Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 42193-EG

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN IN THE AMOUNT OF US$120.0 MILLION

TO THE

ARAB REPUBLIC OF EGYPT

FOR

THE INTEGRATED SANITATION & SEWERAGE INFRASTRUCTURE PROJECT

February 25,2008

Sustainable Development Department Middle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective February 2 1,2008)

ABR AGOSD ASBR BCM BD BOD BWADC CAESB CAS CAWPO CBA CCTV CDA CFAR CPAR CPPR DALY DO

EC EEAA EFS ERO ERR ESA ESAIF ESMMF ESW EU EWRA FC FDI FM FMR FMS FSL

Currency Unit = Egyptian Pound (LE) Egyptian Pounds 5.47 = US$l.OO

FISCAL YEAR

January 1 - December31

ABBREVIATIONS AND ACRONYMS

Anaerobic Baffled Reactors Alexandria General Organization for Sanitary Drainage Advanced Sequential Batch Reactors Billion Cubic Meters Bidding Document Biological Oxygen Demand Behira Water & Drainage Company Brasilia Water and Sanitation Company Country Assistance Strategy Cairo & Alexandria Water & Wastewater Projects Organization Cost Benefit Analysis Closed Circuit Television Community Development Association Country Financial Assessment Report Country Procurement Assessment Report Country Portfolio Performance Review Disability Adjusted Life Year Development Objective Dissolved Oxygen European Commission Egyptian Environmental Affairs Agency Environmental Field Supervisor Environmental Regional Officer Economic Rate o f Return Environmental Site Assessment Environmental and Social Impact Assessment Framework Environmental & Social Management & Monitoring Framework Economic Sector Work European Union Egyptian Water Regulatory Agency Fecal Coliform Foreign Direct Investment Financial Management Financial Monitoring Report Financial Management Specialist Fixed Spread Loan

FOR OFFICIAL USE ONLY

FY GDP GHWSC GIS GOE GOSD GPOBA GTZ HCWW IBRD ICB IDA IEC IFR IIIMP IP ISDS ISR ISSIP IWRM IWSP KfW KWSC LAU LE LVU M&E MALR MCM MDG MIS MM MOHP MOHUUD MOIC MOLD MOSA MOU MPN MSEA MWRI NCB NDC NGO NOPWASD NPV NPSEV NWRC NWRF' OBA O&M

Fiscal Year Gross Domestic Product Gharbeya Water and Sanitation Company Geographic Information System Government o f Egypt General Organization for Sanitary Drainage Global Partnership on Output Based Aid German Technical Cooperation Holding Company for Water and Wastewater International Bank for Reconstruction and Development International Competitive Bidding International Development Association Information, Education & Communication Interim Financial Report Integrated Irrigation Improvement and Management Project Implementation Progress Integrated Safeguards Data Sheet Implementation Status Report Integrated Sanitation and Sewerage Project Integrated Water Resource Management Integrated Water and Sanitation Program Kreditanstalt fuer Wiederaufbau (German Development Bank) Kafr El Sheikh Water and Sanitation Company Local Administrative Unit Egyptian Pound Local Village Unit Monitoring and Evaluation Ministry o f Agriculture and Land Reclamation Million Cubic Meters Millennium Development Goals Management Information System Mitigating Measures Ministry of Health and Population Ministry of Housing, Utilities and Urban Development Ministry of International Cooperation Ministry o f Local Development Ministry o f Social Affairs Memorandum o f Understanding Most Probable Number Ministry of State for Environmental Affairs Ministry of Water Resources and Irrigation National Competitive Bidding Netherlands Development Cooperation Non-Governmental Organization National Organization for Potable Water and Sanitary Drainage Net Present Value National Program for Sanitation o f Egyptian Villages National Water Research Centre National Water Resources Plan Output Based Aid Operation and Maintenance

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

OP ORDEV ORS PAD PAP PBC PCN PER PFS PIC PID PIP Pn l PMCF PMU PO PS QA QC QUAL2K R&R RAP RBC RPF RSU SA SBD SBR S I L SOE SRDP SWM TA TBD TDS THM TOR TSS TTL UASB USAID USEPA WA WB

WHO WQ wsc wscu wss WTP

Operational Policy Organization for Reconstruction and Development o f the Egyptian Village Oral Rehydration Salts Project Appraisal Document Project Affected Persons Performance Based Contracting Project Concept Note Public Expenditure Review Project Financial Statements Public Information Center Project Information Document Project Implementation Plan Project Implementation Unit Program Management Consulting Firm Project Management Unit Private Operator Pumping Stations Quality Assurance Quality Control Water Quality Software Replacement & Renewal Resettlement Action Plan Rotating Biological Contractor Resettlement Policy Framework Rural Sanitation Unit Social Assessment / Special Account Standard Bidding Documents Sequential Batch Reactor Specific Investment Loan Statement o f Expenditures Sohag Rural Development Project Solid Waste Management Technical Assistance To be determined Total Dissolved Solids Trihalomethane Terms of Reference Total Suspended Solids Task Team Leader Up flow Anaerobic Sludge Blanket United States Agency for International Development United States Environmental Protection Agency Withdrawal Application Water Board World Bank World Health Organization Water Quality Water and Sanitation Company Water and Sanitation Company ISSIP Unit Water Supply and Sanitation Willingness to Pay

WUA Water Users’ Association WUO Water Users’ Organization WW Wastewater WWTP Wastewater treatment plant

Vice President: Daniela Gressani Country Director: Emmanuel E. Mbi

Sector Director: Inger Andersen Sector Manager: Vijay Jagannathan

Task Team Leader: Ayat Soliman

EGYPT. ARAB REPUBLIC OF Integrated Sanitation& Sewerage Infrastructure Project

CONTENTS Page

A . STRATEGIC CONTEXT AND RATIONALE ...................................................................... 1

Country and sector issues .................................................................................................... 1 1. 2.

3.

4 . 5 .

Existing situation in the project area ................................................................................... 2

Institutional reform context ................................................................................................. 3 Rationale for Bank involvement.. ........................................................................................ 3 Higher level objectives to which the project contributes .................................................... 4

B . PROJECT DESCRIPTION ..................................................................................................... 4

1 . 2 . 3. 4 . 5 . 6 .

Lending instrument. ............................................................................................................. 4

Project development objective and key indicators .............................................................. 4 Project components ............................................................................................................. - 5

Lessons learned and reflected in the project design ............................................................ 6

Program objective and phases ............................................................................................. 4

Alternatives considered and reasons for rejection ............................................................... 7

C . IMPLEMENTATION ............................................................................................................ - 8

Partnership arrangements .................................................................................................... 8 1 . 2 . 3.

Institutional and implementation arrangements .................................................................. 8 Monitoring and evaluation o f outcomeshesults .................................................................. 9

4 . Sustainability ..................................................................................................................... 10

Critical risks and possible controversial aspects ............................................................... 12

Loadcredit conditions and covenants ............................................................................... 13 5 . 6 .

D . APPRAISAL SUMMARY .................................................................................................... 13

1. Economic and financial analyses ....................................................................................... 13

2 . Technical ........................................................................................................................... 15

3 . Fiduciary ............................................................................................................................ 18

4 . Social ................................................................................................................................. 20

5 . Environment ...................................................................................................................... 21

6 . 7 .

Safeguard policies .............................................................................................................. 22

Policy Exceptions and Readiness ...................................................................................... 22

Annex 1: Country and Sector or Program Background ................................................................. 23

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .......................... 27

Annex 3: Results Framework and Monitoring .............................................................................. 28

Annex 4: Detailed Project Description .......................................................................................... 32

Annex 5: Project Estimated Costs ................................................................................................. 41

Annex 6: Implementation Arrangements ..................................................................................... -48

Annex 7: Financial Management and Disbursement Arrangements ............................................. 55

Annex 8: Procurement Arrangements ........................................................................................... 69

Annex 9: Economic and Financial Analysis .................................................................................. 82

Annex 10: Safeguard Policy Issues ............................................................................................... 94

Annex 1 1 : Water Quality Modeling ............................................................................................ 107

Annex 12: Project Preparation and Supervision .......................................................................... 112

Annex 13 : Documents in the Project File .................................................................................... 114

Annex 14: Statement o f Loans and Credits ................................................................................ - 1 15

Annex 15: Country at a Glance ................................................................................................... 117

Annex 16: Maps- IBRD 33785 and non-Bank maps ................................................................... 119

ARAB REPUBLIC OF EGYPT

INTEGRATED SANITATION & SEWERAGE INFRASTRUCTURE PROJECT

PROJECT APPRAISAL DOCUMENT

MIDDLE EAST AND NORTH AFRICA

MNSSD

Date: February 25, 2008 Country Director: Emmanuel Mbi Sector ManagedDirector: Inger Andersen

Team Leader: Ayat Soliman Sectors: Sanitation (50%); Sewerage (30%);Sub- national government administration (20%) Themes: Rural services and infrastructure (P);Municipal governance and institution building (P); Water resource management (P);Access to urban services and housing (S) Environmental screening category: Partial Assessment

Project ID: PO943 1 1

Lendinn Instrument: Specific Investment Loan

For Loans/Credits/Others:

Total: 180.00 21.50 201.50

Borrower: Ministry o f Housing, Ut i l i t ies and New Communities. 12 Ismail Abaza Street Cairo, Arab Republic of Egypt Responsible Agency: National Organization for Potable Water and Sanitary Drainage (NOPWASD) Arab Republic of Egypt Holding Company for Water and Waste Water (HCWW) Arab Republic of Egypt

Expected effectiveness date: June 15, 2008 ExDected closine: date: June 30. 2014

I 1 AM U. I I

Does the project depart from the CAS in content or other significant respects? Re$ PAD A.3 No

Does the project require any exceptions from Bank policies? ReJ PAD D. 7 Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? ReJ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Re$

[ ]Yes [ ] N o

[XIYes [ ]No

[XIYes [ ]No D A n n 7

Does the project require any exceptions from Bank policies? ReJ PAD D. 7 Have these been approved by Bank management? I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? ReJ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7

[ ]Yes [XINO

[ ]Yes [ ] N o

[XIYes [ ]No

[XIYes [ ]No

Project development objective Re$ PAD B.2, Technical Annex 3 The main objective o f the project i s to contribute to the sustainable improvement in: (i) sanitation and environmental conditions for the resident communities and (ii) the water quality in the selected drainage basins within the served areas.

Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 The project intends to achieve its objective through the following activities:

designing and constructing sanitation systems for village clusters in the selected priority area within the two command areas o f Mahmoudeya and Mit Yazid, falling within the Governorates o f Beheira, Gharbeya and Kafr El Sheikh in the Delta.

improvements in sanitation coverage with anticipated environmental and health impacts.

within the national and local public institutions responsible for sanitation implementation to enhance their capacity to plan, design, construct and operate the rural sanitation investments, monitor outputs and outcomes, as well as promote hygiene practices and social mobilization as a close accompaniment.

Which safeguard policies are triggered, if any? Re$ PAD 0.6, Technical Annex 10 The proposed project falls under the World Bank environmental category B classification, according to the Bank’s Operational Policy 4.01 (OP 4.01) on Environmental Assessment and Involuntary Resettlement (OP/BP 4.12) are triggered. By virtue of the project geographic extent, the feasible approach for environmental and social assessment was to follow the “Framework Approach”. The partial assessment required, according to OP4.01 i s presented in details in the “Environmental and Social Assessment Framework (ESAF)” report, which describes the evaluation o f impacts, and presents an environmental management plan (EMP) which includes mitigation measures, monitoring plan, and institutional aspects.

being prepared, as there may be land acquisition under component 1 (provision of sanitation infrastructure).

Component 1 : Provision o f sanitation systems within selected drainage basins through planning,

Component 2: Establishment of a local result-based monitoring and evaluation system that links the

Component 3 : Institutional development and capacity building to promote institutional development

A Resettlement Policy Framework (RPF) establishing overall resettlement objectives and principles i s

Significant, non-standard conditions, if any, for: Re$ PAD C. 7 Board presentation:

Loadcredit effectiveness:

Covenants applicable to project implementation: (a) Establishment o f NOPWASD ISSIP Unit (dated covenant)

(dated covenant) (b) Signature o f Interagency Agreement between NOPWASD and HCWW "the implementing agency"

(c) Establishment o f ISSIP PIU (dated covenant)

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

1. The Government o f Egypt (GOE) has taken several measures to safeguard the quantity and quality o f water in the country. To this end, it has spent about LE 18 billion on wastewater management projects over the past two decades. Operation and maintenance (O&M) costs for the water supply and sanitation sector alone constitute 4% o f GOE total recurrent budget. Yet water quality in the country continues to degrade, impacting health, agricultural competitiveness and the quality o f l i fe. This degradation also frustrates Government plans for downstream reuse o f drainage water, a key component in Egypt’s water resources strategy. Damage costs from poor water quality are estimated at 1.8% o f national GDP. Moreover, previous Government programs on sanitation have been planned and implemented in isolation, often leading to expensive, geographically fragmented infrastructure projects with limited improvement to the ecosystem.

2. Much o f the organic pollution load reaching the country’s water bodies in the N i l e Delta comes from rural areas, where 57% o f the people live. The present national system for water supply and sanitation has a strong urban bias, while rural areas suffer from weak or non-existent institutional structures for sustainable service delivery and operation, particularly sanitation. Recent improvements in drinking water supplies to the rural areas did not include facilities to safely dispose o f the consequent increases in wastewater flows. Statistics on high levels o f sanitation coverage mask many inefficiencies and problems in the system. For example, existing household toilets cannot cope with the increased wastewater flows. In addition, many areas in Egypt have high water tables, which render many types o f conventional low-cost, on-site sanitation technologies inappropriate. The result i s spillage o f wastewater into streets, irrigation drains, and even into nearby canals.

3 . Facing increasing water resource limitations and the economic costs from water resource degradation and health impacts, the GOE recognizes the need to address rural sanitation issues in a broader institutional and planning context. Over the past three years, the Ministry o f Housing, Util i t ies and Urban Development has embarked on an ambitious reform agenda, with the following highlights for rural sanitation:

(a) Integrated water resources management: The institutional coordination structures between the Ministries o f Water Resources and Irrigation (MWRI) and the Housing, Util i t ies and Urban Development (MOHUUD) were historically limited to data exchange with limited planning across both sectors. In the past decade however, the country has been progressively moving towards integrated water resources planning with the issuance o f the National Water Resources Plan (2004) and the Integrated Water Resources Management Action Plan (2005) under the Ministry o f Water Resources, both emphasizing the need for enhanced cross-sectoral mechanisms to address the compounding challenge o f water quality deterioration with a special focus on the sanitation agenda.

(b) National program for village sanitation: Within the context o f the Presidential program, the Government has been mandated with addressing rural sanitation as a priority program and declared the allocation o f LE 20 billion over the period o f 5 years (2007-2012) to this end, an

1

unprecedented 120% increase in annual investment funding to the sector with a focus on rural areas. The aim i s to increase sewerage coverage from the current 4% to about 40% in 5 years.

(c) Utility corporatization & regulation: Over the last two and a half decades the financial problems o f water uti l i t ies have been compounding, as a result o f lack o f managerial and financial autonomy, lack o f incentives to improve performance and continued overstaffing. Cost recovery i s among the lowest in the region. By the end o f FY 2003 the total accumulated deficit o f the companies had reached $1.3 billion. A strong move towards reforming sector structure was initiated in 2004 with the issuance o f two presidential decrees: Presidential Decree 135 was issued to form a water and waste water sector holding company (HCWW) and transformed the 16 largest water and wastewater utilities into subsidiaries o f that company. At the same time, Decree 136 created the Egyptian Water Regulatory Agency (EWRA), responsible for monitoring and regulating sector performance and setting benchmark to improve efficiency and quality o f service delivery to reach international standards. In the past three years, sector performance has witnessed a gradual improvement, with 3 out o f the 16 subsidiary companies making profit or breaking even, with a vision towards gradual overall sector financial sustainability.

2. Existing situation in the project area

4. The project area in the three Governorates can be characterized as mostly flat agricultural land with a high water table (less than 5 meters). Most development i s fairly recent in origin and rights o f way, other than through roads, are not raised much above the natural ground surface. The high water table i s likely to be a problem when considering the options for sewerage. Annual rainfall i s low, ranging from about 50mm per year in the south o f Gharbeya to lOOmm or more per year in the north o f Kafr El Sheikh and Beheira.

5. Villages in Gharbeya tend to be urban in character with many buildings rising to three stories or more. In Kafr El Sheikh and Beheira villages are more rural in character but even there many buildings have more than one storey and are occupied by more than one household. Rights o f way tend to be narrow, often less than 3 meters, with houses built up to the road.

6. Water use varies considerably between villages but i s often in the range o f 100-140 l/cd. Most households in the three Governorates covered by the project already have water-flushed sanitation although few are currently connected to sewers. Most houses that are not connected to sewers discharge wastewater to cesspits with a small percentage discharging directly to nearby drains. In some locations where the water table i s high cesspits are emptied 2-4 times a month, suggesting either that these are true closed cesspits or, more probably, that infiltration i s poor. Some villages have installed a rudimentary wastewater collection system (erroneously identified as a groundwater lowering system) which discharges into the closest agricultural drain. There are also some 15 wastewater treatment plants in the three Governorates, serving the largest agglomerations. Flows to many o f the existing WWTPs are currently well below design flows, offering possibilities for connecting both additional households within already sewered areas and new areas to existing works.

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3. Institutional reform context

7 . Planning for and serving scattered smaller communities has not been undertaken in Egypt on a large scale yet. This i s why it i s important that the technical solutions and related implementation arrangements adapt to strike the right balance between centralized planning and guidance and decentralized implementation and community participation. The project i s set within a transforming sector, where the role o f the WSCs under the overall supervision o f the H C W W i s being redefined. Beyond mere operation and maintenance o f facilities that have been constructed by NOPWASD, the Ministry i s delegating increasing investment implementation authority to the local level. This includes in the past two years the full transfer o f the rehabilitation and renewal budget (LE 1.4 billion), as wel l as the urgent water supply program (LE 1.5 billion). In addition, H C W W i s positioning i t se l f as the key planning and oversight institution, and has launched the National and Governorate level Masterplans to assist in defining the investment and operational needs over the coming 30 years. The project i s fully aligned with this vision, and therefore has the following key contributions within the sector reform process:

0 Delegating significant design and construction responsibilities to the WSCs for better management o f investment allocations and related operation.

0 Providing a model for rural sanitation planning that can feed into the National Masterplan and guide the National Program for Village Sanitation

0 Creating national capacity within H C W W and EWRA to utilize results-based performance information for management and regulatory purposes.

0 Building local capacity for engaging communities in rural sanitation service provision and combining social and technical ski l ls in planning and implementation

0 Creating local private sector capacity for operating wastewater treatment plants and associated supervision and control measures within the WSCs and at the H C W W

0 Creating a platform for cross-sectoral coordination in monitoring rural sanitation inputs and outcomes to demonstrate IWRM framework in practice.

4. Rationale for Bank involvement

8. The rationale for Bank involvement i s based on three main principles: (i) building on areas where GOE commitment i s strong, (ii) the opportunity for influencing the broader rural sanitation and water quality management agenda in the country, and (iii) capitalizing on Bank and other donor long te rm engagement and experience in the water resources sector. The proposed project addresses al l o f the above principles. First, the commitment to rural sanitation has been emphasized by GOE and manifested by additional local funding allocations o f LE 2 bi l l ion during the current fiscal year. However, GOE recognizes the challenge in ensuring that these large planned financial allocations are translated into visible results on the ground. It i s therefore seeking Bank support through this project to distill global experience, and develop rural sanitation planning and implementation processes that are relevant to rural areas o f Egypt.

9. The Bank has been at the forefront o f the policy dialogue to address the rural sanitation agenda within the IWRM context, emerging from i t s decades o f engagement with GOE in water resources management. A number o f sector studies conducted in the past two years, including a the IWRM Action Plan and Water PER, as well as a dedicated E S W on rural sanitation, have shed the light on the weaknesses in the existing financial and service delivery models. An

approach has been developed that linked, for the first time in the Egyptian context, access to investment in rural sanitation to quantifiable water quality (and health) improvements in a given hydraulic basin. This project has been designed in close conjunction to the I I IMP project o f the Bank, serving the same geographic area, to pioneer a cross-sectoral implementation model that capitalizes on institutional and donor coordination efforts across the board. The opportunity i s also ripe based on the GOE reform signals in the water supply and sanitation sector, to expand the long-term collaboration with other donor partners towards a reform vision across the sanitation sector and to create an investment platform to support it.

5. Higher level objectives to which the project contributes

10. The project i s consistent with the overall Government objective to reconcile economic development with environmental and social sustainability, through better public services for all, especially the poor. The project i s also aligned with one o f the three CAS (2005) pillars for the Arab Republic o f Egypt, namely enhancing the provision o f public services, including through promoting public investments, increasing the involvement o f the private sector and an overall focus on improving water resources management.

11. The project design further supports the Government efforts in advancing the overall sector reform, through (i) promoting a model for integrated cross-sectoral planning o f sanitation along IWRM principles, (ii) increasing decentralized management o f WSS investments and enhancing the capacity o f the subsidiary ut i l i t ies to address the related planning and management aspects, and (ii) enhancing the role o f the private sector in service provision using out-put based performance contracting.

B. PROJECT DESCRIPTION

1. Lending instrument

12. grace period and level repayment o f principle.

The proposed loan will be Fixed Spread with 30 years o f maturity including 5 years of

2. Program objective and phases

13. The Government has pledged LE 20 bi l l ion to address rural sanitation over the coming five years under the National Village Sanitation Program, and i s seeking cost effective implementation mechanisms with greater accountability. This project i s seen as a first large scale pilot to operationalize the larger national program.

3. Project development objective and key indicators

14. The main objective o f the project i s to contribute to the sustainable improvement in: (i) sanitation and environmental conditions for the resident communities and (ii) the water quality in the selected drainage basins within the served areas.

4

15. The development objective outcome will be measured by the fol lowing indicators:

e Improved access to sustainable sanitation services (% increase in coverage and no. of households connected).

e improvement in environmental and hygiene conditions in villages (beneficiary satisfaction surveys, reduced sewage ponding, hygiene evaluation procedures).

e reduction in pollution loads o f the receiving water bodies (ambient fecal coliform and BOD/ DO).

Details o f the intermediate outcome indicators are available in Annex 3.

4. Project components

The following project components are proposed to achieve the above objective:

16. Component 1: Provision of sanitation systems within selected drainage sub-basins (total cost US$181 million of which, IBRD portion US120 million) - This component aims to plan, design and construct sanitation systems for a total o f 14 clusters in the selected priority area within the two command areas o f Mahmoudeya and Mit Yazid, falling within the Governorates o f Beheira, Gharbeya and Kafr El Sheikh in the Delta. The component will be divided into three sub- components:

Centralized sanitation systems construction: includes the construction o f complete sanitation systems for an estimated 222 larger villages (>1500) within 14 clusters, including: (1) Construction o f treatment plants, and (2) Construction o f collection network consisting o f house connection, transmission lines, and pumping stations; Decentralized sanitation system construction/ rehabilitation: will serve an estimated 120 individual villages/ hamlets with population size less than 1500 inhabitants, providing them with a decentralized system consisting o f shallow sewers and anaerobic baffled reactors, and relying on delegated community management for subsequent O&M. It will also include the upgrading and rehabilitation o f existing networks in some villages to acceptable design standards, if feasible; and GTZ pi lot decentralized systems: this sub-component builds on and replicates the implemented GTZ pi lot model in Kafr El Sheikh in an estimated 20 villages in the project area, based on the communities’ expressed willingness to engage. The model serves villages o f up to 5000 inhabitants and depends heavily on community participation and commitment for the O & M o f these systems based on simple (natural system) technology.

Component 2: Establishment of a local results-based monitoring and evaluation system (total cost US$1.1 million of which, IBRD portion i s US$O, Netherlands Cooperation will fund the entire US1.1 million) - This component will establish a results-based monitoring system within the HCWW that l i n k s the improvements in sanitation coverage with anticipated environmental and water quality impacts. The component will include technical assistance support for expertise in designing the system, identification o f monitoring sites, data collection and analysis, results review, finalization, and communication. I t will coordinate among national institutions within the IWRM framework, particularly the M&E system established under I I IMP,

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as well as among the local organizations (incl. WSC’s, CDAs, WUA’s and Water Boards) to develop their capacity to engage in monitoring water quality and improved environmental conditions and hygiene practices and share results regularly with relevant stakeholders.

18. Component 3: Institutional development and capacity building (total cost US$19.5 million of which, IBRD portion i s US$O, Netherlands Cooperation will fund US15.5 million and GTZ will fund US$4,0 million) - This component aims to promote institutional development within the national and local public institutions responsible for sanitation implementation to enhance their capacity to plan, design, construct and operate the rural sanitation investments, monitor outputs and outcomes, as wel l as promote hygiene practices and social mobilization. Through grant donor co-financing, technical assistance will be provided to each o f the implementing agencies (HCWW, NOPWASD and the three WSC’s), consisting of:

(a)

(b)

A technical assistance contract to provide specialist support to the implementing units in their mandates, covering technical, procurement, social and financial aspects; Capacity building for contract management at the H C W W and the three WSC’s to serve in procurement and supervision o f performance based O & M contracts, including through the demonstration o f 2 pilots in the project area;

(c) Training to the implementing unit staff and CDAs in technical and social mobilization aspects o f the sanitation service implementation and O&M; and

(d) Implementation o f the Environmental and Social Management and Monitoring Framework (EMMSF).

5. Lessons learned and reflected in the project design

19. The conceptual approach and design o f the project draws on the experience o f GOE and various donors in implementation o f sanitation projects over the past two decades. The key lessons learned are outlined below:

(a) The main challenge i s to ensure that the constructed systems will continue to operate sustainably after the construction phase. Most o f the sanitation technologies have been tested in Egypt, however systems have failed to continue operating efficiently mainly due to lack o f adequate O & M funding, limited management capacity at the local level and lack o f incentive to enhance performance. A primary aim o f the design should therefore be to ensure that the financial, social and institutional settings support long term sustainability o f operation to achieve the desired outcomes; There i s a need to plan along hydraulic boundaries for visible results to be achieved. Despite the large investments in waste water treatment in the past three decades, impact on the recipient water body quality has been quite limited. The fragmented, top-down and urban-biased approach to planning and sequencing o f investment often yields scattered interventions that do not systematically address the priority water basins and more importantly are not able to demonstrate to the communities the value-added o f proper treatment on their environment; Engagement of local communities i s necessary for sustainability. Several pi lot sanitation programs demonstrated that community participation in planning and operation contributes to increased confidence at the village level o f their ability to manage their resources and enhance O & M cost recovery. I t also reduces the pressure local uti l i t ies face

(b)

(c)

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in managing a large number o f scattered systems. Building on strong local CDA’s and WUA’s i s key to enabling this utility-community partnership, and should be further supported within the legal framework o f the sector; There i s a significant willingness to pay by the communities that can enhance financial sustainability. Communities have indicated, and in some pilots actually demonstrated their willingness to pay for enhanced sanitation services. This willingness to pay i s primarily for safe disposal and reaches up to LE 10/ household/ month, particularly for areas with high ground water levels. This should be matched with an equal willingness to charge by the uti l i t ies for sustainable O & M coverage; Implementation through a decentralized system should be coupled with streamlined procedures and guiding central oversight Experience from several World Bank operations show that multiple authorities particularly at the local level often resulted in significant implementation delays. To mitigate against this, the project should provide streamlined operational procedures and assign strong monitoring role at the central level; and Lessons from Country Portfolio Performance Review (CPPR): A recent CPPR exercise has taken which has provided very useful lessons particularly with regard to procurement, financial management and readiness for implementation which have been reflected in the project design and preparation.

Alternatives considered and reasons for rejection

Addressing solid waste management (S WM) within the same pro-iect area: Addressing SWM within the same context would demonstrate the impact o f a fully integrated system, and exploring the linkages that could be built on addressing both simultaneously. During project preparation three pilot solid waste management systems were designed in the project area. However, the proposed institutional set-up, in this case through the local units and the Governorates, i s different than that for sanitation services. It was therefore recommended that SWM be undertaken as a parallel activity to avoid creating a complex institutional structure given that the mandates fa l l with different agencies, and the scope i s limited to a pilot. This can be liaised with the envisaged national-level SWM project currently under preparation, and with I I I M P under i t s environmental mainstreaming component.

2 1. Addressing one complete command area instead o f the f i rs t priority in both. This option was discussed with GOE, and it was decided that given that this i s a pilot project to demonstrate the approach, it would be better to cover the first priority for the two command areas to put in place the implementation model at the level o f the three uti l i t ies with different typographies. Additional local and donor funding can then be programmed to cover the subsequent priority areas in the context o f the larger National Village Sanitation Program.

22. Division o f responsibilities among the implementing agencies. The project considered two options for allocating works implementation between NOPWASD and the three WSCs. Following consultation, the Minister o f Housing decided to delegate increased responsibility for infrastructure implementation, consisting o f all networks and decentralized systems, to the local companies. This i s in l ine with the overall Government emphasis on decentralization, and supports the assessment with other donor agencies o f the institutional capacities involved.

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23. Subsidizing; house connections for the poor. An extensive study was undertaken to assess the feasibility o f structuring an output based subsidy for the poor to cover the cost o f house connections in Gharbeya. The final design suggested an affermage contract to a private sector contractor for building new house connections and operating 2 treatment plants in the area. Unfortunately, the grant financing did not materialize due to lack o f funding from the Global Partnership on Output Based Aid (GPOBA). However, the study was very useful in determining WTP in the area, and finalizing the 2 proposed output based contracts for WWTP operation included under the project.

C. IMPLEMENTATION

1. Partnership arrangements

24. Strong partnership between development partners, GOE institutions, and stakeholders and beneficiary institutions has been emphasized from the onset in the project design. The Bank has mobilized extensive effort to seek active participation in ISSIP by other international development agencies, and has succeeded in securing the agreement in principle for partnerships with: (i) The Netherlands Cooperation for supporting the institutional development related to the subsidiary companies, the national level planning and M&E systems, and (ii) GTZ for institutional development related to the scaling up o f the GTZ decentralized model in the three target Governorates. At the national level, strengthening the partnership between MOHUUD and MWRI i s envisaged, through the implementation o f a results-based monitoring system across the two sectors, and closer engagement in upstream planning and prioritization. Finally, at the local level, ISSIP implementation aims at securing the future sustainability through effective and appropriate partnerships between the communities, CDAs, WUAs, the private sector and the subsidiary ut i l i t ies in the three Governorates.

2. Institutional and implementation arrangements

25. The project serves a large number o f small and scattered communities in the rural areas. The implementation model i s therefore tailored to provide the balance between centralized planning and construction support, and decentralized implementation with a strong focus on social mobilization and community involvement in management and cost recovery. The project will be implemented through the fol lowing institutions at the national and local levels:

8 A Project Steering Committee will provide coordination, oversight, and overall direction. The Steering Committee will be headed by the Minister o f Housing, Utilities, and Urban Development or his delegate, and will be made up o f representatives o f HCWW, NOPWASD, Beheira, Gharbiya, and Kafr el-Sheikh WSCs, EWRA, MWRI, M O H P and representatives o f the local popular councils from each o f the three Governorates. The Director o f the P I U will act as the Secretary.

The Project Implementation Unit (PIU), will be housed in the HCWW, headed by a P I U Manager and supported by financial management and procurement staff from HCWW, as well as a team o f long-term and short-term technical assistance specialists who will work closely with NOPWASD and WSC counterparts to manage the project and build national and local capacity for rural sanitation programming, including

8

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rn

26.

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3.

27.

integrated planning, technology and social intermediation guidelines, O & M contract management and overall monitoring and reporting,

A NOPWASD ISSIP Unit will be responsible for design and implementation o f all new wastewater treatment works. This unit will be headed by a senior NOPWASD official, supported by a team o f specialists covering technical, procurement and financial management aspects o f wastewater treatment plant design and construction, and supported by technical assistance in the above fields as needed.

Rural Sanitation Units (RSU) will be created within each o f the three WSC’s, responsible for implementation o f centralized wastewater collection systems and the small scale decentralized systems, subsequent O & M management including procurement and supervision o f private sector O & M services as well as in-house O&M. The RSUs will also be responsible for ISSIP hygiene promotion and communication activities. Each unit will be headed by a Unit Head and include a team o f five specialists covering wastewater management, social intermediation, environmental management, procurement and financial management. This team will also be supported by long and short-term technical assistance in the different fields.

In addition, the project will establish partnerships with:

Community Development Associations (CDAs) will be the points o f WSC/community articulation for the decentralized systems. The CDAs will be responsible for meeting the prerequisites for investment in decentralized wastewater systems, and for subsequent O & M and cost recovery. The program will adopt a community selection approach which requires target communities to demonstrate demand in order to be selected for the project.

Local Administrative Units (LAUs) are the lowest level in the local administration system in Egypt. The primary roles o f LAUs under the project are to provide forums and venues for social marketing and hygiene promotion activities associated with the small community wastewater program, since each village council area may include several target small communities. LAUs can also serve as communication points for the program in village council areas in which CDAs need to be established.

Water User Associations (WUAs)/ I I IMP RMCs are being actively developed in the project area under the World Bank/KfW/Netherlands financed I I I M P Project. They are principal beneficiaries o f ISSIP water quality improvements and can be involved in social marketing and in environmental monitoring. Coordination with the Regional Management Committees (RMCs) o f the IIIMP project will be established to align planning and implementation.

Monitoring and evaluation of outcomes/results

The monitoring o f project outcomes and impacts i s a key focus o f this project to demonstrate the link between inputs in terms o f sanitation investments and positive improvements in water quality and environmental conditions in the project area. Visible results if adequately documented and properly disseminated can act as strong incentives for communities

9

to demand and pay towards sanitation services and for Government to direct i t s funding allocations. To this effect, a dedicated component has been included under the project that allows for setting up a well designed monitoring system, based on a solid baseline and systematic sampling/ community surveys to assess the outcomes. This results-based M&E system will be set up in the HCWW, will complement regular output monitoring, and will build on the extensive MWRI monitoring programs for water quality, NOPWASD and MOH data and the M&E system established under I I IMP. Local community organizations such as CDAs and WUA’s will be engaged in data collection and dissemination. Annex I11 provides further details on the proposed responsible entities and overall M&E framework.

4. Sustainability

28. two aspects:

The challenge to efficient long te rm sustainable sanitation systems operation relates to

29. Institutional and Managerial Sustainability: the project adopted a number o f features specifically designed to enhance institutional sustainability. The majority o f the infrastructure works wil l be implemented by the WSCs, who are in closer proximity to the communities and are responsible for subsequent O&M. This will enhance accountability and the focus on quality o f the investments. Recognizing the management burden that a large number o f smaller systems wil l place on the WSCs, management responsibility for the smaller systems will be delegated to active CDAs that meet agreed criteria. Last, but not least, introducing wel l structured performance based O&M contracting o f the local private sector i s a key element to demonstrating effective management set-ups based on clear targets. All o f these features are important in shaping the evolving rural sanitation sub-sector.

30. Financial Sustainability: The project covers a sanitation agenda as well as a water quality agenda. The latter has a larger public good dimension than the former. The project design i s working at the intersection o f these two agendas. As part o f the public good aspect o f sanitation, the Government i s bearing capital cost o f the constructed systems. However, financial sustainability will depend on how well the O & M or recurrent liabilities are handled. For the smaller villages benefiting from decentralized systems, l o w cost technology options and community participation in selecting and implementing the systems i s expected to reduce O&M costs. Communities benefiting from the project will pay for the cost o f O & M o f decentralized systems to the managing CDAs, therefore ensuring their long-term financial sustainability.

31. Concerning centralized systems, the cost recovery will be managed by the three WSCs under the supervision o f the HCWW. It i s envisaged that the following actions will support the improved financial sustainability o f the constructed systems:

(a)

(b)

Agreement with H C W W on realistic tari f f increase projections over the l i f e o f the project coupled with continued targeted subsidy allocation to close the gap; introduction o f private performance based O & M contracting for 2 pi lot plants with ring- fenced allocation o f associated costs to test out risk allocation, cost structuring and benchmarking o f operational efficiency, feeding back into the national pol icy dialogue on cost recovery and sector financial sustainability; and

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(c) establishment o f a local results-based monitoring and evaluation system that creates public disclosure and information sharing mechanisms supporting a national policy dialogue concerning subsidy allocation for public benefits, related primarily to treatment.

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5. Critical risks and possible controversial aspects

1 Risk From Outputs to Obiective Delay in tariff restructuring for drinking water and related wastewater surcharge to

External sources o f pollution impair positive project outcomes

From Components to Output Lack o f capacity at the level o f the subsidiary companies for implementing a large number o f small subprojects and addressing social aspects o f planning and mobilization.

Lack o f coordination among the national agencies limits replication potential between ISSIP and the National Village Sanitation Program

Higher than necessary treatment levels demanded by stringent effluent legislation for smaller systems Resistance by the communities served to pay, particularly under the decentralized

Risk Mitigation Measure

Agree on a vision with HCWWI MOHUUD for tariff restructuring that (i) aims at reaching financial sustainability by end o f project l ife, (ii) takes into account political realities, (iii) factors in a declining transparent GOE subsidy to the companies. Support enhanced private sector involvement in O&M through performance based management contracts as a means o f ensuring reliable service provision and reducing staffing costs to companies Create public disclosure mechanism o f water quality impact that provides local incentives for enhanced performance and supports possible t i i f f increase Strong M&E system, including a water quality modeling component, to guide the planning and targeting o f Phase 11. Coordination under NVSP to promote coverage in larger upstream towns.

RSU staffing to include both strong technical and social staff, supported with T A during project l ife. Successful transfer o f knowledge from similar settings, including social mobilization programs from Brazil and India. National Sanitation Strategy currently being developed by HC WW adopts ISSIP approach for wider implementation Steering Committee, already functioning, has played an important role in coordination and guidance. WQ modeling wi l l be used to verify resulting ambient water quality o f proposed treatment levels. Implemented pilots indicate high WTP. Conditions mecedent for CDA

Risk Rating"

S

S

M

M

M

M

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schemes, and limited C D A capacity for I engagement to ascertain demand. O&M.

Delays on counterpart and donor funding commitment

C D A capacity building, community mobilization and communication framework i s essential.

and counterpart fund allocation as o f 2007. Final commitment from donor partners by negotiations

Assure project has national budget code M

6. Loadcred i t conditions and covenants

32. The main dated covenants include signature o f the inter-agency agreement between NOPWASD and HCWW, establishment o f the NOPWASD unit, P I U and three RSU’s and the finalization and endorsement o f the P I M .by the main implementing agencies.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

33. Economic: The project will expectedly bring about public benefits (e.g., to public health and ambient water quality downstream the interventions) as well as private benefits (household wellbeing). Therefore, the economic feasibility o f the project has been assessed via a Cost- Benefit-Analysis (CBA) approach, rather than the Cost-Effectiveness approach commonly applied with sanitation projects. The C B A has been conducted by factoring in the following considerations:

e For phase 1 under ISSIP, the average per capita capital cost i s around $130 (year 2040). Hence, the (amortized) capital cost per household/month i s around 45 LE/month/family at maximum. O&M costs are about 10 LE/month/family. The private benefits are estimated at the non-income-constrained willingness to pay (WTP), per the “contingent valuation” method. A proxy for this WTP i s current payments which households make to empty the cesspits in the project area, around 50 LE/month/family . The per-capita public benefits from improving rural sanitation have been estimated at about 80 LE/month/family. This estimate corresponds to the expected reduction o f BOD, Fecal Coliforms, Ammonia, and Dissolved Oxygen, towards their ambient and user- specific standards (refer to Annex 3 on M&E and Annex 9 on details).

e

e

34. From the aforementioned (capital plus running) unit costs and (private plus public) unit benefits, the project’s ERR in the low-case scenario has been estimated at about 10%. I t i s interesting to note that the replication benefit to the upstream areas, as indicated under the high- case scenario, results in an increase o f the ERR upward o f 15%. Individual switching values (“flags”) have been calculated for a number o f key uncertain parameters that would reduce the ERR to the cut-off rate o f 10%. These have been subjected to the strategic l o w scenario explained above, regarding the water quality benefits. The results are as follows:

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e

e e

e

Investment unit cost could go up till USD $140 per capita. O & M cost could go up to LE 13 per family per month. Total (private plus public) benefits could decrease to LE 68 per family per month. If the project aims only at meeting the private (sanitation) benefits, the ERR would decrease to 7%. This signifies the relative importance o f addressing the water quality aspects o f the project. In case o f delayed project implementation, that takes four years instead o f the assumed three years, the ERR would s t i l l be around 10%.

e

35. Financial: The project will provide financing for the construction o f sanitation systems using both decentralized and centralized approaches in the Governorates o f Beheira, Gharbiya and Kafr el-Sheikh.

36. The decentralized sewerage systems are planned to cover up to 150 villages, using a demand driven approach that will require: (i) up-front community organization through the CDA, and (ii) a demonstrated willingness to collect user charges and manage the operations and maintenance o f the sewerage systems. The O & M costs o f these facilities will vary from village to village, but are estimated to cost on average LE 7 to 10 per month per household. This estimated cost i s in line with the willingness to pay verified in areas where pi lot C D A approaches have been implemented. As such, it i s expected that the communities benefiting from the project, will be able to pay for the cost o f O & M for the facilities constructed, therefore ensuring their long-term financial sustainability.

37. The centralized sewerage systems planned to be constructed for a total o f 14 village clusters will be entrusted to the management o f the Beheira, Gharbiya and Kafr el-Sheikh WSCs. A review o f the financial performance o f the Beheira, Gharbiya and Kafr el-Sheikh WSCs to assess their future financial sustainability was undertaken during preparation. Details o f this review are available in Annex 9.

38. Overall the, financial and operational Performance o f these utilities i s weak, mainly due to l ow tari f f levels and lack o f incentives to improve efficiencies within the companies’ operations. For the three WSCs under the project, the level o f cost recovery on average i s 60%. Households pay LE 0.23 per m3 for consumption o f water up to 20 m3 and LE 0.65 per m3 for consumption above 20 m3. Wastewater charges are set at 35% o f the water charge. As o f 2006, the Ministry o f Finance has undertaken a transparent system for the transfer o f O&M subsidy to the H C W W to be distributed among the subsidiaries to cover the cost-revenue gap. The current l o w tari f f levels are envisaged to be gradually increased within an overall Government framework to switch to direct targeting o f the poor, while lifting blanket subsidies over basic services.

39. As subsidiaries o f the HCWW, the Beheira, Garbiya and Kafr el-Sheikh WSCs will be part o f the HCWW’s near-term program for the improvement o f the sector’s performance. Key elements o f this program include:

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a

a Financial Planning. a

e a

a

Strengthening o f billing and collection systems and procedures.

Implementation o f an adequate performance monitoring system. Decentralization and streamlining o f utility organization structures. Corporatizing utility services in the remaining fifteen governorates. Building capacity for investment planning and programming, including the preparation of mater plans.

40. In the long-term, business plans prepared for each o f the subsidiary WSCs will serve as the basis for setting up improvement targets in annual performance contracts between the subsidiaries and the Holding Company, under an adequate incentive framework.

41. The government i s committed to improving the level o f efficiency within the WSCs; however, the change i s expected to be gradual. The project will be supporting the Government in i t s efforts, as it will finance the establishment o f a local results-based monitoring and evaluation system that l i n k s the improvements in sanitation coverage with anticipated environmental and health impacts. This system, in addition to the business plans, will be used to set targets for improvement, and to differentiate between public benefits, related primarily to treatment, and private benefits, related mainly to collection, for the allocation o f subsidy. In addition, during implementation, the project team will coordinate with other donors supporting the three ut i l i t ies in terms o f preparing and implementing an action plan for improvement o f collection rates, and support the Government’s plans for gradual tar i f f increases, which should contribute to the improvement o f the performance o f the Beheira, Gharbiya and Kafr el-Sheikh’s wscs.

2. Technical

42. The project i s the first large scale effort to address rural sanitation in Egypt. The design therefore presents an approach that i s tailored to serving a large number o f small settlements, emphasizing intermediate and low-cost options and creating incentives for sustainable management. Best practices from around the world have been incorporated, including through exchange o f experience with leading water and sanitation service providers in B r a d and India.

2.1 Technical design aspects:

43. Sewers. The designs would aim at bringing sewers as close as possible to houses and minimize their depth, thus reducing the cost o f connection. The latter will be particularly important where the groundwater table i s less than 2 meters below ground level. Options such as shallow and small-bore sewers will be considered where applicable. The condominia1 system adopted in Brazil provides valuable lessons on coupling low cost technical design with social field work to arrive at the best sewer routes and enhance community ownership. Needless to say, theses sewer types would require proper use by the residents and regular maintenance by the communities. Community mobilization activities are, therefore, essential to ensure sustainability o f these components.

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Wastewater treatment. There are various l ow cost treatment technologies suitable for rural setting with f low rates in the range o f 3,000 to 9,000 m3/day. Various methods, including Upf low Anaerobic Sludge Blanket (UASB); Advanced Rotating Biological Contactors (RBCs) and Advanced Sequential Batch Reactors (SBRs) have been successfully tested in rural Egypt. These methods have a l o w footprint and reduced energy consumption when compared with other mechanically aerated systems. During implementation, a menu o f appropriate technologies will be provided based on technical, operational, and financial merits. The evaluation will be done on a case by case basis, to reach the optimal Design-Build process. For isolated smaller villages and ezbas with 500 to 1500 people, simpler technologies, delivering an enhanced level o f primary treatment are proposed. Because o f their small footprint and simplicity, the preferred option i s baffled reactors and anaerobic filters, typically with a 48-hour retention time. These will require l i t t le maintenance other than regular desludging.

44. Pilot Performance Based O&M Contracting. The sector has historically suffered from failures to provide sustainable quality operation o f the construction systems. The HCWW, consistent with current industry trends intends to launch performance based contracting for the O & M o f WWTPs to enhance accountability within the right incentive framework. The project will support this initiative for 2 facilities in the area to demonstrate effective PBC arrangements with local private sector. It will also support the companies in structuring and supervising these deals. These 2 pilots will provide valuable lessons in risk allocation, cost structuring, technical considerations (boundaries o f the contract) and benchmarking o f operational efficiency, that would feed into the larger policy dialogue on cost recovery and sector financial sustainability. The final selection o f the two candidate plants and the review o f the current draft contract models will be undertaken in the first 6 months o f implementation. The H C W W P I U will retain technical and contractual expertise to guide the subsidiaries on technical and legal issues o f contract management in coordination with national efforts on public-private partnerships.

2.2 Planning and implementation principles:

45. The planning and implementation methodology incorporates for the f i rst time in Egypt innovative features that are tailored to the rural setting, bearing in mind that i t should be easily replicable to serve as a model for the NVSP throughout the nation:

46. Hydraulic Basin and IWRM approach: The project operates in two hydraulic basins, Mit Yazid and Mahmoudeya, in which irrigation improvement activities are being carried out under another Bank-funded project. The objective o f selecting the same target areas as the irrigation project i s to demonstrate a novel integrated basin improvement approach for the environmental sanitation problems in the Delta based on integrated water resources management principles. Planning the clustering and M&E systems along the sub-basin boundaries' allows for a closer link between input and impact. Furthermore, the project will benefit from the presence o f WUAs in monitoring and social mobilization, which are formed along irrigation canals and supported through the I I I M P project.

47. Clustering approach: The cluster i s considered as the unit o f planning for the project. Each cluster i s centered around one treatment plant located at an optimal central location to serve

' Sub-basins are primarily defined around secondary drains, with reaches in the range o f 15-20 km.

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the maximum number o f villages. A number o f smaller villages will not be feasible to connect to the centralized treatment plant, and will therefore obtain a decentralized sanitation solution. The concept o f clustering considers a comprehensive and cost effective solution for al l villages falling within, based on economies o f scale, pollution abatement objectives and demand responsiveness for smaller settlements. In selecting cluster boundaries, consideration was made to maximizing use o f existing underutilized WWTPs, avoiding expensive crossings o f barriers such as main canals and railways, covering one or two administrative units rather than smaller portions o f a larger number o f units, and maximizing impact upon water quality in receiving drains.

48. Determination o f cluster size was carried out so as to optimize the technical and financial aspects. Too small a cluster would result in very large number o f such units, which would be unwieldy once the project concept i s expanded nationwide, and would defeat the economies o f scale concept. Too large o f a cluster, on the other hand, would lead to crossing large number o f administrative boundaries, and would render the solutions for rural setting not usable, as this would bring the scale closer to urbanized settings. Maps for the final clusters selected under the project are included in Annex 14. Within clusters, the villages/settlements will be provided one o f four types o f sanitation services depending on the optimal solution for i t s specific conditions:

Categories o f Sanitation Services

A. Centralized svstem: for villages with population higher than 1,500 inhabitants and smaller villages in their proximity. These villages will be served by sewerage collection networks, leading to a single central WWTP. Smaller villages should be connected if the cost o f doing so does not exceed the cost o f decentralized treatment. Overall responsibility for centralized schemes will l i e with the subsidiary water and sanitation companies (WSCs), who may contract out O&M to local private sector operators.

C. GTZ Dilot decentralized svstem: for villages between 1,000 and 5,000 inhabitants, which because of their size and distance from other villages may be suitable for implementation of a decentralized community managed approach and natural treatment technologies. Preconditions for adopting this approach will be that communities are committed to provide the land needed for treatment and/or pumping works and to take full management and financial responsibility for the scheme, financing 100% of operating costs. This approach will be tested for replication under the overall guidance o f GTZ and following the model already successfully developed in Moufti Koubra village.

B. Decentralized svstem: for settlements with between 500 and 1,500 inhabitants not located along the networks serving larger villages. Because o f their small size, expressed community demand to receive the service and undertake community management through a CDA will be a precondition for serving them. The schemes will incorporate local collection systems discharging to simple treatment works providing enhanced primary treatment, typically consisting of a communal septic tank followed by a series of baffled reactors. Pumping should be avoided if possible.

D. On site system: for settlements with less than 500 inhabitants. These wil l continue to use on-site sanitation systems, based on cesspits or septic tanks. The project has incorporated the resulting septage in the design o f the treatment capacity within the cluster and will aim to coordinate with LAUs to enhance desludging efforts.

49. Prioritization; Given the limited funds available in relation to the overall sanitation needs o f the selected project areas, it was decided early on that a methodology for selecting priority village clusters should be developed based on multi-criteria analysis o f most relevant factors,

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including population served, reuse potential, location in relation to main drains and canals, potential health benefits, water quality and the proximity to water treatment works. These factors are implicitly based on the key principle that interventions should target areas in which largest impacts can be achieved. The result o f the analysis constitutes the Strategic Sanitation Plan with a prioritized ranking o f areas within each o f the two command areas. The project will serve the identified f i rst priority area, which are along the Mahmoudeya Canal and in the center o f the Mit Yazid Command Area.

50. The pi lot water quality modeling work carried out shows that the greatest beneficial impacts on receiving water quality will be achieved if schemes are developed around drains that originate within the project area and do not carry heavily polluted f low from large towns. This will be further used when finalizing the strategy for Phase I1 o f the project. The Phase I prioritized areas do include some schemes that will link to heavily polluted main drains but al l will also bring about significant improvements in conditions in smaller, less heavily polluted drains.

51. Implementation Phasing: The first phase o f the project (first two years investment program) consisting o f 4 clusters has been selected to maximize the use o f existing facilities and demonstrate different cluster models in the three Governorates. The total cost o f this 2-year investment program covering 4 clusters in the two command areas i s estimated at about $50 million, or 25% o f the total project cost. The second phase will cover the years 3-6, and will allow for incorporation o f lessons learned from the f i rs t phase implementation and adaptation o f the final plan according to the results on the ground. This includes: (i) revising the overall Strategic Sanitation Plan, (ii) adjusting the proportion o f centralized versus decentralized and GTZ model systems in subsequent clusters, and (iii) assessing the efficiency o f the adopted institutional setting and adjusting allocation o f works among the implementing agencies if needed.

3. Fiduciary

3.1 Financial Management

52. A financial management assessment was conducted to identify the adequacy o f the implementing entities’ financial management capacity for the project. While NOPWASD will have the overall responsibility for the project implementation, it was agreed that NOPWASD will enter into an interagency agreement with H C W W (dated covenant) by virtue o f which H C W W will be responsible for implementing parts A2, A3, A4, B and C o f the project (as per the identification o f parts in the loan agreement). In this context, visits to NOPWASD, H C W W and i t s three affiliates involved with the project implementation (Beheira, Gharbeya and Kafr El- Sheikh Water and Wastewater Companies) have taken place to agree upon the project implementation model and the associated financial management arrangements required to support the project activities.

53. The projets has three major components. The Bank will finance Component 1 (Provision o f sanitation systems within selected drainage sub-basins). However, there i s a high degree o f interdependence between this component and the other two components that are financed

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through both the counterpart financing as well as the Dutch co-financing (a letter was issued by the Netherlands Cooperation agreeing in principle on supporting the project institutional development needs). The proposed financial management arrangements took into consideration this specific design.

54. The involvement o f different players in the project implementation poses an additional challenge in relation with the coordination among the implementing entities. The implementation arrangements tried to avoid potential overlaps among them with clear responsibilities for specific activities assigned to each party (NOPWASD, H C W W and the three WSCs). The implementation manual i s currently being drafted with the support o f the consulting firm contracted to support the project preparation activities. A first draft was received in early February 2008.

5 5 . The lack o f recent Bank experience with the implementing entities poses additional risk when it comes to project implementation. In addition there exists varying levels o f capacities across the different entities. For example, the automation o f accounting information systems in Beheira and Gharbeya Companies i s more advanced than that in Kafr El-Sheikh Company. Accordingly the level o f TA support to institutional capacity will be tailored to each entity’s status and needs.

56. NOPWASD will have the overall implementation responsibility and accordingly will ensure that proper books o f accounts are maintained, periodic Interim Financial Report and annual project financial statements are issued and submitted to the Bank. NOPWASD will ensure that the annual project financial statements are audited by an auditor acceptable to the Bank and that an annual audit report issued according to standards acceptable to the Banks, i s submitted to the Bank within 6 months after the closing o f the fiscal year.

57. The disbursement o f the loan funds will fo l low transaction based disbursement model using direct payments to contractors/consultants and/or advances to designated accounts to be opened by NOPWASD (the legal counterpart entitled to receive the loan funds). Accordingly NOPWASD will use the loan financing to implement the wastewater treatment works under the project. It will also make funds available to H C W W to implement i t s affiliates’ respective activities. To accommodate a smooth and clear f low o f funds process, the Bank will finance the project through two designated accounts to be opened by NOPWASD. Account A will cover NOPWASD’s managed activities while Account B will cover the three WSCs managed activities. To speed up implementation, the management o f Account B should take into account the decentralized nature o f implementation (through the 3 WSCs) and the consequential efficiency requirements.

58 . Based upon the above, the overall residual FM risk i s assessed to be “Significant”. Annex 7 describes in details the identified risks, the mitigating measures as well as the detailed project FM arrangements.

3.2 Procurement

59. An assessment o f the capacity o f implementing agencies to undertake procurement actions for the project has been undertaken. Since the implementation model i s designed to

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provide the balance between centralized planning and construction support, along with decentralized implementation and management, the assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement with the “management” units responsible for administration and finance in NOPWASD and H C W W as well as WSCs. Annex 8 explains the outcome o f the assessment and identifies the r isks associated with the implementation o f procurement activities. Consequently, i t establishes the necessary requirements the Borrower needs to undertake as corrective measures. The procurement arrangements for the project address these identified risks and weaknesses.

60. The overall implementation o f the project will be managed by a Project Implementation Unit housed at HCWW. The P I U will be headed by a senior H C W W officer and supported by a team o f specialists who will work closely with ISSIP Unit at NOPWASD and RSUs at WSCs. The whole procurement program containing main investment contracts will be procured by a centralized and decentralized implementation process as explained in Annexes 6 and 8. To reinforce implementation capacity, funds are made available through grant donor co-financing to ensure technical assistance for each o f the implementing agencies (HCWW, NOPWASD and the three WSC’s). The TA consists o f a team o f specialists to support the P I U and RSU’s in their mandates mainly in procurement.

4. Social

6 1. The project will have substantial social benefits. In particular, i t responds to a strong user demand for improved sanitation services. It will provide environmental and economic benefits through improved sanitation. Lastly, social cohesion will be strengthened through the organizational activities o f the community development associations (CDAs) and water user associations (WUAs) and the capacity building they receive. The project will use a participatory, demand-driven approach, helping to ensure sustainability through putting in place systems that users want and are willing to pay for and maintain. The social mobilization and community participation approaches will thus be essential for project success. Accordingly, a Community Participation Framework has been prepared which contains village participation criteria, along with principles o f community participation, responsibilities o f stakeholders, social mobilization techniques, and plans for capacity building. The framework contains elements which promote the community participation o f both women and men. The possibility o f credit mechanisms for poor families will be explored, to facilitate their repayment o f house connections,

62. Hygiene promotion is recognized as an essential activity to maximize the health benefits o f the project’s investments in infrastructure. Following the hygiene promotion scoping study conducted in 2006, a formative research study was conducted to determine the essential information for design o f hygiene promotion activities to accompany the social mobilization efforts within the project. The formative research study thus identified (i) those hygiene practices which should be priorities for behavior change, (ii) the most appropriate channels and agents for communication and influence on behavior, and (iii) the most promising motivators for change in behavior. At the outset, a large number o f focus group discussions were held with community members to identify high risk practices suitable for change. In the second stage, a structured observation, household and school survey was designed and conducted in 140 households and 20

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schools in the project area. The results will serve as an unusually strong basis for design o f the elements o f the hygiene promotion activities in support o f project goals.

63. Loans for household toilet provision. Social surveys show that most households in villages to be served by the project already have household sanitation facilities. There i s some variation between different surveys but on average at least 90% o f households have access to an in-house toilet. There remain some who have to make alternative arrangements. The ISSIP’s full health and environmental benefits will only be realized if these households have access to in- house sanitation. Awareness raising exercises carried out by RSUs and their consultants can also be used to identify toilet-less households start to promote the benefits o f improved sanitation. Further promotion activities will probably be required, possibly alongside arrangements to provide small loans for in-house sanitation improvements. The project will coordinate with existing programs such as the Social Fund which could develop a system o f small loans for sanitation and general house improvements, to be implemented in coordination with rather than directly through ISSIP.

5. Environment

64. The proposed project falls under the World Bank environmental category B classification, according to the Bank’s Operational Policy 4.0 1 (OP 4.01) on Environmental Assessment i s triggered. By virtue o f the project geographic extent, the feasible approach for environmental and social assessment was to fol low the “Framework Approach”. The partial assessment required, according to OP4.01 i s presented in details in the “Environmental and Social Impact Assessment Framework (ESIAF)” report, which describes the evaluation o f impacts, and presents an Environmental and Social Management and Monitoring Framework (ESMMF) which includes mitigation measures, monitoring plan, and institutional aspects. The main issues raised are included in Annex 10.

65. The ESAIF found the project to have major positive environmental and social impacts, resulting from the overall improvement o f the water quality in a number o f drains and canals in the project command area. This will result from stopping the discharge o f the untreated wastewater to these canals and drains, once the centralized and decentralized sanitation services are provided to the village clusters which are responsible for water quality degradation. The improvement o f water quality will have a far reaching improvement on the health o f the residents, who currently have elevated incidence o f water borne diseases (such as diarrhea and gastroenteritis). This results in a considerable overall improvement in people’s quality o f l i fe. Furthermore, the project i s expected to create employment and business opportunities for the local population, especially related to unskilled labor, during the construction phase o f the sewerage systems. The project wil l also stimulate the private contractor sector, l ikely to operate the newly construed, and/or existing, wastewater treatment plants.

66. The ESMMF outlines the various mitigation measures which would respond to the potential negative environmental impacts which may result from the improper construction and/or operation practices. The ESMMF, furthermore, assesses the institutional capacity o f the implementing agencies, in regards to environmental and social safeguards, and proposes capacity building measures. The ESMMF finally proposes a monitoring plan to ensure environmental impacts are accounted for and are within the national and international standards.

21

6. Safeguard policies

Criteria Fiduciary

Staffing and consultants

Tender Documents

Disclosure requirements

Monitoring/ Evaluation

67. A Resettlement Policy Framework (RPF) establishing overall resettlement objectives and principles has been prepared, as there may be involuntary land acquisition under component 1 (provision o f sanitation infrastructure). The RPF discusses legal aspects o f land acquisition, and how the law has actually been applied in similar cases in Egypt in the past. As the extent o f potential involuntary land acquisition becomes known, Resettlement Action Plans (or abbreviated RAPS depending upon scale and severity o f impacts), will be prepared before any physical worWconstruction i s initiated. The RPF includes criteria for the screening o f subprojects, guidelines for mitigation and compensation, implementation arrangements for the RPF and assessment o f the capacity for i t s implementation, and the identification o f the source o f funding for any resettlement activities.

Status Both the procurement and FM assessments have resulted in specific action plans. The Project Implementation Manual identifies the roles and responsibilities for fiduciary and safeguard implementation, and a first draft o f the PIM was received by the Bank on February 13,2008. The NOPWASD ISSIP Unit Director, as well as the WSC RSU staff have been nominated, hiring o f the HCWW PIU Director i s currently underway. Draft Bidding Documents for the first phase clusters are currently underway and will be reviewed prior to effectiveness The final ESMMF was disclosed both in Egypt and the Banks Info shop on December 13,2007. M&E Indicators have been prepared and incorporated into the project design and implementation arrangements, a separate component has been dedicated to ensuring

7. Policy Exceptions and Readiness

I full scale input/outcome monitoring. I Initial indication o f commitments for parallel financing has been provided by Parallel financing - I Netherlands Cooperation and GTZ, and will be finalized prior to project effectiveness. I

* By supporting the proposedproject, the Bank does not intend to prejudice the final determination ofthe parties' claims on the disputed areas

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Annex 1: Country and Sector o r Program Background

1. Key macroeconomic country issues and Challenges

1. Egypt’s GDP growth rate decelerated between 2000 and 2003, averaging around 3.2 percent per annum. The loss o f growth momentum was accompanied by a decrease in both private and public investments. This slow down has however reversed in the past three years, due to several factors, including increased world economic growth, flotation o f the Egyptian pound and a related increase in the demand for key Egyptian exports and the increase in o i l prices and related earnings. The Egyptian economy grew by an average o f close to 7% in the past year. Growth continues to be driven by the gas, construction, tourism and Suez Canal sectors (each up by 10% to 15%). The balance-of-payments surplus increased from 0.7 o f GDP in Q2-06 to 1.6% in Q2-07 to reach US$ 1.8 billion. FDI almost trebled in Q2-07 to reach US$4.1 billion. This more than offset the significant drop in portfolio investments to just US$ 19 mi l l ion in Q1-07 as Gulf investments were significantly withdrawn, a phenomenon seen across the region. The exchange rate has remained within a band o f less than 0.2% during the last few months, and stands currently at LE 5.71/US$ from an average o f around LE 5.72 in January. The level o f external debt and i t s share o f GDP declined to US$ 28.9 bi l l ion and 25% in Q1-FY07, and external debt service was s t i l l l o w at around 6.7% o f current receipts.

2. The key challenge remains to ensure that this high growth i s well distributed both geographically and among the different segments o f society. The Government has declared that the equity agenda i s o f highest priority. Among the issues that it intends to tackle in the coming year i s reforming the subsidy system to ensure a more efficient and targeted allocation o f subsidies to the poor.

11. Key Environmental Issues and Challenges

3. Surface water contamination i s among the most significant environmental issues currently besetting Egypt. In general, surface water quality exhibits deterioration as we move downstream with the worst pollution occurring at the northern lakes. The domestic water demands result into about 3.8 BCM/yr o f waste water being discharged into the Nile, out o f which not more that 35% are treated. Pathogenic pollution o f surface water has been recorded to increase during the 1980s and to decrease gradually throughout the 1990s and in all cases it exists in restricted localized areas. The government comprehensive plans to extend sanitation coverage and waste water treatment to rural areas are expected to eliminate significant pathogenic pollution by year 2017. Industrial effluents contribute to about I .3 BCM/yr o f untreated waste water being discharged to surface waters. Food industries contribute to 45% o f total effluent discharge and to 67% o f the total B O D load introduced. B O D levels in the Nile, at mid stream, are s t i l l below 6 mg/l. The N i l e branches experience more Oxygen depletion which may reach a Dissolved Oxygen value o f 3 at downstream end presenting potential hazard to aquatic organisms. Industrial effluents contribute to the increased levels o f trace elements especially after the construction o f the high dam where the potential for flushing the contaminated sediments during the flood period was eliminated. Drainage return f low to the N i l e result into an increase in salinity o f the water from 130 mg/l at Aswan (far upstream) to 250 mg/l near the delta barrage. Nitrogen fertilizers whose consumption has doubled between 1980 and 1993 present another source o f pollution. Water hyacinth flourishing at the downstream o f

23

water ways due to increased nutrients lead to clogging o f canals and i s combated with mechanical and biological technologies. Despite o f the flourishing fish production in Egypt, only 17 species remain as o f 1995 out o f 47 species which used to be available in 1948. A national water quality monitoring program i s launched by M R W I comprising more than 300 observation sites.

111. Institutional Framework o f the Sector

4. Several ministries are involved in managing the water sector. The Ministry o f Housing, Uti l i t ies and New Communities (MOHUUD), provides water supply and sanitation services to the municipal and industrial subsectors. The Ministry o f Water Resources and Irrigation (MWRI) i s in charge o f development, distribution and management o f water resources, and development and O&M o f the associated waterworks. The Ministry i s also responsible for collection and disposal o f agricultural drainage water, monitoring and assessment o f water quality o f the various water sources, and protecting the coastal lakes and the shoreline. Some other ministries participate by different degrees in auxiliary management and operation o f part o f the irrigation and drainage systems such as Ministry o f Health and Population (MoHP), the Ministry o f State for Environmental Affairs, and the Ministry o f Local Development (MOLD).

Ministry o f Housing;, Ut i l i t i es and Urban Development (MOHUUD’)

5. Under the Ministry o f Housing, Util i t ies, and Urban Development (MHUUD), the National Organization for Potable Water and Sanitary Drainage (NOPWASD) i s responsible for planning, designing, and overseeing construction o f water and waste water systems. NOPWASD has an independent annual budget that comprises al l investments in potable water and waste water at the national level, excluding those appropriations o f Cairo and Alexandria, which are managed by the sister organization, Cairo and Alexandria Water and Wastewater Projects Organization (CAWPO). MHUUDNOPWASD has the mandate to expand water supply and sanitation, including through the recently launched national program for village sanitation.

6. Apart from few privately owned systems built to service resort areas, al l water and wastewater ut i l i t ies in Egypt have been traditionally state-owned. Currently, this sector i s experiencing a process o f reform. Among Egypt’s 26 governorates, plus Luxor, there are now several basic forms o f organization for the water and wastewater sector. The government has been keen to establish self-sustained “companies” in most o f the governorates, with the goal o f reducing recurrent fiscal burden on the government, while improving efficiency and sustainability o f operation and maintenance (O&M) services. In 2004, two presidential decrees were issued, regulating the water supply and sanitation under the responsibility o f the MHUUD. The first decree (no.135 for 2004) i s concerned with creating a holding company for drinking water and waste water and i t s affiliated companies, and transformed the General Economic Authorities for Drinking Water and Wastewater, operating in the governorates, into affiliated companies under the Holding Company for Water and Wastewater (HCWW). The company wi l l seek new financial resources to sustain the O&M budget and relieve the burden on the Government. The Government’s role wi l l be limited to setting national policies for improving potable water and wastewater services and expanding the coverage o f these services according to each governorate Master Plan which i s currently being implemented by local consultants. These governorates and companies include Alexandria, Aswan, the Beheira Water Company, Beni

24

Suef, Cairo, Dakahlia, Damietta, El Minia, Fayoum, Gharbia, Kafr Elsheikh, Sharkia and Qena. The second presidential decree (no. 136 for 2004) covers the creation o f the Egyptian Water and Wastewater Regulatory Agency (EWRA). I t focuses on regulation and monitoring for quality control and tariff adjustment. It reports to MHUUD and will be the liaison between the Government, the customers, and the HCWW. Another presidential decree in 2006 authorized HCWW to establish WSCs in the rest o f the governorates.

Ministry o f Water Resources and Irrigation (MWRI):

7. The Ministry o f Water Resources and Irrigation i s the government body responsible for water resources management in the country. These water resources include the Nile, the High Aswan Dam reservoir, the groundwater reservoirs, flash floods, and the coastal lakes. The MWRI’s main mandate i s regulation and distribution o f water resources throughout Egypt as well as water quality management to serve all water users. The Ministry has recently issued the National Water Resources Management Plan which effectively calls for the implementation o f Integrated Water Resources Management (WRM) across the water using sectors, and identifies key pillars for action to ensure sustainable utilization and abstraction for different purposes. The Ministry also presides over the National Water Research Center (NWRC), consisting o f twelve research institutes and i s responsible for all research activities in the field o f water management and development.

8. Recently, the M W R I has promoted the decentralized approach for managing the irrigation systems. Farmers, as major water users, have formed Water User Associations (WUAs). WUAs are organized at the tertiary canals (mesqa) level and are legally supported by the modification of Law 12 in 1994 (known as Law 213). Since then more that 2500 WUAs have been established. A new modification o f the Law 12 i s sought to allow for higher level water user organizations to be established and legally recognized.

IV. Legislative framework

9. Several laws and decrees have been approved by the Egyptian Parliament, the Cabinet o f Ministers and the President to organize the distribution o f water among different users and recently to protect the environment and water system from pollution. The main laws o f relevance to the water sector legislative framework are: Law 93 for the year 1962 for the discharge to open streams and i t s modifications for the years 1962, 1982, and 1989, Law 27 for the year 1978 for Regulation o f water resources and Treatment o f Wastewater, Law 12 for the year 1984 for the Irrigation and Drainage, Law 48 for the year 1982 Regarding the Protection o f the River N i l e and Waterways from Pollution, The Decree 380 for the year 1982 for the Industrial Water Pollution Control, Law o f Local Administration no. 43 o f 1979, and Law 4 for the year 1994 for the Environment protection. The NWRP includes a detailed description o f all water-related legislation and their current status. Finally, MOHUUD i s currently in the process o f drafting a special law to govern water and wastewater services in Egypt, defining institutional mandates o f the different entities under the sector, the potential role o f the private sector and governing principles, and the rights and responsibilities o f the consumer.

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V. Financing the Water Supply and Sanitation Sector

Stakeholder (Budget Provision)

Water MHUNC Supply

Sanitation Sub-total

10. The analysis o f the budgets o f authorities and uti l i t ies under M O H U U D showed that the total annual budget increased from L.E. 4.73 billion in year 1997/98 to L.E. 8.45 bi l l ion in 2003/04. During the period 1982 - 2004, a total o f LE 25.0 bi l l ion worth o f investments have been channeled by the state budget to potable water supply services. Moreover, a total o f LE 40 bi l l ion has been invested in sanitation services. The potable water production increased from 5.8 mi l l ion m3/day in 1982 to 18.2 mi l l ion m3/day by year 2000. The per-capita rate o f potable water use increased from 130 liter/da in 1981 to 275 liter/day in 2000. Productivity o f sanitary stations increased from 1 .O mil l ion m /day in 1982, to 8.3 mi l l ion m3/day in 2000, and planned to reach 20.0 mi l l ion m3/day by 201 7. As o f today, rural sanitation s t i l l presents a major challenge and an impeding factor along the track o f environmental sustainability.

Y

Table 1. 1 Investment and O&M Costs for the Water Supply and Sanitation Sector

Investments in Operation and Total Water Projects Maintenance Costs 97/98 03/04 97/98 03/04 03/04

0.991 1.65 0.580 1.027 2.677

1.490 2.480 0.870 1.54 4.020 2.481 4.130 1.450 2.567 6.697

All values are in Billion L. E. per

Year

Water Supply and Sanitation Sector

State Budget Environmental Degradation Damage cost - 1.62 - 3.24% o f GDP

11. The N W W predicts a total o f 145 bi l l ion Egyptian Pounds worth o f investments within the water sector during the period 2003 - 2017. The Ministry o f Housing, Ut i l i t ies and Urban development i s foreseen to contribute to 63% o f the latter investments and the Ministry o f Water Resources and Irrigation will provide 32%. The private sector, based on current scenarios, will take care o f about 5% o f these investments.

12. The total recurrent costs in the same period 2003-2017 are estimated at LE 44 billion. These costs include the operation and maintenance costs o f the system but exclude the personnel costs o f the government agencies. The municipalities (Ministry o f Local development) and the subsidiary companies take by far the biggest share o f the O & M costs (70%) for the operation and maintenance o f the drinking water treatment plants and the waste water treatment plants.

13. In summary, the costs for water services for the next fifteen years will be more than triple the current expenditures. Future allocation o f such high costs presents a heavy burden for the government state budget. Alternative scenarios for financial sustainability o f the water sector need to be addressed.

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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

Sector issues

The following related projects, which are financed by the World Bank and other development agencies, are ongoing, planned or recently completed.

Latest Supervision (Form 590) Ratings (Bank-financed Projects Only)

Project Implementation Development

Progress (IP) Objective (DO)

Moderately - Irrigation Improvement Project Satisfactory

Ongoing

Satisfactory

Second National Drainage Project Integrated Irrigation Improvement & Management Project West Delta Water Conservation & Irrigation Rehabilitation Project European Union Budget Support Programme for Water Sector GTZ Decentralized Water Management Project in Kafr El Sheikh USAID Water and Wastewater Sector Policy Reform

- Solid Waste Management Planned Project

Programme

Planned

Satisfactory

Moderately Satisfactory

Satisfactory

Satisfactory

NA

NA

NA

Satisfactory

Satisfactory

NA

NA

NA

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Annex 3: Results Framework and Monitoring

1. Inter-agency Coordination and M&E process

1. The results-based M&E system wi l l focus on monitoring outcomes and reporting on impacts of the implemented sanitation services. This will, for the first time in Egypt, allow for the quantification o f benefits occurring due to improved sanitation and feed into the decision making process on allocating new funds and prioritizing investments. Much o f the M&E activities wi l l make use o f the M&E tools, laboratories, and analysis results already existing per the mandate of the Ministries o f Water Resources and Irrigation, Health, and Housing (as illustrated in the Figure below). The M&E team should also be able to utilize one o f the water quality modeling/management systems existing at the MWRI’s Drainage Research Institute or at MWRI’s Planning Sector, then connect this system to the unit’s own Management Information System.

2. To evaluate impacts against the PDO, the M&E team wi l l coordinate with the Water Boards Project and with I I IMP (including their respective regional inter-ministerial committees, involving Ministry o f Water Resources and Irrigation, Ministry o f Health, and Ministry o f Environment). To monitor intermediate outcomes under component #I, the unit wi l l coordinate with NOPWASD and the three subsidiary WSC’s as concerns the progress o f implementation. As for monitoring intermediate outcomes under component #3, the unit wi l l coordinate with the three WSCs/RSUs and with the respective CDAs.

Figure 3.1: GOE entities entrusted with water quality monitoring and compliance management

Water quality management

I Legal aspects

MoHUNC (Law 93-1 962) MWRI (Law 48-1982)

Inland water MWRI Drinking water MoHP Coastal water EEAA

MWRVMin. of Interior EEAA / Water P o k e

Prevention agro-chemicals MALR

env.action plan EEAA

Treatment Compliance: MoHP Municipal: NOPWASD/GOSD/

AGOSD/Governorates/ORDE V Industrial: GOFIBaciIities

DistributiodReuss M WRI

Inland: NWRC and EHD Coastal: EEAA licencing MWRI

Emuents -I- -

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Table 3.1. Results Framework

PDO Contribute to the sustainable improvement in: (i) sanitation and environmental conditions for the resident communities and (ii) the water quality in the selected drainage basins within the served areas.

Intermediate Outcomes

Component 1 Provision o f Sustainable Sanitation Services to rural populations in project area.

Component 2 Establishment o f a local result-based monitoring and evaluation system

Component 3 Institutional development and capacity building

Project Outcome Indicators % increase in coverage and no. of households connected. % o f target population expressing satisfaction with local environmental conditions associated with improved wastewater management. (local ponding, canal water quality, etc.). % households practicing improved hygiene behavior as measured through qualitative research. Ambient Fecal Coliform, and BOD measurements, plus site and user- specific DO and Ammonia measurements, compared with national standards, in canals and drains around affected communities. Intermediate Outcome Indicators

No of additional working wastewater connections. % number and discharge (m3/day) works achieving design effluent quality.

M&E system in place no later than six months after project effectivess Semi-annual M&E reports prepared with the above contents by HCWW for the Steering Committee and local stakeholders.

% (in value) o f ISSIP bidding documents fully prepared and implemented by the subsidiary companies. Number of signed agreements o f decentralized system management delegated to CDAs. YO community contribution to O&M.

Use of Project Outcome Information

* Evaluate success or failure o f project.

* Adjust scheduling and targeting o f different physical and TA interventions.

* Design of/ advocacy for scale-up of project beyond current area.

Use of Intermediate Outcome Monitoring

* Monitor progress o f physical works; performance o f contractors; design, sequencing and use o f abatement interventions.

* Adjust performance o f TA consultants as needed. * Adjust focus o f communication program. * Revise design, planning and targeting o f later interventions. * Inform water quality planning. * Monitor training program and methods selected to train the companies and the communities. * Review or adjust decentralization strategy. * Adjust performance o f TA consultants as needed. * Assess financial sustainability and revise strategy if necessary.

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2 *

2 *

n m b-

3 & v)

00 m

3 D.

x 2 N

s 0 00

h 3 m

Annex 4: Detailed Project Description

A. Context

1, The Integrated Sanitation and Sewerage Infrastructure Project (ISSIP) aims to provide sanitation services to people living in priority village clusters in Beheira, Gharbeya and Kafr-El- Sheikh Governorates in the N i le Delta. The project i s linked to parallel efforts under the II IMP project to improve irrigation systems in the three governorates and i s thus linked to two specific irrigation command areas, the Mit Yazid Canal command area that straddles Gharbeya and Kafr- el-Sheikh and the Mahmoudia Canal command area in Beheira. This arrangement offers significant economies o f management, demonstrates the implementation o f I W R M on the ground and builds on the experience with the institutions and communities o f the area.

Existing situation in the project area

2. The project area in the three Governorates can be characterized as mostly flat agricultural land with a high water table (less than 5 meters). Most development i s fairly recent in origin and rights o f way, other than through roads, are not raised much above the natural ground surface. The high water table i s a significant problem for sewerage design and implementation. Annual rainfall i s very low, ranging from about 50mm per year in the south o f Gharbeya to lOOmm or more per year in the north o f Kafr El Sheikh and Beheira.

3. Villages in Gharbeya tend to be urban in character with many buildings rising to three stories or more. In Kafr El Sheikh and Beheira villages are more rural in character but even there many buildings have more than one storey and are occupied by more than one household. Rights o f way tend to be narrow, often less than 3 meters, with houses built up to the road.

4. Water use varies considerably between villages but i s often in the range o f 100-140 l/cd. Most households in the three Governorates covered by the project already have water-flushed sanitation although few are currently connected to sewers. Most houses that are not connected to sewers discharge wastewater to cesspits with a small percentage discharging directly to nearby drains.

5. Field reports indicate that in some locations where the water table i s high cesspits are emptied 2-4 times a month, suggesting either that these are true closed cesspits or, more probably, that infiltration i s poor. Some villages have installed a rudimentary wastewater collection system (erroneously identified as a groundwater lowering system) which discharges into the closest agricultural drain. There are also some 15 wastewater treatment plants in the three Governorates, serving the largest agglomerations. Flows to many o f the existing wastewater treatment plants (WWTPs) are currently well below design flows, offering possibilities to connect both additional households within already-sewered areas and add new areas to existing works without requiring additional investment in WWTP capacity. Such connections could, at the same time, offer relatively low-cost sanitation arrangements to the new customers, improve revenues for the service provider, and in some cases improve performance at the treatment works.

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6. Existing WWTPs mostly use activated sludge or extended aeration technology, the latter in the form o f oxidation ditches. While these technologies can produce good effluent quality if operated correctly, their demands for operational skill and energy are high, increasing operational costs, and they require considerable back-up generator capacity to cater for periods when there are power cuts. Oxidation ditches have the added disadvantages o f a relatively large footprint and the need to dewater large volumes o f watery sludge. Recognizing these disadvantages, NOP WASD has experimented with some other treatment processes. These include an Upf low Anaerobic Sludge Blanket (UASB) plant at Nahtay in Gharbeya, a modified Rotating Biological Contactor (RBC) plant at Fisha Selim, also in Gharbeya, and Advanced Sequential Batch Reactors (ASBRs). ASBRs use activated sludge processes which take place sequentially in the same reactor rather than in a series o f reactors. ASBRs have a small footprint and can use less energy than conventional activated sludge

B. Project Description by Component

7. Project Development Objective: The main objective o f the project i s to contribute to the sustainable improvement in: (i) sanitation and environmental conditions for the resident communities and (ii) the water quality in the selected drainage basins within the served areas.

8. Project Area: The project area falls within the two command areas o f Mit Yazid and Mahmoudeya, with a total population o f about 1.35 million. The project area represents the first priority ranked areas for sanitation services within the command areas, based on multi-criteria ranking undertaken as part o f the feasibility study. This f i rst priority area covers about hal f o f the total command area, and includes a total o f around 870 villages and hamlets, with a current population o f close to 1 mi l l ion inhabitants.

Project components:

9. Component 1: Provision o f sanitation systems within selected drainage sub-basins (total cost US$181 million o f which, IBRD portion US$120 million) - This component aims to plan, design and construct sanitation systems for a total o f 14 clusters in the selected priority area within the two command areas o f Mahmoudeya and Mit Yazid, falling within the Governorates o f Beheira, Gharbeya and Kafr El Sheikh in the Delta. The component will be divided into three sub- components:

(a) Centralized sanitation systems construction: includes the construction o f complete sanitation systems for an estimated 222 larger villages (>1500) within 14 clusters, including: (1) Construction o f treatment plants, and (2) Construction o f collection network consisting o f house connection, transmission lines, and pumping stations; Decentralized sanitation system construction/ rehabilitation: will serve an estimated 120 individual villages/ hamlets with population size less than 1500 inhabitants, providing them with a decentralized system consisting o f shallow sewers and anaerobic baffled reactors, and relying on delegated community management for subsequent O&M. It will also include the upgrading and rehabilitation o f existing networks in some villages to acceptable design standards, if feasible; and GTZ pi lot decentralized systems: this sub-component builds on and replicates the implemented GTZ pilot model in Kafr El Sheikh in an estimated 20 villages in the project

(b)

(c)

33

area, based on the communities’ expressed willingness to engage. The model serves villages o f up to 5000 inhabitants and depends heavily on community participation and commitment for the O & M o f these systems based on simple (natural system) technology.

10. Component 2: Establishment of a local result-based monitoring and evaluation system (total cost US$1.1 million of which, IBRD portion i s US$O, Netherlands Cooperation will fund the entire US1. l million) - This component will establish a results-based monitoring system within the H C WW that l i n k s the improvements in sanitation coverage with anticipated environmental and water quality impacts. The component will include technical assistance support for expertise in designing the system, identification o f monitoring sites, data collection and analysis, results review, finalization, and communication. It will coordinate among national institutions within the IWRM framework, particularly the M&E system established under I I IMP, as well as among the local organizations (incl. WSC’s, CDAs, WUA’s and Water Boards) to develop their capacity to engage in monitoring water quality and improved environmental conditions and hygiene practices and share results regularly with relevant stakeholders.

1 1. Component 3: Institutional development and capacity building (total cost US$19.5 million of which, IBRD portion i s US$O, Netherlands Cooperation will fund US15.5 million and GTZ will fund US$4.0 million) - This component aims to promote institutional development within the national and local public institutions responsible for sanitation implementation to enhance their capacity to plan, design, construct and operate the rural sanitation investments, monitor outputs and outcomes, as well as promote hygiene practices and social mobilization. Through grant donor co-financing, technical assistance will be provided to each o f the implementing agencies (HCWW, NOPWASD and the three WSC’s), consisting o f

(a)

(b)

A technical assistance contract to provide specialist support to the implementing units in their mandates, covering technical, procurement, social and financial aspects; Capacity building for contract management at the H C W W and the three WSC’s to serve in procurement and supervision o f performance based O & M contracts, including through the demonstration o f 2 pilots in the project area;

(c) Training to the implementing unit staff and CDAs in technical and social mobilization aspects o f the sanitation service implementation and O&M; and

(d) Implementation o f the Environmental and Social Management and Monitoring Framework (ESMMF).

12. Technical assistance through grant co-financing will be provided to each o f the five investment implementing agencies (HCWW, NOPWASD and the three WSCs), to complement in-house capacity, consisting o f a team o f specialists to support the P I U and RSUs in their mandates. A summary o f the scope o f work for each unit i s included under Annex 6, while the detailed TOR i s included in the Project Implementation Manual.

C. Overall Project Design

13. The following are the key elements o f the project design:

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Planning Principles:

14. The planning and implementation approach o f the project i s both innovative and practical. The project i s innovative as it incorporates a number o f fundamental planning principles (outlined below) for the f i rst time in Egypt, and yet i s practical in i t s simplicity and replicability in order to serve as a model for other areas under the National Village Sanitation Program. The planning innovations include:

15. Hydraulic Basin and I W R M approach: The project wil l provide sanitation services (sewage collection and treatment) to selected villages in Beheira, Gharbeya and Kafr-El-Sheikh Governorates in the N i l e Delta. The project has targeted the Mit Yazid Canal command area (straddling Gharbeya and Kafr-el-Sheikh) and the Mahmoudia Canal command area (in Beheira) in which irrigation improvement activities are being carried out under another Bank-funded project. The objective o f selecting the same target areas as the irrigation project i s to demonstrate a novel integrated basin improvement approach for the environmental sanitation problems in the Delta area based on integrated water resources management principles. Planning the clustering and M&E systems along the sub-basin boundaries allows for a closer link between input and impact. Furthermore, the project would benefit from the presence o f WUAs in monitoring and social mobilization, many o f which will be formedhtrengthened through the I I I M P project.

16. Village clustering: the concept o f clustering defines geographical units (clusters) o f planning and implementation that provides comprehensive and cost effective sanitation solution for al l villages falling within the unit; cluster boundaries are determined by economies o f scale, pollution abatement objectives and demand responsiveness for smaller settlements. Each cluster i s centered around one treatment plant located at an optimal central location to serve the maximum number o f villages at least cost. In selecting cluster boundaries, consideration was given to such issues as: (a) maximizing use o f existing underutilized WWTPs, (b) avoiding expensive crossings o f barriers such as main canals and railways, (c) covering one or two administrative units rather than smaller portions o f a larger number o f units, and (d) maximizing impact upon water quality in receiving drains. Cluster size was thus determined to optimize technical, financial and institutional aspects in order to allow management at the smallest appropriate level. Too small a cluster would result in an excessive number o f such units, which would be unwieldy once the project concept i s expanded nationwide, and would defeat the economies o f scale concept. Too large a cluster, on the other hand, would lead to crossing a large number o f administrative boundaries, and would be technically and financially inappropriate for the dispersed rural setting.

17. Transmission main lengths for the selected clusters range from about 5km to just over 16km, depending on the population density within the cluster. Maps o f the village clusters in the project area are included in Annex 16. Within clusters, the villageshettlements will be provided one o f the following four types o f sanitation services depending on the best fit for i t s specific conditions:

18. Centralized system: for villages with population higher than 5,000 inhabitants and smaller villages lying close to these larger villages. These villages will be served by sewerage collection networks, leading to a single central WWTP. Smaller villages should be connected if

35

the cost o f doing so does not exceed the cost o f decentralized treatment. Overall responsibility for centralized schemes will l i e with subsidiary water and sanitation companies (WSCs), with management responsibilities for pumping stations and WWTPs contracted out to the private sector. 19. Decentralized system: for settlements with between 500 and 1,500 inhabitants not located along the networks serving larger villages. Because o f their smaller size and hence lower pollution loads, these villages will be served based on expressed demand for receiving the service and assuming subsequent O&M responsibility and costs. These should be served by schemes incorporating local collection systems discharging to simple treatment works providing enhanced primary treatment, typically consisting o f a communal septic tank followed by a series o f baffled reactors. Pumping should be avoided if possible. The preferred management option for these schemes i s community management by a C D A or other local legally recognized organizations. Local communities should be involved in oversight, monitoring the contractor’s performance and reporting any problems to the water company.

20. GTZ model decentralized system: for certain villages between 1,000 and 5,000 inhabitants. These villages, because o f their size and distance from other villages may be suitable for implementation o f a decentralized community managed approach and natural treatment technologies. Preconditions for adopting this approach will be that communities are committed to provide the land needed for treatment and/or pumping works and to take full management and financial responsibility for the scheme, financing 100% o f operating costs. This approach (which proved successful in Kafr El-Sheikh) will be tested for replication under the overall guidance o f GTZ and following the model already developed in Mouf t i Koubra. GTZ have identified 20 villages that they believe can be served through this approach. O f these, work could start in 5 villages in Kafr El Sheikh as soon as project funding i s available. These are Ezbet El Kherregeen 3, Ezbet El Kheregeen 5, Kobry El Zawya, Ezbet El Kheregeen 6, and A1 Kafr El Sharky.

2 1. The approach developed by GTZ i s simple in concept. A scheme serves one village and incorporates one pumping station and a series o f waste stabilization ponds for sewage treatment. The village must contribute the land for the works works (which, for waste stabilization ponds, i s likely to be substantial.). I t i s l ikely to be most appropriate in lower-density areas, where villages are smaller and the distances between villages are greater. The approach will only work where village communities are willing to form a C D A and take overall responsibility for the operation o f the scheme, contracting out O&M responsibilities to a local contractor. The institutional model developed by GTZ and i t s consultant requires that the Village Unit (LAU) provides support in management and enforcement while the Kafr a1 Sheikh Water Company i s responsible for supervision and monitoring. The sustainability o f the model, including long te rm commitment o f the different stakeholders as the GTZ support i s withdrawn needs to be monitored.

22. O n site system: for settlements with less than 500 inhabitants. These will continue to use on-site sanitation systems, based on cesspits or septic tanks. The project has incorporated the resulting septage in the design o f the WWTP capacity within the cluster and will coordinate with LAUs to enhance desludging efforts.

36

23. Prioritization: Given the l imited funds available in relation to the overall sanitation needs o f the selected project areas, it was decided early on that a methodology for selecting priority village clusters should be developed based on multi-criteria analysis o f most relevant factors. The factors that were chosen relate to population served, location in relation to main drains and canals, potential health benefits, water quality and the proximity o f water treatment works: These factors are implicitly based on the key principle that interventions should target areas in which largest impacts can be achieved. The analysis has yielded a prioritized ranking o f areas within each o f the two command areas. The project will serve the identified f i rst priority area, which are along the Mahmoudeya Canal and in the center o f the Mit Yazid Command Area.

24. Implementation Phasing; The first phase o f the project (first two years investment program) has been selected to maximize the use o f existing facilities; focus on areas with the largest populations within the overall area, and demonstrate different cluster models in the three Governorates. The total cost o f this 2-year investment program covers 4 clusters in the two command areas and i s estimated at about $55 million, or 26% o f the total project cost. The second phase will cover the years 3-6, and will allow for incorporation o f lessons learned from the first phase implementation and adaptation o f the final plan according to the results on the ground. This includes, inter alia: (i) revising the overall Strategic Sanitation Plan, (ii) adjusting the proportion o f centralized versus decentralized systems in subsequent clusters, and (iii) assessing the efficiency o f the adopted institutional setting and adjusting allocation o f works among the implementing agencies if needed.

25. Maximizing use of existing facilities: The scheme for Cluster AH-2 will make use of the considerable spare capacity available in the existing ‘Abu Hommos treatment. Both schemes in the Meet Yazid Command Area will utilize land that i s available at existing treatment plants. The only scheme requiring a completely new works on a newly acquired site will be that serving Cluster M H - 2 in the Mahmoudia Command Area. Making use o f existing works i s particularly appropriate in the case o f works that are operated by private sector contractors under contracts agreed on the basis o f the design capacity o f the works rather than measured flows. In such cases, any increase in the number o f connections will reduce the gap between the water and sewerage company’s income and expenditure. I t s income will increase with the number o f customers, regardless o f the tari f f level, while i t s expenditure on wastewater treatment will remain constant since it i s governed by the contract. There will be some increase in expenditure on sewer maintenance as the size o f the system expands.

26. Focus on areas upstream of WTPs: There i s a strong need to prevent the discharge o f untreated wastewater into canals, particularly at locations upstream o f drinking water abstraction points. In Beheira, a number o f small treatment works are clustered in the eastern part of the canal command area but the main Abu Homus and Kafr e l Dawar WTPs are located further west, roughly in the centre o f the command area. Both draw water from the Mamhoudia Canal. The ‘Priority 1’ area identified in the Draft Strategic Plan consists o f a strip on either side o f the Mahmoudia Canal, reflecting the importance attached to protecting water supplies. Most of the village clusters identified for inclusion in Phase I l i e upstream o f the major WTPs on the canal. At these sites, particular attention must be paid to the quality o f effluent disinfection.

37

Expected project coverage by Governorate

Governorate

G harbiya

No. of WWTPs No. o f Communities Served Total De-

No. of Population NW Extension Tie-in to Centralized centralized GTZ Clusters Served Construction to existing Existing Treatment Treatment Model Total

3 232,143 1 1 1 29 12 0 41

Kafr El- Sheikh

Beheira

Total:

Technical Design Aspects:

3 305,137 1 1 1 59 20 20 99

8 62 1,279 3 5 134 88 0 222

14 1,158,559 5 2 7 222 120 20 362

27. Collection system: the designs would aim at bringing sewers as close as possible to houses and minimize their depth, thus reducing the cost o f connection. The latter wil l be particularly important where the groundwater table i s less than about 2 meters below ground level. I t was further agreed that options such as shallow and small-bore sewers would be considered where applicable. The Brazilian experience with condominia1 system will also be tested, to optimize the path o f sewers and ensure community ownership and engagement in implementation. Table 4.2 below summarizes the key design parameters for sewers under the project.

Parameter Minimum Cover Minimum Slope

Minimum diameter

Table 4.2. Key sewer design criteria

Current standard 600 mm 1 in 167 for 15Omm 1 in 250 for design) 200mm

200 mm 150 mm

Comments and agreed modification if any 550 mm based on an agreed depth to invert o f 700mm 1 in 300 at critical lengths at the head o f the system to minimize pumping (to be verified in the detailed sewer

Use o f interceptors should be investigated to allow for flatter slopes

100 mm for connections serving one household or one building with up to 5 apts

Treatment

28. There are various l o w cost treatment technologies suitable for rural setting with f low rates in the range o f 3,000 to 9,000 m3/day. NOPWASD has recently tested various methods, including Upflow Anaerobic Sludge Blanket (UASB) (UASB); Rotating Biological Contactors (RBCs) and Advanced Sequential Batch Reactors (ASBRs). These methods have a l ow footprint and reduced energy consumption when compared with other mechanically aerated systems. During implementation, a menu o f appropriate technologies will be provided based on technical, operational, and financial merits. The evaluation will be done on a case by case basis, to reach the optimal Design-Build process. For isolated smaller villages and ezbas with 500 to 1500

38

people, simpler technologies, delivering an enhanced level o f primary treatment are proposed. Because o f their small footprint and simplicity, the preferred option i s baffled reactors and anaerobic filters, typically with a 48-hour retention time. These will require l i t t l e maintenance other than regular desludging.

Performance Based O&M contracting

29. The project will support the water companies in the structuring and supervision o f performance based O&M contracts with the private sector for 2 facilities in the area to demonstrate effective public-private partnership arrangements with the small scale private sector. These 2 pilots will provide valuable lessons in risk allocation, cost structuring, technical considerations (boundaries o f the contract) and benchmarking o f operational efficiency, that would feed into the larger policy dialogue on cost recovery and sector financial sustainability. The identification o f the two candidate plants and the review o f the current draft contract models will be undertaken prior to project effectiveness. Technical support will be provided within the HCWW to guide the subsidiaries on technical and legal issues o f contract management in coordination with national efforts on public-private partnerships. Payment to the contractor will be based on the following key considerations, to be finalized based on the selected pilot specifications:

(a) Improved eficiency of the wastewater treatment plant: Payments directly linked to recorded through-flow at the plant (which i s directly related to the proper operation o f the network) encourage the network to be well run. To ensure that the plant i s operated properly and that routine maintenance i s carried out (to prevent contractors from minimizing costs and simply ‘running down’ the plants) these payments would be subject to two performance criteria, namely:

a effluent quality (directly related to the proper operation o f the plant); and the proper implementation o f an agreed program o f routine maintenance. a

(3) Appropriate disposal of effluent from on-site systems: In cases where on-site options remain operators can also be incentivised to encourage proper disposal o f such wastes at the treatment plant by permitting the construction o f sullage stations for the proper collection o f sludge. This can then be processed through the plant, and thus count towards the measured performance of the contractor. In cases where disposal o f on-site sludge i s likely to be a significant element o f the service provided an incentive payment may be added in recognition o f the greater concentration o f B O D in such wastes. This payment could be structured as an additional fixed % o f the fee per m3 o f treated wastes for each m3 o f waste which i s sourced from on-site locations, which are disposed appropriately and for which evidence can be provided that households requested the service and that it was carried out satisfactorily at the household.

30. To avoid too much complexity in the bid, this item should be part o f the bid but not used as criteria for bid evaluation. To ensure that incentives remain to connect new customers, the total payments to be made for such an item would be capped.

Community Mobilization Framework

3 1 . The project will use a participatory, demand-driven approach, helping to ensure sustainability through putting in place systems that users want and are willing to pay for and

39

maintain. The social mobilization and community participation approaches will thus be essential for project success. Accordingly, a Community Participation Framework has been prepared which contains village participation criteria, along with principles o f community participation, responsibilities o f stakeholders, social mobilization techniques, and plans for capacity building. The details are included in the Project Implementation Manual.

32. Criteria for C D A engagement: To ensure existence o f capacity and commitment to the role o f decentralized management o f the smaller systems, the project will adopt a selection process based on agreed criteria to be met by CDAs who wish to apply on behalf o f communities for the sanitation service in their village. While the hll qualification procedure will be set out in the ISSIP Project Implementation Manual, it i s expected that there will be a staged selection process; at each stage the community will have to meet defined benchmarks. A possible two- stage qualification process might be structured as follows. In the first stage, after an initial round o f WSC social marketing visits, the community submits an Application, which might include:

(a) certification o f C D A registration; (b)

(c)

(d) (e) ( f )

names o f members o f C D A wastewater project committee, including chairman, secretary and treasurer; a map showing one or more sites for the community septic tank, plus copies o f legal t i t le and statement o f owners’ willingness to sel l and final asking price; a l i s t o f households willing to pay at least LE 1 O/month for the service; a map showing the location and layout o f any and al l informal sewers in the community; a statement by the C D A chairman that al l the information submitted i s true;

33. Communities whose applications are accepted enter the second stage o f the program, in which a preliminary design i s prepared in consultation with the CDA, and an estimate o f construction and O & M costs are prepared. In return, the CDA:

(g)

(h)

(i) (i)

prepares by-laws for household participation in the scheme, including incentives for proper use o f the system (e.g., to ensure exclusion o f solid waste, etc); prepares i t s policies and procedures for billing and collection, together with an estimate o f the monthly change for each household, signed by the household head; prepares the financial, procurement, and administrative by-laws o f the system; and opens a special bank account and sources it with two or three months worth o f collected user changes, to be forfeited to the WSC in case the C D A proves incapable o f managing the system or the system i s intentionally damaged.

34. Once these conditions are met, construction would begin. Prior to the completion o f construction, a formal delegation agreement i s signed between the WSC and the CDA, setting out the nights and obligations o f each party, the standards for O&M, O & M procurement, and accounting, and the penalties for violations o f the terms o f the agreement.

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Annex 5: Project Estimated Costs

0.72

A. Costs by Component

0.3 1 1.03

Provision o f sanitation systems within selected drainage sub-basins

15.75

Component 2: Establishment o f a local results-based monitoring and evaluation svstem

2.78 18.53 Component 3 : Institutional development and capacity building

171.40

I 17.47 I 172*40 154.93

20.56 191.96

Total Project Costs** 201.56

41

B. Costs by Sub-Component and Financing Source

14.35

Component Component 1: A1 : Centralized Sanitation Systems- Treatment Plants A2: Centralized Sanitation Systems- Collection Networks B: Decentralized Sanitation Systems construction /rehabilitation C: GTZ- Model decentralized sanitation systems construction Component 1 Sub-Total Component 2: Establishment o f a local results-based

3.48

monitoring and evaluation system ComDonent 2 Sub-To tal

0.74

0.26

Component 3: A: Technical Assistance & Engineering

B: Pilot Performance-based O&M Contracting C: Training and Capacity Building D: ESMMF Implementation Cost

support

0.52

ComDonent 3 Sub-Total TOTAL

(including contingencies)

Cost an1

IBRD

15.01

86.00

11.99

7.00 120.00

120.00

Financin

GOE

7.57

44.49

5.96

3 .OO 61.02

61.02

Netherlands

I

1.08

15.46 16.54

Total

22.58

130.49

17.95

10.00 181.02

1.08

1 .os

17.83

0.74

0.78

0.1 1 19.46

201.56

42

C. Detailed Baseline Costs by Subcomponent

Phase 1

r- Treatment Plant 3,543,736 700,704

8,077,195

ABR I Septic Tank 175,000 Cluster

1,518.192 7,021,160 Piped Network (house connections, gravity pipes and force mains)

Cluster KSH-2

- - Cluster AH-2

ABR I Seotic Tank 1,312,500 42,875

5 606 400 Pumping Stations Pined Natwnrk lhniiso rnnnectinns aravitv ninoq and force mains) Centralized I I I

483,000

I

I Phase 1 Land Acquisitions 687,085

Phase 1 GTZ Model de-centralized sanitation systems: 3,000,0001

Phase 1 Subtotal: 52,835,192)

43

Phase 2

Centralized

Cluster ABR I Septic Tank 560,000 9,800

Piped Network 759,250

Cluster OH-I Subtotal I I ,098,803 I ]Treatment Plant 2,874,706

Decentralized

17,150

Cluster KSH-I Subtotal Treatment Plant 1,994,650

Cluster ABR I Septic Tank 686,000 17,150

Piped Network 886,161

Cluster KSH-I Subtotal 20,493,119 I ITreatment Plant 1,994,650

3 854,909

Cluster ABR / Septic Tank 693,000

ABR / Septic Tank 12,250

567,299

Cluster AH-I Subtotal 7,387,930

44

Phase 2 Land Acquisitions: 1,469,423

Phase 2 GTZ Model de-centralized sanitation systems: 7,000,0001

Phase 2 Subtotal: 119,660,7231

45

Component 2

IEstablishment of a local results-based monitoring and evaluation system 1,031,000

Component 3

HCWW ISSIP PIU Technical assistance support to the HCWW ISSIP PIU 744,000

NOPWASD ISSIP Unit Technical assistance support to the NOPWASD ISSIP Unit 480,000

Kafr El-Sheikh ISSIP Unit Technical assistance support to the Kafr El-Sheikh WSC 1,800,000

Beheira ISSIP Unit Technical assistance support to the Beheira WSC 1,800,000

Gharbiva ISSIP Unit Technical assistance support to the Gharbiya WSC 1,800,000

Engineering Deslgn 8 Supervision 7,542,186

Pilot Performance-Based OBM Contracting 700,000

Training and Capacity Building 750,000

ESMMF Implementation Cost 103,636

GTZ Social B Technical Assistance Support 2,810,000

ISSIP Component 3 Subtotal: 18,529,8221

ISSIP Project Total Baseline Cost: 191,956,7371

46

Notes on Costs:

1. De-centralized Sanitation Systems. For sub-component 1 B (Decentralized Sanitation Systems construction /rehabilitation) it has been assumed that about 35% o f total number o f villages falling within this size category in the project area will be eligible and able to engage in implementing such systems.

2. Land Acquisitions. Based on preliminary surveys, it has been assumed that 35% o f the land required for pumping stations and WWTPs will need to be purchased through ISSIP financing (included under GOE contribution to Component 1 ). The remaining required land will either be obtainable government-owned land (30%) or will be donated from the local beneficiaries (30%).

3. Foreign Costs. The foreign share o f the cost for component 1 i s calculated based on:

a

a

a

50% o f the centralized systems’ WWTPs cost 30% o f pumping stations cost for centralized sanitation systems. 20% o f pumping stations cost for non-GTZ model de-centralized sanitation systems (the lower percentage relative to centralized systems i s due to the smaller size o f the pumping units and higher availability o f local components). For components 2 and 3 foreign costs have been estimated at 30% and 15% respectively. a

4. ESMMF Implementation. Total cost o f ESMMF implementation amounts to US$l ,O lO,OOO, as per the details provided in Annex 10. O f these, costs for training, equipment, environmental construction supervision and other environmental aspects are subsumed under their respective categories.

47

Annex 6: Implementation Arrangements

1. The project wi l l be implemented through the coordinated efforts o f five agencies: the Holding Company for Water and Wastewater (HCWW) and i t s three subsidiary water and sanitation companies (WSCs) in Beheira, Gharbiya, and Kafr el-Sheikh, and the National Organization for Potable Water and Sanitary Drainage (NOPWASD). All o f these agencies are affiliated to the Minister o f Housing, Util i t ies, and Urban Development (MOHUUD) who wi l l head the ISSIP Steering Committee. Through this committee, the project wi l l also coordinate closely with the Ministry o f Water Resources and Irrigation (MWRI), within the framework o f Integrated Water Resources Management (IWRM), with the Ministry o f Health and Population (MOHP) and with local community representatives. The division o f implementation responsibilities between NOPWASD and HCWW wi l l be detailed in an Interagency agreement to be entered into between the two institutions (dated covenant). The Project Implementation Unit (PIU) wi l l be housed in the HCWW headquarter in Cairo. Community development associations (CDAs) in target villages wi l l be involved in articulating demand and organizing their communities to qualify for decentralized wastewater scheme construction by WSCs under the project.

Institutional Reform Context

2. Planning for and serving scattered smaller communities has not been undertaken in Egypt on a large scale yet. This i s why it i s important that the technical solutions and related implementation arrangements adapt to strike the right balance between centralized planning and guidance and decentralized implementation and community participation. The implementation arrangement promote a multi-sectoral and decentralized approach to rural sanitation management, involving NOPWASD, HCWW and three o f i t s companies, and CDAs as implementing agencies, and a larger stakeholder community which includes MWRI, MOHP, WUA’s and the Governorates. But it also reflects o f the current institutional transitions in the municipal water and sanitation sector.

3. The project i s set within a transforming sector, where the role o f the WSCs under the overall supervision o f the HCWW i s being redefined. Beyond mere operation and maintenance o f facilities that have been constructed by NOPWASD, the Ministry i s delegating increasing investment implementation authority to the local level. Within the past two years, this includes the full transfer o f the rehabilitation and renewal budget (LE 1.4 billion), as well as the urgent water supply program (LE 1.5 billion). In addition, HCWW i s positioning i t se l f as the key planning and oversight institution, and has launched the National and Governorate level Masterplans to assist in defining the investment and operational needs over the coming 30 years. The ISSIP project i s fully aligned with this vision, and therefore offers the following key contributions within the sector reform process:

a

a

Assigns significant design and construction responsibilities to the WSCs for better management o f investment allocations and related operation. Provides a model for rural sanitation planning that can feed into the National Masterplan and guide the National Program for Village Sanitation

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0

8

0

8

0

Creates national capacity within H C W W and EWRA to utilize results-based performance information for management and regulatory purposes. Supports building local capacity for engaging communities in rural sanitation service provision and combining social and technical skills in planning and implementation Creates local private sector capacity for operating wastewater treatment plants and associated supervision and control measures within the WSCs and at the H C W W Effects more coordination between NOPWASD as the key investment agency and the WSC’s to ensure timely implementation with the cluster as the unit o f monitoring Creates a platform for cross-sectoral coordination in monitoring rural sanitation inputs and outcomes to demonstrate IWRM framework in practice.

Institutional Assessment

4. main findings are summarized hereunder:

A full institutional assessment has been undertaken o f the main agencies involved. The

The past institutional structure o f splitting investment planning and implementation from O&M creates disincentives in terms o f efficiency o f budget allocation and accountability. This becomes more prominent when the need to serve rural settlements requires a stronger focus on community participation for long term sustainability. NOPWASD recognizes the need to delegate rural works investment to the local companies given the strong link to communities. This has already taken place in the Urgent Plan, and a mechanism by which NOPWASD can transfer State Budget funds to H C W W for capital works has been operationalized. The mandate o f the H C W W and the companies should be expanded in planning and oversight o f rehabilitation and expansion works, and the companies’ familiarity with and closeness to local conditions gives them a comparative advantage in planning and design o f water and sewer networks. H C W W has commissioned thirty-year master plans for water and wastewater facilities in the companies, and has embraced i t s Urgent Plan responsibilities. However, H C W W and i t s companies have less experience than NOPWASD in investment program management tasks such as design, procurement, and project management, but several donors (USAID, GTZ, EU IWSP) are planning or providing relevant institutional support. There are variations in C D A representation, capacity, and dynamism. To ensure that C D A management represents a sustainable option, project implementation arrangements will incorporate screening processes and construction conditions precedent to mitigate this risk.

Implementation Framework

5 . The overall ISSIP program framework includes NOPWASD, H C W W and the three WSCs, and CDAs as implementing entities, and a range o f ministries and agencies with stakes in ISSIP outcomes or regulatory responsibilities with regard to ISSIP implementing entities. The allocation o f ISSIP implementation responsibilities among these agencies i s depicted in Figure 6.1.

49

HCWW PIU Set up results based M&E system to monitor and evaluate ISSIP outcomes and activities (for expansion to national village sanitation program) * Prepare ISSIP Phase 2 strategic sanitation plan

. 1

NOPWASD I S S I P Unit Undertake detailed design, construction, & construction supervision for ISSIP centralized treatment works in coordination with collection networks within the same cluster Supervise commissioning and hand-over o f

1

1

I CDAs, LAUs, WUAs

and related investmenti procurement plans. Guide and supervise WSC implementation of assigned works (collection & decentralized systems) Develop policies and strategy for WSC support o f community-based wastewater systems,

1

1

CDAs 1

1

. Meet conditions-precedent for ISSIP

1 Assist in construction supervision 1

1

Provide fora for WSC social marketing & hygiene IEC Assist in survey work & participate in scheme planning

construction

Comply with rules o f the WSCKDA scheme delegation agreement Manage O&M and collect user charges.

completed treatment systems Ensure coordination between ISSIP plans and national village sanitation program priorities Maintain project accounts and asset registers as per World Bank requirements. Report physical progress to central M&E/ PIU

1

1

1

WUAs/ IIIMP RCUs . . Assist in monitoring activities with a focus on water quality monitoring Assist in survey work & participate in scheme planning with a focus on priority areas for maximum water quality benefits

information dissemination activities 1 Participate in communication and

performance based O&M contracting, and communication & hygiene promotion activities Ensure compliance with World Bank procurement & financial management rules.

1

50

and steering committee

6. A Steering Committee will be established to provide coordination, oversight, and direction to the project stakeholders, as described above. The Steering Committee will be headed by the Minister o f Housing, Util i t ies, and Urban Development or his delegate, and will be made up o f representatives o f al l agencies which are involved in implementation directly or which have a legal or regulatory stake in project outcomes or implementation. These agencies include:

0 HCWW, responsible for the municipal wastewater uti l i t ies in the three ISSIP governorates and in nine other governorates.

0 Beheira, Gharbiya, and Kafr el-Sheikh WSCs, responsible for wastewater service provision in the three ISSIP governorates.

0 E W M , responsible for monitoring the quality and cost o f public wastewater services and advising the Minister o f HUUD on tariffs

0 NOPWASD, responsible for State Budget-funded planning and implementation o f water and wastewater treatment plants in Egypt’s eighteen rural governorates.

0 MWRI, responsible for monitoring canal and drain water quality and for setting and enforcing effluent quality standards.

0 MOHP, responsible for sampling and testing drinking water and effluent from publicly- owned treatment plants.

0 One popular (Le., elected) council representative from each o f the Governorates o f Beheira, Gharbiya, and Kafr el-Sheikh.

7 . The World Bank’s Task Team Leader will participate in Steering Committee meetings as an observer. Embassy and contractor representatives o f related donor projects in the project area may also be invited to attend meetings as the circumstances warrant.

8. The Project Implementation Unit (PIU) will be housed in the H C W W headquarters in Cairo. The P I U will be headed by a P I U Manager and supported by a financial management and procurement specialist who will work closely with appropriate H C W W and WSC counterparts to manage the Project and build capacity for rural sanitation programming. The P I U will be further supported by a team o f long term and short term specialists through the technical assistance component under the project.

9. The PIU will provide scale-economic ISSIP services to the three WSCs. These services include the preparation o f model TORS and tender documents for ISSIP works, development of standard operating procedures and maintenance planning guidelines for the various wastewater system components (treatment unit processes, pump stations, sewers, sludge removal trucks, etc.), design o f cost accounting and billing system improvements, etc. The P I U will also manage the preparation o f the ISSIP Phase 2 investment program, in coordination with the WSCs and NOPWASD and under the guidance o f the ISSIP Steering Committee.

10. The H C W W P I U will procure a consulting firm to design the ISSIP M&E system, collect inputs from the data sources, apply appropriate Q N Q C procedures, and prepare the M&E reports.

1 1. A NOPWASD ISSIP Unit will be responsible for design and implementation o f al l new wastewater treatment works. This unit wil l be headed by a senior NOPWASD official, supported

5 1

by a team o f specialists: a wastewater treatment projects engineer, a procurement officer, and a financial manager. This team o f specialists will be supported through the technical assistance component under the project and will work closely with counterpart NOPWASD staff.

12. A Rural Sanitation Unit (RSU) will be established in each o f the three WSCs, responsible for implementation o f “centralized” wastewater collection systems, and O & M for the completed systems. This includes procurement and supervision o f private sector O & M services as well as in-house O&M. This also covers operational performance monitoring and accounting and billing o f O & M costs in a manner which generates useful management and regulatory information. These latter improvements are understood as indicators o f the GOE’s commitment to increased cost recovery for wastewater services.

13. Each RSU will also be responsible for developing and implementing a demand- responsive small community wastewater management program which will construct decentralized schemes in small villages which are organized, willing, and able to manage O & M o f the scheme and collect charges for O & M and replacement and renewal (R&R) from scheme beneficiaries. The WSCs will provide technical and procurement assistance in decentralized scheme design and construction management, ensure sludge removal and disposal from decentralized WWTPs, and monitor C D A operational and financial performance on completed schemes.

14. Finally, the RSU will be responsible for ISSIP hygiene information, education, and communication (IEC) activities, as well as the implementation o f the Environmental and Social Management and Monitoring Framework (ESMMF).

15. The RSUs will be headed by a Unit Head and include a team o f five full-time dedicated specialists: WW specialist, social specialist, environmental specialist, procurement specialist and financial management specialist. This team o f specialists will be supported through the technical assistance component under the project. Unit personnel will be expected to work closely with counterpart staff throughout the Company, including Branch staff as appropriate.

16. Community Development Associations (CDAs) will be the points o f WSC/community articulation for the ISSIP small communities program. The CDAs will be responsible for meeting the prerequisites for ISSIP investment in decentralized wastewater systems, and they will be responsible for subsequent O & M and cost recovery. Because H C W W and the WSC have few means by which to compel a community to manage i t s ISSIP system after construction, the program wil l adopt a community selection approach which requires target communities to demonstrate demand, in order to be selected into the project.

17. Local administrative units (LAUs), Le., local village council units, are the lowest level in the local administration system in Egypt. The primary roles o f LVUs in ISSIP are to provide forums and venues for social marketing and hygiene IEC activities associated with the small community wastewater program, since each village council area may include several target ISSIP small communities. LVUs can also serve as communication points for the program in village council areas in which CDAs need to be established.

52

18. Water User Associations (WUAs) are being actively developed in the project area under the IIIMP-Water Boards Projects. As WUA boundaries are based on farm contiguity rather than residential contiguity, they are not appropriate units for wastewater scheme planning or management. But they are principal beneficiaries o f ISSIP water quality improvements and can be involved in social marketing and in monitoring environmental compliance by households and sludge vacuum trucks. I t i s also possible that interested WUAs could seek alliances with specialized NGOs or university research departments to assist WUAs in developing and operating co-composting schemes adjacent to decentralized treatment facilities.

Sequence of implementation for a representative cluster

19. illustration o f the respective roles and interactions among different agencies:

The below table provides the expected sequence o f implementation for one cluster as an

Activity

Strategic Planning including WQ sampling/ modeling & prioritization

Communication, Social Mobilization and Hygiene Promotion

Design

Environmental and Social Safeguards

Activity Details Incl. estimated mamower

Review the schematization o f clusters for Phases 2 and later Collect the necessary WQ samples, and carries out the modeling study for the clusters considered Integrate the findings o f the WQM into the in-cluster optimization Undertake social mobilization to get feedback o f communities on solutions proposed Produce strategic sanitation plan for Phase I1 taking into account Phase I results Design overall communication strategy Undertake communication, mobilization and hygiene promotion activities in the areas to be served with sanitation Conduct the design for the cluster works Undertake social field work to include feedback from communities in final sewer design and locations o f PS and WWTPs

Issue RFP for environmental and social assessment for the cluster in question Procure the services o f the consultant based on the Bank’s guidelines Coordinate with the consultant to complete the ESIA (Form B) for the sewerage work in the cluster(s) in question Liaise with EEAA to secure timely approval

By Whom

HCWW PIU in coordination with RSU technical and social teams

RSUs under the guidance of HCWW PIU

NOPWASD unit for new WWTP WSC’s RSU for networks, pumping stations, and extension of existing WWTPs; and for decentralized systems WSC social team

RSUs under guidance from PIU

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Activity

Tendering of works

FM Arrangements

Disbursement

Replenishment o f DA or requesting direct payments

Overall FM Reporting

Activity Details Incl. estimated manpower

Bidding Document Preparation Tendering Contracting Construction Construction Supervision Hand Over

Recording o f contractor invoices Review and verification Processing and settling invoices.

Prepare withdrawal applications, send them to WB, and monitor their status through the client connection website. - Produce monthly reports for management, quarterly financial reports and annual financial statements. - Send quarterly and annual FS to HCWW for consolidation.

By Whom

NOPWASD unit for new WWTP WSC’s RSU for networks, pumping stations, and extension o f existing WWTPs; and for decentralized systems RSUs and NOPWASD Unit NOPWASD PIU for WWTP works & TA WSC’s RSU for all other works and TA NOPWASD

PlLT

54

Annex 7: Financial Management and Disbursement Arrangements

A. Executive Summary

1. A financial management assessment was conducted to identify the adequacy o f the implementing entities’ financial management capacity to implement the project. While NOPWASD will have the overall responsibility for the project implementation, it was agreed that NOPWASD wi l l enter into an interagency agreement with HCWW , by virtue o f which HCWW wi l l be responsible for implementing parts A2, A3, A4, B and C o f the project (as per the identification o f parts in the loan agreement). In this context, visits to NOPWASD, HCWW and i t s three affiliates involved with the project implementation (Beheira, Gharbeya and Kafr El- Sheikh Water and Wastewater Companies) have taken place to agree upon the project implementation model and the associated financial management arrangements required to support the project activities.

2. Under the project implementation arrangements, NOPWASD will be in charge o f tendering the treatment plants under the centralized systems. On the other hand, the collection networks for these centralized systems as well as the decentralized systems for small villages (less than 1,500 persons) wi l l be implemented by the respective sanitation affiliate o f the HCWW. These affiliates are envisaged to be in charge o f recovering the cost o f operations and maintenance o f existing and new treatment plants whether through direct billing to users or indirectly through CDAs.

3. The project has three main components and the Bank will finance Component 1 (Provision o f sanitation systems within selected drainage sub-basins). However, there i s a high degree o f interdependence between this component and the other two components that are financed through both the counterpart financing as well as the Dutch co-financing (a letter was issued by the Netherlands Cooperation agreeing in principle on supporting the project institutional development needs). The proposed financial management arrangements took into consideration this specific design. The involvement o f different players in the project implementation poses an additional challenge in relation with the coordination among the different implementing entities. The implementation arrangements tried to avoid potential overlaps among them with clear responsibilities for specific activities assigned to each party (NOPWASD, HCWW and the three WSCs). The implementation manual i s currently being drafted with the support o f the consulting firm contracted to support the project preparation activities. A f i rst draft was received by the Bank in February 2008..

4. The lack o f recent Bank experience with the implementing entities poses additional risk with regard to project implementation requirements. In addition there exists varying levels o f capacities across the different entities. For example, the automation o f accounting information systems in Beheira and Gharbeya Companies i s more advanced than that in Kafr El-Sheikh Company. Accordingly the level o f TA support to institutional capacity wi l l be tailored to each entity’s status and needs.

55

5 . NOPSWAD will have the overall implementation responsibility and accordingly will ensure that proper books o f accounts are maintained, periodic Interim Financial Report and annual project financial statements are issued and submitted to the Bank. NOPSWAD will ensure that the annual project financial statements are audited by an auditor acceptable to the Bank and that an annual audit report issued according to standards acceptable to the Banks, i s submitted to the Bank within 6 months after the closing o f the fiscal year.

6. NOPWASD will use the loan financing to implement the wastewater treatment works under the project. I t will also make funds available to H C W W to implement i t s affiliates’ respective activities. To accommodate a smooth and clear flow o f funds process, the Bank wil l finance the project through two designated accounts to be opened by NOPWASD. Account A will cover NOPWASD’s activities while Account B will cover the three WSCs activities. To speed up implementation, the management o f Account B should take into account the decentralized nature o f implementation (through the 3 WSCs) and the consequential efficiency requirements.

B. Risk Assessment and Mitigation

7. Inherent Risks

Risk Country level The IFMCA for the water sector identified generic and systemic weaknesses in the central and sectoral systems that relate to capacity in budget preparation and execution as well as reporting and auditing. Project level The involvement o f different players (NOPWASD, HCWW and its three WSCs) may result i s coordination problems, flow o f funds’ bottlenecks, and reporting delays.

Risk Before MM

S

H

Mitigating Measures (MM)

The project will be ring fenced through project units at NOPWASD, HCWW and the WSCs. Institutional capacity development initiatives are taking place at HCWW and i t s affiliates with donors’ s u ~ ~ o r t .

NOPSWAD will enter into interagency agreement to define HCWW duties and responsibilities. A draft project implementation manual was completed before negotiations clarifying the interrelationships and the responsibilities of each party. A single TA will be secured to support al l o f the implementing entities to ensure the highest possible level of coordination.

Risk After MM

M

S

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Risk Implementing entities do not have recent experience with implementing Bank financed projects, which may result in slower implementation.

Inherent Risk Before MM

Mitigating Measures (MM) Close Bank supervision will be planned and conducted at the project early stages o f implementation. A team o f specialists will support the implementation and will be financed by Netherlands Cooperation and GTZ under component 3 (Institutional Development and Capacity Building). Inherent Risk after MM

Risk Before MM H

H

Risk After MM

S

S

57

Control Risks

Risk

A- NOPWASD

Counterpart Funding

- The unavailability/delay o f the counterpart funding can result in project delaved imdementation. Accounting & Reporting

The current system i s not designed to account and report on the project detailed activities level. The current reports submitted to MOF are mainly aggregation o f budget chapters’ expenditures.

B- HCWW and its affiliate WSCs

Reporting

Varying levels of reporting efficiency at WSCs can result in delayed consolidated reporting.

Internal control The nature o f disbursements to contractors implementing activities throughout small and scattered communities poses monitoring and control risks.

Risk

Before MM

S

H

H

H

Mitigating Measures (MM)

- The government has allocated EGP 20 billion to the rural sanitation over 5 vears Deriod (2007-20 121.

- A separate chart of accounts will be used. - The TA support under component 3 will support the set up and implementation o f the project accounting and reporting system.

- HCWW PTU will ensure timely consolidated reporting. - The recruitment o f one consulting firm to provide TA activities will support standardized and timely reporting.

- The implementation manual will clarify the roles within the different involved implementing entities. Written procedures, and control processes will be included in the manual - Different layers of monitoring of implementation progress will be in place (site engineers, supervision consultants, and project external auditors).

Risk

After MM

M

S

S

S

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Risk

The use o f advances to sub-accounts at the WSCs level requires capacity to manage them as well as close monitoring.

C- Cross Cutting Issues

Financing and implementation sequence

The interdependence between components means that any shortage in financing components 2 or 3 from co-financiers will negatively affect the overall project implementation and i t s results measurement.

Auditing The decentralized nature o f the project activities and the numerous involved parties call for a special and tailored audit terms o f reference.

Imdementation Manual Absence o f firmed up arrangements on the flow o f funds can raise disagreements among the implementing entities.

Control Risk Before MM

Risk

Before MM

H

H

S

H

H

Mitigating Measures (MM)

- The WSCs are successfully implementing EGP 1.5 billion urgent water plan under a similar funding mechanism from NOPWASD. - A technical and financial review committee from NOPWASD and HCWW will review the WSCs implementation progress and payments before releasing additional funds to WSCs sub-accounts. The revolving method wil l be used to manage the sub bank accounts

As per official letter received, the Netherlands Cooperation agreed in principle on supporting the project institutional development needs. Final commitment will be secured upon the approval o f i t s annual program in March 2008.

The project auditor’s terms o f reference will ensure incorporating field visits with clear mandates to verify physical progress. In this context, auditors should use relevant technical specialists as needed. The audit TORS will be submitted to the Bank for approval

The f i rst draft o f the implementation manual was received in February 2008

Control Risk After MM

Risk

After MM

S

S

M

S

S

Based on the above detailed analysis, the overall FM risk i s assessed as high. The successful implementation o f the mitigation measures would reduce the risk to significant.

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C. Implementing Entities

NOPWASD

Implementing Entity and Staffing

8. While NOPWASD will have the overall responsibility for the project implementation, it was agreed that NOPWASD will enter into an interagency agreement with H C W W (dated covenant) by virtue o f which H C W W will be responsible for implementing parts A2, A3, A4, B and C o f the project (as per the identification o f parts in the loan agreement). The day to day management o f the wastewater treatment works (part A l ) will be the responsibility o f a NOPWASD ISSIP Unit. I t s head (senior NOPWASD official) i s already nominated and wil l be supported by a team o f officers to be seconded from within NOPWASD covering technical, procurement and financial management aspects. Given the lack o f NOPWASD experience with the Bank guidelines and other requirements, the unit will receive support from a technical assistance consultant team financed under component 3 o f the project. In addition, a program management consulting firm (PMCF) i s currently being recruited for 5 years to assist NOPWASD in the program management and supervision functions o f the national rural sanitation infrastructure program. Overall management support for implementation o f the first and second phase ISSIP investment plans has been included as part o f the PMCF responsibilities.

Financing and Budgeting

9. As per article 8 o f i t s establishing law no. 197/1981, NOPWASD depends upon financing from the state budget, revenues from i t s activities or fees due to consultancy works for others and loans and grants approved by i t s board o f directors.

10. For the implementation o f works and infrastructure by NOPWASD under the project, NOPWASD will allocate local budget to finance part o f these costs along with the IBRD loan financing and the Netherlands Cooperation grant. The government has allocated 20 bi l l ion to the rural sanitation over 5 years period (2007-2012). Netherlands Cooperation has issued a letter agreeing in principle on supporting the project institutional development needs. Final commitment i s expected upon the approval o f i t s annual program in March 2008. Detailed budgets for the wastewater treatment plants were estimated and distributed between IBRD and GOE financing as outlined in Annex 5.

Accounting System

1 1. The current accounting system at NOPWASD follows the governmental accounting system. Given the nature o f the project and the required detailed reporting on the project level, a separate system will be maintained to account for the project activities, handle loan disbursements, and report on the project performance in details. A financial management officer from NOPWASD will be seconded to NOPWASD ISSIP Unit who will be in charge o f the financial management aspects for the project activities carried out by NOPWASD. Technical assistance will be also be secured under component 3 to support the FM implementation as wel l other implementation areas. The nature o f the project activities to be carried out by NOPWASD i s less demanding with regards to information system requirements. NOPWASD implementation

60

will represent less than 15% o f the total project costs. In addition, it will be limited to a few number o f centralized wastewater treatment plants as opposed to the WSCs activities that are spread through decentralized systems in a large number o f small and scattered villages and hamlets. Nevertheless, NOPWASD will retain the final overall responsibility for the project accounts.

HCWWand WSCs

Implementing Entity and Staffing:

12. H C W W was established by virtue o f presidential decree no. 135/2004 under the public business law no. 203/199 1. This decree has transformed the previous economic authorities and public sector companies in governorates to companies affiliated to HCWW. The project day to day implementation o f the wastewater collection systems and O&M for the completed systems will be the responsibility o f the respective WSC in each governorate. Each company will be responsible for the planning, social mobilization, tendering, construction supervision, O&M management and contract supervision. To achieve the above, each company will establish a Rural Sanitation Unit (RSU) comprised o f a team o f technical, social, financial management and M&E specialists, which will be responsible for the above mentioned tasks. The same TA contract supporting NOPWASD will also support H C W W and i t s affiliates in the project implementation. The draft terms o f reference for the TA package are already prepared.

Financing and Budgeting:

13. The H C W W paid in capital amounts to almost EGP 10.1 bi l l ion which represents the total capital o f i t s affiliates. The WSCs main source o f funding i s the consumers’ billings in addition to other revenues generated from extra services or sales. For the projects investments implemented by the WSCs (collection systems infrastructure), the costs will be financed through NOPWASD, the IBRD loan, and the Dutch grant.

14. For the project budget, each WSC will develop i t s own budget and disbursement plan in accordance with the project procurement plan forecasted dates for activities completion and timing o f payments. These will be consolidated at the H C W W P I U level. The financial management team in each company will be responsible for entering the cost estimates along with the disbursement timeline into the project accounting information system. This information will be used to compare the actual performance to the estimates, monitor deviations, and prepare periodic reports to management and to the Bank.

Accounting System

15. While some variance was noted among the financial management information systems in the WSCs, they have al l shown consistent ability to generate timely periodic reports. The sample reports checked provide detailed information on financial performance, physical progress and procurement monitoring. The review o f the three WSCs systems has indicated that Beheira and Gharbeya information systems are a bit more advanced than that in Kafr El-Sheikh. The TA support needs will be considered in the TA contract to be financed under component 3. For Kafr El Sheikh company, the TA support would include the implementation o f accounting software.

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D. Internal Control

16. Payments for the design and construction activities under the networks and treatment plants construction contracts will depend upon different layers o f control whether ex ante or ex post to review the project progress and the validity o f payments. These control layers are represented by the site engineers, supervision consultants, H C W W review committee as well as the project external auditors. The site engineers and the supervision consultants wil l provide ex ante controls through the review o f the physical progress and the approval o f contractors’ invoiceshilling. In addition, networks post reviews will be conducted at the H C W W level through review committees including technical and financial representatives from H C W W and NOPWASD. Finally the project auditor’s terms o f reference will ensure incorporating field visits with clear mandates to verify physical progress. In this context, auditors should use relevant technical specialists as needed to verify physical progress.

17. The project information system will incorporate detailed cost estimates o f the project activities. I t will also provide linkage between the physical progress and the corresponding payments to enable the monitoring and control o f the project disbursements to date at any given time.

18. The project implementation manual will have a section on financial management. This wil l include detailed roles and accountability as well as control processes for a sound control environment. The FM section o f the manual will cover, inter alia, budget preparation procedures, the update o f the project disbursement plans, accounting policies to be adopted, project chart o f accounts, main accounting treatments, procedures and steps for the f low o f funds between NOPWASD, H C W W and WSCs, management o f the two designated accounts and the three WSCs sub-accounts (signatories, criteria for advances and replenishments, periodic reconciliation and reporting), filing system and retention o f supporting documents, and audit terms o f reference tailored to the project specific needs.

E. Flow o f Funds and Disbursement Arrangements

19. The disbursement o f the loan funds will fol low transaction based disbursement model using direct payments to contractodconsultants and/or advances to designated accounts to be opened by NOPWASD (the legal counterpart entitled to receive the loan funds). Accordingly NOPWASD will use the loan financing to implement the wastewater treatment works under the project. I t wil l also make funds available to H C W W to implement i t s affiliates’ respective activities (centralized network collection systems and decentralized systems). To accommodate a smooth and clear f low o f funds process, the Bank will finance the project through two designated accounts to be opened by NOPWASD. Account A will cover NOPWASD’s activities while Account B wil l cover the three WSCs activities. To speed up implementation, the management o f Account B should take into account the decentralized nature o f implementation (through the 3 WSCs) and the consequential efficiency requirements.

20. will take place:

Upon receiving duly approved payment packages the fol lowing disbursement processes

62

I n case of NOPWASD activities:

1 - NOPWASD submits applications to the World Bank for direct payments, or

2- NOPWASD issues checks or bank transfers from i t s designated account “A” and then prepares withdrawal applications for i t s replenishment.

I n case o f WSCs:

1- WSCs requests HCWW PIU to submit through NOPWASD applications to the World Bank for direct payments to the WSCs contractors, o r

2- NOPWASD advances funds from designated account “B” to HCWW based upon the aggregate cash needs o f the three WSCs for the initial three months. HCWW in turn advances these funds to WSCs’ bank accounts exclusively opened for the project expenditures purpose. WSCs issue checks or bank transfers from their respective bank accounts and then request replenishments from HCWW. HCWW then requests replenishments from NOPWASD whose authorized signatories in turn submit withdrawal applications to the World Bank for replenishing designated account “B”. Since the WSCs will issue the payments to the contractors, WSCs will retain the original documents and submit copies to the review committee, which includes NOPWASD and HCWW representatives, for review and replenishment purposes.

63

Figure 7.1: Flow of Documents

RSUs FM staff review the payment

packages and f i l e original

documents

Contractors submit invoices to NOPWASD

ISSIP Unit for wastewater treatment

plants’ progress

Contractors submit invoices to WSCs for

networks, decentralized systems progress and

O&M

Site engineers and construction supervision

consultants review and approve the

invoices

I . NOPWASD ISSIP Unit F M officer

reviews the payment package and f i l e original

documents

NOPWASD ISSIP Unit Head approves

the payment

RSUs submit copies o f payment packages to review committee at HCWW to support

their payment requests

64

Figure 7.2: Flow of Funds

+

World Bank Loan Funds

I

Payments to treatment plants contractors from

DA “A” or through direct

payments

NOPWASD DA “A” for NOPWASD . activities

Payments from WSCs bank accounts to contractors

NOPWASD DA “B” for

wscs activities

1 H C W W

bank account

i

1 Replenishments ofWSCsbank

accounts

1 Direct payments to

contractors

65

E. Financial Reporting

Sent to: Internally to management

WB by NOPWASD

21. The ongoing implementation o f the EGP 1.5 billion urgent water plan by the WSCs i s considered to be a good pilot to test the WSCs implementation and reporting capacities. So far, the WSCs were able to generate timely periodic reports that are reviewed by a committee at the HCWW with technical and financial representatives from HCWW and NOPWSASD which review the WSCs implementation progress and expenditures before releasing additional tranches o f the urgent water plan financing.

Language Arabic or English

English

22. NOPWASD will have the ultimate final and legal responsibility to ensure the timely submission o f the IFRs and PFSs to the Bank. NOPWASD and each o f the WSCs will prepare the reports for their respective parts o f the project, and NOPWASD will ensure that consolidated financial situation i s prepared on regular basis. This will enable the provision o f a comprehensive picture on the project progress and costs. NOPWASD will define in the inter agency agreement, HCWW’sthe issuing o f quarterly interim financial reports (IFR),and annual project financial statements (PFS) Building upon o f i t s involvement with the five implementing entities, the TA consulting firm will fully support the HCWW to ensure the timely consolidation o f comprehensive project reporting.

23. The following table summarized the different required financial reports under the project:

Report FR

IFR

PFS

Frequency Monthly

Quarterly

Annually

Due Date 10 days from end o f month.

2 weeks from end o f quarter

1 month from end o f fiscal year (FY).

By NOPWASD ISSIP Unit and WSCs RSUs NOPWASD ISSIP Unit, WSCs RSUs and HCWW PIU NOPWASD ISSIP Unit, WSCs RSUs and HCWW PKJ

NOPWASD

(a) Monthly un-audited FR. Monthly financial reports (FR) will be prepared by NOPWASD and WSCs on a monthly basis. They will not be sent to the World Bank. They will be reviewed and reconciled with the monthly withdrawal applications and quarterly IFRs sent to the Bank. The Bank will follow up during supervision missions. The format o f the reports should be quite simple (a trial balance listing al l sources and uses o f funds and bank reconciliation ( s ) ) ;

Quarterly IFRs. The format and content o f the IFRs, which will be produced within two weeks from the end o f each quarter, were agreed before negotiations and attached to the minutes o f negotiations, and will be included in the financial management manual. These reports will be complemented by the semiannual progress reports that will be

(b)

66

prepared and submitted to the Bank. They should allow for establishing proper linkage with the physical progress reports; and

Annual PFS. The PFS should be ready within one month after the end o f fiscal year to enable the submission o f the audit report within 6 months after the closing date o f the fiscal year. The PFS would have to include: (i) a statement o f sources and uses o f funds indicating funds received from various sources, project expenditures, assets and liabilities; (ii) schedules classifying project expenditures by components, sub- components, and category; (iii) a DA reconciliation statement; and (iv) detailed statement o f withdrawals made on the basis o f SOEs.

(c)

G. External Audit

24. The financial statements for H C W W for the year ended June 30, 2006 and their respective audit report were received and reviewed in accordance with the Bank’s fiduciary requirements. The audit report was qualified regarding loans and interest due to the National Investment Bank that were converted to capital.

25. NOPWASD will have the ultimate final and legal responsibility to ensure the hiring o f the auditor and the submission o f the project audit reports to the Bank. For the project purposes, annual audits o f the project financial statements will be conducted by independent private auditors acceptable to the Bank. NOPWASD will ensure that the annual project financial statements are audited by an auditor acceptable to the Bank and that an annual audit report issued according to standards acceptable to the Banks.

26. The audit wil l be performed for the project as a whole (Le., al l components and sources o f funds). The audit report, accompanied by a management letter, will cover the project’s financial statements, reconciliation and use o f the DAs, use o f direct payments, and withdrawal based on SOEs. The report should be submitted by NOPWASD to the Bank no later than six months fol lowing the closing o f the fiscal year subject o f the audit fiscal year July 1 to June 30).

27. external auditor in accordance with the International Standard on Review Engagements (2400).

In addition, the project semiannual IFRs will be subject to limited review by the project

28. Since H C W W will be responsible for more than 75% o f project implementation, NOPWASD will require H C W W per the interagency agreement, to submit to NOPWASD i t s annual audit reports to monitor i t s financial viability and capacity to implement. Since they are governed by the Egyptian law, such audits will be conducted by the Egyptian Central Audit Organization. NOPWASD will ensure that certified copies o f these annual financial statements and their respective audit reports are made available to the Bank.

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Report I Due Date Responsibility I Sentto: I Language I Scope

PFS Review o f

Semiannual Project

H. Supervision Plan

FY acceptable to the Bank

semester Acceptable to the Bank 45 days from end o f External Private Auditor World Bank English Review

29. Given the project high level o f risk, the Bank FMS will conduct three supervision missions per year with closer support throughout the early stages o f the project l i fe . Among the priorities at the early stage are the following; (i) ensuring that staff at the different implementing entities are taking full charge o f the project FM arrangements and are adequately supported by the TA consulting firm; (ii) reviewing the issuance o f interim financial reports in accordance with loan covenants while tracking and reporting on all project-related transactions; and (iii) reviewing adherence to the project implementation manual procedures and the stated internal controls.

IFRs HCWW ‘s audited FS

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6 months from end o f FY Central Audit Organization NOPWASD English Audit

Annex 8: Procurement Arrangements

A. General

1, Public sector procurement in Egypt i s governed by a legal framework anchored in Public Tender Law No. 89 for the year 1998. Further information about the country procurement system i s detailed in the Country Procurement Assessment Report (CPAR) o f December 2003,

2. Procurement for the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004 and revised October 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated May 2004 and revised October 2006, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

3. Procurement o f Works: Works procured under this project would include: (i) Centralized sanitation systems construction ($163 M): includes the construction o f complete sanitation systems for selected village groups, including house connection, transmission lines, pumping stations and centrally located treatment plants for an estimated 222 villages within 14 clusters, (ii) Decentralized sanitation system construction/ rehabilitation ($16.2M): will serve an estimated 150 individual villages/ hamlets with population size less than 1500 inhabitants, providing them with a decentralized system consisting o f shallow sewers and anaerobic baffled reactors, and relying on delegated community management for subsequent O&M. I t will also include the upgrading and rehabilitation o f existing networks in some villages to acceptable design standards, if feasible, and (iii) GTZ model decentralized systems ($1 OM): this sub- component builds on and replicates the implemented GTZ pi lot model in Kafr El Sheikh in an estimated 20 villages in the project area, based on the communities’ expressed willingness to engage. The model serves villages o f up to 5000 inhabitants and depends heavily on community participation and commitment for the O & M o f these systems based on simple (natural system) technology.

4. The design identified the size o f works contracts o f clusters comprising networks for number o f villages related to a central WWTP that i s either existing or to be constructed. For centralized treatment, clusters will be tendered with a single responsibility contract for the WWTP while WSCs might procure the construction o f the associated networks. The treatment plant portion will be procured using a design-build approach whereas the networks will be procured on a traditional bid-design-build approach based on a conceptual design.

5. The estimated contract value for a centralized treatment system in a cluster i s estimated to cost around US$10 million which i s within the capacity o f local contractors. The implementation o f these activities by WSCs i s meant to empower their role in the implementation o f the National Rural Sanitation Program. Consequently, N C B method will be

II

69

adopted for these packages. However, as per the agreed N C B procedures annexed in Attachment 2 below, foreign contractors from eligible countries will have the right to bid.

6. The BD for the construction o f new WWTP will be based on Bank’s design-build model for solid waste. Other contracts o f simple WWTP o f smaller value as well as those for networks and house connections will be procured using the Arabic translation o f Bank’s SBD for smaller work contracts. In general, no prequalification o f contractors will be required and al l contracts will be subject to post-qualification process. However, if prequalification o f bidders i s required, Bank’s Standard Prequalification Documents will be used.

7. To ensure proper O&M o f treatment plants, construction companies will be encouraged to subcontract the O&M, required for the one year maintenance period, to specialized private operators who may continue their services through separate contracts financed by funds administrated by CDAs/WSCs. Two pi lot performance-based O & M contracts will be tendered out during the l i f e o f the project to support national and local capacity in managing and supervising this type o f contract in the rural setting. This task would be carried out by the TA consulting firm. The BD and contract form can be based on Bank’s SBD for non-consulting services.

8. For other smaller value work contracts, including construction o f de-centralized treatment systems, N C B procedures will be followed. Further project-specific N C B requirements are provided in Attachment 2 to this Annex.

9. Procurement o f Goods: Goods procured under this project would include IT equipment, furniture for the PMU, and environmental monitoring equipment. The procurement o f goods will be done using the Bank’s SBD for all I C B and N C B packages. An Arabic translation o f Bank’s SBD and a local shopping form can be used for small contracts to be procured locally.

10. Selection o f Consultants: the consulting services financed will include but not limited to the following packages (summary o f the assignments is included in Annex 6 and detailed packages for the first phase are detailed in the project procurement plan annexed in Attachment 1):

a Contracts for consultancy services to provide technical assistance to the P I U at HCWW, NOPWASD ISSIP Unit and the three RSUs to undertake procurement, planning, design, social mobilization, hygiene promotion, and communication. Consulting service package to establish the result based M&E system and provide monitoring on project impacts including water quality modeling, analysis and dissemination; Multiple engineering and construction supervision packages to accompany the works packages Multiple environmental studies and training; Training services to staff at the national and local levels, CDA’s, community and stakeholder engagement, contract management, and other areas as defined by the training and capacity building plan to be developed for the project

a

a

a

a

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11. The selection o f f i r m s or NGOs will be done using Bank’s standard Request for Proposals and contract forms as well as standard evaluation forms. The consultants may be f i rms, NGOs, or individuals. Short l i s ts o f consultants for services estimated to cost less than $200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.

B. Assessment o f the agency’s capacity to implement procurement

12. The project implementation model relies on the existing institutional structure o f the sector. I t i s tailored to provide the balance between centralized planning and construction support, along with decentralized implementation and management with a strong focus on social mobilization and community involvement in management and cost recovery. The overall implementation o f the project will be managed by a Project Implementation Unit housed at HCWW. The P I U will be headed by a senior H C W W officer and supported by a team o f specialists who will work closely with ISSIP Unit at NOPWASD and RSUs at WSCs. The whole procurement program containing main investment contracts will be procured by a centralized and decentralized implementation process as explained in Annexes 6. To reinforce implementation capacity, funds are made available through grant donor co-financing to ensure technical assistance for each o f the implementing agencies (HCWW, NOPWASD and the three WSC’s). The TA consists o f a team o f specialists to support the P I U and RSU’s in their mandates mainly in procurement.

13. During the preparation o f the Project, a Dutch Grant financed the recruitment o f international consulting firms to provide to develop the conceptual studies for the different components and carry out the design o f ISSIP. To further the implementation readiness o f the project, the consultant has prepared BDs for a first phase o f $ 55 mil l ion related to first Priority areas in the three Governorates.

14. An assessment o f the capacity o f the implementing agencies to undertake procurement actions for the project was carried out in May, 2007. Since the implementation model i s designed to provide the balance between centralized planning and construction support, along with decentralized implementation and management, the assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement with the “management” units responsible for administration and finance in NOPWASD and H C W W as well as WSCs. The key issues and risks concerning procurement for implementation o f the project have been identified and include:

8

a

8

0

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8 Lack o f computerized system.

Funds to finance technical assistance are not part o f the loan; Lack o f procurement specialists familiar with Bank’s procurement procedures; Broad regulations not always sufficiently clear for consistent application; Inadequate planning and record keeping; Lack o f experience in output performance-based contracts; and

71

15.

8

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17.

The corrective measures which have been agreed are:

Since funds to finance technical assistance are not part o f the loan, the Borrower has agreed to ensure sufficient resources through co-financing by other donors (Dutch and GTZ) to finance TA and consultancy services contracts ; Establish implementing units (PIU at HCWW, ISSIP Unit at NOPWASD, RSUs at WSCs) and select appropriate staffing for them; Hire a consulting firm or f i r m s to support the mentioned implementing agencies in handling project technical responsibilities, fiduciary responsibilities (procurement and financial management), and contract management responsibilities; Consultant to prepare and operations manual o f the project and also draft bidding documents for the Design Build Approach o f WWTP. Use Bank’s standard BDs, RFPs, and evaluation forms for the procurement o f al l contracts financed by ISSIP; Construction supervision will have to be ensured by private consultants; and. Train procurement officers in PIUs to be provided either by the TA consulting f i r m s or by special training program.

The overall project risk for procurement i s HIGH.

To advance implementation preparedness o f the project, the following activities will be completed prior to negotiations: (i) Finalization o f the Project Implementation Manual, including detailed Implementation Plan and Procurement plan, (ii) recruit TA consultant, (iii) establish implementing agencies in HCWW, NOPWASD unit and 3 RSUs in the WSC’s, (iii) preparation and review o f bidding documents for the first Phase o f the project prior to effectiveness.

C. Procurement Plan

18. The Borrower developed a procurement plan for the f i rst two years o f project implementation which provides the basis for the procurement methods (attachment 1). Activities can be added during the f i rs t two years as a result o f subprojects designs to be carried out by the TA consulting firm. However, the procurement plan can be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency o f Procurement Supervision

19. In addition to the prior review and supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended 2 supervision missions per year to visit the field to carry out post review o f procurement actions.

72

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Prior Review Thresholds: Goods: Works: Services: U S $ l O O , O O O

US$150,000 plus the first three contracts US$400,000 plus the first three contracts

20. Al l applications to withdraw proceeds from the Loan will be fully documented, except for: (i) expenditure o f Contracts for Civil Works with an estimated value equivalent to $ 400,000 or less; (ii) expenditure o f Contracts for Goods with an estimated value equivalent to $ 150,000 or less; (iii) expenditures o f Contracts for Consulting Firms with an estimated value equivalent to $100,000 or less and (iv) expenditure o f Contracts for Consultants with an estimated value equivalent to $ 50,000 or less. Documentation supporting expenditure claim against SOEs will be retained by the PMU and will be available for review when requested by Bank supervision missions and Project Auditors. Al l disbursements will be subject to the conditions o f the Loan Agreement and the procedures defined in the Disbursement Letter.

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Annex 8 - Attachment 2

PROVISIONS FOR NATIONAL COMPETITVE BIDDING (NCB) UNDER BANK-FINANCED PROJECTS

Bidding procedures for goods and works procured under NCB shall comply with the following requirements :

1. Any prospective bidder from a country eligible under the Guidelines who proposes to provide goods procured in, or works provided from any such country shall be eligible to bid for such contracts under NCB procedures.

2. Qualification criteria such as: (i) experience and past performance on similar contracts; (ii) capabilities with respect to personnel, equipment and construction or manufacturing facilities; and (iii) financial position shall be stated in the bidding documents.

3. Bidding opportunities shall be advertised in local publications, with not less than 30 (thirty) days allowed for bid preparation. Bidding documents shall be provided to all prospective bidders at their request. A record o f prospective bidders who received bidding documents shall be maintained by the procuring entity.

4. Any extension o f the time period to prepare bids shall be granted no later than five working days before the scheduled bid opening date mentioned originally in the bidding documents and al l bidders who requested the bidding documents shall be advised in writing concerning the new bid opening date.

5. Government-owned enterprises shall be eligible, provided they are legally and financially autonomous, operate under commercial law, and are not selected or hired b the same supervising or reporting authority to which the procuring entity belongs.

6. to any government-owned enterprise or state-controlled company.

No preference o f any kind (price, or other terms and conditions o f contract) shall be given

7. Bids may also be delivered at the bid opening location up to the time set for bid opening.

Bidders may deliver bids, at their option, either in person or by courier service or by mail.

8. Bids shall be opened in public, that is, bidders or their representatives shall be allowed to be present at the place where bids are to be opened and both envelopes, if two are submitted, shall be opened simultaneously. The time for the bid opening shall be the same as for the deadline for receipt o f bids or immediately thereafter, and shall be announced, together with the place for bid opening, in the invitation to bid. Minutes o f the bid opening shall be prepared, signed by al l the bidders attending the opening and sent free o f charge to al l bidders.

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9. A prospective bidder requiring any clarification o f the bidding documents may do so only by writing to the address stated in the invitation for bids. The response from the procuring entity shall similarly also be in writing only. Written copies o f the request for clarification (without identifying the source o f inquiry) and the response shall be sent to al l prospective bidders who received bidding documents.

10. Bids shall be evaluated based on price and on evaluation criteria, as disclosed in the bidding documents and quantified in monetary terms. No provision for preferential treatment for domestic companies or domestically manufactured goods shall be applied in the bid evaluation.

11. During the evaluation o f bids, the evaluation committee may ask any bidder for clarifications. The request for clarifications and the response from the bidder shall be in writing. No change in the price or substance o f a bid shall be sought, offered or permitted as part o f the clarification process during the evaluation o f bids.

12. The contract shall be awarded to the successful bidder whose bid has been determined to be substantially responsive and determined to be the lowest evaluated bid, provided further that the procuring entity also has determined that the bidder i s qualified to perform the contract satisfactorily. The contract price, unit prices and other terms and conditions o f the contract shall not be negotiated with the bidder.

13. The Borrower shall publish the following information on contract award in a government public procurement bulletin or on a free and open access website or on any other means o f publication acceptable to the Bank, including: (a) name o f each bidder who submitted a bid; (b) bid prices as read out at bid opening; (c) name and evaluated price o f each bid that was evaluated; (d) name o f bidder whose bids were rejected and the reasons for their rejection; and (e) name o f the winning bidder, price it offered as well as the duration and summary scope o f the contract awarded.

14. NCB shall be used.

The Arabic translation o f the Bank’s Standard Bidding Documents, suitable modified for

81

Annex 9: Economic and Financial Analysis

Economic Analysis

1. Inadequate water, sanitation and hygiene account for considerable “private” as well as “public” forgone benefits and avoided damage costs. The project wi l l expectedly bring about public benefits (e.g. to public health and ambient water quality downstream the interventions) as well as private benefits (households wellbeing). Thus, the economic feasibility o f the project has been assessed via a Cost-Benefit-Analysis (CBA) approach, rather than the Cost-Effectiveness approach commonly applied for assessing sanitation projects. In this annex, a summary o f the analysis i s presented, together with the final results. The related details o f the water quality modelling work are presented in Annex 1 1.

Total Public Benefits

2. The CBA attempted to quantify and monetize the public benefits that would accrue to each beneficiary subsector, if ambient/defused water pollution from maltreatedhntreated sewage i s curbed. The analysis started with a generic case assuming that the pollutants concentration i s considerably reduced toward meeting the national standards (thus, by calculating the incremental benefits and avoided damage costs when in-stream pollution from untreated/maltreated sewage i s considerably curbed). The public benefits include:

0

0 Reduction in health costs 0

0 Increased fisheries 0 Elimination o f private costs

Reduction in mortality and morbidity

Reduction in drinking water treatment costs

3. Other benefits may include reduction in mosquitoes and f l ies and a related reduction in the need for spraying insecticides, and removal o f stench. Also the property values within the project area wi l l likely increase. The benefits results are summarized as follows (LE/person/month):

Mortality and morbidity 3 1.67 Health costs 32.28 Drainage water reuse 13.50

Fisheries 3.38 Total LE per family per month 80.93

Drinking water 0.10

Private benefits

4. The project wi l l generate private benefits constituted by the sums that the beneficiary households would be willing to pay for solving their wastewater problem. This i s a non-income- constrained willingness-to-pay approach as per the “contingent valuation method”. The current cost for vacuum trucks can be used as a proxy for this willingness to pay. The content o f the cesspit i s usually dumped (illegally) in canals or drains instead o f WWTPs, causing a health hazard. The monthly costs for a family o f five persons o f using vacuum trucks for cesspit evacuation are LE 20-

82

40. In case o f affordability, i t can safely be assumed that families would be willing to pay LE 50 per month for a system that i s hassle-free and that actually solves the pollution and health problems related to the absence o f proper sanitation in semi-urban areas. Families connected to the WWTP in El Mufty El Kubra pay LE 10 per month, o f which LE 7 i s required for actual O & M (including de- sludging o f the collectors) and the remaining LE 3 i s used for minor repairs. As part o f the project feasibility study, willingness to pay surveys has been conducted in potential project villages. Communities have indicated their willingness to pay LE 10 per month, covering the O & M cost o f the intervention. In summary, the willingness to pay i s higher than the willingness to price.

Sources

Agriculture’

Week Raw Sewage‘

Impact of the water quality modelling on public benefits

Parameters

DO BOD TSS Fecal Bacteria (mg/l) (mg/l) (mg/l) MPN/100 ml

4.0 10 30 0

0.0 400 400 1 o6

5 . The subsequent part o f the analysis aimed to rationalize the above-listed public benefits by subjecting them to the results o f the water quality modelling work that has been undertaken during project preparation. The modelling work assessed project impact on the in-stream water quality within the drainage system. The Table A9.1 below shows the expected concentration o f the water pollutants at the effluent, for the “without-project”, “with-decentralized” system, and “with- centralized” system respectively.

Treated Decentralized (maximum reduction, with Advanced Primary

Treatment) 65% Reduction 70%

reduction 0.0 70% reduction

I Medium Raw Sewage3 I 0.0 I 600 I 600 I 0.5 * l o7 I I Strong Raw Sewage4 I 0.0 I 800 I 800 I 1 o7 I

~

90% 1 5000 ~ ~ 2.0 1 90%reduction reduction Treated Centralized (Secondary

Treatment)

1 60% I 50% Reduction reduction I 0.0 ~ 60% reduction Treated Decentralized (average, with Advanced Primary Treatment)

6. makers can accept the decentralized treatment systems introduced by ISSIP as long as:

Notwithstanding the ambient water quality legislation, as a gradual approach, decision

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A “free zone” o f domestic-wastewater point sources i s enforced along the drain, downstream the ISSIP-introduced treatment point (with a free length o f about 5 to 8 km for most drains). This will enable the se l f purification to function as modelled.

Predominance o f the diffuse source, the agricultural drainage water, i s maintained. The modelling results showed that the agriculture drainage water, overall, provided “net dilution” factor along the drain. This requires a typical drainage catchment for third-order drains of 5,000 10,000 Feddans. Another necessary factor i s to have discharge flows along the drains no less than the following range: 0.6 m d d a y (from Cairo up to Tanta City) to 7.5 m d d a y (north from Tanta City up towards the coastal areas).

There i s minimal upstream pollution load (headwater quality): with DO no less than 5 mg/l, BOD not exceeding 12 mg/l, and Coliform bacteria not exceeding 8000 MPN/lOOml.

The point-source villages and hamlets are o f small sizes, up to 500 to 1,500 capita each, in which case domestic wastewater would be quite smaller than the agricultural drainage water, hence enabling sufficient dilution by the latter. An acceptable ratio between domestic and agricultural return flow would be 1 to 10 (or, safe side, 1 to 20).

The project i s expected to result in improvement in the quality o f the receiving water ways, either from the secondary treatment (which i s expected to meet Law 48/1982 effluent standards), or from advanced primary treatment. The latter i s expected to reach Law 48 ambient quality in receiving drains, assuming that the above mentioned criteria are met. The two types o f treatments, combined, are expected to improve the quality o f at least 40% o f the drains in the project area, by at least 60%.

8. Unit cost: A weighted average o f $ 13O/capita for the centralized and decentralized systems has been used for the “cost stream” in the economic analysis, according to the cost details provided in Annex 5.

9. independent from the scale o f investment. The following assumptions were used:

CBA analysis: The analysis was carried out at the level o f one household, making i t

Investment unit cost: USD$130 per capita (weighted average, as above). Exchange rate LE 5.5/USD (year 2008). Family size i s five persons on average. Investments are carried out in three years at ratios o f 0.3, 0.4 and 0.3. Lifetime o f the project i s 3 1 years (2009-2040). Replacement o f mechanical parts carried out every 10 years at 20% o f initial investment, O&M costs: LE 10 per family per month, payable starting from completion o f construction and onwards. Private and public benefits being 50 and 81 LE per family/month respectively, thus totalling 131 per family/month. The public benefits are subjected to the low and high strategic scenarios as explained below, in relation to the water quality impacts o f the project. Benefit build-up starts year following completion o f construction at ratios 0.2, 0.4, 0.6, 0.8. 1.

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10. The low case scenario: This scenario assumes a slow down on the implementation o f the Government’s country wide rural sanitation programs. In this case, the only improvement in water quality i s expected to result from the project interventions. It i s assumed that 60% improvement o f the water quality index (in 40% o f the drains) would result in a 70% improvement in the public benefit. This translates to a 40% X 70%=28% improvement in public benefit. Hence, the project’s contribution to public benefit i s equal to 28% X 81 LE = 23 LE/person/month. Adding the above- estimated private benefits (50 LE/person/month), the combined benefits would be 73 LE/person/month. The resulting ERR would be around 10%.

11. The high case scenario: This scenario assumes a fulfilment o f the Government’s country wide program o f rural sanitation, thus resulting in improvement o f the water quality in all drains within the project area. This would result in accomplishing the full 70% improvement in public benefit o f the project. In that case, the incremental benefits would be the product o f 70% and 81 LE/person/month, hence 56 LE/person/month. The total (public and private) benefits would therefore be 106 LE/person/month. The resulting ERR will therefore increase to upward of 15%.

12. The sensitivity test: The impact o f uncertainty o f individual parameters on the ERR was evaluated, to assess the possibility o f the ERR dipping below the cut-off rate o f 10%. These have been subjected to the strategic l o w scenario explained above, regarding the water quality benefits. The results are as follows:

a

a

0

a

Investment unit cost could go up to USD $140 per capita. O&M cost could go up to LE 13 per family per month. Total (private plus public) benefits could decrease to LE 68 per family per month. If the project aims only at meeting the private (sanitation) benefits, the ERR would decrease to 7%. This signifies the relative importance o f addressing the water quality aspects o f the project. In case o f delayed project implementation, that takes four years instead o f the assumed three years, the ERR would s t i l l be around 10%.

0

13. Conclusion The economic analysis o f the project exhibits an ERR centering around 10%. The scenario analysis and the sensitivity tests demonstrate that the project interventions are economically viable. This economic viability i s relatively robust and has some limited scope of accommodating cost escalation, benefits reduction, and delays in implementation. This i s on the basis that both the sanitation benefits and the water quality benefits wil l be sought.

Financial Analysis

14. The project will provide financing for the construction o f sanitation systems using both decentralized and centralized approaches in the Governorates o f Beheira, Gharbiya and Kafr el- Sheikh.

15. Decentralized Sewerage Systems are planned to cover up to 150 villages, using a demand driven approach that will require: (i) up-front community organization through the CDA, and (ii) a

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demonstrated willingness to collect user charges and manage the operations and maintenance o f the sewerage systems.

16. The CDA will be responsible for the O & M o f the decentralized facilities financed under the project, including the collection o f user charges. This will be done through a MOU that will be signed between the CDA and the util i t ies responsible for water and sanitation services. The O & M costs o f these facilities will vary from village to village, but are estimated to cost on average LE 7 to 10 per month per household. This estimated cost i s in l ine with the willingness to pay verified in the el-Moufty pilot.

17. The el-Moufty pi lot i s a decentralized system, built with GTZ financing using the CDA approach, in which O & M costs b e being paid for by the community. This pi lot i s considered a model for the implementation o f decentralized systems in Egypt, including the ones financed under the project. As such, it i s expected that the communities benefiting from the project will be able to pay for the cost o f O&M for the facilities constructed, therefore ensuring their long-term financial sustainability.

18. Centralized Sewerage Systems are planned to be constructed for a total o f 222 villages in 14 clusters, consisting o f mother villages and their surrounding hamlets. These will be entrusted to the management o f the Beheira, Gharbiya and Kafr el-Sheikh WSCs. A review o f the financial performance o f these WSCs to assess their future financial sustainability was undertaken during preparation.

19. Beheira. The Beheira WSC serves about 4.2 mi l l ion people. In 2005/06 Beheira had about 530,015 connections with an average consumption o f 379.2 m3 per year. The company produces about 257 mi l l ion m3 o f water on an annual basis, and water losses are estimated to be 24%. In 2005/06 the Beheira WSC, had a net operating profit o f about LE 44 million (before depreciation), this i s mainly due to the fact that the company has not yet taken over the operation and maintenance o f sewerage assets from the Governorate, something that i s planned for the short-term. Levels of accounts receivable are high, at about 14.4 months o f revenues, but they represent an improvement, as the total amount o f accounts receivable decreased by hal f from the previous two years (from LE 120 mi l l ion to LE 60 million). This improvement i s mainly due to efforts by the company to increase payment o f overdue receivables from government entities.

20. Gharbiya. The Gharbiya WSC serves about 5.25 mi l l ion people. In 2005/06 Gharbiya had about 655,181 connections with an average consumption o f 191.8 m3 per year. The company produces about 239 mi l l ion m3 o f water on an annual basis, and water losses are estimated to be 26%. In 2005/06 the Gharbiya WSC, had a net operating loss o f LE 38 mi l l ion (before depreciation). The uti l i ty has prepared projections for the next five years whereby it begins to show net profi t in 20 10, if it able to introduce some tari f f adjustments (as per the attached profivloss table). The levels o f accounts receivable are high, at about 56.7 months o f revenue.

21. Kafr el-Sheikh. The Kafr el-Sheikh WSC serves about 2.6 mi l l ion people. In 2005/06 Kafr el-Sheikh had about 324,856 connections with an average consumption o f 440.2 m3 per year. The company produces about 206 mi l l ion m3 o f water on an annual basis, and water losses are estimated to be 3 1%. In 2005/06 the Kafr el-Sheikh WSC, had a net operating profit o f LE 1 1 mi l l ion (before

86

depreciation) but i s projected to show losses in the near future - unless tari f f increases and efficiency gains are instituted. Levels o f accounts receivable are high, at about 23.1 months o f revenue.

22. The weak financial and operational performance o f these uti l i t ies i s mainly due to l ow tari f f levels and lack o f incentives to improve efficiencies within the companies’ operations. For the three WSCs under the project, the level o f cost recovery i s on average 60%. O n average, households pay LE 0.23 per m3 for consumption o f water up to 20 m3 and LE 0.65 per m3 for consumption above 20 m3. Wastewater charges are currently set at 35% o f the water charge. As o f 2006, the Ministry o f Finance has undertaken a transparent system for the transfer o f O & M subsidy to the H C W W to be distributed among the subsidiaries to cover the cost-revenue gap. The current l o w tari f f levels are envisaged to be gradually increased within an overall Government framework to switch to direct targeting o f the poor, while lifting blanket subsidies over basic services.

23. As subsidiaries o f the HCWW, the Beheira, Garbiya and Kafr el-Sheikh WSCs will be part o f the HCWW’s near-term program for the improvement o f the sector’s performance. Key elements o f this program include:

0

8 Financial Planning. 0

0

8

0

Strengthening o f billing and collection systems and procedures.

Implementation o f an adequate performance monitoring system. Decentralization and streamlining o f utility organization structures. Corporatizing utility services in the remaining f i f teen governorates. Building capacity for investment planning and programming, including the preparation o f mater plans.

24. With regards to improved operational performance, currently there i s a performance incentive program in place between the H C W W and the subsidiaries, which has had limited results in providing appropriate incentives to improve the performance o f the utilities.

25. USAID and GTZ have a technical assistance program at the Holding Company level that has already put in place some o f the foundations for business planning in al l o f the subsidiaries. The business plans were used to provide input into the level o f subsidies in the sector that i s required from the Ministry o f Finance. In the long-term, it i s envisaged that these business plans can serve as the basis for setting up improvement targets in annual performance contracts between the subsidiaries and the Holding Company, under an adequate incentive framework.

26. The government i s committed to improving the level o f efficiency within the WSCs; however, the change i s expected to be gradual. The project will be supporting the Government in i t s efforts, as it will finance the establishment o f a local results-based monitoring and evaluation system that l i n k s the improvements in sanitation coverage with anticipated environmental and health impacts. This system, in addition to the business plans, could be used to set targets for improvement. In addition, during implementation, the project team with work with the three uti l i t ies in terms o f preparing and implementing an action plan for improvement o f collection rates, and support the Government’s plans for gradual tari f f increases, which should contribute to the improvement o f the performance o f the Beheira, Gharbiya and Kafr el-Sheikh’s WSCs.

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Annex 9 - Appendix 1

Revenues Water Sales Other Revenues from Water Other Receivables Revenue from Tariff Increase

(a) Al-Behira ProfitLoss Statement

2006 2007 2008 2009 2010 201 1 77,857,523 80,000,839 95,105,447 103,287,130 104,646,171 11 1,824,468 38,500,000 42,996,755 45,748,830 48,776,113 52,106,125 55,769,137 20,695,000 4,466,000 4,466,000 4,466,000 4,466,000 4,466,000

0 0 37.416.917 63,026.869 90.686,769 115,269,820

O&M Expenses Wages Operating Expenses Other Expenses

Total Revenues I 137,052,523 I 127,463,594 I 182,737,195 I 219,556,112 I 251,905,065 I 287,329,425 I I I I I

33,569,546 39,529,183 45,656,207 52,732,919 60,906,521 70,347,032 32,552,152 36,411,968 49,081,910 54,181,019 55,806,449 62,799,266 10,266,935 16,530,748 18,016,960 18,740,287 18,970,861 19,962,818

Administrative Expenses Total O&M Expenses

15,969,682 16,317,901 18,217,900 20,412,399 22,947,046 25,874,563 92,358,315 108,789,800 130,972,976 146,066,624 158,630,877 178,983,678

Net Operating Income Before Depreciation and Interest

Depreciation Operating Income Before Interest

Interest Expenses Operating Income After Interest

44,694,208 18,673,794 51,764,219 73,489,489 93,274,188 108,345,747 I l l i l l 30,000,000 31,000,000 40,001,634 55,185,113 55,185,113 65,488,188 14,694,208 (12,326,207) 11,762,585 18,304,376 38,089,075 42,857,559

6,000,000 6,000,000 5,937,239 5,937,239 5,937,239 5,937,239 8,694,208 (18,326,207) 5,825,346 12,367,137 32,151,836 36,920,320

Other Expenses Net Operating Profit (Loss)

500,000 600,000 277,000 284,700 293,170 302,487 8,194,208 (18,926,206) 5,548,346 12,082,437 31,858,666 36,617,833

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Al-Behira : Current Tariff and Proposed Tariff Increases on Water and Wastewater Services

Current Tariff L E h 3

Household 10: 1 0.23 Household 20: 1 0.23 Household 30:20 0.35 Household>30 0.35 Commercial 0.85 Government 1 0.45 Government 2 0.65 Other 1 0.45 Other 2 0.65

2008 0.0% 7.0% 7.0% 10.0% 20.0% 20.0% 20.0% 20.0% 20.0%

I I I

Current Tariff L E h 3

0.08 0.08 0.12 0.12 0.30 0.27 0.39 0.27 0.23

Household 10: 1 Household 20: 1 Household 30:20 Household>30 Commercial Government 1 Government 2 Other 1 Other 2

2008 50.0% 50.0% 50.0% 50.0% 90.0% 90.0% 90.0% 90.0% 50.0%

35% 35% 35% 35% 35% 60% 60% 60% 35%

I 2009 0.0% 7.0% 7.0% 10.0% 20.0% 20.0% 20.0% 20.0% 20.0%

2010 0.0% 7.0% 7.0% 10.0% 20.0% 20.0% 20.0% 20.0% 20.0%

201 1 0.0% 7.0% 7.0% 10.0% 20.0% 20.0% 20.0% 20.0% 20.0%

I I 1

2009 50.0% 55.0% 55.0% 55.0% 117.0% 117.0% 117.0% 117.0% 52.5%

2010 50.0% 60.5% 60.5% 60.5% 152.1% 152.1% 152.1% 152.1% 55.1%

201 1 50.0% 66.6% 66.6% 66.6% 197.7% 197.7% 197.7% 197.7% 57.9%

89

(b) Al-Gharbeya ProfitLoss Statement

Revenues from Water Water Sales Fees from New Subscriptions Other Receivables Revenue from Tariff Increase

Revenues I 2006 I 2007 I 2008 1 2009 I 2010 I 2011

42,435,577 5 1,199,893 60,663,373 76,744,953 78,126,362 79,532,637 2,927,949 2,927,949 3,220,744 3,542,818 3,897,100 4,286,8 10 1 1,425,000 1 1,425,000 1 1,425,000 1 1,425,000 1 1,425,000 1 1,425,000

0 0 9,468,177 26,569,418 45,259,995 68,947,595

Revenues from Sanitation Sanitation Sales Other Receivables Revenue from Tariff Increase

10,836,750 13,074,889 18,157,360 18,438,015 23,657,242 35,120,029 1,657,546 1,657,546 1,657,546 1,657,546 1,657,546 1,657,546

0 0 13,321,075 27,472,022 63,518,592 161,686,174

69,282,822 Total Revenues from Water and Sanitation 80,285,277 117,913,274 165,849,773 227,541,838 362,655,791

wage Collection and

O&M Expenses Water Production and Distribution Expenses Wages Operating Expenses Service Expenses

40,244,997 42,928,420 44,680,374 45,924,364 48,815,781 52,003,365 14,2 16,88 1 17,146,159 21,011,501 28,641,290 29,500,529 30,385,545 494,779 10,349,181 10,395,164 10,477,354 10,495,196 103 13,573

(38,751,371) Net Operating Income Before Depreciation & Interest (36,762,083) (5,788,763) 26,995,394 81,680,160 21 1,029,958

,

90

Depreciation Operating Income Before Interest

Interest Operating Income After Interest

27,108,903 30,363,261 41,3 16,564 46,870,464 46,870,464 46,870,464

(65,860,274) (67,125,344) (47,105,328) (19,875,070) 34,809,695 164,159,493

0 88,904 0 0 0 0 (65,860,274) (67,214,248) (47,105,328) (19,875,070) 34,809,695 164,159,493

Other Expenses Net Operating Profit (Loss)

0 1,257,634 1,257,634 1,257,634 1,257,634 1,257,634 (65,860,274) (68,471,882) (48,362,962) (21,132,704) 33,552,061 162,901,859

Al-Gharbeya: Current Tariff and Proposed Tariff Increases on Water and Wastewater Services

Households <10 m3

Current Tariff and Proposed Tariff Increases on Water Services

Current O h of Tariif

Water LE/m3 2008 2009 2010 2011 35.0% 0.08 50.0% 50.0% 50.0% 50.0%

Proposed Sanitation Percentage Share Based on Water Tariffs

Households 10-30 m3 Households >30 m3

35.0% 0.1 1 50.0% 55.0% 1 60.5% I 66.6% 35.0% 0.00 50.0% 55.0% 1 60.5% I 66.6%

Building and Construction Works Services 1 : (mosques, youth centers, etc) Services 2: (recreation centers, embassies,

35.0% 0.18 90.0% 117.0% 152.1% 197.7% 60.0% 0.21 90.0% 117.0% 152.1% 197.7%

etc) I 60.0% I 0.30 I 90.0% I 117.0% 1 152.1% I 197.7% Services 3: (exclusive recreation centers) I 60.0% I 0.24 I 90.0% I 117.0% 1 152.1% I 197.7% Commercial Industrial Tourism and Development Government Special Connections (fixed flow)

60.0% 0.30 90.0% 117.0% 152.1% 197.7% 60.0% 0.32 90.0% 117.0% 152.1% 197.7% 60.0% 0.51 90.0% 117.0% 152.1% 197.7% 60.0% 0.24 90.0% 117.0% 152.1% 197.7% 35.0% 0.08 50.0% 50.0% 50.0% 50.0%

91

(c) K a f r El Sheikh Prof i tLoss Statement

Revenues Revenues from Water Water Sales Other Receiveables from Water Other Receiveables Revenues from Tariff Increase

2006 2007 2008 2009 2010 201 1

37,323,156 37,929,000 39,932,852 53,448,623 54,199,306 54,949,989 10,149,754 15,683,334 16,733,198 17,888,048 19,158,383 20,555,752 26,826,230 6,046,439 6,046,439 6,046,439 6,046,439 6,046,439

0 1,554,580 9,841,928 27,222,910 45,869,890 70,293,915

Revenues from Sanitation Sanitation Sales Revenues from Tariff Increase

3,300,401 4,112,698 4,518,053 5,973,731 5,996,696 6,013,684 0 35 1,003 4,005,196 11,069,793 20,884,740 37,477,577

77,599,541 Total Revenues from Water and Sanitation 65,677,053 81,077,664 121,649,544 152,155,454 195,337,356

O&M Expenses Water Production and Distribution Expenses Wages Operating Expenses Service Expenses

16,207,958 18,701,05 1 19,894,148 21,208,024 21,632,936 23,796,230 20,935,969 21,570,544 23,386,922 3 1,772,834 32,726,019 33,707,799 3,538,625 5,576,957 5,734,162 6,303,003 6,367,661 6,434,258

92

11,643,806 Net Operating Income Before Depreciation (8,718,934) (9,784,884) (1,948,390) 17,461,649 47,785,588

Depreciation Operating Income After Depreciation

22,5 14,445 22,900,000 45,029,185 56,453,034 72,134,480 77,614,555 (10,870,639) (31,618,934) (54,814,069) (58,401,424) (54,672,831) (29,828,967)

Other ExDenses I 6.289.000 I 0 0 0 0 0

K a f r El Sheikh: Current Tarr i f Levels and Proposed Tari f f Increases on Water and Wastewater Services

Public - Government Mosques

Current Tarrif Levels and Proposed Tariff Increases on Water Services

0.35 I 30.0% I 30.0% I 30.0% I 30.0%

Public - Government Agencies 0.62 30.0% 1 30.0% Public - Government Industries 0.85 I 30.0% I 30.0% I 30.0% 1 30.0%

Public - OtheriGeneral 0.40 1 30.0% I 30.0% 1 30.0% I 30.0%

Proposed Sanitation Percentage Share Based on Water Tarijjfs

2008 2009 2010 201 1 Households < lo m3

93

0.08 I 50.0% I 50.0% I 50.0% I 50.0% Households 10-30 m3 0.08 50.0% I 55.0% 60.5% 1 66.6% Households >30 m3 0.1 1 50.0% 1 55.0% 60.5% I 66.6%

Annex 10: Safeguard Policy Issues

1. The assessment o f impacts, environmental management plan, and monitoring recommendations are included in details in the “Environmental and Social Impact Assessment Framework (ESUF) ” report, and the related Environmental and Social Management and Monitoring Framework (ESMMF). This Annex provides the main highlights and most relevant issues.

Analysis o f Alternatives

2. The objective o f analyzing different project alternatives i s to evaluate some project options from the environmental perspective. In the following, each o f these alternatives i s provided with a summary o f i t s main features.

N o Project Alterative

3. (termed the no project alternative) include:

The environmental and social benefits expected from ISSIP, over the existing situation

Improving surface water quality in the project areas. Although there are risks o f discharging noncompliant effluent to drains as discussed earlier the expected discharged loads to surface water wi l l be much less than the loads discharged in the current situation Improve the quality o f groundwater and the high water table in most o f the project areas, through preventing infiltration o f sewage to groundwater Although there may be odor problems associated with operation o f WWTP and PSs, the impacts o f odors and vectors problems are expected to significantly improve compared to the existing situation The socioeconomic benefits o f the project significantly overweigh the expected impacts as the beneficiaries from the project are much more than possibly affected people

The potentially negative impacts expected by ISSIP include: All impacts expected during construction Risks associated with handling o f chlorine and the impact o f disinfection by-products Air emissions o f standby generators in PSs and WWTPs Possible loss o f agriculture land for construction o f PSs and WWTPs Economic difficulties for poor people to contribute in the project’s costs

The overall environmental and social advantages are believed to significantly overweigh the disadvantages; therefore the “no project alternative” i s not favored from environmental perspective.

Alternatives o f Piping Materials

6. There are no direct preferences for piping materials from the environmental and social point o f view related to the direct impacts o f the ISSIP. However, the preferences w i l l be based on the l i f e cycle analysis o f these piping materials. Asbestos piping should be completely banned from ISSIP, in order to prevent production o f hazardous asbestos waste during the operation o f the project.

94

Alternatives Techniques for Biological Treatment

7 . The options considered in First Phase Implementation Plan include:

e

e Trickling filters e Rotating Biological Contactors 0

e Stabilization ponds

Extended aeration activated sludge process

Up-f low Anaerobic Sludge Blankets (UASB)

8. With the exception o f minor environmental concerns associated with methane venting or flaring in the USAB process, no specific preference between the first four alternatives. The experience o f implementing these methods in Egypt should be considered during the technical evaluation o f different bid price. Multi-criteria analysis, including capital and operational costs, and environmental and social aspects, will weigh the merits and demerits o f each o f these technologies.

9. The stabilization ponds alternative i s the most discouraged, because o f the associated large area requirements. However, if by applying al l mitigation measures and screening criteria recommended in the ESMMF it i s found to s t i l l be feasible, there shouldn't be environmental objections to that option.

Disinfection Alternatives

10. The proposed design o f the project includes disinfection o f the final effluent using chlorination. The chlorination o f final effluent will cause production o f trihalomethanes (THMs) and haloacetic acids (TAASs), which are reported to be carcinogenic. However, the disinfection concept i s believed to achieve direct environmental benefits in enhancing the protection o f people in direct contact with surface water from pathogens, such as bathers and villages who use the water for irrigation, while the disadvantages are secondary. O n the other hand, using ultraviolet (UV) disinfection will prevent the problems associated with disinfection byproducts but it i s believed to be more expensive than chlorination/dechlorination4. UV disinfection will the preferred alternative if proven to be feasible, otherwise undertaking the chlorination, associated with pre-chlorination and de-chlorination after effective bacteria kill, i s the second preferred alternative.

Alternatives of Utilization of Decentralized Treatment Works Effluent

1 1. Two alternatives are available for discharging the effluent from decentralized system serving less than 1,000 capita Izbas: Discharging the final effluent to a drain or reusing the final effluent in irrigating wood trees5.

The HCWW i s interested to investigate the feasibility o f the UV system, therefore such feasibility assessment has been

In case a wood tree field i s feasibly nearby

4

considered in the ESMMF

95

12.

a

a a

13.

a

a

a

14.

The advantages o f the first alternative over the second are:

L o w cost o f construction as there will be no need for pumping or long irrigation pipelines Ease o f operation, which does not need human input except for undertaking simple repairs Avoid possible r isks associated with violating safety precautions for using the effluent in irrigation, such as buffer zones, crop limitations and contact limitations.

The advantages o f the second alternative over the first are:

No problems about law compliance Achieving water savings and better water resources management Increase green areas

The irrigation reuse scenario will not be self sustainable unless safety precautions mentioned above are violated. Furthermore, the newly published Egyptian Code o f Practice for Effluent Reuse only allows the reuse in specific designated locations, which may not be relevant to the project area. The first alternative i s therefore recommended.

Alternatives of Utilization o f Sludge

15. further stabilized through co-composing with domestic solid waste, or land disposed.

The generated sludge from WWTP will either be utilized in conditioning agricultural lands,

16. The utilization o f sludge in agriculture land i s indeed the preferred option from environmental point o f view, if safe heavy metals concentration, safe biological properties, and safe land application rates were followed according to the specifications o f Law 93/1962, and the further guidelines o f USEPA. The reason for this preference i s that volume o f waste received in disposal sites will be reduced and an equivalent quantity o f chemical fertilizers, that i s associated with environmental cost for producing, will be saved. O n the other hand, the sustainability for using sludge as land conditioner will be doubtful if the costs o f sludge analysis, for quality control, are not covered by revenues from selling the sludge. The P I U should investigate the cost benefits from selling the sludge as land conditioner against the associated quality control costs, before starting the project operation.

17. with domestic solid waste, as recommended by A A W - A E C in the project plan, or disposal in land.

If reusing the sludge i s not feasible, two alternatives will remain: co-composting the sludge

18. Again the co-composting o f sludge with solid waste will achieve environmental benefits of recovery; however, the main disadvantage will be that the handling o f the sludge will not be within the control o f the project. Furthermore, the mixing with solid waste may cause degradation o f the sludge quality as a land conditioner, because most o f the existing solid waste composting plants are not separating impurities, especially glass, efficiently. On the other hand land disposal o f sludge, although will be practiced by a waste contractor as mentioned in the ESMMF, will only need daily coverage in certain location, a process which could be easily monitored to check i t s compliance with the waste disposal contract. Therefore, the disposal alternative i s preferred over the co-composting alternative with municipal solid waste, in case the direct selling o f sludge from the WWTP has proven not to be feasible.

96

Positive Environmental and Social Impacts

19. The following environmental and social benefits are expected from ISSIP:

a

a

Reduction o f health risks associated with exposure o f villagers to improperly drained sewage in their surroundings Reduction o f water borne diseases resulting from possible microbial pollution o f drinking water obtained from shallow contaminated wells, or through suction o f contaminated water in water supply pipes through accidental negative pressures in water pipes Improving the water quality in drains and irrigation canals, which currently receive raw sewage evacuated from individual cesspits and collected from private sewerage networks in some villages Improving groundwater quality through preventing infiltration o f sewage from porous cesspits Alleviating high groundwater table problem in the project areas Improving the living conditions for villagers in the served communities through achieving the above environmental benefits, upgrade their real state values and contribute in alleviating poverty conditions through work opportunities in construction and operation o f the project achieve economic benefits by saving some healthcare expenses, improving people's productivity and improving water resources management Strengthening community participation in environmental protection through involving CDAs in project operation and social mobilization activities

a

a

a a

a

20. The environmental benefits are expected to overweigh possible negative impacts associated with project activities, as the current rural sanitation situation causes many environmental and health impacts.

111. Environmental and Social Management and Monitoring Framework (ESMMF)

2 1 I The potentially negative impacts and their mitigation measures, and monitoring plans during construction and operation phases are developed in details in the Environmental and Social Impact Assessment Framework (ESIAF) document. Furthermore, training and capacity building required for the implementing agencies i s given. Finally, cost estimate o f the ESMMF i s presented.

22. The Environmental and Social Management and Monitoring Framework (ESMMF) developed for the project includes (a) a set o f mitigation measures to minimize the impacts during the construction and operation phases, (b) a monitoring program for ensuring impacts are within acceptable standards, and (c) institutional arrangements for the implementation o f the management plan, including the necessary staffing and the required training program. The ESMMF will be part o f the Project Implementation Plan. Table A10-1 shows the required human resources for Environmental Management staff o f ISSIP. Table A10-2 shows the required training courses for the successful implementation o f the ESMMF.

97

'ci

b a 3 3

d 8

b a 0 0

c-4 2

I l l

Estimated Budget for the ESMMF

23, The accurate level for environmental and social intervention cost for safeguarding against possible unacceptable impacts could not be reached at this stage. Therefore for estimating a preliminary budget for the ESMMF, realistic assumptions have been made. These assumptions were based on knowledge o f the project components and project area, as well as previous experience o f similar projects and settings. Along with the project development, these assumptions should be reviewed by the P I U and modified according to project progress. The estimated budget for ESMMF i s around $1 million, as shown in the breakdown presented in Table A 10-3.

24. recommended in the ESMMF, because they are already included in the main project budget:

The presented costs do not include the following expenses, for certain measures

e

e

e

Survey o f existing WWTPs and the correspondent improvements for these WWTPs to qualify them for receiving ISSIP wastewaters Geotechnical investigations for PSs Establishment o f anaerobic modules in remote clusters to receive dewatering liquid and contaminated water Installation o f dechlorination systems, including dechlorination chemicals, and correspondent facilitation o f extra aeration to safeguard raise in BOD/COD after dechlorination Installation o f additional treatment facilities for decentralized systems in case no consent was given for the UASB reactor Installation o f oil/solid separators at commercial units to prevent sewers clogging Annual efficiency assessment for WWTPs Subsidies for unaffordable groups o f community Compensations for land acquisition

' 100

F F

Public Consultation

First Public Consultation:

25. The first public consultation for this project was held over two days; the first day was June 13th 2007 for Kafr El Sheikh and Gharbeya Governorates in Kafr El Sheikh Water & Sanitation Company (KWSC) conference room. The second day was June 14th 2007 for Behera Governorate in Behera Water and Drainage Company (BWADC) conference room. Official invitations by H C W W and the three WSC were directed to representatives from Local Units, Directorates o f Health, Departments o f Environment and NGOs. There were 71 attendees present, in the two days, including representatives from:

K W S C GHWSC B W A D C Heath Directorates in the Governorates Environmental Departments in the Governorates Local Councils and Villages Administrations Local NGOs Local press

26. study team i s shown in the following:

The main issues raised during the first public consultations and the actions taken by the

Raised Issue Many existing WWTPs are not complying with Law 48/1982

Many conferences, workshops and public consultations were held without physical implementation Most people will be willing to pay Environmental impacts o f water reuse in agriculture and protection o f dirking water intake should be considered Many sanitation projects started and not completed, why not complete these projects before starting a new one

Actions taken by ESIAF Team The mitigation measures in the ESMMF includes introduction o f adequate modifications to existing WWTPs before utilizing them in the ISSIP Importance o f consulting the community has been emphasized in the two public consultation

Willingess to pay has been addressed in the ESMMF Taken into consideration in the ESMMF

- The following issues were clarified in the second public consultation:

- The ISSIP aims at covering certain deprived areas with the sanitation services to improve water quality conditions, such objective could not be achieved by existing projects - The ISSIP strategy i s to maximize the use of existing WWTPs which could not be achieved by existing projects - The ISSIP i s integrated with the IIIMP in project areas, the existing projects could not achieve such integrated approach

- HCWW was told about this issue to investigate the

102

Raised Issue

Importance o f awareness campaign Using stabilization ponds as fish farms increases i t s efficiency

Second Public Consultation:

Actions taken by ESIAF Team status o f existing projects supervised by them Regarded in the ESSMF Communicated to AAW-AEC who appreciated the concept but mentioned that stabilization ponds wil l be avoided for area savings

27. The second public consultation was on July 1 lth 2007, in one collective event for the three Governorates. Official invitations by HCWW and the three WSC were directed to representatives from Local Units, Directorates o f Health, Departments o f Environment, and NGOs. A flyer was also distributed among inhabitants o f different villages in the project areas, along with short description for the Public Consultation objectives. At the end o f the Second Public Consultation, the local T V o f the Delta area, covering the three Governorates, made interviews with the ESIAF Environmental Consultant and Social Consultant in which about 10 minutes brief about the ISSIP and the ESA was presented. The interview was broadcasted on the same night o f the Public Consultation.

28. An Arabic version o f the executive summary o f the ESIAF was distributed to officially invited people few days before the Public Consultation. Also the executive summary was distributed to attendees with registration. There were 85 attendees present, in the two days, including representatives from:

HCWW KWSC GHWSC BWADC Heath Directorates in the Governorates Environmental Departments in the Governorates EEAA Branch Office in Tanta Ministry o f Endowment and religious affairs Health Insurance Departments Universities Local Councils and Villages Administrations Local NGOs Local TV

29. the study team i s shown in the following:

The main issues raised during the second public consultations and the actions taken by

103

Raised Issue ISSIP should make use of existing groundwater lowering and sewerage networks in villages

Accurate infrastructure maps should be obtained Priority should be given to villages located on

Actions taken by ESIAF Team - Communicated with AAW-AEC who has confirmed that such investments will be utilized if they comply with technical specs - Integrated in ESMMF - HCWW will provide available maps to ISSIP - Explained that this aspect i s already integrated in

freshwater canals Anaerobic stabilization o f sludge i s more

Resettlement Policy Framework (RPF)

selection criteria Included as an option for further feasibility analysis

30. A Resettlement Policy Framework (RPF) establishing overall resettlement objectives and principles has been prepared, as there may be involuntary land acquisition under component 1 (provision o f sanitation infrastructure). The policy framework establishes resettlement objectives and principles, as well as organizational arrangements and funding mechanisms for any resettlement operation and/or involuntary land acquisition that may be necessary during implementation. The RPF i s the instrument used because the exact expropriation requirements are not known at appraisal.

efficient than lime Transporting dewatering liquid to WWTPs i s very expensive

De-chlorination with sodium thiosulphate i s safer than SO2 Religious preachers should participate in awareness Implementation should not be delayed

3 1. As the extent o f potential involuntary land acquisition becomes known, Resettlement Action Plans (or abbreviated RAPS depending upon scale and severity o f impacts), will be prepared before any physical worWconstruction i s initiated.

by the WWTP designer - Risks o f land disposal and disposal in watercourses was clarified - ESMMF includes measures for handling water that could not be feasibly transported - Both options included in the ESMMF for the consideration of WWTP designer - The recommendation to be presented for AAW-AEC to include in the social mobilization component - Clarified that there will be timetable and staged approach that will be followed by the PIU

Background

32. In accordance with Article 34 o f the Constitution o f the Arab Republic o f Egypt: “Private ownership shall be safeguarded and may not be placed under sequestration except in the cases defined by law and in accordance with a judicial decision. I t may not be expropriated except for the general good and against a fair compensation as defined by law. The right o f inheritance shall be guaranteed in it.” According to this article, i t i s understood that procedures for private property expropriation are considered to be exceptional.

3 3 . include:

Other relevant laws governing expropriation and consequent compensation procedures

104

I L a w 577/54, which was later amended by L a w 252/60 and Law 13/162, lays down the

Law No. 27 o f 1956, which stipulates the provisions for expropriation o f districts for re-

The amended and comprehensive Law No.10 o f 1990 on the expropriation o f real estate

provisions pertaining to the expropriation o f real estate property for public benefit and improvement,

planning, upgrading, and improvement, and

for public interest.

I

I

Institutional and Organizational Context

34. The Holding Company for Water and Waste water has formed a commission to be responsible for dealing with any land acquisition. This commission i s working directly with the Community Development Council6 (responsible for estimating land prices). The H C W W can expropriate land and provide fair compensation to i t s owners through this council. The WSC's social focal points will be responsible for handling any resettlement issues that may arise, and they wil l receive any capacity building needed for this task.

35. Once the sub-project's areas have been identified, they will be screened to determine whether or not there will be any involuntary land acquisition. In case o f involuntary land acquisition, a socioeconomic survey wil l be prepared, followed by a resettlement action plan. The RPF outlines what the survey and RAP should contain.

Compensation

36. Compensation will be provided to al l individuals whose assets or access to assets i s severely affected or damaged, as a consequence o f involuntary land acquisition or any other related activities undertaken by sub-projects. The compensation for the loss o f physical and non- physical assets will vary depending on the type o f loss, severity o f the loss, and eligibility o f the Project Affected Persons (PAPs). Compensation may come in the form o f cash compensation, in-kind compensation, and/or assistance. The RPF includes an entitlement matrix that outlines possible losses arising f rom sub projects and respective entitlement benefits.

Grievance redress:

37. PAPs can address any grievances to the relevant WSC office and local authorities either verbally or in writing (in case legal claims or land acquisition issues need to be settled). The WSC ISSIP unit and in particular the unit's social focal point will collect and review the grievances (in coordination with the representative local public official) on a monthly basis, and a decision will be taken about appropriate action. If the PAPs disagree with the action suggested, the two parties may resort to legal action in local government court. However, a l l the aforementioned grievances and procedures are mainly due to grievances from the init ial land acquisition process. Hence, it i s recommended to have a complete and binding agreement with individuals to avoid any potential grievances.

This i s a governmental organization that i s responsible mainly for developing local areas. In addition, people and 6

companies ask for i t s permission before the installation o f any infrastructure services.

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Monitoring and Reporting

Monitoring Percentage of individuals selecting cash or a combination o f cash and in-kind compensation

Payment of compensation to PAPs in various categories Number of grievances

Public information dissemination and consultation procedures Completion dates of the RAP activities

38. The WSC's social focal points will undertake internal monitoring o f the implementation o f any RAPS, and this will be documented in project progress reports. The internal report will mainly cover resettlement policies and compensation standards, resettlement progress, delivery o f resettlement compensation, provision o f development and transitional assistance to PAPs (especially vulnerable groups), the implementation schedule, fund disbursements, land or structure allocation, and grievances and redress. An independent agency (most l ikely a N o n Governmental Organization) will be required to conduct external resettlement monitoring and evaluation, if there i s any resettlement or involuntary land acquisition under the project. The rationale behind hiring an external institution i s to ensure that the overall objective o f the resettlement plan i s achieved in an equitable and transparent manner. In addition to reviewing the issues covered by the internal monitoring progress report, the external agency shall also evaluate and assess:

Evaluation Proposed use of payments

Conformance to compensation policies described in the RAP Timeliness and quality of decisions made on grievances Timeliness, quality, and effectiveness of consultation and information disclosure Actual completion of resettlement activities compared with the RAP time schedule

0

0

0

0

Adequacy o f compensation, development and transitional assistance techniques provided to the PAPs, Abi l i ty to reach the most vulnerable PAPs, Consultation and public disclosure o f the RAP, Effectiveness o f the grievance redress mechanism

39. evaluating the implementation o f RAPs.

The table below provides a l i s t o f some verifiable indicators for monitoring and

Table 5: Verifiable Indicators for Monitoring and Evaluation Implementation of RAPs:

40. Company for Water and Wastewater.

Budget The budget for any land acquisition activities will come from the Holding

106

Annex 11: Water Quality Modeling

Introduction

1. To support the planning and design process o f the project, water quality modeling activities were carried out for a sub-set o f relevant drains in the project area to accomplish the following objectives:

e Evaluate the expected level o f water quality improvement in the receiving water bodies in the project area as a result o f the proposed project interventions,

Identify the necessary level o f wastewater treatment (e.g. primary, advanced primary, or secondary) in the studied clusters, to ensure that the ambient water quality in the receiving streams are o f acceptable quality, as stipulated by article 63 o f Law 48 for the year 1982.

Set acceptability criteria for the proposed level o f wastewater treatment, in terms o f the conditions o f the receiving drains, such that the impact o f the proposed level o f treatment i s acceptable, per the relevant articles in Law 48/1982.

Develop a monitoring framework for the first-phase implementation plan, in terms of water quality parameters, location and frequency o f monitoring.

e

e

e

2. The clusters selected were MH-6 in the Mahmoudya Catchment, and GHR-1 in the M i t Yazied Catchment. These were chosen according to a number o f criteria, including (a) inclusion in the f i rst phase investment plan, (b) fair geographical distribution among Mit Yazied and Mahmoudya catchments, (c) minimal industrial waste discharging into the receiving water body, (d) ability to define the impact o f the proposed treatment interventions, and (e) accessibility for the receiving water body to conduct field measurements and investigation.

3. The drains in the study area are as follows. Sharaf drain in Mahmoudia Command Area receives discharges from the Kom A1 Nasr Cluster, including Kom A1 Nasr i t se l f and 14 smaller villages and hamlet. Nishil drain in Mit Yazid Command Area receives discharges from Isbet Mt El Sheikh, Izbets Maher and Arab and six smaller villages and hamlets. Samatay drain, also in the Mit Yazid Command Area receives discharges from Samatay and four smaller villages and hamlets. Samatay drain did not meet the stated selection criteria in that it was already highly polluted at the point where it entered the study area, with wastewater generated in and around Tanta. As wil l become clear, i t nevertheless provided useful information.

Model Assumptions

4. The model QUAL2K was used to carry out the modeling activities. QUAL2K i s a steady state one dimensional model, with moderate data requirements which i s available free o f cost. For these reasons, i t was considered the most appropriate model for ISSIP requirements. Water quality variables considered in the model were BOD, TSS, DO, and Coliform bacteria.

107

Simulated Scenarios

5. The following scenarios were considered: (a) present condition o f discharging untreated wastewater to the drains, (b) advanced primary treatment using communal septic tanks using anaerobic baffled reactors for smaller villages and ezbas while providing secondary treatment for larger villages above 1000 capita (centralized clusters), (c) collecting the wastewater from the smaller villages and ezbas and providing secondary treatment along with that for larger villages. The centralized schemes would reduce B O D and TSS by 90% and coliform bacteria to 5000MPN/1OOml while decentralized schemes would reduce B O D and TSS by 60% and coliform bacteria by 50%. The results in terms o f B O D and D O are shown graphically in Figure 1, and shown in summary form in Table 1.

6.

With advanced primary treatment, there i s a remarkable improvement for D O o f sharaf drain especially for the last reach (from km 10 to km 15), with DO concentration at the end o f the drain reaching 4.5 mg/l (law 48/82 limit i s 5.0 mg/l). There i s a reasonable improvement for B O D o f sharaf drain especially for the middle and last reach (from km. 8 to km. 15), with the B O D concentration at the end o f the drain reaching 11.8 mg/l (law 48/82 limit id 10.0 mg/l). Asignificant improvement was also found for coliform bacteria o f most o f sharaf drain especially after K o m A1 Nasr where the WWTP located, with coliform bacteria at the end o f the drain reaching 6100 MPN/100 (law 48/82 limit i s 5000 MPN/lOOml). The water quality improvement by providing secondary treatment i s not extensive. The additional cost and technical and administrative complications are, therefore, unwarranted.

M H - 6 Catchment (Kom A1 Nasr Cluster -Sharaf Drain)

7. GHR-1 Catchment (Nishil Drain)

The improvement for D O can be noticed for the last reach (from km. 12 to km. 15), with the D O concentration at the end o f the drain reaching 4.8 mg/l. There i s a reasonable improvement for B O D drain especially for the last seven kilometers (from km. 8 to km.15), with B O D concentration at the end o f the drain reaching 11 .O mg/l. A remarkable improvement was also found for coliform bacteria o f most o f Nishil drain especially after the eight villages located along the drain. The coliform bacteria at the end o f the drain reach 8300 MPN/ l00. The water quality improvement by providing secondary treatment (at km 5) i s not extensive. The additional cost and technical and administrative complications are, therefore, unwarranted.

8. GHR-1 Catchment (Samatay Drain)

There i s no improvement for D O o f Samatay drain over the studied reaches (7.0 kilometers). There i s a negligible improvement for BOD. Minor improvement was found for col i form bacteria o f Samatay drain especially after the proposed WWTP at Samatay village. There i s no appreciable water quality improvement by providing secondary treatment. It should be recalled that this drain receives a heavy pollution load upstream the studied area, the impact o f which i s quite extensive.

108

Table 1. Water Quality Characteristics For The Simulated Cases for (a) Sharaf and (b) Nishil Drains

Case Existing Conditions Advanced Primary (small villages) + Secondary (large villages) Secondarv

DO (mgjl) BOD (mg/l) Coliform bacteria MPN/lOOml) 3 -27 21.4 35130 4.50 11.8 6128

5.10 9.40 3 800

Existing Conditions Advanced Primary (small villages) + Secondary (large villages) Secondary

60

2.64 22.60 18087 4.78 10.91 8350

5.70 7.50 3200

50 -

F 40 -

- 30 - 0 0

F m 20 -

Law 48 Standards 10

0 4 I I , I , I , I , I I , I , I 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5

Distance (krn)

(a) 100

90 80 - 70 60 - 50

30 20 10

P

E 40

0 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 Distance (km)

(b) 6.0

5.0

Q 4.0 m 5 3.0 0 0 2.0

I .o 0.0

Law 48 Standards

0 1 2 3 4 5 6 7 8 Distance (km)

(C)

7

61 Law 48 Standards

i 3 F:; .... . * . . _ . _... .... . . . * *

2 1

" , , , , , , , , , , I , , , I I

0 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 Distance (km)

6

5 Law 48 Standards

m E 3 - ,

1 -

0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 Distance (krn)

I 1 0 100 90

Q 80 70 - 60 50 40

30 20 1 Law 48 Standards I I" I

0 1 2 3 4 5 6 7 8 Distance (krn)

109

Figure 1. BOD and DO for (a) Sharaf, (b) Nishil, and (c) Samatay Drains. Circles: existing conditions, solid lines: advanced primary treatment, dashed line: secondary treatment

Recommended Monitoring

9. For practical reasons it i s recommended to start with a selection o f those parameters that serve as general indicators o f the water quality. As the monitoring procedures continue, and more sophisticated equipment and expertise becomes available, more detailed analyses can be done if required for particular reasons. For in-situ measurements, the following parameters are proposed: (a) temperature, (b) pH, (c) EC/TDS, and (d) DO. As for laboratory analysis, the proposed parameters are: (a) TSS, (b) B O D or COD, and (c) fecal col i form bacteria. The annual estimated cost to carry out the proposed monitoring program i s 56,500 LE, and i s detailed in the final modeling report.

Main Conclusions

10. The following conclusions can be made in light o f the findings o f the modeling exercise:

The sanitation services proposed in ISSIP will improve the main water quality parameters (BOD, DO, TSS, and fecal coliform) in most o f the receiving water bodies.

Advanced primary treatment (anaerobic baffled reactors in communal septic tanks) o f scattered villages and ezbas i s an economic and simple alternative to the collection o f wastewater from these villagedezbas to a centralized secondary treatment plant near the mother village.

Although the advanced primary treatment may not meet all the effluent standards o f Law 48/1982, the se l f purification capacity o f some drains allows the ambient standards to be met downstream.

The probability o f meeting ambient standards o f L a w 48 in-stream i s maximized when the receiving drains receive agriculture runoff from third order drain catchments, and when those drains (a) have free zone o f point source (domestic wastewater), (b) receive predominantly diffuse source (agriculture drainage water), (c) receive minimal or non upstream pollution load (headwater quality), and (d) are overlaid by smaller villages and ezbas (Table 2).

Heavy pollution load from upstream activities diminishes the water quality improvement o f the project. The only solution to meet the ambient water standard in these cases i s to improve the water quality o f the headwater by treating wastewater in upstream towns and villages.

Mathematical modeling o f water quality in the receiving water bodies i s an indispensable tool in planning and decision making o f future sanitation investment phases and design o f water quality monitoring program (which i s an integral part o f the M&E component).

Overall, the main impacts on water quality wil l be achieved by full treatment o f flows from towns and larger villages. Nevertheless, partial treatment o f flows from smaller villages can bring about worthwhile improvements at a significantly lower cost than would be required to link these villages into centralized systems. Decentralized systems

110

can thus bring about immediate improvements, with further improvements achieved in the future when funds become available to link them into centralized systems.

llnlJrrt Acceptability of Deceutrrlized

Table 2. Criteria Determining Probability o f Success o f Self Purification of Drains

Free reach of point Predotniunntir of diffuse rpstream potlotion source source

Headmnter qnatit;v (BOD)

I kln Modera te imonct

M a j o r impact 7 kin

Smaller villages and Ezbns

(domestic disrhnrge to

Ratio 1 to 20

111

Annex 12: Project Preparation and Supervision

Planned Actual PCN review 0613 012005 0613 012005 Initial PID to PIC 08/01/2005 08/01/2005 Initial ISDS to PIC 09/22/200 5 09/22/2005 Appraisal 08/21/2007 1211 512001 Negotiations 09/04/2007 02/12/2008 Board/RVP approval 12/12/2001 03 12 01200 8 Planned date o f effectiveness 06/15/2008 Planned date of mid-term review 06/15/20 1 1 Planned closing date 06/3 0/20 14

Kev institutions responsible for preparation o f the proiect:

Ministry o f Housing, Ut i l i t ies and Urban Development (MOHUUD) Holding Company for Water and Wastewater (HCWW) National Organization for Potable Water and Sanitary Drainage (NOPWASD) Beheira Water and Sanitation Company Gharbeya Water and Sanitation Company Kafr El Sheikh Water and Sanitation Company

Bank staff and consultants who worked on the project included:

Name Title Unit Ayat Soliman Senior Environmental Specialist, TTL MNSSD Alexander Bakalian Lead Water and Sanitation Specialist MNSSD Wendy Wakeman Senior Social Development Specialist MNSSD Maged Hamed Senior Environmental Specialist MNSSD Lizmara Kirchner Financial Analyst MNSSD Ahmed Shawky Senior Water Resources Specialist MNSSD Mohamed Mehany Operations Analyst M N S S D Zakia Chummun Language Program Assistant M N S S D Enas Shaaban Team Assistant MNC03 Abdulgabbar Hasan AI Qattab Senior Procurment Specialist MNAPR Mohamed Yehia Abd El Karim Financial Management Specialist MNAFM Ghada Youness Senior Counsel LEGMS Peter Kolsky Senior Water & Sanitation Specialist ETWWA Kevin Tayler Sanitation Technology Specialist Consultant Klaus Neder Technical Manager, CAESB, Brasilia Consultant

Bank funds expended to date on project preparation:

1. Bank resources: $421,250 2. Trust funds: $0 3. Total: $421,250

112

Estimated Approval and Supervision costs:

1, 2.

Remaining costs to approval: $25,000 Estimated annual supervision cost: $100,000

113

Annex 13: Documents in the Project File

Project Implementation Plan (under preparation)

Bank Staff Assessments

i) ii)

Other

Project Concept Note (June 21/2005)

Draft Project Appraisal Document - QER version (June 2007)

i) ii)

iii)

iv)

V I

vi)

vii)

viii)

ix)

Operational Framework for Rural Sanitation Service Delivery in Egypt, July 2005

Putting IWRM into Practice in Egypt using Conceptual Performance-Based Monitoring and Benchmarking Approach - July, 2005

Summary for Design Study for Hygiene Promotion in Integrated Sewerage and Sanitation Infrastructure Project (ISSIP) within the Governorates o f Kafr El Sheikh, Garbeya and Beheira, June 2006

Assessment o f Existing Situation, February 2007

Support to ISSIP in Technology, Economics and Finance, April 2007

First Phase Investment Plan, April 2007

Strategic Sanitation Plan and Solid Waste Pilot Plan, May 2007

Water Quality Modeling Report, September 2007

Institutional Assessment and TOR Implementing Agencies, November 2007

114

Annex 14: Statement o f Loans and Credits

Difference between expected and actual

disbursements Original Amount in US% Millions

Project ID F Y Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

PO93470 PO9 1945 PO90073 PO88877

PO82952

PO73977 PO49702 PO82914

PO56236

PO45499 Po414 I O PO40858 PO50484

PO49 166

PO45 I75

2007 2006 2006

2006

2005

2005 2004 2004

2002

2000 1999 1999 1999

1998

1998

EG-MORTGAGE FINANCE EG-EL TEBBIN POWER

Second Pollution Abatement Project

DPL EG-Early Childhood Education Enhancement Integrated lrrig Improv. & Mgmt.

EG- FINANCIAL SECTOR REFORM

EG-SKILLS DEVELOPMENT

EG-AIRPORTS DEVELOPMENT PROJECT EG-HIGHER EDUCATION ENHANCEMENT PROG Egypt NATIONAL DRAINAGE I1 EG Pumping Station Rehab Ill EG - SOHAG Rural Dev

EG Secondary Education Enhancement Proj EG East Delta Ag. Sew.

EG-HEALTH SECTOR

37.10 259.60

20.00 500.00

20.00

120.00

5.50 335.00

50.00

50.00 120.00

0.00 0.00

0.00 0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00

25.00 50.00

15.00 90.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00 37.61 0.00 249.75 0.00 18.00 0.00 500.00

0.00 19.90

0.00 119.40

0.00 4.34 0.00 176.35

0.00 16.61

0.00 6.44 20.00 16.98

0.00 3.96 0.00 25.88

0.62 7.70 0.00 8.94

1.23 0.00 -0.28 0.00 -1.83 0.00

500.00 0.00

6.86 0.00

12.73 0.00 4.08 0.00

77.45 0.00

16.61 7.07

5.77 0.00

36.98 0.00 1.96 1.95

22.33 6.57

6.73 5.97 0.72 0.56

Total: 1,517.20 180.00 0.00 0.00 20.62 1,211.86 691.34 22.12

EGYPT, ARAB REPUBLIC OF STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions o f US Dollars

Com m itted Disbursed

IFC IFC

F Y Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

1996 2004 2001 2006 I999 2004 1992 I997 1998 2000 2002 2006

ANSDK Alexandria Fiber Amreya CIB LLC

CIL CIL Carbon Black-EGT Carbon Black-EGT Carbon Black-EGT Carbon Black-EGT Ceramica AI-Amir Cmrcl lntl Bank

1.33 8.00 4.69

0.00 0.00 0.00 0.00 0.00 4.00 5.00

3.33 0.00

0.00 0.00 0.00 0.56 0.00 0.00 0.00 7.00 0.00 0.00 0.00 4.69 0.72 0.00 0.00 0.00 0.74 0.00 0.00 0.00 0.15 0.00 0.00 0.00 1.48 0.00 0.00 0.00 1.48 0.00 0.00 0.00

0.00 0.00 0.00 4.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.33

23.28 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.48 0.00 0.00 0.74 0.00 0.00

0.15 0.00 0.00

1.48 0.00 0.00 1.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

23.03 0.00 0.00

115

2006 2004 2005 2006 200 1 2004

1986 1988 1992

2005 2002 I992

1996 200 I 200 I 2002 2006 2004 2001 1997 200 I 2005

EFG Hemes EHF

Egypt Factors

Gippsland

IT Wont

Lecico Egypt

Meleiha Oil Meleiha Oil

Meleiha Oil

Merlon Egypt

Metro

Misr Compressor

Orix Leasing EGT

Orix Leasing EGT

Orix Leasing EGT

Port Said

SEKEM

SONUT SPDC

SUEZ GULF

UNI UNl Wadi Grow

20.00 0.00 0.00 0.00 0.00 8.94 0.00 0.00 0.00 1 .oo 10.50 9.70 4.00 0.00 1.09

41.07 4.18 10.00 18.40 40.40 2.05 2.06 15.00

0.00 1.70 3.00 4.61 2.00 0.00 8.62 9.20

13.00 0.00 0.00 0.00 0.00 0.53 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 4.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00

132.53 0.00 0.00 0.00

129.07 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 8.94 0.00 0.00 0.00

0.00

10.50 9.70 0.00 0.00 1.09

41.07 4.18 0.00

18.40 40.40

2.05

2.06 7.50

0.00 1.70 0.00 2.03 2.00 0.00

0.00

0.00 0.94 0.00 0.00 0.00 0.00 0.53 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00 0.00 0.00

132.53 0.00

0.00 0.00

129.07

0.00 0.00 0.00

Total portfolio: 214.74 70.51 4.00 261.60 165.47 34.56 0.00 261.60

~ ~~ ~

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2004 ACB Acrylic 0.00 0.00 0.00 0.00 2004 Merlon Egypt 0.00 0.00 0.00 0.02 2000 ACB Expansn 111 0.00 0.00 0.00 0.00 2006 Rally Energy 0.01 0.00 0.00 0.00

Total pending commitment: 0.01 0.00 0.00 0.02

116

Annex 15: Country at a Glance

P O V E R T Y and S O C I A L

2005

GNI per capita (Atlas method US$) GNI (Allas method US$ billions)

A v e r a g e annual growth, 1999-05

Population (966 19 Laborforce (%) 2 6

M o s t recent e r t l m a t e ( la test year aval iable , 1999-05)

Egypt

Population mid-year (millions) 74 0 1250 92 5

Poverty (%of population belownationalpovertyline) R Urban population (%of totalpopulation) 43 Life expectancyat birth (rears) 70 Infant mortality (per 1000 live births) 26 Child malnutntion (%ofchildren under5) 9 Access to an improved watersource (%ofpopulation) 98 Literacy (%ofpopulationage rS+J 71 Gross primary enrollment (%of school-age population) 0 1

Male 0 3 Female 98

KEY E C O N O M I C R A T I O S and L O N G - T E R M T R E N D S 1985 1995

GDP (US$ billions) 347 802 Gross capital formationIGDP 267 R 2 Exports of goods and serviceslGDP 8 9 225 Gross domestic savingslGDP 145 P 2 Gross national savingslGDP 8 4

Current account balance/GDP -93 0 6 Interest payments/GDP 2 6 2 1 Total debt1GDP 0 4 2 557 Total debt serviceleuports 258 134 Present value of debt1GDP Present value of debt/ekports

1986.95 1995-05 2004 (average annual gro wth) GDP 3 9 4 7 4 2 GDP percapita 17 2 7 2 2 E p o r t s of goods and services 7 6 5 1 276

M . E a s t Lower. h N o r t h mlddle.

Afr ica I n c o m e

305 2,241 685

19 3 5

57 69 44 13

89 72 0 3 'D6 1)O

2004

78 8 '66

28 6 152 210

4 3 0 8

38 4 8 8

340 013

2,475 1,98

4,747

10 14

50 70 33 P 82 89 ll4 ns m

2005

89 3 7 3 317 172

22 0

4 8

2005 2005-09

4 9 5 8 2 9 4 8

22 2 118

Life epectancy

GN I Gross

capita enrollment per primary

Access l o improvedwatersource

-̂ _11 Egypt,ArabRep LO wr-middle-income group

Economic rat loo '

Trade

T Capital formation - Domestic

savings

Indebtedness

-----Egypt, Arab Rep Lover-middle-income group

S T R U C T U R E o f the E C O N O M Y

(%of GDP) Agriculture Industry

M anufactunng SeNlCeS

Household final consumption expenditure General gov't final consumption ependiture lmpofls of goads and sewices

(average annualgrowth) Agnculture Industry

services

Household final consumption expenditure General gov't final consumption expenditure Gross capital fo rmatio n lmpofls of goods and services

M anufactunng

1986 1995

200 6 8 286 323 135 174 515 509

882 773 l72 0 5

320 275

1986-96 1995-Ob

2 7 3 5 4 6 4 3 5 0 5 7 3 4 4 7

4 4 4 4 -10 2 8 - 4 7 4 1 -02 3 7

2004

151 36 9 8 3

48 0

714 124

28 9

2004

19 2 5 2 9 6 1

3 2 2 7 2 9

22 0

2006

139 38 7 8 2

47 4

70 2 Q 7 319

2006

3 4 3 5 3 3 6 4

4 5 3 0 8 9

22 9

Growth o f capl ta l a n d G D P (Oh) 10

5

0

5

10

----GCF -GDP

Growth o f exports a n d i m p o r t s (Oh)

30

20

10

0

-10 03 04 05

Nota 2005data are preliminaryestimates This table was producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators in thecountry(in bold)comparedwithits income-groupaverage Mdataaremissing lhediamondwll

be incomplete

117

Egypt, Arab Rep.

P R I C E S a n d G O V E R N M E N T F I N A N C E

D o m e s t i c p r i ces (%change) Consumer prices Implicit GDP deflator

Government f inance (%of GDP. includes current grants) Current revenue Current budget balance Overall surolusldeficit

T R A D E

(US$ millionsj Totaleqorts ( fob)

cot ton Other agriculture Manufactures

Totalimports (cif) Food Fuel and energy Capital goods

Eqor t price index(2000=WOJ Import pnce index (20OO=WO) Terms of trade (2000-WOJ

B A L A N C E o f P A Y M E N T S

(US$ miLonsJ

Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

M e m o : Reserves tncludinggold (US$ rnii1ionsJ Conversion rate (DEC local/US$J

EQOrtS Of goods and SeNICeS

1986

0 1 9 0

22 2 -13 7 -216

1985

1995

157 114

25 9 2 6 -12

1996

4,957 2,76

306 1,655 P.811 2,760

72 1 3 . 0 8

99 115 86

1986 1995

6,866 r2.887 2,606 6,840 -5,741 -3,952

-991 141 4,198

-3,209 386

3,022 368 187 -754

10 3 4

E X T E R N A L D E B T and R E S O U R C E F L O W S 1985

(US$ millions) Totaldebt outstanding anddisbursed 36,U7

IBRD 1,048 IDA 802

Totaldebt service 2 815 IBRD 147 IDA 8

Composition of net resource flows Official grants 734 Official creditors 1,634 Pnvate creditors 573 Foreign direct investment (net inflows) 1 I78 Portfolio equity(net inflows) 0

Commitments 59 Disbursements 269 Principal repayments 70 Net flows 198

Net transfers 114

World Bank program

Interest payments 84

1996

33,499 1,320 1035

2.381 3t? 21

1006 60

411 598

0

80 t?5 2t? -87 t?l

-208

2 0 0 4

113 115

25 9 2 0

-2 4

2004

0,453 3.9a 202

3.972 6,286

1,877 2,639 3,506

0 8 9 2 u 5

2 0 0 4

22,948 23.258

-309

-207 3,934

3,418

-3,576 158

6.2

2004

30,292 503

1465

2 , 3 7 99 50

1.389 -868 -228 1,253

26

670 0 0 16 -6 33

-49

2005

4 9 5 4

24 1

-13 -60

2006

14 000 5 000

06 5 529

23 0 0 2 371 3 363 4 792

138 P8 0 8

ZOO5

28 900 29 0 0

-200

-a0 4 600

4 300

-329 -3 971

6 367 6 0

2006

492 1420

98 52

6 5 118 48 32 6

Inflation (Oh) 1

I -.GDPdeflator &CPI I

Export and Import l eve l s ( U S $ mlll.)

174 """ r 20 000

15 000

10 000

5 000

0 @ @ 00 01 02 03 04 05

mExporls gln-Qorta

C o m p o s l t l o n o f 2004 debt (US$ mill.)

A 503 I G 2,939 B 1,465 I

J E 22 365

A . IBRD E - Bilda-al B . IDA D. Other ~11 i l d6 f3 F . Private C . IMF G . Short-ier

Note This table was producedfrom the Development Economics LDB database 8/P/06

118

I I

II

II

I

I

II

II

II I I

II I

II

II

II I I I

I I I II I I

I I I I I I II

II

I I II

II

I II

II

II

I I I I I II

II

I I I I I I II I I

II

I I I I I I I II

II

II

II

II

II

II

I II

II

I

II

I I I I

I I I I II I I I I I I I

II

II

II

II

II

II

II

I

II

II

I

I I I I I I I

II

I

II

II

II

I

I

I I I

II

I I I

I

I

GIZA

EL FAYOUM

BENI SUEF

SUEZ

MENOUFIYA

GHARBIYA

KAFR EL SHEIKH

DAGAHLIYA

DAMIETTA PORT SAID

ISMAILIA

SHARGIYAH

QALIUBIYA

CAIRO

EL BAHR EL AHMAR

MARSA MATRUH

BEHEIRAALEXANDRIA

Benha

Shibin el Kom

Tanta

Kafr ad Dawwar

Talkha

Zifta

Kafr el ZaiyatItya el Barud

Kafr el Sheikh

DamanhurEl Mansura

Zagazig

Shirbin

Rosetta Damietta

Port SaidAlexandria

Baltim

El Dikheila

Abu Qir

CAIRO

Helwan

Giza

Imbaba Shubra el Kheima

Tebbin

El Fayoum

Beni Suef

Tourah6th ofOctober

(new city)

10th ofRamadan(new city)

Beba

Ismailia

Suez

MAHMOUDIACOMMAND

AREA

MAHMOUDIASUB-PROJECT

WASATSUB-PROJECTMANAIFA

SUB-PROJECTMEET YAZIDCOMMAND

AREA

Lake Manzala

EL Nubariya Canal

Nile R. N

ile R

. (D

amiet

ta Br

anch

)

Lake Burullus

Mediterranean Sea

Lake Idku

Ismailia

Canal

Lake Oarun

Wadi Arabah

Gulf of Suez

GreatBitterLake

Suez Canal

(Rosetta Branch)

31°

31°30°

30° 32°

32°

31° 31°

30°30°

29° 29°

LIBYA

CHAD SUDAN

Cairo

ARABREPUBLICOF EGYPT

Area of map

MediterraneanSea

Nile R.

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.

0 5025 75 KILOMETERS

ARAB REPUBLIC OF EGYPT

IRRIGATION IMPROVEMENT PROJECTIMPLEMENTATION AND COMPLETION REPORT

PROJECT AREA BOUNDARIESCANALS

PERENNIAL RIVERS AND LAKES

INTERMITTENT RIVERS AND LAKES

MARSH

DELTA AREA

SELECTED CITIES AND TOWNS

GOVERNORATE CAPITALS

NATIONAL CAPITAL

GOVERNORATE BOUNDARIES

INTERNATIONAL BOUNDARIES

COMMAND AREA BOUNDARIES

SUB PROJECTS:

IIIMP (WB/KfW/NTC follow up project 2006)

MAHMOUDIA

MANAIFA

WASAT

USAID PILOTS

I I I I I

MARCH 2007

IBRD 33785R

Annex 16: Maps

The Project Area

1

Project Area in Mit Yazid

2

Project Area in Mahmoudia

3