, implementation, Increase in capital and O&M costs supervision and M&E. - 57 - As can be seen in the table below, the EIRR is still above 10%, if capital costs increase by 12%, O&M costs by 40%, and agricultural benefits decrease by 8.5%. The analysis is most sensitive to the concretization of agricultural benefits, and more specifically to the variation in cropped area, result of scheme rehabilitation and yield increases, result of the demonstration component. PARAMETERS BASE CASE SWITCHING % VALUE VALUE CHANGE Capital costs 1602 1794 12% O&M costs 453 634 40% Agricultural benefits 2242 2051 -8.5% Benefits brought about by the agricultural component Adoption rate of the new technology T 45%; Z 35% T 37%; Z 29% -18% Yield increase following the adoption of the new 3-20% 2-15% -23% technology (depends on the crop) Benefits brought about by the rehabilitation component 1. With project scenario: - Increase in the cropped area T 35%; Z 10% T 23%; Z 7% - 35% - Increase in yields 2% NONE < - 100% 2. Without project scenario - Decrease in cropped area 2% 1.54% - 40% - Decrease in yields 2% NONE < - 100% Notes: T stands for Tuban and Z for Zabid. - 58 - Annex 5: Financial Summary REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Years Ending Million US$ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Total Financing Required Project: Costs Investment Costs 0.7 4.0 5.6 6.5 5.5 1.5 0.0 Recurrent Costs 0.2 0.3 0.4 0.3 0.2 0.1 0.0 Total Project Costs 0.9 4.3 6.0 6.8 5.7 1.6 0.0 Total Financing 0.9 4.3 6.0 6.8 5.7 1.6 0.0_ Financing IBRD/IDA 0.5 3.5 5.0 6.0 5.0 1.3 0.0 Government 0.3 0.7 0.8 0.6 0.5 0.2 0.0 Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Co-financiers 0.0 0.0 User Fees/Beneficiaries 0.1 0.1 0.2 0.2 0.2 0.1 0.0 Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Project Financing 0.9 4.3 6.0 6.8 5.7 1.6 0.0 Main assumptions: Note for above table: The above include Governnent and beneficiaries incremental contributions to O&M costs. - 59 - Financial Analysis Cost Recovery from Beneficiaries and Fiscal Impact This Annex presents analyses of the project financial impacts on stakeholders - particularly farmers and Government. A financial analysis was carried out based on the crop budgets and farm models prepared for the Wadi Tuban and Wadi Zabid schemes. Financial benefits for farmers, financial implications for WUAs, farmers' ability to pay for O&M, proposed O&M financial arrangements and project's fiscal impact are discussed below. (a) Farms' Financial Benefits The main financial benefits accruing to farmers are the increase in revenue stemming from an intensification of agricultural production (increase in both yields and cropping intensity) (see Annex 4 for detailed assumptions). Average incremental incomes per ha of Net Command Area (NCA) are expected to reach US$50 at one year after project completion in Wadi Tuban and US$56 in Wadi Zabid. Incremental farm incomes per ha of Net Command Area - Constant prices - US$/ ha of Net Command Area 2001 2002 2003 2004 2005 2006 Wadi Tuban 1 8 24 39 49 50 Wadi Zabid 2 8 17 33 51 56 Notes Average incremental farm income, is the difference between future and present farm incomes. It is before the possible payment of Zakat and before sharing of income between landowner and farmer/sharecropper. These estimates must be considered with caution. Incremental farm incomes are calculated for an average farm, in an average year. Actual farm income may differ a great deal from this average according to its location in the wadi and the characteristic of the flood event. Indeed, farm income depends primarily on water availability, as it determines cropping choice and crop performance. In a spate irrigation scheme, water availability varies across the wadi, and from year to year. (b) Farmers Participation to Capital Investments and Cost-Recovery The costs of rehabilitation/improvement of the irrigation schemes total US$12.4 million (48% of total project costs), of which US$6.7 million for Wadi Tuban and US$5.6 million for Wadi Zabid. These costs include US$1 I million of civil works and US$1.4 million of technical assistance. Beneficiaries are expected to contribute to about 30% of the costs of civil works, or about US$3.3 million (US$1.8 million in Tuban and US$1.5 million in Zabid). The total contribution is about US$127/ha (constant prices) of Net command area over 30 years, and would be collected in two stages: (i) a contribution during implementation of the works of about US$740,000 (US$28/ha) (US$415,000 for Wadi Tuban and US$325,000 for Wadi Zabid) which is about 7% of civil works costs. This share would be provided either as labor, materials or in cash. Specific arrangements would be negotiated up front with the WUAs on a case by case basis; and (ii) an annual cash repayment, starting 5 years after completion of the works, of about 6.4 and 3.8 US$/ha of NCA in Wadi Tuban and Zabid respectively. This annual repayment is set to recover, over a twenty-year period, about 25% of the civil works expenditures for the improvement and rehabilitation of the schemes. This will total about US$1.4 million in Wadi Tuban and 1.1 million - 60 - in Zabid. Specific arrangement and mechanism for cost recovery would be submitted to IDA by March 31, 2002. Detai[led calculation of these contributions is detailed in Appendix I at the end of this annex. (c) Farmers Contribution to O&M Costs and Government Subsidy O&M Costs Requirements. The O&M costs were estimated according to the maintenance loads required between PYI - PY7. The unit O&M costs (per ha of net command area) for Wadi Tuban, including staff costs, operation and maintenance costs of equipment, depreciation of newly purchased costs, and structural maintenance costs, will vary from US$12/ha to US$19/ha over the years and will stay at about US$17/ha after PY7. The unit O&M costs per hectare for Zabid will also vary from US$13/ha to US$16/ha and stay at about US$15 ha after PY7. The annual maintenance loads are expected to decrease during the project intervention periods as well as after the completion of the rehabilitation. Detailed calculation of O&M costs requirements are detailed in Appendix 2 of this Annex. Beneficiaries Contribution to O&M Costs. The suggested general principle for O&M costs sharing is that the WUAs should cover all O&M costs corresponding to those portions of the system fully under their jurisdiction while the Government pays the balance for O&M costs for relevant schemes. Accordingly, WUAs' contribution to O&M costs would increase over time while Government's share would decrease. As shown in the tables below, the O&M charges to farmers (WvUAs) will be increased gradually from an initial figure of zero in PYI to US$15 and US$13 per ha for Tuban and Zabid respectively in PY7, at which time the WUAs and ICs/SWUFs should be in charge of 90% of the irrigation scheme management except some critical operational functions during floods. In PY5 when the Phase I is completed, the WUAs are expected to assume half of the O&M responsibility for the entire scheme in terms of the O&M costs, which will cover up. to secondary canal plus part of the main canal system. The O&M costs initially sustained by the Government will decrease to about US$I to US$2/ha by PY7. Required O&M Expenditures and Financing (US$ per ha of Net Command Area) Year Government WUAs Government + WUAs Zabid (15,000 ha) Tuban (11,000 ha) Zabid (15,000 ha) Tuban (11,000 ha) Zabid (15,000 ha) Tuban (11,000 ha) Unit Rate Total Unit Rate Total Unit Rate Total Unit Rate Total Unit Rate Total Unit Rate Total US$/ha US$ US$/ha US$ US$/ha US$ US$/ha US$ US$/ha US$ US$/ha US$ 1 13.0 195,000 17.5 192,000 0.0 0 0.0 0 13.0 195,000 17.5 192,000 2 14.3 214,200 15.0 165,150 1.6 23,800 1.7 18,350 15.9 238,000 16.7 183,500 3 10.7 160,800 12.1 133,600 2.7 40,200 3.0 33,400 13.4 201,000 15.2 167,000 4 8.7 130,325 8.5 93,763 4.7 70,175 4.6 50,488 13.4 200,500 13.1 144,250 5 7.8 116,500 9.6 105,250 7.8 116,500 9.6 105,250 15.5 233,000 19.1 210,500 6 4.8 72,000 5.6 61,650 11.2 168,000 13.1 143,850 16.0 240,000 18.7 205,500 7 1.5 22,100 1.7 18,750 13.3 198,900 15.3 168,750 14.7 221,000 17.0 187,500 Total 910,925 770,163 617,575 520,088 1,528,500 1,290,250 - 61 - In practice, water users would pay O&M fees to the WUA and SWUF. Fees would remain with the WUA/SWUF for use directly on scheme operation and maintenance activities. As mentioned above, the target would be 90% financing of the scheme O&M by the WUAs by PY7. Government Contribution. The Government is required to provide about US$400,000 for the two schemes in PYI, which will be gradually decreased to about US$40,000 in PY7. The total amount of the Government subsidies will be about US$1.7 million from PYI to PY7, during which period the O&M handover from the Government to WUAs will be completed. In addition, the O&M costs for other wadis to be implemented in Phase II, namely Wadi Mawr, Rima'a, Siham, Bana, and Hassan, need to be allocated annually from 2001 by the Government to prevent further deterioration before the Phase II Project starts. The annual O&M costs were estimated at about US$550,000 based on the unit rate of US$8/ha for the total area of about 69,000 ha and the Government will have to provide about US$2.8 million for five years during Phase I. (d) Affordability of Capital and O&M Costs by Beneficiaries Beneficiaries (farmers and landowners) capacity to pay for capital and O&M costs is analyzed in this section. As shown in the following graphs and tables, average incremental farm incomes are expected to be higher than both O&M and capital repayment contributions. Indeed, in PYI 1, when repayment of capital costs starts, average farm benefits, after contribution to capital and O&M costs, is US$28/ha in Wadi Tuban and US$41/ha in Wadi Zabid. However, this might not be true in all situations. Incremental farm incomes would vary depending on the amount of water received (flood event, location of the farm within the wadi), which determines the type of crops than could be cultivated and their performance. Actual charges for O&M would be weighted towards those farmers deriving the most benefit, in particular towards farmers enjoying perennial flow, so that charges to poorer farmers would be correspondingly less. It is therefore realistic to propose that water user pay fees commensurate with water allocations. More specifically, the actual payment could take into account the following criteria: (i) the type of flow: separate fees to cover perennial base flow, spate flow, and spate flow with groundwater, should be derived. Farmers receiving base flow would likely need to pay at least double the fee for spate flow; (ii) the actual area cropped should be accounted for in the charges; and (iii) the type of crop grown: farmers growing crops with high gross margins should expect to pay higher fees than those growing subsistence crops alone. Refinements will be needed to set charges depending on circumstances during implementation. The PIUs and their TA team will propose to the WUAs options for fair O&M charges that could be mutually agreed to by WUAs and GOY. (e) Fiscal Impact The project will not pose any overall fiscal problem. The project cost would be bome by the budget (12% of the costs), the credit (83%) and the contributions (in kind or financial) of beneficiaries (5%). Over the 5-year implementation period of the project, Government will have to provide US$3.1 million counterpart funds, an average of about US$600,000 a -62 - year. This is about 6% of capital budget for the agricultural sector (YR 1,458 millions in 2000) and less than 1 '%o of the total Government capital budget. Government will provide incremental recurrent funds for a total of US$930,000 over 5 year, or an average of US$186,000 a year. This would include a total of US$870,000 for the O&M of Tuban and Zabid Irrigation schemes and PMU and US$60,000 for the operation of the spate warning system. On the benefits side, since agriculture is exempt from taxation, increases in tax revenues will be negligible. However, savings are expected in recurrent expenditures, as the costs of required maintenance will decrease following the rehabilitation/improvement of the schemes and will be, for the most part, taken over by beneficiaries. It has been proven that transferring the responsibility of O&M tasks to beneficiaries increase the life of infrastructure. As a result, savings are also expected in replacement/rehabilitation costs. Finally, Governmenfts contribution to capital investments will be lower than it has been for similar projects in the past as beneficiaries will contribute about 30% of civil works costs of spate irrigation schemes rehabilitation/improvement, some of it by direct contribution, some by cost recovery over time. In the long-nn, improved incomes, food security and productivity of rural populations would add to national income, which in turn would have a positive fiscal impact. Project Costs and Fiscal Impact Total Project Costs Government's Annual Government's (2001-05) Counterpart Funds Counterpart Funds (US$) (US$ million) (2001-05) (US$ million) Capital Costs 24.2 2.1 420,000 Incremental Recurrent 1.4 1.0 190,000 Costs Total 25.6 3.1 600,000 - 63 - Affordability of Capital and O&M Costs Contribution by Beneficiaries Incrementalfarm incomes versus capital and O&M costs contributions Wadi Tuban - Affordability of capital and O&M costs contributions 40 - f l +Average farms' incremental incomes / | -t Total Beneficianes' contribution i 30- 20 - _ ~2O 0 1 2 3 4 5 6 7 8 9 10 11 31 Project Year Wadi Tuban - Affordability of O&M and capital contributions (US$/ Ha of Net command area) Year 1 2 3 4 5 6 7 8 9 10 11 31 Repayment of capital costs (30% of civil works) 0 0 0 0 0 0 0 0 0 0 6.4 6.4 WUAs'shareofO&M costs 0 2 3 5 10 13 15 15 15 15 15 15 Total Beneficiaries' contribution 0 2 3 5 10 13 15 15 15 15 22 22 Average farms' incremental incomes 1 8 24 39 49 50 50 50 50 50 50 50 Wadi Zabid - Affordability of capital and O&M costs contributions 60- so 1 ~-~ ----- ''~' -/ -Average farms' incremental incomes 40 - 0-- Total Beneficiaries' contribution , 30 20- 10 -/ ____ - 10 1 2 3 4 6 6 7 8 9 10 11 31 Project Year Wadi Zabid - Affordabilitv of O&M and capital contributions (US$/ Ha of Net command area) Year 1 2 3 4 5 6 7 8 9 10 11 31 Repayment of capital costs (30% of civil works) 0 0 0 0 0 0 0 0 0 0 4 4 WUAs' share of O&M costs 0 2 3 5 8 11 11 11 11 1 1 11 11 Total Beneficiaries' contribution 0 2 3 5 8 11 11 11 11 11 15 15 Average farms' incremental incomes 2 8 17 33 51 56 56 56 56 56 56 56 - 64 - Annex 5: Appendix 1 REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Cost Recovery - Beneficiaries' Contribution to Investments Costs Beneficiaries' contribution to capital costs totals about 30% of project civil works expenditures. It includes two tpes of contribution: (i) a participation to 6.8% of the civil works expenditures during construction; and (ii) a repayment of 25% of the remaining civil works expenditures, starting 5 years after completion of the works. 1. Beneficiaries' Contribution to Civil Works during Construction Beneficiaries Total Costs US$ % US$ Headworks 0 0.0% 3,541,201 Earthworks 424,405 10.0% 4,244,045 Canal Structures 71,688 10.0% 716,877 Roads 76,196 10.0% 761,964 Other Civil Works 169,644 10.0% 1,696,435 Total Civil Works 741,933 6.8% 10,960,522 Beneficiaries will contribute to 6.8% of civil works expenditure during construction or about US$740,000, of which US$415,000 in Tuban and US$325,000 in Zabid. 2. Capital Cost Repayment after Construction Beneficiaries' Repayment of Civil Works (US$) Tuban Zabid Overall Total cost of civil works (a) 6,043,659 4,916,864 10,960,522 Bene. contribution during construction (b) 415,874 326,058 741,932 Remaining civil works (c) = a-b 5,627,785 4,590,806 10,218,591 Beneficiaries' contribution @ 25% (d) = 0.25 * c 1,406,946 1,147,701 2,554,647 Annual contribution over 20 years (e) = d /20 70,347 57,385 127,732 Per ha of Net command area (f) = e / NCA 6.4 3.8 4.9 Beneficiaries will contribute to 25% of the remaining civil works expenditures or about US$2.5 million, of which US$1.4 million in Wadi Tuban and US$1.1 million in Zabid. This corresponds to an average annual contribution of about US$5/ha of Net Command Area, combination of a contribution of about US$3.8/ha in Zabid and US$6.4/ha in Tuban. - 65 - Annex 5: Appendix 2 REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT O&M Costs Calculation - Methodology The O&M costs were estimated based on the following components: (a) Total O&M Costs Required (i) Staffing The annual staff costs were estimated at about US$60,000 for 95 staff for Zabid and US$50,000 for 84 staff for Tuban considering the minimum required number of the staff and salary level in 1998. The staffing costs will be reduced to nearly 50% in PY7 when 90% of the Government O&M function is transferred to WUAs. The average staff costs per person were assumed to be reduced by half when the function is transferred from the Government to WUAs considering the salary level of the WUAs staff (farmers) and job demands required only during flood seasons, mainly from March to September. (ii) Equipment The required number of heavy equipment, such as bulldozer, loader, excavator, etc., was estimated based on the simulated maintenance loads, which will change from PY1 to PY7, considering the annual sedimentation deposit volume as well as the reduction of the maintenance loads during the project implementation period and the improved design and operation through sedimentation basins and sluicing gates, etc. The method and results were discussed and confirmed by technical staff from TDA and Lahej Directorate. The required number of the heavy equipment was then calculated considering the actual working capacity in canals as well as the increased capacity in sediment basins. Both the operation and maintenance costs were limited to the required number of machine for each year, reflecting the procurement and replacement schedule as well as the gradually decreasing maintenance loads thanks to the improved irrigation system. The existing equipment from the Land and Water Conservation Project (LWCP), which will be closed at the end of 2000, was also taken into account to determine the number of the equipment to be purchased. - Purchase Costs of New Equipment. The number of the newly purchased equipment was estimated based on the maintenance loads for each year as explained above. Also, the type and number of the existing equipment both at government offices (TDA and Lahej Directorate) and the LWCP were checked in order to reduce the number of the new equipment purchase. - Depreciation Costs of New Equipment. The depreciation costs of newly purchased equipment were estimated to be spread over 10 years for vehicles and 15 years for - 66 - other equipment. Depreciation costs emerge from the next year after the purchase of the new equipment until its full depreciation. Since most of the existing equipment is older than 15 years, their depreciation costs were not included. - Operation Costs. The fuel and lubrication costs for each equipment were calculated based on 7 hours per day and 120 working days (20 days for six months). The operation costs were limited to the required number and type of equipment for each year based on the simulation of the maintenance loads. - Maintenance Costs. Maintenance costs were estimated as 5% of the capital costs for new equipment and 7% for existing equipment. The total estimated refurbishment costs are to be covered by the maintenance costs for existing equipment in PYI and PY2. The maintenance costs were limited to the required number and type of equipment for each year. (iii) Structural Maintenance The maintenance costs of the irrigation structures was estimated at about 1% of the headwork rehabilitation costs, which will cover the regular maintenance of the gates, such as greasing, painting, etc, and some minor repair of the structure. No major structural rehabilitation was taken into account for this cost estimate. O&M Requirements for Wadi Tuban Unit: US$ YRI YR2 YR3 YR4 YR5 YR6 YR7 WUA share(%) 0 10 20 35 50 70 90 Staff costs 50,000 47,500 45,000 41,250 37,500 32,500 27,500 Annual Depreciation 0 17,000 17,000 17,000 73,000 73,000 73,000 Operation costs 22,000 18,000 16,000 15,000 14,000 14,000 12,000 Maintenance costs 120,000 101,000 89,000 71,000 64,000 64,000 53,000 Repair of structure 0 0 0 0 22,000 22,000 22,000 Total 192,000 183,500 167,000 144,250 210,500 205,500 187,500 O&M Costs per ha 17.5 16.7 15.2 13.1 19.1 18.7 17.0 WUAs' Share per ha 0.0 1.7 3.0 4.6 9.6 13.1 15.3 Gov. Share per ha 17.5 15.0 12.1 8.5 9.6 5.6 1.7 - 67 - O&M Requirements for Wadi Zabid YRI YR2 YR3 YR4 YR5 YR6 YR7 WUA share(%) 0 10 20 35 50 70 90 Staff costs 60,000 57,000 54,000 49,500 45,000 39,000 33,000 Annual Depreciation 0 46,000 46,000 46,000 79,000 79,000 79,000 Operation costs 20,000 20,000 16,000 17,000 15,000 17,000 15,000 Maintenance costs 115,000 115,000 85,000 88,000 77,000 88,000 77,000 Repairof structure 0 0 0 0 17,000 17,000 17,000 Total 195,000 238,000 201,000 200,500 233,000 240,000 221,000 O&MCostsperha 13.0 15.9 13.4 13.4 15.5 16.0 14.7 WUAs'Shareperha 0.0 1.6 2.7 4.7 7.8 11.2 13.3 Gov. Share per ha 13.0 14.3 10.7 8.7 7.8 4.8 1.5 O&M Requirements for Phase 2 - Wadis Tuban Zabid Area (ha) 11,000 15,000 Staff costs 50,000 60,000 Operation costs *2) 11,000 10,000 Maintenance costs *3) 36,000 34,000 Repair of structure *4) 6,000 4,000 Total (US$) 103,000 108,000 O&M Unit Cost (US$ / ha) 9.4 7.2 Average O&M Unit Cost (US$ /ha) 8 Notes: I ) Minimum O&M costs of Tuban and Zabid are estimated for other wadis to be implemented in Phase II. These figures are almost half of the required costs for making the systems sustainable. 2) Operation costs only for critical heavy machinery are estimated. 3) Maintenance costs for limited spares and repairs are estimated. 4) Limited maintenance costs for gates are estimated. - 68 - (b) O&M Costs Covered by Project The recurrent O&M costs are mainly to be covered by the Government counterpart fund (66%), as well as by beneficiaries' contribution (30%). (i) Staffing Costs The incremental staffing costs due to additional activities for the project were estimated at about 30% of the total required staffing costs. The average increased rate, 30%, was estimated based on the requested salary level in the project report versus the current salary level (1998). (ii) Equipment Costs - Depreciation Costs for New Equipment. The depreciation costs for newly purchased equipment are not covered by the project. - Incremental Operation Costs for Equipment. The full operation costs of newly purchased equipment are to be covered by the project. Also, 70% of the maintenance costs for existing equipment are to be covered as an incremental operation costs considering the current maintenance level of the irrigation scheme. - Incremental Maintenance Costs for Equipment. The full maintenance costs for newly purchased equipment, which were estimated at 5% of the capital costs, are to be covered by the project. Also, 70% of the maintenance costs for existing equipment, which were estimated at 7% of the capital costs, are to be covered as an incremental maintenance costs considering the current maintenance level of the equipment. The scheduled refurbishment of the existing equipment are to be covered by the maintenance costs for the existing equipment during the first two years. (iii) Maintenance Costs for Irrigation Structure The full maintenance costs of the irrigation structures, which were estimated at about 1% of the rehabilitation costs of headwork, are to be covered by the project considering the current status of the facilities and maintenance, which has not been carried out for long years due to the lack of budget. - 69 - Annex 6: Procurement and Disbursement Arrangements REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Procurement The Credit would finance selected activities requiring the procurement of: (i) works, i.e. rehabilitation and improvement of irrigation infrastructures, access roads, headworks, wadi protection, de-silting and reshaping of canals and repairing gates; (ii) goods, including machinery, vehicles and motorcycles, computers and office equipment; (iii) consultancy services and training including institutional strengthening; and (iv) project management cost including salaries for PMU staff and O&M costs for equipment, vehicles and machinery. Procurement under the Credit would be carried out in accordance with IDA's Guidelines for "Procurement under IBRD Loans and Credits", January 1995, revised January and August 1996, September 1997 and January 1999; "Selection and Employment of Consultants by World Bank Borrowers", January 1997, revised September 1997 and January 1999. IDA's Standard Bidding Documents (SBD) would be used for all procurement under Intemational Competitive Bidding (ICB) and, with modifications acceptable to IDA, in Arabic language, also for National Competitive Bidding (NCB). Simplified documents would be prepared for use under the Credit and apply to relatively low-value works contracts and low-value consulting contracts. National Shopping (NS) procedures would apply to the procurement of small quantities of goods; International Shopping (IS) procedures would be used where there are less than three capable national suppliers. A General Procurement Notice (GPN) would be advertised in "United Nations Development Business" (UNDB) not less than eight weeks prior to the publication of the first Specific Procurement Notice (SPN) and bidders who have expressed an interest would be notified directly by the PMU. Works: Taking into account the relative simplicity and small value of the works, several bid packages would be prepared according to Annex 2. Bid packages with an estimated contract value above US $2.0 million equivalent would be procured using ICB procedures and documents and advertisement in UNDB and in local newspapers (with the exception of those works requiring special construction expertise, contracts of less than US $ 2.0 million are not expected to attract international bidders). Bid packages with an estimated contract value below US$2.0 million equivalent, up to an aggregate amount of approximately US$4.0 million equivalent, would be procured using NCB procedures and documents and advertisements in at least two local newspapers. NCB contract would be open to eligible foreign bidders if they wish to participate. Bid evaluations would be submitted on IDA's Standard Bid Evaluation Form: "Procurement of Goods and Works" - April 1996. Contracts below an estimated value of US$100,000 equivalent, would be procured using simplified NCB procedure. It would require: (i) advertisements in a local newspaper and announcements posted in a public place; (ii) simplified bidding documents in Arabic and evaluation procedures agreed with IDA; (iii) public bid openings; and (iv) contract awards to the lowest evaluated bidder. Pre-qualification would be necessary for all contracts above US$0.3 million equivalent procured under NCB procedures. For contracts below US$0.3 million equivalent procured under NCB, post-qualification will be used. An open pre-qualification process and explicit qualification criteria would be used. Subject to prior agreement with IDA in each case and practical considerations, works below an estimated value of US$10,000 up to an aggregate amount of US$1.0 million equivalent may occasionally be implemented, instead, by using direct contracting with the nearest available source. Force account construction through Yemeni Government personnel and equipment would not be acceptable under this project. Goods: To the extent possible, the procurement of goods would be carried out through bid packages comprising several lots of similar items. Bid packages with an estimated contract value above US$200,000 - 70 - equivalent would be procured using ICB procedures and documents, and advertisements in UNDB and in local newspapers. Bidders would be subject to post-qualification in accordance with IDA's SBD for "Procurement of Goods" January 1995. Bid evaluations would be submitted on IDA's "Procurement of Goods and Works" - (January 1995 and revised March 2000). Bid packages with an estimated contract value above US$50,000 and less than US$200,000 equivalent, up to an aggregate of approximately US$1.5 million equivalent, would be procured using NCB procedures and documents and advertisements in at least two local newspapers. The procurement of goods and supplies below an estimated value of US$50,000 per contract or purchase order, up to an aggregate amount of approximately of $400,000 equivalent, would be procured using NS/IS procedures, with requests for quotations which would indicate the description, quantity and required delivery time of the procured goods. At least three quotations would be solicited from local suppliers, when these goods are readily available locally at competitive prices; otherwise, quotations would be solicited from at least three intemational suppliers in two different countries. The evaluation of quotations would follow procedures agreed with IDA. Goods and supplies below a cost of US$5,000 per purchase, up to an aggregate amount of approximately US$100,000 equivalent would be purchased directly from the nearest available supplier. Under ICB procedures, bids offering goods manufactured in the Republic of Yemen would be granted a margin of preference of 15% when compared to goods manufactured elsewhere. In the comparison of bids to establish eligibility for Domestic Preference, the provisions of Appendix 2 of IDA's Procurement Guidelines would be followed. Services: For consultancies above an estimated contract value of US$100,000 equivalent, the selection method would be Quality and Cost-Based Selection (QCBS). For consultancies below an estimated contract value of US$100,000 equivalent, the selection method would be Quality-Based Selection (QBS) or Least-Cost Selection (LCS) or Selection under a Fixed Budget (SFB) or Quality and Cost-Based Selection (QCBS). Consultants' Qualification-Based (CQ) and Single-Source Selection (SS) methods would be used for all specialized, short-term or contracts with consultants with contract values below US$50,000. Furthermore, for all consultancies with an estimated contract value above US$200,000, a request for expressions of interest would be advertised in UNDB and in local newspapers. Prior Review: The first three contracts packages in each category and each procurement method (works, goods and services), irrespective of the estimated contract value, would be subject to IDA's prior review, in accordance with the applicable guidelines. Thereafter, all procurement of goods and works, which is subject to ICB procedures, would be subject to IDA's prior review. Also, any contract for works with an estimated contract value above US$200,000 equivalent and any contract for goods with an estimated contract value above US$50,000 equivalent would be subject to IDA's prior review. Contracts with individual consultants in excess of US$50,000 equivalent and with consulting firms in excess of US$100,000 equivalent, as well as all single-source contracts, and first three RFPs under any selection method for services would be subject to prior review. The prior review process would cover about 80% of total works, goods and services contracts, which would be reasonably achievable under the circumstances. All other contracts would be subject to post-review on a random basis during supervision missions and procurement audits. Procurement Responsibilities: A Project Management Unit (PMU) will be established at the Ministry of Agriculture and Irrigation in Sana'a The PMU will include a procurement officer as part of its team to be recruited competitively. A Project implementation Unit (PIU) at Wadi Tuban and another unit at Wadi Zabid would be established to supervise project implementation and report to the PMU. The PMU will be responsible for: (i) all procurement activities; (ii) consistent application of procedures at the PIU offices through the Operations Manual; (iii) preparation and updating of procurement plans; and (iv) incremental operating expenses. The PMU will retain responsibility for advertising bids, issuing bidding documents, opening and evaluating bids and awarding contracts. All requests for no objection from the Bank will be - 71 - directed through the PMU manager. Consulting firms or individuals will be contracted as needed to prepare engineering design, specification, and bidding documents and also to provide construction supervision, technical advice and contract management during the construction of the sub-projects. The initial Procurement Plan is shown in Table [ B I]. It would be updated periodically by the PMU. Procurement Training: The procurement assessment conducted for the Ministry of Agriculture and Irrigation and the existing Project Preparation Unit (PPU) shows that the Ministry and the PPU have previous experience with Bank-financed projects and procurement guidelines. Since there is no procurement officer at the existing PPU, one would be recruited once the PMU is established. In order to overcome the weakness of the Ministry, PMU and PIU's in the first year of project implementation, a procurement specialist with relevant experience should be engaged for several months. He should provide on-the-job training for the PMU and the Ministry procurement staff, tendering/awarding committees. The first training course would mainly be for the PMU procurement officer to be held by December 2000, shortly after selection of the PMU procurement officer. This training course will concentrate on preparation of tender documents, RFP's and bids evaluation for works, goods and consulting services. Special attention would be given to procurement of consulting services. Several seminars and workshops would be conducted by the short term procurement specialist for the ministry procurement staff and PMU staff on IDA procurement guidelines, procurement planning, preparation of bidding documents and evaluation of bids. The PMU and PIU's and ministry staff would also be trained on contract management just before the first package of the physical sub-projects is due. This training course would be part of the assignment of the consulting firm that will be selected to supervise and contact manage the key construction work. A question and answer session on procurement and contract management will be conducted during procurement supervision missions. Procurement Assessment: The country's general environment for procurement is not conducive for transparent procedures and efficiency. This is supported by the preliminary findings of the Country Procurement Assessment Report (CPAR) which is currently being drafted, following a fact finding mission and discussions with Government and the private sector. Based on the LACI Implementation Handbook, a Procurement Capacity Assessment of the Ministry of Agriculture and Irrigation and the PPU was conducted in May 2000. The Ministry uses committees in most of its procurement processes. The Ministry's Department of Contracts and Tendering serves as the secretariat of the Tendering Committee. The Tendering Committee reviews all bid evaluations and proposed contract awards above US$200,000 equivalent. The existing PPU staff includes the unit manager, financial manager, an engineer and support staff. The financial manager has participated in the Bank-sponsored capacity building seminar covering procurement, financial management and disbursement. The other staff members also have previous experience in Bank-financed projects. The engineer has a basic understanding of procurement and the preparation of bidding documents. The PPU has been provided with IDA procurement guidelines and standard bidding documents. Recommended Actions (from Procurement Capacity Assessment): (a) build on the existing PPU and establish a PMU. Recruit a qualified procurement officer at the PMU by December 31, 2000; (b) IDA should assist in training the procurement staff at the PMU and the ministry of Agriculture and Irrigation on procurement guidelines, preparation of bidding document, bid evaluation and - 72 - contract management; (c) IDA guidelines should be followed for all types of procurement, with some simplification of procedures and documents for small sub-projects especially community involvement projects; (d) a training workshop will be arranged by December 2001 in order to strengthen private sector in construction management and bid preparation; (e) the local consulting firms should be strengthened by encouraging them to participate with intemational consulting firms in submitting proposals for the consulting assignments of the project. Also, a workshop on preparation of proposals by consultants for local consulting firms would be a good first step; and (f) in order to over come the weakness of the PMU in the first year of project implementation (most of the assignments are consulting services and studies), a short term procurement specialist with relevant experience should be engaged for several months. He should provide on-the-job training for the PMU and the ministry procurement staff. - 73 - Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (US$ million equivalent) Procurement Method Expenditure Category ICB NCB Other N.B.F. Total Cost 1. Works 6.00 4.00 0.70 0.00 10.70 (5.20) (3.30) (0.60) (0.00) (9. 1 0) 2. Goods 1.50 1.30 0.30 0.00 3.10 (1.50) (1.30) (0.30) (0.00) (3.10) 3. Services 0.00 0.00 5.00 0.00 5.00 (0.00) (0.00) (5.00) (0.00) (5.00) 4. Miscellaneous 0.00 0.00 6.80 0.00 6.80 (0.00) (0.00) (4.10) (0.00) (4.10) Total 7.50 5.30 12.80 0.00 25.60 (6.70) (4.60) (10.00) (0.00) (21.30) Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies 2v Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to: (i) managing the project; and (ii) re-lending project funds to local government units. - 74 - Prior review thresholds (Table B) Table B: Thresholds for Procurement Methods and Prior Review' Contract Value Contract Subject to Threshold Procurement Prior Rvlew Expenditure Category (US$ thousands) Method (US$ millions) 1. Works >=2,000 ICB All <2,000 NCB First three packages and all subsequent contracts larger than US$0.40 m. <100 NCB First three packages. <=10 Direct Contracting All 2. Goods >=200 ICB All >50-<200 NCB First three packages and all subsequent contracts larger than US$0.1 m. <50 NS/IS First three packages. <5 Direct Purchase All 3. Services >=100 QCBS All <100 QBS/LCS/FBS/CQ First three RFP and then all TOR and cost estimate. <50 CQ/SS All SS Total value of contracts subject to prior review: US$14 m (IDA) Overall Procurement Risk Assessment Average Frequency of procurement supervision missions proposed: One every 6 months (includes special procurement supervision for post-review/audits) - 75 - Table Bi- Procurement Plan (First Year Initial Plan) Description Type, No of Estimated Procurement Prior/Post Estimated Schedule (mont/year) slices/items cost Metiod Review /sub (US S) Request foe IFB/RFP Bid Contract Conbt packages Inteest opening Award Completion Goods 1. Vehicles for PMU (2 G 1 0.05 NCB Prior 7/00 8/00 10/00 2/01 4WD vehicles) simplified . _ 2. Office furniture for PMU G I 0.01 NS Prior 6/00 7/00 8/00 9/00 3. Equipment for PMU G 3 0.008 NS Prior 6/00 7/00 8/00 9/00 4. Equipment for PIU G 3 0.024 NCB Prior 12/00 1/01 2/01 4/01 simplified 5. Office furniture for PIU G 2 0.011 NCB Prior 12/00 1/01 2/01 4/01 simplified 6. Purchase of 4 pickups G 2 0.4 ICB Prior 9/00 11/00 1/01 5/01 and 5 (4 WD vehicles) for Tuban & Zabid & PMU, 6 (4 WD vehicles) and 24 motor bikes for PIM Services 1. Recruitment of consulting firm for: CS 1 1.75 QCBS Prior 08/00 10/00 12/00 02/01 12/05 - PIM activities - topography survey, design, supervision and Hydraulic modeling -water management aspects 2. Soil salinity/sodicity CS 1 0.20 CQBS Prior 1/01 3/01 5/01 7/01 12/01 mapping in Wadi Tuban 3. Upper watershed study CS 1 0.25 CQBS Prior 1/01 4/01 6/01 10/01 07/02 4. Inventory of Dams study CS 1 0.075 CQBS Prior 9/01 11/01 1/02 6/02 5. Overall Irrigation sector Cs 1 0.25 CQBS Prior 1/01 4/01 6/01 9/01 3/02 assessment studv 6. Legal consultants CS 2 0.10 CQ Prior 1/01 12/01 1/02 3/02 12/02 7. Monitoring & awareness CS I 0.25 CQBS Prior 1/01 5/01 7/01 9/01 3/02 on sustainable WRM ._.. _ I G: Goods, CS: Consulting services. Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation' and contact the Regional Procurement Adviser for guidance. - 76 - Disbursement Allocation of credit proceeds (Table C) The project funds are expected to be disbursed over a period of about five and half years beginning January 1, 2001 and ending in April 30, 2006. The closing date for the Credit would be June 30, 2006. Allocation of Credit Proceeds will be disbursed according to Table C below: Table C: Allocation of Credit Proceeds Expenditure Category Amount in US$miilion Financing Percentage 1. Goods 3.10 100% of foreign expenditures 100% ex-factory 80% local expenditures 2. Works 9.10 85% 3. Consultants' Services and Traning 5.00 100% 4. Project Mangement Cost 2.00 90% 5. Unallocated 2.10 Total Project Costs 21.30 Total 21.30 Use of statements of expenditures (SOEs): Disbursement from the IDA credit will be initially made on the traditional system ( reimbursements with full documentation and against statement of expenditures- SOEs and direct payment). It will be converted to the new procedures (based on Project Management Reports - PMR- based disbursement report) after the testing of the new computerized accounting and reporting system and the issuing of a certification ensuring that the system is operating satisfactory. The target date for this testing of the PMR generation is November 15, 2001. This will allow to issue the first PMR by November 15, 2001. Disbursements for works below US$200,000, for goods below US$50,000, and for services below US$100,000 for consulting firms and US$50,000 for individual consultants, would be made on the basis of Statement of Expenditures. Documentation to support these expenditures would be maintained by the PMU and made available for review by the Bank supervision missions and project auditors. Full documentation for expenditures under contracts requiring the Bank's prior review will be submitted with the corresponding application. Special account: To facilitate disbursements, the Borrower will establish a Special Account (SA) in the Central Bank of Yemen, to be operated by the PMU, under terms and conditions acceptable to IDA. The authorized allocation would be limited to US$500,000 (equivalent to four months of estimated disbursements), and disbursement from this SA will be made against the statement of expenses and full documentation until the new procedures (based on the Project Management Report- PMR) is operational (November 15, 2001). - 77 - Financial Management Assessment The financial management of the project will be undertaken by the Project Management Unit (PMU), which is taking over from the Project Preparation Unit (PPU) established in June, 1999 for purposes of managing the preparation of this project and to facilitate the transition toward the implementation of the proposed project. The PPU is headed by a General Director who reports directly to the Minister of MAI. The Financial Officer, a former, experienced financial manager of IDA-financed projects and a university graduate in the field of accountancy and a professional accountant, supported by an assistant, with both good computer skills, are responsible to handle all financial matters related to the project preparation. The PPU main functions are budgeting, receipts and disbursement of the project funds, management of the special account, management of all aspects of procurement and the accounting for the proper use of the project funds. The PPU is also responsible for undertaking treasury functions. It uses a computerized accounting system based on the Government's unified accounting system (Government budget-based accounting system), on principals and procedures defined by the legal framework applicable to public sector, which is not adequately equipped to provide financial data that is required for proper project management. Payment orders and checks issued by the PPU in settlement of its expenditures are presently signed and counter signed by the Project Director and by the Financial Officer. All payments are to be processed according to the PMU Guidelines agreed upon in the recent CPPR. The internal control system, however, suffers from some weaknesses, such as duties and responsibilities within the financial department are not segregated, particularly those related to handling transactions, recording and preparing claims from the special account. To strengthen the internal control system, the PPU will put in place clear and written internal control procedures, including segregation of duties, for recording, posting and preparation of payment documents. The project maintains vouchers and supporting documents for expenditures on all activities. Reconciliation of the banks accounts is monthly and accurate. The PPU subrmits monthly and quarterly reports to MAI, MOPD and MOF on its actual and budgeted expenditures for the period concerned. The PPU accounts will be closed upon completion of the project preparation phase; the related financial statements will be audited jointly with the financial statements of first FY 2001 of the present project. The PPU will become the PMU for the project; the financial officer and staff will constitute the nucleus FM staff of the PMU, while the Financial Officer oversees, in direct collaboration with PPU's director, the transition of the financial functions of the PPU into PMU. This includes the development of the FM systems and the recruitment of the PMU's FM staff. Initial steps toward the setting up of the project's FM arrangements are being undertaken; agreements on action plans for completing the systems will be finalized during Negotiations. Financial Management Arrangements for the Project The PMU (in Sana'a) will be responsible for all financial management matters of the project including procurement, the handling of financial transactions and treasury functions, accounting and periodic and annual financial reporting. The two PIUs to be established at the regional level, in Zabid and Lahej, will not be involved in any financial decision or transaction under the project. The PPU has decided to acquire an accounting software that has been developed locally and is available to, and being used by, implementing entities and PIUs in charge of IDA-financed projects. The computerized accounting system is being adapted for the project, it is based on generally accepted accounting principals, with PMR-based disbursement capabilities and adequate internal control mechanisms. In a next step, the PPU will acquire the services of a qualified consultant who will complete the development of the financial management - 78 - systerns of the project and the project's Financial Management Procedures Manual, which documents the procedures to be followed in project financial management. Terms of Reference (TOR) and plans for the recruitment of the consultant have been agreed upon during Negotiations. This assignment will be funded by the project preparation funds. The TORs incorporate main features of the FM arrangements which are given below. Staffing. The PMU will be headed by a full time project director with overall responsibilities of planning, implementation and reporting. The key finance and accounting staff of the PMU will be the Financial Officer and the Accountant. The PMU will recruit a Procurement Officer. Staff of the PMU will receive special training in financial planning and management, operation of 'system-based' internal controls, and financial policies. Flow of Funds. GOY will pass on the IDA funds to the MAI, with the foreign risk born by GOY, through a special account in the Central Bank of Yemen. GOY will provide counterpart funds for the project, through deposits to the project counterpart Yemeni Rial special account in the commercial bank. Budgetary allocations will be based on the annual plan, which outlines project activities. The PMU head will be the authorized person for issuing payments, through checks, from the special account and the project counterpart account, based on management and internal control procedures to be set out in the FM Manual (below) . Financial and Accounting Policies. Financial and accounting policies for the project will be developed and incorporated in the FM Manual to ensure transparency and uniformity, provide clarity regarding financial aspects to the various interest parties, and to enforce accountability. These policies inter-alia cover the following aspects: (i) treatment of expenditures, including their classification; (ii) eligibility of expenditures to be reimbursed from IDA Credit; (iii) efficient management and development of funds; (iv) project accounting policies; and (v) internal control mechanism. The above has to be in line with PMU Guidelines as set out by the CPPR. Proiect Accounting System. As indicated above, the PMU will use the customized accounting software which is being adapted for the project; the system will maintain books of accounts for the project's sources of funds and expenditures based on a project-specific chart of accounts. It develops and disseminate financial statements and financial reports, and ensure timely audit of the financial statements. The books of accounts for the project will be maintained on the basis of double entry book keeping principals. Project records and accounts will reflect the project receipts and expenditures and clearly identify the goods and services procured and works performed. Funds received from different resources, including beneficiaries contribution during implementation, as labor, materials or as cash, which are expected to cover a certain portion of the cost of the civil works, will be identified separately and reflected in the projects accounts and financial statements. The trial balance will show all project related receipts, expenditures, and other payments as well as project operation costs. Project financial statements and financial reports will be full basedl on the project books of accounts and substantially generated from the financial accounting system. Financial Management Procedures Manual (FMPM). The FMPM will be completed by Effectiveness. The FMPM will cover: (i) flow of accounting documentation and information through the budget, acquisition, and procurement cycles at the central and govemorates level; (ii) financial and accounting policies and procedures; (iii) internal control system, including computer data entry and data base management procedures, identification of key control points within information flowcharts, and other measures necessary to ensure the confidentiality, quality and reliability of financial data; (iv) Chart of accounts; (v) financial reporting including formats of PMR tables and reporting formnats required by GOY; (vi) auditing arrangements; (vii) budgeting processes; (viii) procedures for the operation of the accounting - 79 - software and related internal control arrangement and levels of protection and security of the system; and (ix) organization and staffing of the PMU at the headquarter and govemorates levels as well as the relationship between both structures and other departments of MAI and other external parties such as, Central Bank of Yemen (CBY). Financial Management Reports. Quarterly PMR for the project would be generated from the computerized accounting system. The first PMR is expected to cover the quarter ending on September 30, 2001. PMR will include the following standard sections: (a) Financial Statements that include: - Summary of sources and uses of funds - Uses of funds by project activity - Project balance statement of affairs - Cash withdrawal Cash forecast - Special account statement (b) Project progress statements that include: - Output monitoring report using contract management information, or - Output monitoring report using unit variance as monitoring indicator (c) Procurement management report that includes: - Contract expenditures report - Goods and works - Contract expenditures report - Consultant - Procurement management report - Goods and works - Procurement management report - Consultant In addition, PMR should cover any requirement set out in the PMU Guidelines. Physical information on key performance indicators that can be readily linked to the financial costs would be maintained as part of the financial management system. Initially this would be maintained for the high cost items, which count for a significant portion of project cost, and for items for which data on physical activities can be easily captured. These items will be identified and will be indicated in the manual. This list of items would be gradually expanded during implementation. Annually, Audited Project Financial Statements (PFS) would be submitted to IDA. PFS will include: (i) a statement of sources and utilization of funds or balance sheet, indicating funds received from various resources, project expenditures, and assets and liabilities of the project; (ii) schedules classifying project expenditures by components, expenditures by categories and sector; (iii) a Special Account reconciliation statement; and (iv) a Statement of Withdrawals made on the basis of Statement of Expenditures (SOEs). Audit Arrangements. Project financial statement will be audited annually by independent private auditors acceptable to IDA on the basis of Terms of reference (TOR) and terms and conditions acceptable to IDA. The PMU will contract independent auditor selected by COCA, MOPD and MOF Special Committee for the first year of the project on terms and conditions acceptable to IDA, and the TOR will be part of the FMPM. Annual audited PFS will be submitted within 6 months after the fiscal year. The audit will be comprehensive and cover all aspects of the project (i.e., all sources and utilization of funds, and expenditures incurred), and will be carried out in accordance with International Standards of Auditing (ISA). Terms of reference (TOR) for this assignnent will cover audit of financial transaction, and an assessment of the financial management system, include review of internal control mechanism. The auditor will carry out a concurrent audit during the fiscal year, to bring to management's attention any issues, - 80 - which needed to be addressed, including comments and recommendations for improvements to the financial and administrative systems and controls. The auditor may be asked to conduct a special review of one or more of the following: (i) economy, efficiency and effectiveness in the use of resources; (ii) achievement of the planned results of the project; (ii) specific systems (e.g., improvements in accounting and data processing operations that may be under development) on which the auditors comments are necessary to ensure accuracy, efficiency and proper controls; and any other activities on which an auditor may report. Financial Management Action Plan. The following action plan has been discussed and agreed in principle with the PPU. It is based on the FM assessment, the framework of the financial management arrangements of the project and on planned Board date of September 12, 2000, and an Effectiveness date of January 2001. The PMU Director and the Financial Officer will be in charge of implementing the following main actions in order to ensure that project FM systems are completed by Effectiveness: (a) By Board Presentation: - The staff of the present competent Project Preparation Unit (PPU) staff, including the financial officer, would be converted to the Project Management Unit (PMU). (b) By Project Effectiveness: - Recruitment of core staff of central PMU and PIUs at govemorates level in accordance to PMU Guidelines. - Setting up of the financial management system, including the establishment of a financial policies and procedures manual. - Appointment of an independent auditor. - 81 - Action Plan: Action Output Responsibility Effective date 1. Preparation for the PMU staff Detailed job position MAI July, 2000 description and TOR. to be recruited. 2. Conversion of PPU staff to Contract acceptable to MAI August 15 2000 PMU. IDA. 3. Preparation of TOR's for the TOR's and PMU's Director August 15, 2000 consultant: specialist in documentation accounting and financial acceptable to IDA. management. 4. Appointment of the Contract for the PMU's Director September 15, 2000 consultant consultant. and launching of the assignment. 5. Developing of the FMPM. Draft of the FMPM to PMU's Director and October 31, 2000 be submitted to SU the consultant and IDA. 6. Acquisition of the software Reception and PMU's Director October 31, 2000 for installation of the accounting and reporting. package. 7. Implementation of the Setting up of the PMU's Director and November 15, 2001 accounting and reporting system and testing the consultant system. documents. 8. Transfer of the financial Transfer of accounting PMU's Director December 31, 2000 management of the PPU records and related to the PMU. document from the PPU. 9. Appointment of independent Contract for PMU's Director December 31, 2000 auditors. accounting firm acceptable to IDA. 10. Issuing of the 1 st PMR. PMR to be submitted PMU's Director November 15, 2001 to IDA. - 82 - Annex 7: Project Processing Schedule REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Project Schedule Planned Actual Time taken to prepare the project (months) 6 8 First Bank mission (identification) 02/11/99 02/11/99 Appraisal mission departure 06/03/2000 06/05/2000 Negotiations 06/10/2000 08/01/2000 Planned Date of Effectiveness 10/15/2000 Prepared by: Usaid El-Hanbali Peer Reviewers: Robert Oblitas Keith Olson Shawki Barghouti Preparation assistance: Bank staff who worked on the project included: Name Speciality Salah Darghouth Sector Manager, Water and Environment Usaid El-Hanbali Irrigation Engineer Chris Ward Operation Officer Ashok Subramanian Water Institution Development Specialist Moharned Ben Ali Agronomist Nejdet Al- Salihi Irrigation Engineer Naji Abu-Hatim Project Officer Marie-Laure Lajaunie Agriculture Economist (consultant) Satoru Ueda Water Resources Engineer (consultant) Tijan Sallah Economist Samia Msadek Financial Management Specialist Majed El Bayya Procurement Specialist Afif Al Saqqaf Financial Specialist Nadia Gouhier Procurement Assistant Josephine Salang Program Assistant - 83 - Annex 8: Documents in the Project File* REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT A. Project Implementation Plan The Project Implementation Plan (PIP) has been prepared by the Borrower. A copy is kept in the project files. B. Bank Staff Assessments The PIP is well prepared and has sufficient details to assist project implementation. C. Other Identification - Memorandum of Understanding of the Identification Mission, February, 1999 Preparation - FAO/CP and Consultant Preparation Reports Yemen Irrigation Improvement - Preparation Report: Annex A Phase I Report Annex B Water Resources Annex C Rehabilitation & Improvement Works Annex C Appendix A Concepts & Designs Philosophy for SII Schemes Annex C Appendix B Wadi Zabid Survey & Outline Design Drawings Annex C Appendix D Wadi Tuban Survey & Outline Design Drawings Annex C Appendix E Wadi Tuban Quantities & Costs of Rehab. & Improvement Works Annex C Appendix F Operation & Maintenance Cost Estimates for Wadi Zabid & Wadi Tuban Annex C Appendix G TOR for International Consultants Annex D Agricultural Production Annex E Institutional Development Annex F Local Framework Development Annex G Social Assessment Annex G Appendix A Land Tenure & Irrig. Management Situation in the Proposed Project Annex H Environmental Impact Assessment Review Mission - Memorandum of Understan-ding of the Review Mission, January 2000 Preappraisal - Memorandum of Understanding of the Preappraisal Mission, February/March 2000 - Social Aspects-Working Paper, May 2000 - Environmental Aspects-Working Paper, May 2000 - Flood Warning System, Consultant report, April, 2000 - 84 - Appraisal - Memorandum of Understanding of the Appraisal Mission, June 2000 Other Documents - Irrigation Sector Strategy Note, Draft, January 1999 - Towards Water Sector Strategy, August 13, 1997 - Agriculture Sector Strategy, September 15, 1998 Project Implementation Plan (PIP) - Draft PIP of June 2000 Policy Statement - Policy Statement on Establishing Water Users in Yemen Proiect Activity Room (PAR) - An electronic version of all the above documents and other related documents are kept in the Project Activity Room (PAR) (a Lotus Notes Database location) *Including electronic files - 85 - Annex 9: Statement of Loans and Credits REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT Difference between expected and actual Orginal Amount in US$ Millions disbursements Project ID FY Borrower Purpose IBRD IDA Cancel. Undisb. Orig Erm Rev'd P005904 1993 Yemen, Republic BASIC EDUCATION 0.00 19.70 0.00 3.95 3.71 2.17 P005911 1994 Yemen, Republic EDUCATION SECTOR 0.00 33.00 0.00 19.33 16.78 5.56 P005910 1993 Yemen, Republic FAMILY HEALTH 0.00 26.60 0.00 12.72 13.92 12.86 P048522 1997 Yemen, Republic FLOOD EMERGENCY 0.00 30.00 0.00 6.45 8.44 0.00 P005836 1992 Yemen, Republic LAND & WATER CONSERV 0.00 32.80 5.55 0.99 5.02 0.10 P050483 2000 Yemen, Republic RY-CHILD DEVELOPMENT 0.00 28.90 0.00 28.00 0.00 0.00 P050706 2000 Yemen, Republic RY-CIVIL SERVICE MODERN 0.00 30.00 0.00 29.52 0.00 0.00 P057915 1999 Yemen, Republic RY-LEGAL & JUDICIAL DEV 0.00 2.50 0.00 2.13 0.26 0.00 P005806 1991 Yemen, Republic RY-MULTI-MODE TRANSPORT 0.00 35.80 0.00 5.09 -3.14 2.26 P049735 2000 Yemen, Republic RY-PRIVATIZATION SUPP. 0.00 10.90 0.00 10.89 2.00 0.00 P060132 1999 Yemen, Republic RY-PUBLIC WORKS II 0.00 50.00 0.00 41.48 11.60 0.00 P050530 1999 Yemen, Republic RY-SANAA EMERG. POWER 0.00 54.00 0.00 34.58 16.79 0.00 P005907 1999 Yemen, Republic RY-SANA'AWS/SANITATION 0.00 25.00 0.00 15.23 -1.38 0.00 P088830 2000 Yemen, Republic RY-Second Social Fund for Development 0.00 75.00 0.00 74.34 0.00 0.00 P041267 1996 Yemen. Republic RY-TRANSPORT REHABILITATION 0.00 37.00 0.00 18.22 20.53 9.58 P005902 1998 Yemen. Republic S.GOVAGRI PRIVATIZA 0.00 24.70 0.00 21.22 11.18 0.00 P039171 1998 Yemen. Republic SEEDS &AG. SERVICES 0.00 12.50 0.00 7.53 3.28 0.00 P041199 1997 Yemen, Republic SOCIAL FUND DEVPT 0.00 30.00 0.00 3.75 -11.40 0.00 P005912 1996 Yemen, Republic VOC. TRAINING 0.00 24.30 0.00 15.85 14.32 0.00 Total: 0.00 582.70 5.55 351.38 111.91 32.53 - 86 - REPUBLIC OF YEMEN STATEMENT OF IFC's Held and Disbursed Portfolio In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1999 ACSM 12.00 0.00 0.00 0.00 8.00 0.00 0.00 0.00 1998 Radfan 3.80 0.00 0.00 0.00 3.80 0,00 0.00 0.00 Total Portfolio: 15.80 0.00 0.00 0.00 11.80 0.00 0.00 0.00 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic Total Pending Commitment: 0.00 0.00 0.00 0.00 - 87 - Annex 10: Country at a Glance REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT M. East POVERTY and SOCIAL & North Low- Yemen Africa Income Development diamond' 1998 Popuiation, mid-year (millions) 16.5 285 3,515 Life expectancy GNP per capita (Atlas method, USS) 300 2,050 520 GNP (Atlas method. USS billions) 4.9 586 1,844 Average annual growth, 1992-98 Population (%J 2.9 2.2 1,7 Labor force (%1 3.4 3.0 1.9 GNP I / Gross per primary Most recent estimate (latest year avaIlable, 1992-98) rapita enrollment Povertv (% of population below national poverty line) 19 Urban population (% of total population) 36 58 31 Life expectancy at birth (years) 54 67 63 Infant mortality (per 1, 000 live births) 96 49 69 Child malnutrition (% of children under 5) 29 14 .. Access to safe water Access to safe water (% of population) 39 81 74 Illiteracy f% of population age 15+) 58 38 32 Gross orimary enrollment (% of school-agepopulation) 70 96 108 - emen, Rep. Male 100 103 113 Low-income group Female 40 89 103 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1977 1987 1997 1998 Economic ratios' GDP (US$ billions) . . 5.7 5.4 Gross domestic investment/GOP .. 21.2 21,5 Trade Exports of goods and services/GDP 44.0 34.5 Gross domestic savings/GOP 12.8 2.4 Gross national savings/GOP 23.8 17.S Current account balance/GDP . 2.4 -40 Domestic Interest payments/GOP 0 5 0.9 Investment Total debt/GOP 67.3 Savings Total debt service/exports 2.6 Present value of debt/GOP 52.5 Present value of debt/exports .. .. 80.8 Indebtedness 1977-47 1938-98 1997 1998 1999403 (average annual growth) GDP 3.8 5.4 3.8 5.1 -Yemen, Rep. GNP Per capita -1.0 -0.5 4.6 2.3 Low-income group Exports of qoods and services . 6 9 7.1 -9.2 3.8 STRUCTURE of the ECONOMY 1977 1987 1997 1998 Growth rates of output and investment I%) (% of GDP) 30 Aqriculture .. .. 16.2 16.2 T Industrv 44.9 44.9 20 Manufacturing 10.5 10.5 10 Services 38.9 38.9 0 Private consumption 68.5 75.7 -10 93 94 95 9I 97 98 General qovernment consumption 18.7 21.9 -GDI .GDP Imports of qoods and services . 52.4 53.6 197747 1988-98 1997 1998 Growth rates of exports and imports (%) (average annual growth) Agriculture .. 4.3 2.2 0.7 60 Industry . 6.4 3.4 3.8 40 Manufacturing . 1.6 3.4 3.8 Services . 1.7 9.6 6.1 20 Private consumption . 1.9 -3.0 6.0 o General government consumption . 3.0 49.1 12.1 . 0 .7 Gross domestic investment . 8.8 6.8 -2.7 20 Imports of goods and services .. 3.0 6.1 -0.7 - Exports .t Imports Gross national Product .. 2.6 2.0 7.3 Note: 1998 data are preliminary estimates. The diamonds show four kev indicators in the countrv (in bold) compared with its income-qroup average. If data are missing, the diamond will be incomplete. - 88 - Yemen, Rep. PRICES and GOVERNMENT FINANCE Domestic prices 1977 1987 1997 1998 Inflation (%) (% change) 8060 Consumer prices . 6.3 8.5 60 Implicit GOP deflator .. .. 7.0 -4.6 40 Govemment finance 20 (% of GDP, includes current grants) o Current revenue .. .. 37.7 29.8 -20 93 94 95 96 97 98 Current budget balance .. 6.0 1.4 -GDP deflator 'CPI Overall surplus/deficit .. . -1.8 -5.0 TRADE (US$ millions) 1977 1987 1997 1998 Export and import levels (US$ millions) Total exports (fob) 2,262 1,632 3,000 Crude oil (govemment share) .. .. 1,004 599 Crude oil (companies' share) .. .. 935 743 2.000 Manufactures .. .. 199 142 Total impo.rts (cif) . . 2,601 2,553 Food . .. 916 881 1000 Fuel ancl energy 185 133 Capital gloods . . 85 73 0 I ' -3 92 63 94 95 96 97 98 Export price index (1995=100) .. .. 114 91 Import price index (1995=100) .. .. 76 75 E] Exports * Imports Terms of trade (1995=100) . .. 149 121 BALANCE of PAYMENTS (US$ millions) 1977 1987 1997 1998 Current account balance to GDP ratio (%) Exports of goods and services 2,522 1,874 20 Imports of goods and services .. .. 3,005 2,915 Resource balance .. .. -483 -1,041 10 Net income . .. -636 -467 0 Net current transfers .. .. 1,254 1,289 94 95 96 97 Current account balance 135 -219 Financing items (net) .. .. 162 56 Changes in net reserves -297 163 Memo: Reserves including gold (US$ millions) .. .. 1,227 1,094 Conversion rate (DEC, local/US$) .. 129.3 135.0 EXTERNAL DEBT and RESOURCE FLOWS 1977 1987 1997 1998 (US$ millkns) Composition of total debt, 1997 (USS millions) Total debt outstanding and disbursed 723 4,585 3,856 IBRD 0 0 0 0 G: 1a8 IDA 59 473 934 1,075 B 1 Total debt service 22 269 98 f IBRD 0 0 0 0 F 837 IDA .. 6 16 18 (U Composition of net resource flows C :250 Official grants 287 242 | _c Official creditors 80 94 | Private creditors 13 174 .. .. Foreign direct investment 0 1 .. .. D 456 Portfolic equity 0 0 . . E: 1,191 World Bank program A - BRD EBilateral Commitments 16 66 149 60 B-IDA D-Othermultilateral F Private Disbursements 21 41 89 121 C - IMF G Short-term Principal repayments .. 2 10 11 I Netflows 21 40 79 111 Interest payments .. 4 7 7 Net transfers 21 35 72 104 Development Economics 9/22/99 - 89 - Additional Annex No.: 11 Institutional Arrangements REPUBLIC OF YEMEN: IRRIGATION IMPROVEMENT PROJECT POLICY STATEMENT (See Attached) - 90 - FROJM MINISTER OFFICE PHONE NO. 009671289509 Jul- 117 2000 09:22PC \m' ^ -O Ms. Doris Koehn Sector MAanager / Director Rural Development. Water & Elnvironment Depatment Middle East and North Africa Region (MNSRE) International Development Authority (IDA) Dear, Subject: MAI PoliMy Stalement on Parti-ipatory Irrigation Management. It pleases me to enclose herewith a copy of the Policy Statement on Participatory Irrigation Management which was issued by me. This statement was reviewed and finalized by my senior staff, PPU and IDA Appraisal Mission for the Spate Irrigation Improvement Proicct (See Annex I of July 2000 MOU). With-best regards. Sincerely, med Sate Jball ricz ttute and Cc Mr. Naji Abu-liatim / Senior operation officer WB/ Sana'a - 91 - FROM MINISTER, OFFICE PHONE NO.: 009671289509 Jul. 1?2O 09:22PM P Republic of Yemen Ministry of Agriculture & Irrigation Policy Statement on Participatory Irrigation NManagement bv Ministr= of Agriculture and Irrigation (MAU) 1I Irrigated agriculture accounts for over 90 per cent of Yemen's water use. In the context of growing costs of additional water development, and competing claim for water from urban and other uses. GOY rcviewed its strategies in irrigation and agriculture and has concluded that efficient and sustainable use of water in agriculture is an important objective. In achieving that objective, COY through MAI seeks to adopt a strategy that combines promotion of efficiency / conservation including measures with maximnum participation of stakeholders. On Ehe other hand. modem spate schemes have been implemented in receat dccades during which GOY has taken a growing responsibility for spate irrigation development and management which covers about I 1% of total cultivated area in Yemen. However, years of deferred maintenance due to shortfall of budget and damages from catastrophic floods have reduced the operability of diversion and control structures and canal systern. This has led to a reduction in water mobilization for spate irrigation and has had the effect of reducing cropped areas and hence agricultural production. From recent studies and workshops. a gireater awareness and increasing interest in the concept of Participatory Irrigation Management (PlivI) has been generated. In order to ensure sustainability of such spate irrigation schemes and agricultural production GOY has agreed with IDA to implement and finance a now project called 'Spate Irrigation improvement Project (SUIP)" which includes PIM as one of its important components. ) Against the above background, and within a framework of parlicipatory N irnation management, MAtA adopts the following guiding principles: Fi ial - 12/07/00 - 92 - FROMI MINISTER OFFICE 'PHONE NOl.: 00967128909 Jul. 17 2006 09'23r (a) Meaningful participation in decisioxu-making anid implementation in relation to spate irrigation scheme improvements and rnanagcment should be enabled for all stakelholders, covering gradually all aspects and levels of the irrigation system. For physical improvements, users should identify priorities, government agencies should facilitate and assist rathcr than direct the process, and a demand-driven element in the approach to improvements should be adopted. (b) The primary focus of institutional development efforts should be on all of the water users in the different reaches of the system. In parallel, however, currently responsible govermnent agencies should be supported through the corresponding transition and reforrn process. (c) IrTigation management and systems O&M responsibilities and powers should be progressively transferred from government agencies to self- rcliant user organizations. At each stage, the transfer should comprise both the maintenance and cost responsibilities and the coTrespondingT operational and financial control and authority. 3. Specifically, MAI will: (a) Promote and help create water user organizations at various levels of the irrigation scheme, starting with the water UJser Groups at thc tertiazy level, Watcr User Associations at the secondary / primary level. and the Scheme Water IJser Federations at the scheme level. Accordingly, MAI will register and recognize the water user orUA's which will be cstablished'temporarily under the Agricultural Cooperative Union Law No. 39 of 1998. This will be a shlort-term ,2y) ;J terim solution until issuance of the irrigation law wereby WUA's will be ( ( 4 er its jurisdiction. Consequently. water users in spate irrigated areas could Q\ .- ;nt formation of such associations which will be registered in MAd and \\in~2~-~fististry of Social Affairs. Final - 12107/00 - 94 - FRO MINISfTCy OFFICE PHONE NO.: 009671289509 Jul. 17 2000 09:24PIn S. GOY will pilot Spatc rIP incorporating the above principles and specific actions. It will monitor results of the project and draw lessons from the pilot for the rmational program of spate irrigation improvem-ent. tnal-12107/00 -95- FROM MINISTER 0FFICE PHONE NO.: 009671289509 Jul. 17 Zd00 09:24PM P-; .. .... iNni .: S1 DJI Ms. Doris Koehn Sector Manager I Director Rural Development, Water & Fnvironment Department Middle East and North Africa Region (MNSRE) International Development Authority (IDA) Dear, Subject: GOY Commitment letter to undertake O&M cost of all spate schemes During appraisal mission of the Spate Irrigation Improvement Project (8-18 June, 2000), the O&M costs has been estimated in details and the annual amounts needed for eacb Wadi scheme under phase I were calculated. The estimates included GOY and WUJAs shares. Also the minimum an nual O&M costs for other Wadis to be included under phase 11 were estimated. This matter was presenLed Lo the Deputy Minister of Finance (MoF) who has agreed to allocate the required amounts requested by MAI for FY 2001 has been already allocated by MoF. We confirm government commitment to provide the specified declining share of O&M costs for Zabid aiud Tuban schemes (Phase I) as indicated in Table 5 of Annex 2 (Engineering Aspects) of MOIJ. In this regard an amount of US$ 21 1,000. Also the required amounts for O&M costs for Phase II Wadis as shown on knnex 3 of the said MOU about US$ 550,000 per year has been allocated. With best regards. of A=,arL ~~~& Irrigation Cc: Mr. Naji Abu-Hatim / Senior operation officer WB/ San - 96 - INSTITUTIONAL SETTING FOR IRRIGATION IN YEMEN The Government of Yemen (GOY) has been active in promoting a set of policies related to water and irrigated agriculture emphasizing efficient water allocation and use, participatory water management, and sustainable management of the water resource and water sector. A. Background: Government Policies The GOY's water and irrigation sector policies are set out in the following key documents: Towarcts a Water Sector Strategy (World Bank, 1997). Three main water resource problems and objectives were identified: (i) to reduce groundwater extraction and promote sustainable use; (ii) to facilitate transfers of water from rural to urban areas; and (iii) to increase the coverage of domestic water supply and sewerage. The need to improve the efficiency and sustainability of spate irrigation by transferring management to user groups was also recognized. Irrigation Sector Note (World Bank, 1999). The sustainability of spate irrigation systems was found to be one of four key challenges confronting the irrigation sub-sector. The financial capacity of the public sector for sustained O&M of the spate schemes has been eroded by the crises in reduced public budget and services. Most of the aging infrastructure was found to be deteriorating and in need of rehabilitation. User participation and cost-sharing in design and construction was found to reduce investment costs and increase sustainability. The stress would have to be on demand driven improvements of spate irrigation schemes implemented on a cost-sharing basis. Aden Agenda; Restructuring of MI (GOY 1999). The GOY's Aden Agenda involves the following basic principles: (i) redefinition of public and private roles; (ii) the Ministry of Agriculture and Irrigation (MAI) should live within available resources; (iii) restructuring of MAI is essential; (iv) services should be driven by demand and economic advantage; and (v) an action plan should be prepared and implemented. The ultimate spate irrigation management objectives are for farners to contribute their share to optimally financed O&M supported by properly equipped, staffed and motivated agencies. Agricultural Strategy Note (World Bank 1999). Incentives and investments for improving water use productivity, and the introduction of participatory management of spate irrigation schemes were identified as two complementary solutions to improve the productivity and sustainability of irrigated agriculture. B. Background: Institutional and Legal Aspects The Ministry of Agriculture and Irrigation (MAI) is responsible for irrigation management in the country through its General Directorate of Irrigation (GDI). The GDI is in theory responsible for a wide range of irrigation sector activities, including planning, preparation and participation in feasibility studies and designs, construction and rehabilitation of hydraulic structures, technical supervision of irrigation management activities and land reclamation. However, in practice, its activities are largely confined to the small dams program. MAI's regional offices and autonomous development authorities are responsible for the management of spate irrigation systems. These include the Tihama Development Authority (TDA) and the Lahej Regional Agriculture Office (Lahej RAO) responsible for the management of the Zabid and Tuban - 97 - schemes, respectively. TDA is also involved in a range of other development and investment activities. Irrigation management is carried out within the framework of overall water resources management. The National Water Resources Authority (NWRA) was established in 1995 and became operational in 1996 with overall responsibility for water resources sector coordination and planning. This included the creation and management of the water resources data base, regional and basin-wide water resources planning and regulation, monitoring, undertaking studies and provision of public information. In general, the legal system of Yemen stems from three sources, i.e.: (i) Islamic Law, or Sharia'ah; (ii) legislation, or written law; and (iii) 'urf, or custom (unwritten law). As stated in Article 3 of the Constitution of 1994, the Sharia'ah is at the basis of the country's legal system. Its principles may not be contradicted by legislation. The legislation of Yemen consists of the Constitution, laws, resolutions (or decisions) and regulations. The Civil Code (Law N. 19 of 29 March 1992) consists of a modem formulation of the principles of the Sharia'ah and contains about 30 articles relevant to water resources. The legal framework for spate irrigation management is mostly based on custom, discussed elsewhere in this report. At present, there is no formal law specifically providing for water user associations. However, a draft Irrigation Law was prepared by MAI and sent to the Cabinet in June 2000 and it included provisions for user participation and management. THE INSTITUTIONAL/SOCIAL BACKGROUND IN THE PROJECT AREA Spate Irrigation Improvement Program is a national program for spate improvement and irrigation management transfer. In the Phase I of five years, the proposal is to work in two wadis (Tuban in Lahej and Zabid in Tihama) whose selection was based on government preferences, and technical and social feasibility including farmer interest. The second phase would provide for scaling-up based on the experience of Phase I. A. Wadi Tuban Current Institutions and Water Management Arrangements The Lahej RAO is supported in the management of the Wadi Tuban spate irrigation scheme by an Irrigation Council (IC) set up by a decree of the govemorate, comprising the District Commissioner acting as Chairman, the Directors of Agriculture and Irrigation acting as Deputy Chairman and Secretary respectively, and a further 14 representative farmer members. Appointments are permanent and members are usually only replaced if they resign or die. Every member of the IC has an equal vote but decision-making is by consensus and disputes are rare. The IC's main function is to approve irrigation plans, approve use of floods, and provide general guidance on irrigation management and maintenance. The statutes of the IC provide for sanctions against infringers that are enforced by the police who may impose fines or imprisonment. Irrigation charges were set and levied, but were later withdrawn since the Ministry of Finance declared that ICs were not legally mandated to collect revenues. The Village Chief (Sheikh al Qaria) is usually elected and is often a member of an influential family. The Deputy Chief (Aqil) is an educated person with good knowledge of traditional Sharia'a law who mediates and settles disputes amongst villagers. The Public Notary (Al Ma'mun) is the registrar of contracts and tax collector. Finally the irrigation Water Master (Sheikh al Obar) is responsible for water distribution and organizing communal O&M at the village level below the jurisdiction of the RAO. The position of Water Master (WM) is formally appointed by the RAO. Thus the position is not necessarily hereditary but appointments are permanent and most WMs have strong ties of allegiance to the Village Chief and other - 98 - local elite. The WMs are assisted by Irrigation Extensionists (IE) who are permanent employees of the RAO. IEs are generally less educated than the RAOs Agricultural Extensionists who are trained in the top down Training and Visit system. Actual distribution of spate water is carried out by the RAO. In the traditional areas some 30 Shaykh al Obars (community water masters) are responsible for daily water operation and maintenance by farmers at the secondary and tertiary levels. They are supported by an equivalent number of extension staff employed by WAI. The IC has established rules to ensure equity for downstream users, the concept being that spate water will not be diverted into fields that have already received either base flow or earlier spates. Water allocation is accordingly based on a fixed irrigation plan summarized as follows: (a) when a spate flow is low (5-15m3/s), priority for distribution is given to schemes in the upper part of the delta (namely Ras Al Wadi and Al-Arais); (b) when spate flow is of medium size (I 5-25m3/s), priority is given also to schemes in the middle part of the delta (including Beizag and Faleg systems); (c) when spate floods are high (25-40 Mr/s) the flow is directed at the main wadi bifurcation point at Ras al Wadi Weir either to Wadi Kabir or Wadi Saghir, depending on which one is due the next turn; and (d) when spate floods exceed 40m /s, the flow is divided evenly between the two wadis. Land Tenure and Water Rights There are three categories of land tenure for the 11,000 ha in Tuban: (i) private ownership represents 70% of the total agricultural land; (ii) government ownership represents 20%; and (iii) Waqf Trust land represents 10%. Waqf Trust and Government land usually are given in tenancy to farmers. Private large ownership (more than 5 ha) represents 7% of agricultural land, medium ownership (1-5 ha) 14% and small ownership ( Project:P\!UNITS\MNSRE\ Task ' Summary Rolled Up Milestone <,> ELHANBAL\YEMEN\PIP\lmplschedl.n 11_=_ n Date: 07/11/2000 Split Rolled Up Critical External Tasks Task Progress Rolled Up Crntical Split Project Summary Baseline Rolled Up Critical Progress Baseline Split Rolled Up Task Page 3 REPUBLIC OF YEMEN Irrigation Improvement Project Implementation Schedules _________________________________________________________________________ If 2nd_Ha I1st_Hall 2nd Hal I1st Half 2nd Halt 1st Halt H 2nd Hal 1st Half 2nd Hal 1stHalf 2nd Half ID TaskName Duration I Start | Finish Qtr2 Otr3 (3Q4! 051 tQtr2fr 3Q 0tr4 Irl |Qr2 IQtr31 4Qtr 1t IQr2 0r3 3 r4 Qtr 1IQtr2103 Qtr IQtri 'Q2 lQtr3 Qtr4 64 Preparation of final design 40 wks 8131/01 6/7/02 0% 65 Preparation of bidding documents 10 wks 6/7/02 8/16/02 o 66 Bidding 24 wks 8/16/02 1/31/03 67 Issue of bid 0 wks 8/16/02 8/16/02 68 Bid openning 6 wks 8/16/02 9/27/02 69 Bid evaluation 8 wks 9/27/02 11/22/02 % 70 IDA noobjection' 4wks 11/22102 12/20/02 71 Contract Award 6 wks 12/20/02 1/31/03 72 Construction S0 wks 2128tO3 911004 . i. iI ,0 %| 73 Headworks 50 wks 414/03 3/19/04 .0% 75 Tertiary Irrigation system 80 wks 2/28/03 9/10/04 I 0% 76 Rehabilitation of 35 km of roads 60 wks 5/9/03 7/2/04 .1/. 77 Wadi protection works 40 wks 7/18/03 4/23/04 0%. 78 Procurement of water measurement device 30 wks 10/10/03 57/04 0% Crifical Baseline Milestone 3 Rolled Up Split Critical Split Milestone Rolled Up Task Progress CrtiGal Progress Summary Progress Rolled Up Baseline Milestone < Project:P\!UNITS\IVINSRE\ Task ' Summary Rolled Up Milestone ELHANBAL\YEMEN\PIP\lmplsched1 .n Date: 07/11/2000 Split Rolled Up Critical External Tasks Task Progress Rolled Up Criical Split Project Summary Baseline Rolled Up Critical Progress Baseline Spit Rolled Up Task Page 4 MAP SECTION 42° 44° 46- 48 50° 52° 54' REPUBLIC OF YEMEN IRRIGATION IMPROVEMENT PROJECT PHASE I IRRIGATION PROJECTS SSAUDI ARABIA PHASE I IRRIGATION PROJECTS (PROPOSED) o TOWNS AND VILLAGES 20° 03 GOVERNORATE CAPITALS ® NATIONAL CAPITAL 0 25 50 75 100 KILOMETERS PRIMARY ROADS r 0 25 50 75 100 MILES SECONDARY ROADS WADIS - \ - - - INTERNATIONAL BOUNDARIES _ a S / _ Saddat ash Shuqqch Ij \O This mop was produced by the Mop Design Unit of The World Bank. i 18 The boundories, colors, denominations and onyother information shown on this map do not imply, on the port ofl The World Bank Group, any judgment on the legal status of any territory, or any endorsement or occeptnce of such boundaries . I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I To ZahronThm ( Saadah S ~ ~ ~~~ ~To ~~l Haz/mSi - AGhuo ui ~~~i~~oyc~~~o *A r ~ ~ ~ ~~ Hoy N / I y'~~~~~~~~-- So~~~fir shalwoh .Y\ 4 Az oh Mahwt Sana'a M~7AMgoi lhya , Al Monsuriy *DFtamar ~~ ~A ar A Gh o oys lbb* ih n0 '5 ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~uu ~~ 42' / DJIBOUTI \ii~~~~~~~Hri cc~~~~~~~~~~~~~~~a IBRD 30791 /t''' ' ..... , ,,' REPUBLIC OF YEMEN "" \' ,-- IRRIGATION IMPROVEMENT PROJECT WADI TUBAN SPATE IRRIGATION SYSTEM b\\\\ XNubat Dukim ~'==f- WADI X\\ \ \\ / - PROJECT BOUNDARY >\\ \7 ,..- / *-,_, SJB-PROJECT LOCATIONS ot\\ \\\\ob 1/ , ===-t ~~~~~E)(ISTING WEIRS \ \l / ~~~~~~~~~~ASPHALT ROADS I i \ \ \ | 1 9 0 TOWNS/VILLAGES A1 .AL ARAIS WEIR * _ \ X 2 *.-I' Al.lROBARSHAKAH 0 5 10 KILOMETERS * '\ * / B2.2 ATH THALAB SYSTEMC| Ii~~~~Scb N B1.31.1 ALWAHTvIR WEB2.4 L BUSTN WEIR \ \'\\\a\ 7 \\\ \ t-.. B2.5 BURT SALEM COMPLEX| B| B.2 MUGAHED WEIR '\ LaiB.6 AL ANSIA EI .A \~~~~~~~~". \N\\ \ * --E : B.7OBRRIYADH| _ ~~~~~~\~\ \\ BSabr . 'N N \\\\ \4 \ AlI B\ .3 A T WE Al Imad - This map was produced by the 0 0Jaw la Map Design Unit of The World Bank. The boundaries. colors, denominations and anyother information shown on this map do not imply, on the port of The World Bank Group, any judgment on the legal status of any territory,or Shek uthr any endorsement or acceptance of such boundaries. 40\' 5)0' 9 a ~~~~S A U D I .. _ Jiddah SAUDI -z n 7t , o' OMAN ERITRE . - REP. OF &., YEMEN Little Aden /, ~ \^>G : Gvyion" v (Al Ghadir) ETHIOPIA - l .....- 0AddibsA SOMALIA AABIAN ulf of Aden '0e ,7 < SEA MARCH 2000 40'id S A U D I 5 AE - J~ddnh A RA BI A REPUBLIC OF YEMEN z OMAN IRRIGATION IMPROVEMENT PROJECT ,. WADI ZABID SPATE IRRIGATION SYSTEM ERITR -a-=f WADI ===lJ- DIVERSION STRUCTURES / en - PROJECT BOUNDARY * TRADITIONAL OGMAs H ETHIOPIA - - - SUB-PROJECT BOUNDARIES ACCESS/FARM ROADS ,TIOI TURNOUTS HIGHWAY -10° SOMAL ARA&'AN CANALS BUILT-UP AREAS '7 To Al Hodeidoh \I l_ t/~~~~~~~~~~~~~~~~~~~~~~~~~~~0 / S \-tar: IShobitah GROUP-2 su \ )S \ z \ X X * G I2SbI ]~~~~~~~~~~~~~ d% ] C' T R D -IO < | >/Q Prt)Ryyasn-Bagr 4 ti / SubProject-5 SAh \ k _ T1FlNAL- X* Wdit Zabid DIVERSION STRUCTUREo e ST RUCTUR *y 560U 19 hal CanY'i *> GRQP2 Anr |1~'& G~VRSOUp11CAAL---- *aGROUP- 111 CAALS / \ / \ | . ,,/._GROUP TRADITIOlu.Atf~ ith T R ADT--ON---4 ______~ BaitAT is __ I~~~~~~N ipled-5n on the le ttso n ertr,o n nosentarUCUR G >'GROUP-3 495 ha / canal 'R- SubProject-S /~~~~~~rjet- 1 / ~~~~~ GROUP-2 risao ha~~~~~~~~~GRU-2c h C- ** / SubPraject-4~~~~~~~~~~~~~~~~~~~.P,jct3Fl-90h This map was prod.ced by the Map D-sign Unit of The Wo,ld BRAn. > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~The bnundnrloies, colors,dnnominotions and anyother information shown M m ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~on thin cmop do not imply, an tke part of The World Rank Grasp, any judgment on the legal status of any territory, or any endorsement or ro ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~acceptance of such boundaries. 1 C),~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Is