Document of MICROyFIqMECot-Y The WorldI 6cport, No. 4g"AJS Type: (. 5AR) Goi!:i, CARL,/ X32'5bm l4:~ M FOR OFFICIAL USIS

Public Disclosure Authorized GaJ 3 ReportNo 8952-AL

STAFF APPRAISALREPORT

DEMOCRATICAND POPULAR REPUBLIC OF ALGERIA Public Disclosure Authorized

SAHARA REGIONAL DEVELOPMENTPROJECT

SEPTEMBER4, 1991 Public Disclosure Authorized

Europe, Middle East and North Africa Region Maghreb Department Public Disclosure Authorized AgricultureOperations Division

fThisdoument ks a resicbd dis o ad may be nsedby r s only in tae peromance of ti offkid dutes. its co_tns may not othrWi be dsle Wod Ran antholtMn C_URRUEY EGVALENTS (March 1991)

Currency Unit - Algerian Dinar (DA) US$1.00 DA 16.60 DA 1.00 - US$0.60

WEIGHTSAND MEASURES

The metric system is used throughout this report

GLOSSARYOF ABBREVIATIONS

ACV - Agent Communal de Vulgarisation AGID - Agence Nationale de Realisation et de Gestion des InfrastructuresHydrauliques pour l'Irrigationet le Drainage ANRH - Agence Nationale des RessourcesHydrauliques ANRH-DRS - Direction Regionale du Sud de 1'ANRH APFA - Accession a la ProprieteFonciere Agricole cDARS - Commissariat au Developpementde l'Agriculturedes Regions Sahariennes CFVA - Centre de Formationet de VulgarisationAgricole CI - Continental Intercalaire CT - Complexe Terminal CTHE - CommissionTechnique Tuniso/Algerienne de l'Hydrauliqueet de 1'Environnement DAD - De1lgu6 de l'Agriculturede Daira DAS - Domaine Agricole Socialiste DDAHA - Division pour le Developpementdes Activit6s Hydrauliqueset Agricoles DP - Direction de la Planification(Ministry of Agriculture) EAC - ExploitationAgricole Collective ERESS - Etude des Ressources en Eau du Sahara Septentrional INRA - Institut National de la RechercheAgricole d'Algerie IDCN - Institut pour le D6veloppementdes Cultures Maraicheres INPV - Institut de la Protectiondes V4gdtaux ITAS - Institut de Technologiede l'AgricultureSaharienne ITDAS - InstitutTechnique de Developpementde l'AgronomieSaharienne OAMVOR - Office d'Amenagementet de Mise en Valeur du Perimbtre de l'Oued R'hir ORD - Office Nationale des Dattes OPIOR - Office des PerimetresIrrigu6s de l'Oued R'Hir PCU - Project Coordination Unit SONELGAZ - Societe Nationalede l'Electriciteet du Gaz

FISCAL YEAR

January 1 to December 31 FOROFICIAL WI ONLY

STA1FAPPASAL REPORT DEMOCRATICAD POPA REPUBLICOF ALGERIA SAAR REGIONALDMELOMT M Loan and Prgiect Summary

BgXWrrov: Democraticand PopularRepublic of Algeria

US$57 millionequivalent Terms: Repaymentin 17 years,including 5 years of grace. Interestwill be at the Bank'sstandard variable rate. ProiectOblectives: The proposed Project would: (a) support an environmentallysound development program for the Sahara; (b) assistGovernment in the definitionof a strategy for agriculturaldevelopment within the constraints determinedby thatprogram; (c) strengthen institutions dealingwith management, monitoring, and control of water resources;and (d) test the technical,organizational andmanagerial aspects included in theProject in a first phaseof renovationof oases. --^ecmutingAgent: "Commissariatau Ddveloppementde l'Agriculturedes R6gionsSahariennes" PtrjectDescription: The proposed Project consists of the following components:(a) InstitutionalDevelopment -provision of themeans to plan and monitor agricultural development in the region,including establishment of a monitoring systemfor water resource use andwater and soil quality, strengtheningof the applied research, training institutions and extensionservices, and creation of an agency for O&Mof the drainage infrastructure, and of a Project Management Unit to coordinate Project implementation;(b) Rehabilitationof Oases -drilling of wells,provision of pumpingequipment and construction of irrigation and drainage networks; (c) On-farm Development -agricultureimprovement and supply of inputs;(d) Studies,Technical Assistance and Training- preparation of development plans, feasibility and environmentalassessments for futureinvestments in the sector,provision of technicalassistance and training.

Benefitsand Rlsks: Establishmentof the basis for a comprehensiveand controlleduse of the groundwater resourcesto support a balancedand environmentallysound development in the AlgerianSahara; setting up proceduresfor an adequate operation of the hydro-agriculturalinfrastructure; increasein revenuesof the farmingcommunity, presently sufferingfrom shortageof water, decreasingyields and physicaldegradation of the irrigationand drainage

Thisdocument has a restricteddistribution and may be used by recipientsonly in the performance of their offlcialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authoriztion. - ii

networks. The risks concernprimarily (a) Government's commitment to restrain the on-going land distribution in the region,which if allowed to continue at the same pace as in the past would jeopardize the sustainableuse of the water resources, and (b) the lack of farmers' participationin maintainingthe farm drainage system, complementingthe Government'sinvestment effort.

nIronMental Issues: The proposedProject has been reviewedin accordancewith the provisionsof OperationalDirective 4.00, Annex A, and placed in environmentalscreening category B. The proposed Project would not require preparation of an environmental assessment and would support improved environmental management in the Project area through incorporation of environmental issues into planning studies and improvements in water management, soil use and crop protection by rehabilitation,demonstration, and research activities.

Kstima$ed Pro ec2tCosts Local Foreign Total -US$ million------

InstitutionalDevelopment 3.8 5.2 9.0 Rehabilitationof Oases 24.1 33.1 57.2 Studies/Tecb.Assist./Train. 0.7 1.7 2.4 On-Farm Development 6.16.5 7.6

Total Base Costs 29.7 46.5 76.2

Physical Contingencies 4.3 6.3 10.6 Price Contingencies 3.1 4.5 7L6

Total Project Costs 37.1/ii 57.3 94.4

/g IncludingUS$17.5 million of taxes and duties. - iii -

Local Foreign Total -,US$ million------

World Bank - 57.0 57.0 Government 17.0 0.3 17.3 Beneficiaries 2.6L_ 2.6 Net ProjectCost 19.6 57.3 76.9

Taxes and Duties 1L.S *.5 - Total ProjectCosts 37.1 57.3 94.4

Note: We understandthat, under an already-signedloan agreement, EIB is expected to assistGovernment in financingits contribution.

Estimated Disbursements: Bank PY 1992 1993 1994 1995 1996 1997 1998 ------US$ Million------

AnuUal 5.0 7.0 12.0 12.0 8.0 8.0 5.0 Cumulative 5.0 12.0 24.0 36.0 44.0 52.0 57.0

Economic Rate of Return: 17 percent

NaO: IBRD 22329 STAFF APOUSLUPR DE1OCRATICAND PQPULAR REPUALIC OF AQlGRIA

Table of Contents

I. INTRODUCTION ...... 1

II. THE AGRICULTURESECTOR ...... 1

A. Place of Agriculture in the Economy ...... 1 B. Recent Developmentsin the AgriculturalSector . . . . . 3 C. Agriculture in the Sahara. 4 D. Sector and Regional Issues Relevant to the Project . . . 5

III. BANK LENDING IN AGRICULTUREAND PAST PERPORMANCE ...... 7

IV. THE PROJECT AREA..8

A. Introduction .. 8 B. Physical Characteristics ...... 9 C. Water Resources...... 10 D. Population ...... 11 E. Land Tenure and Cropping Systems ...... 11 F. AgricultureSupport Services ...... 13 G. Infrastructure ...... 17

V. TilEPROJECT ...... 19

A. Rationale for BankInvolveent ...... 19 B. Concept and Objectives ...... 19 C. Components ...... 20 D. DetailedFeatures ...... 21 E. Status of Design ...... 24 P. Costs ...... 25 G. Financing ...... 27 H. Procurement ...... 28 I. Disbursements ...... 31

This report is based on findings of a pre-appraisal mission which visited Algeria in March 1990, composed of Mr. Carlos Gois (Task Manager), Ms. L. Effron (Economist),Messrs W. Van Tuijl (Sr. Irrigation Engineer), S. Lintner (Sr. EnvironmentSpecialist), P. Van Der Veen (ConsultantAgriculturalist), and N. Saadoun (ConsultantEngineer). - ii -

Table of Contentscont'd ...... Page ng,

VI. PROJECT IMPLEMENTATION ...... 33 A. Organizationand Management ...... 33 B. Execution and Maintenanceof Project Works. Purchase of Goods 34 C. Monitoring and Evaluation ...... 35 D. Accounts and Audit ...... 36

VII. BENFITS AND JUSTIFICATION ...... 36 A. General ...... 36 B. Land Use, Yields, and Production ...... 37 C. Marketing and Prices ...... 40 D. Farm Incomes ...... 41 E. Cost Recovery.43 F. Economic Analysis.45 G. Risk and SensitivityAnalysis ...... 46 H. Sustainability.47 I. EnvironmentalAspects .48

VIII. AGREMNTS REACHED AND RECOMMENDATION.49

In-text Tables

Table 4.1 - Water Resources .11 Table 5.1 - Project Cost Summary.26 Table 5.2 - Price ContingencyRates .27 Table 5.3 - Financing Plan ...... 27 Table 5.4 - ProcurementArrangements .30 Table 5.5 - DisbursementCategories ...... 32 Table 7.1 - Cropping Patterns and Crop Yields ...... 38 Table 7.2 - Increasesof Arnual Productionfrom the Project Area . . 39 Table 7.3 - FinancialBudgets and Returns to Family Labor . . . . . 43 Table 7.4 - Cost and Rent Recovery.45

Sugporting Tables

Table 1. Project Componantsby Year ...... 51 Table 2. ProJect Cost Summary ...... 52/3 Table 3. Estimated Schedule of Disbursementsof Bank Loan . . . 54 Table 4. Total Budget AllocationEstimates by Agency ...... 55 Table 5. Major ProcurementPackages ...... 56 Table 6. Vehicles .57...... i ...... 57 Table 7. List of Oases - Characteristics-Costs...... 58 Table 8. Ground Water Balance in Oued R'hir-ProjectScenario . . 59 Table 9. Ground Water Balance in Oued R'hir-FullRehabilitation . 60 Table 10. Land Tenure ...... 61 Table 11. SupervisionPlan ...... 62 Table 12. Cost Recovery .... . 63 Table 13. Selected Documentsand Data Available in the Project File 64 iii.-

1. ImplementationSchedule ...... 65 2. Organizationand Management ...... 66

NU: IBRD 22329 - Project Area

LIST OF ANNEXES IN IMPLEMENTATIONVOLUHE

Annex 1 - Detailed Cost Tables

Annex 2 - Guidelines for Project Monitoring and Evaluation

Annex 3 - Prices and Conversion Factors used in Economic Analysis

Annex 4 - Farm Models

Annex 5 - Technical Assistance,Training, and Studies

Annex 6 - EnvironmentReview

Annex 7 - Extensionand Applied Research

Annex 8 - Irrigationand Drainage Requirements STff RAISAL RPOT

DEMOCRATI£CANDAOPULAR REPUBLIC OP ALAERIA

MHARLREGNAL DEVELOPEN PRO

I.- TODUCTION

1.01 In the early 1960s, Algeria was a net exporter of food. During the next 30 years, the trade balance in agriculturedeteriorated steadily so that Algeria now imports some 60 to 70 percent of its basic food requirements. Agriculturalexports are negligible and overall Algeria's food imports account for about 20 percent of total merchandise imports. In the early 1980s, Government placed increasingemphasis on the agriculturalsector especially on the rehabilitationand developmentof new irrigatedareas with a view to reverse the deteriorationin the trade balance. These developmentsbenefited mainly the northern plains where the bulk of the population lives. With the growing awareness of the untapped land and water resources in the Sahara, and of the need, for social reasons, to develop neglected areas, Government has more recently given considerationto developmentefforts in the South. At the same time, however, Governmentis aware of the fragilenature of these resourcesand the need to develop a coherent strategy and plan for developing them in this region.

1.02 The project was identified by a joint World Bank-FAO/CP mission which evaluated a number of Government proposals for development in southern Algeria. A report was prepared in February1988 proposingan investmentproject for the renovation of 6,500 ha of oases and expansion of 1,000 ha of new plantationsin the Oued R'hir Valley, as the most importantand representative area for the production of date palm trees. The high cost of the proposed projectwas identifiedas an issue;however, the need to developboth lower cost alternativesand an adequate institutionalframework for developmentof such a potentially fragile area, led to an alternative approach, proposed in a preparation report of FAO/CP in September1989. This included limiting direct investments during the first phase to about 1,600 ha of the lowest cost investmentsand strengtheningthe planning and monitoring infrastructurein the region. The pre-appraisal mission recommended increasing the support for planning to cover the five major wilayate (provinces)to be developed in the medium term, and opted for selecting oases in the area for rehabilitationand further developmenton the basis of water deficiency,which led to the present proposed component for the rehabilitation of about 3,500 ha of date palm plantations.

II. THE AGRICULTURESECTOR

A. Place of Agriculturein_the Economy

2.01 Out of a total area of 238 million hectares in Algeria, only three percent, or 7.5 million hectares are arable. Fallow occupies,on average, more than 40 percent of arable land. Between 1985 and 1987, cereals covered an average of some 2.9 million ha or 60 percent of cultivatedarea. Fodder crops - 2 - occupied roughly 750,000 ha or 15 percent of the total, tree crops 400,000 ha or 8 to 9 percent, and vegetable crops 250,000 ha or 5 to 6 percent. Between 300-400,000ha are irrigated,but there is potentialto expand this to somewhere between 750-800,000ha. The irrigatedarea representsabout 10 percent of the total cropped area nd generatesbetween 30 and 40 percent of the sector value- added.

2.02 Agriculturaldevelopment has his-orically been concentratedin the north of the country, where the best land is found and where farmingconditions (climate, infrastructureand markets) are the most favorable for the majority of crops. Until very recently,most of the best land was farmed by the state farm sector. These farms were formed immediatelyafter independencein 1962 on the narrow coastal strip in the north that had been cultivatedby the Europeans. The creation of state farms involved the consolidationof old European farms, averaging120 ha each, into larger units of almost 1,000 ha each. The Government then added some 6,000 collective farms in the 1970s, built on state, communal and expropriatedland.

2.03 The traditionalprivate sector operated just south of the coastal strip covered by the state farms. These traditional small and medium-sized private farms covered almost two-thirds of arable land (some five million ha) but they were highly fragmented and few were larger than three ha.

2.04 Following independence,partly due to the rapid developmentof oil and industry,the share of agriculturein Algeria's GDP declined significantly over two decades, falling from around 13 percent in the early 1960s to around 7 percent in the mid-1970s, and remainingbetween 6 to 9 percent (in constant 1980 terms) ever since. Moreover,rural-urban migration has been high with rural populationgrowth averagingonly 1.2 percentp.a., comparedto a national average of 3.1 percent p.a. Nonetheless, the rural areas remain important in the national picture, as about half of tVe population of 24 million people still live in the countryside,and one-quarterof the labor force remains employed in the agriculturalsector.

2.05 During the 1960s and 1970s, most of the Government'sinvestments in agriculture were directed at the state farm sector, and the private sector, which still retained some 65 percent of the land, was virtually neglected. The state also dominated marketing activities through monopoly agencies for distributionof inputs and collection of outputs. From these agencies, state farms received some 65 percent of total fertilizerdistribution and 75 percent of tractors, while they covered only 35 percent of the land. Despite better access to resourcesand inputs,the state farms performedonly marginallybetter than private farms for the cereals crops and had consistentlyworse yields for other crops.

2.06 In general, crop yields in Algeria are low in comparison with neighboringcountries with similarclimatic conditions,and have generallybeen stagnant during the last twenty-fiveyears. Wheat yields, for example, have averaged 60 to 80 percent of thoseof Morocco and Tunisia over the past 15 years. This has occurred despite the fact that input and equipment use has been more intensivethan in neighboringcountries. Nonetheless,agricultural growth has been fairly high, averaging 5.5 percentp.a. since 1980. This is due primarily to a shift into higher value, higher yielding fruits and vegetables, and an increase in livestock production. It is noteworthy that this growth is not attributableto increases in productivity.

B. Regent Developmentsin thl AurgcultnralSector

2.07 In the early 1980s, the Governmentdecided to improvethe performance of the sectorby introducingmeasures to liberalizeagricultural markets. Prices for most fruits and vegetables were freed in 1982. Starting in 1983, the Government raised the prices of inputs, and streamlineda number of official marketingagencies. Access to inputs,equipment and generalcredit was gradually extended to private producers.

2.08 In 1987, the Governmentdecided to dissolve the socialistsector by convertingexisting state farms into autonomousprivate management units. Some 3,400 state farms, averaging about 700 ha, were broken up into groups of about 6-7 private farmers, each group with about 80 ha. This reform representeda shift from a system characterizedby centralizedcontrol of investmentallocation decisions,production planning and fixed prices, to one based on decentralized market forces. The weatherhas been poor in the three crop years followingthis reform, resultingin disappointingaverage harvests, but with sufficientwater, yields and production leve,.shave increased. In general, farmers appear to be workingharder than ever before and the expectationis that this reform will have a positive impact on agriculturalproductivity.

2.09 The new orientation for agricultural development,as defined in Government's1990-1994 medium term strategy,seeks to decreasedependence on the highly variable climate, to increaseproductive potential, and to ensure a more rationaluse of water resources,notably by the developmentof small and medium- scale irrigationand the use of supplementalirrigation for cereals. Emphasis is put on the establishmentof economicallyand technicallyviable conditions for improvingproductivity and better extensionand input delivery services for the sector. Outstandingissues in the sector relate to the need for reforms in marketing inputs and output, to establishing a coherent system of price incentivesthat send signals for efficientresource use, and to putting in place a means of screening public investments for their economic contribution to meeting Government'sobjectives.

2.10 In an effort to increase total agricultural production, reduce regional differences,and stem migrationto the north, Governmenthas also been giving increasing priority to development of the arid and semi-arid regions, south of the Atlas Mountains traditionallynamed as "SaharaRegion". To this end, the Five-YearPlan of 1985-89 included: (a) distributingland in the most mountainous regions of the country and in the Sahara to private farmers and providing them with means to develop irrigation on their land under a program called Accession a la Propridt6 Fonci&re (APFA); (b) rehabilitating existing irrigationinfrastructure and repairingdrainage structureson date palm oases; (c) deep well drilling for large-scalecereal production in the Sahara; and (d) renovatingaging palm plantations. For developmentof the South in the medium term, 1990-94,Government plans to continuethe APFA programof land distribution 4-

to private farmers, as well as to encouragelarge-scale wheat production in the Sahara(although on a limitedarea). The rehabilitation of oases for date palm tree production is also an important objective. Given that some of these activitiesuill compete for the same sources of water, and given the dangers of overuse and ultimate deteriorationin the water resources (which for the most part are non-renewable),these developmentactivities should be carried out in a carefully planned context, with well-defined criteria for selection of investment,and with appropriatemonitoring of the impact of the developmenton the soil and water quality and quantity. One of the objectivesof the proposed Project Is to help ensure that this is achieved.

C. A"rLculturein thS &kara

2.11 The Sahara regions of Algeria contain between 7 to 8 percent of the total population. Population density is approximatelyone person per square kilometer,with vast zones practicallyuninhabited. One-thirciof the country's nomadic population is found in this region.

2.12 Only one percent of the land area in this region is currentlyarable (234,000ha), of which half is usually in fallow and one quarter irrigated. The region i8 characterized by extremelydry climaticconditions which have primarily led to oasis agriculture,mostly small traditionalpalm tree plantationscentered around the rare sources of water.

2.13 Historically,development of these water sources was carried out in a manner which preservedthe fragileequilibrium and sustainabilityof resources. More recently,however, with new drillingtechniques, large-scale production with irrigation networks has been developed, with the potential to upset the equilibriumof resources, and causing problems of drainage and soil salinity.

2.14 Some 70,000 ha are cultivated under irrigationwith annual crops, includingwinter cereals, forage crops, winter and summer vegetables. Mosc of those are grown as inter-cropsin the traditionaloases and in the modern date plantations. In recent years, cultivationof field crops (cereals and forage crops) is being developedoutside the date plantationsthrough pivot irrigation using water from deep aquifers (para. 2.22).

2.15 Date palms are the dominant crop in the Saharan region, but have been neglectedfor severalreasons. In the first place, deterioratingirrigation and drainage infrastructurehas resulted in either salinizationof soils and asphyxiationof palm roots, or in the withering of the trees due to lack of water. In addition, the strong migration toward the north has reduced manpower svailsble for seasonal maintenance of crops and infrastructure. moreover, mechanizationremains limited because of the small size of the farms (most have less than two hectares) and to the irregular alignment of trees in the traditionalplantations. Finally, some oases of southwestAlgeria have been contaminatedby the bayoud (Fusariumoxysporum) disease caused by a soil-born fungus, which causes the tree to wilt and subsequentlyto die. Since there is no known method to eradicate it, this malady has the potential of continuing toward the palm plantations in the East. Eastward progression of the disease has been stopped for the last ten years. However, strict sanitary control X - - measures are always in place to try to prevent its spread. These deteriorating crop conditionsand the lack of renovationactivities have resulted in an aging of the palm population. It is estimatedthat more than half of the date palms are past their productive age.

2.16 Livestock raising is of little significancein the region, compared to other parts of the country. However, it has an important role for home consumption. Many familiesin the oases, even urban residents,raise a few goats and sheep for meat and milk to be consumed at special occasions. Most of the forage produced in the oases is used for this small scale livestockproduction. In the northern part of the Sahara Region, migrant flocks of sheep, goats and camels, mainly owned by semi-nomadic herders, are raised on the sparse range vegetation. Cattle are less suited to the region and their number is limited to some 7,000 head. The goat population increasedfrom 324,000head in 1979 to 785,000 in 1987. Sheep and goat numbers fluctuate with availabilityof range vegetation in the northern fringe of the region, and with the prices and availabilityof concentratedfeed, baled straw, and hay imported from the North (feedconcentrates are subsidized). Commercialpoultry production (both layers and broilers) was promoted on the collectivefarms and is expandingby private investors during the cool season (October through April). While there is an important local market, its profitabilitydepends largely on the quality of management,on the feed prices, and on a secure source of feed.

2.17 The applicationof the law on access to property ownership (APFA) issued in 1983 will have an importantimpact on the future developmentof the region. This law defines the rules by which anyone of Algerian nationalitycan acquire agriculturalproperty or publicly owned property in the saharan regions which could be used for agriculturalpurposes if irrigated. Irrigation is a condition for the transfer of the property. The recipient has five years in which to install an irrigationsystem. If not installed,the land revertsback to the State.

2.18 By the end of 1989, a littleover 200,000hectares had been allocated in the nine wilayate of the Sahara region, with close to 50,000 participants (including family members, this would mean over 300,000 people potentially benefittingfrom the program). To date, only about 60,000 ha are actuallybeing cultivated,and of this, only about 8,000 ha had been planted to date palm trees. In some cases, the slow pace of development is due to the high cost of the infrastructure required, and for both Government and privately initiated development(with the help of the agriculturalcredit bank), funds have been in short supply. The full developmentof the 200,000ha of land already allocated has importantimplications for the futureuse and availabilityof the groundwater resourcesfor some of the existingoases; the abilityto monitorand controlthis developmentis thereforea critical aspect of future planning and investmentin the region, and an importantobjective of the proposed project.

D. Sector and Ltgional Issues Relevan to the Projegt

2.19 Because it possessessignificant available land and water resources, the Sahara region can be developedagriculturally through increasedirrigation. - 6 -

Pursuitof this objective,however, raises a number of sector and regional issues.

2.20 WaterResources. The southernregion contains a significantamount of ground water resourceswhich can be tapped for irrigationdevelopment. However,the rate at which they can be exploitedon a sustainablebasis is limited. A large part of the water availableis non-renewable.As discusse in para. 2.18,more than 200,000ha have alreadybeen distributedin the SoutlA to farmersunder the AFFA. Fulldevelopment of this areaalone would exceed the estimatedpotential water resources in certainzones. Clearlyover-exploitation of water resourcescan lead, in additionto prematuredepletion, to serious problems includinghigher pumping costs, salinizationof aquifers, and unfavorableimpact on existingor futuredevelopment projects in neighboring countries(para. 2.22). The AgenceNationale des RessourcesHydrauliques (ANRH) is responsiblefor the inventory,monitoring, mapping, control of the exploitation,use, preservationof the qualityand quantityof the groundwater resources.However, its meansof interventionare limitedand insufficientto accomplishits mandate. Carefulplanning and executionare necessaryto ensure that the land put under irrigationis consistentwith the water resources available and that the pursuit of near-termgrowth does not jeopardize development. The proposedProject would address these issuesby assisting Government(a) in establishingregional development plans where environmental concernsand water resourcespotential would be paramount;(b) in settingup a monitoringsystem to controland curb the use of thesewater resources;(c) in strengtheningthe ANRH;and (d)in revitalizingthe dialoguewith theneighboring countriesfor the exploitationof the commonaquifers. 2.21 Saltnization.Inadequately planned and managedexploitation of the aquifersin the Sahararegion can have adverseeffects on the water and soil quality. Certainareas are alreadythreatened by salinityproblems. Because of a lack of naturaloutlets or deteriorationof drainagenetworks, the level of surfacewater tableshas increasedand resultedin degradationof existing palm plantationsdue to adverse salinityconditions. In addition,badly maintained wells can lead to intrusion from salt contaminatedlayers; uncontrolledextraction may result in destructionof aquiferinterfaces and consequentpollution. The proposedProject would improvethe overalldrainage systemand would setup a systemto monitorthe levelsof waterand soil salinity in the Oued R'hir valley. Governmenthas also establisheda programto close about 500 wells in bad conditionin the Oued R'hir valley(para. 4.31). 2.22 InternationalImplications. The Sahara water resources come essentiallyfrom two largesystems: (a) the ContinentalIntercalaire (CI), an aquiferof considerablethickness (200 m to 1,000 m), very deep ( down to - 2,000 m); its water has relativelylow mineralcontent, is artesian,and warm (>50OC); this aquiferextends over 1 millionkin' in Algeria,and continuesto Tunisia;and (b) the ComplexeTerminal (CT), a more recentaquifer, less thick and deep, also extends into the two countries;its potentialderives from Quaternarydeposits and currentrecharges from the humid areas in the west and northwest;its water has a fairlyhigh degree of salinization(3 to 9 g/1).Based on pre-establishedcriteria, the potential water resources of theselarge systems were studiedby UNESCOand laterby the UNDPwith the help of simulationmodels, - 7 - and the developmentproduction levels were estimatedto ensure a balanced water extractionwhich could guaranteesustainability of their use within and between Algeria and Tunisia. Whereas these criteriacould be adjustedwith time and with better knowledge of the individualsub-aquifers, the adherence to the overall conclusionsof the ERESS (Etude des Ressourcesen Eau du Sahara Septentrional) studiesand a continuousmonitoring of the water use and behavior of the aquifer are essentialconditions for the best use of the resourcescommon to Algeria and Tunisia. Both countries subscribe generally to the conclusions of the ERESS studies and have established an ad-hoc bilateral commission (the Commission Technique Tuniso-Alg6riennede 1'Hydrauliqueet de lEnvironnement, or CTHE) for purposes, inter alia, of exchangingdata on the common aquifers.

2.23 InstitutionalCapacitv. Algeria's developmenthas been hampered by the general lack of implementationcapacity witnin its principal executing agencies. They often suffer from a lack of coordination,and from a shortage of trained staff and essential materials. These problems have limited the region's ability to carry out specific projects, and have had an impact on the performance of agencies that support economic activities such as marketing, input distributionand credit. The proposed Projectwould deal with this issue through support of a comprehensive program providing training, technical assistance, and equipment to those institutionsinvolved in the agricultural developmentof the region.

2.24 EnvironmentalIssues. The Sahara region is ecologicallyfragile, the soil is short in organic matter, and the agricultural lands need to be protectedfrom sand intrusion,especially during the sandstormseason. Leaching of irrigated lands into the groundwater table may also pose problems. More intensiveuse of fertilizerand pesticides to increaseproductivity can lead to long-term hazards for the groundwater. In addition, because of the non- renewable nature of the water supply, the fact that the resource is shared by other countries,and the potentialfor overpumping,the water resourcemust also be exploited with considerablecare. Because of this fragility,agricultural practicesmust be monitoredto protectthe quantityof water available(to ensure proper pumping practices), the quality of drainage and groundwater,and the health of the workers, consumersand residentsin the area. In addition,in the area of the Project, the principal drain used by the oases is also used by the few industries in the area and by the urban areas. It will be important to establish adequate monitoring capacity for the quantity and quality of the irrigationwater and the quality of the water found in the main drainage canal, as well as the quality of the soil in the agriculturalareas. The proposed Project would ensure that environmental assessments are included in the development plans; assurances were obtained at negotiations that Government would set up a monitoring system to control water quality in the main drainage collector by June 30, 1993. In addition, the establishment of an overall drainage system would improvethe salinityand health conditionsin the valley.

III. BANK LENDING IN AGRICULTUREAND PAST PERFORMANCE

3.01 Bank Group lending for agriculturein Algeria started in 1974, and nine projects have since been approved for a total of US$395 million (net of cancellations). Performanceunder the first three projects which were financed In the sector (TechnicalAsslstanceaRural Development Project -- Loan 1159-AL, the Meat Industy Project -- LoaU 1739-AL,and the Ball ChezliffIrrigation Proiect -. Lon 1802-AL)was mixed, reflecting institutionalconstraints in the sector. Project PerformanceAudit Reports have been done on the first two and a Project CompletionReport on the Bas CheliffProject. The main lessonslearned from the implementationof these projects are to proceed with caution in project design, to ensure the full commitment of Government at each stage of preparation, to complete as much as possible of the design process and bidding documentsprior to negotiations to avoid implementationdelays, and to ensure that bidding procedures are cost-effective.

3.02 On-going projects cover a range of activities designed to support infrastructureand institutionaldevelopment across a number of sub-sectors. In the irrigationsub-sector, these includethe Cheliff IrrigationProject (Loan 2i09-AL), the Irrigation Engineering Proiect (Loan 2978-AL) and the Mitidja IrrigationProject (Loan 3076-AL),designed to rehabilitateand extend existing large-scaleirrigation schemes in the northern part of the country, to support the development of an investment program of small-scale irrigation and to prepare a ten-year irrigationdevelopment program for small and medium scale irrigation schemes. These irrigationprojects are progressingsatisfactorily, albeit with some delays because of shortages of certain constructionmaterials (concrete pipes). These lessonshave been taken into accountin the design of the proposed Project.

3.03 Other on-going projects include the Agricultural Credit Project (Loan 3002-AL),approved in December 1988 and declared effective only in March 1990 because of delays in finalizingco-financing arrangements; the project is designed to strengthen the agriculturalcredit bank and to support the medium and long-termlending program of the bank by financingon-farm agriculturaland agro-industrialequipment. The Desert Locust Control Project (Loan 3017-AL), approved in January 1989, was designed as an emergency loan in the context of the 1988 locust plague to support the control program and to reinforce the permanentsurveillance and warning systems to monitor the locust activity while the required improvementswere made. Locust activity was negligible in 1989, was reducedeven further in 1990, and forecastsindicate that the plague is over. As a result, about 602 of the loan has been cancelled. Finally, the Research and Extension Pro1ect (Loan 3216-AL), approved in June 1990, is designed to strengthen research services and introduce pilot extension programs in five wilayate in the North of the country.

IV. THE PROJECT ARA

A. Introductin

4.01 The proposed project area is the Oued R'hir valley, a broad low relief depression situated some 400 km inland from the coast, which runs approximately 150 kilometers in a south to north direction. Currently some 15,300 ha of date palm plantationsexist in the valley but they are threatened by lack of water and salinity. In addition to this main crop, which accounts for about 20 percent of the nationaldate palm production,vegetables and fodder crops are intercropped. In the past ten to twenty years, production has been increasinglyaffected by problemsof drainageand salinity,which now jeopardize the future survival of the plantations. In the 1980s, an effort was made to improve the natural drainage in the valley. A 150 km long main drainage canal and the correspondingnetwork of primary collectorswere constructed,which has alreadyhad a clear beneficial impact. However,a large part of the plantedarea suffers from lack of water and the drainage network still needs to be expanded. Plans have been prepared to correct the situationand improve the agriculture developmentof the valley.

4.02 Irrigationin the Oued R'hir valley has been practicedfor millennia At first, natural springs were the only water source but gradually the construction of surface wells gave rise to a substantial expansion of the irrigatedareas. The first tube well was constructedin 1856 and their number increased rapidly, replacing almost entirely all the other water extraction methods. Since then, the artesian flow has gradually disappearedand pumping has to be used to exploit the aquifers. 'Presently,artesian flow remains only in a limited area in the North of the valley. In 1956, the identificationof a rich deep aquifer with good quality water (the Continental Intercalaire) permittedthe expansionand creationof new irrigatedperimeters. The area has internaldrainage and all surfacewater is conveyednorthward to Chott Merouane, a large depressionwith an elevation of - 20 meters, which is a large brackish seasonal evaporativebasin. Local drainage is poorly developed and the area has a series of natural depressions in which undergroundwater rises to the surfacecreating densely vegetated areas. Historically,where the water and soil qualityhave been suitable,these areas have been developedfor traditionaloasis agriculture by the use of shallow wells. Outside the watered areas, the landscapeconsists of an arid plain sparselyvegetated by low brush with limited areas of low sand dunes. Wildlife habitat is provided by undevelopedseasonal brackish water areas, especiallya marsh at the south end of Chott Merouane and a series of floodeddepressions known as the 'zone des lacs", and on a permanent basis by the oases themselves.

B. Physical Characteristics

4.03 The oases are located at elevationsdecreasing from +90 m at El Goug in the South to -10 m at M'Ghaier/Ouririn the North. The Oued R'hir valley has the same generalconfiguration: gently slopingfrom South to North. A large depression,the outlet of the Oued R'hir, is locatedin the extremeNorth (Chott Merouane); it is below sea level (-20 m to -25 m).

Soils

4.04 Soils are alluvial-colluvialformed during and after the Quaternary; they show superficial crusting due to aeolic sand deposits. Their texture (mostly sandy loam) generally provides a good water retention capacity and permeability. Due to aeolian deposits of fine material in the surface layers, - 10 -

tillage of the surface soil is required once every three years to improve aerationand infiltration. Gypsum content in differentforms is high throughout the profile and there is thereforeno danger of alkalinization. On the other hand, salinity levels are high due to a rising water table as a result of irrigation intensification and lack of adequate drainage in recent decades. A hydromorphiclayer or a gypsum-limestone crust may be noticed due to the high water table. Salinity is of the sulphate-calcictype in the less saline soils (< 6 mmhoms/cm)and of the chloro-sodictype in the more saline ones. Soils are poor in organic matter (less than 0.5 percent) and have a high pH (7.5 to 8.5).

Climate

4.05 Climate is typicallySaharan and can be characterizedby: (a) very low and erratic precipitationwith an annual average of about 58 mm; wide temperaturefluctuations (17°C daily average)with maxima in August; low relative air humidity varying from 66 percent in winter to 38 percent in July/August. Given the extremelylow annual precipitation,agriculture is possible only with irrigation.Annual potentialevapo-transpiration is 1,900 mm; daily values vary between 1.6 mm in Decembet and 8.7 mm in June.

C. Water Resourcesp'

4.06 Ground water resources come from two main aquifers: the Complexe Terminal (CT) and the deeper Continental Intercalaire (CI). According to the ERESS study I the Oued R'hir valley is located between the zone of average Rot-intial,on its central and southern parts, where water pumping could safely reach 16.5 ma/s in year 2000; and the zone of low potential, on its northern part, where water extraction flows could increase to 7.8 e3/s by the same year. Based on the results of model simulations,the potentialwater resources in the Oued R'hir would be 11.3 me/s from the CT and 3.6 nP/s from the CI. These estimatesare valid, provided that pumpingof water from the surroundingregions (Ouarglaand Souf) and in Tunisia also comply with the recommendedcriteria from the ERESS study. These criteria are essentially: (a) to keep the artesianism of the deep aquifer, particularlyin its central zone, at least till the year 2010; (b) to limit the pumping head in the other zones of the CI and in the CT to 60 m.; (c) to balance the exploitationof the aquifersby Tunisia and Algeria. Tables 8 and 9 summarize the ground water balance in the Oued R'hir valley for two typical scenarios: the Project scenario, i.e.,rehabilitationof 3,550 ha and keeping the remainingplantations of the valley (11,240ha) as they are, and the full rehabilitationscenario, i.e., rehabilitationof 6,460 ha, keeping the remaining 8,330 ha as they are, and expanding the irrigatedarea by 1,030 ha. Both scenariosinclude provision for urban and agro-industrialwater consumption. They show that the overall water balance available in the valley is positive, but the resources of the two aquifers should be carefully used. Since these

1/ Table 13, 1- Annex 1 and 3. Both the ERESS study and the Preparation Report contain a detailed descriptionof the water resources and internationalimplications. 2/ Table 13.2 . 11 - balancesindicate the wateravailable for otherdevelopments, and in particular the APFA program,the areasto be irrigatedunder thisprogram should not exceed about 6,000 ha, and they shouldbe concentratedin the southernpart of the valley. The area of land distributedfor privatesector development in the Saharais, however,already too high (para.2.18); in the Projectarea, about 9,000 ha have been subjectto some type of developmentbut only 6,000 ha are cropped.A largepart of thisarea is irrigatedfrom surfacewells (particularly in the northernpart of the valley)which does not yet affectthe resourcesof the CT and CI aquifers. However,these figures show the need to impose restrictionsto the expansionof the APFA program. Assuranceswere obtainedat negotiationsthat Governmentwould developthe regionbased on plans financed under the project (para. 5.18) and after the establishmentof an adequate monitoringsystem for the water extraction(para. 5.07). In the meantime,new irrigationdevelopment would be limitedto the land alreadydistributed under the APFA program,and new land distributionfor irrigationwould be controlled to meet the recommendationsof the ERESSstudy. Table4.1 summarizesthe water resourcessituation. Table 4.1. WATER RESOURCES (m3/s)

ProjectScenario Full Rehab.Scenario Daira Potential Remaining Balance Remaining Balance CT CI Total Needs Total CT CI Needs Total CT CI

Touggourt 5.5 1.6 7.1 4.0 3.1 3.1 0.0 4.4 2.7 2.7 0.0 Djamaa 2.9 1.6 4.5 3.9 0.6 0.3 0.3 4.1 0.4 0.1 0.3 WGhaier 2.9 0.4 3.3 2.6 0.7 0.9 -0.2 2.6 0.7 0.9 -0.2 Total 11.3 3.6 14.9 10.5 4.4 4.3 0.1 11.1 3.8 3.7 0.1

Source: Table 13.1 and Appraisal Mission

D. !Zwlation

4.07 The Oued R'hir population is about 213,000, half of which is concentratedin the Dairaof Touggourt.The workingpopulation is estimatedto be about 80,000,of which 50 percentis in the agriculturesector and the rest is in the civil service,commercial activities, and small industries,including thoserelated to the processingof dates. E. Land Tenureand CronginaS!stems

Iand enure 4.08 The traditionaloases (some9,500 ha, out of a totalof 15,000ha) used to have a complexpattern of privateownership as a resultof the centuries- old inheritancesystem, leading to multipleownership and thewidespread practice - 12 - of share cropping. After the agrarian reform, private ownership was maintained but limited to 4 ha. Ownership of most of the large-scale plantations, established by foreign and local settlers from the second half of the 19th century onwards, was transferredto cooperativesand subsequentlvto collective farms (DAS) in the 1960s and 70s. A number of cooperativeshad already been establishedprior to independence. At present, fanmers in the oases have legal life-long usufruct rights. The right can be transferred through sale or inheritance. An average farm size in the modern plantationsis about 1 ha, with a smaller size prevailing in the traditionaloases. This size provides full employment for a single farm family. There is little mutual assistancebetween families. In addition, there is still some share cropping, particularlywhen the number of palm trees owned by an individual is too small to make a living. The number of farmers in the different categories of association in the Project area and the size of their farms are given in Table 10.

Date Palm Plantations

4.09 The Oued R'hir valley comprises50 oases with about 2.5 million date palm trees (33 percent of the country's plantations). One particular characteristicof the Oued R'hir valley is the excellentquality of the dates. About 80 percent of the plantationsproduce the Deglet Nour variety which is highly appreciatedabroad as well as in Algeria (high demand in the local market is one reason for the decline in exports);17 percent are of the Ghars and Degla Beida varieties, which are demanded locally and in West Africa. The rest are the so-called common varieties and consumed locally or used as fodder for livestock. The Deglet Nour variety prevails in the Oued R'hir valley because the abundant shallow water resources enabled expansion of commercial date production for export by European foreign settlers in the late 19th and first half of the 20th century.

4.10 Date palm oases have existed in the area since historical times, using artesianwater and animal poweredshallow wells. In the late 19th century, foreign and local settlers started to expand date cultivation through establishmentof regularlyaligned rows of palm trees and irrigationand drainage networks. Some 60 percent of 1.3 million date palms in full production are in these modern plantations. Rejuvenationis done graduallybut not systematically in the traditionaloases. About 10 percent of the modern plantationshave passed the age of maximumproductivity (40 to 60 years). Thus far, Governmentattempts to promote rejuvenationin the modern plantationshave failed,partially due to its high cost. Prices of off-shootsof Deglet Nour variety are particularlyhigh because of their limited availability,due in turn to the ban on transport of off-shots from the Bayoud infested areas in the West.

4.11 Plantations show two different layouts: the traditional pattern (about 60 percent of the total area), which has a density of 150 trees per hectare; trees are not alignedwhich makes it difficultto mechanizeagricultural operations;and the modern pattern,which is characterizedby alignedplantations and is less dense (120 trees per hectare).

4.12 Yields vary from 15 to 30 kg per tree in old plantationswith water shortage,high salinityand poor drainage,to 60 to 80 kg per tree in plantations - 13 - with adequate water supply, good drainage, and with palm trees of optimal age for fruit bearing. In favorable years, particularlywhen climatic conditions are good for pollination,production can reach 100 kg per tree. Insects and diseases can cause production losses of up to 20 percent. Systematic and generalized spraying against the main pests and diseases are carried out by governmentagencies, but it is often inadequateas the motorized sprayers have difficultyreaching the interiorof the plots. Aerial spraying is being tested and farmerswho own mobile,hand operatedequipment, often carry out supplemental treatment. High soil and water salinity also affect the quality of the dates; this may be an additionalfactor leading to the decline of exports in the last 20 years.

4.13 Generally, agricultural operations are not mechanized. Water control, cleaning drains and canals, and grading dates at harvest account for about 87 percent of the total labor requirements;operations performed on the trees need specialized personnel for climbing, who are becoming scarce. Therefore,production costs are high; farmerstry to reduce them but this affects the yields and the qualityof the dates. Mechanizationis possible only on large and well-alignedplantations. Mechanizationtests have been carriedout without successbecause open drains hamper the movement of the equipmentand because of its high cost. However, mechanizationusing small equipmentwould be possible for operationssuch as soil preparation,transportation of farm inputs, etc.

Inter-cropnintand Livestock

4.14 Inter-croppingis not developedin the Oued R'hir valley. Only about 10 to 15 percent of the area between palm trees is cropped, and the limited intercroppedareas are due mainly to lack of water, poor drainage, salinity, and lack of rehabilitation. Barley and alfalfa are the most prevalent forage crops. Barley is seeded in the fall (broadcast),irrigated at the same time as the palm trees, and harvestedbetween February and April. Yields are low (10 to 16 ton/ha). By contrast, alfalfa is better cared for and the soil is well prepared and fertilized;good farmersmay obtain a total productionper year of 40 to 50 ton/ha in 12 cuts. Forage is consumedon the farm or sold in the local markets. In winter, onions,carrots, turnips and garlic,and in summer tomatoes, pepper and water melon are the most commonly grown vegetables;they are sold in the local market as well as used for home consumption. Fruit trees are rare.

4.15 Livestok activitiesare limited. Sheep and goats are raised in the oases (usuallykept inside the farm compounds)and in courtyards in the towns. Some commercialpoultry productionhas developed in the cool season on the ex- DAS farms and on the new APFA farms.

F. AgricultureSungort SerixLesi,

4.16 The structureof the agriculturalservices at the regional level is centralizedaround the governorate(Wilaya). At present,each wilaya throughout the countryhas one division (DDAHA) that covers both agricultureand hydraulic

1/ Table 13.1, Annex 3 - 14 - services (as well as forestry). Reorganizationis underwaywhich will make both agriculturalextension and forestryactivities separate from the DDAHA so as to coordinatethem at a national level. Both agricultureand hydraulic services are representedat the district (Daira)and communal levels. This organization and the changes underway do not take into account the special characteristics of the Sahara region (isolation, large areas, climatic and agricultural conditionsrelated to oases development). These particularitieswere dealt with to some extent through the creation of special Saharan departments (CDARS, ANRH-DRS).

Tho "Commissariat au DNvelogpement de l'A4riculture des R4aions Sahariennes" SCAR)

4.17 The CDARS was created in 1986 in the Ministry of Agricultureto plan and implementthe agriculturaldevelopment of the Sahara region. Its objective was to carry out studies for the definitionof the regioca' characteristicsand issues, propose plans and programs for encouraging the intensificationof agriculturein those regions,coordinate the implementationof those plans, and propose particular legislationwhich might be required to expedite and realize the implementation. Although not defined in legal texts, the CDARS is expected to cover all nine wilayate of the Sahara. Having such a large mandate, the CDARS activities still remain rather modest four years after its creation and are essentiallyfocussing on monitoringthe implementationof the APFA program and on assisting some wilayate in preparing their plans. In part, this situation results from frequent changes in its leadership,lack of staff, and questions about authorityover decision-makingbetween the CDARS, which takes instructions directly from the Ministry of Agriculture,and the regional decision makers at the wilaya level.

The "Agence Natioale des RessourcesHvdrauligues" (kNEM)

4.18 Under the Ministry of Equipment, the well establishedANRH is in charge of the inventory of the national water and soil resources. It keeps records and monitors the use of those resources. It is also responsible for maintainingand protectingtheir qualityand quantity. The "DirectignR4gionale Au Ml' (DRS) is the regionaldepartment of the ANRH in the Sahara. The DRS was created in 1989 and has already some ten engineers and technicians. Its headquartersare at Ouargla and one of its eight sectors will cover the Oued R'hir.

The Office d'Am4nagementet de Mise en Vsleur du Primr tre de Oued R'hir (96MVOR)

4.19 Created on January 13, 1983, it started its activitiesonly at the end of 1984. The OAMVOR mandate is to prepare the developmentplan for the Oued R'hir oases, to carry out the necessary studies for the implementationof this plan, to prepare and execute a strategy and a program for extension services in the Oued R'hir, and to assure the maintenanceof the irrigation and drainage networks. It is also responsiblefor the agriculturaland land tenure reform in the area. -15 -

4.20 This agency depends administrativelyon the Wali (Governor)of El Oued, and it is managedby a board of control and a director general. Its staff was to reach 300 people (including 9 engineers and 16 technicians) at full development;however, seven years after its creation, its technicaldepartment has still only 15 staff members, which is clearly insufficientto fulfill its assigned tasks.

4.21 Since its inception, the OAMVOR has had a tendency to concentrate its activities almost exclusively on executingminor works, ignoring its role of planner and regional developer. It has essentially been acting as a contractor for tasks such as tree planting and up-rooting,drilling of wells, construction of canals and drains. It has been assisted by consultants in preparing studies, and it has not performed any drainage network maintenance. OAMVOR will be replaced by the OPIOR (para. 5.12) and its staff and assets transferredto this new organization.

4.22 Responsibilityfor agriculturalresearch in the Project area is sharedbetween the InstitutTechnicue de D4velonpementdo 1 'A&ronomiedes Rduion Sahariennes(ITDAS), the InstitutNational de la RechercheAgronomiaue Appliqu4e (IfiM), and the Institut National de Protectiondes VegAtaux (INPV). Research tasks in the field of vegetables, animal production, fruit crops and farm mechanizationhave been taken over by ITDAS from the concerned specialized national institutes. One of the INRAA field experimentalstations in Oued R'Hir at El Arfiane was transferredto ITDAS. This station requires rehabilitation and has a world-famous collection of male and female date palm varieties established in the 1930s. The other station near Touggourt (Sidi Mahdi) continuesto operateunder INRAA and is carrying out experimentson dates (among other crops). It uses water from the CI aquifer and has good natural drainage. Therefore, it is not representativeof most soil and water conditions in the valley. Research on protected and open air vegetables is carried out by ITDAS near Ouargla. kgnaggonTrnLins

4.23 ITDAS, INPV, the AgriculturalCollege at Ouargla, as well as the extensionstaff of the DADs (Deleguede l'Agriculturea la Daira) all have some responsibilityfor transmittingtechnical information to farmers. The DADs are representedat the village level by the ACVs (Agent Communalde Vulgarisation). These services at villageand Daira levels have taken staff from the former state farms (DAS). Usually, one of the 2 to 3 ACVs at village level is a university graduate and the others are agriculturaltechnicians. They have an office at the local municipality("commune") but they are lacking office and demonstration equipmentand means of transport. They are mostly insufficientlysupervised and do not have a systematicwork plan, but often demonstratesound initiativesuch as the organizationof local agriculturalfairs or exhibits. Most of their time is spent on the new APFA farms. There are two training centers (CFVA) in the Project area, one for Ouargla and one for El Oued Wilaya. These centersprovide short and medium term training courses and demonstration days for farmers, tractor drivers, as well as technicians. Trainers of these agencies receive - 16 - pedagogical assistance from the Institut de Technologie de l'Agriculture Saharienne (ITAS) at Ouargla. a8dcttural-redit 4.24 Formal agriculturalcredit is available to farmers for both short term needs and medium and longer-term investments through the Banque de l'Agricultureet du DeveloppementRural (BADR). BADR maintainsregional offices at the wilaya level and a large number of branch offices throughoutthe country. In the Project area, BADR has three bratichoffices in close approximationto the oases: at Touggourt, Djamaa, and M'Ghaier. Since 1989, BADR has become an autonomous bank, no longer dependent on Treasury funds and Ministry of Agriculture directives for channeling funds primarily to the state farming sector. BADR is making an effort to reach a larger percentage of traditional private farmers than it did in the past, but has been recently hampered by a shortage of long-term funds and by a general scarcity of farm equipment for investment. The AgriculturalCredit Project (loan 3009-AL) addresses both of these issues. In the Projectarea, BADR servesbetween 10 and 25X of the farming populationwith credit facilities (dependingon the daira).

Input §u2nlv and Distribution

4.25 Input supplyhas undergonea series of changesin the last ten years, and is continuing to evolve. Prior to the early 1980s, distributionof inputs vas controlledby state monopolieswith their network of cooperatives,which were essentially the local representative of the governmental distributor. Distributionof inputs was focussed almost exclusivelyon the socialistfarms. In the early 1980s, a number of reforms were implemented,streamlining the distributionsystem and ensuring that traditionalprivate farmers received a larger share of inputs, but retaining the monopoly/"cooperative"distribution system. In 1989, Government passed a law turning the existing cooperatives, which were akin to Governmentparastatals, into "true" cooperativesto be owned and operated by the farmers. In part, most cooperativescontinue to function much as before, and it remains to be seen how they will function as autonomous farmer-ownedentities. Also, monopolies are no longer legal, private traders can, and have begun to distribute inputs. For the time being, farm equipment is still distributed through a network of state agencies that belong to the wilaya government. In the recent past, at least since 1986 when imports were sharplycurtailed, there have been generalshortages of fertilizerand pesticides and equipment throughout the country. In the Project area, in the last two years, equipment for-on-farm investment,particularly tractors, has been most notably in extremelyshort supply. The Projectwould addressthis problem (para. 5.17).

Farmers' OrEanizations

4.26 Water management and operation of water distributionsystems and drainagenetworks at the farm level are the direct responsibilityof the farmers, grouped into formal or informal associations. Procedures exist under Algerian law (Decree No. 72.152 of 7/27/72) for the formal creation of farmers' associations. Collectivedistribution of irrigationwater and participationin - 17 -

the charges seem to have become an accepted part of the culture, and the system works rather well. However, ownershipof tube-wells is sometimes a constraint to balanced water use. Since no requirementsexist to restrict pumping, apart from the physical capacity of the well and of the pump, the result is thst some farm groups may have more than their water needs, whereas others will have shortage. Problems occur also wh;^i repairs to pumping equipment become necessary, because farmers often have difficulties finding spare parts or mechanics on a timely basis. This means that many times replacementparts are not adequate,and inappropriatepumping may shortenthe well life or even destroy it. Joint use of farm machinery is found primarily in the ex-DAS farms; usually one of the members is chargedwith operationand maintenanceof the machine while others contribute to the cost on the basis of a pre-determinedfee per hour.

Suulv of Goods and Execution of Works

4.27 Suppliers and contractors have, until now, not operated in a competitive environment; they have been used to the centrally planned economy which prevailed until recently. The current phase of liberalizationopens the possibilityfor the private sector to compete, which has been well receivedby the private sector. In particular,civil works costs have already started to declinenoticeably. For well drilling,two contractors(both state enterprises) have controlled the market: HYDRO-FORAGESand ONAFOR for the very deep wells required to reach the CI aquifer. Small private enterprises are, however, playing an increasingrole in executingwells (to about 300 m deep) for farmers' groups. Concrete pipes are available from Algerian factories,but regularity of supply has not been satisfactory. The situation is worse for the supply of pumping and electrical equipment. The sharp curtailment of imports, which particularly affected submerged pumps, and very limited supply provided by the local manufacturer at Berrouaghia, raises serious concerns regarding the satisfactionof the Project needs in this field. The proposed use of ICB in the Project procurementwould contribute to solving the possible shortages of the local suppliers and would also improve the competitiveness of the local contractors.

0. Infrastructure

GeneralInfrastructure

4.28 The generalcommunications facilities in the Oued R'hir valley itself and between the valley and the rest of the country are good. Asphalt roads connect Biskra in the North to El Oued in the East and Ouargla in the South. Touggourt is the southern terminal of a line of the national railway running between Algiers, Constantine,Biskra and Touggourt. Touggourt, Biskra,Ouargla and El Oued are provided with daily commercial flights to Algiers. Every oasis is served with permanent and fairly well maintained roads.

4.29 In the Project area, there are 2 hospitals, 2 health clinics, and 11 other smaller medical facilities. Touggourt is by far the best served Daira. However, since these facilitiesare located in the main townships, patients still sometimes have to travel long distances to reach them. There are 60 primary schools, 12 junior high schools and 4 senior and technicalhigh schools. # 18 -

4.30 The power distributionnetwork is satisfactory and most of the communes are provided with electricity. Under these conditions,branching of pumping equipment to the existing grid is simple. A large number of villages are provided with a water supply system, and towns which serve as the administrativeheadquarters of the dairas, have domestic water distribution systems. To ensure good quality,water is obtained from the CI. Domestic waste water is disposed either into agriculturaldrains or sewage pits. Touggourt is constructinga sewage treatment plant; facilitiesare planned for other towns and villages. Presently,all waste water is conveyed to the main drain of the valley and mixed with the drainagewater from the oases. The dilutedwaste water receives an undeterminedlevel of treatmentin the drain and then is discharged into the Chott Merouane.

IrrigAt in In}frastructureix

4.31 Irrigation water is essentially obtained from the CT, and only a small volume comes from the CI. Available studies,>/ indicate that the number of wells pumping from the CT was 850 until recently;however, half of them should be closed, because of the bad conditions of their casings, which cause mixing of relatively good water from the CT with the more saline water of the upper aquifers. It is estimated that only 370 of these wells can be rehabilitated. Currently,all operationalwells in the valley tap about 7.5 e8/s from the CT and 1 mP/sfrom the CI. In the Oued R'hir area, there are nine wells drilled in the CI with depths exceeding1,600 m and yielding a total of about 1 ne/s of artesian water. Two of them are partiallyused for domestic water supply. Government has already establisheda program to close about 500 wells in bad condition in the Oued R'hir valley. Assuranceswere obtainedat negotiationsthat Government would implementand acceleratethis programwhich shouldbe completedbefore the end of the Project implementationperiod (December31, 1996).

4.32 Water is conveyed from the well to the farm by three different systems which can be present simultaneously: earth canals, buried pipes and concrete flumes. Generally, maintenance is poor and networks are in bad condition, leading to water losses estimated on average at 30 percent. Irrigationis by the border strip method. Strip spacingvaries accordingto the layout of the drains whether or not inter-croppingis practiced. On-farmwater losses may reach 50 percent,meaning an overall irrigationsioiency of no more than 30 to 40 percent. From the well, the water is distri'V.a;.ecby rotation, with intervalsof 7, 14, or 21 days. In certain cases, the sanr.farm may get water from more than one well. Wells from the CT are directly operated by farmers without any interventionon the part of the Administration;they share pumping costs on a pro rata basis to their water allocationand area. The water from the Cl is artesian and there are no operatingcosts involved in pumping.

IJ Table 13.1, Annex 1 Z/ TESCO-Bureaud'Etudes de ConstructionsHydrauliques Viziter-Budapest; (1984-89) - 19 -

4.33 The main drainage collector of the valley is the Oued R'hir bed itself which has been improved and reshaped in recent years. It has a total length of about 135 km, collects the water from the primary drainage network and sends it into a large depression (Chott Merouane). This primary network is about 293 km long, of which about 193 km have already been reshaped. It is formed by open drains with an average depth of 1.7 m. At the farm level and within the palm tree plantations,drainage is assured by a network of open ditcheswith depths rangingbetween . 5 m and 1.0 m, and placed 20 to 100 m apart. This system is badly maintained,due to shortage of labor and funds.

V. = PROJECT

A. Rationalefor Bank Involvement

5.01 The development of the Sahara and of irrigation are currently importantobjectives for the Government. In both of these areas, it is important to introduceand ensure environmentallyand economicallysound approachesto the development. Particularlyin the Sahara, where the ecology is fragile and the exploitationof the resourcesmust be handled with care, it is critical to the long-term viability of the area that the development be carefully planned, carriedout and monitored. Becauseof the Bank's experiencein other neighboring countrieswith similar developmentissues in a virtually identicalenvironment, the Bank has a role to play in ensuring the emphasis on institutionbuilding, on long-termplanning for developmentin the area, and on monitoring the impact of developmenton the quality and quantity of water and on the quality of soil.

B. Concept and Obiectives

Project Concept

5.02 The agriculturaldevelopment of the Sahara region has not yet been subject to any comprehensiveplanning. The oases which have been established for many years and those which have been created during the last few decades suffer from gradual degradation and decreasing production due to lack of maintenance,shortage of labor, and presence of salt in the soils. The APFA program (para. 2.17) aims to attract human settlement in the area, but it was conceivedand has been implementedwithout a frameworkcomprising the best use of the available water resources, the establishment of an appropriate infrastructure,and the assessmentof its environmentalimpact. Therefore, the first and most urgent step to improve the situation is to draw up a Master Plan for the Developmentof the Sahara Region and to establish specific development plans for the most importantwilayate. In addition, the institutionsdealing with the planning, implementationand monitoring of agriculturaldevelopment (includingwater resources)are not sufficientlystaffed and equipped to fulfill their mandate and should be strengthened. Therefore, the Project proposes as its primary objectives the establishmentof the framework and of the criteria (technical,economical, environmental) for future developmentof the Sahara and the strengtheningof the appropriateinstitutions. - 20 -

5.03 At this stage, it would be risky to embark on a large investment project aiming at the full rehabilitationof all the existing plantations in the valley or expansion of oases. The appropriateapproach is to prepare the planning instruments,strengehen institutions,test organizationsand methods in a first phase rehabilitationoperation, and prepare the projects for a much larger second phase based on more solid ground. The project concept responds to this desideratum. In this first phase, investmentswould be made on oases which could be supplied within the available water resources,V and for which there are already executionplans; the oases selected would need to show water deficiencyresulting in increasingdegradation of plantationsand have acceptable economic returns.

Protect Obletives

5.04 The proposed Project would:

(a) supportan environmentallysound developmentprogram for the Northern Sahara;

(b) assist Government in the definition of a strategy for agricultural developmentwithin the constraints determined by that program;

(c) strengthen institutions dealing with management, monitoring, and control of water resources; and

(d) test the technical, organizational and managerial aspects of rehabilitated irrigation in a first phase of renovationof oases.

C. Comoonet

5.05 To achieve its overall objectives,the Projectwould implement over a period of five years the followingoperations:

(a) Institutonalflgmn=:

Strengthening institutions dealing with planning, implementing, and monitoring the agricultural development in the region, including the establishment of monitoring systems for water use and for water and soil quality; development of applied research, training and extension; creation of an agency for operation and maintenance of the common main drainage infrastructure; and development of a Project Coordination Unit to coordinate Project execution;

(b) Rebabilitation of Oases:

Drilling of new and replacement wells, provision of pumping equipment and construction of irrigation and drainage networks over an area of about 3,550 ha;

1/ Table 13.1, Annex 1 - 21

(c) On-Am DeveODmen:

Improvement of agriculture production through provision of farm implementsto develop mechanizationof agriculturalpractices;

(d) fitudies.Technical Assistance and Traitnig:

Preparation of development plans, feasibility studies, and environmental assessments for future investments in the sector, provision of technicalassistance and training of staff.

D. Detailed Featgres

InstiLtutionAlDeveLgpmn

5.06 Strengthenint of the CDARS. The Project would assist the CDARS (para. 4.17) in improving its performance as planner for the agricultural development of the Saharan regions in general and, in the context of the Project, in supervising the preparation of the Kaster Plan, and of the Specific DevelopmentPrograms mentioned in para. 5.18. It would also assist the CDARS in ensuring the monitoringof the soil salinity levels in the Projectarea. The Project would finance vehicles (9), office and laboratoryequipment,/ training of staff (para. 5.20). and technical assistance (para. 5.19). A Project CoordinationUnit (PCU) would also be created in the CDARS (para. 5.11) to coordinateand monitor the Project implementation.

5.07 StrUSSthenIMnof the AMRlR-DU. Under the Project, the regional department of the ANRH (para.4.18) would be provided with equipment,y including vehicles (5), measuring devices, computers,office and satellite imagery and interpretationequipment, which is required to set up a system for monitoring ground water resources, its use and potential,and water quality in the project area. Assurances were obtained at negotiationsthat the ANRH would implement this monitoring system before December 31, 1993 and would report its findings annually. This would be complementedwith technicalassistance (para. 5.19) and training (para. 5.20).

S2mnort to Extension. Training.and Research Activities

5.08 Field extensionwork carried out by a total of 25 ACVs (para.4.23) through existing formal and informal farmers' groups will be assisted by the Project. Both the DDAHs and the DADs (para.4.16) will be strengthenedto enable them to carry out their task of support, supervisionand monitoringof extension at the ACV level. The two training centers (CFVA) (para. 4.23) in the Project area would also be strengthened. The Projectwould finance the recruitmentof

1/ Table 12.1, Annex 3 2/ Table 200, Annex 1 ]/ Table 200, Annex 1 - 22 - additionalpersonnel (15 extensionagents) and equipment(27 vehicles, 15 motorcycles,4 demonstrationtractors and equipment).z/

5.09 The CFVAtrainers (para. 5.20) would receive pedagogical support from ITAS (para.4.23) at Ouargla. ITASwill be assistedto fulfillthis role through the provisionof vehicles(2), and miscellaneousmonitoring and audio-visual equipment., 5.10 The Projectincludes the improvementof the appliedresearch programs of the ITDAS (para.4.22), in particularrelated to the Qued R'hir region. The Projectwould financethe purchaseof vehicles,scientific equipment, farm machineryand computers.A/It would also providetechnical assistance (para. 5.19)and stafftraining (para. 5.20); a bank of pollento improvethe production of high qualitydates would also be created. 5.11 Creationof the PCU. A ProjectCoordination Unit would be created in the CDARS,under the directresponsibility of its Commissioner,to coordinate and monitorthe projectimplementation. It would be headedby an experienced manager,assisted by one administrator,one accountant,and othersupport staff as required.The PCU would also be providedwith equipment,including vehicles (2),and officeequipment.w The creationof a Projectmonitoring structure was a conditionof negotiationsand has been compliedwith. Termsof referencefor the PCU were agreedupon duringnegotiations.

5.12 Restructurinxof O . The OANVOR (para. 4.19 - 4.21) has administrativelimitations to extend its activitiesto the entireOued R'hir valley,and it is not providedwith staffand equipmentto fulfillthe task of assuring the operation and maintenance of the common drainage infrastructure. Therefore, the Project would assist in the creationof an agency(OPIOR) for the operationand maintenanceof the main drainageinfrastructure, the management of the safetystock, and the provisionof repairand maintenanceservices to farmers.This agencywould replace the OAMVORand receivefrom it all staffand assets. Under the Project,OPIOR would be providedwith staff,vehicles (13), constructionand officeequipment. The creationof this Unit with a mandate satisfactoryto the Bank is a conditionof effectiveness.Assurances were obtainedat negotiationsthat Governmentwould providefunds to operateand maintainthe commondrainage collectors, prior to sufficientcost recoveryfrom users to finance its operations(para. 7.15). Agreementon the terms of referenceof this agencywas obtainedat negotiations.

Rehabilitationof OasesF

5.13 DPee Wells. About 27 deep wells would be drilledin the CT and 7 in the CI to meet the water needs of the date palm tree plantationsto be improvedunder the Project. The averagedepth of suchwells wouldbe about200 m in the CT and 1,900m in the CI. The Projectalso providesfor a reservefund

1/. 2/ & i/ : Table 200 - Annex 1 Table 201 - Annex 1 i/ : Table 13.1 - Annex 1 - 23 - to permitthe drillingof 4 wells in the CT and one in the CI, in case of an unexpectedfailure of some existingwells. 5.14 Pum&UinuEquigMent. The wells would be equippedwith the necessary submergedelectrical pumps and all the complementaryelectrical equipment (transformers,switch boards, power lines). Shelters for the electrical equipmentwould also be constructed.Cooling towers would be installedfor the water from the CI. A safetystock of spareparts, in an amountequivalent to 20 percentof the investmentin this equipment,would be established.

5.15 IrrigationInfrastructure. Within the 3,550ha of rehabilitation, the Projectwould finance: (a) about90 smallelevated tanks to provideworking pressureand automaticregulation for the water pumpedfrom the CT; (b) about 7 cooling towers for the water tapped from the CI; (c) closed loop pipe distributionsystems for each tank,provided with valves and controllingdevices to distributethe irrigationwater to the farms;areas commanded by CT wellswill generallyhave theirwater supplymixed with a CI well; however,depending on the locationof the wells and irrigatedareas, the Cl wellsmay also have their own loop system. 5.16 Drainageand Road Infrastructure.The constructionand/or reshaping of the drainagenetwork would involvesecondary, collector, and field drains, includingaqueducts and other minor works; the drainswill be designedto maintaina minimumdepth to the groundwater below the irrigatedfields of 1.20m. Internalaccess and servicetracks will be resurfaced.

On fArm Developmenti/ 5.17 Tractorsof 45 to 65 CV (60),mini-tractors of 18 to 30 CV (250) with the correspondingimplements and accessories,backpack sprayers and dusters (4,000),and plasticpacking crates (300,000),would be financedunder the Project. This correspondsto estimatesof the farmers'requirements to develop mechanizationin agriculturalpractices in the Projectarea. Theywould be made availableto farmerseither on creditor cashdepending on the farmers'financial possibilities. The credit would be providedunder the currentconditions practicedby BADR. Studies.Technical Assistance. and Training

5.18 Studies.a/The Projectwould financethe followingstudies: (a) Plan for the Developmentof the SaharaRegions, including a MasterPlau, which would propose the generalstrategy for the agriculturaldevelopment of the region,and SpecificDevelopment Plans for the fivewilayate of Ouargla,Adrar, El Oued, Ghardaia,and Biskra. All the northernpart of the Sahara would thereforebe covered with suitableplanning instruments; (b) Complementary Studiesfor the Developmentof the OuedR'hir, including the next rehabilitation

1/ Table 13.1,Annex 2 2/ Table 13.1,Annex 8 and Annex 6 - 24 - phase, the study of the use of drainagewater for irrigation,and the definition of the works required for the connectionof the areas being developed under the APFA program to the main drainage system.Eventually, these studieswould become the bases for a follow up project in Oued R'hir.

5.19 TechnicalAssistance. , In the contextof institutionaldevelopment, the Project would include technicalassistance to the CDARS, to the ITDAS, and to ANRH-DRS. This would take the form of long and short-termconsultant services to help these organizationsto improvetheir own performancein general, and to implement the Project in particular. The CDARS would be assisted in general management, project coordination, and monitoring (12 MM), planning (6 Hff), project appraisal (3 NM), and organizationof extension,research, and training (6 M1); the ITDAS would also be assisted in general management (12 M0), and specialized research subject-matters related to date palm tree plantations improvement. The ANRH-DRSprogram would includea total of 34 MMfor activities related to the setting up, maintenance and operation of a system to monitor the use of ground water resources.

5.20 Traln&ng.' Training would aim at providing the staff of the agencies supporting the Project (CDARS, ITDAS, ANRH-DRS) and of the regional extension services departments with the skills required to implement the Project activities. ACV and DADstaff would receive training in extension organization, methodology and in technical subjects at the two CFVA in the Project area which would be strengthened(para. 5.09). The program would include scholarshipsand study tours abroad and in Algeria, workshops and seminars.ii The Project would also finance the organizationof, and conductat least one regional international meeting, to discuss matters of common interest in the use of the ground water resources. E. Status of Desiqn

5.21 The execution plans and the bidding documents for rehabilitation works of the Oued R'hir (6,500 ha), which include the works foreseen in the Project,were prepared by consultantsbetween 1983 and 1989. For the 8 sectors coveredby the Project (Table 7), these documentsneed to be updated to include the modificationsresulting from the recent constructionof new wells. They should also be reviewed to reflect the Appraisal Mission recommendations regarding water duties and improvementsin design and construction. These modificationswill reduce quantitiesbut the reductionsare expected to be within the allowance usually provided for variation in quantities during execution of works. Changes in the plans would be carried out shortly and funded under the IrrigationEngineering Project (Loan 2978-AL). A study assessing the impact of the proposed updating and modificationson Project cost has been prepared.

1/ Table 13.1 Annex 3 and Annex 6 2/ Table 13.1, Annex 3 and Annex 6 .]./ Annex 5 - 25 -

5.22 The purchase of goods (equipment,vehicles) should be preceded by the preparationof the technicalspecifications by the particularagency involved (ITDAS, AHRH, CDARS), and coordinated by the PCU for bid invitation. The correspondingadministrative clauses for ICB would be similar to those already approved in other Bank financed projects in Algeria. The CDRA is currently collecting data and organizingthe procurementdocuments.

5.23 The creation of the OPIOR is the responsibilityof the Ministry of Equipmentand constitutesa condition of negotiations(para. 5.12).

F. Costs

5.24 Over the five year implementationperiod (1992-1996),the total cost of the project is estimatedat US$94.37million (DA 2,264 million)with a foreign exchange componentof US$57.31million (DA 1,366 million) or 60.7 percent of the total cost. The cost estimate includes taxes and duties, totalling US$17.5 million (DA 419 million) or 18.5 percent of the total cost. Project costs are detailed in Annex 1 and summarized in Table 5.1 below. Table 5.3 shows the allocationof costs by agency with the break-downin foreign exchange and local currency. - 26 -

Table -3 0:3oAT OM SMM (DAM.) 0Js aM.) s Total Local Foreign Total Local foreign Total * For.Exc. Base Costs A. ISTUTiOI. DEVELOH T Vehicles 12.41 11.83 24.24 0.75 0.71 1.46 486. 1.62 Coatruotlen Equipment 5.12 29.02 34.15 .31 1.75 2.0B 85.00 2.70 Office Equipment 5.14 17.98 23.12 0.31 1.08 1.39 77.79 1.83 Recurrent Costs 54.86 13.64 68.52 2.44 1.69 4.13 40.92 5.41 sub-total 77.58 72.47 150.03 3.81 5.23 9.04 5.85 11.6 5. REOAMILITATIONOF OASES Constructions 6.38 6.36 12.71 0.39 0.38 0.77 50.00 1.00 Irrigation Works 188.58 188.58 377.12 11.36 11.36 22.72 50.00 29.79 Drainse Worka 110.02 110.02 220.05 6.63 6.63 13.26 50.00 17.38 Deep Wells 08.84 206.50 275.32 4.15 12.44 16.58 75.00 21.74 Irrigation Equpupent 7.98 18.58 26.54 0.46 1.12 1.60 70.00 2.10 kecuzrent Costs 3.97 33.21 37.18 1.10 1.13 2.23 50.67 2.92 Sub-total 385.69 583.23 948.92 24.10 33.06 57.16 57.84 74.94 C. TECH.ASS8T/TRAIN/sTUDIM TechnicalAasistance 1.21 10.85 12.06 0.07 0.65 0.73 90.00 0.95 Training 1.31 5.07 6.38 0.08 0.31 0.38 79.50 0.50 Studies 8.80 13.21 22.01 0.53 0.80 1.33 60.00 1.74 Sub-total 11.32 29.13 40.45 0.68 1.56 2.44 63.90 3.20 D. ON-FAR DEVELO8MNST 19.00 107.65 126.65 1.14 6.48 7.63 85.00 10.00

Total BASELINE COSTS 493.57 772.48 1268.05 29.73 46.53 76.27 61.06 100.00 Physioal Contingencies 70.76 104.70 175.46 4.28 6.31 10.57 59.67 13.86 Price Contingencies 333.70 488.77 822.46 3.06 4.47 7.53 59.31 9.87

Total PROJECT CTS 698.03 1365.95 2263.98 37.08 57.31 94.37 60.73 123.73

Soutce: World Bank; Appraisal Mission.

5.25 Base costsare expressedin March 1991prices. Unit pricesfor works and suppliesof goods were derivedfrom recentbidding and appraisalestimates. Costof specialequipment (research, laboratory, etc.) were estimatedbased on their CIF price to which were added the correspondingcustom and other taxesand duties, and transportationcosts to the project area. Unit costs reflect the particular constraints still existing in Algeria, such as, chronic shortages of supplies, insufficientstocks, bureaucraticbottlenecks, and difficulty to obtain foreign exchange, which, together with the severe working conditions of the region, makes those costs much higher (two to three times) than those which are currentlypracticed in neighboringTunisia for similarworks. Physicalcontingencies have been allowed at the rate of 20 percent for irrigationworks, 15 percent for wells and drainage works, and 10 percent for equipment. No physical contingencyallowance was provided for operating costs, training, studies, and technical assistance. Price contingencieshave been calculatedon the basis of the followingannual percentage rates, applied to local and foreign costs, includingphysical contingencies: - 27 -

alab.5.22: PRICE CONTINGENCYRATES (Percent)

1990 1991 1992 1993 1994 1996

Local 14.7 20.0 24.0 22.0 8.0 7.0 Foreign 3.6 3.6 3.6 3.6 3.6 3.6

Source: World Bank (OperationalDirective for foreigncontingencies, Country Operations for local) G. ILnaaLUn

et26 A Bank loan of US$57 millionto the Governmentof Algeriais proposed to finance 100 percent of the foreign exchange component of the Project, including the foreign exchange part of incremental recurrent costs and of the on-farm development components.J' The balance of funds required would be financed by the Government and Project beneficiaries. The Bank loan would cover 60 percentof Projectcosts (74.1 percent of Project costs net of taxes). The Project costs would be shared in the amounts and proportions indicated in Table 5.3.

Tablg 5.3: FINANCINGPLAN Local Foreign Total X of Not ------(US$N equivalent)------Project Cost

World Bank 57.0 57.0 74.1

Beneficiaries 2.6 - 2.6 3.4 Government 17.0 0.3 17.3 22.5 Net ProjectCosts 19.6 57.3 76.9 100.0 Taxes and Duties 17.5 - 17.5 22.8 Total ProjectCosts 37.1 57.3 94.4 122.8

Source: World Bank AppraisalMission

1/ We understandthat the EuropeanInvestment Bank (EIB)has signedwith the Governmenta loan agreementexpected to assistin financing Government'scontribution. - 28 -

5.27 The proposedBank loan (US$57.0million) would be for 17 years, including 5 years of grace. The Governmentwould earmarkthe loan proceedsto CDARS,ITDAS, DDAHA, ANRH, OPIOR,and ITAS throughtheir annualbudgets to financeproposed Project activities. Beneficiaries would share the Project cost (US$2.6million) through their payment for 06M of the pumpingequipment, irrigationand drainagenetworks. Governmentwould financethe remaining Projectcosts (US$34.8million), which includeUS$17.5 million of taxesand US$9.8million to be recoveredfrom farmers,corresponding to the sale of safety stocks and of the equipmentfor the on-farmdevelopment. H. Pronome 5.28 Procurementarrangements are summarizedin Table 5.4 below. Procurementwould be carriedout by the agenciesinvolved in the direct implementationof the severalcomponents of the Project,under the coordination of the PCU. Biddingprocedures would be coordinated by the PCU. Large packages of works and supplieswould be aggregated,and signingand execution of contractswould be done by the executingagencies separately. With a few exceptions highlighted below, procurement would be through ICB in accordance with the Bank guidelines.Drilling of deep wells (US$20.43 million), safety stocks of spare parts (US$0.68 million), including concrete canalsand pipes, the execution of irrigation and drainage works (US$45.97 million), the supply of pumps and hydro-meebanical equipment (US$0.56 million), vehicles (US$1.69 million), and equipment for on-farm development would be awarded entirely under ICB.yV Local firms are expected to be competitive for the supply of some equipment and for the execution of works. A margin of preference equal to 15 percentof the c.i.fbid price of the imported goods or the actual custom duties and import taxes, whichever is less, will be allowed for domestic manufacturers.With regardto the Buildingscomponent (US$0.95 million), cooling towers ($0.87 million) would be procuredthrough ICB but the constructionof sheltersfor the pumping equipment(US$0.08 million) would be procuredunder contractsawarded on the basis of competitivebidding, advertised locally, in accordancewith proceduressatisfactory to the Bank. Assuranceswere obtainedat negotiations that qualified localand foreign bidders would be given equal opportunity to bid under LCB, all bidders would provide bid and performance securities, bid openingwould be publicand no latebids would be accepted,and bids wouldbe evaluatedon the basis of criteriaand factorsspecified in the bidding documents.Electrification (US$1.01 million) would be procuredthrough ICB for the purchaseof the equipment(US$0.68 million), but SONELGAZ,a public companysolely authorized to executerural electrification works, would provideinstallation through direct contract, which would not be financedby the proposedloan. Miscellaneousequipment (US$1.61 million) would normally be procuredthrough ICB; however,contracts valued at less than US$100,000 equivalentfor itemsalready available in the localmarket and which would not be of interestto foreignsuppliers (US$0.30 million) could be procured

1/ Drainageworks (US$11.99million), internal roads (US$4.64million) and part of the constructionequipment (US$1.78 million) are expectedto be financedby EIB and procuredin accordancewith its guidelines. - 29 - throughLCB in which foreignsuppliers would be eligibleto participate;items costingless than US$20,000,totaling US$0.10million, which can easilybe obtainedoff-the-shelf, could be procuredunder local shoppingwith at least three quotations.Although Algerian ICB and LCB proceduresare generally acceptableto the Bank, thereare some aspectswhich are inconsistentwith Bank policyand/or could be improvedto ensurebetter competition. Assurances were obtainedat negotiationsthat procurementunder the Projectwould be carried out following procedures acceptable to the Bank. Consultants for the preparation of studies(US$1.45 million) and for technicalassistance (US$0.79 million)would be selectedin accordancewith Bank Guidelines.Incremental recurrentcosts which are not financedunder the Projectinclude US$7.37 millionfor incrementalstaff salariesand 061 costs of works and equipment for which procurementis inapplicable.Training (US$0.43) would be obtained by direct arrangement with organizations known to provide training on the required themes. - 30 -

Table- 5.4: PROCUREMENTARRANGEME1TS (US$ million equivalent)

PrpcumementMethod Total Project Element ICB LCB Other NA Cost

Deep Wells 20.43 - - 20.43 (16.41) (16.41)

Safety stocks 0.68 - - - 0.68 (0.65) (0.65)

Executionof irrig. 45.87 - - - 45.87 & drainage works (23.27) (23.27)

Supply of pumps & 0.56 - - - 0.56 hydro-mec. equip. (0.54) (0.54)

Electrification 0.68 - 0.33 - 1.01 (0.65) ( - ) (0.65)

Buildings 0.87 0.08 - - 0.95 (0.70) (0.05) (0.75)

Vehicles 1.69 - - - 1.69 (1.43) (1.43) construction 2.40 - - - 2.40 equipment (0.60) (0.60)

Miscellaneousequip. 1.21 0.30 0.10 - 1.61 and supplies (1.10) (0.23) (0.07) (1.40)

On-farm development 9.13 - - - 9.13 (8.63) (8.63)

Studies, Technical - - 2.24 - 2.24 Assistance (2.24) (2.24)

Training - 0.43 - 0.43 (0.43) (0.43)

Incremental - 7.37 7.37 Recurrent costs (_) (.)

Total 83.52 0.38 3.10 7.37 94.37 (53.98) (0.28) (2.74) ( - ) (57.00)

Notes: Figures in ( ) would be amounts financed by WB. - 31 -

5.29 ContrctReview. All bidding packages for works estimated to cost the equivalent of US$500,000 or more and bidding packages for goods costing the equivalent of US$150,000 or more would be subject to the (Bank) prior review of procurementdocumentation resulting in a coverage of about 85 percent of the total estimatedvalue of contractsfor both goods and works. The balance of contractswould be subject to random post-reviewby the Bank after contract award. Assurances that the above procedureswould be followed were obtained at negotiations.

I. Disbursements

5.30 DisbursementSchedul. The proposed Bank loan of US$57 million would be disbursedover seven fiscal years. The detailed schedule of disbursementsis given in Table 5.5 and summarizedbelow.

DisbursementSchedule (US$ million)

IBRD Fiscal Ye_ars 1992 1993 1994 1995 1996 1997 1998 Disbursements Annual 5.0 7.0 12.0 12.0 8.0 8.0 5.0 Cumulative 5.0 12.0 24.0 36.0 44.0 52.0 57.0

The disbursementperiod is consistentwith profiles for the ENENA Region, which generally indicate that seven to eight years are required for full disbursement. This is considered realisticas the bidding documents for the major civil works, equipment and vehicles should be prepared by Project effectiveness. The proposed closing date of the loan would be June 30, 1997.

5.31 Disbursementswould be made after receipt of full documentation, except for goods and services provided under contractsvalued below US$100,000 equivalent,for which disbursementswould be made against certified statements of expenditure (SOE). The SOE would be certifiedby the Project implementationagency incurringthe expenditure. Supportingdocumentation would be retainedby the implementingagency and made availablefor inspection during Bank supervisionmissions and by external auditors. Disbursement categories,amounts allocatedand share of expendituresto be financed would be as indicatedin Table 5.5 below. - 32 -

Table 5.5: DISBURSEMENTCATEGORIES

Category Amount of X of Expenditure to Loan Allocated be financed (US$million)

1. Civilworks for 37.0 70% Irrigation including drilling of wells

2. Equipment, 12.0 100l of foreign materialsand expenditures, vehicles 100l of localexpenditures (ex-factorycost) and 851 of localexpenditures for other itemsprocured locally

3. Consultantsand 3.0 1001 training

4. Un-allocated 5.0 TOTAL 57.0

Source: World Bank AppraisalMission 5.32 To ensurethe efficientand timelyimplementation of the Project, afterloan effectiveness,the Bank would depositan initialsum of up tc US$2.0million to set up a revolvingfund to financeeligible expenditures correspondingto the Bank'sshare of 4 months'Project needs. Bank funds would be deposited in US dollarsin a specialaccount at the CentralBank in Algeria. The modalities concerning the operation of the special account were agreed to at negotiations. Government's contributionwould be through appropriatebudget allocations. Assurances were obtainedat negotiations that the Project'sdraft annualbudgets and financialplans, as proposedto the Ministriesof Agricultureand Equipment,would be presentedto the Bank for informationno later than November30 of each year. 5.33 The Bank would replenishthe revolvingfund as requestedupon receiptof satisfactoryevidence that expendituresmade from it were eligible for financingout of the fund. A replenishmentrequest would normallybe sent to the Bank when 50 percentof the revolvingfund has been disbursed,i.e., about every 2 months. Shouldany disbursementmade from the specialaccount not be acceptableto the Bank,Government would be requiredto depositthe correspondingineligible amount into the specialaccount or, if the Bank so requests,refund to the Bank an amountequal to the amountnot eligible. - 33 -

5.34 No further deposits into the special account would be made by the Bank when the total withdrawnamount of the part of the loan that is expected to be disbursed at loan closure would be equal to US$2.0 million. If it is determined that any amount outstandingin the special account is not required to cover further payments for eligible expenditures,the Government would refund to the Bank such amount outstandingin the special account.

VI. PROJECT INPLEMENTATION

A. Orxanizationand Management

6.01 The responsibilityfor the general coordinationand monitoring of the Project activitieswould rest with the Project Coordinationand Monitoring Committee,created by joint decision of the Ministers of Equipment and Agriculture. The executive body of this Committeewould be the Project CoordinationUnit (PCU) to be created in the CDARS for this purpose (para. 5.11). The Project would provide funds for the recruitmentof staff and purchase of equipment to assist the PCU to fulfill its duties. The PCU would be responsiblefor coordinatingproject activitiesamong the executing agencies (CDARS,ANRH, ITDAS, DDAHAs, OPIOR, AGID, ITAS) and for organizing training and technicalassistance programs. It would also set up a system for monitoring and evaluating Project implementationand impact and would keep records of the physical and financialprogress of the Project executionand report on them periodically. However, the primary responsibilityfor the Project executionwould rest with the executingagencies themselves.

6.02 The CDARS, through its Studies and ProgrammingDepartment, would be responsiblefor agriculturedevelopment in general and for supervisingthe preparationof the Master Plan and Specific DevelopmentPlans included in the Project (para. 5.18). It would also supervise the preparationof the ComplementaryStudies for the Developmentof the Oued R'hir (para. 5.18). These studies would be prepared by consultantsfinanced under the Project. CDARS would also promote and be responsiblefor the organizationof the periodic meitings of the TechnicalCommittee for Hydraulicsand Environment (CTHE) and ensure adequate monitoringof the soil salinity changes in the Project area.

6.03 The regional directorateof the ANRH would be in charge of the assessment and monitoring of ground water resources and in particular the setting up and the operationof a system to monitor the exploitationof these resources. The Project would provide the ANRH-DRS with equipment and technical assistance to help it to fulfill these tasks (para. 5.07).

6.04 Extension serviceswill be provided by the DDAHs and the DADs through the ACVs (paras.4.16, 4.23). These services would be strengthened under the Project (para. 5.08). They would be assisted and get technical guidance from ITDAS, INRA and INPV (para. 4.22). The ACVs will provide a return flow of informationto the research instituteson farmers' specific constraints. The two trainingcenters of El Oued and Ouargla (para. 4.23) would train extension agents in preparingmessages on technical,economical - 34 - and marketingaspects to be transmittedto the farmingcommunity. The DADs will providesubject-matter specialist support to the ACVs.1, 6.05 The appliedresearch component, in particularrelated to the Oued R'hir region,will be implementedby ITDAS. The followingthemes would be included: irrigationand drainagemethods at severallevels of water and soil salinity,intensity of inter-croppingas relatedto over-allvater availabilityand distribution,small scale farm mechanizationof date palm operations(pollinization, trimming, spraying, harvesting), mechanization of fielddrains cleaning, Bayoud disease prevention, post harvestdate quality improvement,the use of low qualitydates and by-productsfor animalfeeding. 6.06 The ITAS wouldbe in chargeof providingtraining to the extension staff of the agenciesinvolved in the implementationof the extensionprogram (para.5.09). B. Executionand Maintenanceof ProiectVorks. Purchaseof Goods

6.07 The responsibility for the execution of the rehabilitation works includingthe drlllingof the deep wellswould rest with the ACID. This agencywould finalizethe preparationof the biddingdocuments, would proceed, in coordinationwith the PCU, with the procurementarrangements, and would sign the respectivecontracts. It would be technicallyassisted by the ANRH for the supervisionof the drillingof wells. AGID wouldbe assistedwith equipmentto strengthenits supervisioncapabilities. 6.08 Whereasirrigation networks would not requireimportant maintenance,drainage systems and equLpmentwill demandroutine cleaning and service. Farmersand farmergroups are alreadycarrying out and would continue to be responsible for the operation and maintenance of the Irrigation and drainage works, as well as of the pumpitg equipment at the farm and oases levels. The OPIORwould provide assistance to the farmers in the most critical fields of pumping and hydro-mechanical equipment by providing spare parts (safety stock financed by the Project) and drain reshaping and, clalning services (also with equipment financed by the Project). The farmers' groups would enter into individual agreements with OPIOR in order to fix mutual responsibilities regarding the operation and maintenanceof the irrigationand drainage networks. The major stipulations of these agreements would focus on the following principles: the OPIORwould commititself (a) to providefree technical advice on operation, maintenance of works and equipment,and on water management; (b) to help the groups prepare their annual programof activities and budgets; (c) to provide any servicerelated to 06N, upon requestof the groupsand at cost. The groupswould committhemselves: (a) to maintainand operatethe pumpingsystems and the irrigationand drainage networksand to pay for the respectivecosts; (b) to pay for the servicesto be providedby OPIOR;(c) to includein their annualbudgets their participation in the cost of maintaining the commondrainage infrastructure; and (d) to permitOPIOR to monitorthe adequacyof their0&K efforts. These

Table 200 Annex 1 - 35 -

specific agreements would be negotiated with each group and signed prior to awarding of the works. Acceptanceof these principles to be part of the agreements to be signed with farmers was obtained at negotiations.

6.09 The 062 of the main drainage systems requires special heavy equipment which would be provided to OPIOR by the Project (para. 5.12). The OPIOR would thereforebe in charge of this maintenance,to be partially financed by the contributions of the groups and users of these common infrastructures (para. 7.17).

6.10 The OPIOR would procure and supervise the supply of the safety stock. The OPIOR would also centralize and coordinate all activities related to the purchase and provision to farmers of the equipment financed under the on-farm development component. ACID would be in charge of the purchase and installation of the pumping, and the purchase of electrical equipment to be installed by SONELGAZ. The construction equipment would be procured by the OPIOR. All other miscellaneousequipment and materials would be purchased by the several agencies directly interested (ANRH, ITDAS, CDARS,ITAS), always under the coordinationof the PCU.

C. Monitoring and Evaluation

6.11 Manaaement and Nonitorla8. The PCU would be responsible for monitoring the progress in Project implementation (paras. 5.11 and 6.01), and for collectingdata needed to evaluate the Project impact. For this purpose, early in the Project and within the frameworkof the technicalassistance financed under the Project (para. 5.19) the CDARS/PCUwould be assisted by a consultant to set up a Project Management InformationSystem (MIS). Annex 2 contains guidelines for defining the key indicatorswhich would be used for this MUE. Each executing agency would be responsible,however, for monitoring and recording data pertaining to its own component,under the coordinationand assistance provided by the PCU, to ensure homogeneity and standardization of proeedures. The physical and financialexecution of contractswould be the object of particular attentionand monitored in accordance with the guidelines mentioned in Annex 2. Because of the nature of the Project, with its heavy emphasis on institutionalstrengthening and due to possibilityof cost savings, the Algerian Governmentand the Bank would carry out a mid-term review of the implementationof the Project before December 31, 1994. Then, the expansionof the area to be rehabilitatedcould be envisaged.

6.12 Regortina and Evaluation. The Studies and Planning Directorateof the Ministry of Agriculture(DEP) would be responsiblefor evaluatingProject results. The PCU would prepare semi-annualprogress reports in accordance with mutually agreed guidelinesand would submit them to the Bank. The DEP would prepare a Project CompletionReport within six months of the loan closing date.

6.13 Ift2ngyiakn.Bank supervisioninput into key activities is indicatedin Table 11 - SupervisionPlan. This is in addition to regular supervisionneeds for the review of progress reports,procurement actions, correspondence,etc., estimated to require two staff-weeksin 1992, four - 36 - staff-weeksin 1993 and 1994, and three staff-weeksin 1995 and 1996. For the total Project implementationperiod, supervisionneeds are estimated at sixty- three staff-weeks. The main lines of this SupervisionPlan were discussed with the Borrower. In addition to the semi-annualreports, and prior to the arrival of Bank supervisionmissions, the PCU would prepare short notes on project progress and the main issues to be discussedduring the mission. The PCU would also be in charge of coordinatingarrangements for Bank supervision missions, and for providing informationrequired. Mission briefings on arrival and wrap-up meetings will normally be chaired by the CDARS Commissioner,assisted by the Director of the PCU and with the participation of representativesof the several project agencies.Before departure, the Bank mission will leave in the field an Aide-Memoirewith its conclusionsand recommendations.

D. Accounts and Audit

6.14 The PCU would be responsiblefor keeping project accounts for the entire Project. The PCU in CDARS would be responsiblefor setting up adequate accounts to coordinate and account for the amounts to be used by the various agencies and departmentsinvolved in the Project (ITDAS, ITAS, ANRH-DRS, AGID, DDAHAs, and OPIOR). These accounts would be maintained in accordance with principlesand practices satisfactoryto the Bank. The Project accounts would be audited by independentauditors acceptable to the Bank. The auditors' annual reports, along with opinions on Statementsof Expendituresused for certain disbursementsunder the Bank Loan, and on the revolvingfund and audited Project financialstatements, would be sent to the Bank within six months after the end of each fiscal year. Assurances to this effect were obtained at negotiations.

VII. BENEFITS AND JUSTIFICATION

A. General

7.01 The directlyquantifiable Project benefits will come from incremental date production and the improvementin date quality, as well as from increased production of fodder and vegetable crops. The improvementsin supply of water through the provision of wells and an irrigation distribution system will alleviate the water shortagenow experiencedon all the farms that will benefit from the infrastructure. Cropping intensitiesare projected to increase from about 110 percent to around 140 percent with the Project, because of the increasedavailability of water. In addition,the improved drainagesystem will reduce salinityon the farms and help the qualityas well as the yields of dates. Improvementsin extensionadvice should benefit farmers directly, as should an increasedavailability of farm equipment,and these two factors should help to raise yields on about 6,500 ha of farms, both those benefittingdirectly from the infrastructure,and those in the Project area benefitting only from the improved services and equipment. The increasedagricultural production should considerably improve farmers' incomes, and both export of dates and reduced importsof vegetablesand fodder crops from the North will result. The estimated increase in annual export earnings is about DA 66 million (US$4 million); date - 37 - exports represent only about 30 percent of total incrementaldate production, as most of the date productionwill be consumed locally.

7.02 In addition, secondarybenefits would accrue in the short term from increasedemployment opportunities,linked directly to Project activities. In the longer term, considerablebenefits should accrue to the entire northern Sahara region, from the strengtheningof institutionswhich would oversee the economic developments and exploitation of the largely non-renewable water resources, and from the master plans for such developmentto be financed under the Project.

B. Land Use. Yields and Production

7.03 LandUse. Detailedcropping patterns and yields for three situations (existing,future without Project and futurewith Project)are presentedin Annex 4 and summarizedin Table 7.1 below. At present,the entire area is planted with date palm trees, and the cropping intensity, including the intercroppedarea, averages 110 percent to 125 percent, dependingon water availability. In areas with the greatestwater deficit (farmmodel A), the intensityis lowest,at about 110 percent. Under the Project, it has been assumed that the intensitieswould increaseover about four years to about 140 percent,with the exceptionof those areas where no additionalwells or irrigationinfrastructure are to be financed (definedby farm model C, these areas would nonethelessbenefit from improved extension service advice and some on-farm investments). - 38 -

Table 7.1: CROPPINGPATTERNS AND CROP YIELDS in the Project Area

At &uII Develonment Existing Situation Withut Project Wlth Proiec Area Yield Area Yield Area Yield ha T/ha ha T/ha ha T/ha

F-armModelA Water deficit > 40 percent

Dates 1.0 3.0 1.0 2.0 1.0 5.0 Barley .05 14.0 .05 9.0 .15 20.0 Alfalfa - - - - .10 50.0 Tomatoes - - .05 12.0 Carrots .05 12.0 .05 7.0 .10 18.0

Crop.Intens. 1.10 1.10 1.40

Farm Model B WAter deficit < 40 percept

Dates 1.0 4.0 1.0 2.5 1.0 5.0 Barley .05 16.0 .05 12.0 .15 20.0 Alfalfa .05 30.0 .05 20.0 .10 50.0 Tomatoes - - - - .05 12.0 Carrots .05 15.0 .05 10.0 .10 18.0 Crop.Intens. 1.15 1.15 1.40

warm Model C No sianificantwater deficit

Dates 1.0 4.5 1.0 4.5 1.0 5.0 Barley .05 18.0 .05 18.0 .15 20.0 Alfalfa .07 40.0 .07 40.0 .07 50.0 Tomatoes .05 10.0 .05 10.0 .05 12.0 Carrots .08 17.0 .08 17.0 .10 18.0

Crop.Intens. 1.25 1.25 1.37

Source: World Bank appraisalmission

7.04 Xlelds. At present, because of lack of water and salinity problems, yields of dates and intercroppedvegetables and fodder crops are quite low. They range from 3 to 4.5 tons/ha for dates in the existing sltuation. It is assumed that in those areas with water deficit and inadequatedrainage (farm models A and B), yields would actually decline over time with a further deterioration in the drainage and increased salinity, to 2 to 2.5 tons/ha. The same pattern would hold for the intercroppedcrops. Projectedyields for dates under the Project and at full developmentln year 5 are conservative,at 4 to 5 tons/ha, and represent increasesof 10 to 65 percent over the without Project situation,depending on the farm model. In - 39 .

addition, there would be an improvementin the quality of the.dates, which would mean that a slightly higher proportionof the total date production would be exportable (25 percent as opposed to 18 percent without the Project), and the average economic price of the productionwould increase. For the other crops, the yield increasesdue to the Project were assumed to be between 20 and 65 percent, depending on the crop and the severity of water shortage in the without Project situation. The yield changes are summarized in Table 7.1 above.

7.05 Prduction. Because the Project would be implementedover a five year period, and full developmentof yields and cropping intensitieswould occur about four years after the investments,full developmentfor the Project would be in about year nine. Table 7.2 below shows incrementalproduction from the Project at full developmentwhich results in the differenceof the estimatedproduction from the Project at this time and estimatedproduction in the without Project situation.

Table 7.2: INCREASESIN ANNUAL PRODUCTION from the Project Area

Dates Fodder Crops/a Vegetables/ '------'000tons ------

Existing Situation 34.4 20.8 9.6

At full developmentA

Without Project 26.9 14.2 8.2

With Project 44.0 65.9 21.2

Incremental 17.1 51.7 13.0

Production increase over existing situation as percent of national production 8.6 7.4 0.4 Production increase over existing situationas percent of local production/4 15 274 15

/a Green barley and alfalfa /b Tomatoes and carrots

/0 Year 9, or 2000 for some crops; later years for others. Thus annual production ln year 2000 or Later is compared to annual production in 1989. /d Local production is considered production from the two wilayate of Ouargla and El OAed. SOurce: World Bank appraisal mission - 40 -

7.06 Incrementalproduction is the result of increasingyields for dates and the other crops, and an increase in cropping intensity,which affects the vegetables and fodder crops. The value of annual incremental production, in 1990 financialprices, is about DA 253 million. This is due mostly to the increased tonnage and partly to the increase in quality of dates, as mentioned above, which is not shown here (detailscan be found in Annex 4). As a proportion of total annual national production,the quantities of the vegetables and fodder crops are small, at 0.4 percent and 7.4 percent, respectively,and the quantity of incrementaldate production represents about 8.6 percent of total national annual production. As a percentage of the total annual productionof the two wilayate concerned,Ouargla and El Oued, this incrementalproduction representsabout 15 percent of both vegetable and date production. For fodder productionattributable to the Project, however, more than a threefold increase is expected over estimatedproduction in 1989 from the two wilayate. According to the data from these wilayate, fodder productionhas been on a rapid increase over the last four years, mainly from the increased areas under developmentin the context of the APFA program. This local production,which is still quite limited at about 21,000 tons, represents a decrease in the amounts of fodder that must be imported from the northern part of the country and goes to feed the small livestock holdings (usually of goats ar, sheep) that typify many households in the area. The incrementalproduct on would thereforecontinue to be substitutedfor imports from the north.

C. MarketW and Prices

7.07 Dates. Dates are sold by the farmer en the local market, to private traders, or the Office National des Dattes (OND). OND is a parastatal under supervisionof the Ministry of Agriculture.OND provides marketing services for both domestic and internationalmarketing of dates although it buys only about 50 percent of national production. In the past 4-5 years, exports have averaged 3,000 to 5,000 tons out of a total national annual production of 200,000 tons. Each of its processingplants (total of seven with three in the Project area) has a number of collectioncenters; there are 10 per plant in the Project area. OND buys only dates which have been harvested and pre-sortedby the farmers. The dates bought by OND are sorted and packaged at the processing plants and sold directly to wholesalersor intermediaries.

7.08 From the end of 1969 to the start of the 1980s, domestic marketing as well as exportingwas a state monopoly. Nonetheless,a large share of domestic productionwas always marketed outside of official channels. After domestic marketing was liberalizedat the beginning of the 1980s, the private sector rapidly expanded further and has managed to compete well with OND. All decisions about OND exports are made by the OND management and the processing plants simply execute them. Transport to the ports is done in OND vehicles.

7.09 With the recent 1989 liberalizationof export marketing as well, a number of private traders have entered the market to export to non-European countries. In the first year since export liberalization,these exportersdid not compete directly with OND, as they bought a lower quality date. A major - 41 -

constraint,however, was their lack PO conditioningfacilities which could have been overcome if they could have rented OND's excess capacity. In any case, date marketing is evolving in Algeria toward a more competitive environment,which may serve both to increase demand for better quality dates and to drive up the prices for such dates. The analysis of the Project, however, used constant real prices for dates.

7.10 Fruits and vegetables. Most fruit and vegetableproduction (garlic,onions, carrots, tomatoes,etc.) is consumed on-farm or sold on the local market. Nonetheless,some early-seasonproduce is sold to markets in the north and there is some trade with neighboringurban centers. Marketing is usually done through direct sale by the producer,usually at the retail level in local markets or the larger weekly markets.

7.11 In the last five years, productionof vegetable crops has practicallydoubled in the Project area, while the prices have remained strong. The increase in productionhas come mainly from the increaseduse of greenhousesin the area and from the recent developmentunder the APFA program. It can be expected that productionof these crops will continue to grow rapidly in the near future (the next five years) from on-goingAPFA development,and prices might soften somewhat over this time period. Incrementalproduction from the Project is expected to equal about 15 percent of the current level of productionand should have no significantimpact on market prices.

7.12 Fodder croRs and livestockproducts. Fodder crops (green barley and alfalfa) are grown primarily to feed on-farm animals. A small share of productionis sold in bales on the local markets, or sometimes in neighboring areas. Since livestockproduction is not well developed,meat and milk consumptionare very low. Demand is, however, fairly strong, to the point of importing fodder crops from the North. Incrementalproduction from the Project would represent a large increaseover current local production (see Table 7.2 above). As a result, it was assumed that the financialand economic prices of barley and alfalfa would decrease by 20 percent in real terms over the next five years.

D. Farm Incomes

7.13 The Project would directlybenefit about 6,000 farm families, includingmembers of small private groups of farmers and cooperatives,and private farmers, for a total of about 45,000 people. In addition, the Project would generate, at full development,over 200,000man-days of employment, which is the equivalentof about 650 full-timejobs, although this would be supplied almost entirely by family labor (except for about 20 full-timejob for skilled workers). Indirectbenefits would include additionalemployment created by the increasedconstruction and maintenanceactivities of the irrigationand drainage infrastructure,and by the increasedmarketing and processingactivities from the incrementalproduction from the Project.

7.14 The financialcosts and benefits to farms are summarizedin three farm models, shown in Table 7.3. Model A representsthe without Project - 42 * situationwhere the water deficitis greaterthan 40 percentof requirements; Model B, where the water deficitin the withoutProject situation is less than 40 percentof requirements;and Model C, the situationwhere there is no water deficit,but where the farmerswill stillbenefit from improvedextension adviceand croppingpractices, and minor on-farminvestments (back-pack sprayersand dusters). In ModelA, becauseof the water deficitcombined with inadequatedrainage, the withoutProject situation is likelyto deteriorateto the point where farmingmay become,after a ten year period,unattractive, and the farmsmay be abandoned,which did happenfor a periodof time in other areasof the Oued R'hirValley. The incrementalbenefits in farmsA and B are particularlylarge: in Model A incrementalnet incomeis DA 37,200,compared to only DA 700 in the withoutProject situation at full developmenit.In Model B the incrementalnet incomeis estimatedat DA 32,100compared to a net incomeof DA 6,200 in the withoutProject situation. At full development,the returns per family day of labor increase from a range of less than DA 50 to 330/manday in the without Project situation, including all three models,to a rangeof DA 440-630/mandayin the with Projectsituation. This comparesto a daily wage rate of about DA 100/mandayfor casual(unskilled) labor in the Project area.j/

~/ These calculations,as well as the figuresin Tables7.3 and 7.4, were made in 1990 termson the basis of a differentexchange rate; with the change in the exchange rate the nominal amounts will be different, but the conclusions in real termsstill hold. - 43 -

Table 7.3: FINANCIALBUDGETS AND RETURNSTO FAMILYLABOR la

Farm Models,k A B C Size of Farm (ha) 1 1 1 Number of farms 2,284 1,269 3,000

- (DA '000) ------'----

Net Annual Income - Present 9.0 20.2 21.3

Net Income - Future without Project 0.7 6.2 23.2

Net Income - Future with Project 37.9 38.4 31.2

IncrementalNet Income 37.2 32.1 8.1

Returns per family day of labor

Present 240 415 300

Future - without Project <50 180 330

Future - with Project 630 550 440

Incremental 600 370 90

/A See footnote to para. 7.14, page 42 /h Model A: Water deficit in the without Project situation is greater than 40 percent of water requirements;

Model B: Water deficit in the without Project situation is less than 40 percent of requirements;

Nodel C: There is no water deficit in the without Project situation,but the farmerswill benefit from an improved extension service and modest on-farm investment.

Source: World Bank appraisalmission

E. Cost Rec.ggya

7.15 In the Project area, farmersbelong to farmer associationsfor the purpose of operating and maintainingthe wells and irrigationdistribution system up to the farm level, and the farm drainage ditches. They divide the costs among themselves and contribute to a fund for this O&M and for major repairs or replacementswhen needed. One farmer may belong to several -44- associationsif he has more than one source of water. The continuationof this situationwould be formalized through the agreements to be established to ensure proper maintenance of the investments(para. 6.08). In addition, under the Project, an agency (OPIOR) is to be set up (para. 5.12) to maintain the main drainage canal and to maintain or construct, on farmers' request and on the basis of full cost recovery,any on-farm irrigationand drainage infrastructure.

7.16 The users of the main drainage network include both the farmers and the urban communitiesof the Oued R'hir valley. All beneficiariesof the main drainage network would be expected to participate in the costs of the infrastructure. Assurances were obtained at negotiationsthat Government would establish the principles of cost recovery (i.e., sharing of costs among farmers throughout the Oued R'Hir valley and urban beneficiaries)for the operation and maintenanceof the common drainagenetworks and would make these principleseffective before Project completion (December1996).

7.17 For the Project beneficiaries,cost recovery would relate to the investmentcosts of the wells and the irrigationsystem and to the investment and maintenancecosts of a portion of the main drainage network. Under the Cheliff IrrigationProject (Loan 2809-AL) financed by the World Bank in the northern part of the country, it was agreed that water charges would recover 100 percent of O&N and 25 percent of investmentcosts. If similar recovery rates are applied to the relevant items under this Project, and if the Project beneficiariesare responsiblefor about 40 percent of the use of the main drainage network, and therefore for about 40 percent of the maintenancecosts, a fixed annual levy would be required, in constant 1990 terms, of DA 5,600/ha for farms in Model A and DA 5,100/ha for farms in Model B. Since farmers already pay charges to their associationsfor O*M of wells and irrigation networks (para. 7.15), this levy would be an entirely new charge to them.

7.18 Table 7.4 shows the burden of 100 percent maintenance (assuming Project farmers will be responsiblefor 40 percent of the use of the main drainage works) and 25 percent investmentcost recovery as a percentage of total rents accruing to the two farm models where investmentin irrigationand drainage will take place under the Project. The rents are defined as net incrementalincome less imputed costs for a number of factors plus an allowance for the farmer's return to risk. SupportingTable 12 shows the detailed calculationsfor the summary in the Table below. About 20 percent of the rent as defined and about 14 percent of the incrementalincome would be captured through these cost recovery levels,which shows that, in principle, the farmers should have no financialdifficulty in paying this extra charge. The only difficultymay be the introductionof a fixed annual levy on the land, and the complicatedland tenure arrangementson a number of farms in the Project area that would make it difficult to apportion a levy on the basis of land holdings; it may have to be done instead on the basis of the number of date palm trees held by a farmer. Agreement was obtained at negotiationsthat cost recovery levels would be applied in the Project area to continue ensuring recovery of 100 percent of operationand maintenancecosts, and to recover a reasonableportion of investmentcosts. - 45 -

TIble 7.6 COST AND RENT RECOVERYA Farm modelsat full development A B Farm size (ha) 1 1 Numberof farms 2,284 1,269 ------DA -..- 1. Net incremeutLalincome/ 41,700 36,200 2. RentA 29,100 23,900

Assuming100l of maintenancecosts of OPIORand 25% investmentcost recovery 3. Land bettermentlevyld 5,600 5,100

4. Rent recoveryindex (3:2) 19.2X 21.3% 5. Net incrementalincome recoveryindex (3:1) 13.4X 14.0%

/a See footnoteto para. 7.14,page 42 /b Water chargesalready deducted, as usuallypaid by farmersto farmers' associationsfor operationof well. /c Rent is incrementalincome less depreciation,inputed value of family labor and of management,inputed return on own capital,and an allowance for risk,calculated at 5X of grossvalue of production. /d Assumingthat all cost recoverywould be througheither a land betterment levy or a date palm tree levy. Here is shown as a levy on the land.

F. Economic Analysis

7.19 The Project would be comprised of institution building for a number of agencies that plan, execute,research, support, monitor, and maintain irrigation infrastructure and agricultural activities in the Sahara; supportfor the establishmentof developmentplans for five wilayate;a componentfor irrigationinfrastructure (wells, irrigation systems and improveddrainage networks); and on-farminvestments. The economicanalysis was carriedout for the irrigationinfrastructure, the supportto the extensionservices, and on-farminvestments. The other componentsof the Projectwould have benefitsof a much longer-termnature, dispersed throughout the southernregions, and are not directlyor easilyquantifiable.

7.20 In the discussionthat follows,the economiccosts And benefits associatedwith the projectare assumedto last over a twentyyear period,the assumedeconomic life of the principalinfrastructure. In some cases,the infrastructureand the date palm treesmay last for up to fortyyears, while in others,the palm treesmay have only fifteenyears of productivelife, - 46 - after which they would be replanted.

7.21 All costs and benefits are expressed in constant 1990 prices and valued in border prices. The costs included in the analysis are for wells and associatedpumping equipment, irrigationand drainage networks,operation and maintenance and replacementcosts, on-farm investmentcosts, and the full costs (vehicles,equipment, training, incrementalstaff costs) of improving the extension services in the Project area. Wherever possible, import or export parity prices were used for items such fertilizers,diesel, and agricultural equipment, using the World Bank's commodity price projections for 1995 and 2000 wherever relevant. Unskilled labor was taken at 50 percent of the market price, while skilled labor was taken at 100 percent because of its apparent scarcity. Where specific conversion factors were not calculated,the standard conversion factor of 0.55 was used.

7.22 Eom=ic Prices of Output. Commodities that are traded have been priced at the 1990 export parity price; this is mainly the highest quality of dates. For the other commoditieswhich are officiallynon-traded, such as vegetables and certain fodder crops, Algerian prices are currently exceptionallyhigh because of a protectedmarket. The vegetables have thereforebeen priced at Tunisian border equivalents,based on 1990 Tunisian financialprices, and adjusted for transportcosts, and the fodder crops have been convertedusing the standard conversion factor. The detailed calculation by crop and comparisonwith the financialprices can be found in Annex 3 of the ImplementationVolume.

7.23 RconomicRate of Return. The overall economic rate of return for the Project is estimated at 17 percent. The Net Present Value of the Project at a discount rate of 10 percent is DA 589.1 million. The Project is thus consideredeconomically acceptable for financing. It also fits into Government'spriority of developingthe South, and will have benefits that extend far beyond thcse measured by this rate of return, in terms of improvementsin long-termplanning, and ensuring sustainabilityof the developmentof water and soil resources in this fragile area.

G. Risks and Sensitivity Analyais

7.24 A number of risks could decrease the economic viability of the Project, but the followingdiscussion shows that the rate of return of the Project is fairly robust:

(i) A delay in Project implementationcould occur because of, inter alia, delays in procurementand finalizingcontractor selection, delays or problems with contractors'performance, or shortage of constructionmaterials. Assuming that expenditureswere on schedule,but that there was a two year delay in finalizing the civil works, which would delay the benefits by two years, the ERR would fall to 13.8 percent. Alternatively,problems with procurementor with contractorscould increase costs; if costs were to increase by 20 percent, this would decrease the ERR to 14.8 percent. - 47 -

(tU) Because of a combinationof profound changes in the structure of marketing and a shortage of foreign exchange, inputs have sometimesbeen in short supply, and shortagesof farm equipment have been common. If the farmers in the Project area suffer from delayed arrival of farm equipmentto be financed under the Project, or from delays or shortagesin inputs, this would adverselyaffect yields. A decrease of 20 percent in benefits from these risks would cause the ERR to fall to 14.3 percent.

(iWi) Farmers could be unwillingto maintain the on-farm systems to ensure sustainabilityof the investments. In this case, the benefits would also suffer and, as noted in (ii) above, a decrease of 20 percent in the benefits would decrease the ERR to 14.3 percent.

(iv) Inadequateoperations and/or maintenanceof the infrastructure could shorten the life of the investments. Sensitivityanalysis shows that if investmentswere to last only 15 years (instead of 20), the rate of return would drop to 14.4 percent.

7.25 The results of the sensitivityanalysis show that in all of these scenariosthe Project is still economicallyviable. The risk of inadequate water supply from over-exploitationof the water resource from continuing to distribute land under the APFA, would be reduced by agreementwith Government on limiting this land development(para. 4.06), and by careful monitoring of water resources (para. 2.22). The risk of inadequatemaintenance would be minimized by reaching formal agreements between farmers or farmer groups and the OPIOR to be establishedunder the Project on the operation and maintenance (paras.6.08 and 7.15). In addition, the switchingvalues on the Project show that all benefits would have to decrease by 67 percent or all costs to increaseby over 200 percent for the economic rate of return to fall below 10 percent.

H. SustainabilitX

7.26 The primary benefits from the Project are designed to address issues of long-termplanning and institutionaldevelopment for planning, implementationand monitoring. It is precisely the sustainabilityof such benefits into the indefinite future that is the primary objectiveof the Project. The intention is to use the results of the long-termplanning for future developmentof the Sahara, and to strengthen the institutions responsiblefor carrying out this development,so that they would have necessary staff, expertise,and training to make good use of the Master Plans to be drawn up under the Project, and would also be able to monitor the soil and water resources. The purpose of strengtheningthe research and extension capabilitiesis also to achieve long-termsustainable benefits from improved cultural practices in the area. In addition, through implementingthe infrastructuralaspects of the Project, a number of other factors will be - 48 -

tested which should prove of use in further rehabilitationof southern oases. These include designs to maximize efficientuse of water, organizational arrangementsfor executionof civil works, for the operation and maintenance of the infrastructure,and implementationof cost recovery policies.

7.27 As to the sustainabilityof the quantifiablebenefits of improved yields and quality dates and higher cropping intensitiesthat will be directly attributableto the infrastructureto be financedunder the Project, this will depend on the effectivenessof the maintenancearrangements put in place under the Project and sustained thereafter. If OPIOR proves to be an effective agency, and if cost recovery policies permit OPIOR to operate with sufficient funds, then the quantifiablebenefits from the Project of incremental production should last at least throughoutthe life of the palm trees, and presumably thereafterthrough replanting.

I. EnvironmentalAspects

7.28 The proposed Project has been reviewed in accordancewith the provisions of World Bank OperationalDirective 4.00, Annex A, "Environmental Assessment'and placed in environmentalscreening category B. The proposed Project does not require preparationof an environmentalassessment and will support improved environmentalmanagement in the Project area through: (a) a program of studies to promote the environmentallysound developmentprogram for the Sahara Region, and (b) a series of specific interventionsto be supportedunder the Project in the Oued R'hir to improve environmentand natural resourcesmanagement.

7.29 Developmentof a Master Plan. The proposed Project will support the preparationof an environmentallysound DevelopmentMaster Plan for the Sahara Region. This will be complementedby developmentplans for the wilayate of Adrar, Biskra, El Oued, Ghardaia and Ouargla. The Projectwould support preparationof environmentalassessments, consistent with the requirementsof the Government of Algeria and the World Bank, as integral components of both the master plan and wilayate developmentplans. The environmentalassessments would promote the evaluation and incorporationof environmentalconcerns into the planning process. At a policy level, this process will be linked by an agreementwith the Governmentof Algeria to support developmentactivities, including the allocationof groundwater resources,which are consistentwith the Regional Master Plan and the recommendationsof the ERESS study of regional groundwatermanagement. The Project will support training in environmentalassessment to improve institationalcapabilities, and to maximize the participationof Algerian experts in the preparationof the environmentalanalyses for studies.

7.30 EnvironmentalActivities in the Qued R'hir. Activities supported under the proposed Project in the Oued R'hir would improve environmentand natural resourcesmanagement by:

(a) establishmentof a system for water quantity and quality management and monitoring in the proposed Project area and training personnel in the use of this informationfor system - 49 -

planning and management;

(b) assuring improvedcoordination of agriculturaldrainage and domestic/agro-industrialwastewater managementby integrationof planning for these activities;

(c) improvingwater management and conservationin irrigated agriculturethrough rehabilitationof wells and water distribution infrastructure,promotion of improved on-farm water managementby extensionpersonnel, and demonstrationof water conserving designs and technologies;

(d) reducing salinizationof soils by improvingdrainage, promotion of improved salt leechingmethods by extensionpersonnel, and applied research on drainage;

(e) reducing vector habitat by removing large volumes of presently stagnant water from informal/temporarydrainage ponds and by connecting tertiary and secondarydrainage systems to the main drainage canal; and

(f) promoting the demonstrationof new crop protectionmethods, training for personnel involved in crop protection research,and provision of proper equipment for the applicationof agricultural chemicalsand for the safety of applicators.

Implementationof these activitieswould be evaluated to determinewhich measures should be adopted for transfer from the pilot project area to future developmentprograms in the region.

VIII. AGREEMENTSREACHED AND RECOMMENDATION

8.01 At negotiations,assurances were obtained that Governmentwould:

(a) set up a system to monitor water quality in the main drainage collectorsby June 30, 1993 (para. 2.24);

(b) base the future developmentof the region on (1) the plans to be financed under the Project and (2) the results of the water extractionmonitoring system to be establishedunder the Project (para. 4.06); in the meantime (i) the irrigationdevelopment would be limited to the areas already distributedunder the APFA program; and (ii) the distributionof new land for irrigation developmentwould be controlled to meet the recommendationsof the ERESS study (para. 4.06);

(c) implement a program to close all deterioratedand non-operational wells in the Oued R'hir Valley and complete this program before December 31, 1996 (para. 4.31); so0 -

(d) through ANRH implement a monitoring system of the ground water resources, includingwater quality, in the project area before December 31, 1993 and report its findings annually (para. 5.07);

(e) establish as a condition of effectiveness,an agency (OPIOR) for the operation and maintenance of the main drainage infrastructure, the management of the safety stock and the provision of repair and maintenanceservices to farmerswith a mandate satisfactoryto the Bank (para. 5.12); provide OPIOR with funds to operate and maintain the common drainage collectors,prior to sufficient cost recovery from users to finance its operations (para. 5.12);

(f) ensure that procurementunder the Project would be carried out under procedures acceptableto the Bank (para. 5.28);

(g) establish formal agreementswith farmers or farmers' groups to define and allocate responsibilitiesfor the operation and maintenanceof the irrigationand drainage systems financed under the Project, before awarding of the works (para. 6.08);

(h) establishthe principlesof cost recovery for the operationand maintenanceof the common drainage networks,with respect to allocation of costs among farmers throughoutthe Oued R'Hir valley and urban beneficiaries,and make these principles effective before December 31, 1996 (para. 7.16); and

(i) apply cost recovery levels in the Project area to ensure recovery of full operationand maintenancecosts, and some reasonable portion of investmentcosts (para. 7.18);

8.02 Based on the above agreements,the proposed Project is suitable for a Bank loan of US$57.0 million to the Governmentof Algeria, for a term of 17 years, including5 years of grace. The Project is expected to be completed by December 31, 1996. - 51 - Table 1

ALGERIA SAHARAREGIONAL OEVELOP T POWJECT (DA N.) Project Caionents by Yeer Oase Costs Total ,...... l1 193 1994 1995 1996 (OM.) (UW.) A . INSITUTIOL DEVELOPnENT 71.94 19.65 245. 16.94 16.94 150.03 9.04 B . REVAILITATIONOF ORSES 240.23 487.32 167.24 30.98 23.15 948.92 57.16 C . FARMOEWELOPHET 57.20 0.00 69.44 0.00 0.00 126.65 7.63 0 . STIES/TEc.ASSIST/TRAIN 8.93 18.26 9.74 1.76 1.76 40.45 2.4 ...... Total BASELIKECOSTS 3.30 525.23 270.98 49.69 41.86 1266.0 76.27 Physicat Contittglenie 52.39 83.67 35.69 3.37 0.35 175.46 10.57 Price Contfngencies 124.02 354.65 248.09 50.09 45.60 822.46 7.53 ...... Total PROJECTCOSTS 554.71 963.55 554.76 103.15 87.81 26.98 94.37 Taxes 105.62 175.69 96.38 22.74 18.9 419.43 17.49 Foreign Exchange 375.40 S47.03 346.49 53.35 43.68 1365.95 57.31 Valims Scaled by 1000.0 8/28/1991 13:15 -52 - TABLE2 LIUA Page 1 SEISA hL OEMANR PeROCT SuWWV Acms Cast EAmrY (CANM.) (USSNI ETouta ...... '-..-.....--...----- S "Io awe_ l feorl Totall Loot Fo@relJn Toti abaW cst ...... ^...... * insurrcost ...... A. btles 1. AIris 0.54 0.54 1.09 0.05 0.03 O.O? 50.00 0.09 z. o s 5.81 5.81 11.62 O03 0.35 0.70 50.00 0.92 Z, ...... 9Tot-T*6t .36 10 0.3 0.77 50.00 1.00 .INISIATIUN"WU 1.t Rh9.68 9.6 19.76 .60 0.40 1.19 50.00 1.56 2. re s u s 16.92 16.92 33.34 1.02 1.02 2.04 50.00 2.67 3. CurA1tes 23.22 23.22 46.43 1.40 1.40 2.60 50.00 3.6? 4. 106.41 106.41 212.62 6.41 6.41 12.62 50.00 16.61 S IwrsJl/enates 7.97 7.97 15.94 0.4" 0.46 0.96 50.00 1.26 6. ars/S.gmdas 22.14 22.14 44.27 1.33 1.33 2.67 50.00 3.50 7. owr"wsjsVWs 0.13 0.13 0.26 0.01 0.01 0.02 50.00 0.02 6. St0k UWliteaIArk 1.90 1.90 3.79 0.11 0.11 0.23 50.00 0.30 ...... suT*totl 188.56 188.56 377.12 11.36 11.36 22.72 50.00 29.79 C. o0816 SUE 1. CoUbstssms 23.12 23.82 4t.63 1.43 1.43 2.87 50.00 3:76 2. Ortmis 29.87 29.87 59.74 1.80 1.80 3.60 50.00 4.72 3. omwr s 25.41 25.41 50.81 1.53 1.53 3.06 50.00 4.01 4. Pisto 30.93 30.93 61.87 1.86 1.66 3.73 50.00 4.89 , ...... W ;...... mb-Totlt 110.02 110.02 220.05 6.63 6.63 13.26 50.00 17.38 0. DE WLLS 1. Forage CT 11.29 33.86 45.14 0.68 2.04 2.72 75.00 3.57 2. eXrse Cl 48.82 16.46 1".28 2.94 8.82 11.76 75.00 15.42 I...... sub-Totl 6 0.1 1.2 240.42 342 10.6 14.48 75.00 198.9 B. DESRMVOEP WELLS 1. Fot go CT 1.67 5.02 6.69 O.O 0.30 0.40 75.00 0.53 2. ForeCl 7.05 21.16 28.21 0.42 1.27 1.70 75.00 2.23 .-...... ;...... i...... :...... sub-Total 6-n 26.18 36.90 0.53 1.58 2.10 75.00 2.76 .-- lltigilaN MIt_t *, paw 2.34 5.46 7.80 0.14 0.3 0.47 ?0.00 0.62 2. NWril Elecwtriq 4.23 9.86 14.08 0.25 0.59 0.85 70.00 1.11 S. stg* Socurite/Apintt 1.40 3.26 4.65 0.08 0.20 0.28 70.00 0.37 t...... s-ToL 7. 18.58 26.54 0.48 1.12 1.60 70.00 2.10 VNICLES 1. ViCltlos IT 7.71 8.35 16.05 0.46 0.50 0.9? 52.00 1.27 2. VehJlloe Laismo 4.67 3.4 8.11 0.28 0.21 0.49 42.40 0.6'. 3. NlM lettes 0.03 0.04 0.07 0.00 0.00 0.00 56.00 0.01 ;...... b-Totl 12.41 11.8 26.24 0.75 0.71 1.46 48.60 1.91 H. CtNM INO IPtHNT 1 uqstp MmI Divers 4.11 23.30 27.41 0.25 1.40 15 65.00 2.16 2. Calon 1.01 5.73 6.74 0.06 0.35 0.41 65.00 0.53 K...... 5mb-To"tal 5.12 t9.02 34.15 0.31 1.75 2.06 85.00 2.70 t. OFuCIN NWnut 1. Odttrs 0.14 0.47 0.61 0.01 0.03 0.04 77.04 0.05 2. M Wer sreu 0.31 1.09 1.40 0.02 0.0? 0.08 77.59 0.11 3. ocuntation 0.13 0.67 0.9 0.01 0.05 0.06 S?.26 0.06 4. sturleI Divrs 4.55 15.56 20.11 0.27 0.94 1.21 7?.35 1.59 ...... b-Toutl 51 17.98 23.12 0.31 1.08 1.39 77.79 1.63 1. atrIel Alicole 19.00 107.65 126.65 1.14 6.48 7.3 85.00 10.00 K. THPIC.L ASSISTAC 1. Cmnsltints 1.21 10.85 12.06 0.07 0.65 0.73 90.00 O.9 L. 12611110 1. stop Etrasr 0.79 3.72 4.51 0.05 0.22 o.2 82.54 0.36 2. Step Psw 0.52 1.35 1.67 0.03 0.08 0.11 72.17 0.15 sub-total 1.31 5.07 6.36 0 .31 0.6 9.50 0.50 1. pigsam Trwn1M 8.80 13.21 22.01 0.53 0.00 1.33 60.00 1.7' .... iZ...... i .... W...... ;...... total UVTNET CSTS 71 725.6 1160.3 26.19 43.71 69.90 62.54 91.63 ...... TABLE 2 -53 -Page 2

11.RECURRENT COSTS A, PERSOWUEL...... ' ...... 1. Chauffeurs 1S.f5 0.00 15.5 0.96 0.00 0.96 0.00 1.26 2. Cadres 4.56 0.00 4.56 0.2? 0.00 0.27 0.00 0.36 3. Agents 4.97 0.00 4.97 0.30 0.00 0.30 0.00 0.39 ...... v...... Sub-Total 25.48 0.00 25.48 1.53 0.00 1.53 0.00 2.01 B. 06f CIVIL WORKS 1. Corstruct ans 0.28 0.28 O.S6 0.02 0.02 0.03 SO.00 0.04 2. Irrigation works 2.21 2.21 4.42 0.13 0.13 0.27 50.00 0.35 3. Drsinae works 5.05 5.05 10.10 0.30 0.30 0.61 50.00 0.80 ...... Sub-total 7.54 7.54 15.08 0.45 0.45 0.91 50.00 1.19 C. 0U EOUIPHENT 1. PumpingCosts 10.19 10.19 20.37 0.61 0.61 1.23 50.00 1.61 2. Paintenance Pump 0.52 1.22 1.74 0.03 0.07 0.10 70.00 0.14 3. Construction Equdpumst 1.95 8.45 10.40 0.12 0.51 0.63 81.27 0.82 4. Office 1.05 3.12 4.17 0.06 0.19 0.25 74.80 0.33 5. Vehicules TT 12.14 16.34 28.48 0.73 0.98 1.72 57.38 2.25 ...... Sub-Total 25.84 39.31 65.16 1.96 2.37 3.93 60.34 5.15 Total RECURRENTCOSTS 58.86 46.85 105.71 3.55 2.82 6.37 44.32 8.3S ...... 7...... M...... 4...... - ,...---....I-----...... I------...... ------...... Total BASELINECOSTS 493.57 77.48 1266.05 29.73 46.53 76.27 61.01 100.00 Physical Contingencies 70.76 104.70 175.46 4.26 6.31 10.57 S9.67 13.86 Price Contingencies 333.70 488.77 822.46 3.06 4.47 7.53 59.31 9.87 Total PROJECTSCOSTS 898.03 136S.95 2263.98 37.06 S7.31 94.3? 60.73 123.73 Val....Sca.ed.b. 0...... 5...... Values Seated by 1000.0- SM28.199113:15 - 54 -

AG SA &WEIONL DEVWPIOR PROJEC STAFF APPRAISAL REPORT

EstiMated Schedule of DisburseMMn of Bank Loan /a

IBRD Semester By end of Cumulative Cumulative Fiscal Year Ending Semester X of Disbursement

1992 Dec 91 - June 92 5.0 5.0 91

1993 Dec 92 3.0 8.0 141 June 93 4.0 12.0 21X

1994 Dec 93 6.0 18.0 321 June 94 6.0 24.0 421

1995 Dec 94 4.0 28.0 491 June 95 4.0 36.0 631

1996 Dec 95 4.0 40.0 70X June 96 4.0 44.0 771

1997 Dec 96 4.0 48.0 841 June 97 4.0 52.0 911

1998 Dec 97 5.0 57.0 1001

/a Expected EffectivenessDate : January 1992 Expected CompletionDate : December 1996 Expected Closing date : June 1997 WA RUZOaL tUIUI R E CZ6 UYUDWDO an iiin SA_US13 MtaL BUDS 4lW=ZC E UI8TDMIU IA 1 fI AUTM.10 0I 11*12T PMA (II NhIJl DA1 Ell M=LICIB W DuAlS)

14IM&oL zla ,e -- Iibalt.a tet l 1 fetas =t imt.ees alclO.el fau 1 totW Me .&Tastetal sm WI.<

7.08 15.26 23.14 M11S -ow 239.23 463.55 702.78 coo0D. 3.01 3.64 0.65 23S8.5 260.54 407.12 cuZS 68.61 9.77 467.36 IRIMS EP 6.90 31.19 36.09 8= FQUp 1.60 6.15 9.05 rICLE 2.12 3.60 5.02 0.83 1.49 2.32 1.16 2.27 3AS 3.24 5.81 9.05 1.08 1.93 3.01 2.37 4.28 6.63 0.37 0.67 1.04 m.nc it. 4.35 47.13 52.06 MMUC.XCIIM. 0.39 2.61 3.00 0.75 S.08 5.83 0.56 3.80 4.3S 2.47 16.73 19.20 0.03 0.19 0.21 0.so 0.71 0.81 Co-PAM EQIIP. 18.31 200.91 219.22 IMC. AS=. 1.00 17.52 18.52 a 32*13198 1.49 0.43 10.02 SRUD7 1.93 33.73 35.86 * 0hR2n33 8.02 0.00 8.02 1.13 0.00 1.13 9.07 0.00 9.07 1.66 0.00 1.66 25.14 0.00 25.14 0.67 0.00 0.67 " amn sNamR 10.27 20.92 31.19 1 EPIWB ~1CCT 14.19 26.9t 43.10 amCOlNR11OIP. 2.02 17.26 19.28 Os"M sC.1QUIP. 2.37 7.10 9.47 1.32 3.97 5.29 1.43 4.29 5.n 5.92 17.75 23.67 2.06 6.16 8.22 0.06 0.16 0.22 0.48 1.44 1.02

1O5hLS 17.32 74.19 91.S1 4.03 10.54 14.57 463.01 1183.87 164.68 1.79 27.3S 46.15 7.26 24.62 32.11 57.09 284.49 341.56 24.46 49.63 74.29 1.2 2.8t 4.44 _~~~~~~~~~~~~~~~~~I - 56 -

Table 5 STAFF APPRAISALREPORT

SAHARAREGIONAL DEVELOPMENT PROJECT Major ProcurementPackages (US$ Million)

Item Method Responsibility 1992 1993 1994 1995

A. Deep wells ICB AGID 17.71 - - - B. Safety stock ICB OPIOR - 0.68 - C. Irrigation/drainageworks ICB AGID 45.87 - - D. Suplly of pumps and ICB AHRH/AGID - - - hydromechanicequip. 1.60 - - E. Electrification ICB AGID - 0.83 - - F. Vehicles ICB PCU 1.69 - - - G. Constructionequip. ICB OPIOR 2.40 - - -

Source: World Bank - AppraisalMission - 57 -

STAFFAPRIA REPOR

SAHARAREGION" IVEOM PROECT

Agency Light 4x4 Minibus Mopeds

CDARS 3 6 ITDAS 3 1 - - ANRH-DRS 1 4 . DDAHA 2 -- - Daira 3 Commune 15 3 15 CFVA 2 - 2 - ITAS 1 - - PCU 1 1 - - OPIOR 5 8 - - AGID - 5

...... ,...... Total 36 28 2 1S

Source: World Bank-Appraisal Hission - 58 -

Table 7

FF*PAPEIBAL REoRT

SAA RAealmL OWaPiE PRJC Listf Oaes.raoteristies.Cost

cosests Cost with conting. sector lltoer am Area rainage Driltltng irriatfon Total Cost/he cost/ha Totad Costha Cost/ho uWd wd Roads PupEing EqUip. ha ..-..... of...... * D US DA0 it. OA us t

16 Sl Ctoucha 224 14.9 8.8 24.8 48.5 216518 13043 89.1 197768 1603 SH7 15 Sfdl Amrane 578 44.9 34.1 60.0 139.0 240484 14487 252.2 436332 1799 Su7 sDr Tdbdidwd Jidide 521 22.2 44.7 46.4 113.3 217466 13100 203.2 390019 16083 SNT So10 Nazer 523 36.2 37.6 67.3 141.1 249790 16252 256.1 489675 20193 S110 so3 N'Ghasersud m 48.7 74.0 81.8 204.5 2648Q6 15958 368.3 477073 19673 OH10 M04 othasiorCuest 389 23.7 33.6 45.1 102.4 263239 158I8 184.4 474036 1954 s110 36 N'ChaeorCentre 244 14.8 34.7 27.5 77.0 315574 19010 136.6 559836 23086 1111 SNS OURthlour 302 14.6 12.3 24.4 51.3 169868 10233 94.3 312252 12876 ...... Totals 3553 220.0 279.8 377.3 877.1 1584.2 =...... Averages 27.5 35.0 47.2 109.6 244729 14743 198.0 642124 18232

Sores A1ox I gs puzUy :_ao

,q.n og uo Poq unwasoT 501 _m

mzv o tttStec "N OWt met Cott tOU Mt tCSot ag ett we 9- 3n tot se0 6Tr "1 OT 10t 9c 9ot tOil t tl8.

90tt 009 Ca t9 3 00 30? lot I090t ot 30 tog 0 get 1t 0 8an U1 3tt In an1 "t BinZ Ut Tt 1?? son tz t 6m 999 1 0 o0e Oct gon luJt 81 3Ste co fit9 16 0 no SOm O"t699? OCZ099 cm6u3 bttISt 93?an UOt131 1gm con0931 AnLB

0t t9- 9 t9tt OL 9"t 8 tO s 0 Om "9O 0 "c0 X&OSUD 93 o0t 9 0 9t 0OC 0 O'5 338 93t 009 e1o 0 9C n 0 963t 3 See 0 06 0 906 @1 0 0? 9Z 0e 3 0 no0 e £95 tUB */1 3/? 3/?T */n 3/ V1 S/_ 1* 7t 10 11n1u

mxwum inm mIlumu - im u4 - mm-r m w~ WMam. Muo

==Xm_MI"=- - Mv_ J.~Irou- 6SIO'NI1V001YVV vq,T Oro mpsn a.1owe"" sMOI *

tI Uel Ttttt 919t 109t 0m 1111 DOMt t9t9 6" 09 Om01 09m it8"

688 91t- cmZgOtZ 6 C9tO 66 1TT Z309 teat 9o0f 0 Ica 3tU 1 1 Ctv 0 It? Tot 60 0 30 £0t 1M 9091 o00 091 91 t0 0ot0 O9 om Om1 tOE a tot lin " t 9 0 X t " O ta an in Sts outt wZe1 tt "a isc at t= 9t8 Z08m o ag09 0tto 069 01 93. I pi 633 00 19 6pi9 £11 no9 0 069 31 93 080? 098 031Z w6n 911 95 1o0 C608 a£n £33 to6 OC t9 9£? U* T0 0 0an "3 3 inn e9- "99 9961 99 £ 6"t o90 on 9m 11tZ 06 91 MI9 691 mw f91 00? 961 oi1 oi1 0U 0 £6 1tt 6 $9 0c 9gt at tol Z8Ct at Lat amt " 969 0 w0 t3t 10£ t801 3C £1 631 to3 993 0 99 g0t 911 £03 0 eg 9 1t n/1 '1 ran on .n._ */ on/1 so To '/1* un E on *n/1 1 UR ^ 3so 1 I OIIVI"=$ MM=033 IMOS 0133310 UV= co=-C WZOZ = I0333wit 6min-03 mm wm usu __no o2ns m M O

UAF459-qU3W 115.

WZCOUd IxNMId g IwM uu iw

' 09 - 61 -

mm

WAIM AMto state Prwfwt botIttdv row Pr1vt bIlvidaSi Pam 1grItt.mtrow"' oil It11t Pwm/ (.A.C) CL.A.I) he hie ha sbJfarmuso.6ts ha [email protected] he nolaiv's 1TGNR 1498 24 490 203 40 961 1610 DOMU 2411 52 1I3 351 ST 41 6 1296 170 moguls 236 50 154 33 29 17102 19

TDTM. 6458 76 225 70 132 70 23 4062 4608

/a tNOMand 11DM feaeardiStation. - 62 - Uab2 11

SAHAR REGIONA DEVELOPMEN PROJECT STAFF APPARISAL UEPORT

SuDervision Plan SuDervisionInput into Kev Activities

Approx. Activity ExpectedSkill Staff Input Dates Requirements (SW)

FY91 - Reviewof bidding - Engineering 3.0 05/1991 documents and procurement - Procurement plan; - Review of design FY92 - supervision mission - Engineering 6.0 12/1991 (ProjectLaunching) - Procurement - Agronomy - Extension FY92 - SupervisionMission - Engineering 6.0 05/1992 - WorkingProgram - Training - Studies - Procurement - Training - Bidevaluation

FY93 Two supervision Missions - Engineering 8.0 - Executionof works - Procurement - supplyof equipment - Credit - Drillingof wells - MasterPlans

FY94 Two SupervisionMissions - Engineering 6.0 - Supply of pumps -P Agronomy - Studies - Extension - Extension FY95 Mid-term review - Engineering 8.0 Two Supervision Missions - Economics - Operation of works - Credit - Training -Environment - On-farm development

FY96 SupervisionMission -Engineering 3.0 09/1995 -Agriculturaldevelop. -Agronomy -Extension -06M1of works

FY97 Supervision Ilssion -Engineering 6.0 -Prepararion of PCR -Economics -Agronomy - 63 -

SNAMRREGIOIAL DELONNET PROE STAFFA_PAISL REOT cosT REI0VEcwY/a

form A FomE Faro A Form Site11 ruzw of Farms 2284 12459

_ .**DA-'000------

1. Gross value of Production/b 41.9 36.3 2. Net Cash incme (before financing) /c 41.7 36.2

Leos: 3. Depreciation of Farm Assets id 2.9 2.9 4. tIpited Value of Family Labor /e 3.0 3.6 5. Imputed Value of NanagementIf 4.2 3.6 6. Kimputod Retum on Capital Jg 0.4 0.4 7. Allowance for Risk /h 2.1 1.8

8. Equals: Rent/Surplus 29.1 23.9 9. Rentas X of Net Cash Income(8:2) 69.aX 65.9%

100Kof O & N and 100I of Investmnt Costs 10. Land Betterment Ley /1 21.5 19.4 11. Rent Recovery Index 10:8) 73.9K 81.3X 12. Net Cab Inoe RecaveryIndex (10:2) S1." SS."

100oof O N and25S of Iniestmnt Costs 13. Land BettermentLevy 5.6 5.1 14. Rent RecoveryIndex (13:8) 19.2X 21.3X 15. Net Cash IncomeRecovery Index (13:2) 13.4X 14.0X

/a Thesecalculations were originally dane at an exchangerate of USS1.0 B DA; with an exchangerate of US*1.0 a 16 DA the nominolamounts would change, but the conclusionsan ineremental farm profitability, returns to labor, and the affordability of cost recovery remin uncharged.

lb Totalincrementel value with Projectat fulldevelopment Incremental producetioncosts deducted from gross icman include water charges (farmers managethe wells themselves) and exclude maintenanmecharges for infrastructure. Incremental cost are low In both farm cases because of the reduction In on-farm mnintenance. /d At 20X of initialinvestment cost (depreciationover 5 years). /e Valued at 100DA per day /f Valuedat 10Qof Net IncrementalCash Income /0 Valvad at 10%of Or-Farm Equfty Investment lh Valued at 5X of GrossVatue of Production /1 Investment cost per has For farm model A, GA180,SOO, for farm model , DA 162,000, recovered over 20 years at 10S (recovery factor .11?47).

Armuet mintonanca cost per ha taken at full development: OPIOR'scosts for: _ - personmel 2,714,000 vehicles 629.000 equipment 1,174,000 office equipet. C51300 Total 4,S30,000/15,000 he a DA 302/ha - 64 -

SAHARA_RRGIONALDEVELOE6m= PROJECT 8SAF AZ3&RALJ uU

SelectedDocuments and Data Availablein the ProjectFile

1. Projet de Developpement des Regions Sahariennes-Rapport de Preparation; FAO/CP9.15.1989; 2. Projet do Reamenagement des Oasis de l'OuedR'hir-Rapport d'Identification; FAO/CP2.18.1988;

3. Actualisation de l'Etude des Ressources en Eau du Sahara Septentrional;UNDP July 1983; 4. Projetde Developpemntdes RegionsSahariennes; Rapport de Nission;N. Seadoun;April 1990;

5. Etude du R6am nagement et de l'Extenslon dos Palmeraies de l'Oued R'hir. Synthese. TESCO-VIZITERV;April 1989 - 65 -

4dw*0rAw* ~~~~~~~~~~~~~~~~~~~~~~~CNARTI STAFFAPPRAISAL REPORT ALGERIA SAHARAREGIONAL DEVELOPMENT PROJECT Imlmmentatfon Scheuhle

Component 1991 1992 1993 1994 199S 1996

1. INSTITUTIONALDEVELOPMEWT -Stt'4thening of COARS -__ __ -Streothening of ITOAS -Stregthenfne of AURN-OR -Stregthening of Extension Services -Streogthesifngof ITAS -Creation if PM)U -Creation of OPIOR -Vehicles Construction Equipment -Miscellaneous Equipment and Supplies 2. REHABILITATIONOF OASES .Deepwelts -SafetyStock PumpingEquipment Electrification -Irrigation and DrainageWorks 3. ON FARMDEVELOPMENT

4. STUDIES,TECHNICAL ASSISTANCE, TRAINING -Studies Planning Studies SpecificStudies -TechnicalAssistanee Training Abroad In Algeria

****** Procurement, consultation,preparation of contracts Delivery,execution SourcetWorld Sank Appraisal Mission - 66 -

SAKOPSAR.OR6 CWG

STAFFAPPRS L REPRT

SAHARA REGICNAL pV ELORIERT PRO3EC

oRGANIZATIONAND "hAAGNEUT

PHU/CaDmS -Thesupervision and monitoringof the Projectimplementation -The coordination of all Project-related activities -The coordination of the recruitment of consultants -Thecoordination and assistancein preparingprocurement documents and invitebids -Thecoordination and assistancein preparingthe separateaccounts for the Project withdrawal applications and statement of expenditures -Preparationof the plans, schedulesand records of the Project

* CDARS . ITDAS AGID. DDARA

-Prepare an agriculture -Implementation of applied -Procure and supervise -Implement the development strategy; researchprogram; the execution and extension serv. equipment of deep program; -Recruit services, -Prepare techn. specs for wells; supervise preparation of equip; plans/studies -Supervise execution of -Implement its training irrigation and drainage -Implement its trainning program; works; program -Assist in the -Promote CTEEactivities; implementation of the extension serv. program; -Monitor soil salinity levels;

* ANRH/DRS . OPIOR . FARMERS . ITAS

-Assessment of ground -Procure construction -Operate and maintain the -Provide training to water resources and equipmentand safety irrigationand drainage the extension staff. settingup of a stocks; works at farm level; monitoring system for the use of those resources -Maintainthe main -Pay for major repairs of and of levels of water drainage infrastructure; these works and salinity, participatein the cost -Assist farmers in of maintaining the -Implement its training repairingpumping common drainage systems; program; equipment; -Participatein tbe -Assist farmers in extension program; cleaning and constructing farm drains; -Make on-farmequipment available to Project farmers;

Source: World Bank AppraisalMission _iBRD223 ALGERIA TOUGGOURT SAHARAREGIONAL DEVELOPMENT PROJECT 3 0 A- PROJECTAREA A T Via."

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