World Bank Document

ReportNo. 1579-CY Appraisalof PitsiliaIntegrated Rural DevelopmentProject Cyprus

July15, 1977 Public Disclosure Authorized FILECOPY Project Department Europe,Middle Eastand North Africa RegionalOffice

FOR OFFICIALUSE ONLY Public Disclosure Authorized Public Disclosure Authorized

Document of the World Bank Public Disclosure Authorized

Thisdocument has a restricteddistribution and may beused by recipients only in the performanceof theirofficial duties. Its contents may not otherwisebe disclosed without WorldBank authorization. CURRENCYEQUIVALENTS

Currency Unit = Cypriot Pounds (CE) 1 C7 = 1,000 Mils 1 CE = 2.4 US$ 1 US$ 0.417 CE 1 US$ = 417 Mils

WEIGHTS AND MEASURES

1 Oke = 1.28 kilograms 1 Donum (Don) = 0.134 hectares 1 hectare (ha) = 7.5 donums 1 kilometer (km) = 0.62 miles 1 liter (1) = 0.264 US gallons 1 cubic meter (m3 ) = 35.3 cubic feet 1 liter per second (l/s) = 0.035 cubic feet per second (cfs) 1 metric ton (ton); (m ton) = 2,205 pounds 1 Imperial gallon (gallon) = 1.2 US gallons

GLOSSARY OF ABBREVIATIONS

CCB - The Cooperative Central Bank CS - Cooperative Society DA - Department of Agriculture FAO/CP - FAO/IBRD Cooperative Programme FA - Force Account GD - Geological Survey Department ICB - International Competitive Bidding LCA - Land Consolidation Authority LC - Loan Commissioner LCB - Local Competitive Bidding MANR - Ministry of Agriculture and Natural Resources MCM - Million Cubic Meters PPC - Project Policy Committee PCC - Project Coordination Committee RHC - Rural Health Center WDD - Water Development Department

FISCAL YEAR

January 1 - December 31

REPUBLIC OF CYPRUS FOR OFFICIAL USE ONLY

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ......

I. INTRODUCTION ......

II. COUNTRY BACKGROUND ...... I

Agriculture in the Economy ...... I Structure of Agriculture ...... 2 Land Consolidation in Cyprus ...... 2 Water Resources of Cyprus ...... 3 Institutions Dealing with Agriculture ...... 4

III. PROJECT AREA ...... 4

Physical Features ...... 4 Surface and Groundwater Potential ...... 5 Road Network and Public Transportation ...... 5 Housing, Domestic Water Supply and Electricity .... 5 Schools ...... 5 Health Facilities ...... 5 Agriculture ...... 6 Land Tenure ...... 6 Demographic Attributes ...... 6 Incomes ...... 7

IV. THE PROJECT ...... 7

Objective and Scope ...... 7 Project Summary ...... 7 Project Details ...... 8 Productive Investment Categories ...... 8 Social Investment Categories ...... 9 Institutional ...... 10 Status of Engineering ...... 11 Cost Estimates ...... 11 Financing ...... 13 Procurement ...... 13 Disbursements ...... 14 Accounts and Audit ...... 14 Environmental Effects ...... 14

This report is based on the findings of a Bank appraisal mission consisting of Messrs. Tariq Husain, Rene Stevenin, and Dean McCrary, which visited Cyprus in November 1976, and a follow-up mission in March 1977 consisting of Messrs. Tariq Husain and Rene Stevenin. Messrs. Altaf Hussain and Javier Tellez assisted in report preparation.

This documenthas a restricteddistribution and may be used by recipientsonly in the performance of theirofficial dutis. Its contentsmay not otherwisebe discloed withoutWorld Bank authorization. TABLE OF CONTENTS (Continued) Page No.

V. ORGANIZATION AND MANAGEMENT ...... 15

General ...... 15 Project Organization ...... 15 Project Implementation ...... 16 Operation and Maintenance ...... 17 Recovery of Project Costs ...... 18 Project Criteria and Review Procedure . . . 20

VI. PRODUCTION, MARKET PROSPECTS, PRICES AND FARM INCOMES . 21

Cropping Pattern, Crop Yields and Production ...... 21 Market Prospects ...... 22 Prices ...... 22 Farm Incomes ...... 23 Farmers' Ability to Pay Debt Service ...... 23

VII. BENEFITS AND JUSTIFICATION ...... 24

Economic Benefits ...... 24 Other Benefits ...... 25 Economic Rate of Return ...... 25 Sensitivity Analysis ...... 26 Beneficiaries and Distribution of Benefits ...... 27 Risks ...... 27

VIII. AGREEMENTS REACHED AND RECOMMENDATIONS ...... 27

ANNEXES

1. The Agricultural Sector 2. Policies for Rural Development 3. The Project Area 4. Land Tenure and Land Consolidation 5. Project Description and Cost 6. The Health Component 7. The Education Component 8. Organization, Management and Monitoring 9. Market Prospects 10. Estimated Schedule of Disbursements 11. Financial and Economic Analysis

MAPS

1. Cyprus 12689 2. Project Area 12690 3. Photographs 1, 2 Land Terraces in Pitsilia 4. Photograph 3 A Village in Pitsilia APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

SUMMARY AND CONCLUSIONS i. The economic development of Cyprus was adversely affected by the events of July 1974. Government efforts in the southern part of the island, however, have resulted in the resumption of economic activity on a significant scale. Prior to these events, as part of its strategy to develop other parts of the island which were significantly poorer than those in the north, east, and west of Cyprus and thus gradually bring about a balanced development of all parts of the country, the Government had envisaged integrated rural development in the Pitsilia region. A Bank loan for such a project was requested. Pitsilia is a mountainous region of about 61,000 ha and is among the poorest areas of Cyprus. Per capita annual income in Pitsilia in 1974 was about US$310; therefore, its population is within the relative poverty group, as Cyprus GNP per capita was then estimated at US$1,180. Farms are small and fragmented averaging about 5.0 ha with about 13 plots per farm. About 10% of the project area is irrigated; the village road network is poor; about 72% of the farms lack access roads; and health and educational facilities are below Cypriot norms. Because of past neglect of the region, combined with the drastic overall loss of agricultural land in 1974, Government feels that a fuller utilization of all residual land and water resources is necessary. The attention being .ocussed on Pitsilia is a reflection of changes in Cypriot development priorities with greater emphasis being accorded to rural development. ii. The objective of the proposed project is to provide income producing assets and social services to the Pitsilia population (about 21,000). The income producing assets comprise water (about 70 minor irrigation schemes dispersed around the region), soil conservation works, land consolidation, farm roads, village roads, extension and farmer training, on-farm investments, agro-processing and credit. The social services include constructing two schools, upgrading six rural health-centers, and improving village water supplies and village streets. The Project components are widely dispersed and the region's entire population would to some extent benefit. The cost per beneficiary for the productive infrastructure at about US$3,600 is considered reasonable in view of the difficult terrain in the Project area. iii. The Project will irrigate about 1,000 ha, rehabilitate about 150 ha currently irrigated, construct soil conservation works on 1,700 ha of dryland and 1,000 ha of irrigated land. About 500 ha of the new irrigated land will be consolidated under the Project. The Project will produce apples, pears, peaches, table and wine grapes, table and oil olives, almonds, and citrus. The incremental income at full development would be about US$4.8 million or US$300 per capita. iv. The economic rate of return for all investments (productive plus social) is nearly 12% while for the productive alone it is 13%; even under pessimistic assumptions the rate of return is above 10%. The project comprises about 70 minor projects, each one of which will be technically reviewed - ii. -

under the Organization and Management proposed. This technical review feature will further safeguard the economics of the project. With the financing terms presently available to farmers, the estimated financial returns are high at between 30 and 35%. The high financial returns do not, however, solve the early year cash flow problems faced by farmers, since tree crops require five to seven years for full production. Consequently, farmers will be given an interest moratorium for the first years of the investments in their minor schemes and interest during the first years will be capitalized. These changes are feasible through administrative action. Although no significant changes in the Government's present policies on financing agricultural investments are recommended for this project, changes in sector priorities have been taking place. Government, therefore, will carry out a study by December 31, 1978 of its concessionary policies to the rural sector. The results of the study will be discussed with the Bank and the mutually acceptable recommendations will be implemented nationwide.

v. The project cost is estimated at US$21 million of which about US$11.8 million is foreign exchange. The proposed Bank loan of US$10 million covers 85% of the foreign exchange cost; the balance of the project costs will be financed by the Government.

vi. Civil works for the Xyliatos dam and its conveyance system, pumping units, polythene sheets, pipes, valves and other ancilliary equipment will be procured under lnternational Competitive Bidding (about US$5.8 million). Civil works for pondq, soil conservation, construction of buildings for health, school and training facilities, agro-processing equipment, agricultural machinery wil'lbe procured under Local Competitive bidding (about US$9.0 million), the procedures for which are satisfactory. Local Competitive Bid- ding will be required due to the scattered location and small sizes of the works and the equipment demands. Finally, US$4.9 million will be under Force Account and will include drilling of boreholes, distribution systems for minor schemes, farm and village roads, village streets and village water supply. vii. The proposed project is suitable for a Bank loan of US$10 million for a period of 15 years including three years of grace. The borrower is the Republic of Cyprus. APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

I. INTRODUCTION

1.01 The Government of Cyprus has requested the International Bank for Reconstruction and Development (IBRD) to assist in financing an integrated rural development project in the central Pitsilia region. The Government had well before the events of 1974, envisaged a program to introduce the benefits of development enjoyed in the north, west and east to the other much poorer regions in the center and south of the island. Pitsilia is situated in a mountainous region, and is one of the poorest areas in the country with a per capita income in 1974 estimated at about US$310; thus its population is within the relative poverty group (as Cyprus GUIP per capita was then US$1,180). Pitsilia is entirely in the southern Government controlled area.

1.02 IBRD has made only one loan (960-CY, 1974) for agricultural development in Cyprus: the Paphos Irrigation Project. The loan for US$14 million became effective in October 1975; and up to May 31, 1977, US$653,000 equivalent had been disbursed. Although the disbursed amount is low compared to estimated, early problems have been solved and the project is being implemented satisfac- torily.

1.03 A set of planning papers defining the proposal for integrated rural development in Pitsilia was initially prepared in 1973 by the Ministry of Agriculture and the Planning Bureau with assistance from the Ministries of Education, Health and Interior. These were incorporated into a project preparation report, with the assistance of the FAO/IBRD Cooperative Program, which was submitted to IBRD in October 1976. A Bank appraisal mission consisting of Messrs. Tariq Husain, Rene Stevenin and Dean McCrary visited Cyprus in November/December 1976. On the recommendation of this mission, the Government completed the additional technical work required to complete appraisal in late February 1977. A follow-up mission consisting of MIessrs. Husain and Stevenin visited Cyprus during early March 1977. This report is based on the findings of the two missions.

II. COUNTRY BACKGROUND

2.01 Cyprus has an area of 925,000 ha; its population is about 630,000. An estimated 480,000 live in the Government-controlled area with the remainder living in the north under Turkish Cypriot control.

2.02 Agriculture in the Economy. Before the events of 1974, agriculture accounted for about 18% of GDP and employed about 36% of the labor force. Post 1974 estimates for the whole of Cyprus are not available. Tentative estimates for southern Cyprus for 1976 put agriculture's contribution at about 18% of a lower GDP, with about 23% employed by the agricultural sector. In - 2 -

1973 agriculturalexports accounted for about 70% of all commodityexports; in 1976 this percentagehad fallen to 37% owing to the loss of an importantpart of the land producinghigh value agriculturalcrops for export, and a rapid growth of manufacturedexports. Citrus, grapes and potatoes are the main agriculturalexports.

2.03 The events of 1974 had a profound effect on the production structure presentlyunder Governmentcontrol. While the whole of the vine-growingarea and most of the deciduous fruit are in the south, roughly 65% of the dryland cereal growing areas, 80% of the irrigatedcitrus plantations,45% of the olives and 30% of the carobs are in the north. This fact as well as other adverse effects on production capabilities,including the transfer of over 150,000refugees from the north to the south, necessitateda drastic revision of the 1972-76Development Plan. The revised Plan emphasized development that would, in the short run, absorb both local and displaced labor. The new schemes that were introduced,as well as the existing schemes that were strengthened,included expanded financialassistance on concessionaryterms (Annexes 1 and 2) to affected farmers. The "schemes" that were emphasized included (i) developmentof marginal land by soil conservationworks and reclamationmeasures, (ii) improvementof communal pastures, (iii) fostering the use of improved seeds and planting techniques,(iv) planting of tree crops, and vines, and (v) expandingcredit for productive investments.

2.04 Structureof Agriculture. The last complete agriculturalcensus for the island was in 1960, according to which there were about 69,000 farm units cultivatingabout 440,000ha or an average of 6.4 ha of cultivated land per farm; area under forest grazing and scrub was an additional 392,000 ha; and 93,000 ha were non-agriculturalland. Tne total cultivated area does not appear to have changed since 1960, but the number of holdings have increased. The average holding size for the island in 1974 was estimatedat 5 ha. There were some 300,000 ha of dryland field crops (cereals,vines, olives, carobs, and almonds),40,000 ha of irrigatedcrops (citrus, potatoes, grapes, deciduous fruits, vegetables)and 100,000ha of fallow. In the irrigated areas (which are about 10% of the total cultivatedland) the majority of holdings are less than 3 ha. In the dryland areas, the majority of holdings are above 3 ha, with about 30% over 10 ha. About a third of all the farmers in Cyprus are in the vine-growingareas which are mainly on mountain slopes; in these areas the average holding size is about 3 ha. Most holdings in Cyprus are fragmented. The average number of plots per holding is about 12.6. As a result, the sizes of individualplots range from 0.3 ha in moun- tainousareas to about 2.1 ha in the plains (Annexes 1 and 4).

2.05 Land Consolidationin Cyprus. Land tenure in Cyprus is a product of tradition,inheritance laws, and populationpressure. There are three land ownershipcategories - private (60%), state (39%), and communal (1%). The present land tenure has the following features: (i) continuallydecreas- ing size of holdings; (ii) fragmentationand dispersalof plots; (iii) small and irregularlyshaped plots; and (iv) joint and dual ownerships (more than one person owning the plot or ownershipby different persons of trees and/or water). In order to reduce, and eventually eliminate, the inhibiting influence of the above factors, the Governmentof Cyprus introduceda country- wide land consolidation program. The empowering legislation for this program was enacted in 1969 in the form of the Land Consolidation Law. A Land Con- solidation Authority (LCA) was created in the Ministry of Agriculture and Natural Resources (MANR) in 1972. Following the enactment of the Law and the creation of LCA, progress has been significant. Five land consolidation projects, covering about 730 ha, were completed by 1974 (all in areas to be irrigated by dams); and thirteen new projects, covering an estimated 1,000 ha, are planned (for dry as well as irrigated land). Six of the planned projects will be within the framework of the Bank-financed Paphos Irrigation Project (Loan 960-CY).

2.06 Water Resources of Cyprus. Cyprus has no rivers of perennial flow; the rivers flow only during the winter and spring months. Groundwater is usually found at substantial depths and so, except for the coastal acquifers, has not been utilized to any significant degree in the rest of the island. According to the Cyprus Waterworks Law, all new groundwater and all water running to waste from rivers are property of the Government. The Government is empowered to store, divert, or otherwise use and control these water resources. However, water from wells, springs or small streams that was used before the Law is considered "privately owned". The collective utilization of the privately owned water is the responsibility of privately formed irrigation associations. The average water supply and utilization picture for surface water is as follows:

Million Cubic Meters (MCM)

Rainfall 4,600 Potentially usable water from surface runoff 600 Present water used from the surface runoff 150 Usable in future with storage 350 to 450 (This is the storage potential)

At this time, the total water storage capacity in Cyprus is 64 MCM, while the incremental storage potential is quite substantial at 450 MCM. Since the groundwater (which is mainly in the coastal areas) has been fully tapped, the main hope for future water resource development and utilization is with surface water. Harnessing of surface water resources is expensive -- the weighted average investment cost of surface water, however, is about US$27.2 per m3, which is equivalent to about US$4,000 per ha irrigated. The investment cost for one dam built in 1973 was US$J10.8 per m3 or US$6,000 per irrigated ha. Most recent investment cost estimates are between US$6,500 and $7,000 per irrigated ha. These high development costs are due to physical constraints. 1/ In view of the high development cost, the lack of significant groundwater sources, and the relatively low rural incomes, the Government, under its existing agricultural sector policies, has been shouldering and proposes to continue to shoulder a significant part of the financing burden. Government financing

1/ Steep topography, unfavorable geology, high erosion in watersheds, irregular river flow requiring high storage capacities, long conveyance system, etc. - 4 - policies for water, agricultural, and infrastructural (schools, health, roads, etc.) development are described in Annex 2, summarized in Table 3, Annex 2, and the application in the project in para 5.04. These policies are extensive, well defined and have been in force more than 15 years. They include grants and soft interest loans which together provide, in most cases, 100% of project costs. The proportion of total costs provided as grants varies with the type of project and/or with the sector.

2.07 Institutions Dealing with Agriculture. The Ministry of Agriculture with its several Departments is the major public sector institution dealing with agriculture in Cyprus. All Departments of the Ministry are well staffed and Lht! MiI1ibLLy, ab d whoile, is fully competenc co implement the proposed project.

2.08 The Cooperative Central Bank (CCB), made up of a Greek Cypriot and Turkish Cypriot Bank, is the second institution dealing with agriculture. It is the hub of a network of Credit Societies which exist in all but the smallest villages of Cyprus. Practically all the farmers of a village belong to a Cooperative Credit Society. The principal objective of these Societies are (i) to provide a savings channel for the rural population; and (ii) to provide short- and medium-term loans to their members. Each Society operates inde- pendently, and in 1976 interest rates to borrowers ranged from 7 to 8.5%; for deposits the maximum interest rate was 7%. The Cooperative Central Bank provides (i) deposit facilities for the surplus funds of the Credit Societies; and (ii) lending facilities for Credit Societies whose members demand more than the societies have available. In addition, the Cooperative Central Bank undertakes the management of loans extended to farmers under the 1962 Credit Law under which long-term credit is provided to farmers at an interest rate of 4.5% per annum. The CCB also manages Government loans issued to farmers through the Loan Commissioners (a Government Committee operating through the Treasury and responsible for issuing soft-term loans) (paragraph 20, Annex 2).

III. PROJECT AREA

3.01 Physical Features. The project area forms the eastern part of the Troodos Massif Mountain range and is centrally located on the island (HIapNo. 12689). Most of Pitsilia is on diabase rocks with gabbros, suitable for conversion into agricultural land, in its western, and pillow lavas in its northern parts. The region is characterized by cool wet winters and warm dry summers, the relief and vegetation being moderating factors on extreme temperatures. Mean annual precipitation varies from 660 mm (altitude = 670 m) to 810 mm (altitude = 910 m). The main rainy season is between December and March. The temperatures range from 3.40 C (in January) to 22.60C (in July).

3.02 Pitsilia contains 49 villages and may be subdivided into three major and one minor subregions or administrative districts. The total area is 61,000 ha and the population is about 20,600. The region lies at elevations between 500 and 1,600 m. The topography is rugged and the terrain is dissected by numerous streams and small deep valleys (photographs 1, 2, 3). - 5 -

3.03 Surface and Groundwater Potential. Pitsilia is divided into two distinct watersheds. In the north, the Akaki and Peristerona rivers are the main tributaries of the Serrakhis river flowing into MIorphou Bay. The southern area is drained by the Limnatis and Kourris rivers which discharge their waters into the Episkopi and Akrotiri Bays. The existing developed surface water resources are estimated at 11 I1CtM: 10 MCtl for irrigation and 1 MCM for village domestic water supplies. This represents about 13% of the total surface water potential of 88 CICM.The groundwater potential is only partially known. Part of the groundwater is tapped through boreholes and used for village water supply, while some of it appears as spring water in valley bottoms and is used for irrigation as well as village water supply. Recent (1976) drillings (as part of the Pitsilia project preparation work) indicate that about 3 I1CM may be extracted by pumping from deep boreholes. Tests are continuing to assess the maximum amount of reliable water supply from boreholes.

3.04 Road Network and Public Transportation. Due to the region's topography, intra-regional communication is difficult. The existing village connecting roads are all of a low standard - some are gravel, and some are asphalted, single-lane roads. The most important roads are (i) the Nicosia- Palekhori-Agros road; (ii) the Alona-Kato-Moni road; (iii) the Zoopiyi-Limassol road; (iv) the Limassol-Troodos road; and (v) the Karvounnas-Saittas road (Map 12690). The villages of Pitsilia are served by 120 buses which provide daily transportation to the main towns of Nicosia and Limassol and to villages en route.

3.05 Housing, Domestic Water Supply and Electricity. Pitsilia's housing stock was estimated at 7,400 in 1974. Mlost of the houses are privately owned and are owner occupied. In 1974, Pitsilia had (i) 360 housing units per 1,000 inhabitants; (ii) 3.5 rooms per house; and (iii) 2.8 persons per house. Fur- ther, 88% of the houses had electricity and 90% had piped water facilities in the house. However, in spite of the availability of facilities for providing water to homes, the overall supply of water was unsatisfactory (defined as less than 20 gallons per head per day) in 23 out of the 49 villages. All villages have a public telephone booth.

3.06 Schools. Most of the villages in Pitsilia are served by their own elementary school. However, due to the small number of children in some villages, central schools serve a number of villages with subsidized transportation. The size of the schools depends on the village's pupil population and ranges from 1 to 11 classrooms. More than half the elementary schools in the region belong to the 1 to 2 classroom group, and most schools have only one or two teachers. The number of pupils attending primary schools in Pitsilia is declining: from 3,300 in 1960 to about 2,250 in 1976. There is only one secondary school in the Pitsilia Region--the Agros Gymnasium. It is centrally located in the village of Agros, and specializes in classical education. Recently its curriculum was extended to include commercial and economic subjects. The number of pupils enrolled at the Gymnasium is increasing and was 960 in 1975, including 300 pupils displaced from northern Cyprus. - 6 -

3.07 Health Facilities. Medical services in Cyprus are provided through a system of General hospitals, District hospitals, Rural Health Centers (RHC) and Rural Health Sub-centers. Pitsilia has two RHCs (at Palekhori and Agros) and three sub-centers (at Pelendria, Kalokhorio, and Kato Amiandos). Each RHC is usually staffed by a general practitioner, a pharmacist, a nurse, a midwife and/or health visitor and health inspector. A health sub-center is usually a small facility where a RHC doctor regularly visits (once or twice per week) to provide medical services to the local population. The Pelendria sub-center has a resident midwife as it is among the three larger (population over 1,000) villages of Pitsilia. In addition, Pitsilia also has the Kyperounda sanatorium which provides treatment for tuberculosis for the whole of Cyprus. With the declining incidence of tuberculosis in Cyprus, the Kyperounda sanatorium facilities are significantly underutilized.

3.08 Agriculture. The main crops in Pitsilia are vineyards, deciduous fruit trees (apples, pears, peaches), citrus (mandarins, lemons), vegetables, and potato. Nearly 90% of the cultivated area is dryfarmed. The gross revenue of the average farm is derived mainly (78%) from crops; animal husbandry, which has been lagging and has limited potential in the region, provides the balance of the revenue. Yields of irrigated as well as dryland crops are low; husbandry standards are poor. Use of fertilizers is confined to irrigated tree crops and vegetables. There is relatively little mechanization-- presently 8 out of 10 farmers use animal traction. Most farms are family operated and rarely use hired labor, except occasionally for harvesting of fruit.

3.09 Land Tenure. Land in Pitsilia is mainly (60%) privately owned; the balance state land (39%) and communal land (1%). Land tenure problems in the region are acute. The farm holdings are small, the average family ownership being about 5.2 ha of which about 38% is not cultivated. Fragmentation of the holdings is high--the average family farm having about 13 plots scattered around the village. The plot size, as a result of the fragmentation, ranges from 0.1 ha for irrigated land to 0.3 ha for dryland. Further, about 72% of the plots do not have road access. There are also the constraints of joint and dual ownerships (paragraph 2.05).

3.10 Demographic Attributes. The average age of the population is 54 years, and the average education is 5.3 years of school, both due to the migration of young people to the towns where opportunities are better. Only 15% of the labor force are full-time farmers; with an additional 6% whose primary occupation is farming. Sixty-seven percent consider farming as a secondary job, and 12% are non-farmers. The average number of family members is 4.6. The population of Pitsilia was 20,789 in 1946; 21,638 in 1960 and 20,585 in 1973. The population projections are for 19,470 in 1986 and 18,555 in the year 2000 (Annex 3, Table 1). It has been shown that when opportunities of employment exist, the people of Pitsilia remain or return to work in the area. When citrus (mandarines) farming was introduced into Arakapas in the early 1970's, the declining population stabilized and during the same period the rapidly declining population in Parekklisa and Pyrrogos reversed following the introduction of tomato production providing more jobs and better income potential. 3.11 Incomes. The small holding sizes and substantial fragmentation necessitate off-farm employment. An Agro-Economic Survey of Pitsilia (in 1974) indicated that the per capita income was US$310 ranging from US$270 (for farms of less than 2 ha) to US$360 (for farms between 4 to 8 ha). This puts the population of Pitsilia among the poorest in Cyprus as the country's per capita income was then US$1,180. Roughly one-half the family income was from off-farm work.

IV. THE PROJECT

4.01 Objective and Scope. The objective of the project is to stimulate an economically depressed region by developing its productive resources and by improving its social services. The project is multisectoral and represents a first such effort by the Cyprus Government.

4.02 Project Summary. The project is subdivided into three investment categories: productive, social and institutional. Each is briefly summarized below.

Productive Investments

(a) water resource development to irrigate about 1,150 ha through about 70 minor schemes, including 150 ha rehabilitated and the construction of a dam at Xyliatos;

(b) construct soil conservation works on about 2,550 ha;

(d) construct about 290 km of farm access roads;

(e) develop on-farm water distribution system on about 1,000 ha;

(f) provide incremental credit for working capital, agro- processing, livestock and other infrastructure; and

(g) upgrade about 50 km of existing village roads.

Social Investments

(h) construct two central elementary schools by consolidating about twelve smaller schools to provide educational opportunities to about 500 pupils;

(i) upgrade two existing rural health centers, three existing rural health sub-centers, and modify existing facilities at the Kyperounda sanatorium to provide for a 20-bed in-patient facility; - 8 -

(j) upgrade domestic water supply facilities in about 15 villages; and

(k) upgrade 20 km of existing village streets.

Institutional

(1) reorganize and focus the agricultural extension facilities, and construct a farmer training center;

(m) upgrade the existing veterinary health facilities;

(n) promote applied research on the specific agricultural problems of the area; and

(o) conduct three specific studies and review engineering, agricultural and other aspects of the project.

4.03 Project Details. The project's investment categories are described below.

4.04 Productive Investment Categories

(i) Water Resource Development. This includes two principal sub- categories: (a) new irrigation; (b) irrigation rehabilitation. New irrigation will be provided through three sources of supply: Xyliatos dam, pond storage, and tubewells (boreholes). About 59 1/ new minor schemes are proposed and the aggregate area target is 1,040 ha net of new irrigated land. The irrigation system will be primarily the "hose basin' type. Irrigation rehabilitation is proposed for 154 ha in eleven areas. The individual rehabilitation schemes will cover areas ranging from 5 ha to 35 ha. Rehabilita- tion will include construction of storage tanks, replacement of open conveyance channels by pipes and supply of additional on-farm delivery outlets (Annex 5).

(ii) Soil Conservation Works. Due to steep slopes, land terracing is necessary for both irrigated and rainfed cultivation; about 60% of the new irrigated and 100% of the dry-farmed land will require terracing, embracing about 2,550 ha (Annex 5).

(iii) Land Consolidation. The proposal is to consolidate only new irrigated areas and only if the total irrigated area exceeds 26 ha; the consolidation target is about 500 ha. Consolidation in the balance of the project area (irrigated, dry) will continue in accordance with the Government's ongoing national land consolidation program. The capital costs of land consolidation

1/ Xyliatos dam 250 ha About 29 pond storages = 390 ha or about 13.5 ha per pond About 30 tubewells = 400 ha or about 13 ha per tubewell 1,040 ha - 9 -

are mainly for farm access roads to the new consol4dated holdings. Based on prior experience, about 40 kms of access roads will be needed for the proposed area (Annex 4).

(iv) Farm Access Roads. About 250 kms of farm access roads will be provided for the non-consolidated new irrigated areas and the dry-farmed land (Annex 5).

(v) On-farm Water Distribution. On-farm water distribution systems will be installed in all newly irrigated areas. Such a system will consist of installing a water gate for the farm/plot, a 1.5 inch conveyance pipe fitted with six to eight take-off valves, and one or two flexible feeding hoses (Annex 5).

(vi) Credit. This has two parts; credit for financing (a) agro- processing, livestock and working capital; and (b) other components. The credit for "a" above will be through CCB and/or Credit Societies and/or Loan Commissioners for partial financing of the sub-projects which include pork and milk processing units, almond shelling machines, beekeeping facilities, agricultural machinery, and purchase of livestock. The credit for "b" above is essentially a cost recovery mechanism and will work as follows: a minor irrigation scheme, say, is financed (by the Government) through a 67% "grant" and a 33% "loan", i.e. a 100% Governmert financing of the minor irrigation scheme. The "grant" component ill be funnelled through the budget of WDD, while the "loan" component will be channelled as '"credit"through the Loan Commissioners. The repayment of the "loan" component will amount to partial cost recovery. Such credit is not identified as "credit" in project costs as it is a part of the cost of project components (Table 4, Annex 5).

(vii) Village Roads. These link neighboring villages and villages with trunk roads, and are all-weather, one-lane, asphalted or earthern gravel roads, about 3.75 m wide with 0.8 m shoulders. The project will improve about 50 km of existing village roads (Annex 5).

4.05 Social Investment Categories

(i) Schools. The Government has agreed to establish two central primary schools--one at Alona; the other at Kalokhorio. In each case, about six smaller schools will be consolidated to create the central schools. Both schools will be located at central locations acceptable to the villages affected by the consolidation (Annex 7).

(ii) Health Facilities. The Government has agreed that the health services in Pitsilia will be improved through the upgrading of existing facilities by: - 10 -

(a) converting part of the Kyperounda Sanatorium into a 20-bed in-patient hospital;

(b) providing better equipment and improved facilities to the two existing rural health centers (at Agros and Palekhori), and the three existing rural health sub-centers (Pelendria, Kalokhorio, and Kato Amiandos) so as to provide for mother and child health care, normal deliveries, vaccinations, dental care, medical consultation facilities, pharmacy and X-ray facilities (Annex 6). The Government has agreed to submit to the Bank for approval no later than September 1, 1978 detailed proposals on the health component.

(iii) Village Domestic Water Supplies. The Government has agreed that low discharge (less than 5 liters/sec) boreholes and spring water will be used to supplement village domestic water supplies. Fifteen schemes are proposed: house-to-house connections in three villages, storage tanks in seven villages (including the three with house-to-house connections), and expanded supply in eight villages. The objective is to provide at least 75 liters per capita per day to the village population to conform to existing, and acceptable, water supply norms.

(iv) Village Streets. Most villages in Pitsilia are on mountain sides, and the street slopes are steep. Paved streets are necessary to prevent erosion and to provide reasonable walking conditions during the wet season. About 20 kms of village streets will be upgraded (Annex 5).

4.06 Institutional

(i) Extension and Farmer Training. The existing extension team of 9 extension agents, 11 specialists and 5 agricultural assistants operating in Pitsilia will be reorganized into 5 beats to cover 7, 12, 10, 9 and 11 villages. The specialists (animal husbandry, water use, horticulture, plant protection and soil conservation) will work full-time in the project area. A farmer training center to accommodate 20 farmers per class will be constructed at Agros and will be an integral element of the extension service (Annex 5).

(ii) Agricultural Research. Cyprus has a first-class Agricultural Research Institute operating as an autonomous unit within MANR. The Institute has several experimental stations and experiments are carried out on new varieties of local crops, irrigation and cultural practices in the major agricultural zones of the country. The Government has agreed that the Institute will carry out a concerted research program in the project area. The Institute will seek assistance from the International Potato Center (in Peru) in its research on seed potatotes. Only supplementary support is needed, and funds are included in the project cost for this purpose. Part of these funds will be used for studies (see 4.06 (iv) below). - 11 -

(iii) Veterinary Health Facilities. In spite of the limited scope of livestock in the region, there is need to provide veterinary health facilities for the existing animal population. The Government has agreed that the existing facilities at Agros and at Palekhori will be improved. This will include provision of laboratory and clinical facilities at the two sites.

(iv) Consulting Services and Studies. Funds are provided for using consultants and for other in-house expenditures to execute specific studies: (a) on the system of investment financing for the agricultural sector (Annex 8); (b) study of future development opportunities in underdeveloped rural areas of Cyprus; (c) monitoring and ex-post evaluation of the project (Annex 8); and (d) review of engineering, agricultural and other aspects of the project. The Government has agreed to participate in the studies by providing qualified professional, technical and supporting staff. Consultant services are expected to start about September 1, 1977 and be completed by December 31, 1982. Approximately 6 man months of consultant services would be involved in the financing study, about 7 man months in the study of future rural development opportunities, about 6 man months in the monitoring and project evaluation, and about 6 man months in the review aspects of the project. Costs per man month are estimated at US$6,000.

4.07 Status of Engineering. WDD and other Departments within the Minis- tries of Agriculture, Health, Education and Interior have engineering and technical capability to complete feasibility investigations, and to plan, design, execute and then maintain the engineering works of the Project. The WDD Water Use Section, Geological Survey Department, will plan, design and execute the engineering works for the Xyliatos dam, the ponds, well fields and the on-farm distribution system. Engineering works for land consolidation areas will be carried out by the LCA. Farm roads, village roads, buildings, etc. will be planned and completed within the appropriate ministries and sections.

4.08 Cost Estimates. Project cost estimates as of July 1977 are based on the technical studies prepared by the Ministries of Agriculture, Education, Health, Interior, and the Planning Bureau. The estimated total project cost is US$21 million, of which about 56% is foreign exchange. Project cost includes US$2.4 million (or 17% of base cost) for physical and US$4.6 million (or 33% of base cost) for price contingencies. Price contingencies have been estimated on the assumption that (i) equipment prices would increase at the average annual rates of 7.5 and 7% for 1977-79 and 1980-85 respectively; and (ii) civil works prices would increase at 9 and 8% per annum for the above periods respectively. The cost estimates are summarized below with details in Table 6, Annex 5. .-1 'X._

Cost Estimates

Foreign Exchange Local Foreign Total Local Foreign Total Percent (CI 1,000) ------(US$1,000)…

Productive (88% of Base Cost)

Water Resource Development 1,336 1,993 3,329 3,206 4,784 7,990 60 Soil Conservation (Dryland) 333 408 741 799 979 1,778 55 Farm Roads, Land Consolidation 206 168 374 494 403 897 45 Credit for Incremental Working Capital 143 37 180 343 89 432 21 Agro-processing, Farm Machinery 49 83 132 118 199 317 63 Village Roads 210 171 381 504 410 914 45

Social (9%)

Schools 79 97 176 190 232 422 55 Health Facilities 30 57 87 73 136 209 65 Village Water Supply 52 98 150 126 234 360 65 Village Streets 58 47 105 139 113 252 45

Institutional (3%)

Extension & Farmer Training 39 38 77 94 91 185 49 Agricultural Research and Studies 40 10 50 96 24 120 20 Veterinary Health 8 12 20 19 29 48 60 Consultant Services 10 32 42 24 77 101 76

Base Cost 2,593 3,251 5,844 6,225 7,800 14,025 56 Physical Contin-l/ gencies (17%) - 428 575 1,003 1,027 1,380 2,407 - Price Contingencies 2/ 829 1,074 1,903 1,988 2,580 4,568

Total Cost: 3,850 4,900 8,750 9,240 11,760 21,000 56

l/ Weighted average of 10% (roads, streets, health, school, and farmer training center) and 20% for the rest; no physical contingencies have been assumed for credit, consulting, research and agro-processing. 2/ See paragraph 4.08 for assumptions. -. 1J -

4.09 Financing. The Bank loan of 10.0 million US$ equivalent or about 48% of the total cost ($21.0 million) will finance 85% of Lhe estirrared foreign exchange cost of the Project. The Government has agreed to cover the balance of the project costs, both foreign and local. The following table gives the proposed financing arrangements:

Financed By Investment Category Bank Government Total - (US$ million)…

Productive 9.1 9.5 18.6 Social 0.7 1.4 2.1 Institutional 0.2 0.1 0.3

Total 10.0 11.0 21.0

4.10 Procurement. The procurement for the civil works of Xyliatos dam and its distribution system, pumping units, ancillary electric equipment, polythene sheets, pipes, valves, water meters, and asbestos pipes amounting to US$5.8 million will be under International Competitive Bidding (ICB). An estimated eight contracts will be awarded: one for the dam and seven for the equipment. Due to their small sizes and scattered nature, procurement for the civil works for storage ponds, soil conservation works, health, school and training facilities amounting to US$9 million will be under Local Competitive Bidding (LCB). About thirty-five contracts will be awarded: four for the ponds, about twenty for soil conservation works, and about eleven for the remaining civil works. Local contractors are qualified for such work, and the tendering procedures for local contracts are satisfactory. There already exists an established Tenders Board which will approve all tenders (Annex 8, Chart 1). Further, local tenders are open to all bidders whether local or foreign. The water distribution systems of minor irrigation schemes, soil conservation works, rehabilitation schemes, village water supply, on-farm investments, village streets and roads, and farm roads are best constructed through Force Account as the small sizes and scattered location of these works would not attract local contractors. Further, in most instances, the construction of these works may require frequent revisions in design; and it is not possible to incorporate such contingencies into bidding documents of small subcontracts. The total estimated cost of expenditures under Force Account (FA) is US$4.9 million. These procedures are summarized below:

Foreign ICB LCB FA Other Total Exchange -- (US$ million)------

Civil Works 2.1 9 4.9 - 16 7.55

Equipment 3.7 - - - 3.7 3.33 Consultants and Studies - - - 0.3 0.3 0.22

5.8 9 4.9 0.3 20 11.1 - 14 -

The Government has agreed to follow these procurement procedures for Bank- financed components in accordance with the current Guidelines for Procurement under World Bank loans.

4.11 The draft specifications and bidding documents for items procured under ICB and for those contracts under LCB whose value exceeds US$250,000 will be approved by the Bank before tendering. The dam and its distribution system will be a single contract. The Bank loan would not finance more than US$1.4 million of the total expenditures under Force Account. The Government has agreed to carry out the project in accordance with the above requirements.

4.12 Disbursements. The Bank loan will be disbursed in five and a half years as follows:

(i) 40% of total expenditures for civil works contracts awarded through ICB or LCB or incurred under FA;

(ii) 100% of the foreign cost of imported materials and equipment, or 100% of local costs (ex-factory) for locally manufactured materials and equipment if purchased in accordance with Bank procedures;

(iii) 100% of the foreign costs for consultants' services.

Disbursement requests will be supported by full documentation, except for civil works performed under Force Account which will be made against a statement of expenditures, the supporting documents of which will be retained by the executing agency and be available for review by project supervision missions. An estimated quarterly disbursement schedule is given in Annex 10. Any savings in the loan after project completion will be cancelled.

4.13 Accounts and Audit. A separate account will be kept for the project. This account will be subdivided to accord with the categories used in the project cost estimates (paragraph 4.08). The account will be audited annually by the Auditor General of Cyprus and the audit report will be sent to the Bank within six months of the end of the audited period. It was agreed that the above separate account will be established by no later than December 31, 1977 and that it will be audited annually by the Auditor General of Cyprus and his report will be submitted to the Bank within six months of the completion of each financial year.

4.14 Environmental Effects. The project would not cause ecological damage to the land, water and human resources of the area. All proposed investments will be technically reviewed by the respective implementing Departments prior to implementation, to ensure, among other things, they exert a positive or at least a neutral environmental impact. Improvements in domestic water supplies, educational and health facilities, soil conservation works, and the intraregional communication network would have a positive effect on the environment. - J5 -

V. ORGANIZATION AND MANAGEMENT

5.01 Gen'eral. The multis ctor-l nature of the project will involve 12 departments or agencies in 6 rm i-i:rles 1/. Their coordination would be the responsibility of the Ministr' of Agriculture which will implement the bulk of the project through its existing departments: Water Development, Agricul- ture, Land Consolidation and Geological Survey (Annex 8).

5.02 Project Organization. Coordination between the involved ministries, departments and agencies will be the responsibility of the Director General of MANR who will be designated Project Coordinator. A senior staff member of MANR will be designated Assistant Project Coordinator as early as possible and not later than November 30, 1977. The selection of this Assistant will be made in consultation with the Bank. The two Committees shown below will be established.

(i) Project Policy Committee (PPC). This Committee will provide the policy framework 2/ for the project. The PPC will be chaired by the Minister of Agriculture. The Director General of Agriculture will be the committee Secretary. The Directors General of Finance, Interior, Health, Education, a representative of the Planning Bureau and the Commissioner of Cooperative Development will be the Committee members. This Committee will meet as and when necessary but no less than four times a year.

(ii) Project Coordination Committee (PCC): This Committee will provide the focal point for all project-related activities. It will be chaired by the Director General of M4ANR in his capacity as Project Coordinator. The Secretary of this Committee will be the Assistant to the PC. The Committee members will include representatives from the four relevant departments of MANR (Water Development, Agriculture, Land Consolidation, Geological Survey) and from the Mlinistries of Health, Education and Interior. The PCC will meet monthly if necessary.

The coordinating and implementing responsibilities of the Director General of MANR are thus assured since he will act both as Secretary of the Project Policy Committee and as Chairman of the Project Coordinating Committee. Chart I, Annex 8, provides a schematic presentation of the above proposals. It was agreed that the above organizational structures will be created by November 30, 1977.

1/ Ministries of Agriculture, Health, Education, Interior, Finance, and the Planning Bureau.

2/ Project size, composition, financial arrangements, budget issues, and the like. - 16 -

5.03 Project Implementation. The project will be divided into major projects, minor projects and other infrastructure.

(i) Major. The Xyliatos dam is the only "major project". WDD will be responsible for the planning, designing, construction and maintenance of the dam.

(ii) Minor. Minor projects (new irrigated areas utilizing water from ponds and/or boreholes, and rehabilitated schemes) would be implemented by an "Irrigation Division" (ID) 1/ and the WDD. An "Irrigation Division" is a group of at least 10 landowners who agree to (a) share the provided irrigation water according to agreed rules and (b) maintain defined parts of the irrigation system. In implementing minor schemes, WDD and an ID will agree on the terms and conditions, such as location and size of water source and terms of repayment before WDD could develop the project. Allowance in the implementation schedule has been made for such procedural delays.

(iii) Other. The remaining components will be implemented by the relevant Ministry or Department as follows:

Land consolidation by LCA Farm roads on consolidated areas by LCA Farm roads on non-consolidated areas by District Officers Village roads and village streets by District Officers School facilities by Ministry of Education Health facilities by Ministry of Health Village water supply by WDD and Village Water Council Credit by CCB and Loan Commissioners Soil conservation works by MANR

5.04 Due to the varying extent of villages'/farmers' participation, the implementation rates of the productive investments will differ. The most time-consuming and uncertain will be the "minor" projects which also happen to be the most significant single category of investments. Because the farmers' consent to the terms and conditions of government financing of the investment is required, and in order to minimize the "delays" that may be caused due to separate and individual "negotiation" of the 70 minor projects, Government agreed that pre-defined terms and conditions will be applied to the Pitsilia project for the productive investments. These terms and conditions are given in the table below.

1/ In rare instances "minor projects" could be implemented by an "Irriga- tion Association" (IA). An Irrigation Association is a group of at least 7 water owners. Irrigation Associations are not common since water was declared a National Resource belonging to the Government. Formation of IAs is not now encouraged by Government. - 17 -

Number of Years Years of for which Grace Period interest for Repayment Percent Percent moratorium Interest of Repayment Loan Grant is given Rate Principal Period Ponds/ boreholes 33 67/1 5/2 6.0 5/2 25 Rehabilitation 33 67/1 0 5.75 2 15 Soil Conservation 75 25 5/2 5.75/2 5/2 15 On-farm systems (water use) o3 15 5/2 5.75/2 5/2 12 Xyliatos dam /3

/1 In exceptional cases in extremely depressed areas of Pitsilia, the figure may be increased to 75.

/2 These figures will be gradually applied over a period of four years (the estimated period for the project to reach its development stage) starting with 3 years or 5% as applicable, and subject to amendment upon the conclusion of the study referred to in para 5.11.

/3 About half of the investment cost will be receovered in nominal terms by a water charge computed at 9% interest per annum over 40 years provided that the resultant charge (excluding O&M costs) is not less than 7 mils/m3 for the first year.

5.05 In the implementation of these terms and conditions, the loan component of all investments would create a demand for credit. These requirements are estimated in Annex 5 (Tables 4 and 11) and will have to be met by the government. Assurances were obtained that the project would be implemented over five years in accordance with the implementation schedule (Annex 5, Chart 1). The Government has agreed to fully provide the credit requirements for the project.

5.06 Operation and Maintenance (O & M). Four Government departments and two community groups will be responsible for the operation and maintenance of the project. The Xyliatos dam, its distribution system, and the structures of ponds and boreholes will be operated and maintained by WDD. The maintenance process will include periodic inspection by WDD staff of the structures and the conveyance system of the dam, ponds and boreholes. For the dam, the inspection will include examination of the settlement of the embankments, structural deformation, reservoir sedimentation, rip-rap condition, downstream erosion, drainage, leakage, concrete deterioration, gates and other mechanical parts. To assure the dam's safety, WDD will arrange, at intervals of not more than five years, a formal inspection of the dam and appurtenant structures to determine any actual or potential deficiencies in the condition of these structures. A copy of each inspection report will be forwarded to the Bank. For the ponds, the inspection will include examination of the embankments, leakage, sedimentation, erosion, and mechanical parts. For the boreholes, the - 18 - inspection will include examination of the mechanical parts and the supply potential. These procedures are satisfactory and WDD has competent staff for the job. The District Officer will be responsible for the maintenance of village and farm roads. The maintenance procedures are satisfactory and the staff of the District Officer is competent for the tasks. The schools and hlealth facilities will be staffed by the Ministries of Education and Health respectively as has been the practice with the existing school and health facilities in Pitsilia. The facilities are operated and maintained jointly by the village councils and the respective ministries. Depending on the poverty level of the village, different cost sharing arrangements apply. The water conveyance systems of the ponds, boreholes, the on-farm water distribution networks, the rehabilitated farms, and the terracing on dry and irrigated land areas will be operated and maintained by farmers and/or Irrigation Divisions. This is the traditional practice and has been quite successful; the responsibility as well as the financial cost of such maintenance is fully borne by the beneficiaries. This practice is considered satisfactory and the farmers and IDs are competent to carry out the related tasks. Finally, the village streets and the conveyance system of the village water supply will be operated and maintained by the village councils. The Government has agreed that for the dam, pond and borehole schemes it will by MIarch 1, 1978 submit its existing O&M program for review and approval, and that once a year, through WDD, the Government will devise, for the dam, ponds and borehole schemes, a construction program for the twelve succeeding months.

5.07 For most project components, the operation and maintenance costs will be fully borne by the beneficiaries. For the dam, WDD will apply a water charge (Para 5.04, footnote 3) of which about 5.2 mils/m3 will be for full recovery of 0 & M. Government has agreed that this charge will be reviewed not less than once every two years and that any change in O&M costs will be reflected accordingly in adjustments to the water charges. For the health and school facilities, the 0 & M cost will be partially or fully borne by the village population. For village streets and the village water supply, the 0 & M cost will be fully borne by the village population. The cost of operating and maintaining village and farm roads will be fully borne by the Government; partial cost recovery would be indirectly achieved through gasoline and other road use taxes. These procedures for explicit cost sharing of operation and maintenance are satisfactory and acceptable for the project area.

5.08 Recovery of Project Costs. Although the government subsidizes the agricultural sector, farmers do, nevertheless, bear a portion of the cost of agricultural investments both of a productive nature and social infrastructure, including schools, health facilities and village water supply (see Annex 2, Table 3). The government covers part of the investment costs, but requires beneficiaries to repay the rest as if it were a loan to them, in addition to bearing the full operation and maintenance costs. This is done through (i) "grants" to the beneficiaries and (ii) "tloans"?at subsidized interest rates. The proportion of the total cost that is provided as a "grant" varies with the type of project, the poverty of the beneficiaries and prior debt and/or other - 19 -

obligations of the beneficiaries. Loans for social or institutional (non- productive) infrastructure will be borrowed and serviced by the relevant village council. The details of the relevant policies are discussed in Annex 2. The individual effect of these policies on cost recovery are presented in Tables 10, 11, and 12 in Annex 11.

5.09 In view of the flexibility of policies noted above, several alternative policies were evaluated. In order to facilitate comparison, the effects of an alternative policy were evaluated for a typical project: (i) cost = Cb 100; (ii) grant - 67%; and (iii) loan = 33%. As a proxy for the cost of public sector funds, a discount rate of 10% was used. The results of the evaluation are as follows:

Typical Present Policy Proposed Policy

If: Interest rate (%) 6 6 Grace period (years) 2 5 Repayment period (years) 20 25 Interest paid grace Yes No Interest capitalization No Yes Project cost (CO) 100 100 Loan amount (Cb) 33 33

Then: Recovery percentage (%) /1 24.1 20.4 Subsidy (Cb) /2 75.9 79.6

/1 Ratio of the net present value of amount recovered from the beneficiary and the cost of the project component, calculated at a discount rate of 10%.

/2 Net present value of the difference between cost and the amount recovered from the beneficiary.

5.10 Typical interest rates for productive components have been between 4.5 to 6%. In discussions, the Government had suggested an increase in interest rates with repayment over 20 years with a grace period of 2 years. Due to the five to seven year gestation periods of tree crops, however, the 2-year grace period would not be viable, even if significant intercropping were practiced. Cash flow constraints on repayment during the first five years would have been severe under the government proposal (Table 13, Annex 11). As a result the proposed alternative includes (a) a lengthening of the grace and repayment periods and the introduction of a moratorium on interest to better suit the cash flow sequences of the proposed cropping pattern (about 55% tree crops which become productive between five and seven years); and (b) an increase in the interest rate to the top of the scale. The recommended proposals will be implemented through administrative decision. - 20 -

5.11 Although no significant changes in the Government's present policies on financing agricultural investments are recommended for this project, changes in national sector priorities have been taking place, and the Govern- ment proposed therefore that a study of the present policy framework for agriculture be a part of this project. The Government has agreed that, in accordance with the proposed terms of reference (Annex 8), it will undertake such a study, to be completed by December 31, 1978, and that its mutually acceptable recommendations will be implemented nationwide by July 1, 1980.

5.12 Project Criteria and Review Procedures. Since the project comprises a number of minor and one major scheme, it is necessary to define criteria for choosing the preferred set of investments from among many alternative sets possible. The principal criterion is that the productive components of the project as an aggregate should be economically viable. The Government has agreed that the project criteria include:

(a) a mini-feasibility study to be prepared for each pond and borehole scheme;

(b) the economic rate of return in the study to be estimated using current input and product prices as used in this report; the economic rate of return to be calculated on a basis similar to that used in Table 16, Annex 11;

(d) in the case of rainfed soil conservation works, a maximum cost will be established so as to ensure a cutoff rate of return of 10%;

(e) in the case of village roads the cutoff rate of return to be 10%;

(f) the technical criterion for choice of land consolidation schemes would be the availability of at least 26 ha (200 donums) of new irrigated land;

The Government has agreed that the irrigation systems would be designed on the basis of crop water requirements given in Technical Note 1, Annex 5. The Project Coordinator will cause up-to-date records of costs and returns to be kept, submit progress reports to the Bank on a six-month basis, and within six months of project completion, an ex-post evaluation of the project. A suggested outline for progress reports is given in Appendix B, Annex 8. It was agreed that the project will be monitored according to a set of agreed key indicators. - 21 -

VI. PRODUCTION,MARKET PROSPECTS,PRICES AND FARM INCOME

6.01 Cropping Pattern, Crop Yields and Production. There are three types of developmentsproposed: (i) new irrigation; (ii) irrigation rehabilitation; and (iii) rainfed improvement. Both new irrigation and rainfed improvements will develop virgin areas; consequently,irrigation rehabilitationis the only project activity with prior production activity. The cropping patterns, yields and production for the three developmentactivities are given below; crop yields presently obtained in the project area are also given: - 22 -

Crop Yields Area Present Full Incremental Project Type Developed Range Development Production donums tons/donum tons/donum tons/ha tons

I. New Irrigation (7,750 donums)

Cherries 930 - 2.4 18 2,232 Apples 163 0.7 to 2 3.2 24 521 Almonds 698 - 1.5 11 1,046 Peaches 388 .9 to 2 3 22 1,162 Plums 155 .9 to 2 3 22 465 Table Olives 798 - 2.5 19 1,995 Citrus 875 1 to 4 5 37 4,379 Table Grapes 310 - 3 22 930 Summer Vegetables 1,627 1 to 2 3 22 4,882 Potatotes 1,806 1 to 2 3 22 5,417

II. IrrigationRehabilitation (1,160 donums)

Peaches 580 0.9 1.8 13 522 Table Grapes 580 1.5 2.0 15 290

III.RainfedImprovement (13,000 donums)

Wine Grapes 11,000 .3 to .5 1 7.5 11,000 Almonds 1,000 .1 to .3 0.9 7 900 Olives 1,000 .1 to .3 1 7.5 1,000

6.02 Market Prospects. The Cypriot Planning Bureau prepared a supply and demand analysis of deciduous fruit, citrus and other crops; and the cropping pattern proposed for the Pitsilia Project is derived from the results of the study (Annex 9). No marketing problems are envisaged. Most of the project production will be for the domestic market. Small quantities of cherries,nuts and citrus would be exported and no problems are envisaged (Annex 9).

6.03 Prices. Prices are not controlled. The prices used in the financial and economic analysis are, therefore,based on the actual farm gate prices received in recent years. Farm gate prices obtained by farmers during 1974-76 have varied significantlydue to seasonal and/or other factors. The table below provides the historical price ranges for the main crops and the prices used in the financialand economic analysis. As the last comparison column indicates, the price assumptionsused in the analysis may be considered conservative(Annex 11). - 23 -

Average of Price' Used Historical Historical I_ _eportR Price Ranges Prices , A B ------(CO/ton)…------…----

Cherries 155 141-277 209 +35 Apples 90 54-95 75 -17 Almonds 150 138-198 168 +12 Peaches 75 76-93 85 +13 Plums 75 64-110 87 +16 Table Olives 200 275-315 295 +48 Citrus 75 81-102 92 +22 Table Grapes 100 - - Potatoes 40 30-72 51 +28

6.04 Farm Incomes. Farm income estimates are derived from the aggregates of the relevant project components: new irrigation, irrigation rehabilitation, and dryland improvement. Since the project comprises about 70 minor schemes, it was felt that estimation of farm income by working downwards from the aggregate project would be a reasonable estimate of project income. However, four farm budgets (Table 6, Annex 11) were prepared to provide a check on the esti- m&tes made by the method used. The background information for the estimated farm-generated incremental income is given below (Annex 11).

Aggregate Incre- mental Net Incremental Income at Full Net Farm Area Under Development Income (donums) (CO 1,000) (Ch per donum)

I. New Irrigation 7,750 1,100 142 II. Irrigation Rehabilitation 1,160 79 68 III. Rainfed Improvement 13,000 858 66

Total - 2,037 -

IV. Income per Capita (US$) With Project 610 Without Project 310

6.05 The estimated incremental per capita income due to the project is US$300 per annum. The total "With Project" income is estimated at US$610 by adding the above incremental income to the "Before Project" income estimated at US$310 per annum (this is the income level at present - Tables 5 and 6, Annex 3). Chat is, the project is expected to increase average farm incomes by about 100%, with all of the increase farm generated.

6.06 Farmers' Ability to Pay Debt Service. The above incremental income will involve increased financial obligations: (i) debt service payment for loans against the productive infrastructure; (ii) charges for repaying loans against the social infrastructure. These financial obligations are gi-en below for: (a) present policy; and (b) proposed policy: - 24 -

Annual Repayment Stream (at Year &-) Under Present Policy Proposed Policy … ------(CGb)…

I. ProductiveInfrastructure 303,076 264,934 II. Social Infrastructure 23,262 23,262 III. Total 326,338 288,196 IV. Debt Service/Charge per family /2 (Gh) 93 (US$223) 82 (US$197)

/1 Year 8 is chosen as all repayment streams are operative in that year. Due to the different repayment periods, the annual debt service burdens would vary from year to year.

/2 For simplicity,we use 3,500 families for both sets of investments;for per capita estimate divide by the family size of 4.6.

At full development,the financial charges represent about 16% of incremental income under present policies and about 14% under proposed policies for the project as a whole, or 15% and 13%, respectively,for the productive investments. However, while the aggregate burdens (16%; 14%) appear bearable, there would be financial problems in the earlier years of the project. Most of the fruit crops take five or more years to produce income; the interveningperiod can be partially covered through intercroppingthe orchards with vegetables and potatoes. However, cash flow analysis under alternativeassumptions (Table 13, Annex 11) indicates that under all but the most favorable conditions farmers would not be able to service their debt in the first years of the project. Consequently,an interest moratoriumwould be an appropriate financial requirement. The interest moratoriumwould provide an additional incentive for farmers to participate,invest collectivelyin a new water source (thus reducing migration), and the net result would be an income transfer to the target group (para 5.11).

VII. BENEFITS AND JUSTIFICATION

7.01 Economic Benefits. The project will contribute to a significant increase in the productive infrastructureof the economicallydepressed Pitsilia region. The most important of these will be the 72% increase in new irrigated areas; others will be (i) improvementof dryland through soil conservationworks and farm roads; (ii) land consolidation;(iii) an improved village roads network. These investments in productive infrastructurewould integrate the region and significantlyincrease the incomes of the project beneficiaries. The incrementalincome from agriculturaldevelopment alone would be about CG 2 million at full development (about year 10). The project would economicallystimulate the area, by providing incentivesfor young farmers to consider agricultureas an attractive alternativeto off-farm work. - 2z) -

7.02 Other Benefits. The attractiveness of the area would be enhanced due to the improvements in the social infrastructure (health, schooling, water supply, village streets). The benefits from these improvements are not quan- tifiable; however, it is evident that the investments in social facilities would not only improve the actual levels of services provided, but also improve the perception of available services from the viewpoint of the village population and induce potential migrants to reconsider their options. It is not possible to make a firm estimate of the overall impact of the project on migration; but it is clear that unless some significant effort is made for the Pitsilia Region, out migration would continue with undesirable economic effects: reductions in the production of deciduous fruits, induced investments in social infrastructure in the urban areas, and incremental investments for job creation in non-agricultural sectors. The project is the first example in Cyprus of a fully integrated, economically viable set of investments which could ultimately be applied to other less-favored regions on the island.

7.03 Economic Rate of Return. The economic rate of return is estimated for the productive infrastructure as a whole, and for its major components. The productive infrastructure includes water resources, land consolidation, soil conservation, farm roads, on-farm investments, 0 & M and incremental working capital. First year returns (counting only road users' savings, Annex 11) were estimated for the proposed nine village road segments. Three road segments accounting for about 30% of the cost had first year returns of between 10% and 20% to paving; the remaining six segments had first year returns between 4 to 7% to paving, implying that a delay in their construction or lower standards would be more economic. Government has agreed that prior to approving the paving of village roads it will examine whether improvement of these roads to gravel rather than paved standards is justified. The main rates of return are summarized below with details in Tables 15 and 16, Annex 11:

Economic Rate of Return (%)

1. New Irrigation 12

(i) Xyliatos Dam 14 (ii) Pond Scheme 10 (iii) Borehole Scheme 14.6

2. Rainfed component 18 3. Irrigation Rehabilitation 18 4. Village roads Above 10

The overall economic returns are satisfactory. The rate of return for all investments (productive plus social) is nearly 12%, while for the productive alone it is 13%. - 26 -

7.04 In order to assess the financial attractiveness of the investments, the financial rates 1/ of return under present financing policies for the more crucial investments are summarized below:

Financial Rates of Return (%)

Xyliatos Dam 33 A Pond Scheme 30 A Borehole Scheme 35

The financial rates of return are very attractive. It could, therefore, be argued, on the basis of project level analysis alone, that project area beneficiaries could carry an interest burden beyond the 6.0% proposed, after the first five years. A higher interest rate, however, would constitute discrimination against the poorest segment of the farming population, since interest rates for the rest of the agricultural sector would remain unchanged. As mentioned above, the level and incidence of the present concessions to agriculture will be studied under the project, the most appropriate method of addressing this issue without penalizing the project area beneficiaries.

7.05 Sensitivity Analysis. Since this project is an aggregate of about 70 minor projects, it is possible that costs and benefits of individual schemes may vary significantly. For example, among the three water sources, the pond scheme appears to be the least economic. The economic rates of return of the 30 ponds envisaged may vary from 8 to 15%. Further, the difficult physical conditions in the project area may unexpectedly raise costs of all schemes. Finally, the production potential assumed may not be achieved everywhere. These contingencies are most likely for the new irrigation schemes; so, a sensitivity analysis has been performed for the whole project and also for the new irrigation component only with the following results:

Economic Rate of Return

(%)

Aggregate Project Cost increased by 10% 12 Benefits decreased by 10% 12

New Irrigation Costs increased by 10% 10.7 Costs increased by 20% 10

The rate of returns are satisfactory; and, given the technical review procedures incorporated in this project, it is not expected that uneconomic minor schemes will be chosen.

/1 The financial rate of return is estimated on the assumption that the beneficiary incurs a cost only when paying back the debt (Annex 11). - 27 -

7.06 Beneficiaries and Distribution of Benefits. The beneficiaries of the project comprise the entire population of Pitsilia which is about 21,000. However, the number of beneficiaries varies with the project component. The costs and subsidies of the project are summarized below (Table 11, Annex 11):

Number of Cost Subsidy Beneficiaries Per Beneficiary (US$)

Village Roads 100,000 /1 10 10 Water Resource Development /2 3,500 3650 2450 Village water supply 5,000 86 54 Health 10,000 13 11 Village streets 10,000 37 23

/1 This includes benefits to those who pass through Pitsilia, but are not residents of Pitsilia. /2 Includes rehabilitation, dam, ponds, borehole, soil conservation, on-farm system and farm roads. Beneficiaries are farmers actually benefitting.

The above estimates indicate that the costs are reasonable. The per- beneficiary subsidies above and the aggregate subsidies reported earlier represent income transfers to the target group. The total fiscal burden is well within the means of the public sector.

7.07 Risks. A multi-component, many-sector project is not an easy project to implement. The difficulties of intra- and interministerial coordination pose the first risk in the project. However, the proposed organization structure will improve both coordination and control hence lowering the associated risk. The second risk in the project derives from the physical environment: the topography, the geology and, most important, the supply of water inherently carry the possibility of significant cost variation. Systematic tests of groundwater availability are being carried out for one full dry season to determine the safe withdrawals feasible for irrigation before the water source distribution systems are implemented. It is expected that the required technical reviews of the minor schemes will weed out potentially costly developments.

VIII. AGREEtMENTS REACHED AND RECOMIENDATIONS

8.01 During negotiations, agreements were reached and assurances were obtained on the principal issues referred to in Chapters 4, 5 and 7. The project constitutes a suitable basis for a Bank loan of US$10 million for a 15-year term including 3 years of grace. The Borrower is the Republic of Cyprus.

ANNEX I Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

The Agricultural Sector 1/

1. General. Cyprus has an area of 925,000 ha with a total population of about 630,000. Before 1974, agriculture accounted for about 18% (range 13 to 20% including the 1973 drought year) of GDP and employed about 34% of the labor force (see Tables I and 2). Situated in the Eastern Mediterranean at 350 north latitude and south of the entire Mediterranean coast of Europe, Cyprus has a warm and rather dry climate with winter rainfall. Five main physiographic regions may be distinguished:

(i) the narrow Kyrenia range of mountains bordering the north coast and rising to some 900 meters;

(ii) the coastal plain and foothills along the north coast and Karpas peninsula;

(iii) the Troodos massif in the southwest rising to 2,000 meters;

(iv) the central plain known as the Mesaoria between the two mountain ranges; and

(v) the southwestern coastal plains and foothills.

2. The average rainfall ranges from about 300 mm to 400 mm in the Mesaoria and 400 to 450 mm in the coastal areas at the foot of the mountains. Winters are mild at the lower altitudes, especially on the coast; and summers hot and dry with mean monthly temperatures reaching 27 C (800 F) in July and August. The mountains are cooler and moister. Snow usually covers the higher parts of the Troodos from January to April and the mean annual precipitation here reaches 1,000 mm. Rainfall on the plains is erratic and droughts are frequent and sometimes severe.

3. Prior to about 1950, most of the population was engaged in subsistence agriculture on small family farms. Dryland winter cereals and pulses were grown on the plains with fallows in alternate years, olives and carobs in the foothills, wine grapes on the steep sides of mountain valleys and

1/ Based on a report prepared by Dr. Charles Johnson in 1974 and information provided in the FAO/CP Preparation Report. ANTTEX 1 Page 2

oriental-type tobacco on the Karpas peninsula. There was some irrigation from springs, streams and shallow wells and deeper groundwater was brought to the surface by underground tunnels sinilar to the Persian "ganat" mainly to produce vegetables and fruit. Spate irrigation was practiced in some places when there was enough rain to produce floods.

4. Since the second World War, a strong impetus to commercial production of fruit, wines, vegetables, milk and meat has been provided by the presence of British and United Nations troops, the development of tourism and an export market for citrus fruits, early potatoes, carrots and other vegetables, grapes, wines and sherry. A substantial trade with Britain has been built up by exploiting a climate favorable for producing certain vegetables and fruits earlier than other accessible sources of supply and the market facilities arising from the British connection and the presence of a Cypriot community in Britain. These developments have led to the emergence of a modern agricultural sector producing fruit and vegetables under irrigation, pigs and poultry in modern units and some beef, veal and fresh cow's milk.

5. The traditional subsistence sector remained for some time largely untouched by these changes, except as a source of labor, but has begun in recent years to respond in part to modern technology. Cultivation and transport have been mechanized and few draft or pack animals are now to be seen except in the mountain areas. Fodder production has begun to replace the fallows and some improvement of the scrub pastures by reseeding, top-dressing with fertilizers, fencing, etc. has started. Soil conservation measures and improved wheat and barley varieties have been introduced and efforts are being made to improve methods of dryland cultivation and forage conservation.

6. Mixed farming is being encouraged by providing cereal growers with livestock for which they grow fodder crops. This has been shown to improve both the financial returns and the utilization of family labor on the arable farms and to increase stability, since fodders make some growth in seasons too dry to bring a grain crop to maturity and cereals that fail to produce grain can be grazed or cut for fodder. MIost sheep and goats are in units of between 50 and 100, with or without arable land. There are a few larger flocks and a number of farmers with less than 10 animals, usually attached to larger flocks for grazing. The cattle population is small and mostly in units of less than 10 except for one or two large-scale dairy farms.

7. Features of Present-Day Agriculture. The last complete agricultural census was in 1960, according to which there were about 69,000 farm units cul- tivating about 440,000 ha or an average of 6.3 ha of cultivated land per farm. The total cultivated area does not appear to have changed much since 1960. It is estimated that in 1974 there were some 300,000 ha of dryland field crops, over 40,000 of vines, 56,000 of olives, carobs, almonds and other dryland trees, 40,000 of irrigated fruit, potatoes and vegetables and about 100,000 fallow (Table 3). In the irrigated areas there is a small ANNEX 1 Page 3

.~j-> large commercial is:ates, but the great majority of holdings are less than 3 ha. A recent study ot dryland and cereal-growing farms in the Western l!esaoriashowed that most of these are above 3 ha and about 30% above 10 ha, which is probably abo-i the average size of dryland holdings on the plains. About a third of all the farmers in Cyprus are in the vine- growing areas on the mountain slopes, and here the average size of holding is about 3 ha, with very few above 6 ha. tIost holdings throughout the island are fragmented, because of the operation of inheritance customs, into a number of very small pieces.

8. Production in the modern sector is dependent on irrigation, and recent years have seen much development of water supply from boreholes. The most important aquifers are those of the western Mesaoria near HIorphou, the southeastern Mesaoria between Famagusta and Larnaca, the Akrotiri peninsula near Limassol and the Kyrenia limestone, and all are reported to be suffering depletion, with intrusion of seawater in some places near the coast. There are several minor aquifers and over 300 springs, mostly rather small and many diminishing in yield as a result of heavy extraction from boreholes.

9. There are no perennial streams except at the higher levels in the mountains, and most rivers in the lower reaches dry up by June. Few dams were built before the 1960's as dam storage is expensive because of the topography and short season of flow of the rivers, but since 1960 a number of dams have been constructed to assist in meeting the increasing demand which can no longer be met from groundwater and springs (see Annex 2). Soil survey have classified 89,000 ha as potentially suitable for irrigation. About 40,000 ha, roughly 12% of the cultivated area, are at present irrigable, in addition to a variable area which can be irrigated by spates when they occur. About half of this area has been developed since 1960.

10. Irrigation has been used mainly to produce fruit and vegetables for export and the expanding domestic market. Output of dryland farming is meant to satisfy the local market requirements for cereals, pulses, olive oil, wines and spirits, mutton, lamb and goat meat, and the export demands for wines and spirits, raisins, carobs, almonds, cheese, wool, hides and skins. Deficits of wheat and barley in unfavorable years are met by imports and there are regular imports of beef and mutton, condensed and evaporated milk, butter and certain types of cheese, sugar, vegetable oils and fats and concentrated animal feeds. Local production of fresh cow's milk, pork, eggs and poultry had by 1974 developed sufficiently to meet the local demand.

11. Forestry and fishing are, in economic terms, relatively minor items in the gross domestic product though useful from other aspects. State forests cover 160,000 ha; private forests, 10,000; and village forests, 2,000 ha. They supply timber for construction and mining, for making boxes and for firewood and other purposes (Table 3). Imports of sawn timber, plywood, chipboard and manufactured wood products have been substantial in recent years. About ANNEX 1 Page 4

100,000 ha of the main forest area have been planted, mostly with pines; and there is enough land available for further afforestation to utilize the present capacity of the forest department up to about the end of the century. Tree growth is slow in the mountains. Quick-growing species such as eucalyptus can be grown at the lower altitudes, but most of the suitable land is used for agriculture. The traditional fishing industry supplies the local demand for fresh fish. Frozen fish, cheaper than fresh, is imported. Recently trawler fishing in deeper waters has been developed and exports of swordfish may be possible. Trout fishing in the mountain streams has developed to supply the local demand, mainly from hotels and the expatriate community, and might find export outlets for processed trout but the potential supply is limited by scarcity of suitable water.

12. There is a strong cooperative movement in Cyprus. There are about 400 credit societies and 44 savings banks with deposits amounting to over CL 40 million and advances of over CL 30 million in loans each year, estimated to cover 85% of all short-term agricultural credit. The interest rate charged by societies to farmers does not exceed 8% per annum. There are over 60 societies for marketing, storing and processing produce and for handling cereals. The Cooperative Central Bank Ltd., established in 1938 for the disposing of surplus funds by societies, finances cooperative packing, storage, processing and farm machinery servicing facilities, operates various Govern- ment loan schemes with funds made available by the Loan Commissioners, makes bulk purchases of fertilizers, seeds, insecticides and arranges insurance services for member societies. Government credit is supplied through the Loan Commissioners 1/ to the Cooperative Central Bank to lend to farmers partici- pating in various development schemes. The Loan Commissioners also provide medium and long-term credit for irrigation works, improvements of water use, soil conservation, land consolidation, boats and equipment for fishermen and various minor projects (see Tables 4 and 5). The Cooperative Central Bank pays 3% to the Loan Commissioners and lends to farmers and fishermen at 4-1/2%.

13. Effect of the 1974 Emergency. The hostilities of 1974 caused a large-scale movement of Greek Cypriots from the northern part of the island to the southern area controlled by the Cyprus Government and a much smaller movement of Turkish Cypriots from south to north. It is estimated that about 36% of the land passed out of the control of the Cyprus Government and that some 20,000 farm families had to move from the northern to the southern area and a much smaller number from south to north. Estimates of the principal crop areas affected are given in Table 3. Roughly 65% of the dryland cereal- growing areas, 80% of the irrigated citrus plantations, 45% of the olives and

1/ It is a Government committee responsible for issuing loans, and operates through the Treasury. ANNEX I Page 5 most of the deciduous fruit is in the south. Over 75% of the forests are in the south. Some 200 of the 400 family fishermen had to move away fiom the northern and northeastern coasts to the south, leaving behind boats and fishing shelters. Exports of produce were affected by the dislocation of transport facilities. The airport at Larnaca did not offer the facilities formerly available at Nicosia and the use of Beirut was hampered by the dis- turbances there. The local market was depressed by the collapse of tourism and construction. Trout fisheries were not affected by division of the island; but the market declined through loss of the tourist trade, though it now seems to be reviving without the tourists.

14. Short-term Development Plans. The above effects necessitated a drastic revision of the 1972/76 development plan, exactly half way through its prescribed period. Emphasis was given to development that would absorb labor in the short term. It is estimated that some 7,000 displaced people had found employment in the agricultural sector by late 1975 and an additional 6,000 by the end of 1976. About 60,000 ha of land owned by Turkish Cypriots in the southern area has been vacated; and of this it is estimated that about 20,000 ha is cultivated land, some of it in permanent crops such as vines, fruit trees, olives, carobs and nuts. This land is being registered and leased to displaced farmers from the north. Farmers who brought their livestock with them are grazing them in the communal pastures and uncultivated scrublands. Some of the displaced fishermen have acquired boats and gear and are fishing off the southern coasts, and some displaced farmers may have joined the family labor force of relatives in the south.

15. Plans to absorb displaced labor hopefully by the end of 1977 include:

(i) Financial assistance to farmers to grow cereals on vacant marginal land of which it is estimated that 3,350 ha are suitable for cereal production without major land improvement measures;

(ii) Development of early vegetable production through loans to farmers for vegetables in the open and in plastic tunnels or cloches; and development of early vegetable and flower production in plastic greenhouses;

(iii) Expansion of the on-going mixed farming project modified to provide special conditions for displaced farmers by reducing the size of units;

(iv) Loans for establishment of (preferably 40-animal) sheep and goat units. This is for landless stockowners and is associated with a project for the establishment of livestock areas designed to set aside places where stockowners can erect sheds, watering facilities, etc; ANNEX I Page 6

(v) Encouraging development of nucleus breeding units for sheep and goats. This is a small scheme for experienced stockowners designed to produce improved breeding stock to meet local and export demand for Chios sheep and Damascus goats; and,

(vi) Loans to displaced stockowners for maintenance of their flocks by purchase of animal feeds and erection of sheds.

16. The first emergency development plan proposed, in addition to these projects for the immediate settlement of as many displaced tarmers and agricultural workers as possible, priority for a number of on-going projects which appear in the general development plan and which have particular relevance to the short-term plans. These include the development of marginal land by soil conservation and reclamation measures; the improvement of communal pastures by reseeding, fertilizing and fencing; fostering the use of improved seeds, fertilizers and pest and weed control practices; planting of tree crops, replanting of vines, production of disease-resistant rootstocks of vines and citrus and virus-free budwood of citrus; purchase of animals for resale to farmers for breeding and/or fattening; and installing of a plant for dehydrating poultry litter, wastes from citrus canning and wine making, vine prunings, etc. In the field of water development, special attention is being given as part of the emergency development plan to completing the water distribution works for irrigation from a number of existing dams and boreholes and for the drilling of new boreholes (see Table 4). APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Gross Domestic Product by Industrial Origin

In Current Prices In Constant 1967 Prices 1971 1972 1973 1974 1975 1975 1971 1972 1973 1974 1975 1975

______% _ _ _ / ---- CE Millions ------CE Millions ------=

Agriculture, Forestry and Fishing 47.1 48.7 40.5 50.2 40.0 16.8 41.7 39.3 27.2 33.7 21.0 14.2 Mining and Quarrying 10.7 9.4 11.6 9.3 6.2 2.6 10.6 11.1 11.1 7.7 6.0 4.1 Construction 19.8 23.0 28.7 21.3 33.5 14.1 15.3 16.2 16.2 9.8 6.8 4.6 Manufacturing 29.9 37.9 43.3 38.4 14.8 6.2 25.6 30.4 32.2 24.6 19.2 13.0 Electricity, Gas and Water 4.6 5.2 5.6 5.1 3.9 1.6 4.8 5.6 6.1 5.3 4.6 3.1 Transportation and Communication 23.2 25.4 32.3 23.5 22.8 9.6 19.4 20.9 23.7 17.5 16.6 11.2 Wholesale and Retail Trade 36.6 42.2 49.3 42.5 36.0 15.1 32.2 35.8 29.8 29.9 22.9 15.5 Banking, Insurance and Real Estate 11.8 13.2 17.4 13.2 11.4 4.8 10.6 11.2 12.0 8.7 6.4 4.3 Ownership of Dwellings 19.7 21.3 23.2 20.7 17.0 7.1 17.4 17.8 18.3 15.8 12.6 8.5 Services 25.9 31.9 38.6 34.1 28.0 11.7 19.6 21.7 22.7 19.2 17.1 11.6 Public Administration and Defense 12.9 15.7 19.0 22.6 24.7 10.4 9.4 9.8 12.0 13.4 14.7 9.9

Gross Domestic Product (At Factor Cost) 241.2 273.9 309.5 280.9 238.3 100.0 206.6 219.8 221.5 185.6 147.9 100.0

Plus Indirect Taxes (Net) 20.8 23.7 26.3 18.0 12.9 -- 21.1 23.2 27.4 20.4 15.9 --

Gross Domestic Product (At Market Price) 262.0 297.6 335.8 298.9 251.2 -- 227.7 243.0 248.9 206.0 163.8 --

1-3 Source: IBRD Country Economic Memorandum, 1976

February 16, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Economically Active Population

1971 1972 1973 1974 1975 1976 ---- (Actual) ------(Estimated) (Projected) ------Number in Thousands. ------

Agriculture, Forestry and Fishing 96.2 95.6 93.9 ( 33.6) 45.3 52.0 56.5 ( 26.7) Mining and Quarrying 4.2 3.9 3.7 ( 1.3) 2.2 2.3 2.5 ( 1.2) Manufacturing 36.3 37.5 38.1 ( 13.6) 20.5 25.0 27.8 ( 13.1) Construction 26.0 26.6 28.6 ( 10.2) 12.2 12.3 15.4 ( 7.3) Electricity, Gas and Water 1.3 1.6 1.7 ( 0.6) 1.8 1.6 1.6 ( 0.8) Transportation and Communication 11.4 11.5 11.6 ( 4.2) 5.6 6.3 6.9 ( 3.3) Wholesale and Retail Trade 21.6 21.5 21.9 ( 7.8) 15.2 16.1 17.0 ( 8.0) Banking, Insurance and Real Estate 2.6 2.7 2.9 ( 1.0) 3.0 3.0 3.1 ( 1.5) Public Administration 9.2 9.7 10.5 ( 3.8) 10.3 10.4 10.7 ( 5.0) Service2 36.9 39.2 41.8 ( 14.9) 21.4 23.5 25.0 ( 11.7) Other 1 2/ 25.0 22.9 21.7 ( 7.8) 31.8 25.2 23.1 ( 10.8) Unemployed - 2.3 2.4 3.3 ( 1.2) 44.4 34.7 22.4 ( 10.6) Total Economically Active 273.0 275.1 279.7 (100.0) 213.7 212.4 212.0 (100.0) Rate of Unemployment (%) 0.8 0.9 1.2 20.8 16.3 10.6 Total Population 3/ 620 626 634 497 490 481

1/ Employed at British Sovereign bases and National Guard. 2/ Greek Cypriots Only. 3/ After July 1974, South Cyprus Only. C >

Source: IBRD Country Economic Memorandum, 1976

February 16, 1977 APPRAISAL OF ANNEX 1 Table 3 PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Land Use in 1974

Cyprus North South

(Area in Thousand ha)

I. Land Distribution

. Forests 172 41 131 . Uncultivated Scrub 124 ( ) ( ) . Grazing Land 96 ( 122 ) ( 191 ) . Non-agricultural Land 93 ( ) ( ) . Cultivated Land 440 207 233 - Dryland (300) (142) (158) - Irrigated ( 40) ( 18) ( 22) - Fallow (100) ( 47) ( 53)

. Total 925 370 555

II. Use of Cultivated Area

Dryland (300) (142) (158) - Cereals 160 104 56 - Pulses and Fodder 41 21 20

- Vines 43 -- 43 - Olives 20 9 11 - Carobs 27 8 19 - Almonds 9 -- 9 . Irrigated (40) (18) (22) - Citrus 15 12 3 - Potatoes 8 3 5 - Vegetables 8 3 5 - Grapes 3 -- 3 - Other Fruit 6 -- 6 . Fallow (100) ( 47) ( 53)

. Total (440) (207) (233)

Source: IBRD Country Economic Memorandum, 1976.

February 16, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Long-term Loans by the Cooperative Central Bank

Amount of Loans Number of Loans January-October January-October Amount of Loans Number of Loans 1973 1974 1975 1976 Total 1973 1974 1975 1976 Total ------Percent ------CE ------

I. Normal Loans 1. Agricultural Credit Law 56/62 31.67 16.72 476,553 282,028 228,817 226,490 1,213,888 553 287 207 177 1,224 2. Water Use 8.08 7.79 76,066 79,008 117,021 37,695 309,790 145 139 212 74 570 3. Mixed Farming 2.59 2.57 22,505 14,870 20,850 41,230 99,455 91 45 22 30 188 4. Soil Conservation and Tree Planting 4.27 7.60 23,705 39,669 50,510 49,745 163,629 79 129 180 168 556 5. Early Vegetables and Flowers 3.64 1.63 15,600 40,050 83,900 __ 139,550 14 36 69 __ 119 6. Resiting of Villages 1.73 2.31 35,149 7,439 22,250 1,508 66,346 89 19 58 3 169 7. Mixed Farming Kokkinochorion 0.06 0.03 -- 1,000 1,200 -- 2,200 -- 1 1 - 2 8. Hay Making 0.49 0.27 1,675 2,630 5,575 8,760 18,640 3 3 6 8 20 9. Viable Mixed Farming 0.72 0.38 6,120 11,230 10,156 -- 27,506 10 11 7 -- 28 10. Water Use (E.E.C.) 2.47 2.54 _ __ __ 94,681 94,681 186 186 Sub-Total: 55.72 41.84 657,373 477,924 540,279 460,109 2,135,685 984 670 762 646 3,062

II. Loans to Displaced Persons For:

11. Livestock 12.72 29.36 -- 168,766 315,740 2,979 487,485 -- 1,243 889 17 2,149 12. Erection of Greenhouses 6.03 1.84 -- 23,721 182,579 24,850 231,150 -- 19 101 15 135 13. Reactivation of Cereals and Vegetables 2.96 7.08 -- -- 113,143 300 113,443 517 1 518 14. Beekeeping 1.07 1.41 -- -- 9,600 31,600 41,200 -- -- 24 79 103 15. Water Use 3.02 4.00 -- 29,953 85,816 115,769 -- -- 63 230 293 16. Rural Development 0.97 6.33 -- 13,163 24,185 37,348 -- 117 346 463 17. Goat and Sheep Units 14.16 6.98 -- 164,050 378,835 542,885 -- 175 336 511 18. Cow Breeding 2.81 0.85 -- -- 107,627 107,627 -- -- 62 62 19. Mixed Farming 0.54 0.31 _ -- 20.20 2 00 -- -- 23 23 Sub-Total 44.28 58.16 _ 192.487 828.228 676.392 1.697,107 -- 1,262 1886 1.109 4.257

TOTAL: 100.0 100.0 657_373 670,411 1.368.507 1.136,501 3,832,792 984 1,932 2,648 1.755 7,f319

Source: Planning Bureau

February 14, 1977

412 ANNtA i Table 5

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Loans Under the Agriculture Credit Law

Loans Issued During January-June Total Loans Issued 1/ Total Loans 1974 1975 1976 Up to June 30, 1976 -As % ------CE ------

Loans For:

I. Purchase of: Land 17,621 5,190 5,580 538,495 Water Rights ------1,030 _ 539.525 14.2

II. Plantations Citrus 2,385 800 1,735 44,922 Vines - Table Varieties 755 200 -- 8,739 other Plantations 800 -- 1,647 21,177 74,838 2.0

III. Purchase of: Sheep/Goats 10,780 27,755 6,170 240,606 Dairy Cattle 4,975 8,650 2,700 145,835 Work Animals ------40,520 Animals for Fattening 3,100 17,705 1,800 159,101 586,062 15.5

IV. Construction of: Sheep Stables 9,155 18,470 18,100 169,747 Pig Sties 35,390 11,050 -- 179,207 Chicken Batteries/Equipment 710 11,140 -- 33,779 Stores ------6,989 389,722 10.3

V. Land Improvement Land Levelling 14,562 4,740 850 240,645 Anti-erosion Works 1,645 loo 650 53,143 Fencing 7,115 970 2,756 93,547 Other 5,515 -- -- 123,583 Fertilizer ------18,000 Borehole Drilling 39,659 19,385 17,567 280,632 Reservoirs 4,150 350 280 56,247 Structure for Pumps 2,010 -- 930 24,098 889,895 23.5

VI. Agricultural Machinery

Pumping Equipment 81,742 82,491 45,897 790,221 Piping 11,009 541 5,000 150,170 Small Tractors 13,591 9,020 5,365 255,117 Other Machinery 2,955 180 2,060 28,573 1,224,081 32.3

VII. Miscellaneous - 12.614 9,070 84.903 84,903 2.2

TOTAL: 282,238 2/ 227,807 2/ 135,449 3,789,026 100.0

1/ Including loans from the beginning of the Program, 2/ Slightly different from the totals included in Table 4, Annex 1. 3/ Includes beekeeping, greenhouses, and others.

Source: Planning Bureau

February 14, 1977 ANNEX 2 Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Policies for Rural Development

1. This chapter describes present Government policies for water, agricultural, rural, economic and social infrastructural development.

I. Water Development

2. Cyprus has no rivers of perennial flow. Groundwater is usually found at substantial depths which, except for the coastal acquifers, has not been developed to any significant degree.

3. Water Supply and Utilization. Table 1 gives an estimate of water consumption by activity and source for an average year of rainfall. Rainfall ij an average year is estimated (based on data ove5 60 years) as 4,600 million m . Out of the total rainfall about 3 950 million m have been estibaSed to be usable water resources -- 600 x 10 m as surface run-off; 350 x 10 m as groundwater and springs. The run-off occurs through about 40 watersheds radiating from the Troodos range and reaching the coast, maiglI in the western half of the island. Table I shows that only 25% (150 x 10 m ) of the total surface run-off is presently being utilized. The balaice flows to the sea. The Govern- ment of Cyprus believes 6 trat of the 450 x 10 m surface run-off to the sea about "300 to 350" x 10 m can be productively used by constructing storage reservoWrs. At this time, the total water storage capacity in Cyprus is about 64 x 10 m . That is, the potential water storage capacity in Cyprus is at least five times the present capacity.

4. Unit Costs of Dams/Reservoirs. Construction of reservoirs is, and has been, very costly. Due to this, the Government policy until 1950 was to focus on the development of groundwater, and utilization of water in springs and small rivers through small diversion works. Studies and investigations carried out during the early 1950's, however, established that, although dams/reservoirs are costly per unit volume of water stored, there were many suitable sites where dams/reservoirs could be built. A cautious dam/reservoir construction program was, therefore,6 ilitiated and by 1960 about 16 dams (with a total storage capacity of 6.2 x 10 m ) were constructed. Experience gained ANNEX 2 Page 2 in this initial period led to increased emphasis on storage projects (especially because the important sources of groundwater had already been fully developed). So, by 1975 an additional 51 dams (22 major, 11 major recharge, and 18 minor recharge dams) were constructed to increase the storage capacity tenfold to about 64 x 106m3.

5. Table 2 gives the unit costs of 10 dams/reservoirs. Based on the dam/reservoir construction program (1960-73), the weighted average cost 1/ for water at the dams is estimated to be about 17.5 mils/m3 (USJ 4.2 per m3); for water delivered to the farmer, the weighted average cost 1/ is 28 mils/m3 (USJ 6.71 per m3). As an extreme example, the cost for water at the Lefkara dam (1973) is estimated to be 20 mils/m3 (USe 4.8 per m3) at the dam, and 45 mils/m3 (US/ 10.79 per m3) at the end of a long conveyance system and after treatment to improve quality. These costs are high 2/ by international standards. There are, of course, specific reasons for these high costs:

(i) Steep topography which requires relatively high dams;

(ii) Unfavorable geology of the sites requiring relatively more treatment;

(iii) High erosion in the watersheds requiring the provision of considerable dead storage;

(iv) Irregular river flow requiring high storage capacities to provide dependable supply;

(v) Due to topography the conveyance of water over long distances is often necessary; and

(vi) Steep land areas, highly fragmented and irregular land holdings, prior water rights also add to costs.

These costs (USe 7 to 10 per m3) can be justified for high value uses -- (i) crops (citrus, vegetables, deciduous fruits), and (ii) domestic water supply. These have been the usual justifications for the projects undertaken so far.

6. However, with only 25% of the surface water resources being utilized at this time, the main dams/reservoir program for Cyprus remains in the future. In view of the high costs, the Government has been shouldering a significant part of the financing burden.

7. Financing Policies. Financing policies for major and minor dams, rural domestic water supplies, groundwater recharge, flood protection, drainage and multipurpose projects are described below.

1/ Not adjusted for inflation.

2/ From 80% to 100% higher on average. ANNEX 2 Page 3

8. Major Dams. Major dams are initially fully financed by the Govern- ment. Costs financed include planning, investigation, design and construction. Government policy is to recover about 50% of the weighted average cost of all Government financed dams. However, depending on the economic and social conditions of the region, the financial positions of the people, the kinds of crops that can be cultivated, the Government contribution mav be varied between 33.33% and 80% of the overall island-wide cost. 1/ In consideration of farmers' ability to bear the financial cost, the Government has decided upon certain maximum charges which cannot be exceeded. These charges are:

Maximum Crop Charge (mils/m3)

Cereals 5 Vegetables 10 Citrus and Bananas 20 Deciduous 20

9. Minor Irrigation Projects. (i) Government contribution towards works carried out for Irrigation Divisions 2/ is based on the following rules: Government Grant

Winter crop irrigation schemes 80% Spring crop irrigation schemes 75% Perennial irrigation schemes 66.67%

(ii) Government contribution towards works carried out for Irrigation Asso- ciations 3/ depends upon the distribution of the water shares amongst the Association members. The contribution ranges from 66% to 38%. The former applies when maximum water owned by 25% of shareholders is between 25 to 30%; the latter when it is 96 to 100%.

1/ The weighted average of recently completed Government financed major irrigation projects is 30 mils/m3 (USJ 7.19 per m3). A 50% contribution of this would give 15 mils/m3 which is what is now being accepted in Cyprus for high return crops such as citrus.

2/ A group of owners of land (at least 10) who own land in the project area form an Irrigation Division (ID). This is administered by a committee of the members' representatives, with the District Officer as chairman and the village President (Muhta) as ex-officio member. The Loan Commissioners lend the loan component directly to the ID and the District Officer is responsible for assuring repayments.

3/ When owners of water (at least 7) form a group, it is called, an Irrigation Association. ANNEX 2 Page 4

10. The Director of the Water Development Department (WDD) is responsible for fixing the proportions to be financed as grants by the Government in accordance with the above rules. However, the Government may accept a higher grant level if special conditions (poverty, flood damage, failure of previous works, etc.) justify the action. The balance (total cost minus Government grant) of the cost is financed through a Government loan for up to 20 years 1/ at an interest rate between 5 to 7% depending on the repayment period. Table 3 summarizes the main parameters of Government's financial policies.

11. Minor irrigation projects include construction of ponds, development of boreholes, irrigation rehabilitation and other minor works. The financing arrangements discussed above (paragraphs 9, 10) relate only to the actual construction costs. Costs of planning, investigations, design and supervision of construction are financed entirely by Government, while operations and maintenance costs are wholly financed by the beneficiaries.

12. Rural Domestic Water Supplies. Government finances 50% of the total investment cost as a grant, the balance as a loan 2/ at 5% interest. The village is the borrower; it also pays the full cost of the water meters that are normally installed. The village authorities usually put a charge 3/ on water consumption to cover maintenance, operating and administrative costs. The loan repayments are raised by initiating a local tax on the village residents. In rare cases, the Government will consider increasing the extent of its grant. The considerations used in such cases include: (i) the outstanding loans of the village, (ii) the income of the village, and (iii) the average annual tax burden per head of population.

13. Groundwater Recharge Works. The financial arrangements are the same as for minor irrigation projects (paragraphs 9,10).

14. Flood Protection Works. These are financed at full cost to the Government unless carried out for an Irrigation Division in which case the arrangements relevant for minor irrigation projects apply.

15. Drainage Works. The financial arrangements are the same as for flood protection works.

1/ Under exceptional circumstances it could be extended to 30 years.

2/ Through the Loan Commissioners.

3/ In towns, the present rates for water are progressive and range from a minimum of 50 mils/m3 (USi 12 per m3) to a maximum of 200 mils/m3 (USe 48 per m3). For town water supplies, the Government does not give any grants. Town water boards fully finance the cost which is fully recovered through water charges. AIINEX 2 Page 5

16. Multipurpose Projects. The rules applicable to the individual components are applied to the financing of the components.

17. Legal Framework. There are a number of laws dealing with water which have been enacted from time to time. The important laws are:

(i) The Government Uaterworks Law. This law vests all groundwater and all water running to waste from rivers to be the absolute property of the Government. It gives power to the Government to store, divert or otherwise use and control all Guvet[iiLLeLL waLer resources and to construct any water works as required. Under this law Project or District Wlater Boards can be established for the regulation of the Government projects. It empowers the application of water charges to be levied on the consumers. Also under this law any water rights or other property can be evaluated and acquired if required in connection with the proposed works.

(ii) IJaterDevelopment and Distribution Law. According to this law the Council of Ministers can declare an area as a development area and appoint a Development Committee for the purpose of taking over and acquiring all water rights and all water works as required for carrying out schemes for the proper water distribution and water development of that area.

(iii) Public Rivers Protection Law. This law gives power to the Government for the protection of rivers against dumping of any materials, excavation in the river bed and pollution of the rivers.

(iv) The wells law and connected legislation for issuing of drilling permits and controlling the use of water.

(v) The Irrigation Divisions and Irrigation Associations Law in connection with the establishment of Irrigation Divi- sions and Associations and the regulation of the use of water for irrigation.

(vi) The Village Wlater Supply Law for the regulation of rural water supplies.

(vii) The Municipal Wlater Supply Law for the regulation of town water supplies.

18. Maintenance and Safety of Dams. Routine inspection by the operating and Headquarters staff has to be made under the supervision of the responsible Engineer. The main features which should be given close examination are ANNEX 2 Page 6 settlement of the embankmernt, structural deformations, rip-rap condition, downstream erosion, drains, leakage, concrete deterioration, sedimentation of the reservoir, grading of the riverbed downstream, gates and other mechanical parts. For the large dams, piezometers have been installed both upstream and downstream of the dam to measure the water level. In the case of Yermasoyia, lavrokolymbos and Lefkara dams, pore water and total pressure cells have been installed in the foundations and the embankment.

II. Agricultural Development

19. Cyprus has a land area of 925,000 ha. About 48% (440,000 ha) of this is considered arable; about 21% (194,355 ha) is pasture land; the remaining is non-agricultural. About 360,000 ha are currently cultivated; of this, about 10-12% (about 40,000 ha) is irrigated. Prior to 1974, agriculture accounted for 13-20% of GDP and about 36% of the labor force was prin- cipally employed in agriculture. Some 70% of the country's exports were of agricultural origin. Following the events of 1974, important parts of the areas under citrus (80%), cereals (65%), forage crops (47%), tobacco (100%), olives (45%) and vegetables (35%) are located on 40% of the Island's land surface presently not under Government control. Of the livestock population, about 36% of the sheep and goats, 46% of the dairy cattle, 30% of the pigs and 50% of the poultry remained in the northern sector.

20. In view of agriculture's importance (before as well as after 1974) for the economy, the Government has a series of special programs for agricultural development under two systems: (a) Government funds through a four- member committee; and (b) Government funds through the Cooperative Central Bank. Under the former ("a" above) loans at concessional (4.5% interest) terms are channelled through a four-member committee 1/ consisting of representatives from the Department of Agriculture (Chairman), Cooperative Central Bank, Mfinistry of Finance and Loan Commissioners. Under the latter ("b" above) the loans are from a revolving fund in the Cooperative Central Bank. The interest rate is 4.5% per annum and the Government provides additional funds (through the Loan Commissioners) whenever repayments from prior loans are inadequate to meet the current demand for loans. The financial terms cover a spectrum which is detailed in Table 3 (under B and C). Tables 5 and 6 summarize the status of loans issued for various project categories by the Loan Commissioners. The major project categories are described below.

1/ This committee and representatives from the Planning Bureau and the Department of Cooperative Development controls the loans provided to displaced persons. ANNEX 2 Page 7

21. Loans Through the Four-member Committee. The projects eligible for financing under this procedure are: (i) soil conservation and tree planting, (ii) water use improvement, (iii) tree crop and vine replanting, (iv) encouragement of beekeeping, (v) establishing sheep and goat units, (vi) other specific projects; and (vii) loans to displaced farmers. Each category is briefly described below. The interest rate for all the above is 4.5 percent per annum.

(i) Soil Conservation and Tree Planting. Long-term loans for up to 75% of total cost are provided for soil conservation works and tree planting in hilly areas. Project works include land levelling for areas irrigated from dams. The balance (25%) of the cost is financed as cash and/or food commodities in cases where the works are undertaken by individual farmers. For works undertaken by the Soil Conservation Division, the loan is for 50% of the cost and the balance as cash subsidy. The repayment period could be up to 10 years, loan amount cannot exceed Ch 500 per family.

(ii) Water Use Improvement. Medium-term and long-term loans, up to 85% of total cost, are provided for installing improved on-farm irrigation systems. The repayment period is between 5 to 10 years and the maximum loan amount is Cb 3,000 per family.

(iii) Tree Crops and Vine Replanting. For tree crops the project mainly involves the production and sale of grafted seedlings (olive trees, citrus and avocado) at below cost. For vine replanting, loans of up to CT 500 per family may be granted for repayment between 7 to 10 years. In addition, cash of up to Cb 50 and food commodities valued up to Ch 120 are also provided.

(iv) Encouragement of Beekeeping. Medium-term loans are provided for the purchase of beehives, swarms and foundation sheets. Maximum amount per family is C+, 400 to be repaid over 4 years.

(v) Establishment of Sheep and Goat Units. Medium and short-term loans are provided for erection and/or improvement of sheds, purchase of animals and land, and purchase of feed. The repayment periods are 7 years for shed erection, 3 years for shed improvement and 1 year for feed purchase. Maximum loan amount is Ch 2,000.

(vi) Other Specific Projects. Project categories may be added or subtracted from the list. At present, the following specific projects are eligible. ANNEX 2 Page 8

Maximum Maximum Repayment Loan Project Category Period (Years) Amount (CO)

1. Water Use Project 10 2,550

2. Soil Conservation and Tree Planting 10 2,000

3. Early Vegetables 5 2,000

4. Fallow Utilization 10 2,000

5. Haymaking 7 2,000

6. Mixed Farming 7 2,000

7. Nucleus Breeding Unit 7 3,500

(vii) Loans to Displaced Farmers. This is a post 1974 program and includes:

Maximum Maximum Repayment Loan Project Category Period (Years) Amount (CO)

1. Reactivation of Women's Handicrafts 2 120

2. Rabbit Breeding 4 1,000

3. Mixed Farming 10 5,000

4. Livestock 7 2,500

5. Greenhouses 7 2,500

6. Beekeeping 4 400

7. Cow Breeding 7 4,000

8. Goat and Sheep Breeding 7 2,000

9. Water Use 10 2,550

22. Loans Through the Cooperative Central Bank. Under the Agricultural Credit Law of 1962, the Cooperative Central Bank provides long-term loans at the concessionary interest rate of 4.5 percent per annum for agricultural ANNEX 2 Page 9 purposes. Under the Law, "agriculture" includes horticulture, fruit growing, dairy farming, livestock breeding and the keeping of land as pasture. The purposes for which loans have been given are: (i) purchase of land and water, (ii) tree planting and vine growing, (iii) purchase of animals, (iv) land improvement, (v) agricultural machinery, (vi) miscellaneous. Each is described below. Repayment periods range from 4 to 15 years for all except agricultural machinery for which the maximum is 7 years.

(i) Purchase of Land and Water. Only agricultural land purchases are financed. Loans are given for the consolidation of holdings (purchase of land adjacent to the consolidated land) and for the purchase of land from religious institutions and landowners who are not residents of the village. Full cost is financed.

(ii) Tree Planting and Vine Growing. Loans are for financing 100% of the cost of land preparation for new tree plantings of specified varieties. Maintenance expenses till yielding stage of the trees may also be financed. Citrus, deciduous fruits, almond, carob, olives and table-grape vines are eligible.

(iii) Purchase of Animals. Loans are for purchase of animals for breeding, fattening, milk and egg production and work animals. Related expenditures on erection of stables, pens and poultry units and for establishng fisheries and apiaries may also be financed.

(iv) Land Improvement. Loans are for the clearing, reclamation, levelling and terracing of land, for water tanks, anti- erosion works, drilling of boreholes, etc. Drilling of boreholes has become the dominant purpose under this category because land levelling is also covered by other schemes.

(v) Agricultural Machinery. Loans are for the purchase of water pumping equipment; small tractors for cultivation of gardens, orchards and vineyards; and other agricultural tools (spraying machines). The loan volume for agricultural machinery is the highest among the above five categories and accounts for about one-third of the total loan volume under the law. The most demanded item for financing is pumping equipment.

(vi) Miscellaneous. Loans are for beekeeping, greenhouses and other agriculture-related activities not covered above.

23. Loans under the Agricultural Credit Law may cover up to 100% of the investment costs. In the case of land purchases, however, the farmers must contribute 20% of the cost from their own resource. ANNEX 2 Page 10

III. Rural Social And Economic Infrastructure

24. The above includes Roads, Educational and Rural Health Facilities. Each is described below.

25. Roads. These comprise village roads, farm roads and village streets.

(a) Village Roads. These are roads linking villages or providing access to villages from main roads. These may be either earthen roads or they may be covered by an asphalted surface 3 to 3.65 meters in width. They are constructed, maintained and improved entirely at Government expense and are the responsibility of the District Officers.

(b) Farm Roads. These are financed under three separate schemes: (i) Contributory Schemes, (ii) Non-contributory Schemes for vine growing areas, and (iii) Land Consolidation.

(i) Contributory Schemes. The Government would usually provide 50% of the cost as grant and the rest is provided by the community. In special cases where the village is very small or very poor, the Government contribution could be up to two-thirds of the cost. The community's share in either case is provided through loans provided by the Loan Commissioners (normally for 2 to 5 years at 5% interest) or from loans by the local cooperative credit societies. The interest rate of the credit societies could be up to 8.5 percent per annum.

(ii) Non-contributory Schemes. These schemes are part of the Government policy of restructuring the vine growing industry by providing loans for replanting and by developing farm roads to improve farm access thus reducing cultivation and harvesting costs. The Government pays the entire cost.

(iii) Roads Under Land Consolidation. Farmers contribute 50% towards the cost of roads constructed under a land consolidation project. They are the responsibility of the farmer and not the community. Each farmer's share of the farm road cost is mortgaged against his property. Loans for 50% of the cost are provided through the Loan Commissioners through the Land Consolidation Authority. The Land Consolidation Authority borrows at 5-1/2% from the Loan Commis- sioners, and lends at 4-1/2% to the farmers. The loans are for a period of up to 8 years. The period of repayment is determined by the amount of the loan itself: ANNEX 2 Page 11

for loans between CI, 10 to 40, repayment is over 3 years; for loans between Cb 40 to 100, repayment is over 5 years; and for loans over CG 100, repayment is over 8 years.

26. Elementary Education. Following Independence, the emnphasiswas initially on the construction of new primary school buildings, the replacement of old buildings and the establishment of schools in all the villages that had tne required minimum (15 pupils) to justify the employment of a teacher. By 1971 the basic requirements in physical facilities had largely been met, and greater emphasis was then placed on qualitative improvements. In order to overcome the problem caused by the rural settlement pattern, the Government encouraged the consolidation of small schools. This was achieved by persuading school boards to close down their small schools and send the children by bus to larger schools in neighboring villages. A high proportion of the resulting transportation costs is subsidized by the Government. This policy has been extended in recent years and thieGovernment has encouraged the construction of new central schools (or the extension of suitably located existing schools) in order to provide schools of optimum size in the rural areas. Larger central schools approaching the optimum size of 8 to 10 classes and serving a population of 3,000 will enable the rural schools to match urban schools in educational standards and facilities. In this way it is hoped that disparities in education between urban and rural areas will be eliminated. Responsibility for elementary education is shared between the school boards at local level and the Government. In rural areas the school boards are normally the village authorities, except where there is a central school in which case the affected village authorities are represented. The school boards undertake the responsibility of providing the buildings and running costs (water, electricity, school materials) for which local taxes are levied on all persons living in the village earning an income.

27. Financial Arrangements for Education. The Government provides subsidies for construction of school buildings, operating costs, teacher's salaries and travelling costs. Normally the Government provides grants of between 20-30% towards the construction of school buildings and extensions but where a village is considered to be poor, Government provides grants to cover a higher proportion of the total costs. Owing to the relative poverty of the Pitsilia Region, the Region's school boards generally receive grants of between 30-50%. In order to provide additional incentives for the establishment of central elementary schools, the Ministry of Education has proposed that grants for such schools should form a higher proportion of the costs. The Ministry has suggested that the schools included in the Pitsilia Project should he financed 70% by the Government and 30% by the communities involved. In addition, the Government, through the Loan Commissioners, would (and does) provide loans to the school boards for the remaining part of the constructirn cost. These loans are at the following interest rates: ANNEX 2 Page 12

Up to 5 years 4% 6 " 12 " 4-1/2% 13 " 15 4-3/4% 16 " 20 5%

Interest rates for education purposes are 1% below the normal rates of the Loan Commissioners.

28. Transport and Other Subsidies for School Children. The Government subsidy towards school operating costs in rural areas is Ch 4 per pupil per annum. Teacher's salaries are paid entirely by the Government. Children who have to travel more than 1-1/2 miles to school receive a subsidy of CL 1 to 2 per month from the Government depending on the distance between residence and the school. Normally this does not cover the entire transport costs, and so parents have to contribute the balance. Although, where convenient, the children travel by normal bus services, in many cases the parents arrange for special bus services for the transfer of the children. In view of the transportation costs involved, great care is taken in the choice of location for central primary schools.

29. Rural Health Facilities. Present policy is to construct Rural Health Centres so that the entire cost is borne by the Government. Facili- ties for Rural Health Sub-Centres, however, are provided by the village community. Normally, the village committee will rent a building which will then be equipped and staffed by the Ministry of Health. When a village cannot provide rented space, it can apply for a 50% Government grant contribution and the balance as loan from the Loan Commissioners at 5% interest rate. The repayment of the loan is made from taxes imposed on the village community.

30. An analysis of the above policies in terms of the Pitsilia Inte- grated Rural Development Project is presented in Annex 11. APPRAISAI OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Water Consumption by Activity and Source (Average Year)

Evaporation and Surface Run-off Groundwater Including Evapotranspiration Excluding Riverbed Infiltration Consumption by Infiltration Direct Rainfall Total Consumption Pumped and Surface Springs 6 3 3 1/ 63 3 6 3 3 6 3 6 3 3 10 m 10 donums - 10 3 10 donums 10 m 10 donums 10 m 10 donums 10 m i% 10 donums %

I. Irrigated Crops Including Irrigated Cereals 150 390 332 270 27 30 130 690 639 14.1 690 10 II. Dry-farming Crops (Cereals, Carobs, Olives, Tobacco, Vines) 900 2,000 900 20 2,000 29 III. Forests, Shrubs 900 1,400 900 20 1,400 20 IV. Pastures, Grass 450 1.200 450 10 1,200 17.5 V. Evaporation Loss 1,270 1,610 1,270 26.4 1,610 23.5 VI. Domestic, Animal Husbandry and Industrial Use 35 6 41 1.0 VII. Groundwater Overextraction -120 -120 - 3 VIII. Sub-surface Losses 70 70 1.5 IX. Surface Losses to the Sea 450 450 10

TOTALS: 600 390 317 270 33 30 3_650 6,900 4,600 100 6.900 100

+ 1 + i= E + |~~37Rainf:lll oa Total| LEj ~~+ + = 9501 ± 7U 1 l7 7 7 ------Usable Water ------LosRainfall Land

1/ 7.5 donums - I ha

Source: Dams of Cyprus by Konteatis C.A.C.

February 7, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURALDEVELOPMENT PROJECT

CYPRUS

Unit Coats of Main Government-Built Dams

Costs Dam Only Including Irrigation System Cost per m Year of Capital Annual Capital Annual Water Supplied Dam Including Completion Dam TYPe Cost-- Cost Cost Cost V AnnuallVOl -- ri Owner Remarks ------(cf. 1,000)…------(Millimonin') …--- Ml".

I. Unit Costs Kiti 1964 Earthfill 140 12 220 19 1.0 12 19 Govgnment Pomos 1966 Rockfill 242 20 326 27 1.1 18 25 ID 2/ Ayia Marina 1965 Rockfill 100 9 128 11 0.2 45 55 ID Irrigation Argaka 1964 Rockfill 270 22 398 35 1.4 16 25 Government Kalopanayiotis 1966 Earthfill 236 19 300 28 0.5 38 56 Government Schemes Polemidhia 1965 Earthfill 809 60 968 84 2.5 28 33 Government Yermasoyia 1968 Earthfill 930 89 1,900 165 6.2 13 27 Goverr_ent Mavrokolymbos 1966 Earthfill 335 28 490 42 2.0 14 25 Government

Weighted Average 17.5 28

Masari 1973 Earthfill 250 21 370 32 1.2 17 27 Government Groundwater Recharge scheme

Lefkara 1973 Rockfill 1,266 110 3,128 250 5.5 20 45 ID - Domestic Water Supply Scheme

Cost Per m3 at an II. Unit Cost Variation with Interest Rate Interest Rate

7 8 9 10 11 12 Unit Coat for: Mils/m3 Dam Only 17.5 19.78 22.15 24.58 27.04 29.48 Dam and Irrigation System 28.0 31.64 35.44 39.33 43.27 47.16

Index of Cost 100 113 127 140 155 168

1/ Capital cost amortized at 77. over 50 years; includes operation and maintenance costs. 2/ 1,000 mils = I C; 3/ ID = Irrigation Division I 4/ Jointly owned by the Lefkara Irrigation Division and the Famagusta Water Board

Source: Dams of Cyprus by Konteatis, C.A.C.

February 4, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Subsidies and Interest Rates in Cyprus

Borrower Percent Percent Interest Rate Duration Source uf De Ju-e Limit Remarka Grant Loan For Loan of Lean Lose On Loan Amounts (Years) (CE) A. Irrigation Works D-m 1 / a) Major DO8s 100 -- -- - _ __ Waterworks Law b) Small Dams Irrigation 66.7 33.3 5- % 2_ 5-30 2/ Loan None Structure plus distrib. system. Diviaion 2/ Comis. - Boreholes " 66.7 33.3 5 -7% 5-20 Ponda 66.7 33.3 5 -7. - 2/ 5-20 Irrigation Rehabilitation 66.7 33.3 5-5.75%- 5-15 " B. Agricultural Development Proj.- Soil Consern and Tree Planting - Parmer 25+ Up to 75 4.5% Up to 10 ) 500 per family Mortgage Guarantee Water Use Improvement 15+ 85 4.5% 5-10 ) Up to 2550 Mortgage or Government Guarestee Beekeeping -- -- 4.5% Up to 4 ) 400/fic. ' " Sheep and Goat Unit Eatablishment -- -- 4.5% 1- 7 ) Loam Coo- 2000/fam. For Refugees only - Early Vegetables ) miesinners a) For Refugees __ 100 4.5% Up to 7 ) through the 2500 Government Guarantee b) For Non-Refugees -- 80 4.5% 5 5 Co-operat. 2000 Mortgage Guarantee - Fallow Utilitation - ) Subject to 4.5% 10 ) Bank. 2000 - Nucleus Breeding Units -- ) Man. Loan 4.5% 7 ) 3500 Mortgage or Government Guarantee - Mixed Farming - )_ Amounta 4.5% 7 ) 0.0. - Say making -- 75 4.5%7 10 ) 2000 Mortgage Guarantee C. Loa,sa Under Agric. Credit Law 6 Farmer Purchase of Land -- ) 4.5% 4-15 Co-op Bank ) In Practice, the loans issued Tree Planting and Vine Growing -- ) 100. Except For 4.5% 4-15 ) 2000/family cover purposes not covered by Purchase of Animals __ ) Land Purchase 4.57 4-15 5000/company other Government schemes. Land Improvement -- ) Where the Maxim. 4.5% 4-15 Purchase of Agric. Machinery -- ) is 807. 4.5% 4-15 " Accounts, so far, for one-third and Warer Equipment of loans issued. The mate frequently financed item was pumping equipment. Miscellaneous D. Roads Village Roads -/ These roads link villages and are constructed, improved and maintained by the Government. For village streets, grant (50%) and leIas (50/) are provided to the local authorities. Farm Roads: Contributory Schemes FPrmer/ SI 50 5% 1- 5 Loam Comis. Grant may go up to 66.7% in Irrigation or Local special cases. Interest rate Division Cooperative increases up to 6% (see jf Vine-Growing Areas -_ lo100 __ Credit below). -- Societies

Land Consolidatiec Farmer 50 45% Up to 8 Land/ Consolidation Authority

E. Schoola 20-30% subsidy for construction of school buildings; higher proportion possible for poorer villages; for Pitsilia up to 70% is proposed by the Government. The balance to be financed as loan with an interest of 4.5% for repayment over 15-25 year. Loan Commissioners grant the loans. In addition a subsidy of CB 4 per pupil per annum is given to meet a part of the operating costs. Teacher's salaries are entirely paid by the Government. Children who travel more than 1.5 miles to the school receive a additional subsidy of up to Ch 2 per month; this subsidy does not cover the full transportation cost. In eaxeptional cases increaaed subsidy is provided to cover the full transportation cost.

February 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Subsidies and Interest Rates in Cyprus

F. Health Centres Centres Government bears full cost of constructing the Health Centre. Normally provided by the community which usually rents a building which is equipped and staffed by the Ministry of Health. Sub-centres For new sub-centres to be built, a 507%grant is given; the balance is given as a loan at 57.by the Loan Commissioner.

G. Village Domestic Water Supplies Normally, Government contributes 50% of the cost; balance is given as a loan - . Only in rare cases would Government increase the proportion of the grant.

1/ There are precedents (the Palekhori dam and Arakapas dam) in the Pitsilia area of the Government contributing 75% of the cost of a dam and the Irrigation Division getting the balance as a loan. The Ministry of Finance uses the following criteria to assess the proportion provided as a Grant: (i) The outstanding loans of the village; (ii) the income of the village; and (iii) the average annual tax burden per family. The Government wishes to maintain its normal limit of only a 2/3 grant. In the case of major dams construction, Government covers the total expenditure and charges water use Fees according to the kind of crops. 2/ Interest rate charge varies with the length of the repayment period as follows: Up to 5 years to repay 5% 6 - 12 5 /% 13 - 15 5-3/4% 16 - 20 6% 21 - 25 "6r7 In Exceptional cases only.

3/ Loan Commissioners is a Government committee responsible for the issuing of loans; it operates through the Treasury. 4/ Mortgaged loans are controlled by a four-member committee consisting of representatives from the Department of Agriculture (chairman) Cooperative Central Bank, Ministry of Finance, and Loan Commissioners. The same committee together with representatives from the Planning Bureau and the Department of Co-operative Development controls the loans provided to displaced persons. The loans are administered by the Cooperative Central Bank which charges 1.5% for its services. The funds are provided by the Loan Commissioners to the Cooperative Bank at 3% p.a. and so the interest rate paid by the farmer is 4.5% p.a. The rate of interest for default of payment is 7%. 5/ About 25% of the total cost is offered as cash and food when works are undertaken by individual farmers. If works are performed by the Soil Conservation Division, 50% of the total cost is offered as cash; the rest as loan at 4.5%. In the case of vines replanting the loans limit is CE 990/family, a 4-year grace period is provided and a CE 3.5/donum subsidy for 5 years is granted. Sa/ Additional incentives provided: CE 1/animal for record keeping, Ch 2/culled animal and CE l/donum for fodders. Limits: CE 120, CE 30 and CE 60 per unit, respectively. 6/ Loans under the agricultural Credit Law provide low interest rate credit for longer term investment. The loan fund operates as a revolving fund with Government providing, through the Loan Commissioners, additional funds whenever the repayments are inadequate to meet the demand for loans. The Loan Commissioners charge 3% p.a. to the Bank which charges 4.5% p.a. from the borrowers. The Cooperative Bank has recently requested (last quarter 1976) that a default charge of 7%/be allowed for loans under the Credit Law. Request is under consideration. 7/ Linking villages; either earthen or asphalted surface 3 to 3.65 meters in width. 8/ Loan Commissioners charge 5.5% from the Land Consolidation Authority which charges 4.5%, from farmers. The differential interest cost for the Authority is subsidized by the Government.

Note: The aforementioned are the main projects receiving Government assistance. Additionally, the Government provides at its own risk medium-term loans to displaced farmers at 4.5% interest rate for handicrafts and rabbit breeding through the Cooperative Bank. For the purchase of agricultural machinery, pumping units, medium-term loans are issued. These loans with short-term loans as well, up to CE 500/family, to cover cultivation expenses for grapes, citrus, cereals and vegetables, are provided through the Department of Cooperative Development and a, the local Co-operative credit societies a r -,

February 11, 1977 ANNEx 2 Oat ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Table4

- - -o"-o- - -~ - ~ 0000 0

-Z Z 00 000 00 00000 0 0000000

. .o,000 .: .. .:000 . .00: .0. .0 0 00 0'00000 00

0 * , o Q O O,,**A0 :0 4 0 0 , 0 : 00

000 ... 003 0 00 00.00000. 0 0000 00. 7,' ~ ~ 00 00 0 0 0 0 00 0 0 000000 00

. ..O ...... o 0 00 0 000.0 0 :.o APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Loans by Loan Commissioners

Loans Approved During ------1975 ------1974 ------1973 ----- 1972 ----- Number Amount Number Amount Number Amount Number Amount CE CE CE CE

I. Water Development and Use 104 728,972 78 306,719 61 468,210 78 429,868 of Which: Major Irrigation Works 1 18,000 - - 2 39,893 1 1,000 Minor Irrigation Works 45 157,013 29 81,558 14 56,433 23 60,917 Village Water Supply 47 168,476 46 157,450 40 230,901 50 221,410

II. Agricultural Development 20 1,553,856 10 379,880 6 80,999 6 85,448 of Which:

WFP -/ Soil Conservation and Tree Planting 3 59,669 1 23,705 1 31,865 1 38,322 Land Consolidation and Settlement 3 28,256 3 32,882 3 34,854 2 23,658

III. Rural Development 120 116,140 122 91,065 130 131,092 143 115,608

IV. Education and other Social Services 44 774,505 37 1,165,250 44 314,619 47 847,264 of Which: Elementary School Buildings 25 243,555 19 104,000 22 84,639 25 217,200 Secondary School Buildings 16 416,950 17 343,250 22 229,980 22 630,064

TOTAL: 414 5,099,773 293 2,286,109 286 2,204,690 324 3,907,349

Amount Disbursed During: From Current Year Commitments 3,608,746 1,877,616 1,696,768 2,609,824 From Previous Years' Commitments 382,827 687,814 1,273,678 649,475

TOTAL: 3,991,573 2,565,430 2,970,446 3,259,299

1/ WFP = World Food Program

Source: Loan Commissioner Accounts

March 18, 1977

aex APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Loans by Loan Commissioners

Cumulative Loans Outstanding at December 31, …1975 ------1974 - …------1973 ------1972 Number Amount Number Amount Number Amount Number Amount CE CE CE CE

A. BY PURPOSE I. Water Development and Use of Which: 990 7,411,495 933 6,840,326 960 6,759,320 960 6,420,335 Major Irrigation Works 5 165,404 4 147,404 4 147,404 2 107,511 Minor Irrigation Works 335 1,255,805 314 1,131,648 326 1,102,829 343 1,104,178 Village Water Supplies 626 2,742,817 597 2,609,288 612 2,618,812 598 2,455,104 II. Agricultural Development 50 2,457,746 40 844,890 33 464,010 28 380,612 Soil Conservation and Tree Planting (WFP) - 1 286,125 1 226,456 1 202,751 1 170,886 Land Consolidation and Settlement 11 119,649 8 91,393 5 58,511 2 23,658 Soil Conservation 25 111,160 23 107,160 22 106,160 20 103,760 III. Rural Development 662 949,844 616 812,913 588 779,626 550 721,162 IV. Education and Other Social Services 636 5,985,831 636 5,425,201 614 4,287,081 601 4,100,342 Of Which:

Elementary School Buildings 464 2,179,343 479 2,116,238 477 2,047,368 484 2,081,709 Secondary School Buildings 159 2,686,350 145 2,303,882 127 1,952,632 107 1,731,552

TOTAL: 2,999 28,164,283 2,612 24,323,199 2,559 22,279,935 2,481 20,175,658

B. BY INTEREST RATE BETWEEN:

2.5 - 3% 49 3,582,032 43 1,892,949 47 1,506,160 53 1,385,282 3 - 4.5% 508 4,110,803 520 4,067,974 554 4,016,740 563 4,003,360 4.5 - 6% 2,436 19,725,583 2,043 17,616,411 1,952 16,125,226 1,860 14,190,540 6 7% - 6 745,865 6 745,865 6 631,809 5 596,476

Value Weighted Interest Rate (%) 4.75 4.84 4.85 4.82

C. BY LENGTH OF REPAYMENT PERIOD

Up to 9 Years 1,381 1,048 997 967 Between 10 - 20 Years 1,591 1,536 1,535 1,488 Between 21 - 30 Years 27 28 27 26

1/ WFP = World Food Program

Source: Loan Commissioners Accounts and Statistics, 1971 to 1975.

March 18, 1977 ANNEX 3 Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Project Area

1. Location. Pitsilia occupies about 61,180 ha and includes 49 villages with a total population of 20,585 (1973). The area forms the eastern part of the Troodos Massif Mountain Range and although centrally located in relation to the Island's form, it is rather isolated and relatively distant from the two main centres, the towns of Nicosia to the northeast and Limassol to the south.

2. To the north of the region spreads the Western Mesaoria Plain, to the east the lower Troodos foothills, to the south the region is demarcated by a region of undulating terrain while westwards is the western and highest part of central Troodos with the highest peaks reaching over 6,400 feet and densely forested.

3. The physical homogeneity of Pitsilia and historic development have provided the area with an identity. This homogeneous region may be divided into three major Economic-Service sub-regions and one minor sub-region:

(i) The Nicosia Economic Region and the Service Region of Klirou, with the following villages: Alithinou, Alona, Apliki, Askas, Ay. Marina, Ay. Irini, Ghourri, Kannavia, Kambi, Khourdali, Spilia, Laghoudera, Lazania, Livadhia, Phterikoudhi, Palekhori, Phikardou, Pharmakas, Platanistassa, Polystipos, Sarandi, Xyliatos;

(ii) The Troodos Economic Region and the Service Region of Agros with the following villages: Agros, Agridhia, Ay. Ioannis, Ay. Theodoros, Dhymmes, Kato Mylos, Khandria, Kyperounda, Kato Amiandos, Pano Amiandos, Pelendria, Potamitissa;

(iii) The Economic and Service Region of Limassol town with the following villages: Akapnou, Arakapas, Ay. Konstantinos, Ay. Pavlos, Athrakos, Dhierona, Eptagonia, Kalokhorio, Louvaras, Sykopetra, Zoopiyi; and

(iv) The Larnaca Sub-region with the following villages: Ayii Vavatsinias, Melini, Odhou, Ora. ANNEX 3 Page 2

4. Relief. The region lies at an elevation ranging between 500 and 1,600 metres above sea level. There are two mountain peaks, i.e., Madari 1,600 m and Papoutsa 1,545 m. A rugged topography prevails and the terrain is dissected by numerous streams and small deep valleys. The drainage pattern has a generally north-south direction.

5. Geology. Structurally the region is part of the Troodos Massif created from the intrusion of ophiolitic magma into overlying sedimentary rocks. The region lies mainly on diabase rocks with gabbros in its western part and the northern part mainly occupied by pillow lavas. Some pillow lavas and ultrabasic plutonic rocks are met in the southern part, as well as some granophyre outcrops. A number of faults dissect the region.

6. Climate. The region is characterized by cool wet winters and warm dry summers, the relief and vegetation being moderating factors on extremes. Mean annual precipitation varies from 659 mm at Kalokhorio (alt. 670 m) to 807 mm at Palekhori (alt. 910 m) and most villages fall within this range. The main rainy season is between December and March; the dry period from June to August. The temperatures also vary with altitude, exposure and season and are quite low in winter; the mean daily for Pano Amiandos in January being 3.4 C and in July 22.60 C. Mean temperature minima are usually above freezing.

7. Surface Water. The region is divided into two distinct watersheds, the northern and the southern. In the north The Akaki and Peristerona rivers are the main tributaries of the Serrakhis river running down into Morphou Bay. The southern area is drained by the Limnatis and Kourris rivers which discharge their waters into the Episkopi and Akrotiri Bays. None of these streams are perennial.

8. Mean annual flows of the rivers flowing through the region is given below. In most cases, these flows, which form the potential in surface water resources, include water currently being used for irrigation. The existing developed water resources are estimated at 11 MCM (10 MCM for irrigation and 1.0 for domestic supplies) and represent only a fraction of the total potential of about 87.7 MCM. The table below gives a disaggregated estimate. ANNEX 3 Page 3

Mean Annual Flows of Rivers in the Pitsilia Region

Catchment Mean Annual Area Run-Off Name (sq/km) (M.C.M.)

North Region

Kalokhorio ) 25 6.5 ) (Akaki) Maroulena ) 34.2 9.0

Palekhori ) (Peristerona) Phterikoudhi ) 78.5 20.0

Lagoudhera ) 16.3 2.0 ) (Elea) Kannavia ) 20.5 3.5

Spilia (Atsas) 9.2 1.5

South Region

Sykopetra ) 18.8 4.5 ) (Yermasoyia) Arakapas ) 35 7.0

Ambelikos ) 75 18.5 ) Treimilini ) (Kourris) 31 15.2

TOTAL: 343.5 87.7

9. Groundwater. A part of this water is tapped from small springs and shallow wells which are mostly used for village water supplies. There is potential for exploiting the groundwater through boreholes. Recent drillings indicate that an estimated 2 to 3 MCM could be extracted by deep pumping throughboreholes.

10. Mineral Resources. On the northwesternpart of the region lies one of the most importantmining centres of Cyprus, the Amiandos asbestos mine. Indicationsof sulphide mineralizationare met, particularlyin the pillow lavas in the northern part of the region. Pyrrhotite mineralizationhas been located within gabbros at Ay. Ioannis village with chromite mineralization located in the Limassol Forest area in the southern part of the region. ANNEX 3 Page 4

11. Soils. Most of the soils in the region are shallow eutric lithosols developed on igneous rocks, non-calcareousof a generally low phosphorous content. Eutric cambisols of a medium texture are met in the eastern part of the region. Deep soils are met in the river valley bottoms.

12. Forests. The total area of the main forests in the region is approximately 17,530 ha, about 29% of the total area. The greatest part (75%) of such forest areas is formed by the Adelphi Forest on the north part of the region, the rest being parts of the Troodos, Limassol and Macheras forests. They are all typically pine forests.

13. Road Network. Transport by road both to and within Pitsilia is difficult owing to the topography. The main roads are all of a low standard with one single asphalted lane. The most significantroads are the Nicosia- Palekhori-Agrosroad, the Alona-Kato-Moniroad, the Zoopiyi-Limassolroad, the Karvounas-Saittasand the Limassol-Troodosroad. The narrower north-south valleys to the north of the main watershed make communicationsbetween villages difficult and, consequently,each valley has developed its own north-south road to Nicosia. Communicationsbetween the villages to the south of the main watershed are somewhat better, but since many roads linking villages are earthen or gravel roads, there is potential for improvement.

14. Public Transportation. The villages of Pitsilia are served by 120 buses providing public transportationon a daily basis to Nicosia, Limassol, and points en route.

15. Villages. Settlement in the Pitsilia Region dates largely from the medieval period when most villages were founded. Practicallyall villages have rural funct4onsand are agriculturalin character. Although no notably large settlement exists in this truly rural region, some of the large ones, such as Agros and Palekhori, have developed as minor rural service centres for the area providing secondary education, health and low-grade shopping and other social facilitiesand services. Practically all villages are located in valley sides adjacent to agriculturalland in the valley itself. Even more significant is that all communications(both main and minor roads) follow the watersheds and the valleys themselves. As the land rises from 900 m to over 1,500 m, communicationbecomes more difficult and most villages are served by only one road.

Three groups of settlementsmay be distinguished:

(a) the central core, including the majority of villages, as well as the larger ones of Agros, Kyperounda and Palekhori;

(b) the southern group, somewhat isolated from the rest of the region and associated more with Limassol than main Pitsilia. These include Zoopiyi, Ay. Pavlos, Ay. Constantinos,Athrakos, Louvaras and Kalokhorio;and ANNEX 3 Page 5

(c) the eastern and nort& -stern group, Pharmakas, Kambi, Lazania, Phikardou and Gourri, again isolated from the the rest of the regi. -s and more linked to Klirou as well as to Nicosia via ti.eMakheras-Nicosia road.

Within these three groups, the settlements are closely located mostly within a mile from each other.

16. Housing. The Region's housing stock in 1974 was estimated at 7,400 housing units; in 1960 it was 6,740 units, i.e., over a period of 14 years the housing stock has risen by 9.8%. Over the same period the Islands' total housing stock has increased by 24.5%. The great majority of houses are privately owned; most are owner-occupied. The following indicators summarize the housing standards in Pitsilia:

1960 1974

No. of housing units/1,000 inhab. 311. 359. No. of households/1,000 inhab. 244. 257. Average No. of rooms/house 2.4 3.5 Average No. of persons/house 3.2 2.8 Average No. of persons/room (taking into account total stock) 1.4 0.8 Average No. of persons/room (taking into account occupied units only) 1.8 1.1

Percent of housing units lacking

- Electricity 78.5 12.0 - Running water (inside the house) 83.8 10.0 - Modern bath/shower 99.5 76.4 - Flush toilet 94.8 74.0

17. Village Domestic Water Supplies. The domestic water supplies in Pitsilia villages compare poorly with other parts of the country. Three of the forty-nine villages in the Region do not have house-to-house supplies, and there are 23 villages in which water supplies are considered unsatisfactory (defined as less than 20 gallons per head per day).

18. Electricity Supply. By 1976, all Pitsilia villages had electricity; the villages of the Troodos Sub-region being connected between 1963 and 1968, those of Nicosia between 1964 and 1970, and those of Limassol during and after 1970.

19. Telephone Services. All villages have a public telephone box. An automatic exchange at Agros village serves most of the region and there are no plans for future expansions as the system has spare capacity. ANNEX 3 Page 6

20. Education. The administration of education is done through the Ministry of Education assisted by school committees in every town and village.

21. Pre-elementary. In 1973/74 there were two kindergartens located at Agros and Pelendri.

22. Primary. Primary education is free and compulsory for all children aged 5 to 11 years. Most of the villages in Pitsilia are served by their own elementary school. Due to their small numbers, children from six villages attend school in neighboring villages. The size of the school depends on the village's pupil population and ranges form 1 to 11 classrooms. More than half of the elementary schools in the region belong to the small size group (1 to 2 classrooms), and most are of the one or two teacher type.

23. The number of pupils attending primary education in Pitsilia is declining. In 1959/60, enrollment in all elementary schools was 3,300 pupils; it declined to 2,377 in 1973/74. The average annual decrease in the period 1959-74 is estimated at 2.2% which is much higher than the national average annual decrease of 0.3% for the same period.

24. Secondary Education. The only secondary school in the Pitsilia Region is the Agros Gymnasium specializing in classical education although recently its curriculum has been extended to include commercial and economic subjects. The number of pupils enrolled at the Agros Gymnasium is increasing: in 1959/60 there were 294; in 1973/74, 566; and in 1974/75, 962 pupils (including 300 displaced pupils). The Gymnasium draws pupils not only from its immediate hinterland but also from the wider Pitsilia Region.

25. Health. Publicly provided medical services are hierarchically organized in the following order: General Hospitals, District Hospitals, Rural Health Centres (R.H.C.) and Health Sub-Centres. The only medical institutions that provide services locally are the publicly administered Rural Health Centres. Three R.H.C.s (Palekhori, Agros and Klirou), two of which are located in the Pitsilia Region and the third at its periphery, provide local medical services to about 95% of the population of the Region. Each of these has a unit which is responsible for a number of villages and within the service area of an R.H.C. there are a number of Sub-Centres.

26. Each R.H.C. is staffed with a team of health workers: a general practitioner, a pharmacist, a nurse, a midwife and/or health visitor and health inspector (environmental health). The R.H.C.s also have a small number of beds.

27. The Kyperounda Sanatorium, which specializes in the treatment of tuberculosis and chest patients from all over Cyprus, is located in Pitsilia.

28. Hygienic and Environmental Health Conditions. Hygienic conditions in the region and environmental sanitation in general are considered satisfactory. ANNEX 3 Page 7

No epidemics of any serious infectiousdiseases have occurred in the area. The responsibilitywith regard to the improvementof sanitary condit_ons in the area rest with the existing public health staff and includes the following activities: inspection of water supplies, sanitary inspection of buildings, insect control, health education, vaccinations,assistance and advice to the local authoritiesfor the improvementof sanitation,etc. It should be noted that environmentalsanitation is considered as the most well-functioninghealth service in rural areas.

29. Population Trends. During 1946-60 the total population of the Island increasedby 1.7% per annum from 450,000 in 1946 to 574,000 in 1960. The urban areas grew at 4.2% per annum, while growth in the rural areas at 0.7% was below the natural rate of population increase. In the Pitsilia Region, only the Troodos sub-region showed growth, while the population actually fell in the Nicosia and Larnaca sub-regions. Overall, the population of Pitsilia grew by 0.3%. Between 1960 and 1973, the populationof the Island increasedat an average of 0.8% per annum; the growth rate of population in the urban areas was 2.0%, while the rural population declined from 368,000 to 365,000. This decline of the rural populationwas largely due to the inclusion of the villages around Limassol as suburbs. In general, the rural areas maintained their population largely beause of the growth of the commuting villages (i.e. those within a reasonable commuting distance from the towns). In the Pitsilia region the population showed an absolute decline from 21,638 in 1960 to 20,585 in 1973. The population decline in the Troodos sub-regionwas very small, but in the Larnaca sub-region the rate of decline was accelerated. In 1973 the Pitsilia region had 3.2% of the Island's population.

30. Population Projections. Population projectionsare based on trend extrapolationtaking into account Island-widepopulation projectionsup to the year 2000. These projectionsare based upon the proportion of the total rural population of Cyprus that Pitsilia would have, adjusted for each sub- region and village. The projectionsdo not allow for the effects of the Pitsilia Project (see Table 1).

31. Age Structure. There are no statistics available regarding the age structure of Pitsilia;however, the statistics available for the Kilani StatisticalRegion provide a reasonable approximationof the age structure of Pitsilia. The Kilani StatisticalRegion had a 1973 population of 23,747 of which 9,304 (or 39%) were from the villages of the Troodos sub-regionsof Pitsilia. A cross-checkwith the number of children in primary schools in Pitsilia and the number implied by the age structure of the Kilani Region showed a reasonablematch, with 2,757 actual pupils and 2,384 implied. Comparisonwith the age structure of the Whole Island indicates a lower birth rate and a markedly aged population (over 50 years of age) (see Table 2). The statistics for elementary school children imply that 16% of the present population of Pitsilia consists of persons displaced from the occupied areas. ANNEX 3 Page 8

32. Land Use. The basic cultivation is the vineyards which predominate the sloping terrain. At present, the cultivated area is restricted to around the settlements and along the riverbeds (irrigated crops), and on terraced areas on the valley sides. The basic cultivations are wine grapes predomi- nating in all sub-regions, and deciduous fruit trees concentrated basically in the upland villages. Potato and other vegetable cultivation is restricted to the irrigated valley bottoms near the villages, whereas citrus groves (mandarines) are found in some of the low-land southern villages. The most outstanding feature is that though dry-farming takes up 88% of the cultivated area, its contribution to gross output is only 32.5%.

33. Land Tenure. The total area (61,180 ha) of the region is divided into the following major categories (1964 data):

(i) Private land 36,051 ha (59%) (ii) Communal land, roads and riverbeds 495 ha (0.8%) (iii) Hali (or state) land 7,095 ha (11.6%) (iv) Main Forests 17,539 ha (28.6%)

34. The region demonstrates the land tenure problems of Cyprus in their most acute form. The farm holdings are small, the family ownership being about 5.2 ha of which about 38% is not cultivated. There is considerable variation in the average size of holdings within the villages of the Region, with the Troodos sub-region having the smallest holdings. Fragmentation of the holdings is high, the average family farm having about 14 plots scattered around the village. As a result, the average plot size is about 0.37 ha, ranging from 0.1 ha for irrigated land to 0.3 ha for dryland (see Tables 3 and 4). To make matters worse, about 72% of all the plots do not have access by either public path or farm road. Problems are also created by the existence of undivided shares, by which a number of people own a plot of land, thus making farm management extremely difficult (Also See Annex 4).

35. Animal Husbandry. Livestock development in Pitsilia is limited. Free grazing is restricted, especially in villages at the higher altitudes. However, each family usually kieps at least three to five goats as tethered animals and six to ten fowl for its own needs. The feed for goats, fowl and traction oxen is derived (mainly) from hay and straw produced from the local vetch and on vegetable wastes; sometimes it is supplemented through purchased feeding stuffs. Recently, some poultry and pig units have been established; feeding requirements are almost exclusively based on purchased feed. Sheep and goats are relatively the most important livestock in the area; however, in the context of the national flock, the goat and sheep population is only about 1% (9,000 in Pitsilia; 860,000 in the island). The output (milk ard meat) produced is essentially for self-consumption either fresh or as cheese (Holloumi cheese manually made, from goat milk, is sold on the local market). ANNEX 3 Page 9

36. Animal Health. The main diseases observed in Pitsilia are: Endo- and Ecto-parasitesof animals, mastitis and avitaminosis. Animal health is looked after by the veterinary station at Limassol and by six substations at Agros, Gajata, Klirou, Saittas, Skarinou, and Aakaki. The substationsare used as veterinary clinics by visiting mobile units at weekly or fortnightly intervals. Besides curative and a little extensionwork, the veterinary system in Pitsilia essentiallyprovides preventive services through vaccinations against enteroxemiaand foot and mouth disease. The overall level of facilities and services is inadequate for the livestock population of the area.

37. Agro-processing. Three specializedwineries, six small factories for rose water and about fifteen meat processing units specialized in smoked pork meat constitute the present industries dealing with the processing of agriculturalproducts in the Pitsilia Region. In addition, the production of local village wine, olive oil processing and the distillationof spirits are common in almost all the villages of the region and are based on traditional methods. A considerablenumber of people are engaged, particularlywomen, in small cottage industries such as cheese making from goat's milk, embroidering, cane and straw basket making, floor covering, etc. The existing non-industrial local agriculturalproduction is not, however, in a position to supply large agroindustries. Even the existing ones are operating only one or two months during the year due to the seasonality of products they depend upon. Cold storage is widely used in villages where deciduous fruits are among the main products. The storage capacity of the existing 96 cold storage plants is estimated at around 3,000 tons and is not presently fully utilized. Beekeeping is also practiced in the region and there are presently about 90 small units in 35 villages. The prospects for a developing beekeeping industry in the region are very promising even from the marketing viewpoint.

38. Mechanization of Farming. Recently, small tractors were introduced; but the lack of agriculturalroads, the highly fragmented land and the old way of planting (not in rows) vineyards, prevent the introductionof more tractors in the region and, therefore, the animal traction power would continue to be important for some years to come. In fact, presently 9 out of 10 farmers use animal traction.

39. Use of Fertilizers. The use of fertilizers is common but confined to irrigated tree crops and vegetables.

40. Labor. Most farms are family farms and rarely use hired labor except occasionallyfor harvesting of fruit (see Tables 3 and 4).

41. Credit and Marketing. Practically every village has a well-established and active cooperativewhich provides both short-term and long-term credit to the farming community at rates of interest between 5-1/2 to 8-1/2%. Marketing of produce is generally done on an individual basis by the farmers who sell their production directly on the regional markets or to middlemen. However, grapes for Commandariawine are generally sold to specialized cooperative wineries. ANNEX 3 Page 10

42. Production Pattern. The gross revenue of the average farm is derived 78% from crop production and 22% from animal husband-y. About 27% of production in terms of value is consumed by the family and animal products form a disproportionately high percentage of this non-cash income. It should be noted that the revenue from vine production is approximately equal to that of tree and crop production. This is because the grapes of the region are also sold fresh as table grapes even though they are of local winemaking varieties, and because the value of the product is increased due to local processing into wines and spirits (i.e., Zivania, Commandaria, etc.). Vines contribute more to gross revenue in the Limassol and Nicosia sub-regions, and other crops more in the Troodos sub-region. Limassol sub-region attained the highest gross revenue of all sub-regions followed by those of Troodos and Nicosia (Table 4).

43. Agricultural Extension and Other Services. The agricultural practices and programs are generally disseminated through the Agricultural Extension Services of the Ministry of Agriculture and Natural Resources. The Region is well-covered by 9 Beat Officers. There is currently a Beat Officer stationed at Agros serving a total of 17 villages in the Region. Another 11 villages are served by a Beat Officer stationed at Deftera, whereas the remaining villages are served by other Beat Officers who serve villages outside the Region as well.

44. Farm Incomes. The average age (54 years) and education (5.3 years) (Table 3) suggest that the majority of farmers are old people with an elementary education. Young people usually seek better opportunities elsewhere since they see no prospects in agriculure and look to education as a means of finding other forms of employment. The size and farming pattern of the area does not allow full employment on the farm (Table 4) and, therefore, many people have off-farm employment. Only about 20% of the owners consider themselves as full-time farmers, or with farming as main jobs (Table 5).

45. The difficult physical and land tenure conditions existing in the area have their effects upon farm incomes. An Agro-economic survey of Pitsilia (in 1974) indicated that the per capita income of an average family (with 4.6 members) was US$310 ranging from US$270 (for farms less than 2 ha) to US$360 (for farms between 4 to 8 ha); roughly one-half the family income was from off-farm work (see Table 6; and Tables 3 and 4). Since about 75% of the residents of Pitsilia do not consider farming as their principal occupation and/or source of income (see Table 5), the off-farm income is earned by selling labor in cities and/or other villages. Substantial commuting, therefore, is a characteristic of the Pitsilia farmers.

46. A survey on commuting undertaken in 1969 provided detailed information on both the number and direction of commuters from each village. The survey indicated that the villagers of the Nicosia sub-region predominantly commute to Nicosia, while those within the Limassol District commute to Limassol. The exceptions to this pattern are the villages of Khandria, ANNEX 3 Page 11

Kyperounda and Agros which have considerablecommuting to both Limassol and Nicosia. There is regular commutingwithin Pitsilia to the Amiandos asbestos mine in the Troodos sub-region. The total number of commuters travellingout- side the Pitsilia region was 2,539, of which 1,086 went to Nicosia, 925 to Limassol and 102 to the mines at Kalavassos,Mitsero and Chromium, the rest commuted between villages in Pitsilia. ANNEX 3 Table 1 APPRAISAL OF

PITSILIA INTECRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Population Projections - Pitsilia

1946 1960 1973 1986 2000 Census Census Survey Projection Projection

A. Nicosia Sub-Region

1. Kannavia 198 222 222 220 224 2. Ay. Irini 107 122 88 53 34 3. Khourdali ) 538 555 437 329 246 4. Spilia ) 5. Sarandi 134 164 149 131 114 6. Laghoudera 338 310 328 335 336 7. Polystipos 425 430 489 533 578 8. Livadhia 188 188 128 76 48 9. Alithinou 82 73 50 31 20 10. Platanistasa 571 590 561 513 466 11. Alona 550 569 507 437 373 12. Phterikoudhi 385 294 261 228 187 13. Askas 439 363 362 346 330 14. Palechori 1,918 1,906 1,683 1,431 1,214 15. Apliki 118 120 130 135 140 16. Ghouri 386 397 365 324 287 17. Phikardou 120 81 32 11 - 18. Lazania (with Makheras Mon.) 175 101 51 76 65 19. Kambi 267 228 235 239 242 20. Pharmakas 501 479 504 517 521 21. Ay. Marina 418 516 539 587 628 22. Xyliatos 110 131 140 152 161 Subtotal 7,968 7,839 7,261 6,704 6,214 B. Troodos Sub-Region

23. Khandria 446 560 581 577 561 24. Kyperounda 1,197 1,538 1,806 2,021 2,242 25. P. Amiandos 656 430 200 200 200 26. K. Amiandos 281 406 372 323 279 27. Dhymes 321 373 391 394 389 28. Agridhia 443 525 557 563 566 29. Agros 1,499 1,476 1,256 1,018 822 30. Potamitissa 262 339 293 241 197 31. Pelendria 1,503 2,094 2,253 2,295 2,331 32. K. Mylos 169 192 199 200 193 33. Ay. loannis 760 875 929 939 945 34. Ay. Theodoros 691 604 467 343 251 Subtotal 8,228 9,412 9,304 9,114 8,975 C. Limassol Sub-Region 35. Zoopiyi 307 265 254 234 217 36. Kalonkhorion 522 548 528 484 448 37. Athrakas 51 7 - - - 38. Ayios Pavlos 218 244 214 122 153 39. Ayios Konstantinos 208 250 272 285 299 40. Sykopetra 215 217 193 163 141 41. Louvaras 283 328 384 435 496 42. Eptagonia 470 427 350 275 201 43. Arakapas 326 401 415 431 437 44. Akapnou 228 175 100 62 36 45. Dierona 310 322 353 360 372 Subtotal 3,138 3,184 3,063 2,911 2,800 D. Larnaca Sub-Region

46. Odhou 263 250 215 172 148 47. Melini 221 221 156 122 82 48. Ora 583 335 236 141 80 49. Ayii Vavatsinias 388 397 350 306 256 Subtotal 1,455 1,203 957 741 566 Overall Total 20,789 21,638 20,585 19,470 18,555

Source: Department of Town Planning and Housing Planning Bureau

March 17, 1977 ANNEX 3 Table 2

APPRA_.SALOF

PITSILIA INTEGRATEDPUPRAL DEVELOPMENT PROJECT

QYURU S

1973 Age Distributionof the Kilani StatisticalRegion and the Whole Island

Age Group Kilani Statistical Whole (Years) Region Island

Under 1 0.9 ) 1.7 ) 1 - 4 5.6 ) 6.9 ) 28.9 5 - 9 8.1 )709.5) 10 - 14 12.4 ) 10.8 )

15 - 19 11.2 ) 10.6 ) 20 - 24 8.6 ) 8.8 ) 25 - 29 5.6 ) 7.9 ) 30 - 34 4.3 ) 5.9 ) 35 - 39 3.8 ) 54.5 5.7 ) 57.5 40 - 44 5.1 ) 5.4 ) 45 - 49 5.0 ) 4.9 ) 50 - 54 5.2 ) 4.3 ) 55 - 59 5.7 ) 4.0 )

60 - 64 5.8 ) 4.1 ) 65 - 69 5.1 ) 3.4 ) 70 - 74 . 18.5 2.9 ) 13.6 75 - 79 1.6 )1.5) 80 - 84 1.2 ) 0.9 ) 85 and over 1.1 ) 0.8 )

TOTAL 100 100

Source: Planning Bureau

March 17, 1977 APPRAISAL OF

PITSILlA INTEGRATED RURAL DVEOLOPS4ENT

CYPRUS

Land Ownership, F-rtni Pattern and GnrlnoeniaonSelected Fan in Piteilla i

Nictosia Troeda. Ltse Global Aper&Ae of Mean of A-eras. of Pte. of Average of Mean of Mean of Nsber ofF -anE: 5 9.... 7 ....5.. 10 36 5 5 6 7 4 31 3 5 5...... j4j 23 90Q...

1. Ow Loand 16.05 15.87 38.15 34.94 98.00 37.97 8.00 21.19 33.00 31.36 62.62 30.00 25.75 33.50 76.50 57.25 59.00 51.99 38.80 2. RentedprFet------3.00 -- -- 1.29 0.51 3.Ch6.1 iLoand -- -- 2.5 -- 0. 44 ------7.00 - -- 1.41 0.55 4. UO..sItitvad 8.51 - 15.00 7.5 38.75 14.32 0.25 5.50 10.50 2.00 4.00 11.27 12.00 6.00 52.50 4.50 -- 20.74 14.91 (I Cslttvabls 7.5 ) - (5.00) (7.5 )(38.75) (12.08) -- (5.00) (6.00) -- 4.00 19.42) (17.00) (6.00) (42.50) 14.50) -- (14.22) (11.71) (ii) Nn-Culti-ohle 1.0 ) - (10.00) -- -- 72.24) C0.25) (0.50) (4.50) C 2.00) -- (1.85) -- -- (10.00) -- -- 6.52) 73.20) 5. CulIvteitd Land (1+2+3-4) 7.55 15.87 23.15 20.94 59.25 24.09 7.75 13.68 22.50 29.36 58.62 18.73 13.75 27.50 33.00 52.75 59.90 33.95 24.95 6. R..ted T. ------~-, -- .88 6. RentedmdTo-- .5-5 1i5.87 23.1 2994 5925 23.23 7.75 1568 22.50 29.36 58.62 18.73 157940 -3.0 .. 0 33.95 233137 II. Irrieated and DrYSsed OpeoratedLoand tdoet-)

8. Orylend 4.88 14.25 21.31 28.07 55.00 20.51 3.75 11.05 16.50 24.30 42.62 14.14 11.00 22.50 22.50 44.75 55.00 30.61 20.45 9. 1irrgeted 2.67 1.62 5.84 1.87 4.25 2.72 4.00 4.63 6.00 5.06 16.00 4.59 2.75 1.50 10.50 1.00 4.00 3.34 3.53 (i) Fnlly 72.67) (1.25) (0.87) -- -- (0.76) (3.12) 72.50) (2.32) (0.56) 78.00) (1.14) (0.50) (1.00) CM.0) 70.75) -- 71.64) (1.12) (if) Seacoonily -- C 0.25)( 0.72) 7 1.87) -- ( 1.13) ( 0.50) ( 2.13) ( 0.59) 7 4.50) 0.50) ( 2.30) ( 2.255 -- 7 6.50) -- 7 4.00)7 1.26) 7 1.57) 7011) Irrigeble -- 10.12) (0.25) -- 74.25) 70.83) 70.38) -- (3.09) -- (7.50) (1.14) -- 70.50) -- 70.25) -- O.44) 70.84) 10. Numbeer of Plots (1 Dryland 3 8 24 11 22 11 5 11 1.4 15 22 Fs 1 6. U 14 10 6 9 (ii) Irrigated 3 7 12 4 3 5 4 16 9 6 12 6 3 4 5 3 1 3 5

Ill. Parsies Patton (do-an) 11. VegetshLen -- 0.25 0.87 1.69 -- 1.02 -- 1.13 0.88 0.25 1.50 0.67 0.50 0.50 1.25 0.25 -- 1.26 0.96 12. terease-- - 2.25 -- 14.50 1.43 ------1.00 -- 2.50 -- 1.99 1.24 13. Lagtse- -- -- 0.55 -- 0.55 0.25 ------0.25 -- -- 4.00 1.235 - 0.25 0.32 14. Pedilere - - -- 0.38 1.50 0.54 -- 1.73 2.84 0.75 - 1.62 3.00 -- 3.50 2.00 1.00 1.41 0.95 15, vines 4.88 8.75 56.81 25.94 35.50 14.58 5.58 11.05 15.50 24.30 42.62 11.52 8.00 21.50 8.00 '39.58 55.00 21.76 15.14 16. Irrigated Trace. 2.67 1.37 0.82 1.87 -- 2.01 3.62 4.23 6.00 5.06 9.25 3.66 2.75 0.25 10.50 0.50 3.00 2.31 2.66 17. Dryland tre..e -- 550 2.50 1.38 2.50 4.52 ------1.00 9.00 - -- 3.44 3.43 18. Total Ares Under Crop 7.55 15.87 23.25 31.81 54.00 24.65 7.37 1.4 2.2 3.6 5.7 177 42 24.25 36.25 46.00 59.00 32.4 24.90

IV. G-ners

19. P.areer'e Age (Years) 35 42 30 57 61 55.7 57 67 52 55 54 52.4 61 26 75 41 45 54.6 54.3 20, Farteer'.egducatine (Yeare) 7 5 6 6 5 5.6 6 2 0 5 4 5.7 3 4 1 6 6 4.3 5.3 21. PFeily Laber (No. of Working Days) 120 150 220 186 150 160 190 210 330 140 450 171 150 80 300 150 278 175 168 22. Hired Laber ( Ne. of Working Day.) 16 ------4 ------40 -- 4 ------7 4 23. Total L.abor (No. of Working Day.) 136 150 220 186 150 164 190 210 330 180 450 175 150 80 500 150 270 182 172 jo' Survey by the Agri-at=lutl RaecebSntiotet, 5975. 2/ 7.5 doem- -Iha. 2/ Stare Lend 4/ Cultivated land net nof(1) rented and (ii) pereneia11y cropped (alnode, vinee) leand. 5/0.86 deeam, praparad.f-r elteod planting. y 3.0 dents for viee. ~/7donasm, for vine.. 8/The averega for 90 faern is poeitive even thoogh for the smallr eob-sanpls thie teas negligible. 9/0.79 dseus for vine. ad e1aneds.

Note en Valsation: ____ 020" - 1 dents nof dryland 0* 150 = 1 den- of e.acenally irrigated land C*200 a 1 don-e of irrigated land Trace. Value for none. et, Ck30 par denti; for citron nod petn et 0lt3 per tree; for ether trees a C*F 2 per tree; ned fort drylend tr.ee ot C* 1 per tree.

I-neary 1977 0 I 0 I ' '.9 -' ANNEX3

'.4 '.4 0 000'

'0 0'0i "9 0 '. - TobIe4 '.4'.'. 0.00 '000 0000'4'0 44O00. -. 9-'.'.' 0.4.9 .4.40400000000000 0 '.-0 .940-'.4 0000 '0 4.] 00 '.4049-1 -004 '4.940.94

.9' I .40.444000000.4000 '0 000 0'00 400.9-0 0'-'404 000 040 00440000 0- .0

o 0 0 -00 - -

0' 000 00.94 04 oo0o000090000 I 0 004 004 00<<0000.400 0 00 000 0 '0'.-.0000 00400000000 -0 00 000000

4 4 .4

oCO 000 00- 0.44 00000 00 0

044000 - - - '000 .900 000.9-4<00 - 0 .440 4 0.-'0 040 00 04 00.0'.40 -o 90 .4 ,-. - 4 000 -'0.-' 0 44

.4.4 0 .4

004 004 000.400040000 000 0.40404400000.400 000 04400040000004 o .4 .4.4 .4 .4000 'C

0 0 .4. -.9 0 0 4.

400 040<44040<00 0 00 0

'1 040

40 joo 000000 '-',.-.--'00' 4-

04.404-00.4 4.44.40 00 4.44000040004 .40000 0..4 40 4 40

0 2 004 '.4 '.4 .4 0 4'

04 440 404 000004000004000 400 440 40 004000..40 0440 0 00 000 Oco 0.440000

.44 400004 000 000.440400.04 440 000 000004040004 0 00 0 040 00.4044 0400 0 00 .4 0 0'0't0 000 4 .4 0 0 0 010 0 4 .4 0 0 0 *00 0 .9 000000. 00 .4 000 4400004.40000 J 000 000 ' 040000000000 0 0 NO.90 N 0 0' 040 04004000004 0 00 4004.4 -.. .4 .4 .4 004 .4 .4 L-'E 440-004.9 44

0-40440.'' 4. 01 o4..94 N 0 '.4 '-0 0

rNO 0j 010 .9. 000 440 ' 0 0004004-' 4.0 4.9.4 44 0 00 0.94. .404' 000.914 000400.9 '.4 0 .9 .00. .90.9 4.4 0o0 .9.90.9 .9 -. 400.00 00 00.. 0- 00004 0 N I 00-4 00 000 044.4 -0.94 0 00-04. 0 0 04' '01000 0 04)0 4' 000 0.4o044004.4.444.0-4.00 0000 0 0 04 0.0 4' NO 4. 44.0 04.000'-.4 0.90 0444-0 0 0 4.4000 0 ON'. 4. 00'. 004.4.00-0-040444. 0 0 0 400 4. 4 0 '0 04 4 04.4. .4 00- 004 0 NO.90 .9.90 000 4. - '.9*.90-00-0.00 0 00o0 g.-. .9 o.-.O .90-0 0-.0-oo0N0 04.00 .90-00 4. 00 01 040 0 0.40 4 0.40 00' '4..'0 '00 .9.000 000.40 04.04. .4 4. .94.04.0 0-4' 40 004-14. 0.. 4. >'1' 04.04.00.90 004.0 4.41 04.0 0.00 0.40 0 4.40 0>0 00044004 44444.04 '4-' s 4.. .41 .4IoI0l4I4I 0 10 >1 4. *01.4 .9 .00 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT

CYPRUS

Occupation of Owners by Size of Ownership

Number of Owners Working Ownership Number of As Full-Time With Farming With Farming As Class Owners Farmers As Main Job Secondary Job As Non-Farmer

0.1 -0.3 27 2 (5.9) 2 (14.3) 21 (13.6) 2 (10) 0.31-0.7 37 1 (3.0) 3 (21.4) 26 (16.9) 5 (25) 0.71-1.33 53 7 (20.6) 4 (28.6) 34 (22.1) 8 (40) 1.34-2.00 29 2 (5.9) 5 (35.7) 21 (13.6) 2 (10) 2.01-4.00 50 7 (20.6) - __ 34 (22.1) 3 (15) 4.01-8.00 25 10 (29.3) - -- 15 (9.7) - -- 8.01-15.00+ 10 5 (14.7) - __ 3 (2.0) ----

TOTAL: -- 231 34 (100) 14 (100) 154 (100) 20 (100) PERCENTAGE: 100 14.7 6.1 66.7 8.7

1/ 8 owners are pensioners; 1 is church. They are not included in the occupation data.

Source: Agroeconomic Survey of Pitsilia 1975

January 1977 r ANNEX 3 Table 6

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Cropping Pattern, Costs and Returns by Farm Size

Farm Size Range (donums) Up To 15 16-30 31-60 Mean

. Number of Farms in Sample 29 36 25 90

. Operated Land (donums) 9.9 22.0 43.3 24.0 . Cropping Pattern Vegetables 0.8 1.0 1.1 1.0 Cereals 0.1 0.3 3.9 1.2 Legumes 0.0 0.1 1.0 0.3 Fodders 0.5 0.9 1.5 0.9 Vines 6.5 15.5 25.5 15.4 Irrigated Trees 2.1 2.9 2.9 2.7 Dryland Trees 0.4 1.9 9.1 3.4

Dryland (% of Operated) Land 74.3 83.8 89.4 85.3 Irrigated (7.of Operated) Land 25.7 16.2 10.6 14.7 Vines (% of Operated) Land 66.0 70.4 59.0 64.1

Livestock (Number of) Goats 2.2 3.0 4.4 3.1 Pigs 0.1 0.1 0.2 0.1 Poultry 6.4 9.9 13.2 9.7

Gross Revenue 288.3 444.4 663.4 454.9 Vines ( 80.9) (158.2) (305.6) (174.2) Tree and Crops (135.6) (179.8) (228.6) (179.1) Livestock ( 71.8) (106.4) (129.2) (101.6) Variable Production Cost 83.4 145.9 167.4 130.7 Fertilizer ( 11.9) ( 28.7) ( 30.8) ( 23.9) Hired Labor ( 3.0) ( 6.6) ( 6.4) ( 5.3)

Fixed Cost 79.9 128.8 179,8 * 127.1 Imputed Rent ( 49.2) ( 85.3) (139.2) ( 88.6) Depreciation ( 15.8) ( 20.7) ( 18.3) ( 18.4) Interest Cost ( 14.9) ( 22.8) ( 22.3) ( 20.1) Net Farm Income 125.0 169.7 316.2 197.1 Off-farm Income 383.0 290.0 241.0 306.0 Total Family Income 557.2 545.0 696.4 591.7 Family Members on Farm 4.9 4.4 4.6 4.6 Per Capita Family Income 114 124 151 129

February 8, 1977 ANNEX 4 Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMEN'" PROJECT

CYPRUS

Land Tenure and Land Consolidation

1. Present Status. As in other countries with a long agricultural his- tory, the pattern of land tenure in Cyprus is a product of tradition, inheritance laws and population pressure. The present land tenure in Cyprus has the following main features:

(i) Continually Decreasing Size of Holdings. The average holding size decreased from 7.2 ha in 1946 (census) to 6.2 ha in 1960 to about 5 ha in 1974. There are significant regional variations. For example, in the Pitsilia region, average size of holding ranges from an average of 4 ha in the Troodos region to 7 ha in the Limassol region.

(ii) Fragmentation and Dispersal of Plots. The island-wide estimate of average number of plots per holding is about 12.6; an average holding in Pitsilia consists of about 14.5 plots with some extreme examples of fragmentation, i.e. 86 plots per holding in Alithinou, 67 plots in Livadhia, 58 plots in Polystipos, etc.

(iii) Small Plot Sizes. Such size varies with region and land use ranging from about 0.28 ha in mountainous areas (0.27 in Pitsilia) to about 2.1 ha in the plains, 0.1 ha in irrigated and 0.3 ha in dryland agriculture.

(iv) Irregular Shapes of Plots. Most of the plots are highly irregular in shape. The worst type of irregularities are observed in mountainous areas.

(v) Lack of Access to Plots. Over 70% of the plots do not have direct access; in Pitsilia, 72% of the plots are without road access.

(vi) Joint Ownership of Plots. It is estimated that about 30% of the agricultural land is jointly owned.

(vii) Dual Ownerships. Ownership of trees and rights to water are distinguished from ownership of land. Often, the owner of the plot does not own the trees on the plots or the water in the plot. ANNEX 4 Page 2

(viii) Land Ownership Categories. There are three: State, Communal and private. In the Pitsilia region, 40% is State owned, 1% is Communal and 59% is privately owned.

2. Effects of the Land Tenure. The above features have had an inhibiting influence on agricultural development. The small size of plots and their irregular shape create conditions unfavorable for mechanization, irrigation, soil conservation and other improvement works. Soil conservation, for example, is based on slope. It is difficult and sometimes impossible to fit the plots with their existing size, shape and layout into a proper soil conservation plan based on contour lines. The same holds true for irrigation networks, both for distribution and for on-farm networks. Superimposing irrigation and soil conservation works on the present land system would be highly wasteful of land, water and capital. Land fragmentation increases the time spent by farmers to cater for their plots. The distance between residence and plots, as well as the inaccessibility of most areas, discourages permanent cultivations, hinders the proper catering of cultivation, increases transport costs, encourages nomadic animal husbandry and discourages mixed farming. A lot of land is also wasted for boundaries to differentiate between plots. It has been estimated that due to the necessity of plot boundaries about 10% of the area of a holding remains unutilized.

3. Land tenure with its undivided dual or multiple ownerships, lack of access, boundary disputes, lack of titles on land also results in significant intangible costs. Boundary disputes, for example, cause ill feelings among farmers. Co-ownership of land hampers development since according to Cyprus legislation, in cases of land held in undivided shares, all owners are entitled in proportion to their shares to any permanent improvement on land.

4. The Land Consolidation Law. The Government of Cyprus decided to directly address the above land tenure implications by launching country-wide land consolidation programs. The empowering legislation for this program was enacted in 1969 in the form of The Land Consolidation Law. This law provides the basis on which to set up the necessary administrative and technical structure to carry out a program of consolidation. The relevant aspects of this law provided:

(a) for the creation of a Central Land Consolidation Authority responsible for the central direction, organization and coordination of all land consolidation activities in the island. Among other functions the Authority is empowered to buy or compulsorily acquire land and other property and sell or use such property for the purposes of land consolidation. The Authority is chaired by the Director General of the Ministry of Agriculture, with representatives from other Ministries and Departments as well as farmers in its Board. The Authority began functioning in 1972;

(b) for the formation of village level Land Consolidation Com- mittees with representatives from the office of the District Officers, land consolidation, lands and surveys, agriculture, ANNEX 4 Page 3

water developmentand of farmers elected by owners in the area. The Committees supervise and coordinate land consolidationactivities on the village level;

(i) by agreement among a small number of farmers;

(ii) by owners' resolution where the majority of owners in an area who own the majority of the registered value of land are in favor of thteproject; and

(iii) by Government order, where the Government proposes to spend large sums of money for the construction of dams or the implementationof extensive soil reclamation and conservationworks;

(d) that the basis of the land redistributionplan would be the current value of ownerships,and that valuations of all immovable properties in a land consolidationarea would be carried out by a Committee of government officers and elected owners;

(e) that land consolidationmeasures would include amalgamation of fragmented holdings, the constructionof a farm road network servicing all new plots, the abolition of undivided and dual ownerships, the enlargementof holdings, the expropria- tion of land less than areas prescribed by the Immovable Property Law (in land consolidationareas these minimum sizes are 0.26 ha for perennially irrigated land, 0.53 ha for seasonally irrigated land, and 1.33 ha for dry lands), and landscape renovation;

(f) that any government land available in a land consolidation area may be used for enlarging holdings; and

(g) that the government contributiontowards costs covers all administrativeand planning expenses as well as half of the costs for road construction. The owners are charged with half of the road constructioncosts, and the value of extra land given to them through the project. The owners' share of the costs is paid in yearly installments up to a period of 8 years at low rates of interest.

5. Implementation. Following the enactment of the law, progress has been rapid, and doubts about the willingness of farmers to accept consolidation have gradually lessened. Five land consolidationprojects were completed by 1974, all in areas to be irrigated by dams, on various types of terrain (2 on low lands, 2 on hilly, and 1 on mountainous terrain). In such irrigated land consolidationprojects, there is a close cooperationbetween the Land ConsolidationAuthority, the Water Development Department and the ANNEX 4 Page 4

Department of Agriculture in the preparation of the plans. The Land Consolida- tion Authority staff prepare the road network and land consolidation plan and is responsible for the construction of the roads through contracts awarded to private firms. The Department of Water Development designs and constructs the secondary irrigation distribution system, and the Department of Agriculture designs and constructs the soil conservation and on-farm irrigation system; both are based on the new land consolidation plan. The second generation of land consolidation projects now under way include 13 projects altegether, both in irrigated as well as dry land areas. Six of these projects would be carried out within the framework of the Paphos Irrigation Project.

6. Experience with Land Consolidation. The actual experience with the five land consolidation efforts carried out so far has been very encouraging. Table 1 details the results from land consolidation in Kissonerga, Chlorakas, Akrojuda, Phinikaria and Palehkori (Palekhori is in the Pitsilia region). The main changes brought about were:

(i) the number of owners was reduced by an average of 39%;

(ii) absentee owners were reduced by an average of 37%;

(iii) holding size increased by an average of 47%;

(iv) pigmy ownerships (less than 0.27 ha) were practically eliminated;

(v) fragmentation was reduced by about 38%;

(vi) the total number of plots was reduced by about 63%; and average plot size was increased by about 126%;

(vii) ownership in undivided shares was eliminated;

(viii) all plots after consolidation were provided access by a properly constructed road network;

(ix) substantial amount of land was purchased from the church and used to increase sizes of holdings; and

(x) all plots were given title deeds.

7. A quantitative assessment of benefits from land consolidation is not easily done due to the difficulty of separating these benefits from those arising from other contemporaneous activities. In Cyprus, quantitative assessments were considered of secondary importance as land consolidation was not deemed as an end in itself but basically as a means for enabling the more appropriate execution of other development activities. However, based on experience in Cyprus and elsewhere, the following estimations may be expected from land consolidation: ANNEX 4 Page 5

(a) increase in total cultivatedarea due to eliminationof a number of plot boundaries;

(b) increasesof about 20% in the land area irrigatedby existing water supply;

(d) decrease in the costs of installing irrigationdistribution networks (about 20%);

(e) decrease in the cost of installingon-farm irrigationequip- ment (about 15%);

(f) increasesin crop yields -- 30% for dryland cultivationand 50% for irrigatedones.

8. The cost of land consolidationcomprises: (i) administrative/ personnelcost (about 25-35%);and (ii) rural road construction(75-65%). Since rural roads are, in any case, required infrastructure,there are additional cost savings in road constructionas without consolidationroads may have to follow plot boundaries. In the Cyprus context, therefore,the case for land consolidationappears to be very sound indeed.

9. Land Consolidationin the Project Area. The need for land consolidation in Pitsilia and implementationpriority within it was establishedby pre- paring a list of villages and ranking these on the basis of the following 17 criteria:1/ rate of population growth, industrializationindex, agricultural index; extent of commuting;rate of change in the amount of cultivated land; extent of private land; extent of state land; average size of operated unit; fragmentationof operated units; size of plots; size of ownership;fragmentation of owned unit; extent of irrigation;per capita income; per holding income; extent of animal husbandry;and altitude of area. The ranking of each of the 48 villages in the region is given in Table 2.

10. Project Proposals. The need of land consolidationin Pitsilia is evident. However, the Governmenthas decided to limit land consolidationto only new areas to be irrigatedand at irrigationprojects of at least 200 donums (27 ha) of gross area or more. The irrigationprojects which satisfy these criteria are located near the villages of Kyperounda,Kato Amiandos, Pelendria,Potamittisa, Kato Mylos, Kalokhorio,Arakapas, Akapnou and the villages in the vicinity of the Xyliatos dam. The total area would be between 400 to 600 ha - an area of about 500 ha is assumed for the proposed project. The rationalefor consolidatingonly a part (about 1/2) of the newly irrigated area is that the required skilled manpower cannot be made available to the project. The balance of the irrigatedas well as the dryland areas would be consolidatedas part of the Government'scountry-wide land consolidation program.

1/ Developed in a Conference on Rural Planning (1973) in Spain. ANNEX 4 Page 6

11. Capital Costs. The capital costs of land consolidationare mainly the costs for the farm access roads network. Based on the prior consolidation efforts at Palekhori, Akrounda and Phinikaria,the road network requirements were estimatedat 35 kms. As a conservativeestimate, the figure of 40 km has been used. Using the per km cost of CB 1,500, the total cost is estimated at Ch 60,000. Other overhead expenditureswould be C1 9,000 for staff work. Since it is so small, these are not separately itemized but are included in the unit costs of farm roads. The credit requirementsfor financing the farmer's share (50%) of the cost are estimated in Table 4, Annex 5.

12. PersonnelRequired. It is tested practice in Cyprus to allocate the execution of a land consolidationproject to a work team of three technical assistantsworking under the directions of an engineer and an agronomist,with the latter two supervisingmore than one scheme. A work team would be assigned to the execution of four schemes at a time. One-half of the land consolidation schemes will be initiated in year 1 and the other half in year 3. APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Results From Land Consolidation (l.c.)

KISSONERGA CHLORAKAS AKROJUDA PHINIKARIA PALAEKHORI Before After Before After Before After Before After Before After l.c. l.c. l.c. l.c. l.c. l.c. l.c. l.c. l.c. l.c.

No. of Owners 395 214 278 204 164 103 97 63 319 186 Average Size of Ownership (ha) 0.63 1.0 0.69 0.92 0.54 0.7 0.68 0.98 0.42 0.7 Average No. of Plots/Ownership 2.7 1.6 1.7 1.3 2.8 1.4 1.7 1.3 2.0 1.2 Average Size of Plot (ha) 0.23 0.64 0.4 0.7 0.2 0.5 0.4 0.78 0.21 0.6 No. of Plots or Shares 1053 334 481 268 466 144 171 79 635 225 7O of Area Held in Undivided Shares 24.9 1.8 17.5 0.14 23.8 1.2 12.7 5.7 10.3 NIL % of Plots Held in Undivided Shares 51.7 2.4 37.2 0.7 31.7 0.7 30.4 7.6 27.7 NIL 7% of Area Served by Roads 38.7 100.0 56.8 100.0 57.5 100.0 52.9 100.0 26.8 100.0 % of Plots Served by Roads 16.5 100.0 27.4 100.0 31.3 100.0 48.9 100.0 27.9 100.0 % of Plots with No Title Deed 15.2 NIL 23.3 NIL 18.7 NIL 22.8 NIL 14.3 NIL Road Length (kIn) 3.7 18.4 4.9 13.1 4.7 9.0 0.8 4.6 8.5 11.4 Average Road Width (m) 3.5 5.5 3-6 6 3 4-6 3-6 3-6 1.5-7.5 3-7.5 % of Ownerships with Dual Ownership NIL NIL 15.1 NIL 58.6 NIL 97.9 NIL NIL NIL Church Land (ha) 21.6 6.2 4.4 NIL 1.04 NIL 3.7 3.2 3.1 NIL Hali Land (ha) NIL NIL NIL NIL 3.2 1.9 0.03 NIL 9.4 1.7 Pigmy Holdings Under 0.27 ha 203 NIL 104 NIL 76 NIL 38 NIL 182 32 7 of Absentee Owners (Abroad, Unknown) 13.6 5.2 1.8 1.5 13.0 9.7 12.3 9.5 3.8 2.7

Source: Land Consolidation Authority, Cyprus.

February 11, 1977 APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENTPROJECT

CYPRUS

Ranking of Pitsilia Villages for Land Consolidation

Number of Points on Number of Points on Selections the 17 Selections the 17 Village Name in Village Criteria Village Name in Village Criteria

Ora 7 200 Dierona 3 88 Ay. Pavlos 6 208 Melini 3 24 Phikardou 6 192 Potamittissa 3 24 Alithinou 6 184 Palekhori 3 16 K. Amiandos 6 184 Ayios Konstantinos 2 128 Polystipos 6 152 Xyliatos 2 72 Akapnou 6 128 Ay. Marina 2 72 Platanistassa 6 72 Arakapas 2 72 Kolochorio 5 104 P. Amiandos 2 72 Khandria 5 64 Phterikoudhi 2 64 Agridhia 5 56 Askas 2 20 Laghoudera 5 56 Sarandi 2 16 Agros 5 52 Kyperounda 2 12 Livadhia 5 52 Ay. Theodoros 2 12 Odhou 4 176 Eptagonia 2 12 Lazania 4 148 Louvaras 1 64 Apliki 4. 120 Pelendria 1 64 Karmbi 4 108 Kannavia 1 32 Alona 4 96 Khourdali-spilia 1 8 Gourri 4 88 Ay. Ioannis 1 8 Sykopetra 3 144 Zoopiyi 1 8 Athrakos 3 132 Kato Mylos 1 8 Ayii Vavatsinias 3 108 Dhymes 1 8 Pharmakas 3 100 Ay. Irini 1 4

February 11, 1977 ANNEX 5 Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Project Description

1. Xyliatos Dam. The dam would be a rockfill structure with a clay core; it would be 42 m high with the full supply level at elevation 537.5 m. Detailed plans for the dam and the associated distribution network are presently under preparation by WDD. The main design parameters and technical details are given in Technical Note 1. The dam and reservoir would be located on a rough and forested area where there are no residents. The owners of the land in the commanded area would receive water from the dam for irrigation. Although the dam would be located near Xyliatos village, residents from seven villages would benefit. The dam itself, being a "major project", will remain the property of the Government.

2. Ponds. These would be earth reservoirs, partly in cut, partly in fill. The ponds would usually be located in flat, saddle-shaped ground in order to minimize earth moving. The embankments would be made of the excavated material with inside and outside slopes of 3 or 3.5/1. A similar design storage pond was constructed at Kyperounda; smaller ones have also been constructed by private farmers in the project area. The WDD is carrying out detailed surveys to identify specific locations for such ponds. Gross capacities of the storage ponds would be between 50,000 and 150,000 m3, sufficient to serve between 80 to 250 donums. The storage ponds would be located near streams and would be filled in the winter season by diverting water either by gravity or by pumping. It is also proposed to combine the operation of a tubewell and the filling of a storage pond. Details are in Technical Note 2.

3. Boreholes. A typical tubewell (borehole) would be 100-230 m deep and would be cased with 8-inch diameter pipes. A submersible electric turbine pump would be used. Electric power for each pump would be 15 to 60 KVA, for a discharge of 5 to 20 litres/second (l/s) and a delivery head of 100-200 m. The area irrigated by each borehole would be between 40 and 200 donums. A larger area may be served if a borehole is operated to fill a pond before it is used for direct irrigation. Details are in Technical Note 3.

4. Rehabilitation of Existing Traditional Schemes. Eleven such schemes are included in the project. The individual sizes of the schemes vary from 40 to 275 donums; the total area to be so rehabilitated would be about 1,160 donums. The rehabilitation would include (i) the construction of storage tanks to impound the natural flow during night hours, since irrigation is usually carried out only during the daytime; (ii) the replacement of open channels by pipes in order to reduce conveyance losses; and (iii) the supply of additional on-farm irrigation delivery outlets and equipment for hose basin irrigation to serve each farm lot of 3-5 donums. Details are in Technical Note 4.

5. Water Conveyance System. Pipes would be used as discharges are small and the slopes are steep, thus allowing for use of small diameter pipes. The ANNEX 5 Page 2

WDD has long experience in installing similar systems. Asbestos cement pipes would be used for diameters of 8 inches or more, and galvanized iron pipes for diameters up to 8 inches. Metal pipes are often laid on the ground surface without excavating a trench. The following criteria would be used in designing the system: (i) each plot shall have its own farm outlet; (ii) irrigation duration during the peak season would be up to 16 hours per day; and (iii) peak water requirementsin July would be 250 m3/donum (1,875 m3/ha or 1 1/s/ha), based on 80% field efficiency and 95% conveyance and distribution efficiency.

6. Soil ConservationWorks. Due to the steep slopes, land terracing is necessary in most of the project area for both irrigationand rainfed cultivation. A part of the project area has already been terraced, and it has been estimated that new terracingwould be necessary only for about 60% of the project lands to receive new irrigation (7,770 donums). Land terracing would, however, be necessary for the entire 13,000 donums of rainfed area included in the project. The Soil ConservationDivision of the Ministry of Agricultureand Natural Resources has substantialexperience in construction of terraces. Excavation is made by bulldozers. Terracing can be made with or without retaining walls. In the old cultivated areas, the farmers have built retainingwalls made of dry stones or masonry and it is likely that over a period of time such walls would be constructed in the project lands by the farmers own labor. However, the project cost estimateshave been assessed without retainingwalls. The stability of terraces can generally be secured by a slope of two vertical and one horizontal. The slopes between terraces may be used to grow grapes, while trees are planted on the terraces.

7. On-farm DistributionNetworks. The configurationof the land plots and terraces requires that a hose-basin irrigation system be used as a standard for the project. It would be used for both trees and annual crops and would permit good field efficiency and would consist of (i) a farm gate at the delivery point on the distributionline; (ii) a fixed pipe 1-1/2 inch diameter galvanized iron to serve each terrace within the individualholding and fitted with 6-8 take-off with valves; and (iii) one or two feeding flexible hoses, rubber or polythene to serve the small basins formed around the trees or crops.

8. AgriculturalDevelopment. This would include provision of an improved technologypackage (new varieties, planting method, ... ) to the farmers in the project area. The same crops - deciduous fruit, cherries,citrus, table grapes, irrigated olives, vegetables - would be grown on the new irrigated areas, but improved varieties would be used and the planting and the husband- ing practices would be improved. The same would be true for rainfed crops - vines, almonds and olives. Besides the provision of improved materials to the farmers, (i) a part of the new irrigated land would be consolidated; (ii) extension activitieswould be intensified;(iii) a farmer training center would be developed in the Agros village; (iv) the existing credit facilities would be expanded; (v) credit would be provided for livestockunits and (vi) the veterinary system would be expanded.

(i) Land Consolidation. See Annex 4.

(ii) AgriculturalExtension. ANNEX 5 Page 3

(a) The Existing Extension System. Presently, the Pitsilia area is served by 9 field extension agents and 11 specialists (3 for water use, 3 for animal husbandry, 2 for soil conservation, 2 for plant protection and 1 for soils). A number of agricultural assistants also cover the area.

(b) Proposed System for Extension. The project area would be divided into 5 beats to be served by five university graduate Agricultural Extension Officers. The following will constitute the five agricultural beats:

- Agros-Pelendri Beat, with Agros, Agridhia, Kato Mylos, Ayios Ioannis, Pelendri, Dhymes, Potami- tissa (7 villages);

- Agros-Kalokhorio Beat, with Ayios Theodoros, Zoopiyi, Ayios Pavlos, Ayios Konstantinos, Kalokhorio, Louvaras, Athrakos, Sykopetra, Arakapas, Dhierona, Eftagonia, Akapnou (12 villages);

- Agros-Pharmakas Beat, with Kambi, Pharmakas, Ghouri, Phikardou, Lazania, Makheras, Odou, Melini, Ora, Ayii Vavatsinias (10 villages);

- Agros-Palekhori Beat, with Palekhori, Apliki, Askas, Phterikoudi, Platanistassa, Alona, Alithinou, Livadhia, Polystipos (9 villages);

- Agros-Kyperounda Beat, with Kyperounda, Kato Amiandos, Khandria, Spilia, Kourdali, Ayia Irini, Kannavia, Sarandi, Lagoudhera, Xyliatos, Ayia Marina and Pano Amiandos (11 villages).

In addition, specialists in Animal Husbandry, Water Use, Horticulture, Plant Protection, and Soil Conservation would be assigned full-time to the project. Since the new staff would be selected from staff already employed, no additional staff costs are envisaged under the project. But, incremental costs for vehicles and teaching aids plus operating costs of the training center, amounting to CL 40,000, are included under extension. Five agricultural assistants would also be selected from among the agricultural assistants presently servicing the region.

(iii) Farmers' Training Centre. Farmers' Training Centres have been operating for several years in Cyprus. Their aim is to train farmers, rural women and youth in concepts and practices of modern agriculture and home economics. These centres are also used for training agricultural workers, i.e., spraying contractors, pruners, etc., and for In-Service training of the staff of the Ministry of Agriculture and Natural Resources. ANNEX 5 Page 4

The duration of the training courses varies from 2 to 15 days. The courses are organized by the Agricultural Extension Serv- ice in collaboration with the specialized sections and departments of the Ministry of Agriculture and Natural Resources. Trainees are given board and lodging at a nominal fee. A new training centre at Agros village would be established to serve the whole Pitsilia region. The cost for a 20-person training centre would be about CL 37,000.

(iv) Credit. Short-term and long-term credit for production costs, establishment of new tree plantation, irrigation and land terracing works, domestic water supply, agro-processing and livestock development would be provided to the project beneficiaries through the village Cooperative Credit Societies and the Loan Commissioners. To enable farmers to satisfy their project- related credit requirements, a credit component has been included in the project cost estimates to complement funds available in the Central Cooperative Bank, village cooperative societies and the Loan Commissioners. Loans would be extended to farmers, village communities and cooperatives under terms and conditions presently applying to the various types of credit operations in Cyprus.

(v) Livestock Units. Although prospects for livestock development in the Pitsilia Region are limited, a few livestock units may be established for demonstration and supplementary income. The project would supplement the on-going national program through providing about CL 30,000 for promoting sheep and goat husbandry:

(a) the establishment of large (40 animals) goat or sheep units near villages where no physical or legal restrictions exist for grazing and where by-products of agriculture could provide supplementary feed; and

(b) the establishment of small (10 animals) family sheep or goat units in areas where grazing is restricted.

The investment cost of the large units is estimated at CL 2,500, including purchase of animals at CL 35 per animal. The investment cost of the small units would be about CL 650. The average gross monetary output per animal is estimated between CL 18-20; the corresponding production cost per animals is estimated to be between CL 13 to 15 provided most feed is farm produced. The gross cash margin per animal is estimated at CL 5. In addition, manure and family-consumed milk and meat would account for about CL 10 per animal.

(vi) Veterinary System Expansion. In spite of the limited scope of livestock in the region, there is need for improving the veterinary health facilities for the existing animal population. The project includes improvement of the Agros Veterinary Sta- tion and the expansion of veterinary facilities at Palekhori. ANNEX 5 Page 5

At both villages, the facilities would include a small laboratory and a small animal clinic. The total cost for the above facilities is estimated at CL 20,000. A detailed list of equipment is available and includes clinical equipment (CL 3,000), clinical supplies (CL 3,000), laboratory equipment (CL 9,380), laboratory supplies (CL 1,620), car (CL 2,500), and vaccines (CL 500).

9. Agro-processing. The proposed project would supplement on-going programs of providing credit to promote selected agro-processing activities: pork and milk processing units, almond shelling machines and beekeeping.

(i) Pork Processing. Two pork processing plants are proposed. Each processing plant would consist of a building with facilities and equipment for processing hams, bacon, sausages and loins and would cost approximately CL 6,000. Each unit would permanently employ four persons and would have a processing capacity of 50 tons of pork meat annually (see Table 9).

(ii) Milk Processing. One milk processing plant which would serve as a "demonstration" or "pilot" unit is proposed. The plant would consist of a shed-type building with facilities and equipment for the production of hallumi cheese and the handling of anari, a by-product. The plant, which would have a daily capacity of about 1,200 kilograms of milk, would employ two persons and would operate about 180 days per year. Total cost of the plant would be about CL 3,000 (see Table 9).

(iii) Almond Shelling Machines. There are presently about 550,000 almond trees in the Pitsilia Region. The average production of almonds is about 1,500 tons. Harvesting of almonds takes place during the second half of July and early August when farmers in the area are almost fully occupied with their deciduous trees. The shelling of almonds (removal of pericarp) is also performed by hand. This causes employment peaks during the period which is critical for other intensive crops. The shelling operation could be mechanized to some extent through shelling machines. The machines would be located near the cooperative centres which handle the marketing of almonds. The cost of each machine is estimated at CL 300. About five shelling machines would be financed (Table 9).

(iv) Beekeeping. The Pitsilia Region is favorable for the development of the beekeeping industry. There are already about 90 beekeeping units in the region. Yields per beehive range between 10 kgs to 40 kgs with an average of about 20 kgs/ beehive. In view of the expected expansion of deciduous plants and the existing vegetation, the development of beekeeping in a systematic way could be a source of additional income and a good opportunity for part-time employment. About 50 beekeeping units (a capacity of 35 beehives per unit) could be established in the region of Pitsilia. The cost for establishing one beekeeping unit is estimated at CL 400 and includes the purchase value of 35 beehives, one machine for the extraction of honey and other necessary tools (Table 9). ANNEX 5 Page 6

10. AgriculturalMachinery. The use of agriculturalmachinery in the Pitsilia Region is presently limited due to the topographyof the area and the existing farming pattern. Only a few farmers have their own orchard tractors which they use for cultivation in irrigatedareas and, to some extent, in vineyards. Other farmers have to hire such tractors when necessary or, in many cases, they use animal traction. Plant protection activities are performedmainly by using small portable sprayers and dusters. In view of the proposed extension of the cultivatedarea under the project, additional machinery will be required for the various cultural practices involved. The agriculturalmachinery requirementsduring the five-yearperiod would cost about CL 95,500 and would include orchard tractors with high pressure sprayers and rotary cultivators,mist blowers, knapsack, sprayers and motorized portable hand sprayers (Table 9).

11. Health and Medical Care. See Annex 6.

12. Primary Schools. See Annex 7.

13. Village Domestic Water Supplies. Supply of domestic use water would be improved in 15 villages. "Improvement"is defined as the availabilityof 20 gallons/person/day(Table 8).

14. Road Infrastructure. This includes village roads, farm roads, and village streets. Each is discussed below.

Village Roads

15. Policy. Village roads provide links between neighboringvillages and also link the villages with trunk roads leading to the town. In some areas where there are no trunk roads, the village roads provide access to towns. The responsibilityfor the construction,improvement and maintenance of village roads is vested in the office of the District Officer. All costs for constructionof village roads are incurred by the Government. In terms of constructionstandards, these roads are either one-lane asphalted roads with a shoulder on either side or earthen/gravelroads. The one-lane asphalted roads have a 3.75 m wide asphalted strip with an 0.80 m shoulder on either side. The earthen or gravel roads are often of similar total width but do not have an asphalted surface. They are, however, all-weather roads. Present Governmentpolicy is to provide at least one asphalted access road to each village that was only connected by earthen gravel roads. An access road was defined as the road providing access to the District Town or the commercial center to which the village commuted. A systematic ranking of priorities was establishedand the Government decided that all the villages without asphalted access would have such a road within 10 years.

16. Project Proposals. Ten village roads are proposed under the Pitsilia Project. These proposals aim at integratingthe Pitsilia Region by removing the physical obstacles to communicationbetween villages. The total road network would be about 63 km, of which 47.3 km would be in the Project area. Only the costs for these are included in the Project cost estimates. The total Project cost would be about CL 419,000 (see Table 1). ANNEX 5 Page 7

17. Unit Costs. The cost per km of these proposed village road schemes varies considerably depending on the current state of the road, the extent to which the alignment needs to be improved and the condition of the surface. Under the Pitsilia conditions, the actual cost per km of road will vary from case to case.

18. Maintenance. The maintenance of village roads is undertaken by the District Officers. The cost of maintaining these roads is estimated as follows:

(a) Non-asphalted roads CL 100 to CL 160 per km per annum (b) Asphalted roads 150 to 250 per km per annum

Village Streets

19. Policy. Since Independence, the Government has implemented a program for the construction of asphalted streets in the built-up areas of the villages of Cyprus. This program is part of the Government's overall rural development program and is implemented by District Officers. Villages contribute 50% of the cost and the Government provides the balance as a grant unless the village is small and/or very poor in which case the Government contributes two-thirds of the cost. The village contributions are often provided by the Government in the form of loans issued through the Loan Commissioners.

20. Project Proposals. The proposals for village streets amount to the sum of CL 130,000 for the asphalting of streets, construction of paving where the ground is too steep or the houses are too close together for road construction, and the improvement of street drainage. This should permit construction of some 20 kms of village streets during the five-year implementation period of the project. The unit costs are given in Table 2. Table 3 gives the proposed village street program.

Farm Roads

21. Policy. Government policy is to ensure that the proposals for farm roads are coordinated so that each irrigated area and each land consolidation scheme would have a farm road constructed by the District Administration connecting the area with the village. Within each irrigated area, the Land Con- solidation Authority is responsible for ensuring that each irrigated plot has direct access to a farm road. In dryland areas, it is not possible to provide each plot with direct access to a road because of the extreme fragmentation of agricultural plots. So, the District Administration simply opens up farm roads providing access to certain areas that are intensely cultivated; and although direct access is not provided to each plot, many plots will have such access and the distance to the road is reduced for all the plots in the area. In general, the construction of the farm roads must be phased with the irrigation and soil conservation works. Farm roads are either constructed by the District Administration or by the Land Consolidation Authority. AMiE_ _ Page 8

22. Project Farm Roads Constructed by the District Administration. These farm roads consist of earthen or gravel roads, ten feet in width. The major part of the cost consists of machinery costs (bulldozers) and, where necessary, suitable material for the surface is provided or labor is used to construct ditches. No land acquisition costs are involved because the farmers volun- tarily arrange the right of way for these roads. Farm roads are financed by the Government under two schemes: (i) a contributory scheme, and (ii) a non- contributory scheme limited to vine-growing villages. Under the contributory scheme, the Government and the village each contributes 50% of the cost, unless the village is small and/or very poor, in which case, the Government contributes two-thirds of the cost and the village one-third. The villages sometimes raise their contributions from the local cooperative credit society, but more often they receive a loan from the Government through the Loan Commissioners. The non-contributory scheme for farm roads is related to the vine-culture subsidizatior. scheme. In order to encourage structural cost- reducing improvements in vine-growing areas, the Government proposed that, over and above the contributory farm road schemes, it would provide funds covering the costs of construction of farm roads in vine-growing villages. The farmers' unions agreed to this arrangement, and each year the farm road program in vine-growing villages has been negotiated. It is estimated that about 250 kms of farm road will be constructed by the District Officers at a total cost of about CL 375,000.

23. Project Farm Roads Constructed by the Land Consolidation Authority. It is Government Policy that in all areas where land consolidation is implemented each consolidated plot should have direct access to a road. Within the areas to be consolidated, the roads would be constructed by the Land Consolida- tion Authority and the roads leading to the areas to be consolidated would be constructed by the District Officers. Farm roads make up the major part of the costs of land consolidation if personnel costs are excluded. Where land consolidation is implemented, the affected farmers contribute 50% of the cost of the farm road and the Government contributes the remaining 50%. Once the roads are constructed, they are declared public roads and the District Officers become responsible for maintaining them. About forty kilometers of road will be constructed by the Land Consolidation Authority under the project at a cost of CL 60,000. The unit costs are given in Table 2.

24. Maintenance. Until recently, the villages themselves were responsible for the expenditure required for the maintenance of farm roads constructed under the various schemes described above. Serious problems arose and the roads were in danger of serious deterioration because of the lack of maintenance. In 1975 an agreement was reached by which the Government would provide 50% of the cost of maintenance on the condition that the villages affected will do the same. In 1976 a Budget allocation for farm road maintenance was introduced, and it appears that the new arrangements are working well. The unit costs of farm roads are given in Table 2.

25. Consolidated Project. Table 5 gives a consolidated statement about the structure of the project. Chart 1 gives the estimated Implementation Schedule.

26. Project Cost. Table 6 gives the total cost and phasing. Tables 7 to 11 provide the backup information for Table 6. ANNEX 5 Technical Note No. 1 APPRAISAL OF Page 1

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

Technical Note 1 for the Xyliatos Dam

River Laghoudera River, tributary of Elea River

Dam type Rockfill with clay core

Spillway type 15 m width, open weir, chute and (left bank) flip bucket

Dam height 42 m

Storage capacity 3 (gross) 1.3 Mm'

Useful capacity 1.3 Mm3

Full supply level 537.50 m a.s.l. i'

Crest level 541.75 m a.s.l.

River bed level 500 m a.s.l.

Catchment area 19.2 km2

Annual inflow (80% probability) 1.46 Mm3

Spillway design floor discharge 130 m3/s (inflow) - 101 m3 /s (outflow)

Freeboard design flood discharge 243 m3/s (inflow) - 197 m3/s (outflow)

1/ a.s.l. - above sea level. ANNEX 5 Technical Note 1 Page 2

ConstructionMaterials

Clay core 43,000 m3

Gravel Filters 23,000 m

Rockfill 163,400 m3

Mass concrete 700 m3 3 Reinforcedconcrete 450 m3

Diversion Works, combined with irrigationoutlet.

Diversion tunnel 132 m long, 2 m diameter concrete lined

Upstream diversion (elevation) 510 m a.s.l.

Diversion capacity 34 m /s

Cost Estimates (rounded)including physical contingencies.

Embankment EC 300,000

Spillway 70,000

Diversion and outlet 60,000

Drilling and grouting 55,000

Miscellaneousand access road 20,000

505,000

Source; Ministry of Agriculture ANNEX 5 Technical Note 1 Page 3

Crop Water Requirements. Major crops in the project area would be deciduous fruit trees and vegetables. The assessment of water requirements is based on actual experience reviewed by the agriculturalists of the Depart- ment of Agriculture. Due allowance would be made for the elevation of each minor scheme, and the following table indicates the average net water requirements.

Net Irrigation Requirements m3/donum

Perennials Cherries 550 Apples 700 Almonds 200 Peaches and Apricots 550 Plums 550 Table Olives 400 Citrus 800 Table Grapes 300

Subtotal (Perennials)

Annuals Fodder 400 Summer Vegetables 600 Potatoes 400 Seed Potatoes 400

Subtotal (Annuals)

Total 484

Allowing for 80% field irrigation efficiency 605

Allowing for 5% conveyance losses 637

Normally water requirements will vary according to the following average percentages:

April May June Jul Ag Sept.

percentage 7 22 26 18 11 8

The peak water requirement in June for citrus would amount to 2,050 m3/ha at the headgate, i.e. 0.8 1/s/ha continuous flow or 1.2 1/s/ha over 16 hours per day. ANNEX 5 Technical Note 2 Page 1

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PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Technical Note No. 2 on Storage Ponds

1. In the topographicalconditions of the Pitsilia area, large storage dams are not feasible; the alternative is to construct small reservoirs to serve small areas suitable for irrigation. These reservoirs would be filled in winter or early springtimeby diverting water from small streams. Such an off-stream storage pond was constructedby WDD in 1972 near Kyperoundawith a capacity of about 60,000 m3; it serves an area of 160 donums. It proved to be satisfactoryand the WDD would be using the following design guidelines:

(a) ponds would be located on flat or saddle-shapedland in order to minimize earth movement;

(b) embankmentswould be made of excavatedmaterial with light compaction;

(d) freeboard would be 0.5 meters with overflow outlet;

(e) water tightness of the pond would be secured by a membrane of polythene covering the whole reservoir bottom. The polythene sheet would be laid on a 50 cm layer of compacted clay and would be protected by a 25 cm overlayer of sand and coarse material.

2. During project preparation, the WDD studied five proposed sites for storage ponds. The main characteristicsof these sites were: ANNEX 5 Technical Note 2 Page 2

Location Khandria Kalokhorio Pelendria Ephtagonia Melini Region Agros Limassol Troodos Larnaca Larnaca

Pond capacity (m3) 70,000 96,000 99,000 92,000 53,000 Estimated cost CL 42,000 72,000 60,000 62,000 54,000 Cost per m3 of useful capacity (Mils) 720 786 425 595 1,000 Annual Water Require- ment (m3 per donum) 610 660 610 780 750 Net Irrigated Area (donum) 105 148 241 134 70 Water Supply gravity pumping gravity gravity gravity plte ptuping from borehole

The useful storage capacity was determined by reservoir operation studies taking into account the 80% probability flow of the stream and the evaporation and the monthly water requirements of the selected cropping pattern. Estimated costs include 20% for physical contingencies and supervision of construction. The Pelendria storage pond is an example of a pond which could be operated in conjunction with a nearby borehole. ANNEX 5 Technical Note 3 Page 1

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PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

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Technical Note No. 3 on Groundwater Schemes

1. Investigationson groundwaterpotential were begun in June 1976. By February 1977 31 boreholes had been drilled. These boreholes are located in faults or highly fractured zones in the gabbros area cz along the Arakapas fault at the point of contact between pillow lavas and diabase. Pumping tests have been carried out and 15 boreholes have already been identifiedwith a capacity of more than 20 m3 per hour, thereforeable to serve at least 50 donums. Water balance in the project area has been tentativelyassessed and the annual replenishmentis about 3 MCM. The anticipated use of groundwater for irrigation or water supply purposes would not exceed half of the annual replenishment. The total number of boreholes to be used for irrigation is not yet ascertained,but is likely to be 25 to 30; and in the cost estimates, provision has been made for 30 boreholes equipped with casing, electric submersiblepumping unit and electric supply. The size of each irrigated scheme to be served by one borehole will vary between 50 and 250 donums, with an average of about 130 donums (17 ha). 1/ Detailed layouts and designs were prepared by WDD for three typical schemes totalling 370 ha net. Cost estimates for the remainder have been based on the average thus derived. The main features of each groundwater scheme would include (i) an electro- submersiblepump of 25-60 KVA to deliver 5-15 l/s with a delivery head of 120-180meters, (ii) a balancing tank of about 30 m3 with a float valve and a pressure control switch to regulate the automatic operation of the pump unit and prevent overheating; (iii) conveyance pipes and tertiary pipes, of diameter between 3 and 8", laid on the ground surface except where crossing roads or tracks; and (iv) farm outlets to serve a plot or a group of plots.

2. Pumping Costs. Pumping would be required for supplying irrigation water to the areas using groundwaterand to part of the areas served by the

1/ Since it is expected that the water withdrawal from the borehole will affect nearby springs or wells, one-third of the borehole yield would be spared for compensationpurposes.

Source: Ministry of Agriculture ANNEX 5 Technical Note 3 Page 2 storage ponds. Pumping costs consist of electric energy consumption, 1/ maintenance,and periodic replacement of the pumping unit and miscellaneous hydraulic or electric related equipment. The costs have been assessed using the following assumptions:

(a) annual water consumption (v), 650 m3 per donum;

(b) overall pumping efficiency (R), 0.65;

(d) average delivery head (H), 135 m;

(e) about 40% of the water delivered by the storage ponds would be pumped;

(f) annual maintenance costs would amount to about 4% of the capital costs of the pumping unit and accessories. The resulting costs are shown in Table 10, Annex 5.

1/ Assessed by the relation E (kwh) = 9.81 V H; 3600 x R

where:

kwh = kilowatt hour V = m3 annual water use H = total delivery meters head R = pumping efficiency ANNEX 5 Technical Note 4 Page 1

APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

Technical Note No. 4 on RehabilitationSchemes

1. The purpose of rehabilitationis to save water now lost in obsolete earth or masonry distributioncanals by the constructionof watertight canals or by the installationof pressure pipes. The water thus saved permits better irrigation of existing permanent crops (mainly deciduous trees) and extension of summer irrigationto neighboringareas presently irrigated only in winter and spring. Benefits accrue from higher yields of existing plantations,new summer crops or extension of tree plantations;and reduction in maintenance costs for water distribution. Similar rehabilitationprojects already carried out, have been monitored and have demonstratedthat the net income of farmers may be almost doubled. The rehabilitationwork is usually comprised of one or more of the following:

- repairing or replacing diversion structuresand conveyance channels.

- replacing earth distributioncanals by pressure pipes, either asbestos cement or galvanized iron depending on diameter.

- provision of night storage tanks to permit irrigation only during about 16 hours of daylight during the peak season.

- provision of outlet valves for each individual farm. On- farm system would be hose basin for the deciduous trees and hose-furrow for vegetables.

Source: Ministry of Agriculture APPRAISAL OF

PITSILIA INTEGRATED RURALDEVEXLPT PRJ3T

CY^lll

Detailed Cost Estimte of Villege Roa

------. ------Road Links Between ------Alona- Xyliatoe- LAgoudhera- Ioanmia- Arakap"s- Eptagonia- Eptagonia- Sykopetra- Ora- Melini- Agros Lagoudhera Polystypos Theodoros Dhierona Melini Akapnou Arakapas Khirokitia Eptagonia Total Sub-Region ------Nicosia ------Limsseol ------LArnaca ------

Length (km) 7 13 2.9 2.4 4 1.6 3.2 7.2 20 2 63.3 Width (m) 3.75 3.7 3.6 3.7 3.7 3.7 3.7 3.7 - - -

Preliminaries 0.50 1.00 0.50 0.50 0.25 - 0600- 0.4 3.75 Erection of Bridge - - - - 5.28 - - - - 4.5 9,78 Earthworks 12.00 10.00 5.00 5.62 9.10 3.90 7.45 19.6 21.00 5.4 99.07 AlIlverts 3.25 5.40 1.80 0.72 2.64 o.76 3.33 10.32 1.95 0.40 30.57 Retaining Wells 10.00 2.00 4.00 - - - - - 1.20 0.30 17.50 Poundationing 12.25 14.80 4.00 ------31.05 Asphalting (2 Coats) 27.60 57.70 11.00 7.70 12.80 5.1 10.2 22.10 15 20 6 30 175.70 Side Drains 2.10 3.90 O.&7 o.96 1.6 o.48 1.28 2.88 3.60 0.30 17.97 Beroe 2.80 6.50 1.13 1.10 1.8 CA84 1.68 2.7 3.60 0.60 22.75 Road Signs 0.35 0.70 0.20 0.4 0.23 0.12 0.16 0.4 0.25 O 2.91 Compensatior 1.00 - 0.50 1.2 1.8 1.00 1.4 0.80 o.6o .20P.50 Subtotal 71.85 102 29 18.2 35.5 12.2 25.5 58.8 48 i, 5 419.55

Thysical Contingencies (10%) 7.15 10 3 1.8 3.5 1.3 2.5 5.8 5 1.8 41.85

OCTAL: 79 112 32 20 39 13.5 28 64.6 53 20.3 461.40

Foreign Exchange Cost (at 45%) 35.55 50.4 14.4 9.0 17.55 6.08 12.6 29.07 23.85 9.14 207?64

J,/ Only 20t of this cost is included in Project Cost Estimates.

lfarch 10, 1977 ANNEX 5 Table 2

APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENTPROJECT

CYPRUS

Unit Cost of Roads

Rate Amount Description Quantity Unit mils CL

1. Village Streets (3.75 m width) Preliminaries 100 Foundationing 3,750 M2 150 562 Asphalting: 1st and 2nd coat 3,750 M2 1,000 3,750 Retaining Walls 100 M3 8,000 800 Traffic Signs 2 no. 10,000 20 Contingencies,Final Design and Supervision 1,267

TOTAL: 6,500

2. Farm Roads (3 m width) Preliminaries 30 Earthworks 3,600 M2 200 720 Culverts 30 M 18,000 540 Contingencies 210

TOTAL: 1,500

February 16, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Proposed Program for Village Streets Phasing of Expenditure Aggregate Length Total ------Year ------of Streets Cost Unit Cost 1 2 3 4 5 (ki) (CE-) (CE km)- - (C 1,000) ------

I. Limassol District Khandria, Kyperounda, K. Amiandos, Dhymes, Agridhia, Agros, Potamitissa, Pelendria, K. Mylos, Ayios loannis, Ayios Theodoros, Zoopiyi, Kalokhorio, Ayios Pavlos, Sykopetra, Louvaras, Eptagonia, Arakapas, Akapnou, Dhierona. 9.7 75,000 7,730 15,100 15,000 15,000 14,900 15,000

II. Nicosia District Palekhori, Askas, Phterikoudhi, Alona, Platanistassa, Apliki, Polystipos, Livadhia, Lagoudhera, Sarandi, Alithinou, Kambi, Lazania, Ghouri, Phikardou, Spilia, Kourdhali, Kannavia, Ayia Irini, Ayia Marina, Xyliatos, Pharmakas. 9.1 50,000 5,495 10,000 10,000 10,000 10,000 10,000

Ill. Larnaca District Ora, Melini, Odhou, Ayia Vavatsinias 1.8 5,000 4,170 1,100 1,100 950 900 950

TOTAL: 20 130,000 6,500 - 26,200 26,100 25,950 25,800 25,950

1/ See Table 3 for detailed breakdown.

Source: Planning Bureau 13

March 1977 |x u t APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Estimated Credit Requirements -

Required - Total Credit Per X Total = Credit Rough Phasing Donum Donums Required ------Year ------

(CF.) (Donums) (CE) 1 2 3 4 5

Investment Category

I. Per Donum

Ponds 219 2,900 635,100 139,722 139,722 139,722 139,722 76,212 Boreholes 114 3,000 342,000 102,600 85,500 68,400 51,300 34,200 Rehabilitation 46 1,160 53,360 13,340 13,340 13,340 13,340 - On-farm System 48 7,770 372,960 44,756 59,674 89,510 89,510 89,510 Soil Conservation: Rainfed 51 13,000 663,000 76,245 139,230 149,175 149,175 149,175 : Irrigated 39 7,770 303,030 39,392 36,364 75,758 75,758 75,758

II. Total Proiect Village Water Supply 90,000 22,500 22,500 22,500 22,500 - Village Streets 78,000 15,600 15,600 15,600 15,600 15,600 Schools 59,000 18,290 20,060 11,800 8,850 - Health 6,000 2,280 1,560 1,140 540 480 Land Consolidation: Farm Roads 30,000 6,000 6,000 6,000 6,000 6,000 : Land Acquisition 23,000 - 12,500 - 10,500 - Agro-industries 132,000 33,000 33,000 33,000 33,000 -

TOTAL: 2,787,450 513,725 585,050 625,945 615,795 446,935

1/ These are not listed under the credit component of the Project as they are included in the Project Cost under their respective headings.

2/ From Table 8, Annex 11. >

March 1977

4-b ANNEX 5 Table 5

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Project Works

Village Rehab. Boreholes Ponds Xyliatos Water Schools Health Extension and Dam Supply Services Training Center ------donum ---- …------

1. KOURDHALI 2. SPILIA 3. AYIA IRINI 120 4. KANNAVIA J 5C (P) 45 X 5. SARANDI 60 (P) 45 6. LAGOUDHERA 60 (P) 3 7. XYLIATOS 475 8. AY. MARINA 345 9. POLYSTYPOS 50 50 (P) 35 10. LIVADHIA 11. ALITHINOU 12. ALONA 80 50 (P) x 13. PLATANISTASA 40 14. PHTERIKOUDI 50 100 15. ASKAS 50 x 16. PALEKHORI X X 17. APLIKI X 18. KAMBI 100 30 19. PHARMAKAS 60 X X 20. GOURRI 80 X 21. PHIKARDOU X 22. LAZANIA X 23. KATO AMIANTOS 270 190 50 X 24. KYPEROUNDA 77 290 220 X X X 25. KHANDRIA 140 750 X X X 26. PELENDRIA 190 240 X 27. POTAMITISSA 200 240 28. DHYMES 29. AGRIDIA 65 30. KATO MYLOS 93 220 X 31. AGROS 200 190 X X A 32. AY. IOANNIS 90 250 33. AY. THEODOROS 130 34. ZOOPIYI 45 35. KALOKHORIO 80 (110 P) 270 X X X 36. AY. PAVLOS 110 (P) X 37. AY. KONSTANTINOS 110 (P) 65 X 38. LOUVARAS 60 (P) 39. ARAKAPAS 260 18C (170 P) 40. DHIERONA 60 (P) X 41. SYKOPETRA X 42. MELINI 70 43. EPHTAGONIA 50 310 (140 P) 44. AKAPNOU 200 (P) 290 45. ORA 60 (P) 70 46. AY. VAVATSINIAS 40 47. ODHOU 110 1,160 1,710 2,900 1,870 (1,290 P) 3,000 (P) proposed

Source: Government of Cyprus

March 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Detailed Project Cost Estimates

Phasing of Cost Total Cost Including Foreign Including Only Physical Exchange Up To Physical and Price Local Foreign Total Local Foreign Total Percentage 1977 1978 1979 1980 1981 1982 Contingencies Contingencies (CE 1,000) ------__ (US$1,000) (Cl; 1,000) ------

New Irrigation Schemes A. Supply Works Xyliatos dam 168 252 420 403 605 1,008 60 - - 250 254 - - 504 650 Storage ponds 513 627 1,140 1,231 1,505 2,736 55 - 300 300 300 300 168 1,368 1,760 Boreholes 76 304 380 182 730 912 80 190 60 60 60 60 26 456 580 B. Distribution System Xyliatos dam 57 85 142 137 204 341 60 - - - 130 40 - 170 210 Ponds/Boreholes 167 251 418 401 602 1,003 60 - 110 110 110 110 62 502 640 C. Soil Conservation 150 183 333 360 439 799 55 - 100 100 100 100 - 400 510 D. On-farm Systems 145 217 362 348 521 869 60 - 100 134 100 100 - 434 550

Subtotal 1,276 1,919 3,195 3,062 4,606 7,t 8 60 190 670 954 1,054 710 256 3,834 4,900

Irrigation Rehabilitation 60 74 134 144 178 322 55 41 4;; 40 40 - 161 200 Soil Conservation-Dryland 333 408 741 799 979 1,778 55 - 200 210 210 210 60 890 1,140 Farm Roads * 206 168 374 494 403 897 45 - 75 105 150 105 - 435 560 Village Roads * 210 171 381 504 410 914 45 - 50 90 90 120 69 419 540 Village Streets * 58 47 105 139 113 252 45 - 26 26 26 26 26 130 160 Village Water Supply 52 98 150 126 234 360 65 - 45 45 45 45 - 180 230 Health Facilities * 30 57 87 73 136 209 65 - 32 38 12 6 7 95 120 Schools * 79 97 176 190 232 422 55 - 60 66 39 29 - 194 250 Extension and Farmer Training * 39 38 77 94 91 185 50 - 40 20 10 10 5 85 105 Agro-pEocessing, Machinery * 57 95 152 137 228 365 62 _ 40 3/ 29 26 20 152 195 Credir.Y and Incremental Working 143 37 180 343 89 432 21 _ 45 63 55 17 - 180 232 C*pital ** 23 Consulting Services ** 10 32 42 24 77 101 76 10 10 10 10 2 _ 42 54 Agricultural Research ** 40 10 50 96 24 120 20 3 10 10 10 10 7 50 64 2/ Total (W.O.P.C. - ) 2,593 3,251 5,844 6,225 7,800 14,025 56 ------Physical Contingencies-3 428 575 1,003 1,027 1,380 2,407 ------

- Subtotal 3,021 3,826 6,847 7,252 9,180 16,432 56 203 1,344 1,714 1,780 1,356 450 6,847

- Price Contingencies 4/ 829 1,074 1,903 1,988 2,580 4,568 7 164 373 564 561 234 1,903 8,750 TOTAL COST 3,850 4,900 8,750 9,240 11,760 21,000 210 1,508 2,087 2,344 1,917 684 8,750

1/ About CE 30,000 is included for purchase of animals. (see Table 11). 2/ Without Physical Contingencies. noi 3! Average contingencies 7 is 177 made up from: 10% for components marked with a single asterisk; 0% for those marked with a double asterisk; 20% for the rest. 4/ Assuming 8.5% p.a. (civil works 707,;equipment 307.)for 1977-79, and 7.5% p.a. (civil works 507.; equipment 50%) for 1980-82. The six price contingency factors are 0.0425, 0.131, 0.227, 0.327, 0.425 and 0.531.

April 1977 ANNEX 5 Table 7

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Irrigation Rehabilitation Schemes

Irrigated Area

Location Permanent Total Cast Crops CL 000' donum

1. AGROS 200 200 25

2. AYIOS IOANNIS 90 90 12 KATO MYLOS

3. KAMBI - PHARMAKAS 100 100 10

4. ALONA 40 80 10

5. ODHOU 110 110 10

6. KATO AMIANTOS 275 275 30

7. AYIA IRINI - KANNAVIA 30 120 10

8. ASKAS 50 50 7

9. PHTERIKOUDI 50 50 7

10. POLYSTYPOS 50 50 7

11. PLATANISTASSA 40 40 6

Total 1,030 1,160 - 134

1/ With 130 donums of intercropping.

Source: Ministry of Agriculture

March 1977 APPRAISAL OF ANNEX 5 Table 8 PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Village Water Supply Improvement Works

Location Improvement Cost Estimate Proposed CL '000

SYKOPETRA HS - 7

LAZANIA HS - ST 1

PHYKARDOU HS - ST 6

KANNAVIA ST 6

KATO MYLOS ST 5

AYIOS PAVLOS ST 5

AYIOS KONSTANTINOS ST 5

KYPEROUNDA - KHANDRIA BH 28

AGROS BH 20

PELENDRIA BH 20

DHIERONA BH 5

KAMBI ST 5

PALEKHORI - APLIKI BH 7

PHARMAKAS BH 55

GOURRI BH 5

Total 180 -

HS - house supply ST - storage tank BH - borehole

1/ Including Physical Contingencies

Source: Ministry of Agriculture March 1977 ANNEX 5 Table 9

APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENTPROJECT

CYPRUS

Agro-processing; Agricultural MachinerY: Veterinary Equipment Cost Estimates

Phasing of Cost Foreign Foreign Unit Number Total Exchange Exchange Cost of Units Cost Cost 1 2 3 4 5 (7.) (CB) ------(CE,) ---

I. Pork Processing Buildings -/ 3,200 Equipment - 2.800 50 6,000 2 12,000 6,000 6,000 6,000

II. Milk ProcessinR Building-3 600 Equipment -t 2.400 50 3,000 1 3,000 1,500 3,000 -

III. Almond Shelling,3 Equipment - 70 300 5 1,500 1,050 1,500

IV. Beekeeping Equipment 6/ 10 400 50 20,000 2,000 4,000 4,000 4,000 4,000 4,000

V. yeterinary equipment 7/ 60 - 9/ 20,000 12,065 10,000 5,000 3,000 1,000 1,000

VI. Agricultural Machinery Orchard Tractors 75 500 150 75,000 56,250 15,000 15,000 15,000 15,000 15,000 Mist Blowers 75 120 50 6,000 4,500 1,500 1,500 1,500 1,500 - Knapsack Sprayers 75 30 150 4,500 3,375 1,500 1,000 1,000 1,000 - Motorized Portable Hand Sprayers 75 200 50 10,000 7,500 2,000 2,000 2,000 2,000 2,000

TOTAL 62 - - 152,000 94,240 44,500 34,500 26,500 24,500 22,000

1/ Working room, cold storage, fumigation room. 2/ Basins, mincer, sausage filling machine, has press, working tables, other. 3/ Shed. 4/ Cheese vats, stirring equipment, cheese table, cheese press, boiler, milk cans, other. 5/ Shelling machine. 6/ Machine for extracting honey and other tools. 7/ Clinical equipment, laboratory supplies, vehicle. 8/ With high-pressure sprayers and rotary cultivators. 9/ To improve the existing Agros Veterinary Station and to establish facilities at Palekhori. Detailed requirements for equipment were supplied to the mission and are available; but since a large number of small items is involved, the list is only indicative and is not included in the report.

Source: Ministry of Agriculture

April 1977 APPRAISALOF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

Operation and Maintenance Annual Cost

Area Capital Cost Percentage Operation Maintenance Replacement Total Annual Cost Donum 000' CL ------0% ------CL Per Donum

1. XYLIATOSSCHEME 1,870

A. Dam 507 2,500 1,400 - 3,900 3.5 B. Distribution System 172 1.5 1,298 1,290 - 2,580 J

2. PONDS 2,900

A. Storage Works 1,370 1.0 6,850 6,850 5,700 19,400 B. Pumping Energy & Pump Maintenance 4,500 4,200 8,700 10.9 C. Distribution System 247 1.5 1,850 1,850 3,700

3. BOREHOLES 3,000

A. Pumping Units 265 4.0 5,300 5,300 18,000 28,600 B. Pumping Energy 11,360 11,360 14.6 C. Distribution System 255 1.5 1,910 1,910 3,820

4. REHABILITATIONSCHEMES 1,160 160 1.0 800 800 1,600 1.4

Source: Mission Estimates

March 1977

0 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Incremental Working Capital Requirements

------Irrigated Crops ------Rainfed Crops ------Year ------Year ------Percent of Full Percent of Full Area Under 1 3 Development Crops Area Under 1 3 Development (Cb/donum) (Cash II Costs/donum) (Weighted by Crop Percent)

I. Crops (CE/donum) Cherries 12 3.14 2.7 4.09 Vineyards 46 8 5.93 8.37 Apples 2.1 0.67 0.53 1.57 Almonds 15 2.57 1.35 2.46 Almonds 9 1.32 1.22 4.83 Otives 39 11.1 2.73 7.02 Peaches 5 1.62 1.43 2.57 Plums 2 0.54 0.44 1.04 Table olives 10.3 3.06 2.21 10.28 Citrus 11.3 4.79 2.07 6.33 Table Grapes 4 1.72 0.66 1.68 Potatoes 23.3 15.59 15.59 15.59 Vegetables 21 9.39 9.39 9.39 21.67 10.01 17.85 Total (X1 ) 100 41.84 36.24 57.37 100

II. Area Under Crop (donums)(X2 ) - 1,840 5,520 8,900 3,000 6,000 13,000

III. Estimated Maximum Working Capital I (X Y(CR) 25,661 66,681 170,197 21,670 20,020 77,350

IV. Sum of 'III" for Irrigated and Rainfed (CE) 47,331 86,701 247,547

V. Phasing of Requirements Year Cumulative (CE) 1 35,000 2 88,000 3 133,000 4 150,000 2 X

1/ Transplanting, seeds, fertilizer, chemicals, machinery and hired labor. 2/ Due to phasing of development, increases in internally generated funds, the actual need for working capital would decline over time.

April 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Project Implementation Schedule

1976 1977 1978 1979 1980 1981 1982

I. Investigations and Design Xyliatos Dam and Distribution System l Ponds Groundwater (Drill and Test) l Distribution Network for Ponds and Groundwater l Rehabilitation Schemes l _l Village Domestic Water Supply Village Roads Village Streets Schools Health _

II. Construction Xyliatos Dam and Distribution System | Ponds Groundwater Distribution Network for Ponds and Groundwater Rehabilitation Schemes i I Village Domestic Water Supply I Soil Conservation (Irrigated, Rainfed) Village Roads Village Streets I Schools Health

III. Area Available from New Irrigation, Rehabilitation, Soil Conservation (donums) Total New Irrigation 1,550 1,550 2,300 2,350 7,750 Rehabilitation 290 290 290 290 1,160 Rainfed 3,000 3,000 3,000 3,000 1,000 13,000

Source: Based on information provided by Water Development Department, Ministry of Agriculture, Cyprus.

March 1977

Lfl ANNEX 6 Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

The Health Component

1. Present Status of Health Services in Pitsilia. There are four Rural Health Centers and three Rural Health Sub-Centers available for providing health-related services to about 95% of the population of Pitsilia. The population of Pitsilia also uses hospital facilities available in Nicosia and Limassol (see Table 1). The four Rural Health Centers are located in Palekhori, Agros, Klirou and Lefkara; only the first two are actually located in the Project area. The three Rural Health Sub-Centers are located in Pelendria, .Calochorioand Kato Amiandos. In addition, the Kyperounda Sanatorium 4 s located in Pitsilia. The Sanatorium specializes in the treatment of tuberculosis and chest diseases from all over Cyprus. There are no private clinics in the Region.

2. Each Health Center is staffed with a medical team (including a general practitioner, a pharmacist, a nurse, a midwife and/or health visitor and health inspector) responsible for a number of'villages. The Health Centers also have a few (up to ;) beds to provide daytime facilities for maternity patients. Only one dentist, located in Agros, provides dental services for the Pitsilia population.

3. The Health Centers and Sub-Centers are functioning reasonably well in meeting the preventive and social health demands of the population. How- ever, for the provision of curative and restorative services, the Pitsilia health system is so poorly equipped that the only curative function it partially performs is outpatient examination (see Table 1). But even in this, due to the ]Rck of equipment and facilities, the Centers/Sub-Centers do not enjoy the confidence of the local population.

4. Proposed Improvement in the Provision of Medical Care. After eval- uating the region's requirements, the Government of Cyprus has proposed improvements of health services in the region through the use of the existing infrastructural facilities supported by additional equipment and facilities. Such expansion would enable the Centers and Sub-Centers to adequately provide the medical services assigned to them. Child health care, vaccination, mother health care, normal deliveries, dental care and school health services, etc., should be the services that could be provided locally.

5. The proposal includes the conversion of part of the Kyperounda Sanatorium into a small inpatient hospital with an outpatient department to serve people in the area. The proposal also provides for the upgrading of the Agros and Palekhori Rural Health Centers as well as of three rural Sub- Centers operating at Pelendria, Kalochorio and Kato Amiandos. This integrated ANNEX 6 Page 2 health system, i.e. improved outpatient facilities in the Rural Heal 'h Cen- ters and higher standard of locally available inpatient facilities, will function within the framework of the existing hierarchy of health services in Cyprus. Each component of the proposed health system is discussed below.

6. Modification of the Kyperounda Sanatorium. The Sanatorium would continue to function as a "Sanatorium" but would, in addition, function as a small hospital with a 20-bed capacity providing inpatient and outpatient facilities for the Pitsilia region. Services such as internal medicine, normal deliveries, emergency acute cases and accidents, full laboratory and X-ray examinations would be provided by the inpatient unit at Kyperounda. The outpatient department would provide examination, casualty services, child and mother health care, mainly for its immediate hinterland, though there would be no restrictions on patients from beyond the hinterland. In addition, the inpatient unit of Kyperounda will be used for the relief of the heavily con- gested district hospitals by accepting people from Pitsilia for convalescence and perhaps local people classified as chronics. In this way, more effective use will be made of this presently underutilized institution. Finally, the conversion of part of the Sanatorium to a small hospital is considered to be on an experimental basis; further expansion in both concept and facilities is possible in case demand for its services is seen to exceed supply.

7. Agros Rural Health Center. This Center would function as the major outpatient facility of the Region. It will offer services on a 24-hour basis, providing outpatient facilities, casualty treatment, normal deliveries, child and mother care, pediatric and dental services. This Center would be upgraded in equipment to provide X-ray and laboratory facilities. There would continue to be two doctors: a General Practitioner responsible for the immediate area of Agros, and a pediatrician responsible for most of the region. The dentist stationed at Agros would also be responsible for most of the region for dental health. A small inpatient unit would be maintained mainly for delivery and for short-term use by mothers until they can be transferred to the Kyperounda or a district hospital. It should be noted that X-ray and laboratory facilities at the Agros Center will also be available to patients from the Palekhori Health Center.

8. Palekhori Rural Health Center. The Health Center at Palekhori would function as an integrated unit with the Agros Health Center for outpatient facilities such as X-ray and laboratory services, and with the small hospital at Kyperounda as far as inpatient services are concerned. The complementary relationship between the Palekhori and Agros Health Centers and the small hospital at Kyperounda would be facilitated by the provision of an ambulance service stationed at Palekhori. However, child and mother health care, im- munizations and normal deliveries would be provided at the Palekhori Center.

9. Health Sub-Centers. These are essentially physical facilities used for outpatient examinations by the Health Center doctors (who regularly tour the main villages of their area) and by midwives who are permanently stationed at these Sub-Centers. It is proposed that improved buildings should be provided at the Pelendria, Kalokhorio and Kato Amiandos Sub-Centers. ANNEX 6 Page 3

10. Costs for buildings and equipment are given in Table 3. Total cost is about CL 95,000. Phasing of cost is given in Table 4.

11. Hygienic and EnvironmentalHealth Conditions. Hygienic conditions in the region, and environmentalsanitation in general, are satisfactory. No epidemics of any serious infectious diseases have occurred in the area. The responsibilitywith regard to the improvementof sanitary conditions in the area rest with the existing public health staff and includes the following activities: inspection of water supplies, sanitary inspection of buildings, insect control, health education, vaccination,assistance and advice to the local authorities for the improvementof sanitation.

12. Government would submit to the Bank for approval detailed proposals on the equipment specificationsas well as on the specific health components to be adopted in each of the above areas. APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Use of Nicosia and Limassol Hospitals by the Population of Pitsilia

Nicosia General Hospital Limassol Hospital Number of Patients Number of Patients

-B x 100 E 100 Total From Pitsilia A Total From Pitsilia D A B C(%) D E F(%)

I. Outpatients (in a Six-day Week) 3,074 97 3.2 2,970 39 1.3

II. Inpatients (During November 1976) 1,225 88 3.6 636 23 3.6 of Which: Internal Medicine 173 13 7.5 160 7 4.4 Maternity 185 14 7.6 89 2 2.3 Gynecological 79 9 11.4 84 3 3.6 Surgical 219 16 7.3 102 4 3.9 Pediatric 153 9 5.9 119 4 3.4 Opthalmological 59 5 8.5 - - - Ear, Noise, Throat 97 12 12.4 28 2 7.1 Neurosurgical 25 1 4.0 - - - Orthopedic 104 6 5.8 32 1 3.1 Private Wards 51 - - 22 - - Psychiatric 61 3 4.9 - - Intensive Care 19 - -

1/ Based on surveys conducted during November/December 1976.

Source: Ministry of Health, Cyprus.

March 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Services Performed at Two Rural Health Centers

Rural Health Centers ------Agros------Palekhori ------1973 1975 1976 1973 1975 1976 Remarks

Staff and Facilities 1. Doctors 1 1 1 1 1 1 2. Number of Beds 4 4 4 4 4 4

3. Imnunization -/ (No.) 3,461 3,323 1,674 3,202 1,941 405 4. General Curative and Preventive Medical Care: - Inpatient Patient-Days 47 59 - Inpatients 17 13 - Outpatient Total Attends 9,052 6,557 6,689 5,228 8,291 5,946 - Number of Dressings 0 0 5. Specialized Services (No.) - Dental Total Attends 3,754 4,085 1,902 0 From the Villages of Agros, Palekhori, Polystypos and Kyperounda - Maternal Total Attends 524 262 63 100 24 30 - Child Total Attends 2,725 2,793 2,217 545 233 175 - Home Visits for Women 246 N.A. N.A. 54 1,115 257 - Home Visits for Children 1,331 N.A. N.A. 2,220 1

6. Deliveries N.A. 18 5 0 0 0 Probably all go to Nicosia

1/ Smallpox, Diphtheria, Tetanus, Whooping Cough, Polio, Measles and Influenza.

Source: Ministry of Health, Cyprus

March 1977 " a APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Costs of Health Facilities

Hospital Rural Health Centers Rural Health Sub-Centers Kyperounda Agros Palekhori Pelendria Kalokhorio Kato Amiandos Inpatient Outpatient Foreign Unit Unit Foreign Exchange Total Exchange Cost ------______- (CE) ------

I. Buildings 10,000 9,000 2/ 11,000 3 3,000 4/ 5,000 -/ 3,000 - 3,000 4 44,000 50 22,000

II. Equipment and Vehicles 22,200 4,020 7,190 8,120 620 150 300 42,600 85 36,200 of Which: Furniture and Fittings 260 420 140 370 400 100 140 1,830 Laboratory Equi g nt 4,040 300 2,02? 350 220 50 160 7,120 7 X-Ray Machine 12,000 ------12,000 Anaesthetic Machine 1,500 ------1,500 Operation Table 4,000 ------4,000 Electrocardiogram 400 - 400 400 - - - 1,200 Dental Unit - 3,000 - 3,000 - - - 6,000 Physiotherapy Equipment - 300 - - - - - 300 Ambulance - - 4,000 4,000 - - - 8,000 Other - - 650 - - - - 650

Subtotal: 32,200 13,020 18,190 11,120 5,620 3,150 3,300 86,600 67 58,200

Physical Contingencies (10>): 8,700 67 5,800

TOTAL: 95,300 67 64,000

1/ Structures to separate the Inpatient unit from the rest of the Sanatorium. 2/ Two examination rooms, one casualty room, one registration room, waiting room, pharmacy, storage area. 3/ Rooms for general examinetion, maternity care, registration, X-ray unit, laboratory, nurses. 4/ Additions to existing facilities. 5/ Examination, maternity, and registration rooms. 6/ Include centrifuge, microscope, distillator, blood bank fridge, auto-clave, oven, incubator, sterilizer, stethoscope, etc. 7/ Specifications given in Appendix A. 8/ The present X-ray unit at Kyperounda will be transferred to Agros.

March 21, 1977 ANNEX 6 Table 4 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Phasing of Health Services

Health Center/ Costs - During Year Sub-Center 1 2 3 4 5 Total

______------(CL) ------Kyperounda 20,920 28,880 - - - 49,800

Agros 10,610 9,410 - - - 20,020

Palekhori - - 12,250 - - 12,250

Pelendria - - - 6,200 - 6,200

Kalokhorio - - - - 3,400 3,400

Kato Amiandos - - - - 3,630 3,630

TOTAL: 31,530 38,290 12,250 6,200 7,030 95,300

1/ The Table does not include price contingencies.

Source: Planning Bureau and Ministry of Health

March 21, 1977 ANNEX 7 Page 1

APPRP,SkAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

The Education Component

1. Introduction. Elementary education in Cyprus is free and compulsory for all children between the ages of 5 and 11 years. Since Independence in 1960, substantial progress has been achieved in educating the population as may be seen from the high literacy rate (88%) and the high proportion (94% during the 1975/76 school year) of primary school children that go on to secondary school. However, a difficult problem remains: the relatively low level of facilities and educational standards in the rural areas. This problem is mainly due to the settlement pattern which consists of small scattered villages. Most of these scattered villages can only support a small school of one or two teachers for all the pupils. Educational standards are normally lower in these small schools because one or two teachers must simul- taneously teach children of different educational levels and ages. In 1972 there were 245 small schools out of a total of 546 on the whole Island.

2. Existing Policy. Following Independence, the emphasis was on the construction of new primary school buildings, the replacement of old buildings and the establishment of schools in all the villages that had the required minimum (15 pupils) to justify the employment of a teacher. By 1971 the basic requirements in physical facilities had largely been met, and greater emphasis was then placed on qualitative improvements. In order to overcome the problem caused by the rural settlement pattern, the Government encouraged the consolidation of small schools. This was achieved by persuading school boards to close down small schools and send the children by bus to larger schools in neighboring villages. A high proportion of the resulting transportation costs is subsidized by the Government. This policy has been extended in recent years, and the Government has encouraged the construction of new central schools (or the extension of suitably located existing schools) in order to provide schools of optimum size in the rural areas. Larger central schools approaching the optimum size of 8 to 10 classes and serving a population of 3,000 will enable the rural schools to match urban schools in educational standards and facilities.

3. Responsibility for elementary education is shared between the school boards at the local level and the Government. In rural areas the school boards are normally the village authorities, except where there is a central school, in which case the affected village authorities are represented. The school boards undertake the responsibility of providing the buildings and running costs (water, electricity, school materials) for which local taxes are levied on all persons living in the village earning an income. The Government provides subsidies for construction purposes, operating costs, teachers' ANNEX 7 Page 2 salaries and student transportationcost. Normally the Government provides grants of between 20-30% towards the constructionof school buildings and extensions;but where a village is considered to be poor, Government subsidizes a higher proportionof the total costs. Owing to the relative poverty of the Pitsilia Region, the Region's school boards generally receive grants of between 30-50%. In addition, the Government, through the Loan Commissioners, provides loans to the school boards for the remaining part of the construction cost. The loans are at low interest rates (4 to 5% depending on the repayment period). Interest rates for educationpurposes are 1% below the normal rates of the Loan Commissioners.

4. The Government subsidy towards school operating costs in rural areas is Cb 4 per pupil per annum. Teachers' salaries are paid entirely by the Gov- ernment. Children who have to travel more than 1-1/2 miles to school receive a subsidy of Ch 1-2 per month depending upon the distance between residence and the school. Normally, this does not cover the entire travelling costs. Al- though,where convenient, the children travel by normal bus services, in many cases the parents arrange for special bus services for the transfer of the children. In view of the transportationcosts involved, great care is taken in the choice of location for central primary schools.

5. Status of Elementary Education Facilities in Pitsilia. There are 43 elementary schools with 2,508 local pupils; during 1976 there were also 687 displaced (from northern Cyprus) pupils in Pitsilia. Only 4 of these schools, those at Pelendri and Kyperounda with 11 teachers each and Agros and Ayios Ioannis with 6 teachers each, provide complete services. The table below shows that 85% of the schools have less than 3 teachers.

Number of Teachers Number of Schools _

1 10 23 2 17 39 3 10 23 4 2 5 5 __ __ 6 2 5 7 _- __ 8 __ __

10 __ __ 11 2 5

Total 43 100

Of these schools, three, those at Sarandi, Livadhia/Alithinouand Melini, are below the minimum of 15 pupils required to justify the maintenanceof a school.

6. Proposals for Improving ElementaryEducation. The Ministry of Education has proposed that two central primary schools be established in order to raise educational standards. It is proposed that one central ANNEX 7 Page 3

school would be in the Alona area within the Nicosia District to serve the villages of Alona, Polystipos, Platanistassa, Livadhia/Alithinou and Pheterikoudhi; and the other will be at Kalochorio to serve Zoopiyi, Ayios Pavlos, Ayios Konstantinos and Louvaras. Both schools would be located at central locations acceptable to the village. The Government is actively pursuing the policy of consolidating smaller schools into centrally located larger schools. This policy is predicated on the following:

(a) Larger schools afford enhanced opportunities to socialize and enrich the early lives of rural children who are generally not exposed to stimulating environments in rural areas;

(b) larger schools permit pooling of teachers, and this raises the potential for creating a better academic environment;

(d) pooling of resources permits economies in operating cost while raising efficiency of resource use; and

(e) if central schools are not established, the downward trend in pupil numbers (see Tables 1 and 2) would continually lower the academic levels of small village schools.

7. The proposed central schools at Alona and Kalokhorio are intended to serve as pilot schemes to test the practical advantages against the dis- advantages of school consolidation. The proposed consolidation of schools in the project would be the first time for the implementation of this policy.

8. Alona Central Elementary School. The need for a central primary school in Alona is both recognized and welcomed by the residents of the area. Four alternatives (including the extension of the existing four-classroom school in Alona) were considered. The most desirable location was found at Ayia Anna which is close to the road junction between the villages of Livadhia and Platanistassa. An eight-classroom school is planned for this area. The total cost is estimated at CL 104,000 (Table 3).

9. Kalochorio Elementary School. There is general agreement among residents of the area that a central school is needed and would be desirable. Two alternatives (including the extension of the existing four-classroom school) were considered and the new location alternative was unanimously chosen. The proposed new school would be located at Pefkos crossroads which is easily accessible from all the affected five villages. The estimated cost of the eight-classroom school is CL 89,000 and (Table 3). The building facilities of the present school would be used for other community purposes.

10. Phasing of Construction. It is expected that both schools would become operational in four years. AP7iUIShL 0"

PtTSOLI& lKTkGDATgD R0661R 0VEW ESt MAMJICT

Al-e C-enCr-l fet.r- Srboo frgagol. . r . 0.1. and Th.-her. 1h the Afaftotd ShrAIs

1963264 1964/65 196/66 19b6267 1967/68 1968/69 1969/70 1970/71 197172 1972/73 --- 1973/74 ------1974/1975 ------_-_ 2------otlca 4e ~~-~---~------eahes Pil. Plj. D atpl-... d Pupils DaP>c*i.p-. Teeher. Z-11

Amas 94 36 a3 as 81 73 78 71 60 51 2 46 41 Sb 4 97 47 24 3 75

1§lY-pen 63 66 67 69 65 72 66 67 69 60 2 61 63 34 3 97 62 16 3 7S platnel.r"s, b2 94 96 90 100 93 37 so 80 is 3 I3 59 69 6 14S 65 36 4 1lD

LIv bfl./ASItthln. 3S 46 47 42 40 40 35 29 Z4 16 1 12 16 22 2 33 a 4 1 12 phtertkotw1 54 55 52 S0 50 S3 51 45 39 35 1 24 23 21 1 44 22 10 5 32

331 347 345 336 336 391 327 300 271 237 9 214 203 222 16 424 2D4 90 12 Z94

kMruSA: P1977i a PebPeery 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Ka.okho-io Central Ele-entary School Proposal Nmbher of P.pil. and Teachers in the Affected Schools

1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 _ 1973/74 ------…--- 1974/75 -___-____-__ ------1975/76 ------Lo-ol Local ------Pupil ------Teachers Pupils . Pupils Dipslaced Teachers pupils pils Displaced Teachers Pupils

Kslokho-io 92 98 104 96 93 92 93 91 85 75 3 68 53 4 3 57 48 4 2 52

Zoopigi 43 51 44 42 33 28 27 26 22 21 1 21 24 8 1 32 27 - 1 27

Ayos Pavlos 49 50 49 45 40 34 29 27 27 25 1 26 27 3 1 30 22 - 1 22

Ayios Constantinos 44 48 45 41 43 42 39 36 36 37 2 33 33 1 2 34 32 2 2 34

Loovaras (long r1 s) 53 58 64 59 56 60 61 58 58 38 2 65 60 2 2 62 60 - 2 60

281 305 306 283 265 256 249 238 228 216 9 213 197 18 9 215 189 6 8 195

Source: Planning Bureau

Febr-ary, 1977 6FRAiSAE OF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PRiOJECT

CYPRUS

Capital Costs of Schools

Alone l/ Kalokhorio / Ph4sing of lotal Cost Total Foreign Foreign Quantity Cost Quantity Cost Cost Exchange Exchanxe Cost Year Cost (CE) (Cb) (CB) (7) (CE) (Cb)

I. Buildings Classrooms 8 24,000 6 18,000 42,000 1 60,050 Specialist Rooms 3 12,000 3 12,000 24,000 2 65,860 Multipurpose Rooms 1 10,000 1 10,000 20,000 3 38,740 Headmaster Room 1 1,600 1 1,600 3,200 4 29,050 Staff Room 0 1,600 1 1,600 3,200 Storerooms 5 5,000 5 5,000 10,000 Total 193,700 Water Connection (W.C.) 12 7,200 10 6,000 13,200

Subtotal: - 61,400 - 54,200 115,600 30 34,680

II. Other Construction Site Layout and Landscaping - 6,000 - 3,000 9,000 Fencing (i) 1,500 6,000 1,400 5,600 11,600 Sports Facilities 2 2,400 2 2,400 4,800 3 Earth Filling (i ) 8,000 5,000 2,000 1,000 6,000

Subtotal: - 19,400 - 12,000 31,400 30 9,420

III. Equipment Heating (No. of Heaters) 13 1,300 13 1,300 2,600 Furniture - 3,000 - 3,000 6,000

- 4,300 - 4,300 8,600 30 2,580

IV. Land Acquisition (donums) 11 3,300 10 4,000 7,300 0 0

V. Utilities Water Supply - 2,000 - 2,000 4,000 Electricity - 4,600 - 4,600 9,200

Subtotal: - 6,600 - 6,600 13,200 50 6,600

Total 95,000 81,100 176,100 30 53,280

Physical Contingencies (107) - 9,500 - 8,100 17,600 30 5,280

GRANDTOTAL - 104,500 - 89,200 193,700 30 58,560

1/ Accepts students from the Villages of Alona, Polystypos, Platanistassa, Alithinou, Livadhia, and Phterikoudhi. 2/ Accepts students from the villages of Kalokhorio, Zoopiyi, Ayios Pavlos, Ayios Konotantinos, Louvaras.

Source: Ministry of Education, Cyprus

March 1977 ANNEX 8 Page 1

APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMFENTPROJECT

CYPRUS

Organization,Management and Monitoring

1. General. The multi-componentfeatures of the project necessitate the involvementof a number of ministries and departments in the implementation of this project. The main departments involved in the agriculture- related components would be:

- The Departmentof Agriculture (DA); - The Water DevelopmentDepartment (WDD); - The Land ConsolidationAuthority (LCA); - The Geological Department (GD); - The Loan Commissioners (LC); - The CooperativeCentral Bank (CCB); and - The Planning Bureau.

In addition, other ministries would be responsiblefor implementingand/or coordinatingthe non-agriculturalcomponents. These other ministrieswould be those of Health, Education, Public Works, Interior (and the concerned District Officers),and Finance.

2. Project Organization. Since more than three-quartersof the proposed project would relate to agriculture,the project coordinationfunction is located in the Ministry of Agriculture and Natural Resources (MANR). The Director-Generalof MANR would be the formal Project Coordinator. However, in view of his other commitmentsand responsibilities,he would be assisted by a senior (see Appendix A for qualifications)staff member who would be a full-time employee of the project. In order to provide a formal vehicle for coordinatingpolicy as well as project-relateddecisions, two committees are proposed:

(i) Project Policy Committee (PPC). This committee would provide the policy framework for the project. The PPC would be chaired by the Minister of Agriculture. The Director General of MANR (as Secretary and Member); Directors General or representatives of Planning Bureau, Finance, Interior,Health and Education and Commissionerof CooperativeDevelopment would be its members.

(ii) Project CoordinationCommittee (PCC). This committeewould provide the focal point for all project-relatedactivities. It would be chaired by the Director General of MANR in his Project Coordinatorcapacity. Its members would include representativesfrom the four relevant departmentsof MANR and representativesof the Ministries of Health, Education, and Interior. The Secretaryof this committeewould be the Assistant to the Project Coordinator. ANNEX 8 Page 2

Chart 1 provides a schematic presentation of the above functions. Chart 2 gives the present Organization Structure of MANR.

3. Project Organization Rationale. The principal feature of the proposed organization is that it uses existing departments as they presently function. However, since this would be the first integrated project in Cyprus, the proposed organization provides the PPC and PCC as coordinating mechanisms. The various project components (minor irrigation schemes, soil conservation works, village streets, etc.) have been implemented as part of the development components of the relevant ministries. For example, the WDD has a budget category for minor projects and the LCA has a budget category for farm roads. Traditionally, WDD and LCA would coordinate their activities as both are part of MANR. However, the development activity of WDD and LCA would usually not be coordinated with the Ministry of Health of the Ministry of Education. This interministerial coordination would be crucial for the implementation of the project.

4. Project Monitoring. The Project Coordinator would be responsible for the implementation and monitoring of the project. He would be responsible for submitting Project Progress Reports (Appendix B gives a sample Progress Report) to the World Bank. In the first year of project implementation, the reporting frequency would be three, i.e., one report every four months. In subsequent years, the frequency would be two per year. The proposed higher frequency in the first year is because three specific and a number of general tasks have to be completed in that year. The three specific tasks are: (i) Development of a specific and coordinated implementation program; (ii) Comple- tion of investigations and designs for the Xyliatos dam, and (iii) Completion of the groundwater drilling and testing program. The general tasks would include setting up the project organization, initiation of discussions with villagers on specific ponds, boreholes and other activities in which the villagers participate financially, setting up a project monitoring system 1/, etc. No additional staff is necessary as the data collection would be done by the staff of various departments and data analysis would be done by the Assistant to the Project Coordinator.

5. Project monitoring activities also include an economic and technical evaluation of the project as it was actually implemented. The Project Co- ordinator would submit to the Bank, within six months after completion of disbursements, an evaluation ex-post of the project.

1/ This would include designing and observation and monitoring system to keep track of project execution and project impact on income, production, prices, wages, migration, investment, savings and other relevant categories. ANNEX 8 Appendix A

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Qualificationsfor the Assistant to the Project Coordinator

1. The Assistant to the Project Coordinatorwould be the de facto Project manager. He would be working through the line authority of the Director General (DG) and would have the benefit of frequent consultation with the DG.

2. The main qualificationsare experience in a technical field (water resources or agriculture)so that he could have a meaningful dialogue on specifics. Preferably,he should be presently a senior (AssistantDirector Level - this is only indicative) staff member of MANR. He should have prior experience in project implementationor he should have a track record in some significantleadership role. ANNEX 8 Appendix B Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Suggested Outline of Progress Reports to Bank

The following is suggested for the Progress Reports of the Pitsilia Project which are to be prepared by the Project Coordinator with the assistance of staff responsible for carrying out the Project.

A. FORMAT

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Report for Period Ending

I. Introduction

This section should include discussion of general topics including market conditions, prices, changes in Government policy and other actions, farmer attitudes, etc., which have affected or may affect project execution.

II. Major Accomplishments During Period

This section should include a discussion of accomplishments in quantitative and, where necessary, qualitative terms. Progress of each project component as listed in the Project Cost Table should be separately described. Progress Reports should compare actual progress with what was initially planned.

III. Work Planned for the Following Six Months

This section should describe the work planned in terms of the specific project components.

IV. Organization and Management

The organizational status (staffing, office space, etc.) of the project should be described in the first report with periodic updates. If special problems arise during the period, these should be flagged with indication of steps taken. ANNEX 8 Appendix B Page 2

V. Major Problems of Project Execution

Any key issues or bottlenecks impeding the progress of the project should be mentioned together with remedial measures which have been taken or anticipated. Also give details of any actions taken or contemplatedwhich could conceivably result in the project, or any project component, developing along lines significantlydifferent from those foreseen at appraisal.

VI. Miscellaneous

Discuss briefly any matters which do not convenientlyfall under any of the above headings.

VII. Summary and Recommendations

Give a brief summary of project activities and a list of recommendedactions designed to facilitateproject execution.

VIII. Tabular Material

The following data should be provided in tabular form and attached as annexes:

(a) Physical facts relating to the project with meaningful details: area planted by crop, crop yields, prices, production cost, lengths of village streets, farm roads, etc.

(b) Expendituresunder the project subaggregatedby components.

B. REPORTING REQUIREMENTS

While there would be flexibility,the above or a similar format should be followed as closely as possible each period in the interest of uni- formity. It is suggested that the narrative portion of the report should be 2-4 pages of single typescript and should provide material to explain and/or clarify the tabular data. The reports should be submitted to the Bank within 2 months after the end of each period, and the end-of-the-yearreport should include a summary of the progress and evaluation for each year. In addition, certified copies of audited project accounts and the auditors' report should be submitted not later than 6 months after the end of each fiscal year. ANNEX 8 Appendix C Page I

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Terms of Reference Study of Agricultural Investment Financing

1. Objective. The study would attempt to establish the need, if any, to modify the present system of concessions to the rural sector. The criteria for establishing the need would include (i) the sectoral and/or the income groups' financial need for concessionary terms; (ii) the economic returns from investments in the sector; (iii) regional and/or income group specific considerations; and (iv) availability of resources in the public sector.

2. The recommendations of the study should be submitted to the cabinet as the net result of the effort should be either (i) a reaffirmation after due consideration of the implications, of the existing system of concessions; or (ii) adoption of a revised system which may or may not have significant concessionary financing.

3. Organization. The study would be jointly carried out by the Plan- ning Bureau and the Ministry of Agriculture. Additional staffing is not needed, but the consultant funds provided in the project could be used for short-term consulting needs. The responsibility for completing the study would be with the Project Coordinator. The study could be completed in six to eight months by a professional manpower input of 12 to 16 man months.

4. Analysis and Output. The study would evaluate:

(i) the structure and performance of the existing system of concessions, especially the effects on production, farm incomes, and technology choices;

(ii) the adequacy of the existing institutions, especially the Cooperative Central Bank, the Cooperative Credit Societies, and the Loan Commissioners;

(iii) the adequacy of the present supply of credit;

(iv) the extent of subsidization implicit 1/ in the concessionary policies and the incidence of these subsidies; and

1/ Besides the amount of the "grant" in the financing package, the cost includes the opportunity costs of the grants and the low interest rate loan component. ANNEX 8 Appendix C Page 2

(v) alternative concessionarypolicies, resulting in recommendations for the policy set most appropriate for Cyprus conditions, including its final position. The recommendationsshould include a transitionprogram from the present to the proposed system. APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Project Organization Chart

Project Policy Committee (PPC)

|Tenders Board 3/ ------Project Coordinator and 2/ Secretary of PPC

Assistant to Thel Project Coordinator

Project Coordination Committee (PCC)

Project Coordinator Chairman of PCC

water Development Agriculture Land Consolidation Geological Liason in Ministry Liason in Ministry Liason in Ministry Department Department Department Survey of Health of Education of Interior

LEGEND ------Consultative Relationship Line Relationship

1/ Members would be Minister of Agriculture and Natural Resources (MANR) (Chairman), Director General of MANR (Project Coordinator and member) Director Generals or representatives of Planning Bureau, Finance, Interior, Health and Education, and Commissioner of Cooperative Development. 2/ Director General of MANR would be Project Coordinator and Secretary of PPC. He or staff designated by him would be the focal point for project-related activities including communications with external financing agencies. 3/ Accountant General, Representatives of Ministries of Finance and Commerce, Representative of Planning Bureau, Director of Stores and Project Coordinator. m Funding for short-term consultants for engineering problems. APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

OrAs-ication Structure of the Ministro of Ajriculture

|Minister-

Water Developent ult Land Consolidation Geological Survey Department of Agriculture Research Deportment Department AutrityDepartent Veterinary Services InstItute _Director _ Director _ Di-t-ect Director _ Director Dir-ctor

Water Reerce |4 Agricultural Steneon | -|Adminiatration -|Administrative Sections Central LaboratorY Ad5ini5tretive

Small Project Planring -PlntProtection |Mineral ploration |etrary Vt--Technical Public R.atth Agronomy 6*

n-Pasture Developren| Planning end Seaearch Drilg Vaccine Production Agricultural ECo.omic| 3

q DesiKn l | -| Horcicultur | AccountingGeoPhycical i | Artificial lnsericaiion 4 -Animal Productioo 8

operation and Mintenance Soils and Plant Nutrition and Publicity Mapping |airie Officea |orticuLture -Pres 7

{; ionalOffices l _ Land and Water Ure ] {i boratories | -| Centr-l Chemical Laboratory 2

3 { 9 3 | ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*The Institute has 41 staff Farms, Stationr and J at~~~~~~~~~~~~~~~~~~~~~~~~embereengaged Sn 4 3 _ Nurseries < Palaeontologicall | ~~~~~~~~~~~~~~~~~~~~~~~~~~~scientificweek.

Source: Dlinietry of Agriculture

Pcbrutry 8, 1977 ANNEX 9 Page 1

APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

Market Prospects

I. Irrigated Crops

1. Deciduous Fruits. Deciduous fruits include apples, pears, apricots (includingkaisha), cherries, peaches, quinces, plums, loquats, pomegranates, and figs. It is estimated that of the 4,935 ha under deciduous fruit trees in Cyprus, about 1,067 ha (22%) are in the Pitsilia Region. The most important trees are apples, which account for more than 46% of the trees in Pitsilia, followed by peaches and plums. The proportion of cherry, apricot and pear trees in Pitsilia is relatively low.

2. Pitsilia is estimated to produce acout 24% of the total Cyprus output of the main deciduous crops, and it is anticipated that by 1981 this proportionwill probably remain the same. The relative importance of the Region as a producer of pears, peaches and plums will decline; but it will, however, become a more importantproducer of cherries and apricots, while maintaining its share of apple production.

3. The main aspects of marketing deciduous fruit in Cyprus are the following:

- Deciduous fruit is mainly consumed as fresh fruit. Between 1961 and 1971, there was a tremendous expansion of deciduous planting in Cyprus; the most notable developmentwas a nine- fold increase in the number of pear trees with substantial increases in apricot, peach and plum trees.

- Prices for deciduous fruits have been fairly stable over the last few years, although fluctuatingin response to changes in annual output. Reduced output in 1974 caused sharp price increases. In 1975 the return to more normal productionlevels within a reduced market led to extraordinaryprice reductions (see Table 1).

- Break-evenanalysis (with cost including own labor) suggests that deciduous fruit prices would have to fall from 33% to 50% before productionwould become unprofitable.

- The promotion of early and late varieties (later than August) of fruit is more profitable because of the reduced competition from substitutefruits. ANNn >, Page 2

4. The Cypriot Pitsilia Project team prepared a supply-and-demand analysis of deciduous fruit up to 1(9~ The analysis of supply was based upon the age structure of trees, actuai yield levels of existing and potential yield levels of new trees. The anal'!. 3s of demand was based on past trends; however, the projected per capita cu.umption levels in Cyprus were kept com- parable to European per capita cons>.- ption levels. The projected consumption levels were based upon the present price changes. The conclusions from the supply/demand analysis for each type of crop are as follows:

(a) Apples. The expansion of the area under apples must be restricted to improved varieties of superior taste and appearance that can keep well in cold stores.

(b) Pears. There should be no expansion of the area under pears unless studies prove that it would pay farmers to produce varieties suitable for canning.

(c) Apricots. As the market situation appears to be in balance, there is a limited scope for the planting of improved varieties.

(d) Cherries. The market situation appears to be promising if exports could be properly organized.

(e) Peaches. There are prospects for expansion and for diversification into new improved varieties.

(f) Plums. Limited prospects. Since plums are mainly consumed in July and August, any new plantings should relate to early or late varieties which in recent years have maintained higher price levels.

(g) Quinces, Loquats, Pomegranates and Figs. There has been reduced interest in these crops during the last few years, though there may be some scattered plantings. Loquats have the advantage of being a relatively early crop but prospects are limited.

5. Nuts. On the world market, nuts are generally marketed through different channels than fruits and vegetables and are normally handled by importers/wholesalers of grocery items or spices. Consumption is generally growing, particularly since these products are on the more expensive side of groceries and are consequently affected by improvements in spendable income. There should be no marketing problems for the relatively small quantities of nuts that may become exportable from Cyprus as a result of the implantation of almonds, pecan walnuts, hazelnuts and pistachio nuts. Annual production of almonds in Cyprus is usually between 3 to 4 thousand tons (Table 2) of which about 20% is exported. Export prices have been bullish and no export problems are anticipated as long as the expansion program is based on the improved varieties demanded in the export markets. ANNEX 9 Page 3

6. Citrus. The citrus component of the Project would consist of mandarins and lemons as these have the least marketing problems. Table 3 indicates the importance of citrus in the Cyprus commodity export structure. Only a small part of the incremental citrus production would be exported.

7. Irrigated Table Olives. There is substantial scope for the expansion of the area under irrigated varieties of table olives in order to replace imported sources. Imports of table olives reached 750 tons in 1975 and the quantity demanded is rapidly increasing. Prices have increased sharply since 1973. It is proposed to give priority to the Pitsilia Region in the cultivation of this crop and to monitor the number of plantings in order to ensure that a balance between demand and supply is maintained.

8. Potatoes. The Pitsilia Region is a traditional producer of high- quality potatoes with the crop being marketed when the spring lowland crop is finished and before the autumn lowland crop is available. No problems are envisaged with the additional quantities (an increase in output of less than 5%) to be provided through the Pitsilia Project. The Potato Marketing Board, which controls planting and sales, would guard against the possibility of overproduction.

9. Other Vegetables. The general tendency in Cyprus over the last ten years has been for a steady rise in fresh vegetable consumption accompa- nied by a rise in average prices. The consumption of vegetables (including potatoes) and dry legumes in Cyprus rose from 112 in 1960 to 186 kilos per head in 1973. It is considered that the per capita consumption would increase to 230 kilos (or 188 kilos excluding potatoes) by 1985. Since the Pitsilia project would add less than 4% to production over a five-year period, and since there is considerable flexibility of choice between the various types of crops, it is anticipated that the additional output can be marketed at remunerative prices. The summer vegetables of Pitsilia are generally of superior quality to the vegetables produced in the plains. It is envisaged that the main crops to be grown would be carrots, tomatoes, cucumber, cabbage, squashes, onions, eggplants, peppers and legumes.

II. Dryland Crops

10. Oil Olives. Olive trees can grow in areas that are unsuitable for almost any other crop and produce a higher return per ha than most dryland crops. Though olive production varies considerably from year to year, it appears that the underlying trend is for production to remain relatively stable. About 60% of the olives harvested are processed into olive oil and the remaining olives are preserved. The Government's objective is to increase production so as to eliminate imports of olive oil and to increase exports (mainly destined for Cypriots residing in the United Kingdom). In general, the proposals for Pitsilia are consistent with consumption trends and would involve only a small increase in the Island's output. ANNEX 9 Page 4

11. Vine Products. The market for vine products consists of a number of separate markets that call upon the same production source. The main vine products of Cyprus are wines, Commandaria,eau-de-vie-de-vin, raisins and fresh grapes.

(a) Wines. There is uncertainty in world wine markets due to annual crop fluctuationswhich cause sharp price movements, but the outlook is considered to be better for moderately priced quality wines. In value terms, wine exports have increased every year since 1966. During 1975, prices stabilizedat a little below 1974 prices and exports fell, although in value they remained above the 1972 level. Cyprus wines have generally faired well because of the dependence on sherry and the United Kingdom market. The Government desires diversification(i) into new markets to reduce the dependence on the United Kingdom market; (ii) of wine exports in order to reduce dependence on sherry; and (iii) into bottled wine exports.

(b) Commandaria. This is a dessert wine made solely in Cyprus. Three cooperativewineries in Pitsilia produce 35-40% of the Commandariaoutput in Cyprus. Exports in bottled form have been increasing but bulk exports have been erratic. In 1974 bottled exports were worth twice the value of bulk exports.

(c) Eau-de-vie-de-vin. A large proportion of the Pitsilia grape output goes for production of zivania, a spirit, which is further processed into eau-de-vie-de-vin. A drought in 1973 led to a severe reduction in its production,but it is anticipated that it may take two years to return to previous output levels. No marketing problems are envisaged.

(d) Raisins. It appears that, in spite of the grape surpluses in recent years, the market for raisins is still satisfactory.

(e) Table Grapes of the verico variety are grown in Pitsilia and sold late in the year. In addition, a significantpart of the wine making varieties from Pitsilia are also sold as fresh grapes.

12. Appendix A gives additional background about wine products. APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Ex-Farm Prices of Principal Crops

1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 ------(CO /m ton) ------Mandarins ------81 102 100 Grapes 18 18 20 22 23 24 24 42 41 36 Apples 92 92 96 80 100 56 68 97 88 57 Pears 104 112 132 140 140 141 104 158 123 -- Peaches 52 36 24 52 52 68 54 94 89 76 Cherries 88 92 88 140 72 128 116 143 281 138 Plums 48 48 44 60 56 81 60 100 112 64 Strawberries 80 80 120 140 136 178 152 162 228 -- Almonds 104 108 109 150 160 130 156 200 140 142 Olives 120 100 104 88 152 160 180 280 320 295 Potatoes 27 31 26 34 31 25 29 31 30 72 Carrots 22 22 22 35 21 22 34 38 26 Tomatoes 32 32 38 36 36 52 54 83 89 58 Cucumbers 44 42 42 44 44 53 56 89 82 60 Haricot Beans 112 112 136 140 140 152 157 224 280 72 Cabbages 48 52 18 28 24 37 43 46 42 57 Onions 24 26 27 48 44 30 41 48 48 77 Squashes 32 32 36 40 44 54 55 85 68 61 Eggplant 44 44 34 32 36 47 52 68 87 Peppers 45 48 52 44 68 68 70 137 125 Dry Beans 221 276 276

Source: Agricultural Research Institute 0z - t February 8, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Production of Principal Crops

1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 ------(Thousand Metric Tons) ------

Mandarins ------4.6 3 3.4 Grapes 140 145 166 200 180 182 165 95 145 173 Apples 8 10 8 8 7 11 10 9 8 9.1 Pears 0.4 0.6 0.7 0.4 0.6 0.7 1 0.9 1 -- Peaches 1 2 2 2 2.5 3.5 4 3.3 2.' 2.5 Cherries 1.4 1.6 1.8 1 2.5 1.5 2 2 1. 1.6 Plums 0.8 1 1.1 0.8 1.2 1.3 1.5 1.6 1 1.5 Strawberries 0.4 0.4 0.3 0.4 0.4 0.5 0.5 0.6 0.5 -- Almonds 3.5 4 5 4 4 4 4 1 3.5 3 Olives 17 30 15 18 7.5 15 20 2 8 13 Potatoes 130 170 173 160 205 175 172 160 150 1.12 Carrots 9 20 16 23 18 15 17 12 15 19 Tomatoes 18 19 20 22 23 25 24 23 17 12 Cucumbers 9 12 12 11 12 14 13 13 11 -- Haricot Beans 1 1 1 1 0.8 0.9 0.7 0.4 0.5 2.2 Cabbages 3.3 3.5 4 4.2 4.5 4.8 4.9 5 4 2.8 Onions 3.3 3 2.5 2 2.2 2.6 2.7 2.3 2 1.7 Squashes 3.5 4.2 4.5 4 3.8 4.3 4.3 4.5 4 3 Eggplant 2 2.3 2.2 2.5 2.5 2.5 2.5 2.6 2 -- Peppers 0.5 0.5 0.9 0.5 0.5 0.6 0.6 0.5 0.4 -- Dry Beans ------0.4 0.5 0.8

Source: Agricultural Research Institute

February 8, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Commodity Exports 1/ and Direction of Export Trade

1970 1971 1972 1973 1974 1975 (US$ Million)

A. Commodity Exports

Food 46.1 57.8 69.6 92.4 63.1 51.0 Citrus (17.3) (30.5) (32.6) (46.3) (29.4) (14.1) Potatoes (15.6) (11.0) (18.5) (24.6) (14.0) (20.9) Grapes (2.9) (4.3) (3.4) (2.9) (2.7) (6.3) Beverages and Tobacco 8.9 10.6 12.8 16.0 17.0 14.9 Minerals (Copper, Iron Pyrites, Asbestos) 33.6 22.6 22.4 28.0 26.1 22.7 Manufactured Goods 4.3 7.0 8.3 11.7 16.7 24.7 Others 3.1 3.1 3.4 6.3 5.2 19.0 TOTAL: 96.0 101.0 116.5 154.5 128.1 132.3

B. Director of Exports (F.O.B.)

Total Exports 102.5 108.7 130.4 171.7 151.7 151.8 United Kingdom 41.8 47.3 55.3 69.2 57.9 53.0 Germany 19.4 13.4 8.3 12.9 9.1 2.6 Italy 6.2 4.1 3.6 4.6 3.3 3.3 Netherlands 3.4 4.6 3.1 7.7 3.3 3.7 France 2.9 5.0 3.9 4.0 1.4 1.3 Other EEC Members 0.7 0.5 0.8 3.1 0.5 0.8 Rest of the World 28.1 33.8 55.3 70.1 76.3 87.1

1/ Excluding re-exports.

Source: Cyprus - Country Economic Memorandum, May 20, 1976

January 1977 ANNEX 9 Appendix A Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Vine Products of Cyprus

I. Significance of the Vine Industry

II. Vine Cultivation

III. Grape Production and Utilization

IV. Wines ANNEX 9 Appendix A Page 2

I. Significance of the Vine Industry

1. The vine industry is very important for the Cyprus economy. It provides employment to about 45% of the farming population. In parts of the Limassol and Paphos Districts many villages are dependent on vine mono-culture. Wine exports contribute significantly to the balance of payments, and in 1975 accounted for about 8% of the total domestic exports. The wine industry is also a major component of the manufacturing sector. In the Pitsilia Region vines are the dominant rainfed crop and cover about 45% of the total cultivated area.

II. Vine Cultivation in Cyprus

2. The total area covered with vineyards in the whole of Cyprus was 45,800 ha or 15.6% of the total cultivated area of dry-land crops. Pitsilia accounts for about 15% of the total area under vines; about 80% of the vineyards in Pitsilia have the local mavro, and about 19% have the local aspro variety. The area under table grapes (mainly sultana) in Pitsilia is in- significant, but the local varieties from Pitsilia are also sold as table grapes (mainly verico and ofthalmo). This is because the Pitsilia Region is closer to Nicosia (and to a lesser extent Limassol) than other wine- growing areas and because the grapes are more suitable for fresh consumption because of the climate. The altitude of the Pitsilia Region enables grapes to be brought to the market later in the year (October, November and sometimes December) when prices are higher.

3. Productivity. Productivity per ha is low in the Pitsilia Region. This is partly due to soil conditions, altitude and cultivation practices, but mainly because a large proportion of the vines are very old: about 65.6% of the vineyards in Pitsilia were planted prior to 1940. During 1974, the average output in the Commandaria-producing villages was 2.1 ton/ha and in 1975 it was 2.4 ton/ha. In other parts of Pitsilia average output was 1.6 ton/ha in 1974, and 1.8 ton/ha in 1975. During 1974 the average output per ha for the whole Island was between 3 to 3.5 tons. Even though the productivity of vines in Pitsilia is low, the quality of Pitsilia grapes is among the best in Cyprus for wine making.

4. Control of Vine Planting. The planting of vines in Cyprus is regulated by the Vine Products Commission (VPC), in cooperation with the Ministry of Agriculture and Natural Resources which provides the technical advice, so that vine planting is related to the marketing prospects for vine products. In view of the marketing difficulties in recent years, the VPC restricts vine planting to the traditional vine-growing areas, where both new planting and replanting are allowed. In the non-traditional areas, vine planting is permitted only after uprooting active vineyards. The issuing of ANNEX 9 Appendix A Page 3 permits for vine planting within the traditional vine-growing areas is expected to continue in the future, unless there is a serious deterioration of the markets for vine products. Of the 48 villages within the Project area, 35 are classitied as traditional vine-growing villages.

5. Vine Replanting Scheme. The quality of the wines produced from the traditional varieties grown in Cyprus does not meet the demand of the export market, especially that of the EEC countries. Furthermore the tastes of consumers are changing, particularly in the U.K. In view of this, vine varieties for sherry, table wines and port-type wines have been imported and compared with local mavro (black) and aspro (white) varieties on demonstration farms. From the results obtained so far, it appears that some of these imported varieties give higher yields of grapes than local varieties, and the quality of the wines produced from them is superior. Certain other varieties although not yielding so well, produce wine of superior quality than the wine produced from the local mavro and aspro. The successfully tested varieties will be used in the replanting scheme in Pitsilia to replace unreproductive local varieties. The replanting scheme is island-wide and its objective is to replant about 15,000 ha of existing vineyards which, due to age and/or un- suitability of terrain, yield less than 2.2 tons of grapes per ha. These areas will be replaced by new varieties of vines.

6. The following incentives are given by the Government to encourage farmers to participate in the replanting scheme:

(a) free issue of cuttings of suitable varieties;

(b) loans (at 4-1/2% interest) and a 25% subsidy (in kind and cash) for soil conservation works up to a maximum of Ch 990 per vine grower;

(c) a subsidy of Cb 26.26 per ha for five years until the new vines start producing grapes (the fields must not be planted for 2 years after uprooting of the old vine stock).

Despite these incentives, the response of farmers has been disappointing. Up to 1975, only 38 ha had been replanted with new varieties. There is evidence, however, that the farmers are showing greater interest in the project. In addition, a further 256 ha of new vine varieties were planted by farmers that were not eligible for assistance under the vine replanting scheme up to 1975.

7. The new varieties of vines have not been tested at the elevation of the Pitsilia Region. Consequently, the replanting planned will consist mostly of the local varieties, the object being to reduce costs of production by producing new, systematically planted hybrids. ANNEX 9 Appendix A Page 4

8. Vine Subsidies and Prices. In the past, two types of vine subsidies have been given in Cyprus: (i) a flat rate per unit of area, and (ii) a subsidy per unit of output. The per-ha subsidies were US$27, 45, 63, 63, 0, 0 for 1970, 1971, 1972, 1973, 1974 and 1975 respectively. The subsidy was stopped in 1974 and 1975 due to the occupation of northern Cyprus. The following table gives prices and subsidies per kg for 1970 to 1975 inclusive:

Prices and Subsidies USU/kg

Variety Mavro/Aspro Malaga Year Price Subsidy Price Subsidy

1970 4.7 0.84 5.1 1.22 1971 4.7 0.47 5.1 0.84 1972 4.7 0.09 5.1 0.47 1973 7.5 -- 8.4 -- 1974 8.8 -- 9.8 -- 1975 7.5 -- 8.4 --

As the subsidy per ha was increased, the subsidy per unit of output was decreased, and in 1974 both subsidies were stopped. The subsidy per unit area was first introduced in 1969; the subsidy per unit of output was first introduced in 1975. In addition, the Government introduced a non-contributory scheme for the construction of farm roads in vine-growing villages. The objective of this scheme is to construct fully subsidized farm roads in vine-growing areas.

III. Grape Production and Utilization

9. The average annual output of grapes during 1969-75 was 162,000 tons. During the drought year of 1973, annual output dropped to 95,000 tons. During 1965-75, an average of 56% of the grape output was utilized by the wine industry; and about 6% was exported; the rest was consumed directly and/or wasted. Grapes are utilized for the production of wine, zivania, grape must and raisins; the residual is consumed fresh or preserved. Grapes are first delivered to the wineries whose absorptive capacity is limited by storage; the output that could not be sold to the wineries (with the exception of the table varieties which are grown primarily for export) is then either turned into zivania or raisins, or is sold on the local market. The production level of zivania and raisins, therefore, is a residual depending upon the level of grape production. ANNEX 9 Appendix A Page 5

IV. Wines

10. International Situation. High world grape output resulted in high production levels for wine during 1973, 1974 and 1975 so that prices fell sharply and wine surpluses developed in the major producing countries. These developments reversed the situation prior to 1973 when shortages in the supply of wine led to sharp price increases. There is, therefore, considerable uncertainty in the world wine market because it has become dominated by annual crop fluctuations that cause sharp price movements. In the short term the high levels of world production in recent years have coincided with a slowing down of imports as a result of reduced income growth in the main consuming countries. The longer term outlook for wine consumption is favorable but depends upon (i) the rate of growth of disposal income in the main importing countries, (ii) the continued growth of consumption in lion-traditional markets such as Japan and the USSR, and (iii) the domestic production levels of the USA and W. European producer nations. Export performance of supplying countries will increasingly depend on quality factors. The shift in demand from ordinary wine to better quality wines in the main consuming countries and the marked increase in countries with hitherto limited consumption offer good prospects for quality wines and for good standard table wines. While there will continue to be an important growing market for wines intended for further industrial processing, the burden of price adjustment to possible surpluses of common wines in major markets will be borne mostly by those countries exporting base quality common wines.

11. The Domestic Situation. The local market is small and unsophisti- cated. The lack of a connoisseur class and absence of private and hotel wine cellars give the local industry limited contact with final consumers. In fact, Cypriots consume only about 6-1/2 to 7 litres of wine per capita, which is very low in comparison to other wine producing countries such as Greece (36-1/2 litres), W. Germany (20 litres) and Italy (110 litres). The per capita consumption of wine in Cyprus is at similar levels with such non-producer countries as Canada and Poland.

12. Cyprus Wine Exports. Up until 1973, Cyprus wine exports were generally increasing in both quantity and money terms. During 1974 the quantity of wines exported decreased but the value of wine exports actually increased. During 1975 there was a reduction in the quantity of wines exported though the value of wine exports (excluding eau-de-vie-de-vin) was above the 1972 level. In general, the price of the main wine exports (fortified wines; mainly sherry) has increased in every year since 1966 with the exception of 1975 when there was a slight decrease in average price (though a relatively high price level was still maintained). During the first 3 months of 1976, bulk exports of wine were greatly increased over the same period during 1975, being 1,560,917 gallons at CE 946,000 in comparison to 367,680 gallons at Ch 224,031 during the same months of 1975. The average price has been maintained during 1976 at over US$1.45 per gallon. ANNEX 9 Appendix A Page 6

13. Cyprus wine exports have, therefore, fared rather well in the international wine market over the last few years. This success has been due to the fact that Cyprus wine exports are greatly dependent on fortified wines, predominantly sherry, and because Cyprus sherry is well established on the U.K. market. Since Cyprus is a major supplier to the U.K., and output in Cyprus was low because of the 1973 drought, it was necessary to divert exports from more competitive markets to the U.K. In this way the average price obtained increased, in a period during which world wine prices were falling. Owing to the low grape crop of 1973, attention was concentrated during 1974 and 1975 on the production of wines; consequently, the output and exports of other vine- products, notably raisins and eau-de-vie-de-vin, were significantly reduced. During 1975 there were some surplus wine stocks, and it is anticipated that over the next few years production of eau-de-vie-de-vin and grape must should rise towards the pre-1973 level.

14. Commandaria. Commandaria is a dessert wine made solely in Cyprus from partially sun-dried good quality grapes, grown on the hills of certain villages of the Limassol District. Annual average production is over 350,000 gallons. Twelve cooperative wineries for the production of Commandaria have been established in eleven villages. The wineries are functioning under the supervision of the Viticulture and Oenology section of the Department of Agri- culture. Commandaria is classified into 3 categories according to the soil conditions, prevailing tradition, means of vinification, and quality of the wine produced. The three cooperative wineries in Pitsilia, at Kalokhorio, Zoopiyi and Ayios Konstantinos, are the cooperatives producing the highest quality Commandaria. These three wineries produce between 35-40% of Com- mandaria output in Cyprus. All the Commandaria production is delivered to the major wineries under long-term contracts. Commandaria exports in bottle have been increasing, though bulk exports are somewhat erratic. Though smaller in quantity, bottled Commandaria exports in 1974 were worth twice the value of bulk exports.

15. Structure of the Industry. The wine industry of Cyprus is dominated by four large wine producing companies, Hadjipavlou (and its ETKO subsidiary); KEO (one cooperative company); SODAP and LOEL. These companies produce almost all the wines of Cyprus and over 80% of the alcoholic beverages (excluding beer). There are a number of small companies that mainly produce brandy for the local market. Each of the four major wineries rely almost entirely upon institutional distribution through breweries and their subsidiaries in the U.K. These firms distribute the wine via pub chains and, to a lesser extent, via supermarkets and speciality stores. However, since in most western countries an increasing proportion of wine consumption is taking place at home, food and department stores are becoming increasingly important. ANNEX 10 Table 1

APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

Quarterly Disbursement Schedule

Bank Fiscal Year Cumulative DisbursementBy and Quarter End of Quarter (US$1,000)

1977/78 September 30, 1977 December 31, 1977 20 March 31, 1978 150 June 30, 1978 500 1978/79 September 30, 1978 1,000 December 31, 1978 1,420 March 31, 1979 2,010 June 30, 1979 2,650 1979/80 September 30, 1979 3,250 December 31, 1979 3,820 March 31, 1980 4,500 June 30, 1980 5,180 1980/81 September 30, 1980 5,920 December 31, 1980 6,480 March 31, 1981 7,000 June 30, 1981 7,600 1981/82 September 30, 1981 8,080 December 31, 1981 8,550 March 31, 1982 8,900 June 30, 1982 9,250 1982/83 September 30, 1982 9,750 December 31, 1982 10,000 ANNEX 11 Page 1

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Financial and Economic Analysis

1. This annex combines the financial and economic analysis of the project as the two aspects are specially interwoven. The reasons are that: (i) the project environment is difficult, and that makes the costs of development inherently high; and (ii) the project area population is poor, and that makes financial cost sharing a necessity. Analysis, therefore, essentially involves (a) establishing that the project investments are economically viable; (b) assessing the financial implications for farmers (rate of return, repayment ability) of Government's present financing policies (proportions given as grant, and loan; interest rate; repayment period); and (c) analyzing the financial implications of alternative policies to devise an alternative financing package which provides acceptable financial incentives.

2. Since virtually all of the project beneficiaries belong to the lowest third of the Cypriot income spectrum, the softness of the financing terms is not a key issue; but, Government policies provide enough latitude for devising a package which minimizes the allocation inefficiencies that could result from soft financing terms. The main avenue used for reducing allocation inefficiencies is the introduction of strong "technical" inputs in the project component designs, i.e., the "technology" is chosen independent of the softness of the financing. Given that the "technology choice" is efficient, the major remaining effect of soft financing terms is on the sharing of the cost between the Government and the farmers. "Distribution" of benefits is desirable as the project beneficiaries are very poor; the extent of the "distribution" has to be determined through assessing the fiscal ability of the Government to finance the burden of distribution. The above is the essential sequence of the financial and economic analysis. The main results from the analysis are discussed in the text. ANNEX 11 Page 2

3. The references to the various aspects of analysis are facilitated by the table list below:

Table Number Table Title

1 Crop Yields 2 Annual Gross Revenue 3 Operating Costs 4 Operating Cost Breakdown 5 Background Financial and Economic Analysis Parameters 6 Farm Budgets 7 Net Revenue Per Donum, New Irrigated Areas 8 Farmers' Ability to Pay Under Present Policies 9 Cost and Returns of Village Roads 10 Cost Recovery of Project Investments Under Present Policies 11 Beneficiaries of the Project Cost and Subsidy Under Present Policies 12 Cost Recovery of Project Investments Under Proposed Policies 13 Sensitivity Analysis of Farmers' Ability to Pay Under Present Policies 14 Sensitivity Analysis of Farmers' Ability to Pay Under Proposed Policies 15 Economic and Financial Rates of Return 16 Economic Rate of Return 17 Interest Rates of the Cooperative Central Bank APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Crop Yields

Before Year Project 1 2 3 4 5 6 7 8 9 10 11 12 13 1l4 Full Development ------(tons/donum) ------

Irrigated

Perennials Cherries 1.00 .30 .60 .90 1.40 1.90 2.40 2.40 Apples .68 .20 .40 .70 1.10 1.80 2.50 3.00 3.20 3.20 Almonds .08 .20 .35 .52 .68 .85 1.01 1.18 1.34 1.50 1.50 Peaches & Apricots .90 .20 .60 1.20 1.80 2.40 3.00 3.00 Plums .90 .20 .60 1.20 1.80 2.40 3.00 3.00 Table olives .25 .50 .75 1.00 1.25 1.50 1.75 2.00 2.25 2.50 2.50 Citrus 1.00 .20 .50 1.00 2.00 3.00 4.00 5.00 5.00 Table grapes .10 .50 .70 .90 1.25 1.75 2.25 2.75 3.00 3.00 3.00

Annuals Fodder (full crop and as 4.00 3.50 3.00 2.00 1.00 .50 5.00 intercrop) Vegetables (full crop and 1.00 2.40 2.10 1.80 1.20 .60 .30 3.00 as intercrop) Potatoes (full crop and 1.20 2.40 2.10 1.80 1.20 .60 .30 3.00 as intercrop)

Rainfed Rainfed almonds .08 .20 .25 .30 .40 .50 .60 .70 .80 .90 .90 Vineyards - grapes .24 .10 .20 .28 .36 .44 .52 .60 .68 .76 .84 .92 1.00 1.00 Olives .08 .20 .25 .30 .40 .50 .60 .70 .80 .90 1.00 1.00

Rehabilitation Peaches 0.90 1.30 1.50 1.80 1.80 Table grapes 1.50 1.70 1.70 1.90 2.00 2.00

Source: Mission estimates, Government of Cyprus.

March 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVEWRLENT PROJECT

CYPRUS

Annual Gross Revenue From Crops

------Year ------1 2 3 4 5 6 7 8 9 10 11 12 13 14 ------~~------,------(CE/donum) ------_----_--______

IrriRated Perennials Cherries 46.5 93 139.5 217 372 Apples 18 36 63 99 162 225 270 288 Almonds 30 52.5 78 102 127.5 150 180 201 225 Peaches and Apricots 15 45 90 135 180 225 Plums 18.8 37.5 56.3 75 93.8 112.5 131.3 150 168.8 187.5 Table Olives 50 100 150 200 250 300 350 400 450 500 Citrus 15 37.5 75 150 225 300 375 Table Grapes 10 50 70 90 125 175 225 275 300 300

Annuals Fodder (a) Full Crop 24 (b) Intercrop 19 16.8 14.4 9.6 4.8 2.4 Vegetables (a) Full Crop 180 (b) Intercrop 144 126 108 72 36 18 Potatoes (a) Full Crop 120 (b) Intercrop 96 84 72 48 24 12 Potato Seed

Rainfed Rainfed Almonds 30 37.5 45 60 75 90 105 120 135 Vineyards-Grapes 7.5 15 21 27 33 39 45 51 57 63 69 75 Olives 30 37.5 45 60 75 90 105 120. 135 150

1/ Based on Tables 1 and 5.

Source: Mission Estimates, Government of Cyprus.

March 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMT PROJECT

CYPRUS

Operating Costa

Year 1 2 3 ,4 5 6 7 8 9 10 11 12+ 13 - 14+ ------(CT/donum)------

Irrigated

Perennials Cherries 35.1 32.1 31.9 34.1 36.6 39.6 41.8 51.5 57.7 66.9 76.4 86.4 Apples 40.7 32.8 35.5 41.3 47.2 50.2 57.8 66.6 73.9 87.8 90.8 98.6 Almonds 18.7 16.5 17.5 20.2 28.0 32.9 39.5 42.2 46.8 51.6 56.2 60.6 Peaches & Apricots 42.6 34.9 40.8 50.9 59.6 68.3 76.5 76.5 76.5 76.5 76.5 76.5 Plums 35.9 29.6 32.9 37.7 42.0 52.0 59.1 66.3 73.4 73.4 73.4 73.4 Table olives 37.7 27.7 29.7 45.8 54.9 63.8 73.6 82.5 91.6 100.0 112.4 117.14 Citrus 50.4 27.9 29.1 33.4 36.9 45.5 53.7 63.0 72.4 81.6 81.6 81.6 Table grapes 47.0 20.8 20.7 23.0 30.5 35.0 39.5 44.o 48.5 50.0 51.0 51.0

Annuals 2 Fodder - full crop 10.6 intercrop. 8.5 7.4 6.4 4.3 2.1 1.1 Vegetables- full crop 51.8 intercrok.41.4 36.2 31.1 20.7 10o.4 5.2 Potatoes - full crop 72.9 intercropLa50.4 41.6 34.5 23.8 11.9 6.o Potato seed

Rainfed

Perennials Wine grapes 18.4 13.8 13.9 14.9 15.3 15.9 16.4 17.1 17.5 18.0 18.6 19.1 19.8 20.2 Almonds 20.1 9.4 9.8 10.5 15.3 17.1 20.0 21.8 24.5 27.3 30.1 32.8 35.0 35.0 Olives 31.5 9.0 8.2 8.4 17.6 21.6 25.5 29.5 33.4 37.6 41.8 45.9 50.0 51.0

1 Excludes Family Labor Cost. F9 2 Average of barley, maize, berseem, sudan and legume. 3 Intercrop 80% of full crop year 1; 70% year 2; 60% year 3; 40% year 4; 20% year 5 and 10% year 6. X

Source: Mission estimates, Government of Cyprus. APPRAISAL OF

PITSILIA INRATiD RURALDEViOEPY3T PROJECT

CYPRUS

Operating Cost of Producing Crops

Cherriesout AppesAlmonds Peacheo & Aprlootu Plumeo T*ble Olives citro Without Yesr Yesr Fuut Yithout Year Year Pull Without Year Year Full Without Year Ye- Full1 Without Ye.r Year pull Without Ye.r Ye r Full With Y Ct Project 1 3 Projeot 1 3 . Pev. ev. jt 3 3 3ev Project 1 3 De,.

Transplants 9.0 15.0 3.5 15.0 12.0 12.5 25.0 Seeds Pertili.er 1.1 3.3 9.8 10.0 1.1 3.9 20.0 1.1 2.4 8.4 10.0 1.1 5.7 15.0 10.0 1.1 3.9 u1.8 1.1 3.0 11.3 7.0 1.0 2.5 7.9 Manure 2.0 2.9 6.6 2.0 2.9 7.0 2.1 3.5 6.6 2.0 3.1 6.6 2.0 2.9 6.6 2.0 3.1 6.6 Chealcal. 3.2 7.5 10.0 5.0 22.6 2.8 10.0 5.1 14.3 10.0 3.9 10.8 2.2 5.5 3.0 1.3 3.3 Irrigation 4.0 5.0 11.0 10.0 4.0 6.o L4.o 2.0 2.4 4.o 10.0 5.0 7.0 11.0 10.0 4.o 6.o 12,0 4.0 4.0 8.0 15.0 4.0 6.o 16.o Machioe costs 16.0 16.o i6.8 6.o 15.6 16.3 22.0 10.1 11.2 16.1 6.o 16.3 17.7 20.0 6.o 13.8 14.4 16.1 16.1 i6.1 17.0 6.o 16.4 14.5 17.3 Hired labor 31.7 10.0 26.4 3.0 2.0 3.0 13.2 66.o 10.0 27.5 Other costs 3..Q .12 n.. - .. Q 1.5 3S0 _.0 3 1.6 .03.0 _6 - L 18 3.0 _- - 1. 7 1.6 _.0 _. .0 1.7 _.12

Total Operating Costs 35.1 31.9 86.4 36.o 40.7 35.5 98.6 17.6 6o.6 39.0 4o.8 76.5 39.0 32.9 73.4 29.7 117.4 41.o 29.1 81.6

Other onrestaenote 115 115 115 115 115 115 115 Panily labor 26.2 26.2 62.8 23.2 23.3 40.0 17.6 18.7 50.1 23.2 38.8 6o.i 23.2 25.9 4o.4 23.6 39.5 io6.o 23.2 26.4 59.7

Table Grapes Rainted vineyards Rainted Almonds Raifed Olives Potatos eitsblssL FPdder Without Year Year Full Without Year Year Pull Without Year Year Full Without Year Year Full Without -Fl Without Fu.l Project 1 3 Lev. Project 1 3 Dev. ProJect 1 3 Dev. Project 1 3 Dev. Project CroP ProJect Crop project Crap ------(Cd-c) ------

Transplanta 23.0 3.5 10.0 Seeds 10.0 34.0 5.0 5.3 .8 Pertilizer 8.o 2.1 4.o 1.8 6.7 2.0 3.2 3.0 6.6 2.0 6.6 2.0 6.5 6.5 5.0 8.7 6.o 5.7 4.8 Maoure Chemicals 1.0 1.5 5.0 0.2 .2 1.0 2.0 2.8 2.0 4.5 5.0 5.5 6.o 5.5 Irrigstion 2.0 2.5 6.o 8.o 4.o 13.0 5.0 2.0 Machine coats 11.0 13.0 20.0 2.0 10.7 10.7 10.7 3.0 7.0 7.0 7.0 12.0 7.0 7.0 6.o 13.4 4.o 13.4 3.0 Hired labor 13.0 1.5 3.3 15.6 2.0 30.0 2.0 5.3 3.0 14.8 Other conti 3.0 1.6 3.0 1.0 1.0 2.0 3.0 .8 3.0 3.0 1.2 3.0 2.0 2.0

Total Operating Costs 20.7 51.0 5.5 18.4 13.9 20.2 8.o 20.1 9.8 35.0 6.o 31.5 8.2 51.0 36.o 72.9 37.0 51.8 io.6

Other invesitente 1U5 115 115 ll5

Famlly labor 40.0 10.0 25.0 33.0 9.5 12.1 16.o 10.0 31.6 45,0 5.0 45.0 24.30 40.0 4.8 ii

/1 Without project operating coot for producing vegetables for teaitoes. 2 Since significant time input of the farmer .ould be necessary to initiate a project, 40% of the ftaily off-farm income is assumed to be invested in addition ti the identified itens.

Source: Ydssion estimates, Sociceconaoic survey of Pitailia.

Marh 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT I CYPRUS

Background Financial and Economic Analysis Parameters

Full Appraisal Net Historical Col. P 100 Revenue Report Gross Net Water Revenue Price Average Col. A Crop Yield Price 3 Revenue Revenue Use per m Range of Range % Tons/donum CE-/-ton C- CE C- 3 CE/ton ---- … Column A Column B Cherries 2.4 155 372 223 550 0.41 141-277 209 +34.8 Apples 3.2 90 288 150 700 0.21 54- 95 75 -17 Almonds 1.5 150 225 115 200 0.58 138-197 168 +12 Peaches 3 75 225 88 550 0.16 76- 93 85 +13 Plum 3 75 225 111 550 0.2 64-110 87 +16 Table Olives 2.5 200 500 277 400 0.69 275-315 295 +48 Citrus 5 75 375 225 800 0.28 81-102 92 +22 Table Grapes 3 100 300 224 300 0.75 Summer Vegetables 3 68 204 94 600 0.16 63- 69 66 -3 Potatoes 3 40 120 23 400 0.06 30- 72 51 +28

Source: Planning Bureau

February 25, 1977 APPRAISAL OF

PITSILIA INTEGRATED RURALDEVELOPMENT PROJECT

CYPRUS

Farm Budgets

15 donum farm; medium high zone 15 donum farm; high croppirng 30 donum farm; low cropping 20 donum farm; medium high Irrigated 5 donumsi1 zone. Irrigated 5 donums S zone. Irrigated 15 donums/7 cropping zone. Rainfed 10 donums72 Rainfed 10 donums /6 Rainfed 15 donums RaPifed 20 donums,e 2 donum farm; rehabilitatedLlo uross Operat,ing Net Gross Operating Net G ross Operating Net Gross Operating Net GrOss Operating Net Year CostL. RevenueL Income RevenueL3 CostL4 Income RevenueZ3 CostL4 Income RevenueL3 Cost/4 Income Revenue Cost income

0 0 0 0 0 0 0 0 0 0 0 9 0 168 61 107 1 432 494 -62 708 280 428 996 1,178 -182 0 377 -377 168 61 107 2 398 351 47 672 301 371 996 813 183 0 254 -254 220 80 1i0 3 459 347 112 685 448 237 1,161 822 339 113 258 -145 273 95 178 4 597 347 250 662 391 271 1,410 900 510 225 276 -51 335 110 225 5 745 371 374 733 445 288 1,829 1,055 774 465 306 159 335 110 z?5 6 913 392 521 762 451 311 2,567 1,164 1,403 593 324 269 7 1,076 419 657 885 458 427 3,138 1,281 1,857 710 346 364 8 1,302 442 860 1,o69 488 581 3,823 1,393 2,430 885 366 519 9 1,523 469 1,054 1,254 513 741 4,505 1,511 2,994 1,050 385 665 10 1,756 490 1,266 1,500 544 956 5,196 1,629 3,567 1,215 407 808 11 1,925 512 1,413 1,647 576 1,071 5,607 1,734 3,873 1,380 430 950 12 2,047 530 1,517 2,023 609 1,414 6,021 1,783 4,238 1,545 450 1,095 13 2,130 540 1,590 2,092 621 1,471 6,246 1,813 4,433 1,710 472 1,238 14 2,175 544 1,631 2,127 624 1,503 6,358 1,824 4,534 1,800 478 1,322 15+ 2,175 544 1,631 2,127 624 1,503 6,358 1,824 4,534 1,800 478 1,322 335 110 225

1 Irrigated almonds 1.7 donums (d); peaches 1.3 d; table grapes 2 d; vegetable intercrop 3 d. Z, FromWine tablegrapes 2.7.5 d; rainfed almonds 2.5 d. From table 3. Cherries 2 d; potatoes 2 d; vegetables 1 d. Almonds 3.5 d; vines 6.5 d. 7 Citrus 3.6 d; table olives 3.3 d; almonds 1 d; potatoes 4.7 d; vegetables 2.4 d. Almonds 7.5 d; olives 7.5 d. a j Wine grapes 15 d; almonds 5 d. 10 1 donum peaches; 1 donum table grapes. Crop yields are differenct from those used in New Irrigation (i.e., the other three budgets above). For peaches the first year yield is 0.9 tons/donum increasing to 1.8 tons/donum in four years. For table grapes, 1.5 tons/donurm in year 1 increasing to 2 tons/donum by year 4. March 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Net Revenue Per Dons ~ (New Irrigated Areas)

Table Table Sumser Cherries Apples Almonds Peach Flum Olives Tangerines Lemons Grapes VeRetables Potatoes

___ Intercrop2- Minus 100% of "inus 50%o Inter.ropj! Intercrop Cropping Samaer Weighted S_ Pattern Vegetables + Potatoes ------CL ------

X 12 2.1 9 5 2 10.3 5 4 21 23.3 55.37 Col. A Col. B Year

I -181 -184 -157 -186 -179 -182 -195 -184 -208 +144 +26 +71 -25.3 -96.3 -60.8 2 -59 -58 -35 -43 -55 -52 -53 -56 -41 +144 +26 +63 +4.3.6 -19.4 +12.1 3 -58 -59 -36 -35 -59 -19 -56 -58 -21 +144 +26 +55 +43.4 -11.6 +15.9 4 -61 -67 -17 -. 1 -50 +13 -48 -57 +15 +144 +26 +36 +41.2 +5.2 +23.2 5 -64 -57 -1.5 +29 -29 +46 -33 -56 +23 +144 +26 +18 +39.6 +21.6 +30.6 6 -67 -44 +16 +59 +6 +79 -5 -44 +36 +i44 +26 +9 +43.9 +34.9 +39.4 7 -32 -27 +32 +89 +41 +111 +56 -24 +65 +144 +26 +0 56.4 56.4 56.4 8 +5 -2 49 89 76 144 115 -2 108 +144 +26 +0 73.5 73.5 73.5 9 +40 51 65 89 111 177 174 +24 152 +144 +26 +0 91.1 91.1 91.1 10 +61 98 82 89 111 210 234 50 200 +144 +26 106.5 106.5 106.5 11 +162 139 98 89 111 237 234 76 224 +144 +26 125.9 125.9 125.9 12-30 +223 150 114 89 111 277 234 129 224 +144 +26 141.7 141.7 141.7

PV-7t l0% 725 526 619

1/ Based on Tables I to 6. 2/ Sua of areas under perennials, i.e. cherries, apples, table grapes. 3/ Net benefits weighted by the cropping pattern percentages 4/ Present value at 1072 discount rate 6 This is Col. B minus Col. A, i.e., no inter5roppine benefits. 6/ This is Col. B minus 50%. of Col. A, i.e., 507. benefits from intercropping, APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Farmers' Ability to Pay Under Present Policies

Terms of Loan -- Government ------Repayment ------Supply Distribotion Total Interest Repayment Grace Works_ System Cost Grant Loan Rate Period Period Remarks ------(CB)------(Years) -- I. Investment Cost Per Donum

Xyliatos Dae 272 92 364 0 2/ 364 1/ 9 40 0 NaiJr Project Pond Storage 472 85 557 373 184 6 20 2 Minor Project Borehole 152 85 231 159- 78 6 20 2 Minos Rehabilitation 138 _ 138 92 -1 46 5.75 15 2 Minor Soil ConeervatiorN On Dryland - - 68 17 -g6 51 4.5 10 2 Minor On-farn System !1 56 8 48 4.5 10 2 Minor Soil Conservation 10/ 52 13- 39 4.5 10 2 Minor

Approximate Total Cost Per Debt Burden Population Siee Population Per Popula- Total Affected unit tion Unit Cost Grant Loan (CK) (CB) ------(CB)------Col. A -/A C/A Col. B Col. C II. Total Investment Cost For Village Water Supply 10,349 17.4 8.7 180,000 99,000 - 90,000 6 20 0 17 V4lldgcs School Buildings 3,648 54.3 16.2 198,000 139,000 59.000 4.5 20 0 11 Villages Health Fecilfties 7,898 6.7 0.8 53,000 47.000Q 6,000 5 10 0 6 Villages Village Streets 19,879 7.9 3.9 156,000 78,000 1/ 78,000 5 10 0 47 Villages Farm Roads - - - 435,000 375,000- 30,000 4.5 8 0

Soil Village Health Rehabili- Conser- On-farm Water School Facili- Village Farn Year Dam Pond Borehole jati n vation Svstee Supolv Buildina ties Streets Roads ------(CB Per Don- -)------r------(Cl Par Year for Entire Project) ------8/ III. ReDa-ment and Income Stremoe of 1 33.8 - 11 4.7 2.64 4.0 2.16 7,846 4,538 777. 10,101 4,549 Above Inveotments Based on Loan 2 33.8 11 4.7 2.64 4.0 2.16 Tems Whicfi are Presently AvPplicable 3 4~~~~~~~~17 7. 4.97 13.5 7.8 ZvX\4 4

10 , 4. 97 13 65 7.28 7,646 4,538 777 10,101 0 11-15 33.8 17 7.2 4.97 0 0 7, 46 4,538 0 0 0 16-20 33.8 17 7.2 0 0 0 7,846 4,538 0 0 0 21-40 33.8 0 0 0 0 0 0 0 0 0 0

1/ The dam would be a major project so that it vill be folly financed by the Government. The Government cost would be recovered by water charge. Government policy is to recover about 50% of the weighted average coat of all Govermnent financed dam. The water charge, under present rules, cannot emceed 20 mils/n. The cost recovery calculation uses 9% interest and a 40-year life for the dam, and is applicable to only the Supply Works nd the Distribution Systes. 2/ 677 grant and 3371 loan. 3/ 25% grant, 75% loan. 4/ 507. grant, 50% loan. 5/ 70% grant, 307. loan. 6/ Health Centers 100% grant; Health Sub-centers 507 grant, 50% loan. r.

7/ For vine-Iroeing areas, 100. graeo; for other areas3 including land consolidation, 507. is loan, the balance is contributed by the farmers. 8/ For 680 m /donu-, this amounts to Mils 50 per i . If the interest rate Was 7%, the per r3 cost would be Mils 40. 9/ Essentially ioveatmento for water use improvements; 157. grant, 857. loan. Lo/ Soil Conservation works on irrigated land. IV All Soil Conservation.

Sorce: Mission Estimates; Government Policies.

March 1977 APPRAISAL Of

PITSILIA INTEGRATED RURAL DEVELOPFENT PROJECT

CYPRUS

Cost and Returns of Village Roeds

Average AnnuaI Average Operating Average Operating Savings in Daily Traffic Io Cost In SPeed On Opening Year In Construction Emi.ti.g Future 4/ First Year Bstimated geanmOc - Road Link Lnthl Cost 1976 Openine Ye.r ~ 1976 Y loeairg3ad Read Overatine Cost Tioe Total Return % Rate of Retur_ - (I- (CE *.OOO) (7ehicles P CMI. peDaer 7)lel. MRieL)- l" per Sour) (.E) Tet-l Savinm 1.6 X 4~ 1.6 -- 14 -~~~~~~~~~~~ ~ ~ ~ ~ ~ ~ -- ~ ~ X3 Xi X2 X7 X -- ~~xCo-struttiss__ __ Cost

Nio..is Sub-region

1. Alone - Agros 7 79 31 50 (1981) 28.5 24.5 10 20 770 3.384 4,154 5.2 6.5 2. Xyliatos - Lxgo-dhera 13 112 54 90 (1982) 29 25.0 15 25 2,600 5,120 7,729 6.9 9.5 3. Lagoudhera - Polystipos 2.9 32 54 90 (1982) 30.5 26.5 15 25 600 615 1,215 3.8 4.0 Lio.s*so 1 Sb-region 4. Ayios loannis - Ayios Theodoroe 2.4 20 58 90 (1980) 35 29 15 35 625 1,720 2,345 11.7 15 5. Arakapas - Dhiieron 4 39 27 106 (1982) 36 29 10 20 1,325 3 179 6/ 4.504 6/ 11.6 6/ 6. Eptagonia - Melini 1.6 13.5 41 63 (1980) 30 26 15 30 520 1,046 - 1,566 - 4.6 - 5 7. Akapon. - Eptagonia 3.2 28 20 32 (1981) 35 29 15 35 300 775 1,075 3.8 4 B. Sykopetra - Arakapas 7.2 64.6 38 66 (1983) 32 26 15 25 1,300 1,577 2,877 4.5 5 Larnar. Snb-region

9. Ore - Xhirokitia 20 53 116 186 (1981) Minor Inprovement 20 30 5,93061 5 6 11. 36/ 21 23 10. Eptagoni. - Mellini 2 20.3 41 63 (1980) 30 26 15 30 ------6 _ - _

Total: 63.3 461.4 480 836

1/ Based on a 4% per anSm. secular growth rate in traffir, en induced trffio com.ponent of 207. on opening sod delopoent trffic cmponent of 107 subsequent to pening (A-ssmptione of Cyprus Roads Departeient). 2/ Of this, only 20'. or Ch 10,600 is included in the Project cost estimates. 3/ Based on inforoation on hi;torical operating costa in Cyprus.

4/ C-opoted as follows: Savings in operating coat in CE - 1000 2 3) 4) +( 1 k(X 2 ) (X3)(X 4] X =Operating cst on existing surfacs (Mils/Vehicle oils) X2 - Operating cost on gravel surface (Mils/Vehicle mile) X - Number of oars per day on the road in future X3 Length of read in miles X4 - Savings ratio from sphlting, i.. Asphalted toedn In this analysia, it is taboo as 1.3 for speeda of 30 v.p.h. (Sotue: Iinfrey, R. "Econo=ic Anelysis for Highways", Page 727) 5 Crav 1rad X) 5/ Time costs per hour are based on average cage rote and the purpose of the trip. Based on studies done amd per hourJ (14) (X - in Cyprus-gag value usingof timethu savedrul -t v-la for Pitei. the e-lues of tine saved per hour for ears, buse.,,va. snd lorries are Mils 543, 2380, 415, sod the saving in Cb = 415 respertively. The per onhour ecisting cost dependssurface, on the composition of traffic. The value of tine savings .escomputed as follows: Using the surface, X - overage speed variables defined in "footnote 4/' and X6 speed of vehicle on asphalt

6/ This .onbioes the Vptegonia-Mehlini links in the two regions, i.e., combinee road links 6 snd 10 above. 2/ Appro-tmeted by using internal rates of retur- tables developed by Victor Wouters' Mimeograph 1967 (-u-rce avsilable on request). Traffic growth rate assomed st 67, per ansum. The economic life is 20 years.

March 1977 APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

Cost Recovery of Proiect Investments under Present Policies

Present Value at 10% Discount Rate of the Repayment Streams -/ for the Various Investments ir Pitsilia Village Village 1 , 4/ Soil on-farm Water School Health Village Farm Year Roads Rehabilitation Dam Ponds Borsholes Conservation Systemas Supply Building Facilities Streets Roads (1,160 donmss) (1,870 donms) (2,900 donuma) (3,000 donums) (20,770 donums)(7,770 donums)

1 0 3,062 18,887 31,900 14,100 43,575 16,783 7,846 4,538 777 10,101 4,54` 2 0 3,062 18,887 31,900 14,100 43,575 16,783 3 0 59765 18,887 49,300 21,600 146,410 56,565 4I 5II

9 4,5494 10 5,765 14 10 56,565 777 10,101 0 11-15 5,765 49 300 21 600 0 0 7,846 4,538 0 0 0 16-20 0 18,887 49,300 21.600 0 0 7,846 4,538 0 0 0 21-40 0 0 18,887 0 0 0 0 0 0 0 0 0

A. Present Value of Repayments (CE) at 10` 0 39,152 184,695 344,737 151,255 721,270 278,570 66,797 38,631 4,773 62,060 24,264

B. Estimated Expenditure - (CL) 419,000 160,080 680,680 1,615,300 711,000 1,288,040 435,120 180,000 198,000 53,000 156,000 432,000

C. Recovery Percentage

AxO 100 at 17. 0 24 27 21 21 56 64 37 20 9 40 6

D. Subsidy (B-A) at 107. (ci,) 419,000 120,928 495,985 1,270,563 559,745 566,770 156,550 113,203 159,369 48,227 93,940 407,736

1/ All Government financed. 7/ Fros Table 8, Annex 11. 3/ only the 40 los for the land consolidation area. It is assumed that since Pitailia is vine-growing the non-contributory scheme for farn roads would be applicable. 3 3 3 4/ Assumes that the maximum water charge of 20 mils/m (of which about 5.2 mile/a is O & M) would be charged. The capital recovery part is 14.8 mil/m or CB 10.1/donum. This is the number used in the above table. The repayments for the water sources are estimated by multiplying the per donum repayment streams in Table 8, Annex ll by the areas that would be irrigated. 5/ Computed from the per donum costs used in the calculation of the repayment streams. For example, for the dam, the actual expenditure is CE 364 x 1,870 = CE 680,680. June 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT

CYPRUS

Beneficiaries of the Project Cost and Subsidy Under Present Policies

Village Village On-farm Water School Health Village Roads Rehabilitation Dam Ponds Boreholes Conservation Systems Supply Buildinrs Facilities Streets Farm Roads

1. Cost Per Beneficiary Estimated Expenditure (CE 10 ) 419 1/ 160 681 1,615 711 1,288 435 180 1984/ 53 156 6/ 43 2/ Estimated Number of Beneficiaries 100,000 ------3,500 ------5,000 - - - 10,000 5- 10,000 6 3,500 - Cost Per Beneficiary (CL) 4.2 …------1,520 ------…------36 - 5.3 15.6 7/ (U8$) 10…_-______3,650 ------86 - 12.7 37.4 7/

1I. Subsidy Per Beneficiary Total Subsidy at 107% Discount Rate (CE 10 ) 419 121 496 1,271 560 567 156 113 159 48 94 408

Per Beneficiary (CE) At 10% Discount Rate 4.2 ------1,022 ------23 - 4.8 9.4 7/

(US$)

At 10% Discount Rate 10 ------2,454 ------54 - 11.5 22.6 7/

1/ The estimated average daily traffic in 1980 is 836 vehicles per day. Assuming an average of 2 persons per vehicle, the annual number of beneficiaries would by 836 x 2 x 150 = 250,000. Conservatively put, it is almost sure that about 100,000 commuters would gain from the village roads per year. 2/ According to the Pitailia Agro-economic survey, the average size of an operated farm unit is about 24 donums (3.2 ha); of this, about 20.5 donums are dryland and about 3.5 donums are irrigated. The newly + rehabilitated irrigated area is estimated to be about 9,000 donums. The dryland area is about 13,000 donums. The number of beneficiaries for the two investment categories would be 9.000 - 2,571 and 13,000 , 634 or a total of 3,200. However, if (as the Pitsilia survey shows) we exclude the "irrigable but not irrigated" 3.5 20.5 area from the 3.5 donums of irrigated land, the average irrigated unit is 2.7 donums and the number of beneficiaries from investments in irrigation would be about 3,330. In view of the predominance of small (7 donums) as compared to large (60 donums) sized farm units, the beneficiaries number is rounded to 3,500. This refers to farmers only; that is, if family members are included as beneficiaries (which they are), the number of beneficiaries would be 7,000 or more. 3/ About 17 villages would benefit from the water supply component. The population of these 17 villages is 10,000. It is believed that about ) of these would have some benefits accruing to them from this investment. 4/ About 11 villages would benefit. The affected child population attending these schools is about 500 pupils. The village population is about 3,500.

5/ Six villages would be directly involved and their population totals 8,000. The beneficiaries, however, would cover the entire Pitsilia region whose population is about 20,000. Conservatively estimated, at least ? of the population is expected to receive benefits. 6/ About 47 villages (i.e. almost all) would benefit, so at least k the regional population should benefit. , 7/ Included in the productive agricultural investments.

Source: Based on data in Tables 8 and 10, Annex 11. March 1977 APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPNENTPROJECT

CYPRUS

Cost Recovery of Project Investments Under Proposed Policies '

Soil Conservation On-farm Year Ponds Borehole Irrigated Systems (2,900onums) (3,000 donums) (7,770 donums) (7,770 donums)

1 0 0 O 0 2 0 0 0 0 3 0 0 0 0 4 0 0 0 0 5 0 0 0 0 6 62,234 27,306 34,499 41,803 7II

10 1U-15 I. 314,199 11,803 16-25 62,234 27,306 0 0

A. Present Value of Repayments at 10% (CT) 328,969 144,340 131,786 159,687

B. Estimated Expenditure (CO) 1,615,300 711,000 1,288,040 4135,120 A C. Recovery Percentage (B x 100) at 10% 20 20 32 37

D. Subsidy (B-A) at 10% (CL) 1,286,331 566,660 871,703 275,433

i Only those activities are included for which proposed policies are changed. Interest capitalized. See Table 10

June 1977 APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVELOPMENT PROJECT

CYPRUS

SensitivityAnalysis of Farmers' AbilitY to Pay Under Present Policies

(Newly irrieated Area Only)

------Water Supply Source DMDr------Water Supply Source Pond ------Water Supply Source -Borehol ----… Maxinec 21 Lend Land Average Net Water Charge Terracing Terracinog Income (Supply and and and With 100%. I Distribution 0 & M Land On-farm Total Wet Supply end 3- 0& M On-farm Total Net Supply and 0 & M4 On-farm Total. Net Yeat Intercrop - System) cost Terraedine System Coat Income-1 Distribution Cost System Cost Incos.e-2 Distribution Cost A SYstem Cost laco.- B1 A -Bl 32 A -B2 83 A -3

I. Basic Parameters 1 -25 13.6 3.5 1. 76 2.16 21.02 -46.02 11 10.9 3.92 26 2 44 -51 4.7 14.6 3.92 23 4 1.76 2.16 21.02 22.98 11 3.92 26 +18 4.7 3 44 3.92 23 it Ij 5.91 7.28 30.29 13.71 17 13.19 41 +3 7.2 13.19 35 9 5 40 9.71 6 44 I13.71 5 7 56 9 25.71 152 6 74 43.71 33 21 10 107 13.6 3.5 5.91 72 3O 9 76.71 j 41 66 I1 13.19 35 72 11-15 126 13.6 3.5 -- 17.1 108.9 028 98 22 16-20 142 13.6 3.5 .LI0 104 -- 17.1 124.9 0 28 114 7r2 02 2 21-40 142 13.6 3.5 -- 17.1 124.9 - 10.9 0 11 131 -14.6 0 15 127

Sass Net Ineome with 100%. Alternative I: Net Income Alternative II: Net Income Alternative III; For Pond Only. Net Incomes For Intercrop (Prom Above) Minus 50% of Intercrop Minus 100% of Intercrop Net Income Net Income A-I AB2A-B 3 AI Al - A -B2 AI -B3 Al All:i AUI&I-82 All -B3 Table Olives Cherries end Tangerinesend Table Grm.s X=i flm 22ual Borehol DM EA Borehole OeM Zp and Itro Itrco Intercrop ~ 4kn&UE ------/d------n-- - -- C no- md ) ------II. Sensitivity Analysis 1 -46 -51 -48 -61 -82 -82 -84 -96 -117 -122 -119 -133 -132 -146 -159 2 23 +18 21 12 -9 -14 -11 -19 -40 -45 -42 -17 -24 -18 -6 3 14 +3 9 16 -14 -25 -19 -12 -42 -53 -47 -8 -47 -45 4 11 0 6 23 -10 -7 -18 -12 5 -25 -36 -30 4 -69 -56 7 5 10 -l 5 31 +1 -10 -4 22 -8 -19 -13 20 -90 -59 -3 6 14 3 9 39 9 -2 4 35 5 -6 0 44 -102 -40 1 7 26 15 21 56 26 15 21 56 26 15 21 67 -76 12 21 8 44 33 39 74 44 33 39 74 44 33 39 100 -39 71 64 9 61 50 56 91 61 50 56 91 61 50 56 133 -4 130 108 10 77 66 72 107 77 66 72 107 77 66 72 166 17 190 156 11-15 109 98 104 126 109 98 104 126 109 98 104 206 1.31 203 193 16-20 125 114 120 142 125 114 120 142 125 114 120 253 212 223 213 21-40 125 131 127 142 125 131 127 142 125 131 127 270 229 240 230

I/ Prom Table 7, Annex 11. 5 3 2/This is Milo 20/n . Assoming 680 m /donum, 3 this amounts to C6 13.6 per donum, The full cost recovery price at 9%. internestover 40 years (see Table 8) is C6b 33.8 per donum This price does not include operation and MaintenenceCost. or 14i1s50 por m. 3/ Repayment according to existintgfinmec-iel terms. See.Table 8. Annex 11. I March 1977 APPRAISAL OF

FIlIILIA INTEGBA1BPDRURAL DIVELOPMINTPR012ZT

CYFTRUI

SeOsitivity Al.ysi.s Of FOrmers' ,4lity to Fey under ProTposedTFlie0ZeaL

Avernge Ttnd BorehPle Borehle tet Intone Soil Total Boil Totel Incore Net ln-sre inome Net Tn-m.e Net Income with 100% BoPply sOd OhM COnrvatioa Cost et Cnoore 3pply 1Ad ___ Co___oti, coot Nat 1om. Minus 50 Mnus ICo mines 50% BOne 100% mtnue 50% MA--a l00 Year On~~~~Iterorop Distributioo Cost ,- On-fhm 93. A-BI PMstotbutlof Coat _h-Fete, ~ 2 A-B2 lateroo ~ r 3 6 eo 31 to

I . Baslo PSoametersr2

1 -25 0 10.9 0 10.9 -35.9 0 14.6 0 14.6 -39.6 -71.9 -106.9 _75.6 -41.6 -61 -96 2 44 0 0 10.9 33.1 0 I 0 14.6 29.4 1.1 -29.9 -2.6 . 33.6 12 -19 3 44 0 0 10.9 33.1 0 0 14.6 29.4 5.1 -22.9 1.4 -26.6 16 -12 4 41 0 0 10.9 30.1 0 0 14.6 26.4 12.1 _5.9 8.4 -9.6 23 5 5 40 0 0 10.9 29.1 0 0 14.6 25.4 20.1 11,1 16.4 7.4 31 22 6 44 21.5 9.8 42.2 1.8 9.1 9.8 33.5 10,5 -3.2 -7.2 5.5 1.5 39 35 7 56 13.8 22 5 3.38 13.8 22.5 24205 56 56 B '4- 31.6i4: 0. 31.6 4o.5 4c.5 74 7J5 9 91 1 46.6 I 57.5 48.3 46.6 ' 57.5 57.5. 91 91 l0 107 , 64.8 73.5 64.8 64.8 73.5 73.5 107 107 I1(15 126 9. 22 33.8 J.93 33. 342.2 6;3.3 . 3.6 92.5 92.3 126 126 16-25 142 21.5 0 314 109'.6 93 9 0 23.7 016.3 109.6 '193. 116.3 116,3 142 142 26-40 142 0) 10.9 0 10.9 131.1 0 14.6 0 1.4.6 127.4 131.1 131.1 127.4 327.4 1442 142

Same as Table 13 (-nder Present Polities), but olly those variables FOr which different policies are proposed. InterestCaPitali..d Orame Period Repayment Period' Interet Rate* durtng Grace Period 5 25; 15 6.5; 5.75 Yes -me nubers after the seBIoolto refer to Boll conservation plus on-farm works; those before refer to pond end birehole..

June 1977 to H g, fri . -

00004 99 e >

nc '.0CC

_ X 0 |9 0 0 0

G iI| *|

e a + o j0It |, ooz iIoc

1a a~ ~ ~~050° 4 { H|

S s o. I taoII *~~~~n000 Ia _st l>

°o n '.11 ; n | 1

n0 5fin 0 . 0 0 1e 00 l_ ;00> ° C

C. 1- l 1 Co H--C-. --- v iC.101: .~~~~~~~~~~~I ..!000.0 4 0° i n

o~~~~~~~~~0~ 0wo ,En M il

o~~~~~~~~~~~tOOFO 001 i. *~~~ ~~~~~~0.4SC 0e0 r e

B ~00' ~ ~ ~ £$gs=; I APPRAISAL OF

PITSILIA INTEGRATEDRURAL DEVEWPMENT PROJECT

CYPRUS

Economic Rate of Return, Productive Inve t,ents -/

----- Incremental Value of Production------Incremental Investment - and Other Costs ------Operation and Maintenance Cost Xi------Incr_ntal New Irrigation Rainfed New Irrigation Rainfed New 5/ Return from Year Irrigation Rehabilitation Land Total Irrisation Rehabilitation Land Irrigation Rehabilitation Rainfed- Total the Project Net Area at Full Development (donums): 7,750 1,160 13.000 A I.._B ------(C------k------CE 1,000) ______--

I. Basic Data 1 0 0 0 0 787.4 40 276 0 0 0 1,103.4 -1,103.4 2 0 -15.6 -57 -72.6 787.4 40 276 16.6 0.4 1.5 1,121.9 -1,194.5 3 -38.8 -15.6 -96 -150.4 1,181.1 40 276 33.1 0.8 3.0 1,534.0 -1,684.4 4 29.5 -11.0 -117 -98.5 1,181.1 40 276 57.9 1.2 4.5 1,560.7 -1,659.2 5 76.7 -1.0 -126 -50.3 - - 276 82.8 1.6 6.0 366.4 -416.7 6 174.4 +31.6 -102 +104.0 - - - 82.8 1.6 7.5 91.9 12.1 7 327.8 48.4 -6 370.2 82.8 1.6 7.5 91.9 278.3 8 325.5 60.6 +87 473.1 381.2 9 343.3 67.3 186 596.6 504.7

11 488.3 67.3 390 945.6 853.7 12 609.2 67.3 495 1,171.5 1,079.6 13 744.8 67.3 606 1,418.1 1,326.2 14 875.8 67.3 714 1,657.1 1.565,2 15 981.9 67.3 813 1,862.2 1,770.3 16 1,063.3 67.3 891 2,021.5 1,929.6 17 1,100.5 67.3 945 2,112.8 2,020.9 18 1,100.5 67.3 978 2,145.8 2,053.9 19 1,100.5 67.3 990 2,157.8 2,065.9 20-30 1,100.5 67.3 990 2,157.8 82.8 1.6 7.5 91.9 2,065.9

II. Summary of Reaults Project Rate of Return (ROR) % 9l13% New Irrigation ROR e12% Rehabilitation ROR 1 8% Rainfed ROR 1l87.

III. Sensitivity AnalYsie Project Cost Increased by 10% 12% Project Benefits Decreased by 10%7 127. New Irrigation Costs Increased by 107, = 10.77. New Irrigation Costs Increased by 20% > 107,

I/ Water Supply, conveyance system; on-farm investments; soil conservation; farm roads; 0 & M expenditures; and incremental working capital. 2/ Except for rehabilitation, all project investments would develop new land resources. These values are derived from phasing the project developments in accordance with Chart I in Annex 5. 3/ For water development, weighted average costs have been used - weights are the areas developed by the three water sources. 4/ Includes replacement. 5/ Estimated at CE 0.5/donum per annum. The 0 & M costs for the water systems are in Table 10, Annex 5.

March 1977 ANNEX 11 Table 17

APPRAISAL OF

PITSILIA INTEGRATED RURAL DEVELOPMENT PROJECT

CYPRUS

Interest Rates of the Cooperative Central Bank

Interest Rate Per Annum

I. Deposits in the Bank

Current Accounts

. On call 3 . Savings book 5 . 7 days notice of withdrawal 5-1/4 . 30 days notice of withdrawal 5-1/2 . 90 days notice of withdrawal 6

Fixed Deposits

. For six months 6-1/2 FFor twelve months 7-1/2

II. Loans by Bank

. Basic rate 7 . Cooperative societies which act as savings bank or credit society:

- Short-term loans 7-1/2 - Long-term loans 8 . Cooperative societies mainly engaged in processing and/or marketing:

- Short-term loans 8 - Long-term loans 8-1/2

Source: Cooperative Central Bank T SYRIA . - ::...... _

CYPRUS LIBYA k l- tO'-" , PITSILIA_2 INTEGRATED RURAL DEVELOPMENT PROJECT f' A. R. E. \ .

L V j = L 4r f

- ', -S ''

qo~~ J

;t-~~~~~ 0i t~*

I/T 9oo A t*ft 3$ o

>0ve2bFoC~~~~~~~~~~~~~~~~~~~~VNVf k-. btw

- ft M*,OWdo ftTd

r R~~~~~~iooi ^o- er itJr tirr ,...... sEs7> t m !Z t' A N E A znN E A ri

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0 S ,,,,0 0 X X M IRD 19O

CYPRUS

50100000 PITSILIAi INTEGRATED RURAL

0..OU DEVELOPMENTPROJECT PROJECTAREA Prot-1 Area Rnndary

0 X X X AA ~0* Villages... V ,, Pa~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~D,oeRod

K io,o,c .~~~~~~~~~~~~~~~~~~cZRea~~~~~,1..Rs.d RaisringorigationE,,l-- Dams "~Eihg K0 gpr,-nn Storag Pond HA ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Pro-teoWorks

X < f / tfff) Z 1t PHIKAIDL3UX E 7,F77,tXytiros Storag Dam -nd Irrigr-on Scheme Nroi-t Roads

S0~ ~ ~ ~ ]GH5UDHEEA;J_ /! | t>O

jth^/R,:,0 i --5 3f t.S , _,

2 o~~~~~~~o PAIEKH~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~( DHI.~~~~ ~~~~~~~~~~~0~ O0c r~~TKk

>;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ j,,.i'n' - 1 V Otors

ml~1. ~ ~~ ~~~~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~ti o ~

0 E1.T.G0.1A - - -k- , -

PITSILIA INTEGRATED RU RAL.DEV/ELOPMENT PROJECT CYPRUS

- ~ ~~~~~~~~~~--0 ,*

Photograph 1

Photograph2 Terraces on the mountainiside in Pitsilia.

PITSILIA INTEGRATED RURAL DEVELOPMENTPROJECT CYPRUS

- r~~~~~

Photograph3 Undulating terrain around a village in Pitsilia.