World Bank Document

Documentof The World Bank

FOR OFFICIALUSE ONLY Public Disclosure Authorized

ReportNo. 6561

Public Disclosure Authorized PROJECT PERFORMANCE AUDIT REPORT

EGYPT FIRST URBAN DEVELOPMENT PROJECT

(CREDIT 831-EGT)

Decenmner 19, 1986 Public Disclosure Authorized Public Disclosure Authorized

Operations Evaluation Department

1his document has a restricted distribution and ma! be used bN recipients onb, in the performance (of their official duties. Its contents mnai not otherwise be disclosed without N'orld Bank authoriiation. lOB OUomiALUS ONLY THEWOSLO SANK Wah.sngon,DC 204)3

OUmcenEOvDvtwCoawe OpwramwnI'ANIwIw

December19, 1986

MEMORANDUMTO THE EXECUTIVEDIRECTORS AND THE PRESIDENT

SUBJECT: ProjectPerformance Audit Report on Egypt First Urban Development Project (Credit 831-EGT)

Attached,for information,is a copy of a report entitled"Project PerformanceAudit Report on Egypt First Urban DevelopmentProject (Credit 831-EGT)"prepared by the OperationsEvaluation Department.

, , f~~~~~~~~~~~~~~~~~~~f

Attachment

This documenthas a restricteddistribution and may be usedby recipientsonly in the performance of their official duties.Its contenu may not otherwisebe disclosedwithout World Bank authoriztion. ABBREVIATIONSAND ACRONYMS

CAPMS CentralAgency for PublicMobilization and Statistics CEDC Cairo ElectricityDistribution Company CFE CreditFoncier Egyptien CPWO Cairo PotableWater Oi'ganization(later, itneral Organization for GreaterCairo Water (GOCCW) ESA EgyptianSurvey Authority GOGCSSD General Organization for Greater Cairo Sewerage and Sanitary Drainage GOE Governmentof Egypt GOPP GeneralOrganization for PhysicalPlanning GOPW General Organization for Potable Water GOSSD GeneralOrganization for Sewerageand SanitaryDrainage HIPCO HandicraftIndustries and ProductiveCooperative Organization ip!i InternationalDevelopment Association JHP ExecutiveAgency for Joint Projects LIHF Low-Income Housing Fund LIHDU Low-Income Housing Development Unit LIHPO Low-Income Housing Project Officer MOHR Ministry of Housing and Reconstruction NBE National Bank of Egypt NGO %n-Governmental Organization ODA Overseas Development Agency PCR Project Completion Report PPF ProjectPreparation Facility SLG Secretariatfor Local Government TOR Terms of Reference USAID United StatesAgency for InternationalDevelopment COUNTRY EXCHANGE RATES

Name of Currency (Abbreviation) Egyptian Pound (LE)

Year Exchange Rate /a

Appraisal Year (1978) US$1 - LE 1.43 Intervening years (1979) US$1 * LE 1.43 (1980) US$1 a LE 1.35 (1981) US$1 - LE 1.35 (1982) US$1 - LE 1.23 (1983) US$1 - LE 1.16 (1984) US$! - LE 1.07 Completion year (1985) US$1 - LE 0.98

/a Calendar year averages. M OFFmALUus ONLY

PROJECT PERFORMANCEAUDIT REPORT

EGYPT FIRST URBANDEVELOPMENT PRCJECT (CREDIT 831-EGT)

TABLE OF?CONTENTS

Page No.

Preface ...... ii...... ****** Basic Data Sheet ii Evaluation Summary ...... , . *... v

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. BACKGROUND ...... 1.....I

A. The Economic Context 1 B. Urban Development a...... 050 00 4 C. Institutionaland Policy Context ... 6 D. The Project 8.*...8

II. IMPLEMENTATION...... 10

A* General 10 B. Design and Implementationof Shelter Components 12 C. Design and Implementationof the Solid Waste Component...... , 15 D. Design and Implementationof the Employment COomponent .... >,...... 16 E. Design and Implementat'onof the Rehabilitation of Water Supply and 3ewerage System in Assiut 17 F. Design and Implementationof the Technical Assistance Component 18

III. PROJECT PERFORMANCE ANr,RESULTS ...... 18

AcGeneral 18 B. Achievements in the Area of ShelterW18 C. Achievements in the Area of Solid Waste Management .... 20 ,,,,,...,,...... D. Achievements Associated with Technical Aosistance ...... * .** o e**** 20 E. Areas of Lesser Achievements 21

IV. POINTS OF SPECIAL INTEREST...... 22

A. The Impact of Procurement Choices on Construction Efficiency 22

This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwise be disclosed without World Bank authorizatior.. TABLE OF CONTENTS(Cont.)

B. The Determination of Construction Standards *..... 24 C. Housing Supply under Rent Control ...... 25

ANNEXES

A. Project Descriptionand PrincipalChanges in Project Description ...... 27 B. USAID ProjectAssistance for Urban Infrastructure and Shelter in Egypt (1977-1985) ...... 31

PROJECTCOMPLETION REPORT

I. Introduction ...... * 33 IT. ProjectIdentification, Preparation and Appraisal... 34 III. The Project...... 35 IV. Implementation ...... 36 ...... V. Institutional Performance and Development ...... 45 VI. Financial Performance ...... o. o. .*0o .. oo..oo.... 49 VII. Economic Reanalysis ...... o.o.... 51 VIII. Role of the Bank and Other DonGrs ...... 51 Ix. Conclusions o.o e o o * o o o o o 00 0 .0.....0...... 0.... ,,.....0... 52

TABLES

1. Summary Costs/Appraisal and Revised Estimates .. oooo 55 2. Disbursementsof IBRD Loans and IDA Credits (S1974-1983) o.o...... o. .o..ooo.oo, ..o...... 56 3. Revised Allocation of Credit Funds ..... 57 4. Anticipated,Actual, and ProjectedRates of Inflationduring the ProjectImplementation Period o o.oo .o... o . . ss.. o....o..ooooo...o 58

ANNEXES

I. ProjectComponents as Appraisedand as Implemented.. 59 II. DetailedCosts: Appraisaland RevisedEstimates, Sites and Services and Upgrading ...... 65 III. Zabbaleen Settlement - Economic Reevaluation ..... o.. 74 IV. Implementationof Project Components ...... 0. . ... 75 V. CompletionReport Prepared by JHP ...... 76 TABLE01 CONTENTS(0Q'nt.)

MAPS

IBRD 13443 (PCR) IBRD 13441 (PCE) IBRD 13439 (PCR) IBRD 19067 (PCR) I'RD 190613 (PCR) IBRD 19069 (PCR) - i -

PROJECTPERFORMANCE AUDIT REPORT

EGYPT- FIRST URBANDEVELOPMENT PROJECT (CREDIT831--EGT)

PREFACE

This ProjectPerformance Audit Report(PPAR) constitutes a performance audit of the Egypt First Urban DevelopmentProject for which Credit 831-EGT for US$14.0 million equivalentwas made in August 1978 and final disbursementswere made on June 28, 1985.

The PPAR consistsof a ProjectPerformance Audit Memorandum(PPAM) preparedby the OperationsEvaluation Department (OED) and a ProjectComple- tion Report (PCR) dated June 28, 1985, preparedby the Europe,Middle East, and North Africa RegionalOffice.

The PPAM is based on the PCR, Appraisaland President'sReports, discussionswith Bank staff directlyinvolved with projectsand programsin Egypt,and a reviewof projectfiles and recordsof the InternationalDevl1- opment Association(IDA). The transcriptof the ExecutiveDirector's meeting when the projectwas considered,indicated that the Creditwas approvedwith- out discussion.

The audit concurswith the PCR in severalaspects. However,on the basis of furtheranalysis made of the availabledata, the audit has drawn some additionalconclusions providing a differentperspective concerning the performanceof the project.

The audit was sent to the Borrowerfor comments;however, none were received. -. Ii -

PROJECTPERFORMANCE AUDIT REPORT EGYPTFIRST URBANDEVELOPMENT PROJECT (CEDIT 831-EGT) BASIC DATASHEET Key Project Data Original Actual/ Item Plan RAtimate

Total ProjectCost (US$ million) 21.0 22.4 Cost Overrun(%) 6.7 CreditAmount (US$ million) 14.0 14.0 Disbursed 13.4 Cancelled 0.b Repaid - Outstanding 13.4 Date PhysicalComponents Completed 12/31/82 12/31/84 ProportionCoupleted by Above Date (2) /a 10.0 60.0 Proportionof Time Overrun(X) 45.0 FinancialPerformance /b Less thaa Sacisfactory InstitutionalPerformance /c Less than Satisfactory EconomicRate of Return(X2F/d 19.0 23.0 /a Completionmeasured in relationto originalproject description. 7b Pricingand cost recoverymeasures established for the projectwere not yet implementedat completiondate. /c The local governmentadministrative system underwent a numberof reformsduring the early years of projectimplementation. These plus centralgovernment institutionalchanges adversely affected the executionof the project. /d The orig4nal estimationof the IERR was made only for the upgradingand the sites and servicescomponents; the reestimationof that rate is for the upgradingcomponent only.

STAFF INpUT Staff-Weeks 1977 1977 1978 1979 1980 1981 1982 1983 1984 1985 Total Identification/ Preparation 25.9 45.3 58.2 129.4 Appraisal/ Negotiations 79.6 79.6 Supervision/Other .1 79.7 50.6 63.0 29.6 30.1 28.0 31.9 313.2 Total 25.9 45.3 138.0 79.7 50.6 63.0 29.6 30.1 28.0 31.9 522.2

CumulativeEstimated and ActualDisbursements (US$ million) FY79 FY80 FY81 FY82 FY83 FY84 FY85 (i) Estimated 0.9 6.1 12.1 14.0 (ii) Actual 1.9 3.9 8.8 13.4 X of (ii) to (l) 13.6 27.9 62.9 95.7 Other Project Data

Original Item Plan Actual

First Mentioned in Files - 02/76 Government's Application - 01/05/77 Negotiations Completed - 05/21/78 Board Approval 05/30/78 06/23/78 Credit Agreement - 08/30/78 Effecliveness 12/28/78 05/01/79 Closing Date 12/31/82 12/31/84 Borrower Arab Republic of Egypt Executlng Agencies LIRDU, LIXI' JHP, CFE Governorate of: Governorate of: Cairo Cairo Alexandria Alexandria Assiut Assiut NBE NBE Secretariat for Secretariat for Local Government Local Government HIPCO CEDC HIPCO GOPW CPWO GOPW GOSSD ESA GOSSD GOCGSSD Fiscal Year of Borrower Jan. 1-Dec. 31 Follow-oiiProject: Loan (i) Greater Cairo Urban Development Project Loan Number (i) 2176-ECT Loan Amount (US$ million) (i) 59.0 Loan Agreement (i) 10/26/82

Name (ii) Egypt: Solid Waste Management Project Appraised in 02/20/85. Processing held up. - IV -

MISSIONDATA

Month/ No. of No. of Date of Performance Item Year Weeks Persons Staff-Weeks Report Rating

Preideotification 03/76 3 1 3 04/21/76 Identification 10/76 1 1 1 11/22/76 Preparation I 02/77 4 4 17 04/01/77 Preparation II 08/77 5 6 14 09/22/77 Preappraisal 10/77 3 6 15 11/22/77 Appraisal 12/77 4 6 21 01/11/78 Supervision I 07/78 2 7 9 09/22/78 1, 2 M Supervision II 11/78 3 4 11 01/04/79 2, 2 M Supervision III 06/79 2 4 6 07/27/79 2, 1 0 Supervision IV 10/79 2 5 11 12/18/79 2, 2 M,P,T Supervision V 02/80 2 2 2 03/25/80 2, 1 M,T Supervisicn VI 06/80 2 6 4 06/24/80 2, 1 M,T Supervision VII 10/80 3 4 9 11/14/80 3, 2 M,T,P Supervision VIII 12/80 3.5 3 6 01/13/81 3, 2 M,T Supervision IX 03/81 2 4 6 04/17/81 3, 2 M,T,P Supervision X 07/81 1 1 1 07/31/81 2, 1 F,T /a Supervision XI 11/81 2 2 5 12/09/81 2, 1 F,T 7a Supervision XII 05/82 2 1 2 06/25/82 2, 1 F,T 7a Supervision XIII 10/82 3 4 7 12/17/82 2, 2 Supervision XIV 02/83 1 1 1 i)4/U6/83 2, 2 Supervision XV 07/83 2 1 2 08/05/83 2, 1 M Supervision XVI 10/83 1 1 1 12/09/83 2, 1 M Supervision XVII 03/84 2 3 5 03/23/84 2, 1 M Supervision XVIII 09/84 2 2 4 09/28/84 2, 2 M Supervision XIX 11/84 1 1 1 12/18/84 Supervision XX 05/85 3 2 6 06/24/85

/a Ratings exclude Alexandria components which were rated 3, 2 and M, T, F, P during the 07/31/81-06/25/82period. ;~~~~~~~~~~~~

PROJECTPERFORMANCE AUDIT REPORT

EGYPTFIRST URBANDEVELOPMENT PROJECT (CREDIT 831-EGT)

EVALUATIONSUMMARY

Introduction

The Egypt First Urban DevelopmentProjec. was the first urban sector operationassisted by the Bank Group in Egypt, intendedto introduce low-cost technologicalinnovations for the provisionof shelter and urban serviceson a pilot scale. The Credit was processedrapidly, from project identificationin October 1976, to appraisalin November 1977, and Credit approvalin June 1978. The IDA Creditfor US$14.0million equivalent to the Arab Republiccf Egypt was intendedto finance 67 percentof total project cost estimatedat US$21.0million equivalent.

Accordingto the appraisalreport, the chief problemin the shelter sector in Egypt was an acute shortageof housingand urban servicesresulting from the rapid increase of the urboanpopulation and exacerbatedby the Government'ssector policies, such as rent control,subsidized public rental housing,and uneconomnicu.tility pricing. The perceivedhousing and services deficits were seen as affectingmost heavily the urban poor whose problems were aggravatedby a declinein the rate of expansionof domesticemployment (SAR, paras. 1.07-1.12).

The project was intendedto meet these problemsby demonstrating the viabilityof: (i) providingnon-subsidized services to existingsettle- ments in Cairo; (ii) guiding future urban expansion through sites and services developmentin Alexandriaand Assiut; (iii) experimentingwith low-costsolutions to the solid waste problemsin Cairo and AlexanIria;and (iv) expandingemployment opportunities through the provisionof loans to small businessesand manpowertraining. In addition,the projectenvisioned the strengtheningof a shelterfinancing agency, the Low IncomeHousing Fund (LIHF) to providemortgage financingto the low-incomegroups under conditions of full cost recoveryand reduced levels of interestrate subsidies. Generalinstitution building in the sector was to be providedthrough technical assistance.

Objectives

The main objectivesof the projectwere to provideshelter, employment, and urban services for about 120,000persons in the lowest income groups at costs they could afford, thus eliminatingthe need for direct public subsidiesand permittingthe project to be replicatedon a larger scale. Tne shelter and related servicescomponents were to be implemented - vi - primarilyby the Governoratesof Cairo,Alexandria, and Assiut,and by para- statal utilitycompanies responsible for water supply,sewerage and electricity, with the assistanceof a centralunit, the Low-IncomeHousing Develop- ment Unit (LIHDU)and the financialintermediation of the LIHF. The employment componentwas to be executedby the NationalBank of Egypt (NBE) through the provisionof loans to small businessesand by the HandicraftIndustries and ProductiveCooperative Organization (HIPCO) through technicalassistance and training. Projectcompletion was plannedfor December31, 1982.

ImplementationExperience

Implementationwas delayed,mainly due to administrativeand legislative changesthat affectedthe projectexecuting agencies at the critical early stages. As a result,very little progresswas made during the first three years. Projectsimplification in the form of a revisedscope and more limited institutionaldevelopment .nbjectives subsequently accelerated implementation. Other than the standardconditions, specific covenantsin the Credit Agreementdealt with the appropriatestaffing and consultingservices for project implementationat the Governoratesof Cairo, Alexandria,and Assiut, and at the central coordinatingunits then comprisingboth the LIHF and the LIHDU;the issuanceby the Borrowerof freeholdtitles to beneficiaries under the upgradingand sites and servicescomponents; and the terms and conditionsof cost recovery. The only specialcondition of effectivenesswas the execution of subsidiaryloan agreementsbetween the Borrower and the LIHF, and between the Borrowerand the NBE. This last conditionwas met after a six month delay but the other three conditionswere not fu]ly met. The closing date for the Project was extended twice, resulting from an extensionin the implementationperiod from four to about seven years.

Results

The project was relativelysuccessful in extendinginfrastructure services to slum dwellers in Cairo, but less so in providingshelter in Assiut. In Alexandria, the shelter components failed ekitirelyand were deletedfrom the projectdue to difficultiesof implementation.IThe project succeededin improvingsolid waste managementin Cairo and Alexandriathrough the constructionof compostingplants and improvedcollection arrangements. The project was unable to support employmentgeneration activities in the various project areas as planned. Urgent repairs to the water supply and seweragesystem in Assiutwere not made within the projectbecause the amount of work requiredvastly exceededthe availableresources. The funds allocated to this componentwere used instead to build off-sitesewerage mains and a pumping-stationto serve the sites and servicesscheme in Assiut,and to purchase equipmentand parts for water leakage detectionin that city. Technicalassistance provided was effectivein supportingconsultancies for the detailedpreparation of the projectand, to a lesserextent, for prepar- ing furtherprojects, although the overallimpact on inscitution-btuildingwas less than satisfactory.The likelihoodthat the projectwill ultimatelymeet its pricing and cost recovery objectives is small, since the chargeq to be - vii - levied for infrastructureservices as well as for sites and servicesplots were not implementedat the time of projectcompletion.

Sustainability

The project did not providefor maintenanceof the infrastructure and buildingsconstructed, either in the form of staff trainingand administrativearrangements, or in the form of actualbudgetary allocations, except in the case of the Cairo and Alexandriacomposting plants. Under these circumstances,uncertainties remain with regard to the provisionsfor maintenance of the shelter and related service investments, In addition, cost recoveryof project investmentsappears unlikely,indicating that sustainability problemsassociated with both technicaland financialarrangements might underminethe benefitsaccrued as a resultof the project.

Conclusionsand Lessonsto be Learned

The less than satisfactoryperformance of this projectis attribu- table, to a large extent, to shortcomingsin design which did not properly take account of account the institutionalcomplexity characteristic of the Egyptian urban sector or for the economic prioritiesassociated with the particularphase of developmentof the Egyptian ;conomywithin which the projectwas conceivedand executed. In retrospect,the projectshould have been reappraisedprior to creditapproval, since the administrativereorganization,which occurredshortly after appraisal,had invalidatedthe institu- tionalarrangements established for projectimplementation,

On the basis of the implementationexperience with this project, the followingpoints of specialinterest surface: (i) sizeablebenefits can be derived from the applicationof appropriateprocurement practices even under difficultconditions such as those prevailingin Egypt; (ii) in view of the fact that land, rather than constructioncosts are the main determinant of housing costs in Egypt, there are several advantagesin selectingcon- structionstandards on the basis of broadercriteria than those derivedfrom affordabilityconsiderations; and (iii) under conditionsof rapid economic growth and relativelyweak capi;al markets, private sector investmentin housing can be expected to increaseat acceleratedrates, even under rent control constraints,pointing to opportunitiesfcr expanding the rental housingmarket as an alternativeto establishingnew instrumentsto finance owner-occupiedhousing structures. PROJECTPERFORMANCE AUDIT MEMORANDUM

EGYPTFIRST URBANDEVELOPMENT PROJECT (CREDIT831-EGT)

I. BACKGROUND

A. The EconomicContext 1/

1. The rirst Bank Group-assistedurban developmentproject in Egypt coincidedwith a periodof intensestructural change encompassing transforma- tions in the political,financial and economicspheres of Egyptianlife which alteredsignificantly the country'sposition and developmentprospects. The projectappraisal (1977) occurred only three years after the Egyptianeconomy became more open as a consequenceof the policy E1 Infitah (The Opening). This open-doorpolicy, enunciated by PresidentSadat in 1974 and continuedby President Mubarak, was aimed specificallyat attractingArab and Western Investmentand marked the dramaticshift in the country'sinternational poli- tics that followedthe 1973 war. 2/ From 1974 to 1980, the Egyptianeconomy grew rapidlyat an averagerate of 9% per annum (about6.5% above the rate of populationgrowth). Capital inflow grew by 50% per year, reflectingin- creased receipts from oil exports,workers' remittancesfrom abroad, Suez Canal earningsand tourismreceipts. 3t

2. As a resultof the changedpolitical situation and renewedeconomic prospectsfor Egypt,large amountsof externalassistance became increasingly available. By 1977 officialexternal assistance, including all sourcesand forms,had reachedabout US$4 billionper annum, and has remainedat compara- bly high levels since then, with increasedaid from the United States and

1/ This section is largely based on Khalid Ikrain, Egypt: Economic Management in a Period of Transition,A World Bank Country Economic Report, The Johns Hopkins UniversityPress, Baltimore,1980; on IBRD, "Egypt: Reviewof Medium-TermInvestment Program," Report No. 5269-EGT of October 1984; and on IBRD, President'sReport on the recently approvedChannel Maintenance Project, dated June 3, 1986.

2/ Egypt is currentlythe most open economyof any developingcountry with a populationgreater than 20 millionaccording to World Bank estimates. The value of exports plus imports at currentprices amounts to 71% of GDP (FY84-85)indicating an unusuallyhigh degreeof economicopenness.

3/ This growth performance is almost twice as high as that of the preceeding1961-1973 period, when GDP increasedat an average rate of about 5X per annum,while populationgrew at about 2.7% p.a. -2- continuedsupport from OPEC countries.4/ These resourceswere necessaryto finance Egypt's large effort to rehabilitatethe economy while remaining preparedfor war. The Suez Canal had to be reopenedand the Canal cities, desertedsince 1967, rehabilitated.Social and physicalinfrastructure, run down after almost a decade of war, had to be restoredat the same time that welfareexpansion was perceivedas a requisiteby a fast growingpopulation. As a result, this period was also one of rapid growth of public sector expenditures(notably public investmentand direct subsidies)leading to a rising public deficit which could not be compensatedfor by the increasein publicand privatesavings.

3. Early signs of serious fiscal imbalanceswere alreadyevident in 1975, when the public deficitreached 18.2% of GDP. The financialburden of the post-warrehabilitation effort was compoundedby inefficientGovernment policies,weak public sectormanagement and excessivedelays in projectcompletion, all of which resultedin low financial returns to public sector investment.

4. These circumstanceewould have called for especiallyjudicious allocationof IDA funds, preferablythrough uncomplicated but very well prepared projects designed to overcome critical institutionalconstraints and fill the most serious resource gaps. These considerations are not reflected in the design of the project under review. Hence, and in retrospect,the audit considers the project as having been an inadequatevehicle for IDA assistanceat that particularphase of the Egyptiandevelopment process.

5. The projectwas particularlyunsuitable for institutionaldevelopment due to its large number of componentsand executingagencies, to the dispersionof investmentsover three cities and to the discontinuityof key agencies as a result of administrativereorganization. As a consequence, experiencesand lessons learned during implementationhave not led to a dialoguebetween the Bank Group and the Governmenton sectorpolicies.

6. Economicconditions in Egypt during project implementation(1979- 1984) became increasinglymore difficult. By the end of the 1970s and in spite of five consecutiveyears of unprecedentedgrowth, the Egyptianeconomy was even more dependenton the inflow of external resourcesand began to sufferunder the impact of fallingoil prices. The economicdownturn, which startedin the early 1980s,had as immediatecauses a declinein Egypt'soil exportearnings, in tourismreceipts and (to a lesser extent) in Suez Canal revenuesand workers' remittancesfrom abroad. Internalconditions wors-

4/ Egypt ranks after Israel as the second largest recipientof American foreignaid, totallingUS$18 billionin civilianand militaryassistance over the last decade. The annual amountof US assistanceto Egyptmore than doubled in recent years from US$1.2 billion in 1980 to US$2.5 billion in 1984. See, United StatesAgency for InternationalDevelop- ment (USAID), Egypt: CongressionalPresentation Fiscal Year 1987, Washington,D.C., March 1986. -3- ened. The cost of living increased at rates in excess of 17% per year and the growth of GNP per capita declinedfrom 7.6% per year (1975-1981)to 0.6% per year (FY81-FY86). Frequent modificationsto the administrative structureof the publicsector, combined with excessiveexpansion of Govern- ment personnel,further reduced the Government'sability to respondto these unexpectedproblems. 5/ Correctivemeasures to redressthe fiscal imbalance were initiated in FY82-FY83but were subsequentlyinhibited by the 1984 elections,causing the deficit to continue at over 22% of GDP through FY84-FY85. The most recentWorld Bank assessmentindicates that medium-term developmentprospects in Egypt are highlydependent on the pace and magnitude of policy reforms,in the absenceof which investmentis expcctedto grow at a modest rate of 2.5% per year and foreigndebt servicemight rapidly reach unsustainablelevels (sir:etotal externaldebt alreadyrepresented 46.b% of GNP in 1983).

7. These changedcountry conditions adversely affected project implementation in general (as its relative pr'ority declined in face of more pressingneeds), and in particularthrough delayed project funding, neglected managementand escalatingconstruction costs. Nevertheless,in the audit's judgment, these additionaldifficulties merely compoundedthe basic short- comings of the project design and preparation,which remain the principal cause of its disappointingperformance. The audit must also add that while Egypt'spolitical realignment and rapid pace of growthin the mid-1970smight have created strong incentivesfor the rapid processingof Credit 831-EGT, these smie factorsmight also have distortedthe perceptionof urban sector developmentpriorities on the part of the Government,thus limiting the opportunitiesfor more purposefulIDA assistanceto the sector.

5/ Civilian public sector employment accounted for about 65% of all additionaldomestic jobs created between 1975 and 1980 (IBRD, 1984). 'he number of Government employees, including the military, has increasedover fouirfoldfrom one millionin 1970 to 4.5 millionin 1986, accordingto AbdelA. Hegazi,quoted in the New York Times of August23, 1986. -4-

B. Urban Development6/

8. Availabilityof water is the strongestdeterminant of land use in Egypt,both for urban and for agriculturalpurposes. As 96% of the country's total area ib arid desert land, settlementhas historicallybeen constrained to a narrow strip along the Nile valley and the Delta. This area (40,000 km2) supporteda populationof about 10 million people at the turn of the centuryand is now occuriedby approximately49.1 millioninhabitants (1985), reflectingthe sharp upturn in the rate of populationgrowth which has occurred since the 1950s. The resultingrural and urban settlementdensities are among the highestin the world. 7/ Most of the usableland is privately owned and has been shifting from agriculturalto urban use at a fast pace over the last three decades,as the urban populationincreased from 38% of the total in 1960 to 46% in 1985.

9. HistoricallyCairo has retainedprimacy among Egyptiancities and has absorbedthe largestshare of urban populationgrowth. With an estimated 10.1 million inhabitants,its metropolitanarea comprisedapproximately 45% of the urban populationin 1985. Alexandriais the secondlargest city, with 3.2 million inhabitantsin 1985, accountingfor 14% of the total urban population. One-quarterof all nationaljobs are concentratedin Cairo alone and employmentthere has expandedtwice as fast in the last two decadesas in the rest of the country. Thus, there appearsto be strongeconomic incentives in favor of urban concentrationwith an increasedbuild-up along urban corridors stretchingfrom Cairo to Alexandriaand a paralleldecline in the share of the populationliving in Upper Egyptiancities.

10. The rapid pace of populationgrowth and the imbalanceof its spa- tial distribution,has led to the widelyheld view that Egypt suffersfrom an acute urban housingshortage. The _ontraryis in fact the case. The housing market has respondedto the accelerationin demand and the scarcityof land

6/ This sectiondraws primarilyon the followingsources: K. lkram (1980); IBRD (1984); IBRD, "Egypt: Greater Cairo Sector Memorandum"(0-port No. 4130-EGT),April 1983; StephenK. Mayo et al., "InformalHousing in Egypt," Abt Associates, Dames and Moore, General Organizationfor Housing Buildingand PlanningResearch (GOHBPR),USAID-financed study, Washington,D.C., January 1982; StephenJ. Malpezzi,"Rent Control and Housing Market Equilibrium: Theory and Evidencefrom Cairo, Egypt," (Ph.D dissertation,George WashingtonUniversity, September 30, 1986); GOHBPR/IBRD,"Construction Industry Study," Dokki, Cairo, 1981;William C. Wheaton,"Housing Policies and Urban Marketsin DevelopingCountries: The Egyptian Experience," Journal of Urban Economics, 9, 1981; Serageldinet al., Manpowerand InternationalLabor Migrationin Middle East and North Africa,(Oxford: Oxford UniversityPress for the World Bank, 1983).

7/ At 1,000 personsper km2 of agriculturalland, rural densitiesin Egypt exceed those of Bangladesh. Residentialdensities in Cairo average 400 persons per ha., and are significantlyhigher than those observed in Manhattan(260 inh./ha.)and in Bangkok(210 inh./ha.). -5- with rapid incrementsto the stock, primarilythrough vertical additions to existingbuildings, at a rate which exceeded (e.g. in Cairo) or matched the rate of populationgrowth. 8/ The resultingextraordinary expansion of dwellingunits and increasedresidential densities reflected the impact of two main economicforces operating in the urban housingmarkets in Egypt over the last decade, namely: (i) increasedavailability of private savingsand perceivedadvantages of urban real estateover other investmentalternatives, and (ii) ncreasedutilization of informalarrangements for land subdivision, housing constructionand rentals, to compensatefor market inefficiencies createdby Governmentpricing and land use controls.9/ On the other hand, while the provisionof basic publicutilities and transportationservices in most citieshas laggedbehind housing expansion(both in total capacityand in the state of repair of existing systems),conditions have significantly improvedover the last decade as a result of large public investmentsfi- nanced primarilyby externalsources, with the importantexception of solid waste collectionand disposal,which remainacute problems.I0/

11. Becauseof distortionscreated by rent control legislation(which is stringentlyenforced and pegs urban rents to the age of the dwelling units)as well as by the patternof public utilitiesprovision, a dispropor- tional share of the housing costs in Egypt is borne by householdswho are recent entrantsto the housingmarket or who wish to change residence(i.e. the general supply/demandequilibrium trend cancels serious inequalities). In Cairo, occupants of new units pay more than three times as much rent as a proportionof income than occupantsof units built before 1960, and households who have moved into a unit recently spent twice the fraction of their

8/ Two thirds of all units added to the Cairo housing stock between 1976 and 1981 were estimated to have come about through vertical expansion. See, Mayo et al. (1982). Data from the Egyptian Central Agency for Public Mobilization and Statistics (CAPMAS) show that for the urban areas of 24 Governorates, 18 experienced more rapid growth in dwelling units than in population during the intercensal period of 1966-1976.

9/ The informal sector share of the housing market has been estimated at between 84-91% in urban areas (1981) or considerablyhigher thaanthe 77% share estimated for the 1966-1976 period nationwide. See, Mayo et al. (1982) and GOHBPR/IBRD (1981).

10/ The extent to which urban dwellers have benefitted from these urban infrastructureinvestments is apparent in Cairo where the proportion of the housing stock connected to public utility lines has risen between 1970 and 1981 from 50% to 65% in the case of water supply, from 44% to 71% for sewerage, and from 59% to 90% for electricity. The level of investment has been considerable. ITSAIDalone has provided over US$l billion to assist urban water and sewerage systems aLndpower distribution proiects in Cairo, Alexandria and the Canal Cities between 1977 and 1985. -6-

income on housing that the average householdwhich had not moved recently did. 11/ For the pooresthouseholds entering the market for the first time, this has meant doublingtheir housingexpenditures from about 15% of income to about 30% of income which (when combinedwith food consumptionrequire- ments of between 60 and 70% of income among the poor) places low-income householdsin an extremelyprecarious financial position. Similarly,the relativecosts of urban servicesare higherfor recententrants to the market than for establishedresidents because basic itilitiesprovided are much less among recentlybuilt informalunits, causing their occupantsto spend much more than averageto pay for privatearrangements.

12. The audit concludesfrom this brief review of sector conditions, that the project was not conduciveto demonstratinglow-cost solutionsto urban shelterproblems in Egypt, due to conceptualflaws which apply to its design of both sites and servicesand urban upgradingcomponents. The first was the failureto identifyland costs as the most importantdeterminant of housing costs and, instead,approach the production-costproblem throughan emphasison the reductionof constructionstandards to levels deemed by the audit inappropriateto supporthtgh residentialdensities (the most obvious market adjustmentto raising land costs), and destined to generate either high maintenancecosts or rapid deteriorationof the installedcapacity. The secondconceptual fallacy lies in supportingthe role of the public sectoras housingdeveloper when there were clear indicationsthat no capitalshortage existed in the sector and that the Government faced mounting financial constraints. This latter issue is further discussed below with reference to the urban institutional framework.

C. Institutionaland Policy Context ?1

13. A large state presence in the economy, combined with weak sector agencies, resulted (over the last several decades) in the introduction of serious institutional distortions to the process of urban development in Egypt. The PCR (paras. 5.01-5.13) describes the principal urban sector agencies as being poorly staffed and in a state of structural discontinuity

11/ Becauisethe income of households varies independently of the age of the dwellings they occupy, the distortions in the distribution of housing costs are not systematically biased against the poor. On the other hand, given an average length of tenancy of 12 years, movers seldom have access to older dwelling units.

12/ The audit's treatment of urban sector institutions and policies in this section does not ao Justice to the actual complexity of the Egyptian context. The reader is encouraged to refer to the following additional documents on this subject: Maurice Mould, "Egypt: Institutional Arrangement," IDA Credit 381-EGT, Project File, OM dated 09/01/77; K. lkram (1980); Egypt: Advisory Committee for Reconstruction,Ministry of Development, "National Urban Policy Stuidy"(by PADCO Inc. under iJSAID grant No. 263-0042), Cairo, July 1982; USAID, "Housing Finance: An Analysis of Prospects for Increased Activity," draft, Washington, D.C., May 1981; S. Mayo et al. (1981) auidS. Malpezzi (1986). - 7 - at the time of projectpreparation and early implementation.Considering the level of institutionalcomplexity and instability,the PCR concludes that appraisal should have been postponed and much more careful preappraisal analysis should have been made of the institutionalframework for project implementation.The audit concurswith this view and notes in additionthat project design afforded little opportunityfor sector policy development. Not only was the projectintended as a demonstrationand not as a vehiclefor policy reform,but more importantly,the sector policy context in Egypt at that time was not conduciveto major reforms.

14. Nationalurban developmentpolicies at the time of appraisal(1977) respondedto a perceivedscarcity of urban housing,the growingcongestion in Cairo, and the rapid conversionof valuableagricultural land to urban uses by emphasizingrestrictive controls on private sector developmentand by supportingthe followingpublic sector investmentpriorities: (i) an urban decentralizationscheme under which the Governmentwould undertakethe costly constructionof free-standingnew towns in the desert; (ii) the rehabilitation and expansionof basic r'"blicutilities and transportationsystems in the major cities, includingthe Canal cities; and (iii) the expansionof Government-producedshelter, which the central administrationbeing pre- disposed to experimentwith low-costtechnologies in substitutionfor fully- built rental apartments (which characterizedprior public sector shelter investments). These new investmentprograms did not, however,contemplate substant!almodificactions to public sector interest rate subsidies for housing, nor significantadjustments to publicutilities tariffs. In fact, none of the policies responsiblefor the low financialreturns to public urban sector investmentwere to be changed.

15. The restrictivecontrols on private sector developmentappear to the audit as haviinghampered, rather than stimulated,orderly urban growth in Egypt. This seems to be especiallytrue in the case of rent controland the regulationsapplied to formalfinancial markets and to land use. Rent control (as indicatedin para. 11 above), has not curtailedthe productionof new housing units, but has caused productioncosts to be irequitablydis- tributed,inhibited tenant mobility,distorted housing consumptionlevels, and forced new homeownersand tenants to pay over-inflatedhousing prices. As to the financialmarkets, the prescribednegative real interestrates of savingsand loan operations,and the high taxationof bond interestincome frustratedfor the most part the mobilizationof privateresources for long- term housing finance,with the followingmain implicationsfor the sector: (i) formal financialmarkets became largely irrelevantto the majority of housinginvestors, who reliedinstead on temporarywindfall financing such as that providedby workers'remittances from abroad or the sale of inherited agriculturalland, and (ii) a short-terminvestment bias became characteristic of the Egyptianhousing market, seriously limiting the opportunitiesfor expansionof plannedsub-divisions on the part of the privatesector. Devel- opment,although rapid, became increasingly piecemeal, unplanned, and out-of- pace with the provisionof urban infrastructure. In addition,because the restrictionsimposed by the Governmenton conversionof agriculturalland to urban uses and on approvalof sub-divisioiisreduce the land supply respon- sivenessto housingmarket changes, demand prices for urbanizableland became overintlated. These restrictivepolicies affecte1, in the early 1980s,over -8-

95% of the urban housing market (whichis private)and thereforeappear to the audit as more importantdeterminants of housing costs in Egypt than specific pricing arrangementsin Government-producedhousing, which was the policy focus of the projectbeing audited.

D. The Project

16. This was the first urban sector operationfinanced by the Bank Group in Egypt, prepared in responseto a request by the Governmentfor assistancein implementingan urban developmentproject aimed at alleviating the housing problemsof the lowest-incomefamilies in Egyptiancities. The focus on employmentand solid waste problems emerged subsequentlyin the course of project preparatior. Project investmentswere to be locatedin Cairo and in Alexancria,in view of the fast pace of growth of these two cities,and additionally,in Assiut (in Upper Egypt),selected in supportof the Government'spolicy of spatialdecentralization. The project approach proposedby the Governmentcomprised cost reductionmeasures for the provision of shelter through experimentationwith sites and services and urban upgrading. An IDA reconnaissancemission, in October 1976, reviewed the Government'sproposal and found it to be congruentwith Bank Group policies for the urban sector at the time. As the proposalembodied innovations which departedfrom traditionalGovernment practices in Egypt, IDA recommendedthat the projectshould be developedon a small-scaledemonstration basis. Not- withstandingthe fact that a similar(but much larger)sites and servicesand upgradingproject in Cairo was being simultaneouslyprepared by the Govern- ment for USAID financing, co-financingwas not contemplated.13/ The projectpreparation proceeded rapidly, starting in early 1977, at tie General Organizationfor PhysicalPlanning (GOPP) in the Ministryof Housing(MOH), with assistancefrom expatriateconsultants financed by a ProjectPreparation Facility (PPF) approved in March 1977. 14/ Appraisalof the project took place in November1977, within one year oTthe reconnaissancemission.

17. The objectivesof the projectas appraised(SAR, para. 2.01) were to help developand implementlow-cost solutions to Egypt'surban problemsin the areas of shelter,employment, and other urban services,while ensuring that investmentswere responsiveto the needs of the poor. The projectwas also intendedto be replicable,by improvingcost recoveryfor shelterand related services and by strengtheningkey sector institutions. In this connection,it would seek to strengthenthe followingfunctions and agencies: (i) project coordinationthrough the Low Income HtousingDevelopment Unit

13/ There were differencesin approachbetween IDA and USAID regardingthe level of housing service provision,according to the Region. USAII) approveda grant in the amountof US$80 millionin August 1978 to assist a Low Income Housingand UpgradingProject in Cairo,whose total costs were estimated at US$160 million equivalent. A summary of USAID assistanceto the sectoris providedin Annex B.

14/ In May 1977, the Governmentsigned a consultingcontract with the firm DoxiadisAssociates International to assist in the preparation of the project. - 9 -

(LIHDU) in the MOH; (ii) financial intermediationthrough the Low Income Housing Fund (LIHF); and (iii) employmentpromotion in the artisan sector through the HandicraftIndustries and ProductiveCooperative Organization (HIPCO)in the Ministryof Local Government(MOLG).

18. The project,whose total cost was about US$21.0million equivalent, and whose componentsare detailedin Annex A, comprised:

(a) ShelterProvision (about US$12.2 million or 54% of total cost with contingencies)including slum upgradingwith communityfacilities for 149 ha (about 18,500households) in 3 settlementsin Cairo and 11 ha (about 1,000 households)in one settlementin Alexandria; sites and services schemes with community facilitiesfor 15 ha (about 1,800households) in one site in Alexandriaand for 25 ha (about 2,800 householdsplus 200 workshop plots) in one site in Assiut;and, provisionof buildingmaterials loans to assist residents of projectsites in improvingtheir dwellingunits;

(b) Solid Waste Services (about US$3.1 million or 15% of total cost with contingencies)including garbage collectionin project sites throughassistance to privatecollectors (Zaballeen) for collection equipmentand appropriaterecycling techniques; improved processing methods through constructionof compostingplants in Cairo and Alexandria;and, betteroperations and maintenanceof streetcleaning and solid waste disposalservices in Alexandriathrough provision of collectionand maintenanceequipment and constructionof solid waste depots;

(c) Employment Promotion Services (about US$2.0 million or 10% of total cost with contingencies) including a credit program for small-scale businesses in project sites, technical assistance to these same enterprises,and vocational training in various fields to be offered to site residents;

(d) Rehabilitation of Water Supply and Sewerage Systems in Assiut (about US$0.9 million or 4% of total cost with contingencies) comprising the provision of maintenance equipment and workshop facilities,repairs to water supplyextraction plants and distribution networks,and rehabilitationof the centralsewerage pumping stationand sewer lines,as well as minor additionsto the existing sewer capacity;

(e) Technical Assistance and Project Management (about US$2.8 million or 13% of total cost with contingencies) including various consul- tancies and the provision of advisory services.

19. The project was to be wholly financed by the IDA credit (67%), by the Government of Egypt, which was the Borrower (30%), and by the National Bank of Egypt (3%). The IDA credit would finance the estimated foreign exchange costs of the proiect and 50% of its local costs. This level of local cost financing was approved in view of Egypt's tight budgetary situation and high incidence of urban poverty. ResponsibiLity for the execution of the - 10 -

shelterand relatedservices components lay with the participantGovernoraies of Cairo, Alexandria,and Assiut,and with the parastatalutility companies comprisingthe Cairo PotableWater Organization(CPWO), the Cairo Electricity DistributionCompany (CEDC), the GeneralOrganization for Severageand Sani- tary Drainage(GOSSD) and the GeneralOrganization for PotableWater (GOPW). Implementationwas to be assistedand coordinatedby LIHDU and funds were to be channelledthrough the LIHF. For the employmentcomponent, implementation responsibilitylay with the NBE for the credit subcomponent,and with HIPCO for the remainingelements. SeparateProject Agreements were to be entered into between IDA and the Governoratesof Cairo, Assiut and Alexandria,as were SubsidiaryLoan Agreementsbetween the Borrowerand the LIHF and between the Borrower and the NBE.

20. Special conditions included the appointment by each participant Governorate ef one full-time Low-Income Housing Project Officer and the granting of freeholi property titles to beneficiaries of the upgrading and the sites and services components, on terms and conditions which provided, inter alia, for the full recovery of capital and administrative costs associated with the implementation of these components. Procurement conditions stated in Schedule 3 of the Credit Agreement, providEd for ICB for contracts for the purchase of goods valued at above US$50,000 and for civil works contracts valued at above US$500,000equivalent.

21. The projec: was expected to he completed by December 31, 1982.

II. IMPLEMENTATION

A. General

22. Credit 831-EGT was signed in August 1978 but became effective only in May 1979, due to delays in the signing of the two Subsidiary Loan Agree- ments by the Dorrower. Following Credit effectiveness, project implementation did not proceed as expected and very litLIe was achieved during the first three years (1979-1982).

23. Several factors account for the implementationdifficulties encoun- tered by the project. In spite of its relatively small scale, the project was geographically dispersed, had a large number of separate and innovative components, and required the participation of several fairly independent agencies. Coordination arrangements relied on two institutions (LIHDU and LIHF) which weere discontinued or otherwise made ineffective at an early phase of project implementation. The principal implementationrole, assigned to Governorates,received less than adequate support from the technical assistance component. As the PCR points out and the audit concurs (PCR, paras.4.11-4.17 and 5.01-5.13), inappropriate preparation and weak institutional arrangements were the most important reasons why the project did not progress during this initial period. Under these circumstances, the audit must add, there appears to be no Justification for the slow response from IDA to the Borrower's unsatisfactory compliance wittriCredit conditions during this extended period. In the audit's judgement. timely and roncerned atcention should have been given by IDA to the nrompt revilewof >T,1dit covenants In the light of changed institutional _ondltions. Tne a,vil iSO - 11 - finds inappropriate IDA's encouragement,during that period, of the preparationof a second shelter project,since that divertedattention from providing the Borrower with much-needJ assistance in carrying out the activitiesof the first project.

24. The project was changed in several significantrespects during execution,but a revised project descriptionwas only formalizedby Amend- ments to the Credit Agreementin May 1983 (see Annex A). These amendments providedfor the extensionof the closingdate by one year (to December31, 1983),for the reallocationof Creditproceeds among disbursementcategories, for the cancellationof componentsand sub-componentsvalued at about US$8.1 million (or 39% of total project cost as appraised), for the inclusion of three additional sub-components, end for the ratification of the withdrawal of the NBE and the LIHF from the project. 15, A second extension of the closing date to December 31, 1984, was approved by IDA after substantial progress was made under the modified scope.

25. The most important changes made comprise: (i) cancellation of the small business assistance component due to the withdrawal of the NBE from the project (in response to an apparent lack of demand for such loans) and the lack of implementation capacity on the part of HIPCO; (ii) cancellation of the shelter components in Alexandria due to the unsuitability of the land proposed for the sites and services scheme and to the unwillingness, on the part of the Governorate, to proceed with the upgrading component; (iii) cancellation of the North Bassateen settlement upgrading in Cairo, in view of the fact that the settlement had already been upgraded by the private sector; (iv) cancellation of the building materials loans sub-component in all upgrading and sites and services areas due to the inability of Governorates to make the necessary arrangements to process such loans; (v) ratification of higher infrastructure construction standards for upgrading sites in Cairo; (vi) provision of off-site sewerage infrastructurefor the sites and services scheme in Assiut; and (vii) construction of a 160 ton/day composting plant in Alexandria.

26. Because the LIHF was abolished soon after Crecliteffectiveness, the project abandoned at the outset the objective of supporting the development of a financial intermediary for low-income housing. The responsibility of channelling project funds was reassigned by the Borrower (in December 1979) to the Executing Agency for Joint Housing Projects (JHP), with accounting services to be provided by the Credit Foncier Egyptien (CFE). 16/ Bidding limits for ICB were raised in 1981, with IDA approval, for civivworks con-

15/ The LIHF was dissolved by the Borrower in June 1979, two months after Credit effectiveness. The NBE decided to withdraw from the project in October 1982, after unsuccessful attempts at identifying clients for the credit program among project site businesses.

16/ The JUP was created in 1978 to coordlifate the implementation of the USAID-financed housing and upgrading project In Cairo. - 12 - tracts to US 1.5 million equivalent,and for goods contractsto US$150,000 equivalent. I /

27. Althoughthe implementationof the project took six and a half years instead of the four and a half years envisagedat appraisal(see PCR, Annex IV), and notwithstandingthe substantialreduction made to its scope, several project activitiesremained incomplete at the closingdate. Among these the most importantare: (i) implementationof pricingand cost recovery arrangementsfor shelter components;(ii) provisionof propertytitles to lot owners in upgradingsites in Cairo; (iii) completionof civil works for infrastructureand communityfacilities in upgradingsites in Cairo a in the sites and services scheme in Assiut; and (iv) selection of beneficiaries,sale of lot6s, and provisionof property titlesat the sites and servicesscheme in Assiut. The project, therefore,remained incomplete at the closing of Credit accounts and some US$0.6 million of the Credit funds, which had not been disbursed,were cancelled. The PCR (para. 6.01) reportsan overall cost overrun of US$1.4million equivalent(6.7% over SAR estimates),although project restructuringin 1983 was designedto maintain expenditureswithin the originalbudget. The dlistributionof actu4alcosts by components was significantly different from the SAR plan (see PCR, Table 1) with shelter ,nd solid waste components accouintingfor 89% of the total instead of the 73% envisaged at appraisal. Proctirementproblems recurred throughout implementationand are discussed later ornin this ?PAM, as a point of special interest.

B. Design and Implementationof SheLter Components

28. The conceptual shortcoming of the shelter components (discussed in Section I of this PPAM) were compounded by problems arising from insufficient technical preparation. Both the upgrading and the sites and servircs components were appraised on the basis of site layouts and standard c-signs for community facilities. Topographic survey,,, soli tests, detailed engineering designs, agreement on construction standards, and preparetion of tender documents were not undertaken prior to Credit approval. Since limited attention was given to the execution of these preparatory tasks, the project implementation schedulegrossly understimatedthe complexityor the activitiesin- volved and misrepresented the implementation capacity of the participating agencies. Because the Governorateswere not involved in preappraisal preparation of the components (although they were given full responsibility for their execution), many differences arose in the perception of the project's concept and scope, and local support was consequentlylimtted.

29. In Assist land acquisition and definition of site boundaries delayed significantly the completion of detailed site des-igns. The allocation of parts of the site to a separate developmenttmay have resulted, moreover, in windfall profits to developers who parttcipated with the Governorate in the construction of five-story middle- and upper-income residential and commercial structures on the best portions of the site (along the main access

17/ IDA's approval was cornrunicatedky cable dated 12/28/81. - 13 - road and the margins of the IbrahimlyaCanal), 18/ Due to lack of information, the audit cannot ascertainwhether this paralleldevelopment paid its share of land costs, off-site infrastructure,and site preparationto the accountof the project.19/ The audit refers the reader to the PCR (paras. 4.18-4.24)for a descrip-Elonof the constructionprocess and the standards built. In general,sites and servicesconstruction management in Assiutwas poor and hamperedby procurementproblems resulting in extensivedelays. At the end of about seven years, on-lot developmentstandards were below what the appraisalprojected them to be. Marketingof the plots had startedbut sales had not taken place. By mid-1985(half a year after the closingdate), the scheme had not yet been connectedto off-sitesewerage systems, although on-site infrastructure,one primary school, and 353 one-room core units (9 sq. m. each) were complete. About 2,400 plots were left bare. Judgingby the pattern of urban land occupationin other Egyptian cities, the audit identifiesa potential problem in connectionwith the lot sizes used in Assiut(lots rangedfrom 45 sq. m. to 72 sq. m.), since they appearto be too small to accommodatethe likely vertical expansion of dwelling units on site. 20/

30. Upgradingworks in Cairo were restrictedto two contiguoussettle- ments (Main settlementand Zaballeensettlement at MansheitNasser) after the cancellationof the third site at North Bassateen.21/ Strong demand for this type of improvementto informalhousing settlements existed in Cairo and the componentpotentially offered a good opportunityto demonstratesystema- tic methods for extensionof services to low-incomeneighborhoods and thus providethe basis for largerscale development.Unfortunately, the implementationof the componentnever receiveda h'gh priorityin the Cairo Governor- ate. A-onrdingto the Region(PCR,, para. 5.10),the large Cairo bureaucracy (about 160,000employees in 1985) was only vaguelyacquainted with the project and treatedit as a minor investment,out-of-scale with the city'ssize-

18/ This paralleldevelopment was intendedto provide resourcesto finance the constructionof one-roomcore units on all sites and servicesplots (insteadof on 25Z of the plots,as agreedat appraisal)but the cross- subsidizationplan was abandonedafter agreementwas reached on site boundariesand land use.

19/ These paymentswere not yet made in July 1983, accordingto IDA supervision reportdated 08/05/83. More recent informationis not available.

20/ If we considerthe averagelot size in Assiut to be 60 m2, this standard correspondsto about two-thirdsthe average lot size in Cairo. Lot sizes in Cairo have been reduced by 25% since the 19609 but still averagedabout 90 m2 in 1981,according to S. Mayo et al. (1982).

21/ The justificationfor the originalinclusion of North Bassateenin the projectis unclearto the audit,since the settlementwas alreadybeing developedby the privateinformal sector in 1977. - 14 -

able capitalexpenditure budget (EE 90,8 million in 1980). 22/ AB a demonstration,the componentfailed to bring about efficiencyin-the construction of the various Infrastructureelements, primarily because the coordination was assignedto a centralgovernment agency which was incapableof bringing local authoritiesto work together (in this case, three parastatalutility companiesand three separatecity departments).23/ Inefficientprocurement practicesused for most of the contractscreated additional difficulties.

31. The componentwas changedduring executionin so far as higher standardswere used for infrastructureconstruction. These standardswere determinedby each specializedcity agency,in accordancewith its own norms, and in disregardto the specificationsset out in the originalCredit Agree- ment. Nevertheless,the audit concurs with the Region (PCR, paragraphs 4.23-4.24)on the appropriatenessof such higher standards. They appear to be technically sound, affordable,propitious to easier maintenanceand operation of assets, and providing a better basis for future settlement densification.24/ Among the important changes made to infrastructure design (seePCR, Annex I) only one was not sanctioned by IDA, namely, additionalsewerage distributionworks which extended piped sewers to the entiremain settlementand to parts of the Zaballeensettlement. These works were entirely financed by the Cairo Governorate. Another unanticipated change was the participationof project beneficiariesin wholly financing individualhousehold connections for water supply and sewerage(valued at £E 0.8 million). This developmentindicates that slum dwellershave both the capacity and the willingness to pay for basic utility services and constitutesthe only cost recovery achievementsthus far attained by the project.

32. Cadastralsurveys and detailedengineering designs absorbedan excessivelylong period of time, as indicatedby the completionof the final designs and tender documents (for the Zaballeensettlement) in mid-1983 --

22/ See IBRD (1983) Table 2.4. The upgrading component, as appraised, representedabout EE 4.7 million in 4-t years, or an annual expenditure averagingabout 1% of the city's totalannual investmentbudget.

23/ These agencies were the GOGCW, GOGCSSD, CEDC and the Departmentsof Roads and Bridges,Mechanical and ElectricalWorks, and Planning and Construction.

24/ The large discrepancybetween standards as-built and SAR specifications results from insufficientpreappraisal preparation. For example, because soil tests were not made, the proposedSAR low-costsanitation solution(involving the constructionof cesspits),was inappropriatefor the rocky soil at MansheitNasser. - 15- one year and a half after the r'1ginalproject completiondate. 25/ Cons- tructionwas poorly supervisedand proceeded at an uneven and sTow pace, exhibitingquality defects in severalinstances, as for example in the case of schools, water supply distribution,and circulationroads in the main settlement,

33. The combinedimpact of a lengthyconstruction period, several cons- tructiondefects, use of higher standards,and escalationof construction prices resultedin significantcost increasesin this component,estimated by the Region (PCR, Annex III) at 672 above SAR estimatesfor the main settlement and at 238% for the Zaballeensettlement. Because the component's accounts were improperlykept, the audit is unable to confirm the exact magnitudeof these cost overruns.

C. Designand Implementationof the Solid Waste Component

34. Solid waste collectionin Egypt was not considereda public aervice and, when provided, was normally concentratedin high-incomeareas where privatecollectors (Zaballeen) could realizehigher salvagevalue. Accumula- tion of refuseon the streetshad become a serioushealth hazardat the time of projectpreparation and was ranked (in Cairo) as the most pressingneigh- borhood problem by residentswho expressed their willingnessto pay for improved services. 26/ These circumstancesled to the preparationof the solid waste componentincluded in the project,in supportof the expansionof the Zaballeencollection services to low-incomeareas, and complementedby improvementsto the public sector processing technology (composLing)and street cleaningoperations in Cairo and Alexandria.

35. Carefulpreparation by consultantsand the fact that investments respondedto a priorityneed contributedto the more successfulimplementa- tion of this componentin the contextof the project. As a result,although the expansion of the Zaballeen refuse collection services still remains limited to a few low-incomeareas, the audit concurs with the Region (PCR, para. 9.03) that an effective demonstrationof the feasibilityof the approachwas achieved,possibly providing a basis for further larger scale development.

36. The changesmade to the designof the solid waste componentduring implementationrefer mostly to the specificationsfor the compostingplants (involvinga higher level of mechanizationthan originallyenvisaged) and appear to the audit as reflectingthe applicationof sound technicalcrite- ra. On the other hand, severalelements intended to improverefuse collec-

25/ The Bank Group had extensiveprevious experience with slum upgradingin other countriesand shouldhave been able to advise the EgyptianGovern- ment on the proper planning and execution of cadastral surveys in densely occupied settlements. Unfortunately,such advice was not offered.

26/ See, Cairo Household Survey (1981), as reported in S. Mayo et al. (1982). - 16 - tion and street cleaning operationsIn Alexandriawere cancelled because funds from USAID were availablefor this same purpose on better terms. 27/ In Cairo, with the exception of the cancellationof the pilot composting plant (which proved unnecessary),most sub-componentswere implementedas planned.

37. The cost overrunsincurred in the implementationof the solid waste component(estimated at 123% over SAR figures in the PCR, Annex II) appear justifiedon the basis of the inclusionof a 160 tons/daycomposting plant in Alexandriain substitutionfor the originallyenvisaged pilot composting plant. Both compostingplants built were operationalby Creditclosing date.

D. Designand Implementationof the EmploymentComponent

38. The rapid growth of the Egyptianeconomy during the secondhalf of the 1970s did not generate a comensurateicmrease in employmentopportuni- ties. Annual growth in the number of jobs between 1971 and 1980 would in fact have been significantlybelow the rate of growth of the labor force, if not for the accelerationof internationallabor migration which occurred after 1975. 28/ Takinginto account the number of Egyptianworkers abroad, overall empfoymentopportunities grew by 2.8% per annum during the 1970s, while the domesticjob market expandedat an annual rate of only 1.9%, indicating the need to create additionaldomestic productive jobs. The employment componentin the first urban projectwas conceivedin responseto this need and seen as a complementto other Bank Group effortsin this area. 29/

39. Unfortunately,the componentwas hastilyprepared and the agencies chosen to implement the credit and technicalassistance programs, and to provide vocational training,were not suitable. Because the NBE had no former experiencein lending to small businesses,it depended on HIPCO to market these loans and evaluateloan applications.HIPCO, on the other hand, had never been involved in either lending or technicalassistance operations. Its non-formalvocational training experience was limited,at the time of appraisal,to the administrationof 18 training centers,of which only 10 were functioning. In general the audit notes that non-formal vocationaltraining experience in Egypt was restricted(in the mid-1970s)to a combinedoutput in industrialand constructiontrades of fewer than 5,000

27/ The AlexandriaWastewater Expansion Project, financed by an USAID grant of US$198,62imillion approve,in August 1979, includedprovisions for improvedsolid waste management.

28/ Internationallabor migration accounts for a large share of the additionalworkers employedduring the decade. The number of Egyptian workersabroad was estimatedto have grown from about 100,000in 1971 to approximately591,600 in 1980 -- an increaseof almost half a million jobs, equivalentto an annual growth rate of 21.8%. See Serageldinet al., (1983).

29/ A Bank loan for the Third IndustrialDevelopment Bank Project (Loan 1533-EGT)for US$40 millionwas approvedin August 1978. - 17 - graduatesper year, and overall performancewas rated less than satisfactory. 30/ The Regionrep3rts (PCR, Table 1 of Annex II) that US$0.37million equivalentwere spent in the constructionof a trainingcenter at Mansheit Nasser in Cairo while the remainingactivities contemplated in the component were cancelled. The constructionof this one center began late in the project executionperiod (1983) and was not completeby project completion date. There is no furtherinformation that would permit the audit to assess if indeed this trainingcenter will be equipped,staffed, and opeLatedby HIPCO, nor when this might occur. In retrospect,and in view of the cancellationof the componentdue to inabilityof the executingagencies to provide the envisagedservices, the audit considersthat it might have been wiser to have limitedthe employmentcomponent to a study of the small-scale businesssector, aimed at servicingthis portionof the market throughfuture industrialdevelopment credit programs. 31/

E. Design and Implementationof the Rehabilitationof Water Supply and SewerageSystems in Assiut

40. Althoughthe appraisalrecognized that improvementsto infrastrule- ture, particularlyto water supplyand seweragesystems, were a precondition to furtherurban growthin Assiut(SAR, para. 1.26),the projectnevertheless provided for a sites and services scheme (for a projected populationof 14,000people) in that city, st.Lportedby a very small citywideinfrastruc- ture rehabilitationcomponent. 32/ As could have been anticipated,the funds providedfor this componentwere grosslyinadequate to executeeven the most urgent repairs.33/ In consequence,the componentwas cancelled (except for the acquisitionof leak detectionequipment) and funds were reallo- cated to the constructionof off-sitesewerage works to ser\'ethe sites and servicesscheme.

30/ Most of the non-formalvocational training programs in Egypt at tnat time were administeredby the Ministryof Industryand by the Ministry of Housing. See K. Ikram (1980),pages 127-128.

31/ The Region does not consider this would have been feasiblegiven the prevailingconditions at the time.

32/ The original allocationfor the componentwas US$0.87 million equivalent. This amountwas deemed insufficientby sectorspecialists within the Bank who reviewedthe project at an early stage in the processing cycle of the Credit. Unfortunately,timely modifications to the project scope were not made.

33/ The consultantshired to define the component during implementation (Consultiag Engineering,in joint venture with Binnie Taylor and InternationalManagement Center in Egypt),concluded from their studies (in mid-1981) that a minimum of EE 7.3 million were required (EE 3.1 million for water supply, EE 2.9 million for sewerage, and £E 1.3 million for operationsand maintenance). This budget compareswith an SAR estimateof EE 0.6 million. See, IDA Credit 831-EGTProject File, SupervisionReport dated 12/09/81. - 18 -

F. Designand Implementationof the TechnicalAssistance Component

41. The compositionof the technicalassistance provided by the project was greatlyinfluenced by the need to preparethe projectitself (a task that absorbedabout 472 of total technicalassistance resources; see PCR, Table 9, Annex II). Becausea decisionwas made, at an early stage in Creditprocess- ing, to postponedetailed project preparation, over one-thirdof the technical assistancefunds were used for this purpose (332) during the implementation phase. These detaileddesign functionswere performedby consultants with virtuallyno participationof the staff of the agenciesresponisible for executing the various components,and very little was gained in terms of staff trainingas a result.

42. The audit notes, moreover,that almost twice as much funds was allocatedto the preparationof future projects(20Z) than to strengthening the implementationcapacity of participatingagencies (only about 11% of the technical assistancefunds were allocated to training,administration, and advisory services). Two studies (a Survey of the Artisan Sector, and an Identificationof the Training Needs in Seven Governorates),absorbed the remainingresouices (about 22%).

43. As a result of this particulardesign structure,the technical assistanceprovided was fragmentedand proved less than satisfactoryas a vehicle for institution-building.Most conspicuously,the componentlacked direct managementsupport for project implementationat the level of the G;overnorates,which the audit considers to be a serious flaw of project design. While agreeing in general with the Region's assessmentof the implementationof this component(PCR, paras. 4.32-4.38),the audit suggests in addition,that advisoryservices originally destined to the LIHF (subsequently cancelledafter that agencywas dissolved)should have been reallo- cated to the Governoratesto provide accounting,financial, and general managementassistance during projectimplementation. One of the reasonswhy project accounts are so incompleteand unreliableis that accountingwas never addressedat the level where the bulk of the project transactionswere made.

III. PROJECTPERFORMANCE AND RESULTS

A. General

44. Project performance was disappointing in most respects,with the important exception of the area of solid waste management, in which some progresswas made towarda more generalsolution to a seriousproblem facing Egyptiancities. While the audit would argue that IDA assistancecould have been more efficientlyextended to Egypt througha differentlydesigned urban developmentproject, it recognizes that specific achievementswere made within the contextof the projectbeing audited.

B. Achievementsin the Area of Shelter

45. In Cairo the living conditions of approximately 70,000 slum dwellerswere signlficantlyimproved through the provisionof potablewater, - 19 - sewerage,and electricityconnfections to their dwellingunits. Transporta- tion servicesand environmentalsanitation were also vastlyimproved in their settlementsthrough the constructionof accessand circulationroads, and the extension of refuse collectionservices. Although informationon income levels in the upgradedsettlements is not available,the audit presumesthat the majorityof the beneficiariesof this componenthave incomesbelow the averagehousehold income level in Cairo. 34, Publicinvestment in upgrading these settlementscontributed directly to the mobilizationof private resources for housing investments. Householdsfinanced their private utility connectionsand made improvementsto their dwellingunits. In addition,the improved settlement conditions supported a large (although unquantified) increasein the housing stock which resulted from the constructionof new dwelling units added throughvertical expansionto existing housing structures. (MansheitNasser was occupied preponderantlyby one to two-story housing structures prior to the project and now exhibits a majority of five-storybuildings.)

46. The quantificationof these urban upgradingbenefits is normally expressedin terms of increasedland values. However,because land values in Cairo have increasedat high rates throughoutthe periodof projectimplementation, it is very difficultto isolate the share of appreciationdirectly attributableto the investmentsmade in connectionwith the project. 35/ Thus, althoughthe audit concurs with the Region that the accruedbenefits are relativelyhigh, it cannot confirmthe specificestimated IERR of 23% for the upgradinginvestments (PCR, Annex III and para. 7.03),in the absenceof data which would permitcontrolling for land price increasesin the city as a whole,and changesin land value gradient.

47. In Assiut,project achievements directly and indirectlyrepresented potentialadditions to the housingstock. By preparingfor occupancy2,800 residentialplots, the sites and servicesscheme will eventuallysupport the constructionby the privatesector of an equal numberof dwellingunits, and potenttallymore than that given the observedti.end favoring vertical expan-- sion of housingstructures in Egypt. The quantificationof the economicrate of returlnfor this component,at present,would result in highly negative because the plots have not yet been sold. It is for this reason and not becauseof rent control (as stated in the PCR, para. 7.02) that calculation

34/ Availablehousehold income data for Cairo is not readilyuseful because reported income and expenditurestend to omit temporary variations, notably those caused by workers' remittancesfrom abroad. Thus, the medianannual household expenditure reported for Cairo in 1981 (EE 1,032 or about US$764)might be understated,particularly with respectto home improvementexpenditures. See Mayo et al. (1982),Table 8.5, page 165 and Lance Taylor,"Income Distribution and ConsumptionPatterns," in K. rkram (1980),pages 80-95.

35/ Land price increasesat compoundannual rates of from 25 to 40 percent have been reportedfor Cairo during the last decade. See Mayo et al. (1982),pages 153-163. - 20 - of the IERR is presentlypremature. 36/ Indirectly,the Assiut sites and servicesscheme contributedto cityw-Tdedevelopment by encompassingthe extensionof trunk water and sewerageinfrastructure to that sector of the city, thus providing the necessary preconditionsfor further housing and commercialexpansion. This benefitis exogenousto the projectand likelyto accrueto beneficiariesbelonging to higher-incomegroups. Nevertheless,its impact on the city of Assiut is positive not only because it represents further additions to the housing stock but also because it offers an opportunityfor the city to grow away from the historical center where congestionand delapidatedinfrastructure set at excessivelyhigh levels the economiccosts of additionalhousing.

48. The impactof the sheltercomponents on nationalhousing policy was modest, primarily because its objectives were restrictedto the area of direct activity by the Governmentqua developer. Within this sphere, the experiencegained from the projectwas beneficialin so far as it contrib- uted, along with assistanceprovided by other donors, to the exclusionfrom the national budget of investmentsdestined to the constructionof fully- built rental housing, which in earlier periods had resulted in highly negativefinancial rates of returnto public sectorinvestment.

C. Achievementsin the Area of Solid Waste Management

49. Refusecollection has been extended to approximately18,500 low- income households in Cairo on a self-financing,private service provision basis, establishinga model which eventuallymight be applicableto citywide expansion. The administrationof street cleaningand solid waste processing services by the Governorates of Cairo and Alexandria was improved by the construction of two composting plants and by the measures taken to ensure that these plants continueto be properlyoperated and maintsined. Although modest in scale, these achievementsmay be consideredan importantfirst step toward improvement in public sector solid waste management and as providing a basis for larger scale future developments.

D. Achievements Associated with Technical Assistance

50. The results of the technical assistance provided are reflected In the level of preparation ultimatelyachieved in the project,which was, as already mentioned, uneven. Technical assistance resources allocated to the preparationof futureurban developmentprojects have succeededin identifying and preparinga solid waste managementproject for which financingis

36/ S. Malpezzi has estimated the costs and benefits of investmentsin rental housing in Cairo under rent control conditions,and the same methodologycould be used in the case of Assiut, if the plots were indeedoccupied. See S. Malpezzi(1986), pages 159-170. - 21 - pending.37/ The effortsmade to preparean urban upgradingproject for the historicalcentral Cairo area (GamaliyaStudy) were not successful,in part because the study itself was less than satisfactorilyprepared (see PCR, para. 4.36). 38/ On the other hand, the engineeringdesign studies conducted in Assiut to determinethe rehabilitationworks requiredby the water supplyand seweragesystems were profitablyused by the NationalOrganization for PotableWater and SanitaryDrainage (NOPWSD) to carry out comprehensive repairsto these systems,once the correspondingcomponent was deleted from the project.

51. The two studies completedduring the project were hamperedby several implementationdifficulties (see PCR, paras. 4.33-4.34)and their usefulnessis difficultto determine. For example,the ArtisanSector Study conducteda surveyof 16,000cases but did only a few in-depthinterviews and relativelylittle data analysis. As a result,the study gives only limited insightinto the workingsof the artisanmarket in Egypt and into the inter- nal operationsof small-scalefirms. Further analysis would be necessary before the knowledgegained through this study could be practicallyapplied in policiesand projectsaimed at developingthe sector. In the case of the Study of TrainingNeeds of Seven Governorates,a usefulpurpose was servedby the extensivediscussions of this and relatedissues which took place within Governmentduring the execution of the study. Although a firm training program was not forthcomingfrom the study, the audit considersthat first steps in this directionwere beneficial.

52. With regard to training,except for one five-monthtraining course at the Institutefor HousingStudies at Rotterdamattended by three Egyptian engineers,training provided by the projectwas restrictedto short seminars and study tours of limited staff developmentimpact. (For a descriptionof the trainingservices offered, see PCR, para. 4.38.) Advisoryservices were only provided to the JHP, and these might have been redundantsince that agencywas alreadyreceiving extensive technical assistance from USAID. The audit considers that higher benefitsfrom technicalassistance could have been ach'evedif directmanagement assistance to the Governorateswas offered throughthis component.

E. Areas of LesserAchievements

53. The audit agreeswith the Regionthat the projectfailed to achieve its objectivesin the areas of cost recoveryfor shelterinvestments, employment generation,and institutionaldevelopment (PCR, paras. 9.07-9.10). The reasonsfor these failuresare embeddedin the design of the projectand in the institutionalconditions in Egypt. Most of these difficultieshave

37/ The EgyptianGovernment has requestedthe Bank to halt furtherprocess- ing of the loan intendedto financethis project,after appraisaltook place in February1985, possiblydue to the availabilityof alternative funds on better terms.

38/ A second phase of this study is being financed in the context of the Cairo Urban DevelopmentProject (IBRD Loan 2176-EGT). - 22 - already been discussedand need not be furtherelaborated here. The audit agrees with the observationmade by the Region (PCR, paras. 9.11-9.19)that importantoperational lessons were learned from the project, particularly with regard to the need for: (i) adjustmentof project objectivesand activitiesto the institutionalframework and implementationcapacity of the Borrower;(ii) better utilizationof the legal instrumentsavailable to IDA by ensuringthat they can in fact be compliedwith by the Borrower(and when not, promptlyamending them), and systematicallyenforcing compliance; and most importantly(iii) utilizationof the necessary time and resources to ensure that a project is thoroughlyprepared before it is submittedto the Board for approval. In this conrection,the audit would underline the necessityof includingmarket analysis in the preparationof urban projects.

IV. POINTS OF SPECIAL INTEREST

54. Becauseof the issues they raise and the possiblerelevance of their lessons for future Bank Group projects,attention is drawn here to points of special interestrelated to project implementationand design in the urban sector. The audit omits among these a discussionof institutional developmentissues (althoughtheir interestin this and in other projectsis significant)in view of the coverageprovided by the Regionwhich is deemed appropriate(PCR, ChapterV).

A. The Impactof ProcurementChoices on ConstructionEfficiency

55. The project gives an interestingillustration of the impact of alternative procurementstrategies on the level of efficiencyof the constructionprocess, especially with regard to procurementof civil works contracts. At the time of appraisalthe Bank Group had alreadyissued procurement guidelines recommendingthe packaging of contracts into bundles in preferenceto a multiplicityof small contracts,whenever feasible. 39/ Notwithstandingthese guidelines,the appraisalprogrammed the procurementof about US$7.8 million equivalentin civil works conrra:ts,dispersed in more than 50 small individualcontracts (SAR, para. 3.12),and concertedeffort to combine contractsin the same site into larger packageswas apparentlynot undertaken(see PCR, para. 4.39). Since so many agencieswere responsible for implementationand each one )-ada vested interestin maintainingcontrol over contractsin their specializedarea, there were strong incentivesto dispersecivil works throughseveral small contractsand the positionof IDA shouldhave been to try to overcomethese bureaucraticconstraints.

56. Great fragmentationof civil works contractswas the result. At the sites and servicesscheme in Assiut, for example,a total of 16 civil

39/ See IBRD, ProcurementGuidelines for Civil Works, 1977. - 23 - works contractswere awardedwithin a 25 ha site area* 40/ The management of the constructionsite and of the contractsthemselveiswas very difficult under these procurementarrangements. Moreover,although contracts were let on a fixed price basis (in accordance with Bank Group policies), the practicalinterpretation of "fixed prices"was subject to qualificationand adjustmentscould be made with referenceto buildingmaterials prices and wage rates controlledby the Government. Becausethe variationof controlled prices does not follow explicitly established indices, the process of contractprice variationadjustment was particularlytroublesome and open to impropriety. The prequalificationprocedures also became more unreliable when a large number of small firms had to be rated, mostly because performancecapacity tends to be more variablewithin this size-categoryof firms. As a result, several contractsawarded to the lowest bidder were non-performingdue to the technicaland financiallimitations of the selected contractors. Under Egyptianlaw, non-performingcontractors have to pay for the completionof works by the second lowest bidder -- a conditionthat is highly unrealisticin view of the financialposition of most non-performing contractors(and particularlyso when they are small firms). Lengthy and expensivenegotiations were the only avenues open to the solutio'of these recurrent procurementdifticulties. When fragmentationof procurementis combinedwith traditionalpractices of delayingcontract signature, and with limited constructionsupervision capacity (as is the case in Egypt), the impact on the constructionprocess is clearly one of increasedinefficiency and highercosts, which was characteristicof the projectunder review.41/

57. Efficientprocurement for civil works was finallyintroduced in the project during the last year of implementationin the Zaballeenupgrading settlementand portionsof the main settlementat MansheitNasser in Cairo. The improvementconsisted in packagingin a singlecontract of water supply, sewerage,and road constructionworks (electricalworks remaineda separate contractunder the direct administrationof the CEDC). Larger firms were attractedto bid for this contractand constructionproceeded comparatively free of problemsafter contractsignature at a significantlyfaster pace than under previous contracts. If interest during constructionhad been calculatedas part of projectcosts, the resultingfigures would have shown the sizeable financialadvantages of this last procurementchoice over the earlierones.

40/ See comments by W. R. Shirrefs (Consultant)in IDA Credit 831-EGT SupervisionReport dated June 24, 1980, where he states that on-lot civil works at Assiut were divided into eight contracts(representing batches of 240-480 core units each), five contractswere awarded for infrastructure construction, and three for community facilities buildings.

41/ Bank Group data on ICB contractsignature by Borrowersas a functionof award date, shows Egypt as having the longest delay among all member countriesbetween these two dates. See, IBRD,Procurement Unit records, 1985. - 24 -

58. A second interestingexample of efficiencygains derived from improved procurementpractices is the case of the supply, erection, and commissioningcontract for the compostingplant in Alexandria. Becausethe contractfor an identicalplant had been successfullycarried out in Cairo, the Borrowerapplied for IDA approvalfor exceptionfrom ICB requirementsin the case of the second plant and permission to negotiate the Alexandria contract with the same supplier responsible for the Cairo plant. Fortunately,IDA denied approvalof the requestand the Alexandriaplant was procured throughLIB. The correspondingcontract was awardedto the lowest bidder (who was not the winner of the Cairo contract) and as a result, projectcosts were lower than they would have otherwisebeen. The Alexandria plant was built withoutproblems and commissionedon schedule.

59. Both the successfuland the less successfulinstances of procurement performancein this project suggest that special attentionshould be given to the proper planningof procurementactivities in futureurban projects, part.cularlyin countrieswhere local legislationand practicetends to make contractinga cumbersomeprocess.

B. The Determinationof ConstructionStandards 42/

60. An importantcontribution made by urban sector policiesdeveloped by the Bank Group during the 1970swas to alert Borrowersto the necessityof maintaininga close relationshipbetween constructionstandards (and therefore costs) and the capacityand willingnessto pay of beneficiariesof such construction. This policy was timely in view of the preferencefor higher standardsobserved in most developingcountries in connectionwith housing projectsintended, nevertheless, for a poor clientele. Evidently,the sub- stance of the policy was that appropriatestandards be applied, although quite often appropriatenesswas identifiedwith lower standards,irrespective of other technical considerations. The case of the first urban project in Egypt is instructivebecause appraisal construction standards were primarily determinedon the basis of assumptionsregarding the level of incomeof project beneficiaries,apparently neglecting other relevant considerations such as: (i) the level of land use densitiesexpected in the settlements; (ii) the actual capacityof local public agencies to operate and maintain utility and road networks;and (iii) the pricing policiesfor utiliLyser- vices in the counitry. The apparent omission of these factors from the constructionstandard selectioncriteria is not acceptablein general and seems particularlyunwise in the case of Egypt. In fact, Egypt was facing specialcircumstances at the time of appraisal. The Governmentwas burdened by unusualdemand for rehabilitationof major utility systems and had very few resourcesto allocateto routinemaintenance, preferring therefore to use standardsthat would minimizemaintenance expenditures in new construction. In addition,in Egypt conditionsare defined by the scarcityof urbanizable land which make high residentialdensities both desirable and necessary, indicatingthat the carryingcapacity of urban infrastructuremust be calcu-

42/ The audit refers the reader to similar findingsreported in connection with the First Urban DevelopmentProject in the Republic of Cote d'Ivoire(Loan 1347/1348-IVC).See PPAR, OED, May 14, 1986. - 25 - lated for supportingseveral times the initialoceupancy levels. This can- straintdoes not necessarilymean that projectsshould be over-designed,but it does requireproper design for future supply expansion. The last important countrycondition that should have been taken into accountis the fact that pricingof publicutility services in Egypt bears little relationto the cost of the servicesprovided and to the capacityand willingnessto pay of the population. These generalizedinefficient prices weaken the affordable- standardsargument advanced by Bank policy because its use, in a slum upgrading project for example,would furtheraccentuate the regressivenature of the generalprice structure. The projecttherefore illustrates the futil- ity of approachinga sector problemfrom a site-specificperspective without complementarypolicy efforts at adjusting the larger institutionaldistor- tions.

C. HousingSupply under Rent Control

61. A comprehensiveanalysis of the impactof rent controllegislation on the Cairo housingmarket is now availableand the audit would ratherrefer the reader to its source than attempt to summarizethe argumenthere. 43/ Althoughthis study,clearly, was not availableat the time of preparationof the projectbeing audited,some of its findingsshould be highlightedbecause they appear of general relevance to the preparation of future urban projects. The first set of findingsreported by Malpezzihas already been discussed (PPAM paras. 11 and 15) in connectionwith the fact that the apparentlylarge subsidiesreceived by Cairo rentersunder rent controlare in fact much smallerthan presumedbecause total housingexpenditures include key money, maintenanceand service expendituresin addition to contract rents. While these side paymentsreduce the averagesubsidy implicit in rent control,they also mask a high degree of inequalityin the distributiionof housing costs and benefitsamong tenants,and large consumptiondistortions associatedwith long length-of-tenureand lower tenantmobility rates. While these findings increase our understandingof market behavior under rent control conditions,what is of more general interest is the fact that landlordscontinue to invest in housing although they are able to recover only about 71% of the market price of housing in the form of rent and side payments. (Incidentally,it must be mentioned that this level of private sector cost recovery is substantiallyhigher than that obtained in public sector housing investments,estimated at 38% of the market price, and correspondingto the contractrent plus utilitypayments.) 44/ In the case of Cairo'sprivate housing market it seems as though investorsare prepared to pay in order to be able to invest in housing -- a behaviorpattern that indicatesthe relativescarcity of better investmentopportunities. This

43/ See S. Malpezzi(1986). This sectiondoes not presumeto be a summary of the major findingsof this study and the reader is encouragedto consul.the originalsource.

44/ An additional337 return in the case of public sector housing investments is probabl'charged informally in the contextof allocatinghighly subsidizedscarce units, but the proceedswould not tend, in our view, to revertto the publicsector coffers. - 26 - housing investment preference pattern ts also not uncommon in other developingcountries with similarly weak capital markets, high levels of uncertainty vis-a-vis the institutional environment, rising domestic inflationrates, and unexpectedincome spurs.

62. From the above observations,it follows that housing financing interventionsthrough urban developmentprojects must not only pay special attention to the behavior of private housing markets but also take into account the general investmentenvironment in the country. In the case of Egypt,and in retrospect,the alternativeof supportingthe privatesupply of rental housingmight have been weighedagainst the creationof a new public sector financialinstrument in support of the expansion of owner-occupied units, although the audit recognizesthat thls type of analysis was not usuallypart of projectpreparation when the firsturban developmentproject in Egypt was appraised. - 27 -

ANNEXA Page 1 of 4

PROJECTDESCRIPTION (As per Schedule2 of the DevelopmentCredit Agreement, August 30, 1978)

PartA - The provisionin Cairo of:

(i) Upgradingof about 96 hectareswith about 11,600households in MansheitNasser (Main Settlement);of about 30 hectareswith about 3,000 householdsin MansheitNasser (ZabbaleenSettle- ment) and of about 23 hectareswith about 3,900 householdsin North Bassateen (Kulaha Settlement)including provisionor improvementsof: access and circulationroads; water supply facilities; sewerage facilities; electricity distribution systems;solid water collectionservices; community facilities comprisingprimary schools,health clinics,community centers and one secondaryschool; new lots for residentialand small business purposes; assistance to self-help upgrading and constructionof houses through the provision of building materials lonas; and assistance in developing appropriate technologiesfor solid waste processingand loans for repair and replacementof garbagecollection equipment.

(ii) The constructionof a pilot composting plant at Shoubra followedby the constructionof a 200-tonper day composting plan at Shoubra for the purpose of improving solid waste disposal.

Part B The ProvisionIn Alexandriaof:

(i) Upgradingof about 11 hectareswith about 1,000households in New Nagaa El Arab, includingprovision or improvementsof: access and circulation roads; water supply; low cost sanitationfacilities; electricity distribution system; waste collectionservices; community facilities comprising primary school,health clinic,and a communitycenter; and assistance to residents for home improvement through provision of buildingmaterials loans.

(it) Sites and servicesfor about 1,800residential plots and about 80 workshop plots on about 15 hectares in South Metras, including site developmentand preparation;infrastructure facilities including roads, water supply and sewerage; ablutionunits and plot perimeterwalls for residentialplots; communityfacilities comprising primary school,health clinic and community center; and provision of building materials loans to residentsfor home constructionthrough self-help. - 28 -

Annex A iage 2 of 4

(iii) The Improvementof solid waste collectionand disposalthrough stre,igthenedmanagement of street cleaning and solid waste disposal services; extension of solid waste collection services to low income areas; constructionof solid waste depots and provisionof collectionand maintenanceequipment; and constructionof one pilot compostingplant.

Part C - The Provisionin Assiutof:

(i) Sites and servicesfor about 2,800 residentialplots and 200 workshop plots on about 25 hectaresat South Gharb El Balad, includingsite development,infrastructure facilities such as roads, water supply and sewerage; ablution units and perimetral plot walls for residential plots; community facilities comprising primary school, health clinic and communitycenter; and loans for buildingmaterials to assist residentsin self-helphome construction.

Part D - Small BusinessDevelopment Program comprising:

(i) Credit program to enterprises in the project areas fcr workshop construction,equipment and for use as working capital. (ii) Technicalassistance and training for entrepreneursin the projectareas.

(iii) Vocationaltraining in variousfields.

Part E - Rehabilitationof the Water Supply and SewerageSystems at Assiut through:

(i) Repairs to the water supply facilitiesencompassing water extraction plants and water distribution networks; and provisionof equipmentand workshopfacilities to maintainand monitor the operationof such plantsand network.

(ii) Rehabilitationof the central sewerage pumping station and existing sewage disposal works and minor additions to the capacityof these facilities;and provisionof equipmentand workshopfacil'ties to maintainand monitor the operationof such facilities.

Part F - Technical Assistance

The provisionof consultancyand advisoryservices to assistin:

(i) Projectdesign and implementation. - 29 -

AnnexA Page3 of 4

(ii) Preparationof furtherurban developmentprojects.

(lii) Strengtheningthe capacity of the LIHF in the areas of organizationand financialmanagement.

(iv) ImprovingHIPCO's organization and staffingand carryingout a study of the artisansector in Egypt.

(v) Identifyingthe trainingneeds in the Governoratesof Cairo, Alexandria,Assiut, Ismailia and Gharblya.

PRINCIPALCHANGES IN PROJECTDESCRIPTION (As per Amendmentsto the CreditAgreement dated May 13, 1983)

A. Shelter

(i) Cancellationof North Bassateenupgrading in Cairo.

(ii) Cancellationof upgradingand sites and servicescomponents in Alexandria.

(iii) Cancellationof loans for buildingmaterials in all upgrading and sites and servicesschemes.

B. Solid Waste

(iv) Cancellationof the pilot composting plants in Cairo and Alexandria.

(v) Redefinitionof the compostingplant in Cairo to a capacityof 160 tons/day.

(vi) Inclusionof a compostingplant in Alexandriawith a capacity of 160 tons/day.

C. EmploymentPromotion Services

(vii) Cancellationof the entire component including credit and technical assistance to small business and vocational training.

(viii) Ratificationof the withdrawalfrom the projectof the NBE and terminationof the subsidiary loan agreement between the Borrowerand NBE. - 30 -

Annex A Page 4 of 4

D. Rehabilitationof Water Supplyand SewerageSystems in Assiut

(ix) Cancellationof the originalrehabilitation program.

(x) Inclusion of the construction of off-site sewer pumping stationand sewermain to serve the sites and servicesscheme.

E. TechnicalAssistance

(xi) Cancellationof consultant and advisory services to assist the LIHF and ratificationof the abolitionby the Borrowerof the LIHF.

(xii) Inclusion,under 'preparationof furthoirurban development projects"of consultancyto preparea solid waste management project. /1~~~~~~~~~~~ 5

USAID PROJECT ASSISTANCE FOR URBAN INFRASTRUCTURE AND SHELTER IN EGYPT- (in US$ thousands) Cumulative Comitment Expenditures through Start Date Comp. Date Project Title 06/30/86 Sep 77 Sep 89 Urban Power Distribution 42,654 97,200 Sep 77 Sep 86 Cairo Water Supply 7,944 91,400 Sep 77 Jan 84 Alexandria Sewerage System 14,639 14,b39

Sep 78 Feb 87 Canal Cities Water & Sewerage 146,010 169,000 Aug 78 Mar 87 Development Planning Studies 19,952 22,800 Sep 78 Sep 88 Cairo Sewerage 99,587 129,000 Aug 78 Aug 88 Low Income Housing Upgrading 50,570 80,000 May 78 Jun 87 Development Decentralization 26,190 26,200

Aug 79 Aug 89 Alexandria Wastewater Expansion 59,857 198,621 Sep 79 Mar 85 Sinai Planning Studies 2,688 2,688

Aug 80 Jun 87 Basic Village Services 69,684 70,000 Sep 80 Jun 87 Decentralization Support 48,652 50,000

Sep 81 Aug 86 Provincial Cities Development 16,183 20,000 Aug 81 Jun 87 Neighborhood Urban Services 19,936 20,000

Aug 82 Sep 89 Basic Vitlage Services 234,295 374,000

Sep 84 Sep 94 Cairo Sewerage II 4,286 360,300

Jul 85 Jul 90 Water & Wastewater Systems Human Dev. - 5,000 Sep 85 Jul 89 Local Development II - 61,000

Subtotal Urban ...... 863,127 1,791,848

All Project Assistance to Egypt ...... 2,912,535 4,393,143

Source: USAID, Egypt - Project Listing as of June 30,1986. Note 1: Excludes telecomriunications, industry, banking, private sector credit, training, general technical assistance, health and educational services. IIV

P, q

[:in

iti M1.I . - 33 -

PROJECTCOMPLETION REPORT EGYPT:FIRST URBAN DEVELOPMENT PROJECT (CR. 831-EGT)

I. INTRODUCTION

1.01 In 1977, at the time of project identification,Egypt's population comprised approximately 37 million people, with 42 percent (17 million) of them living in urban settlements of more than 20,000. Greater Cairo was (and still is) by far the larg st center with about 8.5 million people or approximately one-half of che urban total. Egypt's overall population growth rate was about 2.3 percent per year but the urban population was expanding at nearly double that rate. Roughly 31 percent of its urban population (5.3 million) were poor with incomes below the World Bank poverty threshold of LE 383 (US$547) per household per year.

1.02 One consequence of rapid urbanization was a severe shortfall in urban housing and services; moreover, both public and private investment in housing was steadily declining--from 25 percent of national investment in the 1950's to less than 10 percent in the 1960's-due mainly to a precipitous decrease in formal private investment. The number of formal sector housing units built therefore declined from approximately seven units per 1,000 population per year to about 2.5 units. These outcomes were largely the result of two government actions: (i) a rent control policy that deterred private investment, and (ii) a public housing program that, while limited in scale, drained a disproportionate amount of public funds relative to the number of households served because of overly high building standards and the practice of the public sector providing fully-built housing units. In this milieu, the urban poor largely resorted to informal construction through self-help on unserviced land, without obtaining the required building permits. At the time, it was estimated that perhaps as much as one-half of all private housing construction in Egypt was taking place in the informal sector. Such housing generally was of good quality, with efficient site layouts and adequate rights of way. The major problems facing residents in these areas were lack of secure tenure (since they were built illegally) and inadequate or no services.

1.03 The Government of Egypt (GOE) was keenly aware of the scope and severity of its growing urban problems and so began to revise urban policies within the framework of an overall economic development strategy and liberalizationprocess. Initiatives focused on redirecting growth away from Greater Cairo to areas that would not encroach on agricultural land. In 1976, to squarely meet the housing issue, the GOE created a Low-Income Housing Fund (LIHF) within the then Ministry of Housing and Reconstruction (MOHR) specifically to help finance housing for the urban poor. By early 1977, the GOE also decided to initiate a program of comprehensive low-cost sites and services and area upgrading schemes. The IDA project as originally conceived represented the first phase of that program. - 34 -

II. PROJECTIDENTIFICATION. PREPARATION. AND APPRAISAL A. Identification

2.01 IDA's involvementin the urban sector in Egypt began in February1976 with a preliminaryexamination of urbanizationpatterns in preparationfor a Basic EconomicMission. Followingan initialvisit, the Associationundertook a reconnaissancemission in October 1976 to describeto governmentofficials its policyapproach to urban sector development,the nature and focus of IDA supportedurban projectsin the housing field, and to assess the GOE's level of interestin developingsuch a projectwith IDA financing. Subsequently, the MOHR expressedinterest in an urban projectwithin the general framework the Associationhad presented.

2.02 The projectwas conceivedas multifaceted,addressing sites and services,slum upgrading,community services, and employmentgeneration for lower-incomefamilies, all of which dovetailedwith GOE objectivesin these areas. Three citieswere chosen, two of which were secondary(Alexandria and Assiut)and the other primary (Cairo). Cairo and Alexandriawere selected becauseof their concentrationand intensityof urban problemsand Assiut becauseof its locationin Upper Egypt,and because it representeda wide range of small- to medium-sizedcities. The project thereforepossessed the potentialfor an important"demonstration" effect, since componentswere to be implementedin the capitalcity, a delta city, and a city in Upper Egypt.

B. Preparation

2.03 The projectwas preparedduring 1977 by a specialProject Preparation Unit in the GeneralOrganization for PhysicalPlanning (GOPP) in MOHR, assistedby consultantsfinanced through an IDA advance from the Project PreparationFacility (P?F).

2.04 Becausegovernment officials were unfamiliarwith the many aspectsof implementinga projectof this type, preparationproceeded at ; pace slower than originallyenvisaged. Initiallypreparation focused on site selection, planning,and engineering. The other criticalareas of heusingdesign standards,cost recovery,and implementationarrangements were given only summaryattention. The projectwas later scaleddown, and the number of sites to be developedreduced by two, from eight to six. To redress the deficienciesin projectpreparation and to deal with some sensitiveissues, additionalconsultants were subcontractedto study the institutionaland financialaspects of -theproject as well as the solid waste components.

C. Apiraisaland Negotiations

2.05 Appraisalwas undertakenin December1977 on the basis of (i) preliminaryengineering designs for two of the projectsites; (ii) conceptual designsfor the third site in Cairo; (iii) draft layoutsfor the sites in Assiut and Alexandria;(iv) draft Terms of Reference(TORs) for employing consultantsto undertakedetailed designs and studies;and (v) job descriptionsfor key posts in the implementingagencies. - 35 - 2.06 Negotiationstook place in Washingtonbetween the Associationand the GOE from May 10 to May 13, 1978 and in Cairo with the respectivegovernorates from May 20 to May 21 of that year. Negotiationswere completedin Cairo because the delegationin Washingtonhad not been empoweredto finalize the negotiationsin the form of Agreementsbetween the Associationand each of the three governoratesinvolve-.

2.07 Subsequentdifficulties arose in decidingon site suitabilityin Alexandria(para. 4.04), site boundariesand standardsin Assiut (para.4.12), and adheringto design standardsin Cairo (para.4.23). This suggeststhat more detailedengineering work should have been done prior to appraisal. The eventualsmall size of the project in Cairo, in comparisonto other capital investmentsin that city, stronglysuggests that if the institutional arrangementswere to be kept the same, the appraisalshould have been postponedto permitmore detailedpreparation of a prolectmore in keeping with the size of other city capitalinvestments. Instead,the projectwas scaleddown to permitan early appraisal. As it was, the projectnever receiveda high priorityin the respectivegovernorates (para. 5.10), which adverselyaffected the implementationprocess.

III. THE PROJECT

A. ProjectObiectives

3.01 The main projectobjective was to assist in developingand implementinglow-cost solutions to Egypt'surban problemsin the sectors of shelter,employment, and provisionof urban services,and especiallymaking the investmentsresponsive to the needs of the urban poor.

3.02 Other projectobjectives involved establishing and strengthening urban sector institutions,including the Low-IncomeHousing Fund (LIHF),its counterpart,the newly created (April1978) Low-IncomeHousing Development Unit (LIHDU),as well as the HandicraftIndustries and ProductiveCooperatives Organization(HIPCO) in the Ministryof Local Government.

3.03 As a modestly-scaledfirst demonstrationproject, the intent was to testley elementsof the GOE's urban policy initiativesin an efrort to lay the grour.dworkfor an expandedurban developmentprogram.

B. ProjectComponrnts

3.04 To meet the statedobjectives, the projectprovided for (i) upgrading of three low-incomesettlements in Cairo and one in Alexandria;(ii) development of about 4,600 servicedplots in South Metras in Alexandriaand South Gharb el Balad in Assiut; (iii) grantingloans for workshopsconstruction, equipmentand workingcapital as well as technicalassistance and trainingfor smallbusinessmen; (iv) introducinglow-cost, intermediatetechnology waste disposalsystems and improvementsin waste collection,especially in low-incomeareas, by expandingthe role of small private contractors (Zabbaleen);(v) urgent repairs to the Assiut Water Supply and Sewerage systems;and (vi) consultancyand advisoryservices for projectdesign and implementation,the preparationof future projects,and the strengtheningof LIHF and LIHDU. Annex I providesa descriptionof projectcomponents appraisedand actuallyimplemented - 36 -

C. ImplementationArrangements

3.05 Projectcomponents were to be implementedlargely by existing institutionswithout major organizationalchanges; however, a new organization,the LIHDU,was establishedto coordinateimplementation activities. LIHDU also was to advise and providetechnical assistance to the agenciesresponsible for low-incomehousing projects on all aspectsof project design,construction, operation, and maintenance,including employment generation,beneficiary selection, staff training,and performancemonitoring.

3.06 Organizationaland staffingthe governorateswere presumedadequate, althoughthere was a clear need to strengthensome departments. The General Secretariesof the governoratesof Cairo and Assiut and the Assistant Secretaryof the AlexandriaGovernorate were to be given primary responsibilityfor implementation,while the key coordinatingrole in each governoratewas to be given to a low-incomehousing projectofficer designated to be exclusivelyconcerned with this type of projecton a full-timebasis. This officerwas to be responsiblefor coordinationwithin each governorate and with LIHDU. Each departmentwas also to nominateone officer to have specialresponsibility for low-incomehousing schemes. The Social Affairs Directorate.were presumedto need at least three additionalsocial services officerswith special responsibilityfor low-incomehousing schemes. The Directorsof Cooperation,who also had specialemployment and training responsibility,were also expectedto appointat least three suitablestaff membersto liaisewith the socialworkers and the Undersecretaries(or Directors)of Housing. In Alexandria,a strongcentral unit was to be establishedto deal with the solid waste component.

3.07 The LIHF was expectedto play a key role as the intermediaryfor on-lendingIDA and GOE funds to the governoratesand the other implementing agenciesand in the futuredevelopment of housing in Egypt. LIHDU was to play a parallelrole in the areas of programdevelopment and implementation advice. Projectfunds, therefore,were providedto strengthenthese agencies.

3.08 The GeneralManager of the LIHDU was appointedprior to and participatedin negotiations. Assuranceswere obtainedduring negotiations. that each governorate'ould appointthe low-incomehousing project officer by July 1, 1978. In retrospect-giventhe changesin the administrative structurein the CentralGovernment that took place soon after effectiveness, the abol;tionof the HousingFund (para.5.04) and decentralizationof its responsibilities,the staff changes,and the period of uncertaintyconcerning the fate and role of LIHDU-the detailedimplementation arrangements should have been incorporatedin greaterdetail in the legal agreements.

IV. IMPLEMENTATION

A. Effectiveness

4.01 The loan was to become effectiveDecember 1978, six months after approvalby the Board of the World Bank Group. It was delayedfive months, finallybecoming effective May 1979, the reasonsfor which were to permit (i) executionof the two subsidiaryloan agreementswith the LIHF and the National Bank of Egypt (NBE), (ii) subsequentratification by the People'sAssembly, - 37 - and (iii) issuanceof the requisitelegal opinion--all of which took longer than originallyanticipated. In February1979, the Ministryof Housing promulgateda MinisterialOrder formallyestablishing the ExecutiveAgency for Joint Projects(JEU) to be responsiblefor this and any other externally- financedhousing projects.

B. Start-UD

4.02 Start-upwas slow and the only eventsof significancebefore progress was arrestedwere the transferof funds from the JHP to the Assiut Governorate for land acquisitionand site preparationin June 1979. Proceduresfor the selectionof consultantsfor the solidwaste componentsin Cairo and Alexandriaby then were underwayas well.

C. Revisions

4.03 The projectas implementeddiffered greatly from the projectas appraised: some componentswere cancelledaltogether, others were significantlymodified, while some new ones were introducedduring implementation.Implementation responsibilities changed as well.

4.04 The followingcomponents, for which LE 5.7 millionhad been provided, were cancelledaltogether:

(i) The upgradingand sites and servicescomponents in Alexandria(LE 2.7 million)were dropped,since the subsoilof the South Metras area was found to be unsuitablefor conventionalconstruction. The area that was to be upgradedwas adjacentto the sites and servicesarea and both developmentefforts were integrallyrelated. Without the sites and servicescomponent, upgrading of the area's utilitieswould not have been possible. It was becauseof this that the upgrading componentwas also cancelled;

(ii) The urgent repairsto the water supplyand seweragesystems in Assiut (LE 0.6 million)were also cancelledsince the preparatorystudy indicatedthat the funds allocated(about LE 7 million)would only scratch the surfaceof the problem;l,

(iii) Work on t5e upgradingof the North Bassateensite in Cairo (LE 1.0 million)had been delayedfor some time due to staffingconstraints in JHP and the Cairo Governorate. By the time JHP visited the site to begin design work, the vacant areas within the site, on which the proposalhad been based, were fully developed. Therefore,this component--exceptfor the provisionfor solid waste collection servicesfor which LE 6,610 had been provided--alsowas deleted from the project;

1/ The comprehensiverepairs are being carriedout by the National Organizationfor PotableWater and SanitaryDrainage, in accordancewith the designsfinanced under the project. - 38 -

(iv) The provisionof Credit and TechnicalAssistance (LE 1.4 million) for small businessesand manpower trainingprograms was also deleted from the project. Initialapproaches were rejectedby the communities, based on an unwillingnessto participatein the programbefore receivingthe promisedinfrastructure. By the time the development was sufficientlyadvanced for effortsto be renewed,the National Bank of Egypt (NBE),which was to participatein the financingand implementationof the program,no longerwished to be involved;and

(v) Technicalassistance, originally intended to strengthenLIFU, was also deletedwhen the organizationwas abolished.

4.05 The followingchanges were implemented:

(i) Upgradingand sites and servicescomponents were modifiedto exclude credit for home constructionand improvementfor beneficiaries.This was becauseas late as December1982, the governoratesstill were unable to make the necessaryinstitutional arrangements to process loans for this purposeand did not foreseethe ability to do so in the near future. Besides,provision for the sites that were dropped entirely (see para. 4.04 (i) and (iii)),LE 0.5 millionhad been providedfor the sites that were developed;

(ii) The standardsfor some componentswere raised,notably for infrastructurefor the Zabbaleensite upgrading(costs increased from LE 0.8 to 1.6 million)and electricityfor the sheltercomponents (costs increasedfrom LE 0.2 to 1.5 million);and

(iii) The amount of leak detectionequipment to be purchasedfor Assiut was increasedfrom LE 2,130 to LE 11,950when the consultancystudy financedby the projectshowed that the deteriorationof the network was much more extensiveand funds providedfor major rehabilitation works were inadequatefor the originalpurpose.

4.06 Funds originallyintended to financecancelled components were used to financethe followingnew components:

(i) The developmentof a 160 ton per day compostingplant in Alexandria; (ii) Off-siteworks for the sites and servicesdevelopment in Assiut; and (iii) Preparationof a Solid Waste ManagementProject.

4.07 The followingchange was made to the implementationarrangement for the project:the LIHF, which was to play a key role as a financial intermediaryin projectimplementation and programdevelopment, was abolished and its financialintermediation role in projectimplementation was assumed by the JHP. However,the JHP could not play the same long-termrole in program developmentas that envisagedfor LIHF.

4.08 The DevelopmentCredit Agreement was amended in May 1983 to effect these changes,thereby streamlining the project. The closingdate was extendedby two years in two phases,with the secondextension conditional on improvedimplementation of remainingcomponents. - 39 -

4.09 These changesseriously compromised achievement of projectgoals for institutionaldevelopment, in that (i) followingthe abolitionof the LIHF, the projectno longer supportedthe long-termdevelopment of a housingfinance institution(see para. 5.05 (iii));and (ii) the cancellationof the credit and technicalassistance component for small businessdevelopment meant that the projectno longerpromoted employment creation. TechnicalAssistaice, Training,and Studiescomponents were implementedas planned,except those relatedto cancelledproject components.

4.10 Projectobjectives less seriouslycompromised were related to demonstratinglow-cost alternatives to solvingproblems of shelterand urban services. With regard to shelter,although the number of projectsites was reducedfrom six to three,one site of each type was retained. Upgradingwas undertakenon two sites with entirelydifferent prior developmentand serviced sites were developedelsewhere. A comprehensivesolid waste management program (fromcollection through recycling stages) was also developed.

D. Progressof Civil and BuildingWorks

Completionof Designsand Preparationof Bid Docu.ents

4.11 The progressof initialnetwork extensions and communityfacilities in the MansheitNasser Main Settlementproceeded relatively smoothly, since this componentdid not dependon the preparationof detaileddesigns by the JHP. The network extensionswere elaborationsof the existingsystem and had been indicatedclearly on the layoutsprepared by the consultants. Standard plans were used for the communityfacilities. Yet, despite this early start, the tenderingprocess began almost 1 1/2 years later than originallyplanned, due to the unrealisticschedule 3nd insufficientadministrative capacity.

4.12 There were several factorswhich caused delay in the sites and servicesand upgradingcomponents. The completionand approvalof final la,outdesigns proved time-consuming.At Assiut, the site layouthad to be redone,since the boundariesfor the site finallyacquired did not correspond to those of the appraisedlayout. The revisedfinal layoutwas not agreed until four other alternativeshad been reviewedand turneddown by either the Association,the Governorate,City Council,or the JHP. The proposal eventuallyaccepted provided for one-roomcores on all residentialplots insteadof the 22 percentagreed at appraisal,with a cross-subsidyprogram that would raise the necessaryadditional funds. Followinga changeof governors,the developmentthat was to have been undertakento cross-subsidize the cost of the additionalcores was cancelledby the new governor. The proportionof plots with cores was thereforereduced to about 13 percent.

4.13 In North Bassateenonly sketch layoutswere availableat appraisal, and no furtheraction was taken pendingJHP's acquisitionof sufficientdesign capacity. By the time JHP visited the site to start work in March 1981, the formerlyvacant areas, on which the projectproposal was based,were fully developed. The componentwas thereforedeleted from the project (para.4.04 (iii)).

4.14 JHP also originallyintended to prepare the:plansfor the Zabbaleen Settleme-itusing in-housestaff, but very littleprogress was made and in December1980, they decided to have the job done by a consultingfirm. The - 40 -

contractfor this was signed in October 1981, but it was June 1983 (20 months later)by the time the detaileddrawings were finished.

4.15 In January1982, the contractfor the designof the Masheit Nasser ZabbaleenSettlement was extendedto cover work on tho Main Settlementas well. The work to be done for the Main Settlementincluded the planningof the whole area and the detaileddesign, as well as contractpreparation for developingthe vacant lands. However,cadastral surveys had to be completed beforedetailed plans for the total area of the Main Settlementand the final designsfor the vacant areas could be prepared.

4.16 Numerousbureaucratic procedures were set in motion to obtain a commitmentfor the cadastralwork to be done by the EgyptianSurvey Authority. The contractfor this was signed in June 1981 and expectations were that the job could be finishedin 11 months; it took 32 months instead. This delay was causedby difficultiesin coming to an agreementabout the incentivesto be paid to the staff of the SurveyAuthority by the JHP for this work, and the complicatednature of the work, which had been underestimated. Althoughtechnically the consultantscould have proceededimmediately with preliminarydesign work, they preferredto wait for the cadastralmaps, which fortunatelywere deliveredin stages. This, however,caused a further scheduledisplacement. Hence, the final planningwas not completeduntil *id-1983.

4.17 The qualityof the work producedwas less than satisfactory. The quantitiesin the ZabbaleenSettlement were inaccurateand led to substantial cost overrunsduring construction. The designsand drawingsfor the Main Settlementalso were insufficientfor implementationand left many problems to be solvedon site. It shouldbe noted however that the fees paid to the consultants,based on the appraisalestimate, were quite low in relationto the amountof work they were requiredto do.

Construction

4.18 Contractson the initialextensions to the sewerageand electricity networksin MansheitNasser were let in mid-1980with six-monthcompletion schedules,but took approximatelyone year to complete,due mainly to inadequatecoordination. The water supply contractwas let early-in1981 bat approximately31 months passedbefore completiondue co the rocky nature of the soil at the site, the limitedcapacity of the contractor,and inadequate supervision,Work on vacant sites (that had to await preparationof cadastral mps, planningand design)did not commenceuntil January1984. The contract for this phase covered infrastructurefor vacant lots in the MansheitNasser Main Settlementand the ZabbaleenSettlement as well as road surfacing in the Main Settlement. This integratedcontract is being completedwith fewer problemsthan the earlierones, and completionis expectedby the end of June 1985 (AnnexIV).

4.19 In Assiut,where work was also awarded in small individualcontracts, delaysexceeding one year also occurred. Contractsfor infrastructureworks -and the constructionof 293 cores were successfullycompleted. However, two contractsfor 400 and 297 cores had to be terminatedafter only 70 were built due to the poor performanceof the contractorto whom both contractshad been awarded. -41-

4.20 Using standarddesigns, bid documentswere preparedfor community facilitiesin MansheitNasser in 1980. Work began in early 1981 but completionis not expecteduntil the end of 1985. The excessivedelays were causednot only by the problemsof contractorcapacity and poor supervisions which plaguedthe infrastructureworks, but also by shortagesof building materialsand lack of on-sitewater, pending the completionof the extension to the water supplynetwork late in 1983. Completionof the other building works under the project,including the core houses in Assiut,also was delayed when the-use of Nile silt for brickmakingwas banned,and work on the housing units had to be suspendedwhile they were redesignedto minimizethe use of brick.

4.21 Overallthe designand constructiorphases were slow and excessively drawn out. The majorityof works were divided into small single-element packagesand awarded to small contractors. Because there was no strong complementarysupervision to ensure high qualitywork and timely implementation,the resultswere not very satisfactory,i.e., the qualityof the constructionwas poor and some of the contractshad to be terminatedfor failureto perform. The latter use of a comprehensivegeneral contract coveringall infrastructuralelements for site developmentattracted larger companiesand work now is being carriedout satisfactorily.

As-BuiltStandards

4.22 One of the major objectivesof the projectwas to test the idea that developmentstandards should be based on levelsaffordable to low-income targetgroups and that costs could be recoveredfrom those groups to permit the financingof other such developments. The standardsfor shelter developmentestablished at appraisalwere based on these concepts.

4.23 The standardsused were revisedupwards for three reasons: (i) JHP as coordinator,had no authorityover the governorates,the GeneralOrganization for PotableWater, the GeneralOrganization for Sewerageand Sanitary Drainage,or the electricitycompanies which all had their own established standardsand proceduresupon which they insistedas they would ultimatelybe responsiblefor the maintenanceof the facilitiesbuilt; (ii) the loss of continuityof staffingresulted in the loss of much of the project - documentation;and (iii) the studiescarried out by the consultantsappointed for the planningof the MansheitNasser Main Settlementshowed that, to develop the four vacant sites for the futureconstruction of community facilitiesneeded in the aiea, heavier investmentswere requiredin the utilitynetworks (e.g., sewage lift stations). Designs were thereforebased on traditionalpractices and futureneeds rather than the affordability criteriathat had been used at appraisal. In Cairo, the extent and hardness of the rock in the MansheitNasser sites also did not lend itself to the constructionof cesspits. Also, when the Governorateof Cairo believed that inadequateprovision had been made under the project,notably for the sewerage system,it simplyaugmented the project interventionwith its own funds, independentlyof the projectand the JHP. These costs are includedin the revisedproject ( st tables,although the work was never sanctionedor disbursedagains by the Association.

4.24 Thp I sing of standardswould benefit the upgraded settlement' -- allow a more logicalexpansion and future developmentof - 42 - these areas. Furthermore,the consultants'findings were that the increased standardswould not be unaffordableto the beneficiaries.The electricity networks,which had to be carriedout in conformitywith the requirementsof the EgyptianElectricity Authority, were built to much higher standardsthan necessaryfor the purposesof this project.

E. Solid Waste Managementand Disposal

4.25 The consultantsemployed to providesolid waste managementadvisory servicesundertook basic analysesof the situationin Cairo and Alexandria. In the courseof their work, they assessedthe capacityof the privaterefuse collectors(Zabbaleen) to extend their servicesto cover largerportions of the city; analyzedthe volume and contentof the city's solid waste; and estimatedthe market for recycledproducts that could be sorted from the waste. On the basis of these studies,the governoratesnegotiated the extensionof refuse collectionservices by the Zabbaleento cover a larger proportionof the city. Fees for such servicesare paid directlyto the Zabbaleenby the residentsof the newly served communities,which includethe MansheitNasser Main Settlementand North Bassateen. Where collectionby the Zabbaleenwas not feasible,the consultantsintroduced a systematicapproach to replacethe formerad hoc city service,e.g., route planningand establishingcollection districts.

4.26 The design of the full-scalecomposting plants for Cairo and Alexandriawas based on detailedanalyses of the refusecollected and other factors,such as the market for compostand recycledproducts. The plants constructedwere more mechanizedthan originallyconceived, since each includeda homogenizingdrum, mechanicalequipment for formingthe windrows, and screensfor producingfine compost. Site specificationsalso had to be adaptedbecause the bitumensurface originally specified was found to be unsuitabledue to the hot Egyptianclimate. The compostingyards were made of concreteinstead. The increasedlevel of mechanizationand the fact that more time had elapsedbefore reachingthe tenderingstage meant that the funds set aside were inadequateto cover the cost of the Cairo plant. The capacityof the plant was then reducedtrom 200 tons per day to 160 tons per day. The same specificationswere subsequentlyused for the Alexandriaplant when the decisionwas made to constructsuch a plant there insteadof undertakingsites and servicesand upgrading.

4.27 The plants in Cairo and Alexandriawere procuredon the basis of turnkeycontracts let throughinternational competitive bidding. Both suppliers/contractorsperformed well and the plantsare operatingas planned. Recently,a solid waste managementproject was appraised(February 1985) to extend the solid waste systemsestablished under this project in the cities of Alexandriaand Giza.

Results

4.28 In the Zabbaleencommunity--where insecurity cf tenure had been very high and where there were virtuallyno services--theproject had a strikinz catalyticeffect triggeredby an increasedsense of-security generated by the projectactivities taking place throughoutthe area. The Association's effortsstimulated the participationof-Non-Governmental Organizations (NGOOs) wthofinanced the constructionof cormnunityfacilities and complementary - 43 - activities,such as house constructionand improvementand businessloans; the strengtheningof communityorganizations; and educationalprograms to foster properuse of the new sanitaryfacilities. The communityitself conducted clean-upcampaigns to improvethe appearanceand cleanlinessof their communityand investedsignificant amounts of their own funds on home improvementand businessinvestments.

4.29 The MansheitNasser Main Settlementgrew at a rapid pace and the qualityof the existingas well as new structureswas greatly improved. Prior to the project,the communitywas characterizedby predominantlysingle-storey structuresbut now it is dominatedby structuresof three to five storeys. Ito is difficultin this case, however,to identifythe extent to which this was a resultof the project,since the growth dynamicappears to have been strong before the projectgot underway.

4.30 In Assiut, demand for the core units appears to be very high, as some 4,000 applicationswere receivedwhen applicationswere invitedfor the purchaseof 1,000 core units (about3,000 of the 4,000 applicantswere in the targetgroup earning less than LE 100 per month). At the time of the PCR mission,qualified applicants were being ranked for inclusionon the basis of criteriaestablished by the City Counciland Assiut Governorate.

4.31 The cancellationof the material loan programsdoes not appear to have had an adverseeffect on the achievementof projectobjectives in Cairo, since it has been replacedby an NGO-financedprogram in the Zabbaleen Settlementand by worker remittancesin the Main Settlement. The effect in Assiut is less easily assessedbecause the plots there have yet to be allocated.

F. Non-PhysicalAspects of the Project

4.32 At appraisal,detailed draft TORs acceptableto IDA and the GOE had been preparedfor all servicesexcept (i) the servicesof the project implementationadvisers; (ii) the schemes to improvesolid waste collection and disposalin Cairo and Alexandria;and (iii) trainingfor project implementationstaff.

4.33 Finalizationof the TOR's and selectionof consaltantswas a lengthy processthat involvedparticipation by aenumberof agenciesbesides the JHP. The contractfor The ArtisanSector Study was not signed dntil late July 1981 and the contractfor the Study of TrainingNeeds of Seven Governorateswas signeda few months thereafter(Annex IV).

4.34 Cost overrunsthat might have resultedfrom the delays were avoided by reducingthe scope of work as well as by the GOE's agreementto provide additionalinput. The net result was a compromisein the achievementof objectives,since: (i) inputs from the GOE were less than expectedby the consultantsand generallywere not providedon time; (ii) this, in turn, did not foster the developmentof client/consultantrelationships that mignt have maximizedthe benefitsderived from the studies;and (iii) the various reductionsin scope did not vermit in-depthanalyses to be carriedout. Furthermore,the consultantsselected were not familiarwith the country,and GOE reviewwas conductedby especiallyappointed committees, that were not alwaysquickly constituted. There were also long delays in the respective -44.- com ittee reviewsof consultantreports. The ArtisanSector Study was also initiallyhandled by an ineffectualmanager who did not oversee the project well and had to be replaced. Althoughthe work was bettermanaged thereafter, deficienciesin the data base were reflectedin subsequentstages. Then, the TORs for these studieswere very broad and interpreteddifferently by the clientand the consultants,and this resultedin severalredrafts of the final reportsbefore the studieswere acceptableto the client.

4.35 Despite these problems,the studiesdid providea useful framework for strategiesto promotethe developmentof the artisansector and to launch a trainingprogram in the governorates. They currentlyare being used to seek funds for such programs.

4.36 The GamalivaStudy focusedon the preparationof a possiblefuture upgradingproject in an area of great historicaland culturalsignificance that was densely settled. Agreementon the TORs thereforeinvolved lengthy discussionsof the best strategiesfor undertakinga study in such a nationailyimportant area. Agreementwas reached that the study financed under the projectwould be carriedout by Egyptianexperts in the fieldsof urban development,as well as Islamicarchitecture and history under the umbrellaof a public sector consultingfirm and reviewedby an international blue-ribbonconittee. Becauseof the project'ssensitive nature, involving prominentindividual experts, the negotiationsfor the study were protracted. The draft backgroundreport completed under this projectwas not adequatefor presentationto the blue-ribboncommittee and is being modified. Additional work on the study also will be carriedout under the GreaterCairo Urban DevelopmentProject (Ln 2176-EGT).

4.37 The advisoryservices that would have been providedto the LIHF were cancelledwhen the LIHF was abolished. TORs for the project implementation advisoryservices would have been draftedafter the ImplementationUnit's staff was appointed. Followingthe administrativechanges (para.5.04), advisorsfinally were appointedto assist the JHP but not until early 1980.

4.38 Trainingwas providedin the-areaof urban project planning management,and implementationas well as artisanproduct development and promotionfor officialsof the agenciesdirectly involvedin project implementation.For example,the Chairmanand Deputy Chairmanof JHP, the DeputyGovernor of Cairo and the Presidentof the Assiut City Councilattended short trainingseminars on Urban Developmentand Large-ScaleHousing Projects in the U.S.A.; two seniorengineers from JHP and one from Assiut attended five-monthtraining programs at the Institutefor Housing Studiesat Rotterdam;the Chairmanof HIPCO carried out a study tour of artisan institutionsin Spain,Holland, and Denmark;eleven senior officials(seven from HIPCO and one each from the governoratesof Cairo, Alexandria,Assiut and Damietta)attended a speciallydesigned three-weektraining course in the managementof the artisansector at the Training Instituteof the InternationalLabor Organizationin Turin, Italy. Staff responsiblefor operationand maintenanceof the compostingplants in Cairo and Alexandria receivedtraining at the head officesof the suppliersas well as on-the-job trainingduring erectionand commissioningof the plants. - 45 -

G. Procurement

4.39 In December1981, the local cowpetitivebidding limit for civil and buildingworks was raised to US$1.5 million equivalent,while the limit for equipmentwas raised to US$150,000equivalent with a ceilingof US$1.5 million equivalentto take into account the effects of inflation. All civil and buildingworks contractsunder the projectwere below the limit established for internationalcompetitive bidding. Contract packagingpractices also changedduring implementation.During start-up,separate contracts were let for each infrastructuralelement- and this aggravatedproblems of coordinationand contractsupervision capacity; during the later periodof implementation,and upon completionof the detaileddesigns by the consultants,work was let under larger,more integratedcontr.acts, attracting larger,more competentcontractors. Internationalcompetitive bidding was used to procurethe compost plants in Cairo and Alexandria. All contracts attractedcompetitive bidding and fully compliedwith the provisionsof the CreditAgreement.

H. Disbursement

4.40 As shown in Table 2, no disbursementswere made during the first three years, duringwhich time the Borrowerwas finalizingdesigns and preparingbid documentsand TORs. After that, disbursementsaccelerated rapidlyand by year 8 were close to regional,sectoral, and countryaverages.

I. Compliamcewith Covenants

4.41 The most seriousdeficiencies in compliancewith covenants,which had the most harmfuleffects on the project,were the abolitionof the LIHF and the failureof the governoratesto appoint full-time,low-income housing officers. Taken togetherthey adverselyaffected project implementation and compromisedthe achievementof long-terminstitution building goals.

4.42 Auditedaccounts acceptable to IDA for 1980 through1983 were receivedin mid-1984. At the time of the ProjectCompletion mission, 1984 accountswere being preparedfor audit and were not yet due.

4.43 Regularquarterly reports were receivedthroughout the project period. Althoughthey satisfiedthe credit covenant,they were not used for internalmanagement purposes by the JHP.

V. INSTITUTIONALPERFORMANCE AND DEVELOPMENT

A. InstitutionalContext

5.01 At the time of projectidentification, Egypt was going througha decentralizationprocess within which powersand responsibilityfor policy formulation,planning, implementation and administrationwere transferredfrom the central to the local level. Major legislationto effect this processhad been passed in 1975, 1977 and 1978. At the same time, the GOE was formulating l/ Separatecontracts were awarded for water supply,sewerage, and road construction,each supervisedby a differententity of the governorates, with no coordinationand considerableinterference in each other'swork. p._ - 46 - new policiesand creatingnow institutionsfor addressingthe previously neglectedarea of low-incomehousing development. A new institution,the LIHF,was establishedin 1976as partof the process. 5.02 Duringproject preparation, the Associationrecognized the complexity of the institutionalframework and gave priorityto analyzingit. The implementationarrangements agreed at appraisalmirrored the existingset-up and tookthe decentralizationinitiatives into account. Primary implementationresponsibility was placed at the local level with coordination and technicalsupport from the center. All projectcomponents were to be implementedby existinginstitutions without major organizationalchanges. The only changesenvisaged were (i) the creationof a new post in each of the governorates,that of Low-IncomeHousing ProjectOfficer (LIHPO),and (ii) strengtheningdepartments within the governoratesby augmentingtheir staff (para.3.06).

5.03 These arrangementsmight have been satisfactoryif (i) it not been for administrativechanges coupled with the passaG,eof new legislation occurringalmost immediatelyafter projectapproval and negotiations,and (ii) a more realisticimplementation schedule had been drawn up; and (iii) the size of the projectelements had been relatedto the size of other investments of the implementingagencies responsible for their implementation.Certain deficienciesin the arrangementare worth noting: (i) the governorates,which were given primaryresponsibility for project implementation,were not fully involvedwith the projectpreparation phase; (ii) the projectwas excessively ambitiousin that it tried to demonstratenew approachesin severalsectors in three differentcities, was to be coordinatedby a newly created institution that had not yet hired its staff, and was not yet at the detaileddesign stage. In retrospect,it was also unrealisticto expect the project to be completedin 3 1/2 years, as illustratedby disbursementrecords (Table2).

5.04 Betweenappraisal in December 1977 and negotiationsin May 1978 the followingchanges occurred: (i) in January 1978, as part of the devolution process,the governorateotook full control of all local technicaland administrativestaff, includingthose appointedby the Ministries;and (ii) in May 1978, the MOHR, under which the projectwas prepared,was divided into two ministries--theMinistry of Reconstructionand New Communitiesand the Ministryof Housing."' The decisionto locate the LIHDU in the Ministryof Housingwas not taken until severalmonths after this change. In June 1979, new legislationwas enacted to speed the devolutionprocess that among other things,dissolved the LIHF and transferredits responsibilitiesto the governorates, This left the projectwithout a conduitfor projectfunds until December1979, when this responsibilitywas transferredto the JHP (of which LIHDU was a part).

5.05 The direct effectsof these changeson the projectwere to: (i) break up the policymakingand technicalteams that preparedthe project; (ii) create periodsof uncertaintyduring which members of the implementationunit were unsure of their eventualroles and those who were not yet activelyinvolved with the projectdid not see any progress;and (iii) lose an opportunityfor

:1/ These were later recombf.nedinto the Ministryof Reconstruction,Land Reclamationand State Ministryfor Housing,only to be split again in 1984 into the Ministryof Reconstructionand New Communitiesand the Ministry of Housingand Public Utilities. - 47 - the projectto contributeto the developmentof complementaryfinancial and technicalinstitutions that could work togetherto develop and implement low-incomehousing policies and programs. Indeed,the main institution(JHP) that remainedfor the Associationto work with was geared towardsforeign donorsand hence was not integrallylinked to housing sector institutionsin Egypt. An indirecteffect was gradualstaff attritionof those assignedto projectsin the governorates,which occurredduring the periodsof uncertainty when staff were inactive. By the time some of the staff were reassignedand new personsrecruited, much of the institutionalmepory of the projecthad been lost, as most officialsassigned to the projectwere not involvedin the initialproject preparation phase. This was particularlytrue in the governoratesof Cairo and Alexandria.

5.06 A furthercomplication was that during this perioda decentralization process took place within IDA, in that the operationalresponsibilities for the urban sectorwere transferredfrom the (then)Central Projects Department to the ProjectsDepartments under the siy.Regional Vice-Presidents. Between appraisal(December 1977) and mid-1980,the IDA team assignedto the project completelychanged.

5.07 Then, too, projectconcepts were new to Egypt and most team members workingon the projecthad not been involvedwith the preparation. Furthermore,very few members of the implementationteams in JHP or the governorateswere fluent in English,yet Arabic translationsof the Staff AppraisalReport were not preparedto meet this need; also, none of the membersof the Bank'smission teams betweenAppraisal and October 1982 spoke Arabic,so they could only communicatedirectly with a limitednumber of officials. This significantlycontributed to insufficientunderstanding by the Egyptianofficials of project conceptsand details relatedto standards and implementationarrangements, which might have enabledsmooth implementationto take place. On the Association'sside, there was a correspondinginsufficient understanding of the institutionaland cultural frameworkin Egypt that could arise to hinder progress.

5.08 Subsequently,recruitment and retentionof competentstaff were difficultbecause of low salariespaid by the publicsector. This-problem persistedthroughout the implementationperiod. As of May 1985, when the situationwas reviewed,an engineerjoining the privatesector startedat LE 150 per month, whereashis counterpartin the public sectorstarted at LE 60-75 per month. The discrepancywas found to be even greater for experiencedengineers. Engineerswith 15-years'experience were receiving less than LE 200 per month in the public sector,while their privatesector counterpartsreceived about LE 1,500. The conditionsof serviceallcwed public sectorprofessionals such as engineersto forfeita small percentageof their salariesand to undertakework privately. Althoughsuch work was to be done outsideofficial working hours, this apparentlywas not always the case.

B. InstitutionalPerformance

5.09 The solid waste managementcomponents were to be handledby special units within the zovernorates(the nuclei of which alreadyexisted), assisted by consultants. The consultantswere identifiedand appointedearly. Few problemswere encounteredwith implementation,since this was similar to the type of operation(with clear technicalissues and solutions)for which the governoratestraditionally received assistance from the centralgovernment to - 48w48 - perform;furthermore, the consultantsselected by the Cairo Governorate,who also subsequentlydid most of the generalstudies, proved to be very competent.

5.10 Managementof the sheltercomponents was more difficult. The governoratesnever appointedthe LIHPO's (as had been agreed at appraisal), nor did they appoint the additionalstaff for their Social Affairsand CooperativeDirectorates. In Assiut,both the presidentof the City Council and the projectengineer had been involvedwith project preparation,and the projectwas accordedhigh priorityat the City Council level;however, only one staff member, the enginper,was assignedto the projectfull-time. The presidentof the Council himself liaisednot only with councilmembers but also with the AlexandriaGovernorate and JHP. In Alexandria,there was a completestaff turnoverbetween appraisal and mid-1980,and no staff member was ever given full-timeresponsibility for the project. For the shelter components,prior to their cancellation,supervision by the Associationand coordinationby the JHP were very difficultbecause of the diffusenature of responsibilities.The situationin Cairo was even worse. The tasks there were sharedby a much largerbureaucracy (about 160,000employees in 1985) within which the projectobjectives and processeswere not well understood; thus the projectwas treatedperfunctorily as simplya small-scaleinvestment of LE 6 millionover eight years in a contextwhere annual capital expendituresamounted to LE 150 million (1983).

C. InstitutionalDevelopment

5.11 The ExecutiveAgency for Joint Housing Projects(JHP) had been createdby the GOE to coordinatethe implementationof this projectand to directlyimplement a US$160-million,U.S. Agency for InternationalDevelopment (USAID)-financedproject, which was also identifiedabout the same time. The LIHDU,a unit of the JHP, was concernedsolely with the implementationof this project,but was unable to concentrateon start-upactivities assigned to it, since *ts first concernhad to be the hiringand orientationof staff. By January1980, the unit had six full-timeprofessionals and shared the services of technicaland social researchunits of the JHP. An internalconsultant was hired soon thereafterto assist witt.project implementation and trainingof the rest of the7staff. The staff wao subsequentlyaugmented- by the addition of four other full-timeprofessionals plus part-timeconsultants. Unfortunately,staff workingon the IDA projectwere at a disadvantage relatiP-eto their colleaguesassigned to the USAID project,since the latter were providedmore attractiveincentives and considerablymore supportfrom independentconsulting firms. The staff of the IkA projectalso were frustratedby the limitationof their role to coordinationonly, whereas their USAID colleagueshad direct implementationresponsibility. Despite these constraintsand the widespreaddisincentive of low public sector salaries, performanceof the JHP was satisfactoryin that the staff of JHP often went beyond the confinesof their officialduties as coordinatorsand advisors to compensatefor deficienciesat the governoratelevel. In January 1983, when there was a major changeof personnelat the Cairo Governorate,the JHP, at the suggestionof an IDA mission,proposed that it relieve the Cairo Governorateof its implementationresponsibilities, especially since it appearedthat the new team would not be able to fully master the project in time. The Cairo Governoratevehemently objected and IDA did not pursue the matter further,since the projectalready was in the first year of extension. - 49 -

5.12 At apprais.i,it was known that HIPCO was neitherorganized nor adequatelystaffed to meet the foraidabletask of providingsupport to the many cooperativesin the artisan sector. This was exacerbatedby the decentralizationdecree of January 1978 (para.5.04) that transferred implementationresponsibilities to the governorates. Provisiontherefore was made for the appointmentof consultantsto study the sectorand advise on its reorganization.The study,however, took much longer than expectedand its recomnendationsare only just now being implemented,mainly due to the appointmentof a new and stronglymotivated chairman. The withdrawalof the NBE from the projectalso preventedHIPCO from carryingout the proposed programfor assistanceto small businesses.

5.13 In general,the capacityof the Egyptianadministration to implement a complexproject embodying new conceptswas overestimated. It was particularlyunrealistic to expect that a new unit could be quickly created to coordinatethis activity,and the Associationfor its part was slow to recognizeor adapt to the capacityconstraints. In retrospect,the project might usefullyhave been reshapedor even reappraisedearlier, especially followingthe ministerialrestructuring and subsequentlegislative changes in 1978-79.

VI. FINANCIALPERFORMANCE

A. ProjectCosts

6.01 The final cost of the projecL,as implemented,was only LE 1.0 million (US$1.4million equivalent) above the cost of the projectas appraised;however, the compositionof the final projectwas considerably differentfrom that appraisedand the Credit Agreementitself was revised in May 1983 to incorporatethose changes. Subsequently,project components were redesignedto accommodatethe availablefunds (see Table 3 for a comparisonof cost relatedto the originaland revisedCredit Agreement).

6.02 A comparisonof the inflationrates used for civil works and equipmentas estimatedat appraisalwith actual inflationrates (Table4) suggeststhat local inflationwas underestimatedby about 20 percentagepoints and internationalinflation by about 7 percentagepoints. Since very little work was done prior to the originaldate establishedfor completionof the implementationphase, about 20 to 25 percentextra would then have been needed to completethe projectas originallyplanned.

6.03 Much of the work done during the actual implementationphase, however,was not based on appraisalstandards. The components,for which increasedstandards were most significantincluded the piped seweragesystems in the MansheitNasser Main Settlement''and part of the Zabbaleen Settlement,the electricitynetwork (para.4.23), and the level of mechanization-ofthe Cairo compostingplant (para.4.26).

6.04 Inflationappears to have been much higher and less predictablein the buildingconstruction sector than in the rest of the economy. In Cairo, for example,the bid price of identicalbuildings rose from LE 85,000 to about

1/ Carriedout independentlyby the governoratefrom its own funds. - 50 -

LE 267,000in four years. This resultedin cost increases of over 400 percent above the appraisalestimate for schools tenderedlate in the project implementationperiod.

6.05 Cost increasesfor consultancyservices were containedby reducing the scope of work to be carriedout by consultantsand by hiring fewer advisersto the JHP than originallyhad been planned (AnnexII, Table 9). As alluded to in para. 4.34, this was not withoutits cost in terms of sacrifice in the qualityof the work performedand the depth of analysis.

6.06 Overall, the inadequacyof the implementationschedule and the lack of detaileddesigns (aggravatedby a loss of momentumdue to administrative and legislativechanges) led to substantialmodifications in the originalcost estimates. The projectwas thereforereshaped during implementationto producea range of innovationsin the deliveryof housingand urban services on the basis of consultants'plans within the frameworkof the original projectdescription and budget parameters.

B. Pricingand Cost Recovery

6.07 One of the objectivesat appraisalwas to fostera policy of cost recoveryfor urban servicesthat would help financecosts relatedto further expansionand operatingand maintenancecosts. Principlesand criteriafor recoveringthe cost of investmenttherefore were an integralpart of the project.

6.08 As of May 1985, charges to be leviedfor infrastructuralservices had been caltulatedon the basis of the criteriaestablished at appraisal,but were not yet implemented. Cost recovery,however, is likely to be much less than anticipatedat appraisalsince (i) the substitutionof the JHP for the LIHF means that there is no longeran agency with a strong incentiveto recoverthe cost of the project. Funds collectedfrom projectbeneficiaries will now return to general revenuesat the CentralGovernment level; and (ii) the traditionof providingsubsidized, fully-built houses and subsidized serviceshas continued.

6.09 Refuse collectionservices were established-underthe projectin North Bassateen,the MansheitNasser Main Settlement,and other communitiesin Cairo. Although tha cost ofEthe preparatorywork (LE 2,280) for arrangingfor this servicewill not be recovered,the full cost of operationsare being paid directlyto the Zabbaleenby the conmmunitiesserved.

C. Affordability

6.10 The upgradingprogram for unservicedlow-income areas was expected to cost an averageof LE 145 (US$210equivalent) per householdunder the project. Actual costs were about LE 245 (US$350)per householdin the MansheitNasser Mr.inSettlement, and in Assiut the cost of the cores ranged from about LE 2,620 (US$3,745)to LE 3,090 (US$4,419),compared to LE 850 (US$1,215)at arpraisal. No revisedincome data were availablefor this reevalua;ion;hence, the reducedaffordability of the projectinterventions could not be quantitativelyreassessed. - 51 - ProiectFinancing

6.11 At appraisal,the NBE was expectedto contributeLE 0.4 million (US$0.6million) of projectcosts. This contributionwas not made since the employment-creationcomponent was cancelled. On the other hand, project beneficiariespaid approximatelyLE 0.8 millionfor connectionsto infrastructuralsystems in Cairo. Overall,project costs increasedby LE I million (US$1.4million) and the IDA contributionfell by 0.6 million,which subsequentlywas cancelled. The GOE's contributiontherefore amounted to LE 5.72 (US$8.18million), an increaseof 27 percentover the amount estimated.

VII. ECONOMICREANALYSIS

7.01 At appraisal,an economicrate of returnwas calculatedfor the sheltercomponents only (sitesand servicesand upgrading),since the benefits to be derivedfrom other investmentswere not quantifiable. Benefitswere based on the estimatedincreases in propertyvalues broughtabout by the improvement.

7.02 For the sites and servicescomponents, the value of the improvements were measuredthrough imputed rental values for the units to be constructedby projectbeneficiaries, which gave a rate of return of 16 percent. A key assumptionwas that legislationpassed in 1977 would removesome of the distortionsof the rent control laws and would facilitatethe operationof market forces. This, however,did not occur and rent controlis still as entrenchedas ever. The resultingdistortions make it practicallyimpossible to estimatereal market rents. Moreover,the legislativeprovisions do not reflectthe way the systemworks, hence tenantsare reluctantto reveal their deviationsfrom such provisions. Derivingreal market rentswould involvea major researcheffort. As the sites and servicesarea in Assiut is not yet occupied,the researchneeded to obtain a good reestimateis not considered cost-effectiveand thereforewas not done for purposesof this reanalysis.

7.03 Rate of returncalculations for the upgradingcomponent were based on land sale values and were estimatedat 23 percentat appraisal. Land sales in the ZabbaleenSettlement in late 1984 and early 1985 were at a rate of LE 40 to LE 60 per square meter, dependingon the locationand the size of the plot. A reestimate(Annex III) on the same basis as that used at appraisal, but takingNGO investmentsinto accountand using the lowestsales price, produceda return of 23 percent--thesame as that derivedat appraisal. Sensitivityanalyses using the above 1984-85prices indicatethat a 25 percent increasein the price increasesthe rate of returnderived to 44 percent. The projecthas thereforeachieved its objectiveas measuredby rate of return estimates.

VIII. ROLE OF THE BANK AND OTHER DONORS

8.01 Lendingby the World Bank Group for urban developmentactivities was initiatedin FY72 so that by the time the projectwas appraisedthe Associationhad had some five years of urban experienceon which to reflect. As the projectconcept was new to Egypt, the Associationplayed a major role in definingand identifyingthe project. - 52 -

8.02 In retrospect,one can see that the projectwas inadequatelyprepared at appraisaland the Association'sreaction to the ministerialreorganization of 1978 and the abolitionof the LIHF was not appropriate;given the recognitionof the institutionaldevelopment issues, the Associationmight usefullyhave reappraisedthis part of the project.

8.03 Discussionswith officialswho were involvedwith project implementationsuggest that the Associationwas most effectivein the initial phase,when the conceptswere introduced,and later on when technicalissues were encounteredwith constructionwork and the conductof studies. During supervision,the Association'svisits playedan importantpart in educating new staff memberswho had not been involvedin preparationand who did not understandthe project concepts. However,during the initialperiod, there were frequentchanges of IDA staff assigned to the project,and mission membersdid not always appear to be giving the same advice as their predecessors,which led to confusion. On the other hand, aide-memoiresleft behind by IDA missionsdid provideuseful managementtools.

8.04 Other donors were active in the urban sector in Egypt during the projectimplementation period. Shortlyafter the appraisalof the IDA project,USAID financeda sites and servicesand upgradingproject in Cairo and the OverseasDevelopment Agency (ODA) of the United Kingdomfinanced another in Ismailiya. Altz&oughthe projectsdiffer greatlyin terms of operationalscale and administrativearrangements, along with the IDA-financed project,they providea basis for the design of subsequentprojects in the urban sector in Egypt.

IX. CONCLUSIONS

A. ObjectivesAchieved

9.01 Although the projectchanged in scope,most of the changeswere made within the contextof the projectobjectives. The followingobjectives were achieved:

ShelterProvision

9.02 Low-costalternatives to the provisionof fully-builthouses were demonstratedwithin three differentcontexts. In Cairo, upgradingwas done in two communitiesthat differedgreatly in the statusof prior development;and in Assiut,a servicedsite with core units on some plots.

Solid Waste Management

9.03 A least-costapproach to Solid Waste Managementwas demonstratedby the extensionof servicesof privatecollectors (Zabbaleen) to cover selected low-incomeparts of the city, on the basis of fees paid directlyto the Zabbaleenby the householdsserved; and the developmentof a systematic approachto solid waste collectionand disposalby the urban authoritieswas set up where serviceby the Zabbaleenwas not feasible. -53- Institution-Building

9.04 The ExecutiveAgency f'r Joint Projects(JHP) was developedas a centralinstitution through which technicalassistance can be providedto local authorities.

9.05 The studiesconducted under the projectprovided useful frameworks for: addressingtraining needs at the governoratelevel, developing a strategy for promotingthe developmentof the artisansector, and rehabilitatingthe water supplyand seweragesystems of Assiut.

FutureProject Preparation

9.06 A Solid Waste Managementproject (appraised in February1985) was preparedto extend the principlesestablished under this projectin Alexandria and Giza.

B. ObjectivesNot Achieved

ShelterProvision

9.07 While the projectdemonstrated the effectivenessof the Government's provisionof servicesinstead of fully-builtdwellings, it did not succeedin basing such standardson affordabilitycriteria.

Cost Recovery

9.08 The applicationof the pricingpolicies and cost-recoveryprinciples promotedunder the projectwas not yet testeda' the time of credit closure.

EmploymentGeneration

9.09 Cancellationof this componentmeant that the employment-creation objectives,other than the study for increasingthe potentialfor employment generationin the artisansector, were not met.

InstitutionalDevelopment

9.10 As the LIHF was abolished,the projectwas unable to supportthe developmentof a financialintermediary for the long-termdevelopment of the housingsector.

C. LessonsLearned

A number of useful lessonscan be learnedfrom this project.

Institutional

9.11 During preparationmore thoughtmight have been given to matchingthe institutionalframework to the size and nature of the project. In particular, in the case of multi-componentprojects, where implementationresponsibilities are to be shared by a number of agencies,the element to be handledby each agency should be similarto the size of capital investmentsusually undertaken by that agency. - 54 - 9.12 At appraisal,the capacityof the bureaucracyto handle the type of projectenvisaged also shouldbe assessed. The time actuallytaken to completevarious tasks shouldbe examined;and disincentives,such as non-competitivewages that could cause some delays,should be taken into considerationin scheduling.

9.13 The project experiencealso emphasizesthe need to fully involveall the agenciesthat are to be responsiblefor implementationwith the preparationand planningof the projectfor which they will assume responsibility.

9.14 Greatermoderation in goal settingalso appears to be called for. The experiencesuggests that multipleobjectives might be more successfuly achievedthrough a seriesof projectsrather than througha single project.

9.15 The loss of institutionalmemory that occurredduring the implementationof this projectalso suggeststhat more detailsof the implementationarrangements might have been reflectedin the legal agreements. This appearsto be particularlytrue for sectorswithini which structuralchanges, such as transferof responsibilities,are takingplace.

Communications

9.16 The projectexperience also highlightsthe need for more effective communicationswhen dealingwith countriesthat do not have Englishas their officialand commonly-usedlanguage. Some of the ways in which such improvementsmight be acalieved,as demonstratedby the project,would be: routinetranslation of all basic project-relateddocuments, especially staff appraisalreports, as well as all legal agreements;more frequentinvolvement of Arabic speakerson missions to Egypt; and greateranalysis of the institutionaland culturalframework and its implicationsfor project activities.

Staff Continuity

9.17 Followingfrom the above, continuityof styatfingon IDA missionswith an overlapof at -leastone personon each mission;on the Borrower'sside, an overlappingof preparationand implementationteams would facilitategreater retentionof institutionalmemory and fostergreater understanding between the teams working on projects.

PreappraisalPreparation

9.18 Perhaps the most fundamentallesson learned is that such projects should have all or at least most of the physicalcomponents at the detailed design stage,and nonphysicalcomponents should be worked out in detail before being presentedto the Board and the NationalAssembly for approval.

Implementation

9.19 Finally,problems with the implementationof projectsshould be remediedearly to ensure that when changesare made they are forward-looking rather than ex post facto. This projectmight usefullyhave been reshapedor even reappraisedfollowing the far-reachingadministrative and legislative changes that occurredsoon after negotiations. 1111

EGYPT FIRST URBAN DEVELOPMENT PROJECT

TABLE 1: SUMMARYCOSTS: APPRAISAL AND REVISED ESTIMATES

Actual Cost/Beestisate _itfftenra LE As of. SIAi Ai) a (LE Million) (USilon) (LE "1111On) (US 1ll1On) (LE "14illOn) (US Illon)

Sbelter CoQoRngn1ents w) Ca rn

Upgrading - Mansheit Nasser a. Main Settlement 1.86 2.66 3.18 4.S5 1.32 1.89 71 b. Zabbaleen Settlement .48 .68 1.65 2.36 1.17 1.6 244

Upgrading - North Ha:sateen .95 1.36 -. - ' f) (1.36) (I")

a. Sites and Services - South Hetras 2.45 3.50 .17 .24 (2.21) (3.26) (93) b. Upgrading - New Nagaa el Arab .19 .27 - -(.19) (0.27) (186) Lo

Sites and Services - Soutb Gar-b el Balad 2ZkQ 3472 3.tl 4.U .1 1.16 231 Shelter Components Stab Total 8.53 12.19 8.41 12.03 (.12) (.16) (1)

il1omer Traillllo FrQgfrm 1.43 * 2.03 .26 .37 (1.17) (.66) (82)

ai4dJOs aiAifQjJid AleD3ndCis 2.14 3.06 S.SO 7.87 3.36 4.81 IS7

> itt-8Sal->t L!"e-.dLvf-uPP-! i Sewriage 5y'tMaln A5iL .61 .87 .01 .01 1.60) (.6) (98)

consultant ad _Advisory ' Lryn" 1.67 2.39 1.43 2.04 (.241 (.35) (14)

PIlA.kL ^^. A .2 .0.i UL2I. L.4A0 iML

PROJECT IOTAL iLlS 21_4 -538L. JI

LE 2.22O was spent onl implementisg -a refuse management system for this coommnity. - 56 -

Table2: DISBURSEMENTOf IBRDLOANS AND IDA CREDITS(1974-1983) (CuulativeI of Loanor CreditAmounts Disburied)

No. of Proiects Year fromDate of BoardAoproval

1 2 3 4 5 6 7 8 9 UrbanSector Dankwide 93 3 12 28 47 65 80 90 98 100 All Loans- EMENARegion 564 3 15 32 52 70 83 93 99 100 All Loans- Egypt 65 2 13 31 51 69 82 91 97 100

Egypt- UrbanI 1 0 0 0 14 30 63 89 96 - Table 3: REVISED ALLOCATIONOF CREDIT FUNDS

OriginalAmount of Revised (5/85)Amount Credit Allocated of the Credit (Expressedin (Expressedin Category Dollar Equivalent) Dollar Equivalent)

1. Civil Works 6,200,000 4,855,000

2. Loans for Smll Businesses 570,000 -

3. Equipment,Materials and Vehicles 3,350,000 6,000,000 (a) Imported (b) Locally Manufactured

4. Consultants'Services 1,700,000 1,500,000

5. Repaymentof Advance 300,000 300,000

6. Unallocated 1.880,000 1,345,000 - 58 -

TableL4: ANTICIPATED, ACTUAL ANO ESTIMATED RAMTE Of INFLATION DURING THE PROJECT IMPLEMENTATIONPERIOO (1)

Otfferance A_httmtaRa&1l - A /Eea_tim_ates (nereontage point) Civlv Lbesl," Eol n Civil Warks IMUIMIN"sl2 Civil Worki ERuip nt

1978 10 7 11.33' 17.9 Isis la 6.S 9 83/ 11.6 1980 9 6 18.04 8.3 1981 9 6 1S.O4/ -S.0 Index"' 144 128 166 135 22 7 1962 - - 18.04 -1.9 1903 - 20.03/ -4.2 1964 -- 16.0$ -2.8 1965 - 16.0' 5-.0 Indx7 -- 321 129 -

.1 StaffAppraisal Report. 2/ Based on UnitValue Index of Manufacturedexports from developed to developingvountries on as it basisand expressedin US dollarterm A1nnual percentag increase in costof livingindex. V OfficialCPI for these years understates inflation. The percentages reflectBank staff and IW ost utst. 5l PreiminaryesttiAte of percentageincrease in costof livingindex. Al Proected percentage increase in cost of livingindex. 7/ 1977 * 1001 ErTP- IIT IA MWLOHMET PECT (CS. Ili-EGYT

F~XCTaNernTS ASAPPRISIED MmS As VLUEwayEa

EmNT:mSAS APPRAISED casTS AS IIPLEIElTED

A Ca!!Q. 1WnktejL_Nasser (MainSettlmwnt) Surffacinig of about 6.400 a of access and circulation roads. including (a) Surfacing of access and circulationroads as implementedwith only thietthree access points to the settlement and the main cmercial minor changes to the original plan. Some other main roads were ret. A further 3.000 m of secondary access routes would .Negraded, surfaced by the Governorate without the prior knowledge of JNP. Grading of secondaryaccess roads was founidto be umecessary. (hi lniprovemuea,tto water supply facilities by provision of a new boosterpump (b) The extension of the water supply network was implemotedsubstanttally anid 650 m of 300 - diater mains. Extension of existing network by as planned. pt ovi'%iOf of 7,200a of new pipeline, allowing up to Gf of the plots Repairor replaceometof existing standpipes was not undertaken and to have inidividualhouse connections. Repair or replacementof the new ones were not provided. eight e.~rstinqstandpipes and the provisionof 23 now standpipesto Plovide water within 100 m of all otherPlats on the basisof I.'~~~~~~~~~~~~~~~~_ oniestandpipe/400 persons. a~~~~~~~~~~~~~~~~~~

U Improvements.in sanitationi. Four hundred and fiftyexisting cesspits (c) The Governoratechose to extend the piped sewoeragesystem to Serve the waould be repaired or reconstructedand uipto 400 new units would be diole_ settlement _ _ _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i, at their own expense independentof the pro-eCt aVW provided while 100 existing ones would be abandoned, bringing the total the JHP. The as-built sewerage System served an area appreximetely niagutiet of cesspits to about 2.300. Eight hundred plots wfithinthe | ___ MS larger than__~~~~~~~~~~~~~~~~~~~~~~~~~~a planned at appraisal. Householderssubsequently sjentral area whnichwill be provided wmithon-plot water would be chose to connect to the system Immediately. The need to reair S oosi,ec ted to a newiPiped sewerage system by the provision of 9.000 a of existing cesSpits. construActnew ones, and to provide cesspitemptying %D Pipe E.istinq ce-sspitswill be used to form maunioleswierever econom- services was therefore obviated.I ]rial toa certainiareas with shallow depth of cover to rock, existing ,eS%PrtN till be kept in use but connected to Pipes that will (oeivey overfleowingeffluent to the central system. Specially-designed duonkey cait', with hand pumips would be used to empty cesspits in othier rueai,. Piped sewage and affluent from the cesspits would be di,.0tmarqed intto a pipilng StatiOn nOowbeing completed next to the site. ill1 I t.Lr*n.ori of the electricity system by the off-site proviSion of (d) Electrical services provided on-site were much more extensive than 4.000 ii of pouer l1inesand a ntew 500 kva transformers.on-Site works planned: approximatelya.oso m of off-~sitep05.52' lines (200l of ,v(,4jd m0iitrde the buryinigof 8.000 a of existing cable and the laying appraisal estimatel; 11 new SOD kw& transformers; I new 100kw& uf 7l80u m of niewcables, thusiproviding 3.008 plots with direct access transformer; 52.000 a of on-site cables (6010tof appraisal estimate); to electricity -supply. About 500 streetlightswould provide security and 700 streetlights (140% of appraisal estimati.. The as-built system lritatiui.j ti all mauiistr-eets, and access roads. also had safetyfeatures built In to ensure service reliability.udhich was not planned at appraisal. (el Solid waste collection by the Zabbaleen. (a) Solid waste collection services by the Zabbaleen were provided as planned.

(f) Provision of materials for heoe iprovev_nt. Loans avergitng E 519 (f) Provisionof m_terials for how improvementwas cancelled. would be available for about 5S800 households. (9q lmrovement of camninity facilities. Comnuity facilitieswould be (g) Oue to site constraints.only one primary school and one el _ary impeoved to the average level of service prevailing in Creater Cairo school were provided. They ware larger than the schelS originally s through the provision of (ii three primary schools of 14 classroom. planned. The total number of classrooms provided. and hence the each with a capacity of CS students per class nd *prating on double capacity of these schools was as planned at apraisal. Thte comnuity slifts; 0i) one secondary school for girls with 14 classrooms; center was provided as planned. A health clinic was built in the (iii) a health clinic and a dispensary with Integratedhealth and conmity with USAID financing. family planning services to be provided as under the IDA-assistedpopu- lation project; and (iv) a community center. open areas would be provided with simple landscaping. The design principles for ceinity facilities and the services provided would be similar for the other urban and sites and services schmes.

(ii) Development of about 385 new or infill plots with water supply. sewerage (hl Occupation of smaller vacant areas was not controlled by the iplm_- asid ablution units, ingagencies. Planning done for the major vacant areas under the project reserved those spaces for conwercial/smallIndustrial use nd community facilities.

8 Cairo; faui,htl. iAJ.st(Zabbaleen Setlent) (a) Two maii access roads and the main artery 4about 1.700m) would be (a) About 3.300 * of access and min roads (194S of appraisal plan) were giaded and asphalted. Two additional access roads of 1.50 m would graded and asphalted: be graded and improved;

Ibh Water supply would be brought to the settlement and would serve four (b) IpIemented substantially as planned but with two instead of three moulti tap standpipes, three public ablution units each incorporating public ablution units, since the population was found to be tach abotit 20 showeis and washing sheds. and three fire hydrants. 1,600 a smaller than that estimated at appraisal. of new water mains would be required;

Electricity would be provided to com_munity buildings and ablution units. (c) In addition to the provision of streetlights and the lighting of l.boo m of cable would be provided. with soMe 30 streetlights; cotmmnity buildings and ablution units. a full electricity supply network was provided;

(dl DemonstFation housing for living. waste sorting and pig breeding would (d) This element was cancelled. DOemnstration houses were constructed _ be constructed. Building materials for self-help improvemnt of howe improvement and small-scale enterprise loans were provided by e,istinug houses would be provided at a value of up to LE SO per 1GO's. household Loans of the same amount would be provided for repair nd *eplacewent of donkey carts; le) A tin baling plant and a composting plant with a 35 tonnes per day (e) Both the tin-baling plant and the composting plant are being provided capacity would be installed to be operated by the cotmunity; and by IGO's. if) ODe p. in asy school of 14 classrooms with a capacity of 4S students per If) The school was provided as planned under the project. The health and cla%s amid operating on double shifts, one health center. and one co_u- community centers are being provided by EGO's. iity center would be constructed. r (gs In addition to the elements planned at appraisal, a partial piped sewerage system was provided for this cotnity under the proSect. '

. . _ _ t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. C ~lgil!Q!QtN sshuffng (Al Water supply thirough standpines and private connections; we* on the upgrading of this comenity was delayed for Sam tim. Sy the tim site Investigationwas Initiated,it was found that the vacant sttes (b) Sewerage improvements through cesspit rehabtlitation; on which important *leents of the orisinal proposal were based teN c_- nents f an g) had beon occupied. ( Sanitary facilities through public ablution units and washing Sheds; (dl lefuse collection; Part (di. introduction of a refuse collection system. was iinlementedOS Part of the project. (c) Katerials for home improvement at LE SO per household; if) Comulnity facilities including one primry schoel of 14 classroom with a capacity of 45 students per class, operating on a double shift, one healtl center, one comunity center and ne playground; and

1.) Developmeent of about 600 plots on vacant land, with water supply. sewerage and ablution units.

Q &1exandrlii new MSgaaa el Arab (a) Vehicular access to within 75i of every plot; This coonent was Integrally linked to the adjacent site and service development IllS. below) and was therefore cancelled ehn tha letter (b) Water supply via external taps within SO a of every house; coe_onent was found to be unfeasible'

(dl Provision of a refuse collection service from bins located-within 50 m of all plots; 4e) facility for on plot electricity connections by provision of one 500 kva ti ansfovier. 2.000 of cable and security lighting; (fI Materials for home improvement at LE SO per household; a (q) A primary school and a health center would be provided In the adjoining sile's and services area of South Netras.

t Land Tetrm. The land in all four of the upgrading areas belongs to Procedures for selling the plots to the occupants in the twnit UaSser the governorate. Residents would be given freehold titles conditional mn and Zabbaleen Settlements are urderway. upon satisfactory payent of plot charges. Hoever, in the case of the Zabbaleen settlement at Hansheit Nasser. the results of the consultant study and the response of the c_unity to the diptaled proposals will be reviewed by the Cairo Governerate before a decision Is taken on the timing of the granting of freehold titles.

05 'Ii~~~~~~~~~~~~~~~'Lc~~~~~~~~~~~ 1114~~~~~~~~~~~~~~~~~~~~tflAfk3~~~~~~~~~~~~ ~~ ~ i'i

A AWoul,; 5am&LjjGrbmL AladL A 2i.4 hectare.sitewas to have developedfor an eventualpopulation of a. b. c add wereiplownted substantially as planned. 14.00(8personis. The eventual developmentwas to comrise: Standards for 0 and f were significantlyIncreased. (a) 70.5% of the total area shouldbe marketable; (b) 2.761plots rangingfrom 45 2Zto 72 w2 In site; (c) Individual on-plot water supply; (dt Individual comnection to waterborne sewrage dispoal system; (e) Electricity provision crnwised of low tension supplyto plot boundari es; (f) Street lighting on primcy and secondary ctrculation routes. (g) Refuse bins within 75 meters of plots: to) fot Ippl~mted. (h) Max wAumnon-plot development opt ion of one remn of 9 m2 an 255 (h) The design was changed, with IDA's concurrence. te provide rn-rem of plots; minihew development of ablution uinttan perimter wall; cores an all residential plots Instead of the 22-pen not ae at appraisal. To cover this cost. Assiult propomadto build five-storgy walk-oe aperte* nts for sale to higher-tncom gromps and csrceal plots to subsidize the deveSlopme. Nowever. there was a subroo changeto of goernor an the now governor did not ar22 to plan. Eventually only about 36e such cores ware built. since te cenw that was awarded contracts for the second and third pimss of 4; ad 297 units, respectively, in 1903 was only able to csuto lN t lts prior to credit clo and local funds were usavailably to fia nce the construction of cores on the other plots, 1ece. the deeoe;lt In Assiut Is cnwoised of about 363 plots with perimte walls. ablution urnits and cores coandabout 2 399 bare, plots. it) One school providing 1.260 school Plots; (i) The school was provided as planned. (1) One health center. . (J) The health center Is being built by the Ministry snelthof con site prea"red s rderthe project.

aA 1ex anaIriaj _guULM&LfA2 The component rascancelled. After some stte preparation mm led bow undertaken.soil tests revealed that sub-soil conditions would rtire Development of 15.1 ha for an eventual population of 9.008 persons. pilt foundationb for structuros built on site, and it was therefore Standards as indicated above for South Gharb el Salad. unsuiitablefor housing Intended for low-income earners.

.AI,gl lu~Q iess Ass SLAW.& and annur Trainin* Saull business loans averaging LE050 (US$1,200)each, with a ( T).(it) and (III) Canceled followingdelays encounteredidu commity naximmm of LE Some (US$7.150) per enterprise, Indicated its utwillinter ss to psrticipate in this aspect of the project (II ExtenNionservices to smallbusinesses on proJectsites and. as appro- beforereceiving infrastructure services and the subsequentwithdrul priate. in the surroundingcommunity. of the national Senk from the Project. I ii) Vocatiognaland accelerated training procrm to complement and e l) er_) above. 4 d Conistructionof training center In MiansholtNasser to serve the Imonseentedas planned.riv) training requirements of the four manor cooperative societiesthat operate locally and that represent an element In the d 1ortant ar-tisa.nsector of the commiunty. ( k ) wocationalPre r *ndtoaccelerated ce pltrain1ns _ nt (1) and li1)~~~~~ ~ ~ ~ 1 above~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~ ~~~~~~~~~~~~~~~~~~~~0

0i I WEg1jgWI=L1._in Solid Waste Collactimi n leaa CE&roand Alexandria

&Cai (M Pilot conpostIng plant with a capacity of _ot IU tonneslday to (i) Cncelled. Solid waste Consultant undertook expaerlamtl Cast tifg test the c_ sition of the waste being collected and the aality an market research which provided an adequate basts for ItI). and warketability of the resulting ce _t and to develop the appropriate design an operating pro'edsw.s for a larger plant.

fit) If the outcine of the above-n_ntionod tests are positive. construc- 41I) Oetaled amnlysis of fectors such as the cmw osition of Cairos refuse tion of a ZO tonns/day plant. and tS potntial mrket for copst and recycled materials wre t C Into consideration in the design of the min plat. The spCiftcati_ called for Ute provision of s hme"nialng drum *eWifn for turni the windwres and a coe t instead of a bitumen swlfc for the ebet- Ing yard. The cost of the plant therefor exceeded Uhe fin_ls at aside for It. Ike sir of the plant was scaled dam fro_W to 2W tim per day to minimdie cost overuns.

U Alexandri& (I) Pilot composting plant with 10 tonnes/day capacity. (i) Cancelled. A 1" tons per day plant was constructe with the Psf originally Intended for site and services and fgrading(I SWA 11 a abeve). th design was basd an the ewerience in Cairo. ctty cwAcil fit) 300 donkey carts for waste collection. (Al) Cancelled. The refuse cellectors (private) and the rejLcted the *dea of using _ey carts. (bii 68O handcarts for street cleaning. (IV) medepots for street cleanin. Ite Ill. Iv. v. VI. and wi were canelled. Tb s facilities wer (v) 2 sorting depts for dtspsal. provided wwr a V5IAS-fminced project. (vi) 2 worlkshops for repair of street refuse collection vehicles. (via) Equ pmnt for 4 garages. (visi 4 vehicles for suPervision. (witt) Tom ve,tcles were prchased instead.

9b v U-gent Reo1r5 Ig the Assiut W S a Seweraa*Svat

I Ui gent repairs and possible extensions of existing waterSuPply The consultants regort (VIg) revealed that more extensive work then aoid sewerage systems based on consultancy studies Indicated in originally envisaged was needed. The funds provided VI y below. for this cenent were therefore inadequate and were used for (l) the most urent equipnt t i) Prepalation of broad technical wister plans for water sypply and needs for tediate repairs and maintenance; and (ii) foreign sewerage. for tbe exchange cost of a punping station and off-site tewer mains to serve the ( 1ii) Training for staff in charge of the i_ardiate rehbilitation works sites and services area developed under the project and other recent foi ater supply and sewerage and for staff responsible for ongon extensions of the city. maintenance and administration of the system.

VI Ci1Mnl .n A4LvirairyServices an *raining

a)PnectPit preparation IIDA advance made in 1977). covering the identifica- (a) Completed as planned; tion of comPonents together with the preparation of site layouts. Pieliminary engineering designs and costs. The work was undertaken by GuPP using a local project preparation unit assisted by consultants; lO) Pioect implementation advice. Provision has been madefor advisers to fbi Implemented but without staff support assuaed at appraisal; as%ist the tow Income tHousing Development Unit ti)in undertaking rent,al pi3ject coordination and monitoring and (it) in assisting the Gove.snoates in project execution. Ter=msof reference would be drafted afte, LIHOU staff have been appointed; I( ) Detailed design and implementation of the upgrading scheme for the (c) Implementedas planned; Zabbaleen settlement at Slansheit Nasser; (di Preparation of future upgrading schemes for Central Cairo. particularly Id) Saoe preparatory work was done on an upgrading schme for El fog LI G_ttlto. Gamalia; This study is being continued under the Greater Cairo Urban Developlnt Project; A solid wast.emnaginnt project appraised In February 19M was also prepared; (v) A ssitance to HIPCO in project implenotation and also to (I) assess le) Parts Mi)and (iii) were impleented as planned; S bot,. the assistance requirements of the artisan/smal business sector in Egypt and the existing and proposed system for delivery of this a,ssita,ce. (i advise on HIPCO's organization and staffing. nd (iii) help train HIPCO staff. The proposed assistance to HIPCO is based on the recomndations of the IDF,s Division'sreport 'Arab Republic of Egypt. S. rvey of Small-Scale Industry' dated Deceber 2. 1977; dl Prepawation and implementation of schems to improve solid waste (f) Iplemented with changes indicated in IV above; collection and disposal in Cairo and Alexandria;

,.) Ilnestigations and urgent repasrs to the water supply and sewerage (s) Investigations were iwplemented as planned but the study indicated v,lems in Assiut, that the urgent repairs needed were more extensive than originally had been provided; (iii Flioaicial management and accounting services for the recently established (h) and l1) Cancelled as the lHF was abolished; Lo. Income Housing Fund. Consultant services will be provided to to ecast the likely long-term operations of the Fund and to design a seYtcn of accounting and financial managemnt and a staffing organtzation to a?et the requirements of the Funri for the next several years; ti) Baimkilig advice The project includes provision for a full-time banking adv ioi to be made available to the Low-Income Housing fund for a Period of one year to assist the fund's management to formulate and implement so.iid financialbanking practices at this early stage in its development; Ideritif,catiociI} of traininsg eeds in five Governorates. In 197d. the (ji Implemented as planned; tii,st tia)oF impact of devolution of functions from Central Government is IiiLeI to be felt by the Governorates. Studies would be undertaken in ts,e (ao'.erorates Cairo. Alekandria. Assiut. Ismailia and Gharbiya - to estimate the likely requirements for training within the Governorates o n a niationwide basis; and ii frainiiiqg of pro)ect staff in the implementing agencies. (k) Impleaented as planned.

. o~~~~~~~~~~~~~~~~~~~~~C - 65 -

ANNEX It Table I EGYPT FIRST UR3UN DEVELopMe? PROJECT

DETAILED COSTs: APPRAISAL ANP REVIStD ESTIMATES

SITES AND SERVICES AND UPGRADING

Actual Cost/ Appraisal Reestimates Estimate I/ As of 5/8S Difference ILE - OtWI -JlLE OOOIL

Manshait oaerI4ain Satt.lIMnt

A. Site Preparationand Survey 10.12. 57.12 464

B. On-Site Infrastructure 1. Roads 108.63 269.58 148 2. Water Supply 70.40 57.92 (18) 3. Sewerage (includingcesspits) 119.a8 300.082/ 150 4. Street Lighting and Electricity Network 46.75 182.103/ 290 S. Improvementof CowmunitySpace 23.38 - 4/ (100) 6. Refuse Collection 3.75 12.75 Z15 Subtotal 372.79 822.25 121

C. On-Plot Oeveloe nt 1. Water Connections 64.94 240.005/ 258 2. Swer Connections 1S.75 561.005' 3.462 3. Cesspits (a) Repair 19.69 - (100) (b) Construction 132.70 ) (100) 4. Ablution UWtts 0..a.i -L Subtotal 265.41 801.00 202

0. Self-Help ConstructionMaterial 286.98 - (100)

E. Off-Site Infrastructure 1. Sewers - 222.12 - 2. Roads 123.75 50.00 60 3. Water Supply 36.85 - (100) 4. Electricity 1fi2.90 891.77 ii Subtotal 357.50 1.163.89 226 f. Conmwnity Facilities 1. Schools 250.25 170'957s (32) 2. Health Centers 129.25 (100) 3. Conninty Centers 31.00 130 96 297 Subtotal 412.50 301.91 (27)

G. Design and Supervision 152.75 30. 58/ (80)

H. Project Managemnt 46.35 - 9' (100 TOTAL TL z

1/ tncluding physical and price contingencies where applicable. Z/ The sewerage network was expanded to serve the whole 5ettlement. l/ Only street lightingwork provided for at appr0isal. 4/ Included in other on-site costs. 1/ Undertaken by householders with their own funds. Costs based on AS lut data: at LE 0.30 per m 2 for water, and LEO.70 per m2 for sewers. 6/ Extension and phasing of trunk and network enabled lmmedVate connections to be made. Z/ Two schools instead of four were built. The total number of classrooms provided was as planned. A/ For vacant sites within settlement only. 2/ Not quantified. Responsibilitieswere shared between a number of agencies No 3tiff members were assigned full time responsibilityfor this project - 66 - ANN II Table 2 30!? FIRISTURBA DEVELOPMENPROJECT

DETAILEDCOSTS: APPRAISALAND REVISED ESTIMATES

SITu AN SRVICES ANDUPGRADING

Actual Cost/ Appraisal Reestimates Estimate I/ As of 5/85 Difference (LE'OOO) (LE'OOO) ( CAIRO

Mansheit Nasser Zabbalsen Sttlemut

A. Infrastructure 1. Sewerage - 169.06 ' - 2. Roads 26.13 215.45 t' 725 3. Water Supply 36.44 596.01 i' 1536 4. Street Lightingand Electricity Network 5.50 398.06 t' 7,137 Subtotal 68.07 1,378.58 1,925

B. DemonstrationHousing 4.12 - (100)

C. Self-HelpConstruction Material 130.40 - " (100)

D. CommunityFacilities 1. Schools 49.50 267.00 439 2. Health Centers 129.25 - ) (100) 3. Community Centers/Dispensaries 27.50 - ) i' (100) 4. Tin Baling Plant 27.50 - ) (100) 5. Compost Plant 13.75 - ) (100) Subtotal 247.50 267.00 8

F. Design and Supervision 27.881/ - (100)

F. Project Management 9.53 (100)

TOTAL 487.50 1 645.58

1/ Includingphysical and price contingencieswhere applicable. 2/ Not providedfor at appraisal. 3/ Road lengthswere doubled. 4/ A pumping statipnand storage tanks were needed to get water to the settlement. S/ Only street lightingwas providedfor at appraisal. 6/ Cancelled. All are being providedby NGO's. 7/ Sum providedfor here added to amount provided for in Table 9. 8/ Not quantified. No staff members were assigned full-timeresponsibility for the project. - 67 -

ANNEXII Table 3

EGYPTFIRST URIANDEmVLOPMENT PROJECT

DETAILEDCOSTS: APPRAISALAND REVISED ESTIMATES

SITES ANDSEIVICES ANDUPGRADING

Actual Cost/ Appraisal Reestimate Estimate 1/ As of 5/85 Difference (LE 'OOO) (LE'OOO) X

CAIRO

North Bassateen

RefuseCollection 6.61 2.28 (66) TOTAL La iw

1 Including physical and price contingencies where applicable. - 68 -

ANNEX II Table 4

EGYPTFIRST URBANDEVELOPMENT PROJECT

DETAILEDCO0TS: APPRAISALAND REVISED ESTIMATES

SITES AND SERVICESAND UPGRADING

Actual Cost/ Appraisal Reestimate Estimate 1/ As of 5/85 Difference (LE '000) (LE'000) (X)

ALEXANDRIA

South Metras

Site Preparation 1,059.49 1 60.111/ n.a. Design and Supervision 221.02 9 . 1 22j n.a.

TOTAL 1.280.51 169.2

1/ Including physical and price contingencieswhere applicable. 2/ The work was abandonedwhen the developnientwas found to be unfeasible. - 69 -

Table S

0hlTA!L6D~EtI: APPUISAL hVh RIVIEID ITISNATIS

SITtS AMA itItNO UPCRAAICi

Actual Cost/ Appraisal Reestimtes Estimato 1/ As of 9/85 Difference &WMI~IL

South G arb El fladp Si. n avicag

A. Land Acquisition 610.002/ 700.00 1S d. Site Preparationand Surveys 886.7 S.7S (94)

C. On-Site Infrastructurn 1. Roa&a 187.67 - (100) 2. Water Supply 30.61 329.19 3 975 3. Soerage (includingcesspits) 139.96 5$9.02 321 4. Street Lighting 3.33 237.00 7,017 S. Refuse Collection i.,k - tied% Subtotal 368.23 1,1SS.21 214

0. On-Plot Oevelooant 1. Water Connections 46.50 42.35 (9) 2. Sewer Cownections 2S.03 986.J 295 3. ElectricityConnections 0.795 - 4. Ablution Units 201.68 - ) ' (106) S. Foriiter Walls 381.40 ) (100) G. Core Units 1lU992 417.3A 7/ liE Subtotal 804.73 SS9.20 (30)

C. Self-Help ConstructionMaterial 90.59 - (100)

F. Off-SiteInfrastructure 1. Roads 26.62 (100) 2. Water Supply 24.62 10.05 (59) 3. Sewerage 29.28 350.00 * 1,095 4. Electricity I53.73 259.50 A Subtotal 234.25 619.55 164

G. Community Facilities 1. Schools 55.90 300.22 437 2. Health Centers 125.11 - (100) 3. Comnunity Centers 1J.94 - 10 Subtotal 212.95 300.22 41

H. Design and Supervision 197.02 44.13 IO/ (78)

1. Project Management _ 64.49 30.87 '' £52. TOTAL L.ZQa ..LuL.a

1/ Including physical and price contingencieswhere applicable. 2/ No price contingency is added to the land cost as this was to have bccn an innediate expenditure. 1/ Deferred. Roadways wer. levelledduriig site preparation. I/ Not executed due to delay in site development. 5/ Connectionsnot provided for at appraisal. J/ Cancelled in favor oV range of core unit options and bare plots. Z/ For about 360 plots. A/ Sum represents the project's one third share of works serving cthcr new developmcnts also. 2/ Health center being constructed by Ministry of Health on site provided under project. II/Consultants,fees. Some design work was also done by the City Council. 11/Assiut costs only. - 70 -

ANNEXII Table 6

EGYPTFIRST UR5ANDgVELOPMENT PROJ8CT

DETAILEDCOSTS: APPRAISALAND REVISED EBSTIMATES

SMALLBUSINESS ASSISTANCE AND MANPOWER TRAINING

ActualCost/ Appraisal Reestiates Estimate 1/ As of 3/85 Difference (LE'000) (LE'OOO) _ (S) A. Manpower Training

1. TrainingCenters 87.83 255.25 191 2. Equipmentand Tools 61.42 - (100) 3. RecurringCosts 400.92 (100) 4. Designand Supervision 7.98 - (100) Subtotal 558.15 255.25 (54)

B. ProjectAdministration 14.13 (100)

TOTAL 572.28 255.25 (55)

l/ Includingphysical and price contingencieswhere applicable. - 71 -

Table 7 ICdYPTFtS mmSVES I.e

flovtfTI KU LoLB &S^TItfLLsEtIa A& 01510W

Actual Cost/ ApprasSal Reesthates IsttmAte 1/ As of 5/6S 01ffirence

A. 0

PilotComposting Plant at Shoubra 137'5 - (100) Hain Plant - 200 tons/day 962.50 245d8.4 3 15S Designand Supervision 9... 1 .2 1.15± Subtotal 1,073.50 2,541.51 137 ProjectAdministration 27-Z2 -A Lio. SubtotalA 1,101.70 25S41.51 131 *. ALUhAIZA

Collections- 300 donkeycarts 143.60 - 4/ (100) StreetCleaning - 600 handcarts 82.00 66.0 (20) - 40 depots 164.10 - ) s' (100) Disposal 2 sortingdepots 273.60 - ) S" (100) - 1 pilot compostingplant 27.30 2.824.46 f' n.a. Workshops I1 workshop 180.00 (100) - sorting depots 273.60 - ) 5' (100) I1 mobile workshop 12.00 - ) (100) Garages- equinpment 96.00 - ) (100) Supervision 4 jeeps 24.00 10.30t' (57) Designand Supervision 62 oO 55.94 Li1. Subtotal 1,338.20 2.956.70 121 ProjectAdministration 25.20 8 400

SubtotalB 1,363.40 2,956.7C 117 TOTAL LAALLB Lis"9LL

11 Includingphysical and price contingencieswhere applicable. 2/ Pilotoperations were carriedout in the Zabbaleensettlements by the consultant preparingthe TOR for the main plant. a/Actual size of plant built is 160 tons/day. V Cancelled.The Zabbaleenand the CityCouncil did not wish to continueusing donkey carts. , 5/ Providedby USAIDas part of comprehensivesolid was.e collection program. i/ Pilotcancelled in favorof main plant,based on Cairo experienct. Z/ 1 pick-upand 1 microbuspurchased instead. A/ Actualsnot quantified.No staffmembers were assigredto the projecton a fulltime basis. - 72 -

ANNEX II Table 8

EGYPTFIRST UREANDEVELOPMENT PROJECT

DETAILEDCOSTSt APPRAISALAND REVISED ESTIMATES

REPAIRS 1 USLUT WATERSUPPLY AND SEWERAGE SYSTEM

ActualCost/ Appraisal Reestimates Estimate1/ As of 5/85 Difference (LE'OOO) (LE'OOO) (

Leak DetectionEquipment and Meters 2.13 11.95 461

TOTAL ILa 194 - 73 -

Tabla9

C_.AhY AM u £

ActUal Cost/ Appraisal Reestimates Estimete I/ As Of 5/85 Difference

A. Projet Preparation (P9 Advance) 246.002' 194664 (20)

B. Projoet IolemeftationAdvisors to LIHOU 68.04 35.73 (47) C. Future Projeet Preparation

(1) Preparationof Upgrading Scheme in G&tl1yia 144.02 82.75 (ioz (ii) Preparationof Solid Waste Project - 208.39

0. Preoration and Zmplementatitonof Upgrading Scheme for Mansheit Nasser abbaleenSettlement 112.93 3' 127.53 13 E. studies to Determine the Characteristics of the Artisan Sector and to Make RecoamendationsRegarding itz Development 374.22 297.97 (20) F. Investigationsand Repairs to Water Supply and Sewerage Systems in Assiut 272.16 297.99 9 G. Preparationand Implementationof Schemes to Improve Selid Waste Collectionand Disposal Systems in Cairo and Alexandria 136.08 59 45 4/ (56) H4.Identification of Trainmng Needs in Governorates 28.35 24.36 (14)

I. Staff Training 97.52 96.95 (1)

J. Project Administrat1on 34.02 36.00 i/

TOTAL JLI JSh.1. 1 L

J/ Including physical and price contingencieswhere applicable. Z/ No price contingenciesapplied as this expenditurewas to have been made prior to project effectiveness. J/ Sum provided for consultantsunder sites and services component (Table 2) added to amount provided in this table. J/ General preparatory studies only. J/ Not fully quantified. Implementation responsibilities were shared by a number of agencies. Costs shown here are for operation of LIHDU and LIHDU share of JHP overhead costs. _ 74 _

AWIEX I I I

~gjjg3j~~.iqut-ICnUO~fIEVALUATIN

(LE '000)

cah1111 1hZ wa au IIM6 Sewerage 169.06 101.44 67.62 Roads 215.45 129.27 86.16 Water Supply S96.01 357.61 238.40 Electricity 398.06 278.64 119.42

Total Intra. 398.06

Comnity Facilities' 267.00 53.40 106.80 106.80

Co Jnity tacilltiesi 127.50 76.50 S1.0

Design & Supervision 72.67 7.27 65.40

Project Management 35.84 7.17 7 17 7.17 7.17 7.17

Total (current prices) 1,881.59 14.44 72.57 137.07 1.031.92 625.59

Total3' (#8S prices) 20.92 97.06 169.00 1,134.26 625.S9

MnLtsa Gross Area (0OOOm2) 300.00

Net Area (%) 40.00

Sale Price (LE/m2 ) 40.00

Old PriceI'4'(LE/m2 ) 14.20

Total Benefits 3,096.00

Net Benefits -20.92 -97.06 169.00 1.134.26 625.59 3,096.00

IRR 23X

I/ Financed under the project. Z/ Built by NGOs. 1/ Adjusted through the GOP deflator. 4/ 1985 price. - 75 -

ANNEXIV

.. . --

. n ~SW i*n 1966* IUI 190 196 194 91S

._*t ~ ~ tr -- .t

Aspetiel6.sw mse.. tts. .2001114^uls Sehtlmnt98tlt ...... *gw,etl 6stlate ------No bUmtw AWGhl 1411 ...... NWNesa gi Arab Aeprtl glttiste .....-....,.____._.

.Jewth etreu Agrssaigstlal te ...... -outlh >arb £1 lal I Appraisal gsatint ......

tracttanaf eiimmaat Mlamta .Cairo(Main PMait) Apgraisal lstimte Actual s.fssz Z ::zn:: .Alexamlria Actual

5S*t?UUE iii AtPut ! water Supply .Seweravee | E%t*"tANDtlS%ll l l ------

_ _ _r__il Estimae .._.. |tigtrugtipn nf Vpetatiennl I Trainin CUtgadn r I AeprsisalCstliace s I I1 Aprtual (Estmate) J J :

Actual I I I - a |ASliutWater Supply and I I j j SewerageSystem I Appraisal Estima - .. -____.__- I! Actual I I 5iZZZ3Sg3SU* Artisan Sector I i AppraisalEstimate ...... _ I.. Actual I I zzzz z;n::; A.GovernorateTaimnnt Nteds Aoerorastetstr ati eed------AActual I

Originl 01,191,7ctualtval 1 % rsa &~~~Oigia Actuat. .- NCgotiationq ODate ateof Clcsir Closirg D'0 Sle SCUedulod Effecct-Mess Ote Datce Effectveness - 76 - AM=X V Page 1 of 13

ARAB REPUBLICOF EGYPT MINWSTRYOF RECONSTRUCTIONAND STATE MISTRY FOR HOUSINGAND LAND RECLAMATION JOINT HOUSINGPROJECTS

The internationalconsulting firm DOXIADESconducted a study of low-incomepeople in Egypt, in collaborationwith the GeneralOrganization for PhysicalPlanning at the Ministryof Housing. The study was financedby the World Bank.

A workingGroup, the ProjectPreparation Unit (PPU) was formedto work out the low-incomehousing project in Cairo,Alexandria and Assiut,to be financedby the World Bank.

The study comuencedin March 1977, with an economicand development surveythe purposeof which was the initialselection of the three proposed citieswhere the projectwas to be implemented- Cairo,Alexandria and Assiut. Resultsof the study were submittedto the World Bank consultantwho approvedthem.

The study was conductedunder the supervisionof World Bank consultantswho visitedEgypt in three missions. Each missionwas formedof 5 or 6 consultantswho were specializedin architecturalplar.ning, economics and sociology.

The first missionvisited Egypt July 25 - August 12, 1977. The secondmission visited Egypt September19 - October 7, 1977. The third missionvisited Egypt November28 - December19, 1977.

The final reportwas submittedin draft to the third World Bank mission (November28 - December19, 1977)which approvedit. The final report was submittedin three volumesto the Ministryof Housing.

On the basis of this preliminarystudy, the World Bank drew up its AppraisalReport on June 6, 1978, coveringthe variousproject components, costs,financing method and the responsibleparties for project implementation.The preliminarystudy cost LE 250,000.

Thereuponthe Loan Agreementassigned on August 30, 1978, between the Governmentof the Arab Republicof Egypt and IBRD affiliate,the International DevelopmentAssociation, Credit 831-EGT. Three subsidiaryloan agreements were signedwith the Governoratesof Egypt,Alexandria and Assiut. -77- ANEX v Page 2 of 13

The Agreementbecame effective with the approvalof the Egyptian NationalAssembly on May 12, 1979. InitialProject costs were estimatedat $21 million.

Under this Agreement,the world Bank would assist in financingthe First Urban DevelopmentProject in Egyptby extendinga $14 million loan and the EgyptianGovernment would providethe equivalentof $7 million in Egyptian currencytowards project financing.

The Proiectis designedto:

1. Upgradeand developchree existing housing settlements (two in Cairo and one in Alexandria)haphazardly constructed and havinga total populationof 97,000people.

2. On-sitepreparation of about 4600 plots providedwith utilitiesand services(in Alexandriaand Assiut),designed to benefita population of about 23,000persons.

3. Assistsmall handicraftbusinesses by providingloans for workshop construction and procurement of equipment.

4. Improvewaste disposalby utilizingintermediate technological systemsin Cairo,Alexandria and Assiut.

5. RepairAssiut Water Supplyand Seweragesystems.

6. Upgradethe efficiencyof agenciesin the Governorates.

PartiesResponsible for ProjectExecution

i. Low-income Housing Development Unit. (Ministry of Housing). 2. NationalBank of Egypt. 3. Low-Income Housing Fund (replaced by Credit Foncier). 4. Ministry of Local Rule. 5. Handicraft Industries and Productive Cooperatives Organization. 6. National Water and Sanitary Drainage Authority. 7. The Governoratesof Cairo,Alexandria and Assiut.

ProjectDescription

1. Cairo Governorate

1.1 Upgrading an area of approximately 96 hectares occupied by 11,600 households (Main Settlement), an area of approximately 30 hectares occupied by 3000 households in Manshiet Nasser (Zabbaleen Settlement) and an area of approximately 23 hectares occupied by 3900 households in North Bassateen (Kala'a Settlement). - 78 -

9 ANNEX V Page 3 of 13

This includes:

a. Improvementof accestand circulationroads.

b. Improvementof water supplyfacilities by extendingthe existing network,provision of new equipmentand repairor replacementof existingequipment.

co Improvementof sanitationby reconstructingexisting cesspits, provisionof publicrestrooms and washroomsin ManshietNasser (ZabbaleenSettlement), and BassateenSettlement (Kala'a Settlement).

d. Extensionof the electricitysystem, including the provisionof additionalpower lines,transformers and street lighting.

e. Solid waste and garbagecollection in ManshietNasser and North Bassateen.

f. Provisionof new communityplots for housingand small businesses.

g. Improvementof facilitiesthrough the provisionof three primary schools,a secondaryschool for girls,a healthclinic, a joint communityand healthcenter, an open playgroundin Manshiet Nasser (Main Settlement).

h. Upgradingthe level of communityservices through the constructionof a primaryschool, a health clinicand a communitycenter in ManshietNasser (ZabbaleenSettlement).

i. Upgradingthe level of communityservices through the constructionof a primaryschool, a healthclinic, a cnmmunity centerand an open playgroundin North Bassateen(Kala'a Settlement).

j. Constructionand refurbishingof housirgthrough self-reliant effortsby providingconstruction inputs to the peoplein the aforementionedsettlements, and the constructionof model housingunits in ManshietNasser (ZabbaleenSettlement).

k. Provisionof a waste recyclingplant with a daily capacityof 35 tons, and anothertin-baling plant, which involvesimprovement of garbagecollection, and solid waste disposaland provisionof loans to repairand replacedonkey carts in ManshietNasser.

1.2 Constructionof a pilot refuserecycling plant in Shubra,with a 200-tondaily capacityto operateand improvesolid waste disposal services. - 79 - ANNEX V Page 4 of 13

2. AlexandriaGovernorate

2.1 Upgradingabout 11 hectaresoccupied by approximately1000 households in Naga'aEl-Arab which includes:

a. Improvementof accessand main roads.

b. Installationof water pipesand faucetsto improvepotable water facilities.

c. Provisionof above groundvented pit privies.

d. Installationof a transformerand expansionof the electricity powerstation to providestreet lightingand facilitate connectionsbeyond the residentialhousing area.

e. Improvementof refuseand solid waste collection.

f. Improvementof communityservices through the establishmentof a primaryschool, a healthclinic and a communitycenter in a..joiningsites to SouthMetras.

g. Provisionof ccastructionmaterials to enable the populationin the area to build theirown housesthemselves.

2.2 Provisionof sitesand servicesfor 1800 housingplots and 80 commercialplots over 15 hectaresin south Metras. This includes:

a. Land reclamationand preparation.

b. Provisionof utilityservices, including roads, potable water and sewerage.

c. Provisionof publicrest-rooms and water metres for residential units.

d. Communityservices, consisting of a primaryschool, a health clinicand a communitycenter.

e. Provisionof constructionmaterials for the peopleto construct theirhouses through self-reliant efforts.

2.3 Improvementof refusecollection and solid waste disposalin the low-incomehousing areas through:

a. Establishmentof an organizationfor streetcleaning, refuse and solidwaste disposal.

b. Enteringinto contractwith privaterefuse collectors to collect waste from low-incomeareas.

c. Establishingwaste depotsat which the above-mentioned contractorswould dump or sell such waste. - 80 -

ANNX V Page 5 of 13

d. Establisha pilot plant to make use of waste materialsand providedonkey-drawn carts for refusecollection and hand-carts for streetcleaning as well as workshopsites for repairand maintenanceof vehiclesand equipment.

3. AssiutGovernorate

3.1 Provisionof sites and servicesfor approximately2800 housingplots and 200 plots for the businesssector over an area of about 25 hectaresin SouthGharb El-Balad. This includes:

a. Land preparation.

b. Servicesand utilities,including roads, potable water and sewerage.

c. Restroomsand improvementof housingplots.

d. Communityservices, consisting of a primaryschool, a medical centerand a communitycenter.

e. Provisionof constructioninputs.

3.2 Action to providethe following:

a. Small businessloans of no more than LE 5000 per businessin the Projectarea for construction,procurement of equipmentand capital.

b. Trainingand provisionof technicalassistance to business entrepreneursin Projectareas in the management nd operation of small businesses.

c. Urgentvocational training of manpowerin the variousfields.

3.3 Rehabilitationof Water and Sewerageutilities in Assiut through:

Repairand rehabilitationof the water supplysystem in Assiut, includingpumping stations and the distributionnetwork, provision of the requiredvehicles, field servicesand equipmentto test, maintain and operatesuch networks.

3.4 Provisionof advisoryservices by IDA to the borrowerin the followingareas:

a. Projectdesign and execution. b. Preparationfor other urban developmentprojects. c. Improvementof the financial,accounting, administrative and organizationalmethods of the Low-incomeHousing Fund. - 81 - ANNEXV Page 6 of 13

Sites and ServicesProject in South Metras AlexandriaGovernorate

Developments

1. On October29, 1977, the GeneralOrganization for PhysicalPlanning 'GOPP),met in Cairo with the World Bank missionand proceededto the Project site for an on-the-spotinspection. Delivery of the land by the Coast Guard Authoritywas scheduledfor November3, 1977.

2. On November28, 1978, the local councilof Gharb El-Madina(West of the City) met with the Fishermen'sUnion in Anfoushiand Lake Maryutand agreed to allocatethis water surfaceto house the area's fishermen.

3. On March 31, 1970, the Governorate'sExecutive Committee issued a decreestating its approvalto allocate40 feddansin Lake Maryut for the Project,with the provisothat the beneficiarieswould be the fishermenof Lake Maryut,members of the AlexandriaFishermen Cooperative.

4. An examinationof previousplanning through the World Bank indicated that it was inappropriatefor the region,besides not adheringto the laws regulatingland division. AlexandriaGovernorate therefore conducted a study of the projectsite, and studiescontinued until the finalplans drawn in keepingwith the natureof the regionand the objectivesfor which they were designed,were approvedby the World Bank missionon December10, 1980.

5. The earth-fillingcomponent of the site was put up for public tenderingand the contractwas awardedto the TersanaCo. at a total value of LE 342,000. The companywas servedwith the order to proceedon October4, 1981 and it commencedits work, earth-filling11.5 feddansat a cost of LE 149,498before a halt was put to the Project.

6. Work on the Projectwas discontinuedfor a long time due to the obstaclesthat had emergedrelated to, among other things,the difficultyof foundationwork on weak earth-filledterrain and the high cost of foundations if pilingswere to be sunk.

7. The World Bank missiontherefore proposed three alternatives to the Governorateto selectone of them:

(i) Selectingan alternativesite to implementthe Project.

(ii) TransferringProject funds to establish a waste recycling plant.

(iii) Transferring the Project funds to the components of the other projectsin Cairo and AssiutGovernorates. - 82 - ANNEXV Page 6a of 13

8. On October5, 1982, AlexandriaGovernorate decided to transferthe Projectfunds to establisha waste compostingplant at a total cost of LE 2.5 million.

9. The bid submittedby the Britishfirm Mazerwell*to executethe Projectwas selected,and the contractwas signedon June 6, 1983.

* A transliterationfrom the Arabic. - 83 - ANNEXV Page 7 of :3

JAslutGovernorate

ProlectModifications*

Consequently,the ExecutiveUnit in the Governoratesuggested as a -_rststep that a one room with an ablutionunit on each plot shouldbe xnstructedand the foundationprovided for completionof the housingunit =cordingto the relevantmodel.

Such a proposalnaturally entailed a significantincrease in the =oject's initialcosts which could not be coveredby the World BAnk loan.

The situationbeing such, there was nothingto hold up executionof ae projectin its presentform and subsequentevaluation of the experiment. --at we believeis an obstacietoday, may well turn out to be insignificantin -tual practice,and the projectwould be one of the fruitsof cooperatior. *Ith internationalorganizations--attracting more such achievements. dLanningEfforts Preceding Finalization of ProjectPlans

_ The originalsites and servicesproject drawn by the consultingfirm E Doxiadesand the GOPP was examinedand found acceptablein terms of layout, -Atthe threeGovernorates could not accept it due to threereasons:

a. The East West perimeterswere perpendicularto the Naga'a Hamadi Canal (Al Silah previously),which was not in keepingwith the site acquisitionperimeters, since the counterpartperimeters inclined at an angle to this course,leaving a vacanttriangular area to the West of littleuse.

b. High tension132 KW electricalpower lines cut across the project, which obviouslyposed a directdanger to residentsin the area.

c. The unconventionalsewerage method prescribedthrough extension of main seweragelines on the plotsand withinblock perimeterswas considereda sourceof continuousmenace to the houses due to the possibilityof sewageoverflow and blockage,particularly in the light of inadequateawareness of the users in such areas.

Requestwas thereforenade for revisionof the generallayout plan ith due observanceof the above comments. The Unit receivedin November1979 ayout Plan No. Z from the pla'inersof the F.rst Project.

A studyof the layot.tplan indicatedthat it was a rush job that ailed to meet the standardsrequired for severalreasons, including multiple edestriancrossings at maiz roadsand multiplepathways leading to cul de acs, and unavailabilityof distinctlyresidential areas.

- TR's note: The Arabiczeroxed copy of this segmentis illegibleand was translatedwith some difficulty. - 84 - ANNEXV Page 8 of 13

3. The ExecutiveUnit in Assiut thereforerequested the ProjectAdvisor to preparea more appropriatelayout plan upon which a plan givingmore considerationto layoutprinciples was drawn and submittedto the Steering Committeeand the World Bank missionFebruary 1980. The World Bank mission approvedthe projectafter introducinga numberof non basic modifications, which includedopening or closingsome pathwaysand redistributionof services within the generalperimeters. Initialestimates of a numberof housingunit modelswere submittedto the World Bank missionduring its presencein Egypt.

E. The CentralDevelopment Unit drew up the ProjectChart includingthe proposedmodifications and dispatchedit at the end of March 1980 to the ExecutiveUnit which consideredthat the proposedmodifications added nothing new to the originalproject.

5. Tbk ExecutiveUnit in Assiut thereupondrew anotherlayout plan in which it dividedthe roads into three segments: main, secondaryand pedestrian,bearing in mind the Mission'srecommendations in reducingaccess pointsto currentlyunplanned areas in the vicinity. This layoutplan was submittedin May 1980 to the World Bank missionwhich approvedit.

6. In the interim,the ExecutiveUnit decidedto group the threeareas designatedfor popularhousing estimated at 19 feddansin one region,instead of their distributionin three disperseddirections, east, west and south. The projectsite was moved a distanceof 100 meters to the South,for observationof perimetersof site acquisitionto the south and west along the main road on the bank of Naga'aHamadi Canal.

7. A new layoutplan was drawn which was consideredas meetingalmost all the requiredlayout principles, including the divisionof vehicularaccess into two roads--10and 12 meters,apart from pedestriancrossings. Besides the Main ServicesCenters, subsidiary centers were also locatedwithin the housingcompounds. Provisionwas also made for developmentthrough the expansionof some verticalcore units. Seweragenetworks along'comparable lines to those for apartmentbuildings w.ere designed for the Project.

8. This plan was submittedto the World Bank mission in 1980,but the missionobjected to the modificationsas it was not convincedof the factors leadingto their introduction,prior approvalhave been given in May 1980. The missionrequested restoration of the Projectto iEs previousstatus quo regardlessof the constructionof the subsidiaryservice areas.

9. Thcughthe Unit was not convincedthat it shouldgive up the layout advantages of the October 1980 plan, it thought no more time should be lost in discussionsand acceptedthe projectsite: overlookingto the North a 50-meterwide road, bypassingthe electricallines, and to the West the main road along Naga'aHamadi Canal. Anotherlayout plan was drawn within these perimetersthe World Bank missionaccepted in December1980 with its recommendationto expand the schoolsite area againstreducing a maximumarea of 50 plots,and to attemptthe constructionof verticalcore units on a maximum of 50 plots providedno assistanceshall be grantedfrom the loan, and give free of chargea numberof plots. - 85 - ANNEXV Page 9 of 13

10. The presentlayout plan representingthe agreedon pointsbetween the Unit and the World Bank Missionwas drawn and finalizedin February/March 1981. The relevantinfrastructure plans--sewerage, water, roads,electricity were designedand submittedto the Missionin March 1981,with the initial estimateefor the constructionof the housingunits and executionof infrastructure.The Billsof Quantit.es and sourcesof additionalfunding were also submittedand the missionconsidered these steps as a promising beginningfor Projectexecution. - 86 -

ANNEXV Page 10 of 13

Agreements

On February24, 1979,a subsidiaryagreement was signedbetween the Governmentof the Arab Republicof Egypt,represented by the Ministryof Economyand the Low IncomeHousing Fund to deposit proceedsof the loan and other fundsmade availableby the Governmentto the Projectunder the State Budgets. The Fund shallbe responsiblebefore the ExecutiveAgency for Joint HousingProjects, the Governoratesand the other agenciesinvolved in covering the Project'sfunding requirements and disbursements.

On May 27, 1979, an agreementwas signedbetween the Low Income HousingFund and the CreditFoncier Egyptien, whereby the Fund delegatedand entrustedthe CreditFoncier to undertakeits obligationsset forth in the subsidiaryagreement signed on February24, 1979 betweenthe Egyptian Governmentand the Fund.

Upon enactmentof Law No. 43 of 1979 establishingthe systemof Local Rule and its provisionfor the abolitiono£ the Fund, MinisterialDecree No. 405 of 1979, dated December5, 1979 was issued,stipulating that the Executive Agency for JointHousing Projects will assume the tasksand responsibilities of implementingthe DevelopmentLoan Agreementin placeof the abolishedFund, and that the ExecutiveAgency for Joint HousingProjects will replacethe Fund in the agreementsigned with the CreditToncier Egyptien on May 27, 1979.

Therefore,an agreementwas signedon December16, 1979 betweenthe ExecutiveAgency for JointHousing Projects and the CreditFoncier Egyptien by virtue of which the ExecutiveAgency for Joint HousingProjects replaced the Low IncomeHousing Fund abolishedunder Law No. 43 of 1979. -87-

Page 11 of 13

Ref. No. 781 May 6, 1979

Chairman of the Board of Directors Credit Foncie' Egyptien

This is in reference to your letter dated 15 March 1979, reporting the Credit Foncier's Board approval on February 28, 1979, of the draft agreement drawn between it and the Fund under which Credit Foncier would discharge all or part of the Fund's obligations pertaining to the Project under the IDA loan extended to the Arab Republic of Egypt.

I have the honor to inform you that the draft agreement was submitted to the Fund's Board of Directors a.. its meeting on March 27, 1979, and the Board decided to approve it. Credit Foncier shall thereby discharge all Fund obligations set forth in the subsidiary loan agreement signed between the Governmentand the Fund and in conformity with the conditions set forth in the draft agreement with Credit Foncier. The Board of Directors' approval contained the following points:

1. Article 7 of the Draft Agreement means that the 2% service fee shall be payable on amounts which Credit Foncier shall actually disburse on account of the Project from the loan proceeds and budget allocations, and not on the balance of amounts deposited by the Fund with Credit Foncier. This is to avoid any confusion in this connection.

2. Credit Foncier shall pay the prevailing interest rate on Fund balances remaining in the Project Account longer than 15 days.

The Ministry of Housing has endorsed the resolutions of the Board adopted at the aformentionedmeeting in his letter Ref. No. 694 dated May 5, 1979.

The Fund hopes to receive confirmation of your understanding of Article 7 as above indicated and your approval of the statement in item 2, so that the time and place for signing the agreement can be decided upon.

With assurances of our esteem.

Undersecretaryof the Ministry Fund General Manager Saad Mohammed Helmy ANNEXV Page 12 of 13

Credit Foncier Egyptien

May 14, 1985 Cairo

The Undersecretary General Manager of tne Low-Income Housing Fund

This is in reference to your letter No. 781 dated May 6, 1979 concerning Credit Foncier's discharge of all obligations of the fund set forth in the Subsidiary Loan Agr,ament between the Government and the Fund and in conformity with the conditions set forth in the draft agreement with Credit Foncier, and the Fund's Board approval on 27 March 1979.

I have the honor to state hereafter our understanding of Article 7 of the Draft of Agre-ment:

The 2% service fee shall be charged on all payments debited to the Project Account, regardless of whether directly disbursed by Credit Foncier or by other entities and debited to the Project Account.

Concerning interest on the Current Account, Credit Foncier has no objection to pay interest according to the rates determined by the Central Bank of Egypt on any amounts credited to the Project Account, which the responsible parties wish to keep in term of deposits.

With assurances of my esteem.

Signature Credit Foncier - 89 -

ANNEX V Page 13 of 13

Ministryof Reconstructionand State Ministryfo- Housingand Land Reclamation Joint HousingProjects

Establishmentof the ExecutiveAgency for Joint HousingProjects and its Units

PresidentialDecree No. 48 of 1979 was issuedinstituting the ExecutiveAgency for Joint HousingProjects at the Ministryof Housing,to undertakethe executionof housingprojects in conformity with the agreementssigned with foreigngovernments and the internationalauthority concerned with housingaffairs.

MinisterialDecree No. 36 of 1979 was issued,establishing the SteeringCommittee at the Ministryof Housing,and assigningit the task of supervising,coordinating, monitoring and renderingtechnical assistanceto housingprojects and developmentfinanced by the InternationalBank for Reconstructionand Development.

Decre!eNo. 1 of 1979 of the Chairmanof the ExecutiveAgency for Joint HousingProjects was issued,instituting a CentralUnit for Low-IncomeHousing Development and assigningit the task of assisting the SteeringCommittee formed in conformitywith MinisterialDecree No, 36 of 1979, in supervisingthe executionof the First Urban DevelopmentProject in Egypt. MAP SECTION IBRD13443 (PC

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