Document of The World Bank FOR OFFICIAL USE ONLY Report No 39866-ET PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 65.6 MILLION (US$lOO MILLIONEQUIVALENT) TO THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR AN IRRIGATION AND DRAINAGE PROJECT May 17,2007 Environment and Socially Sustainable DevelopmentDepartment Eastern Africa Africa Region This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of The World Bank
FOR OFFICIAL USE ONLY
Report N o 39866-ET
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 65.6 MILLION
(US$lOO MILLION EQUIVALENT)
TO THE
FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
FOR AN
IRRIGATION AND DRAINAGE PROJECT
May 17,2007
Environment and Socially Sustainable Development Department Eastern Africa 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 January 2007)
Currency Unit = Birr U S $ l = Birr8.7
SDR = US1.52493 U S $ = SDR0.65577
FISCAL YEAR January 1 - December 3 1
ABBREVIATIONS AND ACRONYMS
ADLI Agricultural Development Led Industrialization APL Adaptable Programmatic Lending ASDF Advisory Service Development Fund AWP Annual Work Program BOARD BoFED BoWRD BoCP Bureau o f Cooperative Promotion BoTI CAS Country Assistance Strategy CEM Country Economic Memorandum CIDA Canadian International Development Agency CPAR Country Procurement Assessment Report CQS Consultants Qualifications DA Development Agent EA Environmental Assessment EIAR Ethiopian Institute o f Agricultural Research EIRR Economic Internal Rate o f Return EMCP Expenditure Management and Control sub-program EMP Environmental Management Plan ENCOM Eastern N i l e Council o f Ministers ENSAP Eastern N i l e Subsidiary Action Program ENSAPT Eastern N i l e Subsidiary Action Program Team ENTRO Eastern N i l e Technical Regional Office EPA Environmental Protection Authority EPLAUA Environmental Protection, Land Administration and Use Authority ESIA Environmental and Social Institutional Assessment ESMF Environmental and Social Management Framework ETB Ethiopia Birr FA Fiduciary Assessment FASF Farmers’ Advisory Service Fund FDI Foreign Direct Investment FREG Farmer Research-Extension Group
Bureau o f Agriculture and Rural Development Bureau o f Finance and Economic Development Bureau o f Water Resources Development
Bureau o f Trade and Industry
FOR OFFICIAL USE ONLY
FTC GDP GoE H a HICES IA I C ICAS I C B IDA IFPRI IFR IWMI I&D LCS M&E MDG M I S M o A R D MoFED M o W R MTR NBI NBTF N C B NGO NPC NPSC O&M PASDEP PDO P F M PJM PPA PPD PPP
QCBS RAP RARI RCBP RPC RPF RPSC S A P SBD SDPRP S I L SME SMI SSA su TA
Q m a
Farmers Training Center Gross Domestic Product Government o f Ethiopia Hectare Household Income Consumption and Expenditure Survey Implementing Agencies Individual Consultant Interim Country Assistance Strategy International Competitive Bidding International Development Association International Food Policy Research Institute Interim Unaudited Financial Report International Water Management Institute Irrigation and Drainage Least Cost Selection Monitoring and Evaluation Millennium Development Goal Management Information System Ministry o f Agriculture and Rural Development Ministry o f Finance and Eonomic Development Ministry o f Water Resources Mid-Term Review Ni le Basin Initiative N i l e Basin Trust Fund National Competitive Bidding Non-government Organization National Project Coordinator National Project Steering Committee Operation and Maintenance Plan for Accelerated and Sustained Development to End Poverty Project Development Objective Public Financial Management Project Implementation Manual Public Procurement Agency Planning and Programming Department Public Private Partnership Quintal Per Hectare Quality and Cost Based Selection Resettlement Action Plan Regional Agricultural Research Institute Rural Capacity Building Project Regional Project Coordinator Resettlement Policy Framework Regional Project Steering Committee Subsidiary Action Program Standard Bidding Document Sustainable Development and Poverty Reduction Program Specific Investment Loan Small and Medium Enterprise Small and Medium Industry Sub-Saharan A f i c a Support Unit Technical Assistance
,
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.
TBIWRDP Tana Beles Integrated Water Resources Development Project TOR U S B R VAT WB WOARD WIT WUG F M S
Terms o f Reference United States Bureau o f Reclamation Value Added Tax Wor ld Bank Water Resources Development, Agriculture and Rural Development Woreda Project Implementation Team Water Users Group Financial Management System
Vice President: Obiageli Ezekwesili Country Director: Ishac D iwan
Sector Manager: Karen Mcconnell Brooks Task Team Leader: IJsbrand de Jong
Ethiopia Irrigation and Drainage Project
TABLE OF CONTENTS
A . STRATEGIC CONTEXT AND RATIONALE .................................................................... 4
Country and Sector Issues .......................................................................................................................... 4
Rationale for Bank involvement. relation to Country Assistance Strategy ............................................ 8
Higher level objectives to which the project i s contributing .................................................................... 9
B . PROJECT DESCRIPTION ............................................................................................ 10
Social Analysis ............................................................................................................................................ 29
Source BORROWEWRECIPIENT INTERNATIONAL DEVELOPMENT
IRRIGATION AND DRAINAGE PROJECT
Local Foreign Total 7.10 0.00 7.10
18.60 8 1.40 100.00
PROJECT APPRAISAL DOCUMENT
ASSOCIATION LOCAL COMMUNITIES
AFRICA
2.90 0.00 2.90
AFTSZ
Date: May 17, 2007 Country Director: Ishac Diwan Sector ManagedDirector: Karen BrookdMichel Worrnser Project ID: PO92353 Lending Instrument: Specific Investment Loan
Team Leader: IJsbrand H. de Jong Sectors: Irrigation and drainage (80%); Agro- industry (20%) Themes: Water resource management (P); Other trade and integration (S) Environmental screening category: Full Assessment
Project Financing Data [ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ 3 Other:
Total: I 28.60 I 81.40 I 110.00 I Borrower: Federal Democratic Republic o f Ethiopia Addis Ababa, Ethiopia
Responsible Agency: Ministry o f Water Resources PO Box 5744 Addis Ababa, Ethiopia Tel: +251 11 663690916625515 Fax: +251 11 6630459 e-mail: hayalsew@,:yahoo.com
Project implementation period: Start November 1,2007 Expected effectiveness date: November 1 , 2007 ExDected closing. date: October 3 1. 201 5
End: October 3 1,2015
[ ]Yes [XI N o Does the project depart f rom the CAS in content or other significant respects? Re$ PAD A.3
[ ]Yes [XI N o [ ]Yes [ 1 N o [ ]Yes [XI N o
[XIYes [I N o
Does the project require any exceptions f rom Bank policies? Re$ PAD D. 7
I s approval for any policy exception sought f rom the Board? Does the project include any critical risks rated “substantial” or “high”? Re$ PAD C.5
Have these been approved by Bank management?
[XIYes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7
Project development objective: Re$ PAD B.2, Technical Annex 3
The development objective o f the project i s to sustainably increase agricultural output and productivity in project areas.
Project description Re$ PAD B.3, Technical Annex 4
The proposed project consists o f three technical components covering: (i) Irrigation Development; (ii) Agricultural and Market Development; and (iii) Irrigation Management. The fourth component i s Project Management.
Component 1: Irrigation Development. The objective o f this component i s to sustainably develop about 20,000 hectares o f ground and surface water infrastructure and ascertain future irrigation potential in 80,000 hectares. The component wi l l directly benefit participating households, expected to number approximately 12,600.
Component 2: Agricultural and Market Development. The objective o f this component i s to promote sustainable intensification and commercialization o f agriculture on the irrigation schemes developed by the project.
Component 3: Irrigation ‘Management. The objective o f this component i s to enhance the efficiency and the financial sustainability o f irrigation infrastructure intended for implementation and future study. Doing so will help ensure that investments in irrigation infrastructure under component one will be sustainable.
Component 4: Project Management. The objective o f this component i s to manage resources in accordance with the project‘s objectives and procedures.
Which safeguard policies are triggered, if any? Re$ PAD 0.6, Technical Annex 10
2
The following safeguard policies are triggered:
Environmental Assessment (OP 4.01) Natural Habitats (OP 4.04) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.11) Involuntary Resettlement (OP 4.12) Safety o f Dams (4.37) Projects on International Waterways (OP 7.50)
Significant, non-standard conditions, if any, for: Re$ PAD C. 6
Credit Effectiveness:
0
0
0
0
Adoption o f a Project Implementation Manual in form and substance satisfactory to the Association; Appointment o f a Regional Project Coordinator with experience, qualifications and terms o f reference satisfactory to the Association; Recruitment for the MoWR and BoARD, each, a procurement specialist with experience, qualifications and terms o f reference satisfactory to the Association; and Recruitment for the MoWR, BoWRD and BoARD each an additional accountant with experience, qualifications and terms o f reference satisfactory to the Association.
3
A. STRATEGIC CONTEXT AND RATIONALE
Country and Sector Issues
Background
Macro-economy
1. Economic growth performance over the past two years has been strong and broad-based. After a significant drought-induced contraction, Ethiopia’s economy rebounded in 2003/04 and 2004/05 with rapid growth driven by strong agricultural performance, Real Gross Domestic Product (GDP) growth was 10 percent in 2005/06 and has increased to 11 percent in 2006/07.
2. Despite the generally positive performance o f recent years, the Ethiopian economy remains vulnerable to a variety o f shocks (e.g., o i l prices, weather, etc.). The Household Income Consumption and Expenditure Survey (HICES) update that i s currently under preparation i s expected to show a significant decline in poverty. The overall progress in reducing poverty since 1992, however, remains less than that required to meet the Millennium Development Goal (MDG) o f halving poverty by 2015, due to weak and highly variable agricultural productivity, accompanied by the rapid expansion in the country’s population.
3. The Government o f Ethiopia (GoE) has recently finalized the Plan for Accelerated and Sustained Development to End Poverty (PASDEP). PASDEP reflects a consensus that pro-poor growth i s a fundamental priority. The program i s centered around eight elements: (i) commercialization o f agriculture and promoting rapid non-farm private sector growth; (ii) geographical differentiation; (iii) population; (iv) gender; (v) infrastructure; (vi) risk management and vulnerability; (vii) scaling up service delivery; and (viii) employment. PASDEP advocates continuing to pursue the strategy o f Agricultural Development Led Industrialization (ADLI), but with important enhancements to capture the private initiative o f farmers and support the shifts to diversification and commercialization o f agriculture. A private sector push, especially on exports, i s advocated to create jobs and reduce foreign exchange constraints.
Agriculture
4. Rainfed agriculture remains the predominant source o f livelihood for Ethiopians, and income levels are both low and highly variable due to climatic shocks. The primary asset to cushion weather shocks i s livestock (72 percent o f households own cattle), but the ownership o f other physical assets i s extremely low. Agriculture commodities (coffee, oilseeds, chat, horticulture, floriculture) contribute ha l f o f GDP, 90 percent o f exports, and 80 percent o f total employment.
5. Productivity and input use in Ethiopia’s agriculture are low. From 2003/04 - 2005/06, average yields are 13.5 quintal per hectare (qha) for cereals, 9.8 q h a for pulses and 6.0 q h a for oilseeds. Although fertilizer consumption has increased five-fold over the past 10 years, i t s use o f 30 kg per ha o f arable land remains low compared to other parts o f Sub-Saharan Afiican (SSA), and profitability o f fertilizer use i s depressed by poor control o f water and scarcity o f improved seed. Cropping intensities are as low as 0.5, which corresponds to one crop every two years. Extension and research are constrained by turnover o f qualified staff, and by weak links between the two.
6. Agricultural growth has been based primarily on area expansion, and labor productivity i s amongst the lowest in SSA. Extensive cultivation has led to widespread deforestation, massive soil loss, sedimentation and flooding. Agriculture suffers from frequent periods o f drought. Area expansion based on population growth also has limited impact on per capita poverty levels, as confirmed by the poverty reduction
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performance o f the economy. Between FY95-FY99, rural poverty declined marginally from 47 percent to 45 percent.
7. Largely for historical reasons, Ethiopia’s vast water resources have not been effectively developed. Rainfall variability provides a disincentive for farmers to use productivity enhancing inputs, and constrains market access because o f unreliable supply. Recent estimates using a multi-market, spatial model o f the Ethiopian economy indicate the devastating impact o f a single drought (poverty rate increases by 12-14 percent), but also that hydrological variability reduces economic growth even if the variability i s less than that resulting in drought. Policies and investments should be designed to smooth overall variability, rather than focusing exclusively on mitigating the impact o f droughts. The analysis also indicates that cost-benefit analyses o f irrigation and drainage investments that ignore rainfall variability significantly underestimate returns. Incorporating rainfall variability in the projection o f an irrigation investment’s impact on GDP growth more than doubles the estimated returns relative to assuming either constant rainfall or a single drought event (World Bank, 2005).
8. The government’s MDG strategy calls for a rapid scaling up o f existing irrigation development plans. According to the MDG needs assessment, the plan for irrigation development i s 717,400 ha, o f which about 381,000 would be small scale, while medium and large scale investments would cover 336,400 hectares. The total estimated cost for study, design and construction o f the expanded area was estimated at US$11,470 million.
9. The Irrigation and Drainage (I&D) project will develop irrigation on about 20,000 hectares o f land in the Megech and Ribb commands o f the Lake Tana sub-basin’. Currently, these areas are mostly cultivated by subsistence-oriented smallholder farmers practicing rainfed agriculture with average farm sizes o f about 1 hectare. Production focuses on cereals ( te8 rice, sorghum, maize, barley, and wheat), oilseeds (niger seed) and livestock. Although the area i s within the high agricultural potential regions o f the country, agricultural productivity remains low. Figures for agricultural productivity, incomes and incidence o f poverty within the specific target area o f the project are not yet available, but are believed to be consistent with the average o f the Amhara Region as a whole. According to the Amhara Bureau o f Finance and Economic Development (BoFED) Statistics, rural incomes within the Region were US$91 per capita in 1999, productivity o f major cereal crops i s around 990 kg per hectare and 43 percent o f the rural population lives under the national poverty line.
Irrigation
10. Ethiopia’s irrigation potential has been estimated at up to 3.7 mil l ion hectares, o f which up to 2.2m hectares are located in the Ethiopia Nile Basin. Total area under irrigation i s estimated at 197,000 ha, o f which only 30,000 hectares are located inside the N i l e Basin. Small-scale irrigation schemes (over 63,500 ha) account for less than half o f this area. Large-scale irrigation (over 8 1,000 ha) i s concentrated in the Awash valley and includes centrally managed state farms for commercial sugarcane and cotton production.
1 1. Actual irrigation development represents 5 percent o f potential, and less than 0.6 percent o f crop land. Irrigation accounts for 3 percent o f food production. There are four categories o f irrigation schemes in Ethiopia. These include traditional schemes, modern communal schemes, public schemes and private commercial schemes.
12. The Government o f Ethiopia’s policy towards irrigation management and development has been outlined in a number o f recent documents. The Government’s objectives are outlined in the Water
A final estimate o f costs and acreage will be available at the time o f completion o f the feasibility study.
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Resources Management Policy (1999). Conservation and management o f water resources i s carried out by the Ministry o f Water Resources (MoWR). Legislation on water resources utilization and management has been enacted. A water code that regulates licensing, fees establishment, charges for urban and irrigation water supply and pollution control has been prepared but has not yet been enacted.
13. The objective o f the National Water Strategy (2001) i s to translate the Water Resources Management Policy into action by defining a set o f medium to long-term measures or action plans. These have been identified in the field o f general water resources, hydropower development, water supply and sanitation and irrigation development. The World Bank has provided support to the MoWR for the completion o f the National Irrigation Strategy as part o f the overall National Water Strategy. The Water Resources Development Strategy (2002-201 6) envisages the development o f over 260,000 ha o f irrigation in small-, medium- and large-scale schemes. T h i s i s an increase o f 135 percent above current levels, at a total cost o f US$1.7 billion. The growth rate in irrigated land i s planned to accelerate over the time period, from 4.5 percent in the short term, to 5.5 percent in the medium term, and 6.5 percent in the long term. The recently completed PASDEP proposes carrying out pre-feasibility, feasibility and detailed design studies, and construction o f medium and large scale irrigation.
14. Planning from a macro perspective and attracting private sector partners will be critical for the success o f large-scale irrigation projects. Large scale irrigation schemes are costly, and reaching sustainability take years. Achieving the ambitious targets would depend on additional external assistance as well as innovative solutions to reduce costs and bring in the private sector-through concessions; build, operate, and transfer arrangements, risk guarantees and partnerships. Institutional capacity has to be built up front. Complementary interventions to improve input supply provide appropriate extension and marketing services, and better market access will be critical.
15. Irrigation, drainage and water development projects have a significant potential for private sector involvement. The Tana Beles area, for example, i s suitable for growing industrial crops that have considerable export potential. There i s also a possibility o f groundwater availability in these areas (something which the private sector i s more inclined to favor due to the associated reliability o f supply). Complementary investments in communications and roads, and upgraded international airports, would be important. For example, the recent value chain analysis for the cotton sector found that an irrigation investment strategy could reduce the cost o f cotton produced by over 45 percent (World Bank 2006). There i s also scope for private sector involvement in irrigation management, provided that, among others, adequate guarantees are provided.
16. Despite high potential for upscaling and significant impact on poverty, irrigation development carries comparative high development costs. In the proposed project, these amount to slightly over US$5,100 per beneficiary or US$3,500 per hectare (hardware only). However, ample empirical evidence suggests that the benefits o f irrigation are not only captured by those who benefit directly from a more reliable access o f water. For example, following reforms in the early nineties, overall paddy production in the 80,000 hectares irrigation scheme Office du Niger (Mali) increased by a factor 5.8. Over the same 15 year period, per person production went up by a factor 1.7, suggesting that the increased output benefited more than the direct beneficiaries. Indeed, over the same period, population increased by a factor 3.5 and the Office du Niger is, after Bamako, the most important immigration area in Mali.
17. Multiplier effects o f agricultural intensification can be significant. In SSA, the International Food Policy Research Insti tute (IFPRI) estimates that every additional dollar o f farm income increases total household income by between US$1.96 (Niger) and US$2.88 (Burkina Faso) (Delgado et al, 1998). IFPRI (2003) attributes lower multipliers in SSA to low per capita incomes, poor infrastructure, and farming technologies that required few purchased inputs - in other words to a less developed agriculture sector. Evidence from China shows a strong positive effect o f irrigation on incomes and output, with a
6
disproportionately high welfare benefit to poor farmers (Huang et al., 2006). A recent study by the International Water Management Inst i tute (IWMI) (2005) o f six Asian countries found that irrigation significantly reduces income poverty. Datt and Ravallion (1 997) found that higher initial irrigation intensity, higher literacy rates, and lower initial infant mortality all contributed to higher long-term rates o f poverty reduction in rural areas. Haggblade and Hazel1 (1989) found that irrigated regions dominated by medium sized farms and modem input-intensive farming systems generate the largest multipliers between agricultural production and income. Multipliers are smaller in rainfed farming systems, and in regions dominated by very small farms or large estates. Recent analytical work (World Bank, 2005) asserts that increased agricultural productivity o f in particular cereals has a significant impact on poverty reduction through consumption and production linkages.
Nile Basin Initiative
18. Ethiopia’s current emphasis on expanded investment in irrigation has benefited from achievements in recent years under the N i l e Basin Initiative (NBI). The Bank has been actively engaged in supporting the Ni le Basin Initiative. The NBI was formally launched in February 1999 by the Council o f Ministers o f Water Affairs o f the N i le Basin States. The Initiative includes all N i l e countries and provides an agreed basin-wide framework to fight poverty and promote socio-economic development in the region. The Initiative i s guided by a Shared Vision “to achieve sustainable socio-economic development through the equitable utilization of; and benej2 from, the common Nile Basin water resources”. The N i l e countries seek to realize their Shared Vision among others through a Subsidiary Action Program ( S A P ) , comprising sub-basin projects.
19. The Eastern N i l e Subsidiary Action Program (ENSAP), which includes the countries o f Egypt, Ethiopia, and Sudan, seeks to initiate a regional, integrated, multi-purpose program through a first set o f investments. The Eastern Ni le riparians have identified sub-projects in the areas o f integrated water resources management, flood management, power generation and interconnection, watershed management, and irrigation and drainage.
20. The I&D project has evolved from national work and a series o f regional meetings. The Eastern N i l e Council o f Ministers (ENCOM) decided in March 2001 that funding should be sought to advance studies o f promising irrigation and drainage sites to feasibility and design level. In October 2004, ENCOM decided to fast-track the preparation o f the I&D project.
2 1. In the Blue Ni le (Abbay) sub-basin, there are very significant opportunities for hydropower (primarily about 6,500 MW installed capacity identified at Karadobi, Mabil, Mendaia and Border in the Blue Ni le gorge, in addition to smaller possibilities in the tributaries) and about 400,000 ha o f irrigation (primarily in the Lake Tana basin and i t s tributaries such as Ribb, Megech, Gilgil Abbay and Gumera, Beles, as well as the Blue N i l e tributaries such as Anger, Didessa, Dinder, Rahad, etc.). T h i s sub-basin offers multipurpose opportunities that are significant for Ethiopia as well as for the entire Eastern Nile, providing possible flood management, low-flow augmentation, sediment management, evaporation savings, and hydropower, irrigation and navigation benefits in Sudan and Egypt. All these options are major undertakings and need to be studied in greater detail. The proposed I&D project assists in this endeavor by helping to clarify the decision calculus for investment in irrigation, including environmental, economic, and social dimensions, and applying that calculus to specific areas to be financed. The need for such an explicit decision process and tools to manage it arises because agreements reached under the Nile Basin Initiative have allowed for expansion in irrigation in Ethiopia at a pace and scale that i s unprecedented in recent history.
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Poverty Reduction Strategy Framework
22. Ethiopia’s PASDEP provides a strategic framework for poverty reduction from 2005/06 - 2009/10. PASDEP reflects new thinking on growth driven by the private sector and diversification and commercialization of small farms, and it i s broadly consistent with i ts predecessor, the Sustainable Development and Poverty Reduction Program (SDPRP). Accelerated growth i s at the core o f PASDEP.
23. Ethiopia will continue to pursue pro-poor growth, with a major emphasis on agriculture. Promotion o f rainwater harvesting and irrigation, and enhancing the productivity o f land and labor are identified as key interventions. Export growth i s pursued through production o f high value agricultural products and through the strengthening o f the private sector.
24. The high cost o f large scale irrigation schemes o f $5,000 to $8,000/ha2 and the disappointing history o f past investments in large schemes are major challenges. Irrigation development must, therefore, promote the distribution o f irrigation benefits among as many direct and indirect beneficiaries as possible. For that to happen, it i s important to support the emergence o f forward and backward linkages between irrigated agriculture and markets through private sector investors. The recent ‘rose revolution’ suggests that there are opportunities for expansion o f agribusiness in rural areas, with significant spin-offs in terms o f employment and foreign exchange earnings. Flowers alone generate at least five times more jobs per hectare than cereals. The planned scaling up o f investment in large scale irrigation also provides an opportunity for private investment in both agricultural production and processing.
25. Small-scale farming also creates opportunities for agribusiness development. There are many examples o f constructive partnerships that allow small-scale farmers to participate in higher value markets, especially for exports. Some o f these are emerging in Ethiopia, including out-grower schemes for producing fresh beans for the European market, and contractual arrangements between private sector and farmers to produce haricot beans for the UK. More secure access to land through land certification will help the emergence o f a more flexible land market and land use that favors higher added value per hectare.
Rationale for Bank involvement, relation to Country Assistance Strategy
26. An Interim Country Assistance Strategy (ICAS) was presented to the Board in May 2006. The ICAS sees both governance and growth as the central underpinning o f the Bank’s support to Ethiopia. It reflects the expected thrust o f the PASDEP which translates into support for four inter-related themes:
Deepening Ethiopia ’s ‘core ’ governance program in areas consistent with the Bank’s mandate - public sector reform, decentralization, public financial management and local level accountability and empowerment; Providing basic services for poor people in a fair and accountable way; Fostering free enterprise, in particular strengthening institutions o f governance o f the private sector; Increasing agricultural productivity.
27. Agriculture i s recognized as one o f the main drivers for growth, through an incremental shift from subsistence into small-scale market oriented agriculture. Water management and irrigation are identified as key instruments. The Country Economic Memorandum (CEM) presents an update on the economic challenges facing Ethiopia, and confirms the importance o f expansion o f irrigation and measures to reduce vulnerability and land degradation. The ICAS proposes to increase agricultural productivity by: (i) boosting the role o f rural towns as growth centers and markets for goods and services; (ii) increasing
Ethiopian Social Rehabilitation and Development Fund. Ministry o f Water Resources.
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private sector participation in agriculture; and (iii) strengthening agricultural technology systems; and improving management o f the environment and watersheds. A greater focus on the private sector, incentives for Foreign Direct Investment (FDI) in agriculture and competitive markets would improve the growth orientation, with the main emphasis on building private seed and fertilizer markets and developing small towns and growth corridors in rural areas as centers o f activity and employment.
Higher level objectives to which the project i s contributing
28. The proposed project constitutes a key element o f the Bank’s strategy in Ethiopia, and will contribute to achieving priority objectives o f GoE and World Bank (WB) through increasing agricultural productivity, the fourth thematic pillar o f the ICAS, and hence accelerating growth and reducing rural poverty. More reliable access to water through investment in water management i s a fundamental requirement for the commercialization o f agriculture. Returns to the use o f productivity enhancing inputs (fertilizer, improved seeds, etc.) r ise as supply o f water becomes more reliable. Moreover, farmers can move into higher value products, through satisfying the requirements o f markets, and capturing high seasonal prices. Through intensification and transformation o f agricultural production systems, the project aims to support more inclusive growth that translates into rural poverty reduction.
29. The project will promote a more equitable distribution o f the returns on expensive investments in irrigated agriculture between direct and indirect beneficiaries by supporting mechanisms that capture multiplier benefits. This includes support for: (i) the acceleration o f the existing GoE land certification program; (ii) private investors in agro-processing, marketing, input supply and service provision; (iii) credible, accountable and transparent irrigation management; and (iv) value chain development for produce originating in the irrigation area.
30. The project also aims to support the N i l e Basin Initiative and contribute to improved cooperation between N i l e riparian countries. Investments under the project will show the tangible benefits that accrue to the improved understanding on the part o f the N i l e riparians. All parties benefit from continued commitment to the agreements reached under the NBI, and the project contributes to sustaining that momentum.
3 1. To facilitate this cooperation, the ENSAP aims to “ensure efficient water management and optimal use o f the N i le ’s resources through equitable utilization and causing no significant harm” and to “target poverty eradication and promote economic integration.” An initial program o f ENSAP projects was presented to the international community in 200 1. The Eastern Ni le Technical Regional Office (ENTRO), the f i rst international institution o f the three countries, was launched in 2002. To accelerate the progress of project preparation, ENCOM agreed to launch a set o f simple and non-controversial ‘fast track projects’, to show early results, and to consider the way forward for major, joint, multipurpose development o f the Eastern Ni le.
32. This was to be achieved through cooperative investments that conferred tangible benefits, demonstrated joint action, and realized ‘win-win’ gains for all countries. The Ethiopia Irrigation and Drainage project i s one o f these fast track projects. I t was conceived based on the following decision o f the Eastern Ni le Subsidiary Action Program Team (ENSAPT) in i t s 18th Meeting in Alexandria (Egypt) that “with regard to fast track irrigation and drainage projects, agreement was reached by the EN Countries that up to 100,000 hectares will be studied at feasibility level in each EN country and final design and implementation will follow for about 20,000-30,000 hectares”. The report o f the ENSAPT was endorsed by ENCOM in i t s 19th Meeting in Alexandria (Egypt) on February 15-16,2005.
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B. PROJECT DESCRIPTION
Lending Instrument
33. The proposed lending instrument for this operation would be a Specific Investment Loan (SIL). The implementation period o f the SLL would be eight years (FY08-FY 15), thereby providing the GoE with the time necessary to implement the construction and institutional strengthening agenda. The project duration i s longer than a conventional operation because o f the significant capacity and institutional challenges associated with ensuring the sustainability o f the investments. Because o f the duration o f the project, clear benchmarks for progress in implementation are defined and wil l be assessed during implementation, with corrections in course undertaken as necessary.
34. Total Project cost i s estimated at US$110.0 million, o f which US$lOO.O mil l ion will be financed by the International Development Association (IDA). US$7.1 mil l ion will be financed by the Borrower, and US$2.9 mil l ion contributed by Beneficiaries.
Project Development Objectives and Key Indicators
35. The development objective o f the project i s to sustainably increase agricultural output and productivity in project areas. The expected overall project results include: (i) increase in value added per worker, and (ii) increase in value added per hectare. Details are provided in Annex 3. The project i s expected to be completed over an eight year period, with a closing date on October 3 1,2015.
36. Project implementation over the eight year period i s justified because o f the challenges involved in transforming rainfed subsistence agriculture into irrigated commercial agriculture. Implementation i s divided into three stages: (i) mobilization: social sensitization, support to agricultural advisory services provision, and completion o f feasibility and detailed design studies; (ii) consolidation: establishment o f Water Users Groups (WUGs), development o f irrigation infrastructure and strengthening o f market initiatives; and (iii) upscaling: upscaling o f WUGs, sustainable operation o f irrigation schemes, and improving agricultural production.
Project Components
37. The proposed project comprises three technical components: (i) Irrigation Development; (ii) Agricultural and Market Development; and (iii) Irrigation Management. The fourth component i s Project Management. The project wil l support the Lake Tana growth pole and will closely work together with other operations such as the Tana Beles project (under preparation) and the Rural Capacity Building Project. A more detailed description o f the components and activities i s provided in Annex 4.
Component I: Irrigation Development (US$75.0 million total, including IDA funding of US$70.0 million and Borrower financing of US$5.0 million)
38. The objective o f this component i s to develop sustainably about 20,000 hectares of ground and surface water infrastructure and ascertain future irrigation potential in 80,000 hectares. The component will directly benefit participating households, expected to number 12,600. In support o f capturing the multiplier benefits o f irrigation investments, the component will accelerate the existing GoE land certification program in the project area.
39. The component will finalize feasibility and detailed design studies, prepare bidding documents and launch tenders for construction and construction supervision, and develop irrigation infrastructure
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covering about 20,000 hectares3. The component will also conduct feasibility studies into 80,000 hectares o f irrigated agriculture and will conduct a number o f additional studies. Finally, the component will promote low-cost irrigation technologies in low-lying areas around Lake Tana. Specifically, the project will finance the following sub-components:
Trigger Feasibilitystudy o f Ribb dam indicates i ts non- viability. Delay in tendering for construction.
(1)
(ii)
Risk Timing Mitigation measures for I&D Project Small Ju107 0 Area under Megech will be expanded, and Ribb area will not be
developed.
Small Feb 08 0 If the delay goes beyond January 2009 when the irrigation system design under the I&D project i s expected to be completed, the start o f the procurement o f construction o f the irrigation distribution network w i l l be shifted to accommodate this delay.
Sub-component 1. I - Irrigation Investments. Development o f about 20,000 hectares o f irrigation and appurtenant infrastructure, implementation o f works and construction supervision. In addition, the project will complete technical feasibility and detailed design studies on 30,000 hectares. Two sites have been retained for development4: Megech and Ribb. The component will also promote existing low-cost individual irrigation technologies, and will pilot groundwater development around lake Tana, in accordance with the recommendations o f a study that i s currently underway. All studies, construction and construction supervision will be outsourced to the private sector. Beneficiaries will be expected to contribute to overall investment costs. Sub-component 1.2 - Technical Assistance. The project will prepare feasibility studies for up to 80,000 hectares o f new irrigation development in selected sites, including Anger, Upper Beles, Negesso and Megech. Anger will be taken up to design level, i f the feasibility study confirms i t s viability. A number o f additional studies will be conducted, including review o f existing irrigation legislation, support for the completion o f an irrigation strategy and establishment o f a national irrigation maintenance fund for the maintenance o f public irrigation infrastructure. Studies also include ways to improve the efficient use o f irrigation water, and the preparation o f an institutional framework for large- and medium-scale irrigation development and management.
(iii) Sub-component 1.3 - Environmental and Social Assessments. The project will provide support to the GoE in conducting environmental and social assessments o f investments in hydraulic infrastructure to help ensure that these meet internationally accepted standards. The assistance will not be limited to infrastructure immediately associated with the project, but will be extended to other hydraulic infrastructure, including proposed storage works on the Gumara, Megech and other rivers in the lake Tana sub-basin. The sub-component will finance environmental and social impact assessments and the resettlement action plans, as well as implementation o f the recommendations o f the assessments in the project area. Finally, the sub-component will support and accelerate implementation o f the existing GoE program o f land certification in the project areas.
40. Ribb dam i s currently being studied at feasibility level. Investments in irrigation in Ribb depend on the construction o f Ribb dam by the GoE. Wh i le the GoE i s committed to completing construction o f the dam, delays in dam construction will have a direct impact on project performance. The project proposes to mitigate theses r isks by adopting a high level o f flexibility in implementation, and making sure that decisions concerning irrigation development are aligned with progress in dam construction. The table below identifies the following key triggers and mitigation measures:
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completion. 7 dam mid-way.
Sep 09
Oct 07 -Sep 09
0 Contracts for construction o f the irrigation distribution network wil l be written contingent on benchmarks for progress on the dam.
0 If the delay i s likely to be in terms o f years, Megech scaling up w i l l be considered. A decision to this effect w i l l be taken by January, 2009. Contracts for the irrigation distribution network w i l l be written so that construction o f the network i s commensurate wi th progress on the dam, wi th cancellation or suspension clauses in case o f interruption o f work on the dam. GOE will aff irm financial commitment to the dam as condition o f effectiveness.
0 Annual allocations for the dam w i l l be disclosed as part o f annual work planning process for the project.
0 In case the dam i s abandoned early in the project, additional area in Megech w i l l be developed.
0 Decision to be taken at the time o f the f i rst mid-term review.
41. In addition, construction o f Ribb dam raises a number o f safeguard issues that need to be addressed in a comprehensive way. The project will do so by raising these issues for the irrigation scheme and dam jointly, even though they are financed separately. T h i s i s further outlined in Annex 10.
42. Indicators include: (i) irrigated land as a percentage o f crop land at the end o f the project; (ii) acreage covered by completed irrigation infrastructure in Megech and Ribb schemes; (iii) number o f sites dri l led and improved pumping technology adopted in and outside Megech and Ribb command areas, (iv) acreage covered by feasibility studies completed in Anger, Megech, Upper Beles, and Negesso; (v) the livelihoods and standards o f living o f persons resettled into and within the irrigation command areas; and (vi) the acreage o f important river and wetland habitats within and adjacent t o the command areas. Intermediate outcomes at project completion include: (i) an increase o f the irrigated land as a percentage o f crop land at the end o f the project f rom 0.6 percent to 0.7 percent; (ii) 20,000 hectares o f completed irrigation infrastructure in Megech (Seraba) and Ribb schemes; (iii) 100 sites dri l led and improved pumping technology adopted in and outside Megech and Ribb command areas; (iv) 90,000 hectares o f feasibility studies completed in Anger, Megech, Upper Beles, and Negesso; (v) livelihoods and standards o f living o f persons resettled into and within the irrigation command areas at least equal to the pre-project situation; and (vi) acreage o f important river and wetland habitats within and adjacent t o the command areas equal to the pre-project situation.
Component 2: Agricultural and Market Development (US$I 7.0 million total, including IDA funding of US$13.5 million, Borrower financing of US$O.6 million and a Beneficiaries’ contribution of US$2.9 million)
43. The objective o f this component i s to promote sustainable intensijkation and commercialization of agriculture on the irrigation schemes developed by theproject. The component will contribute to the project’s development objective by helping establish forward and backward linkages between irrigated agriculture and markets so that multiplier effects o f irrigation development are being captured by direct and indirect beneficiaries. The component will provide resources to assure the delivery o f adaptive research and development (R&D) o n improved production systems and technologies, the delivery o f agricultural advisory services including increased pluralism in service, the strengthening o f research- extension-farmer linkages, and the improvement o f market linkages within the project’s target Woredas (districts) and Kebeles (sub-districts). Activities under this component will be implemented by the regional agricultural bureau and complement the interventions o f the Rural Capacity Building Project (RCBP) in the project’s areas.
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44. Sub-components and activities to be funded are the following:
(i) Sub-component 2.1 - capacity-building for farmers in irrigatedproduction through the delivery o f adaptive R&D and farm management tools that will enable them to take full advantage o f irrigation infrastructure and technologies; Sub-component 2.2 - capacity-building for applied research and extension services to improve the delivery o f relevant agricultural and farm management advice; and Sub-component 2.3 - market and value chain development, as well as a matching grant mechanism, to help commercial entities (SME/SMIs, including farmer owned entities) take advantage o f market opportunities and develop value chains.
(ii)
(iii)
45. Direct beneficiaries from the agricultural and market development component are as follows:
Megech: Ribb Valley: Total Project:
approx. 3,400 farm households and related SME/SMIs approx. 9,200 farm households and related SME/SMIs approx. 12,600 farm households and related SME/SMIs
46. Main outcome indicators are: (i) number o f households adopting irrigated agriculture in the Ribb & Megech command areas; (ii) percentage increase in cropping intensities; (iii) percentage increase in quantities o f major products marketed by farmers in project area; and (iv) percentage increase in net value o f major products marketed by farmers in project area. Expected intermediate outcomes are: (i) 10,000 households adopting irrigated agriculture in the Ribb & Megech command areas; (ii) increase in cropping intensities from 140 currently to 180 percent at the end o f the project; (iii) 50 percent increase in quantities o f major products marketed by farmers in project area; and (iv) 50 percent increase in net value o f major products marketed by farmers in project area. All o f the above outcomes will be contributing to a sustainable increase in farmers’ net revenues in the project’s areas, and will help capture multiplier benefits beyond the irrigation scheme itself .
Component 3: Irrigation Management (US$13.3 million, including IDA funding of US$12.2 million and Borrowerjnancing of US$l. 1 million)
47. The objective o f this component i s to enhance the eflciency and thejnancial sustainability of irrigation infrastructure intended for implementation and future study. Doing so will help ensure that investments in irrigation infrastructure under Component 1 will be sustainable. Accountable and transparent irrigation management will improve the quality o f service delivery, which will have impacts on the distribution o f benefits among direct and indirect beneficiaries. This will be accomplished in two ways: (i) strengthening the capacity o f Water Users Groups to enhance their capacities and to carry out necessary operation and maintenance (O&M) and cost recovery functions; and (ii) promoting and implementing a greater role for public-private partnerships in irrigation infrastructure management in order to improve efficiency and operational performance. Fixed per hectare O&M charges will provide additional incentives for farmers to improve added value per hectare.
48. Direct benejciaries from the irrigation management component include those households who farm in the project areas (about 12,600 households in total), s ta f f from M o m , local authorities and irrigation extension staff. Those outside the project area will benefit through opportunities for employment and service delivery. Outcome indicators include: (i) percentage O&M fees collected; (ii) number o f Public, Private, Partnership (PPP) contracts signed; (iii) user satisfaction with irrigation O&M services; and (iv) irrigation efficiencies in the top- and tail-end part o f the scheme. Intermediate results are: (i) 100 percent o f O&M fees collected; (ii) at least two PPP contracts signed; (iii) at least 70 percent user satisfaction; and (iv) irrigation efficiencies in top- and tail-end o f the scheme at least 40 percent.
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49. The component includes the following sub-components:
(i) Sub-component 3.1 - Developing and Strengthening Capacity of Water Users Groups. This will include: (i) implementation o f an intensive program o f stakeholder consultations and dissemination o f information to farmers; (ii) establishment o f legally recognized Water Users Groups (understood to include both Water Users Associations and Water Users Cooperatives - see annex 4); (iii) implementation o f demand-based approaches to system planning and design for Ribb and Megech schemes; and (iv) strengthening capacities o f farmers, WUGs and regional and national irrigation extension staff on issues associated with irrigated agriculture. The project will also provide assistance to MoWR and local authorities to make sure that they play a supporting role in the enforcement o f WUG rules and regulations. Specific attention will be devoted to strengthening the capacities o f regional staff from the MoWR and Bureau o f Water Resources Development ( B o w ) in participatory approaches to irrigation, including WUGs establishment and mobilization, stakeholder involvement in identification, planning and design o f irrigation schemes, and sustainable O&M o f irrigation.
Planning and Operation. T h i s will include advisory and transaction Technical Assistance (TA) to implement the Ribb and Megech transaction models, and identification o f other possible opportunities within the remaining 80,000 hectares o f feasibility study. The sub-component will assess risks associated with each scheme, consult with Government and farmer groups on r i sk allocation, communicate with stakeholder groups, develop legal agreements and bid documents, launch a search program for both foreign and local bidders, and manage the bid and contract negotiations. The costs o f this sub-component will include a provision for the shortfall in O&M cost recovery from water users during the initial years o f scheme operations, and the O&M costs o f primary public irrigation infrastructure.
(ii) Sub-component 3.2 - Promoting the Role of Private Operators in Irrigation Infrastructure
Component 4: Project Management. (US$4.7 million, including I D A funding of US$4.3 million and BorrowerJinancing of US$0.4 million)
50. The objective o f this component i s to manage resources in accordance with the project’s objectives and procedures.
5 1, Outcome indicators include: (i) Incidence o f funds flow, procurement and technical services delivered according to Annual Work Program (AWP) schedule; (ii) Incidence o f financial and project progress reports delivered within one week o f due date; and (iii) number o f studies (ongoing participatory assessments, midterm and terminal evaluations) completed according to Monitoring and Evaluation (M&E) framework. Intermediate outcomes at project completion include: (i) 100 percent incidence o f funds flow, procurement and technical services delivered according to AWP schedule; (ii) 100 percent incidence o f financial and project progress reports delivered within one week o f due date; and (iii) all studies (ongoing participatory assessments, midterm and terminal evaluations) completed according to M&E flamework. The project will finance the following sub-components:
(i) Sub-component 4.1 - Management of the Project. This wil l include: (a) provision o f technical assistance, training, office equipment and vehicles, auditing and evaluation studies, and incremental operating costs in support o f project management; (b) overall project planning, outsourcing o f quality oversight through independent financial and technical audits and evaluation o f project activities; (c) strengthening procurement and financial management capacity at all levels; and (d) preparation and implementation o f a communications strategy in view o f the possibly high exposure o f the investments. Sub-component 4.2 - Establishment of a Monitoring and Evaluation system. Determine project specific performance based Management Information System (MIS) system, based on
(ii)
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baseline survey arrange for data collection and reporting on key performance output and impact indicators, through surveys, participatory assessments and two mid-term and final evaluations.
Lessons Learned and Integrated into the Project Design
52. The design o f the project i s based on lessons drawn from evaluations o f programs and projects in the irrigation sub-sector, both in Ethiopia and globally. Past investment in irrigation in Ethiopia has been on a limited scale and under institutional arrangements different from those intended under the project, and past lessons are accordingly o f somewhat limited applicability.
53. Ethiopia’s experience in large-scale irrigation development and management i s mostly in state enterprises, particularly in the Awash valley, that mainly grow industrial crops such as cotton and sugarcane under public management. Experience o f the private sector in large-scale irrigation i s mixed (see Mekuria 2005). Only few o f the conventional schemes have managed to survive, despite government incentives. In sharp contrast, irrigated floriculture and horticulture around Addis Ababa have grown exponentially over the past few years. The sub-sector now contributes 2.9 percent o f total export (2004 - 05) and employs over 20,000 people. Government provided incentives (tax holidays, subsidized cargo flights) have played an important role in the rapid expansion. New business development approaches are being tested, including the development o f greenhouses that are being leased out to flower producers.
54. Much o f the development o f irrigation has been in small-scale and rainwater harvesting schemes. Experience with small-scale irrigation and rainwater harvesting has been captured in a number o f reports (Amen, 2001; IWMI 2005; Anderson 2005) that show that performance in terms o f productivity and sustainability has been mixed. Wh i le the scale o f these investments l i m i t s the relevance o f lessons learned, it i s clear that the sustainability o f the investments and the ability and willingness o f farmers to take up responsibility for O&M i s a critical issue. An additional challenge i s the requirement to change existing cropping patterns from low-value subsistence to high-value marketable crops, and the need to assist farmers to make this transition successfully.
55. The ADB-funded Koga project provides the most relevant and most recent experience to date in terms o f large-scale irrigation smallholder development in previously rainfed areas. A report entitled “Resolutions for the Issues o f Concern for KDIP Implementation and KDIP Operation” was prepared in December 2006 and identifies, among others, the following issues o f concern:
(i) Community and farmer awareness, including farmer contribution to quaternary infrastructure development and O M communication with farmers needs to start early and should be focused on specific farmer requirements, and not just be a conduit to relay messages from the project to the farmers.
(ii) Capacity strengthening: Training should be on-the-job, and include a broad spectrum o f issues. I t should include farmers, farmers’ trainers, Federal, Regional, Woreda and Kebele Government staff, and M&E.
(iii) Cost recovery of capital investment and O&Mcosts: GoE’s policy requires f i l l cost recovery for capital investment costs. Experience from Koga suggests that even recovery o f O&M costs will provide a significant challenge.
(iv) Land redistribution and involuntary resettlement: Specific proposals need to be prepared and discussed with the farmers as early as possible. Clear and consistent messages need to be disseminated. Costs o f implementing resettlement must be estimated in advance, and included in the financing plan for the investment.
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56. While reducing per beneficiary and per hectare investment costs i s important, lessons learned from irrigation experience elsewhere suggest that the benefits o f irrigation are not only captured by those who are located in close vicinity to the irrigation infrastructure. Multiplier effects o f agricultural intensification can be significant and can push the number o f beneficiaries well beyond those who benefit directly. Irrigation has often acted as an engine for rural growth and agricultural intensification that has created significant employment and that has attracted private service providers in O&M, input supply, agricultural machinery and equipment, finance and marketing.
57. The project i s designed in such a way that multiplier benefits are being captured as much as possible so as to ensure a more equitable distribution o f benefits among beneficiaries, including those who benefit indirectly. This includes the following activities:
(i) Support for land certzjkation to help establish a more flexible land market. This would enable farmers to benefit from irrigation in a number o f additional ways other than through increased production, depending on the specific circumstances o f each individual farmer. Farmers who are less interested in production could lease out the land to more commercial farmers thereby maximizing the value added per hectare to them. It would also assure rights o f intended beneficiaries against the threat o f encroachment and/or dispossession.
(component 2) and service provision (component 3). T h i s would help establish mechanisms for backwards and forward linkages between irrigated agriculture and the broader economy.
(iii) Support for the establishment o f accountable and transparent irrigation management, cost recovery o f O&M and quality service provision so as to make private investments in irrigated agriculture a winning proposition. T h i s will be done through supporting credible mechanisms for enforcement o f agreed irrigation management rules, recovery o f O&M charges, empowerment o f WUGs and M&E o f service delivery through user satisfaction surveys. Per hectare O&M charges wil l provide additional incentives for farmers to maximize returns per hectare, and will further contribute to striking a balance between costs and benefits per beneficiary.
(iv) Support value chain development. The project will promote value chains for produce originating in the irrigation area. T h i s will occur through the availability o f additional produce, and directly through the activities provided under component 2.3. This will lead to significant additional net revenue in the form o f value added to produce, as well as to increased off-farm employment opportunities.
(ii) Support for various kinds ofprivate sector investors in agro-processing, marketing, input supply
58. The cost effectiveness o f irrigation will depend on smallholders’ ability to adopt improved technologies, diversify into new products in accordance with market conditions, and improve on-farm management o f water resources. Component 2 o f the project will therefore support: (i) agricultural research and advisory services that promote affordable irrigation and agricultural technologies as well as greater market orientation o f farmers (in conjunction with the interventions supported under the rural capacity building project); and (ii) developmentlstrengthening o f markets for selected products. The project will thus seek to contribute directly to improved productivity on smallholder farms, diversification o f agricultural production within target areas (towards marketable products), and improved on-farm management o f water.
59. Reasons for the failure o f some o f the irrigation investments identified by the different studies are lack o f market access; lack o f access to extension services and input supply; and weak capacity o f farmers and WUGs. The conditions o f success identified by these same studies include the following:
(i) An integrated approach that contributes to increased productivity and incomes in irrigation schemes, improves the provision o f agricultural extension and inputs, promotes a better access to
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markets and actively supports emergence o f a private sector. Markets need to be identified at an early stage.
(ii) An unambiguous institutional framework with clear responsibilities in accordance with policies such as: (i) decentralization and legislation for farmers and their groups; (ii) decentralized government services; and (iii) agencies and private operators.
(iii) An approach that emphasizes capacity strengthening o f al l stakeholders to help them play their respective roles and responsibilities, and to transition f rom subsistence-based rainfed agriculture to irrigated commercial agriculture.
(iv) A participatory approach, coordinated decisions and respect for commitments, adequate resources and capacities, and full participation o f stakeholders in decision-making, Incentives and mechanisms wil l be in place to encourage appropriate behavior and respect for commitments made, and there will be interfaces for cooperation and dialogue in accordance with decentralization policies.
services. Involvement o f the private sector will need to be done o n the basis o f adequate risk sharing between stakeholders.
(v) Involvement, where possible, ofprivate sector providers of irrigation and related support
60. Global experience in implementing the above agenda provides important lessons for the duration o f the proposed project. Establishment o f WUGs, capacity strengthening o f farmers and WUGs so as to make them fully sustainable and capable o f covering O&M costs, involvement o f private sector service providers and transitioning into a more commercial, market-based agriculture are activities that require adequate amounts o f public support over a sufficiently long period o f time. The proposed project applies this lesson f rom experience through i t s eight year duration and through a phased approach to irrigation development, WUG empowerment and market connectivity.
61. Whi le a wide variety o f public-private models and variations o f such models have been successfully transacted in many infrastructure projects, the experience in irrigation i s not rich. A recent study’ reviewed 21 cases o f projects that involve some level o f private sector participation, most o f which was in the form o f service contracts for O&M and o f financing schemes for farmers to invest in on-farm pumping equipment. However, more recently, the West Delta Design-Build-Operate project in Egypt and the Guerdane concession project in Morocco provide new financially sustainable models o f larger irrigated schemes run o n the “utility” model, meaning one provider offering irrigation services to many connecting farmers based o n a consumption tariff. The I&D project has incorporated the relevant lessons o f these experiences into i t s design, in particular with respect to appropriate r isk allocation ratios between public and private sector.
Alternatives considered and Reasons for Rejection
62. A number o f alternatives were considered and rejected in the project design:
(i) Develop theproject as an Adaptable Program Loan (APL). The project team felt that, although the agenda i s one that will be relevant over a long t ime horizon, and despite the phased approach to project implementation, temporal triggers related to institutions that usually characterize the design o f an APL are not easy to identify. In addition, the project does not pursue major pol icy reforms.
Basin. The client sought a focus o n the N i l e Basin. Moreover, with this focus the project will be better placed to enhance the impact o f the NBI.
(ii) Development o f irrigation at the national level as opposed to an exclusive focus o n the N i l e
PPP in the Irrigation and Drainage Sector: the Need for a Professional Third Party between Farmers and Governments. Henr i Tardieu (2004).
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(iii) Addressing agricultural advisory services delivery on a stand-alone basis. However, in view o f the agricultural services expertise reflected in the design o f RCBP, it was decided that the project, through i t s component 2, would support the arrangements designed under the RCBP.
(iv) Additional focus on complementary rural development activities such as ruralfinance and land tenure. I t was determined that other instruments are better placed to address these issues. Inclusion would increase project complexity and create significant implementation risks. The project supports the existing land certification program o f the GoE.
(v) Include in the design o f the project additional elements o f investment, recognizing inter-linkage between irrigation and other purposes for investing in water. For example, the project could have been defined very broadly in scope, including interlinked investments in storage, water resource management, hydro-power, transport, and irrigation. T h i s conception o f the project would have complicated the preparation and made implementation extraordinarily challenging. Instead the team recognizes the inter-linkage o f complementary investments for example, through defining the safeguard work broadly, but defines the project more narrowly as investments in irrigation and incremental costs in related investments necessitated by the irrigation agenda.
(vi) Inclusion o f irrigation under the multi-sectoral Tana-Beles project. However, i t was felt that irrigation development in i tse l f i s a comprehensive activity that requires close linkages with agriculture, markets and institutions. Including it in another operation would overload the Tana Beles project, and would complicate the responsiveness to specific irrigation-related constraints and challenges. The two projects will work closely together.
C. IMPLEMENTATION
Partnership Arrangements
63. The proposed Irrigation and Drainage project i s part o f the fast-tracked operations under the Ni le Basin Initiative, supported by a multi-donor Ni le Basin Trust Fund (NBTF). The N i l e Team plays a role in facilitation, technical assistance, and coordination for all EN projects, as well as appraisal and implementation review where activities are NBTF or Bank-financed. As o f September 30,2006, the Bank and NBI institutions had entered into grant agreements for 15 projects amounting to U S 7 4 . 6 mil l ion and allocated US$6.0 mill ion to Bank-executed activities. In addition, grant agreementdamendments for 7 more projects amounting to US25 .8 mil l ion are expected to be signed soon. All projects financed through the NBTF (with the exception o f NBI Facilitation and General Support) are implemented by NBI institutions (Nile-SEC, ENTRO and NELSAP-CU). Therefore, almost 95 percent o f the allocated funds are directly under the control o f NBI. These implementation arrangements ensure ownership and help to build institutional capacity needed for sustainable development and implementation.
64. The proposed project, in particular component 2, will also upscale the World Bank-funded RCBP in those Woredas where RCBP i s not active. This concerns in particular the introduction o f alternative institutional arrangements for the delivery o f agricultural advisory services within Woredas (districts) and Kebeles (sub-districts). The RCBP anticipates substantial collaboration with the Canadian International Development Agency (CIDA), with a planned estimate o f US$17.0 mil l ion in joint financing to be provided.
65. The I&D project will build on lessons from the initiatives introduced through the RCBP, provide TA to adapt initiatives according to lessons learned and extend the initiatives to all I&D’s Woredas and Kebeles. The project will also broaden the thematic coverage by emphasizing the irrigated nature o f the I&D project areas. For example, it will expand capacity strengthening efforts to include water management, equip farmers’ training centers that are specialized in irrigation and water management, and focus more narrowly on a limited number o f value chains that can be grown under irrigated conditions.
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66. Based on the opportunities and growth scenario around the Tana and Beles sub-basins GoE with assistance from the Bank i s currently preparing the Tana Beles Integrated Water Resources Development Project (TBIWRDP). The TBIWRDP aims at achieving the enabling environment for improved development and management o f land and water resources o f the Tana and Beles sub-basins to contribute to accelerated growth and sustainable socio-economic development. The Project Development Objective (PDO) will be achieved primarily through: (i) physical investments o f no regret nature (watershed and flood management) and institutional arrangements for optimal development and sustainable management o f land and water resources which in addition to enhancing the productive impact will also reduce the destructive impact o f water on growth; and (ii) building synergies with relevant on-going and planned initiatives in the sub-basins and identifying critical investment gaps as necessary. The underlying principle o f the program i s that integrated planning and management o f water and land resources when synergized with critical investments, institutional development, environment management, and the facilitation o f private sector development, can provide an effective framework to promote economic growth. Three broad areas o f interventions are envisaged: (i) institutional development for water management as well as to support related productive activities; (ii) identifying physical investments in water and land development to promote growth and complementary investments to unleash the region’s growth potential; and (iii) creation o f enabling environment for private sector participation in this growth agenda. The project will have strong links with the I&D project, as it will operate in the same area as irrigation and would provide necessary forward linkages in terms o f markethommunication developmentlenhancement. I t would address some o f the environmental concerns and finally directly address watershed development o f the Ribb catchment.
Institutional and Operational Arrangements
67. The project will be implemented by M o W R and in Amhara Regional State through the different regional agencies including B O W , Bureau o f Agriculture and Rural Development (BoARD), Environmental Protection, Land Administration and Use Authority (EPLAUA), Bureau o f Cooperative Promotion (BoCP) and the Regional Agricultural Research Institute (RARI). Coordination at the regional level will be provided by a Regional Project Coordinator in BoFED. Guidance will be provided by a National Project Steering Committee (NPSC) and a Regional Project Steering Committee (RPSC) at the respective levels.
68. The National Project Steering Committee will be chaired by the State Minister, M o W R with representatives from Ministry o f Agriculture and Rural Development (MoARD), Environmental Protection Authority (EPA), Ministry o f Finance and Economic Development (MoFED), Ethiopian Institute o f Agricultural Research ( E M ) and the Private Sector at the federal level and representatives from the Amhara BoWRD, BoARD, BoCP, EPLAUA, civi l society, academia and other relevant stakeholders. The NPSC will be responsible for ensuring relevant government water sector policies and that project objectives are adhered to. I t will review and approve annual programs, work plans and budget and monitor and evaluate the progress o f the project. The Committee will meet at least twice annually.
69. The Regional Project Steering Committee will be chaired by the Amhara Regional President and will consist o f the Head o f BoWRD, Head o f BoARD, and representatives from ARARI, BoCP, BoFED, Bureau o f Trade and Industry (BoTI), EPLAUA, Food Security Office and representatives o f the two apex WUGs. Membership will also be extended to representatives from local universities, civi l society and private sector organizations (e.g. chambers o f commerce) on a case by case basis. The RPSC will be responsible for: (i) reviewing and approving annual programs, work plans and budget; (ii) monitoring and evaluation o f the progress o f the project; and (iii) providing guidance and advice to the Regional Project Coordinator (RPC). The Committee will meet at least on a quarterly basis.
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70. Overall Coordination:
0
0
0
MoWR will assign a National Project Coordinator (NPC) under i t s Irrigation and Drainage Development Studies Department; The NPC will be assisted by consultants’ services and contractual s ta f f in areas o f finance, procurement, M&E, PPP development and other technical staff; The NPC will be guided and advised by the NPSC and will also serve as a secretary for NPSC.
7 1, Regional Coordination:
0 A Regional Project Coordinator will be assigned within BoFED to coordinate project activities among the various participating regional agencies (BoWRD, BoARD, BoCP, ARARI, EPLAUA). The RPC will also liaise with participating Woredas and Kebeles; BoWRD will be responsible for implementation o f components 1 and 3 o f the project. BoARD will be responsible for implementation o f component 2; The project will provide technical support to BoWRD and BoARD in the areas o f financial management, procurement, including capacity development and training; The RPC will be assisted by Contractual Staff in areas o f M&E and database management and planning on a full time basis; EPLAUA, in collaboration with EPA, will be responsible for the implementation o f the environmental and social safeguard activities under the project.
0
0
0
0
72. Woreda Implementation:
0 Representatives from involved Woreda Offices o f Denbia, Fogerra, Libokemkem and Gonder Zuria will form four Woreda Project Implementation Teams (WPIT) comprising o f the different Office Heads o f Agriculture and Rural Development (including Extension, Inputs and Credit, Cooperative Promotion and Environmental Protection), Water Resources, Finance; representatives o f Kebele Associations, and WUGs. The WPIT will be headed by the Woreda Head, Office o f Agriculture and Rural Development. They will be assisted by Kebele Associations and Development Agents (DAs).
73, Financial Arrangements: The overall responsibility for financial management will be with the MoWR at the federal level. A Special Account and a Birr account will be opened for the MoWR at the national level. Two regional Birr accounts will be opened within BoWRD and BoARD, respectively, and a small petty cash account at BoFED. Budgetary allocations will be made by MoWR to the regional Birr and petty cash accounts based on annual work plans to be approved by the NPSC and RPSC at the national and regional levels, respectively.
74. Procurement: MoWR will be responsible for major procurement including the procurement o f the services o f consultants and contractors for study, design, construction and supervision o f major infrastructures, hiring o f consultants for feasibility studies, and purchasing o f major equipment. Thresholds will be defined at appraisal. Recruitment o f consultants and procurement o f goods, works and services below a certain threshold that will be established during appraisal will be done by the regional BoWRD for components 1 and 3, and by BoARD for component 2. Recruitment o f contractual staff will be done directly by the respective Bureaus and by the Woredas.
75. Technical Assistance: Provision will be made for full time Contractual Staff for Finance, ProcurementKontract Administration and Monitoring and Evaluation at the national level within MoWR, at the regional level within the Amhara BoWRD and BoARD. In addition, at the level o f the relevant
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Bureau, provision will be made for: (i) intermittent Contractual Staff at various stages o f the project life, including in construction, agronomy/ irrigated agriculture, land administration; (ii) WUG development; and (iii) agricultural marketindagribusiness and cooperative development.
76. Monitoring and Evaluation Functions of OutcomesLResults: Overall responsibility for M&E functions will rest with the NPC and RPC. They wil l be responsible for: (i) preparing annual work plans; (ii) maintaining a systematic project database to facilitate periodic reporting (quarterly and annually); (iii) undertake routine monitoring o f project activities; (iv) preparing annual progress and performance reviews for presentation to the NPSC and RPSC, respectively (see fig. 1); and (v) tracking project financial and physical performance. They will be supported by specialized M&E contractual s taf f both at MoWR and in BoFED.
Fig. 1 Information and Reporting Links
BoWRD I + Woreda
Project Implementation Teams: - I - 1 Fogera,-Liboke& Denbiya, Gondar Z.
Kebele Associations/ Community Organisations
I I I regional I 4--+ = information and reporting links. Include submission
of AWPs and periodic reporting
77. The M&E specialists would ensure timely collection, collation, and analysis o f data from various sources, systematic storage in the project database, and preparation o f routine and special reports and studies. The latter include baseline and thematic evaluation studies, which will provide a basis for mid- term and terminal evaluations. The regional M&E specialist will work from the office o f the regional President, and will collaborate with the Planning and Programming Departments (PPD) o f B O A R D and BoWRD and other relevant agencies, such as EPLAUA and BoCP.
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78. Project Implementation Manual: A detailed Project Implementation Manual (that includes sections on Monitoring and Evaluation, and Administration, Financial Management, Procurement and Accounting) will be prepared during the preparation o f the project.
Monitoring and Evaluation o f OutcomedResults
79. Monitoring and Evaluation will be done by MoWR’s Department o f Database at the federal and by the RPC and M&E specialist at BoFED. A specialized project M&E system and procedures for data collection and reporting will be prepared to the satisfaction o f IDA. M&E will be based on direct reporting by institutions involved in project implementation, relevant data collected on a systematic basis for other purposes, participatory assessments, user satisfaction and income surveys, and targeted data collection (among others through satellite photos), as established in the project implementation manual. MoWR will commission three evaluations o f project output and impact indicators, at two and five years after effectiveness, and at completion. Results o f these evaluations will include operational recommendations on how to improve the performance o f the project that will be discussed and agreed by the NPSC and RPSC. The project will, before the presentation o f the project to the Board, establish a baseline. The results framework that forms the basis for this baseline i s presented in h e x 3.
80. The project will put in place an M&E framework (see h e x 3) that allows for rapid identification o f the project’s progress towards achieving the performance triggers. Indicators have been selected in such a way that they allow for an early detection o f problems and for rapid adjustment during implementation. The M&E framework will also help in the design o f the second consolidation and third upscaling stages o f the project.
8 1. In view o f the eight year duration o f the project, results o f annual M&E will be discussed, and specific measures to address any weaknesses wil l be proposed, agreed and implemented by the NPSC and RPSC. Two Mid-Term Reviews (MTRs) will be held, and funds have been allocated to undertake comprehensive progress reviews prior to these MTRs.
Sustainability and Replicability
82. The project aims to achieve the sustainability o f investments in the following manner:
By incorporating it into the N i l e Basin Initiative, the project responds to a strong interest expressed by the GoE o f using Ni le Basin water for consumptive purposes, including irrigation. The project would be one o f the f irst investment operations in Ethiopia under the NBI. In linking irrigation to markets and private sector development, the project will contribute to more sustainable and cost-effective irrigation development and management and improved quality o f service delivery, and will distribute benefits more equitably among beneficiaries. Priority will be given to capacity and institutional strengthening. The project will not establish new institutions (with the exception o f WUGs), but will build on GoE’s priorities and on what has already been established. The project will deliver capacity strengthening services to WUGs and farmers through non-governmental organizations (NGOs). The project recognizes that this will take a comparatively long time, and it i s therefore proposed to be implemented over an eight year period. Client demand, contributions in cash or in kind to development costs, and ownership will be the determining factor in deciding to go ahead with investments in agriculture and supply chains.
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Critical R i s k s and Possible Controversial Aspects
83. The potential r isks o f the project are presented in the table below.
Table 1: Critical risks and mitigation measures
Risks
Farmers are unable or unwilling to pay for the full costs o f irrigation services even though they have agreed to the indicative O&M costs.
Farmers unable or unwil l ing to adopt higher-value crops.
Local elites capture project benefits.
Limited capacities at Federal, Regional and Woreda level.
Environmental and social issues delay development o f Ribb dam.
GoE withdraws from development o f Ribb dam.
Project’s linkages with storage development attracts international Ittention.
Risk rating
S
M
M
M
S
M
S
Risk Mitigation Measures
0 The project will emphasize capacity strengthening o f farmers, WUGs and government staff. The project will confer maximum responsibility to WUGs. O&M fees collected will remain within the scheme. The project will involve local authorities in managing irrigation schemes. The project will improve linkages in supply and marketing chains to increase farmers’ income and improve their capacity to pay. The project will allow for a gradual increase o f cost recoverv.
0
0
0
0
Support for land certification w i l l help establish a more flexible land market so that non-adopters can lease out their land. Project will emphasize capacity strengthening oj farmers and extension staff. Project will make available funds to support demand-driven innovations.
arrangements. Beneficiary selection criteria w i l l be prepared prior to project effectiveness. WUGs will be trained in accountability, transparency and good governance. Capacity strengthening at al l levels w i l l be a priority for the project throughout i t s implementation. Adequate resources have been set aside. Contractual staff and consultants w i l l be recruited to provide support at al l levels. Project will provide advisory services to GoE in connection with environmental and social impact assessments, identification o f mitigation measures and preparation o f a RAP.
0
0 Project will promote contract-farming
D
0
Alternative sites w i l l be developed from among those pre-selected initially if Ribb dam i s not being developed. Decision w i l l depend on progress made on Ribb dam (see detailed description o f sub-component 1.1 in Annex 4). Transparency in approaches; media used to promote al l aspects o f the project. Briefing to interested parties. Communication strategy prepared and implemented.
B
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Irrigation investments lead to an increase in malaria.
Project Level Collaboration between Federal, Regional and Woreda level may fail.
S The project will work wi th existing health projects and with regional Bureaus o f Health,
M
Financial reporting Delays in the production and submission o f financial reports required for managing and monitoring project activities.
Overall Risk Rating
Regional President responsible for coordination.
levels. Preparation o f clear financial management guidelines. Organization o f regular training to regional
S Recruitment o f additional accountants at a l l
Accountants. S
Loadcredit Conditions and Covenants
84. Effectiveness Conditions include:
e Adoption o f a Project Implementation Manual in form and substance satisfactory to the Association; Appointment o f a Regional Project Coordinator with experience, qualifications and terms o f reference satisfactory to the Association; Recruitment for the MoWR and BoARD, each, a procurement specialist with experience, qualifications and terms o f reference satisfactory to the Association; and Recruitment for the MoWR, B O W and BoARD each an additional accountant with experience, qualifications and terms o f reference satisfactory to the Association.
85, Other Covenants include:
Funds transferred to regions for project activities will be counted as additional funding on top o f federal contributions to the regions and, therefore, wi l l not be offset in the Government’s formula for allocating regional funds. MoWR will submit the audited project accounts to IDA six months after the end o f each fiscal year. The fiscal year ends on 7 July o f each year. The audited financial statement will include al l sources o f funds for the Project, including other donors and the government. MoWR, after receiving the financial reports from al l Implementing Agencies (IAs), wil l submit interim unaudited financial reports to IDA forty-five days after the end o f each quarter. GoE will also commit to disclosure o f annual allocations for the dam as part o f annual work planning process for the project. GoE shall, no later than December 3 1,2008, have completed survey work associated with land certification in the Project Area, in form and substance satisfactory to the Association and have issued land certificates to all affected persons in the Project Area.
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86. Disbursement Conditions
0 No withdrawal shall be made for payments under civi l works unless: (i) an Environmental and Social Institutional Assessment (ESIA) and Resettlement Action Plan (RAP) have been prepared in form and substance satisfactory to the Association; and (ii) signed entitlement delivery certificates have been issued to people to be resettled under the Project in accordance with the RAP.
D. PROJECT BRIEF SUMMARY
Economic and Financial Analysis
87. Project Benefits: The main quantified benefits o f the I&D project are the increases in incomes o f smallholder farmers in the Ribb and Megech River within the Tana basin. About 12,600 farming households with current average annual per capita incomes o f about US$125.0 are expected to benefit from the project. Increased net farm incomes accrue as a result o f changes in production arising from increased cropping intensity, higher and more stable yields, and changes in cropping patterns towards higher value crops.
88. Increased cropping intensity: Much o f the current production in both command areas i s 100 percent cropping intensity. However, about 40 percent o f the area produces a second crop with residual moisture under less than favorable conditions. By developing irrigation potential, the Project will allow effective production o f a second crop on about 80 percent o f the project area and supplementary irrigation during the wet season.
89. Higher and more stable yields: Although compared to other regions o f the country yield levels in the Project area have tended to be relatively high, it i s nevertheless understood that there i s considerable room for improving yields if the use o f fertilizer and improved seeds increases and i s combined with adequate water availability. The project combines investments in irrigation infrastructure with enhanced provision o f agricultural senices and improved market access to transform current agricultural practices which should result in significant improvements in agricultural productivity.
90. Furthermore, production and yields fluctuate from year to year due to variable climatic conditions. The project will allow supplementary irrigation during the wet season at times o f poor rainfall and thereby help to maintain stable production levels each year.
9 1. Changes in cropping patterns: The project will promote greater commercialization o f smallholder agriculture. At a minimum it i s expected that, with the introduction o f irrigation opportunities, farmers will shift to production o f crops that: (i) respond to better water management - e.g., from te f f and millet to wheat and maize; and (ii) fetch a good price on an established market - e.g., haricot beans, faba beans and chickpeas all o f which are currently exported.
92. Additional benefits: The project area i s believed to have considerable growth potential. Urban centers (Bahir Dar, Gonder and Debre Tabor) in the vicinity o f the commands, major road connections linking the commands to major domestic markets (particularly Addis Abeba) and international gateways, and growing private investment in the Region provide favorable conditions for building further on the growth in agricultural supply resulting from the project. The benefits o f the project are therefore not limited to the farm HHs directly benefiting from irrigation. Rather they will contribute to overall Regional growth as multiplier effects are believed to be large.
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93. The project will also have nutritional benefits. It will promote a shift in production away from cereals which are already a large part o f the Ethiopian diet (particularly in the Amhara region where consumption o f fruits, vegetables, and tubers i s not common) and increase the availability o f non-cereal foods on the local market. Livestock productivity i s also likely to increase resulting in higher milk, egg and poultry production for on-farm consumption. The project will thus contribute towards more diverse diets and better nutrition. I t i s also expected that the project will yield benefits in terms o f employment in o f f farm activities that will be created as a spill over from the development o f irrigation infrastructure. The economic and financial analyses do not attempt to calculate these benefits. The estimates o f benefits are therefore somewhat conservative.
Total Project I Megech
94. Economic Analysis: A cost benefit analysis has been undertaken based on quantifiable benefits related to farmers’ net incremental incomes. I t i s expected that non-quantified benefits such as nutritional and employment benefits are substantial. The total benefits quantified in the cost benefit analysis should therefore be interpreted as a conservative lower bound estimate. The analysis shows an overall economic internal rate o f return (EIRR) o f 15 percent (22 percent for the Megech scheme and 14 percent for the Ribb scheme). The estimated net present value o f benefits o f 200 mil l ion birr for the Megech and Ribb schemes (1 1 percent discount rate). The economic rates o f return have been calculated based on different combinations o f irrigation development between the two schemes. The baseline results are as follows:
Rlbb
I 15% I 22% I 14% I
Decrease in incremental benefits by 10% Increase in investment costs by 20% Lag in farmer’s response to project opportunities (adoption of ag. technologies, and shift in cropping patterns) Lag in farmer’s response plus 10% lower incremental benefits
The Ribb irrigation scheme i s dependent on the prior construction o f a dam on the Ribb River, which will be undertaken independently o f the project. The feasibility analysis for dam construction i s not yet completed; therefore, although the Government o f Ethiopia has expressed i t s strong resolve to go ahead with Ribb dam, an eventuality that the dam i s not constructed must be a factored in the economic analysis. In this event, the project will shift to full irrigation within the Megech command as the Megech scheme i s scalable up to 24,179 ha. Returns o f such an investment are 182.7 mil l ion birr NPV and 14 percent ERR.
95. A sensitivity test shows that the rates o f returns to the project are robust. Basic sensitivity analysis on various variables critical to the project (adoption rates o f agricultural technologies, farmer participation in the irrigation schemes, cost escalations, differences in productivity levels with and without the project) indicate positive NpVs and economic rates o f return which i s always above 12 percent.
96. A risk analysis takes into account factors that are considered uncertain factors and food price fluctuations (*25 percent price fluctuations, delay o f project benefits, *15 percent measurement margin for cropping intensity, irrigated area, average yields). Even under pessimistic assumptions the analysis shows that there i s less than 5 percent probability that the overall EIRR will be significantly below 14 percent. The result o f the analysis i s that price fluctuations for major crops do impact on the EIRR, but
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only modestly. This suggests that the economic viability o f the project should be considered as robust against unexpected price movements.
97. Farm Level Financial Analysis: An analysis o f the financial impact o f the project at the farm level has been carried out. I t i s found that as farmers respond to opportunities provided by the project, irrigation potential and technological advice, their cash inflow should double from current farm incomes within the f i rst two years and may increase up to four fold within six years o f project implementation.
Technical
98. Previous irrigation development experience in Ethiopia suggests that the two main related challenges associated with irrigation development are to ensure that: (i) a more reliable access to water translates into more commercial agriculture, higher productivity and a more diverse cropping pattern; and (ii) the hydraulic assets that the project helps create are operated and maintained in a sustainable way. These two challenges are intricately related to each other, as higher agricultural outputs help farmers pay for the usually significant costs o f sustainable O&M.
99. The above challenges are reflected in the project design. Component 1 will invest in the development o f ground- and surface water irrigation assets. Component 2 promotes the agricultural and agro-business development that needs to take place to capture the benefits o f a more reliable access to water. Component 3 emphasizes irrigation management arrangements through both WUGs and private operators.
100. The proposed approach for implementation o f the project i s based on the following principles:
Each o f the entities involved in the implementation has responsibilities that are in accordance with their mandates. For example, the Federal MoWR has the mandate to develop large-scale irrigation infrastructure and will, in close collaboration with the B O W , be responsible for components 1, 3 and 4. The regional BOARD i s responsible, at the regional level, for delivery o f agricultural services and i s therefore responsible for component 2. Coordination and M&E at the regional level will be undertaken by BoFED. Flows o f project funds empower and support responsibility and mandates o f each o f the parties. Stakeholders will be fully engaged in the preparation, design, implementation and evaluation o f investments. Feasibility studies, environmental and social impact assessments and resettlement plans will be prepared in full consultation with stakeholders. Farmers are expected to contribute in labor and local materials to part o f the irrigation development costs. Achieving sustainability and higher agricultural output levels requires a comprehensive approach to agricultural intensification. Water i s a means to that end, but other issues are important as well, including market access, use o f seed and fertilizer, capacity strengthening and agricultural service delivery. The project will adopt such comprehensive approach, but will also take advantage o f a number o f other operations that are implemented in parallel in the project area. Land certification, support for private sector, accountable and transparent irrigation management and value chain development support the emergence o f multiplier benefits and a more equitable distribution o f benefits among direct and indirect beneficiaries. The project will adopt an innovative approach to irrigation management and will seek to capture efficiencies from private sector irrigation service delivery, while at the same time providing incentives for full O&M cost recovery from water users. T h i s approach i s justified in Ethiopia in view o f the limited experience in smallholder large-scale irrigation, and the mixed experience in the management o f smaller-scale smallholder irrigation. In recognition o f the comparatively long period that i t will take to achieve project sustainability, and in
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(vii)
(viii)
accordance with international best practice, the proposed project will be implemented over a period o f 8 years. Another innovation i s the recognition that not all irrigation infrastructure can and should be managed by water users. Some of the larger infrastructure i s clearly beyond the farmers’ capacity for cost recovery and should be considered public infrastructure. In accordance with similar approaches adopted in Senegal and Madagascar, the project will assist the GoE in establishing an entity responsible for maintenance o f public irrigation infrastructure. Management o f the agency may be outsourced to a private operator. Replenishment options wil l be analyzed and agreed during project implementation. Agricultural and market development will follow a value chain support approach that identifies and helps resolve specific constraints in agricultural supply chains in the project area. This will include supporting contract farming arrangements, seed money and business incubators, capacity strengthening o f farmer groups and provision o f private sector matching grants.
Fiduciary
10 1. Procurement: Public procurement in Ethiopia follows the federal structure o f the government. Procurement at Federal level i s governed by the procurement code issued by the Federal Government in January 12,2005 and the Procurement Directives released in July 2005. The procurement code & directives i s adapted to the Regions based on the model prepared by the Federal Government.
102. Works estimated to cost less than US$l,OOO,OOO per contract may be procured using National Competitive Bidding (NCB). Direct Contracting may be used for works in exceptional cases, according to paragraphs 3.6 and 3.7 o f the Guidelines. Shopping may be used for small value contracts in accordance with paragraph 3.5 o f the Guidelines.
103. Prequalification o f contractors would be used for the construction of Megech Pump Irrigation scheme, and Ribb irrigation scheme. W B ’ s Standard prequalification document - issued August 2006 will be used for the purpose o f pre-qualifying potential bidders.
104. Goods and Equipment contracts estimated to cost less than US$200,000 per contract may be procured using NCB, using national Standard Bidding Document (SBD) agreed with or satisfactory to the Bank. Direct Contracting for goods may be used in exceptional cases, such as for the extension o f an existing contract, standardization, proprietary items, spare parts for existing equipment, and emergency situations, according to paragraphs 3.6 and 3.7 o f the Guidelines. Shopping may be used for contracts with estimated values o f less than US$50,000 in accordance with paragraph 3.5 o f the Guidelines.
105. Most consultants’ contracts with f i r m s wil l be awarded through the use o f the Quality and Cost Based Selection (QCBS) described under section II(2.1-2.3 1) o f the Consultant Guidelines, using the Bank’s Standard Request for Proposals. Consulting Services for audit and other contracts o f a standard or routine nature may be procured under the Least Cost Selection (LCS) method described under paragraph 3.6 o f Consultant Guidelines. Consulting assignments costing less than US$ 100,000 may be procured using Selection based on Consultants Qualifications (CQS) described under paragraph 3.7 o f Consultant Guidelines. Single source selection can be used to contract f i r m s for assignments that meet the criteria set out under paragraphs 3.9 to 3.13 o f the Consultant Guidelines. Contracts for individual consultants (IC) wil l be done by comparing the qualifications o f at least three candidates, in accordance with Section V o f the Consultant Guidelines.
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106. Short l is ts o f consaltants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
107. Expenditures made for operational costs such as fuel and stationery will follow Ethiopian Government practices in accordance with the Federal Public Procurement code and Directives released on July 2005 or, whenever those Directives do not apply, commercial practices commonly used for the same purposes.
108. The procurement procedures applicable to the project shall be outlined in the Project Implementation Manual (PIM). The SBDs to be used for procurement o f goods and works using N C B that are revised as per the comments provided and found to be acceptable by the Bank would be provided to each implementing agencies with the PIM.
109. Financial management: The country’s discipline in executing budget and compliance with the existing government ru les and regulations are the major strengths in implementing this project. Ministry o f Water Resources, Amhara Regional BoWRD and BOARD will be involved in processing most o f the project financial transactions. All the I A s will strictly follow the government ru les and regulations in processing, recording and reporting the project financial transactions.
110. The government system o f accounting will be used for budgeting, recording, reporting and auditing o f the project financial transactions. The major r isks for the implementation o f the project are the high number o f I A s involved in the implementation and the low capacity at all levels. In order to mitigate these risks, additional s ta f f will be recruited to strengthen the existing capacity and extensive training will be provided to all regional staff.
1 1 1. Provided a satisfactory solution i s found to the unpaid balances o f special accunts under already closed projects, a Designated Account will be opened in the National Bank o f Ethiopia to transfer funds from the Credit Account. From the Designated Account funds may be transferred to the local Birr account and from the local Birr account to various implementing agencies.
112. The Federal Auditor General will assign external auditors, acceptable to the Bank, to conduct the audit o f the project financial transactions.
113. The overall conclusion from the financial management assessment i s that the existing government system could be used for the implementation o f the project provided additional s ta f f are recruited at all levels and the required training i s provided by MoWR to all staff o f the I A s on recording and reporting o f the financial transactions o f the project (detailed FM assessment i s in Annex 7).
Social Analysis
114. As part o f the feasibility study, a social assessment study has been commissioned to study in the project area the social structure o f the population, the process o f social differentiation, the prevailing systems o f production, strategies to access water, and the public perception o f the project.
115. The project primarily targets the population living within the two irrigation command areas, but also those who will be directly or indirectly affected as a result o f upstream storage development through Ribb dam. To create a market dynamic, provide jobs and disseminate more productive and commercial production systems, private investors are also targeted. Finally, the beneficiaries o f component 2 (Agricultural and Market Development) will also include farmers outside the command area who benefit from improved agricultural service delivery through alternative service providers.
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116. A major social risk that the project might face i s linked to the restructuring o f the land in the command areas that might result in smaller farm sizes in the schemes. The project considers this as a dispossession issue which i s to be addressed through Bank safeguards (see Annex 10).
117. Although farmers in general seem to welcome the concept o f the project and are eager to move into irrigated agriculture, the change might prove difficult for those who will be moving from traditional subsistence dry farming to market oriented irrigated farming. Indeed, this change implies a radical paradigm shift as farming i s not only an economic activity but also a way o f l i fe that changes slowly and gradually. WUGs are proposed to be established that wil l act as the project’s main vehicle for farmer participation in feasibility, design, implementation and use o f the schemes.
Water Users’ Groups
1 18. Water Users Groups will be created and promoted to help farmers adequately manage irrigation water, maintain their tertiary structures, resolve conflicts and reduce operation costs. T h i s presents challenges to traditional rainfed farmers who will in future need to cooperate on water management and maintenance. The effective development o f sustainable WUGs will require a gradual approach. Three phases are planned, each with a duration o f approximately two to three years: (i) mobilization: identification o f key stakeholders and WUG formation; (ii) consolidation: formal establishment and capacity building; and (iii) upscaling: the transfer o f more responsibility to WUGs and an increase in O&M cost recovery to 100 percent. Each o f the phases will require specific capacity strengthening efforts, the contents o f which will be established through a training needs assessment at the start o f each phase, and an evaluation on the basis o f agreed indicators at the end o f each year. The phased approach to establishing and empowering WUGs reflects the fact that the shift to irrigated farming must be undertaken at the pace o f the farmers, incrementally, and taking into account the socio-cultural and economic conditions and realities o f the farmers.
119. The mobilization phase coincides with the technical feasibility and detailed design studies. I t i s perhaps the most difficult, given the lack o f exposure o f local farmers to irrigation. As the foundation for all future development, this stage i s also the most critical. As a first step, an international expert on participatory management wil l be recruited and a WUG Support Unit (SU) will be established. The S U will consist o f a trained team o f local staff from relevant regional bureaus and Woreda Project Implementation Teams. As the “change agent”, the S U will be responsible for helping farmers understand the aims o f the project and the central role o f WUGs. With support form the international expert, the S U wil l implement a program aimed at informing farmers and gaining their support for the project, including through publicity, communication and awareness campaigns, village-level meetings, exposure visits, and training. Additionally, farmers will participate in decision-making over system design through formal and informal meetings and walk-throughs with the SU. In conjunction, a willingness-to-pay study will be conducted by the S U as a baseline and in order to assess the potential longer-run viability o f alternative system designs. The selected system design will determine the boundaries o f the WUGs that will be established.
120. In this phase, a few areas will require special attention. First, irrigation institutions in Ethiopia have little experience in participatory irrigation. Efforts will need to be placed in better aligning cultural attitudes within line agencies with the principles o f participatory irrigation. The project will do so by strengthening capacities o f staff within the MoWR and B O W in the fields o f participatory irrigation management, WUGs establishment and mobilization, and stakeholder involvement, including women and the marginalized. Full representation o f these groups in organizations will take time to achieve, but the process can begin with, for example, meetings specifically tailored to create awareness and foster participation o f these groups, and social mapping to identify vulnerable sectors o f the community.
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121. The consolidation phase coincides with the construction o f irrigation infrastructure. I t will focus on the formal establishment o f WUGs and on capacity building. T h i s includes ensuring that there i s suitable enabling WUG legislation and strengthening the administrative and management framework for the groups. This phase will also see the recruitment o f a private operator who will operate and maintain the schemes. The S U with support from the international expert, will conduct a training needs assessment at the start o f the phase, and will be responsible for training and capacity building programs, including on procedures for organizing and managing general meetings, day-to-day management, conflict resolution, etc. WUG staf f will be identified and trained to improve their capability in general management (record keeping, performance monitoring, etc.), financial management (financial records, setting and collection o f fees, etc.), and technical management (system operation and maintenance).
122. The creation and capacity building o f WUGs i s a long process that will be monitored and evaluated all along the project l i fe span and beyond. To this end, impact surveys wil l be conducted by the S U to determine whether WUGs are progressing towards sustainable operation, and that help identify and take adequate measures to address any problems that may emerge. The surveys will include a range o f indicators, covering institutional, financial and technical issues related to the establishment o f WUGs, their management, and the operation and maintenance o f irrigation and drainage systems.
123. The scaling up phase will scale up the positive developments o f the earlier two phases and will focus on the proper use and management o f the irrigation infrastructure. With the foundation laid in the f i rst and second phase, WUGs will be federated to take on management responsibilities for the secondary and parts o f the primary canal system. Further support will be required for this process, including changes in legislation.
124. During this phase, WUGs will become increasingly responsible for full O&M cost recovery. The private operators that were recruited during the consolidation phase will become increasingly accountable to the WUGs, and less so to the public sector. WUGs will continue to be supported by the S U and training programs will be implemented, based on a training needs assessment at the start o f the phase.
Environment
125. The principal natural environmental issues associated with the proposed irrigation schemes are:
Megech Environmentally sensitive areas include the Megech River, Lake Tana, and wetlands along the lake shore and within the command area. The Megech River i s a small seasonal river which i s used as a spawning site for Lake Tana fish species o f which the dominant are Barbus spp., Oreochromis spp., and Clarius spp. The major environmental health concerns in the area are water-related diseases such as malaria, typhus, and schistomiasis.
Ribb Environmentally sensitive areas include the Ribb River, Lake Tana, the Fogera Plain, and wetlands along the lake shore and within the plain, especially in and around Welela and Shesher Ponds. Wetlands on the plain appear to be dependent on seasonal flooding o f the Ribb River. The Ribb River provides important spawning and nursery habitats for migratory fish well up into the drainage, especially the economically significant Barbus fish species. The Ribb Dam will block upstream fish migration, and reduce or eliminate seasonal flooding o f the Fogera Plain wetlands. Mitigation measures (eg. f i sh ladder, artificial habitat creation downstream o f the dam, minimum flow releases from the dam, deliberate flooding o f Fogera wetlands) are indicated to avoid significant adverse impacts. Lake Tana, Fogera Plain and the associated wetlands are wintering habitat for vulnerable and threatened bird species, so mitigation measures to protect these wetlands i s important. Water-borne diseases are the major health threats in the area with malaria being the most important.
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126. Also, development o f intensified agriculture through irrigation i s expected to involve the increased use o f pesticides with consequent health and environmental risks.
Safeguard Policies
127. The following World Bank Safeguard Policies were triggered:
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment (Op 4.0 1) Natural Habitats (Op 4.04) Pest Management (OP 4.09) Physical Cultural Resources (OP 4.1 1) Involuntary Resettlement (op 4.12) Indigenous Peoples (OP 4.10) Forests (Op 4.36) Safety o f Dams (Op 4.37) Projects in Disputed Areas (Op 7.60) Projects on International Waterways (Op 7.50)
128. The Ethiopia h iga t ion & Drainage Project has been classified as EA Category A.
129. Since the Borrower's feasibility studies are expected to be launched by July 2007 and completed by December 2007, an Environmental and Social Management Framework (ESMF) has been prepared to guide the preparation, review and approval o f environmental assessments (EAs) o f the individual irrigation schemes. The ESMF specifies further consultations, as needed, in the preparation o f EA studies that include comprehensive Environmental Management Plans (EMPs). The EAs will address specific environmental safeguard issues (natural habitats, pest management, and physical cultural resources). EAs will need Bank and GoE approval before finalization o f detailed designs and construction bid documents. Similarly, a Resettlement Policy Framework (RPF) has been prepared which describes the procedures and policies that will apply in preparing the needed RAPS during implementation o f the I&D project and as soon as the relevant information becomes available. As well, a dam safety review o f the GoE-financed Ribb dam will be done during the dam feasibility studies undertaken by the MoWR. Riparian notification for OP 7.50 was completed through the N i l e Basin Initiative.
130. Wh i le Ribb dam will be financed by the GoE rather than the proposed project, the environmental and social issues, and their resolution, are closely linked. Thus, the project will conduct as much as feasible a comprehensive, integrated environmental assessment and resettlement planning for the dam and irrigation development together. This work will be undertaken according to the requirements o f the Bank's safeguards policies, and will build upon similar, more restricted, work being undertaken by the M o W R as part o f their feasibility studies o f the dam to be completed by May 2007 at the earliest. The linkages between the dam and irrigation developments are important:
0 Flow releases from the dam need to be designed to accommodate seasonal irrigation needs downstream, as well as biodiversity (fish, aquatic wildlife) values in the downstream river and in wetlands on the Fogera Plain and along the Lake Tana shore.
0 The Ribb irrigation command area will be the host area for displaced population from the Ribb dam area. The dimensions and numbers o f people in the reservoir and irrigation command areas will not
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be accurately known until technical studies for both the dam and irrigation scheme are completed. Since the development o f the irrigation scheme will necessitate infrastructural investments that will require land acquisition, displacement o f people, land ownership restructuring and possibly land consolidation, i t must be undertaken so as to accommodate resettlees from the dam reservoir.
13 1. Since both the responsible federal and regional authorities have inadequate capacity to thoroughly address safeguards concerns during the preparation and implementation o f the irrigation schemes, the project will finance technical assistance to support the development o f terms o f reference (TORS), EAs and RAPS, the review and approval o f documents, and the implementation o f EMPs and RAPs.
132. In preparing the ESMF and RPF, consultations were held with government officials at the federal and regional levels. Preparation o f the EAs/EMPs and R A P s during project implementation will involve substantial consultations with stakeholders and potentially affected peoples in the irrigation scheme areas.
133. The ESMF and RPF were disclosed through the Bank’s InfoShop and in-country on February 21, 2007.
Policy Exceptions and Readiness
134. The project requires no exceptions to Bank policy. Fiduciary arrangements are in place and additional project staff with direct implementation responsibilities are being mobilized. All disclosure requirements have been met.
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Annex 1: National, Sectoral and Project Context
A. National and Sectoral Context
Irrigation
1. Irrigation in Ethiopia i s divided into the following categories:
(i) Traditional irrigation schemes are small-scale irrigation schemes developed by peasant farmers. They have existed for perhaps several hundred years. Each scheme generally varies in size from less than 50 to 100 hectares. The schemes are operated and maintained by the farmers themselves. Over the past few decades many o f these schemes have expanded as sk i l l s developed. Traditional diversion structures are often washed away during high river flows and have to be remade each year. Traditional water users’ groups are responsible for operation and maintenance o f traditional irrigation schemes. It i s estimated that approximately 72,000 ha i s under traditional irrigation.
(ii) Modern communal irrigation schemes include government-constructed schemes, usually with the participation of farmers. They range in size from about 20 to 200 hectares. Their main objective i s to enhance food security and to improve the livelihood o f peasant farmers by providing cash income through the production and marketing o f the produce. Operation and maintenance o f the schemes are executed by water users groups. There are a total o f about 288 modem communal schemes in the country capable o f irrigating about 30,000 hectares.
(iii) Public irrigation schemes are generally large-scale in size, with each scheme larger than 3,000 hectares. They are owned and operated by public parastatals. Currently, these schemes cover about 61,000 hectares. The largest concentration o f public irrigation schemes, about 73 percent o f the total, i s found in the Awash Valley. Nearly 87 percent o f public irrigation schemes are located in the two regions, Oromiya (52.4 percent) and Affar (34.4 percent). The only large-scale public irrigation development in the N i l e sub-basin i s Fincha Sugar State (currently 6,114ha).
(iv) Private commercial farms pioneered the development o f medium and large-scale irrigation enterprises in the Upper Awash in the early 50s and late 60s. Nationalization o f private schemes in the mid 70s brought such endeavours to an abrupt halt. A few private schemes, mostly in the form o f private limited companies, have re-emerged with the adoption o f a market based economic policy in the early 90s. An estimated 18 modern private irrigation projects are now operational. These schemes are located in Oromiya, Affar and SNNP regions and cover a total area o f about 6,000 hectares.
Project sites
Megech
General
2. The proposed sites for this scheme are adjacent to the northern shores o f Lake Tana, in the North Gonder Zone o f the Amhara National Regional State. The proposed irrigation area straddles the Megech River near the Lake Tana shoreline. To the west are sub-projects Sereba and Guramba, located in Dembia Woreda (a local name for District). The eastern parts are Robit and Jarjer sub-areas, in Dembia and Gonder Zuria Woredas. The Megech River, which has a catchment area o f about 7 0 0 h 2 , flows generally in a southerly direction towards Lake Tana. The main tributaries o f the Megech R. are the West Fork and
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the Angereb. The project area i s on the Lake plain south o f the Gonder -Debre Tabor road, and begins at a point about 1 5 h north o f the lake where the river breaks out o f the steep canyon area in to the lake plain.
Previous Studies
3. The project was f i rst identified by the United States Bureau o f Reclamation (USBR, 1958-1964), then adjusted and reformulated by the Abbay River Basin Integrated Development Master Plan Project by BCEOM (1996-1999).
Present Situation and Infrastructure
4. According to a previous study and a site visit (2002), almost the whole area i s cultivated and used for grazing. The project area i s used by 5,508 households, with 26,880 persons, giving an average irrigable area o f 1.82 ha per household. Crops grown in the proposed irrigation areas include: (i) cotton, maize, sunflower, sorghum, teff, haricot bean, pepper and rice in the wet season; and (ii) maize, sunflower, haricot bean, onion and rice in the dry season.
5. Access to East Megech i s possible via a track departing from the main road Gondar-Bahir Dar, 1 km south-west o f the village Maksenyit. Access from Kola Diba i s impossible due to lack o f bridges or dri f ts across the Megech River. Access to the West Megech i s possible from Kola Diba and Gorgora. However, during the rainy season the area i s inaccessible as most tracks are on vertisols that are rendered impassable even after the slightest rain. Apart from Gorgora, there are no harbours or landing facilities.
6. The population in and around the project area i s some 350,000 (1994 Census). Electricity has reached Kola Diba. Harbours and hotels are supplied by a generator. There are open markets in Kola Diba and some other towns along the Gondar-Gorgora road.
Topomauhv and Climate
7. The upper and middle parts o f the Megech River Basin catchment are characterized by mountainous, steep slopes and deep valleys with a maximum altitude o f 3000 mamsl. The lower part i s characterized by plains o f flat to gentle slopes towards Lake Tana. The topography o f the command area i s flat to gentle slope, having slopes less than 2 percent.
8. The climate o f the area i s marked by a wet season from June to September, with monthly rainfall varying from 155mm in May to 271 mm in July to 115mm in September. The dry season from October to May has a total rainfall o f about 14 percent o f the annual rainfall o f 906mm. The dependable rainfall varies from less than 20mm during the dry season o f June to September with 177mm in July, equivalent to 40-70 percent o f the average values.
9. Average daily temperature variations throughout the year are minor (19"c in December to 23"c in May), where as humidity values vary between 77 percent in February and 88 percent in August. Wind speeds are low, thus minimizing potential evapotranspiration values between as low as 95mm/month in December and a high o f 14lmm/month in April. Sunshine duration i s reduced to 6-6.5 hours during July to August.
Hvdrologv
10. With regard to hydrology, development o f irrigated agriculture in the valley would depend on water available from Lake Tana and on the possibility o f drainage that i s influenced by the water level o f Lake Tana. Drainage would have to be provided to prevent water logging during the wet season. Lake levels
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vary between 1,784 and 1787.5mamsl. Over bank flow from Megech River tends to flood areas along the riverbed and therefore flood protection dykes have to be constructed. The present dykes are directly along the watercourse and have very steep banks.
1 1. Average flows o f Megech River decrease from a maximum o f 50.63m3/sec in August to 0. 14m3/sec in March. The mean annual runoff at the hydrological station near Azezo, covering a catchment area o f 462kmz, i s estimated to be 130Mm3 (USBR, 1964) and 170Mm3 (JCIETC, 1996).
Soil. Land Suitabilitv and Land use
12. The majority o f the soils in the project area can be classified as heavy clay soils, with impeded drainage. In some areas close to the lake, the water table i s found at a depth o f about or less than lm. All the l ow lying and depression areas were excluded from the proposed scheme. On the contrary, the soils o f the steeper area are excessively drained. The flood plain soils (mostly vertisols) have high levels o f base saturation indicating a high fertility level. Slope i s not a constraint in this area as most o f the land i s relatively flat.
13. For most o f the proposed crops 33 percent o f the area i s moderately suitable, with limitations on workability due to the heavy texture o f the soil (that can be overcome with mechanization) and nutrient deficiency that can also be overcome by using fertilizers. Sixty seven percent o f the area i s marginally suitable mainly due to the heavy texture o f the soil. However, with irrigation it should be possible to get the right soil moisture at the time o f ploughing, which i s the bottleneck in the land preparation and seed bed preparation. At present almost the whole area i s cultivated and used for grazing.
Environmental and Social Sensitivities
14. The major environmental health concerns in the area are water-related diseases such as malaria, typhus, and schistomiasis. Environmentally sensitive areas that are located close to the Megech irrigation project areas include the Megech River, Lake Tana, and a 300 ha closed wetland system. The Megech River i s a small seasonal river which i s used as a spawning site for Lake Tana f i sh species. The shallow oligomesotrophic Lake Tana supports diverse fish species o f which the dominant families are Barbus spp., Oreochromis spp., and Clarius spp.
15. The population size, as projected from the 1994 Census, was 26,880 in 1997, o f which about 14,021 are economically active. The majority o f the populations belong to the Amhara ethnic group. The available social services in the command area include: 6 primary schools with 27 teachers, one junior secondary school with 2 teachers, one health post with two health assistants, grain mills (one grain mill for every 15 19 households). The gross enrolment ratio in education in Megech command area, at 8 percent, i s reported to be among the lowest in the Amhara Region. No household has access to clean water, and there i s no electric power supply in the command area. The main source o f energy i s fuel wood. Access roads are constrained by the lack o f bridges across the Megech River. An estimated 2,220 households are annually affected by food deficit.
Project Outline
16. The following project i s part o f the project: Seraba with 5,254 ha to be commanded by a main canal following contour 1,795m. A pumping station located just north o f the village o f Gogora will lift the water from Lake Tana via a 110 m long pipeline to the head o f the contour canal, which extends to Megech R.
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Ribb
General
17. The Ribb river i s located on the east side o f Lake Tana in Amhara National Regional State and has a drainage area o f about 1790km2. The length o f the main river i s about 129.7km. It i s one o f the main stream on the east side flowing into Lake Tana and, with i t s tributaries, forms a watershed on the western slope o f the high mountainous area east o f the town o f Debre Tabor at an elevation o f approximately 3050 meters. The river flows generally in a westerly direction and empties into Lake Tana.
18. Ribb river catchment i s bounded in the south by Gumara river catchment, and in the west by Lake Tana. The geographic position o f the catchment i s 11'42' - 12'14'N latitude and 37'34' - 38'14'E longitude.
19. In the low and middle reaches o f the river, especially in the extensive alluvial plains bordering the lake the river minders i t s way and flows slowly. This results in a serious river channel deposit, and overflow o f riverbanks during rainy season. Therefore, i t i s necessary to tackle the problems o f flooding, water logging and back flow o f Lake Tana with relevant engineering and other measures to develop an irrigated agriculture in the area.
Previous Studies
USRR, (1958-64):
The development plan includes a storage dam, a diversion dam, two main canals, a lateral distribution system and drainage canals to provide full irrigation for 15,270 ha out o f the 20,400 ha arable land.
EWRAILWSA:
In 1980, the land and water studies agency o f Ethiopia Water Resources Authority presented proposal for the Ribb and Gumara flood control project. Development along Ribb river would include improved agricultural production on 29,037 ha, the protection against floods o f 12,935 ha land by dikes and river training works, the installation o f an internal drainage system including sluices (drainage by gravity) and drainage pumps. Irrigation by pumping o f 12,935 ha, the construction o f roads and bridges and the provision o f social infrastructure for 7000 households in 25 settlement areas.
BCEOM, (1996-1999):
The development includes a reservoir, a diversion dam, and main canals on the right and le f t banks of the river to irrigate 19,925 ha o f land.
0 Jiangxi Corporation for International Economic and Technical Cooperation (JCIETC) (ChindCo- SAERARBCEOM, 1996):
In 1996, the Chinese experts proposed a water conservancy plan in Ribb River catchment. In the upper reaches o f the river, it i s planned to set up some medium and large-scale hydropower projects. At the valley & mountainous pass, some multi purpose projects which give priority for irrigation and which at the same time take account o f flood control, generating electricity, and water supply have been proposed.
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The development plan includes 9 medium and large-scale reservoirs and a diversion dam to irrigate 20,600 ha o f land. Four reservoirs & a diversion dam are to be situated on the main river, and the rest are to be on the tributaries o f Ribb River.
0 Pre-feasibility Study (BCEOM, 1999):
Water will be provided from Ribb Reservoir, then released into Ribb River and diverted by a diversion weir in to a main canal on the left bank. The right bank will be provided by siphon supply to irrigate 19,925 hectares gross and 14,460 ha net.
Location and Accessibilitv
Dam Site and Reservoir Area:
20. The proposed Ribb dam site and reservoir area i s located in south Gondar Zone, Amhara National Regional State. The right bank i s part o f Ebenat Woreda with Ebenat as administrative center and the left bank i s part o f Fartta Woreda with Debre tabor as an administrative center. The geographic position o f the dam site (axis) in UTM i s 391408m N latitude and 1,330,421m E longitude at the left abutment o f the river.
21. The dam site can be reached from Addis Zemen:
0
0
0
From Addis Zemen to Zeha Giorgis i s about 30km all weather road (along the Addis Zemen- Ebenat main road); From Zeha Giorgis village (coordinates 390228N, 1330243E) to the damaged Ribb bridge i s about 4kms dry season poor conditioned road (old Addis Zemen - Nifas Mewoocha road); From the damaged Ribb bridge to the dam site i s about 4-5km track.
Command Area:
22. The irrigable area i s located in south Gondar Zone, Amhara National Regional State. It i s situated to the east o f Lake Tana on both sides o f the river and on both sides o f Addis Zemen Woreta road. The right bank i s part o f Libokemkem Woreda with Addis Zemen as administrative center and the left bank i s part o f Fogera Woreda with Woreta as administrative center. The project area covers 19 Kebeles with a total area o f 473km2.
23. To the south and west, the area i s bounded by a line roughly following contour 1820m at Ribb river and descending to contour 1795m near Woreta. The contour 1820 constitutes the northern boundary.
24. The lower part o f the command area i s traversed by the Bahir Dar-Gondar main road. The southern part or the lef t bank i s partly accessible from Bahir Dar-Gondar and Woreta - Woldia main roads. The northern part or the right bank could be accessed from the Addis Zemen - Woreta main road and the Addis Zemen-Ebenat road. However, accessibility to the area i s very poor, because most trails are on vertisols which become impossible at a showery rain. Moreover, the flood plain i s dissected by many streams some o f them are rather deep with steep banks.
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Present Situation and Infrastructure
25. At present most o f the project area i s cultivated and partly used for grazing by about 9,000 households, amounting to some 40,000 persons. Crops grown presently in the proposed irrigation areas include teff, finger millet, niger seed.
26. The lower part o f the project area i s traversed by the main Bahir Dar-Gondar road, whereas the southern part on the left bank i s partly accessible from the Wereta-Weldia main road. The northern part or the right bank could be accessed from the Addis Zemen-Debre Tabor road. However, accessibility to the area i s very poor because most tracks are on vertisols which become impassable at the slightest rain. Moreover, the floodplain i s traversed by many streams sometimes rather deep with steep banks. Apart from the main road structures, there are no culverts or bridges.
27. The population in and around the project area i s about 476,000 (1994 Census).
Touomauhv and Climate
28. The upper and middle parts o f the catchment i s characterized by mountainous, highly rugged and dissected topography with steep slopes, the highest one i s Guna Terara with an altitude o f 4,135 meter asl.
29. The lower part o f the catchment i s characterized by valley floor with flat to gentle slopes.
30. The command area i s located on the flat to gentle slope part o f the river basin. The dam site i s located on Yifag 1 :250,000 scale map. The coordinates o f the dam site are 37'59'45"E longitude and 12"02'30"N latitude. At the dam site, the elevation i s approximately 1867 (BCEOM, 1998).
3 1. The valley width i s 150m, 461m, 542m, 590m and 632m at elevation 1870m, 1880m, 1890m, 1900m, 1910m and 1920m respectively. Therefore, the valley i s wide with le f t bank slope o f 50 percent and a right bank slope o f 20 percent. The maximum left bank elevation i s 1925 (BCEOM, 1999).
32. The climate o f the study area i s marked by a wet season from May to September, with monthly rainfalls varying from 65mm in May to 41 lmm in July. The dry season, being from October to April has a total rainfall o f about 8 percent o f the annual rainfall o f 1295mm.
33. The dependable rainfall varies from less than 13mm during the dry season to 8 0 - 2 7 5 d m o n t h during the period o f June to July/August equivalent to 40-80 percent o f the average values.
34. Temperature variations throughout the year are minor being 19°C in December to 23°C in May. Humidity values vary between 70 percent in December to 88 percent in August. Wind speeds are low, thus minimizing potential evapotranspiration values between 9 5 d m o n t h in December and 1 4 0 d m o n t h in April. Sunshine duration i s reduced to 6-6.5 hours during July to August.
Hydrolorn
35. Irrigated agriculture in the valley would depend on water available from the Ribb River and on the possibility o f drainage, which i s influenced by Lake Tana. Without dam, average flows o f Ribb river decrease form a maximum o f 3 lm3/sec in August to a low 0.39m3/sec in April. Dry season flows, exceeded 4 out o f 5 years reach minimum values 0.09m3/sec on average during the dry season in March the discharge i s 0.4m3Isec.
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36. The mean annual discharge at the dam site, covering a catchment area o f 677km2, i s 1l96m3/sec. The average annual inf low i s 454Mm3/year.
37. The flood peak discharges at Ribb dam site are 435m3/sec for 100 years and 723m3/sec for 10,000 years. The sediment load i s estimated at 490,000 tons per year at the dam site. (BCEOM, 1998).
Geolom
38. The geology o f the sub-basin i s dominated by a huge volcano named Guna Terara, which belongs to TTB2 formation o f the Termaber series. It corresponds to the eruptive events that have been occurring during the early Miocene to Pliocene period and i s classified in the shield group basalt.
39. The common lithotype for this material refers to lenticular basalt with large amount o f interbedded scoriaceous lava and basalt agglomerates. Some paleosoils may be interbedded. The other smaller volcanoes located at the north are also considered being active during the same geological period. According to the geological map at 1:250,000, the lava flows issued from the Guna mountain turned north wards while lava flows from the north volcanoes are flowing south wards.
40. Th is fact partly explains the sudden change o f the river direction: the upper section o f the valley runs to north, following the Guna flows direction while down stream the dam site i s r u n s west wards to jo in lake Tana, probably blocked by the hard basaltic flows coming from the north.
41. The lower part o f the valley before lake Tana i s completely overlain by recent fluvial deposition which are mainly formed by s i l t y to clay deposits. Recent volcanic flows belonging to the quaternary eruptive events have also been noted but they appear to be localized in the lower section o f the Ribb plain. No evidence o f such flows has been mapped in the upper parts o f the Ribb basin.
42. The Termabler series o f TTB2 have been affected by the tectonic, which have formed the Lake Tana, and the main stems correspond to the general trend recorded in the vicinity o f Lake Tana. The orientation i s N-S for the major one and NNW-SSE for the second system. Minor fractures may come out locally.
Soil, Landuse and Land suitability
43. In the Abbay River Basin Master Plan Study, 34619 ha o f land was surveyed. The soil survey includes 3 19 auger holes, 94 pits and 354 soil samples. For infiltration test at 24 sites reading were conducted.
44. Accordingly the majority o f the soils can be classified as heavy clay soils with impeded drainage. The soils o f the steeper areas are excessively drained. Electrical conductivity values are very low, having values o f 0.1-0.9ds/m. Therefore salinity wouldn't impose any limitation on plant growth. The flood plain soils (mostly vertisols) have high level o f base saturation indicating a high fertility level.
45. Ground water in the flood plain i s expected to be at a moderately shallow depth, however the semi- detailed soils survey didn't show water table at less than 2 meters depth at the time o f survey. For most o f the proposed crops 71 percent o f the area i s marginally suitable, with limitations on workability due to the heavy texture o f the soil and nutrient deficiency that can be overcome by using fertilizers. With irrigation, i t should be possible to get the right soils moisture at time o f ploughing which i s the bottleneck in the preparation o f seedbed.
46. Most parts o f the dam site and reservoir area are cultivated and grazing with few open bush lands. There i s no significant settlement inside the reservoir area and dam site but few households are settled at the periphery o f the reservoir area and dam site.
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47. According to the Woredas agriculture offices, in the 19 Kebeles, the land use i s classified as follows:
48. The gross area commandable by the main canal i s estimated to be 21,499 hectares. In 1980, 16,864 hectares (78 percent) was under cultivation and 16,100 hectares (75 percent) o f the total command area in 1996 (BCEOM, 1999).
Environmental and Social Sensitivities
49. Water-borne diseases are the major health threats in the area with malaria being the most important. The environmentally sensitive areas in this project area include the Ribb River, Lake Tana, the Fogera Plain and a 2,340 hectares wetland. The mouth o f the Ribb River at Lake Tana serves as an important spawning site for the economically significant Barbus spp. fish species. Additionally the river i s also the nursery habitat for fry o f the same species. Lake Tana, Fogera Plain and the surrounding wetland systems are homes to vulnerable and threatened species such as Lesser Kestrel, Wattled Crane, Greater Spotted Eagle, Lesser Flamingo, Pallid Harrier and Great Snipe.
50. The population size, as projected from the 1994 census, was 39,958 in 1997, o f which about 25,113 are economically active. The majority o f the population belongs to the Amhara ethnic group. The gross enrollment ratio in primary education in the Ribb command area i s among the lowest in the Amhara Region, estimated at about 8 percent. Malaria i s the most reported cause for ailment, and the second i s intestinal parasites. Some 33 percent o f the population has access to clean water, which i s obtained from developed springs and shallow boreholes. Boreholes supply good water to 1.4 percent o f the population. There i s no electric power supply in the command area. The main source o f energy i s fuel wood. The available social services in the command area include: 4 primary schools with 22 teachers (schools are accessible by an average walking distance o f some 40 minutes), grain mills (one grain mill for every 10,893 households, the grain mills are accessible by an average walking distance o f about 76 minutes). A market place exists at an average walking distance o f some 80 minutes. During the 1994 and 1997 period, 2000 households were affected by food deficit.
Project Outline
5 1. The Ribb project area i s located in the plain laying in the middle Ribb valley on both side o f the Addis Zemen-Wereta road and does not reach Lake Tana shores. The area has been specifically selected for gravity irrigation o f a large area from a dam (the study and design o f the dam i s currently underway) to be constructed on the Ribb River.
52. The project will encompass the following elements: flood control, drainage and supplementary plus dry season irrigation by gravity from the Ribb Reservoir, which will be used for storage and flood control. Water will be released from the Ribb Dam into the riverbed, and diverted to the irrigation sites by a weir build close the irrigation sites.
53. With regard to the location o f the diversion weir two potential sites have been identified:
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Site 1 i s located at a bifurcation o f Ebb River and its old course on the southern side o f the flood plain. This old course could be used as f i rs t part o f the main canal to gain command area; Site 2 i s located between Ribb Gabriel and Galilah Mariam. 0
54. The diversion weir would supply water to a left bank main canal. The right bank would be provided via a siphon, supplying water to the right bank main canal. The total irrigable command area identified i s 19,925 ha, as follows:
0
0
0
0
On the right bank o f the river some 6,503 ha were identified below contour 1,800m; On the right bank o f the river some 2,601 ha were identified between contour 1,820 and 1800m; On the left bank o f the river some 7,956 ha were identified below contour 1,800m; On the left bank o f the river some 2,865 ha were identified between contour 1,820 and 1800m.
55. The total net irrigable area on both banks o f the river i s 14,460 hectares.
Anger
General
56. The Anger River, largest o f the three main tributaries o f the Didesa River (the other two bieng Wama and Dabana), drains the area north and east o f Nekemte. The Didesa River i s the largest tributary o f the Blue N i l e River in terms o f volume o f water, contributing roughly a quarter o f the total f low as measured at the Sudanese border.
57. Three projects in the Anger River Basin have been included in the Init ial List o f projects (during the Project Identification Phase), two being multipurpose (irrigation and hydropower) dam projects and one a run o f the river (RoR) irrigation project.
58. The multipurpose projects are: Anger Dam and Nekemte projects. These projects are situated downstream from the Anger’s emergence into a relatively wide, somewhat dissected valley, about l O O k m from the Anger-Didesa confluence.
59. The third project - Dembi GUSU, also h o w n as Anger RoR project - i s located on the right bank o f Anger River about 35km from the Anger-Didesa confluence.
60. The Anger projects are located in East Wellega Region o f the Oromia National Regional State, in the Woredas o f Gida Kiramu, Abe Dengoro and Sibu Sere. The zonal capital o f East Wellega Region i s Nekemte, which i s some 328km form Addis Ababa.
61, The center o f the project area lies 40 km north o f Nekemte. The Anger Dam and Nekemte project areas extend about 50km along both sides o f the Anger River, and for most o f their lengths have a width o f 20 to 25 km.
62. The Dembi Gusu project i s situated on the right bank o f the Anger River some 20km downstream o f the other two projects.
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Previous Studies
63. Irrigation projects in the Anger Sub-Basins were f irst studied at reconnaissance level by the USBR as part o f their “Land and Water Resources Study o f the Blue Ni le Basin” (1964), and more recently by BCEOM, in their “Abbay River Basin Integrated Development Master Plan Project”. BCEOM has identified about 13 irrigation projects in the sub-basin, including the Anger dam and Nekemte schemes. Also, these sites are among the several sites studied, at reconnaissance level, by WAPCOS (“The Preliminary Water Resources Development Plan”, 1990).
Location and Accessibilitv
64. The Anger Dam irrigable area starts at about 35km on the road from Nekemte-Bure after crossing the new bridge on Anger River. The dam site proposed by the previous studies i s about 7 0 h on the road from Nekemte-Shasho Ber-Bure and 9km from Shasho Ber village to the east direction towards Anger River. The dam coordinates are 25’25’56” E and 10’72’01” N, between Tulu Mulu and Bidit hills in Ali and Bidit Kebeles. The Nekemte-Bure all weather road passes through the project area.
Present Situation and Infrastructure
65. Agriculture i s the basis o f livelihood and income for not less than 90 percent o f the peoples living in the Anger River Sub-Basin. The farming system employed i s mixed farming with more emphasis on crop production, using rather traditional methods. In the proposed areas, diversified agriculture can be practiced based on the prevailing climatic conditions, the topography, and the soil and water availability.
66. The catchment areas i s mostly covered by woodlands and bushes and sparsely populated. The erosion and degradation problem in the Anger Sub-Basin i s not as severe as that o f the high lands in the upstream parts of the Abbay River Basin. According to a previous site visit (2002) there are about nine functional small-scale irrigation schemes with total command area o f about 600 ha in the sub-basin. They are constructed by Oromiya Irrigation Development Authority. There are also some currently non-functional small-scale schemes, which were constructed by different Non-Governmental Organizations.
67. The main ethnic groups in the area are Oromo and Amhara settlers speaking their respective languages. The settlement pattern i s a very scattered one. Christianity i s the major religione.
68. There i s no power supply in the vicinity. Estimated population within and near the vicinity o f the project areas i s about 200,000.
ToDomaDhy and Climate
69. The Anger River enters the valley, in i t s upstream part, through broken country, which blends into the mountains to the east. At the lower, or western side o f the Nekemte project, the river enters rough, broken terrain and leaves the area through a precipitous canyon.
70. Topographically the project areas consist o f numerous, irregularly shaped, broad topped, ridges created by innumerable small streams that have cut the general bench land area.
71. The general gradients o f these areas range from gentle to rather steep slopes, but the bulk o f the land varies between 1 and 5 percent in grade. The ridges l ie from 5 to 10m above the stream bottoms.
72. The average elevation o f the project areas, being about 1350mams1, renders the climate in this area almost ideal for growing a variety o f crops under irrigation. There i s no frost hazard at this elevation and
43
latitude. The average annual temperature i s estimated to be around 22°C. Average annual precipitation being about 1 OOOmm, occurring mostly in the June to September period, while annual evapotranspiration by the potential agricultural crops was determined to be 1,390mm.
Hvdro lom
73. The source o f surface water supply for all three projects would be the Anger River. Hydrologic studies performed indicate that there would be excess o f water for irrigation leading to inclusion o f planning for hydroelectric power production.
74. The average f low at the Anger Dam site, covering a catchments area o f 1,926km2, i s 172m3/s, while the peak design flood was taken to be 985m3/s. The annual sediment yield was estimated to be 173,000 tons.
75. At the Nekemte Dam site the annual average flow, covering a catchments area o f 4,623 km, i s 1,937X106m3, while the peak design flood was taken to be 1,280m3/s. The annual sediment yield was estimated to be 962,000 tons.
Geolom
76. The Anger River flows from the high plateau through sharp, steep canyons into a low, wide flat basin, which has been eroded through the plateau, volcanic, and Adigrat sandstone into basement crystalline rocks. Granitic masses o f rock r ise above the general valley floor, indicating that the granitic intrusions are more resistant than the metamorphic rocks composed o f gnesis and schist. The metamorphic rocks, which are expected to be fractured and sheeted, would most probably require consolidation or curtain grouting.
77. The Anger dam site i s located between two ridges, which are granitic intrusions o f acidic compositions.
78. The geologic conditions for for both the Anger and the Nekemte dams are similar. The foundations being underlain with hard metamorphic rocks, which are overburdened with slope-wash and alluvial materials, will most probably, require stripping to bedrock for the cutoff trench. Impervious materials for the core o f the dams are available in sufficient quantities in the immediate vicinity o f the dam site.
Soil, Land use and Land Suitability
79. Cultivated fields with scattered indigenous trees are the land cover o f the Anger Sub-Basin area. The high gradient hills around the project site are covered with dense and open woodlands. Rain fed agriculture i s the main land use type in both Anger and Nekemte project areas.
80. With the exception o f some alluvial deposits near the river and some other isolated areas, all o f the soils in the area are Acrisols and Alisols. These types o f soils are clay loams and clay texture, have a low plasticity, are readily permeable and can be tilled over a wide range o f moisture conditions without structural disturbance. Land classification revealed that about 3 1,275 ha are suitable for irrigation.
Environmental and Social Sensitivities
8 1. The major human health concern in the Anger River basin i s malaria with a prevalence rate o f 5 percent, i s the second most disease in Oromyia Region. N o significant environmentally sensitive areas are listed in the Abbay Master Plan Sectoral Report for this basin. A need for tsetse control programs i s indicated. There i s a good network o f main roads throughout the zone. These state farms in the zone have
44
a network o f access roads to them which are in need of upgrading, The population density in the zone i s very low, estimated at about 36personshz.
Groundwater Development around Lake Tana
82. The area around Lake Tana suitable for groundwater exploitation i s more diffuse and less well defined as compared to the other project areas, but includes in particular the northern and eastern shores o f Lake Tana, where groundwater potential i s significant, where relatively flat low lying areas are available, and where shallow groundwater i s accessible for agricultural purposes.
83. Groundwater use through pumping i s often done on an individual or contractual basis and i s as such more suitable for commercial production, as it provides individual control o f production factors. Opportunities exist to promote private irrigation service providers, equipment leasing companies, pump importers and sales network, and/or treadle pump manufacturers and sales network.
84. In consultation with a rapid groundwater assessment that i s currently under implementation, the consultant will select an area on the eastern or northern shores o f Lake Tana and will propose a specific transaction model and action plan for the promotion o f value chains for the import, manufacturing, lease, sale and/or service provision that will be implemented by the I&D project. Two models will be considered:
(i) Development o f private groundwater exploitation through dissemination o f low-cost individual groundwater abstraction technologies. Project support will be provided for those activities that the private sector will find difficult to finance initially, including development and implementation o f a mass marketing campaign, appropriate technology development, and training and piloting o f technologies. This would be done both within and outside the project areas.
(ii) Development o f community groundwater schemes that use deeper layers o f groundwater, which require public investments in deep drilling. In view o f high pumping costs, only sites with artesian water that reaches ground level will be developed. The project will do so in one pilot site initially.
85. A final decision will be taken once the results from the rapid groundwater assessment are known.
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Annex 2: Major Related Projects Financed by the Bank and / or Other Agencies
Tana-Beles Integared Water Resources Development Project-I.
Productive safety net APL 11.
Productive safety net APL I.
Rural Capacity Building Project.
Sustainable Land Management.
Regional learning and policy dialogue on key agricultural input and output markets.
World Bank
Water Resources Planned Development
Board to approve on January, 2007
Completed
Effective in February, 2007
Planned
Ag. Marketing Proposed
I I
Project I Sector Issue Addressed I Impl. Status I I
Koga Imgation and Watershed Irrigation ADB
Ag. Marketing Private Sector Development. Analytical work and support to specific value chains.
Planned
I
Ratin s
On-going I + On-going
On-going 7 On-going 7
4 On- oin
46
Management project.
Rehabilitation of SSI schemes and training o f Woreda staff.
Irrigation FA0 On-going
Sida-Amhara Rural Development Programme, SARDP.
Irrigation
Agriculture Sector Support project.
JICA On-going Irrigation Farming Improvement Project in Oromia Region.
Baro-Akobo Multipurpose Water Resources Development Sub-project.
Water Resources Development
Water Resources Development
Irrigation
Watershed Management Sub-project.
ENTRO Planned
ENTRO Planned
CIDA On-going Water Harvesting and Institutional Strengthening in Tigray (WHIST).
Performance improvement o f irrigation schemes in Africa (2002).
Irrigation
Blue N i l e Institutional Study.
AFD On-going
Crop Diversification & Marketing Development Project.
Water Harvesting and Institutional Strengthening in Amhara (SWHISA).
Water Resource Development
Eastern N i l e Planning Model.
AFD Ongoing
Agribusiness and trade expansion.
Rural Development
Agricultural input and export market development.
FAO, IDC On-going
Regional learning and policy dialogue on lcey agricultural input and output markets.
4griculture Marketing Support Program.
Ag. Marketing USAID
Rural Development On-going
Rural Development On-going
On-going
Ag. Marketing RNE On-going
Rural Development -Ag. Marketing
IFAD Pipeline
Development
Ag. Marketing
47
Hierarchy of Objectives
Intermediate Outconies
Outcome Indicators
in value added per
in value added per
*
e itcxeagc covered by campfeted
ttire in the Ribb &
project area,
Perccnrage UQM funds cofkcted.
Number o f PPP conhacts signed.
Use of Outconie infomntion
* Measures AAP target.
* Determne adequacy af a ~ r i c ~ ~ t t ~ ~ a ~ ' es towards increasing cropping
ty of the project.
48
tIicrarchy of Objectives Outcome Indicators
fnctdencc of .Funds f l ~ , p r ~ c u r ~ ~ e n t and tcchnrcal sewices d ~ l ~ ~ , e r e d according to AWP schedule.
* Incidence financial. ar3d project progress reports delivered ulthiti one week o f due date. No. o f studies ~ o n ~ o ~ n ~ p ~ ~ i c i p a ~ o ~ a s s ~ ~ ~ r ~ e n t s , mdterm and ~ c ~ ~ ~ ~ ~ a ~ evaluations) ~ o ~ p ~ ~ t c d according to M&E results-bascd framework.
Use o f Outcome Information
* ?&mires Enanctal and i ~ s ~ i ~ u ~ i o n a l sus~ainability.
* Weips identify equity issues for ~ ~ ~ ~ a t ~ o € ~ water and services.
Help identify ~ m p ~ e m e n ~ a ~ ~ # n b ~ ~ l e n e c ~ s at various levels and decide on corrective actions needed.
* Ensure a~equacy of p r o c e ~ ~ e s for an effective project ~ n a ~ ~ ~ ~ ~ n t i n ~ o ~ t ~ o n system.
* Indicates whether the coocept o f M&E has been ~ a n s l a t ~ d into pmctice.
49
3
CI
c) s 0
a 1
18
I
8
c w
s
lo I
;e ?
;e ?
a 3
. .
Annex 4: Detailed Project Description
Project Objective, Outcomes and Components
1. The development objective o f the project i s to sustainably increase agricultural output and productivity in project areas. The expectedproject results include: (i) increase in value added per worker, and (ii) increase in value added per hectare. Achievements under the project will be measured by indicators tracking progress in infrastructure development, intensification o f agricultural production, welfare o f beneficiaries and performance o f key institutions.
Component 1: Irrigation Development (US$7S.O million total, including IDA funding of US$70.0 million and Borrower Jinancing of US$S.O million)
2. The objective o f this component is to sustainably develop about 20,000 hectares of ground and surj5ace water infrastructure and ascertain future irrigation potential in 80,000 hectares. Developing irrigation infrastructure will contribute to achieving the overall development objective by laying the infrastructure foundations for agricultural intensification, and will directly benefit 12,600 beneficiary households.
3. The component will finalize feasibility and detailed design studies on 30,000 hectares. For 20,000 hectares within these 30,000 hectares, the project will prepare bidding documents and launch tenders for construction and construction supervision and develop irrigation infrastructure6. The component will also conduct feasibility studies into 80,000 hectares o f irrigated agriculture, and will conduct a number o f additional studies. Finally, the component will promote low-cost irrigation technologies in low-lying areas around lake Tana, and will support the on-going GoE land certification program.
4. Indicators include: (i) irrigated land as a percentage o f crop land at the end o f the project; (ii) acreage covered by completed irrigation infrastructure in Megech and Ribb schemes; (iii) number o f sites drilled and improved pumping technology adopted in and outside Megech and Ribb command areas; (iv) acreage covered by feasibility studies completed in Anger, Megech, Upper Beles, and Negesso; (v) the livelihoods and standards o f living of persons resettled into and within the irrigation command areas; and (vi) the acreage o f important river and wetland habitats within and adjacent to the command areas. Intermediate outcomes at project completion include: (i) an increase o f the irrigated land as a percentage o f crop land at the end o f the project from 0.6 percent to 0.7 percent; (ii) 20,000 hectares o f completed irrigation infrastructure in Megech and Ribb schemes; (iii) 100 sites drilled and improved pumping technology adopted in and outside Megech and Ribb command areas; (iv) 80,000 hectares o f feasibility studies completed in Anger, Megech, Upper Beles, and Negesso; (v) livelihoods and standards o f living o f persons resettled into and within the irrigation command areas at least equal to the pre-project situation; and (vi) acreage o f important river and wetland habitats within and adjacent to the command areas equal to the pre-project situation.
5. The financing modalities are described in further detail in Annex 4. The component will be implemented by the Federal Ministry o f Water Resources in close collaboration with the regional B O W . The Ministry will be supported by consultants and contractual staff; construction and construction supervision will be outsourced to private consultants and contractors. Implementation responsibilities are detailed in Annex 6.
The estimate o f costs o f irrigation development i s based on a pre-feasibility study that was conducted in 1999. At the time o f completion o f the feasibility study a more precise estimate o f costs w i l l be available and a final decision on acreage w i l l be made.
53
6. The component will finance the following sub-components:
Sub-component 1.1 : Irrigation Investments
7. This sub-component will finance irrigation development on an area covering about 20,000 hectares. The Federal Ministry o f Water Resources has suggested Ribb and Megech sites (Amhara region, Lake Tana basin, see map in Annex 15) for initial irrigation development. The selection was based on a detailed multi-criteria analysis o f nine projects in the Ethiopia part o f the N i l e basin. The selection was also based on the need to keep the upper limit o f development in the current project close to 20,000 hectares.
8. The sub-component will finance the following activities:
Promotion o f low-cost individual irrigation technologies, and piloting o f groundwater
Development o f Megech pumping scheme (5,254 hectares); Development o f Ribb irrigation scheme (14,460 hectares);
development.
9. In Megech Pump Scheme the project plans to irrigate lands o f smallholder farmers through pumping from Lake Tana. The total command area i s 28,846 ha as detailed below:
I Location 1 Nameofsub-scheme I Area(ha1 I
10. The project will take up Seraba in the West Megech area for initial development (5,254 hectares). The development would include head work (pumping station); main irrigation canal (including approach roads); secondary irrigation system, tertiary irrigation and drainage systedflood protection; power transmission line/transformers etc. The estimated cost o f this development with physical/price/engineering contingencies would be around US$9.7 million. An additional 6,532 hectares in Robit will be taken up for feasibility and detailed design study.
1 1, In Ribb Irrigation Scheme MoWR i s currently engaged in carrying out a detailed feasibility study o f a 58 m high Ribb dam through i t s own resources. This i s a part o f larger planned development o f five schemes on the tributaries o f Lake Tana to manage the Lake waters in order to meet the various multipurpose demands (water supply, irrigation, hydropower, flood control, fisheries, navigation, tourism, and environment management o f the Lake). Ribb dam would enable development o f the irrigation command o f the Ribb scheme. The project will encompass the following elements: flood control, drainage and supplementary plus dry season irrigation by gravity from the Ribb Reservoir. Water released from the Ribb Dam into the riverbed will be diverted to the irrigation sites by a weir built close the irrigation sites.
12. Ribb dam i s currently being studied at feasibility level. Investments in irrigation in Ribb depend on the construction o f Ribb dam by the GoE. Wh i le the GoE i s committed to completing construction o f the dam, delays in dam construction will have a direct impact on project performance. The project proposes to
54
mitigate theses risks by adopting a high level o f flexibility in implementation, and making sure that decisions concerning irrigation development are aligned with progress in dam construction. The table below identifies the following key triggers and mitigation measures:
Timing JunO7
Feb 08
Sep 09
Oct 07 -
Trigger Feasibility study o f Ribb dam indicates i t s non-
Mitigation measures for I&D 0 Area under Megech w i l l be expanded, and Ribb area will not be
developed.
0 If the delay goes beyond February 2008 when the irrigation system design under I&D i s expected to be completed, the start o f the procurement for construction o f the irrigation distribution network w i l l be shifted to accommodate th is delay. Contracts for construction o f the irrigation distribution network will be written contingent on benchmarks for progress on the dam.
0 If the delay i s l ikely to be in terms o f years, Megech scaling up will be considered. A decision to this effect w i l l be taken by February, 2008.
0 Contracts for the irrigation distribution network w i l l be written so that construction o f the network i s commensurate wi th progress o n the dam, wi th escape clauses in case o f interruption o f work on the dam. GOE will aff irm financial commitment to the dam as condition o f
viability. Delay in procurement for construction.
Delay in completion.
Abandoning the dam mid-way.
Risk Small
Small
Small
Small Sep 09 effectiveness.
0 Annual allocations for the dam w i l l be disclosed as part o f annual work planning process for the project.
0 In case the dam i s abandoned early in the project, additional area in Megech will be developed.
0 Decision to be taken at the time o f the f i rst mid-term review.
13. In addition, construction o f Ribb dam raises a number o f safeguard issues that need to be addressed in a comprehensive way. The project will do so by raising these issues for the irrigation scheme and dam as much as possible jointly, even though they are financed separately. This i s further outlined in Annex 10.
14. The diversion weir would supply water to a le f t bank main canal. The right bank would be provided via a siphon, supplying water to the right bank main canal. The total command area i s 19,925 ha as follows: (i) 9,104 ha on the right bank o f the river, and (ii) 1032 1 ha on the left bank o f the river. The project would develop the entire 19,925 hectares. Development would include the diversion weir; main irrigation canal (including approach roads); secondary irrigation system, tertiary irrigation and drainage systedflood protection etc. The estimated cost o f this development without physical/price/engineering contingencies would be around US$39.1 million. All studies, construction and construction supervision wil l be outsourced to the private sector.
15. The management o f the schemes will capitalize on opportunities for private sector involvement, as outlined in component 3. Beneficiaries are expected to contribute to capital development costs in labor and local materials. The contribution i s expected to be around 10 percent o f the investment costs.
16. Promotion of low-cost individual irrigation technologies, and piloting of groundwater development around lake Tana will be based on a rapid assessment o f potential in the Lake Tana sub-basin. Currently there i s a near absence o f groundwater irrigation in the sub-basin, but pumping through individual low- cost equipment from rivers and lake Tana i s fairly widespread. Significant shallow groundwater potential in part o f the sub-basin appears to provide an opportunity for upscaling use o f such individual irrigation equipment, in particular dissemination o f low-cost treadle pumps. Deep artesian groundwater, the presence and yields o f which needs to be confirmed by a groundwater study, may provide an opportunity to pilot
55
community groundwater irrigation. Depending on the results o f the groundwater study, the project would (i) in and outside project areas promote low-cost affordable irrigation technologies for shallow groundwater abstraction. T h i s would include training o f local manufacturers, support for a supply network o f low-cost pumps, identification and development o f pico-hydropower plants in the irrigation schemes, and development o f a promotional campaign; and (ii) implement outside the irrigation command areas one deep artesian groundwater pilot scheme for community irrigation.
Sub-component 1.2: Technical Assistance
17. The sub-component will finance the following activities:
0
Additional studies. Feasibility and detailed design studies for 80,000 hectares;
18. Selection o f the schemes for this component i s based on the recommendation o f the PSC on the analysis done by the consultants in the report “Consultancy Services for Identification o f Irrigation and Drainage Projects in the N i l e Basin in Ethiopia- Revised Final Report” July 2006, Federal Ministry o f Water Resources, Ethiopia”. This sub-component will cover the following schemed irrigable command area:
0 Anger: 17,000 0 Megech: 16,660 ha 0 Upper Beles: 30,731 ha 0 Negesso: 10,460 ha
19. Out o f 56,270 hectares identified as arable land in the Anger River Sub-Basin, 31,275 ha (17,000 ha in the Anger Dam project area, 13,200 ha in the Nekemte project area and 1,075 ha in the Dembi Gusu project area) have been found to be suitable for irrigation. Anger i s one o f the schemes identified by the MoWR for quick implementation, and will be taken up to design level, if the feasibility study confirms i ts viability. Anger has important multi-purpose benefits, including irrigation, hydropower, water supply etc, and has a net irrigable area o f 14,450 hectares. The estimated cost o f this activity will be around US$3.4 million. The estimated cost o f the feasibility studies o f the rest o f the area in Megech, Upper Beles and Negesso will be around US$6.4 million. Development o f Upper Beles will depend on completion o f the Tana-Beles Hydropower inter-basin transfer project. The comparative advantage o f Upper Beles would be large-scale development for industrial crops (sugarcane, cotton). The feasibility studies will include a component that will identify opportunities for private sector involvement in the management and development o f irrigation.
20. A number o f additional studies will be conducted, including:
Review o f existing irrigation legislation, including review o f an enabling WUG law. Such law would be specifically designed to cater for WUGs, including membership, arrangements for getting involved in for-profit activities, provisions for cost recovery, etc. The project would also review a streamlined framework for responsibilities in the sector, and an institutional framework for large- and medium-scale irrigation development and management. Support for the completion o f an irrigation strategy. T h i s was started during the preparation o f the project. The purpose o f this activity i s to facilitate internalization o f a number o f critical issues identified in the existing irrigation strategy, including private sector involvement, cost recovery, stakeholder participation. Much o f the large-scale irrigation infrastructure will be considered public irrigation infrastructure (e.g., the pumping station in Megech). In analogy with other countries in the region, this study will help the GoE identify options for the establishment o f a national irrigation maintenance fund in
0
56
charge o f maintenance o f public irrigation infrastructure. The study will focus on sustainable replenishment mechanisms. Improving the ejjicient use of irrigation water. Irrigation i s a wastehl user o f scarce resources, and there are significant opportunities to improve i t s efficiency and productivity. T h i s study will look into these options and assess their validity for Ethiopia.
0
Sub-component 1.3: Environmental and Social Assessments
21. T h i s sub-component would provide assistance to the GoE in the preparation o f environmental and social assessments for investments in hydraulic infrastructure in the lake Tana area. The support would help the GoE to prepare these according to international standards. Support would not be limited to the investments immediately associated with the project, but would extend to other hydraulic investments including investments in storage infrastructure that the GoE i s currently preparing on the Gumara, Megech and other rivers in the lake Tana sub-basin. The component would finance environmental and social impact assessments and the resettlement action plans. The safeguard analyses will also include an environmental and social impact assessment for Ribb dam that will be conducted as much as possible jointly with the assessments for Ribb irrigation scheme. A resettlement plan for those impacted by the dam construction (right-of-way o f the dam, borrow-pits, etc.) will be prepared, as well as, at a later stage, for those impacted by the reservoir. Costs o f resettlement for the two schemes included in the project will be included (but not for the other investments not immediately associated with the project). If necessary, separate assessments will be conducted for groundwater extraction.
22. The sub-component will also support and accelerate implementation o f the existing GoE program o f land certification in support o f capturing multiplier benefits to direct and indirect beneficiaries. The certification process involves a number o f steps, including: (i) surveying, (ii) processing and recording o f the certificate, (iii) preparation o f an index map, and (iv) issuing the certificate. Time i s provided to stakeholders to contest certification decisions. In view o f the fact that land under the project i s irrigated, a high level o f survey accuracy i s justified. The project wil l therefore support the use o f surveying equipment (slower but more accurate) as opposed to GPS (faster but less accurate).
23. The project will finance: (i) support for the acceleration o f detailed land surveys; (iii) preparation and issuance o f permanent certificates; and (iii) strengthening o f the regional cadastre through equipment and staff training.
Component 2: Agricultural and Market Development (US$I 7.0 million total, including IDA funding of US$I 3.5 million, Borrower financing of US$O.6 million and a beneficiaries’ contribution of US$2.9 million)
24. The objective o f this component i s to promote sustainable intensification and commercialization of agriculture on the irrigation schemes developed by theproject. The component will contribute to the project’s development objective by helping establish forward and backward linkages between irrigated agriculture and markets so that multiplier effects o f irrigation development are being captured by direct and indirect beneficiaries. To a large extent, the success o f irrigation development in the Tana basin will depend on smallholders adopting improved technologies, diversifying into new products in accordance with market conditions, and as a result, increasing their incomes from irrigation farming. Additional details are provided in Annex 17.
25. The component will provide resources to assure the delivery o f adaptive R&D on improved production systems and technologies, the delivery o f agricultural advisory services, the strengthening o f research-extension-farmer linkages, and improvement o f market linkages. I t wil l contribute to improved productivity on smallholder farms and diversification o f agricultural production within target areas
57
towards marketable products. T h i s support would be provided within all the project’s target Woredas (districts) and Kebeles (sub-districts). Activities under this component will be implemented by the regional agricultural bureau. The implementation principles and mechanisms which have been adopted by the Rural Capacity Building Project (RCBP), supported by the World Bank and CIDA, would be used.
26. The RCBP aims to pilot institutional arrangements for improved extension services delivery within a few Woredas and Kebeles. I t i s expected that the RCBP will introduce these initiatives within some, but not all, o f the I&D project’s target Woredas and Kebeles, which will allow both the research and extension systems to be more responsive to the specific needs o f farmers cultivating irrigated lands. The project will build on lessons from the initiatives introduced through RCBP, provide TA to adapt initiatives according to lessons learned and extend the initiatives to all Woredas and Kebeles targeted under the project. I t will provide adequate resources to do so, as well as to extend training and capacity-building activities o f the whole range o f actors (farmers, extension agents, service providers, commercial entities) to such thematic areas as irrigation management, farm management, crop diversification post-harvest technologies, market information and development.
27. The project will upscale a financial support mechanism that has been established under RCBP in support o f innovative and sustainable agricultural intensification, and that consists o f four distinct windows:
Under component 2.1: the Farmers’ Advisory Service Fund (FASF) that will promote the development o f the demand side o f the agricultural extension services; Under component 2.2: the Advisory Service Development Fund (ASDF) that will improve the quality and relevance o f the technical advice delivered to farmers by DAs and alternative service providers; Under component 2.2: research grants for Farmer Research-Extension Groups (FREG) to support on-farm adaptive research and development; Under component 2.3: Matching Grants that support development o f dynamic market-driven supply chains, particularly by creating and strengthening linkages between producers and markets, building up o f farmers’ capacities and strengthening professional organizations.
28. Direct beneficiaries o f the agricultural and market development component are as follows:
Megech: approx. 3,400 farm households and related SME/SMIs Ribb Valley: approx. 9,200 farm households and related SME/SMIs Total Project: approx. 12,600 farm households and related SME/SMIs
29. Main results indicators are: (i) number o f households adopting irrigated agriculture in the Ribb and Megech command areas; (ii) percentage increase in cropping intensities; (iii) percentage increase in quantities o f major products marketed by farmers in project area; and (iv) percentage increase in net value o f major products marketed by farmers in project area. Expected intermediate outcomes are: (i) 10,000 households adopting irrigated agriculture in the Ribb and Megech command areas; (ii) increase in cropping intensities from 140 to 180 percent; (iii) 50 percent increase in quantities o f major products marketed by farmers in project area; and (iv) 50 percent increase in net value o f major products marketed by farmers in project area.
30, Implementation arrangements are described in detail in Annex 6. The responsibility o f implementing this component would be entrusted to the regional bureaus o f agriculture.
3 1. The component will include three sub-components:
58
(i) Sub-component 1 : capacity-building for farmers; (ii) Sub-component 2: capacity-building for applied research and extension services; (iii) Sub-component 3: market and value chain development.
Sub-component 2.1: Capacity-building for farmers in irrigated production
32. This sub-component aims at providing adapted technical advice and management support to farmers in the project areas to help them transition from the current production system based on subsistence to one based on intensified irrigated cropping. To that end, it would use the extension services o f the agricultural bureaus, currently supported by the RCBP, and assist Government to introduce alternative institutional arrangements for the delivery of adaptive research and development and supply of agricultural advisory services, as foreseen in RCBP. The project will also support the Farmers’ Advisory Service Fund (FASF) that will promote the development o f the demand side o f the agricultural extension services. Funds would cover both the contracting and advisory services for the Farmer Training Centers (FTCs) and the overhead costs required at Regional and Woreda levels. Start up TA will be provided from the PMU to assist the farmers from each participating FTC to make initial plans and FASF proposals in a participatory manner. This sub-component would assist Government to introduce alternative institutional arrangements for the delivery of adaptive research and development and supply of agricultural advisory services within all the project’s target Woredas (districts) and Kebeles (sub-districts), including:
Further decentralization o f responsibility for decisions on extension from the Woreda level to farmer groups, communities and farmer training centers (FTCs); Increased participation o f farmers in programming, M&E, and priority setting; Increased pluralism in service delivery to draw in the sk i l l s and ideas from a variety o f service providers; Development o f advisory service programs adapted to the needs o f specific circumstances and demands emanating from irrigated agriculture and marketing o f high value crops; Development o f mechanisms to reach married women farmers; Establishment o f stronger agricultural research-extension-farmer linkages; and Greater emphasis placed on management o f cropping systems and farm management. .
Sub-component 2.2: Capacity-building for applied research and extension services
33. This sub-component will assist Government in improving the linkages between the Ethiopia Institute for Agricultural Research (EIAR), i t s regional research stations and the end users, and in strengthening the capacities o f extension services delivered by the Amhara regional agriculture bureau, providing additional resources to the ongoing RCBP and in introducing and scaling up alternative institutional arrangements for the delivery of adaptive research and extension services by a wide range ofproviders, public and private. The project will also support the ASDF, put in place by the RCBP, as well as the other institutions supported by the RCBP (REFACs, FREGs). Through TA, training and other consultancy services, i t will seek to improve the quality and relevance o f the technical advice delivered to farmers by DAs and alternative service providers (including researchers, agricultural input suppliers, agricultural traders, private agricultural advisors, agricultural extension staff from regional offices as well as from participating Woredas).
Sub-component 2.3: Market and value chain development
34. The project will fund, through Matching Grants, development o f dynamic market-driven supply chains, particularly by creating and strengthening linkages between producers and markets, building up o f
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farmers’ capacities and strengtheningprofessional organizations. The activities funded under this sub- component would be essentially private in nature and would be initiated upon request by a farmer, a farmer group or a private sector operator. Project support would be provided to priority new investments through a cost sharing mechanism according to a pre-established positivehegative l ist. Sub-projects considered could include investment in collective storage, supply chain development, new technology demonstration and dissemination, support to private distribution networks for inputs and equipment and microfinance institutions, and support to contract farming and integrated sub-projects initiated by commercial or agro-industrial partners and involving small scale producers. The overall goal o f these activities will be to increase household incomes o f the SME/SMIs including farmers. To achieve this overall objective, the activities will focus on four key thematic goals: developing market linkages, providing business development services to SME/SMIs, developing SME/SMI institutions in general and associations in particular, and facilitating credit and savings among SME/SMIs. The activities to be supported will benefit the following key target groups: farmers, SME/SMIs, business associations, business development service providers, corporate entities in the value chain and government institutions involved in the implementation o f the activities.
Component 3: Irrigation Management (US$13.3 million, including I D A funding of US$12.2 million and Borrower financing of US$I .I million)
35. The objective o f this component i s to enhance the efJiciency and thefinancial sustainability of irrigation infrastructure intended for implementation and future study. This will be accomplished in two ways: (i) strengthening the capacity o f Water Users Groups to enhance their constituency base and to carry out necessary operation and maintenance (O&M) and cost recovery functions; and (ii) promoting and implementing a greater role for public-private partnerships in irrigation infrastructure management in order to improve efficiency and operational performance. The component aims to support accountable and transparent irrigation management and to improve the quality o f service delivery so that irrigation becomes an attractive proposition for private investors. This i s expected to have impacts on the distribution o f benefits among direct and indirect beneficiaries.
36. Direct beneficiaries from the irrigation management component include those households who farm in the project areas (about 12,600 households in total), staff from MoWR, local authorities and irrigation extension staff.
37. Outcome indicators include: (i) number o f MoWR and BoWRD staf f trained in participatory irrigation; (ii) percentage O&M fees collected; (iii) number o f Public, Private, Partnership (PPP) contracts signed; (iv) user satisfaction with irrigation O&M services; and (v) irrigation efficiencies in the top- and tail-end part o f the scheme. Intermediate results are: (i) 25 staff members from MoWR and BoWRD trained in participatory irrigation management; (ii) 100 percent o f O&M fees collected; (iii) at least two PPP contracts signed; (iv) at least 70 percent user satisfaction; and (v) irrigation efficiencies in top- and tail-end o f the scheme at least 40 percent.
Sub-component 3.1 : Developing and Strengthening Capacity of Water Users Groups
38. Few farmers in the project areas have experience in individual and combined responsibilities related to water management and maintenance o f infrastructure. Each o f the project sites will therefore require an intensive program o f stakeholder consultations and dissemination o f information to farmers. Additionally, assistance will be needed to organize farmers into legally recognized Water Users Groups with a set organization and decision making structure. Particularly, there i s a need to inspire the level o f accountability for the farmer groups to carry out their responsibilities for system maintenance, for collection o f user fees, for allocating water entitlements and for scheduling irrigation services as well as for sanctioning members that don’t respect ru les and regulations. Accountable and transparent irrigation
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management will help the project deliver on i t s commitment to distribute benefits more equitably, and turn investment in irrigated agriculture into a credible proposition for private investors. Flat per hectare O&M charges will also provide incentives to farmers to increase value added per hectare.
39. Ethiopia’s experience in large-scale irrigation i s mostly in the field o f parastatal farms. Increasingly, large-scale smallholder irrigation i s being developed. This i s l ikely to continue in the near future. The project will therefore strengthen capacities o f MoWR and BoWRD staf f to ensure that they adequately involve beneficiaries o f irrigation investment programs in project feasibility and design studies, and in project implementation. The project would help develop capacities for the design, pilot and evaluate innovative approaches for stakeholder involvement and for the implementation o f participatory approaches. MoWR and BoWRD would become responsible for establishment and capacity strengthening o f WUGs under the project and would take the lead in the implementation o f PPP in irrigation.
40. The sub-component will also implement demand-based approaches to system planning and design for Ribb and Megech schemes. Such stakeholder consultations are needed to consider the farmer wishes and their ability to pay for irrigation services in the technical designs. The planning and design o f irrigation infrastructure will involve intense stakeholder consultations with farmer groups in order to bridge what has traditionally been a common divide between technical solutions, and what farmers need and can reasonably pay for.
41. Water users in Ethiopia have so far been mostly organized into legally recognized Water Users Cooperatives, in accordance with the Cooperatives Act and with the assistance from the Ministry o f Cooperative Promotion. However, under the project, Water Users Groups are understood to include both Water Users Associations and Water Users Cooperatives. The project will sensitize communities on WUAs and encourage the formation o f these in view o f the comparative advantages as demonstrated in other countries, and in view o f the nonprofit nature o f O&M.
42. The sub-component will: (i) assist in establishing WUGs in the Megech and Ribb command areas; (ii) conduct extensive consultations with farmers and water users groups as part o f the demand based irrigation planning and design process; (iii) strengthen capacities o f farmers, WUGs and Woreda, regional and national irrigation s ta f f on issues associated with irrigated agriculture, including: (a) water management; (b) O&M requirements; (c) administration and management program o f WUGs; (d) cost recovery and financial sustainability o f the system, and other issues as jointly identified through a training needs assessment.
43. Capacity strengthening will be done on the basis o f a capacity strengthening needs assessment, and wil l be implemented at the site level using farmer field school methodologies. I t wil l be practical and on- the-job. Annual training evaluations will provide inputs to the design o f subsequent training programs. The project would actively support the delivery o f capacity strengthening services through third parties, and support MoWR and local authorities to make sure that they play a supporting role in the enforcement o f WUG rules and regulations, in particular those related to recovery o f O&M costs.
44. The effective development o f sustainable WUGs will require a gradual approach. Three phases are planned, each with a duration o f approximately two to three years: (i) mobilization: identification o f key stakeholders and WUG formation; (ii) consolidation: formal establishment and capacity building; and (iii) upscaling: the transfer o f more responsibility to WUGs and an increase in O&M cost recovery to 100 percent.
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Sub-component 3.2: Promoting the Role of Private Operators in Irrigation Infrastructure Planning and Operation
45. This sub-component will provide high level advisory and transaction specialists in order to implement the PPP elements for the operation and maintenance o f the main systems o f the proposed investment schemes at Megech and Ribb. T h i s will be based on the transaction models and action plans that have been prepared under the preparation o f the project. In addition, it will identify other possible opportunities within the remaining 80,000 hectares o f study, where the role o f a private operator in taking on the related r isks o f a given operation can be expanded. During project preparation, a number o f public-private models for involving private operators have been studied and retained for implementation under the project. The models are largely determined by the way the various risks o f the investment, financing and operation are allocated between the public and private partners.
46. For the proposed schemes intended for implementation, the PPP advisors will be carrying out a number of activities including:
(i) (ii)
An assessment o f the various risks associated with each scheme; Engaging in consultations with Government and farmer groups on the reasonable manner in which risk can be allocated, without losing the plausible interest from private parties, and communication and stakeholder consultations for transferring know how to the various groups;
(iii) Adopting a number o f alternative schemes which can be market-tested for likely private sector interest;
(iv) Adoption o f transaction models for implementation; (v) Launching an effective investor search program for both foreign and local bidders; (vi) Developing legal agreements and bid documents and managing the bid and negotiations and
finalizing the transaction.
47. The costs o f this sub-component will include the shortfall in O&M costs during the initial years o f scheme operations, and the O&M costs o f primary public irrigation infrastructure.
Component 4: Project Management (US84.7 million, including I D A funding of US84.3 million and Borrower financing of US80.4 million)
48. The objective for this component i s to manage resources in accordance with theproject’s objectives and procedures.
49. Outcome indicators include: (i) incidence o f funds flow, procurement and technical services delivered according to AWP schedule; (ii) incidence o f financial and project progress reports delivered within one week o f due date; and (iii) number o f studies (ongoing participatory assessments, midterm and terminal evaluations) completed according to M&E framework. Intermediate outcomes at project completion include: (i) 100 percent incidence o f funds flow, procurement and technical services delivered according to AWP schedule; (ii) 100 percent incidence o f financial and project progress reports delivered within one week o f due date; and (iii) all studies (ongoing participatory assessments, midterm and terminal evaluations) completed according to M&E framework. The project will finance the following sub- components:
Sub-Component 4.1: Project Management
50. This sub-component will manage the project by providing technical assistance, training, office equipment, vehicles, office upgrading works, auditing and evaluation studies, and operating cost in support of project management. The sub-component will carry out overall project planning, quality
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oversight and technical supervision, strengthen procurement and financial management capacity and improve monitoring quality o f project activities. It wil l also contract out quality oversight through independent financial and technical audits, and evaluation o f project activities against expected outputs and outcomes. I t will support the institutions involved in project implementation, including the Ministry of Water Resources and other Ministr ies at the Federal level, Bureaus at the regional level and WITS at the Woreda level.
5 1. The sub-component will link periodic and annual monitoring o f project performance with subsequent annual project planning activities so that M&E data are interpreted and used as an instrument for project planning.
52. The project management support will encompass all target Woredas (Fogera, LiboKemkem, Gonder Zuria and Addis Zemen) as well as national (NPC) and regional (WC) level coordination.
Sub-component 4.2: Monitoring and Evaluation
53. This sub-component will conduct regular M&E o f project inputs, outputs and results. It wil l also support the establishment o f a national irrigation M&E system in the M&E department o f M o m . The latter will be responsible for project M&E and assessment o f development impact. The sub-component will also assist the M&E department in measuring the results o f irrigation investment in agriculture development. The type o f support would include technical assistance, training and capacity strengthening (which would include technical skil ls, management ski l ls , existing data system and their quality, technology available, fiscal resources and institutional experience). The sub-component will improve data collection and reporting on key performance output and impact indicators, including targeted data collection, surveys (including baseline and user satisfaction), participatory assessments and mid-term and final evaluations. The data that will be collected and monitored include those presented in Annex 3.
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Annex 5: Project Costs
Project Cost By Component and/or Activity Total
Foreign us Local U S $million U S $million $million
Component 1 : Irrigation Development 11.6 55.6 67.2 Component 2: Agricultural and Market Development 8.6 7.1 15.7 Component 3: Irrigation Management 5.1 7.2 12.3
* The Borrower’s contribution to project costs wi l l include taxes and duties.
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Annex 6: Institutional and Implementation Arrangements
A. Project Implementation
1. The project will be implemented based on the following principles: (i) Government’s policy which further devolves decision-making process to the local levels; (ii) a more proactive role by regional bureaus and Woredas in the implementation o f projects while fully recognizing the respective mandates; (iii) capitalize and build upon existing institutional structures, manpower, mandates and facilities and strengthening these through technical assistance; (iv) full participation o f the end users in project preparation, design and implementation; (v) private sector participation and public-private partnerships; and (vi) capacity strengthening o f implementing organizations at al l levels.
2. The project will be implemented by the following agencies at national, regional and Woreda levels:
0
0
0
National: The Ministry o f Water Resources, in full consultation with other ministries and organizations, will be the major implementer o f the project at the national level. Regional: In Amhara Regional State, the agencies that will be involved in the project implementation include BoWRD, BoARD, EPLAUA, BoCP and RARI. Woreda: At Woreda level the project will be implemented by the WPIT, consisting o f the Heads o f Woreda Offices, including Water Resources Development, Agriculture and Rural Development (WoARD) and others. The WPIT will work with Kebele Associations, DAs, SMSs and FTCs.
B. Implementation Arrangements
Steering Committees and Guidance
3. National Project Steering Committee (NPSC): an NPSC has been established at the level o f the federal Government. The NPSC will be chaired by the State Minister, M o W R with the National Project Coordinator (NPC) as secretary. Membership would reflect the range o f stakeholder interests o f the I&D project, including, but not limited to, representatives from Ministry o f Agriculture and Rural Development (MoARD), Environmental Protection Authority (EPA), Ministry o f Finance and Economic Development (MoFED), Ethiopian Institute o f Agricultural Research (EIAR), private sector at the federal level and representatives from the Amhara BoWRD, BoARD, BoCP and EPLAUA, c iv i l society, academia and other relevant stakeholders. The NPSC will be responsible for: (i) ensuring that relevant government water sector policies and the project objectives are adhered to; (ii) reviewing and approving annual programs, work plans and budget; (iii) monitoring and evaluating the progress o f the project; and (iv) providing guidance and advice to the NPC. The NPSC will meet at least twice annually.
4. Regional Project Steering Committee (WSC): At the regional level, a RPSC will be formed under the chairmanship o f the Regional President with the Regional Project Coordinator (RPC) as secretary. The RPSC wil l consist o f the Head o f BoWRD, Head o f BoARD, and representatives from ARARI, BoCP, BoFED, Bureau o f Trade and Industry (BoTI), EPLAUA, Food Security Office and representatives o f the two apex Water Users Groups. Membership will also be extended to representatives from local universities, civil society and private sector organizations (e.g. chambers o f commerce) on a case by case basis. The RPSC will be responsible for: (i) reviewing and approving annual programs, work plans and budget; (ii) monitoring and evaluating the progress o f the project; and (iii) providing guidance and advice to the RPC. The RPSC will meet at least on a quarterly basis.
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Implementation o f Project Activities
5. National: M o W R will be responsible for the overall implementation and coordination o f the project at the national level and will implement the different activities o f the project through coordinated arrangements with the regional and Woreda bureaus and other offices. The Ministry has appointed an NPC under i ts Irrigation and Drainage Development Studies Department who will be assisted by TAs in areas o f finance, procurement, M&E, and PPP development. The coordinator will also solicit the assistance o f the different line departments o f the Ministry as required.
6. Regional: An RPC will be appointed in BoFED by the Amhara Regional President. BoWRD, BoARD, EPLAUA, BoCP, ARARI will be responsible for implementation o f the project activities. B O W and BoARD will be assisted by TAs in areas o f finance and procurement on a full time basis. Other TA will include land administration, cooperative promotion, and farmers-research-extension groups, and will be provided intermittently, according to the development phase o f the project. The different agencies and TAs will provide support and services in implementation o f project activities at scheme (Rib and Megech) and Woreda (Denbia, Fogerra, Libokemkem and Gonder Zuria) levels.
7. Woreda: At the Woreda level, implementation wil l be done by Woreda Project Implementation Teams (WPIT), comprising o f the Heads o f the Woreda Offices o f Water Resources Development, Agriculture and Rural Development, Cooperative Promotion and Environmental Protection, representatives from Woreda Finance, representatives o f Kebele Associations, and WUGs. The WPIT will be responsible, among others, for promoting the I&D project in the community, facilitating the implementation o f capacity building for farmers in irrigated agriculture, capacity building for applied research and extension services and the introduction o f three grants (FASF, ASDF and FREG), assist the community in selecting and contracting local service providers, and assist farmers to establish WUGs. Schematic representation o f the implementation arrangements i s shown in Chart 1.
8. Financial arrangements: The overall responsibility for financial management will be with the Administration and Finance Services o f the MoWR at the federal level. A Special Account and a Birr account will be opened for the MoWR at the national level; two Birr accounts will be opened at the regional level - one in the BoWRD and one in the BoARD. A petty cash account will be established at BoFED. Budgetary transfers will be made based on annual work plans to be approved by the NPSC and RPSC at the national and regional levels respectively. At the regional level annual work plans will include budgetary provisions for implementing agencies including BoWRD, BoARD, BoFED, BoCP, EPLAUA and other agencies involved in project implementation.
9. Procurement: At the national level, the MoWR will be responsible for major procurements under component 1,2,3 and 4, including the procurement o f the services o f consultants and contractors for study, design, construction and supervision o f major infrastructures, hiring o f consultants for feasibility studies and purchasing o f equipment. BoWRD and BoARD will be responsible for their respective procurement needs below thresholds that have been determined through a procurement assessment (see Annex 8). Procurement responsibility above the threshold will be done by MoWR. Procurement for BoFED under the project will be done by BoARD or B O W .
10. For each contract financed by the Credit, the different procurement or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, the implementing agency, and time frame have been determined in the Procurement Plan. A Procurement Plan has been prepared at appraisal (see Annex 8) and wil l be updated at least annually to reflect changes during implementation.
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1 1. Technical Assistance: MoWR will be provided with fill time TA support for Finance, Procurement/Contract Administration and Monitoring and Evaluation. At the regional level, fulltime TA support will be provided for Finance, ProcurementKontract Administration to BoWRD and BoARD each, and intermittent TA support at various stages o f the project l i f e to the relevant Bureau in Agronomy/ Irrigated Agriculture; Land Administration; Water Users Groups Development; Agricultural Marketing/Agribusiness, Cooperative Development and other technical areas to be identified. TA for Monitoring and Evaluation will be provided to BoFED.
12. Project Implementation Manual: Detailed manuals for Project Implementation (including sections on Monitoring and Evaluation, Project Financial Management and Procurement) have been prepared during the preparation o f the project.
Component 1: Irrigation Development
13. Sub-component 1.1: Irrigation Investments: The Ministry o f Water Resources, through i t s Contract Administration Department, will be responsible for the selection o f consultants, contractors and contract administration and supervision under this sub-component for both surface water and ground water. The Amhara BoWRD will be delegated by MoWR to supervise and follow up the construction o f the different structures including the drilling for ground water.
14. Sub Component 1.2: Technical Assistance (Feasibility and Design Studies): The M o W R will be responsible for the selection and supervision o f consultants for conducting the feasibility and design studies in Anger, Megech, Upper Beles and Negesso. I t will work closely together with the Amhara BoWRD.
15. Sub Component 1.3: Environmental and Social Assessments: to meet internationally accepted standards for large scale irrigation projects, the MoWR will undertake environmental and social assessments relating to project infrastructure and related storage in the lake Tana sub-basin through consultancy services. This would be done in consultation with EPA and EPLAUA.
Component 2: Agricultural and Market Development
16. T h i s component will be implemented by BoARD, in close consultation with BoWRD, BoCP and AR4RI.
17. Sub-component 2.1 : Capacity Building for Farmers in Irrigated Production: This sub-component will be implemented through the extension services o f BoARD and WoARDs, and will involve FTC strengthening, including inclusion o f irrigated agriculture topics in the training curriculum, and upgrading o f DAs in areas related to irrigation. The Agricultural and Market Development Division and RARI will be involved in supporting research-extension-farmer linkages and the establishment o f FREGs. The RPC will facilitate the availability o f FASF and research grants for FREGs. BoARD together with WoARD will help facilitate the establishment o f contracting and advisory services for the FTCs and the preparation o f research proposals by FREGs for funding. T h i s sub-component will have strong linkages with RCBP.
18. Sub-component 2.2: Capacity Building for Applied Research and Extension Services: BoARD and WPIT will undertake capacity building needs assessment o f the extension services in the region. They will arrange for TAs, consultancy services and s k i l l upgrading training for DAs and SMSs in TVETs, higher learning institutions, and through other service providers in the relevant areas. BoARD and the WoARDs will also make use o f the ASDF to facilitate professional development o f public and non-public sector service providers, public and private input suppliers and traders on irrigation and drainage.
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19. Sub-component 2.3: Market and Value Chain Development: The Crop Development Division o f BoARD, together with the Inputs and Marketing Division, supported by BoCP wil l be responsible for the development o f market-driven supply chains and the strengthening o f farmers’ organizations including the development o f SMEI SMIs. T h i s would include provision o f advisory services to farmers in marketing o f produce, including high value crops, resulting from irrigated agriculture. The Matching Grant will be implemented by the WPIT with appropriate screening, approval and disbursement procedures, as outlined in the Project Implementation Manual.
Component 3: Sustainable Management o f Irrigation Infrastructure
20. Sub-component 3.1: Developing and Strengthening Capacity o f Water Users’ Groups: Farmers will be organized into WUGs by DAs with the assistance o f Woreda Water Resources Team, the Kebele Associations and Woreda Rural Development Committees. The WPIT will be responsible for identifying and arranging for TAs and service providers to assist communities in establishing WUGs, introduce appropriate management systems and technologies, arrange for training o f WUGs members and officials, and help empower communities plan, construct, and manage irrigation and drainage facilities sustainably. Implementation will be supported by an international expert in participatory irrigation.
21. Sub- Component 3.2: Promoting the Role o f Private Operators in Irrigation Infrastructure Planning and Operation: This sub-component would involve the acquisition o f high level advisory and transaction specialists and will be the responsibility o f the MoWR at the federal level in consultation with BoWRD.
Component 4: Project Management
22. Sub-component 4.1: Project Management: MoWR has appointed an NPC under i t s Irrigation and Drainage Development Studies Department, while the Amhara Regional President will assign an RPC, to be located in BoFED, to coordinate the project at the regional level. The RPC will have responsibility for coordinating project activities among the various concerned regional agencies (ARARI, BoWRD, BoARD, BoCP, EPLAUA) and WPIT, and provide the necessary coordination support for effective implementation at Woreda and Kebele levels.
23. The project will provide technical support in M&E to MoWR and BoFED. In addition, the MoWR, BoWRD and BoARD will receive TA in financial management, procurement, including capacity development/ training at the respective levels. The NPC and RPC will be responsible for: (i) preparing annual work plans; (ii) maintaining a systematic project database to facilitate periodic reporting (quarterly and annually); (iii) undertake routine monitoring o f project activities; (iv) preparing annual progress and performance reviews for presentation to the NPSC and RPSC; and (v) tracking project financial and physical performance.
24. Sub-component 4.2: Strengthening Monitoring and Evaluation Functions: overall responsibility for M&E functions will rest with the NPC and RPC. They will supervise all M&E activities, supported by a specialized M&E contract officer both at MoWR and in BoFED. The M&E officers would ensure the timely collection, collation, and analysis o f data from various sources, systematic storage in the project database, and preparation o f routine and special reports and studies. The latter includes baseline and thematic evaluation studies, which will provide a basis for mid-term and final evaluations. The regional M&E officer will work with the PPD departments o f BoWRD and BoARD and other relevant agencies, such as EPLAUA and BoCP. In view o f the comparatively long duration o f the project, three evaluations will be held at two and five years from effectiveness, and at project completion.
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25. Capacity for M&E functions within MoWR and in the region has been developing in recent years. However, further strengthening at both levels i s necessary. Th is i s provided for through local and overseas training and study visits as well as technical assistance and contracts for M&E system development, including database software development, and the design and undertaking o f sample surveys and community level participatory assessments. These would be guided by the results framework outcome indicators (see Annex 3) and the M&E Manual being developed as part o f project preparation.
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3 Y L nt f L,
Annex 7: Financial Management and Disbursement Arrangements
Introduction
1. The financial management (FM) assessment i s conducted in line with the Financial Management Practice Manual issued by the FM Board on 3 November 2005. The objective o f the assessment i s to determine whether the implementing entities have acceptable financial management arrangements, which wil l ensure: (i) the funds are used only for the intended purposes in an efficient and economical way; (ii) the preparation o f accurate, reliable and timely periodic financial reports; and (iii) safeguard the entities’ assets. As part o f the FM assessment, the team visited the Ministry o f Water Resources (MoWR) and used the team’s cumulative knowledge and experience about the country and existing projects implemented by MoWR, and Amhara Regional Agriculture and Rural Development, and Water Bureaus. The FM assessment was conducted during the months o f February and March 2007.
Country Issues
2. The recently completed Joint Budget and Aid Review (JBAR) and the Fiduciary Assessment (FA) show that Ethiopia has made significant progress in strengthening public financial management in recent years. As part o f the JBAR, the Bank in collaboration with other donors, conducted a Public Financial Management (PFM) status review using the Public Expenditure and Financial Accountability (PEFA) framework. Of the fourteen indicators covered under th is review, Ethiopia met seven o f the indicators related to the planning, budgeting and reporting systems. Generally, Ethiopia scores high in macroeconomic management, including aggregate fiscal discipline and minimizing fiscal r isks. Satisfactory progress was also noted in budgeting and accounting reform, though the adequacy and quality o f budget reporting leaves room for improvement, and remains a key concern.
3. The FA, which was completed in early 2005, notes that considerable progress has been made in the implementation o f FM reforms in both federal and regional level administrations. The areas o f improvement include budget processes, internal controls and cash management. Also, some steps have been taken in reforming internal and external audits. Nevertheless, there are some weak areas that require attention. These include: (i) delays in financial reporting (both in-year and annual); (ii) inadequate capacity o f the auditors-general to discharge their responsibilities; and (iii) weakness in legislative scrutiny o f audited financial reports. At Regional level, the situation varies from region to region. With the support o f the Government and donor initiatives, the roll-out o f PFM reforms occurred f i rs t in SNNP and Tigray regions and both show improvement in the overall public finance function and a consequential reduction in fiduciary risk. Other Regions are at an earlier stage o f investment in PFM, or have not yet commenced their plans, and therefore demonstrated less progress in PFM improvement. More recently, Amhara and Oromiya have improved their performance significantly, as evidenced by timeliness in closure o f accounts as well as implementation o f the budget and accounts reforms.
4. Ethiopia’s public financial management reforms have been managed by the Expenditure Management and Control sub-program (EMCP) o f the Government’s civi l services reform program. EMCP has developed a revised strategic plan to implement the nine components o f the sub-program. Mobilization behind the EMCP (in terms o f financial and human resources), as a key component o f the Public Sector Capacity Building Program, i s now a priority.
Summary of Project Description
5. The development objective o f the proposed project i s to sustainably increase agricultural output and productivity in project areas. The proposed project consists o f three technical components: (i) Irrigation
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Development, (ii) Agricultural and Market Development, and (iii) Irrigation Management. The fourth component i s Project Management.
Risk Mitigating Measures
Incorporated into Project Design
Risk Assessmc Risk Conditions for
Negotiations, Board or
Effectiveness Y/N)
N
N
Inherent risk Country level
PreDaration o f FM
Entity level
I
Y Project level
The government accounting systems w i l l be revised to accommodate the needs o f the project.
Control Risk
Y (Effectiveness)
Budgeting
Accounting
Internal Control
Funds Flow
Financial Reporting
t and M Risk
rating
S S
S
S
S M
S
M
M
S
manual (as annex to the Project Implementation Manual) and recruitment o f
(Effectiveness)
additional accountants. I I
I N
MoWR will design a good reporting and (Effectiveness) monitoring mechanism, and provide continuous trainin L to Finance.
Remarks
The Civ i l Service Reform Program, undertaken by the government, i s in the process o f developing the accounting and auditing profession and studies are being conducted to improve the salary scale o f c iv i l servants. These will have a long-term effect rather than a short-term effect. The number o f accountants at every level i s l ow and t h i s i s aggravated by high tum- over o f staff. The long-term solution i s to increase the supply side and government i s building thirteen additional universities to increase the number o f graduate accountants and the government i s also providing training to the existing staff through the C iv i l Services Reform Program. Preparing clear FM guidelines and recruiting additional accountants w i l l enhance the capacity o f implementing entities.
All implementing agencies prepare annual budget and they prepare regular reports comparing budget and actual. Ministry o f Water Resources (MoWR) and Amhara Bureau o f Water Resources Development (BoWRD) and Bureau o f Agriculture and Rural Development (BOARD) have previous experience in implementing donor-financed projects.
The internal audit departments at al l levels w i l l include the project in their work program. Clear guidelines on how to transfer funds to lower level and how to transfer subsequent transfer will be included in FM guidelines There could be delays in getting financial reports from Regional Bureaus o f Agriculture and Water.
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Auditing
H-High, %Substantial, M-Moderate, L-Low
Officers at a l l levels to get timely financial reports.
project accounts, within three months after the end o f each fiscal year so that the auditors will have three months to complete the audit.
S MoWR will close the N There have been delays in submitting audited project accounts by MoWR for closed and existing projects.
5. The overall financial management risk rating for this project i s assessed as Substantial.
Significant Weaknesses Action Responsible body Lack o f adequate staff at Recruitment o f one MoWR, Ahmara
Strengths
Completion Before Effectiveness
6. The country’s discipline in executing budget and complying with the existing government regulations are the major strengths indicated in most o f the PFM diagnostic works conducted so far. MoWR, and Amhara BoWRD and BoARD have previous experience in implementing donor-financed projects, including Bank-financed projects. To implement the project effectively, MoWR, Amhara BoWRD and BoARD will recruit additional Accountants to strengthen their finance departments.
Delays in getting regular financial reports on a timely basis.
Weaknesses and Action Plan
capacity. Organize continuous MoWR Regular training for finance s ta f f o f all implementing agencies.
additional Accountant at the Finance Department o f MoWR, and one Accountant for each o f the Amhara BoWRD, BoARD in order to further strengthen their existing
BoWRD and BoARD
Implementing entities
7. The overall responsibility for the implementation o f the project rests with Ministry o f Water Resources (MoWR). At the regional level, a Project Coordinator (RPC) wil l be appointed by the Regional President to coordinate project activities among the various participating regional agencies (including BoWRD, BoARD). The RPC will s i t in BoFED which will be responsible for the planning and programming o f regional activities. BoWRD and BoARD will be responsible for project implementation at the regional level. At the Woreda level, the WITS will be responsible for the implementation o f project activities. MoWR and the Amhara Regional President’s Office will be supported by a national and regional project coordinator, respectively and by M&E staff, The MoWR will further be supported by experts in procurement, finance, etc. The finance units at MoWR, Ahmara BoWRD and o f BoARD will be responsible for the financial management o f the project. Expenditures incurred at Woreda level will be
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handled by the respective regional bureaus for activities which are implemented by BoWRD and BoARD, and all the supporting documents will be kept in BoWRD and BoARD.
Budgeting
8. The Ethiopian budget system i s complex, reflecting the fiscal decentralization structure. Budget i s processed at federal, regional, zonal (in some regions), Woredas and municipality levels. The federal budgeting process usually begins by issuing the budget preparation note to the Budgetary Institutions. Based on the budget manual, the Budgetary Institutions prepare their budgets in line with the budget ceilings and submit these to MoFED within six weeks following the budget call. The budgets are reviewed at f i rst by MoFED and then by the Council o f Ministers. The final recommended draft budget i s sent to parliament around early June and expected to be cleared at the latest by the end o f the fiscal year.
9. MoWR, and Amhara BoWRD and BoARD prepare annual budgets based on their respective strategic plans. MoWR’s annual budget i s included in the annual budget proclamation o f the federal government and the annual budgets o f Amhara BoWRD and BoARD are included in the regional budget proclamation. Each o f the implementing agencies prepares regular reports comparing actual and budget and submit the same for management and donors for information and decision making.
Accounting
10. MoWR, Amhara BoWRD and BoARD are using the Ministry o f Finance and Economic Development (MoFED) system o f accounting- modified cash basis o f accounting on a double entry accounting system. Manuals, formats and guidelines o f MoFED are being used in recording and reporting financial transactions o f their respective offices.
1 1. MoWR i s using computerized accounting system-Instant GL accounting software. The system was developed by modifying MoFED’s chart o f accounts so as to accommodate the financial transactions o f IFAD- and Bank-financed projects. The Finance Department of MoWR has suggested that the existing computerized accounting system should be revised to accommodate the needs o f this project.
12. MoWR, and Amhara MoWRD and BoARD have project accounts units, which look after the financial transactions o f donor-financed projects. The project accounts units use their own formats and chart o f accounts so as to fulfill donors reporting and auditing requirements.
13. In order to get uniform reports from all the Implementing Agencies (IAs), i t i s necessary for MoWR to develop a standardized reporting format and chart o f accounts to be used by al l I A s . As mentioned in the above, the existing accounting system needs to be revised to accommodate the recording and reporting o f the project transactions. This will be an effectiveness condition for the project.
14. Staf f o f the Finance Departments in MoWR have some experience in implementing donor-financed projects. Currently, MoWR has fifteen staff in i t s finance department. Two s ta f f with f i rst degree are specifically assigned for donor-financed projects, including IDA and IFAD. The two staff will continue to handle the transactions o f this project. However, one additional accountant with a f i rst degree i s required to handle the financial transactions o f the project at MoWR.
15. The Finance Departments in Amhara BoWRD and BoARD do not have adequate and experienced staff to handle project transactions. The Amhara BoARD has six permanent and four contractual staff, two o f them have a first degree and the others have a diploma. The Amhara M O W has six permanent and three contractual staff, two o f them have a f i rst degree and the others have a diploma. The existing accountants are busy in handling the regular government budget and other donors-financed projects. Thus,
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in both cases, there i s a need to hire one additional accountant with a f irst degree for each o f the Amhara BoWRD and BoARD.
16. This project i s also implemented by four Woredas o f Amhara Region. I t was agreed with the Regional Government o f Amhara that all expenditures incurred at the Woreda level will be handled and settled by BoWRD and BoARD. All the supporting documents for payments made on behalf o f Woredas should be kept at BoWRD and BoWARD.
17. The hiring o f one additional accountant at MoWR and one additional accountant at each o f the Amhara BoWRD and BoARD will be an eflectiveness condition for the project. The proceeds o f the credit may be used to cover the salaries o f the additional accountants.
Internal Control and Internal Auditing
18. Internal control comprises the whole systems o f control, financial or otherwise, established by management in order to: (i) carry out the project activities in an orderly and efficient manner; (ii) ensure adherence to policies and procedures; and (iii) safeguard the assets o f the project and secure as far as possible the completeness and accuracy o f the financial and other records.
19. M o m , Amhara BoWRD have good internal control systems, which help the management o f the project in achieving the project objectives in orderly and efficient manner. Thus, the main focuses o f the internal control system are placed on the following:
0 Segregation o f duties; 0 Physical control o f assets; 0 Authorization and approval; 0 Clear channels o f command; 0 Arithmetic and accounting accuracy; 0
0 Supervision. Integri ty and performance o f staff at all levels;
20. MoWR has an Internal Audit Department with four staff, two with first degree and the others two with diploma. The Amhara BoWRD and BoARD have internal audit departments with only one internal auditor in each o f the departments. The internal auditors perform post-audit activities. The Government Civi l Services Reform Program i s building the capacity o f internal audit in the country. So far, internal audit manuals have been issued and training has been provided to internal auditors. The improvement in internal audit has been recognized in recent diagnostic works, e.g. the FA assessment. The internal auditors at each o f the I A s will conduct post audit activities on the project financial transactions.
Fund Flows and Disbursement Arrangements
Flow of Funds
21, Subsequent to resolving the issue o f unpaid balances in special accounts o f closed projects, proceeds from the Credit will be deposited in a US$ Designated Account to be opened in the National Bank o f Ethiopia. One local currency account in Birr will be opened in the National Bank o f Ethiopia to transfer money from the US$ Designated Account to cover four months expected expenditures. MoWR will manage the US$ and Birr accounts. Funds could be transferred to various implementing agencies from the Birr account at the M o m .
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22. Each o f the implementing agencies will open a Birr account to receive funds from M o W R . Fund transfers will be made o n the basis o f approved annual work plans and budgets.
Designated Account in TJS$-MoWR
23. Subsequent replenishments to the DA will be made up o n submission o f SOEs by M o W R to IDA. Each o f the I A s i s expected to submit regular reports on the utilization o f funds to M o W R . Before transferring any money to the lower levels, M o W R will ensure: (i) separate accounts have been opened and (ii) there are adequate F M S capable o f producing the required financial reports.
, Birr Account- 4 . _ . _ . _ . _ . _ . _ . _ . _ . _ M O M
24. Advances to the regional B o W R D and B o A R D and other implementing agencies f rom MoWR will be based on the approved annual work plan. The init ial advance will cover four months expected expenditures and the subsequent transfer will be based o n actual. All U s wil l submit regular reports to the Finance Department o f M o W R and keep original documents at their respective offices.
A ! ! I
Flow of funds to Implementing Agencies
IDA CredidGrant Account
Notes: - -Flow o f funds
b -Flow o f reports _ . _ . _ . _ . _ . - . - . - . - .
Disbursement Methods
25. The project will start with disbursement methods based o n Direct Payment and Special Commitment. Upon satisfactory resolution o f the outstanding refunds in special accounts related to closed projects, a Designated Account Advance will also be available for disbursements. At the beginning o f the project, and after resolution o f the above-referred to issue, the designated accounts will be replenished o n the basis o f statements o f expenditures. I t i s possible to use the interim unaudited financial reports for the replenishment o f the Designated Account after IDA i s satisfied with the adequacy o f the financial arrangements .
Minimum Value of Applications
26. The minimum value for Direct Payment and Special Commitment will be US$l,OOO,OOO.
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Reporting on Use of Credit Proceeds
~~
Expenditure Category
1. Goods and Equipment
2. Civi l Works
3. Consulting Services and Audits 4. Training and Workshops 5. Grants 6. Operating Costs
7. Refund o f Project Preparation Advance
8. Unallocated
27. The supporting documentation for reporting eligible expenditures paid from the Designated Account will be summary reports o f Statements o f Expenditure (SOEs) and records evidencing eligible expenditures for payments against contracts valued above US$200,000 for works and goods, US$lOO,OOO for consulting f i rms and US$50,000 for IC. The supporting documentation for direct payment requests should be records evidencing eligible expenditures (copies o f receipt, supplier’s invoices, etc). The project will submit a bank statement and a reconciliation o f the Designated Account together with the withdrawal application on a monthly basis.
Amount in US$ million Financing percentage
1,800,000 100% o f foreign expenditure and 90% o f local expenditure
44,600,000 100% o f foreign expenditure and 90% o f local expenditure
29,600,000 90% 3,600,000 100% 2,000,000 100% 2,700,000 90% for expenditures
incurred before October 3 1, 2009; 70% for expenditures incurred before October 3 1, 20 1 1 ; 50% for expenditures incurred before October 3 1, 20 13 and 40% thereafter.
700,000 Amount payable pursuant to Section 2.07 o f the General Conditions
15,000,000
28. All supporting documentation for SOEs will be retained at each o f the implementing agencies and must be made available for review by periodic World Bank review missions and external auditors.
29. The format o f the interim un-audited financial report was discussed during the Negotiations and will be attached to the disbursement letter.
Designated Account
30. After satisfactory resolution o f the unpaid balances in specials accounts o f closed projects, the total allocation o f the Designated Account will be US$10 million.
Counterpart Funding
3 1. The Government must make all arrangements necessary to ensure the timely mobilization o f the counterpart funds required for project implementation. The contibution may be in-kind providing office spaces and assigning staff to the project, etc.
Table C: Allocation of Credit proceeds
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Financial Reporting
2
3
32. I t i s the responsibility o f the Finance Department o f MoWR to prepare regular quarterly reports and consolidated annual accounts and facilitate the external audit o f the consolidate accounts. Each o f the other I A s i s responsible to submit regular financial reports to M o m . MoWR will develop the required reporting formats to be used by all the I A s . The formats will be included in the FM guidelines to be prepared by MoWR.
chart o f accounts on recordhg and reporting o f the Project financial transactions, this may be done by Before Borrower revising the existing accounting system o f MoWR and by roll ing it out to the regions. Organize a launch workshop for finance staff at all levels to equip them with the flow o f funds, recording, reporting and auditing arrangements. Recruitment o f one additional accountant at MoWR and one additional accountant at each o f Before Borrower the Amhara BoWRD and BoARD.
Effectiveness
Before Effectiveness
Borrower
Effectiveness
33. The existing accounting and reporting systems o f MoWR, Amhara BoWRD and BoARD are capable o f producing accurate and reliable information regarding project resources and expenditures provided that the action plans indicated below are properly implemented. After the implementation o f the action plans, the system will produce reliable reports on all assets and liabilities, and record all the financial transactions o f the project.
34. M o W R will produce Interim Unaudited Financial Reports (IFRs) and submit the same to IDA forty- five days after the end o f each quarter. At a minimum, the financial reports should include the sources and uses o f finds, expenditures by main expenditure classifications, beginning and ending cash balances and other supporting schedules. The formats o f the IFRs will be agreed during negotiation.
Auditing
35. According to the Ethiopian Constitution, the Office Federal Auditor General (OFAG) i s responsible to carry out the audit o f all the financial transactions o f the federal government and subsidies to the regions. Each o f the regions has regional auditor general responsible to audit financial transactions in the region. OFAG usually delegate i t s responsibility mostly to the Audit Services Corporations, the government owned audit firm, and in some cases to private audit f i rms to carry out the audit o f donor-financed projects. For this project, OFAG will assign external auditors acceptable to IDA.
36. According to the audit policy o f IDA, MoWR will prepare consolidated project accounts, which include all the sources from donors and the government and related project expenditures, and the auditors will express a single opinion on the consolidate Project accounts. The audit reports wil l be submitted to IDA six months after the end o f each fiscal year, which ends on 7 July o f each year.
37. There i s no outstanding audit report from MoWR.
Action Plan
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Conditions
Effectiveness condition
38. The adoption o f a Project Implementation Manual in form and substance satisfactory to the Association i s an effectiveness condition. The Project Implementation Manual will contain an annex on Financial Managament. I t i s understood that the Financial Managament annex to the Project Implementation Manual will be judged satisfactory if the following conditions are satisfied:
*:* Establishment o f an adequate financial system to record and report the financial transactions o f the project. Establishment o f an adequate FMS will include:
0 Developing and adopting a standard reporting formats and chart o f accounts to be used by the IAs . This could be done by revising the existing accounting system to accommodate the needs o f the project; Recruiting one additional accountant at the Finance Department o f MoWR and one additional accountant at each o f the Amhara B O W and BOARD; and
0
0 Organizing a launch workshop.
Financial Covenants
39. MoWR will submit the audited project accounts to IDA six months after the end o f each fiscal year. The fiscal year ends on 7 July o f each year. The audited financial statement will include all sources o f funds for the project, including the government.
40. MoWR, after receiving the financial reports from all I A s , will submit interim unaudited financial reports to IDA forty-five days after the end o f each quarter.
Supervision plan
41. Considering the nature o f the project, the Bank’s supervision mission should be as regular as possible. Each year, there should be at least two supervision missions.
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Annex 8: Procurement Arrangements
Procurement Environment
1. Federal level i s governed by the procurement code issued by the Federal Government in January 12,2005 and the Procurement Directives released in July 2005. The procurement code and directives are adapted to the Regions based on the model prepared by the Federal Government.
Public procurement in Ethiopia follows the federal structure o f the government. Procurement at
2. country procurement system. The Government has taken the following actions based on the recommendation o f the CPAR: (i) a new procurement code has been enacted at the federal level and at the level o f the four major regions; (ii) an independent Public Procurement Agency (PPA) with monitoring functions has been established at Federal level; (iii) new Federal Procurement Directives were issued in July 2005; (iv) standard bidding documents (SBD) for procurement o f works, goods and selection o f consultants have been prepared and distributed to Federal and Regional government bodies; and (v) procurement has been fully decentralized to implementing agencies. However, gaps in capacity building s t i l l remain, as the large training program envisaged in the CPAR action plan could not be implemented in full. In addition independent regulatory bodies have not been established in the regions. It has been reported that professional staff have been assigned at the Oromia region. However, there i s a need for further actions to make the regulatory agencies at each o f the regions fully staffed and functional.
The Country Procurement Assessment Report (CPAR) done in 2002 identified weaknesses in the
Amhara Regional State
3. Regional Government in June 15,2006 and the procurement directive number 1/1999, which i s in force as o f December 2006. The procurement code was developed based on the model provided by the Federal PPA. However, the following gaps have been identified: (i) the code issued by the Amhara Region does not provide for the establishment o f an independent PPA responsible to oversee procurement functions o f the region; (ii) the procurement code indicates use o f merit point, but it i s not clear from the code or directive when or for what type o f procurements it could be used,- i t i s noted that this procedure i s widely used in the region, almost for all goods procurement; and (iii) standard bidding documents for procurement o f works, goods and selection o f consultants have not been prepared and there are no documents specifically applicable throughout the region.
Public procurement in Amhara Regional state i s governed by the procurement code issued by the
A. General
4. “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreement. The general descriptions o f various items under different expenditure category are described below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, implementing agency, and time frame are agreed between the M o m , Amhara BoWR/BoARD and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
Procurement for the proposed project would be carried out in accordance with the World Bank’s
5. Procurement of Works: Works to be procured under this project would include the development o f Irrigation scheme covering 20,000 hectares under Ribb irrigation scheme and Megech Pump irrigation scheme, including the construction o f head works/pumping station, main canals, secondary & tertiary
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canals, irrigation and drainage systems, flood protection dykes, transmission l ines and ancillary works. The procurement will be done using the Bank’s SBDs for all International Competitive Bidding (ICB) and National SBD agreed with (or satisfactory to) the Bank. To the extent practical, contracts shall be grouped into bid packages estimated to cost the equivalent o f US$l,OOO,OOO or more and would be procured through ICB procedures. The bidding documents shall include a detailed description o f the works, including basic specifications, the required completion date, basic forms o f agreement acceptable to IDA and relevant drawings where applicable. Specific procedural details can be found in the Project Implementation Manual. Works estimated to cost less than US$l,OOO,OOO per contract may be procured using National Competitive Bidding (NCB). Direct Contracting may be used for works in exceptional cases, according to paragraphs 3.6 and 3.7 o f the Guidelines. Shopping may be used for small value contracts in accordance with paragraph 3.5 o f the Guidelines.
6. scheme, and Ribb irrigation scheme. W B ’ s Standard prequalification document - issued August 2006 will be used for the purpose o f pre-qualifying potential bidders.
Prequalification o f contractors would be used for the construction o f Megech Pump Irrigation
7. Procurement of Goods: Goods procured under this project would include: office furniture and office equipment, vehicles, motorbikes, computer hardware and software, pumps and other water related equipment. The procurement will be done using the Bank’s SBD for all ICB and National SBD agreed with or satisfactory to the Bank. To the extent practical, contracts shall be grouped into bid packages estimated to cost the equivalent o f US$200,000 or more and would be procured through ICB procedures. Goods and Equipment contracts estimated to cost less than US$200,000 per contract may be procured using NCB and national SBD agreed with or satisfactory to the Bank. Direct Contracting for goods may be used in exceptional cases, such as for the extension o f an existing contract, standardization, proprietary items, spare parts for existing equipment, and emergency situations, according to paragraphs 3.6 and 3.7 o f the Guidelines. Shopping may be used for contracts with estimated values o f less than US$50,000 in accordance with paragraph 3.5 o f the Guidelines. Procurement from United Nations Agencies may be used for contracts with estimated values o f less than US$lOO,OOO in accordance with paragraph 3.9 o f the Guidelines.
8. supervision services, feasibility studies for 80,000 hectares irrigation development, feasibility study and detailed design for 30,000 hectare irrigation infrastructure development, preparation o f irrigation legislation, study for the establishment o f a national irrigation and maintenance fund, environmental and social impact assessments, resettlement action plans, technical assistance, financial and technical audits. The consultant services would also include specialized advisory services to the NPSC and the NPC for project implementation monitoring and for the DSRP hired to review the design of, and oversee implementation o f safety measures for, the Ribb Dam. Most contracts with f i r m s will be awarded through the use o f the QCBS described under section I1 (2.1-2.3 1) o f the Consultant Guidelines, using the Bank’s Standard Request for Proposals. Consulting Services for audit and other contracts o f a standard or routine nature may be procured under the LCS method described under paragraph 3.6 o f Consultant Guidelines. Consulting assignments costing less than US$lOO, 000 may be procured using CQS described under paragraph 3.7 o f Consultant Guidelines. Single source selection can be used to contract f i rms for assignments that meet the criteria set out under paragraphs 3.9 to 3.13 o f the Consultant Guidelines. Contracts for ICs will be done by comparing the qualifications o f at least three candidates, in accordance with Section V o f the Consultant Guidelines.
Selection of Consultants : Consultant services under the project would include: construction
9. contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
Short l is ts o f consultants for services estimated to cost less than US$200,000 equivalent per
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10. Operational Costs: Expenditures made for operational costs such as fuel and stationery will follow Ethiopian Government practices in accordance with the Federal Public Procurement code and Directives released on July 2005 or, whenever those Directive do not apply, commercial practices commonly used for the same purposes.
1 1. tenders for procurement o f goods and works under ICB. Domestic preference would be applicable under ICB in accordance with paragraphs 2.55 and 2.56 o f the Bank’s guidelines. The Federal Government’s standard bidding documents for procurement o f goods and works for N C B were reviewed by the Bank and found to be generally consistent with the Bank’s guidelines and procedures. However, some provisions in the Government’s standard bidding documents need to be adjusted to ensure that the documents are fully compatible with the Bank’s guidelines. The standard documents o f the government can be used for procurement o f goods and works provided that: (i) the standard documents are used for NCB without pre-qualification only; (ii) margin o f preference i s not applicable; (iii) bidders are given a minimum o f 30 days to submit bids fkom the date o f availability o f the bidding documents; (iv) foreign bidders are not excluded from participation; and (v) results o f evaluation and award o f contract are published. Detailed comments have been provided by the Bank for revision o f the bidding documents.
Standard Bid Documents and Manuals: The Bank’s standard bid documents will be used for all
12. The procurement procedures applicable to the project shall be outlined in the Project Implementation Manual (PIM). The SBDs to be used for procurement o f goods and works using NCB that are revised as per the comments provided and found to be acceptable by the Bank would be provided to each implementing agencies in the PIM.
B. Assessment of the agency’s capacity to implement procurement
13. and by the Amhara BoWRD and BoARD at Amhara region.
Procurement activities will be carried out by the Ministry o f Water Resources at the Federal level
14. and selection o f consultants, and the Property and Equipment Administration Department for goods procurement. The Federal project coordination office would devise appropriate mechanisms to monitor the projects’ procurement activities under these departments. The procurement specialist recruited by the project coordinating office would liaise and work with these departments on a day to day basis.
MoWR Contract Administration Department will be responsible to carry out works procurement
15. The Amhara BoWRD and BoARD will be responsible for procurement activities o f their respective componentlsub-component o f the project. The BoARD should recruit a qualified procurement specialist, who has at least f i rst degree in relevant discipline and training on WB procurement procedures. The BoWRD should recruit a short term consultant to provide procurement and other technical staf f (Engineers) with hands on training on ICB procurements and selection o f consultants.
16. o f regional implementing bureaus, will not be involved in day to day procurement activities. Procurements required by the regional coordinating office, if any, would be carried out in coordination with and by either o f the regional implementing agencies, except for miscellaneous operational expenditures.
The regional project coordinating office situated at Amhara BoFED, responsible for coordination
17. for the project has been carried out by Abiy Admassu on February 9,2007 at M o W R and March 27,2007 at BoWRD and BoARD. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the Ministry’s relevant central un i ts for procurement management.
An assessment o f the capacity o f the Implementing Agencies to implement procurement actions
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Mo WR
18. The Contract Administration department has been handling a number o f consultants’ selections and limited works contract financed by the African Development Bank and other donors, including the WB. The department has not had staff specifically assigned to carry out procurement. I t i s reported that normally projects, through their coordinating office, prepare bidding documents as per the donors requirement and the department handles the day to day procurement activities - like sales o f bidding documents, receipt o f bids, arranging bid opening ceremonies, etc, and the department head serves as chairman o f tender committee and oversees the overall process. Technical evaluations are done by technical committees formed on an ad hoc basis for selection o f consultants where project head’s playing the chairman’s role. MoWR at present i s engaged with a number o f donor financed projects related to water resources development.
19. procurement through ICB, NCB and other procurement methods. The department handled all MoWR goods procurement whether it i s financed from Government resources or donors. The practice that i s followed by the beneficiary departments i s simply to forward their requirement and wait until the process i s completed and the goods are delivered. Projects have no room neither to participate in the decision making process nor the opportunity to air their concern. It i s apparent that such arrangement would deprive projects from obtaining critical information for timely intervention, if required.
The Property and Equipment Administration Department has been handling several goods
20. The project coordinating office i s currently staffed only with a project coordinator. The office has already obtained the permit, and i s in the process to recruit nine professionals (water resource engineer, Environmentalist, Economist, etc.) and support staff. The procurement specialist position i s not part o f the l i s t o f professionals to be hired, but there i s a plan to deploy one.
Bo WRD
2 1. Preparation o f tender documents i s a collaborative effort o f the Bureau’s departments. Upon the request o f beneficiaries, the Study and Design department will prepare terms o f reference, specification and design. The Contract Administration Department will prepare tender documents for works procurement and selection o f consultants, while the Procurement, Machinery and Material management services takes care o f goods procurement. Once the documents are prepared the procurement service handles all day to day procurement activities - l ike sale o f bidding documents, receipt o f bids, arranging bid opening ceremonies, etc, and would serve as secretary o f tender committee. There are no standard bidding documents applicable for the bureau; the documents currently used by the bureau have been derived from the SBDs’ o f the Bank and other donors.
22. The Bureau’s tender committee i s composed o f representatives from the Bureau’s five departments and has the mandate to review bids irrespective o f the bid amount. The tender committee will propose award recommendation for the bureau’s head. When required, technical evaluation i s done by technical committees formed on an ad hoc basis, and it includes at least a member from the beneficiary department. AAer contract award the procurement service would continue administering goods contracts while the Contract administration department takeover the contract administration works o f consulting and works contracts.
23. The Bureau’s Procurement service responsible for the day to day procurement activities has a procurement head and two purchasers. The procurement head has attended WB procurement training conducted at the MoWR for the procurement o f goods and selection o f consultants. However, he does not have hands on experience on ICB procurements. It i s learned that the Bureau has not done procurements or selection o f consultants involving foreign bidders/consultants. The bureau had procured several goods procurement for towns’ water supply - such as Generators, pumps, pipes and fittings, chemicals, etc
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where it requires importation o f goods. However, instead o f using ICB and importing the goods, the bureau processed the bids under NCB where participation was limited to national suppliers.
BoWRD
M o W R
MoWR/BoARD / B O W
BoARD
Before the first disbursement Before Effectiveness should be outlined in PIh4
Project launch
24. The Bureau’s Purchasing, resource management and transport service has been responsible for the day to day activities o f the bureau’s procurement, starting from preparation o f bidding documents to contract administration o f the procured goods and distribution to the beneficiaries. Most o f the bureau’s procurement i s related to agricultural inputs and office supplies, and procured through NCB method. The bureau prepares NCB bids using the national language - Amharic, and the document i s found to be sub- standard and incomplete. I t i s learned that the bureau does not have experience in preparing bidding documents in another international language and has not been involved in any ICB bids.
M o W o A R D /BoWRD
25. departments, where the purchasing head serves as a secretary. The committee has the mandate to review bids irrespective o f the bid amount.
The Bureau’s tender committee i s composed o f representatives from the Bureau’s five
By Effectiveness
26. purchasers - who have diploma in business administration. Either staff has not attended WB or other donor financed procurement training.
The Bureau’s Purchasing, resource management and transport service has a head and two
27. capacity and non availability o f specific procurement staff accountable for the day to day project procurement activities; (ii) loose organizational linkage between the project coordinating office and the departments responsible to carry out procurement in MoWR; (iii) though MoWR and BoWRD office had experience with other donors financed procurements i ts experience in WB financed project i s very limited; (iv) use o f un acceptable procedure - such as merit points are used for procurement o f goods; (v) poor records management - documents are available but filed haphazardly; (vi) the salary structure i s not attractive to getlretain qualified staff; and (vii) delays in evaluation o f technical proposals - since most members o f technical evaluators are department heads and are busy on other assignment.
Issues/ r isks concerning procurement under the project have been identified and include: (i) weak
28. The corrective measures which have been agreed are:
Item No. 1
2
3
4
5
Activity
Assigdrecruit procurement staffs that have/equipped with the necessary skill to handle works and selection o f consultants. Recruit a short term consultant.
Lay out a monitoring system that would enable PCO to monitor f low o f procurement activities both at Property & equipment administration and Contract administration department. A procurement orientation workshop will be conducted for staff at MoWR, BoARD, and BoWRD that are involved in the procurement decision-making process including tender committee members, Division Heads, Department Heads. The Orientation would be conducted during launch o f the project. Provide checklist o f relevant procurement documents for proper records management, Devise a proper
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Responsible Expected
Before Effectiveness
procurement management, evaluation and decision making system. The applicable procedure should be defined in the PMprocurement Manual.
29. the P I M and i t s procurement annex the above issues are addressed.
The overall project risk for procurement i s high. The task team would ensure that in reviewing
C. Procurement Plan
30. The Borrower, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. The plan has been agreed between the Borrower and the Project Team on May 3,2007 and i s available at MoWR (National Project Coordination office) and Amhara BOARD and BoWRD. I t will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
3 1. assessment o f the Implementing Agency has recommended yearly supervision missions to visit the field to carry out post review o f procurement actions.
In addition to the prior review supervision to be carried out from Bank offices, the capacity
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Attachement 1
Details o f the Procurement Arrangement involving international competition.
1. Goods and Works and non consulting services.
(a) List o f contract Packages which will be procured following ICB and Direct contracting:
MoWRII & I Construction o f 30,000
structures for Ebb
Procure- ment
Method
ICB
ICB
NCB
P- Q
- Yes
No
- No
Shopping I No
stic
(b) All goods contracts estimated to cost above US$150,000 per contract and all direct contracting will be subject to prior review by the Bank.
(c) All works contracts estimated to cost above US$l,OOO,OOO per contract and all direct contracting will be subject to prior review by the Bank.
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2. Consulting Services
(a) List o f Consulting Assignments with short-list o f international f i rms.
1
Ref. No.
MoWW I&D/Q CBS/02
2
Description of Assignment
Consultants’ services to conduct Environmental and Social Impact Assessment in Megech Pump,
I Ribb, and Anger Dam Project MoWW I Consultants’ services to conduct
I&D/Q CBS/O5
MoWW I&D/Q CBS/06
1 Negesso etc.) MoWW 1 Consultants’ services for the
construction supervision and contract administration o f Megech Pump Irrigation Scheme Consultants’ services for the construction supervision & contract administration o f Ribb Irrigation Scheme
Estimated Cost in US$ 000’
500
250
6857
800
800
4
Selection Method
QCBS
QCBS
QCBS
QCBS
QCBS
5
Review by Bank
Prior
Prior
Prior
Prior
Prior
6
Expected Proposals Submission Date
Nov 24, 2007
Jan 07,2008
May 27, 2009
June 10, 2009
June 10, 2009
Comments -I (b) Consultancy services estimated to cost above US$lOO,OOO per contract and Single Source selection o f consultants (firms) for assignments estimated to cost above US$50,000 wil l be subject to prior review by the Bank.
(c) Short lists composed entirely of national consultants: Short l is ts o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
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Annex 9: Economic and Financial Analysis
Project Description
1. The Ethiopia Irrigation and Drainage Project aims to increase irrigated area within the N i l e basin by around 20,000 hectares. The project will support: (i) physical investments linked to but separate from the construction o f a multi-purpose dam on the Ribb River to enable irrigation o f 14,460 ha. in Fogera, Lib0 Kemkem and Gonder Zuria Woredas in the east o f Lake Tana; (ii) investments for pumping from the northern shores o f Lake Tana in the Megech River command area to allow irrigation o f a further 4,466 ha. in Dembia and Gonder Zuria Woredas; and, (iii) feasibility analysis and design o f a dam and irrigation infrastructure for 17,000 ha. in the Anger sub-basin.
2. Building on investments in irrigation infrastructure, the project wil l also support: (i) effective management o f water resources and cost sharing through the establishment o f water users groups, the development for cost recovery systems and the promotion o f public-private partnerships in irrigation development; (ii) greater dissemination o f modem agricultural technologies/practices; and (iii) development o f markets. It will thus capture the linkage between irrigation, provision o f agricultural services, and improved market access to transform current agricultural practices. The combined result would be higher agricultural incomes among participating households.
Methodology and key assumptions
3. Both the financial and economic analyses are based on an estimation o f representative farm-level incremental benefits that are due to the Project. Benefits (net o f costs incurred by the farm) are computed from farm budgets provided separately. The farm models used in the analyses typify the average farm in the project Woredas producing several crops (see discussion on cropping patterns below) and operating on averagel.5 ha. o f land. From the representative farm models, the financial analysis computes net cash flows and average incremental incomes at the farm level that are due to the project as well as incremental returns per family labor. For the economic analysis, incremental farm level benefits (valued at economic prices) are aggregated to the entire commands o f the two schemes covered by the project (Ribb gravity irrigation and Megech pumping), which have been considered separately. Aggregated benefits for the two schemes over a 30-year period are compared to project costs; net present value (computed at 11% discount rate following the Abbay River Basin Integrated Development Master Plan) and internal rates o f return are provided.
4. The analysis i s undertaken on the basis o f representative household survey data, as per result o f area- specific baseline surveys for these project Woredas, undertaken by the Amhara Region State in 20047. The data i s comparable to CSA survey data but more area-specific. I t has been verified by selective field observations o f the mission team. The command areas cut across administrative structures, but fully representative baseline survey data i s available only for these administrative structures. Based on field observations, however, i t was found that data variability for the Megech and Ribb command areas are in fact minimal.
Assumptions
5 . Direct Project Benefits: The main quantified benefits result from changes in smallholder production arising from increased cropping intensity, greater commercial orientation and a shift in cropping patterns
Amhara National Regional State, Bureau o f Finance and Economic Development, Rural HH Socio-Economic Baseline Survey o f 50 and 56 Woredas in Amhara Region, Bahir Dar, Sept 2004.
88
as well as higher and less variable levels o f productivity. To quantify these benefits, the following assumptions are made:
6. Increased cropping intensity: Much o f the current production in both command areas i s based on rainfed agriculture at 100 percent cropping intensity. In addition, about 40 percent o f the area produces a second crop with residual moisture under less than favorable conditions. By developing irrigation potential, the project will allow effective production o f a second crop (dry season) on about 80 percent o f the project area and supplementary irrigation during the wet season.
7. Increased commercialization: The project will promote greater commercialization o f smallholder agriculture which will result in a significant shift in cropping patterns towards crops with high market demand. While there may well be niche markets for certain high value crops such as horticulture, spices, etc., there i s no indication, at present, o f large market opportunities for such products. It i s assumed that, with the introduction o f irrigation opportunities, farmers will shift to production o f crops that already have an established market - e.g., haricot beans, faba beans and chickpeas which are currently exported; and where productivity increases are most promising; e.g., from t e f f and millet to wheat and maize.
8. The current cropping pattern i s diverse and farmers produce a large variety o f crops. Five major crops covering more than 90 percent o f the project area are assumed to represent the cropping pattern o f the ‘without project’ situation. The available baseline survey data in line with field observations just i f ies the assumption that the situation in the two schemes i s roughly the same. Table 1 lays out the cropping pattern ‘with’ and ‘without’ the project.
Table 1 cropping patterns with and without project _ _ _ _
YO farm devoted to each crop W/O Project I With Project
Crop
Source: Amhara National Regional State Rural Baseline Survey; staff estimates.
9. Increasedyields: Although compared to other regions o f the country, yield levels in the project area have tended to be relatively high, it i s nevertheless understood that there i s considerable room for improving yields if the use o f fertilizer and improved seeds increases and i s combined with adequate water availability. I t i s assumed that the yield levels indicated in Table 2 - consistent with EIAR’s findings on potential yield levels for recommended technology packages - will be achieved for each crop o f the ‘with project’ cropping pattern. I t i s further assumed that, as farmers adopt recommended technologies, they will
89
not immediately achieve the potential yield levels indicated in Table 2, as th is i s also dependent on improved farm management and agricultural practices. As farmers respond to opportunities provided by the project (irrigation, agricultural advice, etc.); they will apply inputs as recommended by research findings but achieve only 60 percent o f potential yield levels in the f i rst year. In their second year o f participation, they will achieve 75 percent o f potential yields and only in their third year will they achieve the full potential yields.
10. Computations o f the ‘without project’ yield levels are based on current rates o f technology adoption and average yield levels even for outlying years.8 I t can be expected that over time, improved adoption o f agricultural technology wil l be observed even without the project. However, this will require expenditures on advisory services, output market development, agricultural research, and input supply systems that are also inherent to the I&D project.’ The analysis attributes improved productivity to the project. Nevertheless, sensit ivi ty analysis on the impact o f a reduction o f incremental benefits on project returns has been undertaken to capture the effect o f any increases in productivity without the project.
Table 2 Yield levels with and without project
Yields kgha Crop W/O Project I WithPro j ect
a. b.
Source: EIAR average yield levels over a range o f improved seed varieties and recommended fert i l izdpest ic ide use levels on farmers’ plots; staff estimates.
1 1. Phasing in of benefits: The project will work closely with farmers to help them engage in irrigation (and produce a second crop), become more commercially oriented, and adopt improved agricultural technologies. Given the focus o f the project on agricultural development linked to irrigation, i t i s assumed that the changes discussed above will be achieved fairly quickly as follows: 20 percent o f farmers would participate fully and transform their farming systems in the f i rst year that water for irrigation i s made available. An additional 30 percent, 30 percent and 20 percent will do so in the second, third and fourth years respectively. By the fourth year (FY 15 for the Ribb scheme and FY 14 for the Megech scheme) all farmers would be fully engaged. The sensitivity analysis will consider the implications o f a greater lag in increasing cropping intensity, shifting cropping patterns, and adoption o f new technologies.
Without project yield levels are computed from the Central Statistical Authority’s Annual Agricultural Sample Surveys for the Amhara Region, averaged over an %year period (1998/99 to 2005/2006) and verified be selectively field observations.
Over the past two decades growth in agricultural productivity has been only 0.5% per annum; the consideration would have an insignificant impact on the analysis.
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12. Additional non-quantifiable benefits: The project will have nutritional benefits. It will promote cropping patterns that are less dominated by cereals which are already a large part o f the Ethiopian diet (particularly in the Amhara region where consumption o f fruits, vegetables, and tubers i s not common) and increase the availability o f non-cereal foods on the local market. Livestock productivity i s also likely to increase resulting in higher milk, egg and poultry production for on-farm consumption. The project will thus contribute towards more diverse diets and better nutrition. It i s also expected that the project will yield benefits in terms o f employment in o f f farm activities that will be created as a spill over from the development o f irrigation infrastructure. Finally, the project will also pilot ground water irrigation that has the potential for added farm incomes. The economic and financial analyses do not attempt to calculate these benefits. The estimates of benefits are therefore somewhat conservative.
13. Costs: Increased costs will be incurred as farmers introduce the changes discussed above. These increments result from changes in farm level application o f six key inputs: water, land, oxen power, fertilizer, pesticidesherbicides and improved seeds.
14. Water: Irrigation i s assumed to be insignificant in the ‘without project’ situation. On the other hand, with the project, farmers will use water supplied by the project in both the dry and wet seasons. The cost o f water use has been valued per hectare based on an estimate o f the operating and maintenance (O&M) o f each scheme. The project will introduce fees for the use o f water gradually, with full recovery o f O&M costs within four years that farmers engage in irrigation charging 25 percent, 50 percent, and 75 percent respectively in the f i rst three years. This gradual cost build up, i s reflected in the computation o f farm budgets for the financial analysis, while total O&M costs per hectare are used for the economic analysis.
15. Labor and oxen: As farmers engage in irrigation, as they adopt improved agricultural technologies and as yield levels improve, labor inputs per hectare will increase for land preparation, weeding, and harvesting. Similarly, the use o f oxen for land preparation and threshing will also increase. Increments have been calculated per hectare per crop according to the experience with small scale irrigation documented by the Amhara Region Water Resources Bureau. Labor has been valued at 12 birr per MD and oxen power at 20 birr per day according to current market rates for the financial analysis and at a 20 percent discount for the economic analysis (following similar adjustments made in the Abbay River Basin Integrated Development Mater Plan).
16. Fertilizer, pesticides and improved seeds: Currently, the use o f fertilizer, pesticides and improved seeds i s insignificant in the command areas o f both schemes. As has been discussed above, this situation i s not expected to change without improvements in agricultural advisory services - an anticipated result o f the project. Thus, it i s assumed that there will be no use o f fertilizer, pesticides and improved seeds in the ‘without project’ situation and that farmers will apply EIAR recommended rates for these inputs as they engage in the project. DAP and UREA are valued at 400 and 360 birrkg respectively for the financial analysis and at their import parity price for the economic analysis. Improved seeds and pesticidesherbicides are valued at market prices obtained from field observations.
17. Non-farm costs: All local costs have been converted to border prices by using a standard conversion factor o f 0.9. Even though no benefits have been assessed from some activities o f the project, all costs have been included in the economic analysis, therefore producing a conservative estimate. Project costs have been estimated as per the project’s COSTAB. Project costs outside o f the farm budgets include:
0
0
0
Infrastructural development costs (pumping station (Megech scheme), head works, primary, secondary and tertiary irrigation canals and drainage systems); Costs o f environmental and social impact mitigation; Costs for improved services and accelerated technology transfer, and market development; and
91
For the Ribb scheme, the project will invest in the infrastructure required to develop irrigation from the Ribb dam. The construction o f the dam i tse l f i s part o f a larger project linked to diversion o f water from Lake Tana to the Beles sub-basin, hydro-power generation and the need to regulate the lake’s water given the diversion. Given that investments in diversion o f lake water for the Tana-Beles hydro electric plant are under way, the Ribb dam will be constructed whether or not the I&D project i s undertaken. The project will then invest in the additional infrastructure necessary to enable irrigation using the dam’s water. Thus, the costs o f dam construction are considered as sunk cost and have not been included in the cost benefit estimates o f the project.
Unit Product
18. Prices: Import parity prices have been calculated for internationally traded commodities and chemical fertilizers using World Bank commodity price data. The current official exchange rate o f ETB 8.9 per US$1 .O has been used in the economic analysis, applying a 10 percent exchange rate premium adjustment. All other commodities have been valued on the basis o f the prevailing market prices using CSA survey data. However, these market prices have been converted to border prices by applying a standard conversion factor o f 0.9. All prices are for the last quarter o f 2006.
Table 3: Prices of output (with and without project) and major inputs, 2006 (ETB)
Source: World Bank Commodity Price data, February 2007; CSA Prices of Monthly Goods and Services (Amhara, Region Numbe November 2006; and staf f estimates.
20. The impact o f assumed changes in relative prices over time i s not included in the baseline analysis. In the sensitivity and risk analysis, however, the impact o f price fluctuations will be assessed in detail. The Bank’s current commodity price data projections until 2015 suggest an average price increase for major agricultural commodities o f about 2.5 percent and a decrease o f fertilizer prices o f about 10.7 percent. Projecting constant prices for the baseline scenario will thus produce a conservative estimate o f the NPV and EIRR.
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21. Table 4 provides net cash flows and incremental incomes to an average farmer as hui'she engages in the project - thc two schemes are c ~ n s ~ d c r e ~ s c p a ~ ~ ~ u l ~ f al~hough with ~ ~ n ~ n ~ a l dj fference~.
Table 4: Gross revenue, net incremental i $ at the farm level (ETB)
e l - d a ~ b ~ i n ~ net revenueS from crop p r u ~ ~ c ~ ~ o n in the first year that a fanner i s abfe to take full ~ ~ ~ a n ~ a g e ofthe o p ~ ~ ~ u n ~ t i e s provided by the project; Le., ~ n g a ~ i n ~ in i ~ ~ a t ~ a n , i n c r ~ a s ~ ~ ~ c r ~ ~ p p i n ~ intensity, s ~ i ~ ~ i n ~ cropping patterns and a d o ~ t ~ n ~ ~ ~ p r ~ ~ e d ~ e c h n o I Q ~ ~ ~ s , *~dd~~iQna~ i ~ c r e ~ e n t s in farm i n c ~ ~ e ~ are generated ovcr the ~ ~ l l ~ ~ r ~ n ~ h\io years as p ~ ~ c n ~ ~ ~ ~ yields are gradually rea l j z~d - reaching to over three times the 'without projectB (year 0) s ~ ~ ~ a ~ ~ ~ ~ .
f i ts 1s about 80 mill financial internal r
24. The ~ ~ ~ n o ~ i c analysis ~ n ~ i c a ~ e ~ an ~ c ~ ) ~ o n ~ i c ~ n ~ ~ ~ a ~ rate o f r e t u ~ ~~~~ o f 15 percent for the project. Thc project Includes two s c h e ~ ~ s ~ ~ ~ ~ c c h and Ribb) that arc j n d ~ e n d e ~ i ~ ufcach other and t h e ~ e ~ o ~ ~ afso considerud s~para~ely. l n ~ r e ~ e n t a l benefits per hectare are similar under both s c ~ e m e ~ QF the project. I-Iowever, costs o f devc~Qpin~ the Megech scheme are s i ~ i f i c ~ ~ ~ ~ lower than chat o f the
schemes.
a scheme 1s the bigger
i s a small chance that dam ~ o n s ~ u c ~ i ~ n may bc found i a f e a ~ i b ~ e and therefore a ~ a n d o n e ~ . In the event that the dam i s not ~ o n s t r ~ c t e d , the project wi l t shift to ;Full i ~ ~ ~ a t ~ o n within the Megcch corrtmand as the ~ e g e c h scheme i s scalable up to 24,179 ha. The economic ana~ysis has considered the returns o f such an i n v ~ ~ ~ e n ~ . The NPV r e ~ a ~ n s positive at 182.7 million birr and the ERR 14 percent.
rn cropping p a ~ e ~ ~ towards high value crops;
~ n c e ~ a i ~ ~ .
27. Yet the above results depend on a s s u ~ p $ i o ~ s o f a fairly quick response by farmers to the o p p o ~ ~ n ~ t ~ e s presented b y the project. S e n s j t ~ ~ i ~ anatysis has been ~ n d c ~ a k e n on a more c o ~ s e ~ ~ a ~ i ~ ' e rate o f r e s ~ o ~ s e by ~ ~ ~ e r s in terms o f shifts in ~ropp~ag p a ~ ~ e ~ s and adop~ion of a ~ i c u ~ ~ u r ~ l ~ ~ c ~ ~ o l o ~ i e s ~ whereby rn the f irst two years farniers will only increase c r ~ p ~ ~ n ~ intensity and produce a second crop. In the third year,
tural ~ ~ c h n o ~ o ~ i e ~ . Over the pping patterns and ad ing farmers will do so.
Table 6: Results of ~ e ~ § ~ t i ~ r i ~ ~ Analysis (NPV in million E'I"I3)
29. The EIRRs and NPV values provided by the analysis =e dependent on minimal changes in relative prices of outputs and inputs over time in addi~ion to a strong response by f ~ e r s to the o ~ p o ~ u n ~ t i e s created by the project. Vet, the high returns indicated above could be driven by recent food price ~ n ~ ~ ~ i o n ~ ~ ? tendencies that may or may not be sustained over time. The f o l l o ~ ~ n ~ risk analysis suggests that there i s less than 5 percent p r o b a b ~ l ~ ~ y that the base case EIRlZ (I 5 percent for the project as a whole
ore conserv ' o f fanners response) will be srbguficantiy below other u n ~ e ~ ~ i n s ~ ~ ~ b ~ ~ s .
94
30. Severaf variables in the base analysis were considered to be subject eo ~ n c e r t a ~ n t ~ . The table below shows thc marn risk variables that are analyzed:
Price ~ ~ u c ~ u a ~ j o n s (k25 percent) for major crops (teffi maize, wheat, rice, beans); A defay o ~ p r o ~ e ~ ~ benefits as n ~ a n ~ f e s ~ e d in a slower ~ a r t ~ ~ j p ~ ~ ~ o n o f farmers in the i ~ i ~ ~ t ~ o n schemes ~ i n c I u d ~ n ~ produc~ion o f a second crop, shifting ~ r o p p ~ n ~ patterns and a d ~ p t i n g improved t e c h ~ o ~ o ~ i e s ) ~ and ~ e a s ~ r e m ~ n t margin (k l S percent) of field data for key vmabfes ~ c r o p p ~ n ~ intensity, irrigated arm, average yietds).
*
*
3 1. The table below presents thc oslginal point values used in the ERR base case. It also shows the dis~r~but~ons w ~ i c h were assumed for these values. Food price ~ ~ c ~ u a ~ ~ o ~ s are a p p r o ~ ~ m a t e d by ana l~z ing price Wends over the past cf~cadc, '~ Simple" ~ i a n ~ l a r d i s ~ ~ ~ t ~ o n ~ were used to a p p r ~ x j ~ a ~ e u n c e ~ ~ ~ n ~ for the other variables.
ptions for Uncertain Variables
ions for the origmal poi values for the new distr
crops do Impact on the EIRR, but only modestly. This suggests that the e c ~ n o ~ i c viabrfity o f the project should be robust ~ ~ ~ ~ n s ~ ~ ~ e x p e ~ t ~ ~ price m o ~ e ~ e ~ t s .
Graph: Probability of Economic Rate of Return Considering Uncertainty
1
0.8 --
0.6 --
0.4 --
0.2
0 0.136 0.141 0.145 0.1 50 0. 54
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Annex 10: Safeguard Policies Issues
BACKGROUND
1. The Irrigation and Drainage project involves feasibility studies and implementation o f two irrigation schemes - Megech and Ribb - that raise safeguards concerns. These schemes were selected through a comparative analysis o f nine candidate schemes based on economic, environmental and social criteria. The I&D project will entail substantial infrastructure works such as access roads, drainage and irrigation canals, pumping stations and a dam which will entail the acquisition o f individual, communal odand public lands. Detailed information about the nature and location o f the works, and their impact on the environment and on the population will only become available during project feasibility studies.
2. A Social Assessment (SA) will be conducted as part o f the feasibility studies. I t will focus on stakeholder identification, their socioeconomic profiles, their social organization, including the existence or non-existence o f Water Users Groups, systems o f land tenure and land status, impact o f the project on the land, existing survival strategies in terms o f irrigation, organization and access to water. The social assessment will be conducted that will also verify the presence o f indigenous peoples in the project areas. The SA will propose recommendations from a social perspective for project design, including supportive measures for capacity building, professional associations and other institutional arrangements, in particular a system for monitoring and evaluation which i s adequately adapted to measure and assess the social indicators which need to be developed. The SA will also pay particular attention to the issue o f vulnerable ethnic groups and other marginal groups. Relevant information will be provided to determine the presence o f indigenous peoples.
3. Borrower's feasibility studies are expected to be launched by February 2007 and completed by September 2007. These studies will involve substantial consultations with project beneficiaries and other affected people.
4. Whi le Ribb dam will be financed by the GoE rather than I&D project, the environmental and social issues and their resolution are closely linked. Thus, the I&D project will finance comprehensive, integrated environmental assessment and resettlement planning for the dam and irrigation development together. This work will be undertaken according to the requirements o f the Bank's safeguards policies, and will build upon similar, more restricted, work being undertaken by the M o W R as part o f their feasibility studies o f the dam to be completed by April 2007 at the earliest. The linkages between the dam and irrigation developments are important:
F low releases from the dam need to be designed to accommodate seasonal irrigation needs downstream, as well as biodiversity (fish, aquatic wildlife) values in the downstream river and in wetlands on the Fogera Plain and along the Lake Tana shore;
The Ribb irrigation command area will be the host area for displaced population from the Ribb Dam area. The dimensions and numbers o f people in the reservoir and irrigation command areas will not be accurately known until technical studies for both the dam and irrigation scheme are completed. Since the development o f the irrigation scheme will necessitate infrastructural investments that will require land acquisition, displacement o f people, land ownership restructuring and possibly land consolidation, i t must be undertaken so as to accommodate resettlees from the dam reservoir.
ENVIRONMENTAL ASSESSMENT CATEGORY: A
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SAFEGUARD POLICIES TRIGGERED
Environmental Assessment (OP 4.01)
5. Each proposed irrigation scheme will include environmental and social analysis and planning as part o f the feasibility studies. An Environmental and Social Management Framework (ESMF) has been prepared to guide the preparation, review and approval o f environmental assessments (EAs) o f the individual irrigation schemes. The ESMF specifies further consultations, as needed, in the preparation o f EA studies that include comprehensive Environmental Management Plans (EMPs). The EA will also identify physical cultural resources in need o f protection, and the EMP will identify mitigation measures. EAs will need Bank and GoE approval before finalization o f detailed designs and construction bid documents. Cost estimates for the preparation o f EAs, and implementation o f Ems, total US$995,000 and are given in Section 4 below.
6. The principal environmental issues associated with each scheme are expected to be:
Megech Environmentally sensitive areas include the Megech River, Lake Tana, and wetlands along the lake shore and within the command area. The Megech River i s a small seasonal river which i s used as a spawning site for Lake Tana fish species o f which the dominant are Barbus spp., Oreochromis spp., and Clarius spp. The major environmental health concerns in the area are water-related diseases such as malaria, typhus, and schistomiasis.
Ribb Environmentally sensitive areas include the Ribb River, Lake Tana, the Fogera Plain, and wetlands along the lake shore and within the plain, especially in and around Welela and Shesher Ponds. Wetlands on the plain appear to be dependent on seasonal flooding o f the Ribb River. The Ribb River provides important spawning and nursery habitats for migratory fish well up into the drainage, especially the economically significant Barbus fish species. The Ribb Dam will block upstream fish migration, and reduce or eliminate seasonal flooding o f the Fogera Plain wetlands; mitigation measures (eg. fish ladder; artificial habitat creation downstream o f the dam; minimum flow releases from the dam; deliberate, controlled flooding o f Fogera wetlands) are indicated to avoid significant adverse impacts. Lake Tana, Fogera Plain and the associated wetlands are wintering habitat for vulnerable and threatened bird species, so mitigation measures to protect these wetlands i s important. Water-borne diseases are the major health threats in the area with malaria being the most important.
Natural Habitats (OP 4.04)
7. Proposed irrigation schemes may put important natural habitats (see above) at risk if not sensitively designed and operated. Preservation o f such habitats will be factored into feasibility studies, and addressed in the EA studies and EMPs.
Pest Management (OP 4.09)
8. Feasibility studies will include consideration o f the need for IPM and pesticide management in preparing plans for scheme development and operation. As needed, individual scheme pest management
98
plans will be prepared and then evaluated during the EA studies. The IPM plans will be implemented through component 2: Agricultural and Market Development.
Indigenous Peoples (OP 4.10)
9. The safeguard policy on Indigenous Peoples (OP4.10) i s not triggered at this stage. However, the presence o f Indigenous Peoples will be screened during the social assessments that will be conducted as part o f the ESIA. A final decision o f triggering o f the policy will be taken on the basis o f the results o f this assessment.
Physical Cultural Resources (OP 4.11)
10. Lake Tana area i s r ich in cultural heritage. Physical cultural resources (if any) that need protection will be identified during the Environmental Assessments, and mitigation measures wil l be designed in the Environmental Management Plans.
Involuntary Resettlement (OP 4.12)
1 1. The I&D project will develop irrigation on about 20,000 hectares o f land on two sites: Megech and Ribb. In Megech, i t will develop pumped irrigation from Lake Tana on about 5,000 hectares. In the Ribb command area, about 14,460 ha will be irrigated from the Ribb River with water stored in the upstream Ribb Dam reservoir. In addition, low-cost ground water-based irrigation technologies will be promoted around Lake Tana.
12. Since feasibility studies for the irrigation schemes and the Ribb dam are not complete, a Resettlement Policy Framework (RPF) has been prepared which describes the procedures and policies that will apply in preparing the needed Resettlement Action Plans (RAPs) during I&D project implementation and as soon as the relevant information becomes available. The RAP will identify entitlement packages and the project wil l ask affected people to s i g n entitlement certificates. This could make later supervision auditing possible.
Affected Pouulation and Assets
13. At project appraisal, accurate figures on areas o f land, and numbers o f affected peoples, are not available. The estimates used below have been derived from various sources and field observations. Final figures will become available when the feasibility studies are finalized, and the censuses for the R A P s completed. At this stage, i t i s estimated that:
0 Within the Ribb reservoir area o f approximately 78 km2, some 500 to 600 households, representing between 3,000 and 4,000, people, will be affected. Within these figures, an estimated 150 to 200 households will be displaced and the remaining 300 to 350 households will loose part o f their assets, mainly land and shelters for livestock, without being physically displaced; In the Ribb command area, the construction o f the irrigation infrastructure (canals, access roads etc.) will affect an estimated 200 to 250 households, with possible physical displacement. The land restructuring, consolidation and re-distribution will affect another estimated 1,500 to 1,800 households; and In the Megech irrigation site, the estimated total population varies between 3,000 and 5,000 people. Acquisition o f land for the construction o f irrigation infrastructure, pumping stations and access roads will affect an estimated 200 households, without, however, physical displacement. At this stage, and according to the M o m , the GoE i s not intending to bring in farmers from outside the scheme, and the decision as to whether or not allocate land to private investors i s not clear. The
99
creation o f Water Users Groups (WUGs) might or might not necessitate the restructuring and consolidation o f the land. If no land i s allocated to outside farmers and to private investors, then the impact on farm sizes will not be significant. If, to the contrary, outside farmers and/or private investors are brought in, then the size o f the farms will be significantly reduced and will be considered as a dispossession. In this case, perhaps up to 500 households will be affected.
Scope o f the R A P s
14. For each o f the Ribb dam and the command areas (Megech and Ribb), particular attention should be given to the preparation o f the RAPS, their implementation and their supervision. The preparation o f the RAPs for the Ribb Dam and the Ribb command area are closely interrelated as well as sequential. Indeed, the preparation o f the RAP for the Ribb command area cannot be completed until at least the census o f the affected people in the Ribb dam i s achieved, and the results are processed and made available. The results o f the census will then be used to determine the total number o f the people who will be compensated within the Ribb command area. Hence the need to prepare both R A P s in an integrated manner. The preparation o f the RAP for Megech command area can be prepared independently. However, the R A P s for both command areas must be prepared in conjunction with the land structuring, consolidation and certification and the formation o f WUGs so that the land allocation i s done in accordance with the farmer's social and familial preferences and affinities.
15. Because o f the complexity o f the RAPs, especially in the Ribb dam and command areas, the preparation, implementation and monitoring o f the RAPS will be closely monitored and supported by training and technical assistance.
Estimated Budget for the Resettlement Program
16. The estimated grand total cost o f the resettlement program for both schemes, including Ribb dam, i s US$2,250,000. The cost breakdown by scheme and phase i s given in Section 4 below. Because the exact unit prices, the number o f people to be affected, and the scope o f land acquisition are estimates, the exact figures will not be known until the R A P s are prepared.
Safety of Dams (OP 4.37)
17. The safety o f the Ribb dam design i s being reviewed by a Dam Safety Review Panel as part o f project preparation and during the dam feasibility studies undertaken by the Ministry o f Water Resources.
Projects on International Waterways (OP 7.50)
18. The I&D project will have an annual abstraction from the Ni le River, which i s shared by 10 riparian countries. By 201 1 (when the project i s operational) the abstraction from the Ni le to serve the project area i s estimated to be 183 mcdyear for 20,000 hectares. The N i l e riparian countries have formed the NBI for enhanced collaborative development and management o f the Ni le River for the benefit o f all. Wh i le the NBI i s not yet established as a permanent institution, the Ni le Council o f Ministers (Nile-COM) acts as the body governing the activities under the NBI. The I&D project i s one o f a series o f NBI projects which the Nile-COM has approved for project preparation under the umbrella o f the NBI. The Government o f Ethiopia had developed a project profile for the I&D project that summarizes the key components and identifies the potential water related impacts. Th is project profile has been shared with the riparian countries on Febrary 27 under an agreed procedure thus meeting the requirements o f the Bank's policy on international waterways (OP 7.50).
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PROJECT BUDGET TO MEET SAFEGUARDS REQUIREMENTS
Environmental Specialist Training, Capacity Building and Technical Assistance (Environment) Monitoring, Technical Assistance and Training (Social)
19. The costs o f preparing and implementing the safeguards aspects o f both the Megech and Ribb schemes are estimated below. In addition, since both the responsible federal and regional authorities have inadequate capacity to thoroughly address safeguards concerns during the preparation and implementation o f the irrigation schemes, the I&D project will finance technical assistance to support the development of TORS for EAs and RAPS, the review and approval o f documents, and the implementation o f EMPs and R A P S .
15 15 15 45 50 20 20 90
50 25 25 100
Subtotal - Environment Subtotal -- Social
Grand Total
995 2,250
3,245
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Annex 11: Project Preparation and Supervision
PCN Review In i t ia l P I D to PIC In i t ia l ISDS to PIC Appraisal N e go ti a tions Board Approval Planned Date o f Effectiveness Planned Date o f In i t ia l Review Planned Date o f Mid-term Review Planned Closing: Date
K e y institutions and persons responsible for preparation o f the project:
Bank staff and consultants who worked on the project included: Name Title Unit IJsbrand de Jong E.V. Jagannathan Karen Brooks Jeeva Perumalpillai-Essex Laketch Mikael Im Azeb Fissha Wendy Wiltshire Patrick Labaste John Boyle Mohamed Arbi Ben-Achour Christine Akinyi Onyango Arianna Legovini Rajat Narula Mar ie Khoury Aldo Baietti Samuel Haile Selassie Eshetu Yimer Almaz Teklesenbet
Sr. Water Resources Mgmt. Specialist Sr. Water Resources Mgmt. Specialist Sector Manager Lead Operations Officer Rural Development Specialist E T Consultant Operations Analyst Lead Agruculture Economist Sr. Environmental Specialist Sr. Social Scientist Sr. Counsel Sr. Economist Sr. Finance Officer Sr. Finance Officer Sr. Financial Specialist Sr. Procurement Specialist Sr. Financial Mgmt. Specialist Program Assistant
*:* World Bank, 2005: Well-being and Poverty in Ethiopia: the Role o f Agriculture and Agency
Preparation Studies - Working Papers
Anderson 2005: Small-scale Rainwater Harvesting
IWMI 2004: Experiences and Opportunities for Promoting Small-Scale/Micro Irrigation and Rainwater Harvesting for Food Security in Ethiopia
Mekuria 2005: Large- and Medium-Scale Irrigation in Ethiopia: Experience, Opportunities and
Tahal, 2006: Identification o f Irrigation Schemes in the Ni le Basin o f Ethiopia
Amhara National Regional State, Bureau o f Finance and Economic Development 2004: Rural Household Socio-Economic Baseline Survey o f 50 and 56 Woredas in Amhara Region, Bahir Dar
Annen, 200 1 : Promotion o f Small-scale Irrigation in Food Insecure Woredas o f Ethiopia
IWMI 2005: Pro-Poor Intervention Strategies in Irrigated Agriculture in Asia
Ministry o f Water Resources 2001 : National Water Strategy
Henri Tardieu, 2004: PPP in the Irrigation and Drainage Sector: the Need for a Professional Third Party between Farmers and Governments
IFPRI, 2003: Market Opportunities for African Agriculture Mot t MacDonald, 2006: Resolutions for the Issues o f Concern for KDP Implementation and KDIP Operation
supports
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Annex 13: Statement of Loans and Credits
Original Amount in US$ Millions
Difference between expected and actual
disbursements
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
PO49395 PO50938 PO4461 3 PO75915 PO81773
PO50383 PO57770 PO69886 PO73 196
PO52315
PO67084
PO50342 PO35147
PO69083
PO00756 PO00736 PO00733 PO00755 PO00732 PO00771
2003
2003 2003
2003 2003
2002
2002 2001
2001 2001
2001
2001 2001
2001
1999
1998 1998 1998 1998 1996
ETHIOPIA -ENERGY ACCESS Capacity Building for Dec.Serv.De1. ET Road Sector Development Program I1 ET Pastoral Community Development EMERGENCY DROUGHT RECOVERY PROJECT Ethiopia: FOOD SECURITY PROJECT ET CULTURAL HERITAGE Multisectoral HIVIAIDS ET:Dernobilization and Reintegration Proj ET:CONSERVATION OF MEDICINAL PLANTS
EMERGENCY RECOVERY AND REHAB. PROJECT Women Dev. Initiatives
ET CONSERV.& SUSTAIN. USE MEDIC. PLANTS AFTKL: ET GLOBAL DISTANCE LEARNING Health Sector Dev. ET ENERGY I1 ET: AG. RESEARCH & TRAINING ETHIOPIA ROAD SEC. DEV. PROG.
IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
Total portfilio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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Annex 14: Background Paper on Agricultural Development and Marketing
I. Cropping Opportunities in the Selected Project Sites *
1. Two sites have been selected by the Government o f Ethiopia for investment through the proposed Irrigation and Drainage Project: the Megech and Ribb River schemes. Both o f these sites are located on river flood-plains adjacent to Lake Tana. The area to be developed i s as follows:
a) 4,466 hectares at Megech (pumping stations) b) 14,460 hectares in the Ribb River Valley (dam)
2. In addition, i t i s proposed that a further area o f 80,000 ha o f command area would be subjected to a full feasibility study by the project. One area which wil l be studied will be the Anger scheme.
Main Physical Production Parameters
3. An examination o f the main production parameters (soil, slopes, climate and altitude) at each site provides an insight into the types o f cropping which could be undertaken successfully from a technical perspective. T h i s then provides a basis for assessment o f potential cropping systems on a financial basis, using market prices and costs.
4. Agro-ecological Characterization of the Project Sites. The Megech and Ribb River basins are located in the warm to cool moist mid highlands ago-ecological zone. This zone has double growing periods o f about 90 to 120 days and 40 to 60 days in each o f the wet seasons. The area receives average annual precipitation o f about 900 mm, most o f which i s concentrated in the summer months from June to September. The altitude o f the area i s about 1800 meters above sea level. The mean annual temperature and rainfall varies from 16 OC to 21 OC and 800 to l O O O m m , respectively. The predominant soil types are vertisols, nitosols and leptisols.
5 , The area suffers from water-logging and inundation during summer months due to the combined effects o f concentrated rainfall, flooding from the river and the soil characteristics which do not allow for rapid infiltration o f moisture. As a result, many farmers have successfully switched to production o f wet rice (padi), with this crop being well suited to conditions which would be extremely damaging to most upland crops.
6. This climate would indicate that supplementary irrigation would be required in summer and full irrigation in winter.
Current Crop Production
7. The current farming system i s mixed cropAivestock production, with crop production predominating. All the land in the project area i s occupied by subsistence farmers. Both rainfed and irrigated crop production are practiced in the project area. Crops grown under rainfed conditions during the main crop production season (June, July, August and September) are cereals (Teff, finger millet, wheat, barley, maize, rice), pulse crops (chick pea, rough pea (vetch) and lentils), o i l seed crops (noug and safflower), spice (fenugreek) and vegetables (pepper). Due to a chronic waterlogging problem, rice cultivation during the rainy season i s expanding very rapidly. Chick
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pea, rough pea (vetch) and safflower are grown using residual moisture from October to February.
8. In both project areas, there has been spontaneous development o f small-scale private irrigation systems in areas close to the rivers. The major crops that are grown under irrigation include vegetables (tomato, onion, pepper, garlic and cabbage), cereals (wheat, oat and maize), and pulse crops (chick pea, rough pea and fenugreek).
9. The major crop production constraints in the project area are:
Flooding after the commencement o f the main rains in June/July damages all crops with the exception o f rice. Crops like noug, safflower, wheat and barley do not withstand even short durations o f waterlogging; Insect pests: such as bol l worm in chick pea and stalk borers in maize; Diseases: fungus attack i s common in safflower, wheat and vegetables; Weeds: primarily cuscuta, a parasitic weed in noug; Lack o f inputs (fertilizers, pesticides, herbicides, improved crop varieties); Lack o f markets for the produce: As a result o f limited urban markets for perishables; most vegetable prices are very low and a significant proportion i s unsold.
a
a
10. The field crops which could be successhlly grown under irrigated conditions in the Megech- Ribb irrigation area are:
a
a
a a
Cereals - Maize, Wheat and Rice (probably upland varieties as flooding would be eliminated); Pulse Crops- Soya bean, Haricot bean, Chick pea and Lentils; Oil Crops - Noug, Sunflower and Flax; Spices -Black and White Cummins, Turmeric, Coriander, Fenugreek, paprika and Red Pepper; Fruit - Mango, Avocado, Banana and Grape h i t .
1 1, Although it i s reported that both sorghum and cotton are grown in this area, i t i s thought that these would not be suitable for production under irrigation. Yields would be relatively low due to low night time temperatures (due to the altitude o f the area), as well the short duration o f sunshine during several summer months (caused by cloud cover).
11. Market Opportunities for Agricultural Produce in the Project Area
Domestic Market Opportunities
12. Ethiopia has a large population o f about 75 mil l ion people, but this does not translate into strong domestic demand for food and other agricultural produce. This i s due to the prevailing low incomes and low proportion o f the population, about 15 percent, located in urban areas.
13. There are, however, a few examples o f opportunities for production for local markets which are either not satisfied, or which are being satisfied by imports.
14. The most obvious example o f the first category i s sugar. The current consumption level in Ethiopia i s about 3.5 kg per person per year. This compares with levels more than four times
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higher than this in neighboring countries such as Sudan, Kenya and Somalia. T h i s indicates a substantial level o f unmet demand. Wh i le i t i s known that there are advanced plans for further investment in sugar production facilities in the country, these may not be sufficient to satisfy the unme t demand.
15. There are also several apparent opportunities for production o f products and commodities which would compete with products currently being imported. The largest apparent opportunity i s to substitute some proportion o f the large imports o f wheat and various wheat and cereal manufactured products currently being imported. In 2004, the value o f imports o f such products to Ethiopia was about US440.0 million. While much o f this i s in the form o f direct foreign food aid, this does not account for all o f it. Moreover, a proportion o f the food aid could be purchased locally if supplies allowed for this. Prices for wheat and most other cereals reflect a situation where imports, as a combination o f commercial purchases and food aid, meet the deficit between local production and demand. The price for wheat, for example, i s much higher than the export parity price, and only a little below the import parity price. This i s important because it means that local producers and merchants are supplying into a market where prices are determined primarily by the competing cost o f supplying imported produce, without the attendant transportation and logistical costs associated with importing.
16. Seed Production. There are several seed companies operating in Ethiopia, including the state owned Ethiopian Seed Enterprises, and at least six private companies, some o f which are subsidiaries o f prominent multi-national seed companies (e.g. Pioneer). These companies are producing significant quantities o f hybrid and certified seed, with sales increasing rapidly. However, the seed companies prefer to multiply their seed under irrigated conditions to improve productivity and crop management. With irrigation areas in relatively short supply, some seed companies have signaled their interest in engaging outgrowers to grow seed under contract. This presents and opportunity for the development o f contract farming for these relatively high value crops for small and medium-scale irrigators, including those who would benefit from the project. An indicative financial model o f this crop has been prepared as part o f the set o f crop and farm models for the project areas.
17. Other agricultural products which are currently being imported, but which could conceivably be produced in one or all o f the proposed irrigation scheme areas include:
0 Milk and dairy products; 0 Sugar and confectionary products;
Vegetable o i l products; 0 Tobacco; 0 Cotton and cotton products.
18. It should be noted that small-scale producers o f agricultural products are not liable for payment o f Value Added Tax (VAT). However, formally organized or corporate farmers are liable for payment o f VAT, which i s set at 15 percent o f the sale value. This puts them at a disadvantage when competing with smallholders for the same markets, that is, for domestically consumed produce such as maize or pulses. However, production o f export commodities does not have a requirement for payment o f VAT (see below).
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Export Market Omortunities
19. Despite these possibilities for producing for the relatively small domestic market, i t i s almost certain that the largest and most consistent market opportunities for farmers in the new irrigation schemes will be with export commodities. Ethiopia possesses several advantages which will allow it to compete effectively in export markets. The most prominent o f these are:
Access to irrigation water;
Relatively friendly policy environment.
Cheap land and plentiful labor supply;
A versatile climate which i s conducive to production o f a wide range o f temperate and tropical crops;
20. However, there are also some significant obstacles confronting production and profitable sale for export. The most important are:
e
e
e
Poor inland transport and communications infrastructure; Lack o f a national sea port; Lack o f proper grading and standards for many products; L o w s k i l l base o f the agricultural population; Government agricultural extension services which are focused on food security and subsistence farming rather than on production for markets; The relative lack o f private sector service providers in the agricultural sector, and some Government hostility towards such non-public sector entities; The relative inexperience and small size o f commercial entities with existing rural value chains; Lack o f access for farmers and micro-enterprises to medium-term finance.
21. The recent performance o f exporters o f non traditional agricultural produce from Ethiopia has been impressive, albeit from a low base position. Wh i le export values for coffee have fallen, there has been good growth in exported values o f oilseeds and oilseed products, pulses (beans), leather and other animal products (including live animals and fresh meat to Sudan and Egypt), fresh and chilled vegetables and flowers. This performance demonstrates that the production and marketing environment in Ethiopia i s sufficiently competitive to allow for profitable exports o f a wide range o f agricultural commodities.
22. There i s also anecdotal evidence that exporting companies are facing problems o f supply rather than o f demand. Production o f almost all produce in Ethiopia i s done by smallholders using rudimentary technology within rainfed farming systems. Such systems are inherently unreliable, as production i s influenced greatly by rainfall patterns and amounts, as well as by other naturally occurring factors. Moreover, the small size o f marketed surpluses produced by individual farmers from widely scattered areas means that the costs o f collecting, packaging and transporting produce i s high relative to i t s intrinsic value. Market entities which operate in the value chains for rural produce therefore are forced to adopt opportunistic and short-term strategies for securing supplies. T h i s militates against long-term price stability for farmers and fails to build reliable supply chains. It i s obvious that if production i s switched to an irrigated farming system, many o f these constraints could be overcome.
23. One specific export commodity which may be applicable for the proposed irrigation schemes i s paprika, used primarily as a food colorant. Although production o f this crop i s in i t s infancy in
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Ethiopia, it i s currently being successfully grown in other African countries by smallholders within contract farming arrangements. One firm engaged in i t s production and marketing in Ethiopia has indicated that it would be interested in contracting smallholder irrigation farmers to produce the crop. Although such production would be unlikely to occupy more than a few hundred hectares in the proposed scheme areas, i t could nonetheless become a financially important crop, and crucially, act as a stimulant and a model for the development o f production models for other export commodity crops. An indicative financial model o f paprika production i s presented as part o f a set o f crop models.
Market Development Prospects
24. There are several new developments which will tend to create new market opportunities for Ethiopian producers and exporters o f agriculturally derived products. Amongst the most important o f these are:
The establishment o f an Agricultural Commodity Exchange, with attendant standards, warehouse receipts scheme and certification procedures; The emergence o f Chinese markets for a variety o f agricultural produce, supported by the decision o f the Chinese government to allow importation o f 187 commodities without tariffs or quotas; The emergence o f some specialty “niche” markets for Ethiopian produce, e.g. Teff, due to i t ’s low gluten content; The reopening o f the border with Sudan, allowing for trade in livestock, fruit, pulses and other produce to the growing Sudanese and Egyptian economies; Continuing Government emphasis on enabling the agricultural sector, with provision o f credit guarantees to producer cooperatives and several initiatives aimed at improving the quality and coverage o f the official extension services; The burgeoning development o f Micro-Finance Institutions (MFIs) in rural areas, which has greatly improved access to finance by farmers and rural SMEs.
0
0
0
25. These positive developments provide genuine cause for optimism with respect to the development o f efficient and liquid markets which will provide improved opportunities for farmers to engage in profitable commercial production, as opposed to a continued orientation towards subsistence farming. However, there are also numerous remaining institutional and structural constraints, the resolution o f which would greatly aid in fostering market development for rural produce. These include:
A somewhat insecure regulatory environment, demonstrated by the recent (2006) ban on cereal exports; Outdated and insecure land tenure regulations, which effectively precludes the use o f agricultural land as loan collateral, inhibits the development o f a liquid market in land, and also acts as a deterrent against long-term investment in enhancing/protecting the productive capacity o f land; Lack o f competition in inputs supply, with effective Government control o f both seed and fertilizer supplies; Application o f outdated and unproductive agronomic techniques, leading to low yields, lack o f crop security and higher production costs per unit o f value; Almost complete lack o f appreciation o f the need for application o f commercial tools and decision-making techniques within the agricultural sector, and l i t t le or no capacity to provide training for extension services and farmers in their application;
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A very poor record o f performance by publicly constructed irrigation schemes in recovering sufficient costs and developing the robust institutions required to ensure scheme sustainability; and a correspondingly large proportion o f public irrigation schemes which have failed or which are in a state o f terminal decline; Lack o f appropriate procedures for effective contract enforcement, which increases the r isks o f contract farming for both farmers and merchants.
Note on Potential for High Value Horticulture and Floriculture.
26. There has been very obvious and spectacular investment in high value export oriented floriculture and horticulture in Ethiopia in recent years, particularly in areas adjacent to Addis Ababa. Wh i le this i s a welcome development, caution must be exercised in using it as a basis for building expectations o f i t s replicability. The opportunities for this development have stemmed from:
0
Access to a relatively skilled population at low wage cost, sourced from the burgeoning population o f the capital; Access to investment finance, with some special provision o f finance being provided through Government intervention; Appropriate climatic and environmental conditions; Near access to an international airport with freight handling facilities and competitively priced air-freight; The collapse o f the previously established Zimbabwean floriculture and horticulture industry due to the political and economic situation in that country.
27. I t i s important to note that it i s not access to irrigation waterper se which provides the key to allowing for this type o f production system to flourish. Furthermore, the total area likely to be engaged in such production in Ethiopia would be several hundred hectares at most. I t i s therefore unlikely that such production systems would be used for more than a tiny fraction o f the proposed 20,000 hectares development proposed under the I&D project. The areas nominated for development do not possess most o f the factors which have made this production system so successful in the areas adjacent to Addis Ababa, and these factors would not be l ikely to be provided in the foreseeable future. Although it has been proposed that an international standard airport may be constructed in the vicinity o f one o f the sites, at Bahir Dar, this would not be sufficient o f itself to ensure that a high value production system would be profitable. Although proximity to such an airport i s necessary, there are other crucial elements which would need to be functioning to provide the basis for success. These would include specialist exporting facilities, especially refrigerated stores and other equipment to enable maintenance o f a “cold chain”, and most crucially, international air transport services provided by competitively priced airfreight operators. Experience elsewhere in Africa has demonstrated that airfreight options at an affordable price are usually only provided in conjunction with existing high frequency contra- directional freight or passenger operations using wide-bodied aircraft.
28. I t must therefore be concluded that i t i s unlikely that high value export oriented horticulture andor floriculture would be viable in the project areas in the near to medium term. Moreover, even if all the conditions enabling viable production for this industry were present, i t would s t i l l only make up a very small proportion o f the total production on the 20,000 hectares identified for irrigation development. I t i s therefore prudent that preparations for this project focus on production o f industrial and commodity crops for which there are ready markets regardless o f quantities produced.
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111. The Basis for Viable Crop Production
29. It i s essential that the project achieves economic and financial viability to ensure i t s long-term viability and maximum impact on poverty reduction. There i s ample evidence to demonstrate that if financial viability i s not achieved at the level o f the individual farmer and the scheme operator, then the scheme will fail due to lack o f finance for enhanced farmer incomes as well as for operation, maintenance and systematic provision for depreciation. There are numerous schemes in Ethiopia and elsewhere in sub-Saharan Africa which have failed due to lack o f provision for these items.
30. In order to achieve financial viability, i t will be necessary for farmers supported by provision o f irrigation facilities to operate in a commercial manner, that is, profitably through production o f a marketable surplus. I t i s not sufficient that farmers simply achieve improved productivity for subsistence consumption, as this would not generate the required cash flows. In recognition o f this, and as a means o f providing commercial orientation to the project, a detailed market assessment and value chain analysis study will be carried out during 2007. This study i s expected to be available by about June 2007.
3 1. The process o f identifying the most profitable means o f production at each site commences with an investigation o f the potential profitability o f technically feasible crops at each o f the sites chosen for development. The steps in this process are clearly outlined in the Terms o f Reference. In summary, they are:
0
0
Conducting a gross margin analysis for each crop considered, showing financial returns as well as returns to labor (for smallholders) with a sensitivity analysis; Constructing financial models showing technically and financially viable cropping patterns at the individual farm level for each o f the schemes, showing overall cash flow, profitability, returns to labor and returns to incremental capital; Preparing a Series o f Financial Models for the most attractive options for Agricultural Production for each scheme, showing overall profitability, cash f low and internal rates o f return. From this, provide a ranking o f the most attractive crop and enterprise models.
0
32. In addition to undertaking these quantitative analyses, the MAS will provide a qualitative assessment o f the technical and financial r isks associated with the production and marketing o f each commodity, and recommendations on procedures for risk alleviation. I t will also provide an analysis o f the supply and marketing chains for each o f the most attractive crops-enterprises, in order to identify weaknesses and propose appropriate remedial action. As part o f this assessment, i t will report on the current provision o f rural finance, and advise on i ts potential to promote the types o f commercial agricultural production envisaged.
IV. Preliminary Conclusions on Marketing Issues
33. From the information available, it i s reasonable to infer that there would be markets available for a wide range o f crops and products which could be grown in the proposed project areas. Exactly which crops are to be grown would initially be determined through a thorough Market Assessment Study, to be carried out as part o f the I&D project preparation process. Thereafter, i t will be advisable for all stakeholders to constantly update the information on the most attractive markets, due to the natural volatility o f prices and demand for agricultural produce in both local and export markets.
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34. There i s substantial information showing that viable existing and new markets for Ethiopian agricultural produce are becoming more accessible. Local markets for sugar, cereals, pulses and dairy products are currently under-supplied, or else served by imports, and would provide good options for producers in the new irrigation schemes. There are also burgeoning export markets for oilseeds, pulses, livestock and animal products and some niche items such as tropical h i t and industrial crops such as paprika.
35. It i s unlikely that high value horticulture and floriculture markets would prove to be attractive to irrigators in the proposed project areas. Th is i s because viability o f such markets depends on several factors which are not likely to be available in these relatively remote areas. I t i s also pertinent to note that production o f these products does not require large areas o f land or large quantities o f irrigation water.
36. Ultimately, the “markets” used for products derived from the new investment will be determined by the ability o f farmers to produce at a cost which allows for an adequate financial margin to be obtained within the available price structure. Farmers are always price-takers, and most o f what they produce can be readily substituted by producers in other parts o f the country or from imports. For this reason, the financial analysis o f alternative crop and production systems at the farm level i s an essential tool in determining what products can be profitably produced on a sustainable basis.
V. Activities to be supported by the Project in Agricultural Production and Associated Market Development
37. The project would support Agricultural Production and Associated Market Development through activities organized in three sub-components. I t i s recognized that i t will require concentrated effort in terms o f farmer capacity building, technology development and application and the development o f reliable markets. Whi le it i s proposed that the project would in general adopt the methodology o f the RCBP, i t would apply the activities in a concentrated way, with services being available for all farmers within the project area.
38. Below are some details concerning this support which i s additional to that contained in the PAD.
Sub-Component 2.1 : Capacity-building for farmers
39. Support toprovision of R&D. The project would support the provision o f appliedadaptive research into technology which would be potentially o f use to farmers. These services would aim at disseminating and replicating more systematically the results from the research system ( E M ) and would be supplied by Government and Non Government Service Providers on a fee for service or contract basis. Th is means that specific research activities would be funded by the project on the basis o f an identified need. The emphasis would be on the provision o f farmer managed trials and demonstrations on farmer’s fields. Farmers would be enabled to participate in the planning, execution and evaluation o f the trials and demonstrations. Topics which would most likely be prominent would include:
0
0 Introduction o f new crops; 0
Introduction o f improved varieties and cultivars;
Inputs use (fertilizer, pesticide, herbicides);
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Application o f reduced and zero tillage, as well as mechanized operations; Efficient irrigation and drainage techniques.
40. Provision of advisory services in thematic areas and in farm management. The provision o f services to develop the capacity o f farmers would be strengthened on a temporary basis during project implementation by the appointment o f Thematic Specialists on a contractual basis. These specialists would be competent in disciplines such as irrigation agronomy, farm management, post harvest technology etc. A total o f 20 Thematic Specialists would be appointed in the project area, on the basis o f one per 1,000 hectares under irrigation.
41. The need for commercially oriented farming means that farmers will need an appreciation o f the importance o f financial measures o f production, and the tools needed to make decisions based on a combination o f financial and technical criteria. They wil l need to appreciate and be able to apply simple gross margin analysis, crop and farm profitability and risk assessments. Training in these techniques would be provided by Government and Non Government Service Providers on a fee for service or contract basis. Included in this activity would be the strengthening o f Farmer Based Organizations (FBOs) such as primary cooperatives, farmer associations and common commodity interest groups.
42. The capacity o f the regional extension services to provide these services to farmers would be enhanced through the provision o f motorcycles and allowances for their operation to be granted to Development Agents (DAs) and Thematic Specialists. The project would also provide ITC equipment for Farmer Training Centers, as well as a yearly allowance for ITC supplies, to complement what i s to be provided under the RCBP.
43, Funds/GrantsMicro-projects. This sub-component would also provide resources for the grant mechanisms established by RCBP, i.e. the Farmers Advisory Services Fund (FASF) and the Farmer-Research Extension Groups (FREGs). To support the development o f the demand side o f the agricultural extension system, annual grants o f up to US$5,000 par participating FTC would be provided under the I&D project. The awarding and administration o f these grants would follow the procedures set forth for the RCBP. Two annual grants o f US$5,000 each would be awarded each year to support the FREGs.
Sub-Component 2.2: Capacity-building for Applied Research and Extension
44. It i s recognized that the extension services at Regional, Zonal and Woreda levels are relatively weak with respect to the requirements for sustainable provision o f relevant expertise for imgation farming. Currently, these services are oriented towards rainfed farming and associated livestock production at subsistence level. The resources allocated to this component aim at improving and strengthening the capacities o f the public providers o f applied research and extension services.
45. Studies, training and workshops. The budget includes a provision o f US$200,000 per year for consultancy and studies, as well as yearly lump sum provisions for training, seminars and workshops targeted at the research and extension s t a f f (DAs), as well as for the Kebele authorities. Training in applied research and commercial farm management would also be provided, including scholarships for training abroad. Four vehicles would be acquired under the project to facilitate supervision by both high level extension staff (2) and researchers (2).
46. GrantsMicro-projects. The ASDF would receive a yearly allocation as o f year 3 o f the project. The ASDF has been designed under RCBP to enhance the supply side o f Ethiopia’s
113
extension system. The grants would finance training o f and technical assistance for DAs, as well as non public service providers.
Sub-Component 2.3: Market and Value Chain Development
47. This sub-component aims at supporting market and value chain development in the project’s areas. In contrast to sub-components 2.1 and 2.2, this type o f intervention i s new and not covered by RCBP.
48. Market studies, facilitation and development of BDS. The budget for the sub-component includes a provision for a number o f operational market studies on value chains (2 per year, on products whose market potential needs to be thoroughly assessed and partnerships between farmers and operators need to be developed, such as o i l seeds, h i t s and vegetables, etc.), technical assistance to develop value chains and promote contracting arrangements, and setting up o f a BDS Fund for SME/SMIs.
49. Training, seminars and workshops. The activities funded under the sub-component would include workshops and study tours, as well as training to enhance the offer from BDS providers in the project area.
50. GrantsMicro-projects. The Market and Value Chain Development sub-component would also include a matching grant mechanism to leverage private investment. This facility would include three windows: (i) matching grant for V C partnerships; (ii) matching grant for investments in post-harvest equipment and technologies by farmers or farmer groups (warehouses and storage facilities, processing equipment); and (iii) matching grant for SME/SMIs. For each window, clear and transparent eligibility criteria would be defined. The matching grant mechanism would typically fund 50 percent o f investment costs for windows 1 and 2, and 25 percent for the sub-projects submitted by SME/SMIs. The facility would be managed by an independent entity recruited for that purpose and supervised by an approval committee made o f representatives o f regional BOARDS, farmer organizations and private sector operators.
5 1. Management and support. Two coordinators - one for each project site - would be appointed to manage and coordinate the activities to be implemented under the sub-component. The project would purchase one vehicle for each coordinator and fund salaries and allowances for the vehicle’s operating costs, as well as per diems and travel outside the region. Eventually, the two coordinators could be seconded by a consulting firm to be recruited through a competitive process.
VI. Possible Non-Quantified Benefits
52. There are several non quantified multiplier benefits which would accrue to farmers and the rural community in general as a result o f project interventions. Amongst these are:
(a) Livestockproduction. This i s already important for a large number o f farmers in the proposed command areas. They currently produce both dairy and meat products, as well as using cattle for animal draught power. It i s highly probable that this type o f production would be enhanced as a result o f the irrigation development. This would occur through the production o f higher yields o f crop residues, especially from cereal and legume crops, which would be available for animal fodder. In addition, i t i s also probable that some farmers would choose to grow specialist fodder crops, especially for consumption by dairy animals.
114
(b) Employment generation. The impact o f the project will be to generate an immediate incremental demand for farm labor. This occurs due to the increased complexity o f irrigation farming, the higher input use, the higher yields and the increased cropping intensity. Most crops wil l induce an incremental labor demand o f between 100-150 percent. In the case o f higher value crops, the increase would be o f the order o f 300 percent. Although the crop models assume that this will be satisfied by increased inputs o f family labor, this wil l not be the case for larger farm units. These would undoubtedly hire extra laborers, contributing to increased cash incomes for the poorer sections o f the rural community.
(c) Consolidation of land areas and land certzjkation. I t has been noted that most smallholder families are able to only manage an irrigated area o f a maximum o f 0.5 ha per season within their existing resources o f family labor and access to draught animals. However, the project proposes that each family would retain most o f their existing land within the command area, with relatively small adjustments (reallocation) being made for families displaced by the requirements for irrigation infrastructure and inundation by the Ribb dam. This means that the average landholding within the irrigation area will continue to be around 1.5 ha per family. There will thus be a process o f adjustment after the project commences, whereby farmers with greater capacity for production will increasingly occupy and use irrigated land which i s beyond the capacity o f those less able. This dynamic would be subject to intermediation through project support, allowing the emergence o f more specialist (and productive) commercial farmers over time, while also providing new opportunities for labor based income generation. To that end, the project will support and upscale the existing GoE land certification program, as it will help the emergence o f a more flexible land market.
(d) Value Chain Development. The project will induce private investment in value chains for produce originating in the irrigation area. This will occur through the availability o f additional produce, and directly through the activities provided under component 2.3. T h i s will lead to significant additional net revenue in the form o f value added to produce, as well as to increased off-farm employment opportunities. However, neither o f these benefits i s quantifiable until the nature and scale o f induced value chain investments becomes apparent.
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Annex 15: Country at a Glance
'365 Mob 2005
M.6 57.7 413.3 47.7 P owl
123 8.9 13.5 13.3 nencubm bdustry
!%mites 32.7 32.4 40.2 380 Household h l expenditure M4l 78.6 81.8 822 hml qov't b i r d coI\RIRIpbQI - expendike 10.3 8.4 14.0 142 knportsdgwdsadserwces 1t.5 15.7 32.6 39.1
5.1 4.8 5.3 5.1 henufaeturina
Ethiopia at a glance &I2108
6mwtnotcqltPrmdCDPrX)
16 p
-75
-0Q .9.Ioop
46 0.4
55.3 27.7
EthiDpir
71 3 1BO 11.4
2.1 2 2
44 16 42
110 4? 22
93 101 88
1SSS 7 6
18.0 8.7
11.9 20.7 2 6 0.8
135.5 lB.l
2001
12.3 10.1 36.4
S r B S a b r a
Africr
741 745 552
2 3 2.3
35 48
FW 28 58
93 OB 87
2W B.7
21.3 115.4 4.1
162 -5.1 0.5
67.5 5.0
212 124.6
2005
8 7 6.8
-2.5
T
2005 112 26.3 16.4 3.8
172 a1
tQ05-09
5.6 3.4
11.7
Tfa&
T
Indebtedness
3.0 2.2 17.3 120 Sauenge@WW m n
3 8 5 2 6.8 -5.1 3.5 5.4
lndvsby
serwes -0.2 52 5.8 HaKehold k a l 1.9 3.0 14.7 !la Geflenl W't -3.1 0.8 0.4 Gmss capital f G l l n & h -1.8 5.1 3.4 30.1 hnucits d m d s and s m w s -0.1 8 2 18.5 M 4
Note: 2OU5 data are prelinmayeamak.
* The diivronds skw ku key t n d i SI thecountry(n bold) campared rmh Ik m w n g w p ivonee. ff diita yc rnismg. the dkovd mil
W r i W r i n g
be nieonplolo.
116
1985
l0.t 32. t
14.1 0.3
-5.8
1985
3co 225
1% &I
975 283 388 249 I f 0 too 1 tO
1985
546
533 -33 l# 473 420 4 a
I ,082
21% 2.1
1985
5.233 49
437 I59
7 6
515 527 8 0 0
32 M 7
43 7
38
199s
10.0 13.5
14.4 3.1
-3.5
1995
454 288 25 78
1.083 181 188 350 758 88
t82
1995
784 1,272 4 8 8 -60 730 180
-11 1 -70
580 8.3
t995
10,308 0
1,470 154
4 23
47% 18Q 4 8 14 0
142 84 18 67 11 58
ZOM
3.3 Q.6
18.4 4.2 -6.6
ZOM
do0 224 fa5 62
2,587 ZeB 31 1 EQO
81 117 88
mu4
1,466 3,171 -1.673
-81 1,238 4#
903 4 6
1,350 8.6
2aoL
8.574 0
3,488 97 0
38
1.422 FA 71
545 0
189 2w
13 189 23
187
11.6 11.0 to
0
192 -M
r r ,
1.555 8.7
2005
0 3,350
0 72
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118 29 80
C: 153
117
MAP SECTION
A B B A Y R I V E R B A S I N
LAKETANA
BASIN
Upper Beles
Negeso
Anger
Koga
Megech IrrigationScheme
Ribb IrrigationScheme
A M H A R A
O R O M I YA
GAMBELA
ADDIS ABABA
BENSHANGUL
Atbara R.
Abbay R.
Abba
y R.
Dinder R.
Bele
s R.
Beshilo R.
Dabus R.
Dura
R.
Abbay R.
Welka R.
Mugar R.
Guder R.
Anger
R.
Anger R.
Didesa R.
Jemma R.
LakeTana
Ribb R.
Gumara R. WeldiyaDebra Tabor
Nazret
Welkite
Hosaina
Gimbi
Gonder
Dese
DebreMarkos
DebreBirhan
Asela
Gore
Nekemte
Jima
Fogera Plains
Bahir Dar
Gambela
Asosa
ADDISABABA
36°E 38°E 40°E
36°E 38°E 40°E
12°N
10°N
8°N
12°N
10°N
8°N
ETHIOPIA
Addis Ababa
SUDAN
KENYA
ERITREA
E T H I O P I A
Area of Map
SOMALIA
DJIBOUTI
UGANDA
REP. OF YEMEN
Red
Sea
Gulf of
Aden
INDIAN
OCEAN
00 2525 5050
00 50502525 75 Miles75 Miles
75 Kilometers75 Kilometers
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.
