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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4357a-YDR Public Disclosure Authorized STAFF APPRAISAL REPORT PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN SEIYUN REGIONAL WATER SUPPLY PROJECT Public Disclosure Authorized October 13, 1983 Public Disclosure Authorized Water Supply and Sewerage Division Europe, Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (As of December 1, 1982) Currency Unit = Yemeni Dinar (YD) = 1,000 Fils YD 1 = US$2.9 US$1 = YD 0.345 YD 1,000,000 = US$2,900,000 ABBREVIATIONS ft = foot m = meter ha = hectare mm = millimeter Km = kilometer Mm3 = million of cubic meters inh = inhabitant m3 /sec = cubic meters per second lcpd = liters per capita per day min = minute MEASURES AND EQUIVALENTS Metric System U.K. System Kilometer (km) = 0.62 mile (mi) Hectare (ha) = 2.47 acres (a) Meter (m) = 3.28 feet (ft) Cubic meter ( 3 ) = 220 gallons (g) Million cubic meters/year (Mm3 /year) = 0.603 million gallons per day (mgd) Liter (1) = 0.220 gallon (g) Liters per second (1/sec) = 19,000 gallons per day (gd) Kilogram/cm2 = 0.981 Bar GLOSSARY OF ACRONYMS FAO = Food and Agriculture Organization of the United Nations IDA = International Development Association MAAR = Ministry of Agriculture and Agrarian Reform PCEP = Public Corporation for Electric Power PDRY = People's Democratic Republic of Yemen PWC = Public Water Corporation UNDP = United Nations Development Program PWC's FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN SEIYUN REGIONAL WATER SUPPLY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. INTRODUCTION ............................................. 1 II. THE WATER SUPPLY AND SEWERAGE SECTOR. 1 Background.1 Water Resources. 2 Service Levels ....................................... 4 Constraints to Sector Development. 5 Sector Development Strategy and Program. 6 The Sewerage Subsector. 7 IDA's Objectives-for the Sector. 7 III. THE PROJECT AREA. 8 General Features. 8 Existing.Water Supply. 8 Present Organization. 9 Waste Disposal System. 9 IV. DEMAND AND MARKET ASPECTS. 9 Water Production and Consumption ...................... 9 Population Forecast .10 Forecast of Consumption .11 V. THE PROPOSED PROJECT .11 Project Genesis and Concept .11 Objectives of the Project .12 Project Description. 13 Cost Estimates. 15 Project Execution .16 Project Financing .16 Onlending Arrangements .17 Procurement .18 Disbursement .18 This report was prepared and written by Mr. Fritz Rodriguez and Mr. Aziz Kassab. Mr. Charles Todd provided assistance at headquarters. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - Table of Contents (Continued) Page No. VI. THE BENEFICIARY..................... 19 Background........................................... 19 Past Performance ..................................... 19 Management and Organization .......................... 20 Staffing............................................. 21 Staff Training....................................... 21 Billing and Collection............................... 22 Accounting Practices and Procedures.................. 22 Audit................................................ 22 Insurance......... .............. 23 Taxes... 23 VII. FINANCIAL ANALYSIS....................................... 23 Past and Present Financial Position .................. 23 Revenues............................................. 23 Financing of PWC's Investment Program ................ 26 Future Financial Performance......................... 27 Monitoring System.................................... 27 VIII. ECONOMIC ANALYSIS........................................ 28 Objectives of the Proposed Investments............... 28 Justification........................................ 29 Environmental Impact of the Project .................. 29 Institution Building................................. 30 Risks................................................ 30 IX. AGREEMENTS REACHED AND RECOMMENDATIONS................... 31 LIST OF ANNEXES Annex No. 1. Past and Proposed Investments in Water Supply 2. Villages and Populations in the Project Area 3. Forecast of Population, Number of Service Lines and Water Demand 4. Population and Water Demand 5. Terms of Reference for Detailed Design of the Upper Tuban Wellfield and Transmission Pipeline to Bir Nasir 6. Terms of Reference for Feasibility Study and Detailed Design of Water Supply in Tarim 7. Terms of Reference for Detailed Sanitation Studies in Seiyun 8. Detailed Cost Estimates 9. Detailed Annual Project Costs 10. Annual Project Investments - 111 - Table of Contents (Continued) 11. Bar Chart for Bidding and Execution of the Project Activities 12. Contract Schedule 13. Allocation of the Credit and Loan Proceeds 14. Estimated Schedule of Disbursements 15. Public Water Corportation - Organization Chart - 1982 16. PWC's Branch in Seiyun - Proposed Organization Chart - 1986 17. PWC - Consolidated Income Statements 18. PWC - Consolidated Table of Sources and Application of Funds 19. PWC - Balance Sheets 20. Assumptions for Financial Projections 21. Total Water Production and Sales and Service Lines, Past and Forecast 22. Monitoring Indicators 23. Calculation of the Average Long-run Marginal Cost of Water 24. Selected Documents and Data Available in the Project File Map No: 16898 Project Location 16899 Project Area 16900 General Layout of the Project Facilities I i I PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN SEIYUN REGIONAL WATER SUPPLY PROJECT STAFF APPRAISAL REPORT I. INTRODUCTION 1.01 This report appraises a water supply project for forty rural communi- ties in the People's Democratic Republic of Yemen (PDRY). The project covers the first construction stage of a master plan designed to meet potable water needs in the town of Seiyun and thirty-nine surrounding villages, through 1995. It basically includes the construction of new water supply production facilities and distribution systems and the setting up of an operating branch of the national water supply authority, the Public Water Corporation (PWC), in the Seiyun Conurbation. The proposed works and related studies are estimated to cost US $16.1 million, with a foreign exchange component of US $13.8 mil- lion, and are programmed to be executed during the years 1983 through 1987. An IDA credit of US $7.0 million to finance part of the project foreign exchange cost is proposed. 1.02 The proposed project would be the Association's fourth operation in the water supply and sewerage sector. In 1978, the Association made a credit of US $1.2 million (S-21 YDR) for a water supply engineering and technical assistance project. This project was successfully implemented and has led to the formulation of construction projects (Credits 1038-YDR and 1159-YDR) in the country's two largest towns, Aden and Al Mukalla. The implementation of these two projects is progressing satisfactorily. Meanwhile, the implementing agency, PWC, for which improved administrative structures were proposed under the engineering and technical assistance project, has greatly strengthened its organization and finance, and today is one of the best public utility compa- nies in PDRY. 1.03 The project concept was first discussed with PWC during a preparation mission in November 1980. During these discussions, the Association suggested the adoption of better design criteria and particularly, of reduced per capita water consumption for the master plan. This change resulted in substantially lowering the estimated cost of the plan. Subsequently, a first stage program of works in Seiyun and the thirty-nine satellite villages was defined and in- cluded in the proposed project. A mission composed of Messrs Fritz Rodriguez and Aziz Kassab appraised the project in November 1982. II. THE WATER SUPPLY AND SEWERAGE SECTOR Background 2.01 Located in the south-western corner of the Arabian Peninsula, the People's Democratic Republic of Yemen (PDRY) occupies an area of 333,000 km2 and extends nearly 1,400 km along the Gulf of Aden. It is a semi-arid land of rugged configuration, with sparse vegetation and few natural resources. The - 2 - majority of the population lives in the narrow costal plain along the gulf. Further inland to the north, the country becomes very mountainous, forming what is known as the "Yemen Frontier" where the mountain elevations exceed 2,000 meters. Beyond this frontier, the land flattens again to form the high plateaux and the Northern Desert, which extend into Yemen Arab Republic and Saudi Arabia (see Map IBRD No. 16898). 2.02 Overall, a harshly dry climate prevails in PDRY, though it is milder in the interior plateaux. In general, temperatures in the coastal areas are more uniform and humid throughout the year than in the interior. The hottest months are May throuRh September; temperatures higher than 430 C have been recorded in June. Rainfall in the coastal areas is irregular but more frecuent durinR the winter months; the mean annual rainfall in the coastal plain is about 50 mm. In the mountainous part of the country, it is more regular and occurs in summer months; the average annual rainfall is about 500 mm in this part. The rate of evaporation is high and runoff is limited even