Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 43358-50

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN .

IN THE AMOUNT OF US$25.0 MILLION

TO THE

GREATER AMMAN MUNICIPALITY

WITH A GUARANTEE OF THE HASHEMITE KINGDOM OF JORDAN

FOR AN

AMMAN SOLID WASTE MANAGEMENT PROJECT

August 28,2008

Sustainable Development Department Middle East and North Africa Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective August 18,2008)

Currency Unit = Jordanian Dinar (JD) JD0.709 = U S $ l US$1 .41 = JD 1

F I S C A L YEAR

January 1 - December 31

CAS CDM CERs CFE DOE EB E C EPC ERPA ESIA ESMP FM F M S GAM GHG IUR JD kwh LFG MENA METAP M o E M o F MoPIC M S W MSWM MW NPV P D D PSP RPF S W M SWMDP U S A I D

ABBREVIATIONS AND ACRONYMS

Country Assistance Strategy Clean Development Mechanism Carbon Emission Reductions Carbon Fund for Europe Designated Operational Entity Clean Development Mechanism Executive Board European Commission Executive Privatization Commission Emission Reductions Purchase Agreement Environmental and Social Impact Assessment Environmental and Social Management Plan Financial management Financial management system Greater Amman Municipality Greenhouse gas Inter im Unaudited Report Jordanian Dinar Ki lowatt hour Landf i l l gas Middle East and Nor th A fnca Mediterranean Environmental Technical Assistance Program Ministry o f Environment Ministry o f Finance Ministry o f Planning and International Cooperation Municipal solid waste Municipal solid waste management Megawatt Net present value Project Design Document Private sector participation Resettlement Policy Framework Solid waste management Solid Waste Municipal Disposal Plan United States Agency for International Development

Vice President: Daniella Gressani Country Director: Hedi Larbi

Acting Sector Manager: Jonathan Walters Task Team Leader: Jaafar Sadok Friaa

FOR OFFICIAL USE ONLY

THE HASHEMITE KINGDOM OF JORDAN AMMAN SOLID WASTE MANAGEMENT PROJECT

CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 I . A . B . C .

I1 . A . B . C . D . E .

I11 . A . B . C . D . E .

I V . A . B . C . D . E . F . G .

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

Rationale for Bank involvement ......................................................................................... 5

Higher level objectives to which the project contributes .................................................... 6

PROJECT DESCRIPTION ............................................................................................. 6 Lending instrument ............................................................................................................. 6

Project development objective and key indicators .............................................................. 6

Project components ............................................................................................................. 7 Lessons learned and reflected in the project design ............................................................ 8

Alternatives considered and reasons for rejection .............................................................. 9

IMPLEMENTATION .................................................................................................... 10 Institutional and implementation arrangements ................................................................ 10

Monitoring and evaluation o f outcomes/results ................................................................ 11

Sustainability ..................................................................................................................... 11

Critical r isks and possible controversial aspects ............................................................... 12

Loadcredit conditions and covenants ............................................................................... 14

APPRAISAL SUMMARY ............................................................................................. 14 Economic and financial analyses ...................................................................................... 14

Technical ........................................................................................................................... 15

Fiduciary ........................................................................................................................... 16

Social ................................................................................................................................. 17

Environment ...................................................................................................................... 18

Safeguard policies ............................................................................................................. 19

Policy Exceptions and Readiness ...................................................................................... 20

Annex 1: Country and Sector or Project Background ............................................................ 21

Annex 2: Ma jor Related Projects Financed by the Bank and/or other Agencies ................. 25

I I

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

Annex 3: Monitoring and Evaluation Arrangements .............................................................. 26

Annex 4: Detailed Project Description ...................................................................................... 29

Annex 4 bis: Attached Carbon Finance Operation ................................................................. 32

Annex 5: Project Costs ............................................................................................................... 35

Annex 6: Implementation Arrangements ................................................................................. 35

Annex 7: Financial Management and Disbursement Arrangements ..................................... 38

Annex 8: Procurement Arrangements ...................................................................................... 43

Annex 9: Economic and Financial Analysis ............................................................................. 53

Annex 10: Safeguard Policy Issues ............................................................................................ 68

Annex 11: Project Preparation and Supervision ..................................................................... 88

Annex 12: Documents in the Project File ................................................................................. 89

Annex 13: Statement of Loans and Credits .............................................................................. 90

Annex 14: Country at a Glance ................................................................................................. 91

Annex 15: Map 36439 ................................................................................................................. 93

THE HASHEMITE KINGDOM OF JORDAN

AMMAN SOLID WASTE MANAGEMENT PROJECT

PROJECT APPRAISAL DOCUMENT

MIDDLE EAST AND NORTH AFRICA

M N S S D

Date: August 28, 2008 Country Director: Hedi Larbi

Team Leader: Jaafar Sadok Friaa Sectors: Solid waste management (85%);Sub-

Sector ManagedDirector : Jonathan D. Walters national government administration (1 5%) -

Project ID: P104960 Lending: Instrument: SDecific Investment Loan

Themes: -Pollution management and environmental health (P) Environmental screening category: A

v

[XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 25.00

Borrower: Greater Amman Municipality (GAM) Guarantor: Government o f Jordan Responsible Agency: Greater Amman Municipality

Project implementation period: Start January 1,2009 End: December 3 1, 2013 Expected effectiveness date: January 1,2009 Expected closing date: June 30,2014 Does the project depart from the CAS in content or other significant respects? Re$ PAD I. C. Does the project require any exceptions from Bank policies? Re$ PAD I K G.

[ ]Yes [XINO

[ ]Yes [XINO

Have these been approved by Bank management? & []Yes [X N o Does the project include any critical r isks rated “substantial” or “high”? Ref: PAD III. E. Does the project meet the Regional criteria for readiness for implementation? Ref: PAD IKG. Project development objective Ref: PAD ILC., Technical Annex 3

[]Yes [XINO

[]Yes [XINO

[XIYes [ ] N o

(i) Environmentally upgrade and expand the existing municipal solid waste landfill to meet the city’s disposal needs up to 2013 and generate electricity while mitigating GHGs; and

(ii) Improve the cost effectiveness o f the existing municipal solid waste collection and transport system and improve overall cost recovery.

Project description [one-sentence summary of each component] Re$ PAD ILD, Technical Annex 4 Component 1 : Institutional Strengthening and Capacity Development. This component will finance technical assistance and capacity building activities benefiting GAM departments involved in the planning, development, operation, and evaluation o f M S W services. This component will also finance (a) technical assistance to GAM in operating the landfi l l site and monitoring the LFG recovery contract; and (b) engineering services for supervising a l l c iv i l works contracts, including construction o f cell 3 and upgrade o f the existing leachate treatment facility.

Component 2: Infrastructure Development : This component includes three subcomponents aimed at improving the cost recovery and effectiveness o f disposal and transfer, strengthening management and capacity expansion o f the existing landfill, and using LFG to generate electricity. The investment activities are: (i) Landfi l l construction and upgrade o f leachate treatment facility; (ii) Construction o f two transfer stations; and (iii) Design, Build and Operation o f an LFG recovery system.

Component 3 : technical assistance to the Project Management Unit (PMU).

Project Management Component. This component will finance necessary

Attached Carbon Finance Operation: The World Bank as a trustee o f Carbon Funds will purchase part o f the CERs resulting from the project, amounting to 0.9 to 0.95 mi l l ion tons o f C 0 2 equivalent (tC02e) o f CERs f rom 2009 to 2014.

Which safeguard policies are triggered, if any? Ref: PAD IKF . , TechnicalAnnex 10 Environmental Assessment (OP4.0 1): The proposed Solid Waste Project has been classified as Category A because o f i t s potential impacts on environment and natural resources. An ESIA was

prepared in compliance with the requirements o f the Jordanian regulations as wel l as the Bank guidelines and procedures including OP4.0 1 “Environmental Assessment”. The ESIA report was based on studies, f ield investigations, and public consultation including consultation with affected population groups and key stakeholders and NGOs. An ESMP was also prepared and related costs estimated as part o f the above ESIA report.

Involuntary Resettlement (OP/BP 4.12): Some o f the project’s physical components may result in involuntary resettlement and/or land acquisition. OP 4.12 o n Involuntary Resettlement i s thus triggered, and a RPF has been prepared. An RPF i s the instrument used, because the exact nature and extent o f land acquisitionhesettlement resulting from the project are not yet known. In the context o f this project, this applies to the construction o f transfer stations which may - depending upon the location chosen - entail some degree o f land acquisition and/or resettlement.

Significant, non-standard conditions, if any, for: Re$ PAD III. F :None Board presentation: Tentatively scheduled for September 30,2008

Loadcredit effectiveness: Tentatively scheduled for January 1 , 2009

Covenants applicable to project implementation: None (TBC during negotiations)

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. During the last five years, Jordan has maintained i ts strong economic performance; real GDP growth remained high at 6.4 percent in 2006. The expansion was broad, led by the manufacturing, construction, and service sectors. Continuing robust demand in these sectors is explained partly by high liquidity in the region. Capital inflows as wel l as tourist travel to Jordan have reached record levels. The strong economy has helped boost public revenues, while public spending has remained under control, resulting in a lower public deficit. However, increasing h e 1 prices combined with high demand in the economy has stoked inflationary pressures, leading authorities to tighten monetary policy. The current account deficit narrowed in 2006, but remains high at 13 percent o f GDP. Avoiding excessive overheating o f the economy remains a challenge, which the government has been addressing through several instruments, including higher fees for real estate, higher central bank interest rates, tighter bank supervision, and lending constraints for investors in the Amman Stock Exchange.

2. Jordan’s political stability provides an environment that is conducive to reform despite continuing security threats and regional tensions. The top political reforms include expanding political freedoms and social participation, removing remaining gender discrimination, and enhancing judicial independence and fairness. The Cabinet, reshuffled in November 2007, i s pursuing its mandate to implement the National Agenda, which was translated recently into a medium-term plan identifying pol icy priorities.

3. Despite continuing economic growth, environmental degradation, which the Mediterranean Environmental Technical Assistance Program (METAP) estimated to cost 3.1 percent o f GDP (2003), affects the health o f Jordanian citizens, interferes with Jordan’s access to the environmentally conscious EU market, and jeopardizes the country’s high tourism potential. Solid waste is an important component o f the country’s environmental agenda, due to the relatively high rate o f per capita waste generation in urban areas (0.9 kgl persod day) and the fast pace o f population growth, estimated at 2.3 percent, pushed upwards in recent years by the flow o f migrants from neighboring countries such as Iraq and the West Bank.

4. With respect to solid waste, i t i s anticipated that the quantity o f municipal waste wil l continue to increase in the years ahead in tandem with population and consumption growth, and would thus affect the quality o f l i fe in Jordan. Currently, the production o f municipal waste in Jordan is estimated at 1.5 million tondyear, and is projected to reach 2.5 m i l l i on tondyear by 2015. The collection rate i s estimated at 90 percent in urban areas and 75 percent in rural areas. About 50 percent o f the waste generated is sent to 21 open dump sites that lack essential facilities or infrastructure.

5. Jordan has recently strengthened the sector’s legal framework by adopting regulation for the management o f solid waste (Regulation No. 27 o f 2005), however, in terms o f policy, planning, financing, management, organization and enforcement, progress remains to be made. Although Jordan does not yet have a solid waste management ( S W M ) policy, the Government has adopted a series o f enabling elements toward solid waste sector reform that represent a sound framework in the short term, including:

1

6. The solid waste sector is among the target areas of the Government’s National Agenda (NA) for Sustainable Development: The NAY which represents the Government’s pol icy for a ten-year period (2006-201 5), has established the fol lowing four objectives to be attained in the waste sector: (i) extending waste service coverage by providing financial, technical and human resource capacity-building to empower concerned authorities; (ii) promoting environmentally sound solid waste disposal and treatment; (iii) minimizing generation o f solid waste; and (iv) maximizing environmentally sound solid waste reuse and recycling.

7. Designation of the Ministry of the Environment (MoE) as the agency responsible for developing a S W M policy and laws and regulations o f the waste management sector. The Ministry has received technical assistance from the European Commission (EC) to train staff and to assist in drafting framework waste regulations. The purpose o f the regulations i s to provide for: (a) minimization o f waste generation and reduction o f its harmfulness (hazardous characteristics); (b) promotion o f the re-use o f feasible components o f waste; (c) a high level o f protection o f the environment, human l i f e and health; and (d) sustainable development through protection o f natural resources. The United States Agency for International Development (USAID) wil l be supporting the M o E to develop enabling legislation and its internal capacity through the Sustainable Achievement o f Business Expansion and Quality (SABEQ) program. Assistance wil l also include preparation o f environmental licensing, including establishing benchmarking, standards and guidelines for S W M facilities.

8. Encouraging Private Sector Participation in Infrastructure, as stated in the National Privatization Law No. 21 o f 2000 and Jordan’s National Privatization Strategy, which calls for the restructuring and privatization o f public institutions, increasing private sector investment in infrastructure, and attracting foreign technology and know-how. The Executive Privatization Commission (EPC) was set up to stimulate and drive the privatization program. The EPC i s prepared to assist in private sector participation (PSP) in Municipal Solid Waste Management (MSWM) where needed.

9. Adopting a National Energy Strategy, which calls for, inter alia, the development o f renewable and sustainable energy. In view o f the increase in energy prices, the Government has set an objective o f producing 10 percent o f its energy consumption with renewable sources o f energy by the year 2020. Landf i l l gas-to-electricity investments are among the potential projects that should contribute to this goal.

10. The metropolitan area o f Amman, the capital c i ty of the Kingdom o f Jordan, accounts for more than hal f o f Jordan’s population, 80 percent o f the country’s industrial sector, and 55 percent o f total employment. In recognition o f the expansion o f the city and the integration o f nearby villages and suburban developments, the perimeter o f Greater Amman Municipality (GAM) was extended in 2007 to include seven additional districts, bringing the total area o f GAM to 1,680 km2 and i t s population to 2.2 million. This population figure does not include seasonal laborers, or, more importantly, Iraqi citizens, the latter o f whom are estimated to total 750,000 for Jordan as a whole.

11. To achieve the optimum balance o f healthy growth and quality o f life, GAM has recently developed, with support f rom the World Bank, USAID, Agence Franqaise de Developpement and the European Investment Bank, an ambitious Master Plan that provides a framework for

2

infrastructure, planning and zoning, transportation, service provision, and PSP in municipal services for the next two decades. This plan i s considered the city’s blueprint for sustainable development and for the achievement o f the objectives outlined in the National Agenda. I t was designed to guide the growth o f Amman and address environmental protection, culture and heritage, transportation and infrastructure, and community development.

12. At the heart o f the Master Plan i s the improvement o f municipal services, including those related to M S W M . This i s consistent with the National Agenda, which considers M S W M to be one o f the major issues in Jordan.

Key Sector Issues

13. About ha l f o f the active landfill sites in Jordan adopt, open dumping as a disposal method. Even in sites that adopt landfilling, disposal practices are often inadequate in terms o f the environment and work safety. The disposal o f special and hazardous waste (including industrial wastewater, farm waste, and hospital and medical waste) in ordinary landfills i s not uncommon. Recognizing the strategic relevance o f the sector, the National Agenda established a number o f targets for improved S W M in Jordan, including an increase in the percentage o f M S W disposed o f in an environmentally sound manner (from 50 percent in 2003 to 60 percent and 70 percent in 2009 and 2013, respectively), as wel l as the percentage o f recycled and reused solid waste (up to 8 percent in 2009).

14. With a f low o f 2,400 tons o f waste per day, GAM accounts for approximately 50 percent o f Jordan’s total M S W . In contrast to other areas in Jordan, however, GAM has a h l ly functional waste management system that handles al l types o f solid waste (household, construction, etc.). The municipality directly manages the collection o f waste throughout the city, i t s transfer at three transfer stations, and disposal into the A1 Ghabawi landfill, located approximately 23 km from the ci ty center. In addition to managing its own solid waste, A1 Ghabawi landfill receives part o f the waste o f Zarqa and Russeifeh municipalities.

15. GAM’S S W M i s remarkable in several respects. First, GAM collects M S W o n a daily basis from almost 100 percent o f i t s residents. Second, through automatic charges levied through electricity bi l ls and commercial solid waste fees included as part o f business licensing, i t has one o f the best solid waste cost recovery rates in the Middle East and North Africa (MENA). Finally, there are effectively no scavengers - licensed or illegal - at the controlled landfill outside o f the city. On the whole i t is a remarkable accomplishment.

16. However, there are serious inefficiencies in SWM, and the costs o f providing services are quite high. The municipality has been working to increase revenues related to SWM, but it needs to improve i t s efficiency in terms o f collection, transfer, and disposal, including generating revenues from recoverable materials and landfill gas (LFG) recovery. M S W M in Amman is faced with the fol lowing issues:

17. Ineffective institutional organization and a lack of technical capacity to plan, operate, monitor and evaluate MSW services: GAM i s responsible for providing M S W services within the metropolitan area, while the M o E i s responsible for monitoring and regulating S W M in terms o f environmental and public health protection throughout the country. Within GAM, many

3

departments are involved in providing solid waste services, but mandates are not clear regarding several main functions, including pol icy setting, strategic planning, monitoring and evaluation, communication and awareness, etc. Also, the efficient provision o f M S W services i s currently constrained by lack o f coordination between the concerned departments for SWM-related investments and operations, from design and construction through operation, coupled with a lack o f formal procedures in nearly al l aspects o f MSWM, and poor technical oversight o f disposal.

18. Insufficient disposal capacity has negatively affected the environmental performance of the existing landfill: In 2003, fol lowing the adoption in 2002 o f a Solid Waste Municipal Development Plan (SWMDP), GAM established a new semi-controlled landfill at A1 Ghabawi. W h i l e waste disposal practices being followed in the new landfill represent an improvement in terms o f the environment and work safety compared with the older Russeifeh Landfill (which has been decommissioned and is now receiving only construction waste), the current disposal practices at A1 Ghabawi are not acceptable in environmental, technical and operational terms. As a result o f limited capacity and experience, the expansion o f the site’s disposal capacity has been seriously delayed, which has resulted in waste disposal in the first cel l far beyond i t s capacity - Cell 1 was designed for a total capacity o f 2 mi l l ion tons, but has received about 3.6 mi l l ion tons. In addition, the current practices o f LFG and leachate management are inadequate, a fact that i s compounded by the excess waste in Cell 1.

19. Increased transfers from general revenues to cover solid waste service costs: A strong revenue base, anchored mainly in property taxes and service fees, enables GAM to maintain a balanced budget. However, S W M revenues do not currently cover S W M costs. Preliminary estimates indicate that in 2007 the financing gap between S W M costs and revenues was approximately JD 8 million, despite an effective system o f collecting household tariffs via electricity bills and a recent increase in the tari f f from 14 JD to 20 JD per household per year. Unfortunately, because o f the inabi l i ty to track S W M costs over time, there i s no way to calculate the pattern o f cost recovery over the last several years. However, based on estimated expenses for 2007 only, cost recovery o f total expenses (including capital expense depreciation) was about 63 percent, resulting in significant transfers from general revenues to cover costs.

20. Compared to many other municipalities in the MENA region, Amman does a significantly better j ob at both providing S W M services and recouping costs from its customers. That said, there i s scope for both reducing costs - through improving the efficiency o f waste collection and transfer - and strengthening revenues through the sale o f carbon emission reductions (CERs) and energy generated through LFG, as wel l as, potentially, the collection and sale o f recyclable materials.

21. High collection and transport costs: the network o f three transfer stations i s inadequate for the geography and topography o f GAM, which stretches over a large and hilly area. The large distances covered daily and the obsolescence o f the waste collection fleet are responsible for high collection and transport costs, which account for approximately 80 percent o f total S WM operating costs.

22. Private sector participation in SWM is still in its infancy in GAM: a pi lot scheme o f privately managed waste collection covering 10,000 households was launched in 2007. In contrast, despite a provision for private sector recycling at A1 Ghabawi, recycling has not yet

4

started. GAM senior management expressed strong willingness for significant involvement o f the private sector in M S W M , but GAM needs a strategic action plan for such participation, as we l l as technical and managerial capacity for ensuring proper contracting and supervision.

23. Untapped carbon market opportunities: As a developing country (non-Annex B Party) that has ratified the Kyoto Protocol, Jordan i s eligible to participate in the flexibility mechanisms enabled under the Kyoto Protocol such as the Clean Development Mechanism (CDM). Waste disposed in landfills generates gases typically composed o f 50 percent methane (a greenhouse gas [GHG]) that can be captured and flared or used to produce electricity. CERs generated through LFG recovery can be sold to Part 1 country entities to generate revenue for the improvement o f current S W M practices.

24. While LFG recovery and use for electricity generation has been piloted at the older Russeifeh site, which has 3.5 MW o f installed capacity, there i s at present no LFG capture in place at A1 Ghabawi, which results not only in global environmental impacts l inked to the emission o f GHG, but also in national losses in terms o f foregone revenues from power production and from the sale o f CERs under the C D M .

B. Rationale for Bank involvement

25. The proposed Amman Solid Waste Management Project would be the first Bank operation in Jordan to systematically address municipal solid waste management issues and initiate steps towards integrated and efficient M S W M while mitigating negative environmental effects at both the local and global level. The Government sees the proposed project as a model for other municipalities in Jordan to enhance their M S W M systems.

26. The Government views the Bank as an important partner in supporting GAM’S improvement o f its M S W M and in taking advantage o f the international carbon market due to i t s ability to provide an integrated package o f investment financing, purchase o f CERs, and technical assistance. The Bank’s recognized technical expertise makes it an important partner in addressing the complex environmental, social, economic, and institutional issues and arrangements associated with sustainable and affordable S W M services. Additionally, the Bank has been able to leverage i ts experience with carbon finance operations in the solid waste sector in the design o f the landfill itself, so as to maximize potential CER revenues.

27. The Bank’s extensive experience in financing large municipal development projects and i t s prior experience in the successful implementation o f the Jordan Community Infrastructure Development Project as well as the ongoing Regional and Local Development Project, combined with its broad understanding o f municipal strategic planning and measures to improve the quality and cost effectiveness o f solid waste services, enhance the likelihood o f a positive outcome o f the proposed project.

28. The project i s consistent with the 2006 Country Assistance Strategy (CAS) for Jordan, which underscores the significance o f the environmental agenda and i t s linkages with local development. On solid waste in particular, the CAS highlights the increasing drain o f public h n d s for S W M and calls for innovative solutions. The proposed project builds on the inclusion in the CAS o f a Carbon Finance operation in the solid waste sector by proposing an integrated

5

approach, whereby the Bank provides loan financing for physical and institutional strengthening investments, as wel l as purchases the CERs resulting f rom some o f those investments.

29. Finally, the project is also consistent with the Bank’s strategy, endorsed by the Board in December 2005, to further engage in carbon finance, focusing on three objectives: (i) to ensure that carbon finance contributes to sustainable development; (ii) to assist in building, sustaining, and expanding the international market for CERs; and (iii) to further strengthen the capacity o f developing countries to benefit from the emerging market for CERs.

C. Higher level objectives to which the project contributes

30. This project conforms to the objectives o f Jordan’s National Agenda, particularly those related to environmental sustainability within the chapter o n infrastructure development. Regarding solid waste, the main recommendations o f the Agenda are to develop solid waste management policies, promote environmentally sound disposal sites, encourage recycling, and minimize solid waste generation. In the context o f environmental sustainability, the Government o f Jordan intends to carry out projects with World Bank assistance, including projects aimed at bolstering i t s efforts toward sustainable development based on i t s commitments in Johannesburg and Kyoto, in addition to the water, sanitation, and agriculture sectors to which the Government o f Jordan has allocated a sizable share o f i t s public expenditure.

31. The project also supports the CAS’S cross-cutting theme o f environmental protection and i s consistent with specific objectives o f the CAS, including objective ii (supporting local development through increased access to services and economic opportunities) and objective iv (restructuring public expenditures and supporting public sector reform).

11. PROJECT DESCRIPTION

A. Lending instrument

32. The project involves a Specific Investment Loan (SIL) to GAM. The Loan wil l be guaranteed by the Government o f Jordan through a Guarantee Agreement to be signed between IBRD and the Government o f Jordan.

B. Project development objective and key indicators

33. The development objectives o f the proposed project are to strengthen the operational, financial, and environmental performance o f MSWM in Amman. Specifically, the project will help achieve the following:

(i) Environmentally upgrade and expand the existing municipal solid waste landfi l l to meet the city’s disposal needs up to 2013 and generate electricity while mitigating GHGs; and

(ii) Improve the cost effectiveness o f the existing municipal solid waste collection and transport system and improve overall cost recovery.

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34. The Key Performance Indicators are the following:

0 Percentage o f collected municipal solid waste disposed o f and managed in a sanitary landfi l l increased from 0 to 80%;

160,000 MWh generated through the LFG recovery system by 2013; and

The cost recovery ratio for S W M improved from 63% in 2007 to 75% by 2013.

0

0

C. Project components

35. Component 1: Institutional Strengthening and Capacity Development (US$l.8 million): This component wil l finance technical assistance and capacity-building activities benefiting GAM departments involved in the planning, development, operation, and evaluation o f M S W services. This component, which wil l build o n the recommendations regarding organizational restructuring in the Master Plan (see para. 1 l), will include: (i) support for strategic planning in S W M systems including collection, recycling, sorting, transfer and landfilling, and updating o f procurement guidelines, regulations and practices in GAM; (ii) support for pi lot ing private sector participation in S W M services in GAM; (iii) development o f information systems to track technical, environmental and financial performance o f MSW services; and (iv) development and implementation o f a public information, education, and communication program.

36. This component will also finance (a) technical assistance to GAM in operating the landfi l l site and monitoring the LFG recovery contract; and (b) engineering services for supervising a l l c iv i l works contracts, including construction o f cell 3 and upgrading o f the existing leachate treatment facility, and the construction o f the two new transfer stations.

3 7. Component 2: Infrastructure Development (US$34.1 million): Component 2 includes three subcomponents aimed at improving the cost recovery and effectiveness o f disposal and transfer, management strengthening and capacity expansion o f the existing landfill, and using LFG to generate electricity. The investment activities are:

Sub-comuonent 2. I : Landfill construction and upgrade of leachate treatment _facilitv: The sub-component would finance c iv i l works construction o f cell 3 at the existing A1 Ghabawi landfill and the upgrading o f the existing leachate treatment facility. I t is expected that the two works would be undertaken under a single c iv i l works contract in order to maximize synergies in the work.

Sub-component 2.2: Construction of two transfer stations: Under this sub-component, the project will expand the transfer system by financing the construction and equipment o f two new transfer stations to service the North-west and South-west areas o f Amman. These two facilities aim at increasing the proportion o f M S W transported through transfer station from 75% to 95% and thereby reducing the cost o f collection and transfer o f municipal solid waste in Amman.

Sub-component 2.3: Design, Build and Operation (DBO) of an LFG recovery system: Under this sub-component, the project wil l finance the design, supply, installation, commissioning and initial operation for 5 years o f an LFG recovery system (extraction o f

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LFG and energy generation) for cells 1, 2, and 3 at a1 Ghabawi landfill. The sub- component wil l include final capping o f these cells as well as upgrading o f the leachate drainage system in order to maximize LFG recovery. The total capacity o f the power plant to be installed during the project period wil l be 6 MW. Implementation o f this sub- component wil l also enable income generation from the sale o f CERs and electricity.

38. Component 3: Project Management (US$0.6 million): Component 3 will finance necessary technical assistance to the Project Management Unit (PMU), which i s being established to undertake the day-to-day management o f the project. The technical assistance to the P M U wil l facilitate the PMU’s overall supervisory, coordinating, and monitoring role.

39. Attached Carbon Finance Operation: The World Bank has entered into an agreement with GAM to purchase part o f the CERs resulting f rom the project, amounting to 0.9 to 0.95 mil l ion tons o f C 0 2 equivalent (tC02e) o f CERs from 2009 to 2014. Given the current market, the emissions reduction purchase agreement (ERPA) i s valued between 8 and 9.5 mil l ion Euros. The World Bank CER purchase i s on behalf o f the Carbon Fund for Europe (CFE).

40. Payments o f CER revenues wil l be made annually subject to verification by an independent Designated Operational Entity (DOE) accredited by the C D M Executive Board (EB) established under the Kyoto Protocol. The World Bank’s Carbon Finance Unit will support GAM financially and technically in project registration, verification and certification o f CERs generated by the project.

41. In accordance with rules governing the CDM, a portion o f the carbon revenues i s to be allocated to sustainable development. GAM has already agreed with the M o E that 15 percent o f the carbon revenues will be allocated to support pollution abatement activities as part o f the Environment Protection Funds Program housed at and managed by the MoE.

D. Lessons learned and reflected in the project design

42. Countrywide: This project would be the first World Bank-assisted solid waste management project in Jordan and the only Bank loan to the city o f Amman during the last twenty years. The Bank’s recent experience in Jordan’s municipal sector includes the Jordan Community Development Project (closed in June 2004) and the ongoing Regional and Local Development Project (approved in November 2006). One o f the valuable lessons learned from these projects is that attention needs to be paid to the sustainability o f investments at the municipal level, in particular by strengthening the financial and technical capacity o f municipalities.

43. Worldwide: World Bank experience internationally with M S W M projects was taken into account during project preparation. The Lebanon Solid Waste Management Project, the Tunisia Sustainable Municipal Solid Waste Management Project, the Olavarria Methane Capture Project (Argentina), the Mexico Second S W M Project, the Bosnia and Herzegovina SWM Project, and recent solid waste sector work in India highlighted issues common to such projects and provided important lessons, including the following:

44. Inadequate technical capacity for strategic planning and private sector participation: Local government managerial capacity and experience in developing policies and strategic plans for

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private sector participation, as wel l as technical capacity to ensure proper contracting, supervision and monitoring hnctions, are keys to project success. In addition, the private sector on many occasions has not performed at the technical level expected and/or at acceptable costs, and government counterparts have lacked the ability to monitor and enforce contracts. Previous experience clearly points to a need for good planning and the benefits o f phased private sector participation in order to build government capacity, particularly for solid waste collection services. Technical Assistance within this Project will be in conjunction with the recommendations o f the Master Plan, which, among other tasks, i s proposing an appropriate organizational structure for S W M within GAM’S administration. Institutional strengthening will be provided in the context o f the new operational and managerial structure.

45. Overestimation of LFG systems performance: The preliminary results o f the verifications o f several Bank-hnded and other LFG projects show that projects have delivered fewer CERs than forecast in the Project Design Documents (PDDs). The main reasons include: (a) estimations from too-optimistic models due to lack o f experience and insufficient attention paid to the project environment; (b) high leachate levels and/or unstable waste mass, which negatively affect the generation and collection o f LFG; (c) delays in implementing the LFG system as we l l as in equipping the site with appropriate CER monitoring and recording equipment; and (d) poor design and operation.

46. Public participation and communication: Experience clearly demonstrates that without strong public participation and communication to address public concerns, projects that depend on changes in public behavior are l ikely to fail.

47. In addition, the Project took into consideration the Bank’s experience in Jordan within the framework o f METAP, particularly the EU-funded Regional Solid Waste Management Project. The project covers eight countries o f MENA and is aimed at enhancing the capacity o f the region’s countries (including Jordan) to implement integrated M S W M . Under the METAP project, Jordan received, inter alia, technical assistance for institutional analysis and reform, the promotion o f private sector participation in municipal waste, and the development o f a monitoring unit o f private sector contracts in Madaba, as wel l as training in waste management. The institutional component o f this Project will, among other things, help implement and apply the results o f that technical assistance.

E. Alternatives considered and reasons for rejection

48. Several alternative investments were considered during the project design phase, and the S IL was judged the most appropriate alternative. This instrument, as we l l as the activities i t i s intended to finance, are in line with the Government’s current policy, which is oriented toward concurrently improving infrastructure and strengthening institutions, rather than toward structural reform or macroeconomic pol icy reform, for which a development pol icy loan would have been more appropriate. In the context o f a SIL, several alternatives were considered:

49. Pursuit of a country-wide program: This option was not considered due to the embryonic stage o f disposal and treatment o f M S W in properly engineered sanitary landfills. It wil l be important f i rs t to establish, on a pi lot basis, the institutional and financial instruments and the corresponding investments in a municipality, such as GAM, that has a sound base to manage

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complex arrangements. Once a strategy for PSP and experience in contract management has been developed, that experience can be expanded to other municipalities, including, perhaps, with World Bank support.

50. Full private sector contracting of MSWM: Moving much more quickly toward comprehensive contracting o f a l l M S W M services was considered, and in fact would have been supported at the highest level o f GAM. However, there are a number o f preparatory initiatives that are required in order to prepare for significant participation o f the private sector. K e y issues that need to be addressed include: (i) strengthening the management capacity o f GAM to ensure PSP implementation support; (ii) strengthening understanding o f S W M cost structures and cost recovery; and (iii) the development o f operational and supervisory guidelines for S W M . These prerequisites are being addressed both through the project and through EU and U S A I D assistance. This operation as designed with gradual private sector involvement, starting with the LFG recovery component, while preparing the base for greater involvement o f the private sector in other segments o f SWM. Neighboring countries have tried to pursue large-scale private sector participation without these prerequisites, which has led to contract and service disruptions and serious delays o f payment.

5 1. Selection o f LFG-to-electricity option vs. LFG collection and flaring: LFG recovery (collection and electricity generation) has proven to be economically and financially viable and i s thus the recommended option under both the feasibility study and the PDD. In addition, Jordan has an objective o f producing 10 percent o f its primary energy f rom renewable resources, and this investment supports that goal.

52. Assessment of composting vs. landfilling: Consideration had earlier been given under the solid waste master plan study for composting, but this was ruled out as not being economically or financially feasible, in particular due to high investment costs and lack o f domestic market demand for compost in Jordan.

111. IMPLEMENTATION

A. Institutional and implementation arrangements

53. The project will be implemented by GAM. An Advisory Committee consisting o f the Ci ty Manager o f GAM, the Deputy Ci ty Manager for Planning and Economic Development, the Deputy Ci ty Manager for Public Services, and representatives from the Ministry o f Planning and International Cooperation, the MoE, and the EPC has been established by Mayoral Decree and will provide strategic guidance to and overall monitoring o f the project. In addition, the Advisory Committee wil l facilitate coordination and collaboration between the various GAM departments involved and help in duplicating the project in other municipalities in Jordan.

54. A PMU has been established within GAM by Mayoral Decree. I t will be responsible for day- to-day management o f the project and will be the counterpart to the Wor ld Bank for al l technical, fiduciary, and environmental matters. The PMU will be responsible for: (i) the overall supervision o f the project; (ii) ensuring compliance with the IBRD legal agreement and the EWA; (iii) supervising the technical assistance related to Component 1 ; and (iv) coordinating

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with the various GAM departments in the implementation and supervision o f contracts under Component 2.

55. The PMU wil l be established and financed by GAM. Staff will consist o f (i) a full-time project manager; (ii) a full-time solid waste technical specialist seconded from GAM’S Environment and Cleanliness Department; (iii) a full-time financial management specialist seconded from GAM’S Financial Department; (iv) a part-time environment specialist; (v) a ful l- time procurement specialist seconded from GAM’s Department o f Procurement and Tendering; and (vi) a full-time administrative assistant. GAM will also provide office space, office equipment, computer and telecommunications equipment for PMU staff, and a vehicle dedicated to the project for work-related transportation.

56. The PMU will report directly to the office o f the Mayor, but will work closely with the Environment and Cleanliness Department o f GAM, which i s responsible for M S W services. GAM’s technical capacity will be strengthened both through technical assistance and through project implementation itself, as most o f the PMU staff will be seconded f rom GAM’s technical and managerial departments.

57. Implementation period: The project wil l be implemented over the 2009-201 3 period, with significant advanced procurement starting in 2008 for the infrastructure component.

B. Monitoring and evaluation o f outcomedresults

58. GAM will be the borrower and the implementing agency. The PMU will be responsible for progress reports and wil l make sure that procurement reports and Interim Unaudited Reports ( IURs) are submitted to the Bank on time. Performance indicators will be monitored and regularly reported in progress reports (see Annex: 3: Results Framework and Monitoring).

59. With the support o f the project, the PMU will house and manage an information system for results evaluation and monitoring. This information system would be expected to continue to function beyond the l i f e o f the project, creating the core data source for evaluating and monitoring the performance o f solid waste services within Amman. Funds would be available to develop such an information system under Component 1 o f the project.

60. Bank supervision wi l l be carried out a minimum o f twice yearly during the implementation o f the project, and Bank staff wil l assist GAM in project execution and monitoring o f project performance, particularly in terms o f LFG collection and electricity generation. This wil l minimize the delivery risks in terms o f CER and electricity sales and wil l subsequently maximize project revenues and economic benefits.

C. Sustainability

61. One o f the core goals o f this project i s the improvement in GAM’s cost recovery o f SWM services. Investments in transfer stations and in LFG recovery are specifically designed to reduce costs and to generate income, respectively, and thereby to promote the sustainability o f investments. The financial analysis undertaken as part o f project preparation indicates that the net financial returns o f the project over a 20-year period are over US$44.5 million, or a net

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present value o f US$18.4 mi l l ion (discounted at 8 percent). In addition, the project wil l contribute to improvements in the cost recovery ratio for the sector - currently, cost recovery i s estimated at 63 percent; i t i s expected to increase to approximately 75 percent by the end o f the project.

62. In terms o f institutional sustainability, proposed technical assistance and contracting arrangements are designed to promote improved S W M and the long-term sustainability o f new arrangements. Technical assistance includes assistance to develop a strategic action plan for an integrated and affordable solid waste management system and to promote and pi lot PSP in providing solid waste services, as well as to strengthen GAM’S capacity in institutional aspects o f S W M - e.g., collection optimization, contract and performance management, benchmarking, and monitoring. The project-supported public awareness and communication program i s intended to educate residents not just on their rights with respect to SWM, but on their responsibilities as well. In addition, technical assistance related to supervision o f investment and operations contracts in solid waste disposal i s designed to train GAM staff in contract and performance management and to prepare them for later contracting in solid waste collection. The close working relationship among PMU and Environment and Cleanliness Department staff wil l also promote institutional strengthening and sustainability o f project investments.

63. I t is important to emphasize how the above technical assistance wil l combine with the DBO contracts financed by the project and with expertise within the P M U to build GAM capacity to provide efficient and sustainable S W M services. Until now, GAM has always directly run S W M , but has lacked an overarching strategic vision and the ability to view the entire scope o f S W M tasks. GAM management recognizes the need to outsource to the private sector in order to improve overall efficiency, but at present they do not have the capacity or experience to set service expectations, contract with providers, or monitor performance.

64. The project promotes a gradual shift to increased PSP in SWM. The DBO contract wil l support overall S W M through revenue generation, as wel l as provide a learning opportunity for S W M staff in contract performance supervision. It i s envisaged that this experience, combined with development o f the PSP strategic action plan, will lead to at least one, if not several, contracts for municipal solid waste services by the end o f the project. This expertise wil l be developed within the PMU, but with close coordination with GAM’S Environment and Cleanliness Department; i t i s envisaged that the technical and institutional expertise developed within the PMU will form the core o f the solid waste team within the Environment and Cleanliness Department, leading strategy, monitoring, standard setting, cost analysis, and private sector contracting for the sector going forward.

D. Critical risks and possible controversial aspects

65. The analysis o f the critical r isks associated with the project are summarized in the matrix below:

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R i s k s Lack o f coordination among GAM departments may affect project implementation and results.

Lack o f implementation capacity, resulting in delays in project implementation.

Lower-than-anticipated levels o f LFG could lower electricity and carbon revenues, thereby reducing the project’s financial viability.

Di f f icu l ty in securing sites for the transfer stations because o f environmental or social concerns o f potentially affected communities.

Polit ical commitment to PSP may wane, resulting in delays to contracting.

Transfers from GAM’s general budget are insufficient to fully fund S W M services.

Rating Moderate

Moderate

Moderate

Moderate

L o w

L o w

Comments and/or Mitigation Measures An Advisory Committee including heads of concerned departments was established to ensure coordination and provide guidance during implementation. I t will report to the Mavor . A strong counterpart team i s being established by GAM.

Counterpart funds are secured through line items within G A M ’ s annual budget.

Advanced procurement for the DBO contract for the LFG recovery system started in M a y 2008.

Estimates o f LFG recovery used in the PDD and in revenue projections are quite conservative, having used both a conservative LFG production rate and collection efficiency rate. It i s highly l ikely that targets for f laring and for electricity production will be met.

During project preparation, an extensive decision-making process was undertaken regarding site selection for the transfer stations. A l i s t o f potential sites taking into consideration social and environmental criteria and public/municipal ownership o f land was agreed on. Final selection o f the two sites i s not expected to be an issue.

The team considers the l ikelihood o f this risk to be quite low. Jordan has consistently been a leader in the region in PSP and privatization, and the benefits to efficiency and productivity are wel l known and accepted in Jordan. The EPC has extensive experience with privatization and PSP and has committed to worlung with GAM.

GAM’s first priority in al l areas i s financing necessary services f rom the general budget, and there are n o rules requiring cost recovery from user charges. In addition, the shortfall in S W M cost recovery i s approximately 4 percent o f GAM’s total revenues, and therefore not a burden o n the budget.

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Risks Rating A significant portion o f the Moderate

sufficient allocations within i t s budget for the project. The allocation will be for the loan proceeds as well as for the counterpart funding.

Comments and/or Mitigation Measures GAM will include on a yearly basis

Changes in GAM’s leadership cause delays in project implementation

Overall Project Risk Rating

E. Loadcredit conditions and covenants

Moderate The establishment o f a strong Advisory Committee with key representatives from GAM and other governmental agencies will support project implementation.

Moderate

66. There are no specific effectiveness conditions.

IV. APPRAISAL SUMMARY

A. Economic and financial analyses

67. The economic andflnancial analysis of this project consists o f (i) a cost-benefit analysis o f the project comparing the capital and operating costs o f the project to the benefits produced by this operation in the form o f revenues from the sales o f CERs and electricity and cost savings from a more efficient transfer system; (ii) an analysis o f the financial returns o f the project; (iii) an analysis o f SWM cost recovery at GAM; and (iv) an analysis o f GAM’s debt capacity.

68. The methodology used for the economic appraisal i s a cost-benefit analysis based on the comparison between a defined Do-Nothing scenario and a defined Do-Something scenario. The economic analysis considers the project investment and operating costs and the fol lowing main benefits: (i) cost savings from collection and transfer through the implementation o f the two new transfer stations; (ii) carbon emission reductions through the implementation o f the LFG recovery system; and (iii) sales o f electricity produced by the LFG-to-electricity plant.

69. The economic analysis indicates that the investment component o f the proposed project is economically viable, returning a positive N e t Present Value (NPV) o f US$16.9 million, following an incremental investment o f US$23.5 million. The EIRR i s 37 percent and the estimated B/C ratio i s 1.63, which, since it i s greater than one, supports a decision to invest in the project. Sensitivity scenarios have been run and show that the proposed investment i s relatively robust to defined variation in key parameters o f interest, with significant changes in both the capital costs o f the project or the LFG production (which would affect the income from CER and electricity sales) s t i l l resulting in a positive NPV. Moreover, even without CER revenues; the project i s s t i l l economically viable, returning an NPV o f US$ 2.1 m i l l i on and an EIRR o f 12 percent.

70. Thefinancial analysis of the project i s also based on the comparison between a defined Do- Nothing and a defined Do-Something scenario. The financial benefit wi l l be derived from CER

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revenues through the implementation o f the LFG system and sales o f electricity produced by the LFG-to-electricity plant, and costs savings in collection and transfer. The financial costs include the project investment costs and increased operating costs due to the implementation o f the LFG recovery system and the LFG-to-electricity plant.

71. The financial analysis indicates that the investment i s financially viable, returning a positive NPV o f US$18.4 mi l l ion at a discount rate o f 8 percent, fol lowing an investment o f US$23.5 million. The financial internal rate o f return is 30 percent, which i s well above the cost o f financing. The sensitivity analysis reveals that the proposed investment i s relatively robust to defined variations in key parameters o f interest, with significant changes in both the capital costs o f the project and LFG production st i l l resulting in a positive NPV at the 8 percent threshold and a higher FIRR than the cost o f financing for GAM.

7 2 . S W M cost recovery is estimated to have been approximately 63 percent in 2007, with transfers from GAM’s general budget above revenues from user fees o f about JD 8 million, or approximately 4 percent o f GAM’s total revenues. Projections were made o f h t u r e cost recovery given expected growth in municipal waste generation, inflation, and costs and revenues generated by the project, indicating that cost recovery would be about 86 percent in the first year o f revenues from LFG recovery, and averaging about 79 percent until 2013. Cost recovery projections were undertaken up to 2020; due to underlying higher costs than revenues and gradually decreasing CER and energy revenues, cost recovery gradually falls to approximately 68 percent in 2020. However, this assumes that there are n o increases in household solid waste fees over the entire period o f the review; in fact, i t is highly l ikely that GAM will raise fees periodically to meet increases in underlying costs.

73. GAM’S debt capacity: As GAM is the borrower o f the proposed loan, GAM’s debt capacity was analyzed and projections estimated. O n the whole, the proposed Wor ld Bank loan i s a minor part o f GAM’s overall financial responsibilities, and there are no financial impediments to the city’s borrowing from the Wor ld Bank. GAM has remarkably l o w debt levels, as GAM’s revenues easily cover i t s operating costs and the majority o f its capital expenditures. GAM’s debthcome ratio is currently approximately 40 percent, due to a recent bond issue o f JD 60 million. Given the estimated disbursement schedule o f the Bank loan and repayment schedules o f the bond issue, the debthncome ratio falls steadily, reaching 5 percent in 2018 and continuing to fal l after that. Barring an unexpected and drastic increase in new borrowing, debt service (i.e,, a l l principal and interest payments) i s correspondingly small. Debt servicehncome ranges from an estimated 7 percent and 2.5 percent between 2008 and 2018.

B. Technical

74. The project is technically sound, and the investment as we l l as the institutional components o f the project were selected based on an updated solid waste master plan and a comprehensive feasibility study prepared by an international engineering firm. Over the past 30 years the technology for extraction and utilization o f LFG has developed to the point where today there are more than 1,300 plants worldwide in operation. Approximately 750 o f these plants have been established in Europe and 425 in the United States. The technology to be used for the proposed LFG-to-electricity plant will be selected from well proven technologies through international competitive bidding and using a performance-based DBO contract.

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75. For the extensiodupgrade o f the existing disposal site, the design o f the new cel l and the upgrade o f the existing leachate treatment facility were reviewed and improvement measures were integrated into the bidding document for the related c iv i l works. The operation o f these facilities will be performed by the Environment and Cleanliness Department o f GAM. However, the project wil l finance technical assistance and capacity-building activities to ensure enhanced disposal practices while preparing the required environment for cost-effective and sustainable private sector takeover o f the whole site in 2014 for a 1 5 year-period. To avoid any overlapping responsibilities between GAM and the LFG operator for the first three cells, the latter will not undertake i t s activities before the relevant cel l i s full and temporarily capped. Final capping, collection o f LFG, leachate management inside the cells and electricity generation f rom LFG will be under the full responsibility o f the LFG operator.

76. The institutional component and its related TA and capacity-building activities are intended to introduce state-of-the-art management tools to GAM as wel l as a strategic action plan for PSP. I t i s expected that by the end o f the project, GAM will be able to structure, contract, and monitor the private sector in complex and ongoing S W M operations.

.

C. Fiduciary

77.Procurement: GAM will be the implementing agency and will be responsible for procurement under the project. The capacity o f GAM to carry out procurement activities was assessed during project preparation and was deemed adequate. Although GAM is not familiar with Bank procedures, its Department o f Procurement and Tendering staff are competent in the procurement area and are wel l versed in the major differences between the Bank’s directives and Jordanian procurement legislation. However, in order to familiarize GAM staff with Bank’s directives, procurement training has been included within Component 3 o f the project. The Department o f Procurement and Tendering o f GAM intends to strengthen procurement procedures and to bring them up to modern standards as part o f ongoing strengthening o f GAM administration and management.

78. Procurement wil l be carried out in accordance with the Wor ld Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated M a y 2004 and revised October 2006, “Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers” dated M a y 2004 and revised October 2006, and provisions stipulated in the Loan Agreement.

79. A Procurement Plan has been prepared and i s provided in Annex 8. Project procurement management wil l be located within the PMU, which wil l have a full time procurement specialist seconded from GAM’S Department o f Procurement and Tendering.

80. Overall procurement risk is assessed to be moderate. Procurement arrangements are detailed in Annex 8.

8 1. Financial Management: GAM generally follows the same processes and procedures in financial management (FM) as the national government and i s subject to verification by Jordan’s Court o f Accounts. A number o f issues identified in the FM assessment indicate that there are risks in the current reporting system operated by GAM for its day-to-day financial activities, and that i t should not be used for project financial management. This i s due largely to an ongoing

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major project to shift GAM’s financial management to a modern system that wil l include: (i) a chart o f accounts with functional, economic, and organizational coding, (ii) implementation of the Oracle Financials suite, and (iii) shifting to accrual accounting. These changes wil l take two to three years at a minimum. In the meantime, i t is not possible to use existing or transitional systems for project financial management.

82. Measures mitigating the above r isks have been agreed upon with GAM and are being implemented. These measures include: (i) installation o f a ring-fenced accounting system to support the financial management accounting, reporting and internal control requirements o f the project; (ii) production o f monthly, quarterly and annual financial reports to track the project’s status; (iii) secondment o f a financial management specialist from GAM’s finance department to oversee the financial management arrangements in compliance with the Bank’s fiduciary guidelines; and (iv) an annual audit for the project undertaken by an independent external auditor, acceptable to the Bank.

83. The Project FM activities will be located within the PMU, which will have a financial management specialist seconded from GAM’s finance department. The financial specialist has been identified by GAM management and has participated in the Project appraisal mission. A Designated Account (DA) will be established at the Central Bank o f Jordan and wil l be managed by GAM’S finance department and supported by the PMU. The PMU, o n an annual basis, wil l manage the inclusion o f GAM counterpart funds and the loan proceeds into GAM’s annual budget process. Project expenditures wil l be allocated within the GAM budget starting fiscal year 2009.

84. The project’s financial statements wil l be audited on an annual basis by an independent external auditor, acceptable to the Bank, in accordance with internationally accepted auditing standards. The audited financial statements wil l be submitted to the Bank no later than six months following the close o f each fiscal year being audited.

85. GAM’s audited financial statements, audited by an independent external auditor, wil l also be remitted to the Bank on an annual basis six months after the end o f the fiscal year.

86. The Overall FM risk i s assessed to be moderate. FM arrangements are detailed in Annex 7.

D. Social

87. The project i s not expected to have serious social issues, however, because o f the potential for involuntary resettlement and/or land acquisition due to the siting o f the two transfer stations financed by the project, O.P. 4.12 on Involuntary Resettlement i s triggered, and a Resettlement Policy Framework (RPF) has been prepared.

88. An area o f concern regarding social impact i s the situation o f waste pickers. Although there are no established waste pickers o n A1 Ghabawi landfill or at the existing transfer stations, waste pickers do go through waste discarded by residents and businesses to collect items o f value. Very few (less than 5-10 persons) cross the fences o f the landfi l l i l legally at night. Component 1 o f the project includes support for the promotion o f recycling activities as part o f PSP development, as well as for the design and implementation o f a public awareness and communication program.

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Studies under the component will pay explicit attention to social issues in general and to the role o f the “upstream” waste pickers in particular. In addition, research and planning for recycling in Amman will consider waste picking activities. This will build on related previous studies and activities, e.g., a recent EU study on recycling and recent efforts by the M o E to engage c iv i l society in such efforts.

89. A socio-economic survey wil l be carried out during the init ial stages o f project implementation to obtain more accurate information about the waste pickers at the source. This group, which consists o f several thousand persons, represents the poorest section o f the population. The study should include an estimate o f the number involved, where they work, organization, what i s being picked, l i n k s to middle-men, potential sources o f conflict, the role o f NGOs, etc. Experience from other parts o f the wor ld stresses the importance o f establishing channels o f communication with waste pickers. This assessment i s part o f a study planned to be carried out with the support o f a U S A I D grant managed by the Bank and executed by the EPC in close coordination with GAM.

90.Based on the findings o f the survey and recommendations o f the EPC-managed study, follow-up activities should be considered with the aim o f improving the current situation o f the waste pickers. This would potentially allow for better organized participation o f the poorest sections o f the population as wel l as improved recycling by linking waste picking and recycling activities. The study will further explore options with regard to the hiring o f waste pickers for the collection and sorting o f recyclable materials. Options should be based upon the findings o f the socio-economic survey, but may include the formalization o f current activities, e.g., by giving waste pickers licenses, as has successfully been done elsewhere. The role o f the private sector, c iv i l society and GAM would have to be clarified at a later stage. However, in view o f the intention o f GAM to ultimately privatize SWM, l inks to the private sector would be given particular attention in the socio-economic study.

E. Environment

91. An Environment and Social Impact Assessment (ESIA) was carried out during project preparation and was found to be in compliance with Bank safeguard pol icy OP 4.01 as wel l as with Jordanian environmental regulations.

92. According to the ESIA report, the proposed project wil l have a strong positive impact on the overall environment o f the project area while addressing global environmental issues i.e. mitigating GHGs. I t wil l particularly address the deficit in municipal solid waste disposal capacity, improve disposal practices, and address related gas and leachate management issues, hence mitigating negative impacts o f the existing disposal facility on the environment and natural resources.

93. The project wil l contribute to global climate mitigation through the reduction o f 2.8 mi l l ion tons o f C02eq during a 21-year period while generating 565,000 MWh o f electricity. I t wil l mobilize additional revenues that wil l be used to enhance S W M cost recovery in Amman and to financially support sustainable development activities through the allocation o f 15 percent o f carbon revenues to Jordan’s Environmental Protection Fund.

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94. Other substantial benefits are related to the rationalization o f collection in underserved districts in terms o f transfer. The operation o f the two planned transfer stations in conjunction with the existing ones wil l reduce the overall trips made to the landfill. This wil l decrease traffic levels, which will have a positive impact o n roads and street users o f the surrounding areas.

95. Major adverse impacts associated with the project are leachate management and polluting discharges and odor and gas emissions. The design of the proposed project took into consideration these potential impacts; appropriate mitigation, monitoring and institutional strengthening measures are part o f the project and are reflected in the related Environmental and Social Management Plan (ESMP) as wel l as in the project budget in the amount o f US$490,000

96. Other impacts: There may be adverse environmental impacts during the construction phase; however, they are short term, reversible and unl ikely to be significant. Typical impacts are noise nuisances, air pollution due to dust formation, safety hazards from construction activities, etc. Good construction practices wil l be included in the bidding documents o f contracts and would mitigate most o f these temporary impacts to acceptable levels.

F. Safeguard policies

97. The table below indicates that only the Environmental Assessment and Involuntary Resettlement policies will apply to the project. The detailed assessments and agreed actions are described in Annex 10.

Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [ I [XI Physical Cultural Resources (OP/BP 4.1 1) [ I [XI Involuntary Resettlement (OP/BP 4.12) [XI [ I Indigenous Peoples (OP/BP 4.10) [ I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP 7.60)* [I [XI Projects on International Waterways (OP/BP 7.50) [ I [XI

98. Environmental Assessment (OP4.01): The proposed Solid Waste and Carbon Finance Project has been classified as Category A because o f i t s potential impacts on the environment and natural resources. An ESIA was prepared in compliance with the requirements o f Jordanian regulations as wel l as Bank guidelines and procedures, including OP 4.01 “Environmental Assessment”. The ESIA report was based on studies, field investigations, and public consultation, including consultation with affected population groups and key stakeholders and NGOs. An ESMP was also prepared and related costs estimated as part o f the above ESIA report.

* By supporting theproposedproject, the Bank does not intend to prejudice the final determination of the parties’ claims on the disputed areas

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99. The ESMP specifies the appropriate environmental management and supervision mechanisms, mitigation measures, environmental monitoring plan, training activities and budget allocation necessary to implement the proposed mitigation measures and to strengthen the Borrower’s capacity in terms o f environmental management. The ESMP wil l be closely monitored during supervision missions, and wil l be presented as part o f the progress reports to be submitted by GAM to the Bank.

100. As part o f i t s mandate to monitor project implementation, the PMU, in close coordination with GAM’S Environment and Cleanliness Department, will ensure the implementation o f the mitigation measures and will address any additional issues that might be identified during project implementation. An environmental specialist wi l l be hired to assist the PMU in supervising the implementation o f the ESMP.

101. Involuntarv Resettlement (OP/BP 4.12): Some o f the project’s physical components may result in involuntary resettlement and/or land acquisition. OP 4.12 on Involuntary Resettlement is thus triggered, and an RPF has been prepared. An RPF i s the instrument used, because the exact nature and extent o f land acquisitionhesettlement resulting from the project are not yet known. In the context o f th is project, this applies to the construction o f transfer stations which may - depending upon the location chosen - entail some degree o f land acquisition and/or resettlement.

102. The key purpose o f the RPF is to establish resettlement objectives, principles, organizational arrangements and funding mechanisms for any resettlement operation that may be necessary during the implementation o f any o f the subprojects. When during implementation the exact extent o f land acquisition and/or resettlement becomes known, Resettlement Action Plans (RAPS) or abbreviated RAPS - depending on the scale and severity o f impacts - are prepared. If land acquisition and/or resettlement will be required, i t should be noted that this process must be completed prior to the start o f physical works, in this case prior to the construction o f the transfer stations.

G. Policy Exceptions and Readiness

103. The project does not require any exceptions to Bank policies and meets the regional criteria for readiness for implementation set forth in the procurement and financial management assessments.

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Annex 1: Country and Sector o r Project Background

104. During the last five years, Jordan has maintained i t s strong economic performance. Real GDP growth remained high, at 6.4, percent in 2006. The expansion was broad, led by the manufacturing, construction, and service sectors. Continuing robust demand in these sectors is explained partly by high liquidity in the region. Capital inf lows as wel l as tourist travel to Jordan have reached record levels. The strong economy helped boost public revenues, while public spending has remained under control, resulting in a lower public deficit. However, increasing fuel prices combined with high demand in the economy has stoked inflationary pressures, leading authorities to tighten monetary policy. The current account deficit narrowed in 2006, but remains high at 13 percent o f GDP. Avoiding excessive overheating o f the economy remains a challenge, which the government has been addressing through several instruments, including higher fees for real estate, higher central bank interest rates, tighter bank supervision, and lending constraints for investors in the Amman Stock Exchange.

105. Jordan’s political stability provides an environment that is conducive for implementing reforms despite continuing security threats and regional tensions. The top political reforms include expanding political freedoms and social participation, removing remaining gender discrimination, and enhancing judicial independence and fairness. The Cabinet, reshuffled in November 2007, is pursuing i ts mandate to implement the National Agenda (NA), which was translated recently into a medium-term plan identifying pol icy priorities with linkages to financing plans.

106. Despite the continuing economic growth, environmental degradation in Jordan, which the Mediterranean Environmental Technical Assistance Program (METAP) estimated to cost 3.1 percent o f GDP (2003), affects the health o f Jordanian citizens, interferes with Jordan’s access to the environmentally conscious EU market, and jeopardizes the country’s high tourism potential. Solid waste i s an important component o f the country’s environmental agenda, due to the relatively high rate o f per capita waste generation in urban areas (0.9 kg/ person/ day) and the fast pace o f population growth, estimated at 3 percent, pushed upwards in recent years by the f low o f migrants from neighboring countries such as Iraq and the West Bank.

107. With respect to the solid waste sector, i t i s anticipated that the quantity o f municipal waste will continue to increase in the years ahead in tandem with population and consumption growth, and would thus affect the quality o f l i f e in Jordan. Currently, the production o f municipal waste in Jordan i s estimated at 1.5 mi l l ion tondyear, and i s projected to reach 2.5 mi l l ion tondyear by 2015. The collection rate i s estimated at 90 percent in urban areas and 75 percent in rural areas. About 50 percent o f the waste generated i s sent to 21 open dump sites that lack essential facilities or infrastructure.

108. The Government o f Jordan considers Municipal Solid Waste Management (MSWM) to be one o f the major issues throughout the country and in particular for Greater Amman. Although Jordan does not yet have a S W M policy, or a legal and regulatory framework, the Government has adopted a series o f enabling policies and reforms that point toward good compliance with modem S W M policies. These enabling policies represent as such a sound

21

framework in the short term for defining and testing the elements o f a S W M policy and reform in the sector. These enabling polices are:

109. The Government’s National Agenda for Sustainable Development - which i s the Government’s pol icy for 2006 to 2015 - has established the fol lowing four objectives to be attained in the waste sector, namely:

1. Extending waste service coverage by providing financial, technical and human resource capacity-building to empower concerned authorities to extend safe waste collection and disposal services to al l people in urban and rural areas;

2. Promoting environmentally sound solid waste disposal and treatment by (a) disposing o f a continuously increasing proportion o f solid waste in an environmentally sound manner; (b) establishing programs to prevent or mitigate the environmental impacts o f the existing disposal sites, and (c) by establishing environmental and health-quality guidelines and standards governing M S W disposal and disposing o f solid waste in accordance with these guidelines and standards;

3. Minimizing generation of solid waste by (a) inducing beneficial changes in lifestyles, production and consumption patterns, through economic or other instruments, and (b) reducing the production and consumption o f containers and packaging materials, especially those that are non-biodegradable; and

4. Maximizing environmentally sound solid waste reuse and recycling by: (a) establishing and implementing programs for efficient separation o f different types o f solid waste at the point o f generation to facilitate recycling and reuse; (b) establishing and implementing a national program for solid waste recycling and reuse; and (c) establishing a technical unit responsible for collecting and disseminating solid waste recycling and reuse information and techniques.

110. The Ministry o f Environment (MoE) has been designated the responsible ministry for developing a S W M policy and laws and regulations for the waste management sector. The Ministry has received technical assistance from the European Commission to train staff and prepare a draft framework for waste regulation whose purpose is to provide for (a) minimization o f waste generation and reduction o f i t s harmhlness (hazardous characteristics), (b) promotion o f the re-use o f components o f waste in an environmentally friendly manner; (c) a high level o f protection o f the environment and human health; and (d) sustainable development through protection and conservation o f natural resources. In view o f the MoE’s additional needs both in terms o f enabling legislation (regulations and instructions) and o f capacity development, the United States’ Agency for International Development (USAID) wil l support through its Sustainable Achievement o f Business Expansion and Quality (SABEQ) program the preparation o f an environmental licensing framework, which wil l also include establishing benchmarks, standards and guidelines for S W M facilities.

111. Consistent with the National Privatization Law (No. 21 o f 2000) and the National Privatization Strategy, which calls for the restructuring and privatization o f public institutions, increasing private sector investment in infrastructure and attracting foreign technology and know

22

how, the Government would l ike to encourage private sector participation in infrastructure services, including in S WM. The Executive Privatization Commission (EPC), which was established to stimulate and drive the privatization program, i s prepared to assist in private sector participation in M S W M where needed.

112. In addition, the Government has adopted a National Energy Strategy, which calls, inter alia, for the development o f renewable and sustainable energy. In view o f recent increases in energy prices, the Government has set an objective o f producing 10 percent o f i ts primary energy generation with renewable sources o f energy by the year 2020, including with landfi l l gas.

113. implementation actions. These are:

On the basis o f these enabling policies, GAM has already embarked o n a series o f

1.

2.

3.

4.

5.

114.

Financing a master plan for GAM, including the reorganization o f GAM and its services toward greater private sector participation. H.E. the Mayor intends to eventually privatize al l aspects o f M S W services, and has requested the Bank’s assistance in developing a strategy toward that objective. The project has included a study as part o f i ts institutional development component.

Extending collection in al l the major districts, rehabilitating three transfer stations, and constructing two new ones in order to ensure optimal effectiveness for short and long haulage o f waste for disposal at El Ghabawi landfill.

Upgrading El Ghabawi landfi l l according to best-practice standards for both design and operation, and contracting the private sector for the collection, treatment and disposal o f medical waste.

Contracting the private sector to construct and operate a recycling facility for high-value non organic material. A pre-feasibility review i s being undertaken with the assistance o f the European Commission.

Designing and implementing two Clean Development Mechanism (CDM) projects for electricity generation f rom LFG, contributing to meeting the target for the use o f renewable energy. The Finnish Government has supported an LFG-energy plant at Russeifa landfill, whereas the subject project includes support for an LFG-to-eelectricity plant at A1 Ghabawi. The facility at A1 Ghabawi i s to be designed, constructed and operated entirely by the private sector.

The project responds to the major elements o f the four objectives o f the National Agenda for establishing a modern S W M system in GAM. The project i s also consistent with the privatization policy and the renewable energy targets through the following interventions:

0 MSW Strategic Planning. The institutional development component will finance the development o f a strategic plan to help in establishing goals, objectives, and investment plans towards the promotion o f an integrated and affordable S W M system.

23

0 Monitoring/supervision of MSWM services. The institutional development component wil l finance the services o f an engineering consulting firm to monitor, supervise and provide on-the-job training for the operation and maintenance o f A1 Ghabawi landfill; Communication with MSWM producers. The institutional development component wil l also finance a communication strategy and awareness campaigns to promote change in behavior, recycling and waste minimization; Provision of solid waste disposal services. The infrastructure component o f the project wil l establish the necessary performance standards and benchmarking requirements for the design, construction and operation o f A1 Ghabawi landfill; Private sector participation. The project wil l finance, as part o f i t s infrastructure component, the services o f a private sector operator for the LFG-to-electricity facility using a design-build-operate (DBO) contract; and

0 Reductions in greenhouse gas emissions. The project will contribute not only to the reduction o f greenhouse gases at the global level, but will also improve the local environment. I t will contribute to the reduction o f public investment requirements and provide access to the wor ld market in carbon credits.

0

0

0

24

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

Sector Issues Low-income, refugee, and squatter settlements in Jordan were suffering f rom a long-term lack o f essential physical and social infrastructure, including adequate water supply and drainage, school, community, and health center infrastructure, transportation infrastructure, and sewage treatment and solid waste management. In addition, institutions responsible for providing infrastructure and services lacked the capacity to adequately perform their responsibilities.

Jordanian municipalities, with the exception o f Amman and a few other large cities, lack the financial and institutional capacity to manage core services and make sustainable infrastructure investments. In addition, intergovernmental systems and institutions to support and oversee municipalities are weak, and the fiscal transfer system needs to be restructured.

A high percentage o f solid waste in Tunisia i s disposed o f in open dumps, resulting in environmental damage, particularly around the larger cities and along the coast. The landf i l l serving Tunis i s approaching full capacity, and will have to be expanded. An earlier experiment in subcontracting S W M has failed in many municipalities, resulting in a need to rethink the approach. Cost recovery i s only 15 percent, and there i s an urgent need to improve S W M financing.

Fol lowing the end o f the c iv i l war, there was an urgent need to invest in core solid waste infrastructure -waste disposal (landfills, in particular) and collection facilities (containers and compactors), in particular. In addition, government institutions responsible for S W M needed urgent capacity building.

Project Name PDO Rating

Jordan: Community Infi-astructure Development Project (closed)

Jordan: Regional and Local Development Project (ongoing)

Tunisia: Sustainable Municipal Solid Waste Management Project (ongoing)

Lebanon: Solid Waste Management Project (closed)

S

S

S

U

25

Annex 3: Monitoring and Evaluation Arrangements

Strengthen the operational, financial, and environmental performance o f M S W M in A m a n . Specifically,

(i) Environmentally upgrade and expand the existing municipal solid waste landfill to meet the ci ty ’s disposal needs up to 2013 and generate electricity while mitigating GHGs.

(ii) Improve the cost effectiveness o f the existing municipal solid waste collection and transport system and improve overall cost recovery

Disposal capacity to satisfy Amman’s needs up to 2013 i s in place

Appropriate leachate treatment capacity in place

Revenues generated from the LFG- to-electricity plant

Revenues generated from CER sales

Reduction in collection and transfer costs per ton o f waste in the districts served by the new transfer stations

A monitoring and evaluation system i s in place to track sector costs and performance

- Percentage o f collected municipal solid waste disposed o f and managed in a sanitary landfill increased from 0 to 80%

- 160,000 MWh generated through the LFG recovery system by 20 13 - Cost-recovery ratio for S W M improved from 63% in 2007 to 75% by 2013.

Intermediate Outeome Indicators

Disposal infrastructure constructed at A1 Ghabawi landfill for a total capacity o f 8 mil l ion tons o f waste.

Discharge from the leachate treatment facility meets Jordanian standards.

160,000 MWh by 201 3 produced and connected to the electricity grid

950,000 tons o f CERs (as C 0 2 equivalent) generated by 2013

The ratio o f kilometers travelled by collection vehicles in the districts served by the new transfer stations to the total tons o f municipal waste collected in those districts ( h s / tons) i s reduced from 5.5 to 2.5.

Sector monitoring reports produced on a quarterly basis to management.

To monitor environmental performance at both the local and global level.

To evaluate achievement o f the PDO and to inform GAM management regarding cost efficiency and cost recovery.

Management information and project progress reporting

Management information and project progress reporting.

To assess the performance o f the LFG-to-energy component

To gauge LFG recovery system as a model for other landfills.

To assess the performance o f the LFG recovery system.

To gauge LFG recovery system as a model for other landfills.

Management information and project outcome monitoring

Management information

26

2 0 N

.

2 i2

$ m 0 0 \o

3 0

2

2

0 0

I x

0 0

2

x

P

d z

d z

Annex 4: Detailed Project Description

Component 1: Institutional Strengthening and Capacity Development Component

115. The primary objective o f Component 1 is to finance technical assistance and capacity building activities benefiting Greater Amman Municipal i ty (GAM) departments involved in the development, planning, operation, and evaluation o f municipal solid waste management. The component wil l include the fol lowing activities:

116. Sub-component 1.1: Technical Assistance to GAM, including: (i) supervision o f the contract to construct two transfer stations, and o f the contract for landfill construction and upgrade o f the leachate treatment facility; and (ii) technical assistance to GAM for supervision o f the DBO contract and the operation o f Ghabawi landfill.

117. Sub-component 1.2: Support for Strategic Planning, Private Sector Participation, and Monitoring and Evaluation

0 Support to GAM to define strategic actions toward the establishment o f a sustainable and affordable municipal solid waste management (MSWM) system from collection to recycling, sorting, and transfer to landfilling and that wil l satisfy the city’s needs during the upcoming fifteen years. Those actions wil l cover policy, the institutional and legal framework, investment planning, financial management, cost recovery, and opportunities for enhanced recycling and recovery activities. This activity will also include review o f the current GAM procurement regulations and guidelines, and support GAM in upgrading i t s procurement procedures.

0 Support to GAM in exploring opportunities and defining appropriate options for private sector participation in providing M S W services. Under this activity, technical assistance and capacity-building activities would support GAM’S contracting, supervision and monitoring.

0 Development and implementation o f an overall S W M performance monitoring and evaluation system, including information systems to track technical and financial performance o f M S W M services.

11 8. Sub-component 1.3: Development and Implementation of an Information, Education, and Communication Program: This sub-component wil l finance public information and education campaigns to raise public awareness and build partnerships in various areas o f SWM. This activity wil l also finance a sustained awareness campaign involving the production o f education and learning materials and their systematic dissemination. Attention wil l be given to working with NGOs and informal organizations.

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Component 2: Infrastructure Component

119. This component includes three subcomponents aimed at improving the cost effectiveness o f S W M transfer and disposal, strengthening the management o f the existing landfill, reducing methane emissions (and generating emission reductions credits) and generating electricity. The main investment activities under this component are as follows:

120. Sub-component 2.1: Landfill construction and upgrade of the leachate treatment facility: Under this sub-component, the project will finance c iv i l works construction o f cell 3 o f a1 Ghabawi landfill. This cel l wil l have a capacity estimated for 2-3 years based on an average quantity o f waste o f about 3,000 tons per day. The construction i s based on a design prepared by an international consulting firm in 2003, which was updatedoptimized by an international expert during preparation. This sub- component wil l also finance upgrading o f the existing leachate treatment facility. These two works wil l be undertaken under a single c i v i l works contract in order to maximize synergies.

12 1. Sub-component 2.2: Construction of two transfer stations: This sub-component wil l finance the construction and equipment o f two transfer stations aimed at reducing the cost o f collection services in the North-west and South-west areas o f GAM. These two transfer stations will help ensure that 100 percent o f waste collected transits through transfer stations, thereby reducing total transit costs. The project feasibility study validated the final selection o f the sites, capacity, technical specifications and related cost estimates.

122. Sub-component 2.3: Construction of an LFG extraction system and LFG-to- energy plant: Under this sub-component, the project will finance the design, supply, installation, commissioning, and initial operation o f an LFG recovery system (extraction o f LFG and energy generation) for cells 1, 2, and 3. This sub-component wil l also include final capping o f cells 1, 2, and 3, as wel l as upgrading o f the leachate drainage system, with the objective o f generating and extracting the maximum amount o f LFG. Implementation o f this sub-component wil l enable income generation f rom the sale o f emission reductions credits (through the related Carbon Finance operation) and energy sales.

Component 3: Project Management

123. A Project Management Unit (PMU) has been established to ensure day-to-day management o f the project. This component will provide technical assistance to the PMU to assist i t in fwlfill ing its overall supervisory, coordinating, and monitoring role. This component will also support a l l project management activities, including technical issues, procurement, and financial management.

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124. operations.

The schedule below indicates the timing for the infrastructure works and

Table 1: Planning Table for Infrastructure Component

2008 2009 201 0 201 1 2012 201 3

Cell 2 Cell 3 Cell 4

Landfill Cells I Cell 1

Gas to Electricity I 4 M W

( I M W

Leachate treatment

Transfer Stations

Legend Tendering Construction Operation by GAM Operation by PSP Capping and LFG equipment

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Annex 4 bis: Attached Carbon Finance Operation

Background:

125. The Bank manages a pool o f funds contributed by governments and companies in OECD countries to purchase project-based greenhouse gas emission reductions in developing countries and countries with economies in transition. The emission reductions are purchased through one o f the Bank’s carbon funds on behalf o f the participants within the framework o f the Kyoto Protocol’s Clean Development Mechanism (CDM) and Joint Implementation.

126. Unlike other World Bank development products, the Wor ld Bank Carbon Finance Unit does not lend or grant resources to projects, but rather contracts to purchase emission reductions in the form o f a commercial transaction.

127. The purchase contract is a performance-based contract. Payments to GAM will be triggered by successful verification o f the reduction o f methane emissions by an independent and accredited designated operational entity (DOE) under the ru les o f the Kyoto Protocol.2 The quantity o f CERs to be contracted, the length o f time over which the purchase wil l be made, the price paid, advance payment, and other conditions have been finalized between the World Bank and GAM during negotiations o f the Emissions Reduction Purchase Agreements (ERPA). IBRD i s responsible for the preparation o f the Project Design Document (PDD), hiring o f a DOE, registration o f the project with the C D M Executive Board, annual verification by DOE, and certification by the Executive Board.

128. The Bank’s carbon finance operations have demonstrated numerous opportunities for collaborating across sectors and have served as a catalyst in bringing climate issues to bear in projects in several sectors, including solid waste management. The Bank is making every effort to ensure that developing countries such as Jordan can benefit from international efforts to address climate change. A vital element o f these efforts i s ensuring that developing countries are key players in the emerging carbon market for greenhouse gas emission reductions.

Carbon Finance and the Amman SWM Project:

129. A s a developing country (non-Annex B Party) that has ratified the Kyoto Protocol, Jordan i s eligible to participate in the C D M under the Kyoto Protocol. As per Kyoto Protocol guidelines, a Designated National Authority (DNA) has been established at the Ministry o f Environment (MoE) to ensure that a l l C D M projects meet Jordanian criteria and requirements. The Protocol commits industrialized (Annex 1) signatory countries to reduce their carbon emissions by an average o f 5.2 percent below 1990 levels in the f i rs t commitment period (2008-2012). To meet these commitments in the most

* The DOE has two functions: 1) to validate and subsequently request registration o f a proposed CDM project activity; and 2) to veri fy emission reduction o f a registered C D M project, to certify it as appropriate and to request the CDM Executive Board to issue CERs.

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effective manner, the Protocol's Article 12 enabled industrialized countries to receive credits for financing carbon emission reduction projects in developing (host) countries. Although host countries have no commitments for emission reduction targets under the Protocol, they can benefit from activities under the CDM.

130. Municipal solid waste disposed in landfills generates gases typically composed o f 50 percent methane, a potent greenhouse gas (GHG) that has 21 times more global warming potential than carbon dioxide. Methane can be captured and flared or utilized in energy production. Those emission reductions can be negotiated for sale to Annex 1 Parties, to generate revenues for the improvement o f S W M practices and disposal.

13 1. The proposed project i s the second blended operation, and the f i rs t landfill gas-to- energy project in the Middle East and North Afr ica region. I t has been designed in an innovative manner to address landfill operations, proper closure and aftercare, as well as utilization o f the landfill gas to generate energy. The project's design follows the main regional recommendations for best practices in CF, namely, mainstreaming CF in regular lending operations.

Emission Reduction Purchase Agreement (ERPA) of the project:

132. The World Bank-managed Carbon Fund for Europe (CFE) will purchase the CERs resulting from the landfill gas-to-energy component o f the Amman Solid Waste Management Project up to 2014. The design o f the project wil l be significantly influenced by the attempt to optimize the amount o f CERs to be delivered and purchased through this transaction.

133. The CFE wil l purchase 0.9 to 0.95 mil l ion tons o f C 0 2 equivalent (tC02e) o f CERs from April 1" 2009 to December 31St 2014 generated f rom the project. Table 1 below summarizes the CER potential estimated in the PDD. The ERPA has been negotiated between the Bank and GAM and i s expected to be signed by September 30, 2008.

134. The carbon revenues would pay for more than 70% o f the total investment costs for the landfi l l gas collection, flaring and energy generation systems. In addition, revenues from the sale o f electricity are estimated at 26 m i l l i on Euros. Under the ERPA terms, GAM will receive an advance payment equivalent to 25 percent o f the estimated revenue from I B R D ' s purchase o f CERs.

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Table 1 : Emission reductions potential.

2009

Year' I Annual estimation of emission 1 reductions in tons of C02

158,545

201 1 2012

I 2010 I 175.376 I 200,5 12 216,258

2013 2014 2015

Tota l estimated C 0 2 e reductions over the first crediting period (tons o f C02e) Tota l number o f crediting years over the f i rs t crediting period

240,87 1 256,397 272,004

1,5 19,963

7 _.

Average reduction over the first crediting period (tons o f C02e)

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217,138

Annex 5: Project Costs3

1.1.1. Technical support for supervision o f the DBO contract and operations o f Ghabawi 1.1.2. Technical assistance to GAM for the supervision o f civil works (transfer stations, leachate treatment facility and cell 3) 1.2.1. Support for strategic planning 1.2.2. Support for piloting pnvate sector participation

1 1. Institutional Development Component I Total cost in I WB Loan I CALM 1 Comments USD 500,000 500,000

300,000 300,000

500,000 450,000 50,000 200,000 200,000

2.1.1. Upgrade o f the existing leachate treatment plant 2.1.2. Construction o f cell 3

2.2. Construction and equipment o f two new transfer

2,000,000 1,650,000 350,000 The same contractor wi l l 4,500,000 3,700,000 800,000 undertake 2.1.1 and 2.1.2

for a total estimated amount o f US$ 6.5 million.

3,000,000 2,400,000 600,000

2.3.1. Capping and equipment o f cells 1, 2 and 3 with

2.3.2. Construction o f LFG-to-electricity plant 2.3.3. LFG system operation (including LFG-to-

LFG system and operations o f LFG system

electricity) for 5 years Subtotal I 34,100,000 I 22,450,000 I 11,650,000 I

The DBO contract wi l l

1 1,100,000 9,000,000 2,100,000 2'3'3 for a amount Of

7,000,000 5,700,000 1,300,000 include 2.3.1 9 2.32 and

US$24.6 million. 6,500,000 0 6,500,000

All costs are estimated excluding taxes given that environmental projects in Jordan are eligible for tax exemption. Front-end Fee is calculated o n the basis o f 0.25 percent of the l oan amount.

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Annex 6: Implementation Arrangements

The implementation arrangements for the project are as follows:

135. The project wil l be implemented by GAM. An Advisory Committee consisting o f the Ci ty Manager o f GAM, the Deputy Ci ty Manager for Planning and Economic Development, the Deputy Ci ty Manager for Public Services, and representatives f rom the Ministry o f Planning and International Cooperation, the Ministry o f Environment, and the Executive Privatization Commission has been established by Mayoral Decision and will provide strategic guidance to and overall monitoring o f the project. In addition, the Advisory Committee wil l facilitate coordination and collaboration between the various GAM departments involved and help in duplicating the project in other municipalities in Jordan.

136. A Project Management Unit (PMU) has been established within GAM by Mayoral Decision. It wil l be responsible for day-to-day management o f the project and wil l be the counterpart o f the Wor ld Bank for al l technical, fiduciary, and environmental matters. The PMU will be responsible for: (i) the overall supervision o f the project; (ii) ensuring compliance with the IBRD loan agreement and the Emissions Reduction Purchase Agreement (ERPA); (iii) supervising the technical assistance related to Component 1; and (iv) coordinating with the various GAM departments in the implementation and supervision o f contracts under Component 2.

137. The P M U wil l consist of: (i) a full-time project manager; (ii) a full-time solid waste technical specialist; (iii) a full-time financial management specialist seconded f rom GAM’s finance department; (iv) a part-time environment specialist; (v) a full-time procurement specialist seconded from GAM’s Department o f Procurement and Tendering; and (vi) a full-time administrative assistant. GAM will also provide office space, office equipment, and computer and telecommunications equipment for PMU staff, and a vehicle dedicated to the project for work-related transportation.

138. linkages to GAM’s departments i s shown below.

An organizational chart o f GAM’s new structure showing the PMU and its

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Annex 7: Financial Management and Disbursement Arrangements

Executive Summary

139. A financial management (FM) assessment o f Greater Amman Municipality (GAM) took place and identified that GAM generally follows the same processes and procedures in financial management as the national government. A number o f issues identified in the assessment indicate that there are sufficient risks in the current system that i t could not be used for the financial management o f the project. This is due largely to plans to implement a major project with the objective to shift GAM’s financial management to a modern system that will include: (i) a chart o f accounts with hnctional, economic, and organizational coding, (ii) implementation o f the Oracle Financials suite, and (iii) shifting to accrual accounting. These changes will take two to three years at a minimum. In the meantime, it is not possible to use existing or transitional systems for project financial management.

140. Measures mitigating the above risks have been agreed upon with GAM and are being implemented. These measures include: (i) installation o f a ring-fenced accounting system to support the financial management accounting, reporting and internal control requirements o f the Project; (ii) production o f monthly, quarterly and annual financial reports to the Bank and GAM to track the project’s status; (iii) a financial management specialist seconded from GAM’s finance department to oversee the financial management arrangements in compliance with the Bank’s fiduciary guidelines, while working closely with GAM’s Director o f Finance; and (iv) an annual audit o f the project by an independent external auditor acceptable to the Bank.

141. Project FM will be located within the Project Management Unit (PMU), which wil l have a financial management specialist seconded from GAM’s finance department. This financial specialist has been identified by GAM.

142. o f the project i s considered to be moderate.

Based on the mitigation measures agreed upon with GAM, the overall risk level

Risk Assessment and Mitigation:

143. GAM’s overall financial management i s handled by the Finance Department, which develops GAM’s annual budgets, processes al l disbursements made by GAM’s various departments (with the exception o f petty cash accounts managed by the departments), and tracks expenditures against approved and revised budgets. Budgets are classified in six major categories - revenue, salaries and wages, operating expenditures, transfers, other operations and maintenance, and capital expenditures. The structure does not include functional classifications, which makes it dif f icult to identify costs o f operations that are distributed across different departments (for example, o f solid waste management).

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144. The current system is not able to monitor the project accounts and provide sufficient assurances for reliable control o f the project. This assessment is based on several factors:

0 The financial systems and the underlying chart o f accounts wil l be undergoing major changes over the next several years as GAM moves to a new chart o f accounts that includes functional, economic, and organizational coding;

GAM has purchased licenses for the Oracle Financials suite for governments. Implementation should begin in late 2008, and it will take approximately two years to implement only the f i rs t three modules (general ledger, accounts payable, and accounts receivable). GAM will also be re-engineering al l underlying financial processes and procedures;

0 GAM plans to move to an accrual basis o f accounting in tandem with implementation o f Oracle;

GAM does not have an independent internal audit function.

0

0

145. For the above reasons, the key r isk mitigation measure i s to locate the FM fimction within a PMU. The PMU staff will include a full-time financial management specialist who will, among other tasks, review requests for payment and ensure that such invoices are approved as per GAM controls, prepare regular financial reports, and coordinate the work o f the external auditor who wil l be assigned to perform the project audit.

Implementing Entity:

146. The project wil l be implemented by GAM, a public institution that operates independently o f the government and has i ts own systems o f financial management and controls. I ts governance structure features a Municipal Council, headed by the Mayor, who i s appointed by the Prime Minister o f Jordan. The Council approves al l policies and related decisions regarding the operation o f the municipality. Decisions relating to new or amended bylaws and financial statements are referred to the Prime Minister, under whose oversight the municipal government operates.

147. GAM has designated project management authority to a PMU, which reports directly to the Mayor. The PMTJ will be responsible for day-to-day management o f the project, and wil l be the counterpart o f the World Bank for a l l technical, fiduciary, and environmental matters.

Internal controls

148. The project’s expenditure cycle will fol low the controls specified in Jordan’s financial bylaws applied by GAM. These include: (i) technical approval o f the department involved, (ii) review and approval by GAM’S finance staff, and (iii) review o f payments by the controller who checks the accuracy o f the payment and i t s compliance with the laws applicable in Jordan. These controls will be complemented by the

39

verification and approval by the PMU financial management specialist as well as the PMU technical staff.

149. Accounting, Financial Monitoring and Reporting: The PMU will procure and install a financial management information system that i s capable o f generating necessary financial reports, including sources and uses o f funds, cash withdrawals, cash forecasts, and Designated Account (DA) reconciliation. I t is recommended that simple, off-the- shel f software be procured for this purpose. The format, content, and frequency o f these reports were agreed upon during project appraisal. The PMU’s Financial Management System (FMS) wil l prepare, at a minimum, quarterly interim un-audited reports (IURs), which will be submitted to the World Bank 45 days after the end o f each calendar quarter.

150. Flow of Funds: In addition to allocations to the DA from the IBRD loan account, GAM contributions to project expenditures wil l be approved as part o f GAM’S annual budget process. The P M U wil l be responsible for submitting withdrawal applications with appropriate supporting documentation for expenditures incurred. Deposits into and payments from the DA to pay contractors, consultants, suppliers and others will be made in accordance with the provisions o f the loan agreement. Replenishments o f the DA will fol low Bank procedures.

15 1. Financial Reporting: In order to comply with the Bank’s reporting requirements as wel l as track amounts spent under the project by category, component and activity, GAM, through the PMU, wil l be required to generate reports showing the sources and uses o f funds, a listing o f contracts and the general status o f the project. These reports wil l be issued as follows:

Quarterly: The project will be required to generate quarterly I U R s and submit them to the Bank as part o f the project’s progress report. These reports consist o f the following:

0 Financial reports: to include a statement o f sources and uses o f funds, quarterly cash forecast, an expenditure report comparing actual and planned expenditures by activity, and a DA reconciliation statement.

Contracts listing: to include a listing o f al l contracts showing amounts committed and disbursed under each.

0

Annuallv: Audited Project Financial Statements (PFS) wil l be prepared annually following the cash basis o f accounting and wil l be submitted to the Bank within six months from year end. The PFS will include:

- Statement o f sources and uses o f funds, indicating sources o f funds received and project expenditures; Appropriate schedules classifying project expenditures by component, showing yearly and cumulative balances; DA reconciliation statement reconciling opening and year-end balances;

procedures as defined in the legal agreement; and

-

- - Statement o f payments made using Statements O f Expenditures (SOEs)

40

- Statement o f project commitments, i.e., the unpaid balances under the project’s signed contracts.

152. Auditing: The following audits wil l be undertaken o n an annual basis.

a. Project Audit: An independent private-sector auditor wil l undertake annual audits for the project. Terms o f reference for the audits wil l reflect the nature o f the Project. The audit report and opinion, accompanied by a management letter, will cover the project’s financial statements, reconciliation and use o f the DA, use o f direct payments, and withdrawals based on SOEs. The audit should be submitted to the Bank no later than six months following the close o f the fiscal year. The audit should encompass al l project components and activities as a whole under the Loan Agreement.

b. Entity Audit: A copy o f GAM’S audited financial statements wil l be remitted to the Bank along with the project audit. This audit should be re-emitted to the Bank six months after the end o f GAM’S fiscal year.

153. SOEs will be used for al l expenditures relating to (i) goods under contracts costing less than US$200,000, (ii) civ i l works f i r m s contracts costing less than US$lOO,OOO equivalent each, and (iii) individual consultant contracts costing less than US$50,000 equivalent each, under such terms and conditions as the Bank shall specify by notice to the borrower. The supporting documentation will be maintained at GAM and wil l be made available for review by Bank supervision missions upon request. Documentation relating to SOEs should be retained for up to one year from the date the Bank receives the audit report for the fiscal year in which the last withdrawal application from the loan account was made.

Statements of Expenditure (SOEs):

154. Designated Account: A special purpose bank account - the Designated Account (DA) - will be used to ho ld project funds and from which disbursements to contractors, consultants, and other Project vendors wi l l be made. No payments for goods or services other than those related to the Project wil l be made from the account. I t has been agreed that GAM will establish the DA at the Central Bank o f Jordan. The DA will have a ceiling o f US$ 2.0 million (representing approximately four months o f eligible expenditures financed by the loan). Authorized signatories, names and corresponding specimens o f their signatures wil l be submitted to the Bank prior to the submission o f the first withdrawal application.

41

Allocation of Loan Proceeds

(3) Front-end Fee

Category

62,500

(1) (i) Works under Parts 2(a) and 2(c) o f the Project

TOTAL AMOUNT

(ii) Works under Part 2(b) o f the Project

25,000,000

(2) Consultants’ services, including training

Amount o f the Loan Allocated

(expressed in USD) 21,657,000

2,590,500

690,000

Percentage o f Expenditures to be financed

(exclusive o f Taxes) 90% o f Foreign Expenditures; 90% o f Local Expenditures (ex-factory cost), and 70% o f Local Expenditures for other items procured locally.

90% for f i r m s within territory o f the Borrower; 95% for services o f individual consultants within territory o f the Borrower; and 90% o f foreign expenditures. Amount payable pursuant to Section 2.03 o f this Agreement in accordance with Section 2.07 (b) o f the General Conditions

155. World Bank Supervision: Financial management o f the project will be supervised by the Bank in conjunction with i t s overall supervision o f the project. Init ial ly this supervision wil l be performed on a quarterly basis; the frequency wil l be reduced after year one o f the project l ife. Supervision wil l review work done by the PMU and ensure that the system i s maintained in a consistent manner. The supervision plan will include detailed training activities regarding Bank guidelines and procedures in order to support the PMU financial management specialist.

42

Annex 8: Procurement Arrangements

General

156. Procurement for the proposed project wil l be carried out in accordance with the World Bank "Guidelines: Procurement under IBRD Loans and IDA Credits" M a y 2004, revised October 2006, and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers", M a y 2004, revised October 2006, and the provisions stipulated in the Loan Agreement.

157. National Competitive Bidding (NCB) wil l be carried out with procedures acceptable to IBRD which allow: (a) an explicit statement to bidders o f the evaluation and award criteria; (b) national advertising with public bid opening; (c) sufficient time for bidders to submit bids (a minimum o f thirty days); (d) no preference margin to national contractors; (e) foreign bidders to participate in N C B if they so wish; and ( f ) contract award to be made to the qualified bidder whose offer i s substantially responsive and lowest evaluated. The methods to be used for the procurement under this project, and the estimated amounts for each method, are summarized in Table A. The threshold contract values for the use o f each method are set in Table B.

158. Overall, the Jordanian procurement legislation for goods and works i s in l ine with the Bank's guidelines for procurement, and the country has adequate control organizations. However, substantial divergences exist in the procedures for the selection and employment o f consultants which, fol lowing local legislation, are based on open competitive bidding. Under the project, Jordanian implementing agencies would apply the Bank's procedures.

NCB Provisions and Conditionalities

159. Except in the cases provided for below, goods and works shall be procured under contracts awarded on the basis o f paragraphs 3.3 and 3.4 o f the guidelines and paragraphs below. Contracts for goods and works procured under the National Competitive Bidding procedure shall comply with the following:

(a) Standard bidding documents approved by the Bank shall be used.

(b) Invitations to bid shall be advertised in at least one widely circulated national daily newspaper and bidding documents shall be made available to prospective bidders, at least twenty-eight (28) days prior to the deadline for the submission o f bids.

(c) Bids shall not be invited on the basis o f percentage premium or discount over the estimated cost.

(d) Bidding documents shall be made available, by mail or in person, to a l l who are willing to pay the required fee.

43

(e) Foreign bidders shall not be precluded from bidding and no preference o f any kind shall be given to national bidders, to that end, having a presence in the Borrower’s territory should not be a condition for bidding.

(f) Qualification criteria (in case pre-qualifications were not carried out) shall be stated in the bidding documents, and if a registration process is required, a foreign firm determined to be the lowest evaluated bidder shall be given reasonable opportunity o f registering, without any hindrance i.e. no non- registration status should be considered as a non-eligibility-to-bid criterion. Additionally, one envelop system shall be used.

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

(h) Except for late bids, bids shall be opened in public in one place preferably immediately, but no later than one (1) hour, after the deadline for submission o f bids, and prices for a l l bids will be read out in this public session and no disqualification shall be made at that stage.

(i) Evaluation o f bids shall be made in strict adherence to the criteria disclosed in the bidding documents, in a format, and within the specified period, agreed with the Bank.

(i) Bids shall not be rejected merely on the basis o f a comparison with an off icial estimate without the prior concurrence o f the Bank.

(k) Bids shall be solicited and contracts shall be awarded on the basis o f unit prices, and not on the basis o f a schedule o f rates, and award wil l be based o n a l l items included within the bid or the lot in case o f multiple lots.

(1) Split award or lottery in award o f contracts shall not be carried out. When two or more bidders quote the same price, an investigation shall be made to determine any evidence o f collusion, following which: (A) if collusion i s determined, the parties involved shall be disqualified and the award shall then be made to the next lowest evaluated and qualified bidder; and (B) if no evidence o f collusion can be confirmed, then fresh bids shall be invited after receiving the concurrence o f the Bank.

(m)Contracts shall be awarded to the lowest evaluated and qualified bidder within the init ial period o f bid validity so that extensions are not necessary. Extension o f bid validity may be sought only under exceptional circumstances.

(n) Extension o f bid validity shall not be allowed without the prior concurrence o f the Bank: (A) for the first request for extension if i t i s longer than eight (8) weeks; and (B) for al l subsequent requests for extensions irrespective o f the period.

(0) Negotiations shall not be allowed with the lowest evaluated or any other bidders.

(p) Re-bidding shall not be carried out without the Bank’s prior concurrence.

44

(9) All contractors or suppliers shall provide performance security as indicated in the contract documents. A contractor’s or a supplier’s performance security shall apply to a specific contract under which it was furnished.

Works

160. The c iv i l engineering works to be financed under the project include:

Landfill construction and upwade of leachate treatment -facilitv: The project will finance c iv i l works construction o f cell 3 o f a1 Ghabawi landfill. This cell wil l have a capacity estimated for 2-3 years based on annual quantity o f waste o f about 3000 tons per day. The construction will be based o n the design prepared by Cabinet Mer l in in 2003 (updated in 2008 with the feasibility study). This sub-component wil l also finance upgrading o f the existing leachate treatment facility. I t i s expected that these two works wil l be undertaken under a single c iv i l works contract in order to maximize synergies in the work.

ii) Construction of two transfer stations: The project wil l finance the construction and equipment o f two transfer stations aimed at reducing the cost o f collection services in the Nor th and South-East areas o f GAM. These two transfer stations will help ensure that 100% o f waste collected transits through transfer stations (thereby reducing total transit costs). The ongoing feasibility study wil l validate the final selection o f the sites, capacity, technical specifications and related cost estimates.

iii) Construction of a landfill zas (LFG) extraction svstem and LFG-enerm dant: The project will finance the design, supply, installation, commissioning and init ial operation o f an LFG recovery system (extraction o f LFG and energy generation) for cells 1, 2 and 3. This sub-component wil l also include final capping o f cells 1, 2, and 3, as well as upgrading o f the leachate drainage system, with the objective o f generating and extracting the maximum amount o f LFG. Details o f the LFG extraction and energy production system are provided in Annex 5.

161. The bidding documents for the Design-Build-Operate contracts o f the project component on the recovery and treatment o f biogas were developed during Project preparation. The DBO bidding documents developed in the context o f the Local Government Finance and Development Project (P048588) in the Philippines were used as the basis for preparing new documents for the project. These documents were the subject o f a preliminary review by the procurement, legal, and regional units.

162. According to estimates, the overall value o f these contracts amounts to roughly the equivalent o f US$36.8 mi l l ion including contingencies. The works for installing the gas recovery system wil l be awarded by International Competitive Bidding, while contracts valued at US$2.6 mi l l ion or less wi l l be awarded using National Competitive Bidding (NCB) procedures, taking due account o f the provisions set forth above and using bidding documents acceptable to the Bank. For the N C B documents model we will use the Bank’s standard documents, which wil l be prepared by the Borrower for review by the Bank.

45

163. threshold, they wil l be awarded by International Competitive Bidding (ICB).

Although al l the contracts for gas recovery and gas flaring fal l below the N C B

Goods

164. The purchase o f goods, such as computer hardware, software, and other computer equipment, wi l l be handled under technical assistance contracts for institutional support and the pi lot activities.

Consultants’ services

165. The services o f consultants, for an overall amount equivalent to US$2.6 mi l l ion for technical assistance and studies, wil l be provided by national and international consultants. Requests for expressions o f interest in consulting services expected to cost more than the equivalent o f US$200,000 are to be published o n the UN Development Business web site and in its publication, and in at least one national dai ly newspaper. For al l contracts in amounts exceeding US$200,000, the Quality- and Cost-Based Selection (QCBS) method wil l be used using the Bank’s standard Request for Proposal (WP) documents.

166. For contracts with an estimated value equal to or greater than the equivalent o f US$lOO,OOO, but less than the equivalent o f US$200,000, the selection method may be Quality-based Selection (QBS) or selection based o n the consultants qualifications.

167. For contracts below the threshold o f US$lOO,OOO, selection may be made based on Consultants Qualifications, in accordance with the provisions o f para. 3.1 and 3.7 o f the consultants guidelines. If needed, selection may be made under a Fixed Budget, or Least-Cost Selection method. Individual consultants will be selected and employed in compliance with the provisions o f paragraphs 5.1 to 5.4 o f the Guidelines.

168. Single-Source Selection o f a consultant for reasons specific to the project is not currently foreseen, but should i t prove warranted it must be carried out in compliance with the provisions ofparagraphs 3.9, 3.10, 3.11, 3.12, and 3.13.

169. For contracts valued at less than the equivalent o f US$200,000, the short l i s t may include only national consultants if a sufficient number o f Jordanian firms exist and if those f i r m s are cost competitive. However, if foreign f i r m s express interest, they may not be excluded from consideration.

170. Training and workshops will be carried out on the basis o f approved programs on a yearly basis. The programs wil l identify the general framework o f training and similar activities for the year, including the nature and objectives o f the training and workshops, institutions where the training/workshops would be conducted (selection o f institutions and justifications thereof), cost estimates and contents o f the course, the number o f participants, cost estimates, and translation o f the knowledge gained in the actual implementation o f the project components.

46

Evaluation of GAM’s capacity to execute procurement activities

Expenditure category (US% M)

Works

Goods

Consultants’ services

171. GAM’s capacity to execute procurement activities was assessed during the preparation phase, and f i led with the project documents. Although the agency i s not familiar with Bank procedures, i t s staff are competent in the procurement area, although they apply GAM’S procedures, and are wel l versed in the major differences between the Bank’s directives and Jordanian procurement legislation. Our assessment indicates the procurement risk is average; however, the designation o f a project coordination unit i s desirable for its successful execution. (See the implementing provisions in Annex 6).

Method to be used ICB(1) NCB(2) Other(3) NBF(4) Total

36.8(24.3) 36.8(24.3)

0

1 .O (0.7) 1.6 2.6 (0.7)

172. GAM will be the principal agency responsible for overall coordination o f procurement procedure in the context o f the project, including the capacity building components. GAM has l i t t le experience with carrying out projects financed by the Bank, but a sizable number o f i t s staff has experience in the various stages o f procurement. However, the project involves the intervention o f several different operational divisions; consequently, a project management group will be named and made responsible for monitoring proper project execution.

- Expenditure Contract Value Procurement Contracts Subject to

Category (Threshold) Method Prior Review US $thousands

1. Works 12500 ICB Al l <2500 NCB First contract

Services

- Firms -

>IO0

Table B: Prior Review Thresholds Thresholds for Procurement Methods and Prior Review

QCBS Al l

=< loo

I 2. Consultancy I I I I

QCBS, QBS, CQS, LCS, FBS

First two contracts

- Individuals ss Al l

>50 Comparison o f 3 CV Al l

47

D. Procurement Plan

I. General Name of project: Amman Solid Waste Management Project. Borrower: Greater Amman Municipality. Lender: International Bank for Reconstruction and Development (World Bank Group). Loan agreement signed on: n.a. Project execution:

works 1.2.1. Support for strategic planning in S W M systems in GAM 1.2.2. Support for piloting private sector participation in S W M 1.2.3. Support for the design o f an appropriate M&E system 1.3. Public awareness and Communication 2. Infrastructure component 2.1.1. Upgrade o f the existing leachate treatment plant 2.1.2. Construction o f cell 3 2.2. Construction and equipment o f two new transfer stations

GAM 2.3.1. Capping and equipment o f cell 1,2 and 3 with LFG system and oaerations o f LFG svstem 2.3.2. Construction o f biogas to electricitv alant I

GAM

2.3.3. LFG system operation (including LFG to electricity) for 5 I years 3. Project Management Unit 3.1. Project Manager 3.2. Procurement Specialist 3.3. Financial Management Specialist 3.4. Solid Waste Specialist 3.5. Environmental and Social Safeguards Specialist 3.6. Procurement o f project financial management systems 3.7. Annual Proiect Audits

GAM

I 3.8. Procurement training

Date o f Bank approval of procurement plan: Date o f General Procurement Notice: Period covered by the procurement plan: 18 months beginning.

48

11. Provision of Goods and Services (Other than Consultants)

Prior review by the Bank The fol lowing are subject to prior review by the Bank:

(a) Works contracts with an estimated cost equal to or greater than the equivalent o f US$2,500,000 (b) The first works contracts concluded using N C B (c) The draft standard I C B documents for works contracts (d) All goods contracts awarded o n the basis o f single-source selection; and (e) Contract amendments which increase the contract value beyond an earlier threshold

Implementation Manual The procurement and financial management procedures wil l be set out in detail in the implementation manual being prepared for the project.

Itemization of contracts The provisional procurement plan for the provision o f goods and services other than consultants, for the first 18 months o f the project and i s set out in detail in the tables below.

Use of “Statements of Expenditure”: N o t applicable.

111. Selection of Consultants and Training

Prior review by the Bank: The following are subject to prior review by the Bank: (a) Contracts for consulting firms with an estimated cost equal to or greater than the equivalent o f US$100,000.00 (b) Contracts for individual consultants with an estimated cost equal to or greater than the equivalent o f US $5 0,000; (c) All consultancy contracts awarded on the basis o f single-source selection; and (d) Contract amendments which increase the contract value beyond an earlier threshold.

Local preference To ensure that priority is accorded to identifying qualified national consulting f i rms, the short l i s t for contracts for which the estimated cost does not exceed US$200,000 may include only national consultants, in accordance with 5 2.7 o f the Guidelines. However, if foreign f i r m s express interest, they shall be considered.

Use o f “Statements of Expenditure” The following may be requested on the basis o f Statements o f Expenditure: (a) Consulting f i rms ’ services for which the contract cost is less than US$100,000.00; and (b) Individual consultants’ services for which the contract cost i s less than US$50,000 per contract.

49

Itemization of contracts The provisional procurement plan for consultants’ contracts for the f i rs t 18 months and is set out in detail in the tables below.

IV. Project Management Capacity Building The provisional procurement plan for building and strengthening project management capacity i s included in the detailed description o f consultant contract procurement.

E. Advertisement

173. A general procurement notice shall be published in the online edition o f the DGmarket and UN Development Business. Specific procurement notices for al l I C B works contracts and requests for expression o f interest for consulting assignments with firms shall be published in at least two national dailies and the DGmarket and UNDB.

F. Procurement Information and Documentation Filing

174. Procurement information will be recorded and reported as follows:

a) Complete procurement documentation for each contract, including bidding documents, advertisements, bid reception, bid evaluation, letter o f acceptance, contract agreement, securities, related correspondence, etc., wil l be maintained by the implementing entities in an orderly manner, readily available for audit.

b) Contract information wil l be promptly recorded and contract rosters as agreed wil l be maintained by the PMU.

c) Comprehensive semi-annual reports wil l be prepared by the PMU indicating:

i) Status o f on-going procurement, including a comparison o f originally planned and actual dates o f procurement actions, including preparation o f bidding documents, advertising, bidding, evaluation, contract award, and completion time for each contract, and;

ii) Updated procurement plans, including revised dates, where applicable, for the procurement actions.

G. Fraud, Coercion, and Corruption

175. All procuring entities as well as bidders and service providers, i.e., suppliers, contractors, and consultants, shall observe the highest standard o f ethics during the procurement and execution o f contracts financed under the project, in accordance with paragraphs 1.15 and 1.16 o f the Procurement Guidelines and paragraphs 1.25 and 1.26 o f the Consultants guidelines. The Ant icompt ion Guidelines apply to the Project.

50

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50 3 > 0 Z -

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8

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-

Annex 9: Economic and Financial Analyses

176. The economic and financial analysis o f this project consists o f four parts. The f i rst part covers the cost-benefit analysis o f the project. This part compares the capital and operating costs o f the project to the benefits produced by the operation in the form o f revenues from the sales o f carbon emission reductions, electricity and cost savings from a more efficient transfer system, The second part presents the financial appraisal o f the project, the strategy o f GAM and its budget for hauling and dumping solid waste. The third part analyzes GAM’s current cost recovery with regard to S W M and expected cost recovery with and without the project. The fourth part analyses GAM’s debt capacity and its ability to repay the proposed IBRD loan.

I - Economic Analysis:

177. The methodology used for the present economic appraisal i s a cost-benefit analysis based on the comparison between the Do-Nothing scenario and the Do- Something scenario. These are defined as the following:

P Do-Nothing scenario: Minimal investment to allow solid waste management operations to be continued in GAM in the current manner, i.e., a business-as-usual scenario without investment in transfer stations, the leachate treatment plant, LFG collection system, and LFG-to-electricity plant. However, in this scenario, GAM would need to invest in the construction o f cel l 3.

> Do-Something scenario: Upgrade o f current solid waste management practices in GAM through the infrastructure investment component including: (i) construction and equipment o f two transfer stations; (ii) upgrade o f the existing leachate treatment plant; (iii) construction o f cell 3; (iv) capping and equipment o f cells 1 , 2 and 3 with LFG system; and (v) construction o f LFG-to-electricity plant.

178. benefits:

The economic analysis considers the project costs and the fol lowing main

0

0

0

Cost savings from collection and transfer through the implementation o f the two new transfer stations; Carbon emission reductions through the implementation o f the LFG system; and Sales o f electricity produced by the LFG-to-electricity plant.

179. Other general assumptions include:

0 The project evaluation period i s 20 years (typical for LFG-to-electricity plants), starting in 2009, when the first expenditure i s expected to take place, and finishing in 2029.

0 Costs and benefits are expressed in U S D assuming an exchange rate o f approximately JD 1 = US$ 1.41.

53

The discount rate traditionally used for Wor ld Bank projects i s 12 percent.

a) Project Costs:

*:* Investment Costs:

180. The project costs are those related to the infrastructure component only5 and include: (i) construction and equipment o f two transfer stations; (ii) upgrade o f the existing leachate treatment plant; (iii) construction o f cell 3; (iv) capping and equipment o f cells 1, 2 and 3 with LFG system; and (v) construction o f the LFG-to-electricity plant. The total investment cost i s estimated to be around U S $ 28 million.

I 1. Construction and eauiDment o f two new transfer stations I US$3.000.000 I

181. Given that the methodology used for this appraisal considers only incremental costs between the Do-Nothing scenario and the Do-Something scenario and that cell 3 wil l be constructed in both scenarios, the incremental investment cost to be considered is then US$23.5 million.

*:* Increased Operations and Maintenance costs:

182. The installation o f the LFG system as we l l as the construction o f the LFG-to- electricity plant will increase the Oh4 costs o f current solid waste services in GAM. The cost o f operating the LFG system and the gas-to-electricity plant has been estimated based o n regional benchmarking at about US$ 6.6 mi l l ion for 5 years, or an average o f US$1.3 million per year. After the f i rs t 5 years, i t has been assumed that operations and maintenance costs o f the installed 6 MW facility wil l decrease along with the quantity o f gas extracted from cells 1 , 2 and 3, which are the only cells within the present project.

183. Increased Oh4 costs resulting from the leachate treatment plant have not been considered because the cost o f treating leachate can be valued at least as the benefit o f not treating it in the Do-Nothing scenario compared to the Do-Something scenario. Indeed, in the Do-Nothing scenario, not treating the leachate at landfi l l level will result in a f i ture treatment cost to avoid contamination o f water resources, which i s conservatively assumed to be as high as the cost o f treating i t at landfi l l level.

The bulk o f the project costs are dedicated to the infrastructure component. The institutional component 5

benefits are difficult to quantify, and have not been taken into account.

54

b) Project Benefits:

*:* Savings from collection and transfer:

Currently, about 70 percent o f M S W in GAM are transported via 3 transfer stations: - Sha’er: 45 percent o f M S W quantities and 55 percent o f collection vehicle loads

from November 2006 to October 2007, but progressing and its capacity is being increased by two additional compaction systems. Ain Ghazal: 10 percent o f MSW quantities and 15 percent o f collection vehicle loads. Yarmouk: 7 percent o f M S W quantities and 4 percent o f collection vehicle loads.

-

-

184. Collection areas in western districts o f Amman are about 10 to 28 kilometres away from the closest transfer station, thus have to spend up to nearly 1 to 2 hours in traffic to unload in one o f the existing transfer stations and come back to their collection area. With a minimum o f 2 trips per shift, the collection vehicles may spend up to 3 hours in waste hauling and only 5 hours in collection per shift.

185. With an objective o f placing transfer stations within an average o f 20 minutes drive for the collection areas in west Amman, each vehicle in these districts would save about 2 hours per shift, increasing the cost-efficiency o f the collection.

186. The objective is to transfer about 98 percent o f GAM’s M S W in the transfer stations to larger vehicles to be hauled to A1 Ghabawi landfill, so that only the MSW collected in small communities and villages within about 15 km o f the landfill are transported directly to Ghabawi by the collection vehicles.

187. The construction o f the two new transfer stations is expected to improve the productivity and cost-efficiency o f the collection, and thus to reduce the collection fleet by the equivalent o f 25 to 28 vehicles. The reduction o f the collection cost in the districts served by the two new transfer stations i s estimated at about 900,000 JD/year (US$ l,270,000/year) in 2009.

188. After subtracting the new costs related to the two new transfer stations and adding the current operational costs for transfemng and hauling the concerned quantities o f M S W from the existing transfer stations, the equivalent cost reduction on the collection and transportation system i s about 650,000 JD/year (US$917,000/year) in 2009.

189. The economic benefit increases with the M S W quantities. The calculation o f the increase o f the economic benefit i s conservative as it has been made considering GAM’s average population growth, while most o f the districts served by the new transfer stations are development areas with a growth rate expected to be higher than average one. The growth rate assumed for the M S W quantities is 5 percent.

55

*:* Carbon emission reductions:

2009 2010 201 1 2012

190. The collection and flaring o f methane at A1 Ghabawi landfill will enable GAM to sel l CERs. The CERs shown in Table 2 are based on the Project Design Document prepared for the registration o f the project at the C D M Executive Board.

reductions in tons of C02 158,545 175,376 200,5 12 21 6.258

Table 2: Annual and total emission reduction in tones of C02 equivalent Year' I Annual estimation of emission I

2013 2014

240,871 256,397

2015 Total estimated C 0 2 e reductions over the f i r s t crediting period (tons o f C02e) Total number o f crediting years over the first crediting period Average reduction over the f i r s t crediting period (tons o f C02e)

272,004

1,5 19,963

7

2 17.138

191. An estimated selling price o f about € 9 (US$ 13.5) per CER (up to 2015) has been applied, and i t has been assumed that the Bank would pay 25 percent o f the total ERPA amount upfront. Sales o f CERs have been assumed for the crediting period up to 2021. I t i s important to note that this i s a conservative assumption given that the project i s being registered by the Kyoto Protocol C D M Executive Board for a 2 1 -year period.

192. With these assumptions, total carbon revenues would amount to about US$ 3 1.4 million until the end o f 2021. The graph below shows the profile o f CERs generated during the crediting period considered (2009-202 1).

Table3: CERs estimated during the period 2009-2021

CER in US$

Year I

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*:* Sales o f electricity:

193. The income from electricity production is computed o n the basis o f 0.04246 JD per kWh (price paid by the Jordanian Electric Power Company (JEPCO) when buying electricity from renewable energy sources). Furthermore, JEPCO pays an extra peak load tari f f (so called “Maximum Demand”) price o f 99,333 JD, which i s an extra bonus price paid to small power producers once a month, if they deliver electricity during that ha l f hour per month where the power company has its highest production. I t i s also assumed that the LFG-to-electricity plant i s being operated 8,000 hours per year. Based on a calorific value o f methane o f 5 kWh/Nm3 and a power efficiency o f 36 percent, the power effect and the yearly power production are presented in the graph below. Total income during the project l i fe from electricity sales i s estimated to be around U S $ 39 million.

Table 4: Power production estimates during the period 2009-2029

I Power Production

---

I Power Production

Year

c) Results of the base case:

194. The results o f the economic analysis in terms o f the Ne t Present Value (NPV), the Economic Internal Rate o f Return (ERR), and the Benefit Cost Ratio (B/C) are presented in the fol lowing table.

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Table 5: Results of the economic appraisal

Indicator

201 6

2018 2019 2020

2022

Value

pE 2025

NPV(k2 12%) USS16.9 million EIRR

195. The economic analysis indicates that the investment component o f the proposed project i s economically viable, returning a positive NPV o f US$16.9 million, fol lowing an incremental investment o f US$23.5 million. The ERR i s 37% and the estimated B/C ratio i s 1.63, which since it is greater than one supports a decision to invest in the project.

37%

d) Sensitivity and Switching Analysis:

B/C Ratio

196. This section indicates the impact o f uncertainty or variation in the key parameters o f interest on the economic appraisal o f the project. Those key parameters are perceived to be the capital costs and the landfill gas production. The impact o f defined variation in these parameters is presented in the fol lowing table, together with the percentage change in the former necessary to make the project unviable (e.g. NPV becomes negative), also called the switching values. For every scenario, both situations (with and without CERs) are presented.

1.63

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Base Case NPV(@12%) EIRR

197. The table reveals that the proposed investment i s relatively robust to the defined variation in the key parameters o f interest, with significant changes in both the capital costs o f the project and the landfill gas production (affecting the income from CERs and electricity sales) s t i l l resulting in a positive NPV.

With CER without CER US$16.9 million US$2.1 million

37% 12%

198. The sensitivity analysis also reveals the estimated switching values, with capital costs needing to increase by 82 percent, or landfill gas production falling short o f the forecast by 55 percent before the project becomes unviable.

199. I t i s also important to note that even without CER revenues, the project i s st i l l economically viable, returning an NPV o f US$ 2.1 mi l l ion and an EIRR o f 12 percent. However, the alternative scenarios show that the situation without CERs is less economically viable, with lower switching values, a lower ElRR and a negative NPV. The addition o f CER revenues, even with pessimistic assumptions on gas collection efficiency, improves dramatically the economic viabi l i ty o f the project.

I1 - Financial Appraisal of the project:

200. scenario and the Do-Something scenario. These are defined as the following:

The financial analysis i s based on the comparison between the Do-Nothing

Do-Nothing: scenario: Minimal investment to allow solid waste management to be continued in GAM in the current manner, that i s to say a business-as-usual scenario without any investment in transfer stations, the leachate treatment plant, the LFG system, and the LFG-to-electricity plant. However, in this scenario, GAM would need to invest in the construction o f cell 3.

Do-Something scenario: Upgrade o f current solid waste management practices in GAM through the infrastructure investment component including: (i)

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201.

a

a

e

a

202.

a

a

203.

construction and equipment o f two transfer stations; (ii) upgrade o f the existing leachate treatment plant; (iii) construction o f cell 3; (iv) capping and equipment o f cells 1,2 and 3 with LFG system; and (v) construction o f LFG-to-electricity plant.

Other general assumptions include:

The project evaluation period i s 20 years (typical for LFG-to-electricity plants) starting in 2009, when the f i rs t expenditure is expected to take place, and finishing in 2029. Costs and benefits are expressed in USD assuming an exchange rate o f approximately JD 1 = US$ 1.41. The discount rate used i s the average cost o f capital for GAM assumed to be equal to the Jordanian Treasury Bond rate at 8 percent. The inflation rate i s estimated to be about 5% over the whole period (2009-2029).

The financial benefit wil l be derived from:

Carbon emission reduction revenues through the implementation o f the LFG system; and Sales o f electricity produced by the LFG-to-electricity plant.

The financial costs include the project investment costs and increased operating costs due to the implementation o f the LFG system and the LFG-to-electricity plant.

204. In this section, we only take into account financial cash flows, so savings in transfer costs are excluded. More over, financial cash flows imply that we take into account the effect o f inflation on costs and revenues which was not the case for the economic appraisal. The discount rate used in this section is the financial opportunity cost o f capital for GAM.

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Table 5: Financial Appraisal of the project

Indicator NPV FIRR

Value US$18.4 mi l l ion

30%

205. The financial analysis indicates that the investment i s financially viable, returning a positive NPV o f US$18.4 mi l l ion at a discount rate o f 8 percent, fol lowing an investment o f US$23.5 million. The financial internal rate o f return i s 30 percent, which i s well above the cost o f financing proposed by the Bank.

Base Case NPV(@8%) FIRR

206. The impact o f uncertainty or variation in the key parameters o f interest o n the financial appraisal o f the project has been evaluated. Those key parameters are perceived to be the investment costs, and the landfi l l gas production. The impact o f defined variation in these parameters i s summarized in the following table.

Table 6: Sensitivity Analysis

With CER Without CER US$18.4 mil l ion (US$3.9 million)

30% 5%

Capital Costs NPV(@8%) FIRR

+20% with CER US$14.2 mil l ion (US$8.1 million)

22% 2 Yo

+20% without CER

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Landfill Gas Production NPV( (38%) FIRR

207. The table reveals that the proposed investment i s relatively robust to the defined variation in the key parameters o f interest, with significant changes in both the capital costs o f the project and the landfill gas production st i l l resulting in a positive NPV and an FIRR at the 8 percent threshold. However, the table also shows that the project i s not financially viable without CER revenues in al l the different sensitivity scenarios presented above.

-20% with CER US$9.1 mil l ion (US$9.9million)

18% 1%

-20% without CER

I11 - Cost Recovery and Projections:

208. As part o f the project feasibility study, significant effort was put into estimating the total costs o f S W M collection and cleaning, transfer, and disposal for 2007. The Phase I report provided the following figures for operational and capital costs6:

Table 9: 2007 SKI4 Operational and Capital Costs (JD)

Total Collection and Overhead Street Cleaning Transfer Disposal -

800,000 15,018,000 790,000 633,000 17,241,000 Operational costs Capital Costs 2,899,000 574,000 1,837,000 5,310,000 Total 800,000 17,917,000 1,364,000 2,470,000 22,551,000

209. Based on a total amount o f M S W collected in Amman in 2007 o f about 731,500 tons, the cost per ton o f a l l solid waste services in Amman was approximately JD 30 per ton7 The costs o f collection and cleaning are estimated at JD 25 JD per ton, while transfer and disposal are JD 2.1 and 3.0 per ton, respectively.

Table 10: 2007 S WM Costs per Ton (JD) Collection and street cleaning 25.0 Transfer 2.1 Disposal 3.0 Total: 30.1

210. Revenues: The main fee charged by GAM for solid waste services is a JD 20/year charge assessed through electricity bills. All households connected to the electrical network are charged JD20/year plus 5 filskWh over 200 k W m o n t h for the households consuming more than 200 k w m o n t h ) as part o f electricity charges. Revenues collected through the fee over the past several years are provided in the table below. The charge per household has not changed since 2003, when i t was JD 14/year;

Capital costs are estimated annual depreciation costs based on previous years’ investments. This figure also includes the amount o f waste disposed o f at a1 Ghabawi landfill but collected by

other cities or disposed directly by commercial establishments. In 2007, that amount was approximately 159,000 tons, or 18 percent o f solid waste disposed at a1 Ghabawi. As the cost o f disposal i s a relatively smal l part o f total costs, th is does not greatly affect the per-ton cost o f MSW services in Amman.

6

7

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growth in revenues are the result o f growth o f Amman and the addition o f new households connected to the electricity network.

21 1. Total revenues from waste fees f rom businesses are significantly lower than those f i om households. Businesses in Amman are granted annual business licenses, f rom which 20 percent o f the total license fee i s specified as a charge for waste services. Businesses connected to the electricity network are also charged JD20/year plus 5 f i l s / k W h over 200 k W m o n t h for the business consuming more than 200 kWWmonth) as part o f electricity charges. GAM reports that in 2008 it began to assess commercial waste service charges on an individual basis, sending small teams o f assessors to businesses to calculate a waste fee based on the type o f business, number o f employees, type and estimated amount o f waste generated, etc. It reports, however, that there is yet no clear assessment methodology, and that the exercise has only recently begun. Estimates o f the amount o f revenue this would generate in 2008 varied between JD 500,000 and JD 5 million. W h i l e GAM does need to revise the way i t charges businesses for waste services, i t should clarify the basis on which this exercise is being undertaken, and ensure that the assessment methodology leaves l i t t le room for discretion.’

212. Finally, GAM charges large commercial producers o f solid waste a per-ton fee o f JD 6.5 for collection and disposal (JD 4/ton for collection and JD 2.5/ton for disposal). Commercial producers may deliver waste directly to a1 Ghabawi and be subject to only the JD 2.5/ton charge. Finally, i t charges other municipalities a JD 2.5/ton tipping fee for disposal at Ghabawi. These fees are estimated to have generated 17.9 and 12.7 percent o f total S W M revenues in 2005 and 2006, respectively.

Table 11: Summary of Solid Waste Revenues, 2005 - 2008 2005 2006 2007 2008 (estimated)

Domestic Fees 5,909,109 8,543,918 11,193,818 13,000,000 Commercial Fees 1,015,348 1,090,000 1,120,000 No t available

and Tipping Fees Total 8,472,792 11,240,000 14,170,264 16,500,000

Large Commercial 1,548,335 1,656,063 1,856,446 2,000,000

213. Cost Recovery: Because GAM’S financial management systems are not set up to track total S W M costs, i t was not possible to calculate the pattern o f cost recovery over the last several years. Based on estimated expenses for 2007 only, cost recovery o f total expenses (including capital expense depreciation) was approximately 63 percent, resulting in transfers from general revenues to cover costs o f about JD 8 mil l ion.

In 2006 and 2007, fees from businesses were approximately 11-12 percent o f fees from households, while in 2004 and 2005 fees from businesses were between 17 and 18 percent o f household fees. I t does not appear at this time that GAM i s able to assess whether the amount o f waste collected from businesses i s in proportion to the fees assessed, and i t may be that households are subsidizing commercial waste collection and disposal. This i s an issue that should be addressed as GAM improves its oversight o f the sector and i t s information collection.

8

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Projected Cost Recovery:

214. Based on current S W M costs and revenues, cost recovery for the sector was projected for the next decade under with- and without-project scenarios. For the without- project projections, the fol lowing assumptions were used:

Projections were made based on per-ton costs, which were estimated to increase at the projected rate o f inflation (5 percent).

Tons o f solid waste disposed at a1 Ghabawi landfi l l per year were estimated to increase 2.8 percent in 2008 and 2009, 2.7 percent in 2010 and 2011, 2.5 percent in 2012 and 2013, and thereafter on a declining basis, leveling out to a growth rate o f 2.2 percent at the end o f the period. These increases were provided by the feasibility study.

All revenues were based o n GAM’S 2008 budgeted figures. Revenues from household waste fees are based on the growth in households and o n the annual solid waste fee charged through electricity bills. Households are (conservatively) projected to increase at a five percent annual rate over the next several years, declining to a three percent annual rate at the end o f the period. N o increases in the fees for solid waste are projected in order to keep year-to-year comparisons simple; however, realistically, GAM is l ikely to increase rates at some time during the period under review.

Revenues from business waste fees are assumed to increase at six percent per year, reflecting both the rate o f inflation (five percent) and an estimated three percent growth rate o f the number or size o f businesses.

Revenues from tipping fees are expected to increase at the rate o f increase o f solid waste disposed of, or five percent annually.

Revenues from energy sales and CER sales are taken from the Carbon Finance Project Design Document.

The project induces additional operating costs and investment costs due to the operations o f the LFG recovery system. The LFG operating costs are taken directly from the project feasibility assessment; the investment costs are taken from the Carbon Finance Project Design Document, but are recorded according to the depreciation costs, assuming a 20-year deprecation period.

New transfer stations and associated investments result in reduced S W M operating costs. These costs are taken from the feasibility assessment.

Because o f net revenues generated by the project, sector cost recovery improves for all years o f the projection. Beginning in the f i rs t year o f project revenues (2009), cost recovery i s projected to be 86 percent, which i s a 15 percentage point increase over 2008, (and a 23 percentage point increase over 2007). However, this is due to the large up-front payment for CERs. From 2010 through 2014, cost recovery i s around 79 percent. From the end o f the period, cost recovery then falls between 2 and 3 percentage points per year, ending at 68 percent in 20 19.

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216. The analysis also estimates the amount o f transfers from GAM’S general budget to cover SWM costs not covered by user fees and revenues generated through LFG recovery. In absolute terms, these increase from JD 3.7 mi l l ion in 2009 (compared to JD 8.3 million in 2007) up to JD 14.0 mi l l ion in 2019. As a percentage o f GAM’S estimated total revenue, the shortfall r ises from 1.5 percent in 2009 to 3.8 percent in 2019.

21 7. ratios.

The attached table provides the projected revenues, costs, and cost-recovery

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IV - GAM’s debt capacity:

218. As part o f project preparation, a review and projection o f GAM finances was undertaken in order to confirm GAM’s debt capacity and ability to repay the proposed IBRD loan. The analysis indicated that the proposed loan poses n o burden regarding either GAM’s overall debthncome ratio or debt service requirements.

219. GAM has a very strong history o f revenue generation, and revenues dedicated to operating expenditures are low. Whi le the past pattern o f revenue growth (an average o f 17 percent annual growth in current revenues between 2003 and 2007) may not be replicable in the longer term, GAM has a strong basis for revenue generation. I t s main source o f revenue i s property taxes (it receives practically no revenues from the central government), however, fees related to development (ie., density charges) and the sale o f municipal land provide an increasingly lucrative source o f fimds.

220. Less than hal f o f GAM’s revenues are allocated to current operating expenses, while more than hal f o f revenues have been allocated to capital expenditures. Compared to general municipal experience, this i s a very l o w ratio o f current/capital expenditures. GAM has an ambitious capital investment program, but i t also has a high degree o f leeway in terms o f i ts decisions regarding the timing o f investments. I t has the capacity to front-load investments at this time and borrowing to finance them, while reducing investments and repaying debt in the future.

221. GAM has very l i t t le debt relative to i t s income, and debt service i s exceedingly manageable. GAM had i ts highest debthcome ratio in 2007, at which point new borrowings from local commercial banks and a JD 60 mi l l ion bond issue pushed i t s debthcome ratio to 41 percent. Going forward, the debthncome ratio is expected to fall steadily; once the bond issue i s paid o f f (and assuming there i s no additional debt other than the World Bank loan), debthncome ratio falls to less than 5 percent.

222. Barring an unexpected and drastic increase in new borrowing, debt service remains highly manageable. Debt servicehcome i s estimated to be 7 percent in 2008, but averages about 2.5 percent between 2008 and 2013. From 2014 to 2018, GAM i s scheduled to pay o f f the principal on i t s bond issue, and debt service i s between 6 and 4 percent. After 2018, however, assuming the World Bank loan i s GAM’s only debt obligation, debt service drops to less than 1 percent o f income. The proposed World Bank loan i s not therefore expected to be a burden on the municipality o f Amman, and there are no financial impediments to GAM’s borrowing from the Wor ld Bank.

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Annex 10: Safeguard Policy Issues

I. Environmental Safeguards

A. Safeguards Classification

223. The proposed project falls under the World Bank environmental category A classification due to i t s size, magnitude, severity, and irreversibility o f potential environmental impacts. Of the World Bank’s ten safeguard policies, two policies are triggered: Operation Policy (OP) 4.0 1 o n Environmental Assessment and Operational Policy (OP) 4.12 Involuntary Resettlement. In order to comply with OP 4.01 a full Environmental and Social Impact Assessment (ESIA) was camed out by a Jordanian independent consulting firm, ECO Consultants, according to the Terms o f Reference approved by the World Bank, prepared the ESIA. Furthermore in order to comply with OP 4.12, a resettlement pol icy framework (RPF) has been prepared and disclosed and is described in section E below.

224. During the ESIA preparation, the borrower consulted with stakeholders twice. The f i rst round o f consultation took place during the scoping stage o f the EIA and was held on February 5th 2008. This meeting helped the environmental consultant define the scope o f work, and focus o n the most relevant environmental and social issues, through feedback o f the participating stakeholders. A Second Consultation Session was held on June 12, 2008 in which a l l main findings and recommendations included in this ESIA were presented to the public. During this session, various affected stakeholders were invited once again in order to review and provide feedback on the draft Environmental & Social Impact Assessment (ESIA) draft report and the Resettlement Pol icy Framework, which both were made available in Arabic in a form understandable to the general public. Approximately 40 people attended the session from different institutions including governmental, non-governmental organizations, c iv i l society and local communities. The remarks and concerns raised during the consultation were included in the ESIA which was finalized during the appraisal mission

B. Analysis of Alternatives

225. An analysis o f alternatives was carried out during the E S I A preparation. A number o f the key alternatives have been included in this report as potential options to be implemented for each project component. For each alternative, the potential benefits and impacts resulting from i t s implementation have been identified. The ‘no-project’ scenario would result in continuing with the current negative environmental consequences at Ghabawi. Waste management alternatives such as centralization and decentralization o f landfill in several areas o f GAM were considered, with the conclusion that the current management option o f centralization, given the generally l ow capacity o f local authorities outside Amman, their small budgets, and the lack o f experienced engineering staff in the Solid Waste Management sector, represents the best approach.

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226. Regarding SW transfer procedures and management, the option o f constructing 2 new transfer stations i s also considered as a positive alternative for improving the existing conditions. In addition, strategic treatment activities at the landfill were examined. Upgrading the Leachate Treatment Plant and constructing the Landfill Gas to Energy Plant, which i s the full project alternative, provides the best overall reduction in negative environmental impacts. For the Leachate Treatment Plant, the most effective approach i s a combination o f several treatments since the proposed treatments wil l not be effective individually. Moreover, involving the private sector in cleaning and collection, waste transfer and landfi l l operations could create incentives to better performance, and could produce a better managed site, and reduce negative impacts on the environment.

C. Impacts

227. According to the ESIA report, the proposed project will have a strong positive impact on the overall environment o f the project area while addressing global environmental issues i.e. mitigating GHGs. I t will particularly address the deficit in municipal solid waste disposal capacity, improve disposal practices, and address related gas and leachate management issues, hence mitigating negative impacts o f the existing disposal facility on environment and natural resources.

228. The project wil l contribute to global climate mitigation through the reduction o f 2.8 mi l l ion tons o f C02eq during a 21-year period while generating 160,000 MWh o f electricity and wil l mobilize additional revenues that will be used to enhance SWM cost recovery in Amman and to financially support sustainable development activities through the allocation o f 15 percent o f carbon revenues to Jordan’s Environmental Protection Fund.

229. Other substantial benefits are related to the rationalization o f collection in undersewed districts in terms o f transfer. The operation o f the two planned transfer stations in conjunction with the existing ones wil l reduce the overall trips made to the landfill. This wil l decrease traffic levels, which wil l have a positive impact on road and streets users o f the surrounding areas.

230. More specifically, environmental benefits would include : improvements o f health & safety conditions for workers and nearby residents to transfer stations; reduction o f traffic to Ghabawi Landfi l l and therefore, reduction o f C 0 2 emissions; reduction o f potential threats to the soil, sub-soil and groundwater at the landfi l l site by treating the leachate; reduction o f odours at the landfill area and i t s surroundings by treating the leachate; reduction o f GHG emissions such as CH4 and C 0 2 and LFG emissions including local pollutant emissions and trace constituents such as VOCs, by collecting and treating the LFG; improvement o f leachate management which reduces r isk o f groundwater pollution; and improvement o f control and monitoring activities reducing potential air emissions and leachate contamination.

231. Socio-Economic Benefits would include reduction o f potential threats to the water resources and air quality which improves the nearby populations’ environment

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conditions; employment generation; development o f local capacities in building, managing and monitoring LFG collection and power generating equipments; and improvements on public work and safety by reducing LFG migration at the existing disposal site.

232. Negative Impacts: Major adverse impacts associated with the project are leachate management and polluting discharges, and odor and gas emissions. The design o f the proposed project took into consideration these potential impacts; appropriate mitigation, monitoring and institutional strengthening measures are part o f the project and are reflected in the related Environmental and Social Management Plan (ESMP) as wel l as in the project budget in the amount o f US$490,000

233. Other impacts: There may be adverse environmental impacts during the construction phase; however, they are short term, reversible and unlikely to be significant. Typical impacts are noise nuisances, air pollution due to dust formation, safety hazards from construction activities, etc. Good construction practices will be included in the bidding documents o f contracts and would mitigate most o f these temporary impacts to acceptable levels.

234. More specifically, the potential negative impacts o f the construction, and operation phases o f the El Ghabawi landfill and the transfer stations are summarized as follows:

Negative Environmental Impacts during construction:

235. A significant potential Impact can be due a decrease o f the health & safety conditions o f workers as they are exposed to particles and gases emissions as wel l as handling machinery. Other impacts which are generally unlikely to be significant are related to noise nuisance o f the area, and increased traffic volumes in the surroundings o f the construction works

Negative Environmental Impacts during operation:

236. associated to the implementation and operation o f the project:

The following i s a summary o f the potential significant negative impacts

0 Groundwater pollution from uncontrolled leachate generation and consequently, increase o f odors at the landfi l l and surrounding areas.

0 Potential contamination o f soil, sub-soil and groundwater f rom undetected liner leakage

0 Increase o f LFG and GHG generation before the LFG to Energy Plant i s operational by increasing the landfill capacity, as well as from the proposed leachate treatment.

0 Higher costs associated to the leachate treatment plant construction. 0 Increase o f odors from fugitive emissions during handling and treatment o f

leachate at the landfi l l and its surroundings.

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0 Potential r i s k o f accidental spills and discharges, fires or other accidents at the transfer stations and the landfill.

D. Schedule

Environmental and Social Management Plan (ESMP) and Implementation

237. All the mitigation and monitoring measures proposed as above mentioned have been defined for each o f the construction and operation phases, and synthesized into a ESMP (see table below).

238. The different entities responsible for various aspects o f the project and Solid Waste Management have been defined and the specific role o f each o f them clarified, in order to set out the responsibilities o f each entity. The design and construction o f al l cleaning and collection activities, in addition to the transfer stations and the landfi l l activities, except for those related to landfill gas, would be the responsibility o f the private sector contractor whose performance wil l be monitored by the Environment and Cleanliness Department o f GAM. All activities related to landfill gases, including operation o f the plant, would be undertaken by another private sector entity.

239. Additionally, a Project Management Unit (PMU) has been established, to be in charge o f the management o f the project. This Unit should coordinate with the various GAM departments the implementation o f al l Solid Waste Management activities and supervise al l technical, fiduciary and environmental project related matters.

240. The fol lowing table includes a summary o f the EMSP including the implementation schedule for the actions proposed. The estimated incremental cost o f the EMSP is US$ 490,000 and divided as follows. This amount was included in the project cost.

Mit igation Plan: US$250,000 Monitoring Plan: US$70,000 Institutional Strengthening US$l70,000 Total US$490,000

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11. Social Safeguards

A. Resettlement Policy Framework

241. Since some o f the project’s physical components may result in involuntary resettlementAand acquisition, OP 4.12 o n Involuntary Resettlement i s triggered, and a Resettlement Policy Framework (RPF) has been prepared. An RPF is the instrument used, because the nature and extent o f land acquisitionhesettlement o f the some o f the sub-components are not known at appraisal. In the context o f this project, the location o f the two new transfer stations to be established are not yet determined which may - depending upon the exact location - entail some degree o f land acquisition and/or resettlement.

242. The key purpose o f the RPF is to establish resettlement objectives, principles, organizational arrangements and funding mechanisms for any resettlement operation that may be necessary during the implementation o f any o f the subprojects. When the exact extent o f land acquisition becomes known, Resettlement Act ion Plans (RAPS) or abbreviated RAPS - depending on the scale and severity o f impacts - are prepared. The resettlement process should be completed prior to the start o f physical works.

243. The Resettlement Pol icy Framework (RPF) sets the basis for any subsequent Resettlement Action Plan (RAP). I t also represents good project development practice. This RPF has been prepared according to Decree (12) o f 1987 (the Land Acquisition Law) o f Jordan, and GAM’S internal resettlement principles with due consideration o f World Bank Operational Pol icy (OP) 4.12. GAM’s commitment to such principles i s based on the laws o f Jordan which ensure that Project Affected Peoples (PAPS) are fairly compensated for any necessary confiscated land. GAM’S principles should include the following aims and objectives:

1 - Involuntary resettlement should be avoided, or minimized where unavoidable. 2- Where resettlement i s unavoidable, resettlement plans and activities should be part o f

the project development process. 3- Resettled persons should be provided with sufficient investment resources and

opportunities to share in project benefits (i.e. proper compensation for confiscation o f lands should be paid).

4- Displaced persons should be fully consulted, and participate in planning and implementation o f resettlement programs.

5- Displaced persons should be compensated for their losses at full replacement cost. In accordance with Wor ld Bank OP 4.12 this should take place before the affected parties are displaced.

6- The resettled persons should be assisted in any necessary relocation and provided with support during the transition period.

7- Resettled persons should be assisted with their efforts to improve, or at least restore, their former living standards and income earning capacity.

B Guiding Principles for Resettlement:

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244. as part o f the proposed works:

GAM will bind itself to the following principles in regard to any land acquisition

Principle 1 : Resettlement Must Be AvoidedMinimized: This process wil l be conducted in full accordance with the Jordanian Land Acquisition Law (LAL) No. 12 o f 1987 and i t s Amendments.

Principle 2: Genuine Consultation and Participation Must Take Place: Compensation requires negotiation and communication with project affected peoples.

Principle 3: A Pre-resettlement Data Baseline will be established: GAM will compile an inventory o f landholdings, crops in agricultural land, and buildings to determine fair ly and identify what i s considered to be a reasonable level o f compensation..

Principle 4 Assistance for Relocation must be Made Available: GAM will provide assistance to PAPS in the relocation process as necessary.

Principle 5: A Fair and Equitable Compensation Must be Negotiated: Through the LAL o f 1987 i t i s stated that direct negotiation between land owners and the relevant purchasing party (in this case GAM) should ensure a fair and just level o f compensation.

Principle 6: Resettlement Must Take Place as a Development That Ensures That Directly Affected Communities Benefit:

Principle 7: Vulnerable Social Groups Must Be Specifically Catered For: GAM will take any such groups into consideration in the event that they are identified during the consultation and negotiation

Principle 8: Resettlement Must Be Seen As An Upfront Project: GAM will ensure that compensation costs - if any - are built in the overall project budget as an up-front cost, and that the confiscation budget i s ‘ring fenced’.

Principle 9: An independent Monitoring and Grievance Procedure Must Be In Place: GAM will ensure that compensation i s placed under bank accounts in their names in accordance with the LAL o f 1987 (article 16). GAM will identify an individual who will deal with complaints that local people might have regarding the compensation process.

Principle 10: The Developer Will Accept Responsibility For Resettlement and Ensure That “Best Practice” I s Adopted

C. Process for Developing the Subsequent RAP:

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245. The World Bank safeguard pol icy on resettlement (OP 4.12) paragraph G, states: Where large-scale population displacement is unavoidable, a detailed Resettlement Plan, timetable, and budget are required. Resettlement Plans should be built around a development strategy and package aimed at improving or at least restoring the economic base for those relocated.

246. A Land Acquisition PldResett lement Plan will be required in accordance with the World Bank OP 4.12, detailing the manner in which it is proposed the PAPs are to be compensated. Within the framework o f a process o f public consultation and disclosure, the Land Acquisition Plans that wil l be developed by GAM - if needed - will be subject to scrutiny by PAPs, the local authorities and the World Bank. The Land Acquisition Plan shall include a surveylcensus o f a l l those who will be affected by the land acquisition. It is essential that consultative mechanisms are put in place. The levels o f literacy o f the PAPS should be taken into consideration, and if needed, the document wil l be presented to the PAPs in the form o f verbal presentations, to ensure that consultation is as robust as possible.

D. Estimated Population Displacement and Likely Categories of Displacement:

247. Additionally, a Project Management Unit (PMU) has been established, to be in charge o f the management o f the project. This Unit should coordinate with the various GAM departments the implementation o f a l l Solid Waste Management activities and supervise al l technical, fiduciary and environmental project related matters.

248. need might arise when the locations o f the two new transfer stations are determined.

Although the project so far does not require the resettlement o f any people, the

E. Eligibility Criteria for Displaced Persons:

249. resettlement assistance and the associated eligibility criteria for assessing this eligibility.

This section o f the RPF details the types o f people who wil l qualify for

F. Legal Framework:

250. GAM Framework and Authority: GAM has been afforded under Jordanian law the authority to confiscate land for public benefit on the understanding that i t provides fair and just compensation to any PAPs. In doing so GAM must ensure that any Land acquisition i s undertaken in accordance with Decree (12) o f 1987, commonly referred to as the LAL and its amendments. The LAL applies in al l cases o f land acquisition and to al l concerned institutions.

25 1. The implications o f the LAL on specific groups are summarized below.

82

252. Land Owners: The LAL specifies in Ar t i c le 7 that the owner o f the property is the person in whose name the property i s registered at the Land Registry. If the property is not registered, the person seizing the land o n the day o f issuance o f the Council o f Ministers’ Resolution to acquire the land shall, for the purposes o f compensation, be considered the owner. This stipulation does not preclude anyone else from claiming ownership through the courts.

253. Compensation for Improvements and Water Rights: Compensation for farmlands may include separately itemized compensations for features such as walls, greenhouses, wells, water rights, etc. The loss o f water rights also attracts compensation.

254. Crops and Trees: Under the LAL, tree and annual crops are subject to compensation but no guidelines are defined expect that the expropriation shall be in consideration o f a suitable level o f compensation.

255. Amount o f Compensation Payable to Renters: In the event that such individuals are identified, the following compensation wil l be awarded (as required by the LAL) to tenants proportionately as a percentage o f the compensation for the plot. The maxima are: 15% if the Compensation i s for occupation for industrial or commercial purposes, and, 5% if the property is occupied for any other purpose.

256. The LAL does not preclude private agreements between tenants and owners. In conjunction with other laws, a settlement without the agreement o f the renter i s extremely unlikely.

257. Policies of the World Bank and IFC: In addition to the consideration o f the National Legal Framework, the policies o f the World Bank need to be addressed given that the Bank will provide a guarantee to the commercial lenders o f the project. OP 4.12 sets out three underlying pol icy principles:

Involuntary resettlement i s avoided wherever feasible, or minimized, exploring al l viable alternative project designs; Where it i s not feasible to avoid involuntary resettlement, activities are conceived and executed as sustainable development programs, providing sufficient investment resources to enable people adversely affected by the project to share project benefits. Displaced persons are to be meaningfully consulted and have opportunities to participate in the planning and implementing o f resettlement programs affecting them; and Displaced persons should be assisted in their efforts to improve their livelihoods and standards o f living, or at least to restore them, in real terms, to pre-displacement levels or to levels prevailing prior to the beginning o f project implementation, whichever i s higher.

258. The project i s in compliance with OP 4.12 regarding the locations o f the new cells in the landfill, thus minimizing the number o f affected persons whilst also ensuring that there i s no need for resettlement o f households.

83

G. Valuation Methods:

259. steps:

According to the LAL o f 1987, valuation methods wil l include the following

1. Demonstration o f public benefit from the project concerned. 2. Assessment o f replacement values o f confiscated land. 3. Establishment o f Compensation rates for a l l assets to be confiscated.

H. Entitlement Delivery:

260. Once any compensation amounts have been negotiated and agreed upon, GAM will deliver the compensation to the land owners directly or place it in the Treasury under their names according to the requirements o f the LAL o f 1987 articles 14 and 16D. The officials at GAM or the Directorate o f Land wil l verify the delivery o f the negotiated amount o f compensation.

261. ensure that a l l amounts reach al l intended beneficiaries.

GAM’S land acquisition team will monitor the delivery o f such funds so as to

I. Implementation Process:

262. The fhdamental responsibility for delivery and implementation o f the resettlement actions rests with GAM. Current protocol for the land confiscation process l ies within the LAL o f 1987 and its Amendments. Implementation o f any land acquisition starts with identification o f the required land and i t s owners or PAPs that have any use r ights upon that land. GAM has the responsibility o f announcing the need for such confiscation and identifying the associated public benefit through two dai ly newspapers and i s then required to allow for a period o f 15 days for any responses. The second step i s then the application to the Council o f Min is ters for approval o f any necessary confiscation, which wil l not be given until i t i s proven that such project is for public benefit, agreement on the appropriate level o f compensation with the PAP’S i s achieved, and the capability o f GAM to pay the agreed compensation i s assured. Agreement upon compensation may be achieved through direct negotiation or through the Primary Court o f Jurisdiction. Any agreement made by GAM must be agreed by the Council o f Ministers. GAM, as developer o f the project, i s required to work with local officials to identify the public benefits o f the project as well as agree to the appropriate level o f compensation with the PAPs. Agencies that that could provide assistance in this as necessary include the Ministry o f Finance, Ministry o f Municipalities, Directorate o f Land, Ministry o f Agriculture and Ministry o f Environment.

84

J. Funding Arrangements:

263. The overall responsibility o f implementation o f the confiscation and compensation plan l ies upon GAM, and it should provide funding for compensation as part o f the project financing. Current practice is for GAM to work closely with different government agencies in Jordan to calculate compensation and make sure that such compensation reaches the appropriate parties.

264. GAM will provide both financial as wel l as additional administrational and technical expertise to the confiscation and compensation processes. To this end, GAM will be required to:

Coordinate the implementation o f the confiscation and compensation processes. Ensure that the Guiding Principles are adhered to. Ensure maximum participation o f the PAPs. Obtain sufficient funds to finance just and fair compensation to PAPs. Accept financial responsibility for payment o f compensation to PAPs. Ensure monitoring and evaluation o f the implementation stages and undertaking o f appropriate action to deal with any grievances.

K. Consultation and Participation:

265. The identification o f an appropriate leve l o f compensation requires negotiation and communication with al l PAPs. Consultation with affected communities wil l take place in the form o f visits by the GAM project management team to various individuals identified as being potentially affected by the proposed development. The project should also be advertised in the press to raise public awareness.

266. An integrated program o f consultation was undergone to engage with the general public regarding the construction o f the new cells in the landfill. Similar consultation should take place once the locations o f the two new transfer stations are determined in order to gain a clearer understanding o f the PAPs’ opinions on the proposed projects and to allow them to express any concerns. This can start with house to house meetings with local people in the locations o f the two new transfer stations to explain the nature o f the project and the expected effects and benefits o f the project on the surrounding environment and local peoples. Involved parties can be asked to fill a survey questionnaire form in Arabic language. Illiterate persons can be aided by the consultants and other local literate people from the community to fill in the forms. The survey questionnaire can register the areas o f concern and provide GAM with those that need to be given more extensive consideration. Based on the results o f consultations and such a survey, recommendations can be established for a fair level o f compensation where confiscation o f lands i s unavoidable.

85

L. The Next Steps

267. and implementation o f the RPF.

This section outlines the implementation programme for the preparation, approval

Valuation and Negotiation: Where necessary, GAM will prepare a compensation package for the PAPS. PAPS have the right under LAL to appeal the valuation within 28 days from receipt o f notification o f the valuation from GAM.

Appeal Lodged. If an appeal i s lodged, GAM representatives may seek to negotiate with the affected person. If no agreement is reached the case i s referred to the Compensation Review Board (CRE3) [subject to their agreement to act in this project] .

N o Response. If the person concerned does not respond to the init ial valuation and no further response is obtained within the 28-day period, and provided that reasonable effort i s shown to have been made by GAM to contact the person concerned, the draft compensation offer is referred to the CRB for approval. In this case letters o f notification o f approval o f the compensation will be served.

In the “no response” case, when compensation i s awarded but the entitled person has not been identified, the funds allocated for this particular compensation will be retained within the Ministry o f Finance (MoF) in the project’s name until such a time as the rightful recipient can be identified.

Grievance Redress Procedures (Disputes)

Appeals o f four types may be made at the respective stage.

Appeal Against the Intent to Expropriate. Up to 15 days after publication o f the intent to acquire land in the newspapers, written appeals against the project may be lodged with relevant municipalities.

Appeals on the ground of Disputed Ownership. Disputes may arise over who is entitled to compensation. Lack o f formal documentation over the status o f a piece o f land or tenancy agreement may lead to such disputes, affecting the project implementation. In such cases the further verification o f status o f the entitlement by GAM/the relevant parties will be necessary. This may include consideration o f a variety o f documentation: a) Copies o f land titles, mortgage deeds, revenue receipts or other legal tender showing ownership o f tenancy; In the case o f renter farmed or rented land, documentary evidence o f the understanding between the landowner and the renter, if available; and, for proof o f residence, voters l i s t or any other official record.

86

Appeal against the Compensation Valuation. Appeals against assessed levels o f compensation wil l be heard by the CRB. Article 10 o f the Jordanian LAL states that failure to agree o n levels o f compensation at this stage could lead to the matter being referred to the Courts.

Appeal to the Courts. Once referred to the Courts the acquisition process i s taken out o f the hands o f GAM. The judgment o f the court i s binding on al l parties. However, if the land to be acquired i s not classed as directly affecting a residential unit, either by demolition or in making the property uninhabitable, the acquisition process will proceed on the basis o f the last valuation made by the CRB. Any changes o n that compensation ordered by the Courts will be settled as required.

Monitoring of Confiscation and Compensation

GAM i s responsible for the implementation o f any confiscation and compensation plan. GAM will be responsible for providing financing, for compensation and i ts delivery to the righthl people, and grievances will be properly dealt with. Such financing will be provided for as part o f the project cost. Internal monitoring wil l be conducted through qualified persons within GAM. GAM has a division that deals with the acquisitiodconfiscation o f land associated with GAM projects and whose responsibility i t i s to negotiate appropriate payment for parties affected by GAM projects. External monitoring will be conducted through Wor ld Bank Supervision missions. Both monitoring levels should assure that fair and just compensation was delivered to the right individuals.

Budget The actual amount o f compensation - if needed - i s not yet defined, but wil l as necessary be built into the overall project budget.

87

Annex 11 : Project Preparation and Supervision

Planned Actual PCN review 1211 812007 Init ial PID to PIC 21 1212008 Init ial ISDS to PIC 3/7/2008 Appraisal 611 712008 6/17/2008 Negotiations 08/04/2008 07/15/2008 BoardRVP approval 0913 012008 Planned date o f effectiveness 01/01/2009 Planned date o f mid-term review 06/15/2011 Planned closing date 06/30/2014

Key institutions responsible for preparation o f the project: - Greater Amman Municipality - Ministry o f Planning and International Cooperation

Bank staff and consultants who worked on the project included:

Name Title Unit Jaafar Saadok Friaa Senior Environmental and Solid Waste Specialist M N S S D Rafaello Cervigni Senior Natural Resources Economist M N S S D Dahlia Lotayef Senior Environmental Specialist M N S S D Mokhtar Abdallaoui-Maan Junior Professional Associate M N S S D Lamis Aljounaidi Junior Professional Associate M N S S D Elisabeth Shenvood Financial Sector Specialist M N S S D Knut @sal Senior Social Development Specialist M N S S D Natasha Hafez Program Assistant M N S S D Ahmed Mostafa Technical Specialist ENVCF Kenneth Mwenda Senior Counsel LEGEM

Sherif Anf Environmental Specialist Consultant Hans Willumsen Landfil l Gas and Waste Mgmt Specialist Consultant

Hyacinth Brown Senior Finance Officer LOAFC

Robert Bou Jaoude Senior Financial Management Specialist MNAFM Jad Mazahreh Financial Management Specialist MNAFM

Velayutham Vijayaverl Senior Procurement Specialist MNAPR Andrew Macdonald Public Sector Management Specialist Consultant

George Khoury Haddad Procurement Specialist Consultant

Bank funds expended to date on project preparation: 1. Bank resources: $230,000 2. Trust funds: n/a 3. Total: $230,000

Estimated Approval and Supervision costs: 1 .Remaining costs to approval: 2.Estimated annual supervision cost:

$25,000 $ 90,000

88

Annex 12: Documents in the Project Fi le

A. Final Scoping Report, GAM, February 2008.

B. Final Draft ESIA Report, GAM, May 2008

C. Solid Waste Management Master Plan, GAM, 2000.

D. Country Solid Waste Management Report, World Bank.

E. Capacity Assessment Report: GAM Solid Waste Management Project

F. Feasibility Study, GAM, May 2008

G. Project Design Document

H. Financial Analysis o f Greater Amman Municipality, M a y 2008

I. PID, PAD, ISDS, and al l relevant project correspondence.

89

Annex 13: Statement of Loans and Credits

Difference Between Expected & Actual

Disbursements Original Amount in US$ M

IBRD Cancel. Undisb. Orig. Frm Rev’d Project ID FY Proiect Name P100534 2008 JO - Employer Driven Ski l ls Dev. 7.50 7.48 0.08 P100546 2008 JO - Social Protection Enhancement 4.00 4.00 0.32 PO8 1823 2007 JO - Cultural Heritage, Tourism & Urban Dev. 56.00 55.25 4.53 PO70958 2007 JO - Regional & Local Development 20.00 19.40 5.37 PO91 787 2005 JO - Public Sector Reform Capacity Bldg. 15.00 14.43 0.41 14.74 PO81505 2004 JO - Amman Development Corridor 38.00 12.89 12.89 PO75829 2003 JO - Education Reform for Knowledge Econ.1 120.00 22.27 21.37 Total 260.50 14.43 121.70 59.30

JORDAN STATEMENT OF FC ’s

Held and Disbursed Portfolio In Millions o f U S Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2003 Al-Hikma 10.25 0.00 0.00 0.00 10.25 0.00 0.00 0.00

1997 BTC 1.34 0.00 0.00 0.00 1.34 0.00 0.00 0.00 2001 Boscan Jordan 1 S O 0.00 0.00 0.00 1 S O 0.00 0.00 0.00

2006 CTI 15.00 0.00 0.00 0.00 8.00 0.00 0.00 0.00

Hikma UK 0.00 0.85 0.00 0.00 0.00 0.85 0.00 0.00 1999 MAICO 0.00 0.25 0.00 0.00 0.00 0.00 0.00 0.00

2002 MEREN 4.40 0.60 0.00 0.00 4.40 0.60 0.00 0.00

2000 SGBJ 0.00 2.09 0.00 0.00 0.00 1.06 0.00 0.00

1996 Zara 0.00 2.97 0.00 0.00 0.00 2.97 0.00 0.00

Total portfolio: 32.49 6.76 0.00 0.00 25.49 5.48 0.00 0.00

FY Approval Company

Approvals Pending Commitment

Loan Equity Quasi Partic.

Total pending commitment: 0.00 0.00 0.00 0.00

90

Annex 14: Country at a Glance

JORDAN: JO-AMMAN SOLID WASTE POVERTY and SOCiAL

2006 Population, rnid-year (millions) GNI per capita (Atlas method, US$) GNI (Atlas method, US$ billions)

Average annual growth, 2000-06

Population (w Laborforce (%)

Jo rdan

5.6 2,630

14.7

2.5 3.6

Mos t recent est lmate ( latest year avallabie, 2000-06)

Poverty (% o f population belo wnationalpoverty line) Urban population (x o f to tal popuiatio n) Life expectancyat birth (yaars) Infant mortality(per/OOOlivebirths) Chiidmalnutrition (%ofchildrenunder5J Access to an improvedwatersource (%ofpopulation) Literacy(%ofpopulaflonage ?5+) Gross primaryenmllment (%of school-agepopulation)

Male Female

t4 63 72 22 4

97 91 96 95 96

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1966 1996

GDP (US$ billions) 6 2 6 9 Gmss capital formatiodGDP 205 294 Exports of goods and SeNICeSlGDP 293 529 Gmss domestic savings1GDP -56 4 1 Gross national savingslGDP 6 1 262

Current account balancelGDP Interest payments1GDP Total debtlGDP Total debt selvicelexports Present value of debt1GDP Present value of debtlekports

-0.7 -3.2 3.5 4.9

78.2 a6.6 8.2 8.2

1986-96 1996-06 2005 (average annual gm wth) GDP 2.6 5.1 7 2 GDP per capita -2.1 2.6 4.6 Exports of goods and sewices 5.6 5.7 5.6

M . Eas t Lower- & N o r t h mlddle-

A f r l ca Income

311 2,481

771

16 3.5

57 70 43 15

90 73 1)3 1)B 99

2005

P.7 23.7 5t9

-V.9 6.7

-I70 1.3

60.5 6.5

59.3 79.1

2276 2,037 4,635

0.9 14

47 71 31 U 61

1u 117 n4

a9

2006

14.2 26.0 50.7 -8.0

4.8

-23.0

2006 2006-10

6.4 5.1 3.1 2.7 0.7 1t2

Development diamond' 1 Life expectancy

GN I Gross

capita enrollment per p n m w

Access to improvedmtersource

-Jordan Lo ver-rniddlemcorne gm up

Economic ratios.

Trade

Indebtedness

-Jordan __ Lover-middleincomegmup

~~~~

STRUCTURE o f the ECONOMY

(%of GDP) Agnculture Industry

Services

Household final consumption expenditure General gov't final consumption ekpenditure Imports of goods and services

Manufactunng

(average annual gm Mh) Agriculture Industry

Selvices

Household final consumption expenditure General gov't final consumption ekpenditure Gross capital formation lmporls of goods and sewices

Manufactunng

1986

6 3 24 4 1)6

69 3

79 4 26 2 55 4

1996

38 26 1 Q 6

70 0

76 6 773

78 2

1966.96 1996-06

51 4 1 40 7 7 5 4 0 2 t5 4 2

19 7 8 -42 39 5 6 42 2 6 79

5 3 157 934 947

296 317 82 207 676 656

112 Q O 62 -25

01 02 03 M 05 5 0 6 2 ----Exports -Imports

Note 2006 data are preliminaryestimates This table was produced from the Development Economics LOB database 'Thediamonds showfour keyindicators in thecountry(in bo1d)comparedwthits income-groupaverage If data aremissing,thediamondwiI

be incomplete

91

Jordan

PRICES and GOVERNM ENT F INANCE

Domesfic prices (%change) Consumer prices Implicit GDP deflator

Government finance (%of GDP, includes current grants) Current revenue Current budget balance Overall surplusideficit

T R A D E

(US$ millions) Total exports (fob)

Food and iive animais Phosphates Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export pnce index (2000=?20) Import pnce index(2000=X)O) Terms of trade (2000=X)O)

B A L A N C E of P A Y M E N T S

(US$ millions) Exports of goods and sewices Imports of goods and sewices Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net resewes

M e m o : ReSeNeS including gold (US$ millions) Conversion rat e (DEC, lo cal/US$)

1986

0 0 0 1

37 1 137 -10

1986

731 PO 185

237 2,429

473 377 404

83 83 130

1986

1,803 3,316 -150

- 150 1,6l7

-46

74 -28

MI 0 3

E X T E R N A L DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

1986

4,832 IBRD 28 1 IDA 81

Total debt service IBRD IDA

594 36

1

Compositionof net resourceflows Official grants 455 Official creditors 189 Private creditors 434 Foreign direct investment (net inflows) 23 Portfolio equity(net infiows) 0

World Bank program Commitments Disbursements Pnncipal repayments Net flows Interest payments Net transfers

78 83 16 67 22 45

1996

6 5 2 1

37 3 9 7 2 3

1996

1,878 228 181

750 4,340

979 53 1

1127

IT7 133 10

1996

3,706 5,479 -1,773

-304 1,853

-225

0 2 P

1,957 0 7

1996

7,385 777 67

978 127

3

167 405 -159

16 0

180 169 80 89 49 40

2005

3.5 4.0

33.5 29

-4.6

2005

4,289 490 8 8

1,627 13,466

1,971 2,328 2,292

0 1 156 84

2005

6,591 11,873 -5281

376 2,747

-2.158

2,329 - 8 0

5,517 0.7

2005

7,696 925 45

616 136

3

54 1 -52 145

1,532 60

15 48 76

-28 33 -6 1

2006

6 3 4 8

33 9 4 1

-3 4

2006

4,911 502 158

1802 11941 2,185 2.871 2,509

144 169 85

2006

7,186 0,421

-6,235

273 2,708

-3,254

4,009 -755

6,292 0 7

2006

897 42

P 3 3

0 43 80

-38 46

-83

01 02 03 M 05 ffi

i GDPdeflator +CPI

Export and import levels (US$ mill.)

I Ii0 ' 5000

I I 1 00 01 02 03 04 05 06

I:J Exports BB Imports

G:582 A:925

1 A - IBRD E-Bilaterd 1 B - IDA D - Othw rmltilaterd F- Private C-IMF G-Short-tern

Note This tabiewas producedfrom the Development Economics LDB database 9/28/07

92

Annex 15: Maps

JORDAN: JO-AMMAN SOLID WASTE

93

ZaZarrqaqa

Al-RussiefehAl-Russiefeh

Abu NuseirAbu Nuseir

SweilehSweileh

WWadi adi Al SirAl Sir

Marj al HamamMarj al Hamam

Na'urNa'urSahabSahab

TTo As Salto As Salt

Al Sukhnan Al Sukhnan CampCamp

Al HashimiyahAl Hashimiyah

MahisMahis

Queen AliaQueen AliaInteInterrnationalnational

AirpoAirporrtt

Al JizahAl Jizah

MadabaMadaba

ManjaManja

Al ‘AlAl ‘Al

MubisMubis

EastEastDheybahDheybah

WWestestDheybahDheybah

Hwy

Hwy..

DeserDesertt

Madaba

Madaba

Road

way

Road

way

YYado

udah

Rd.

adou

dah

Rd.

TTo Aqabao Aqaba

AMMANAMMANAMMANAMMAN

ShaterShater

Ain GhazalAin Ghazal

YarmoukYarmouk

Zarqa

Al-Russiefeh

Abu Nuseir

Sweileh

Wadi Al Sir

Marj al Hamam

Na'urSahab

To Qasr Al Kharana

To As Salt

Al Sukhnan Camp

Al Hashimiyah

Mahis

Queen AliaInternational

Airport

Al Jizah

Madaba

Manja

Al ‘Al

Mubis

EastDheybah

WestDheybah

Madounah Road

Hwy.

Desert

Madaba

Road

way

Jara

shH

wy

ZarqaBypass

Yajouz Rd.

Hizam

Rd.

Sahab Rd.

Sahab Hwy.

Yado

udah

Rd.

To Syrian A.R.

To Iraq

To Aqaba

To Dead Sea

AMMANAl Ghabawi

LandfillShater

Ain Ghazal

Yarmouk

Med

iterr

anea

n Se

a Lake Tiberias

Jord

anRi

ver

DeadSea

Gul

f of A

qaba

Amman

Jerash

Ma’an

At Tafilah

Al Karak

Az Zarqa

Irbid

Ajlun

Aqaba

JORDAN

Madaba- -

Al Mafraq

Area of map

As Salt

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 2 4 6 8

KILOMETERS

SEPTEMBER 2008

IBRD 36439

JORDAN

AMMAN SOLID WASTE MANAGEMENT PROJECT

AL GHABAWI LANDFILL

EXISTING TRANSFER STATIONS

GREATER AMMAN MUNICIPALITY BOUNDARY

DISTRICT BOUNDARIES

MAIN ROADS

SECONDARY ROADS