Document ofThe World Bank

Report No: ICR00003931

IMPLEMENTATION COMPLETION AND RESULTS REPORT(IBRD-72910)

ON A

LOAN

IN THE AMOUNT OF US$120 MILLION

TO THE

ARAB REPUBLIC OF EGYPT

FOR AN

EGYPT-INTEGRATED IRRIGATION IMPROVEMENT AND MANAGEMENT PROJECT

DECEMBER 15, 2016

Water Global Practice Egypt Country Management UnitMiddle East and North Africa Region

 

CURRENCY EQUIVALENTS(Exchange Rate Effective October 28, 2016)

Currency Unit = Egyptian Pound (EGP)EGP 1.00 = US$0.1129US$1.00 = EGP 8.8574

FISCAL YEARJuly 1–June 30

ABBREVIATIONS AND ACRONYMSBCWUA Branch Canal Water Users AssociationCAS Country Assistance StrategyCF Conversion FactorCPF Country Partnership FrameworkDWB District Water BoardERR Economic Rate of ReturnESMP Environmental and Social Management PlanFM Financial ManagementGOE Government of EgyptIAS Irrigation Advisory ServiceICR Implementation Completion and Results ReportIIIMP Integrated Irrigation Improvement and Management ProjectIIP Irrigation Improvement ProjectIIS Irrigation Improvement SectorIWMD Integrated Water Management District IWRIGD Integrated Water Resources and Irrigation General DirectorateKfW German Development Bank (Kreditaustalt fur Wiederaufbau)LLL Laser Land LevelingLTA Land Tax AuthorityM&E Monitoring and EvaluationMALR Ministry of Agriculture and Land ReclamationMEE Ministry of Electricity and EnergyMTR Midterm ReviewMWRI Ministry of Water Resources and IrrigationNDC Netherlands Development CooperationNPV Net Present ValueO&M Operation and MaintenancePAD Project Appraisal DocumentPDO Project Development ObjectivePMU Project Management UnitRAP Resettlement Action PlanRCU Regional Coordination UnitRPF Resettlement Policy Framework

 

SSD Subsurface DrainageSWM Solid Waste ManagementTA Technical AssistanceTF Task ForceWMRI Water Management Research InstituteWUA Water Users Association

 

ARAB REPUBLIC OF EGYPT

Egypt-Integrated Irrigation Improvement and Management

CONTENTSA. Basic Information.........................................................................................................................iB. Key Dates.....................................................................................................................................iC. Ratings Summary.........................................................................................................................iD. Sector and Theme Codes............................................................................................................iiE. Bank Staff ...................................................................................................................................iiF. Results Framework Analysis......................................................................................................iiiG. Ratings of Project Performance in ISRs..................................................................................viiiH. Restructuring (if any) ..............................................................................................................viiiI. Disbursement Profile………………………………………………………………………… ix

1. Project Context, Development Objectives and Design................................................................12. Key Factors Affecting Implementation and Outcomes...............................................................53. Assessment of Outcomes...........................................................................................................104. Assessment of Risk to Development Outcome.........................................................................165. Assessment of Bank and Borrower Performance......................................................................166. Lessons Learned........................................................................................................................197. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...........................21

Annex 1. Project Costs and Financing...........................................................................................23Annex 2. Outputs by Component..................................................................................................24Annex 3. Economic and Financial Analysis..................................................................................27Annex 4. Bank Lending and Implementation Support/Supervision Processes.............................38Annex 5. Beneficiary Survey Results............................................................................................40Annex 6. Stakeholder Workshop Report and Results...................................................................41Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR.....................................42Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders........................................51Annex 9. List of Supporting Documents.......................................................................................53MAP...............................................................................................................................................54

 

A. Basic Information

Country: Egypt, Arab Republic of Project Name:EGYPT-Integrated Irrigation Improvement and Management Project

Project ID: P073977 L/C/TF Number(s): IBRD-72910ICR Date: 11/28/2016 ICR Type: Core ICR

Lending Instrument: Specific Investment Loan Borrower: ARAB REPUBLIC OF EGYPT

Original Total Commitment: US$120 million Disbursed Amount: US$120 million

Revised Amount: US$120 millionEnvironmental Category: BImplementing Agencies: Ministry of Water Resources and Irrigation, Egypt Cofinanciers and Other External Partners: Kreditanstalt fur Wiederaufbau (German Development Bank) and the Netherlands Development Cooperation

B. Key Dates

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

Concept Review: 06/25/2002 Effectiveness: 05/02/2006 05/02/2006

Appraisal: 02/24/2005 Restructuring(s):10/14/201203/31/2014 01/17/2016

Approval: 05/12/2005 Midterm Review: 02/29/2012 06/05/2012 Closing: 03/31/2014 03/31/2016

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately SatisfactoryC.2 Detailed Ratings of Bank and Borrower Performance (by ICR)Bank Ratings Borrower RatingsQuality at Entry: Moderately Satisfactory 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 IndicatorsImplementation Performance Indicators QAG Assessments (if

any) Rating

Potential Problem Project at any time (Yes/No): No Quality at Entry

(QEA): None

Problem Project at any time (Yes/No): Yes 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 (Central Agencies) 4 4 Irrigation and Drainage 94 94 Sanitation 1 1 Waste Management 1 1

Theme Code (as % of total Bank financing) Decentralization 13 13 Participation and civic engagement 25 25 Rural policies and institutions 13 13 Rural services and infrastructure 25 25 Water resource management 24 24

E. Bank Staff Positions At ICR At Approval Vice President: Hafez M.H. Ghanem Christiaan J. Poortman Country Director: Asad Alam Emmanuel Mbi Practice Manager/Manager: Steven N. Schonberger Narasimham Vijay Jagannathan

Project Team Leaders: Bekele Debele NegewoAbdulhamid Azad Jose Simas

ICR Team Leader: Heba Yaken Aref Ahmed ICR Primary Author: Heba Yaken Aref Ahmed

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document)The overall project objective is to assist the Borrower in improving the management of irrigation and drainage in the project area in order to increase the efficiency of irrigated agriculture water use and services.

(a) PDO Indicator(s)Indicator Baseline Value Original Target Formally Actual Value

 

Values (from approval documents)

Revised Target Values

Achieved at Completion or Target Years

Indicator 1: Water productivity (kg/m3) increase for main crops (wheat, cotton, rice, maize and berseem) (%)

Value 0 n.a. 20% 15% Date achieved January 2006 03/31/2014 03/31/2014 03/31/2016

Comments Revised with 2014 restructuring to improve original wording (Volume of water used for given level of agricultural production [m3/ha/crop cycle])Partially achieved (75% of target)

Indicator 2: Difference between land productivity (t/ha) between head- and tail- end farmers (%) Value n.a. n.a. Date achieved January 2006 03/31/2014 Comments Dropped with 2014 restructuring in favor of Indicator 5 to assess equity of distributionIndicator 3: Value of land (compared with non-project neighboring command area) Value n.a. n.a. Date achieved January 2006 03/31/2014 Comments Dropped with 2014 restructuringIndicator 4: Irrigation Costs (EGP/1000 m3)

Value Pumping: EGP 50/1,000 m3

Labor: EGP250/1,000 m3 n.a. 100 150

Date achieved January 2006 03/31/2014 March 2014 March 2016

CommentsIntroduced with 2014 restructuringPartially achieved (75% of target) as switching from diesel pumps to electrical units, which would have generated reduction in pumping costs, was only partially carried out

Indicator 5: Ratio of Water Availability (in m3/hour) measured at head and tail (%) Value 0 n.a. 75% 75% Date achieved January 2006 03/31/2014 March 2014 March 2016

Comments Introduced with 2014 restructuring instead of Indicator 2 to assess equity of distributionAchieved (100% of target)

Indicator 6: Area provided with improved irrigation and/or drainage services (ha)

Value 0 n.a.193,750(490,000 feddan)

193,750(490,000 feddan)

Date achieved 01/31/2006 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringAchieved (100% of target)

Indicator 7: Water Users provided with new/ improved irrigation and/or drainage services (number)

Value 0 n.a. 360,612 476,662 Date achieved 01/31/2006 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringExceeded (132% of target)Estimated percentage of female beneficiaries: 20 (same as target)

Indicator 8: Operational Water User Associations created and/or strengthened (number)

Value 0 2,000 1,530 1,162

 

Date achieved 01/31/2006 03/31/2014 03/31/2014 03/31/2016

Comments Elevated to PDO level with 2014 restructuring (previous Component 3, Indicator 1)Partially achieved (76% of target)

Indicator 9: Beneficiary farmers reporting improved access to adequate water and drainage services (%)

Value n.a. n.a. 50% 91% Date achieved 01/31/2006 03/31/2014 03/31/2014 03/31/2016

Comments Revised and elevated to PDO level with 2014 restructuring (previous Component 4, Indicator 1)Exceeded (182% of target)

Indicator 10: Yield of main crops (rice, maize, wheat, cotton, berseem) (tons/feddan) increase (%)

Value 0 n.a. 20% 15% Date achieved 01/31/2006 03/31/2014 03/31/2014 03/31/2016

CommentsRevised and elevated to PDO level with 2014 restructuring (previous Component 2, Indicator 3)Partially achieved (75% of target)

Indicator 11: Direct Project Beneficiaries Value 0 n.a. 1,000,000 2,262,900 Date achieved 01/31/2006 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringExceeded (226% of target)Estimated 20% of female beneficiaries

(b) Intermediate Outcome Indicator(s) by Component

Indicator Baseline ValueOriginal Target Values

(from approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Component 1: Indicator 1 Quantity of water flowing in cross-regulators and intakes (m3/s)

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 1: Indicator 2 Quantity of water delivered to branch canals and mesqas

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 1: Indicator 3 Adoption of continuous flow

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 1: Indicator 4 Area where mesqas improvement is completed (feddan)

Value 0 n.a. 85,000 feddan 85,347 feddan Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

 

Comments Introduced with 2014 restructuringAchieved (100% of target)

Component 1: Indicator 5 Area where new subsurface drainage systems are implemented (feddan)

Value 0 n.a. 4,000 n.a. Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringNot informed

Component 1: Indicator 6 Area where subsurface drainage systems are rehabilitated (feddan)

Value 0 n.a. 118,760 92,085 feddan Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringPartially achieved (77% of target)

Component 2: Indicator 7

Quantity of water used by farmers trained under the project one crop cycle after training completed (m3/ha/crop cycle)

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 2: Indicator 8 Value of production per m3 of water used

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 2: Indicator 9 Yield of main crop (wheat, cotton, rice, barseem)

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Revised and elevated to PDO level with 2014 restructuring (Indicator 3)Component 2: Indicator 10 Farmers trained on irrigation, water saving and drainage techniques (number)

Value 0 n.a. 10,000 Date achieved 04/29/2005 03/31/2014

Comments Revised with 2014 restructuring to improve original wording (Share of eligible farmers who have received training [%])

Component 2: Indicator 11 Area where marwa improvement is completed (feddan)

Value 0 n.a. 30,000 feddan 24,000 feddan Date achieved April 2005 March 2014 March 2016

Comments Added with 2014 restructuring Partially achieved (80% of target)

Component 2: Indicator 12 Area where land leveling was introduced (feddan)

Value 0 10,000 feddan 10,000 feddan 7,000 feddan Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Added with 2014 restructuringPartially achieved (70% of target)

 

After demonstrations on land leveling, farmers were convinced and land leveling became part of their land preparation activities, and thus not computed on the project

Component 3: Indicator 13 Number of WUAs legally established

Value 0 2,000 1,530 1,162 Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Elevated to PDO level with 2014 restructuring (Indicator 8)Partially achieved (76% of target)

Component 3: Indicator 14 Number of WUAs and BCWUAs functioning one year after establishment

Value 0 n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 3: Indicator 15 Cost recovery collections

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuring Component 3: Indicator 16 Equity = difference between head and tail yield for main crops

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014

Comments Dropped with 2014 restructuring in favor of PDO Indicator 5 to assess equity of distribution

Component 3: Indicator 17 Number of established BCWUAs

Value 0 80 162 308 Date achieved 04/29/2005 03/31/2014 March 2014 March 2016

Comments Introduced with 2014 restructuringExceeded (190% of target)

Component 3: Indicator 18 Number of established District level Water Boards (WBs)

Value 0 11 11 9 Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringPartially achieved (81% of target)

Component 3: Indicator 19 Number of established IWMDs

Value 0 11 22 22 Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Introduced with 2014 restructuringAchieved (100% of target)

Component 4: Indicator 20 Share of farmers in project area satisfied with administration of irrigation systems

Value n.a. n.a. Date achieved 04/29/2005 03/31/2014 Comments Revised and elevated to PDO level with 2014 restructuring (Indicator 9)

 

Component 4: Indicator 21 Implementation pace (actual vs planned disbursements)

Value 0 n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 5: Indicator 22

Number of environmental (performance-based) monitoring/benchmarking systems in place and functioning

Value 0 n.a. Date achieved 04/29/2005 03/31/2014 Comments Dropped with 2014 restructuringComponent 5: Indicator 23

People in project area reached by awareness activities related to proper sewage and solid waste disposal and water quality impacts

Value 0 n.a. 50,000 59,400 Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Wording changes with 2014 restructuring (original wording: Public awareness of quality of water in irrigation canals)Exceeded (119% of target)

Component 5: Indicator 24 Solid waste collected and safety disposed (ton)

Value 0 n.a. 10 n.a. Date achieved 04/29/2005 03/31/2014 03/31/2014 03/31/2016

Comments Wording changed with 2014 restructuring (original wording: Tons of solid wastes collected and safety disposed to (pilot) landfills)Not informed

G. Ratings of Project Performance in ISRs

No. Date ISRArchived DO IP Actual Disbursements

(US$, millions)1 09/08/2005 Satisfactory Satisfactory 0.002 09/23/2005 Satisfactory Satisfactory 0.003 04/13/2006 Satisfactory Satisfactory 0.004 09/12/2006 Satisfactory Satisfactory 0.605 04/02/2007 Satisfactory Moderately Unsatisfactory 0.606 10/05/2007 Satisfactory Moderately Satisfactory 3.607 06/02/2008 Satisfactory Moderately Satisfactory 5.698 12/31/2008 Satisfactory Moderately Unsatisfactory 7.689 06/11/2009 Moderately Satisfactory Moderately Unsatisfactory 8.4310 10/06/2009 Moderately Satisfactory Moderately Unsatisfactory 10.6611 06/07/2010 Moderately Satisfactory Moderately Satisfactory 20.3712 07/05/2011 Moderately Satisfactory Moderately Satisfactory 34.9513 01/21/2012 Moderately Unsatisfactory Moderately Unsatisfactory 40.2114 12/19/2012 Moderately Unsatisfactory Moderately Unsatisfactory 44.1615 07/08/2013 Moderately Satisfactory Moderately Satisfactory 55.2216 01/01/2014 Moderately Satisfactory Moderately Satisfactory 60.41

 

17 06/01/2014 Moderately Satisfactory Moderately Satisfactory 70.4218 12/12/2014 Moderately Satisfactory Moderately Satisfactory 79.1219 06/15/2015 Moderately Satisfactory Moderately Satisfactory 88.0620 12/08/2015 Moderately Satisfactory Moderately Satisfactory 99.4321 04/06/2016 Moderately Satisfactory Moderately Satisfactory 116.72

H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO

Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in US$, millions

Reason for Restructuring & Key Changes MadeDO IP

10/14/2012 MU MU 43.4

Changes were made to increase the percentage of expenditures to be financed under the loan from 70% to 90%, reallocate the loan proceeds among categories of expenditures, and as amend Schedule 4, Section III-I of the Loan Agreement based on the revised procurement plan, to identify the number of contracts subject to the World Bank’s prior review.

3/20/2014 MS MS 65.99

Extend the loan closing date and reallocate loan proceeds among different categories of expenditures. Improvement of the Results Framework.

01/17/2016 MS MS 101.96

Reallocation of the loan proceeds among different categories of expenditures to help finance procurement of emergency pumps and spare parts for large pumping stations to ensure sustainability of investments under the project.

I. Disbursement Profile

 

 

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. Egypt has been described, since time immemorial, as the ‘gift of the river Nile’, and so it is not surprising that management of water resources has been central to all aspects of national strategy. Its reliance on the Nile is reflected in the fact that 90 percent of the population live on 5 percent of the land area around the stem of the Nile River and the Delta. The Nile waters are shared by nine other upper riparian nations, all with growing water demands. The country faced the strategic challenge of improving the productivity and sustainability of water use, rather than augmenting water supply. Population growth had exacerbated the problem: at project appraisal, Egypt had a per capita availability of 950 cubic meters (m3) per year of renewable freshwater resources, which was lower than the regional average of 1,200 m3 per year. This was projected to decline to 650 m3 per year by 2017.

2. At appraisal, improving the productivity and sustainability of water use was expected to be derived from reducing losses on the mesqa and marwa (farm) level by piping open canals (both at the mesqas and marwas), diminishing surface runoff through land leveling, and reducing deep percolation through adjustments in the irrigation scheduling. In addition to water savings, increases in productivity and reductions in irrigation costs were expected (electric versus diesel fuel for pumping and labor required), as well as 2 to 3 percent of additional cropping area recovered through the filling of the old open mesqas and marwas with the new proposed piped system.

3. Increasing the economic return per unit volume of water also created both on-farm and off-farm income and employment for the rural poor and non-poor alike. At appraisal, 70 percent of the poor lived in rural areas, with some 38 percent on landholdings of less than 1 feddan. Furthermore, because the annual Government of Egypt (GOE) expenditures on water services absorbed up to 10 percent of total public expenditures, rationalizing and reforming water management was central in any strategy aimed at accelerating the country’s economic growth. The Ministry of Water Resources and Irrigation (MWRI) had taken the lead in launching this reform agenda, an Integrated Water Resources Management Action Plan was being finalized during project preparation.

4. At appraisal, a full understanding of the performance and functioning of existing land drainage systems was expected to be achieved during mesqa-level design and implementation. The population had reported that water tables in the project area had risen and rendered the discharge capacity of drainage systems less effective. It was assumed that the anticipated effect of improved mesqa design would lead to a decrease in seepage losses and hence to lower water tables and their stabilization. However, the benefits from water table stabilization, along with the elimination of waterlogging from the life of the beneficiaries, were barely appreciated.

5. Rationale for World Bank involvement. The World Bank’s strategy in Egypt placed emphasis on areas where the GOE commitment was strong, where the GOE-World Bank partnership had a long track record, and where donor financing catalyzed long-term reforms. The proposed project satisfied all those requirements. In particular, the project built on the World Bank’s long and successful partnership with the MWRI in the irrigation and drainage sector in Egypt and the long-term collaboration with the German Development Bank (Kreditaustalt fur Wiederaufbau, KfW) and the Netherlands Development Cooperation (NDC) in promoting a

1

common donor vision for institutional change. The involvement of the two donors with their areas of comparative advantage supported a long-term reform process with a blend of technical assistance (TA) and investments.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

6. The objective of the project is to assist the borrower in improving the management of irrigation and drainage in the project area to increase the efficiency of irrigated agriculture water use and services. This is from the Loan Agreement and is essentially the same as in the Project Appraisal Document (PAD) where ‘overall project objective’ is used instead of ‘objective of the project’.

7. The PAD, on page 3, presented the following selected key indicators: (a) water use volumes, system efficiencies, and water distribution equities; (b) crop yields and farmer incomes; (c) Branch Canal Water Boards (BCWBs) and mesqa water user associations (WUAs) established, with operation and maintenance (O&M) responsibilities fully transferred to mesqa WUAs and jointly assumed by BCWBs and the MWRI district-level agencies; and (d) all involved institutions/agencies actively coordinating and interacting for project planning, implementation, and management.1

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

8. The original project objectives remained unchanged throughout project implementation. However, three core sector indicators were added:

Area provided with improved irrigation and drainage services Water users provided with new/improved irrigation and drainage services (male,

female) Operational WUAs created and/or strengthened

9. The value of land (compared with non-project neighboring command area) indicator was dropped because a number of causes, such as encroachment of urban areas into agricultural land that was not project dependent, were influencing the value of the land.2

1 The list of key indicators was elaborated in annex 3 of the PAD, however, mainly at the component level. Many of the broad concepts in page 3 of the PAD, such as ‘systems efficiencies’, had not been elaborated in annex 3. Consequently, when it came to identifying the original key indicators, particularly in creating the Results Framework, the ICR was guided more by the 2014 Restructuring Paper which had just four PDO indicators, one of which (value of land) was dropped at that stage. In addition, when the 2014 Restructuring Paper had introduced an indicator as a PDO indicator and the PAD had included that indicator but not as a PDO indicator, the ICR included them in the Results Framework as if they had been PDO indicators all along.2 The units of measurement for two indicators were also changed. The unit for water productivity indicator was changed from m3/ha crop cycle to water productivity increase (in percentage) for main crops, because the new unit reflected better the PDO objective of ‘efficiency of irrigated agriculture water use’, for example, when higher value/higher water use crops were introduced by the farmer. For the same reason, the unit to measure equity within a mesqa was changed from ‘difference between land productivity (T/ha) between head- and tail-end farmers’ to ‘ratio of water availability measured at head and tail end’.

2

1.4 Main Beneficiaries

10. The direct beneficiaries are the farmers and their families supplied with improved irrigation and drainage services who now receive more reliable and regular water supplies following the interventions made under the project. An estimated 476,662 water users have been provided with new/improved irrigation and drainage services by the project, of which about 20 percent are females. The project is estimated to have a total of 2,262,900 direct beneficiaries (about 5 direct beneficiaries per water user).

11. Alexandria City residents are the indirect beneficiaries of the project-financed improvements of the Mahmoudia main canal. Dredging of the canal and rehabilitation of water control structures improved the hydraulic functioning and capacity of the canal, benefiting drinking water supplies (improved safety and reliability) to a population approaching 5 million. The city gets about 70 percent of its water supply from the Mahmoudia canal, drawing annually about 912 million m3 for drinking water and 273 million m3 for industrial usage.

12. Other beneficiaries include populations living adjacent to the Mahmoudia and Meet Yazed main canals. Canal stabilization works as well as raising the banks in some sections resulted in considerable improvement in the conditions of the roads along the canals. Before the project, seepage through the embankments was making the roads quite unstable and they were collapsing regularly into the canals. Rehabilitation of various structures, including bridges and regulators, was also beneficial to the population and to the industries that use these roads.

1.5 Original Components (as approved)

13. The project had five components:

(a) Improved and Integrated Water Management (US$224.9 million). This component covered the implementation of irrigation and drainage rehabilitation, improvement and modernization works and programs at all levels of the selected command areas. Subcomponents included (i) main canal system improvements; (ii) branch canal (secondary) and mesqa (tertiary) system improvements, including electrification for pumping stations wherever feasible; (iii) marwa (quaternary) and farm-level irrigation system improvements; (iv) open and subsurface drainage (SSD) network improvements; (v) main pumping station improvements; (vi) tube well irrigation and groundwater monitoring improvements; and (vii) engineering studies, designs, construction supervision, and O&M set-up.

(b) Improved On-Farm Water Management (US$4.6 million). This component covered (i) regional water and land management adaptive research programs; (ii) extensive on-farm water control and irrigated agriculture practice demonstrations; and (iii) irrigation advisory and production support services strengthening.

(c) Institutional Development and Capacity Building (US$14.3 million). A major focus of this component was the proper establishment, expansion, and scaling-up of water user organization functions at the levels of tertiary and secondary system irrigation and drainage hydraulic units throughout the selected command areas. Defined subcomponents covered (i) establishment of secondary system irrigation

3

and drainage BCWBs and ensuring their voice in water management decision making at district and command area levels through the formation of federated water boards at the district level; (ii) establishment of mesqa WUAs and ensuring their proper representation within the BCWBs; (iii) establishment and mainstreaming of Integrated Water Management Districts (IWMDs), together with establishment of suitable joint or integrated irrigation/drainage command area management systems; (iv) execution of cadastral and water users registration surveys and preparation of corresponding databases; and (v) preparation of updated digital and hard copy maps based on IKONOS satellite images and national mapping grids.

(d) Project Management, Coordination, and Integration (US$11.0 million). This component was to support the management and coordination entities, functions, and activities needed for effective planning, implementation, and eventual commissioning of irrigation and drainage improvements on the basis of full command areas. It also promoted and facilitated, as appropriate, the integration of the various functions and contributions, both within the MWRI and between the MWRI and other involved and concerned ministries. Subcomponents covered (i) establishment and operational support for an integrated Project Management Unit (PMU), reporting to the Project Steering Committee and located within the MWRI; (ii) establishment and operational support for Regional Coordination Units (RCUs) and regional implementation teams attached to the PMU, one at each of the two project command area locations; (iii) setup and execution of monitoring and evaluation (M&E) arrangements and programs to assess project impacts and performance; and (iv) assistance with the formulation and facilitation, as needed, of liaisons and linkages at and between central and local levels that will advance the integration of improvement planning, implementation, and management, including for execution of preparatory studies for the potential Integrated Irrigation Improvement and Management Project (IIIMP) Phase II.

(e) Environmental Mainstreaming (US$5.0 million). This component focused on carrying out of an environmental management program, consisting of the following: (a) the provision of goods, training, and consultants’ services for (i) conducting public awareness and information disclosure campaigns; (ii) carrying out performance-based monitoring activities; (iii) conducting environmental studies and management plans related to rural sewage, solid waste, and pest management within the project area; and (iv) strengthening the institutional capacity of water user organizations; and (b) the carrying out of works and provision of goods required for rural sewage and solid waste management (SWM) pilots, all to support environmental mitigation measures and to empower water boards to ensure a sustainable management of water resources.

1.6 Revised Components

14. Components were not revised during project implementation.

4

1.7 Other significant changes

15. According to the PAD, the project duration (see page 35) was expected to be seven years with the closing date set for March 31, 2014. However, because of the political unrest in Egypt (January 2011 and June 2013), which affected the implementation progress of the project in various ways, the project closing date was extended to March 31, 2016.

16. The project was restructured three times as follows: (a)Schedule 1 (withdrawal of the proceeds of the loan) was amended and all other (National Competitive Bidding) contracts to be subject to post-review by the World Bank on October 14, 2012; (b) extension of the project to March 2016 and reallocation of funds among categories and introduction of a service category on March 31, 2014, with additional changes related to the scope category 6 (‘Services’) to include ‘Consultant services, training and workshops, and operating costs’ on July 7, 2014. Improvement of the Results Framework with changes in the results indicators were made in this restructuring; and (c) further changes related to the scope of the categories on January 17, 2016.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

17. Project preparation. Project design integrated the experience and lessons learned under the Irrigation Improvement Project (IIP), the National Drainage Program, and other ongoing projects. Inequity of water supplies along the mesqas (tertiary canals) had been identified as a key problem: head end users were favored at the expense of tail-enders, who more often experienced delayed crop establishment, reduced crop development and yields, and crop failure. Farmers generally suffered because of limited water availability, as water at the branch canals (secondary canal) was often insufficient to feed all mesqas. When water was available, farmers had to bear high irrigation costs by pumping water from the mesqa canals using individual diesel pumps. Finally, inefficient drainage would result, among other things, in periodic rise of the water table, which would make working in the field particularly difficult in addition to negatively impacting yield.

18. Design. Under the IIP, a pilot (covering 6,500 feddans) addressed the above issues and was the basis of the project design of the IIIMP. The pilot had focused on improving the efficiency and equitable distribution of water at the mesqa level, and found that the complete system from the main and branch canals had to function efficiently to deliver water to the mesqa outlets. Consequently, the IIIMP design included the structural improvements of the main (primary) and branch (secondary) canals to improve the hydraulic capacity of the system and deliver more water to the mesqas (tertiary) canals. Improved irrigation and drainage services were expected to translate in increase in yield and water productivity. Improvement of the drainage system financed under the IIIMP was expected to prevent waterlogging, with the additional benefit of making water available for downstream users. Construction of a pumping station for each mesqa (tertiary canals) and its electrification were expected to reduce pumping costs compared with use of individual diesel pumps.

19. In addition, the IIIMP design addressed institutional arrangements both for individual mesqa operation through the WUA and the changes and strengthening of all the relevant

5

institutions upon which the mesqa-level WUAs depended. Lastly, participation of multiple donors/institutions, for example, the World Bank, NDC, KfW, Food and Agriculture Organization of the United Nations, and U.S. Agency for International Development, during appraisal and/or implementation was important for the borrower in addressing the sectoral issues concertedly.

20. Alignment with the World Bank Group Country Partnership Framework (CPF). With the above design, the project was well aligned with the World Bank’s Country Assistance Strategy (CAS), which emphasized environmental conservation, sustainability, and poverty alleviation by improving the irrigation infrastructure to address agricultural productivity. The CPF, covering 2015–2019, specifically has as its objective 2.4: Enhanced access to improved agriculture and irrigation services. The project was also consistent with the World Bank’s 2003 Water Resources Sector Strategy. Lastly, the project built on the World Bank’s long and successful partnership with the MWRI in the irrigation and drainage sector in Egypt.

21. Risk assessment. A number of critical risks were identified in the PAD, with proposed mitigation measures. The major risks identified at appraisal were two: (a) the limited implementation capacity of domestic contractors, which could reduce the area improved or could result in delay and (b) the delay in design of improvement works and procurement processing. These risks were to be minimized by (a) provisioning TA and training of contractors and staff and (b) advance actions on procurement and design work using Policy and Human Resources Development grants funds. In retrospect, both risks were underestimated since, in spite of the mitigating measures adopted, they both caused delays. Similarly, provision of electrical lines for mesqa pump stations was considered a moderate risk. However, the difficulties and subsequent failure to deliver power to the individual mesqa pumping stations within the implementation period became the key reason for not achieving the target number of operational WUAs.3

22. Quality at Entry. Some other risks were not identified in the PAD and had to be addressed later. For example, relying upon the estimates and the pilot, but without detailed surveys, feasibility studies, and engineering designs, the project had underestimated costs (by about 15 percent). These lack of detailed studies and engineering design were rectified without affecting the outcome.

2.2 Implementation

23. Initial progress. Initial progress on the project was slow. As indicated above, the lack of detailed engineering designs on large civil works (that was rectified after the project was effective) was one of the reasons. However, the most important reason was the slow uptake of the mesqa improvement. Mesqa improvement works formed the largest component of the project, absorbing approximately 50 percent of the infrastructure budget. The designs for the mesqas and particularly the pumps and pump houses were critically reviewed during the implementation to reduce the overall costs of the mesqa-level subproject since these costs would be recovered from the individual farmers. This detailed design work caused delays. Delays also

3 Once it was realized that electrification was going to be slow, because it was within the purview of institutions other than the MWRI, beneficiaries were willing to accept, as an interim measure, diesel units which decreased operational costs for the beneficiaries to some extent. This improved the number of fully operational WUAs but it still fell short of the target.

6

arose from acceptance of the design by a large majority (75 percent) of the farmers at a particular mesqa. Without farmers’ approval of proposed works, the implementing agency and the project could not proceed with their construction.

24. Political upheavals. The political upheavals of 2011–2013 were also one of the key factors affecting project implementation. The Egyptian revolution of 2011 took place across all of Egypt in January and the country entered a period of political uncertainty that remained high even after the presidential elections in early 2012, as Islamists clashed with non-Islamists over the direction of policy. In mid-2013, the army removed the president and soon after, declared a state of emergency and nighttime curfews. These three years severely affected project implementation because, among other things, the political uncertainty and the accompanying macroeconomic problems made the contractors very reluctant to proceed with works or bid for new contracts. The curfew also curtailed working hours because people had to complete all activities outside their house, including going to the stores for example, before nighttime.

25. PMU. On the positive side, the implementation was facilitated by a straightforward organizational design for project implementation. The project PMU was established in the MWRI offices in Cairo and was responsible for the integrated planning, financial management (FM) and budget control, procurement of goods and services, monitoring and coordination of project activities, and overall technical and progress reporting. The PMU had a coordinating, monitoring, evaluation, and problem solving role, while actual implementation of the structural works was delegated to the line departments within the MWRI. TA was provided by national and international consultants.

26. Procurement arrangements. The PMU was responsible for the procurement process, and after establishing acceptable procedures in discussions with the World Bank, there appeared to be few problems in the preparation, bidding, and contract award process in the latter stages of the project. Physical implementation of project works was designated to the technical units within the ministry who were then responsible for all activities related to the satisfactory completion of the project works. At the regional level, the RCUs were coordinating project implementation for Mit Yazid and Mahmoudia. These RCUs actually helped bring together irrigation and drainage sectors at the local level, which facilitated implementation of the project on the ground.

2.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization

27. M&E design. The original M&E framework in the PAD 2005 was based on the overall project rationale and design and its underlying assumptions. In general, the framework was appropriate but key indicators had several shortcomings. First, the key indicators did not match the broad concepts, such as systems efficiencies, in the main text of the PAD with what was envisaged to be measured as shown in the annex. For some indicators, the design did not appreciate that a particular indicator, such as the value of land, could be influenced substantially by factors extraneous to the project. At least for two cases, the units of measurements chosen did not suit the PDO objective of ‘efficiency of irrigated agriculture water use’. Lastly, specifications of (intermediate and end) targets were not provided in the PAD and had to be developed later. Essentially, most of the design shortcomings were indeed rectified during implementation (see subsection on M&E utilization below).

7

28. M&E implementation. During the period of project effectiveness, the project had a strong progress monitoring system. The PMU relied on the regular provision of progress information from various implementing agencies involved, such as Irrigation Improvement Sector (IIS), Irrigation (IS), HEPS, Egyptian Public Authority for Drainage Projects (EPADP), and the Ministry of Agriculture and Land Reclamation (MALR). Earlier plans to facilitate and streamline progress monitoring by activating the ‘procurement’ and ‘project planning’ modules of the Lawson M3 software package, which was purchased in January 2007, was abandoned because the activated part of the software package covered only financial monitoring. Instead linked Excel sheets were used to generate monthly tabulated or graphic physical progress of the project. Based on this, monthly progress reports were prepared by the PMU and were used to adjust their overall planning of activities, adjust the financial forecast, and to take action with regard to poor performance of contractors, and so on. For financial monitoring, the project used the Lawson M3 software package, which allowed for entering the financial transactions into the system on a monthly basis. As a result, the PMU had a reliable filing system with easy access to the financial files and transactions. Financial monitoring reports were easily generated by the software, providing instant answers to queries.

29. M&E utilization. During the midterm review (MTR), pursuit of continuous flow4 in mesqa-level designs was quite correctly dropped. Shortly after the MTR, a revised framework was prepared combining existing elements and main targets defined in the arrangements for results monitoring with new indicators. It corrected some, but not all, of the problems in M&E design. For example, the indicators still failed to consider that most irrigation and drainage benefits come only after a number of years of improved irrigation/drainage services when farmers adjust their practices (and yield/productivity gains ensue). On the positive side, the new indicators were indeed made simpler and easy to measure, and more meaningful to the borrower and the World Bank. The changes included, adding to the original list of PDOs, indicators such as total area with improved irrigation and drainage services, number of beneficiaries, and number of established WUAs.

2.4 Safeguard and Fiduciary Compliance

30. Overall, the project activities complied with all applicable World Bank policies. The project was classified as category B according to OP 4.01, as there were no associated significant, sensitive, diverse, unprecedented, or irreversible impacts. The triggered Safeguards Policies were OP 4.01 (Environmental Assessment) and OP 4.12 (Involuntary Resettlement) for the possible resettlement and economic losses attributed to the various planned activities the project.

4 Continuous flow means a variable but nonstop supply of water to the heads of the branch canals. In contrast to rotational flow, the same amount of water that is normally provided during the ‘ON’ period of the rotation is provided, but spread out over the full period. Consequently, daily discharges under continuous flow are smaller than those during ‘ON’ periods of a rotation. However, when the project applied continuous flow on a number of branch canals, it found that changing from rotational flow to continuous flow did not have a significant effect on water productivity. In addition, a key requisite for continuous flow in the branch canals is the ability to measure and regulate flows into the branch canals. The regulation of flows into branch canals, particularly during periods of low flow or high demand, has to be equitable and transparent to the farmers. Such a limitation made continuous flow infeasible for many branch canals.

8

31. Environmental safeguards. The client prepared an Environmental Assessment, which concluded that the net environmental impacts of the project are positive and that the direct negative impacts are generally temporary and minor. An Environmental Assessment and an Environmental Management Plan has been prepared to address both direct environmental impacts and external factors. The environmental mainstreaming component demonstrated how water quality could be improved through control of urban SWM and sewage treatment. Under this component, a feasibility study was undertaken for the preparation of the Integrated Sanitation and Sewerage Infrastructure Project in the same command areas, where rural sanitation investments were implemented, while other measures, including SWM and instream wetlands, have been transferred to the ongoing Enhanced Water Resources Management (EWRMP) GEF project. On the other hand, relatively higher-risk contracts, such as siphons5 and canal bed dredging,6 were subject to site-specific Environmental and Social Impact Assessments /Environmental and Social Management Plans (ESMPs). The PMU has kept records showing the monitoring measures taken during implementation of the ESMPs.

32. Resettlement Action Plan (RAP). In light of the triggered OP 4.12 in March 2005, a provisional RAP was completed before project approval. During implementation, there was a scale-back and the need for land was significantly reduced. An update on the ESMP, including a Resettlement Policy Framework (RPF), was prepared and disclosed in 2010. The RPF was determined as the most appropriate choice of instrument because (a) the exact command areas for civil works were unknown and (b) the scope of the project and the magnitude of impacts were uncertain. Although the RPF indicated a possibility for preparing site-specific RAPs, no more RAPs were prepared during the course of the project. During implementation, the contractors worked carefully, selecting the timing of the civil works to minimize crop losses. After the works were completed, farmers had full use of their land without any restrictions or impacts on the land value (in fact, land value increased).

33. Compensation. During project implementation, lack of crop compensation for electrification contracts was identified, a joint World Bank/PMU team proactively conducted a series of field visits to the World Bank–funded investments in Kafr El Shiekh Governorate, between April and May 2016 to identify the project affected persons, assess crop damages, and pay compensation. Payment of all project affected persons was swiftly and successfully completed by end of May 2016. During this process, nonpayment for crop damages associated with SSD in Behira, because of lack of funds, was also identified, and extensive fieldwork was carried out to identify farmers and provide fair compensation.

34. FM. FM under the project included an externally hired FM consultant, in addition to three seconded accountants from the MWRI Finance Department. All of the employees in charge possessed the required skills and expertise to carry out their responsibilities. The project consistently maintained sound manual and automated accounting records. The quarterly report reviewed Interim Financial Reports and the annual audited Financial Statements were consistently received on time and were of acceptable quality.

5 A site-specific Environmental and Social Impact Assessment/ESMP was prepared for the larger siphon with risk of old siphon failing, and it was agreed that the ESMP would be generalized to other siphons.6 Samples from the Mahmoudia canal sediments were analyzed to determine the safe method of handling/disposal.

9

35. Procurement. All procurement was carried out by the PMU. A total of 156 civil works contracts were awarded following standard World Bank procurement guidelines. In addition, 38 contracts were awarded for the supply of goods and services, the largest contract being for the supply of spare parts for drainage pumping units. There appeared to be minimal delays in the actual procurement process. Delays appear to be in identifying works and preparing detailed designs and technical issues for bid documents.

2.5 Post-completion Operation/Next Phase

36. Success of the post-completion operation/next phase will depend largely on the WUAs. As each mesqa was fully completed and operational with electric power supply and electric pumping units, and the mesqa handed over to the WUA, the beneficiaries took full responsibility for O&M. This allowed the project to move steadily and smoothly into the operational phase, one operational WUA at a time. The involvement of the farmers at all stages of the development of the mesqa contracts including the design layout and location has ensured that the community has a strong sense of ownership of the system, and this should also ensure its overall sustainability. In some cases, the farmers were prepared to take over their systems with only diesel units installed. To redress their situation, since January 2016, the MWRI has allocated EGP 162 million from the counterpart funding to complete all ongoing contracts. Lastly, the MWRI is expected to maintain the availability of water through the main and branch canals.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

37. Relevance of objectives. The relevance of the project objective is rated High.

38. The above rating is based on three observations. First, the project explicitly included drainage in the objective and addressed issues of rising water table, for example. This made the project objective highly relevant not only in terms of agricultural production/poverty alleviation but also in terms of general well-being that include prevention of contamination from waterlogging/flooding that used to happen for the beneficiaries regularly7. Second, elements other than drainage in the project objective, such as management of irrigation, continue to be very relevant in the country context. Of course, even without the project the beneficiaries would be using irrigation but its management, with distinct roles for the public sector and the beneficiaries, needed to be addressed in the context of diminishing water supply and climate change. Furthermore, given the country condition, it is also well understood that because the main livelihood of the population in the Nile delta is agriculture, improvements in the link between irrigation and agriculture such as improvements in the reliability and equity of water supply are very relevant. Contribution to employment and reduction in rural poverty are elements

7 In agricultural land drainage, the purpose of water table control is to establish a depth of the water table that no longer interferes negatively with the necessary farm operations and crop yields. However, shallow water tables can increase the risk of flooding and affect the quality of drinking water with health consequences for the communities. The African Development Bank (AfDB) recently announced a grant agreement to complement the World Bank’s support to the National Drainage Programme, which aims at optimizing the benefits of irrigation by draining excess irrigation water from agricultural land to reduce waterlogging and consequent soil salinity, in addition to making more land available for cultivation. This is expected to result in higher crop yields in the target areas, higher farm incomes, and increased food security and poverty reduction in general.

10

of this relevance. The project objective specifically addressed ‘increase the efficiency8 of irrigated agriculture water use and services’, which made it quite consistent with the World Bank Group CPF (FY2015–19) for Egypt Objective 2.4: Enhanced access to improved agriculture and irrigation services. Egypt’s 2009 Sustainable Agricultural Development Strategy Towards 2030, on page 21, puts its number one objective as enhancing water use efficiency in irrigated agriculture and which the project’s PDO addressed.

39. Relevance of design/implementation. The relevance of the project design/implementation objective is rated Substantial.

40. The project design/implementation used essentially a two-pronged approach where in terms of organization, the design/implementation focused on the development of the WUAs at the tertiary level (that is, one level above the individual farmer) with some development of other institutions, such as water boards and so on, above the WUAs. To have cohesion at the WUAs, the design/implementation focused on the equity aspect (for example, availability of water at the head and tail end) as well as on costs (for example, cost of electricity/gasoline). The design to address the equity aspect locally while addressing broad water issues through the state’s institutions, the MWRI in particular, was powerful. It did not have the usual trade-offs of winners and losers or efficiency and equity. Similarly, the benefit of having 40–50 diesel pumps replaced by a single electricity powered unit not only brought down costs but also had a substantial positive effect in terms of greenhouse gases.

41. The other prong focused on the investments that went into rehabilitation and improvement of the irrigation and drainage facilities in the project area at various levels starting at the main canals, moving through branch canals, into tertiary (mesqa) and quaternary (marwa/farm level) systems. Combining the two prongs, the design/implementation had half the investment for the tertiary systems matching the development of WUAs, where the MWRI came with support that coordinated its various directorates.

42. These investments aimed to increase the efficiency of water usage through improvement in the management of both irrigation and drainage and led to better water distribution, particularly for tail end users, which was reflected in the PDO. The components were well aligned with the PDO. In general, the Results Framework was appropriate but there were minor shortcomings in indicators that were rectified during implementation. In terms of process, the project empowered water users for participation in the planning and implementation and reduced the fragmentation that existed within the MWRI. Lastly, with water users assuming greater responsibility for O&M through their WUAs, the project built upon indications that users are willing to share the costs, if services are reliable. Such sharing of costs/responsibility is expected to lead to greater sustainability of the infrastructure modernization and improved management of the irrigation and drainage systems.

3.2 Achievement of Project Development ObjectivesRating: Substantial

8 ‘Efficiency’ in the PDO goes beyond the inputs and outputs and carries a sense of being able to accomplish something (for example, equitable distribution of water at the mesqa level) with the least waste of time and effort.

11

43. The project improved the management of irrigation and drainage by the borrower’s MWRI in the project area by (a) mainstreaming a program that encouraged user participation at the tertiary (mesqa) and secondary (branch canal) levels and (b) leveraging user preferences at the mesqa level to integrate various parts of the MWRI to coordinate their programs on irrigation, drainage, and pump-related engineering services. The project also attempted to coordinate beyond the MWRI to include the services of the MALR, Ministry of State for Environmental Affairs, and other ministries, but with modest success, maybe because of the challenge of such inter-ministerial coordination.

44. The results in terms of increase in efficiency of irrigated agriculture water use (as per the PDO) are most visible at the mesqa level, with the availability of water at the head and tail end at 75 percent level and water table stabilization, and to some extent, also at the marwa level in terms of water productivity increases and substantial cost reductions. The water productivity result is expected to reach their target as farmers adjust their practices to reflect the reliability of water supply. These improvements materialized from the project:

Main canals. A total of 27 contracts were completed, of which 13 on Mahmoudia main canal and 14 on Meet Yazid and Zawia main canals, that included, among other things, rehabilitation of major structures including locks, cross-regulators, and bridges, installation of bored and sheet pile bank protection works, reprofiling and stabilizing embankments with stone pitching and internal drains, construction of reinforced concrete sections to replace unstable sections of the main canal, seepage control works, and the replacement of syphons.

Branch canals. A total of 43 branch canals were rehabilitated with upgrading of 445km of canals with 38 completed contracts with works including bank stabilization, new road and foot bridges, repair or replacement of cross-regulators, improved mesqa offtakes, construction of boxed culverts through residential areas, and construction of some lined sections. Contracts were also awarded to install ultrasonic flow measurement systems in the main and branch canals.

Rehabilitation and new construction of SSD. A total of 97,982 feddans were covered under contract, of which 92,085 feddans were completed, with some new construction, with 10 contracts.

Activities for mesqa WUAs and irrigation improvement. Preparation of designs and tender documents for 85,347 feddans of mesqa improvement.

Marwa development covering 24,546 feddans (completed).

45. Similarly, some improvements in costs are expected as more mesqas are connected to electric pumps. However, they may still have higher total costs (from higher labor costs) because they are unwilling to invest in cost savings, for example, from a change in farming practice that would be supported by the reliable water availability because of various reasons such as unemployment of family members.

46. The increase in efficiency indicated above came from 476,662 water users, where beneficiary farmers reporting improved access to water and drainage services was 91 percent

12

(almost double the target). The large coverage results also demonstrate in another way how the project improved borrower’s management of irrigation and drainage in the project area.

47. Substantial achievement was also made in institutional development and on farm management in the project area:

Three Integrated Water Resources and Irrigation General Directorates (IWRIGDs) were established in Beheira, Gharbia, and Kafr El Sheikh.

A total of 22 IWMDs were established.

A total of 308 Branch Canal Water Users Associations (BCWUAs) were established.

Nine District Water Boards (DWBs) were established.

At the mesqa level, 1,162 WUAs were operationalized, which required a large majority (75 percent) of the beneficiaries in the mesqa to agree to the proposed design specific to that mesqa and agree to bear mesqa improvement costs as required under the law.

The WUAs operationalization effort fell short of the target (1,530 WUAs), partly because of problems with electrification. The shortcoming was partly redressed by establishing 2,070 WUAs that exceeded considerably the target (also 1,530). These were established but were not fully operational; WUAs continue to use individual pumps and do not benefit from electricity-related operational cost reduction.

48. Lastly, the project assisted the borrower in improving the management of irrigation and drainage organizationally by having other donors work together toward the same PDO. The project was supported by two other agencies: KfW provided an initial loan of EUR 38,800,000 and in addition a grant of EUR 2 million for TA for consultancy services, and this was subsequently increased by a further EUR 25 million; and the Netherlands Government Ministry for development Cooperation provided a grant budget of EUR 14,900,000 which was allocated specifically to the various components of the project and focused on training and awareness programs. The Netherlands Grant was extended by three months, to compensate for the suspension during the political unrest, and closed in early 2014. The KfW support has a closing date of December 31, 2016.

3.3 EfficiencyRating: Modest

49. The project efficiency suffered mainly from the higher cost of mesqa rehabilitation compared with the appraisal estimate and from the two-year delay in implementation during the political upheavals. During project appraisal, the target cost for mesqa rehabilitation was set at US$1,200 per feddan, with an upper limit of US$1,450 per feddan. With 85,000 feddans improved for an overall cost of US$112.24 million, including the branch canals, the cost for improvement came to US$1,320 per feddan, 10 percent above the appraisal estimate. Similarly, for SSD, the cost was estimated at US$450 per feddan for 124,000 feddans. Instead, the project

13

completed 94,715 feddans at a cost of US$528 per feddan, 17 percent above the appraisal estimate.

50. While there were some initial delays before the loan became effective, it was a period when there was no financial outlays made from the project and consequently, the impact on the project efficiency was minimal. However, once the project started to incur costs and there were delays in implementation, for example, during the political upheavals in 2011 and 2012, benefits from the project got delayed after substantial expenditure9 had been incurred. While no calculation has been attempted, based upon the one-sided impact on the benefits getting postponed while substantial expenditures have been incurred, the impact of the delays from the political upheavals in the middle of the implementation period can be assumed to have a more substantial impact on the project efficiency.

51. The appraisal’s economic analysis assessed the economic soundness of the project based on the Economic Rate of Return (ERR) and Net Present Value (NPV), both of which had been calculated from projected incremental costs and benefits to society as a whole, using the with- and without-project approach. Yields were expected to grow gradually during five years, increasing from 4 percent to 25 percent depending on the crop, improvements financed, and the location. The project was expected to have an ERR of 20.5 percent. The NPV, at a discount rate of 12 percent (representing the opportunity cost of capital), was estimated at EGP 847 million (about US$141 million equivalent).

52. The financial analysis at farm level estimated that farmers’ incremental income would allow not only for the cost recovery of investments but also for a significant increase in family income in the range of 12 percent to 26 percent. After debt service, family benefits were expected to increase by 12 percent to 26 percent after the fifth year, depending on the farm size. Therefore, the project was expected to contribute toward alleviating poverty in project areas. This is confirmed by the significant increase in the value of land and rental costs in the newly improved areas as compared with similar neighboring unimproved areas10.

53. The economic analysis is based on the results obtained at completion at the crop/activity level, preparation of representative farm models, the type of improvements financed, and the areas benefited by each type. Based on the assumptions described in Annex 3, the project ERR is recalculated at 12.2 percent (instead of the 20.5 percent estimated at appraisal) 11. The NPV at a discount rate of 6 percent (representing the marginal utility of consumption of the project

9 In constant 2016 U.S. dollar, about 51 percent of the project expenditures had been incurred before 2013.10 The increased value of land and rental costs in improved areas is due to the higher expected NPV of benefits derived from the project investments. It was not quantified in the economic and financial analyses because it would mean double counting the same project benefits.11 Couple of key differences in assumption also arose during project implementation regarding the benefit from water savings. Water savings which were assumed as a benefit at appraisal were not included for the ICR because water lost to drains or groundwater aquifers and ‘saved’ in improved buried mesqa and marwa areas was (and is) anyway reused downstream by other farms to a large extent. Essentially, it can be argued that water is not really ‘saved’. That is the reason why in the economic analysis, no value was assigned to the water ‘saved’. Similarly, achieving ‘continuous flow’ (see footnote 2 to see what it implied) could even have a negative NPV, because it incurred considerable costs, including monitoring costs by the farmer, but it did not produce perceivable benefits in that mesqa, in terms of yield and without the water savings for the whole system. Definitely, the farmers at any particular mesqa had no incentive to incur the cost of monitoring and coordinating.

14

beneficiary)12 is estimated at EGP 1,350 million (about US$153 million equivalent). Using the same discount rate as for the analysis at appraisal of 12 percent, the NPV would still be positive at EGP 27.56 million, or about US$3.13 million equivalent.

3.4 Justification of Overall Outcome RatingRating: Moderately Satisfactory

54. The overall outcome rating for the project is Moderately Satisfactory because it is rated High on relevance of objectives, Substantial on relevance of design/implementation and achievement of its objectives, and Modest on efficiency.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

55. Poverty impact. More than 70 percent of the farmers in the project area have landholdings of less than 3 feddans, with some 38 percent having holdings of less than 1 feddan. Consequently, the significant reduction in irrigation costs from EGP 300 per m3 per crop to EGP 150 per m3 per crop, the increase in yield of main crops by 15 percent, and improvement in equity in water availability from project design/implementation at the mesqa will have a significant effect in the reduction of poverty in the project areas.

56. Gender. Although not targeted specifically by project interventions, significant numbers of female are expected to benefit. In addition, during administration of TA, it was found that although their land ownership could be limited, the women were very much involved in water management. Female farmers are heavily engaged in agriculture particularly during sowing, harvest, and postharvest work. It is estimated that 20 percent (over 90,000) of the water users, who were provided with new/improved irrigation and/or drainage, were female.

57. Adaptation to climate change. The project activities will enhance adaptation to climate change in irrigation water management through the improvement in the hydraulic infrastructure. The replacement of open mesqas (from which farmers push water with diesel pumps individually) with underground piped mesqas served by communally managed electrical pumps, resulted in a reduction in the use of diesel and also a reduction of the emissions of the greenhouse gas CO2. The replacement of individual diesel pumps resulted in a decrease of 80.62 kg of CO2 per feddan per year. With a total farm area of 92,085 feddan of improved mesqa area from SSD systems, it amounts to a reduction of over 7.4 million kg of CO2 per year. This is expected to go up further when all diesel pumps are replaced by electric pumps.

(b) Institutional Development Achievements

58. Project activities have strengthened and enhanced the institutional capacity for more efficient operation and management of the water resources with 3 IWRIGDs established at

12See Discounting Costs and Benefits in Economic Analysis of World Bank Projects, OPSPQ. May 9, 2016. “Where no country-specific growth projections are available, we suggest using 3% as a rough estimate for expected long-term growth rate in developing countries. Given reasonable parameters for the other parameters for the other variables in the standard Ramsey formula linking discount rates to growth rates, this yields a discount rate of 6%.” Note prepared by Marianne Fay (GGSVP) et al., February 18, 2016.

15

Beheira, Gharbia, and Kafr El Sheik and 9 DWBs established in the project area, with 22 IWMDs. All these are aimed at resolving the concerns of a fragmented water service delivery. Further institution development focused on the farmers with the establishment of 308 BCWUAs and 2,070 WUAs at the mesqa level.

4. Assessment of Risk to Development OutcomeRating: Moderate

59. The risk to the development objectives is considered to be Moderate. The project has provided good quality and more efficient small pumping stations, and has strengthened the decentralized irrigation service delivery. The WUAs established for the mesqas have incentives to ensure that the systems continue to operate successfully because each farmer depends on the efficient and equitable distribution of the available water resources. The risk to the sustainability of the mesqa infrastructure is negligible, and the farmers should continue to benefit from the reduced irrigation costs brought about by the project.

60. The Government is committed through annual budgetary allocations to operating and maintaining the irrigation and drainage infrastructure as they are critical for the survival of agriculture.

61. Cost recovery. Law 213 of 1994 provides for recovery of mesqa improvement costs from the landowners benefiting from such investments.13. The costs of pump sets are repaid within three years, while repayment of the cost of civil works takes place over 20 years. Costs are repaid without interest. Collection of the instalments is the responsibility of the Land Tax Authority (LTA). After deduction of fees for the LTA and IIS, the amount collected is paid into a revolving fund which is intended to be used for further mesqa improvement.

62. Until 2013, arrangements to start the cost recovery were delayed while a decision was being awaited as to whether the costs of electrification should also be included. During summer 2013, a formal decision was made by the MWRI in conjunction with the Ministry of Finance that the costs of the electricity networks should be taken into account for the cost recovery, with repayments to be made over 15 years.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at EntryRating: Moderately Satisfactory

63. The rating is based on the following strengths: (a) a clear analysis of the alternatives including a review of lessons learned from earlier projects that led to emphasizing improvement of management of irrigation and drainage to increase the efficiency of irrigated agriculture water use and services and (b) the identification of the need for improvements both in the institutional arrangements, where multiple agencies provided services, and infrastructure to improve the equity, timeliness of water supplies, and costs to farmers.

13 Similar arrangements exist for subsurface drainage works.

16

64. The World Bank was possibly overoptimistic about overall readiness and preparedness to launch the project. For example, detailed studies of the canal systems were needed before critical major civil works contracts could be awarded but were unavailable at entry. This might have increased the implementation period. However, this activity was not in the ‘critical path’ because mesqa-level work was being carried out in parallel and consumed more time than what was required for the detailed studies. The seven-year project was indeed delayed by two years but it was mainly due to political upheavals during 2011–2013. Similarly, better estimates of costs of the mesqa-level work might have been obtained through sampling the needs at different locations, instead of from one pilot, at appraisal. Again, this increase in cost was modest, of the order of 15 percent, and more detailed sampling would have increased project preparation costs.

65. Contrasting the above shortcomings, of course, are how the World Bank preparation team had correctly identified the problem/issues and set the stage for the implementation effort to persevere in the right direction. The preparation effort set the stage for a two-pronged effort that would lead to organizational changes at the MWRI as well as set the structure to carry out systematic mesqa- and marwa-level design efforts at over 1,500 locations, addressing, among other things, piping open canals in a concerted manner under the MWRI. Even the apparently long period between approval and effectiveness was actually well utilized. When this project was approved, projects in Egypt were regularly held up at the legislative body and delay of a year or so was the norm. This project was reviewed twice at the legislative body and consequently, much of the period between approval and effectiveness required the attention of the World Bank staff to address the queries at the legislative body that included obtaining legal opinions, which indeed was accomplished.

(b) Quality of SupervisionRating: Moderately Satisfactory

66. The World Bank supervised the project regularly throughout the implementation period. Early supervision rectified the lack of detailed engineering designs on large civil works but found the uptake of the mesqa improvement more challenging. Delays arose because of the slow pace of social mobilization of beneficiaries. The slow pace at the mesqa level were not only due to getting a large majority (75 percent) to agree to the plan at over 1,000 locations but also because mesqa improvement costs have to be recovered from the individual farmers14. The World Bank supervision played an important role to have these mesqa-level designs critically reviewed and keep the overall costs of the project within control. In addition, throughout the lifetime of the project, the World Bank task team was proactive and helped the Government restructure the project so that implementation could catch up with the original schedule after political upheavals (for example, by increasing the percentage of expenditures to be financed by the World Bank), and when that became infeasible, extend the closing date. The number of supervision missions undertaken was sufficient and the skills mix was good. Aide memoires were regularly prepared and transmitted, which alerted the Government and the World Bank management to problems with project implementation and suggested remedies on time.

67. Lastly, although the MTR was particularly delayed in terms of elapsed time since project launch (five years), it was appropriate in terms of proportion of project expenditure before the MTR. Because of the participatory process and the slow uptake of the mesqa improvement 14 See paragraph 60.

17

indicated above as well as the 2011 political upheaval, the project had spent a little less than 30 percent of the US$303 million of the project funds (as indicated in the PAD), when the MTR was undertaken. The need for sufficient investment with enough evidence on implementation precluded an earlier MTR.

(c) Justification for Rating of Overall Bank PerformanceRating: Moderately Satisfactory

68. Overall Bank performance is rated Moderately Satisfactory, reflecting the Moderately Satisfactory rating for both World Bank performance in ensuring quality at entry and for quality of supervision.

5.2 Borrower Performance

(a) Government PerformanceRating: Moderately Satisfactory

69. The rating is based on the following: ownership that included providing counterpart funding more or less as planned and senior officials availing themselves to the World Bank missions without fail. The authorities supported implementation arrangement, including appointment of key staff, and initiated restructuring requests as and when required.

(b) Implementing Agency or Agencies PerformanceRating: Moderately Satisfactory

70. The responsibilities for actual implementation of the various civil works contracts was assigned to the HEPS, IIS, IS, and EPADP. Although each of these agencies performed satisfactorily during the latter period of the loan, there was slow progress during the first years of the project, maybe because of the steep learning curve of coordination at various levels. Progress accelerated in the last four years as all contracts were awarded, and the departments could focus on contract management, ensuring that the works were completed on schedule. During this time, the departments also became more proactive, prepared to terminate underperforming contractors and appoint new contractors to complete the works.

71. The PMU was established following a formal Government Decree and functioned satisfactorily throughout the project period. The PMU had the important task of monitoring and coordinating the activities and performance of the other agencies. The PMU regulated the procurement activities on the project and was responsible for the financial aspects including making disbursements for all project activities and making appropriate withdrawal from the World Bank.

72. Compliance with safeguards requirements on the electrical contracts with land and crop compensation was only resolved during the final stages of the project. This issue, had it been identified sooner, could have helped earlier completion on the electrical contracts with better results on operationalization of WUAs.

18

(c) Justification of Rating for Overall Borrower PerformanceRating: Moderately Satisfactory

73. Overall borrower performance is rated as Moderately Satisfactory, reflecting Moderately Satisfactory rating for both the Government and the implementing agency performance.

6. Lessons Learned

74. The main lessons learned from implementation of the project are as follows:

Design projects more realistically by limiting outcomes to project’s direct influence. In the IIIMP, some assumptions were made during project preparation, such as environmental mainstreaming and continuous flow, which were conceptual in nature and found to be infeasible during implementation. During implementation, arriving at a more realistic project design rested on separating what was within the project’s direct influence from broader benefits outside its influence. For example, outside project’s influence included environmental mainstreaming because it was not part of the mandate of the MWRI. Outside project’s influence also included items which were incentive incompatible. For example, continuous flow required farmers to participate/monitor without substantial benefits accruing to that particular farmer. The lesson learned is that limiting outcomes to project’s direct influence make project design more realistic.

Be ready for implementation with priority contracts ready to be tendered. Both the World Bank and the Government should be more realistic in assessing the time required to launch such a complex project. Before loan award a more rigorous assessment of the readiness of each of the separate agencies was needed, with the Steering Committee established to ensure coordination and establish priorities for the overall implementation process. The lesson learned is that selected priority contracts should be ready to tender soon after Board presentation.

Irrigation management and infrastructure improvements must go hand in hand. Project experience has demonstrated that irrigation improvement is not merely a matter of adding measurement and control structures but also requires a mindset change: irrigation services for farmers and existing institutional arrangements must be systematically analyzed and redefined. The lesson learned is that project design in irrigation management has to be based on a combination of infrastructure improvement and management solutions (for example, improvements in monitoring, planning, institutional capacity, and operation).

Beneficiaries’ participation enhance benefits. The project interventions provide a better service for farmers in water deliveries and improved controls, and during implementation nearly 120,000 person months of employment was created. In addition, the project is expected to generate employment for O&M and for incremental labor as a result of increased agricultural intensification. The lesson learned is that creating WUAs not only benefits the design, improving both the objectives of equity and efficiency of water usage, but also brings valuable

19

additional employment opportunities both during construction and beyond in these communities.

Procurement of civil works and contract management could be improved with larger procurement packages. With smaller procurement packages, sometimes 4–6 fully qualified contractors were unavailable to bid for such a package. The smaller packages did not appeal to the best-quality contractors. Usually, in these very specialized works, the best-quality contractors develop a pool of smaller contractors through subcontracting and monitoring them. Instead, the Project Implementation Unit often had to undertake close monitoring of the smaller contractors, thereby increasing project monitoring costs. The lesson learned is that a project with very specialized works needs to be packaged in larger procurement packages that would maintain the high standards for contractors for all packages and where capacity of smaller local contractors would take place through subcontracting. The Project Implementation Unit would then have to monitor fewer and more reliable contractors, bringing down project costs.

Transparency and accountability are core elements of performance management and service delivery. During project implementation, accountability and governance were strengthened on the side of the service providers, the MWRI, and the Ministry of Electricity as well as for the recipients (farmers) of the service. The lesson learned is that to overcome problems of poor maintenance and inadequate service delivery in irrigation, it is important to have a clear agreement between the MWRI, the Ministry of Electricity, WUAs, and farmers about respective roles and responsibilities, proper financing arrangements, and transparency and accountability in monitoring the agreement.

Sustainability beyond maintenance of works may require legal changes. Resource constraints imply that success of the post-completion operation/next phase, as indicated in section 2.5, will depend largely on the WUAs. The involvement of the farmers at all stages of the development of the mesqa contracts, including the design layout and location, has ensured that the community has a strong sense of ownership of the system, and this should also ensure its overall sustainability. In addition, the MWRI is expected to maintain the availability of water through the main and branch canals. Notwithstanding the above, sustainability beyond maintenance of works has not been fully addressed. The lesson learned is that when the implementing agencies are all project-oriented and once the works are completed, there is no support for the farmers in terms of specialist training to use the water well. In theory, agricultural extension is available but that institution tends to focus on crop and livestock production, not on the particular skills needed to operate an irrigation system efficiently. To have that level of sustainability, more institution building is needed where BCWUAs and DWBs have legal powers and users have a greater stake in the management, operation, and maintenance of the infrastructure.

20

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies

21

75. No additional comments required.

(b) Cofinanciers

On the comments from KfW:

76. The Implementation Completion and Results Report (ICR) elaborated the project’s inability to deliver electrical power to all pumping stations (and consequently operationalizing fully all WUAs) at various places (see paragraph 21 for example), and captured the issue of project costs in the section on Efficiency. The ICR, as well as the borrower’s completion report found ‘continuous flow’ to be of limited benefit to the farmer and incompatible with the incentives at the farm level (see footnote 4 and Lessons Learned). Lastly, the ICR acknowledges the legal weakness of IWMD and how that could exacerbate issues related to sustainability (see Lessons Learned). However, as experience with other countries, including that in California in the United States, suggests, such legal changes have usually required a much longer period to align interests of all water users.

On the comments from NDC:

On the conversion of diesel pumps to electrical units:

77. The ICR indicates the reduction of costs at the farm level in the Results Framework (on page iii). Indicator 4 puts this as 50 percent. This is a snapshot and would vary with changes in relative prices of diesel compared to electricity. In terms of environmental sustainability/climate change, the ICR does not delve into details of various possible solutions but just indicates what was achieved under the project (see paragraph 57). The replacement of individual diesel pumps resulted in a decrease of 80.62 kg of CO2 per feddan per year. With a total farm area of 85,200 feddans of improved mesqa area, it amounts to a reduction of 6,869 tons of CO2 per year, not counting the CO2 emitted for the generation of the electrical power. This is expected to go up further when all diesel pumping is replaced by electric pumps.

On the role of women in water management:

78. The ICR in the Results Framework (page iv) reports 20 percent of beneficiaries to be women (based on gender segregated data in all soft aspects of the project that the IIIMP collected). The ICR downplays the provisions for women as elected members of water boards and so on, because the legal basis for them is incomplete, but has incorporated the NDC’s view of women’s role in water management in paragraph 56.

(c) Other partners and stakeholders

79. Not available.

22

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in US$, millions equivalent)

ComponentsAppraisal

Estimate (US$, millions)

Actual/Latest Estimate

(US$, millions)

Percentage of Appraisal

Component 1Improved and Integrated Water Management 224.92 226.02 100

Main canals 21.70 18.13 84Branch canals and mesqa improvement 95.10 136.14 143Subsurface and open drainage 70.80 49.98 71

 Component 2:Improved On-Farm Water Management 4.62 0.58 13 Component 3:Institutional Development and Capacity Building 14.29 9.17 64

Establish BCWUA and DWBs 5.00 1.35 27Establish mesqa WUA 5.90 2.98 51

 Component 4:Project Management, Coordination, and Integration 10.99 13.57 123

Establish and operate PMU 6.40 8.11 127 Component 5: Environmental Mainstreaming 5.00 0.07 1 

Total Baseline Costs 259.82 249.41Physical Contingencies 21.14Price Contingencies 19.04

Total Project Costs 299.99 249.91 83

(b) Financing

Source of FundsAppraisal Estimate

(US$, millions)

Actual/Latest Estimate

(US$, millions)

Percentage of Appraisal

Borrower 105.00 57.71 60.6International Bank for Reconstruction and Development 120.00 118.56 98.8KfW 53.00 60.93 115.0NDC 25.00 10.76 43.0

23

Annex 2. Outputs by Component

Component 1: Improved and Integrated Water Management

1. Component 1 generally comprised all the infrastructure rehabilitation and modernization required to achieve the project objective of improving the management of irrigation and drainage in the project area. The project was an integrated package with the benefits targeted at the individual small-scale subsistence farmers at the tail end of the system through the modernization of the mesqas and marwas, but this process was dependent on improving and modernizing all the upstream infrastructure so that the benefits can be achieved. Thus, the first zones targeted by the project were the two main canals serving the area—the Mahmoudia and Meet Yazeed main canals—and 27 contracts were completed for works including dredging of the Mahmoudiya canal, rehabilitation of major structures including locks, cross-regulators, and bridges, installation of bored and sheet pile bank protection works, reprofiling and stabilizing embankments with stone pitching and internal drains, construction of reinforced concrete ‘U’ sections to replace unstable sections of the main canal, seepage control works, and the replacement of syphons.2. The second zone targeted under the IIIMP covered all the branch canals which served the mesqas selected for upgrading. A total of 445 km of branch canals were upgraded under the IIIMP. A total of 43 branch canals were rehabilitated with works including bank stabilization, new road and foot bridges, repair or replacement of cross-regulators, improved mesqa offtakes, construction of boxed culverts through residential areas, and construction of some lined sections. Contracts were awarded to install ultrasonic flow measurement systems in the main and branch canals. Gauges were installed at 28 sites. 3. Mesqa improvement is the largest part of the IIIMP and a total area of some 85,347 feddans was completed with works including providing intakes from the branch canal, gravity pipelines to the concrete pump sump, pump house with electric pump units and a standby diesel pump, suction and delivery pipework, electrical fittings including a meter, and a buried PVC pipe distribution network. In some contracts, provision was made to extend the pipe distribution system to include the marwas. A total of 52 contracts were awarded for all these works. 4. Providing electricity to the pump houses and handing over operational mesqa pump stations to their WUAs were less successful. While 1,530 WUAs were targeted to be operationalized, only 1,162 were handed over as fully operational at project closure, largely because of the poor performance of the electrical contractors. Government funds, which are already budgeted, will complete the electrical contracts, ensuring that all 1,530 mesqas receive project benefits.5. SSD works were also a large part of the IIIMP, with over 92,085 feddans provided with either new or rehabilitated drainage systems, exceeding the 85,000 feddan target. Payment of crop compensation is a critical element in this component, and EPADP and its site staff ensured that the regulations were followed on the amounts to be paid to the farmers.

Component 2: Improved On-Farm Water Management

6. Component 2 focused on improving on-farm water management carrying out on-farm demonstrations for farmers, and arranging farmer excursions to other successful areas on the project or to demonstration plots. Other activities under this component included capacity building through training of teachers for Irrigation Advisory Service (IAS) and Central

24

Department for Irrigation Advisory Services (CDIAS) extension staff in coordination with the MWRI Training Centre. With the adaptive research handed over to the EWRMP, this component focused on the remaining areas including demonstrations and farmer excursions.

Component 3: Institutional Development and Capacity Building

7. A major focus of this component was the proper establishment, expansion, and upscaling of the WUA concept to other levels within the system. The project established some 308 BCWUAs and provided 208 training courses to strengthen and develop the overall concept. DWBs were established at nine centers, and start-up workshops and training courses were organized at each center. Establishment and strengthening of the WUAs at each mesqa was a major part of the work under this component; the project established 2,070 WUAs in total and provided 242 training courses for these WUAs. The project also established three IWRIGDs in Beheira, Gharbia, and Kafr-El-Sheikh, rehabilitating the offices and providing equipment. Finally, the project also established 22 IWMDs. Under this component, 15,525 people, including 1,926 females, were trained in various aspects of project management and operation.

Component 4: Project Management, Coordination, and Integration

8. The PMU is established under this component with a coordinating, monitoring, evaluation, and problem-solving role on all the separate components. The PMU assigned the responsibility for implementation of the project works to the HEPS, IIS, IS, and EPADP. This approach for project implementation was effective, utilizing the specialties and expertise available within the MWRI. In addition, the PMU appointed a consultant to provide technical support for assistance to the PMU, to prepare the designs for rehabilitation of the selected canals, and to provide support during project implementation. During the latter years, this technical support from the consultant was focused on the mesqa improvement works rather than the major civil works carried out by HEPS. The PMU was responsible for all procurement activities and during implementation all disbursements were made through the PMU. The PMU prepared the overall project activity chart and reported progress regularly on all activities carried out on the project. The PMU was prepared to be proactive in searching for solutions to accelerate progress and took action when necessary on slow-moving contracts.

Component 5: Environmental Mainstreaming

9. Component 5 aimed to develop public awareness and environmental mainstreaming for the project components. This component, funded under Dutch Aid, aimed to ensure that standard environmental concerns were addressed by the project; the component ensured that numerous technical studies and evaluations were carried out including the preparation of the ESMP, environmental impact assessments, social mitigation plans, and updating of RAPs and these were completed in the early years of the project. Completion of these studies and reports were generally required before approval for implementation of the works. In 2014, all remaining environmental mainstreaming activities were taken over by EWRMP. Some awareness campaigns continued under the IIIMP to board members of 56 BCWUAs and 1,668 WUAs with some 11,140 direct beneficiaries receiving awareness related to proper sewage and solid waste disposal and water quality impacts, who in turn were expected to reach five family members on average.

25

26

Annex 3. Economic and Financial Analysis

Summary of the Ex Ante Economic and Financial Analysis

1. The appraisal’s economic analysis assessed the economic soundness of the project based on the ERR and NPV, both of which had been calculated from projected incremental costs and benefits to society as a whole, using the with- and without-project approach. The expected establishment of continuous (on-demand) water flow in branch canals and mesqas, together with the off- and on-farm investments and activities such as marwa improvements and on-farm water management, were expected to attain water savings of 10 percent to 30 percent depending on the initial situation of the areas (unimproved or partially improved by previous projects), while at the same time crops were irrigated more efficiently. Complementary on-farm improvements (piping of marwas, use of hoses, gated pipes, improved furrows, laser land leveling (LLL) where needed, and water management assistance) would result in improved water use efficiency and distribution as well as water savings. Yields were expected to grow gradually during five years, increasing from 4 percent to 25 percent depending on crop, improvement, and location.

2. Financial and economic prices were set using field data at constant 2004 values. Project economic costs were derived by excluding taxes, duties, and subsidies and corrected with the corresponding conversion factor (CF) to eliminate market distortions. Water savings were expected to reach on average about 22 percent or 838 million m3 per year at project maturity.15 Assigning no economic value for the water saved, the project would have an ERR of 20.5 percent. The NPV at a discount rate of 12 percent (representing the opportunity cost of capital) was estimated at EGP 847 million (about US$141 million equivalent). If the previous high-cost design criteria used in the preceding IIP remain unchanged,16 and no marwa or on-farm activities were improved (as under the IIP), the ERR would drop to 7.6 percent. If water was assigned an economic value equivalent to the residual imputed economic value derived from the without-project situation (EGP 0.46 per m3) which could be considered the opportunity cost of water,17 the ERR would be 30.4 percent. The latter could be the adequate estimation of the IIIMP results if water saved could be used in alternative new irrigation areas.

3. The financial analysis at farm level showed that farmers’ incremental income would allow not only for the cost recovery of investments but also for a significant increase in family income in the range of 12 percent to 26 percent. The main conclusions of the financial analysis were (a) irrigation improvement would allow for significant savings in water use, with a parallel average increase in gross value of production of about 20 percent after the fifth year; (b) before debt service, family benefits were expected to increase between 13 percent and 27 percent from the fifth year on, and the amount to be paid as debt service would represent only about 23 percent of the expected increases on farm benefits in the third year; and (c) the project would 15 Water lost to drains or groundwater aquifers and ‘saved’ in improved buried mesqa and marwa areas was (and is) anyway reused downstream by other farms to a large extent, so it can be argued that water is not really ’saved’. That is the reason why in the economic analysis in the ICR, no value was assigned to the water ‘saved’. 16 Proposed new designs had significant reduction in material and backfilling costs. Old designs consider up to four times the needed capacity of pumps and pipes. 17 Based on the residual imputation approach which approximates the marginal value of product of water, by subtracting all costs of production except water from the total value of output, its economic value was derived. Water used in the without-project situation in the project areas (3.7 billion m3) produces a net benefit of LE 1.7 billon (about US$290 million), about LE 0.46 per m3.

27

lead to higher farm income for all the farm sizes. After debt service, family benefits were expected to increase by an average of 20 percent after the fifth year, for all three models. The project would contribute toward alleviating poverty in Egypt’s rural areas where it is most intense.

Actual Implementation

4. There were significant differences between what was planned and what was actually implemented because what was actually spent in real terms was only half the planned amount to be invested. Table 3.1 shows that the actual expenditure in 2004 real U.S. dollar terms only reached US$150.7 million.

Table 3.1. Current and Constant 2004 Projects Cost (US$, million)

Components Appraisal ActualIn Current US dollars Estimate Estimate Value Percentage

A. Improved and Integrated Water Mgmt 261.33 226.02 -35.31 86.5%Branch Canal and Mesqa Improvements 82.74 112.24 29.5 135.7%Marwa Improvements 33.4 25.77 -7.63 77.2%Electrification 27.6 13.2 -14.4 47.8%Drainage Improvements 82.07 49.98 -32.09 60.9%Other 35.52 24.82 -10.7 69.9%

B. Improved On-farm Water Management 5.05 0.58 -4.47 11.5%C. Institutional Development & Cap. Build. 16.04 9.17 -6.87 57.2%D. Project Management, Coord. & Integration 11.53 13.57 2.04 117.7%E. Environment Mainstreaming 6.06 0.07 -5.99 1.2%

Total 300.01 249.41 -50.6 83.1%In Constant 2004 US dollars

A. Improved and Integrated Water Mgmt 261.33 136.14 -125.19 52.1%Branch Canal and Mesqa Improvements 82.74 65 -17.74 78.6%Marwa Improvements 33.4 1.27 -32.13 3.8%Electrification 27.6 8.38 -19.22 30.4%Drainage Improvements 82.07 30.13 -51.94 36.7%Other 35.52 31.34 -4.18 88.2%

B. Improved On-farm Water Management 5.05 0.4 -4.65 7.9%C. Institutional Development & Cap. Build. 16.04 5.99 -10.05 37.3%D. Project Management, Coord. & Integration 11.53 8.14 -3.39 70.6%E. Environment Mainstreaming 6.06 0.06 -6 1.0%

Total 300.01 150.73 -149.28 50.2%

Difference

The Ex Post Economic and Financial Analysis

Economic and Financial Analysis

5. This section summarizes the estimated results obtained by the IIIMP, based on the ERR and the NPV calculated with FARMOD software. As at appraisal, the incremental costs and

28

benefits of the project to society as a whole, using the with- and without-project approach, was followed. A description of the differences in costs and benefits and key underlining assumptions are presented below, including market prices used for key input and outputs, shadow pricing, and phasing of improvements. Incremental net benefits were obtained by deduction of the project costs from increased revenues. These took account of the impact on productivity increases, cost reductions through the new approach for improvement designs, and the electrification of pump sets. Water savings which were assumed as a benefit at appraisal were not included for the ICR because water lost to drains or groundwater aquifers and ‘saved’ in improved buried mesqa and marwa areas was (and is) anyway reused downstream by other farms to a large extent. Essentially it can be argued that water is not really ‘saved’. That is the reason why in the economic analysis, no value was assigned to the water ‘saved’.18

6. The economic benefits of the project were calculated by estimating average crop and activity budgets for the main crops and livestock components, and aggregating them in farm models representing the three type of improvements: (a) areas previously not improved incorporating new mesqas in 85,347 feddans; (b) areas previously improved but only at the mesqa level incorporating piped marwas covering 24,546 feddans; and (c) areas with SSD totaling 95,385 feddans.19

7. Crop budgets were built on data obtained through interviews with farmers in the improved areas integrating the changes induced under the project including average yield increases and irrigation cost reductions. In determining the production costs and yields obtained before and after the project, and in estimating their future development, several sources of data were used including the WaterWatch Studies performed in 2008 and in 2014 using remote sensing approaches; the results of the M&E activities implemented under the IIIMP as well as field observations from the ICR mission. The cropping patterns did not show any significant change as a direct result of the project investments. Cropping intensities were assumed to be 188 percent without project and 194 percent with project, considering that there was a 3–5 percent increase in land use as the open mesqas and marwas were piped and buried. Table 3.2 shows the assumed cropping pattern.

Table 3.2. Cropping Pattern in the Project Area

Cropping Pattern

Before Improvements Current Situation Changes in

AreaCrops in Project Area % (feddan, thousands)

Winter 79.0 172.1 178.1 6Wheat 20.0 42.0 42.0 0Berseem (long season) 10.0 21.6 21.6 0Berseem (short season) 25.0 53.9 53.9 0Broad beans 3.0 6.2 6.2 0Winter vegetables 21.0 48.5 54.5 6Summer 70.0 151.4 157.4 6

18 Achieving ‘continuous flow’ (see footnote 2 to see what the term implied) could even have a negative NPV, because it incurred considerable costs, including monitoring costs by the farmer, but it did not produce perceivable benefits in that mesqa, in terms of yield and without the water savings for the whole system.19 The original planned coverage had to be revised because of the diminished value of expenditures in 2004 real U.S. dollar terms.

29

Cotton 16.0 35.1 35.1 0Rice 30.0 64.6 64.6 0Maize 16.0 34.5 34.5 0Summer vegetables 8.0 17.2 23.2 6Orchards 21.0 43.1 43.1 0Cropping Intensity — 1.88 1.94 —

8. Project benefits in terms of increased productivity are shown in table 3.3, which were assumed to be realized smoothly during the five years following the completion of improvements at the benefited farm level in 117,700 farms or 215,000 feddans. Average crop budgets were estimated for the 10 major crops in the two command areas, as well as an activity budget for milk and meat production as berseem, one of the major crops in the Delta (35 percent of the winter crop areas), is used mainly for feeding cows and buffalos. Tables 2 to 12 in the IIIMP ICR.xls file (in the project files) present the crop and activity budgets, including the yields, inputs, and costs for the cultivation of 1 feddan area before and after the project.

9. From the three sources of data taken into consideration—the WaterWatch remote sensing report, the Water Management Research Institute (WMRI) monitoring data, and the observations from the field and interviews with farmers’ benefited groups during the ICR mission—the following relevant conclusions are summarized:

(a) WaterWatch studies concluded that the yield differences in rice-cultivated areas between the improved and unimproved areas (considering the summers of 2008 and 2014) showed (i) slightly higher ET/water consumption; (ii) 3–10 percent lower ET-deficit; and (iii) 1–2 percent higher yields.

(b) The WMRI reported that, “improving subsurface drainage is a main factor that could result in an increase of productivity up to 20 percent.” The WMRI also reported that irrigation costs for rice in El Mahmoudia command area before and after the improvements decreased by EGP 234 per feddan (65 percent) at the head of the canals according to farmers’ estimates, while at the tail end the average reduction was about EGP 200 per feddan (48 percent). Similarly, in Meet Yazid canal command area these reductions averaged to EGP 175 (53 percent) and EGP 133 (42 percent) at the head and tail end of the canals, respectively.

(c) From the ICR mission visits to improved works at several project sites including mesqas from El-Ezbah on the Nekla Canal, farmers reported that with the project yields have increased about 20 percent to 30 percent at the tail end of the canal, while irrigation costs were reduced from an average of EGP 500 to EGP 200 per feddan.

7. Based on these sources, the assumed incremental yields for this ICR impact assessment for the main crops in the project area are summarized in Table 3.3:

Table 3.3. Expected Incremental Yields by Crop

Mesqa Improved Areas SSD Improved AreasWithout With Increase Without With Increase

Crop/Activity Project Project % Project Project %

30

Maize 3.300 3.475 5 3.600 4.000 11Rice 3.500 3.675 5 3.700 4.000 8Cotton 1.200 1.260 5 1.300 1.500 15Summer vegetable 9.000 9.450 5 11.000 12.500 14Wheat 2.400 2.520 5 2.700 3.000 11Broad beans 1.100 1.160 5 1.200 1.330 11Winter vegetable 11.000 11.500 5 12.000 13.500 13Berseem long season 30.000 31.500 5 35.000 39.000 11Berseem short season 22.000 23.000 5 23.500 27.000 15Citrus 9.000 9.500 6 10.000 11.500 15Milk 1,500 1,575 5 1,600 1,700 6Meat 150 158 5 160 170 6

11. Project benefits were assumed to accrue over a period of 15 to 20 years, consistent with the life cycle of major improvements.

12. Financial and economic prices have been estimated for this assessment using 2016 data and are presented in Table 3.4. CFs for shadow pricing were based on estimates prepared by the ICR Borrower’s report built on World Bank Commodities Price Forecasts dated March 2016. For nontraded commodities, such as berseem and other forages, the financial prices were assumed to represent fairly well their economic prices. Future prices for traded inputs and outputs are not expected to show major variations according to the most recent World Bank forecasts. A CF of 0.7 was considered for labor costs, and CFs of 2.06 and 1.4 were used for diesel and electricity costs, respectively.20

20The GOE has been cutting back fuel subsidies, and hence the diesel oil price has increased now to LE 1.80 per liter. In real terms, however, it has only increased by 20 percent since 2004. Electricity generation is favorably affected by the larger natural gas reserves, which will maintain electric power generation (by gas turbines) at a reasonable cost. Farmers purchase electricity at the concessional rate of LE 0.27 per kWh, whereas commercial tariff is LE 60 per kWh. In real terms, the electricity tariff for agriculture has not increased since 2004. However, because one of the major sources of benefits from the IIIMP improvements are derived from reduced irrigation costs (by switching diesel to electricity pumping), a sensitivity analysis was done and presented in this assessment report, using the U.S. costs for these to sources of energy, given that there is no reliable estimation of their economic costs and CFs in Egypt’s changing environment.

31

Table 3.4. Output and Input Financial and Economic Prices

FINANCIAL ECONOMIC FINANCIALECONOMIC(In LE) Price Price Conversion Price ` Price Conversion

Unit 2016 2016 Factor Unit 2016 2016 Factor

Outputs Inputs Winter Crops Fertilizers

Wheat ton 2,936 3,170.88 1.08 Urea (45%) 50 kg 100 109 1.09Berseen ton 320 320 1 Ammonium Nitrate (33%N) kg 1.5 1.635 1.09Broad beans ton 5,100 5,100 1 Phosphoros 50 kg 75 81.75 1.09

Summer Crops Agrochemicals Rice ton 2,100 2,231 1.06 Irrigation costs Maize ton 2,250 1,935 0.86 Pumpset Depreciation (diesel) hr 3.1 3.1 1.00Cotton ton 10,162 9,450.66 0.93 Pumpset Depreciation (electric) hr 0.93 0.93 1.00

Fruits and Vegetables Pumpset Maintenance (diesel) hr 6.69 6.69 1.00Cabbage ton 740 740 1.00 Pumpset Maintenance (electric) hr 1.67 1.67 1.00Citrus ton 2,741 2,192.8 0.80 Diesel lt 1.8 3.708 2.06Tomato ton 1,443 1,154.4 0.80 Electricity KWH 0.27 0.378 1.40

Animal products Other production costs Milk lt 3.85 2.695 0.70 Tractor hr 250 237.5 0.95Meat kg 25 17.5 0.70 Mechanic harvesting hr 125 118.7 0.95

Threshing hr 100 95 0.95Winnowing hr 50 47.5 0.95Sprayer hr 70 66.5 0.95Maintenance Open Mezcas lumpsum 200 190 0.95

Labor Person day 60 42 0.70

13. Project economic costs were derived from the financial costs by excluding taxes, duties, and subsidies (table 3.5) and expressed in 2016 constant prices using the gross domestic product deflator.21 As at appraisal, all investment costs were included in the cost stream for this analysis with the exception of those from the environmental component.

Table 3.5. Current and Constant 2016 - Project Costs (US$, millions)

Current U.S. dollars 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

Component 1 1.01 3.45 11.93 27.93 23.16 14.99 27.49 41.72 50.33 22.66 224.65

Component 2 0.33 0.07 0.09 0.01 0.06 0.02 — — 0.58

Component 3 2.01 0.39 0.61 0.72 0.98 0.98 1.74 1.61 0.10 0.02 9.17

Component 4 1.42 1.69 1.57 1.86 1.38 1.31 0.99 1.51 1.64 0.13 13.49

Component 5 — 0.00 0.04 — — 0.01 0.02 — — — 0.07

Total Current U.S. dollar 4.77 5.60 14.13 30.61 25.51 17.29 30.30 44.85 52.07 22.81 247.95

Constant 2016 U.S. dollar 11.3 11.9 26.9 52.9 39.5 23.8 38.3 50.8 53.4 22.8 331.6

14. Benefits, phasing, and buildup. As mentioned, the project spent about 50 percent of the original budget in constant 2004 costs. Additionally, implementation has been slower than expected due to, among other things, slow process at the mesqa level to get the full commitment of the farmers as well as political upheavals. The project restructuring and the extension of the closing date until March 2016 provided the opportunity to complete improvements of farm areas of the revised targets and the main canal works in the project areas. Table 3.6 and Table 3.7 show the pace of implementing the project improved areas.

21 http://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG?page=2.

32

Table 3.6. Farms Per Subproject and Farm Size

New UnimprovedFarm Size (feddan) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

0.75 0 0 71 2,012 1,330 708 719 1,377 1,618 387 8,2221.5 0 0 171 4,888 3,230 1,721 1,746 3,345 3,931 941 19,9734 0 0 127 3,635 2,402 1,279 1,298 2,487 2,923 700 14,851

Total 0 0 369 10,535 6,962 3,708 3,763 7,209 8,472 2,028 32,142Previously ImprovedFarm Size (feddan) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

0.75 0 0 0 0 0 387 355 118 1,076 176 2,1131.5 0 0 0 0 0 941 863 286 2,613 429 5,1334 0 0 0 0 0 700 642 213 1,943 319 3,816

Total 0 0 0 0 0 2,028 1,860 617 5,632 924 11,061

Table 3.7. Area Per Subproject and Farm Size (Feddan)

New UnimprovedFarm Size (feddan)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

0.75 0 0 53 1,509 997 531 539 1,033 1,214 290 6,1661.50 0 0 257 7,332 4,845 2,581 2,619 5,018 5,896 1,411 29,9604.00 0 0 510 14,538 9,607 5,118 5,192 9,949 11,690 2,798 59,404

Total 0 0 820 23,380 15,450 8,230 8,350 16,000 18,800 4,500 95,530Previously ImprovedFarm Size (feddan)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

0.75 0 0 0 0 0 290 267 88 807 132 1,5851.50 0 0 0 0 0 1,411 1,295 430 3,920 643 7,6994.00 0 0 0 0 0 2,798 2,568 852 7,773 1,275 15,266

Total 0 0 0 0 0 4,500 4,130 1,370 12,500 2,050 24,550

15. Three different subareas covered by different improvements were considered for the economic analysis: (a) 85,347 feddans of new areas with improved mesqas; (b) 24,546 feddans of improved areas under previous projects incorporating improved marwas; and (c) 95,385 feddans of areas provided with SSD works.

16. Economic results. The evaluation exercise conducted with FARMOD software allowed for the analysis at the crop/activity level, for showing representative farm models per type of improvement, and for the overall project area. Based on the stated assumptions, the project shows an ERR of 12.2 percent (instead of the 20.5 percent estimated at appraisal). The NPV at a discount rate of 6 percent (representing the marginal utility of consumption of the project beneficiary)22 was estimated at EGP 1,350 million (about US$153 million equivalent) as shown in Table 3.8. Using the same discount rate used for the analysis at appraisal (12 percent), the

22 See Discounting Costs and Benefits in Economic Analysis of World Bank Projects, OPSPQ. May 9, 2016. “Where no country-specific growth projections are available, we suggest using 3% as a rough estimate for expected long-term growth rate in developing countries. Given reasonable parameters for the other parameters for the other variables in the standard Ramsey formula linking discount rates to growth rates, this yields a discount rate of 6%.” Note prepared by Marianne Fay (GGSVP) et al., February 18, 2016.

33

NPV was EGP 27.56 million, or about US$3.13 million equivalent. These result indicators are not considering significant additional benefits from (a) the employment generation during a period in which unemployment was exacerbated by the social unrest in the country; (b) the environmental and climate change impact; and (c) the improved conditions for supplying water to the city of Alexandria.

17. The nonquantified project impact. The project has spent a total of US$248 million in the period 2007–2016 mainly for small rural works, which are rather labor intensive. It is estimated that the equivalent of 26 million man-days of work have been created, plus a further 2 million annually for scheme O&M and for incremental labor as a result of increased agricultural intensification.

18. Climate change impact. The replacement of open mesqas from which farmers push water with diesel pumps individually, by underground piped mesqas served by communally managed electrical pumps, results in a significant reduction in the use of diesel and also a significant reduction of the emissions of the greenhouse gas CO2. The replacement of individual diesel pumping results in a decrease of 80.62 kg CO2 per feddan per year. With a total farm area of 85,200 feddans of improved mesqa area, it amounts to a reduction of 6,869 ton CO2 per year, not counting the CO2 emitted for the generation of the electrical power.

19. Another nonquantified benefit was the improved conditions for supplying water to the city of Alexandria which is 70 percent dependent on the Mahmoudia Canal for their drinking water supply. Because of constrictions in the Mahmoudia Canal in the Kafr El Dawar area, it was not possible to pass the required flow down the canal without excessively high water levels and with high risk of breaches. Four contracts with a combined value of over EGP 24.1 million were implemented to enlarge the capacity of the Mahmoudia Canal so that sufficient water could be delivered to Alexandria. Also, the dredging works below Kafr El Dawar from 44.77 km to 62.457 km ensured that the Mahmoudia Canal had sufficient capacity to supply the water requirements for Alexandria. 

20. Given the lower than anticipated economic results, the project efficiency is rated as modest. The overall result is lower than the appraisal estimate because (a) the project spent half of the budgeted amount (in 2004 real U.S. dollar) covering a smaller than the original planned area with improved mesqas and marwas and (b) implementation was delayed because of political unrest in 2011 and 2012. The main benefits are (a) an increase of about 10 percent in the gross value of agricultural production because of the combined effect of slightly higher yields obtained mainly at the tail ends of the water conveyance system and about 3 percent to 5 percent of recovered land for production and (b) a decrease in irrigation costs mainly because of the single-point electric pumping stations at the mesqa level, instead of thousands of individual farmers’ diesel pumps, together with reduced labor time required for irrigation. The lower irrigation costs are consistently reported on the M&E reports prepared by the WRMI and were also verified in the field by the ICR mission directly from beneficiaries.

34

Table 3.8. Economic Budget of the Project

ECONOMIC BUDGET (AGGREGATED) (In LE Million) Without Project With Project

1 to 30 1 2 3 4 5 6 7 8 9 10 15-30

Main Production Winter Crops 980 980 980 980 980 981 987 997 1,007 1,016 1,027 1,054Summer Crops 1,208 1,208 1,208 1,208 1,208 1,210 1,217 1,229 1,242 1,255 1,269 1,304Fruits and Vegetables 1,537 1,537 1,537 1,537 1,538 1,564 1,592 1,625 1,659 1,698 1,752 1,816Animal products 912 912 912 912 912 913 917 923 930 936 942 959

Sub-total Main Production 4,637 4,637 4,637 4,637 4,638 4,669 4,713 4,774 4,838 4,905 4,990 5,133By Products 108 108 108 108 108 109 109 111 112 113 114 118

Gross Value Of Production 4,745 4,745 4,745 4,745 4,746 4,777 4,823 4,885 4,950 5,018 5,104 5,251On-Farm Use

Winter Crops 505 505 505 505 505 505 505 506 506 506 507 508Summer Crops 22 22 22 22 22 22 22 22 22 22 22 22By Products 63 63 63 63 63 63 64 64 64 65 65 67

Sub-Total On-Farm Use 591 591 591 591 591 591 591 592 592 593 594 597On-Farm Consumption

Winter Crops 303 303 303 303 303 302 301 301 300 299 299 299Summer Crops 218 218 218 218 217 217 217 216 216 215 215 215Fruits and Vegetables 76 76 76 76 74 72 71 69 67 65 63 63Animal products 317 317 317 317 317 317 317 317 317 317 317 317

Sub-Total On-Farm Consumption 914 914 914 914 911 908 906 903 900 897 895 895Net Value Of Production 3,241 3,241 3,241 3,241 3,245 3,278 3,326 3,390 3,457 3,528 3,616 3,759Purchased Consumption 8 8 8 8 7 7 6 5 5 4 3 3

INFLOWS 3,233 3,233 3,233 3,233 3,238 3,272 3,320 3,384 3,452 3,524 3,612 3,756Production Cost

Investment Mezca Improvements (incl pump & electricity - - - 11 316 209 111 113 216 254 61 -Marw a Improvements - - - 2 47 31 25 25 35 63 13 -Sub-surface Drainage - - - - 123 123 123 123 123 123 123 -

Sub-total Investment Costs - - - 13 485 362 259 260 373 439 196 -Operating

Purchased Inputs Winter Crops 18 18 18 18 18 18 18 18 18 18 18 18Planting materials 118 118 118 118 118 120 121 122 123 124 127 127Summer Crops 0 0 0 0 0 0 0 0 0 0 0 0By Products 18 18 18 18 18 18 18 18 18 18 18 19Fertilizers 282 282 282 282 282 285 286 288 289 290 294 294Agrochemicals 65 65 65 65 65 66 66 66 67 67 68 68Irrigation costs 147 147 147 147 147 146 140 132 124 119 113 96Other production costs 546 546 546 545 539 536 534 531 527 521 522 524Payments for Previous Improvements 1 1 1 1 1 1 1 1 1 1 1 1

Sub-Total Purchased Inputs 1,195 1,195 1,195 1,195 1,189 1,190 1,184 1,175 1,167 1,159 1,160 1,147Labor

Labor 1,022 1,022 1,022 1,022 1,022 1,027 1,030 1,032 1,035 1,039 1,046 1,047Sub-total Operating Costs 2,217 2,217 2,217 2,217 2,210 2,217 2,214 2,207 2,202 2,198 2,207 2,194

Sub-Total Production Cost 2,217 2,217 2,217 2,230 2,695 2,579 2,474 2,468 2,575 2,638 2,403 2,194Other Costs

Other System Improvements - 16 17 30 36 25 50 47 76 53 38 -Improved On-Farm Water Management - 5 1 - 1 - 0 1 0 - - -Instit. Development & Capacity Building - 33 5 8 9 12 12 24 22 1 0 -IIIMP Project Coordination - 30 3 27 29 21 21 17 25 28 2 -

Sub-Total Other Costs - 83 26 65 76 58 83 89 123 83 40 -OUTFLOWS 2,217 2,301 2,243 2,295 2,771 2,637 2,556 2,557 2,698 2,720 2,443 2,194

Cash Flow 1,016 932 990 938 466 635 764 828 754 804 1,169 1,563Net Economic Benefits 1,930 1,847 1,904 1,852 1,377 1,543 1,669 1,731 1,655 1,701 2,064 2,457_________________________________IRR = 12.2%NPV = LE 1,350 million (with 6% discount rate) or LE 27.56 million (with 12% discount rate)

35

Sensitivity Analysis

21. One of the major sources of benefits of the project is the reduction in irrigation costs, mainly from substituting diesel pumps for electricity pumps. In addition, the relative prices between diesel and electricity may not necessarily reflect the reality of their opportunity costs because of the existing distortions of the subsidy policies in Egypt. In the absence of a recent study for determining the CFs for these energy market prices, a sensitivity analysis was made using as a proxy the average values for diesel and electricity in the United States for estimating alternative CFs.23 The project ERR under these parameters becomes 12.3 percent and the NPV LE 1,372 million (US$155.9 million) when using 6 percent as discount rate or LE 37.1 million when using 12 percent as discount rate. These values are almost identical to those obtained in the base analysis.

Financial Analysis

22. Farm models allowed for the assessment of the project impact at the beneficiaries’ family income level. Seven farm models were built to represent the beneficiaries’ income increases induced by the project improvements. In the case of the first two subareas improved, they are represented by three farm sizes: 0.7 feddans, 1.5 feddans, and 4 feddans, while for the third subarea with SSD, a 1.5 feddans farm model was prepared. Tables 13 to 19 in the Appendix in project files present the financial budgets including changes in farmer net income for the seven farm models. In the farm budgets, full cost recovery of the on- and off-farm investments (up to mesqa level) was included to analyze the payment capacity of small farmers and the resulting net income after cost recovery. Farm models confirmed the financial justification of the project improvements and the expected impact on rural incomes where most of Egypt’s poor make their living.

23. Annual family benefits show a 5 percent to 12 percent increase after the improvements and after payment of the annual installments for cost recovery of the investment.24 The annual net income weighted average of benefited households has increased by 8.2 percent from US$5,957 to US$6,449 alleviating poverty in rural areas in Egypt. Table 3.9 shows the number of farms represented in the project areas, and the expected family income increases after full cost recovery of on-farm improvements.

23 Diesel and electricity in the United States average 63 U.S. cents per liter and 12 U.S. cents per kWh, respectively. Converting these values into Egyptian pounds, the CFs become 3.08 (diesel) and 3.08 (electricity). 24 Since the late 1980s, the GOE has provided financial and technical support for the adoption of mesqa improvements (including single-point pumping to each mesqa and the improved mesqa itself), coupled with the development of WUAs to manage water distribution and maintenance. The package is usually well received by farmers because it reduces pumping costs and water distribution inequalities and gives farmers greater control over water management, resulting in increased productivity and enabling shifts to higher-value crops. The package also includes mesqa improvement cost-sharing mechanisms between the GOE and the beneficiaries. For pumps, pump houses, and auxiliary equipment, farmers pay the cost of the improvements in installments over a three-year period, without interest. For mesqa, marwa, and drainage improvements, farmers pay the cost of the improvements in installments over a 20-year period, without interest. In both cases, payments include 10 percent to cover the MWRI’s administrative expenses.

36

Table 3.9. Farm Models and Expected Income Increases (EGP)

Income Increase

After Debt

Service

Model Size

(feddan)

Area Per Type of Model

(feddan)

Number of

Farms

Farmers Net Income

(EGP/farm model)Without Project

With Project

New Unimproved Project Areas 95,530 32,141 Model 0.75 feddans (6% of area) 5% 0.75 6,166 8,222 35,190 36,959 Model 1.5 feddans (31% of area) 6% 1.50 29,960 19,973 43,036 45,752 Model 4 feddans (63% of area) 10% 4.00 59,404 14,851 63,451 70,107IIP and Other Projects Improved Area 24,550 11,062

Model 0.75 feddans (6% of area) 5% 0.75 1,585 2,113 37,063 38,761 Model 1.5 feddans (31% of area) 6% 1.50 7,699 5,133 45,692 48,580 Model 4 feddans (63% of area) 12% 4.00 15,266 3,816 68,925 76,957SSD Improvements Model 1.5 feddan (100% of area) 8% 1.50 95,385 63,590 46,098 49,960

24. All farm models representing the results of the improvements confirmed the positive financial impact of the project in enhancing their family incomes. As shown in the detailed tables in the Appendix in project files, the project—through integrated on-farm and off-farm investments—allowed for productivity increases together with irrigation cost reductions. Household income increases after cost recovery ranges from 5 percent to 12 percent. The improvements had a direct influence on the land market values of the improved areas which show increases of about EGP 100,000 per feddan (about 50 percent) over the values before the improvements varying with the location of the improved farms.

25. As a conclusion of the analysis, it can be said that the economic and financial analysis confirmed that although having a lower impact than expected, the IIIMP had a positive impact for the country and for the beneficiaries. The results confirm a way forward to significantly improve water use efficiency in Egypt, agricultural productivity, and equity toward a shared prosperity.

37

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title UnitLendingUsaid I. El-Hanbali Consultant GWA07

Jose Simas Lead Water Resources Management Specialist

Ghada Younes Senior LawyerBadr Kamel Senior Procurement Specialist GGO05Hisham Waly Practice Manager GGO25Hani El Sadani Senior Water Resources EngineerNarasimham VijayJagannathan Consultant IEGSD

Ayat Soliman Practice Manager GSU11Marwa El-Moslemany Program AssistantSupervision/ICRMohamed Yahia Ahmed Said Abd El Karim Senior Financial Management Specialist GGO23

Abdulhamid Azad Lead Water Resources Management Specialist GWA05

Nina Bhatt Practice Manager GSU03Bekele Debele Negewo Program Leader EACCFAhmed Shawky M. Abdel Ghany Senior Water Resources Specialist GWA06

Hani Abdel-Kader El Sadani Salem Senior Water Resources Engineer

Akram Abd El-Aziz Hussein El-Shorbagi Senior Financial Management Specialist GGO24

Wael Ahmed Elshabrawy Financial Management Analyst GGO23Jamal Abdulla Abdulaziz Senior Procurement SpecialistBadr Kamel Senior Procurement SpecialistMaiada Mahmoud Abdel Fatt Kassem Finance Officer WFALA

Enas Shaaban Mahmoud Program Assistant MNCEGHeba Yaken Aref Ahmed Operations Analyst MNSWAClaudine Kader Program Assistant GWA05Mohab Halouda Senior Energy Specialist GEE05Michael Sandoz Irrigation Consultant GFA03Knut Opsal Lead Social Development Specialist GSU07Mikael Sehul Mengesha Senior Procurement SpecialistMohamed Mehani Operations Engineer

Jose Simas Lead Water Resources Management Specialist

38

(b) Staff Time and Cost

Stage of Project CycleStaff Time and Cost (Bank Budget Only)

No. of staff weeks US$ Thousands (including travel and consultant costs)

Lending FY02 6.57 45.81 FY03 6.07 29.74 FY04 29.47 125.92 FY05 60.43 248.36 FY06 18.73 83.79

Total: 121.27 533.62Supervision/ICR

FY06 14.04 35.90 FY07 49.42 165.70 FY08 47.36 205.20 FY09 34.66 206.88 FY10 17.07 95.77 FY11 19.55 89.52 FY12 23.38 136.39 FY13 11.45 75.26 FY14 20.00 105.08 FY15 16.05 89.57 FY16 27.34 160.85

Total: 280.32 1,366.12

39

Annex 5. Beneficiary Survey Results

A beneficiary survey was not undertaken.

40

Annex 6. Stakeholder Workshop Report and Results

A stakeholder workshop was not undertaken.

41

Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR

Background

1. The IIIMP was originally a seven-year multidonor funded project implemented under the Egyptian MWRI that aimed to enhance the management of irrigation and drainage and to increase the efficiency of irrigated agriculture water use and services in the Mahmoudia and Meet Yazid command areas in the Middle and West Delta. It addressed the water management issues in the two command areas in an integrated and participatory manner.

2. The overall objective was to improve water distribution, quantity, quality, equity, and timeliness and hence to increase agricultural production and alleviate poverty. Key elements to achieve these goals were the rehabilitation and improvement of the water management infrastructure. This was accompanied by institutional reform and user participation.

3. The IIIMP is regarded as a pioneer project where the policy reforms of integrated planning and development of water management service through better integration of the MWRI departments and other Government agencies are rolled out on a large scale.

4. The IIIMP implementation program was covered by five (5) components: (1) Improved and Integrated Water Management; (2) Improved On-Farm Water Management; (3) Institutional Development and Capacity Building; (4) Project Management, Coordination, and Integration; and (5) Environmental Mainstreaming.

5. The IIIMP involved a great number of sectors and departments within the MWRI as well as other ministries, in particular the MALR and Ministry of Electricity and Energy (MEE).

6. The framework for implementation, which was prepared during 2006, elaborated the IIIMP project concept as defined in the PAD and consisted of two documents:

A Project Implementation Plan

A Project Implementation Manual

7. The activities and plans described in these documents are fully in line with the IIIMP concept.

Partnership and Funding Arrangements

8. The main partnership arrangements included (a) a loan from IBRD for financing infrastructural improvements and equipment, (b) an additional loan from KfW for financing infrastructural improvements, (c) a grant from KfW for financing the TA services, (d) a grant from the Netherlands Government for the preparatory phase and institutional development and capacity-building activities relating to WUAs on the one hand and the MWRI on the other and the rehabilitation of district buildings, and (d) the GOE with a national counterpart fund budget.

9. The original project duration covered a period of approximately seven years from March 2007 to March 2014. The original closing date of the IBRD loan was March 31, 2014. However,

42

because of the political unrest in Egypt (January 2011 and June 2013), which affected the implementation progress of the IIIMP in various ways, in March 2014, the IBRD extended its loan for another two (2) years up to March 31, 2016.

10. The original Netherlands Contribution Arrangement also covered a period of seven years, that is, from 2006 to December 2013. For similar reasons, this closing date was extended for three months up to March 31, 2014.

11. The original closing date for KfW funds (both Loan and Grant) was December 31, 2015; again for similar reason this was extended to December 31, 2016. At present, a second extension is being contemplated up to December 2017 to complete the ongoing activities in the KfW areas of the IIIMP.

Summary of Implemented Activities

12. The IIIMP is implemented through the various departments of the MWRI and the MALR (EALIP) and MEE and coordinated through a PMU and RCUs at regional level. The three RCUs (in each of the three governorates) assist the PMU in the coordination, monitoring, evaluation, and reporting. A Steering Committee has been established to provide strategic leadership for the timely and effective implementation of the IIIMP. At the governorate level, the project implementing sectors and partners are represented in a Regional Management Committee. The TA for the IIIMP includes (a) individual consultants hired directly by the PMU (and financed by the NDC) and (b) the main consultant Euroconsult Mott MacDonald in association with Mott MacDonald (United Kingdom), CES (Germany), S&H (Egypt), and CBI (Egypt), financed through the loan and grant from KfW.

13. Moreover, the PMU-IIIMP decided to make use of the MWRI’s in-house expertise in the various disciplines to establish a cost-effective mechanism for implementing the different IIIMP components through a number of task forces (TFs); the aim of these TFs was to facilitate the preparation, coordination, and implementation of the various IIIMP activities.

14. The actual activities are summarized in Table 7.1:

Table 7.1. Summary of Activities

Component Subject Summarized Description ActivitiesComponent 1 Improvement and

Integrated Water Management - investigations, design, and supervision

Main canals: 27 completed contracts, of which 13 on Mahmoudia main canal and 14 on Meet Yazid and Zawia main canals.

Branch canals: 36 completed contracts, 2 contracts ongoing, and 5 contracts planned.

Mesqa improvement works: Completed 85,347 feddans and expected 95,532 feddans.

Electricity medium and low voltage networks: Completed 3 contracts, ongoing 16 contracts, and planned 8 contracts.

Marwa development: 24,546 feddans completed and 9,525 feddans to be completed.

Rehabilitation of open drains: 10 contracts. Rehabilitation and new constriction of SSD: 97,982 feddans under

contract, of which 95,385 feddans was completed at IBRD closure date (this figure included 2,458 feddans completed of new SSD systems with

43

Component Subject Summarized Description Activitiesa remainder of 1,342 feddans to be completed).

Activities for mesqa WUAs and irrigation improvement: Preparation of designs and tender documents for 95,532 feddans of mesqa improvement. This included support for farmer participation and developing the capacity of the WUA to manage and operate the new infrastructure.

Activities for SSD improvement have contributed to the preparation of SSD improvement in 97,982 feddans. To date, approximately 97,982 feddans are awarded to contractors and more than 95,385 feddans (112% of adjusted project target) of SSD was completed by March 2016.

Activities for preparation for installation, commissioning, and operation of ultrasonic flow measurement devices, together with the MWRI Telemetry Directorate, who were involved in USFM calibration and commissioning.

Activities for main system improvement: PMU and HEPS in the field investigation, preparation of tender documents and the procurement process, and construction supervision of contracts.

Component 2 Improved On-Farm Water Management

Water crop management adaptive research Adaptive research for SRI: The PMU selected 80 feddans to pilot the

rice intensification system in the Nekla command area, which was taken over by EWRMP project in January 2014.

Investigations for water management under controlled drainage: In total, 300 feddans of controlled drainage was piloted and farmers were trained in El Baradei area; this was also taken over by the EWRMP in January 2014.

On-farm demonstrations and farmer excursions: The W10 demonstration area (4,500 feddans) was implemented and used to demonstrate improved marwa development and LLL in improved mesqa areas. Moreover, farmer excursions were organized to show farmers to show the benefits of such improvements. Some 7,000 feddans of LLL was implemented; these LLL activities are continued under the FIMP.Irrigation advisory support services strengthening: This included setting up a number of CF pilot areas (most advanced being the Nekla Pilot scheme) and training of concerned WUAs and BCWUAs (farmers) and the MWRI staff in preparing them for continuous flow irrigation as an alternative to rotational flow; this was also taken over by the EWRMP in January 2014.Other activities included capacity building (training for trainers courses) for IAS and CDIAS extension staff in coordination with the MWRI Training Center.

Component 3 Institutional Development and Capacity Building

This component mainly covered the establishment and strengthening of IWRIGDs, IWMDs, DWBs, BCWUAs, and WUAs. 308 BCWUAs have been established. Nine DWBs have been established. 2,070 WUAs have been established. 1,162 mesqas handed over to the WUAs and these now have full

operational responsibility. Three IWRIGDs were established, activated, and strengthened in

Beheira, Gharbia, and Kafr El Sheikh. 21 IWMDs were to be established. Total number of trained beneficiaries: 15,525 (13,684 males and 1,926

females). Total number of the MWRI staff trained: 1,261 (1,699 males and 370

44

Component Subject Summarized Description Activitiesfemales).

Component 4 Project Management, Coordination, and Integration

Support to the PMU and RCUs: Under this component, support was given for the establishment and operation of the PMU and the three RCUs. Moreover, a number of TFs were established for coordination of activities. The following TFs were involved: TF for high-level project coordination; TF for project coordination; TF for procurement, documentation, and finance.Support for setup and execution of M&E program: Monitoring of the project’s implementation progress and comparison with the overall work plan for the infrastructure works involved in the IIIMP; maintaining a database for monitoring the progress of contract implementation and interim payments; monitoring water levels which are automatically registered by the WMRI at several locations in the monitored canals and drains, as well as data such as cropping patterns, productivity, salinity, pump operations, and irrigation practices. These water levels were used for estimating performance indicators; periodic evaluations on WUO functioning are carried out by the PMU and progress reporting on procurement and construction works. The PMU relied on information provided by the IIS, EPADP, HEPS, and RSUs. The PMU, assisted by the TA consultant, regularly prepared a revised ‘Procurement Plan’ to facilitate and streamline monitoring of the procurement and implementation of construction works.Impact, performance, and progress M&E: Two studies were prepared by contracting E-Leaf (formerly WaterWatch). These studies (covering the summer/winter season of 2008–2009 and the winter and summer season of 2013–2014) included remote sensing studies to analyze parameters related to water use and agricultural productivity, with the aim of assessing the impact of irrigation modernization interventions in the Nile Delta. These parameters are valuable indicators of the quantity, quality, and timeliness of water delivery. The first study formed an important input for the Baseline Study, which was prepared in 2009–2010 for summer/winter 2008–2009.The outcome of both studies represents an important element of the IIIMP M&E activities for both the baseline study and completion report.

Component 5 Environmental Mainstreaming

Public awareness and information campaigns: Prepared awareness building pamphlets on relevant environmental issues and the distribution thereof.Performance-based environmental M&E: Activities included collection and analysis of environmental monitoring data. A water quality measuring program was implemented by the WMRI, which formed part of the monitoring activities, mentioned under Component 4Technical studies and management plans - activities included: An update on the ESMP in 2010. A scoped Environmental Impact Assessment for dredging of main

canals in 2011. Social mitigation studies before tendering of some of the main canal

improvement works. Social studies concerned with illegal squatters on the banks of the

Mahmoudia Canal in 2011. An updated RAP in 2011. An ESMP for Nishil and Sharaf drains in Gharbia and Beheira,

respectively, in 2013 and the preparation of design and tender documents.

Institutional capacity building: Environmental training courses were

45

Component Subject Summarized Description Activitiesconducted for district drainage engineers of the IWRIGDs and formed part of the overall capacity-building training program reported under Component 3.

General WUO and the MWRI staff institutional training sessions

Throughout the implementation period of the IIIMP, the institutional strengthening and capacity-building activities included training courses, workshops, seminars, and some overseas study tours for IWM staff and involved the MWRI project staff.

Procurement of Goods and Services

From 2007 to 2016, procurement of goods and services were financed using IBRD and NL-CA funds. The goods were mostly procured using the International Competitive Bidding and National Competitive Bidding procedures and through a shopping procedure, if within the required budget ceiling.

Table 7.2. Summary of IIIMP Progress up to March 31, 2016

Item UnitTarget at

CompletionMTR

Total Estimated Cost in LE

Awarded up to March 31,

2016

Implemented up to March

31, 2016

% Implemented Compared to

TargetCivil worksMain canal LE 150,000,000 150,000,000 168,130,031 167,802,933 111Branch canal LE 81,200,000 81,200,000 159,978,649 146,189,505 180Mesqa improvement

Feddan 85,000 777,955,000 95,532 85,347 100

Electrical networks

LE 142,000,000 142,000,000 139,282,000 104,727,000 74

Mara development

Feddan 30,000 58,750,000 34,071 24,546 82

SSD Feddan 85,000 221,500,000 97,982 95,385 112Open drains Contract 8 28,400,000 10 10 125Institutional activitiesEstablished IWMDs

District 22 9,450,000 22 22 100

Established DWBs

DWB 11 600,000 9 9 82

Established BCWUA

BCWUA 308 2,345,000 308 308 100

Established WUAs

WUA 1,618 1,100,000 2,341 2,070 130

Handover WUAs

WUA 1,530 — 1,162 1,162 76

Note: IWMDs were established, but one IWMD was transferred from IWRIGD Gharbia to IWRIGD New Zifta.

Summary of Budget and Expenditures

15. Actual expenditures up to the end of March 2016 amounted to US$247.35 million, of which US$118.56 million for IBRD, US$60.93 million for KfW, US$10.76 million for NL-CA, and US$57.71 million for the GOE (see table 7.3).

Table 7.3. Actual Project Expenditures (US$, millions) up to

Project Component BudgetPAD

Budget Revised

Actual Expenditures up to March 2016IBRD KfW NL-CA GOE Total

1. Improved and Integrated 224.90 116.00 58.40 0.26 49.99 224.65

46

Project Component BudgetPAD

Budget Revised

Actual Expenditures up to March 2016IBRD KfW NL-CA GOE Total

Water Management2. Improved On-Farm Water Management 4.60 0.21 0.00 0.12 0.25 0.58

3. Institutional Development and Capacity Building 14.30 1.13 0.00 5.69 2.35 9.17

4. Project Management, Coordination, and Integration 11.00 1.23 2.53 4.66 5.09 13.49

5. Environmental Mainstreaming 5.00 0.01 0.00 0.03 0.03 0.07Subtotal 259.80 118.56 60.93 10.76 57.71 247.96

Price and physical contingencies 40.20 n.a.

Total 300.00 118.56 60.93 10.76 57.71 247.96

16. Note that the figures for expenditures are as mentioned in the FMR report, dated March 31, 2016. Moreover, for IBRD, we use actual exchange rate (before used US$1.00 equivalent to LE 5.50). For KfW, NL-CA, and GOE, an exchange rate of LE 5.50 to the U.S. dollar was used. By June 1, 2016, the total amount of the IBRD loan (US$120 million) was disbursed, as notified by the IBRD disbursement section (the IIIMP obtained a grace period up to July 31, 2016).

Cost Recovery

17. Law 213 of 1994 provides for recovery of mesqa improvement costs from the landowners benefiting from such investments.25 The costs of pump sets are repaid within 3 years, while repayment of the cost of civil works takes place over 20 years. Costs are repaid without interest. Taken together with the fact that there is usually a significant delay between the time when the investments are made and the start of repayments, this means that, particularly in the case of the civil works, that there is a significant element of subsidy.

18. Collection of the instalments is the responsibility of the LTA. After deduction of fees for the LTA and IIS, the amount collected is paid into a revolving fund which is intended to be used for further mesqa improvement.

19. Until 2013, arrangements to start the cost recovery were delayed while a decision was being awaited as to whether the costs of electrification (low-voltage networks), should also be included. During summer 2013, a formal decision was made by the MWRI in conjunction with the Ministry of Finance that the costs of the low-voltage networks should be taken into account for the cost recovery, with repayments to be made over 15 years.

Summary of Main Lessons Learned

General

Initial indications show that costs and irrigation time have decreased after the improvement of the mesqa and the establishment of WUAs.

25 Similar arrangements exist for subsurface drainage works implemented by the EPADP.

47

Improved water flows have increased crop yields, particularly at the tail end of improved branch canals.

Increased women participation has been observed in some WUAs and BCWUAs.

Conflicts between farmers on the same mesqa have decreased after improvement works were completed.

The exposure to contaminated irrigation water supply has been reduced at the tail end of the system through the provision of mesqa pump stations.

Land saving because of buried feeder pipelines from the offtakes to mesqa pumping stations and buried feeder lines and hydrants when developing the marwas.

The increase in land value because of improved farm infrastructure and improved environmental conditions was not taken into account in the economic analysis model used.

Electrification of Mesqa Pumping Stations

25. The Electricity Distribution Companies (EDCs) are responsible for the development and O&M of electricity distribution and as such they are best placed to undertake the additional work rather than awarding yet more contracts to private and state enterprises.

Farmer Objections

26. The use of a more flexible, yet firm approach to farmer participation could reduce problems during later stages, though this may result in more fragmented construction sites. The farmers themselves have to accept that the opportunity to participate brings with it responsibilities to ensure that all the farmers with a stake in a mesqa are fully involved in the development process and that they all accept the mesqa layout and other conditionalities.

Continuous Flow

27. A key requisite for continuous flow is the ability to measure and regulate flows into the branch canals and at present only a limited number of flow measurement devices have been installed. The regulation of flows into branch canals, particularly during periods of low flow or high demand, has to be equitable and transparent so that farmers are able to check the flows into neighboring canals. Until such time as all the branch canals have a flow meter with visual display, this is not possible.

BCWUAs

28. There have been a number of projects to establish and build the capacity of BCWUAs and DWBs; however, neither of these bodies have any legal status under Law 213 of 1994, which amends the Irrigation and Drainage Law 12 of 1984. Given the necessary powers, BCWUAs would have an important role in any future plans to introduce Integrated Water

48

Resources Management, whereby users have a greater stake in the management and O&M of the infrastructure.

Establishment, Strengthening, and Operating of WUOs

29. The overall manpower and technical staff within IAS and CDIAS involved in this work was underestimated, more so if this same staff was involved in participatory design activities and problem solving during construction.

30. The introduction of an IWM system requires a long-term effort well beyond the completion date of the project and its construction activities.

Monitoring and Evaluation

31. Establishment of a centralized management information system would considerably streamline activities and information flows. The management information system should contain data on contracts signed, implementation progress, and individual target objects (for example, main and branch canals, mesqas, marwas, WUAs).

32. Remote Sensing Analysis (RSA) can provide additional dimensions. Main contributions of RSA to results monitoring improvements in irrigation and drainage have been the high reliability when identifying main cropping pattern, the overall calculation of water consumption, and crop growth/biomass. The outcomes of RSA and field monitoring ideally support each other. Aligning seasonal RSA with field monitoring activities is considered essential.

33. In view of small average field sizes in the Egyptian Delta, the use of high-resolution images (<10 m) should be considered to reduce interference of different crops grown in adjacent fields. As high-resolution images are more costly, certain study areas could be carefully selected, for example, in line with field surveys being done.

Post-completion Support in General

34. The implementing agencies are all project oriented and once the works are complete, there is no support for the farmers in terms of specialist training, workshop, and spare parts; building the capacity of the WUA, IWMDs, and DWBs; operation and management of irrigation infrastructure; and so on. In theory, the MALR is charged with agricultural extension, but this tends to focus on crop and livestock production, not on the particular skills needed to operate an irrigation system efficiently. It would be relevant to reserve a special budget line within the MWRI Training Center overall annual budget allocation for training and strengthening of farmers (WUAs), IWMDs, and DWBs.

Main Conclusion and Recommendations

35. The IIIMP is widely considered as a pioneer project, where the policy reforms of integrated planning and development of water management service through better integration of the MWRI departments and other Government agencies are rolled out on a large scale.

49

36. Implementation of the IIIMP to date has been difficult because of complex conditions in the field, including the political upheavals during 2011 and 2012, which extended to the rural areas being served and the limited capacity of some local contractors; the combination of these factors caused delays in implementation, which could not be foreseen at the start-up of implementation and as a consequence also had their effect on the disbursement rate.

37. However, with the approved extension of the IBRD loan from March 2014 to March 2016, the IIIMP managed to use the completed IBRD loan of US$120 million and fulfilled most of the revised results indicators, which were amended during the MTR.

38. Long-term sustainability of the IIIMP, however, requires additional support, especially in the field of capacity building of beneficiaries, to ensure long-term sustainability. The IIIMP has created an unprecedented momentum and expectations within the Delta region and its local population. However, not all expectations have been met as yet. Nevertheless, the contribution in the field of institutional strengthening and capacity building within the IIIMP implementation program, particularly with regard to the WUOs, has been of primordial importance and remains important.

39. The MWRI foresees a continuation in the field of mesqa development in other parts of the Nile Delta and Upper Egypt, building on the experiences gained under the IIIMP.

40. With the experiences gained, however, the PMU would propose to have the existing Agricultural Cooperatives actively involved in the establishment of the WUAs instead of the IIS as they have a more intimate knowledge of the farmers’ organizational structures at the field level, whereas the IIS has limited staff available for such activities, particularly so when the IIS has to be involved at the same time in the designs and construction supervision.

41. In such a case, the MWRI could arrange for a protocol between the MWRI and these agricultural cooperatives.

42. Moreover, in any future endeavor we would recommend having a separate loan in parallel with the MEE to provide for electricity networks in the future areas of mesqa improvement without the direct inference from the MWRI, similar to the scenario of Assuit Barrage (where the loan for civil works is assigned to the MWRI and a separate loan is assigned to the MEE). If the pilot(s) of supplying solar energy for the mesqa pumping stations show that this is a feasible option, this could become an alternative energy source.

50

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

From: KfW

We are largely in agreement with your ICR findings:

Despite the undisputed achievements made in terms of an improved equitable water distribution to the mesqas in conjunction with notably increased water productivity and very significant improvements made in the management of irrigation and drainage participation (WUAs), the overall project success was nevertheless constrained by:

A) The failure to deliver electrical power to all individual MESQA pumping stations within the implementation period, which hampered full development of operational WUA and limited mobilization of operation cost saving potentials.

B) The project cost was higher than expected. Assessment of overall readiness and preparedness to execute this complex project was possibly too optimistic, leading to longer project execution durations, additional cost, and resulting in lower than expected ERR.

C) The positive effects of the continuous flow concept did not materialize. Indeed, despite its pivotal role, at the heart of the IIP’s and the IIIMP’s concept, continuous flow was never implemented and is not being implemented. Any pilots in this direction have only been misleading for farmers, as they were actually providing continuous flow, without any limitation of water volume. Moreover, the MWRI is, at policy level and publicly in relation to farmers, still pretending to be pursuing continuous flow, implementing such misleading pilots. What is pending is the MWRI abandonment of continuous flow, at policy level and clearly communicated to farmers.

D) IWMD. The introduction of IWMD has not been consequently implemented. Partly such introduction is not properly functional due to lack of staff and budget, partly it is even being reversed.

From: NDC (Netherlands Development Corporation)

General

The Dutch contribution toward the IIIMP was in the order of EUR20 million, divided into three components. One components was to provide TA to the MWRI for mainly institutional aspects such as the establishments of water boards, and so on to prepare the ground for the infrastructural improvements which would be brought about by the World Bank loan upon loan effectiveness. This component started prior to loan effectiveness and continued well into loan effectiveness. This TA component established procedures to expand participatory water management into, among others, the commander areas of Mahmoudia and Meit Yazid (IIIMP project area). It also introduced and institutionalized training of the MWRI staff (IASs) to ensure continuity of training at all levels well after this component was completed. Under this component, a number of important tests and experiments were performed relating to volumetric distribution in canals as opposed to level distribution under continuous flow.

51

The other two components provided under Dutch development cooperation were both financial assistance toward the IIIMP to help the MWRI to continue to provide training, and so on and carry out the skills acquired under the TA program after that was completed. This component helped establish and operationalize water boards/WUAs, branch, and DWBs, and so on. It was complementary to the loan and was to be used for all activities which the loan could not be used for under Egyptian regulations (such as procurement of TA and consultancy services). The MWRI was reluctant to purchase expatriate consultancy services mainly due to the red tape involved in the process; however, national consultants were recruited when necessary under this component.

The third component, also financial assistance, was used to finance the feasibility study mentioned in the ICR which was subsequently used as the basis for the Integrated Sanitation and Sewerage Infrastructure Project cofunded by the World Bank and KfW, and so on. I feel this should somehow be included in the ICR report for completeness. It also tends to set the framework in general and provides answers where questions could be asked especially those pertaining to continuity and sustainability.

There were a number of more specific comments:

On the conversion of diesel pumps to electrical units:

The cost of irrigation has been reduced from EGP300 to what amount? From my personal experience, since the price of diesel fuel has been increased, the difference between the two means of pumping has widened even further in favor of electricity being the cheaper.

Farmers take over with diesel units. How is this in proportion to environmental sustainability? How many farmers are taking over with diesels? Are other solutions possible? How does this impact the remarks on mitigating climate risks?

What kind of training is needed? Can there be some more detail in the areas that still have to be covered?

On the role of women in water management:

Contrary to indication in this paragraph, women were very much targeted under the TA component of the IIIMP. Provisions are in place to ensure that a certain number of women are elected members of water boards, WUAs, and so on. The IIIMP collected and reported on gender segregated data in all soft aspects of the project. It is probably correct that not many landowners in these command areas are women; nevertheless, it is a fact that women are also very much involved in water management. Kindly amend the said paragraph accordingly.

On the Overall Outcome Rating:

Is moderately satisfactory not a bit too modest? Satisfactory (as in between ‘moderately satisfactory’ and ‘high’) seems to be more in place.

52

Annex 9. List of Supporting Documents

Loan Agreement (Loan number 7291 EGT). Integrated Irrigation Improvement and Management Project, May 12, 2005

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

Supervision Missions’ Aide Memoires from 2005 to 2016

Midterm Review Report. Integrated Irrigation Improvement and Management Project, May 2012

Restructuring Paper IIIMP, October 2012.

Restructuring Paper IIIMP, March 2014.

Restructuring Paper IIIMP, December 2015.

World Bank Group 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

World Bank Group Country Partnership Framework for the Arab Republic of Egypt for the period FY 2015–2019, November 2015

Integrated Water Resources Management Plan, MWRI, June 2005

Irrigation Improvement Project, ICR, June 2007

Arab Republic of Egypt, Sustainable Agricultural Development Strategy Towards 2030, Cairo, 2009

53

MAP

54