Project Information Document (Pid) s33

PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB3858 Project Name Ethiopia - Tourism Project Region AFRICA Sector General industry and trade sector (100%) Project ID P098132 Borrower(s) FEDERAL REPUBLIC OF ETHIOPIA Implementing Agency Environment Category [ ] A [ X] B [] C [ ] FI [ ] TBD (to be determined) Date PID Prepared May 15, 2008 Estimated Date of September 22, 2008 Appraisal Authorization Estimated Date of Board December 4, 2008 Approval

1. Key development issues and rationale for Bank involvement Ethiopia has enormous potential as a tourism destination offering a rich array of cultural, historic and natural sites that set it apart from most of its neighbors. UNESCO recognizes eight world heritage sites (as many as Egypt and more than any other country in Africa): Axum’s obelisks, the monolithic churches of Lalibela, Gondar's castles, the Omo Valley, Hadar (where the skeleton of Lucy was discovered), Tia's carved standing stones, and the Semien National Park, and the walled city of Harar, added to the UNESCO list in 2006. A series of challenges face Ethiopia in attempting to carve out tourism market share in the region and transform cultural and heritage value into economic value. The World Heritage sites, as well as many other of equal though unrecognized significance and beauty, have been neglected and there has been little public investment in their maintenance, interpretation for visitors and infrastructure to access them. The public investments (hotels, human resources and airports) made during 1970s have also stagnated and had little reinvestment. Perhaps the biggest hurdle though is that Ethiopia also has an image problem to overcome; the predominant image in international media remains one of starvation, conflict and barren landscapes. Twenty years on from the from the humanitarian crisis of the mid-1980s, the military regime of the same decade and the fall of the Derg in the 1990s, tourism has a role in changing the outlook for Ethiopians as well as the image and images coming from the country.

There are signs however that the GOE is investing again in tourism as a driver of growth. In the PASDEP, GOE has prioritized the development of the tourism sector emphasizing that the historic and cultural sites need to become productive sources of jobs, incomes and economic growth for Ethiopians. The ESTDP is conceived in support of this objective and to augment the various initiatives already taken by the GOE to align resources, some of which are: (i) GOE has up-graded the tourism portfolio from a Commission to a full ministry now known as the Ministry for Culture and Tourism with State Ministers appointed for both “Culture” and “Tourism”; (ii) GOE has initiated a public private forum known as the provisional National Tourism Council which is now formally established and chaired by State Minister of Tourism and replicated at the regional level with responsibility for advocacy, coordination and public private communication; (iii) GOE has committed resources for the rehabilitation of the Tourism Training Institute in Addis; (iv) GOE has invested in upgrading airports on the Northern Historic Route; (v) GOE is in the process of drafting a tourism policy; and (vi) GOE has demonstrated a commitment to work with the World Bank to develop a strategy for the sector and implement an investment program for the sector.

The draft policy prioritizes improved access and infrastructure to tourist sites, human resource development both in the public and private sectors, deepening the supply chains linked to tourism and improving the overall quality and standards of goods and services offered to tourists, and, improved marketing and promotion of tourism products. Adequate resources to effectively deploy strategies targeted at these objectives are lacking but it is evident from recent analysis that growth in the tourism economy is achievable and may, as a result of market forces, happen over time anyway. However, there is an opportunity to accelerate this growth through focused interventions that leverage the GOE focus and increased private sector investments to promote local economic development through and the creation of opportunities for income generation and employment.

Based on a World Bank diagnostic study of the tourism sector1 in 2005-6—excluding foreign exchange earnings from Ethiopian Airlines—tourism generated approximately US$ 132 million in direct in-country expenditure on accommodation, inland transport, food and drink, visitor fees and arts and crafts purchases (making it the third highest foreign exchange earner behind coffee at $185m and oil seeds at $168m). The base for this revenue was about 150,000 foreign visitors who came to Ethiopia for various purposes such as leisure (63,000), business and conferences (62,000) and to visit friends and relatives (25,000). The average length of stay was 7-8 days and the per capita expenditure averaged $850. The length of stay is below the regional averages (Kenya 12.8 days, Tanzania 14.1 days, Uganda 9.7 days) while the per capita/per day expenditure is above average (Kenya $62, Tanzania, $104, Uganda $71, South Africa $47, and Ethiopia $109). From a destination growth perspective, Ethiopia is at an early stage of development as characterized by relatively short and expensive stays due to poor tourism infrastructure and a weak supply side.

A US$5 million Learning and Innovation Loan (LIL) supplied to the Ethiopia Cultural Heritage Project (ECHP), which closes in June 2007 has yielded lessons concerning the management of World Heritage sites in Gondar, Axum and Harar. The ECHP has also contributed to innovations, increased employment and increased value-added in the artisanal sector and many of these activities need further support to scale up. Other Bank operations in the pipeline can potentially be leveraged to enhance the impact of the ESTDP; for example, the Urban Development Project, Rural Capacity Building Project, and Tana Beles Integrated Water Resources Development Project.

The proposed project provides an opportunity to address poverty and development issues in Ethiopia, using the rich tourism resources as the vehicle for generating tourist expenditure on goods and services provided by Ethiopians. This approach is consistent with the tourism development objectives outlined in the PASDEP and the interim CAS. The Bank is well placed to add value through its national and international experience and association with: small-scale infrastructure and SME development projects, national cultural heritage protection and CDD approaches to local economic development.

2. Proposed objective(s) The proposed development objective for this program is: “Tourism is the No.1 export earner in the Ethiopian economy through investing in improved product and market development that encourages more tourists to spend more and stay longer”

It is expected that this outcome will be met through a) the design and implementation of strategic integrated destination development plans (IDDP), and, b) an enhanced private sector response to the increased access to opportunities for jobs and income generation that the IDDP highlight, c) increased numbers of tourists visiting the targeted destinations, and, d) increased tourist expenditure and length of stay. Intermediate outcomes that are expected to contribute to the desired PDO include (i) a high level of satisfaction among cultural tourists visiting participating destinations and sites, (ii) protection and enhanced management of the cultural and historic assets, and, (iii) increased participation of communities and micro, small and medium enterprises in the tourism economy of the participating destinations.

1 2006, World Bank. Towards a Strategy for Pro-poor Tourism Development 3. Preliminary description

3.1 Component 1: Integrated Destination Development - $18million This component supports the objective that the historic and cultural sites need to become productive sources of jobs, incomes and economic growth for Ethiopians. It will achieve this by developing and implementing integrated destination development plans (IDDP) for three key regions of Ethiopia; Addis and environs, the northern Historic Route and the southern and eastern tourist routes. Activities will be divided into two phases; development and implementation. During the development phase the following will be carried out: (i) identification of tourist sites and what investments are needed to conserve them, manage them and enhance their touristic appeal, (ii) definition of how these sites can provide opportunities for jobs and income generating activities, and, (iii) definition of how these individual sites and the products they offer are integrated into the overall concept of a circuit or destination, such as the northern Historic Route. The implementation phase will operationalize the action plans defined by the development phase. This is envisioned as the core investment component of the ESTDP and will provide the platform for tourism growth, which will in turn fuel job creation and income generating activities. Investments will include (i) rehabilitation and enhancement of historic sites such as Lalibela, (ii) training and business development support for tourism related enterprises, (iii) the establishment of a joint tourism development fund with the GOE to fund private enterprise in tourism (similar to that created for the flower industry).

3.2 Component 2: Market Development - $3million Preparation studies concluded that Ethiopia does not have a strong market presence and an effort to strengthen this goes hand-in-hand with the product development work to be carried out in component 1. Activities to address the weak market presence will include; a) the development and implementation of marketing strategies such as targeting specific markets—both demographic and geographic—and positioning and promoting products; b) support to an image and branding strategy. Ethiopia’s poor image is cited by all tour operators in source markets as the major constraining factor to selling the destination. An image and branding exercise is being funded through the Ethiopia Capacity Building Project (ECBP) and the ESTDP will support this initiative through a communication strategy that promotes new product developments as they happen during the course of implementation. The component activities will be implemented in close collaboration with the private sector and Ethiopian Airlines who have committed to subsidizing promotional trip by journalists and international tour operators.

3.3 Component 3: Institutional Development and Capacity Building - $2million Essentially a TA package to build capacity in sector management, this component will support existing federal and regional government structures to create the enabling environment for tourism to thrive. The federal political system in Ethiopia has now established a Culture and Tourism Bureau and a Regional Tourism Council in every region and these institutions are charged with managing the tourism sector. Capacity, especially in the regions where ESTDP will be operational, needs targeted support in the areas of: tourism strategy development, policy and planning; technical guidelines; marketing and promotion; standards supervision and regulation; cultural heritage protection research; monitoring; training and education; tourist service and information centers; exhibitions; and international cooperation. In part, this demand will be met by long term technical assistance attached to the Ministry, but the bulk of the technical assistance will be tailored to individual regions’ demands and targeted assignments.

3.4 Component 4: Program Implementation Support - $2.5million This component will provide ongoing financial management, procurement and monitoring and evaluation support to a program management office (PMO) to be located in the Ministry of Culture and Tourism and reporting directly to the Minister of State for Tourism. It is likely that the decentralized design will also require implementation assistance at the regional level, the exact scope of this support will be ascertained during program preparation.

4. Safeguard policies that might apply [Guideline: Refer to section 5 of the PCN. Which safeguard policies might apply to the project and in what ways? What actions might be needed during project preparation to assess safeguard issues and prepare to mitigate them?]

Activities under this project are expected to finance investments that will plan and/or implement destination and circuit development. This may include infrastructure development. Thus Environmental Assessment (OP 4.01) will be triggered. Where affected sites will be selected during the course of the project, an Environmental and Social Management Framework (ESMF) will be prepared by the Borrower outlining an environmental and social screening process and mitigation of any potential adverse impacts. The capacity needs to be built in the Regional Bureaus of Tourism and Culture (actually partly at Wereda level) and to some extent in the Ministry of Culture and Tourism (coordinating, facilitating, etc), as it is the project proponents who are responsible for managing environmental impacts of their projects.

Natural Habitats (OP 4.04) safeguard policy could be triggered if one or more of the destinations involve, for example, a game park.

Activities under this project are intended to affect known cultural heritage sites, and will include work on or in the vicinity of UNESCO World Heritage sites. Thus Physical Cultural Resources (OP 4.11) is triggered. Protection of physical cultural resources will be in the development of the integrated destination development plans (IDDPs), and will be emphasized as needed in the environmental management plans (EMPs).

The precise location and impacts of project activities are not yet known. But OP 4.12 on involuntary resettlement is triggered by the planned rehabilitation of physical cultural sites under component 1. A resettlement action plan or abbreviated plan will be prepared in the event that a project activity such as upgrading a tourism site or widening an access road should have impacts such as relocation or loss of productive land. Meanwhile, a resettlement policy framework (RPF) will be prepared in the context of this project preparation.

5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 5 International Development Association (IDA) 25 Total 30

6. Contact point Contact: Francois Nankobogo Title: Sr Operations Off. Tel: (202) 473-4589 Fax: (202) 614-4589 Email: [email protected]