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Document of The World Bank

Report No: ICR0000595

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-43860)

ON A

LOAN

IN THE AMOUNT OF US$ 120 MILLION

TO THE

ARAB REPUBLIC OF EGYPT

FOR A

THIRD PUMPING STATIONS REHABILITATION PROJECT

February 25, 2008

Sustainable Development Department Middle East and North Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 22, 2007)

Currency Unit = Egyptian Pound 1.00 = US$0.175

US$ 1.00 = LE 5.70

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

CAO Central Auditing Office CAS Country Assistance Strategy CR Complete Rehabilitation DRI Drainage Research Institute EMP Environmental Management Plan EPADP Egyptian Public Authority for Drainage Projects ERR Economic Rate of Return FAO Food and Agriculture Organization of the United Nations GD General Directorate GDP Gross Domestic Product GOE Government of Egypt IEG Independent Evaluation Group ICB International Competitive Bidding ICR Implementation Completion Report IWRMP Integrated Water Resources Management Plan KfW Kreditanstalt fur Wiederaufoau (German Bank for International Development) M&E Monitoring and Evaluation MED Mechanical and Electrical Department of MPWWR MIS Management Information System MWRI Ministry of Water Resources and Irrigation NCB National Competitive Bidding NC New Construction NPV Net Present Value O&M Operation and Maintenance OED Operations and Evaluation Department PAD Project Appraisal Document PDO Project Development Objectives PIP Project Implementation Plan PR Partial Replacement PS Pumping Station SOE Statement of Expenditures SP Spare parts TA Technical Assistance USAID United States Agency for International Development

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Vice President: Daniela Gressani Country Director: Emmanuel Mbi Sector Manager: Vijay Jagannathan

Task Team Leader: Maher Abu-Taleb ICR Team Leader: A. Azad

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ARAB REPUBLIC OF EGYPT THIRD PUMPING STATIONS REHABILITATION PROJECT

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design...............................................2. Key Factors Affecting Implementation and Outcomes ............................................ 13. Assessment of Outcomes.......................................................................................... 14. Assessment of Risk to Development Outcome ........................................................ 25. Assessment of Bank and Borrower Performance ..................................................... 26. Lessons Learned ....................................................................................................... 27. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 2Annex 1. Project Costs and Financing.......................................................................... 2Annex 2. Outputs by Component ................................................................................. 2Annex 3. Economic and Financial Analysis..................Annex 4. Bank Lending and Implementation Support/Supervision Processes ..............Annex 5. Beneficiary Survey Results.............................................................................Annex 6. Stakeholder Workshop Report and Results ....................................................Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR.......................Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders....................... 1Annex 9. List of Supporting Documents ...................................................................... 1

MAP

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A. Basic Information Country: Egypt Project Name:

Pumping Stations Rehabilitation III

Project ID: P041410 L/C/TF Number(s): IBRD-43860 ICR Date: 10/09/2007 ICR Type: Core ICR

Lending Instrument: SIM Borrower: GOVERNMENT OF EGYPT

Original Total Commitment:

USD 120 million Disbursed Amount: USD 99.546 million

Environmental Category: B Implementing Agencies: Mechanical and Electrical Department (MED) of the Ministry of Water Resources and Irrigation (MWRI) Co-financiers and Other External Partners: GOE and German Development Bank (KfW) B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 06/17/1996 Effectiveness: 06/29/2000 06/29/2000 Appraisal: 03/06/1998 Restructuring(s): Approval: 08/06/1998 Mid-term Review: 12/30/2005 03/24/2004 Closing: 02/28/2005 08/31/2007 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately satisfactory Risk to Development Outcome: Modest Bank Performance: Moderately satisfactory Borrower Performance: Moderately satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately unsatisfactory Government: Moderately satisfactory

Quality of Supervision: Moderately Satisfactory

Implementing Agency/Agencies: Moderately satisfactory

Overall Bank Performance: Moderately satisfactory Overall Borrower

Performance: Moderately satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time

Yes Quality at Entry (QEA):

None

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(Yes/No): Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Central government administration 10 10 Irrigation and drainage 90 90

Theme Code (Primary/Secondary) Environmental policies and institutions Primary Primary Rural policies and institutions Secondary Secondary Rural services and infrastructure Primary Primary Water resource management Primary Primary E. Bank Staff

Positions At ICR At Approval Vice President: Daniela Gressani Kemal Dervis Country Director: Emmanuel Mbi Salah Darghouth, Acting Sector Manager: Narasimham Vijay Jagannathan Salah Darghouth, Task Team Leader: Maher F. Abu-Taleb Nejdet Al-Salihi ICR Team Leader: A. Azad ICR Primary Author: A. Azad F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The primary Project Development Objectives (PDOs) were to: (a) improve the efficiency of operation and maintenance of the pumping stations and thereby save public expenditures on O&M; (b) improve the efficiency and reliability of delivery of irrigation water and evacuation of drainage water to prevent losses in crop yields resulting from the ageing stations; and (c) strengthen further the planning and O&M capability of the MED to enhance the sustainability of the irrigation and drainage systems. Revised Project Development Objectives (as approved by original approving authority)

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(a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of farm families and total area benefiting

Value (quantitative or qualitative)

Not available.

700,000 farm families 1.55 million feddans (651,000 ha)

Over one million farm families; 2.4 million feddans (one million ha)

Date achieved August 2007 Comments (incl. % achievement)

Number of farm families and area to benefit will increase when the new pumping stations sub-component is completed. The project is still under implementation by GOE and KfW.

Indicator 2 : Prevention of agricultural production losses Value (quantitative or qualitative)

Not available US$ 69 million per year US$54 million per

year

Date achieved August 2007 Comments (incl. % achievement)

Indicator 3 : Reduction of operation and maintenance cost and energy consumption

Value (quantitative or qualitative)

Not available

US$ 1.2 million per year O&M savings; US$ 2.1 million per year energy savings.

US$ 1.55 million per year O&M savings; US$ 3 million per year energy savings.

Date achieved August 2007 Comments (incl. % achievement)

Estimated increase in efficiencies: from 44% to 64% for irrigation and from 43% to 50% for the drainage pumping stations.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 :

A) Construction of new pumping stations. B) Complete or partial rehabilitation of pumping stations. C) Provision of spare parts. D) Upgrading of Emergency Centers.

Value (quantitative or qualitative)

Not available

A) = 32 B) = 36 C) = 9 D) = 5

A) = 0 B) = 49 C) = 55 D) = 5

Date achieved August 2007 Comments (incl. % achievement)

None of the new pumping stations have been completed. All the electromechanical equipment has been delivered and the civil works are inprogress. Estimated completion date is December 2008.

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G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP

Actual Disbursements (USD millions)

1 03/05/2001 Satisfactory Satisfactory 0.50 2 11/01/2001 Satisfactory Satisfactory 3.85 3 04/30/2002 Satisfactory Satisfactory 9.36 4 05/22/2002 Satisfactory Satisfactory 10.89 5 11/15/2002 Satisfactory Satisfactory 18.90 6 05/12/2003 Satisfactory Satisfactory 23.35 7 06/23/2003 Satisfactory Satisfactory 24.47 8 12/12/2003 Satisfactory Satisfactory 35.10 9 02/27/2004 Satisfactory Satisfactory 35.33

10 04/28/2004 Satisfactory Satisfactory 35.38 11 05/26/2004 Satisfactory Satisfactory 35.49 12 11/01/2004 Satisfactory Satisfactory 39.10 13 04/25/2005 Satisfactory Satisfactory 48.02 14 10/31/2005 Satisfactory Satisfactory 58.28 15 12/22/2005 Satisfactory Satisfactory 60.26 16 06/22/2006 Satisfactory Satisfactory 67.49 17 12/20/2006 Satisfactory Satisfactory 78.44 18 04/18/2007 Moderately Satisfactory Satisfactory 83.01 19 07/30/2007 Moderately Satisfactory Satisfactory 88.05 99.546

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal The proposed project was the third phase of the Government of Egypt’s (GOE) long-term program for rehabilitation of the major pumping stations located on main canals and drains of the Nile Valley and Delta water management system. Most of the pumping stations (about 743 stations) are large by world standards with pumping capacities ranging between 2 to 75 m3/s. They command large irrigated and drainage areas with a high cropping intensity ranging from 180 to 200 percent. New lands, which always need pumping, are planted with high value export oriented crops such as fruits, vegetables and groundnuts while the major crops in the Nile delta and the valley are rice, sugar cane, wheat, cotton, broad beans, fruits and vegetables. The Government has formulated a long-term program for rehabilitation of the irrigation and drainage pumping stations to reduce the adverse effects on crops of inefficient pumping operations (i.e. mainly because of the deteriorating physical condition of the pumping stations resulting from aging and lack of spare parts). From a fiscal point of view the program would also reduce the operation and maintenance costs of the pumping stations. The World Bank fully endorsed the objectives of this program and has provided support for more than two decades. The rehabilitation of the aging pumping stations was recommended as a priority operation in the Irrigation Sub-sector Review carried out by the World Bank in 1981. The World Bank’s strategy in Egypt has given high priority to financing projects which improve the utilization of existing capacities, particularly in the irrigation and drainage sector. Other donors also identified the rehabilitation of pumping stations as a priority area for support. Among these donors are the German Development Bank (KfW), EU, USAID, Japan, and the Islamic Development Bank. The Mechanical and Electrical Department (MED) of the Ministry of Water Resources and Irrigation (MWRI) owns the pumping assets and is responsible all aspects of their design, construction, operation and maintenance. The previous two phases of the project were implemented between 1983 and 1998 and covered only 17 and 9 percent of the existing pumping stations respectively. The overall performance of the first phase was rated highly satisfactory while the second phase was rated unsatisfactory by the Bank’s Operation and Evaluation Department (OED) now known as the Independent Evaluation Group (IEG).

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The primary PDOs were to: (1) improve the efficiency of operation and maintenance of the pumping stations and thereby save public expenditures on O&M; (2) improve the efficiency and reliability of delivery of irrigation water and evacuation of drainage water to prevent the losses in crop yields resulting from aging stations; and (3) strengthen further the planning and O&M capability of the MED to enhance the sustainability of the irrigation and drainage systems. The key performance indicators were: • Number of farm families to benefit: 700,000. • Irrigation and drainage area to benefit or effectively served: 1.55 million feddans (651,000

ha). • Prevention of agricultural production losses: estimated at US$ 69 million/year. • Reduction of operation and maintenance cost: US$ 1.2 million per year during the first five

years after project completion.

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• Reduction of energy consumption: US$ 2.1 million per year • Strengthening of planning and O&M capability in MED to improve efficiency and enhance

the sustainability of the irrigation and drainage systems.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification.

The PDOs and key performance indicators were not changed during project implementation.

1.4 Main Beneficiaries The direct beneficiaries were estimated at 700,000 small farmers and their families farming in an area of 1.55 million feddans (651,000 ha). The rehabilitation of pumping stations would help the direct beneficiaries, whose average size farm is about 2 feddans, in avoiding a decline in their income due to unreliable irrigation water supply and accumulation of drainage water. It would also reduce the incentives of the rural population to migrate to urban centers. Although poverty-targeted intervention and employment generation was not mentioned as a higher development objective, the project is in line with key features of the current reform program of GOE as it relates to job creation and poverty alleviation. The other direct beneficiaries are the staff of MED and operators of pumping stations. Employment of skilled and unskilled labour during the construction and operation and maintenance period are other direct benefits.

1.5 Original Components Component 1: Rehabilitation of pumping stations (US$214.4 million, 85% of total cost). This component would support: (i) new construction of 32 pumping stations, of which four (drainage stations) were to be financed by KfW, to replace existing old and dilapidated stations. It would provide for the supply and installation of electromechanical and auxiliary equipment, trash racks and civil works including buildings’ inlet and outlet works. The GOE was to finance all civil works and parts of the auxiliary equipment manufactured in Egypt; (ii) complete rehabilitation of 36 pumping stations of which three (drainage stations) were to be financed by KfW, to replace all of the electromechanical equipment within the existing buildings with some rehabilitation of buildings, inlet and outlet works; (iii) supply and installation of spare parts and selective rehabilitation of inlet and outlet works for repairs and rehabilitation of 9 drainage pumping stations; and (iv) supply of mobile pumps, motors and generators of various capacities (diesel and electric) for five emergency centers (two existing and three new) to be established under the project. The GOE would finance the construction of buildings and other facilities for these centers.

Component 2: Strengthening central workshop and electrical laboratories (US$10.9 million, 4% of total cost) would provide for O&M equipment to central mechanical workshops and electrical laboratories through provisions of appropriate equipment including mobile electrical laboratory equipment and mobile mechanical workshops. Locally manufactured equipment and vehicles would be procured through GOE financing and loan funds would be used for specialized equipment and heavy duty equipment which would not be available locally.

Component 3: Institutional support (US$ 23.7 million, 10% of total cost) would strengthen the electrical and mechanical workshops and laboratories for preventive maintenance, providing diagnostic and inspection equipment, miscellaneous equipment for maintenance purposes, staff housing, workshops, stores and field offices and supply of vehicles. Two new units would be established within MED: (i) to coordinate the environmental activities both within MED and with other agencies; and (ii) for monitoring and evaluation (M&E) activities. The component also involved strengthening of the Management Information System (MIS), focusing in particular on

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expanding MIS activities in the field offices, stores and workshops/laboratories. It further involved the introduction of a telemetry system on a pilot scale. The M&E unit would selectively monitor the efficiency and energy consumption of pumping stations before project improvements and after installation of new electromechanical equipment. New procedures for monitoring project benefits from agriculture production and reduced expenditures on O&M would include appropriate selection of areas and monitoring parameters. The equipment for this component would be financed by the Bank.

Component 4: Capacity Building (US$3.4 million, 1% of total cost) for MED through technical assistance and training, consulting services for M&E, specialized studies, public awareness raising of the role of the pumping stations, and strengthening of the MIS and environmental activities, staff training overseas and locally with regard to pumping stations inspection and diagnosis, stores administration, monitoring of pumping stations O&M, MIS and telemetry linkage to the main system of the MWRI. Only a small portion i.e. US$ 0.6 million was to be financed through the World Bank loan. At appraisal in 1998, total costs of the six-year project amounted to US$252.4 million. Financing was to be shared by GOE – 41%; IBRD – 48%; and KfW – 11%. The IBRD loan was approved in August 1998 and the project closing date was February 2005.

1.6 Revised Components Components were not revised during project implementation.

1.7 Other significant changes: The major changes were: (i) The project was twice extended. The original closing date of February 2005 was extended to August 2007. (ii) An amount of US$ 20 million was cancelled from the loan amount of US$120 million in 2004. The international prices for electro-mechanical equipment were lower than anticipated at appraisal. Local costs were lower in US$ terms because of devaluation of the Egyptian Pound.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry The project was identified by MED and prepared by the Bank team and FAO/CP. No quality assessment of project design was made at appraisal. Although the project objectives and component were reasonable and simple, the quality at entry is considered moderately unsatisfactory. The project’s institutional support provisions for technical assistance (design and construction supervision), monitoring and evaluation, management information systems and all other implementation activities including capacity building and training were insufficient, given the limited technical and institutional expertise within MED. Inadequate attention was given to land acquisition and to bringing the new construction sub-component, MIS and establishment of M&E unit to a state of readiness before project effectiveness. One of the major lessons learned under the first phase project was that use should be made of turnkey contracts for construction of new pumping stations. This was not included in project design. The project design covered mainly rehabilitation of existing large pumping stations that are far from the farms. Because of their location no social assessment was carried out. These stations serve mainly main canals and drains of the larger irrigation and drainage systems. The downstream irrigation and drainage distribution systems, on-farm drainage and support to Water User Groups/ Associations were the subject of the National Drainage Project (NDP) and the Irrigation Improvement Project (IIP). The NDP and IIP were also supported by the WB as well as by a number of donors during the design stage and implementation of this project. It was recognized at the design stage of this project that it would be extremely difficult to expect any

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progress on cost recovery of O&M beyond what was agreed under the NDP and IIP. The loan agreement called for development of plans for the transfer of responsibilities for O&M of the small pumping stations to farmers. However, no provision was made for support apart from a small study to be finance by the loan. Attempts were made during earlier pumping stations projects to hand over booster pumps to farmers, however this was not found to be practical as farmers very often ended up requesting MED to take back stations to avoid total failure of their crops. This was due to breakdowns of pumps and the electromechanical equipment associated with them, which the farmers themselves were not equipped to operate and maintain. With regard to water measurement at the pumping stations the FAO/CP preparation report highlighted that water measuring reports referred to nominal pump ratings and not to actual measurements. The reported (nominal) measurements deviated in fact more than 30% from the actual measurements. To promote rational water use it was proposed during project preparation that all the rehabilitated pumping stations would be supplied by water measuring equipment. However, the loan agreement did not include water metering equipment. Two critical risks were identified at appraisal: (a) inappropriate design and selection process, and (b) inadequate operation and maintenance budget. These risks were supposed to be minimized by (a) applying well established design criteria from the previous two phases financed by the WB and (b) reviewing yearly budget provisions during supervision missions.

2.2 Implementation Board approval occurred in August 1998, but delays in credit agreement approval by the cabinet and ratification by the People’s Assembly only allowed effectiveness to occur in June 2000. The project started disbursing three years after Board approval, and the initial momentum built-up during project preparation was lost. The project was implemented directly by the MED without any separate project implementation unit. The plans for renewal or complete replacement of each pumping station were subjected to a number of criteria which are summarized below. In most cases these criteria were met, however feasibility and completion reports are not available for each or a cluster of pumping stations financed under the World Bank loan. • The age of the equipment exceeds 20 years • The average operating hours per unit exceed 100,000 hrs • The capacity is inadequate or there is no stand-by unit • Discharge and static head requirements have changed • Very poor condition of the building – major structural deficiencies • Problems with switch gear, gear boxes and corrosion • New pumps will be installed if the cost of spare parts exceeds 70% of new pumps

The project was seriously affected by invalid assumptions made at appraisal: that the implementation schedule was practicable for the new construction of irrigation and drainage pumping stations; that MED was institutionally capable of successfully implementing the civil works without the support from the consultants; and that M&E would happen easily. Performance of the civil works contracts was greatly delayed and therefore largely unsatisfactory. Factors fully or mostly within the control of the GOE and of the MWRI/MED that resulted in implementation delays included (i) time taken for land acquisition for the construction of new pumping stations; (ii) a slow build-up in preparation of designs and tender documents; (iii) slow tendering of civil works construction contracts; (iv) slow progress of contracts execution; (v) unusual delays in preparing the design and contracting of the MIS.

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Devaluation of the local currency from 2001 to 2003 had a substantial impact on project progress. Egyptian regulations that precluded the application of price escalation adjustments are also identified as a negative contributing factor for the civil works part of the pumping stations. The civil works contracts were implemented by MED according to their GOE guidelines and did not contain conventional escalation clauses of the Bank’s typical bidding documents. The implementation of civil works through local funding had been the norm on the previous two projects financed by the Bank. There was inadequate intra- and inter-departmental coordination within MWRI which resulted MED working mostly in isolation. Total project costs are re-estimated at US$193.9 million against the appraisal estimate of US$252.4 million. Expenditures on the institutional support component exceeded appraisal estimates.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Project appraisal gave due attention to M&E by calling for the establishment of an M&E unit and performance indicators. However, the institutional assessment did not clearly establish that MED was actually committed to setting up such a new M&E unit. In fact, as early as in 2000 MED announced that the M&E unit would not be established. The reason given was that monitoring and operation responsibilities are with the Directorate of Investment Project, Monitoring and Follow-Up, while evaluation responsibilities are with the Directorate of Inspection General. The M&E unit was supposed to monitor the efficiency of pumps, energy consumption, and discharge and to develop procedures for monitoring the benefits in terms of preventing losses in agricultural production resulting from installation of new electro-mechanical equipment. The parameters established by the M&E unit would have been used to monitor the agricultural production and other benefits, such as benefits in terms of reduced expenditures on O&M. This would be initially limited to about two drainage pumping stations and four irrigation pumping stations. This would have been expanded to six more pumping stations during the third and fourth year of project implementation. The project made provisions for both international and local experts' services and socio-economic surveys to establish base line data for selected pumping stations. No attempts were made to prepare a simple baseline survey during project implementation. The M&E system was not well-embedded institutionally and did not have sufficient ownership, reflecting the apparent disinterest of the MED and the MWRI. Some activity reports were produced by the project coordinator during project implementation but these reports could only provide decision makers with information on the status of inputs and outputs and not on outcomes or impacts. Reliable outcomes and impacts could only realistically be made some years after commissioning of pump stations and would not be easily determined in the short span of project implementation.

2.4 Safeguard and Fiduciary Compliance The project was rightly placed in environmental screening category “B” and was consistent with Operational Directive 4.01, “Environmental Assessment.” Given the focus on rehabilitation of existing pumping stations, the project did not require an involuntary resettlement or result in damage to archaeological and/or historical sites. Environmental Management Plan (EMP) was prepared by MED. The EMP supported: (a) establishment of an Environmental Unit in MED; (b) environmental training for MED staff at a variety of levels; (c) use of site-specific environmental review procedures for pumping station rehabilitation activities; (d) support for water quality monitoring; and (e) measures to apply water quality

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guidelines for the reuse of drainage effluent at mixing stations. The EMP was implemented by MED with the support of individual consultants and the Drainage Research Institute (DRI). Monitoring of environmental parameters is now a routine activity within MED. However, there are no reports showing, for example, if and how water quality problems have arisen and have been mitigated. Highly saline drainage water cannot be used to irrigate salt sensitive crops, but it can be used on salt tolerant crops, trees, bushes and fodder crops. A major concern in reuse is that drainage water is often highly concentrated, requiring careful management. For this, environmental monitoring and evaluation are very important. The project is seen to have had positive environmental and social impacts, including energy savings (estimated at US$ 3 million per year), greater equity in access to reliable irrigation water, removal of debris from canals, improved soil productivity through timely evacuation of drainage water, and reduced exposure to water-borne health hazards. The project also supported an intensive “work safety” awareness program for technicians and operators of the pumping stations. Safety tools have been provided to all operators and technicians and safety signs have been installed.

Fiduciary (procurement and financial management)

The Bank mainly financed the supply of electro-mechanical equipment and auxiliary equipment for the pumping stations, and logistical support equipment for the decentralized O&M directorates and emergency centers. Almost all this equipment was imported because it was unavailable in Egypt. The following table summarizes the number of contracts which were financed by the loan by procurement method:

Procurment method No of Total amount Contracts US$ million

International Commpititive Bidding 27 60.6Direct Contract 17 33.67National Commptitive Bidding 1 1.52Local Shopping 1 1.14

Total 46 96.93

Procurement was according to the Bank’s standard bidding document for the “Supply and Installation of Plant and Equipment”. Procurement of spare parts was based on direct contracts with original manufacturers. The electro-mechanical equipment delivered was according to bidding specifications and in line with international and national standards such as International Organization for Standard Specification (ISO), British Standard (BS), German Standard (DIN) , International Electrical Commission (IEC) and National Electric Code (NEC). The civil works for new pumping stations and buildings under the institutional support component (staff houses, offices and emergency centers) were not financed by the Bank and were 100% financed by the GOE contribution. The procurement of civil works followed the government’s procurement guideline and was done through a national competitive bidding method. By project closing date not all the civil works contracts financed by the GOE have yet been completed and work is still in progress.

The Bank supervision mission’s field visits were very intensive. Most of the pumping stations and decentralized O&M directorate offices were visited, including the emergency centers which were supplied with logistical equipment and spare parts. During the ICR mission’s field visits to the Mariopolis pumping station (contract dated June 2001) it was found that a number of large pumping units and transformers delivered in 2002 have not yet been installed and, moreover, that their storage did not meet the required standards.

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Financial management of the project followed the Bank’s disbursement guidelines. The implementation of financial management has however been moderately unsatisfactory. The missions’ aide-mémoires mention that project staffing at financial management level has been consistently insufficient (i.e. with high turn-over of staff). They also mention that the accounting systems did not enable efficient tracking of project expenditure along with supporting documentation. The project’s financial reports were not sufficient to provide a full picture of project performance and costs. The reports only focused on the Bank’s financing and did not include the government’s or KfW contributions. The project recording and reporting was handled by the Project Coordinator, who maintained the project records and issued periodic reports about the project’s financial position. The project audits were carried out by the Central Audit Organization and later during project implementation by private auditors. Audit reports were submitted on time with few exceptions.

2.5 Post-completion Operation/Next Phase Most of the project investments relate to electro-mechanical equipment for the pumping stations. These have been in operation for many years and operation plans have already been developed. Decentralized O&M offices and five emergency centers have been equipped and strengthened and spare parts for the project’s pumping stations have been made available for the next five years. However, MED will need to pay particular attention to ensure that all the 21 new pumping stations civil works are completed as early as possible. MED will also need to finalize the MIS and make it operational. For this purpose a Project Operation Plan will be required. Efforts should be directed towards establishing better linkages with the Irrigation Department, Drainage Authority and last but not least with the Ministry of Electricity and Energy, which is implementing Energy Efficiency Programs including the auditing of energy consumption. These programs have had some success so far in the domestic water supply and waste water treatment pumping stations. It is desirable that a follow-up project, with a different design, be considered to capitalize on opportunities that have recently opened up under the government’s IWRMP, including the water sector reforms. Sustainable operation of the vital public infrastructure services, such as irrigation and drainage pumping stations, will remain an important goal in an economy where irrigated agriculture is of vital interest. A follow-up project could support a number of the relevant outcomes of the IWRMP and the CAS namely: (a) enhancing the provision of public services through improved efficiency of infrastructure, and (b) facilitating private sector development through actions outlined in the IWRMP regarding empowering water users associations, public-private participation and cost recovery of irrigation and drainage services. In the Nile Delta drainage pumping stations will remain important public goods assets and will “climate proof” the investments by helping to counter the effect of sea water intrusion through the impact of the sea level rise predicted by different climate change scenarios for Egypt. The most effective way to prevent or at least ameliorate sea water intrusion would be to continue to grow rice in the areas adjacent to the northern shores by irrigation using mixed irrigation and drainage water.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation Considering the continued contribution of agriculture to the country's economy, to employment, and to reduction in rural poverty, the project’s objectives were and still are highly relevant. This is evident from the current CAS and the GOE’s Integrated Water Resources Management Plan (IWRMP), which focus on enhancing public infrastructure services. The objectives also included strengthening MED’s institutional capability in order to improve and optimize the

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operation and maintenance of the pumping stations and to ensure better sustainability of the investments made under the project. Project design included a substantial component relating to environmental monitoring mainly by establishing an Environmental Unit, provision of equipment for water quality monitoring, safety tools, awareness programs and capacity building. Despite the single source of water supply, the water management and irrigation water delivery system is very complex and depends largely on pumping. Pumping heads range from 5 to 50 meters to satisfy the irrigated agriculture. Pumping of drainage water is also needed to control ground water levels and salinity and to ensure conveyance of the drainage water through dedicated drainage channels towards the sea. Implementation arrangements for construction of new pumping stations proved to be unsatisfactory. MED lacked the capacity to implement the new construction of pumping stations, MIS and M&E subcomponents.

3.2 Achievement of Project Development Objectives

Objectives # 1 and 2 were partially achieved. The project has improved the efficiency of operation and maintenance of 104 irrigation and drainage pumping stations through complete rehabilitation, partial replacement and provision of spare parts. These 104 pumping stations are providing reliable irrigation water during peak water demand (i.e. about 40,000 liters per day per feddan) and evacuating drainage water (between 10,000 to 8,000 liters per day per feddan) to prevent the losses in crop yields of smallholders. The aggregate command or served area is about 2.4 million feddans, or 155% of the original target, as shown in the table below. The project would further improve 21 irrigation and drainage pumping station after completion of the new pumping stations serving an aggregate area of 533,000 feddans (Table 1 of Annex 2).

Type of intervention Actual CostIrrigation Drainage Total Irrigation Drainage Total Million (US$)

New construction 13 8 21 189,000 344,300 533,300 72.3Complete rehabilitation 19 5 24 126,780 501,000 627,780Partial replacement 19 6 25 359,800 449,750 809,550Provision of Spare parts 41 14 55 652,480 316,250 968,730 31

Total 92 33 125 1,328,060 1,611,300 2,939,360 128.2

Number of Pumping Stations Benefited Area (feddan)

24.9

The overall impact on efficient energy use has been positive and exceeds the appraisal expectations. New equipment and spare parts have increased the operational efficiency of motors and pumps and reduced the amount of maintenance required, resulting in immediate cost savings. Estimated energy savings stemming from the project amount to about US$3 million annually. Savings in maintenance costs are estimated at 5 and 1 percent of the capital costs of rehabilitation and spare parts or US$1.55 million a year.

Type of intervention Annual Energy SavingsIrrigation Drainage (US$)

Complete rehabilitation + 22% + 10% 624,637Partial replacement + 13% + 5% 1,376,690Provision of Spare parts + 9% + 7% 1,054,593

Total 3,055,920

Pumping Station

Increase in efficient Energy Use

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The project is generating agricultural benefits. The weighted average of the net agricultural benefits is estimated at about US$42/feddan in the case of improved drainage pumping stations, and at US$26 for irrigation pumping stations. At full development, when the new pumping stations have been completed, it is envisaged that the incremental benefits of the project would be US$54 million annually which is lower than estimated at appraisal (US$ 69 million/year) Objectives # 3, strengthening further the planning and O&M capability of the MED to enhance the sustainability of the irrigation and drainage system, was partially achieved. This is mainly because the MIS system is not yet operational (see Annex 2) and because of shortcomings in monitoring and evaluation aspects. The strengthening of central workshops and laboratories together with the supply of spare parts for pumping stations have reduced the O&M costs and improved pumping efficiencies. Despite the shortcomings in M&E it is possible to infer that the four components of the project contributed directly to improved quality of the level of irrigation and drainage services summarized as follows:

Service quality Irrigation Drainage

Adequacy Ability to meet water demand for optimal plant growth

Ability to dispose excess water in minimal time to prevent damage

Reliability Confidence in supply of water Confidence in ability to dispose excess water

Equity Fair distribution of share of water shortage risks and minimize the head and tail equities (poverty aspect)

Fair distribution of risks

Flexibility Ability to choose the frequency, rate and duration of supply

Ability to choose the time, rate and duration of drainage water disposal

3.3 Efficiency The costs per feddan for new construction, complete and partial replacement and the provision of spares are summarized below. The unit cost per feddan for the spare parts was higher than for partial or complete replacement because enough spare parts (i.e. because of customized nature of the pumps) had been provided for about five years operation. About 14 pumping stations were provided with spare parts in addition to being subject to rehabilitation (either partial or complete).

Type of intervention Benefited area Actual Cost Cost perfeddan Million (US$) feddan (US$)

New construction1/ 533,300 72.3 136Complete rehabilitation 627,780Partial replacement 809,550Provision of Spare parts 968,730 31 32

Total 2,939,360 128.2 44Note 1: civil works are under implementation

24.9 17

The recalculated economic rate of return (ERR) is 13.9% compared with 30% at appraisal (Annex 3). The net present value using a discount rate of 12% would be US$19.6 million against the US$136.26 million estimated at appraisal. The ERR has been calculated over a 20 year period from the project start-up (January 2001).

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Economic Results ERR NPV

PAD 30% US$136.26 million ICR 13.9% US$ 19.6 million

The main reason for the lower than expected ERR is the poor performance of the project’s main sub-component: the new constructions originally foreseen have been reduced in numbers from 32 to 21 due to civil works being delayed beyond any reasonable implementation time. The corresponding loan funds were reallocated to the purchase of spare parts. Because of poor and delayed development of the project MIS and M&E activities, the bases for estimating project agricultural production benefits and of cost reduction in operation and maintenance are still rather weak. Because of the lack of solid M&E data, expected benefits were estimated on a conservative basis as outlined in Annex 3. Sensitivity Analysis A sensitivity analysis was performed. In the first case, it was assumed that the benefiting command area was 30% smaller (about 2.06 million feddans instead of the 2.94 million feddans registered by MED). In the second case, it was assumed that the partial replacement of pumping stations and the provision of spare parts did not create agricultural benefits, keeping only the benefits from the new construction and complete rehabilitation components. In the first case, the ERR drops to 9.9%. In the second case, the ERR drops to 10.5%.

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3.4 Justification of Overall Outcome Rating At project closing the overall rating is considered moderately satisfactory as summarized below.

Cost US$ million Project Outcome1/

Weight Over

Contribution to PDO Components

Appraisal Actual Rating Value Actual Value %

1- Rehabilitation of pumping stations 214.43 139.4 i) Construction of new stations 125 72.3 U 2 37 0.75

ii) Complete rehabilitation 67 24.9 S 5 13 0.64 iii) Provision of spare parts 15 31 S 5 16 0.80 iv) Provisions for five Emergency Centers 7 11.2 S 5 6 0.29 2- Strengthening Central workshops and laboratories

10.87 9.5 S 5 5 0.24

3- Institutional support for MED 23.72 40.9 i) Developing an integrated MIS 3 6.8 MU 3 4 0.11 ii) Establishing an Environmental Unit 3 2.1 S 5 1 0.05 iii) Provision of buildings, equipment and vehicles

18 32 S 5 17 0.83

4- Capacity building for MED 3.4 4.1 i) Provision of technical assistance 2.3 2.4 S 5 1 0.06 ii) Provision of training 1.1 1.7 S 5 1 0.04

Total 252.42 193.9 MS 3.8 Note 1: Satisfactory (S)=5; Moderately Satisfactory (MS)=4; Moderately Unsatisfactory (MU)=3; Unsatisfactory (U)=2;

The project is still under implementation by GOE and KfW. It is recommended that the project be evaluated 24-36 months after loan closure. Points of specific focus should be: (1) the timeliness and quality of the completion of the new pumping stations which are under progress; (2) operation and maintenance plans of new pumping stations; and (3) the use of the management information system. Rating: Moderately satisfactory

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The project was very important in combating poverty and in generating employment given that two-thirds of the poorest people in Egypt lives in rural areas. The number of rural farm families benefiting from the project is estimated at one million which is more than the appraisal estimate of 700,000. The incremental benefits on farm family income range between 6 to 10 percent (Annex 3). Construction works have generated employment and so will the operation and maintenance of irrigation and drainage pumping stations. Direct benefits can also be attributed to the employment of the national contracting industry in the construction of the new pump stations which, although delayed and currently about 70% completed, will have participated in the provision of experience and expertise for this vital national industry and its staff. In addition considerable experience to the consulting engineering profession which will have participated in the design and supervision of the civil works for the station

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The other direct employment impact would be on agricultural growth through production, consumption and labor market linkages. The project has also the potential to reduce equity disparities between head-end and tail-end farmers through better access to reliable irrigation water by improved pumping stations. Evacuation of drainage water has also a broad range of positive impacts on social development through improved water quality and reduced exposure to water-borne health hazards. (b) Institutional Change/Strengthening The project was implemented directly by the MED without any separate project implementation unit. The Directorate of the Environment (DOE) was upgraded to a General Directorate of Environment. This is a major step towards ensuring that environmental concerns will be streamlined into MED’s operations. In addition the Central Directorate for Projects was upgraded to a Sector Directorate Level. More than 200 persons have so far been trained on subjects related to operation and maintenance of electro-mechanical equipment. Most of the training was provided by the suppliers and manufactures of equipment and through the environmental sub-component. The large training program undertaken under the project has insured that adequate staff is trained to carry out efficient O&M programs. Serious shortcomings were the failure to introduce the MIS and monitoring and evaluation at an early stage. The recommendations from the cost recovery and privatization studies have been incorporated into the Bank-executed Private Sector Participation (PPP) action plan for MED. In this context, MED has expressed interest in pursuing the conceptual models to be developed, forming a specialized PPP committee. (c) Other Unintended Outcomes and Impacts (positive or negative) In the Nile Delta the rehabilitated drainage pumping stations will remain an important asset and will “climate proof” the investments by helping to counter the effect of sea water intrusion through the impact of the sea level rise predicted by different climate change scenarios for Egypt. The project contributed in sustaining a vibrant, efficient, private sector driven and export oriented commercial farming community, generated significant employment and contributed to overall economic growth and prosperity of the country.

4. Assessment of Risk to Development Outcome The risks to the development outcome are modest. The project has provided good quality and more efficient electromechanical equipment, has strengthened the decentralized O&M directorates and established five emergency units. Another positive aspect is that enough spare parts for the pumping stations which are not locally available have been supplied for at least the next five years. The Government is committed through annual budgetary allocations to operating and maintaining the pumping stations as they are critical for the survival of agriculture. After reviewing the MED’s O&M budget for the last four years, the ICR mission noted that allocations are generally adequate. The analysis also showed that most of the operating costs are mainly for energy consumption. The allocation of funds to maintenance activities is however small and the system is subject to contingency repairs. Neither the MIS nor the M&E effort has

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as yet been sufficiently integrated into the regular organizational pattern to sustain benefits in the longer term. Cost recovery measures are proposed in the most recent IWRM plan. Equally important are the proposed actions related to the use of Public Private Partnerships (PPP) to enhance efficiency and sustainability of integrated water resources management.

5. Assessment of Bank and Borrower Performances

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Bank performance has been moderately unsatisfactory in project preparation and appraisal. The project was not ready in terms of land acquisition and readiness of MED in establishing an M&E unit and MIS. The Bank was also overoptimistic with regard to the construction of new pumping stations. (b) Quality of Supervision The supervision missions were carried out regularly. Supervision missions rightly reduced the number of new pumping stations after realizing there were major difficulties with land acquisition and the capacity of MED in design and implementation of civil works. Generally, the missions were helpful to project implementation but often took too optimistic a view of project implementation progress and achievement of development objectives, which is the basic reason for the different rating given in the ICR. The Bank’s supervision missions called for “turnkey” contracts to speed up the construction of the new pumping stations. However, this was recommended only four years after the start of the project. It would have been desirable for the Task Team to have invited an agronomist, IT or MIS specialist and an institutional specialist to participate in some of the supervision missions. Bank missions in the last years of implementation were effective in introducing the public-private partnership concept in operation and maintenance of the pumping stations. The relationship between the Borrower, KfW and the Bank was satisfactory. KfW participated in several missions including the mid-term review missions. (c) Justification of Rating for Overall Bank Performance The Bank together with the German Development Bank (KfW) continues to facilitate institutional strengthening of MRWI through continued dialogues with the GOE. The Bank’s PPIAF study highlighted the need for the public-private partnership in operation and maintenance of the pumping stations. The Bank extended the project by 18 months. However, if the Bank had extended the project, which was continued beyond the closing date by KfW and GOE, by two further years, so that the new construction of pumping stations and MIS subcomponents could have been completed, the outcome of the project should have been more satisfactory. Overall Bank performance is rated as moderately satisfactory.

5.2 Borrower Performance (a) Government Performance

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The Ministry of Water Resources and Irrigation (MWRI) was supportive to the project and the ownership and commitment were established at the identification and preparation stage. The MWRI maintained cordial and good working relationships throughout the project implementation. The minister of MWRI himself was always highly interested in the project and in resolving major issues such as in the design and preparation of the Management Information System sub-component. The government was less effective in resolving issues related to land acquisition, construction delays, and lack of coordination between relevant departments implementing irrigation and drainage projects. The government did not maintain a Special Task Team as stipulated in the loan agreement. (b) Implementing Agency or Agencies Performance The Mechanical and Electrical Department (MED) was directly involved in project identification and has provided sufficient staff inputs in carrying out project identification as well as project preparation. The MED managed successfully to improve the operation and maintenance of irrigation and drainage stations. It is a credit to MED that it is able to maintain stations which are 30 to 40 years old with reasonable efficiency without major complaints from the Irrigation Department and farmers. Continuity of senior staff was good and there was only one project coordinator for the entire duration of the project. There was remarkable improvement in the performance of MED’s General Directorate of Environment during the later stage of project implementation. Less positive have been major deficiencies in the implementation of civil works, and the supply of electromechanical equipment for pumping stations that were not yet completed or even started, financial managements, the implementation of the MIS sub-component and attention paid to M&E activities. The project was implemented largely without coordination with the Irrigation Department. Overall Borrower Performance: This is rated moderately satisfactory.

6. Lessons Learned The main lessons learned from implementation of the project are as follows: 1- There was a need for this project and there is still a need for further modernization of

existing irrigation and drainage pumping stations and for improved operation and maintenance program. However, ensuring that rehabilitated irrigation and drainage pumping stations are sustainable in the long term should be the first priority in the design of any such project.

2- Use of “turnkey” or “Design-Build-Operate-Transfer” contracts will potentially involve less complication than having two separate contracts of which one for electromechanical equipment and one for civil works. It would avoid such things as the arrival of electro-mechanical equipment without the related civil works being ready for installation of the equipment.

3- A repeater project such as this (this was the third project) with a simplified project design should not be at the expense of dealing with broader and longer term issues. All features of water use for agriculture should be considered, rather than only the most urgent repair work to the infrastructure itself, and the need for institution strengthening should be looked at, as well as the possibility of irrigation management transfer and public-private partnership arrangements which are essential for sustainability of irrigation and drainage assets. Some provision should be made in the budget and flexibility should be introduced in project design so that these issues may be properly addressed during later stages of implementation when the most urgent repair works have been done.

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4- The process of establishing an MIS and M&E unit should start ahead of project implementation. A baseline survey is needed to appreciate the incremental impact of project-induced changes.

5- The importance of good planning of project implementation cannot be overstressed. For instance, the fact that a certain time is needed for acquisition of land and procurement in accordance with Bank guidelines has been well known for many years, yet still such a factor has been the cause of serious delay.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (unedited) The project which was designed as the third Bank-financed project supporting the Government’s strategic plan for rehabilitation of the pumping stations along the Nile Valley and Delta water management system achieved considerable favorable results as outlined throughout the ICR. Likewise, a number of lessons were learned to further improve progress during implementation. While in general the ratings presented in the ICR are indicative of the project progress and situations faced during the implementation period, it is important to note that while the Bank’s contribution to the project was closed on the 31st of August 2007, the project as a whole is still under implementation by the Government. It is expected that all project activities currently under implementation will be completed by the end of 2008. This will significantly add to the project’s benefits as well as progress on achievement of the final project outcomes. The initial loan closure date was extended from the initial date of 28 February 2005 to 31 August 2007. While further extension was not possible by the Bank, it would have been favorable to allow for completion of all components within the loan duration. Accordingly a total amount of US$ 20 million was cancelled from the loan as outlined in the Borrower’s section of the ICR. With regards to discharge measurements at the pumping stations, even though it was not included within the initial project design, it was implemented throughout as per MED’s norms of requiring discharge measurement tools in the bidding documents of all new stations. As presented throughout the ICR a number of major factors throughout the implementation period caused severe delays with regards to the new construction pumping stations. While the national procurement law (no. 89 for the year 1998) has been revised and now includes a provision for price adjustments –which was identified as one of the delay factors particularly with the devaluation of the Egyptian currency- one of the major lessons learned during implementation is to adopt a Turn Key approach, combining both civil and electro-mechanical works, for the tendering of new pumping stations. Towards the end of the loan closure period, the Turn Key method was utilized for the tendering of the four stations of West Tahta 1, 2, 3 and 4. Follow up on these contracts is showing favorable results compared to those achieved with the non-Turn Key approach. Another element that was delayed in implementation was the completion of the Management of Information System (MIS). An initial tendering process had to be cancelled during the Invitation for Bids stage following the Minister’s instructions to implement an MIS system that is connected and compatible with the one used throughout the MWRI. During that time the Bank team worked closely with the project team at MED and even provided an MIS consultant to work with the team in formulating the technical specifications and bidding documents needed for the new tendering.

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With the loan closed and pending items nearing completion, it would be of considerable benefit if the Bank continued its engagement in the Government’s long-term program for rehabilitation of major pumping stations throughout Egypt’s irrigation and drainage networks. (b) Cofinanciers The Draft ICR report was submitted to the cofinancier KfW for their comments. KfW did not have any comments to the contents and performance ratings. However, KfW provided valuable comments concerning their contribution to the project. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal

Estimate (USD millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

Rehabilitation of pumping stations 214 139.4 65

Strengthening central workshops and laboratories 11 9.5 87

Institutional support for MED 24 40.9 172 Capacity building for MED 3.4 4.1 121

Total Project Costs 252.4 193.9

(b) Financing

Source of Funds

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of

Appraisal

Government of Egypt 103.8 65.4 63 International Bank for Reconstruction and Development 120 99.5 83

Germany - KfW1/ 28.6 29 101 Total 252.4 193.9

Note 1: KfW contribution was about 24.03 million Euro.

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Annex 2. Outputs by Component Component 1: Rehabilitation of pumping stations (Actual cost 139.4 US$ million, 72% of total cost). (i) The project provided for supply and installation of electromechanical equipment

and auxiliary equipment for 21 new pumping stations (13 irrigation and 8 drainage) to replace existing, old and dilapidated stations. Or, in some cases, because of the remodeled irrigation and drainage systems, the pumping capacities had to be increased due to modified lifts dictated by altered water levels. The Government is financing all civil works and parts of the auxiliary equipment manufactured in Egypt. None of these 21 stations have been completed. Civil works are in progress (Table 1).

(ii) Complete or partial rehabilitation of 49 pumping stations to replace all of the

electromechanical equipment within existing buildings with rehabilitation of the building itself, inlet and outlet works. The project provided for supply and installation of electro-mechanical equipment, auxiliary equipment and rehabilitation of existing buildings including inlet and outlet works. The Government financed all rehabilitation works and parts of auxiliary equipment manufactured in Egypt.

(iii) Supply of spare parts for repairs to 55 irrigation and drainage pumping stations.

The project provided for supply and installation of spare parts. The spare parts are from the original manufacturers (Hungary, Japan, USA, Switzerland and Germany)

(iv) The project supplied mobile pumps, motors and generators of various capacities

(diesel and electric) for five emergency centers, two existing and three new. The Government financed the construction of buildings and other facilities for these centers, which are located at: Mariut No. 2 Pumping Station in North West Delta; Kafr El Sheikh in Middle Delta; El-Wadi in East Delta; Beni Suef in Middle Egypt; and Naga Hammadi in Upper Egypt.

Component 2: Strengthening Central Workshops and Electrical Laboratories (Actual cost US$ 9.5 million, 5% of the total cost) Existing electrical and mechanical workshop and regional directorates were strengthened through the provision of equipment including mobile electrical laboratory equipment and mobile mechanical workshops. The following has been supplied: 16 telescopic cranes (30 to 45 tons) and 5 boom cranes including spare parts (US$5.8 million); 33 fork lifts (3 to 5 tons) and 5 backhoe loaders (1 m3 capacity), for a total sum of US$0.9 million; weed screens cleaning machines which prevent debris from entering into the pumps (US$0.8 million); and 100 grease filling devices (estimated costs US$1.2 million). These equipments are facilitating the effective operation of these workshops and laboratories. Loan funds were mainly used for specialized workshop and laboratories equipment and heavy-duty equipment which was not available locally. The project provided support to the MED headquarters through provision of utility vehicles, four fully equipped mobile laboratories including a vehicle, equipment for diagnostic and inspection purposes and basic equipment for water quality testing and analysis.

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Component 3: Institutional support (US$ 40.9 million, 21% of total actual cost) The major part of this component was financed only by GOE. It included civil works for staff housing, workshops, stores and field offices. In addition this component covered rehabilitation of regional offices (i.e. for operation and maintenance). Total estimated actual cost is about US$ 31 million. No detailed breakdown in square meters of new or rehabilitated buildings is available. The Management Information System (MIS) was established on a pilot scale under Pumping Stations Rehabilitation Project I (Ln.2270-EGT) and was expanded to cover all of the major activities of MED under Pumping Stations Rehabilitation Project II (Ln.3198-EGT). It was proven to be a good management tool and the plan was to modernize and expand the MIS under this third project to various field regional offices, major pumping stations, stores, workshops and laboratories. At the start of the project the MED faced considerable problems with the preparation of TORs, specifications, bidding packages and tendering process. The process of implementing an MIS is summarized below. MIS Contract Details:

- Request for Proposals issuance: September 2005 - No objection: April 2006 - Issuance of purchase order: June 2006 - Contract effectiveness: January 2007 - Contract completion period: 14 month - Contract completion date: March 2008

Contract Cost:

- Delivery CIF of equipment: US$ 2,660,412 - Installation, local deliveries, local works and training: LE 11,012,756 - Sites preparation, furnishing and supply of AC units: LE 13,051,160 There is a provision for technical support for a period of one year after system introduction (acceptance). Provisions are also made for system maintenance during the guarantee period of three years. To ensure successful operation of the system, the MED is now negotiating with the Contractor for extending the technical support for another two years. The MED is planning to outsource the operation and maintenance of the MIS to the Contractor until it is sure that MED engineers and operators will be able to run the system efficiently. Progress at project closure is summarized below: • All hardware and software has been delivered. • MED headquarters:

o All civil and architectural works are completed. o All computer facilities, fixtures and furnishings have been supplied and

installed. • Regional Offices, workshops, storehouses, emergency centers and major pumping stations:

o Completion of civil and architectural works is about 60%. o Training component is 70% complete.

Telemetry has not been established except in a couple of pumping stations independently of the project on a trial basis. The MED had agreed to establish a Monitoring and Evaluation unit which would have focused on a selective basis on monitoring the efficiency of pumps before project improvements and would have continued to monitor the efficiency after installation of

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new electro-mechanical equipment. The energy consumption was also to be monitored. This M&E unit, however, was not established.

Component 4: Technical Assistance and Training (US$ 4.1 million, 2% of the total cost)

Technical assistance and training focused on which was either new to MED or where expertise is needed to broaden the scope of knowledge of the MED staff. Technical Assistance (TA) included a consultancy assisting MED (7 person-months; US$30,000), ii) the preparation of the MTR Report (9 person-months; US$16,500); iii) auditing services (10 person-months; US$10,000); and iv) the cost recovery and the privatization studies (8 person-months; US$34,000). In addition, a number of TA activities were/are undertaken under the civil works and electro-mechanical contracts (total of 5 person-months) such as: testing and inspection of electro-mechanical equipment and hydraulic & structural surveys. MED also spent about US$40,000 equivalent for conducting water quality analysis (by the Drainage Research Institute - DRI) and another US$40,000 for preparing an environmental strategy, all that using its own funds.

The recommendations from the cost recovery and privatization studies have now been incorporated into the Bank-executed Private Sector Participation (PPP) action plan for MED. In this context, MED has expressed great interest in pursuing the conceptual models to be developed, forming a specialized PPP committee and, during the mission, hosted a workshop to review the interim report of the PPIAF consultants with the Bank team. The PPP concepts have now been further developed in line with the Ministry’s movement forward in this direction and a planned preparation by MED of PPP pilot activities is now being considered.

Local training using counterpart funds: Since the year 2000, about 600 of MED employees were trained at the MWRI Training Institute in Cairo on several major themes such as O&M, fire prevention, program logic control and technical inspection Overseas training has been provided by suppliers of electro-mechanical equipment through the projects’ goods contracts. About 222 persons have been trained on subjects related to operation and maintenance of electro-mechanical equipment. This training amounts to a total of 705 staff-weeks, with half of those consisting of overseas training which has been provided for a total cost of about US$1.9 million through the procurement of goods contracts.

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Table 1: Status of New Irrigation and Drainage Pumping Stations

Electro-mechanical Contract Civil Works Contract GOE financed

Station Name Foreign Portion U.S.$

Local Portion

L.E

Equipment Delivery

Cost Million

L.E

Contract Award

Estimated Completion

Date

Progress %

Wadi Abadi 1 492,652 2,183,701 April-05 9.4 May-04 Jun-08 90 Wadi Abadi 2 466,582 1,309,824 April-05 5.6 Apr-04 Jun-08 90 Wadi Abadi 3 466,582 1,309,824 April-05 4.1 Apr-04 Sep-08 86 Wadi Abadi 4 492,652 2,183,701 April-05 4.4 Apr-04 Jun-08 85 Bani saleh 780,000 1,466,380 June-05 5.9 May-04 Aug-08 60 El-Nasr No.4 5,511,533 7,066,309 September-04 16.5 Jan-05 Jul-08 83 Deir Abo Hennes Intake 439,825 2,003,397 July-07 5.5 Sep-06 Nov-08 22 Deir Abo Hennes Inner 304,975 2,397,219 July-07 2.7 Sep-06 Nov-08 10 Zawyet Soltan 237,412 1,672,798 July-07 7 Sep-06 Nov-08 36 Sharawna 468,764 2,013,836 July-07 8.2 Sep-06 Nov-08 15 El-Gharak 1 588,910 3,268,790 January-07 10 Jun-05 Jul-08 20 El-Gharak 2 1,377,964 3,821,004 March-07 10 Jul-05 Aug-08 20 El-Gharak 3 1,520,260 3,928,015 March-07 10 Jul-05 Aug-08 40 West Tahta 1 643,009 4,310,765 April-06 16.25 Sep-05 Dec-08 30 West Tahta 2 499,857 4,313,994 April-06 16.25 Sep-05 Dec-08 85 West Tahta 3 499,857 4,313,994 April-06 16.25 Sep-05 Dec-08 50 West Tahta 4 434,922 3,917,246 April-06 16.25 Sep-05 Dec-08 65 Deir Al-Sankouria 1,880,860 3,546,353 October-05 10.2 Oct-04 Jun-08 75 Drain no. 1 2,305,113 3,035,716 November-06 15.1 Feb-05 Feb-05 45 Drain no.3 1,803,448 3,939,762 December-05 14.5 Feb-05 Feb-05 80 Hafer Shehab El-Din 2,207,112 4,405,121 December-05 14.4 Feb-05 Feb-05 69

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Annex 3. Economic and Financial Analysis

In the context of Egypt’s overall agricultural and economic policy, the strategic focus on agricultural export sector is crucial because of the potentially large positive impact on Egypt's rural sector via higher farm incomes, sector-wide rural economic growth, and increased employment opportunities1. In turn, this would induce better living standards in rural areas which, despite substantial migration rates to urban areas, are currently still inhabited by about 55% of Egypt's population. MED’s irrigation and drainage (I&D) pumping stations (PS) are critical to the survival of Egypt's agricultural economy. The adequate functioning of irrigation PSs is important to ensuring timely availability of Nile water for farming and for assuring dependable supplies during periods of peak demand. Equally vital is the adequate functioning of drainage PSs to enable the evacuation of drainage water to prevent excessive water and salinity. Without adequately functioning I&D facilities, agricultural production and consequently exports would fall and food imports would rise. According to the PAD the project would have two main beneficial impacts: (i) losses prevention in crop yields by ensuring adequate supply of irrigation water and provision of adequate drainage during peak periods (June-August); and (ii) reduction of the unit cost of water pumped by improving the efficiency of the PSs, resulting in fiscal savings through reduced expenditures on O&M. Based on reasonable assumptions, the PAD envisaged that the project would benefit a total of about 498,595 fed through rehabilitation of irrigation PSs, and 1,049,550 fed through rehabilitation of drainage PSs, resulting in a total of about 1.55 million fed benefiting under the project. With average size of land holding per farm equivalent to about 2 fed, about 700,000 farm families would benefit from the project. The PAD noted that there were limitations in drawing precise conclusions on the relationship between water table levels, irrigation deliveries, drainage performance and yields. So, it states that it was difficult to come up with a precise calculation of the effects on agricultural production of the declining performance of PSs, because crop yields are a function of several interrelated factors (technology, inputs, cultural practices and farm management). Although there is no single causal factor for yield changes, especially under real field conditions, it was correctly recognized that, without adequate water and/or drainage conditions, crops suffering from water stress or excess would have consequent reductions in yields. Hence, the on-going reduced performance of I&D PSs, particularly during critical periods, would have an increasing adverse effect on crop yields. The PAD calculations revealed that the average annual incremental benefits (from avoiding crop losses) due to complete rehabilitation (CR) or new construction (NC) of PSs in the three regions of the Delta, Middle Egypt and Upper Egypt would be about US$85 per fed for irrigation and about US$35 per fed for drainage. The benefits per feddan for spare parts (SP) were estimated at US$10 per annum. A total of 1.55 million fed would benefit under the project. At full development; i.e., by 2007, it was envisaged that the total agricultural benefits from the project (based on crop loss prevention) would be US$69 million annually. Based only on the agricultural benefits calculations for the economic rate of return to the project showed it to be in the order of 30% and the NPV US$136.26 million. Base Assumptions for the ICR Analysis Because of poor and delayed development of the project MIS and M&E activities, the bases for estimating the scope for improvements for the project in terms of pumping performance, of

1 Poverty was estimated in 19.6% in FY05 with half of the poor in Egypt living in upper rural region.

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resulting production benefits, and of cost reductions are still rather weak. No detailed feasibility studies were undertaken of the pumps before project interventions and reliable data on the baseline and current performance of the project enhanced PSs in terms of water delivered, down-time, and O&M costs is generally lacking. The key measure of performance is the efficiency of the pumping system. This is in principle measured by the Mechanical and Electrical Research Institute every 3 years, but no routine monitoring or analysis has been carried out to establish the impact of rehabilitation or supply of spare parts on efficiency. Similarly, costs of O&M are not routinely monitored. There is even some doubt about the accuracy of the areas served by each PS. In spite of the mentioned lack of solid data, expected benefits were estimated on a conservative basis. The assumptions used for this ICR evaluation of project benefits are as follows: (i) Benefited areas were considered for each improved PS assuming the respective MED declared command area. Total area served by the project 125 supported PSs (21 NC, 24 CR, 25 PR, and 55 SP) reached 2.9 million fed (1.3 million fed from improved irrigation PSs and 1.6 million fed from drainage PSs). The following table summarizes the type of PS improvement, the investment involved and the area served by each of the project programs. Table 1 Number and Type of PSs, Investments and Area served per program.

Program No. of PSs Investment Benefited Area (fed) Type of PS Irrigation Drainage Irrigation Drainage Irrigation Drainage

New Construction 13 8 US$ 72.3 million 189,000 344,300 Complete Rehabilitation 19 5 126,780 501,000 Partial Rehabilitation 19 6 US$ 24.9 million 359,800 449,750 Spare Parts 41 14 US$ 31 million 652,480 316,250 Emergency Centers US$ 11.2 million Other components US$ 54.5 million Total 92 33 US$ 193.9 million 1,328,060 1,611,300 Note: About 14 PSs which were provided with spare parts have been also rehabilitated by the project. To avoid double counting for the estimation of benefits, their command area was only considered as CR or PR. Regarding the type of improvement the area benefiting from the 21 NC PSs was estimated at 533,300 feddans (189,000 feddans from Irrigation PS sand 344,300 feddans from drainage PSs). Given the delays being experienced in carrying out the NC civil works, benefits for these 21 PSs have been delayed until 2008 and 2009 reflecting the expected completion dates of works as well as the build-up of benefits in crop yields. Agricultural area benefiting from the CR of PSs was estimated at 627,780 fed (126,780 feddans from irrigation PSs and 501,000 feddans from drainage PSs). The PR program command areas cover about 809,450 fed (359,800 fed from irrigation PSs and 449,750 fed from drainage PSs); and the SP program reaches about 0.97 million feddans (0.65 million from irrigation PSs and 0.32 million fed from drainage PSs). It is noted that improved drainage PSs not only benefit through agricultural increased production, but also to villages and infrastructure which may be flooded as a result of rising water tables, excessive rainfall and climate change. Poor drainage also generates health problems associated with pounded water such as water-borne diseases. These benefits are not quantified for this assessment. (ii) The analysis considered all actual project investment costs including complementary subcomponents and components, calculated in constant 2006 dollars. Taxes and duties levied by government on imports have been excluded from the costs, because they do not involve real productive use of resources but only positive transfers to government. No adjustments were made for the civil works and prevailing financial prices have been used to represent economic prices.. Total costs are expected to reach US$193.9 million once the completion of unfinished

32

works under the NC subcomponent is attained. Project costs are shown by year and component in Table 2.

Table 2 Project Actual Costs per Year and Component (in million US$) 2001 2002 2003 2004 2005 2006 2007 Total Modernization of PS New Construction Rehabilitation Spare Parts Emergency Centers

-

2.5 8 -

15 4

6.5 -

20 4

3.5 -

15 3.5 7

2.5

10 2 6 4

6 3 -

2.5

6.3 5.9 -

2.2

72.3 24.9 31

11.2 Central Workshops - - - 2.5 4 3 - 9.5 Institutional Support

- 5 10 8 12 - 5.9 40.9

Capacity Building - 1 - 2 0.5 0.6 - 4.1 Total 10.5 31.5 37.5 40.5 37.5 15.1 20.3 193.9 (iii) The project is generating agricultural benefits through improved yields due to enhanced delivery of irrigation water in quantity and timing, and also by better evacuation of drainage water. Timely delivery and evacuation are totally dependent on the reliability of the PSs. Reliability is critical during periods of peak demand for water and disruptions or malfunctioning in I&D PSs would have deleterious effects on crop yields and reduce farm incomes. The main impact of improved reliability and efficiency of pumping on irrigation PSs is felt at peak periods when water supply is more plentiful and temporary shortages of water are avoided. On drainage PSs the impact is felt both in summer and winter crops since they correspond to the peak irrigation season in summer and to the rainy season in winter. The regional average cropping pattern for each region in Egypt was assumed as shown in Table 4. Yield increases were considered according to the nature of the project intervention in line with actual or expected completion of civil works and equipment installation for each rehabilitated PS. (iv) For both I&D, it was assumed that field-level irrigation and drainage facilities are in place: for drainage, for example, it was assumed that drainage laterals and collectors are operating and the analysis only evaluates the effects on agricultural yields of investments in major PSs (head works) situated on the main canals. It is widely accepted that one third of the crop yields effects due to inadequate drainage can be attributed to the drainage PSs and two thirds to the rest of the drainage system (on-farm subsurface drainage and inter farm collectors) (v) Crop budgets under FARMOD framework were used for the analysis: the average incremental yield of summer and perennial crops was conservatively taken to be 5% as result of the NC and CR schemes of irrigation PSs2. For the Partial Rehabilitation (PR) and Spare Parts (SP) schemes, the average incremental yield was assumed to be only 1% and 0.5% respectively (20% and 10% of the benefits expected under the NC or CR programs). In arriving at the 5% increase estimate, consideration has been given to FAO Irrigation and Drainage Paper No 33 “Yield Response to Water”3 and to the monitoring information of the Irrigation Improvement

2 Certain incremental variable costs such as harvesting and transport are also assumed to be incurred for the incremental yield, as will additional pumping and irrigation costs at field level as compared with the without project situation. These were estimated at no more than US$5/feddan.

3 According to FAO Paper 33, a 30% shortage of water applied to crops can lead to a reduction of 10% to 30% in crop yields for different crops. A 20% shortage would be equivalent to 1 in 5 pumps failing at PS.

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Project (IIP) recently completed4. In the case of NC and CR of drainage PSs, also a 5% yield increase was considered, in this case for all summer and winter crops5. As in the case of irrigation PSs, the enhanced drainage PSs under the PR and SP programs would have only 1% and 0.5% yield increases. Estimated values of incremental net benefits/fed for the NC and CR schemes are given in Tables 3 and 4. The weighted average of the net agricultural benefit was estimated at about US$42/feddan in the case of improved drainage PSs and at US$26 for irrigation PSs.

4 Improved availability of water during the peak season allows for the reduction in time between irrigations. M&E of IIP assessed the impact of applying continuous flow (CF) in improved areas on crop yield: the total yield per fed of crops were compared in the areas with and without CF in Mahmoudia for the 2005 season. Yield of wheat varieties were higher with CF than those without it except for Sakha 69. All yield of summer crops on farms with CF were higher than those without CF. The increase in yield ranged between 11-38%.

5 Under the Second National Drainage Program EPADP has been conducting the M&E (Progress Report No 11) of establishing, enlarging and deepening of open drains and the rehabilitation of old drainage systems and infrastructure works required, including PSs and siphons, to provide a water table depth of 2.5 m in the open drains to create an adequate outflow of collaterals and to prevent the return of drainage water in the lateral drains. Crop production increase during the studied period 1999–2006 ranged from 5–40% after four years of the rehabilitation of the drainage systems (rice 30%, maize 40%, cotton 20%, wheat 5%, and beans 14%).

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Table 3 Estimation of Project Incremental Benefits for Drainage PSs (NC or CR)

Crop Yield Economic Financial %cropping GrossRev US$/fed Incr.

Revenue t/ha US$/t US$/t pattern Economic Financial % US$ Delta Econ. Wheat 2.6 249 200 34% 220 177 5% 11 Broad bean 1.16 378 378 5% 22 22 5% 1 Berseem long 29.1 10 10 30% 87 87 5% 4 Berseem short 11.2 10 10 13% 15 15 5% 1 Winter Vegetable 9 70 70 9% 57 57 5% 3 Summer Vegetab 9.8 80 80 13% 102 102 5% 5 Cotton 1.08 621 478 14% 94 72 5% 5 Rice 1.3 217 175 35% 99 80 4% 4 Maize 2.6 211 150 30% 165 117 5% 8 Citrus 7.3 143 110 9% 98 75 5% 5 Total 192% 958 804 47 Benefit net of incremental costs (US$5/feddan) 42 Middle Egypt Wheat 2.28 249 200 36% 204 164 5% 10 Broad bean 1.16 378 378 4% 18 18 5% 1 Berseem long 28 10 10 30% 84 84 5% 4 Berseem short 10.8 10 10 9% 10 10 5% 0 Winter Vegetable 8 70 70 11% 62 62 5% 3 Summer Vegetab 10 80 80 14% 112 112 5% 6 Cotton 1.23 621 478 12% 92 71 5% 5 Sorghum 2.32 196 140 5% 23 16 2% 0 Soybean/Sunflower 1.23 407 380 8% 40 37 2% 1 Maize 2.66 211 150 50% 281 200 5% 14 Citrus 5.7 143 110 7% 57 44 5% 3 Sugar 47.44 32 28 3% 46 40 5% 2 Total 189% 1027 856 49 Benefit net of incremental costs (US$5/feddan) 44 Weighted Average according to project interventions US$/fed 42 (Delta 689,000 fed, Middle Eg. 167000 fed)

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Table 4 Estimation of Project Incremental Benefits for Irrigation PSs (NC & CR) Crop Yield Economic Financial Cropping GrossRev US$/fed Econ.Incr. Rev. t/ha US$/t US$/t pattern Economic Financial % US$ Delta Econ. Wheat 2.6 249 200 34% 220 177 0 Broad bean 1.16 378 378 5% 22 22 0 Berseem l 29.1 10 10 30% 87 87 0 Berseem s 11.2 10 10 13% 15 15 0 Winter Veg 9 70 70 9% 57 57 0 Summer Veget. 9.8 80 80 13% 102 102 5% 5 Cotton 1.08 621 478 14% 94 72 5% 5 Rice 1.3 217 175 35% 99 80 5% 5 Maize 2.6 211 150 30% 165 117 5% 8 Citrus 7.3 143 110 9% 98 75 5% 5 Total 192% 958 804 28 Benefit net of incremental costs (US$5/feddan) 23 Middle Egypt Wheat 2.28 249 200 36% 204 164 0 Broad bean 1.16 378 378 4% 18 18 0 Berseem l 28 10 10 30% 84 84 0 Berseem s 10.8 10 10 9% 10 10 0 Winter Veg 8 70 70 11% 62 62 0 Summer Veget 10 80 80 14% 112 112 5% 6 Cotton 1.23 621 478 12% 92 71 5% 5 Sorghum 2.32 196 140 5% 23 16 5% 1 Soybean/Sun 1.23 407 380 8% 40 37 5% 2 Maize 2.66 211 150 50% 281 200 5% 14 Citrus 5.7 143 110 7% 57 44 5% 3 Sugar 47.44 32 28 3% 46 40 5% 2 Total 189% 1027 856 32 Benefit net of incremental costs (US$5/feddan) 27 Upper Egypt Wheat 2.28 249 200 41% 233 187 0 Broad bean 1.16 378 378 4% 18 18 0 Berseem l 28 10 10 16% 45 45 0 Berseem s 10.8 10 10 3% 3 3 0 Winter Veg 8 70 70 7% 39 39 0 Summer Veget 10 80 80 11% 88 88 5% 4 Cotton 1.23 621 478 3% 23 18 5% 1 Sorghum 2.32 196 140 30% 136 97 5% 7 Soybean/Sun 1.23 407 380 0% 0 0 5% 0 Maize 2.66 211 150 28% 157 112 5% 8 Citrus 5.7 143 110 4% 33 25 5% 2 Sugar 47.44 32 28 25% 380 332 5% 19 Total 172% 1154 964 41 Benefit net of incremental costs (US$5/feddan) 36 Weighted Average according to project interventions US$/fed 26 (Delta 185,000 fed, Middle Eg. 216000 fed & Upper Eg. 27.000 fed)

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(vi) Projected 2007-2010 economic prices for traded commodities had been used in constant 2006 dollars based on World Bank commodity price forecasts made in May 2007. Export parity prices were computed for cotton, rice and citrus; and import parity prices were calculated for wheat, maize and sugar cane6. For non-traded commodities, such as vegetables, berseem and broad beans, and for traded and non-traded inputs, such as fertilizers and labor, the prevailing financial prices have been used to reflect economic prices. A 1.75 conversion factor for electricity was used considering the high subsidies on energy costs in Egypt. This factor is based on a recent estimation of the economic cost of electricity at High Voltage connections which was estimated at US$ 0.052 / kWh. This value was derived from a recent kWh pricing that will be used for contracts with large industrial companies7. (vii) Improved efficiency of PSs. There would be a reduction in hours pumping to deliver an equivalent amount of water and in electricity consumption. Based on an average supply of 10,000 m3 per fed, the electricity cost saving was estimated at US$3 million per year in economic values from a reduction in energy consumed. The economic cost of energy used was US$0.052/kwh to cover the opportunity cost of the energy consumed as well as distribution and transmission costs. (viii) Savings in Maintenance: By replacing old equipment with new, the project should reduce the requirements for repairs, although routine inspections and maintenance are still needed. Costs of repairs and maintenance for pumping systems are generally reckoned to amount to the equivalent of the initial capital cost of the equipment over the life of the equipment. Costs tend to mount with age and, by renewing equipment, there will initially be a substantial reduction in cost. Savings in maintenance costs are estimated at 5 and 1 percent of the capital costs of rehabilitation and spare parts or US$1.55 million a year. The annual estimated reduction in these costs for the 104 PSs (excluding the new pumping stations which are still under progress) was estimated at US$1.55 million per year.

Financial analysis Representative two fed farm models were prepared for illustrating the average situations of six typical farms benefiting from the project. Two models correspond to each of the three main regions (Delta, Middle and Upper Egypt). For each region one model represents the area covered by the NC or CR schemes of irrigation PSs, and the second model the areas covered by the NC or CR of drainage PSs. The financial expected benefit on family incomes was calculated assuming only the crops grown taking the average regional cropping pattern. Family income stemming from livestock activities which are present in almost all farms was not included in the models. The following Table 5 summarizes such benefits stemming from the project investments’ improved farming conditions. In the case of irrigation PSs, the annual average income increase would be US$38 per farm (6%), while for drainage PSs would reach US$60/farm, since it also benefit the winter crops. For the PR and SP project interventions, the expected benefit would be only 20% and 10% respectively, of the above mentioned income increase.

6 Resulting conversion factors for switching from financial to economic prices resulted in 1.245 for wheat, 1.3 for cotton and citrus, 1.24 for rice, 1.4 for maize and sorghum, 1.07 for soybean and 1.11 for sugarcane.

7 Egypt is electrically connected to Jordan, Libya and Syria, and has exchanged electricity with the three countries in 2005/2006. The cost of kWh varied according to recent calculations between US$ 0.06 and 0.10/kWh.

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Table 5 Financial Impact of the Project in Benefited Family Farms (US$/farm)

NC and CR of PSs Increment per farm Region Before After In US$ / farm In %

Irrigation PSs Delta Middle Egypt Upper Egypt Weighted Average

591 792 855 630

628 835 903 668

37 43 48 38

6 5 6 6

Drainage PSs Delta Middle Egypt Upper Egypt Weighted Average

591 792 855 630

648 857 925 690

57 65 70 60

10 8 8 10

Economic Rate of Return Based on the foregoing assumptions, the ICR calculations carried out reveal that the average incremental benefits per annum (from yield increases and/or avoiding crop losses) due to project new constructions, rehabilitation or spare parts supplied to the 125 PSs in the three regions of Delta, Middle Egypt and Upper Egypt will be about US$44 million per year once the NC program completes their works and the new PSs are in full operation, by 2010. A total of 2.94 million fed would benefit under the project. At full development; it is envisaged that the total agricultural gross value of production from the project would be US$54 million annually. Fiscal annual savings in O&M costs include US$3 million in electricity consumption and US$2.3 million in maintenance costs per annum in economic costs.

Economic Results ERR NPV

PAD 30% US$136.26 million ICR 13.9% US$ 19.6 million

The ERR has been calculated over a 20 year period from the project start-up (January 2001). The resulting rate is 13.9% which is positive but far below the 30% that was foreseen at appraisal. The net present value using a discount rate of 12% would be US$19.6 million against the US$136.26 million estimated at appraisal. The main reason for the lower than expected result is the poor performance of the project’s main component: the new constructions originally foreseen have been reduced in number due to slow processing of civil works which were delayed beyond any reasonable implementation time, and the corresponding loan funds reallocated to the purchase of SP foreseen to be needed for a about five years. The following Table 6 summarizes the overall project results and the corresponding indicators for each of the three main components. All benefits discussed above have been assigned to each component and set against the costs of all project components.

Table 6 Project Economic Results

Investment 1/ (US$ million)

ERR (%) NPV (12% disc.) (US$ million)

New Construction (NC) 109.4 8.3 - 19.2 Complete Rehabilitation (CR) 37.6 26.1 36.7 Spare Parts (PR & SP) 46.9 12.9 2.1 Overall Project 193.9 13.9 19.6

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1/ Includes proportional share of the Emergency Centers, Central Workshops and Laboratories, Institutional Support and Capacity Building Components. As can be seen from the above table, being the NC component the most important (56.4% of investment) the ERR appears to be only 8.3% (negative NPV of US$19.2 million) as result of the delays in completing the civil works and install the electromechanical equipment that has been idle since bought between four and six years but still stands in the PS’s sites waiting for its installation. The PS rehabilitation component (19.5% of investment) shows a significant 26.1% ERR (NPV at US$36.7 million) since the building sites were in good shape for immediate installation of the new equipment under the CR or PR schemes. Finally, the PR and SP program shows a marginal ERR of 12.9% (NPV at US$2.1 million) since SP for an estimated ten year requirements were purchased keeping far more than a reasonable stock of expensive SP. In Table 7 to 10 present detailed calculations of the costs and benefits for the overall project and the three main subcomponents, and the corresponding results in terms of ERRs and NPVs. Sensitivity Analysis The two main assumptions considered in the analysis that could be considered are: (i) the actual command area of the enhanced PSs; and (ii) the benefits stemming from the PR and SP schemes. A sensitivity analysis was performed assuming, in the first case a 30% reduction of the project benefited command area registered by MED (about 2.06 million fed instead of the 2.94 million registered by MED); and in the second case, a complete exclusion of the benefited agricultural area assigned for the PR and SP program (about 1.78 million fed increasing yields by 1% and 0.5% respectively) keeping only the 1.16 million fed as the command area benefited by the NC and CR components. In the first case, if the overall command area of the enhanced PSs was reduced by 30%, the ERR drops to 9.9%. If the benefits of the US$31 million investment in PR and SP programs are computed as generating no benefit, the ERR would drop to 10.5%.

1

Table 7 Project Summary ECONOMIC BUDGET (In US$ Million) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2012 Main Production Wheat 208 208 208 208 208 209 209 209 214 218 Broad Beans 17 17 17 17 17 17 17 17 18 18 Berseem 88 88 88 88 89 89 89 89 89 90 Winter Vegetables 54 54 54 54 54 54 54 54 56 57 Summer Vegetables 129 129 129 129 130 130 130 130 133 136 Cotton 102 102 102 102 102 102 103 103 105 107 Rice 82 82 82 82 82 82 82 82 84 86 Maize 225 225 225 225 225 226 226 226 231 237 Citrus 106 106 106 106 106 106 106 106 109 111 Sorghum 35 35 35 35 35 35 35 35 35 36 Soybean 10 10 10 10 10 10 10 10 10 10 Sugar 60 60 60 60 60 60 60 60 62 63 Sub-total Main Production 1,116 1,117 1,117 1,118 1,118 1,119 1,120 1,121 1,146 1,170 Production Cost Inputs 562 562 562 562 563 563 563 563 568 572 Energy Consumption 16 16 16 15 15 15 15 14 14 12 Operation & Maintainance Costs 8 8 8 8 8 8 8 8 8 6 Sub-Total Production Cost 586 586 586 586 586 586 586 585 590 590 Other Costs I&D PSs New Construction Investments - - 15 20 15 10 6 6 - -

I&D PSs Complete Rehabilitation Investments - 3 4 4 4 2 3 6 - -

I&D PSs Spare Parts Investments - 8 7 4 7 6 - - - - Emergency Centers - - - - 3 4 3 2 - - Central Workshops and Labs - - - - 3 4 3 - - - Institutional Support - - 5 10 8 12 - 6 - - Capacity Building for MED - - 1 - 2 1 1 - - - Sub-Total Other Costs - 11 32 38 41 38 15 20 - - OUTFLOWS 586 596 618 624 627 625 601 605 590 590 Cash Flow 530 520 500 494 492 495 519 516 556 580 IRR = 13.9%, NPV = 19.62

2

Table 8. New Construction Program ECONOMIC BUDGET (In US$ Million) 2001 2002 2003 2004 2005 2006 2007 2008 2012 Main Production Wheat 73 73 73 73 73 73 73 73 77 Broad Beans 6 6 6 6 6 6 6 6 6 Berseem 31 31 31 31 31 31 31 31 32 Winter Vegetables 19 19 19 19 19 19 19 19 20 Summer Vegetables 54 54 54 54 54 54 54 54 57 Cotton 42 42 42 42 42 42 42 42 45 Rice 32 32 32 32 32 32 32 32 34 Maize 92 92 92 92 92 92 92 92 97 Citrus 44 44 44 44 44 44 44 44 46 Sorghum 14 14 14 14 14 14 14 14 15 Soybean 4 4 4 4 4 4 4 4 4 Sugar 25 25 25 25 25 25 25 25 26 Sub-total Main Production 437 437 437 437 437 437 437 437 458 Production Cost Inputs 221 221 221 221 221 221 221 221 225 Energy Consumption 3 3 3 3 3 3 3 3 2 Operation & Maintainance Costs 4 4 4 4 4 4 4 4 3 Sub-Total Production Cost 228 228 228 228 228 228 228 228 230 Other Costs I&D PSs New Construction Investments - 15 20 15 10 6 6 - - Other Costs - - - 1 2 1 1 - - Central Workshops and Labs - - - 1 2 2 - - - Institutional Support - 3 6 5 7 - 3 - - Capacity Building for MED - 1 - 1 0 0 - - - Sub-Total Other Costs - 18 26 23 22 9 11 - - OUTFLOWS 228 246 254 251 250 237 239 228 230 Cash Flow 209 190 183 185 187 199 198 209 229 IRR = 8.3%, NPV = -19.15

3

Table 9 Complete Rehabilitation Program ECONOMIC BUDGET (In US$ Million) 2001 2002 2003 2004 2005 2006 2007 2008 2012 Main Production Wheat 109 109 109 109 109 109 109 114 114 Broad Beans 9 9 9 9 9 9 9 9 9 Berseem 46 46 46 46 46 46 46 47 47 Winter Vegetables 28 28 28 28 28 28 28 30 30 Summer Vegetables 51 51 51 51 51 51 51 54 54 Cotton 40 40 40 40 40 40 40 42 42 Rice 34 34 34 34 34 34 34 36 36 Maize 90 90 90 90 90 90 90 95 95 Citrus 42 42 42 42 42 42 42 44 44 Sorghum 14 14 14 14 14 14 14 14 14 Soybean 4 4 4 4 4 4 4 4 4 Sugar 24 24 24 24 24 24 24 25 25 Sub-total Main Production 491 491 491 491 491 491 491 515 515 Production Cost Inputs 244 244 244 244 244 244 244 249 249 Energy Consumption 2 2 2 2 2 2 2 2 2 Operation & Maintainance Costs 2 2 2 2 2 2 1 1 1 Sub-Total Production Cost 248 248 248 248 248 248 247 252 252 Other Costs

I&D PSs Complete Rehabilitation Investments 3 4 4 4 2 3 6 - -

Other Costs - - - 0 1 0 0 - - Central Workshops and Labs - - - 0 1 1 - - - Institutional Support - 1 2 2 2 - 1 - - Capacity Building for MED - 0 - 0 0 0 - - - Sub-Total Other Costs 3 5 6 6 6 4 7 - - OUTFLOWS 251 253 254 255 254 252 255 252 252 Cash Flow 240 238 237 236 237 239 236 263 263 IRR = 26.1%, NPV = 36.71

4

Table 10 Spare Parts Program ECONOMIC BUDGET (In US$ Million) 2001 2002 2003 2004 2005 2006 2007 2008 2012 Main Production Wheat 26 26 26 26 27 27 27 27 27 Broad Beans 2 2 2 2 2 2 2 3 3 Berseem 11 11 11 11 11 11 11 11 11 Winter Vegetables 7 7 7 7 7 7 7 7 7 Summer Vegetables 25 25 25 25 25 25 25 25 26 Cotton 19 19 20 20 20 20 20 20 20 Rice 16 16 16 16 16 16 17 17 17 Maize 43 43 43 43 43 43 44 44 44 Citrus 20 20 20 20 20 20 20 21 21 Sorghum 7 7 7 7 7 7 7 7 7 Soybean 2 2 2 2 2 2 2 2 2 Sugar 11 11 11 11 11 12 12 12 12 Sub-total Main Production 189 190 190 191 192 193 194 194 197 Production Cost Inputs 97 97 98 98 98 98 98 98 99 Energy Consumption 10 10 10 10 10 9 9 9 8

Operation & Maintainance Costs 3 3 3 3 3 2 2 2 2

Sub-Total Production Cost 110 110 110 110 110 110 110 110 109 Other Costs

I&D PSs Spare Parts Investments 8 7 4 7 6 - - - -

Other Costs - - - 1 1 1 1 - - Central Workshops and Labs - - - 1 1 1 - - - Institutional Support - 1 2 2 3 - 1 - - Capacity Building for MED - 0 - 0 0 0 - - - Sub-Total Other Costs 8 8 6 11 11 1 2 - - OUTFLOWS 118 118 116 121 121 111 112 110 109 Cash Flow 71 72 75 70 71 81 82 85 88 IRR = 12.9%, NPV = 2.07

5

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/ Specialty

Lending

Supervision/ICR

Maher Abu-Taleb Senior Water Resources Management Specialist MNSSD Task Team Leader

Adel F. Bichara Senior Irrigation Engineer, Consultant MNSSD Engineer and former TTL

Usaid Al Hanbali Senior Water Resources Engineer ECSSD Former TTL

Nejdet Al Salihi Lead Irrigation Specialist, Consultant MNSSD Engineer and former TTL

Mohamed Yahia and Ahmed Said Abd El Karim Financial Management Specialist MNAFM Financial Management

Azad Abdulhamid Senior Irrigation Engineer MNSSD ICR TTL Stefanie U.S. Brackmann Consultant AFTEN Hani Abdel-Kader El Sadani Salem Senior Water Resources Engineer MNSSD Zakia Chummun Language Program Assistant MNSSD

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only)

Stage of Project Cycle No. of staff weeks USD Thousands (including travel

and consultant costs) Lending

FY96 136.74 FY97 41.47 FY98 137.05 FY99 12.12 FY00 0.65

Total: 331.83

Supervision/ICR FY96 2.63 FY97 0.77 FY98 0.00 FY99 17.30 FY00 6 23.64 FY01 10 55.87 FY02 12 59.75 FY03 13 62.11 FY04 12 111.99 FY05 17 77.70 FY06 20 68.93 FY07 17 93.16 FY08 (estimated) 100

Total: 107 673.85

6

Annex 5. Beneficiary Survey Results (if any)

7

Annex 6. Stakeholder Workshop Report and Results (if any)

8

Annex 7. Summary of Borrower's ICR Project Description During preparation of the appraisal report the project’s components were as follows:

• Rehabilitation of 77 stations, 68 financed from the World Bank and 9 from KfW, setting up 5 emergency stations equipped with mobile pumping stations and power generators in addition to providing spare parts for 9 stations.

• Supporting the central workshops and engineering laboratories with operation and maintenance equipment.

• Supporting the Department with transport vehicles and inspection equipment. • Capacity building of the Department’s staff by providing technical support and training.

During preparation of the mid-term review the components were modified as follows:

• New construction of 21 stations. • Complete and partial rehabilitation of 75 stations. • Providing spare parts for 73 stations. • Setting up 5 emergency centers.

At the end of the project the components were as follows:

• New construction of 21 stations. • Complete and partial rehabilitation of 51 stations. • Providing spare parts for 62 stations. • Setting up 5 emergency centers.

This is in addition to increasing the quantity of equipment supplied over the initial assessment carried out during the beginning of the project. Loan Amount Upon the quantities calculated during the initial assessment the foreign component of the project was $120 million. During implementation and based on the Department’s good use of the loan, quantities of equipment delivered reached 150% of what was foreseen at the initial assessment and at less than the loan amount. Based on this, the Department returned $20 million of the loan amount due to the inability to utilize these funds in the period remaining up to loan closure and to avoid payment of interest on this amount. Outcomes Achieved by the Project The project benefits with respect to what is saved from O&M expenses which reached $2.5 million annually and the benefits from electricity savings of $1.8 million annually and the agricultural benefits of $47 million annually, this in addition to increasing the amount of water pumped to 8.1 BCM. Factors Affecting the Project

9

The main issues that played an important role in affecting project implementation can be summarized as follows:

1. Long implementation periods for civil works in new constructions. 2. Long periods for verification of technical data of the stations by the responsible agencies

before bidding. 3. Increases in construction materials such as steel and cement during project

implementation and long periods in approving compensations for contractors, a fact that led to a halt at construction sites.

4. Difficulties facing the Department in achieving expropriation of the required areas for construction of stations in case land is not owned by the Department.

Performance of the Department and the World Bank

From the beginning of the project a complete cooperation appeared between the Department and the World Bank to implement the project in the best way possible. This appeared during identification of the project components through the Preparation Report and the Appraisal Report, this in addition that during project implementation, the Bank would send missions every 6 months to supervise the project. At the end of each mission a report was prepared to update each of the project components.

Development of the Department’s Systems In light of the huge advancements in information systems all over the world and to be in-line with these advancements, the World Bank approved the Department’s upgrading of its information system be financing a complete project including upgrading the information system at the Department and connecting the main central with all directorates following it from Aswan to Alexandria. The project also includes a database for all the stations and its condition as well as the status of the stores and spare parts availability…etc. This system speeds up the process of decision making with regards to what stations need rehabilitation, renewal or supply of spare parts.

Lessons Learned

The lessons learned from this project form an important element that has to be taken into consideration during preparation of future projects, theses lessons are:

1. Focus on stations that need rehabilitation within the same structure while giving

attention to obtaining detailed data for the equipment to be rehabilitated as well as arrangement of structural drawings for the station. All this to be carried out during project component identification and preparation.

2. Inclusion of new construction stations under the condition of the availability of the

required expropriation documents or to use land owned by the ministry and tendering the contract on a Turn Key basis.

10

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders The Draft ICR report was submitted to the cofinancier KfW for their comments. KfW did not have any comments to the contents and performance rating by ICR. However, KfW provided valuable comments concerning their contribution to the project.

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Annex 9. List of Supporting Documents

• Staff Appraisal Report (Report Number 18163-EGT). Third Pumping Stations

Rehabilitation Project, July 1, 1998

• Loan Agreement (Loan number 4386 EGT). Third Pumping Stations Rehabilitation Project, November 4, 1998

• Supervision Missions’ Aide Memoirs from 2000 to 2007

• Mid Term Review Report. Third Pumping Stations Rehabilitation Project, August, 2003

• Country Assistance Strategy for The Arab Republic of Egypt for the Period FY06-FY09

IBRD and IFC, May 20, 2005, Middle East and North Africa Region

• Integrated Water Resources Management Plan, MWRI, June 2005

• Third Pumping Stations Rehabilitation Project, Appraisal Support Mission Report for KfW, Arcadis, April, 1998

• Irrigation Improvement Project, ICR, June, 2007

• Irrigation Pumping Stations Rehabilitation Project – ICR – May, 1993

• Second Pumping Stations Rehabilitation Project – Project Performance Assessment

Report, February 2004

• Project Appraisal Document. Integrated Irrigation Improvement and Management Project, April 7, 2005

• Assessment of Options for Public Private Partnership in Operation and Maintenance of

Irrigation and Drainage Infrastructure (with emphasis on pumping stations); PPIAF, July 2007

12