Z-Al _•&O5 ' c6 7 Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No, 11107-EGT

STAFF APPRAISAL REPORT Public Disclosure Authorized EGYPT

PRIVATE SECTORTOURISM INFRASTRUCTURE AND ENVIRONMENTALMANAGEENT PROJECT

NOVEMBER20, 1992 Public Disclosure Authorized IjNTERALDOUMETS UNIT - 814151X341

Infrastructure Operations Division Privatization & Project Planning Country Department II Cofinancing and Financial Public Disclosure Authorized Middle East and North Africa Region Advisory Services

Tbi document has a resticted disribution and may be usd by recpients ondy in de pedonnanceof thei officiad duties Its contents may not odtewise be disosed witbout Wodd Bank authodzabon. CURRENCY EQUIVALENTS (Ai of July 1, 1992)

Currency Unit = Egyptian Pound (LE) = 100 Piasters = 1000Miliemes LE 1.0 = US$0.3 US$1.0 = LE 3.33

WEIGHTS AND MEASURES

km (kilometer) 0.62 miles m3 (cubic meter) = 35.31cubic feet I/s (litersper second) = 22,800 US gallonsper day

GLOSSARY OF ABBREVIATIONS AC - AffiliatedCompany ASD - Abu Soma DevelopmentCompany CZM - CoastalZone Management EEAA - Egyptian EnvironmentalAffairs Agency EGOTH - Egypitan General Organizationfor Tourism and Hotels EIA - EnvironmentalImpact Assessment ERSAP - Economic Reform and StructuralAdjustment Program GDP - Gross Domestic Product GEF - Global EnvironmentalFacility COAC - Central Organizationfor Auditingand Control GNP - Gross National Product GOE - Government of Egypt GOP - Gross OoeratingProfit HC - Holding Company IBRD - InternationalBank for Reconstructionand Development ICB - InternationalCompetitive Bidding IDA - InternationalDevelopment Association IFC - InternationalFmiance Corporation IMF - InternationalMonetary Fund LCB - Local CompetitiveBidding MOT - Ministry of Tourism OECD - Organi-.tion for Economic Cooperationand Development SHBD - Sahl Hasheesh Bay DevelopmentCompany SOE - Statementof Expenditure TDA - Tourism DevelopmentAuthority TSHC - Tourism Sector Holding Company UNDP - United Nations DevelopmentProgram USAID - United States Agencyfor InternationalDevelopment FISCAL-YEAR

July 1 - June 30 FOROMCiAL USEOnLY EGYPT STAFF APPRAISAL REPORT PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTALMANAGEMENT PROJECT Tableof Contents

LOANAND PROJECT SUMMARY ...... i L THEI ECONOMY% ...... 1 II. THETOURISM SECITOR ...... 1 A. Tourismin theEconomy ...... 1 B. TheTourisln Market ...... 3 C. InstitutionalSetting ...... 4 D. Constraintsin the Sectur...... 5 E. Torisn Strtegy ...... 9 F. PastInvolvement of the BankGroup ...... 10 0. RationaleFor Bank Involvetnent ... . . 10

IIm THE PROJECT...... 1 1 A. ProjectObjectives . . . 1 11 B. ProjectDescription ...... C. DetailedFeatues .. . 12 D. ProjectCost and Financing Plan . . . 18 E. Procureent and Disbursenint...... 22 F. ProjectSupervision and Monitoring ...... 25 IV. THE IMPLEMENTINGAGENCY ...... 26 A. Organizationand Management ...... 26 B. Staffing...... 26 C FinancialPosition of TDA ...... 27 D. Accountingand Auditing ...... 28

This report w s prepared by Ms. Minh Chau Nguyen and Mr. Arun Banerjee (Task Managers),Mr. Albert Pelteldan(Sr. MunicipalEngineer), Ms. Abha Joshi-Ghani,Mr. Ranzi Al-Bader(Fmancial Officers), Ms. MeriwetherWilson and Mr. JonathanWager (EnvironmentSpecialists). Secrtaial assistancewas provided by Mrs.rInin Mahase.The report has been reviewedby Messrs.Michel Pomnier (CODOP),Enile Sawaya(MN2IE), and DhananjayaKumar (EMTIE).

Thisdocument ha a restictd distibutionad maybe usedby tocipientsonly in the perormance Ioftheir offlciadduties Is contentsmay not othewinebe disclosedwithout World Bank authorization. V. PROJECT JIJSTIFICATION...... 8 A. ProjectBenefits ...... 8 B. Financialand Economic Analysis ...... 29 C. ProjectRisks...... 36 D. EnvironnentalIn p a c t ...... 3 6 VI. SUMMARYOF AGREEMENTSAND RECOMMENDATIONS.. 37 Annexes

Annex1 " MinisterialJurisdiction Over Tourism Annex2 - Termsof Referencefor LandAllocadon Study Annex3 - Termsof Referencefor TrafficControl, Navigadon, and SafetySystenm Annex 4 - Abu Soma DevelopmentCompany Annex5 - Sahl Hasheesh DevelopmentCompany Annex6 - Infastructre Developmentin the Red SeaCoast and for NileCruises Annex7 - ProjectInplementation Schedule and MonitoringPlan Annex 8 - Project DisbursementSchedule Annex 9 - Project SupervisionForecast Annex 10- TourismDevelopment Authority: Organization and Function Annex11 - EconomicAnalysis of Red SeaInfrastuctre and NileCruise Annex12 Sununaryof EnvironmentalAssessment MIN IBRDNo. 24046 IBRDNo. 24047 ApprovingRegional Vice President : Mr. CaioKoch-Weser ApprovingDirector Mr. RamK. Chopra ApprovingDivision Chief : Mr. AlastairJ. McKechnie EGYPr PRIVATESECTOR TOURISM INFRASTRUCTURE ANDENVIRONMENTAL MANAGEMENT PROJECT Loan and Project Summary TourismDevelopment Authority (IDA) Guarantor Arab Republicof Egypt BendiciazkI TDA, Private Sector, Egyptian Environmental Affairs Agency (EEAA),Red Sea Govenoat LoanAmouK. US$130million equivalent Tenns:~ 20 years, including a 5-year grace period, at the Bank's stdard variableinterest rae O 1lndingI: lmThe Loan would be made to TDA at the Bank's standardvariable interestmte. TDAwould onlend the prceeds to eligibleprivate sector sub-projectsfor 15 years,including S years of grace at the Bank's stdard variable rate plus a margin of 200 basis points, and an additional100 basis points for a suboinated loan.

.DPMDegtdon; ITheProject would consist of. (a) implementaton of measuresto improvethe policy envionment in the tourismsectr; (b) financial supportfor. (i) fte developmentof infrtct for two integated area developmentsub-projects in the gmenfild sites on the Red Sea coast (Ras Abu Soma and Sahl Hlsheesh) sponsord by two private companies;(ii) the provisionof viamersupply, sewenge, solid waste collectionand disposalfacilites for ex :ting touist sorts on theRed Sea Coast (SouthHurghada to Safagaarea) by the privatesectr, (ffl) th construcdonof additionalberthing faciities for Nilecruises at two majorand four minorsites by the privatesector, and (iv)imprvemen -of tic and navigationfacilites andaccess to touist sites in the Nile valley by the public sector, (c) development of a coastal zone envmental managementplan and inidatingthe implementatonof the plan for the Red Sea coast, under the auspices of the Global Environmental Facility (GEF); and (d) provision of technical assistanceto TDAand trainingfor TDA,EEAA, and local govenorate staff. kn@flza: The Project wouldsupport the Goverment of Egypt (GOE) in the formulationand implemenion of a strategyand policy framework for the developmentof one of the most important sectors in the Egypdaneconmy. The Projectwould also assistin the development and sMngthening of an instituidonalframework which would ensure that all further developments in the sector take place in an environmentallysound manner. Additionalbenefits would be: (a)

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improvedopportumities for private sector investmentsin the tourism industry, (b) higher foreign exchangeearnings for the country; (c) increasedemployment both in the tourismindustry itself, as well as in industrieswhich serve tourism;and (d) aresting the environmental degradationtaldng place In someof the adjoiningtourism areas. lhe Project would have a demonstradoneffect in mobilizingthe private sector for financing,building and opeating infrastructurewhich has raditionallybeen underaken by the Govemment. If successful,the *eperiencewould be valuablefor GOE in promodngprivate sector partcipaton in public servicesin other sectors. The Project would also make a significantcontribution to the global achievementsin protectingcoral reefs, endemic island wild life and diverse marine environmentsdough the GEF component. Once fully developedby about year 2002, the Project would generateincremental foreign exchangereceipts of aboutUS$380 million per year in constanttenns and providedirect employment to about 12,000 people, and idirect employmentto about20,000 pople. Ricsh: The implementationof the Project will be complex, with a need to coordinate the actions of many parties: ministries, agencies, goveromes, commercialbanks, private investors,and contctors. Giventhe dispersd natureof the work,there ae somerisks of delays i implementaIon. The areas to be developedunder the Project e evironmentallysensitive and musttherefoe be proected againstany possibies of environmentaldegrdaton The strengening of TMA being undertaken under the Project would ensure an integrated approachto the developmentof the toursm sector as a whole and wouldpardcularly focus on achievingcoordinin amongthe %arious pardes involvedin the Project Steps ae being taken to ensure that TDA is staffed with suitablyqualified professionals in critical areas and arrangementshave been made so that the Projeci, at least in the intial stages,would be closelysupevised by the Banlk The private sectorwould be implementingmajor parts of the Projectand sinceit is within their interest to completeconstruction on time, this should minimize delays in project implementation. The environment componentof the Projecthas beendeigned specificallyto mitgate the environmentalrisks inherentin lage tourismdevelopments in coastal Proiect Cgst: Local oeign Total Lwal Eoreign Tal (LEMilion) (USSMillion) AreaDevelopment in GreenfiekSites RasAbu Soma 654.30 408.52 1,062.82 196.49 122.68 319.17 SahlHasheesh 401.47 201.27 602.74 120.56 60.44 181.00 WorkingCapital 2658 26.61 53.19 7.98 7.99 15.97

Sub-total 1,08235 636.40 1,718.75 325.03 191.11 516.14 nfastructureDevelopment in ExistingTouism Areas Nile Cmuises 61.90 28.90 90.80 18.59 8.68 27.27 RedSea 21.53 42.96 64.49 6A7 12.90 1937 Sub-total 83.43 71.86 153.29 25.05 21.58 46.63 ESuionmentalManagement 3.26 15.82 19.08 0.98 4 75 5.73 TechnicalAssistance 5.04 11.70 16.75 1.52 3.52 5.03

TotalBse Cost 1,174.08 735.78 1,909.86 352.58 220.95 573.53 PhysicalContingencies 79.18 6539 144.58 23.78 19.64 43.42 PriceContingencies 329.15 124.99 454.14 98.84 37.53 13638

TOTALPROJECT COST 1,582.42 926.16 2,50858 475.20 278.13 75333 IDCon BankLoan 1031 4933 59.64 3.10 14.81 17.91 IDCon O0t Loans 81.77 3036 112.13 24.56 9.12 33.67

TOTALFINANCING REQUIRED 1,674.50 1,005.85 2,680.34 50285 302.06 804.91 FmaCing Plaxl

Lfai flJ$sEmMgalmilluion IBRD 22 108 130 PrivateSector Equity 229 101 330 CommercialBanks 212 . 88 300 Gomait 40 - 40 GEP - 5 5

TarAL 503 302 805 Pisbmenxlnt EY3 E9 EX9 EX EX2Z E98 EY2 FY200

Anmu (US$ M) 0.9 11.0 18.2 23.2 32.6 22.7 16.2 5.2 Cumuladtve(US$ M) 0.9 11.9 30.1 53.3 859 108.6 124.8 130.0 Cumuladw (%) 0.7 9.0 23.1 41.0 66.0 83A 96.0 100.0

EgimaBk Econoinc Rates o£fRebI 11% to 27% EGYPT PRIVATESECTOR TOURISM IFRSTRUCTVRE ANDENVIRONMENTAL MANAGEMENT PROJECT I. rHE ECONOMY

1.01 Egypthas nearly55 millioninhabitants with an averageper capitaGNP estimatedat US$620for 1990/91.Over the last fourdecades and untl veryrecently, Egypt has pursueda public- sector-ledand inwardlooldng development stategy. The economyhas been affectedby resource misallocation,stemming from a legacy of central planning, excessive state intervention,and ineffectivepublic management of productiveassets. The incentivesystem was distorted,reflecting a multitudeof price,foreign exchange and tradecontrols. The publicsector representing 60% of total investnents, 80% of manufactred exports, and 40% of GDP has weak financial performance, deteioratingfactor productivity, and lowefficiency in investment.Inadequate policy adjustments for dealingwith thesestructural problems resulted in substantialmacroecononic imbalances. Between mid-1970'sand up till late 1980'sthe Govemmentof Egypt's(GOE) overall budgetary deficit was over 20% of GDP annually. Egyptincreasingly relied on externalborrowings to meet its budgetary deficits. As a result,Egypt experienced an unmanageableexternal debt burdenexceeding 150% of GDP and highdomestic inflation. Realizingthe needfor fundamentalchanges in economicpolicies, GOE has adoptedan econonic refonr and structal adjustnentprogram (ERSAP) in March 1990 with the objectiveof achievingsustainable economic growth and inprovement of thecountry's living standards. 1.02 ERSAPfocuses on ftfreeareas: (a) stabilizationto restoremacroeconomic balance and reduce inflation; (b) structural adjustmentto stimulatemedium and long term growth; and (c) modificationof currentsocil policiesto ninimizethe effectof economicreforms on the poor. These measureswere supportedby an DIP Standby,an IBRDStrucural AdjustmentLoan, exceptional debt relief grantedby the Paris Club, and a SocialFund for De 'lopmentProject financed by IDA and otherdonors. The stabilizationand adjustmentprogram provides an economicframework for restoringeconomic equilibrium and reorientingthe economy to a maket basedsystem. 1.03 Egypt's econoniicperformance in FY91and in the first half of FY92has been better thar wasanticipated a year ago. Prmnary estmatesindicate that thereal GDP increasedby about 2% in FY91,compared with a projecteddecline of 1.5%. The inflationrate whichrose from 16%in FY89 to over 20% in FY90,remained in the rangeof 15%in FY91. Althoughthe inflationrate is esmated at 21% for FY92, ihepace of priceincrease has deceleratedsharply in secondhalf of FY92 (under10 % in the 12 monthstirough June 92). Also,the balanceof paymenthas beensignificantly stronger an waeprojected a yearago. The currentaccount balance (including transfers) is estimated to haveshifted from a deficitof US$2.6billion in FY90,to a surplusof US$2.4billion in FY91,and an estmated surplusof US$2.6billion in FY92. This has beenachieved mainly because of the debt servicerelief that was grnted to Egyptby the Paris Club,increases in foreignexchange revenues from touism, workers'renittances, Suez Canaldues, and petroleumexports, together with lower imports. IL THETOURISM SECTOR A. Tourism in tLe Economy 2.01 Egypthas considerablepotential for developingits tourismsector. It is endowedwith historicalmonuments and landmaks coveringseveral millennia which brings together in a relatvely smallarea histocal monumentsof thep-Chisan, Christian,and Islainc civilizatons.In addition, -2-

Egypt enjoysa coastlineof about2,700 km, on both the Mediteraean and the Red Sea, most of whichremains underexploited. These are furtherenhanced by mild weatherfor at least 8 monthsof the year. 2.02 Duringthe 1950sand early 1960sthe tourismsector received substantial attention. However,this supportsoftened as the developmentemphasis shifted to the industrialsector. The deteriorationin the tourism industry was furtheraggravated by the war of 1967 and continued hostilites for about 10 yearsuntil the PeaceAgreement Duringthis period,the influxof touriststo Egyptdeclined substantially. The qualityof servicesreached the lowestlevel as the infrastructurefor transpor, accomnodationand servicesfor touists deteriorated.The changein thenational econonic philosophycoupled with the signingof the PeaceAgreement in the mid-seventies,brought with it increasedemphasis on tourism,In addition,the Ministryof Tourismadopted in the mid-eightiesan aggressivepolicy whichaimed to liberalizethe tourismsector and encouragea greaterrole for the private sector in tourismdevelopment As a result, the numberof hotelsincreased, facilities for servicingthe tourism sector improvedand the number of arrivals rose substantiallyrelative to previousdecades. This was furtherassisted by a liberalizedcivil aviationpolicy and effortstowards diversificationof Egyptiantourism from a culural destinationto a combinedleisure and cultural ataton. 2.03 Between 1985 and 1989, tourism in Egypt, as measured by the number of internationalarrivals, grew on averageby about13.6% per annun, muchhigher than worldtourism which grew at an average annualrate of about 5.9% during the same period.t Prom being the smallestcontributor to foreignexchange ningsof aboutUS$300 milion in 1986,tourinsm receipts reachedUS$0.9 billion in 1990/91,placing the industryin secondplace after workers'remittances, but aheadof SuezCanal revenues and revenuesfrom oil exports.In addition,Egypt has considerably more domesticcontrol over the generatonof foreignexchange through tourism which has showna greaterresponsiveness to favorabledomestic policies compared to othersources of foreignexchange. As an illus on, the 37%exchange rate depreciationin May 1987coincided with a 28%increase in tourist arivals, a 34% increasein nights spent in Egypt and a 133%increase in recordedtourist receiptsin 1987/1988over the previous year. In 1991/92,tourism recepts reachedUS$1.8 billion. 2.04 Apartfrom being an importantforeign exchange eamer, tourism development also has a substandalimpact on employmentin othersectors such as transport,food industry, textiles, cottage industryand the smallscale informalsectors in manufacturingand serviceswhich are particularly labor-intensive.This is especiallyrelevant with the currentproblem of growingunemployment and the need to redeployredundant labor frm govement and public ownedenteprises. Direct and indirectemployment in the tourismsector is estmated at 250,000. This is based on estimatesof 60,000 employedin the hotel sector, 15,000in travel agencies, 10,000in restaurants,20,000 in tourism-relatedretail trade and some 500 tour guides,the remaining145,000 or so being indirect employment About 17%of the workforce in tourismare women,which is higherthan the national averageof 12%. 2.05 The inportance of the tourismsector becomes even more evidentover the coming yearsdue to uncertaintiesin othermajor sources such as workers'remittances, oil exportsand Suez Canalfees, which are all likelyto expandat slowerrates. Althoughtounsm still contributes less than 2% of GDP,it has beenthe fastestgrowing sector in the economysince 1987. The opporunitiesfor increasingits contributionto the economyare excellentgiven the country's unique but under- exloited touristpo"dal.

ntnainl ToudsmReport, No., 1991, Ecnomit Intigen Unk -3-

B. The TourismMarket 2.06 Tourismto Egyptoriginates from two distinctmarkets: Arab and foreign. The Arab marketconsists of visitorsfrom Saudi Arabia,Kuwait, Libya and Sudanwho accountedfor about 32%of Egypt'stourism market in 1990. The foreignmarket is dominatedby visitorsfrom Europe, mosdyfrom Germany,France, the UnitedKingdom and Italy. Theseaccounted for about43% of Egypt'stourists in 1990. Only in three long haul marketshas Egypt built up a significantmarket share: the USA,Japan and Australia. Tourism arrivals are evenly spaced betweenthe summer months (April - September) and winter (October - March). Growth in tourist anrivalsand in touxist nightsin the pastfew yearsis sunmmizedby mainregion of originin Table 1. However,the overall averageincrease in arrivalsof 44.9%between 1987 and 1990masks regional variations. The Arab countriesof the MiddleEast grew most rapidly as a source,with Europe ard the Americasjust below average.

Table:I Trends in F.Vnt Tnunim bv OQi 1987-90('0G,) change 19V 1988 1989 1990 1987-90 A. From: - MdiddleEast 477.6 469.0 731A 829.4 73.8 -Africa 1923 204.8 238.5 326.6 69.8 - Americas 149.0 164.1 200.5 179.1 20.2 - Europe 863.0 1011.7 1188.8 11232 30.1 - Asia-Pacific 112.1 119.2 143.4 141.0 25.8 ..(0her - 0.3 0.7 0.8 0.8 166.7 TotalaJ 1794.9 1969.5 25034 2600.1 44.9 From: - MfiddleEast S.42 5.58 7.72 725 33.7 -Afica 2.40 2.19 2.05 2.51 4. , ..* - Americas 0.95 1.05 1.27 1.18 242 - Eurqpe 6.23 8.04 8.52 7.90 26.8 - Asia-Pacific X 0.86 1.00 1.01 1.10 27.9 -Other 0.01 0.01 0.01 0.01 - Total/A 15.86 17.86 20.58 19.94 25.7 /ATotas may not add up due to rounding Source:oisxy OfTourism

2.07 The majorityof touristsare on leisuretrips rather than business, and an estimated90% are attacted to the countryby the historicalatractions of the Nilevalley. In general,most visitors take one of a varietyof trips alongthe Nile Valleybetween Cairo, Luxor, Aswan and Abu SimbeL The traditional"cultural" visits, however, do not bring aboutrepeat touinsm. Recent government policyhas beenoriented towards trying to spreadtourism more evenlythroughout the countryrather thancontinuing to concentae heavilyon the trditional historicsites of theNile valley. Implicitin the policyis diversificationby providingnew toursm products,which would allow Egypt to appealto a muchwider overseas market than has been possible in the past. The coastinesalong the Red Seaand theGulf of Aqabaare being increasingly promoted for leisuretourism. In recentyears there has been a rapid expansionin hotelsand tourism facili8es along the Red Seacoast near the Southof Hurghada and alongthe coastof the Gulf of Aqaba.This has begunto atract a numberof visitorsfor sea coast tourismas wel as those whose main pursuit is diving. This is a relativelyspecalized, though -4-

potentiallylucrative market, and rapid ratesof growthhave been achieved due to the low base from whichit began. Althoughthe competitionin the marketis strongfrom comparable Mediterranean destinationssuch as Morocco,Tunisia, Greece and Turkey, Egypt has an advantageover these destinationsin terms of a longer season lasting for eight to nine months of the year. Another specialzed segmentof the tourismmaket whichhas recendyacquired prominence in Cairois that associatedwith conferenceand incentivetravel. There are a numberof possiblevenues in Cairo whichcan accommodatelarge conferences. Statistics sugjest thatthere may be some30,000 visitors per annumin thissegment of the market.

2.Ob Undlthe Gulf crisis intervernd, tourism in Egyptwas enjoying a periodof exceptional expansion.This wasdue partlyto theli ion policyand partlyto the strongeconomic growth duringthe 1980s.in the OECDorigin countries. As a resultof the Gulf Crisis,growth has slowed downand tourismarrivals in 1990were close to the 1989levels of 2.5 millionarrivals and about20 million nights. Like other tourismdestinations, Egypt is vulnerableto politicalinstability in the region. However,Egypt's tourism sector has shownunusual resilience. Signs of recoveryafter the Gulf crisis are apparent,with tourist arrivalsduring the 1991summer season surpassing the 1989 levelby about 25%. 2.09 Internationaltourism is projectedto grow at a rate of 5% per annumin the 1990s comparedto about6% duringthe latterhalf of the 80s,and to becomethe largestsingle item in world tradeby theend of thecentury. This lower rate of growthis due to theprojected slowing of economic growthin OECDcountries. It is thereforeexpected that tounsmgrowth in Egyptwould slow down reflectng worldmarket trends. Assumingthat Egypt wil only maintainits shareof worldtounsm at 0.6%,tourist arrivals would increase from 2.6 nmllionin 1990to over4.2 millionby the year 2000. This translatesinto a needfor approely 40,000additional hotel rooms by the end of this decade. If the developmentof coastalresorts to accomnmodateleisure tourism is successful,it is possiblethat Egypt couldcapture a larger shareof the world toursm marketprovided Egypt maintains a stable political and economicenvironment, and major constraintsto the developmentof the sector are adequatelyaddressed.

C. Institonal Setting 2.10 The Ministryof Tourism(MOT) is the mainauthority dealing with tourismin Egypt. Like most other governmentorgamzations, MOT suffersfrom over staffing,low staff motivation, and inadequatetechnical capability. In cognizanceof thesedeficiencies, MOT is beingstreamlined to improveefficiency and strengthenits technicalexpertise in supportof a private-sector-ledtounsm developmentstatewgy, to be competitvewith neighboring counties, and to protectthe unique cultural and natual resourcesin Egyptfrom ervironmental degrdation. The first step has beenthe creation of the TourismDevelopment Unit (IDU) in MOTby a ministerialdecree in 1989. TDU has been tansformed into the TourismDevelopment Authority (IDA) by a presidentialdecree in September 1991, to becomean autonomousagency with the requiredjurisdictional authority over tourism developmentare. TDAdraws on pnvatesector expertse to carty out nationaltourism development plans,and to guideand promote increased private sector investments in the sector. Thesechanges are expectedto providethe sectorwith a strongerinstitutional framework for coherent,private sector orientedand environmentally sound tourism development. 2.11 MOTalso overseesthe followingpublic sector organizations:(a) EgyptianGeneral Authorityfor Promotionof Tourismresponsible for promotingtourism in both interational and domesticmarkets; (b) Public Authorityfor ConferenceCenters for managementof conference centers under MOVsjurisdiction; and (c) TourismDevelopment Authority. Under Law 203, the PublicTourism Authority, which was underthe supervisionof MOTin the past, becamea holding companyin May 1992for the sectorand consistsof the followingaffiliated companies: (i) Egyptian .5-

GeneralOrganization for Tourismand Hotels (EGOTH)(ii) Misr TravelCompany (iii) Egyptian Hotels Company(iv) Misr Hotels (v) Grand Hotels of Egypt. These affiliated companiesare expectedto be graduallyrestructured and privatized under the Govemment'sprivatization policy. D. Constraints in the Sector Long-Tern Planning 2.12 The planningcapabilities of MOTare inadequatein termsof providingthe integrated plans neededfor the developmentof the sector. The tourismsector, despite its contributionto the economy,lacks the databaseneeded for indicativeplanning and investmentby private and public sectors. Data on tourist arrivals,length of stay, types of tourist are incompleteand inaccurate. Expendituresby tourist class and activity are virtuallynon-existent. Investmentexpenditure by project and the source of financingfor each item are unavailable,as are employmentstatistics. Planningfor the sectoris basedon globalfigures and the interfaceat the planningstage between the physicaland financialaspects is particularlyweak. Overallplans for investmentsare drawn without adequateattention to the impactof the plannedoutlays on the nationalbudget. Inflationrates are underestimated,which results in significantdifferences between planned and actualinvestments. In view of the emphasisand the increased reliaice on private investments,the sector planning responsibilityhas beenvested in TDA whichwould be reinforcedunder the proposedProject to: (a) providereLiable information on thesector particularly for investmentplanning; (b) strengthenland use andenvironmental planning functions; and (c) ensurethat public andprivate sectorinvestments are conplementary.

XndMaateEraMLd fj P=rnjtigCompettio 2.13 ricing Policies. MOT is required by law to rate all tourist establishmentsin accordancewith the levelof service,and to approvethe pricesfor services.In determiningthe prices of services,MOT confers with the Chambersof Hoteland Tour Agents in orderto set theprices for the year, based on suggestionspresented by ownersand managers.2 In the past,the triff leveland suucturefor hotelswere detemined by takinginto accountthe coststructure and revenue requirement of each categoryof hotels. Thesetariffs tendedto be set at levelsthat werepegged to the lowest performers which promoted inefficiencywithin the sector antdacted as a disincentivefor the imrovementof productivityand better management In April 1992,the Minister of Tourismissued a decreeto removethe ceilingon pricesof each gradeof hoteis. However,the minimumprice level was stillmaintained in orderto protectlower category hotels from price wars durmg the leanseasons. Hotelsare allowedto set pricesfor food,beverages and services. However,they sdll haveto seek approvalfrom MOT. Whilethe Government'sintention is to protectconsumers and ownersof two and three star hotels,MOT"s intervention may create barriers to entryto the sector,and subjectsthe pnvatesector to cumbersomeprocedures that affectthe improvementof productivityand efficiency. 2.14 The pricespaid in the tourismsector for someinputs, e.g., electricity,sewerage and, watersupply, etc., are not based on the real cost of the resourcesto the economy. Differenthotels incorporatedunder the variouslaws pay differentprices. Law 230 hotelspay economicprices for

2 Hotelrooms are priced in US Dollarsfor three,four and fivestar hotelsand in Egyptianpounds for one and twosas. Hotelsare allowedto givediscounts to groupsand travelagents. These discounts are not allowed to exceed50% of the"rack rae" approved by MOT. Egyptiannationals and residents are givena mandatory discount of 40%, to encouragedomestic tourism. Food and beveragepricing is based on actual cost of ingredientsplus a profit marginthat varies accordingto the rating of the establishment. Pticing of ground ifInsportationis also presentedfor approvalto MOT. Busesare gradedby categoryand rates are set for each category. -6- electricity and water, and others pay, subsidizedprices. Costs for municipal services, site improvement,are all borne by the publicsector through the municipalitiesor the variousministries withoutproviswn for recoveringthese costs from the hotelsand their patrons. The adjustmentof factorprices to reflecttheir market determined prices coupled with the deregulationof the tariffsfor the servicesprovided by the hotels, wouldprovide the mostreliable measures for determiningthe viability3f eachof thehotels and signalthe needfor restructuringshould the financial performance of the hotelsbe deemedunsatisfactory. The inputpricing distortion is beingaddressed under the SAL and outputpricing would be coveredunder the proposed Project (para. 3.04). 2.15 MuftliciU gafLaws. Competitionin the Wconomyas a wholehas been hinderedby the multiplicityof laws governingthe activitiesto be undertakenthrough joint venture,foreign investnent,etc. i.e., InvestmentLaw 230,Company Law 159,Public Sector and BusinessEnterprise Law 203, and TourismLaw 1. Theseprovide different treatment to entrprises within the sectorin termsof accessto foreignexchange, level and distribution of profits,factor prices, subsidies, taxation, repatrationof profits,etc. The multiplicityof lawsand differentiated treatnents have not onlycaused confusionto investorsbut in most cases result in unfair competitionwith negativeeffects on the oveall investmentenvironment. GOE is now takingsteps in harmonizingthese differences by the preparationof an uniformlaw that wouldbe appliedto all publicand private enterprises. 2.16 Distorted Taxation System. Tax exemptionfor interest earned on deposits have exacrbated theproblems related to investmentsand in thedevelopment of otherfinancal instruments whichcould effectivelymobilize the substantiallevel of savings in the country. Incomesfrom depositsare tax exempt,while others are subject to corporateand dividend taxes. As such,it has been difficultfor entrepreneursto mobilizeequity. Expansionof an existingtourist facility, e.g., a hotel, would be eligible for a tax holiday only if it is an investmentlaw company(Law. 230). For companiesestablished under other laws, tax holidayis not allowed. Differentialtreatment of tax holidayregarding expansion of existingfacilities would have an importantinmplication on the selling priceof publictounst facilities. The taxationissue is beingaddressed under the SAL. 2.17 E=Qanwt Poliav. For thetourism sector, staffing flexibility is neededto respondto seasonalshifts in demandand to thevolatile nature of the business.However, there is no clearlabor policy,and thus the disiissal of workersis an extremelytime consumingand difficultprocess. If the tourism sector is to be developedand managedefficiently, a flexible employmentpolicy is required,combined with an adequatecompensation framework to maintainsocial stability. The reformof laborlaws wouldneed to be addressedunder a larger contextthan the proposedProject, and is pursuedunder the policy dialogue between GOE and theBank.

2.18 Responsibilityfor tourismdevelopment is sharedamong several ministries (Annex 1). The task of achievingcoordination and cooperationis extremelycomplex and time consuming. This has been one of the major obstaclesto private investmentsin tourismin Egypt. MOT was establishedin 1965 with limitedresponsibilities and resources. In 1981,it was expandedunder PresidentialDecree No. 712 with an extendedmandate that wentwell beyond the operationalaspects of licensingand travel promotion. More recently, MOT was authorizedby the Councilof Ministers througha PrinmeMinistedal Decree (933/1988) to planthe developmentand coordinatethe provision of infas andfacilities for all areasdesignated as tourismzones. Thesezones are desert areas, piedominantlysituated outside the limits of populatedcities in the NileValley, Red Seaand the South SinaiGovemorates. However, in spiteof the changesin the mandateof MOT,several ministries and subordinatedentities are also involvedin activitieswhich affect tourismdevelopment direcdy or indirectly. In cognizance of this problem, in March 1991, Law 7 was enacted to grant the .7- jurisdictionalauthority over the designatedtourism zones to a nationaltourism authority. However, coordinationwith a large number of ministriesand agencieson the needs of the tourismsector continuesto be a timeconsuming and difficult taskL LgaftquateJ&eguator Fmamework 2.19 RgulatoryStandards and Eafg . MOTs emphasison touTismdevelopment in Egypthas beento maxinizethe numberof touristanrivals and foreign exchange earnings. Since 1986, GOE'spolicy has been to spreadtourism more evenlythroughout the country rather than concentratesolely on the traditionalhistoric sites of the Nilevalley. However,this strategyhas not beensupported by an institutionalframework that wouldrationalize investments according to sound technical, economic and environmentalstandards. There is a lack of proper development, environment,safety and public healthstandards. Ineffective monitoring and enforcement of existing regulatorystandards has alsorendered an alrcadyweak regulatory framework even more fragile. The absenceof a clearmandate and overlapping authority between many ministries and organizationsis one of the main reasonsfor the ineffectivenessof existingregulations. This is exacerbatedby the scarcityot expertiseand adequate motivation to monitorand enforce these regulations. Thus, private proposalsprior to mid-1980shave been negotiatedand approvedin an ad hoc mannerwithout due regardto the adequacyof infrastructuresupport and environmentalprotection. This lack of a proper regulatory frameworkhas resulted in uncontrolleddevelopment on the Red Sea coast, land speculation,crowded and unsafecruise operations on the Nile, and evensome spoilageof the coast line. The institutionalreinforcement for monitoringand enforcingdevelopment, environment, and safetystandards would be addressedunder the proposed Project. 2.20 LandAllocation andl QrLIW. Clarityin landallocation and owntrshipis essential for real estate development.MOT has attemptedto developpolicies and guidelinesin promoting privateinvestments on land in the remoteareas. However,these are inadequateand inconsistently applied. For example,land is allocatedto privatedevelopers for a nominalprice with the condition that thearea would be developed according to a masterplan acceptable to MOT. If developmentdoes not take placewithin five years,the allocatedland would be reclaimedby MOT. The actualtransfer of title does not take place until the developedland is sold to investorsfor the constructionof supeucture. At tk.At time, MOT would have a claimto 50%of thfesale proceedsafter deducting the cost of providinginucture. Thispractice has been contested by privateinvestors as theytake all the risks for developmentbut have to share 50% of the retumrns.Furthermore, there may be a tendencyby theprivate sector to overpricethe cost of developmentto reducethe shareof capitalgains to MOT. This policymay also induceprivate developers to use the landas equityin superstructure development,and thus limit market mobilityand deprive MOTa source of income. Finally,the uncertaintyand prolongedprocess in gettingthe tile to the land impedesprivate sectoraccess to maricetfinancing. MOT would need to strikea balancebetween tedious and cumbersomeprocedures whichmay result in locling awaytracts of landthat couldbe gaifully and imaginativelydevelop:d by the privatesector and thosewhich may lead to land speculationand accusationsof givingaway publicland. Thisissue wouldbe addressedunder the proposed Project

DCtdorating re 2.21 The past enphasison meetingbasic needs through subsidized services and the inward lookingdevelopment sategy basedon industryhas resultedin deterioratinginfastructure in Egypt. Nilecruises are one of the majortourist aations as well as a meansof tansport Over the 1980s, cruise travel grew at an averagerate of 13.3%per annum. The numberof cruise ships in service grew from47 in 1982to 119 in 1989. The growthhas been fastersince 1989,which led MOTto impose a temporaryfreeze on ganting new permits to build and operatecruise ships througha -8-

regulatoryrestriction linking the grantingof permitsto availabilityof berthingfacilities. In spiteof this, over 180cruise ships are operatingin 1992. It is projectedthat by the year2000 there wouldbe about276 ships on the Nile. However,rapid and uncontrolledgrowth of the cruise travel in the UpperNile has broughtwith it severalproblems which could become substantially more serious over the comingyears. The infrastructuresupporting the Nilecruises is poorlymaintained, and berthing facilitiesare inadequateand insufficient. At present there is a very basic and outdatedsystem of navigationaland trafficcontrol in placewhich is not only overburdeneddue to increasedtraffic but is also hazardousgiven the numberof vessels on the waterways. Finally, one of the most serious dangersposed by uncontrolledand unregulatedtraffic on the Nile is the dangerof environmental pollutionfrom sewageand other dischargesfrom the vessels. Regulationsexist to protectthe Nile fromvarious sources of pollutionespecially concerning treatment of wastewater but theyare poorly enforced.The Nilecruise infructure wouldbe upgradedunder the proposedProject. 2.22 Developmentof tourismin remotezones was sarted in Hurghada,which is situated by the Red Sea. Althoughthe first majorproperty was the governmentowned four star Sheraton Hotel,later developmtentscomprised low capital "holiday villages' by the privatesector, erected on landprovided by the Governmentat nominalcosts. However,land use planning has beeninadequate, and developmentshave been too close to each other and to the sea. In addition, the scale of developmenthas beenexcessive in relationto thecarrying capacity of existinginfrastructure. These developmentsare now in need of new waterand sewagedisposal facilities. MOTtIDA plans to furtherdevelop the Red Seaarea to attractleisure touism As thisis a greenfieldarea where potential tourist arrivalsare uncertain,there is a need for properplanning of basic infrastructureto attract privateinvestments and at the sametime to scalethe developmentin accordancewith market demand. The improvementof infastuctr in the existingtourist area and thedevelopment of newfacilities in remotezones would be addressedunder the proposedProject. Limited Access to Long Term Financing

2.23 GOE is currently undertaking measures to improve resource mobilizationand allocationand to increasepivate sectoraccess to financingat a reasonablecost. Notwithstandingthe reforms,the businesscomniumty in Egyptstill has limitedaccess to long-termfinancing, particularly fromthe internationalcapital and credit markets. As Egyptis undergoingdebt rescheduling, lending with guaranteesby export credit agenciesis scarce. Limitedrecourse financing is virtuallynon- existentin spite of the guaranteesprovided by theGovenmment under law 230 againstexpropriation andthe rightto repatiate profits. Therecent macroeconomic reforms are expectedto helprestore the internationalcomnmecial lenders' confidence in Egyptand thus improveaccess to long-termloans. However,this will happenonly in the longterm The avalabilityof financingin thedomestic market is linited by the creditceiHings imposed on the bankingsystem since February1991, high interest rates (at presentabout 22% to 28%),and substantial Government borrowing. 2.24, Most lending to private tourism projects has catered to small and medium sized superstructureprojects such as touristvillages, low to mediumgrade hotels on the west coast of the Red Sea and the historic tourist sites of Luxor and Aswan, and to cruise ships on the Nile. Commerciallending for infuctre on a largescale is nonexistent.There have been only about ten long-termloans for tounsmprojects in thelending prtfolio of the bankingsystem during the last five years. The maximumtenor is seven years includingtwo years of grace whichis inadequatefor developmentprojects having a gestation period of at least three to four years under Egyptian conditionsbefore becoming fully operationaLAs a result,private investors have had to reschedule loans,resting in high costsand delayedand lowerreturns. Instutional lendingoutside the banking systemis nonexistentas most of themprefer safer investmentssuch as term depositsand treasury bills. Underthe presentcircumstances, investors have to rely more on mobilizingequity or scale -9- downinvestments in theface cf non-availabilityof financing.Domestic venture capital exists, but in a very limitedcapacity. The limitedaccess to long-termfinancing is a real impedimentat a time when tourismis gainingimportance in theEgyptian economy as a sectorwith higheconomic potential. E. Tourism Strategy 2.25 GOE'stourism strategy is aimedat: (a) changingthe role of the publicsector from that of owner/operatorto planner/regulatorand protnoter/faciliuttor, (b) deregulatingthe industryto allow the private sectorto operatefeely in a competitiveenvironment; (c) protectingand conservingthe uniquecultural and naturalresources in the tourismareas; and (d) promotinga largerrole for the privatesector in the design,finance, implementation, ownership and operationof tourismfacilities. Thesepolicies are expectedto substantiallyincrease the role of theprivate sector in the development of new facilites and operationof existingpublic sector facilities acquired through privatizAtion and divestiture,or leasingarrangements. Private sector investnents, however, have tended to concentrate in the narrowcorridor of the Nile Valleyand Cairowhere infrastructure is alreadydeveloped and where tourismdemand has been growingsubstantially. Atuctive, but remote, sites suitablefor leisuretourism have to be developedwith the residualresources, resulting in unattrawvefacilites and inadequateinfrastructure. Touristfacilities along the Red Sea coast have evolvedin responseto demandsin the absenceof long term landuse plans. Today,Hurghada, the site seen a few yearsago as the first to be developedfor tourists and vacationers,stands as a monumentto unguided development,inadequate infrastructure and virtually non-existent environmental management. 2.26 GOEs approachto stemmingthis undesirableapproach to the developmentof the Red Seacoastal areas was to giveresponsibility to TDAfor planning,developing and monitoring tourism developmentin the remainingcoastal areas and some of the areas in the Nile Valley(para 2.10). TDAinitiated the preparation of extensiveland use planswith theassistance of internationaland local consultingfirms and to promoteprivate sector investnents in accordancewith these plans. Initially, TDA intendedto assume responsibilityfor infrastructureand let the private sector develop the superstructure.This approachimplied that TDA would secure loans and creditsand use its own resourcesto developinfrastrucure on a large scalewith thehope dw thisdevelopment would allow the privatesector to mobilizethe fundsneeded for supersre. The public sectorwould bear all risks associatedwiti the developmentof inrastructure. Experienceelsewhere has shownthat provisionof publiclyfinanced infrsru withoutparallel development of superstructureoften resultsin overinvestment and underd infrstructureand encouragesland speculation. 2.27 A differentapproach is neededif GO3Estourism strategy is to succeed. There is a need for an integated developmentof infrastructureand superstructurein an environmentallysound manner and for private sectorinvestments to be based on the principlesof projectfinance under limitedrecourse where lendersand investorsassume well specifiedrisks and rely on the project's ability to generaterevenues needed for securingthe debt and providingthe returns. Under this concept,the private sector wouldassume aU the commercialrisks (i.e., market,viability, design, finance,constuction andoperation). This approachhas the advantageof subjectingthe projectsto marketforces and scrutinyof the financialcommunity, avoiding the needfor directintervention by GOEin projectdesign and implementation,thus reducig the probabilityfor resourcemisallocation. A phasedapproach to infrastructuredevelopment by the private sectorwould also allowGOE to postponemajor investnents in trunk infrastructureuntil they are economicallyor environmentally justified.GOE has requestedthe Bank's assistance in implementingthe strategyhighlighted above. -10-

F. PastInvolvement of the Bank Group 2.28 The Bank'sonly lendingoperation for tourismin Egyptwas an IDA Creditfor the EgyptTourism Project (Cr 909-EGT)in the amountof US$32.5million, approved in May 1979. The main objectivesof the project were to increaseforeign exchange earnings by increasingthe numberof touristsvisiting the majorantiquities centers of Luxorand Abu Simbel, and to promotethe economicdevelopment of the Luxor region throughthe provision of needed infrastructureand services. The projectconsisted of: (i) improvementof the infrastructureand touristsuperstructure facilitiesin Luxorand the introductionof measuresto protectimportant archaeological sites; (ii) a modest expansion of the Nefertari Hotel in Abu Simbel and improvement of supporting infastructure;and (iii)the renovation of the EgyptianMuseum in Cairo. Whilethe project succeeded in providing most of the needed improvements to the infrastructure and other services, implementationwas delayed by five years. All majorproject components were implemented with the exceptionof the renovationof the EgyptianMuseum in Cairoand the protectionof six pharaonic tombs. The projectwas alsoless successfulin achievingthe institutionaland administrative reforms envisagedat the time of appraisal. Amongthe key factors causing delays in the project were jurisdictionalfnmentation and discontinuitiesin personnel,complexity of theproject, i.e., too many components,and the complexityand slownessof Egyptianprocurement procedures. The project closed in December 1989 with about US$10 million remaining undisburseddue to canceled components,and thedevaluation of theEgyptian pound. 2.29 IFC has beeninvolved in the touism sectorftrough lending and equity paTicipation to the hotel industry. [FC recently completedthe CrocodileTomrist Project in Luxor where it participatedvith an equityinvestment of US$1.37million and has approvedparticipation in the SerenaBeach Hotel Co. with an equityparticipation of US$1.2million and a loan of US$6million. [FC is alsoparticipating in the EgyptianToursm InvestmentCompany with an equitycontribution of aboutUS$2 million. The project involvesthe establishmentof a debt-equityfund, capitalizedat approximatelyUS$20 million to financeprivate sector projects in thetourism sector. 2.30 LessonsLearnt*om thePast The proposedProject is an innovativeoperation which has not been tied out in the past in Egypt. However,some of the lessonslearnt from previous operationshave been usefil in its design. First, the jurisdictionaloverlapping and fragmentation problemsexperienced previously would be mitigatedby focusingproject implementation under the TDA. Second,jurisdictional authority over tourisminfrastructure has been clearlydelineated and recognizedby law and by Presidentialdecree. Third, as theProject would be mostlyimplemented by the private sector,delays experiencedin publicprocurement processes would be avoided. Fourth, previously experienced mismatchesbetween public investments in infrastructureand private investments in superstructurewould be mitigated under the Project by designing the area developmentas an integratedpackage, to be fullydeveloped by theprivate sector. Finally,potential environmentalproblems would be avoidedthrough a masterplan conceptof land developmentand closemonitoring of developmentand operationalstandards in thetourism area. G. RationaleFor BankInvolvement 2.31 The country assistance strategy gives high priority to projects which increase employmentand foreign exchange earnings. Tounsm has gr potental in both of theseaspects. As the tourism sector is at the forefront of deregulation,privatization and promotion of private investments,the Bank's involvementin the sectorwill be instrumentalin acceleratingthe pace of reform and main its momentum Bank assistance in the Project.has proved essentialto catalyzelending and equityinvestments from the private sectorfor infrastructure,an area that has traditionallybeen financedby publicresources. The Bank loanis alsocritical given the shortageof -11- sufficientlylong term local financingfrom the financial system,while Egypt's performancein servicingexternal debt severelylimits access to foreignresources. Finally,Bank support in mapping out an environmentalmanagement program under the auspicesof GEF including institutional strengtheningand financing of public sector environmentalcomponent would assist GOE in regulatingtourism development in an environmentallysound manner. The Bank's supportto the Projectwould also complement IFC's role in privatesector development in Egypt.

IL THE PROJECT A. ProjectObjectives 3.01 The objectivesof the proposedProject are to: (a) support the Governmentin improvimgthe policyenvironment for the tourismsector through further investment rationalization, deregulation,and privatizationof the touism portfolio;-(b) providecatalytic financial support for infrastructuredevelopment in majortourist areas sponsoredby the privatesector in orderto mobilize long-termfinancing from commercialbanks and venture capitalfor equity investments;and (c) ensuresound environmental management of the RedSea coast with thesupport of the GEF. B. Project Description

3.02 The proposed Project would consist of. (a) implementationof meaes to improvethe policyenvironment in the tourismsector consisting of: (i) developmentof an overall frameworkfor public and private sector investments;(ii) liberalization of pricesfor tourismrelated services; (iii) developmentof land allocationand ownershippolicies for private investments;and (v) improvementsin the regulatory frameworkaffecting the operation of the tourism sector (ie., development, operation,environment and navigation); (b) financialsupport for: (i) the developmentof infrastructurefor two integratedarea developmentsub-projects in the greenfieldsites on the Red Sea coast (Ras Abu Soma and Sahl Hasheesh)sponsored by two private companies;(ii) the provisionof water supply, sewerage,and solid waste collectionand disposalfacilities for tourist developmentson the Red SeaCoast (SouthHurghada to Safagaarea) by the privateser, (iii) the constructionof additionalberthing facilities for Nile cruisesat two majorand four minorsites by the private sector;and (iv)the inVrovementof trafficand navigation facilities and accessto touristsites mihe Nilevaley by thepublic sctor. (c) developmentof a coastalzone management plan and initiatingthe implementationof the planfor the Red Sea coast,pardcularly as it affectsthe protectionof the marinehabitat in. the touist areasto be developedunder this Project;and (d) provision of technical assistance and training for TDA and EEAA staff to (i) strengthencapacity in tourism planning and marketing;(ii) procurementand financial managernent;(iii) developmentof environmentalguidelines, and capacity for monitoringand enforcementof environmentalrules and guidelinesin tourismzones; and (iv)preparation of projectsto promotefurther tourism development. -12-

C. DetailedFeatures Pol*XReforms 3.03 Investment Program. Public sector investmentsin the past had crowded out private initiative,competed for scarce resources,and resultedin unfair competitionbetween public and privatesector companies (para 2.12). If the tourismsector is to expandits capacityto accommodatea larger numberof touristsduring the next decade in a deregulatedenvironment, there is a need for MOTto rationalizeits investmentsby concentratingon a core investmentprogram comprised of high priorityinfrastructure projects which, although essential and economic,may not be undertakenby the private sector in the presentclimate. An agreementhas been reachedwith GOE/MOTon a core investmentprogram of high priorityprojects for the sectorover the next five years. The program identifiesprojects suitable for bothpublic and private sector investments. The projects for theprivate sector would serveas an indicativelist whichTDA could use as a basis to promoteprivate sector interest. The core investmentprogram would be reviewedunder the contextof publicexpenditure reviewunder the SAL. 3.04 PricAgPolia. Priceregulations promote inefficiency and providedisincentives for the improvementof productivityin the sector(para 2.13). If the tourismsector is to be developed efficiently,hotels should be allowedto competeon the basisof bothprice andservices. To thiseffect, MOTwould issue a ministeriladecree or ta La effectivenessthat it wouldwithdraw compete fromsetting_ a egultng gric of all torist sce TheChamber of Hotelsand Tour Operators would providea guidelinefor the relative structureof tariffsaccording to the grade of the hotels. Hotelsand resturants wouldpost prices publicly and wouldnot chargemore than the postedpices. GOE is planningto phase out subsidiesfor u.ueland electricityby June 1995under the ERSAPand the differencein input prices for enterprisesestablished under Law 230 and Law 159 would be eliminatedunder a unifiedlaw in 1993,both supported by the SAL 3.05 LandAlloca£ioandOWnEb.U Existing land allocationpolicy is deficientin terms of promotinga competitiveand efficient framework for private sector investments in the sector(para 2.20). To improvethe existingland allocationpolicy, TDA would undertakea study by June 30. 1993based on tenns of referenceagMed with the Bank(Annex 2V- and by December31. 1993.TDA would issuea newland allocationpRolicy to be used in promotingg$vate sectorinvestments in the touristzones. after consultation with theBank. RMtor Framaad 3.06 The regulatoryfunctions of the tourism sector should be defined and streamlined a;nongthe variousinstitutions. The PresidentialDecree of September1991, which created TDA, has grantedit the responsibilityfor: (a) establishingand supervisingthe implementationof development plans for designatedtounist zones; (b) preparing,reviewing and evaluatingprograms, studies and projects required for tourism development,and setting priorities for their implementation;(c) implementinginfrastructure projects in the designatedtourist zones and recoveringtheir costs; (d) supenisingthe implementationof thedevelopment plans in theseareas (e) managing,exploiting and disposing of desert lands allocated to the tourism projects; and (f) preparing and monitoring environmentalregulations. MOT would maintain its role as a regulatorybody for touristservices in tem of licensinghotels and cruiseships, approving ratings of hotelsand cruiseships, ensurng that servicessuch as food,beverages, casino, entertainment etc., meetthe requiredstandards in orderto protectconsumers, and enforce environmental and healthregulations in thetourist zones. -13-

3.07 The explosivegrowth of Nile cruisetravel has occunredwithout adequate planning, monitoringor regulation The volumeof traffic, the limitedarea in whichit takes place, and the potentialfor accidentsand damage require that someforn of overallmanagement plan be developed (para 2.21). An arrangementwould be required,through better delineationof responsibilitiesof existingautnorities, and reinforcingthem with equipmentand trining for integratingnot only travel scheduling,but also settingstandards and monitoring the performance of otheroperational areas such as facilitiesmanagement (berthing, service centers, navigational aids, emergency equipment), sewage and solid waste disposal from cruise ships, and safety inspectionof vessels for health and fire hazards. The operationalcost couldbe supportedfrom fees paid by the ship operatorswho use the NileRiver. The insitutionalarrangement for Nilecruises and the costrecovery mechanism based on termsof referenceagreed with the Bank (Annex3) is currentlyunder preparation. An &gmen has been rea,chedwith TDA that the insiuional ap=angementfor improvin afetyregulations for Nile cruises would be Reared by December31. 1993, and appropriatemeasures would pe taken Xforce suchregusati AreaDevegloment Sub-pEajects n GIreenfelSdSite 3.08 The two area developmentsub-projects, Ras Abu Soma and Sahl Hasheesh,to be financedunder the proposedProject, are large touristresorts in the remote zones to be developed accordingto tourismdevelopment master plans approved under the guidelinesset by TDA. Bothsub- projectsare sitated on the Red Seatowards the southof Hurghada(see MapsIBRD No. 24046and 24047). The sub-projectsinclude an integrated developmentof infrastructurenetwork and uperstructureover an areaof about22 millionmn 2. The sub-projectswere identified for infriastructure financingunder the proposedProject since: (a) theyconstitute major centers of developmentin areas whichattract tourism and further private investennts in super s on a significantscale and in an e,nvironmentallysound manner, (b) their proposalsfor inhfastructuredevelopment follow a gradual aroach whichwould allow the public sectorto phasein majorinvestments in trunk infrastructure basedon economicor environmentaljustification; and (c) the sub-projectsare in an advancedstate of preparationwhich would allow them to go to themarket to obtainfinancing by the end of 1992. The Bankesfinancial support for the sub-projectswould be linited only to theinfastructure component. 3.09 Rasbg Soma The resort is locatedsome 40 Ikmsouth of Hurghada. The area is being developed by the Abu Soma Bay DevelopmentCompany (ASD), incorporated under InvestmentLaw No 230 of 1989with an authorizedcapital of LE 300 millionand issuedcapital of LE 25 million. The majorityshareholding of the companyis withthe EgyptianFmance Company, a well knownand establishedcompany in Egypt. ASD is the masterdeveloper for the Ras Abu SomaBay site and has executedan agreementwith the MOTwhereby it has purchased1 millionm2 of landand has leased another9 millionm 2 of land (withthe right of purchase)on theRas Abu Somapeninsula. ASD has developeda comprehensivedevelopment plan approvedby TDA, and acceptableto the Banlk 3.10 The area wouldbe developedas an integratedpackage with overlappingdevelopment of infrastructureand superstucture. Detaileddescription is providedin Annex4. The infrastructure facilities to serve an area of 10 million m2 would include: (a) about 17 km of roads; (b) water desalinationplants with a capacity of 2,500 m3 per day and associatedstorage and distribution network; (c) two sewage treatment plants with a capacity of 1,000m 3 and 2,500 m3 per day, respectively;(d) an irzigationnetwork for landscaping,(e) fourdiesel generators with a totalcapacity of 20.8MW; and (f) electical andtelecomunwncaions networks. The supertucture wouldconsist of about 10 four to five star hotels (about300 rooms each), 400-500resort villas and condominiums, two mainas, a retailcenter, sportsand recatonal facilities,and employee housing for about5,000 staff. The area wouldbe developedin two phasesover the nextten years Ehae I wouldinvolve the -14- developmentof relevantcentral infrastructure facilities, four hotelsand touristresorts over an areaof 1.5million m 2. Phaseb wouldcover the remaininginfrastructure, six hotelsand touristresorts over an area of 8.5 millionM 2 . 3.11 ASD has commissionedengineering and technicalconsultants to producethe detailed designsand cost estimatesfor the infrastructurefacilities supporting the proposed ten hotelsof Phases I and II. As a masterdeveloper, ASD wouldown and operateall centralinfastructure facilities, and maintainall publicuse sites. ASD wouldestablsh separatecorporate entities for eachof the hotelsto be constructedwithin the development. To maintain ASD's control in the design, operationand managementof these hotels, ASD also plans to take an equity positionin each of these affiliated corporateentities. The hotelsand resortswould be managedby intemnationalhotel chains. ASD is negotiatingcontacts withClub Robinson and Sheratonfor the managementof thefirst two hotels. 3.12 Sahl llashmk. The resort is locatedsome 20 km south of Hurghada. The sub- project is beingdeveloped by Sahl HasheeshBay DevelopmentCompany (SHBD), incorporated underInvestment Law No 230 of 1989with an authorizedcapital of LE700 niilion and issuedcapital LE 46 million. Shareholdersconsist of both foreign investors(50%) and Egyptiansponsors of 2 2 (50%). The total areaof the proposedsub-project is nearly 12 millionin , of which6 millionm has beenpurchased, and the rest has been leasedfrom the MOTwith the optionto purchase.SHBD has developeda comehensive developmentplan approved by TDA,and acceptable to theBank. 3.13 The area wouldbe implemenedin phases,with PhaseI consistingof the development of 6 millionm 2. The inftucture facilitiesfor this phase,for whichfinancing is soughtunder the proposed Project, would consist of: (a) 32 kan of access roads and walkways; (b) two water plantsof a capacityof 2,000m 3 and4,000 Mi3 per day,respevely and associaedstorage desalination 3 3 and distibution network;(c) two sewagetreatment plants of a capacityof 1,500m and3,500 m per day, rsectively, (d) sewerageand irrigationnetworks; e) fourdiesel generators of a totalcapacity of 20.8MW; and (e)electrical and telecommunication network. Detailed description of the sub-projectis providedin Annex5. 3.14 Phase I, to be developedover a periodof eight years,is furthersub-divided into two 2 stages:Phase la wouldconsist of the developmentof 2 millionm of land andwould comprise all the basicinfrastructure facilites, set up in modularunits to fit the needsof thisstage, two five-starhotels (300 rooms each) and one four-starvillage (165 rooms), and a marina. PhaseIb. covering the remaining4 millionm 2 of land wouldconstitute two four-starresorts (200-250room each),villas, chalets,a boatmarina, and a towncenter (with a 300-roomfive-star hotel and casino). 3.15 SHBDhas comiissioned engineeringand architecturalconsultants to producethe detaileddesigns and cost estimatesfor the Phase I infrastruture facilities. SHBDwould own and operateall centralinrastr facilitiesand public areas. SHBDwould also aim at creatng affilated companiesfor hotelsand resorts and participate in theirequity. SHBDwould enter into an operation and managementcontract with a specializedfirm for the infrastructurefacilities. As in the case of ASD, hotels and resorts would be operated and managed by internationalchains. SHBD is negotiatngwith Forum and Ritz Carltonfor the managementof thefirst two hotels. frastmetureDereloUMfnt in Existin Toul reasm 3.16 This componentwould consist of: (i) provisionof infrastructureservices on the Red Seacoast between the municipalboundaries of Hurghadaand Safaga;and (ii)improvemnents to cruise -Is-

ship operatibnsat the sites of antiquitieson the Nile, between Aswan and Luxor. Detailed descriptionsare in Annex6, andsunmarized below. 3.17 The Red Sea Coast infrastructurewould consist of: (i) reverse-osmosisdesalination plants with a capacityof 3,000m3 per day, associateddistribution networks and administration buildingsto serveSouth Hurghada; (ii) sewagestabilization pcnds with an initial capacityof 3,000 m3 per day, about 1.0 km to the westof the Hurghada-Safagaroad, two pumpingstations of 70 I/s and 140 I/s capacity,respectively, and associatedgravity collector and pipes; and (iii) a sanitary landfillwith an ultimatearea of 80 hectares,compactor tucks andcollection bins. 3.18 The Nile Cruise componentwould consist of: (i) the constructionof 14 additional berthsat Aswan,28 at Luxor, 11 at Dandara,4 at Esna, 8 at Edfu and 8 at Kom Ombo. Berthing facilitieswould be providedwith water supply,power supply, sewagedisposal, and solid waste disposalservices; (iil a trafficand navigationcontrol center equipped with emergencyfire fighting and medicalservices and facilitiesfor inspectionand licensingof both cruiseships and crew;and (iii) improvementsto the accessroads to the antiquitysites at Kom Ombo,Edfu, Esna and Dandara; andprovision of improvedfacilities near the antiquity sites for thetourists. 3.19 The implementationof these componentswould be essential to prevent further degradationof the environmentand existing infiaucture in Hurghadaand touristsites on theNile river. In line with the new tourismstrategy (paras 2.25-2.27), TDA is presentlysoliciting private sectorinterest to build,own and operatethese components (except for the navigationcontrol center and accessto touristsites) and prequalificaton of sponsorsfollowing intenational advertisements is underway. MA would fmnish to the Bank.not later than December31. 1993. nroposalsfor the assiannent to private sector sonsors for the construction,ogperation maintenance of Red Sea infrastcture andNile berthing facilities. In casefinancial closure would not be completedby pivate sonsors for thesecomponents by December1993. TDA would execute them withpublic resources. Inhi een MA wouldlease out thefacilities to the priat sectorfor opeation andmanagemnt

3.20 The Red Sea has an unusualphysiography which has ceated a manneenvirbnment that supportsflourishing coral reefsand endemicwetland communities in latitudesfar northof their limits elsewhere.However, the demandsfor oil exploration,shipping and tourism have resulted in a loss of bio-diversityand marinepollution and it is increasinglyevident that the fragilecoral reef and marine environmentwill not be able to withstandunregulated, unmanaged development. While environmentlunits and regulations are being devloped in variousgovernment agencies, and private sector developersare now seeingthe impactof unplanneddevelopment on Egypt's Mediterranean coastand some parts of the Red Sea,there is stil a severelylimited insdutional capacity to handlethe complexit of competingintersts for theRed Sea. 3.21 In recognizingthe need for sustainabledevelopment of the Red Sea resourcesby all the Red Sea nations, GOE soughtfunds from the GlobalEnvironment Facility (GEF) of about * US$4.75million to developa coastalzone managementprogram to reducethe loss of biodiversity and maine pollutionand also orchestratethe currentlycompeting tourism and oil interestsin a way that wouldbe compaubleand productivefor both concernedagencies and the Egyptianpeople. The grantwould be usedto assist,over a thee yearperiod, the TDA,the EgyptianEnvironmental Affairs Agency(EEAA), and the Red Sea governorateto imnplementan integratedcoastal zone management programin the Egypian portionof the Red Seabetween Ras Shukeirin the northand the Sudanese border in the south. Detaileddescription of the programis in the Memorandumof the Director -16-

(ReportNo. 11131-EGT) which is summarizedbelow. A crosseffectiveness condition would be in placefor the groposedLoan and the GEFGrant Areement 3.22 Coastal Zone Management Plan. This component would develop an integrated coastalzone management (CZM) plan to guidea programof inter-sectoralcoastal zone management duringthe Projectimplementation phase and beyondby carryingout necessaryscientific base-line inventoriesanalysis of the resources,and zonethe coastaccording to the allocationof significanttareas for conservationand development.Resource allocation would illustrate a spectrumof management practicesfrom pure developmentto conservationwith an emphasison interactiveroles between the two andthe privateand publicsectors. Due to the complex,multi-sectoral nature of developingsuch a plan, a high degreeof backgroundwork through inventories and studies are neededto considerthe broadrange of concernedagencies and resource uses possible, and makejudgments on whatactivities can be developedin an environmentallysustainable manner. This componentwould establish a data base incorporatingexisting information, new surveys,with GeographicalInformation System (GIS) as an interactiveplanning tool. Studieson resourceuse optionsand management,such as tourism altenatives,recurrent funding and carrying capacity would build on thedata directions needed for the plan. A final plan with policiesfor zoningand managingcoastal and marineresources would be developedand approvedby all concernedagencies.

3.23 Environmental Assessment Capability. One of the most potentially effective mechanismsto supportenvironmentally sound development and to mitigateimpacts on the marine resourcesof the Red Sea, is the environmentalimpact assessment (EIA) process. However, neither the TDA nor the EEAAcurrently have the capacityto evaluateand enforcerigorous EIAs. This componentwould develop EIA practicesfor touism and otherdevelopment activites impactingthe coast and the Red Sea. It would improveTDA's and the EEAA's capabilityto manage EIA requirementsand review tourism-relatedEIA studies. It would provideTDA and EEAAwith a model of EIA guidelinesand proceduresto developtheir capacityto manageElAs for large-scale private sector investments. TDA's and the EEAA's environmentalunits would be staffedand trainedin ETAmethods and procedures,and wouldproduce a manualon EIA proceduresto be used by developers,other agencies, etc. 3.24 Maine PollutionCotrL As describedearlier, the Red Sea is a uniqueecosystem whosephsiogeographic configuration is conduciveto a rapid concentrationof landand water-based pollutants,affecting many countries. To effectivelyimplement the CZMplan and EIAs, a capacityto monitor and enforce rules and regulations must be developed. Rather than establishing an independentregulatory system for CZM, the Project would facilitate the coordination and strengtheningof capacitiesbetween the TDA, EEAA and the Red Sea Governorateand other agencies. Red Sea officewould be establishedin the Governorateto providea focusof operations with the establishmentof a monitoringand enforcementunit, which would coordinatethese responsibilitieswith the environmentalunits of EEAAwith the Red Sea Governorateand TDA. Additionallocal staff from otherconcerned agencies may be attachedto this unit to implementthe C2M guidelines,regulations, pernitting proceduresand pollutioncontrol in the project area, and receivetraining in carryingout theseactivies. 3.25 &e&crea tLMan=mggaLEgypt's coral reefs are theprimary tourist attraction on the Red Sea,yet the verypeople who enjoy theem and maketheir livingfrom promoting them are also killing them Uneducatedsnorkelers and divers can cause considerabledamage to reefs through physicalcont Anchordamage is oneof the majorcauses of directreef destruction.To implement actionsunder the CZM4plan there is a need to establisha capacityto managerecreational facilities to protect the coral reef habitatsand promotesustainable visitor use and enjoyment. This component would manageactivities that provideenjoyment and appreciationof coral reefs and other coastal -17- marine habitats in this area, throughtraining activities,recreation facility management,public awarenessefforts, in cooperationwith privatesector tourism businesses. The abovewould be done through the developmentof a Reef Recreation ManagementAction Plan and Program. the establishmentof ReefRecreation Management Unit, management arrangements between public and privatesectors and otherentities. This componentwould incorporate information from the nature- basedtourism and carryingcapacity studies developed during the CZMplanning process and alsothe monitoringand enforcementactivities from the pollutioncontrol component. While this component wouldfocus on the Hurghada-Safagaarea, the activitieswould also applyto the establishmentof the marinepark andreserves in thefollowing protected areas component. 3.26 lgd PrtecW AM &t4aWIhMent,The Red Sea coast offers a rangeof nature conservationopportuiies throughthe establishmentof protectedareas to not only protect the biodiversityof the reefs and ecologicalintegrity of other island and coastal habitats, but also potentiallysupport socio-econonicbenefits through nature-basedtourism, local pride, scientific researchand environmental education. Protected areas of intactecosystems also offera controlarea that can providevaluable information in comparisonwith research catTied out in areasbeing restored, e.g. Hurgada. In spite of documentedeconomic, ecological and socialbenefits directly associated with protectedareas, funding to adequatelyestablish and manageprotected areas, especially marine areas,is rare. Therefore,too manyparks are "paper parks" and in somecases are actually catalyzing in-situhabitat destruction because they attt touristsbut do not havemanagement controls in place. Given the reality that fundingfor protectedareas in an ecologicallynecessary scale throughthe Egyptiangovernment, and coordinationwith private-sectorinitiatives is difficult,there must be a mechanismsuch as thiscomponent to protectselected sites alongRed Sea. 3.27 To protectthe uniquebiogeographical character of the Red Sea coast,the wholearea fromMersa Alam to the Sudaneseborder is proposedas a protectedarea(s), which would incorporate a rangeof levelsof conservationprotection zones. This areaincludes the GebelElba and Ras Banas regionand exhibitshigh biodiversity and exceptionai scenc value,that is bothregionally and globally signifcant. The CZMplan strategywould identify areas that would supportdifferent management zones,e.g., pure protecdonof terrestrialand marineenvironments to incorporationof low density natue-based tourism. The area is well suited for the implementationof UNESCO'sMan and BiosphereReserve approach, incorporating core conservationzones as wellas adjacentbuffer areas, andrequiring a high degreeinvolvement by the localcommunities and differentgovernment sectors. The componentwould conduct detailed surveys and preparemanagement plans for areasto be given legalprotection. This componentwould support basic facilities to ensuremanagement and control of sites,provide small scale visitor facilites in partnershipwith private interests and the local community and train a core staff in park managementtechniques. The protectedareas program would draw on the experienceof the Ras MohammedPark in SouthSinai 3.28 CZM Monitoring and Evaluation. The Project would demonstrate mechanisms for multi-agencyand multi-disciplinaryarrangements to plan,conserve and manage coastal resources and to controland promotesustinable developmentinvolving government agencies, private-sector parties and local communities. Such an approachis new to Egypt; the achievementsand difficulties encounteredand lessons learned would be valuablefor CZMactivities in therest of the countryand in other countriesaround the Red Sea A review of the CZMplan and arrangementsfor pollution controland monitoring,reation managementand protected area managementwould be undertaken mid-waythrough the Project. Built into each of the componentsare a series of monitoringand' evaluationactivities, such as inventoriesand pollution monitonng. The mid-termand final reviews would concentrate on ways to improve institutional arrangementsand coordination between concernedagencies, and to ensure that user fees and other sources of funding generatedby the actvitiesof CZMare availableto maintainthese functions when the project ends. D. Project Cost and FinancingPlan RM Cost

3.29 Totalfinancing requirenent, including interest during e;nstruction, is estimatedto be about US$805million of whichUS$302 million or about 38% is in foreignexchange. Physical contingenciesare estimatedat 10%for the area developmentcomponent and the Red Sea and Nile Cruisesinfrastructe. No physicalcontingeiacies are included for technicalassistance or engineering services.Price contingenciesfor thesecomponents have beenincluded at 3.9%for foreigncost, and 15%for localcost in FY93,9% in FY94,6% in FY95and 5% thereafter. 3.30 A summaryof cost estimatesand financingrequirement for the Projectis given in Table 2. The cost estimateincludes the sum of US$4.75million in grant fundsfrom GEF for the protectionof the EgyptianRed Seamarine bio-diversity.

Table. 2 urn ~ ~ ~ ~~r: itt % % % Base Total lQI Egmiga IaMl LF Eorign aW EX Financing (LEMili) (USSMillion) Area Developmaentin Geefield Sites Ras Abu Soma 65430 40852 1,062.82 196A9 122.68 319.17 Sahl Hasheesh 401A7 20127 602.74 12056 6OA4 181.00 WorkingCapital 26.S8 26.61 53.19 7.98 799 15.97 Sub-total 1,08235 636A0 1,718.75 325.03 191.11 516.14 37 9) 64 ifrasuctue Developmentin ExistingTouism Areas Nile Cuises 61.90 2890 90.80 1859 8.68 2727 Red Sea 2153 496 6449 6A7 1290 1937 Sub-Wtotal 83A3 71.86 15.29 2.05 21.58 46.63 46 8 6 Eiemental Management 3.26 15.82 19.08 0.98 4.75 5.73 83 1.0 Q7 TechnicalAssistance S.04 11.70 16.75 152 3.52 5.03 70 09 0.6 TotalBase Cost 1,174.08 735.78 1,909.86 352.58 220.95 57353 39 100 71 PhysicalContingencies 79.18 6539 14458 23.78 19.64 43A2 45 5 Price Contingencies 329.15 12499 454.14 98;84 37.53 136.38 28 17 TOTALPROJECT COST 1,582A2 926.16 2,50858 47520 278.13 75333 37 94 IDCon BankLoan 1031 4933 59.64 3.10 14.81 1791 83 2 lDCon OtherLoans 81.77 3036 112.13 2456 9.12 33.67 27 4 TOTALFINANCING 1.67450 1,005.85 2,68034 502.85 302.06 80491 38 100

Financing Flan 3.31 The total Bankloan would be US$130millon. Of this, aboutUS$100 million would financeboth foreignand local costs of the infrstrctm e componentof the area developmentsub- projects, estimatd at about 14% of the total cost of the integratedpackage of infasucture and superstructure.For otherinfasuc componets andtechnical assitance, about US$30 million of -19- the Bank loanwould finance the foreignexchange cost. The financingof the localcost in the area developmentsub-projects is justified on the basis that private sectorinvestment is an integrated packageof both infrastructureand superstructure,and that Bankfuiancing of infrastructuresubject to the debt/equityratio of 60:40of ASDand SHBDcapital structure would have an importantcatalydc effect in mobilizingequity and commercialborrowing. Furthermore, the total financingwould be less thanthe foreignexchange cost estimatedat US$263million of the totalintegrated project costs. The privatesector wouldcontribute US$330 million in equity and US$300milion in commercial loans. GOE wouldbe expectedto contributeabout US$40 million which would cover the localcost of the RedSea and Nilecruise ifrastucture, technicalassistance, and the environmental management program. However,if privatesector equity would be forthcomingfor the Red Sea and Nile cruise infrastructure,government contribution would be decreased.The foreigncost of the environmental managementcomponent would be financedby a grantfrom the GEF. Table3 showsthe financing plan.

Tabe: 3 (in US$mlon) FinAncing FundingAsene LOA Foreign liwi ESan

IBRD 22 108 130 16 PrivateSector Equity 229 101 330 41 CommercialBanks 212 88 300 37 Government 40 - 40 5 GEP - 5 5 1 TOTAL 503 302 805 100

0lnendiIgAmnangmM - 3.32 The proceeds of the proposedLoan, would be made availableby TDA to ASD, SHBDand privateinv4stos for the Red Sea infrastructureand Nileberthing facilities. TDAwould enter into sub-loanagreements with ASD and SHBDand other selectedprivate sector sponsors for the Red Sea and Nile cruise infrastructure. The draft Sub-LoanAgreements has been reviewed duringnegotiations. Condition of disbursementof the proceedsof the sub-loansto ASD and SHBD would be the effctivenes of gMes Sub-Loan Agremnt and the fulilmentof conditions speified underthe securitya gement(paras. 3.35 - 3.37l. 3.33 The loansmade by TDA to privatesector would bear a maturityof 15 yearsincluding a 5 yeargrace period in orderto providelong term financingto the sub-projectscompatible with the implementationschedule and cash flow of the sub-projects. The grace period would facilitate completionof constructionreflecting the gestationperiod characteristicof such projects. The loan fromTDA couldbe subordinatedto othe commercialborrowings by privatedevelopers in order to leveragethe resourcesonlent and to mobilizelocal commercialborrowings for longertenors than is possibleat present. TDA wouldonlend to the private sectorsub-projects at a variablelending rate deteminedsemi-annually and comprised of thefollowing: (i) thevariable Bank lending rate to TDA; (ii) a spreadof 175basis points;(iii) a premiumof 100basis pointsfor the subordinationfeature of the loan; and (iv) the cost of managingand administeringthe loansdetermned at 25 basis points. The onlendingrate wouldbe adjustedsemi-annually based on theBank's lending rate to TDA. TDA -20-

wouldalso pass on comnuitmentfees of the relevantportions of the Loanto the privatesector where applied.The fundsonlent to privatesector would be denominatedand repaid in US dollars. SecuritvArrangeMents fgr Area DevelonmentSub.Projects 3.34 A securitypackage has beendeveloped and agreedwith ASDand SHBDin orderto ensure that: (i) the financingplan for the sub-projectsmeets the requirementsoutlined under the Project;(ii) private sector borrowersassumne all financialcharges and foreignexchange risks that wouldbe incurredunder the onlendingarrangements with TDA; (iii) the masterdevelopers carry out the overalldevelopment of the resortsas agreedwith TDA; and (iv) there are sufficientrevenues availablefrom the sale of utilitiesto a criticalmass of superstructure,as well as fromland sales,in orderto servicethe debt. 3.35 Disbursementsunder the loan to ASD and SHBDwould take place only whenthe followingrequirements have been fulfilled to the satisfactionof the Bankand TDA: (i) Loan Agreementswith the commercial banks lending to ASD and SHBD for infrastructureto be constructedduring the first phase; (ii) financial closure on the first two hotels to be constructedunder the first phase consistingof a ShareholdersAgreement, (since both ASD and SHBD would be shareholdersin the respectivehotels), and Loan Agreementsfrom commercial banks lendingto hotelcompanies; and (iii) signedconstruction contracts for the constructionof infrastructurefacilities under considerationfor the firstphase including roads, water desalination plant, waste water treatmentplant, and communicationnetworks; (iv) signed operation and managementcontracts where appropriate,or staffmg and organizaionplans for theoperation and management of the infastructurefacilities; (v) signedland sale agreements with the firsttwo hotels; (vi) signedconstruction contract for the firsttwo hotels; (vii) signedO&M contracts with reputable hotel operators for thefirst twohotels; and (viii) signedutility contracts between ASD/SHBD and the first two hoteloperators setting out that all utilityservices required by the hotelswould be boughtfrom ASD/SHBD andthe tens andconditions for the saleand purchase of utility. 3.36 As the sub-projectsare in greenfieldareas, these conditions are aimedat reducingthe lag dme betweenthe construction of inacture and superstucture,and thus help accelerate tourist arrivalsto the Red Sea. Theseconditions also aimat ensuringthat a criticalmass of superstructure wouldbe in placeat the completionof the first phaseof the infrastructureto assurea securedsource of revenuefor debtservice. The twoprivate sponsors have progressed well in preparingthe design of thefirst twohotels and in selectinginternational hotel operators. The mobilizationof resourceswould be acceleratedonce there is a preliminarycommitment from TDAto ASDand SHBDfor financing of the infastucture. 3.37 A mid-tennimplementation review of the area developmentsub-projects would take place towardsthe end of the first phasefor ASDand SHBD(around December 1996 for ASD,and December1995 for SHBD). At that time,ASD and SHBDwould be expectedto submitan updated feasibilityfor the secondphase to ascertainthat its implementationwould be technically,financially, -21- andenvironmentally viable, based on experienceunder the first phase. Disbursementsfor contracts under the secondphase ould take place subjectto (filBank aiWd3DA- -rloyal of the updated feasibilitysUUdX; and (ii) substantialcoMe f the infrastructureand superstructurein the first

FinancingPlan for the Area DevelopmentSub-Projects on GreenfieldSites 3.38 Ras Abu Soma Develogpment.The total financing required for the development of infrastructureand superstructurefor the Ras Abu Somadevelopment is aboutUS$461 million. Of this US$371million would be for the developmentof superstructureconsisting of hotels,marina and employeehousing, and US$90 millionwould be for the financingof the infrastructurefacilities consistingof roads, water desalinationplant, waste water treatmentplant, electricitygeneration, communicationsand all associatednetworks. The total amountof debt of aboutUS$245 million (53% of the integratedcost) would be financedby US$50 million from TDA to ASD towards infrastructurecost (11%of the integratedcost), US$7.5million from commercialbanks to ASD, US$1.5 million in the form of land mortgage from MOT and about US$185 million from commercialbanks towards superstructure costs. The total amountof equitywould be aboutUS$216 million(47% of the integratedcost), consisting of a cash contributionof US$31million from ASO towardsinfrastructure cost, and aboutUS$185 million equity in the hotels. The financingplan for ASDis summarizedin Table4 below. Detailsof financingare in Annex4.

Table: 4 Abu Sam. Davannw MProg Phudg Et

Phase I PhaseII Total 1993-96 1997.2002 SOURCESOF FNANCNG: m1 9b USI miltion i,Lo . ~~~~~~~~~~million million Superstructure Equity/l 69 5 116.5 5) 185.5 40 Commercial Debt 69 5) 116.5 50 1855 40 Total FinancingSuperstructme 138 100 233 100 371 so Infrastructure Equity 12.3 29 18.7 40 31 7 Land Mortgage2 IA 3 IA EBRD/TDALoan 27.8 65 22.3 47 50.1 11 Commercial Debt 1.7 4 53 13 75 2

Total Financing Inastuture 43. 100 463 100 9)

Total Sub-Project Finawct 181.2 279.8 461 100 /1 includingequity fromASI in the formnof developedland and cash contribution. 12 80% of the purchase value of land would be financed in the formof debt (land deferred payments)from GOB 3.39 Sahl HasheeshDevifpment. The total financingrequired for the developmentof infrastructureand superstructurefor the Sahl Hasheeshdevelopment is aboutUS$258 million. Of this, aboutUS$165 million would be for the developmentof superstructureconsisting of hotelsand touristvillages, and aboutUS$93 million would be for the financingof the infastructurefacilities consistingof roads, water desalinationplant, waste watertreatment plant, elec;ricitygeneration, conununicationsand all associatednetworks. The total amount of debt of about US$145million (56%of the total integratedcost) wouldbe financedby US$50million from TDA to SHBDtowards the infrastructurecosts (19% of the integratedcost), US$7.5million from commercialbanks to SHBDfor the infrtructure cost, aboutUS$82 milion for the superstructure,and US$5 millionin -22- the form of land deferredpayment to MOT. The total amountof equity would be about US$113 million(44% of the integratedpackage), consisting of a cash contributionof about US$31million from SHBDtowards infrastructure cost, US$82million from SHBDand superstructureinvestors towardssuperstructure costs. The proposedfinancing plan for the Sahl HasheeshDevelopment is sumumarizedin Table 5 below. Detailsof financingare provided in Annex5. Tabke:5 Sakise Unanc0 e Pa EcauLuwdLEka_ _ Phase la Phase lb Total 1993-95 1997-99 SOURCESOFFEINC11 Yei I o.af million million milinn Toal Superstructure Equity/I 42.8 50 39.4 .0 82.2 32 CommercialDebt 42.8 .S0 39.4 50 82.2 32 Total FinancingSuperstructure 85.6 100 78.8 100 164.4 64 Infrastructure Equity 10.7 26 20 40 30.7 12 Land Mortgagel2 52 12 5.2 2 IBRDIDA Loan 27.5 62 22.7 46 50.2 19 CommercialDebt - - 7.5 14 75 3 Total FinancingInfrsncue 43.4 100 50.2 100 93.4 36 Total SubPro.jectFlnancina 129.0 129.0 258.0 100 I This includesequity fromSHBD in the fonn of deveoped land and cas. /2 80% of the purchasevalue of land wouldbe financedin the forn of debt (land defenred payments)from GOE

E. Procurement and Disbursement

Procurement 3.40 All Bank-financedprocuremnent for civilworks, equipment and materials,for boththe privatesector and public sectorcomponents would be in accordancewith the Bank'sProcurement Guidelines. Procurementof consultant servicesand technicalassistance would follow Bank's Guidelinesfor the Use of Consultants. Egyptianmanufacturers competing under International CompetitiveBidding (ICB) would receivea preferencein bid evaluationof 15 percentof the CIF price or the prevailingcustom duty applicableto non-exemptimporters, whichever is less, provided the local value addedto the productis not lessthan 20% of the ex-factorybid price. 3.41 Contracts for supply of goods and equipment valued at US$250,000 or more would be awarded through ICB procedures. These contacts would be grouped, as far as practicable, to attract international competition. Goods and equipment costing between US$50,000 and US$250,000 would be procured through Local Competitive Bidding (LCB) and those below US$50,000 would be procured through solicitationof at least three price quotationsfrom more than one country. 3.42 Contcs for civil works valued at US$500,000or more would be awarded through ICB. Civilworks contracts under US$500,000, and civil worksfor the upgradingof antiquitiessites and accesses, would be awarded throughLCB open to foreign contractors. LCB procedures are generallyconsstent with economy and efficiency in theexecution of the project Thereare, however, -23- a few proceduresinconsistent with Bankprocurement guidelines, and othersrequiring clarification at negotiations.During negotiations, Government agreement was obtainedregarding changes needed to makethe procedures acceptable to theBank. 3.43 Withfew exceptions,the typesof worksare of a relativelyconventional nature and can be implementedby the largerEgyptian contractors. Similarly, with the exceptionof the Nile cruise componentsEgyptian consultants are capableof designingmost componentsof the Project. It is expectedthat about50 percentof all consultancywork would be carriedout by local consultants, while60 percentof contractswould be carriedout by localcontractors. Both major private sector developershave agreed to follow the Bank's guidelinesfor procurementand intend to appoint reputableinternational and local consultantsfor project management. These firms will provide technicalassistance to the developersin (i) planning and packagingcontracts; (ii) issuing and evaluatingbids; (iii) monitoringthe implementationof contracts;(iv) monitoringcash flow and payments;and (v)dealing with all implementationmatters. 3.44 TDA has adequatecapability to implementthe projectcomponents under its direct responsibility. MOThas secondeda completeunit from its procurementdepartment to TDA to handlethe legaland procedural aspects of procurementThe unit has fullauthority to awardcontracts andenter into comnmitmentswith regardto the expenditureof publicfunds. TDA has alsorecruited a numberof seniorengineers with experience in procurementand project management. These

Table:6 PtouDetment Arrageements

P'rocuremnentMethod Noof la LX0i2a -mContracts- AMa DevelopmentIn GreenfieldSites Ras Abu Soma 16 331.91 i1056 18.47 460.94 (35.84) (12.05) (2.11) (50.0) Sahl Hasheesh 16 183.03 64.55 10.24 257.82 , (3.S.62),(12.10) (2.29) (50.0)

Sub-total - 32 514.94 175.11 28.71 718.76 (71.5) (24.1) (4.4) (100.0) Infiuswtre l)eyelomn=in Existing TourismnArea Red Sea 14 18.48 10.56 2.39 31.43 (8.1) (3.6) (1.1) (12.8) Nile Cruims 32 6.74 31.36 5.86 43.96 (4.8) (7.8) (1.6) (14.2)

Sub-total 46 25.22 41.92 8.25 75.39 (12.9) (11.4) (2.7) (27.0) TechnicalAssistance - 5.03 5.03 (3.0) (3.0) ONFComponent NA 5.73 5.73 (4.75) (4.75)

TOTAL 78 540.16 217.03 47.72 804.91 (84.4) (35.5) (1485) (134.75) Not: Figuresin parenthesesrepresent portion financed by theBank including interest during construction. -24-

engineerswiU be responsiblefor the reviewof biddingdocuments, evaluation of bids andprovision of adviceto the managementof TDA. 3.45 All documentsrelating to the procurementof Bank-fmancedconsultancy services wouldbe subjectto the Bank'sptior review. All biddingpackages for worksand goodsestimated to cost US$250,000equivalent or more, would be subject to the Bank's prior review of the bid packages. Theselimits would result in priorreview of about95 percentof the loan amount. Other contractsfor works and goods would be subjectto the Bank'sreview after awardof the contract. Table6 givesa breakdownof Projectcomponents to be procuredby ICB,LCB and other procedures. The quarterly progress reports to be submittedby TDA (para 3.51) would include details on procurementmatters, showing the date andvalue of any new contractawards, changes in the scope andvalue of contracs under implementation,any changes in contractvalue and cost overruns,and a briefsummary of forthcomingtenders. 3.46 statusafEwiEcwa=m. Feaibiity studiesand conceptua designs have already beencompleted for all projectcomponents. The wastewater treatment plant for SouthHurghada has beencarried to finalengineering, whereas some parts of theNile cruises, namely the berthingfacilities at Aswan and Dandara, and the navigation control center have been carried to preliminary engineering. TDA has preparedterms of referencefor carryingall Project componentsto final engineenng and a timetablehas been agreed upon for the appointmentof consultantsfor these activities. For the two area developmentsub-projects, preliinary engineeringhas beencompleted for all infrastructurecomponents and prequalificationfor major contracts(i.e., water supplyand electricalpovaer plants) is underway.Terms ofreference for all projectrelated studies have also been agreedupon withTDA.

D isburme i 3.47 Table 7 shows how the proposedBank loan of US$130million would be disbursed againstthe variousproject components. For the two area developmentsub-projects, the proceedsof Bank loan wouldbe disbursedagainst 100%of the cost of infrastructureand interest and finance charges. For other components,the proceedsof Bankloan wouldbe disbursedagainst 40% of the totalcost in case of Nilecruises, and 50%of the total cost for the Red Sea infrastructureand interest and financecharges. If there is private sectorcommitment in investingin thesecomponents, TDA wouldenter into loanagreements with the selectedprivate sponsors. In this case, the disbursement for these two componentswould be contingenton theeffectiveness of the LoanAgreements with the respectiveinvestors.

Table:7 Disburaewen=

% of Amount Expenditures Catel Desitiou US$ million To be Financed

1 PrivateSector Area Development 80 100%of the cost of infrasct Sub-project 2 Nile Cruisesinfrasucue 13 40% of the totalcost 3 Red Sea Infrastrctu 12 50%of the total cost 4 TechnicalAsistance 3 100%of the foreigncost S ntweraanO FTA anLal Chat 223ue 100%of amount1 . ~~~TOTAL 130 -25-

3.48 The estimated quarterly disbursement schedule is given in Annex 8. The disbursementschedule is basedon the Bank'sdisbursement profile for Egyptbut has beenslightly modifiedfor a sevenand a half yearimplementation period instead of eightyears. This is due to the fact that about90% of theloan will finance private sector investment projects which are expected to be implementedfaster than the publicsector supported components. Disbursements are expectedto be completedwithin six monthsafter project completion. The closingdate of theproposed loan will be December31, 2000. 3.49 In orderto enableTDA to effectivelyimplement the Projectand to ensureavailability of foreign exchangeto private sector developers,TDA would maintain a SpecialAccount at a commercialbank in Egyptfor a maximumamount of US$5million, which is expectedto coverthe Bank'sshare of eligibleexpenditure over a four monthperiod. Paymentsfrom the SpecialAccount wouldonly be madefor eligible expendiures indicated in the loanagreement. The accountwould be denominatedin US Dollarsand replenishedagainst withdrawalapplications. Applicationswith appropriate supporting documentationshould be submitted wheuiapproximately half of the maximumallocated amount of the SpecialAccount has been spent or quarterly,whichever occurs first. Disbursementsunder the Projectwould be madeagainst standard documentation, except for contractsvalued at less than $250,000equivalent, which would be claimedunder Statementsof Expenditure(SOE). Relatedsupporting documents for SOE claims would be retainedat TDA's headquartersand made available for inspectionby Bankmissions and project auditors. F. Project Supervisionand Monitoring

3.50 - The implementationof the Projectis expectedto take aboutseven and a half years. The Bank would supervisethe Project three times a year during the first two years of project implementation,and an averageof twicea yearduring the last five and a half years. The core team for the supervisionmissions would consist of an ifrastucte engineer,a financespecialist, and an environmentalexpert. This core team would be supplementedby other expertsas needed. The Projectis complexand the implementingagency is new. Constructionof facilitieswould take place over a widelydispersed area. Intensivesupervision would be required,particularly in the earlier years. About 17 supervisionmissions are planned duringproject implementationand the total supervisioneffort is estimatedto requirea total of 120 staff weeks (avewageof 16 staff weeksper year). Detailsof supervisionforecast are includedin Annex9.

3.51 A project implementationschedule and monitoringplan is given in Annex'7. In additionto supervisionmissions, the Projectwill be monitoredthrough quarterly progress reports which would be submittedby the TDA to the Bank witiin 30 days after the end of each quarter duringthe entire projectimplementation period. Thesereports would focus on both the cumulative and specificprogress achieved during the reportingperiod for. (a) the implementationof the agreed actionplan to improvethe policy environmentin the sector, (b) the biddingprocess for all major contractsfor civil worksand equipmentto be procured,separately for theprivate developers and the public sector,(c) the physicalprogress by contractof civil worksand equipment delivery, separately for private developersand the public sector, (d) the status of technicalassistance, studies, designs, programs,and staff trainingto be providedunder the GEFfinanced component of the project;(e) the status of Bank disbursments and projecteddisbursements for the nextsix months;(f) the statusof covenantsand accountsand audit; and (g) a summay of any issuesraised by Pank missionsand -26-

actionstaken for their resolution.A brief summarywould be addedexplaining the reasonsfor any delaysor shortcomingsin any of theabove items and of actionstaken to improveprogress. 3.52 A mid-termreview of all projectactivities would be conductedjointly by TDAand the Bank. To facilitatethis review,TDA would preparea detailedreport coveringall aspects of the project and submitit to the Bank by December31, 1995for a joint reviewin February1996. The projectcompletion report wouldbe preparedby TDA and submittedto the Bank not later than six monthsafter the loan closingdate. An agrement has beunrached tha ld submit:(a) quarerl rge reportswithin 30 days of the end of each quarter.(b' the detailedrenort for the mid-termrevie Y ber 31. 1995:and (c) the projectcompletion report within six months after loan closing.

IV. THE IMPLEMENTINGAGENCY A. Organizationand Management 4.01 TDAwas establshedas an autonomousauthority in September1991 with a Boardof Directorschaired by the Ministerof Tourismwhich consists of 16 membersrepresenting the public and privatesectors and the ChiefExecutive Officer (CEO) of TDA. The Boardof Directorsis the supremeauthority for settingpolicies concerning TDA!s activities, for approvalof TDA's work programand annual opeing andcapital budgets, for naing decisionson allocatingland andgiving developmentrights to pdvate sectordevelopers in areas designatedas tourismzones, for approving costrecovery policies for tourismrelated services, and for contractingloans for TDA. The initialby- laws of TDAhave been prepared and adopted. As TDA activitiesgrow, it is expectedthat these by- lawswould be suitablyamended to reflectexperience gained in theimplementation of its policies. e 4.02 The CEOis the executivehead of the TDAwho is appointedby Presidentialdecree followingnonmination by the nister of Tourism. At this initialstage of TDA'soperations the CEO is assistedby an Adviserwith broad based experience in tourismand a FmancialAdviser. The rest of TDA is organizedinto six functionalunits: Personnel and LegalDepartment, Financial Controller, Information ManagementUnit, Business DevelopmentDepartment, Investment Development Department,and the TechnicalDeparamnt. The TechnicalDepartment has three units:Planning and ProjectPreparation, Environment, and ProjectInplementation. Each of thesedepartments and units either are or will be headedby high caliberprofessionals recruited outside the civil servicesystem. the organizationchart and the duties of the variousfunctional units of the TDA are providedin Annex10. B. Staffing

4.03 TDAis a smallorganization. The intentionis to keepa smallnumber of highcaliber staff on a permanentbasis andcontract out specifictasks to outsideconsultants as muchas possible. With growthin TDA'sactivities it is expectedthat the part-timeMOT staff would be absorbedby TDA. The need for foreign experts will also grow temporarilyparticularly in developing environmentalregulations, and for the implementationof the GEF componentof the Project. These temporarystaffing needs are shown separatelyunder the GEF component. Table 8 providesa summaryof the existingand expected staffing level of TDA. -27-

Table: 8

Stiff Categoz 1221 122= i2 1994 199S

Full Time Prefessionals 21 26 33 35 40 ForeignExperts 2 4 4 4 4 Part Time Consultants 7 8 10 11 12 Partrime MOT Staff 8 8 8 8 8 SupportStaff 5 9 9 10 12

Total 43 55 64 68 76

C. Financial Position of TDA

4.04 Prior to its formal establishment in September 1991, TDA operated as the Tourism Development Unit of the MOT. Most of its operational costs were financed by the MOT, which provided the local funds, supplemented by grant funds from UNDP, USAID and the Japanese Grant Facility to cover the foreign exchange costs for expatriate personnel, consultants, and equipment. Since TDA was created to operate as a self-financing organization, it no.w collects fees from land allocation to private sector for development. These fees are: (i) alIlganfees which are calculated as 2% ofthetotalprice of theland allocated by TDA; (ii) cntfees calculated at 5 % of the total price of the land sale contract with TDA; and (iii) project review and mnonitong fees which are set at 0.35% of the total estimated cost of the project submitted for approval by TDA. Since payments for all land allocated by TDA would be nmade over a seven year period, and other fees are paid in installments in relation to project phasing and implementation progress, these fees would provide a steady stream of income. Table 9 TDAIs1 Ii

Alocion Fees 1138 1194 1254 1003 952 ContractFees 2844 2986 3136 2508 2383 MordtodagFews 2647 2780 2919 - 2335 2218 Studiesand Services 52D 546 57 60Q 632 Incomefrom Intet -- - - 1838 Toftl Revenues 7149 7506 7882 6448 8023 Sar 2232 2343 2460 2583 2712 OfficeSpace 2600 2730 1000 1000 100D Equipmattand Supplies 1000 10D0 liO2 1157 1215 OperationalExpenses 433 455 477 501 526 Traveland Promotion 717 752 790 830 871 TotalExdtures 6962 7330 S829 607 6324 Surplusor (Deficit) 167 176 2053 377 1699 AccumulaedSurplus (Deficit) 167 343 2396 2X 4472

4.05 TDA also denves revenues from canying out studies and providing technical services to private settor developers who are interested in invesdng in the tourism zones. In addition, TDA would also receive a small portion (25 basis points) of the interest that would be charged by TDA to -28- the privatesector developers under theproposed Project. A sunmuryof TDA's financialposition in the nextfew yearsis providedin Table9. D. Accountingand Auditing 4.06 TDA'saccounting systems and formatsare the samneas of any otherpublic authority. Untilnow its financialactivities have been rather limited and mainly consist of payrolland payments for consultantservices, operational costs and maintenance.The accountingstaff is small. With growthin its activities,however, these functionswould have to expand. The Projectwould provide technicalassistance to ensurethat thisexpansion of activitiestakes place in a systematicmanner. For the purposesof this Project,separate accounts would be maintainedfor all projectrelated financial transactions.TDA would maintainseparate records and projectand loanaccounts for each private sector and public sector sub-project,the GEF activities,other institutional support activities, stments of expendimes,and thespecial account. 4.07 Publicauthorities in Egyptare auditedby the CentralOrganization for Auditingand Control(COAC). The auditingprocedures and standardsof the COACare acceptableto the Bank. Agreementhas been reachedduring negotiationsthat startingin its fiscal year 1992-93:(a) TDA would mamintanitsoverall accountsinl an approriat formataccetable to the Bank: (b?)these

(c) the auditors would. in addition to e overalludit reportfor the TDA. prere and submit a seara oinion on the accuracyand appropriatenessof the pmjc accounts (includingSpecial Account to be ntainedby the A andd the ann adit t and the reort on the project accounts would be submitted to -the _Bankwithin six Monthsof the en oechfiscal yecar. Expendituresby EEAA and the Red Sea governorateon the GEP componentwould be audited annuallyas requiredunder the GEF agreement. 4.08 Privateinvestors would also maintaintheir accountsin appropriateformat acceptable to the Bankand TDA. These accountswould be auditedannuaUy by independentand experienced auditorsacceptable to the Bank and TDA. In addition,ASD and SHBDwould also submitto TDA and theBank their accounts certified by a reputableaccounting firm acceptable to the Bankalong with disbursementrequests to demonstratethat at all time,ASD and SHBDwould maintain a debt/equity ratio of 60:40. Theseconditions would be reflectedin the LoanAgreements between TDA andASD and SHBD,respectively. V. PROJECTJUSTIFICATION A. Project Benefits

5.01 The proposedProject would assist GOE in the formulationand implementationof a strategyand policy frameworkfor the developmentof one of ihe most importantsectors in the Egyptianeconomy. The Project would also assist in the developmentand strengtheningof an institutionalframework which would ensure that all furtherdevelopments in the sectortake place in an environmentallysound manner. Additionalbenefits from the Projectwould be: (a) improved opportunitiesfor private sector investmentsin the tourism industry,(b) higher foreignexchange eamingsfor the country;(c) increasedemployment both in the tourismindustry itself, as well as in industrieswhich serve tourism, such as foodprocessing and small-scaleenteprises and (d) arresting the environmentaldegradation taking place in some of the adjoiningtourism areas. The Project would have a demonstrationeffect in mobilizingthe private sector for financing,building and operadnginfrastructure which has traditionallybeen undertaken by the Government.If successful, -29- the experiencewould be valuablefor C3OEin pursuingthe strategyof promotingprivate sector participationin publicservices in othersectors such as watersupply, power and telecommnunications. 5.02 Once fully developedby aboutyear 2002, ASD and SHBDwould add about4,500 roomfsin hotelcapacity. Assuming an occupancyrate of 70%and a netforeign exchange expenditure of US$100per day (excludingairfares), foreign exchange generated by the two area development projectswould be aboutUS$230 million per year. In addition,as a resultof the additionalberthing facilities,about 80 crise shipsof a capacityof 70 roomseach would be operating,generating another additional5,600 rooms. Assumningan occupancyrat of 76% anda net forcignexchange expenditure of US$50per day, foreignexchange generated by Nile cruiseswould be aboutUS$150 million per yea. 5.03 The Project would also expect to providedirec employmentto about 12,000and indirect emnploymentto about 20,000people. Sincethe salaries in the tourism sector are on an average almost twice that of the national average, the employmentprospects would prove considerablyattractive to the populationin Hurghadaand Safaga, the two towncenters closest to the developmentareas. Furthermore,given the size of touristdevelopmnents and thefact that employment would be yearround, the Projectwould help promote the growthof secondarycities, and thus slow downmigration to Cairo, Luxorand Aswan. The averageemployment for womenin the tourism sector,both public and private,is around17% compared to the nationalaverage of 12 %. Althoughin the remnoteareas, as evidentfrom the emnploymentstatstcs for Sinai Regionand the Red Sea, thins averageis around 14%,the Projectwould provideincreased opportunities for the employmentof womienand would be,able to attrac a highernumnber of womensince employeehousing and other commuiunitservices would be providedin the RedSea developments. 5.04 The extensiveRed Sea coral reefs are the mostcomplex and valuablehabitat in the Red Sea in termnsof richnessof species,endermisnm, diversity and ecologicalfunctioning. They are not onlyinvaluable on a sitespeciallocal scale but are alsocritical to the overallfunctioning and health of the entire Red Sea, as well as representinga truly unique global resource. Protectionof the Egyptianreefs and othercoastal habitats& and actionsto mitigatepollution of the.semi-enclosed Red Seawaters would not only benefitthe people of Egyt but also theriparia nationsas wellas provide an exampleof integratedmanagement that is neededon coastalareas worldwide. The Projectwould makea significantcontribution to the globalachievements in protectingcoral reefs,endemic island wild Iffeand diversemarine environments. The associatedGEF projectwould be the first of this scale,in the region.This approachwould be adaptablein otherRed Seacountries through the regional frameworkbeing developed by UNDPand with a p-arlel GEFproject in Yemen. B. Flnancialand Economic Analysis 5.05 The modular,decentralized approach proposed for the infrastructurein the Red Sea wouldbe the least cost solutionat this stagefor the remnotezones. Analysiswas carriedout for an alternativesolution involving the constructionof a pipelinesomrcing water from the Nile fromQena to Safaga. The analysis demonstratedthat such a large investmnentat this stage would not be financiallyand economicallyviable given the projecteddensity of populationin the area. If tourist arrivalswould materialize as projected,it is expectedthat a largersystem would be requiredby the year 2000. By that time, thedesalination plants constructed under the proposedProject would reach the end of theireconomnic life. GOE has'noplans to extendthe nationalelectrical grid systemnto the area for similar reasons. In telecommunications,public facilities are adequate for the resort developmentsand thus no additionalpublic investmets are envisaged. Under the Project,public roadsto projectsites areadequate, and public funds would be require mainlyfor maintenace,which would be providedby. GOE under its road maintenanceprogram The private sector would be *30-

responsiblefor constructingaccess roads to variousfacilities within their developments, and thus no publicinvestnents would be requiredover the life of theProject. 5.06 An analysisof the financialand economicperformance of the two sub-projectsASI) and SHBDis providedbelow. Sincecost and revenuesof these two sub-projectsduring the ;econd phase would be revised based on the performanceof the sub-projectsfrom the first phase, the analysisis resticted to the firstphase of the loans. Separatefinancial analysis has beencarried out for infrastructe and superucture componentsas the constitutionof the shareholdersis differentfor both (paras.3.09 and 3.12). The economicanalysis, however, is performedfor the integratedsub- projects. Detailsof assumptionsand calculationfor the analysisare providedin Annexes4 and 5, respectively. Abu SomaSal DeXelognlt CoM=![ 5.07 Rnuesm Thereare threemain sourcesof revenuefor ASD:(i) Utiliv rMnm: Theseare based on the consumptionof four hotels,vilas, condos,marinas that would be built and commissionedunder Phase I. Directutility rates charged are basedon an analysisof the unit cost of productionof each type of utility,plus a suitableprofit margin;(ii) Dividends:These would be receivedfrom ASD's share in the hotels.ASD would have an aggregatepardcipation of about50% in the equity of the four hotelsof Phase1 equivalentto the valueof developedland contdbuted to the hotelsand straightequity. A dividendpayout ratio of 95%is assumedfor the analysis. Hotelroom rates are assumedat US$100for a five-starhotel and US$80for a four-starresort. The former wouldreach 70% of occupancyrate, and the latter 80%by year 4 of opertion; and (iii) PevelMd 1mndLRevenues from the saleof anypiece of developedland would be collectedin the formof a 40% down-payment,followed by two anmualinstallments of 30%each. MOT would receive 50% of the profitfrom the sale of landother han that whichis contributedto the hotelsas equity-in-kind.Annex 4 providesa detailedoutline of the land salesplan and pricesas envisagedby ASD,resulting from the developmentof the initial 1.5 millionm2. The currentmarket price of land in Hurghadaand SharmEl Sheikhranges from iE- 150to LE 350/ m2. Developedland is estimatedto be sold to the hotels at LE 100-180m2. Land sold for the developmentof other superstructuresuch as villas, chalets,et. wouldbe sold at a pice of LE 230/rn2 for 1993.The planassumes dtat the price of land wouldappreciate by 5% annuallyin real terns, strtng from1993, although appciation on theprice Oflan4 for compaabledevelopments in the nearbyareas has beenobserved to be muchhigher.

5.08 Annual Operating Cost. ASD's annual operating costs are those attributed to the productionand distibuton of electricity,water desalination and distibution, waste waterdrainage and treatment, and the operations and maintenance of 768,000 m2 of shared facilities as conununicationnetwork, roads, public grounds,and irrigation network. The unit cost of producing each kwh of power and each cubic meter of potableand recycledwater, consideringlabor, fuel, lubricants,maintenance, and depeciationof fixedassets wouldamount to LE 0.28/kwhfor power, LE 5.7/m3 for potablewater, and LE 1.9/m3 for recycledwater. Furthermore,ASD wouldincur an annual expenseof about US$0.64million (LE 2.11 million)associated with the operationsand maintenanceof the 768,000m 2 of hared facilities. 5.09 ASD's Financial Pefgormance. Table 10 below summarizes the financial performanceof ASD for the nextten yearsin constanttems. The proposedutility rates (Table11) are assumedto remainconstant for the life of the sub-project.Under the assumptionof landsales as indicatedabove, ASD wouldbe ableto serviceits debt with theproposed utility charges Theserates, though,imply a healthymargin for ASD, and comparefavorably to the current rates in the area. ASD shouldbe able to increaseits revenuesby captuing a higher marketvalue for its developed -31- land, and sellingmore utlities to futuresuperstucte facilitiessuch as villas,condos, marinas, and employee housing.

Table: 10 AI,u Sgma Rav &gsncM CZ. Ea= I - ll cA (IO..O ml, Prolietions of Financial Performange (Rase Cnse)

Saw of llIlee 1.66 3.46 3.67 3.84 3.94 3.94 3.94 3.94 3.94 3.94 3.94 DMden InoomeftomHatel 1.21 5.72 4.97 4.19 4.48 4.78 5.1S 5.69 8.78 10.62 11.01 Saleof DeedLandp" fJZIi 2.2 LZ Looag a 2 2lmam I Lo ooo La TotaRevenuesS$muon 3.24 10.78 11.65 10.73 9.81 8.73 9.10 9.64 12.73 14.66 14.95 OpeatngEpnses /2 L4 1Z1 &U L S Z za IZQ L722 AIm LIZ L50 i.Q Not Income 2.39 2.01 2.90 2.26 1.65 0.92 3.66 4.52 7.95 10.15 10.87

Total0ebt eSvloeOblgstls 0.00 2.08 1.92 1.27 1.14 1.00 1.03 1.17 2.02 2.89 2.97 DOebtServleCoveRatRo 0.00 2.30 2.53 2.44 2.42 2.38 2.87 3.66 6.21 9.07 12.13

/1 AssumesASO mnage. to see 1t0A of the slble lad area,in addton to the landused by hotes,and thatMOT would rean 50%of the prom from suchsale /2 inudin depmeatIn & aonwftzion. 5.10 Table 11 summarizes financial and economic performance of infrastructure and superstucturedevelopments under Phase L Bothinrastructure and superstructureinvestments are econonicallyviable, with an aggregaterate of returnof about15%. The hotels' shareholderswould earn a real returnon equity of about16%. For a purelyinfastructe company,ASD's shareholders wouldrealize an acceptablead return on their equityinvestment of about6%, excluding potential capital gains from its sharein the hotels. This is exprainedby the fact that ASD's infrastructure facilitiesare more than adequatefor 15 millionm 2 and that it srouldneed to sell more landduring Phase I to increasethe returnto shareholders.If ASD wouldshift landfrom the golf courseto sell additionalvillas and condos, the return on equitywould improve to about 10%.The upsidepotental for retr on equty is robust as ASD expandsits developmentto Phase II, and sells more land. Furthermore,GOE has firmplans in the nearfuture to begina regularferry serviceacross the Red Sea.

Table: 11 Abu So=t RAy Dlaudq=nna Co.

Financial and Economic Results

POUWozmb) 0.40 Po*s Wat 11.00 PAW/dWadW f JwRm5) 5.00 Ssnke Few OUXh) 4.50 ASD- MmnDst SuvieCover (MSMato 1.00 ASO- Retun an EquilybMM6.2SK ASD-Om aoowSM/ " 22.6% Holk- AverGOP "44.9% Mdeb - R,Zuman Equly QRR) 15.7% i*Eoo"". P91M18.0% itmnsPrk*ed IRR_ 15.0%

it All out and bandit stam in Economi DRR¢aduaios weaead*usto elImit tae, dt, sad pieog -32- betweenSafaga and SaudiArabia. This wouldmost definitely serve to boosttourism demand in the Red Seaarea, and provide an upwardpressure on landprices. 5.11 Sensititv Anais. Sensitivityanalysis measures the effect of lowerhotel occupancy rates androom rates. Table 12 summarizesthe results of the analysis.The resultsindicate that while the economicIRR of the sub-projectis acceptable,the debt service capacity of ASD is highly sensitiveto the pessimisticscenario of lowerhotel room rates (US$90and US$70per roomfor five and four-starhotels, rspectively) and lower hotel occupancy by about10%. Thiscould be addressed by higherutility rates, or conversionof landreserved for the golf courseto landfor villasand hotels, both of them would still be in line with those in the markeL The financialperformance of ASD wouldbe monitoredclosely during project implementation to ensurethat ASDis able to serviceits debt to TDA.

Table: 12 Abu Soana Day Develpoment Co.

Resul* of SaiSiNZ1 Angoir

BaSS W Rai Hdsl2o_ 215 000 .' ~~~~~~~~~~~~~~~~~~~~~~~m2sod OccpancyL ,wk ease Bsue s .10% -10% Sas HotelRoom RatP (UWnW):l "-star $100.00 90.00 00.00 100.00 100.00 100.00 4-star 60.00 70.00 70.00 80.00 60.00 60.00

Pb"nr "AEKMh) 0.40 0.40 0.68 0.40 0.68 0.40 Water (LiS) 11.00 11.00 18.28 11.00 19.00 11.00 RecydedWater LE3) 5.00 6.00 5.00 5.00 5.00 S.00 Swvio Few LAn2) 4.50 4.50 4.50 4.50 4.60 4.50

ASD- lMlDSbtSewvi.C RoveRbo(DSO 1.00 0.79 1.00 0.80 1.00 1.29 ASO- Nbnr d yess DCFk1A.0 0 4 0 4 0 0 ASD- RswnonaEqiy(FRR 6.2% 8.2% 6.5% 3.2% 6.7% 10.0% ASD-EoMlo9xlRR 22.6% 19.2% 22.9% 19.8% 23.1% 29.1%

Fasb*-Mhdmu nDSCR 1.57 1.37 1.26 1.41 1.30 1.57 Hotl -NwmwbedtysmOSCRd1.0 0 0 0 0 0 0 Hotek-AvermaeGOP 44.9% 44.1% 41.0% 44.7% 41.7% 44.9% Fk*s - PRbtunan Equity(MM 15.7% 11.9% 10.0% 12.7% 10.8% 15.7% Hotsib-EonomnbIRR 18.0% 15.4% 14.0% 15.9% 14.6% 18.0%

Annual atycoss% ht gss revenues 5.9% 6.7% 9.7% 6.0% 9.0% 5.9%

5.12 Revenu, Thereare threemain sources of revenue for SHBD: (i) Udlitv Revenues: Utilityrevenues for Phase1A are basedon the salesto threehotels, villas and chalets,and manrnas. In addition,there wouldalso be comrmnitycharges for maintenanceof about 882,500m2 of shared public areas. Utilitycharges similar to those of ASD are also assumedfor SHBD;(ii) Devedped Llnu Annex5 providesa detailedoutline of the landsales plan and pricesas envisagedby SHBD, resulting from the developmentof the initial 2 million m2. Developedland is estimatedto be contibutedto the four-starresort at a conservativerate of LE 90/m2.and LE 100/M2 to the five-star hotels.Land soldfor the developmentof other superstructuresuch as villas,chalets, etc. wouldbe sold at a marketprice based on a price of LE 230/m2for 1993. The plan assumesthat the price of land would appreciate,by 5% annually in constant terms, starting from 1993, although the apprciation of comparableland in nearbyareas has beenhigher, and (iii) Dividends: SHBDwould -33- have an aggregateparticipation of about50% in the equityof the three hotelsof Phase Ia. SHBD wouldcontribute the full value of land in the five-starhotels, and 50% of the value of landfor the four-starresort, as equity-in-kind.A dividendpayout ratio of 95% is assumedfor the analysis. 5.13 Annual Onerating Costs. SHEBD'sannual operating costs are for the production anddistribution of electricity,water desalination and distribution, waste water drainage and treatment, and the operationsand maintenanceof 882,500m 2 of sharedfacilities as communicationnetwork, roads, public grounds,and irrigationnetwork. The unit cost of producingpower and potableand labor,fuel, lubricants,maintenance, and depi;ciationof fixed assets recycledwater, considering 3 would amount to LE 0.28/kwh for power, LE 8.11/r3 for potable water, and LE 3.52/m for recycledwater. Furthermore,SHBD would incur an annualexpense of aboutUS$0.71 million (LE 2.3 milion), associatedwith the operationsand maintenance of the sharedfacilities. 5.14 SLhLEiacial ECCaMMce. Tables 13 summarizeSHBD's projected financial performancefor the first 10 yearsof operation.The tabledemonstrates, that at the proposedutility rates whichcompare favorably to thoseobserved in the area,and underthe assumptionof landsales as indicatedabove, SHBD would be ableto fuly coverits debtservice obligations. The utilitycost to the hotelsrepresents about 8.6% of the hotel'sgross annual revenues, compared with the industry's averageof about5%. The proposedudlity rates are assumedto remainconstant over the life of the sub-project. In reality,however, SHBD may very well be able to chargehigher utilityrates and capturea highermaret valuefor its developedland. SHBDwould have an aftertax loss duringthe fit yearof operation,but wouldearn substantial profits dunng the lateryears.

Tabk: 13 Sai Hakheesu Day Developmeat Co. Phai Ia. hrasIcbau (2.000.000m2) Pm cmofinacd Perform4nce(ose Case)

3.58 3.58 3.58 3.58 Sale Ul"ts 0.73 2.90 3.22 3.42 3.58 3.58 3.58 8.16 8.25 O*Dhendnf oome rom Hotb¢d 0.00 3.09 2.71 3.57 4.10 3.53 3.61 4.21 6.54 al diDevelopedLandw I &Aa 4.9S 5Ln85 Z 18 L " OMi1 OSS ILl oun ooo 11.88 Tot.JRev.nues-$mIOn 3.61 10.92 11.79 11.56 9.53 7.60 7.70 8.14 10.21 11.74 -Operaing&P91eM 2 1 AZ4.8 L0 Li L2 L5-20 £21Am £2 1£21 A2M 8.07 8.63 Notlnome 0.68 4.87 5.79 5.63 3.74 1.99 3.20 3.87 6.20 2.43 2.46 T*tW . Se.vo Oblgaftlms 1.28 2.80 .3.06 2.01 1.61 1.23 1.23 1.31 2.06 10.95 DeomSWeANoewRaft 1.28 3.43 3.78 3.80 3.28 2.74 3.08 3.75 5.77 8.26 rtain 1 famee SHBDO ase to . 100%of the delopd bnd area,In addmonto the landused by hotels,and ta MOTwould 60%of h proft fromSuch _aes. /2 Inoudhngdepratifon & uotalon. 5.15 Table 14 below summarizes financial and economic performance for both infiucwture and superstrucureconmonents. Based on the aboveassumptions, the developmentof Phasela wouldbe economicaUyviable, with a rate of returnof about22%. The real rate of returnto SHBDequity shareholdersis 10%,excluding potential capital gains from its share in the hotels. However,the upsidepotential for higherretuns on equityis robust,as the assumptionsused for the analysisare based on conservativeestmates of utilityrates and landsales in the Red Seaarea today. If SHBDis successfulin mobilizng resourcesfor a fourthclub resort in PhaseIa, the real rate of returnto SHBDwould improve to about13%. Retumto hotel shareholdersis about 17%compared to the 12-15%range customarily observed for manyhotels in Egypt. -34-

Table: 14

Phase la (2,000O00 m2) Financial and Economle Re.Ults

Prooge mUgiqtyRatfn Power (LEIKWh) 0.40 Po"ab Water ( $nS) 11.00 RecydedWater (LI-.i) 6.00 Seevl Fees (LEI) 4.50 8D0-A. DeWSeu Cor Raio (0SCR) 1.23 8HBD- Reumaon equIty (IRR) 10.4% *H30 EmoMteIIRR/I 27.7% Hotob- Avere GIOP 44.4% Hoelb- Rom on equlty(IRR) 17.1% Hatels- rEm IRR 19.0% MtWd P IRR 22.0% /1 Al cotmd befit stas in Emic hR cauaions wme adjustedto elnae tes duties,and pixcecontences.

5.16 Sen d Analvss. Similarsensitivity analysis is conductedfor SHBD(ie., lowerhotel and occupancyrates), and the resultsare summarzedin Table 15below. The resultsshow that whilethe economicIRR at bothinfastructure and s rstuctuelevel is acceptable(above 12%), however, the debtservice coverage mio on theTDA debt would be at a lowlevel of 1.0during one or twoyears of project operations. As mentionedabove, however, SHBDcould charge higher utiy rate, or altematively,add another4-Star club resort. Financialperformance of SHBDwould be closely monitoredduring implementation.

ha&eI1 (200.14 n2) Resaf of Se&tbb Ax4lvsk ) ,,.~~~~~~~~~~~~~JUHb Ram H

omp _sc 8oaas$ on -10% Hoel RoomRat (UStht): S-star $100.00 90.00 100.00 4-star 80.00 70.00 80.00 5 PowerQ.EKh) °*0.40 0.40 0.40 Water OEMn) 11.00 11.00 11.00 RecyepdWater LERnO) 5.00 5.00 S.00 SeviceFew ima) 4.50 4.50 4.50 8HBODMhMLDWSS. ComrPalo(DSCF 1 .23 1.01 1.01 OHM-Numberof yam0CR1.0 a 0 0 SHOD- P_man Equity(MM 10.4% 7.2% 7.1% SI0-r-* I,M 27.7% 25.3% 25.2%

Hoes- Mltum OSOR 1.57 1.37 1.41 Hes - Nwnbewo yeen DSCk1.0 0 0 0 Hoabus-AvwageOP 44.4% 43.3% 44.1% Hstb - ARm an Eqly(I) 17.1% 13.6% 14.2% Hie-BeonoIrdoIRR 19.0% 16.5% 16.9%

Aual utl onts as % d hotelsM woren 6.6% 9.6% 8.8% -35-

Red Se Cogs Infrastrugbl S 5.17 This componentwould consistof the watersupply and waste water collectionand treatmentsystem to serve the South Hurghadaarea, and the solid waste collectionand disposal facilitiesto servethe areafrom Hurghadato Safaga,including the developmentsat Ras Abu Soma and Sahl Hasheesh.IThe construction of thesesystems is expectedto startin 1994and completed by end 1996. Due to the existingshortage of waterin the SouthHurghada area, the full capacityof the watersupply system being installed under this project is expectedto be utilizedwithin the first three years. Additionalwater production facility would have to be constructedthereafter. The sewerage treatmentfacility is also intendedto be constructedin stagesso that capacitycan be extendedas the needarises. The solidwaste facilty will be sufficientto servethe need for the nexttwenty five years. Provisionhas beenmade for renewalcosts for both waterand seweragecomponents at 2% of initial costevery five years,and at 5% forthe solidwaste component. 5.18 The tarifffor combinedwater supply and seweragehas beenassumed at LE12/m3of water consumption. This is less than the cost incurredby present hotel owners in the South Hurghadaarea for watersupply alone and is alsocomparable to the tariffproposed to be chargedby both the ASD and SHBDin their respectivedevelopments. For solid waste,the tariff assumedis LE110/ton of collectedwaste. This wouldbe an acceptablecharge based on discussionswith hotel ownersin the area. Basedon theseassunmptions, the economicrate of retun forthe aboveinvestment will be about 11% (Annex 11),which is the nunimummeasure of the benefitsaccruing from tzie Project.Given the scarcityof waterin theproject area and the verypoor condition of thesewage and solid waste collectionsystems, there is little or no possibilityof the facilities not being used. Sensitivitytes were,however, carried out in casethe implementation of theproject is delayedby up to 2 yeas. Therate of returnfals to about8%. This,however, does not accountfor the variousother benefitsassociated with the projectwhich are difficult to quantify.The touristfacilities would have adequatequantities of cleanwater which would be healthwise beneficial for boththe touristsand the workersin theseestablishments. The costs of producingwater at individualhotels which is rather expensive,and transportng water from distant places would be avoided.The provisionof sewerage would allowtourist establishments to avoidexpensive investments in septic tankmaintenance and constructionof additionalfacilites. The solid waste investmentswould contributeto the overall improvementin the environmentalconditions and the generalappearance of the area whichis so essentialfor tourism.

Ifile Beathng Facilities 5.19 A total of 73 additionalcruise ship berths will be constructedat two major sites (Aswanand Luxor)and four minorsites (Dandara,Esna, Edfuand KomOmbo). Theseberths will be providedwith facilitieswhich will enable then to supplythe cruise ships with watersupply, sewerage,power supply and solid waste disposal facilities. The berthing areas will also have restarnts and smallshops to catr to the tourists. For demonstatig te economicviability of this component,the facilidesat Aswanhas beenseleced. Therewill be fourteenberths and it is assumed that the berthswill be occupiedat least 300 nightsa year. This is a conservativeestimate given the presentlyserious overcrowding at all of the berthingfacilides on the Nile River,with 5 or 6 cruise shipshaving to parlrin parallelat each of the exsting berthsat the peak of the tourist season. It is assumedthat the cLArgefor berthingat these sites will be LE700/day.There will be an additional incomeof LEIOO/dayfrom each ship for the provisionof watersupply, sewerage, power and solid wastedisposal services and an incomeof LE125/day per shipfrom the restaurantsand shops. The berthingchages assumedare about 25 perent higherdan the presentcharges. Howeverthe services providedwould be muchbetter than available at presentand the shipowners are willingto pay them. Based on these assumptionsthe economicrate of return of this componentis estimatedat 21%

-49 - A _ A -36-

(Annex 11). The period of constructionhas been assumedat three years based on engineering estimates.Even if constructionwere to be delayedby up to two years,the ERRwould still be over 16 percent.These ERRs are alsobased on only thequantifiable benefits of the Project.There will be manyother benefits,e.g. the reductionin the pollutionof the Nileriver, fewer incidenceof water bornediseases, employment creation, and increased convenience and comfort for the tourists,which are unquantifiable.

C. Project Risks 5.20 The implementationof the proposedProject would be complex,with a need to coordinatethe actionsof a broadrange of parties:ministries, agencies, governorates, conunercial banks,private investors,and contractors.Given the dispersednature of the work,there are some risks of delaysin implementation.The areasto be developedunder the Projectare environmentally sensitiveand must thereforebe protectedagainst any possibilitiesof environmentaldegradation. Thereis also a longerterm risk associatedwith the volatiletourism sector where a politicalcrisis in the regioncould affect tounst traffic to Egypt,and an econonmccrisis could discourage private sector investmentsin the sector. 5.21 The strengtheningand expansionof TDA beingundertaken under the Projectwould ensure an integratedapproach to the developmentof the tourism sector as a whole and would particularlyfocus on achievingcoordination among the variousparties involved In theProject Steps are beingtaken to ensurethat TDAis staffedwith suitablyqualified professionals in criticalareas and arrangementshave been made so that the Project,at least in the initial stages, would be closely superised by the Bank. The privatesector would be impl.mentingmajor parts of the Project,and since it is withintheir interestto completethe constructionof infrastructureand superstuctureon time, thisshould minimize delays in projectinplemention. Fnally, historicaldata has shownthat Egypt's tourism sector has shown strong recoveryin the aftemath of political crisis that affect tourism As Egyptcontinues to mainin macroeconomicstability and pursuesreforms to deregulate the economy,it is expectedthat privatesector investments would continue to grow,partcularly mn the touinsmsector. 5.22 Until recentlythe Governmenthas showna limitedunderstanding and supportfor integrted decisionmaking which is requiredto plan and managevulnerable coastal resources. Consequently,it is essential that TDA, EEAA and the Governorate of Red Sea staff retain eerienced andqualified staff to workin theseremote areas. Environmentalregulations which exist havenot beenenforced properly. Tbese risks wouldbe reducedunder the Projectby thepreparation of a CZM Plan, and by developinga plan for cooperationand joint action amongthe various concernedagencies to protectthe coastalresources of the RedSea. The Projectwill contributefunds to assistin creang a coreteam with the adequateexpertise and experience to fulfillthe objectvesof the Projectand to trainalarge numberof local staff in variousaspects of CZ:M Studieswould be carred out under the Projectto developsources of recurrentfunding to supportCZM actvities in a sustinable manner. D. EnvironmentalImpact 5.23 The coastalzones of the EgyptianRed Sea are knownfor their extensivecoral reefs, mangroveswamps and extremelydiverse marine life. These unique and highly fragile coastal ecosystemsare a valuableresource and the very reasonwhy touristsare attractedto coastalEgypt. The Nile Valley,with its abundanceof antiquities,and cruising along the Nilehave beentraditional attactions for tours. The developmentson the Red Seacoast and on the NileRiver to be carried out underthe Projectwere classified as CategoryA environmentalprojects and detailedEIAs were -37-

carried out for all of them. Mitigatorymeasures to be undertaken,both during constructionand operation,were proposed. A summaryof the EIAs and the proposedmitigatory measures are in Annex 12. The studiesindicated that the Projectwould be an enhancementto the environmentand wouldnot haveany signifh;ant harmful effects. Furst,the approachpursued in attractingprivate sector investmentsin the area under the Project is aimed at long-termdevelopment of the area in an environmentallysound manner. Second,TDA has developedenvironmental guidelines consistent with the Bankguidelines to be used for approvingprivate sector proposals which would be further refined under the GEF componentof the Project. With GEF support,capacity would be built up within TDA and EEAA in its environmental assessment capacity and in monitoring the environmentalsituation along the entire Red Sea coast on a regularand continuous basis. In addition, througha CZMplan, the Projectwould help establishprotected areas and practicalregulations for managingmarine recreation resources. Third, the constructionof additionalberlhing facilities along the NileRiver with adequate water supply, liquid and solidwaste disposal facilities, and power supply would reduce the pollution created by the cruise ships which is a hazard to public health. Improvementsin navigationalaids would promote safety standards and procedures.

VI. SUMMARYOF AGREEMENTSAND RECOMMENDATIONS 6.01 Conditionsof effectivenessof theproposed Loan would be: (a) the issue of a Ministerialdecree to liberalizeall pricesaffecting tourist services (para 3.04);and (b) theeffectiveness of theGEF Grant Agreements (para 3.21); and 6.02 Conditionsof disbusementfor the two privatesector area development sub-projects woud be the effectivenessof the LoanAgreements between TDA and ASDand SHBD,respectively and thefulfillment of conditionsspecified under the secity arangeents (para 3.35). 6.03 Thefollowing additional agreements have also been reached: (a) TDAwould undertake a studyon landallocation policy by June 30, 1993. Basedon the recommendationsof the study,TDA wouldimplement a new land allocationpolicy by December31, 1993after consultation with the Bank(para 3.05); (b) MOTITDAwould prepare a planfor improvingsafety regulations for Nilecruises by December31, 1993,and implementmeasures recommended by the study to enforce such regulationsafter consultation with the Bank (para. 3.07); (c) TDAwould furnish to the Bank,not later than December31, 1993,proposals for the * assignmentto privatesector sponsors for the construction,operation and management of the Red Sea infrastrucureand Nile berthingfacilities. TDA may executethis componentwith publicresources if the private sectorfails to concludeits financing. However,TDA would arrangefor operationand maintenance of the facilitiesby the privatesector (paa 3.19); (d) a mid-termimplementation review would take place for each of theprivate sector area developmentsub-projects based on their updatedfeasibility study for the secondphase, and disbursementwould take placefor contua under this phase only whenthe Bankapproves the updatedfeasibility study (para 3.37); (e) reportingrquits for TDA(para 3.52);and -38-

(f) stwtingin its fiscalyear 1992-93:(i) TDAwoud maintainits overallaccounts in an approprat formatacceptable to the Bank;(ii) that these accountswould be auditedannually by independentand experienced auditors acceptable to the Bank;(iii) that theauditors would, in additionto the overallaudit report for the TDA,prepare and submita separateopinion on the accuracyand appropriatenessof the projectaccounts (including Special Account) to be maintainedby the TDA.,and (iv) that the annualaudit report and the report on the project accountswould be submittedto the Bank within six monthsof the end of each fiscal year (para4.07).

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_ _ _,______i ,______- 40 - A_C" Page 1 of 3 EGYPT

PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTAL MANAGEMENT PROJECT

LANDALLOCATION POLICY TERM OF REFERENCEFOR CONSULTANCY SERVICES

1. Under Law 7 of 1991,the Governmentof Egypt(GOE) has grantedthe Tourism DevelopmentAuthoity (IDA) withthe authoity to developland in the touist zone,including the nght to allocateand sell undevelopedland to privatesector for toursm developmentTDA policy has beento allocateundeveloped land to privatedevelopers for a nominalprice with a condition that the area would be developedaccording to the masterplan acceptableto MOT. The actual transferof tide does not tak place undl the area is developed.At that time,TDA wouldhave a claimto 50%of the saleproceeds after deducting the cost of providinginrasuc. Thispolicy is aimed at encoragig private sectorpardicpation in the remote areas,and at the same tme, protectspubLc intet and the one Giventhis objective,MOT would need to strikea balancebetween public polcy and procedureswhich may resultin lockdngaway tract of land whichcould be gainfullyand ima vely developedby the privatesector and thosewhich may lead to land speculadonand accusatonsof givingaway public land. Ihus, TDA has decidedto launcha study,with theas6sn of dte WorldBank, to reviewthe existg policyand pracdtes, and with redts based o inional experece, to recommendto the Boad of Dhectors a modMe policy.

2. The studywould have the following objectives: (a) Definea long-termstmegy for TDAfor an tecienland development polcy in the remote tourist zones. (b) Articulateland allocationoptions taking into account experiencesfrom other counis with similarproblems (e.g. Mexico, Spain, Turty). (c) Detailpnciples andprocedures for a landallocation policy for Egpt that would attract foreign and local pnvate capital, genrat appropriat revenuesfor the Govermen, andpromote envimally sounddevelopmen (d) Preparepro-foma contacts t would be used in land transactionnegotiations betweenIDA andprivate sector. The study would be undertak in two phases: Phase I would analyzethe curent situationin Egypt andinteao eperiences to arrivea long-tem strategyfor land developmentand land aLon for TDA. On te basis of the agreementbetween the Bank,TDA, and consultantson the resultsof PhaseI, workwould condnue in Phase IIto outlinethe principlesand procedur to be established,and thedrfting of proformacontracts. -41- Annex2 Page2 of 3

ScoLIof

3. Phase I - Atilation of a lonL-temis grate,vand allocation options: (a) review of curnent laws, policies, practices, and contacts that affect land developmentin theremote zones. (b) interviewconcemed public and privatesector on the pros and cons of current policiesand ptices. (c) analyzeinternatonal experiences (e.g. Mexico, Spain, and Turkey) including the followingaspect: (i) objectivesof theirrespective land development policy, (ii) therole of public and privat sectorin developingremote areas for tousm; (jii) regulatoryframework and the nature of regulation(price, environment, developmentand implement- donal stndards, etc.); (iv) pocedue for tafering landownehip fromthe public to prvate sector andits impLcation on atmctig pnvatecapital; and (v) basisof pcig land,particulady publc land in remoteareas, cost recovery foriasre, andfiscal aspects of to;urimand land development. (d) on thebasis of theabove analysis, recommend options for land development policy in the remotetourist zones in Egypt,and analyzethe pros and cons of each

(e) define an appropriatelong-term land developmentstategy for TDA and its implicationonthe current policy, organization and procedurs.

4. PhaseII -- Definition of grinciples and procedus for recommendedland AUallcaoogficv ai nd ofs. (a) Defineprinciples to be usedin allocatngland to privatesector icluding * (i) enateof landallocation (e.g. lease, conditional sale, or outrighttransfer of ownersip); (ii) mtd to be used(e.g. auction, negodation, etc.); (iO) pricedetenn (e.g. costplus, market price minuscost, auctioning price); (IV) ment of capital.gains(taxation, lump sum tranfer to TDA,royalty, etc.; and 42 Annex2 Page3 of 3 (v) tansfer of tide of ownershipto privatesector. (b) Preparea policystatement for IDAoutlining the govenmment policy and proc&dures to be followeddth couldbe usedin atacting privatecapital into the remotetourist areasbased on resultsin PhaseI andPhase 1; (c) Draft pro-forma contracts that would be used by TDA in land transaction negotationswith the prvate sector,and (d) Preparea brochureoutlining land developmentguidelines, standards and criteria latve to eachrecoended developmet piop .

5. The study would be conductedby a reputableconsulting finn with extensive experiencein land andreal ate development,particularly for tourism. The finmis expectedto associatewith localconsuants, partcularlyin the legalareas to helpdefine a policythat wouldbe aceptableunder the existg legislation,or if themeis a needfor its modificatin, to helpestablish theproces for its impltao The followingexperse wouldbe require&

(a) Financial economist (b) Realesd e developmentewert withexerience in developingcountries

(c) Lal epert

. . -43 - Page I of 2 EGYPT PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTALMANAGEMENT PROJECT NILECRUISE SHIP OPEATIONS STUY FOR TAIC CONTROL,NAVIGATIONAL AI AND SAFETYSYSMS TERMSOOP

1. Tourim is the mostrapidly frowing sector of fte Egyptianeconomy. One of the mostatractive featres of ourismin Egypt s theopon ofalmost 200 cruiseships on the Nile River. Rapidgrowth im te numberof wniseships i the upperNile is accompaniedby certain problemswbich endanger the health,safety, and convenience f touists and ship'screws, and if left unmsolved,could become an impedinientto te grwth of touism. Theseproblems are: (a) lack ofprper affc regulationsand trafficcontrol systems which cause severe c n at cin imes at berts andlocks; (b) absenceof propernavigational aids for caise shipopeations; (c) lack of proper fire safety systemson cruiseships and at berths, and weak efrcementosafeyr ations; (d) lack of enforcementof regulationsrelated to solidand liquidwaste disposalfrom the crue ships. 2. TIe TourismDevelopment Authoity (IDA) is thepincpal agencyresponsible for pianning andpmoing tourismin Egypt DA has,with theassistance of consultants,prepared a PriorityActdon Plan for developinginfrastructure wbich will supportthe growthof tourismin Egyp. InIaddition to prposals for mrsuctural investments,the ActionPlan has also idenffied the need to develop a managementplan for taffic regulationon the Nile river, installationof navigationalaids, and pollu controland safetymeasures Consulta haveprepared technical proposalsto addressthese issues. TDA now wishesto iitiate a studywhich wil resultin the formuladonof an insttutonal frameworkfor the implementaton of the taffic regulation, navigaionalaid, and fire hazardsystems, and for the ent of fire and healthregulatons andpollution control regulations.

*~SA gf Work 3. The wodcwould consist of the following: (a) reviewthe tncal proposalsprepared by consltants withrspect to taffic control system, naviptdonal aid system, and tho fre hazad system and propose any alteratin or mproementsdeemed necessqr, (b) eamine thejurisdiction and peomance o stinggover antinstitutions with either direct or indirectresponsibilites wihh respect to raic managementand enf m of safetyand pollution standars - 44 - Page(2 of 2) (c) evaluate the adequacyof the legal frameworkwithin which these institutions operMe;and (d) proposean institutionalframework to implementand opeme a propersystem of utac control and navigadonaids, and enforce safety and pollutionstandards, takinginto accountdelineatng role for publicand pivate sectr 4. Afterconsultaons with TDA and the World Bank on therecommended istutional framework.the consultantswill proceedwith the prepaaon Ofthe deiled proposalwbich should consistof. (a) organizational structure including representations of related or concerned institutions; (b) changesin anyexisting legislation or anynew legislation required; (c) staffingrequrements (both the kind of staffand numbers); and) (d) identify the costs associatedwith the opeaions of these systemsand propose methodsfor recoverngthem either dectdy or indirectly.

5. The followingstaffing is expectedto be uikedto cazy out the abovementioned tasks. One of die expertswill be the Team LTader(prefeably the Orgnization Expert). Tbe. consultantis encouragedto proposealternatives both in tea compodon andthe dme for which theyar required. Expertin marinetaffic controland commniaos - 4 weeks E in navigationalaid systems - 4 weeks L gaexper - 5weeks Organizationalexpert - 5 weeks Financiaexpert - 4 weeks 5e*m3LBn A(artment 6. Theconsulting team is expectedto submita draftreport ne monthafter thestart of work to coverthe scopeof workspecified under para 3. Afer approvalof thereport, consulLnts willproceed with theremaining wor sted underpara 4. -45- Page1 of 27 EGYPT PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTALMANAGEMENT PROJECT

Abu Soma Bay Development (ASD) PtojectDesciron & LandUse Mas Plan: 1. Theresort wouldbe centrallylocated in the Hurghada-Saft region,some 40 kn southof Hurghada The projectis beingdeveloped by the Abu SomaBay DevelopmentCompany (ASD), incorporatedunder InvestmentLaw No 230 of 1989with an authorizedcapital of LE 300 million andissued capital of LE 25 million. The majorityshareholding of thecompany is with the Egyptan FinanceCompany, a welllnown and establishedcompany in Egypt ASD is the masterdeveloper for the AbuSoma Bay site andhas executedan agreementwith the MOTwhereby it has purchased 1 millionm2 of land and has leased another9 millionm2 (withthe right of purchase)on the Ras AbuSona peninsula. ASDhas developeda comprehensivedevelopment plan approvedby TDA. Advanceddiscussions have beeninitiated with a viewto finalizehotel management agreements for the first two hotels with RobinsonClub of Gemany and the SheratonHotel Group. ASI) would pardcip in the equityof hotelsof around29% mainly through contibution of developedland. 2. The project would be implementedin stages, with the first stage consisting of the developmentof 10 million m2. This stage is furt sub-dividedinto two phases. Pha=I the subjectof this analysis,would consist of the developmentof 1.5 ndllion m2 of land and would compriseall the basic infiastr-cturefacilties, comprsing of a 300-roomclub resort, hee 5-star botels(300 rooms each), 250 housingunits, a boatmarina, a retailand ent town cent, a 9-holegolf course, and employeehousing for 1500staff. The constucon of this stageis envisaged to beginin early 1993for a periodof about 3 yearsfor the infastucte componentand 4-5 years for the fourhotels. At the end of construction,ASD expects to seUabout 165,000m2 of developed land,for the subsequentconstruction of 75 privatevilas and 80 condominiums.In accordancewith the agreementbetween TDA and ASD, MOT wouldreceive 50% of the profit from the sale of developedland to thirdparties, with the exceptionof landsold to the hotelcompanies. Out of the 1.5 million m2, PhaseI wouldhave a total sellablearea of about690,000 m2 (includingthe 525,000 za2for the4 hotels)and theremaining 810,000 m2 in the formof publicarea (utlity center,beaches. greens,golf course,roads and pavements),of whichabout 42,000 M2 would be rentable(marina and employcehousing). PA= coveringthe remaiing 8.5 nillion m2 wouldbe developedonce PhaseI is at an advancedstage of operations,and wouldconstitute six additional5-star hotels, 125 villas, 120condominiums, a secondboat marina and housingfor another3500 employees. Out of the 8.5 million m2, Phase II would have a total sellable arei of about 1,235,000m2 and the reanining 7,265,000m2 in the formof publicareas. 3. ASD commissionedthe frm of Aronsonand Associatesas architectsand to prepare the conceptualplans for the project. The local firm of Sabbour & Associates were retained, in consultationwith SKANSKAInteonal (Sweden),as engineeringand technicalconsultants to producethe detailed drawingsand cost estimatesfor the infrastructurefacilities supporting the proposed10 hotelsof PhasesI and IL Co" nia vesmfnt & Proosd FnancingPlan: 4. The total cost of PhasesI & 11(10.0 million m2) is estmated at US$460million (LE 1,532 million)and would consist of the developmentof infructure faciLitiesand ten prmary hotels.All -46 - Ar 4 Page 2 0f 27 hotelcost esdmatesare basedon sinilar projectswith the same characteristicsand located in theRed Sea area. The investmentcosts of the hotels shown in the table belowinclude the value of land contributedby ASD as masterdeveloper, all pre-operadonaldevelopment costs. conununication and alarm,air conditioningand service equipment, furniture, contingencies, Interest During Construction (IDC)and relatedfinancing costs. Under Phase I, the averagecost per room comes out to about US$113,000for a 5-starhotel and US$100,000for a 4.star resortclub. Approximately48% of the cost of infrastructurefor the entire 10 millionm2 envisagedto be completedduring Phase I. As masterinfrastucture developer, ASD wouldhave a total capitalrequiremnnt of US$43million for PhaseL Of this, about US$26million is in fo pgncurency, while US$17equivalent is in local currency.The large local currencycomponent is typicalof such projectswith significat locally incurredexpenses such as land, civil works,and localy sourcesequipment The foreigncurrency costs are expectedto be thoseof importedequipment for waterde on, wastewater tatment, powergeneation anddistibution, and commnicaton/tlephone systems

TAIME A-, ABU SOMA DEVELOtPM COMPANY . PEASESI&U1 CAPITAL STRUCTURE & PROPOSED FINANCING PLAN

Ptimei ¶ .50o.oma FWSUU 8.500.000 m12 CoglgudinPelok 1993-9- 1996. .oreign Load Tod Loa Tdd SsuPese| -- ~11LMtlsm LE I s nflStm uS OWL m awecad 35.39 230.27 104.53 53.08 345.40 158.80 gWaddhgC4p2 3.84 15.10 8.21 5.51 25.62 12.42 Phydodg Cbnonps" 1.15 5.18 2.83 1.73 8.28 4.25 RPkeCan*Wpe 4.11 49.20 18.8" 14.60 129.18 53.39 100 & Olh Fkwtdh C"_1I." 1JU La LU Ji6 LUf Tod. St5plemttu0 45.87 307.15 138.11 77.S6 517.29 232.91 Faebn Lood Totd -FLW tc Tot U9S~~~~~~~JLmmE LlJE E Lstnffl LSSmflk LJEmiflli USSMO LandFnxnG8E 5.00 1.50 28.31 8.60 CXphSoedFw pwJs Costs 8.00 2.40 wZeP""angkn & UnUMb12 1=F #" 23L62 U4 8 1= 30 ±LU 29.Z4 84e CoaS 17.61 36.62 28.57 10.60 42.11 29.24 wnung C8vts /3 0.88 0.94 1.1t 0.63 0.69 1.04 PbydcZCcMngslpy /4 ~ 1.76 1.88 2.33 1.66 1.38 2.07 P*oeCo0nrpeny 1.34 7.83 3.69 4.7 S.S5 6.44 lOC&

LSSn=JOE= EtmMona*M - tmU9im LEALm imMm Ta EqPAYis 0.11 40.60 12.30 28.53% 11.02 23.64 18.72 40.00% Land Mot"" is 0.00 4.46 1.34 3.10% BRS0VDALoan /7 226.17 5.46 27.81 64.80% 13.80 28.04 22.23 47.50% Ftoww Dom 3.63 3.63 7.76%

Tdd Fbinmea 26.28 56.07 43.12100.00% 29.06 59.11 46.81 100.00%

/1 arwoses expoed to be fnan edby 50%equy and 0%debt. 2 ibliudes8% duas onhupoited *qupnesL 13 Takenas S% of st peparain 6 utils nwesrmnaed /4 Takenas 10%of sit preperaton& ueWs lawsmeososd /5 AualhareddkonWeqt*y In toe ntrowewod anmawto about 50% Of the tdotaltsbn ot ASO.hcdig AGOs eqdy In do htodwoop-aZ. in dof bnnet d NWandcah hebeonMt A 80%d #h puretasve_ ndwouid befinaed In the fowmof deb Oanddead papmntWs)frm GWE 17 3RDM'A toeks _w 1hIo qonupto abnu 31* f ASVe>to capWooo kheoso at*A vam ofAS o*y"in de hoodcompunhe -47 - Anne%4 Page3 of 27 5. Whileabout US$28million of EBRDfrDAfunds would be disbursedto ASD towardsthe infrastructurecomponent of Phase I during 1993-95,the remaining US$22 million would be committedby MDAin favor of ASD subjectto the successfulimplementation of Phase I and the appraisalof PhaseI. Of the US$28million IBRDrTDA loan for Phase 1.about US$26miLUion is expectedto be disbursedagainst foreign currency expenditures. The shareholdersof ASD would contribute direct equity funds of about US$12 million to cover capitalized pre-operational development expenses, a 20% down payment for the purchased land from MOT, site prepaaon/utilities costs, andnon-lDC fincial costs.An additionalUS$34 million in the forn of developedland and cash invesmentwould be contributedby ASDas equityin the proposedhotels. bringingtotal equityto roughly50% of ASDscapiton. 6. Debt financing from local commercialsources was assumed to be repayed in foreign curency andhave an interestrate of 10%,a 3-yeargrace period effective from each drawdown, and repaymentover 6 years.The IBRDrrDAloan, in the case of ASD,would have a variableinterest rate of 10.5%,a 5-yeargrace period effcive fromthe date of loancommtment, and 20 semi-annual repayments.Since the [BRD/TDAloan is expectedto act as a catalyst to enable ASD to borrow addidionalfunds from lkcal commercial banks, it wouldcarry the subordinatedfeature and its interest rate would reflect a subordinationpremium of 100 basis points. The IBRD/TDAloan to ASD would bear no front-end fee but would have an annualcoUitlent fee of 0.25% on the undisbursed loan amount. 80% of the pizchase value of land acquired from MOT would be financed through a 5% GOEmortgage insumnt, havinga graceperiod of 3 yearswith equalannual repayments over a 7-year period.

7. Te financialprojections and analyseswere made on phaseI of developmentof 1.5million m2, with the aim of ascining the abilityof ASD to generatesufficient income to: (i) covertheir operadingand financingcosts; and (i) sevice their debtobligations to TDA.As such,the cashflow aralysis does not accommodatethe investmentrequirements, operating expenses or revenues associatedwith any developmentsubsequent to the first phase,namely the 8.5 millionm2 under Phase1I. The cashflowprojections are conductedin 1992constant terms and covera periodof 20 years.Expenditures under the financingplan wereescalated using appropriate price contngencies. Under Egypt'sInvestnent Law 230 of 1989,both superstructureand infrastructurecomponents would be exemptfrom incometaxes for the first ten yearsof opemtions,and are taxedat a rate of 40% thereafter.Fixed assets were depreciated using a simplestaight line depreciadonover 30 years for hotel buildingsand civil works,15 yearsfor ASD'sutilidtes stations, and 10 years for furnture, A/Cand otr equipmentin hotels.Capitalized pre-operdng development costs, IDC, and financing cost wereamortized over 5 yea Theexchange rate of LE3.33/US$ was used. 8. Hotelreven.es are generatedfrom different operated departments such as rooms,food and beverages,sales and rental fromshops, spos facilities,minor charges such as telephone/telex/fax, and laundry.Average room rates for 1996onwards used for the S-star hotelsand 4-starresorts of PhaseI, are US$100and US$80per night,respectively. These rates are in line withcurrent rates in the Red Sea area (see next page). Higher amtesmay be achievabledue to the muchhigher quality hotelsplanned for thisproject, and to reflectthe fact that price controlson hotel tariffswere recently removed(April 1992). The averageoccupancy rates were taken as: -48 - Page4 of 27

}HotdlOccuannnv Rates / ASD DoubleOccupancy ResHotel 9. 2fi 22 9 2299 E ClubRas Soma 70% 75% 75% 80% 80% 2.00 SomaBay Sheraton 50% 60% 65% 70% 70% 1.80 Hotel 3 - Club reson 70% 75% 75% 80% 2.00 Hotel4 50% 60% 65% 70% 1.80 9. The Double Occupancy Factor is a measure of the average number of guests per room. See the attached tables for further details on the assumptions used to calculate the revenues from each hotel departnent. The follownngtables give an indicationof recent room rates and occupancyrates in Egyptand the Red Seaareau

Hotel RoomRates (1990-199). Range (US$) Resr/HtelCatror MmXMax S-star 70 150 4-sar. 42 70 3-star 27 45 Red Sew Sonesta 5.Star 70 100 Sheraton 4-star 69 80 Magawish 4-tar 54 68 Ambia 4-sta 58 81 Gifta 3-star 51 72 Hgtel Oc v Rates in the Red Sea (1986.19i91

Sheraon 91% 81% 82% 83% Magawish 83% 55% 63% n/a -Gifto 74% 94% 83% 79% 10. Hotel annual operating expenses are typically divided into departmental costs and overhesd. Deparmnentalcosts are wages, salaies, and cost of goods directly related to the operations of a hotels various departments and are taken as a percentage of each department's revenues, estimated from similar hotels in the Red Sea area The departmentalcosts used in this study are 18% for rooms, 40% for food and beverages (35% in the case of a 5-star hotel), and 60% for other minor operations.

11. Annualoehdm expenses relate to the overall operationsof the facility und are not allocated to specific departments, such as: (i) administrative and general expenses: are estimated at 3% of a hoters total revenues to cover license fees, travel expenses, printing and stationary, credit card commissions,etc.; (ii) maredng and sales: are esdmated at 2% of a hotel's total revenues to cover agency fees, advertising, enteainmnent, etc.; (iii) property operations (repair, replacement and maintenance)ar estmated at 5% of a hotel's total revenues for the overall upkeep of the property, funishings, equipment spare parts; and (iv) insuance: an annual premium equivalent to 1% of the fixed assets. Other expenses are: (i) funitue replacement an annual cost equivalent to 4% of Gross OperatingProfit (GOP); (ii) managementfees: for the hotel operator company and is equal to 3% of total annual revenues and 10% of Gross Operating Profit (GOP); and (iii) udWties: charged by the master developer(ASD) for the hotels cnpton of electric power, potable water,recycled -49- 6LM4 PageS of 27 waterfor irrigation,and service/communuitycharges. With the exceptionof utilityrates. whichare the subjectof analysishere, hotelcost estimatesare in Linewith actualcosts currentlyexperienced in similarhotels in theRed Seaarea. 12. ASD'srevenues would be derivedprimarily from: (i) dividends received from ASDs share in the hotels. ASD would have an aggregate participationof about50% in the equity of the four hotelsof Phase1. The analysisassumes that the hotelswould adopt a dividendpayout ratio of 95%. (ii) revenuesfrom the sale of any piece of developedland wouldbe collectedin the formof a .40%down-payment, followed by two ammualinstallments of 30%each. MOT would receive 50% of the profitfrom the sale of landother than that whichis soldto the hotels.A detailedoutline of the landsales plan and pricesas envisagedby ASD, resultingfrom the developmentof the initial 1.5 mion m2, can be foundin the attachedtables. A recent investigationrevealed that the current marketprice of land in Hurghadaand SharmEl Sheikhranges from LE 150 to LE 350 per square meter.ASD assumes that, in orderto attracthotel investmentsto their area,developed land would be soldto the hotelsat a low rme of LE 100/m2.Land soldfor the developmentof othersuperstuctre suchas villas,chalets, etc wouldbe soldat the prevailingmarket rate. In this analysisit is assumed that the price of land wouldbe aroundLE 230/m2in 1993and would appre by 5% annally in constnt term thereafter.ASD's cost of developingone squaremeter of land comes to aboutLE 92.5/m2,including the purchaseprice of US$1/m2from MOT. Though revenue projections from the sale of landare purelyacademic at this early stageof the project'sdevelopment and priorto the actual completionof the infase constuction, the analysiswould neverthelessattempt to mcase dtheitpact of this revnue, partiallyand wholly,on the project'seconomics in tems of the level of utilityrates that ASD would need to charge the three hotel companiesin order to fully serviceits debtto TDA. (m) utility revenues are based on the consumptionof the four hotel that are to be built and commissionedunder PhaseL as well as the expectedconsumption by villas and condossold under this pbiase.Unit utilityrates chargedto these hotels are based on an analysisof the unit cost of productionof eachtype of utility,given the totalvolume being consumed by all fourhotel, as wellas by the sharedpublic areas such as streetlighting, water desalinaton and watertreatment plants, and waterconsumed for commongreens. The projecestotal annual consumption of electricalpower was estimatedat about26,235 MWh, potable water 867,185m3, andrecycled water 421,020 m3. Te high consumptionof potablewater (at 96% of nominaldesalination capacity) is due primarly to its use in irrigatingthe golf course. Electricityconsumption levels roughlyrepresent 32% of the nominalproduction capacity of the installedutility equipment.Furthermore, ASD would incur additionallabor costs, maintenanceand asset depreciationassociated with about 768,000m2 of publicareas and servicesshared by the hotelsand future supersuure. Iuitially,the fourhotels and futureowners of residentialunits would be chargedan additionalannual service fee to coverthe cost of running and maintaning these public facilitiesrepresented by the communicationssystems, irngationnetwork, site upkeepand landscaping, and roads/pavements/walkways. 13. ASD's annual operating cost are those attributedto the productionand distributionof dectriciy, waterdesalination and distribution, waste water drainage and teautmet, andthe operatons and maintenanceof 768,000m2 of sharedfacilities. Preliminary engineering estimates and design specificationsindicate dtat the electdc powerconsumption rate by the entireproject under PhaseI 50- Ao 4 Page6 of 27 wouldbe 8.0 KWh/m3for the waterdesalination plant, 1.5 KWh/m3for the watertreatment plant. and 2.0 KWh/roomfor each hotel.

14. The consumptionrate of potablewater by the entire project under Phase la is estimatedat 0.90 m3/room/day(450 liters per guest)for hotels, 0.70 m3/roos/day (350 litersper guest)for housingunits, and 0.25 m3/employee/day(250 liters per employee).The consumptionrate of recycledwaer bythe entireproject under Phase Ia is estmatedat 80%of the rate of consumptionof potable water, or 0.72 m3/room/dayfor hotels, 0.56 m3/room/dayfor housing units, and 0.20 m3/employee/day.Based on this, the unit cost of producingeach KWh of power and each cubic meter of potable and recycled water, consideringlabor, fuel, lubricants, maintenance,and deprecation of fixed assets wouldamount to LB 0.28/KWhfor power, LE 5.7/m3 for potable water, and LE l.9/m3 for recycledwater. Furthermore,ASD would incur an annual expenseof about US$0.64 illion (LE 2.11 milion) associatedwith the operationsand maintenanceof the 768,000m2 of sharedfacilities. ASD's Ekqg&ancaPdrbmne:

15. As mentionedearlier, the objectiveof the analysiswas to measurethe impactof revenues fromthe enviaged sale of developedland, partially and wholly, as wellas projectedhotl dividends on theprojet's economicsin termsof thelevel of uwilityrates and sevice feesthat ASDwould need to chargethe fourhotel companies and otherusers in orderto fully sevice its debtto TDA.A profit marginwould be addedto the unitcost of productionof eachtype of uility in orderto comeup with the final price.This marginv would be variedto the pointwhere ASD, as borrowerof the IBRDIMDA loan, wouldhave a numniun debt serce coverratio of 1.0.The followingtable givesa summary of projectpedom underphase I, in tems of ther on equity(IRR) and the economc IRR, of both the hotelsand ASD.It was asiued th the resutng ulty rates wouldremain constant in real termsfor the life of the project.'h basea performanceshown in tablt 4.2 assumesthat (i) ASDwould acually be able to sell 100%of the sellablearea of developedland: (ii) equity at boththe infrastuctue and supeucre levelswould not faUbelow 50% of total financing;and (iii)ASD wouldretain a minimumof 50% shareholdingin the hotelcompanies in orderto maimie its share of hotel dividends.MOrs share of the profit on such land sales would amountto about US$4.2 miLlion(LE 14million) during the period1995-97.

TAM 4_ ABUSOMA BAY DEVELOPMENT CO. PHASEI (1,500,00 =2) SBA CASERESULTS

PWRO(LEW*Vh) 0.40 watw ozhm ~~~~11.00 Pbqded Wabt txd) t5.00 swvEoeasto Fees 4.50 I A0-Mi0 SeM CoeR aod(08CR) 1.00 ASO-RdmaEqt*(lR" 6.2% Aso-Ewu I-MRnI 22.6% Hebb - Av rGOP 44.9% MM-d -PAtoman 13dy tR)15.7% Houl -EcamolI 18.0% !~~~~-iwfgm . ,kggW_Rk IlM n ~.~nPmn~30e3m..e - 51 - Page7 of 27 16. The abovetable clearlydemonstrates that at the utilityrates shown.ASD wouldbe able to fullycover its debt serviceobligations to TDA.While the economicreturms of the hotelcompanies and ASD)are strong,ASLYs shareholders, however, would realize a marginalreturn on their equity investment,which at this stagedoes not takeinto considerationthe futureappreciation in the value ASD's sharesin the hotel companies.A measurementof a hotel'soperating profitability is typically the Gross OperatingProfit margin(GOP), whichis often found to be around40-50% for many hotel projectsin Egypt Asumiag that hotelswould repa their localdebt in foreigncu Encv 10%interest per a=m. insteadof the 20% on local currencyrepayment return on equity at the hotellevel is also foundto be very acceptableand within the 12-15%range customarily observed in manyhotels in Egypt.It is evidentfrom Table 4.3 belowthat thehotels would be expectedto havea robustperformance even at thereasonable room rates assumed in tdis analysis.

ABUSOMA DVOELPMENT PHASEI - SUPERSTRUCwURE(4 Hotels) PROJECTIONSOF FINANCIALPERFORMANCE (Base Case)

ROW. 11.61 24.75 26.63 28.36 29.35 29.35 29.35 29.35 foo.da .vags 9.88 21.10 22.92 24.26 26.10 25.10 25.10 25.10 cowsL 51= JLJ± Jij jj am Ja Izz iLl ropuia mRsvsnu 26.68$56.76 1.33 64.73 66.97 66.07 66.97 86.97 .6U ExpsNs n 15.28 31.58 33.91 36.67 36.85 36.85 36.85 36.65 arm 0pe p .m twm 42O af ZLO2Z2 l ZL 2 1U=2 aOl Not tnene/2 4.43 13.73 7.62 9.57 11.34 12.35 19.47 12.88

Tdi OdX SoMosObIgnds 4.60 7.08 12.08 16.05 15.25 14.73 2.05 0.00 OD S8rnk* owRabft 1.96 2.89 1.85 1.67 1.61 1.6B 11.00 0.00 /1 nesassdsmtNsWdandeitfd OWLe 2 iwidig depmoaemn& a nrtafntI ttse I an Ioatus and nnagwmnst f_ 17. lbe basecae assumesthat ASDwould actualy be able to seU100% of the seUablearea of developed and. It was also assmed that the resultingutility rates wouldremain constant in real tms for the life of the project.The udlitycost to the hotelsunder the base caserepresents about 5.9% of the hotel's gross annual revenues,compared to the industry's average of about 5%, consideringthe fact that these rates would need to be set at an adequatelevel to cover SHBD's investmentin new infrastuctue. The mostrecent and current levels of utilityrates paid by hotes in Hurghadahave experiencedsharp increases over the past few years. 1992rates werefound to be LE 6-16/m3for potablewater, subject to an averageescaladon of 15%annually over the previous three years, and LE 0.26/KWh,escalating at 25% annually over the previousthree years. A summaryof ASD'sperformance is shownbelow in Table 4.4. 18. The performanceof ASD is basedon conservativeassumptionf about the sellingpotential of land once the proper infrastucturewas established.GOE has firm plansin the near futureto begina rmgularferry serviceacross the Red Sea betweenSafaga and Saudi Arabia.This would mostdefinitely serve to boosttourism demand in the Red Seaarea, and providean upwardpressue on landprices, potentially leading to thesale of ASD'sdeveloped land in a muchshorter period than anticipatedby ASD and at potentiy higher value. Furthermore,hotel rates are expected to continuouslyincrease with the industry'sderegulaton to permitASD's hotel companiesto charge higherrates than usedin tis analysis.The hotelrates used in the analysiswere in line withexisting 4-5 starhotels in Hurghada,which are consideredby manyintenaional hoteland tour opemorsto be wellbelow the standardof theirclassication. -52 - Anmu4 Page 8 of 27

TAIIS4A - ABUSOMA DEVELOPMENT CO. PHASEI - INFRAtAU CTURE(500.000 .2) PROJECTIONSOF FINANCIALPERFORMANCE (Rae Case)

~~U LLLWJA£UA ~~±ULLU ZWQJ LiU JL2.2A SaW$of litiX 1.86 3.46 3.67 3.84 3.94 3.94 3.94 3.94 3.94 3.94 3.94 OMddtweoemptromllab 1.21 5.72 4.97 4.19 4.48 4.78 5.15 S.61 8.78 10.62 11.01 Sdleat DOWuipedLaid /1u LU Li2ua. =Z ±.U =2 LQf L2f LQf LU LD TraAP e.mI- Wo 3.24 10.76 11.55 10.73 9.81 8.73 9.10 9.64 12.73 14.56 14.95 Opeain Jenee 12 2d LU LU L107= Z* L LU U2 LU LU NMlosro 2.39 2.01 2.90 2.25 1.65 0.92 3.66 4.52 7.95 10.15 10.87

Tote$Gda ol Olggbmm 0.00 2.08 1.92 1.27 1.14 1.00 1.03 1.17 2.02 2.89 2.97 DOWsweCev erRaft 0.00 2.30 2.53 2.44 2.42 2.38 2.87 3.60 6.21 9.07 1 2.1 /I Assume AGOmwain to se 100%d th enD laid in addkiUonto the id use by hUMtiea tha MOTwou ndel 50%d Ih poft fom uu Seim kwluinIn2 posin s8amouU

19. The followingtable provides a summaryof the resultsfron the sensivity analysisin order to assess ASD's projectodpfornance under less favorableconditions at the hotel leveL Two cases wer exa ed Case'A' udliseslower hotel averg rooomrates, and Case 'B' assumesthat hotd occupancywould drop by 10%from the base case levelsthroughout the project's Ife. Under Cas 'A' and 'B' separatey, the utilityrates chaged by ASD for power and potablewaer wer adjustedto improveASD's perfance anddebt sevice capabiliq.

ABUSOMA DEVELOPMENT CO. PHASEI (1500,000.I) RESULTSOF SENSITfVrrYANALYSIS

, lleaeH=LD_ a..si8 *dtfeal o1 OcaUPss Levels Base sa Bm. -10% -10% _m. HOWRoom Rae UM : 6-5tar 0100.00 90.00 90.00 100.00 100.00 100.00 4- W 60.00 70.00 70.00 80.00 80.00 80.00

Po ) 0.40 0.40 0.65 0.40 0.68 0.40 Watew (.) 11.00 11.00 18.28 11.00 19.00 11.00 RAd WOr (Lam) 5.00 5.00 5.00 5.00 6.00 5.00 8wieFew (1.12) 4.50 4.50 4.60 4.50 4.50 4.50

AO-MIL Dn. 8.wCow Rat(0OACF 1.00 0.79 1.00 0.80 1.00 1.29 ASO- Nu_mb d yam 0ScD.O 0 4 0 4 0 0 AGO-Adm an quly (MM 6.2% 3.2% 6.5% 3.2% 6.7% 10.0% ASMD*-Unm'FM 22.6% 19.2% 22.9% 19.3% 23.1% 29.1%

HatuI- MbdhmDuOR 1.57 1.37 1.26 1.41 1.30 1.57 Helsd -Nud rofyam 0sCR1.0 0 0 0 0 0 0 Hsfebs-AwragsOP 44.9% 44.1% 41.0% 44.7% 41.7% 44.9% HsIPAU= * equiy(IFR" 15.7% 11.9% 10.0% 12.7% 10.8% 15.7% Nsfeb-SmEIRR 13.0% 15.4% 14.0% 15.9% 14.6% 18.0%

AnmuAutWty os as % d A,Dil" 9re _vemma5.9% 6.7% 9.7% 6.0% 9.0% S.9%

20. Under both cases, SHBD would suffer a severe setback in performance, sufficient to compromiseits debt serice capabity to TDA. In order to fully semriceits debt to TDA, ASD - 53 - Amm 4 Pag 9 of 27 wouldhave to increaseits utilityrates by upto 60% shouldoccupancy and/or room rates drop as shown.In all cases,the performanceof hotelsremains fairly strongas long as utilityrates remain somewhataround the industry's standardmeasure of 5% of the hotels' gross revenues.Since incomefrom the sale of developedland does not representa large componentof ASD's overall revenues,ASD's performancewould be rnuch more sensitiveto incomegenerated from utility salesand hotel dividendsthan it is fromland sales. ASD's performance could be improvedfurher if more sellable land was developed. Under their current master development plan. ASD's total sellableland (other than landfor hotels)is only 165,000m2 or 11%of the total purchasedland of 1,500,000m2, comparedto 27% in the case of SHBD, of which about 500,000m2 has been allocatedto a 9-hole golf course and green areas. consuminglarge quantitiesof non-revenue generatingwater. If an additional215,000 m2 (in the form of 100 8-roomvilas and 80 4-room condos)of these greenareas were to be sold,for example,ASD's base case pefon and debt servicecapability would be dstically improved. tl44

ComDRnV(ASDI .IE Abu SomR DeveloRment Inlrastructure & S%neystwucturelLandUse Schedule

Sector Phase I Phase11 South CaadLtu Amea :auadtt AIRac AIla IRooms Jm2) UolU InRomsi Im21 ! IRoomsI jmZ gah 10 300Wotel 525.000 4 30IONotd 90o.000 6 300hotdi 1.300.000 Hotetlesons 125 Oblu 462.500 200 SivIa Villas 1sO.000 75 S8Ib 312.600 120 4kondo 37,00 200 4kondo Condos ,80 4kond Z22J 690.000 1.235.000 1.800.000

Retble At 1hnit 3.000 60 lAint Center 2.000 20 IAS* 4.000 40 Maunallown 80m2hnit Il 5000 wOmnzAI EmployeeHousing OO 1500 800iA"* M1 3500 42,000 104.000 143.000

2ao.000 AoadslPven _ 170,000 30.000 60.000 90.000 150.000 Beadces 1,250.000 GisenAreas 500.000 750.000 5.000 S.000 10.000 Uwit Center 5.I Otlher 33000 n.z2a. 768. ?al.o LM2Q.Qo TotalPublic Areas 10.250,000 TotalDevelopment 1.500.000 8.500,000 hAm 4 55 Pa8eIT of 27

_ ha.. I!~~~~!c

M @101 b~~~~~~~~~~~~~~~~~~c

.~~ S . Li anaIuiI ii~~~~~~~I

01010~~~~~~~~~~~~~~~~~~~~c * ~------

o0 0 * 0 0 0 0 0 *6 84 "We 4 0 0 0 0 0 4 6 44 00440 fit303 oil0 a*04 03 Os Os 8O O* . O0 0 0 a 0 _0 O_ __ 40mD ec *** g o** 80 r . 09 0 oVI0owt 0o oaO 4 a *w tw *an'ss ptwo

8 41000 "all 06l14 0 0 a 0 0a0 G0 '0 I4 0 6 664.4 6 0"0 o 0 0e 0 0 0 a 4e0 066 6 08 I6h £4 0* no' M0* 0 0' 0 0 0 0 80ri Ni's 46 in6 4 AK6SZ tw0466.0 040004 606* 0 0 a 0 ow 0a44 6 01414t 4 068 '04-a I SNd6466O P401

_~~~~~~~~~~~~~7 T O_ S_ a _ru.-_. owl088 0.4WV 64 0 0 0 0 0at8s 60*44 40 040 .- a a0 t ta-u - 9`9 -ir- " 406.8 8604s 88-"g 0*0i0 *0 *5o .6 400 *6 0 0 -- ~~~a00 t456 S -ffs09 so--r-- on-~--- 5 &qiqW pU*

so so s0 so 0c @0o i r E *44 f Pon* too's s* 61 so- so0 .e So 40o 5s8C 0r.l, M:e____~~~~~~ ,",T0_ _-a0 6- S_s& d -g afot vompi- 00.8 &W11 4(e 0s06G0 %0 s0o s0o 5*ew 6 1 SIU"Aamm Us" 0t910 ne's "Al !L! * 8 t.__. [ as§ _-Dr WsW _. o, 70_NjoE*d01 ai_soft"" _VOWOUL MOM 111up 00188*8 "O8 i0 5ss so 50so 0e Stt%a htCH

0 a el ~ 0 0 0 0

00 00 0' ow aw t8 400 .8t 0 ,_ _ _000oe A_-. pu4t4 _.t^_,...... r s _...... 4s

8 0 8 0 '4 Oeme&3-, IP btO't~~~~~~~~4e61 pk* ties !a test' less. 0 a 0 0 00 0 0 "Ws_1 1S19633_bd

o00 00.31 004.1 00.3 0. 0. 000. 0.0 e ee e 000.0 e ~~~~~~~~~WOMMLmevo I o __q N$-t ees-e Cff't O e e n *N tc C 309J_PZM__1~~~~~~~4 SCtM$$-| 03ca§ e e e SC-U eV3s4""eValp P%

44 0

EGYPr ABUSOMAF DELOPMENlr COMIPANY CAPITALCOSTS & FINANCINGSTRUCTURE (Phase I - m rstrucure) (US$mllIlon)

TOTAL 1993 11994 1995 1996 199

BaseCost 57. 16A 40.12 1.20 0.00 0.0 ASDs Financngo Hotels 24.25 5.23 11.82 7.21 0.00 0.0 InterestDuring Conht, (IDC) 6.63 0.51 2.24 3.88 0.00 0.0 FinancialCosts 0.74 0.23 0.51 0.00 0.00 0.0

Total ProloectCost 89.08 22.11 54.69 12.28 0.00 0.0

ASD'sLand to Hotels 21.71 4.50 17.21 0.00 0.00 0.0 ASD'sDirect Equity In Hotels 12.01 3.00 6.01 3.00 0.00 0.0 DirectEquity in ASO 12.98 4.16 7.78 1.05 0.00 0.0

Total - Equity 46.71 11.66 30.99 4.05 0.00 0.00

LandLoan 1.34 0.82 0.45 0.07 0.00 0.00 WS/TDALoan - Local 1.64 0.09 1.24 0.30 0.00 0.0 WBTDALoan- Foreign 26.17 7.32 16.25 2.60 0.00 0.0 OtherDebt 0.00 0.00 0.00 0.00 0.00 0.0 LocalDebt 13.23 2.21 5.76 5.26 0.00 0.0

Total * Debt 42.38 10.45 23.71 8.23 0.00 0.0

* . . I Annex 4 Page 14 of. 27

AWIOMAOIVULOPUUNFcoUPM4 PNS I * NPRAST CMN (18oo0 na

19n3 1094 1los 1198 1t97 1tn8 1lot LAWOFRe _...... e ... -- e. ee MM m2 t,000,000 t00.000 LVm2 3.33 3.33

co d_ofPu"W sd (LamIln) 3.33 1.685 0 0 0 0 0 LZ m2 0 LEWm2 3.3

Lem al s.(LInEmiuk) 0 0 0 0 0 0 0

1913= 1 tl28t114 1161 1156 1II 1116 1116 PASS* mt sO .OOoo.ooo 00.000 LVIm2 j,j JI 100.00 t00.00 105.00 110.25 115.76 121.55 127.63

Rin (La dmo) 6.00 6.00 0.00 0.00 0.000-00 0.00 _Sam_elaym2 *50.000 75.000 7r.000 LhaI j-I 120.00 120.00 126.00 13S2.30 138.2 145.88 113.15

_sAmum(LE _m) 9.00 *.0 0.0 0.0 0.00 0.00 0.00 HOW-3 a0 120.000 0 LE* I jfls 110.00 150.00 117.10 165.8 173.4 162.33 191.44

FeWeM (LI _mUo) 0.00 18.00 0.00 0.00 0.00 0.00 0.00 HOWd 4 mt 135s000 0 135.000 0 0 0 0 0 LImz r 160.00 160.00 186.00 108.45 208.37 218.70 229.73

Rawam (LE No, 0.00 24.30 0.00 0.00 0.00 0.00 0.00

m2m50.000 50.000 50.000 50.000 0 0 LE/mg F # 230.00 241.50 253.58 266.25 270.57 293.54 308.22

R=wm (LI aim 0.00 0.00 12.68 13.31 13.18 0.00 0.00

CWaa mg "I, 5.000 5.000 5.000 0 0 LEz* L .A.. 230.00 241.50 213.58 266.25 279.57 293.54 308.22

Rswui (LEfdIeM) 0.00 0.O0 1.27 1.33 1.40 0.00 0.00

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Nellp LawRsWV_m (0 No 0.0o 0.00 13.95 14.14 15.38 0.00 0.00

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PNA I - _es_VMW VSU, OX

t0s0 2001 2002 1Os too. loto tsos tooo.? loto t

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19,422 e4,8t4 2,SOI O O O O S,OOJ 45,S S*itobl 455 t8,850 4,US48.0 500 1.544 O O O ,.54 464 it ICZ 13293 an Woftd Goods lles S 00 0 10,594 soa 1.364 4,01 IseS I" 1C2 . S . t39 t ,sU hmbst 152 SOI uu_ 03 oaum $30 1JSu ,016. 5.20 4.010 303 10 0 00 Pn34 COM t,a 26,236.333 0.32Z26 6J,14 1,107J5 0 99062 TSg 5. CDbSWp Cc55t 910 19,421 2.047 34.04 3,91 2,0a0oS ,93 2,S04 II 363 O O O 0 2. 1.107 4.016~~~~~0 nc St 91 t,o4 70S 303 - 606 1.30 701 0.334 qhytsmCen 1.001. 303 290 ,.30 .0290 871s6.=6.. Wog CaphS 1 1 19.71 7.05 34.0 1.107" 3,633 =00, 0 0 53950 45.4 3,984 42867 Totat5.Canal. -OmIopehut 10 464 26.98 5J 1.J 0 0 0 PfFeConinpSwl 39 1.62 52. 3U.170 109,554 $.36 43.50 152 2 O1.t09J utoh- pro" Co5t t,40152 22.24 95 3w =61 63 0aso 15w 5s P#ajsct303 1. 630 1.7

.~~~~~~~~~~~~~~~~~~~~~~~~ 0 sI O Ebud-33

Lmdt06 1.0 0 0 0 0 16.000 5.405 l."00 indihg ctcm W ult 5.6 2.727 9.0 00 2.500 3.227 17.350 8.437 2s.096 Et*nml &Mae i*is: 0 0 0 0 Cc ~munIUobnI Alm 265 1.03o 265 1.035 5 1.017 E8t9C.4chJAC 455 2.00 2,121 8.000 2.578 10.000 6.570 1t.576 Senke EqumsWss 0 0 0 0

Sub-ToNl 0 0 455 25.65 5.13 18.035 500 2.50 0 0 6.068 46.368 19,997 66.591

Dutyonan qtdGw$Gooq 0 121 1.36 133 0 0 ,61 4865 1.617 Futh 152 60 1.364 4.000 152 G0 1.,68 5.000 3,170 10.564 Pvlsc Ubrwg CnsufthgIcnooUn 3003 1,00 530 1.75 152 50 965 S.25 1.961 6.530 Pm-pepngh Cosas 1.001 303 1,000 303 605 2.000 1.207 4.016

Toal. D hunopmnt s&CoAst 0 0 910 20,471 7,310 26.147 1.107 3.63 0 0 9.327 s6.252 26.820 69.310 Phydcdowinsftncy . % 0 0 91 1.04 731 2.615 t11 36 a 0 933 4.025 2.141 7.131 woe6khcnpId 5t1 303 1.41 303 1 419 730 2.430 Pdb CoulnogoY 0 0 t0 2.9 975 9.45 252 2.14 0 0 1.309 14.514 5,663 16,674

Told - Prt On.B6Cost 0 1.081 32.43 9.019 38.21 1."3 7.55 0 t 1.072 76.2t 35,359 117,745 I~~~~~~~~~~3~ U"U UUWU UaUU _~U UUU3 *a w w _0 *" *Wx w3 *n U a 0 Noal- 4

Lsnd 0 24.30 0 0 0 0 24.300 7.207 24.300 dkgsa CklviWials 5.6 2.727 9.00 500 2.5c 3,227 17.350 8.437 26.004 Eqv4mo a Maenor. 0 0 0. 0 Comua*dea, a Alum 255 1,03 265 1.035 576 1.17 UIe0M,9chJAC 455 2.00t 2.121 8.000 2.676 10.00 5.579 8s.578 Sewtc Equms 0 0 0 0 Sub-Totls 0 0 455 32.1S 5.113 1t.035 500 2.50 0 0 6,066 52.665 21,ti9 72,B91

Ol onolmpauod Goods [0 121 1,36 1s 0 0 1.51 465 1.,17 Fwulue 152 50 1.364 4,00t 152 60 1.6866,000 3j.O 10.554 Potct MmsmomewdxoCsulgPomdom 303 1.00 530 1.70 1s2 5 095 3.250 1.961 6.539 PM.aWbi Costs _._ O 303 ,oot 303 606 2.000 1,207 4.016 Totd - Ondopnt a Conrt 0 0 9tO 34.771 7,310 26.147 1OT0 3.63 0 0 9.327 64.552 25.712 95.60 Plysc Coklu 1:0g%i 0 0 91 1.047 731 2.61 it 363 0 0 833 4.025 2.141 7.131 WVdngC 1l 5L1 S03 t.41 303 1.419 7SO 1.430 Pdce Congc 0 0 50 2.920 9t7 9.454 252 2.140 0 0 1.309 14.514 5.666 18.874

Toal - Ptet Ban Cool 0 O 1,06t 38,73 9.019 33.21 1.t73 7.55, 0 0 11.672 84.51 37,251 124.045 *sfl3 =_2U aUUU _2 J_U - _ @ wU3U #Uwi UU n_ UUU Ws *3 '4

0

o~~~~~~~~~~~~~~op ~ ~

P4~~~ ~ ~ ~ ~~~~~~~~~GP

ABUSODAA DEVELOPMENr COMPANY CAPffALCOSTS & FINANCNGSTRUCTURE (Phase I - eupersktucttie) (USSmIIlon)

TOTAL 1993 1994 1995 1996 1997

BaseCost 134.536 14.847 66.783 44.822 8.083 0.000 InterestDuring Const (IDC) 2.506 0.278 2.228 0.000 0.000 0.000 FinancialCoss 1.068 0.324 0.744 0.000 0.000 0.000

Tot Project Cost 138.110 15.450 69.755 44.822 8.083 0.000

ASD-DDveopdt.and 21.712 4.505 17.207 0.000 0.000 0.000 ASD - AddflonalEquty 12.012 3.003 6.006 3.003 0.000 0.000 OtherEquty 35.103 2.521 13.362 15.817 3.404 0.000

Total - Equity 68.826 10.028 36.575 18.620 3.404 0.000

ForeignDebt 45.467 2.008 20.205 19.729 3.545 0.000 ASD'sDebt 12.241 2.223 5.814 4.204 0.000 0.000 Local Debt 11.555 1.191 7.161 2,069 1.135 0.000 Ttl-D 542024 3.1- 2-0- -.--8 0.0

Total . Debt 69.284 5.422 33.180 26.002 4.680 0.000

. 4 . " ~~~~~~~~~~~EGM ABUSOMA DEVELOPMENT OOMPANT

PoomS: 1993 1v04 1996 1996. 1997 1998 1999 2000 2001 2002

Guestsperfloomn 2.00 2 2 2 2 2< 2 2 2 2 2 Daly Rate (Snight) I $80.0 $80.00 $60.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 $80.00 OccupancyRae. 0% 0% 70% 75% 75% 80% 80% 80% 80% 80%

Hod Capacy -Rooms 300 300 300 300 300 300 300 300 300 300 300 tA,phdRooms. Day 0 0 210 225 226 240 240 240 240 240 OccupiedRoams$ Annuldy 0 0 76,50 82.125 82.125 87.600 87.600 87.600 87.600 67,600 Annu?Numbe o Guestb 0 0 1S3,300 164,250 164.250 176,200 115,200 175.200 175.200 17S.200 , ~ ~ - 0..- - - ... - Reenes -Rooms($ mnl) 0.00 0.00 6.13 6.S7 6.57 i.01 7.01 7.01 T.01 7.01 Food& Beverages: Revemnu- FIB ( milan) 0.00 0.00 4.99 5.35 5.35 S.7O 5.70 5.70 5.70 5.70 OtherRevenes: Revens - Othe anmn) 0.00 0.00 3.91 4.19 4.19 4.47 4.47 4.47 4.47 4.47

ToedRevnwnes (t eon) 0.00 0.00 15.03 16.10 16.19 17.18 17.18 17.18 17.18 17.18

'0 '0 * IsSormef Sheraton

Pboms: 1993 1994 1995 1996 1997 1996 1999 2000 2001 2002

Guest perRo n 1I 18.6 1 .8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Daly Rate "niht $100.001$100.00 $10.OO $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 ccupwanyRale ... was.n. 0% 0% 50% 60% 65% 70% 70% 70% 70% 70%

HotelCapacIy- Rooms 300 300 300 300 300 300 300 300 300 300 300 OccupedRfoms.-Dly 0 0 150 10 195 210 210 210 210 210 OCupedRooms- Annualy a 0 54,50 65,700 71.175 76,8S0 76.650 76,650 76.650 78,650 Annul Numberof Guests 0 0 98.650 118.260 128.115 137,970 137,970 137,970 137,970 137,970

Reenues- Roosr(S m0an) 0.00 0.00 5.48 6.57 7.12 7.67 7.67 7.67 7.67 7.67 -W .. a =aWw-a ====Wm an=== wa==wst===a=u ="w====numane a===ne =am== Food A Beverages: Revenues- FIB (S milin) 0.00 0.00 4.89 5.87 6.36 6.85 6.85 6.85 6.86 6.8S Other Reyenues. Revenues-Otr$ Smndon) 0.00 0.00 1.26 1.S4 1.67 1.79 1.79 1.79 1.79 1.79

TotWRevenues- nISlon) 0.00 0.00 11.65 13.98 15.14 16.31 16.31 16.31 16.31 16.31 mannX mU.... annumn maccam c.n.nw .n.aa" nfal.. gsann. c.n. n.m.." C.. o Roams: 1993 1994 1996 1996 1997 1998 1999 2000 2001 2002

sGuetsper Room 2.001 2 2 2 2 2 2 2 2 2 2 Daily Rate ($nlght) $80.0 $80.00 $60.00 $80.00 $80.00 $90.00 $80.00 $00.00 $80.00 $80.00 $80.00 OccuopacyRate ==O=- ===> 0% 0% 0% 70% 76% 75% 80% 80% 80% 80%

HotelCapaty - Rooms 300 300 300 300 300 300 300 300 300 300 300 OccupiedRoms - Daly 0 0 0 210 226 225 240 240 240 240 OccupiedRoms - Annually 0 0 0 76.650 82,126 62,125 67,600 67,600 87,600 87.600 AnnuedNumber of Guess 0 0 0 153,300 164.250 164,250 175.200 175.200 175,200 176.200

Fevenus - Rooms ($ mUln) 0.00 0.00 0.00 6.13 6.57 6.67 7.01 7.01 7.01 7.01

Food&f BwflfMs Revrens - FUB (S nmUkon) 0.00 0.00 0.00 4.99 6.36 6.35 5.70 6.70 6.70 6.70

Revnues - Ote S minilon) 0.00 0.00 0.00 3.91 4.19 4.19 4.47 4.47 4.47 4.47

Tot Revenues (Smillnw) 0.00 0.00 0.00 15.03 16.10 16.10 17.18 17.18 17.18 17.16

I 1HOel - 41

Roows: 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Geutsper Roomn 1.6 11.6 1.6 1.8 1.8 1.8 1.8 1.6 1.6 1.6 Daly Rate ($Ing) $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 OccupancyRatse Mo=ww=w> 0% 0% 0% 60% 60% 65% 70% 70% 70% 70%

HotelCapacity - Rooms - 300o 300 300 300 300 300 300 300 300 300 OccupiedRoms- Daly 0 0 0 150 180 195 210 210 210 210 Ocpid Rooms- Annudly 0 0 0 54,750 65.700 71,175 76,650 76,650 70,650 76,650 Annut Number Guests 0 0 0 96.5SS 119.260 128.115 137,970 137,970 137,970 137,970

Revenus - Rooms (l mIlon) 0.00 0.00 0.00 5.4 6.57 ?.12 7.67 7.67 7.67 7.67 ummufi Umams. m"ann mnuD-a" macsan msauc *D--- assume aueeu .,555 Food& Revefaoou: Revenus - F.B l$ mUon) 0.00 0.00 0.00 4.89 5.87 6.36 6.86 6.86 6.85 6.66 Olho Revenues: Rsvenus - Other($mUhon) 0.00 0.00 0.00 1.28 1.54 1.67 1.79 1.79 1.79 1.79

TotalRevnues -* ndmon) 0.00 0.00 0.00 11.65 13.98 1£.14 16.31 16.31 16.31 16.31 *amas mu"=="= Monos ma.sue =b.m. -an. e5S -m--- .. =.Wm ===. EOYpr SOMA 0 AU DEVELOPMENTCOMPANY o n Wl El-w~~~~~~~~~F* OPEA WMCOM8

Iclkb Res SmAa 1993 1994 1995 1998 1997 1998 1999 2000 2001 2002 Ovetheads: ------ ------______% Tol Rev. Gneal & Adminhistralve a 0.00 0.00 1.20 1.29 1.29 1.37 1.37 1.37 1.37 1.37 Marketngb Sales 2% 0.00 0.00 0.30 0.32 0.32 0.34 0.34 0.34 0.34 0.34 PRope Mantennance Opeatins 0.00 0.00 0.75 0.81 0.81 0.86 0.66 0.86 0.86 0.8S Insurance (lIed assets) i 0.00 0.00 0.16 0.16 0. 1 0.16 O.S 0.16 0.16 0.16

Subtotl - Ovwheads 0.00 0.00 2.42 2.59 2.58 2.74 2.74 2.74 2.74 2.74 Departmenta: ______% DOM ~ Roams .toS 0.00 0.00 1.10 1.18 1.18 1.26 1.26 1.26 1.26 1.26 Food b Beveages 40N4 0.00 0.00 2.00 2.14 2.14 2.28 2.26 2.28 2.26 2.28 Other so 0.00 0.00 2.34 2.51 2.51 2.68 2.68 2.68 2.68 2.68

Suboad - Deparmentad 0.00 0.00 5.44 5.83 5.83 6.22 6.22 6.22 6.22 6.22

co Towald0 0.00 0.00 7.86 8.41 8.41 8.96 6.96 8.96 8.96 8.96

lSoma Bay Sherabn 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 OveChads: ------% TOWaFbv. Gewal & Adnlnldhalve i 0.00 0.00 0.93 1.12 1.21 1.80 1.30 1.30 1.30 1.30 Maretng & Sales 2 0.00 0.00 0.23 0.28 0.30 0.33 0.33 0.33 0.33 0.33 Pfr4mW Mainteance & Opera"o 86% 0.00 0.00 0.68 0.70 0.76 0.82 0.82 0.82 0.62 0.62 smzame(% xedass) I% 0.00 0.00 O.16 0.16 0.18 0.16 0.18 0.18 0.16 0.11

Subttal - Ovheada 0.00 0.00 1.62 2.27 2.45 2.62 2.62 2.62 2.62 2.62

Departmenbt: ______% Dm Payev. Rooms - 1Is 0.00 0.00 0.99 1.16 1.28 1.38 1.38 1.38 1.38 11.3J Foodl Beverages 35% 0.00 0.00 1.71 2.05 2.23 2.40 2.40 2.40 2.40 2.40 Other 60 0.00 0.00 0.77 0.92 1.00 1.06 1.08 1.06 1.08 1.08

Subtotal - Depatmenta 0.00 0.00 3.47 4.16 4.51 4.65 4.85 4.65 4.85 4.65 mamma. a..m.= w=mam wamama .. naan maumma. *--ua maman Canaa= Ca=naa Tota 0UUJ 0.00 0.00 6.39 6.43 6.965 7.46 7.48 7.48 7.48 7.48 *-mam nuaman wamama amunm- n---ma ammantaw anma aCama maCman ammwam 44 a

Fte1l - 3 2002 1993 1994 1995 1996 1997 1998 1999 2000 2001

---- %- ToW Rev. 1.29 1.37 1.37 1.37 1.37 GOsend8Adninzbatlve 8% 0.00 0.00 0.00 1.20 1.29 0.92 0.32 0.34 0.34 0.34 0.34 Mabtodng&Sales 2% 0.00 0.00 0.00 0.30 0.81 0.81 0.86 0.86 0.86 0.86 Prop" Mihnutert & CperaNx 5e °.0°° ° °°0 °0 0.75 0.18 0.18 0.1B O.l 0.1 0.18 Insurance Yfixedats) I °°° °°° 0.18 0.18 2.76 2.76 2.76 9u5bi - oveheads 0.00 0.00 0.18 2.44 2.60 2.60 2.76

Departmental: 9;.% Rev. ------1.18 1.18 1.26 1.26 1.26 1.26 Rboms [a 0.00 0.00 0.00 1.10 2.14 2.14 2.28 2.28 2.26 2.28 Food& Beveages 401 0.00 0.00 0.00 2.00 2.51 2.51 2.66 2.66 2.68 2.68 Other soe 0.00 0.00 0.00 2.34 6.22 6.22 6.22 - Departmenta 0.00 0.00 0;00 5.44 5.63 5.893 6.22 Suboal ==*======an e#-_= =-===n =ws======-F1= :=w=a= =_===t 8.98 Tota O&M 0.00 0.00 0.18 7.88 8.43 8.43 8.98 8.98 8.98

rHot-el-4 1993 1994 1905 1996 1997 1906 1999 2000 2001 2002 ------COverheads: %Tobt Rev. ------1.12 1.21 1.30 1.30 1.30 1.30 Genera Adinlnlsrati 8 0.00 0.00 0.00 0.93 0.28 0.30 0.33 0.33 0.33 0.33 Mardetng& Sales 22 0.00 0.00 0.00 0.23 0.76 0.82 0.62 0.62 0.82 Maiwnen & Operatins 5 0.00 0.00 0.00 0.58 0.70 Property 0.18 0.16 0.18 0.16 0.18 0.18 Iswnce (% fed assets) 1 0.00 0.00 0.18 0.18 2.45 2.63 2.63 2.63 2.63 Subtota- Overheads 0.00 0.00 0.16 1.93 2.28

Departmental: ------_ __ - SDea Rev. 1.18 1.26 1.38 1.38 1.38 1.38 Pooms 1% 0.00 0.00 0.00 0.99 2.23 2.40 2.40 2.40 2.40 Food& Beveages 35 0.00 0.00 0.00 1.71 2.05 1.00 1.08 1.08 1.08 1.06 Other 60 0.00 0.00 0.00 0.77 0.92 4.85 4.85 4.85 Subtot - Depabmental 0.00 0.00 0.00 f.47 4.16 4.51 4.85 uUuu m- uisin a*u# B""ums "wum s * u1.U *-m-- 3U2= 7.48 7.48 Totl O&M 0.00 0.00 0.16 5.40 6.44 6.96 7.48 7.48 anuuin WU-W *--- UwUw mum" mumam" .umai Uws.UU U2wa ""UUn Oro ice e9s ICsl ats faie OOSI oti Se91 0oto WtI at usa Sr-i toe WI tOO 000 S-14wmOwi3u 3mlVWem) (col) itle) (tCol) (gt) (18) (cOOC) fess) ISO see so's ESa 68 ZOII)eZ lot go4I Oo ODo sdwao3a m

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.._.__._ ......

06

; O Annex 4 - 11 Page 27 of 27

AU SOMABAY OEVELOPMAET PHASE I & U (MO000O0M2

GM" Saleof Consrn& Opeaing & Changesin Net Hotel Oweloped Oevelop't Maintenance Wordng Economic BAY LOWacamX Q9ams 0808nits 1993 0.00 0.00 (19.15) 0.00 (0.38) (19.54) 1994 0.00 0.00 (59.02) 0.00 (1.45) (60.47) 1995 26.68 1.68 (35.82) (18.22) (3.31) (29.00) 1996 56.76 3.02 (4.76) (36.03) (3.07) 15.92 1997 61.33 4.42 (42.85) (38.69) (1.08) (16.88) 1998 64.73 2.70 (132.04) (40.06) (3.33) (108.59) 1999 106.99 10.88 (80.13) (68.15) (7.45) (37.86) 2000 152.11 17.09 (10.64) (94.50) (6.81) 57.25 2001 158.96 25.06 0.00 (98.43) (0.52) 85.07 2002 164.07 15.33 0.00 (101.35) (0.22) 77.83 2003 167.42 7.85 0.00 (103.30) (0.26) 71.72 2004 167.42 0.00 0.00 (103.30) 0.03 64.16 2005 167.42 0.00 0.00 (103.30) (0.07) 64.06 2006 167.42 0.00 O.CO (103.30) (0.07) 64.06 2007 167.42 0.00 0.00 (103.30) (0.17) 63.95 2008 167.42 0.00 0.00 (103.30) (0.24) 63.89 2009 167.42 0.00 0.00 (103.30) (0.07) 64.05 2010 167.42 0.00 0.00 (103.30) (0.02) 64.11 2011 167.42 0.00 0.00 (103.30) 0.59 64.72 2012 167.42 0.00 0.00 (103.30) 4.61 68.74

AS'sE-IRRI 15.1%| - 72 - Page1 of 23 EGYPT PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTALMANAGEMENT :ROJECT

Sabi Hasbeesb Bay Development(SHID) PreM Deption & LandUse Mase Plan: 1. Theresort would be cenraly locatedin the Hurghada-Safagaregion, some 20 Km southof Hurghada.The projectis beingdeveloped by SHBD,incorporated under Investment Law No 230 of 1989with an authorizedcapital of LB700 mion and issuedcapital of LE 46 million. The total area of theproposed project is nearly 12million m2, of which6 millionm2 has beenbought and the rest has been leased from the MOT with the option to purchase. SHBD has developed a comprehensivedevelopment plan approvedby TDA. The developmentplan providesfor the constructionand adminstrationof the key infrastructurefacilities for the projectincluding potable water,power generation, sewage ament, internalroads and communicationwhich would suppot a luxurytourist esortconsisting of hotels,villas, chalets mainas and recreationalcenters. SHBD wouldparticipate in theequity of hotelsup to 40% mainlythrough contribution of developedland. 2. The projectwould be implementedin phases,with PhaseI consistng of thedevelopment of 6 nmllionm2. PhaseL is furthersub-divided into two stages. Sta&C(a1, the subjectof this analysis, would consist of the developmentof 2 million m2 of land and would comprise all the basic nfastructure facilities,set up in modularunits to fit the needs of this stage,as wellas two 5-star hotels and one 4-star club rsot Each 5-star hotel wouldhave 300 rooms and constructedon a 200Q000m2 plot. The 4-star resort would have about 165 rooms in the form of chalets and bungalows,and constructedon a 177,000m2 plot. The constructionof this stage is envisagedto beginin early 1993for a periodof about3 years.At the end of construction,the sponsorsexpect to sell about540,500 m2 of developedland for the subsequentconstruction of privatevillas, chalets, palaces,and marina housingunits. In accordancewith the agreementbetween TDA and SHBD, MOTwould receive 50% of the profitfrom the sale of developedland to third parties, with the exceptionof land sold to the hotel companies.Out of the 2 million m2, stageIa wouldhave a total seUlablearea of about 1,117,500m2 (or 56%of total area)and theremaining 882.500 m2 wouldbe in the form of public area (beaches,greens, roads and pavements).Negodadons with international hotelchains and is e opemors areunderway. Stage (b) coveringthe remaining4 million m2 of phas I wouldbe developedin the secondand third yearsof operationand wouldconstitute two 4-star resorts(450 rooms), palaces, vilas, chalets,a town center(with a 300-room5-star hotel and casino),and retail center.Out of the 4 millionm2, stage lb would have a total sellablearea of about2,706,500 m2 (68%of total area)and the remaining1,293,500 m2 in theform of publicareas. 3. SHBDcommissioned the US firmsof Anderson,Cooper, Georgelas and EDAWto prepare the conceptualplans for the entiresite, and the detailedplan for Phase 1 (6,000,000m2). The local firm of Sabbour& Associateswere retainedas the engineeringand architecturalconsultants to producethe deiled drawingsand cost estimates for the PhaseI infastructe facilities.

Gaital kMa=en & Prosed Flpaacig Plan: 4. The total cost of Phase1 (6 milliotim2) is esdmat at US$258million (LE 860 million)and wouldconsist of the developmentof infrastructuefacilities and six prnmaryhotels and club resorts. The investmentcosts of the hotelsshown in the tablebelow include the valueof landcontributed by - 73 - Page2 of 23 SHBD as master developer, all pre-oprational development costS, commuunicationand alarm, air conditioningand serviceequipment, furniture, contingencies, Interest During Constuction (MDC) and relatedfinancing costs. Under Phase la, the averagecost per roomfor a 4-starresort comesout to aboutUS$100,000, while the 5-star hotelis aboutUS$1 15,000. Approximately 46% of the cost of in uctue for the entire6 millionm2 of PhaseI is envisagedto be completedduing PhaseIa. As masterinfrastrucure developer, SHBD would have a total capitalrequiment of US$43million for PhaseIa Of this, aboutUS$22 million is in foreigncurrency, while US$21 equivalent is in local curency. The large local currencycomponent is typicalof such projectswith significantlocally incued expensessuch as land, civil works,and locallysources equipment. The foreigncurrency costsare expectedto be thoseof importedequipment for waterdn, wastewater treatmet powergenemtion and distribution, and communicaton/elephone systems.

TABLR A. SABLRASEME lAY DVELOPMEN COMPANY PEASEI * a, b CAITAL SMUCTUnE& POPOSEDPIANCING PLAN X'Mk MM I W b 4.000.0 mg Cor_bogla Peiled 1993-95 1107.00 ______Fi Lad. Tom f I T _E 1 ~~LEa 11I1 ,us cm_0"1 10.10 170.02 63.20 74.2 141.19 50.31 lVddag- b pN¢0.27 4.12 1.61 0.16 3.19 1.14 Pi OW*VftW 1.02 0.99 4.02 0.79 14.12 5.0$ I OMO1.10o_q 32.37 10.82 1.62 50.63 r 10.79 Toed. & _UtnauM 14,.14 237.90 15.02 11.85 222.77 76.75 FoSp~~~~~~~~~fLW ToW. LLm~ ~ ~ ~ nnao LLO hw mQO£m 19.98 6.00 Oapmbw So"wadqco"t 8.00 2.40 Of Pnqsaft & US"bsfA2 2dt9 2uA 25.Z esU 3 2 OMsCO 16.04 54.91 33.13 25.72 26.55 34.29 h#Whg Capd /3 0.63 1.12 1.17 2.57 2.66 3.43 PipdcS CANkRpnzy14 1.55 9.68 4.46 5.14 9.99 8.14 Prb Ccn*tprq 1.60 2.25 2.34 1.29 1.43 1.71 10 &OU M CM 1= 17 Lu TRequheduFbanonw 21.80 71.30 43.27 36.68 44.93 80.17

un Un ILEmIb USMLMg s US2Jan U SMMM 2i eqphy s 0.05 35.40 10.70 24.74% 14.67 17.97 20.07 40.00%A LdndiXwWpg is 0.00 17.23 5.17 11.96% 0.00 0.00 0.00 0.00% NLOMnALoamn /Y21.61 18.61 27.39 63.31% 16.51 20.22 22.S 45.00% FW*"omb O0.00 0.00 0.00 0.00% 5.50 0.00 5.50 10.97% LamlDow UR o QULo Q LQQ LQ LQA L23 Todfbelasg 21.86 71.30 43.27100.00% 36.68 44.93 50.17 100.00%

f2 Mc am apemd to befiad WM50% OxY and50% deft 4 InWds 0%d As an Impa aleId .qumMIt aS Talmeas 0%of dul Prepa*Mn idlas hweshnet am 14 Teln a 10%d oft pespeato & uAlUm. e etmtcou _ _ _ A5 AxtuduhawNhoWId mp*y wd amultst abeS5% olfthe toa capbuetofp 8HB0,hidi the vaueo 9t1sequ*y ln thehdd ooCp_es in b0 tam od aid oWit ceetWon /8 80%Sd the pudo valueof andWOd be inad hI fo ftmdet (lnd dcwredpaaemnt tem GOE /7 1TA lan forphae la coes up to awn 4$%at SHBWcapia ibMdm whenemNd SMOD.equy hi the hold

S. T ponmoshave indicatd t twoloc bank, CIB andSuez Canal Bank, have expressed wllgness to ange the fiancing for the hotels if the the inras fncing was secured. - 74 - Page3 of 23 While about US$27 mrullionof IBRD/TDAfunds would be disbursedto SHBD towards the infrastructurecomponent of Phase la during 1993-95.the remainingUSS23 million would be conunittedby TDA in favor of SHBDsubject to the successfulimplementation of PhaseIa and the appraisalof Phase lb. Most of the US$27million IBRD/1DA loan for Phase la is expectedto be disbursedtowards foreign currency expenditures. Under Phase la. the shareholdersof SHBDwould contribute direct equity funds of about US$11 million to cover capitalized pre-operational development expenses, a 20% down payment for the purchased land from MOT. site preparation/utilWescosts, and non-IDC financial costs. An additionalUS$20 million in the formof developedland and cash investmentwould be contributedby SHBDas equity in the proposed hotels,bringing total equityto roughly57% of SHBDYscapitaliztion. 6. Debt financing from local conunercialsources was assumed to be repayed in foreign currencyand havean interestrate of 10%,a 3-yeargace periodeffective from each drawdown, and repaymentover 6 years.The IBRD/TDAloan. in the case of SHBD,would carry a variableinterest rate of 9.5%,a 5-yeargrace period effective from the dateof loancommiumnt, and 20 equal seni- annual payments.Since the IBRDrrDAloan is expectedto be the only loanto SHBD,it wouldnot carry the subordinatedfeature and its interestrate would not reflectthe subordinationprenuum of 100 basis points.The IBRDITDAloan to SHBDwould bear no front-endfee but wouldhave an annualcommitment fee of 0.25%on the undisbursedloan amount.80% of the purchasevalue of land acquiredfrom MOT wouldbe financedthrough a 5% GOE mortgageinstrument, having a graceperiod of 3 yearswith equal annual repayments over a 7-yearperiod. AssumSgfns fo iEmancialAnlsis: 7. The financial projectionsand analyseswere made on the first stage of developmentof 2 nmllionm2, with the aim of ascertainingthe abilityof SHBDunder this phaseto generatesufficient incometo: (i) covertheir operating and financing costs; and (i) servicetheir debt obligations to TDA. As such, the cashflow analysisdoes not accommodatethe investmentrequirements, operating expensesor revenuesassociated with akiydevelopment subsequent to the firstphase, namely the 4 mdllionm2 under Phase lb. The cashflowprojections are carried out in 1992constant terms and cover a period of 20 years, inclusiveof the 3-year constructionperiod required by Phase Ia. Expendituresunder the financingplan wereescalated using appropriate price contingencies.Under Egypt'sinvestment Law-230 of 1989,both supers=rcture and inrs componentswould be exemptfrom income taxes for the first ten years of operations,and are taxed at a rate of 40% teeafter. Fixed assetswere depreciated using a simplestraight line depreciationover 30 yearsfor buildingsand civil works, 15 yearsfor SHBD'sutilities stations. and 10 yearsfor furniture,a/c and other equipment in hotels. Capitalizd pre-operatingdevelopment costs, IDC, and financingcosts wereamordzed over 5 yeas. Theexchange rate of LE 3.33/US$was used. 8. Hotel revenuesare generatedfrom different operated departments such as rooms,food and beverages,sales and rentalfrom shops, spos facilities,minor charges such as telephone/telex/fax, and laundry.Average room rates for 1996onwards used for the two 5-star hotelsand one 4-star resortof Phase Ia, are US$100and US$80per night.respectively. The averageoccupancy rate for the 5-starhotels would start at 50% for thefirst year of operadonand increaseto 60% in the second years,65% the third year. and 70% thereafter.The 4-star resort would operateat 70% in the first year, 75% in the second and third years,and 80% thereafter.The DoubleOccupancy Factor, a measureof the averageexpected number of guestsper room,is takenas 2.00 for the 165-roomclub resort and 1.80 for the 300-roomhotels. While the resort is assumedto commenceoperations in 1995,afoer a 2-yearconstuction period, the otherhotels would begin operations in 1996. -75 - Am 5 Page4 of 23 9. Hotel annual operating expenses.QgarnSj costs used in this study, expressedas a percentageof departnentalrevenues, are 18%for rooms,40% for food and beverages(35% in the caseof a S-starhotel), and 60% for otherminor operations. 10. Annualgvejhead expenses relate to the overal operationsof the facilityand are not allocated to specificdepatments, such as: (i) admsve and generalexpenses: are estimatedat 8% of a hotel's total revenues to cover license fees, travel expenses,printing and stationary,credit card commissions,etc.; (ii) marketingand sales:are estimatedat 2% of a hotel'stotal revenuesto cover agenc fees, advertising,eninment, etc.; (iii) propertyoperations (repair, replacementand maintenance)are estmated at 5% of a hotel'stotal revenuesfor the overallupkeep of the property, fmnishings,equipment spare parts; and (iv) insrance: an annualpremium equivalent to 1%of the fixed assets Other expensesae: (i) funiture replacesmnt an annal cost equivalentto 4% of GrossOpeting Profit(GOP); (ii) management fees: for the hotd operatorcompany and is equl to 3% of total annualrevenues; and (iii) utilities: chargedby the maste developer(SHBD) for the hote's consumption of electric power, potable water, recycled water for irrigation, and senrice/communitycharges. With the exceptionof uility ratmes,which are the subject of analysis heme,hotel cost estimatesara in line with actal costs currentlyexperienced in similarhotels in the RedSea area 11. SHBD's revenues wouldbe derivedprimadly from- (t) dividends received from SHBD's share in the hotels. SHBD would have an agegate participationof about50% in the equity of the three hotels of Phase Ia. SHBD wouldcontibe fiull alueof land as equityin theS-star hotels,and 50%of e valueof land for the 4-sta resrt, as equity-in-kind.The analysisassumes the hotelswould adopt a dvidendpayout rtio of 95%. (i) revenuesfrom the sale of any piece of developed land would be collectedin the form of a 40% down-payment,followed by two annualinstallments of 30% each. MOT would receive50% of the profitfrom the sale of land other than that whichis sold to the hotes. A detW ouline of the land salesplan andprices as envisagedby SHBD,resulting from the developmentof the initial 2 nillion m2, is found in the attachedtables. A recent invesgadtonrevealed that th cure marketprice of landin Hurghadaand SharmEl Sheikh ranges from LE 150 to LE 350 per square meter.SHBD asmes that, in order to attract hotel investents to theirarea, developedland wouldbe soldto a 4-starclub resort at a low rate of LE 90/m2,and LE 100/m2to a 5-starhoteL This analysisassumes that land sold for the developmentof othersuperstcr such as villas,chaleat, etc. wouldbe soldat a market rate stardng with a price of LE 230/M2 in 1993. The plan assumes dta the price of land would appreciate by 5% annuallyin real terms, starting from 1993. SHBD's cost of developingone squaremeter of landcomes to aboutLE 62/m2,including the purchaseprice of US$1/m2from MOT. (iii) utility revenues are basedon the consumptionof the three hotel that are to be built and comuissioned underPhase la, as well as the expectedconsumion by villas.chalets, etc. Unit uility rates chargedare basedon an analysisof the unit cost of productionof each pe ofuiy, giventhe totalvolume beng consumedby all su tructureunits under Phase Ia, as well as by the sharedpublik areas such as streetlighing, waterdesainaion and water treaumentplants, and water consumedfor common greens. The project's toul annual conslmpton of eleccl powerwas esdmatedat about26,673 MWh, potable watw 364,900 - 76 - nn Page5 of 23 m3. and recycled water 292,160 m3. Those consumptionlevels roughly represent 35-50% of the nominal production capacity of the installed utilitycapacity. Furthermore,SHBD would incur additional labor costs, maintenance and asset depreciation associated with about 882,500 m2 of public areas and services shared by the hotels and future superstructures. Initially, the three hotels and future owners of residential units would be charged an additional annual service fee to cover the cost of running and maintaining these public facilites represented by the comununicationssystems. irrigation network, site up-keep and landscaping,and roads/pavements/walkways.

12. SHBD's annualoperating cost are those attributed to the production and distribution of electicity, waw desalinationand distribution,waste water drage and treatment,and the operations and maintenance of the 882,500 m2 of shared facilities. Prelinmnaryengineering estimates and design specifications indicate that the electric power consumptionrate by the entire project under Phase la would be:

Waterdesalination plant 8.0KWhIM3 Wastewat treaunentplant 2.0KWbh 5-starhoed 3.9 KWhoo,n 4-starresort 2.6KW/ooom H using:Villas. chalets. palaces. etc 2.0 IW/occupan:

The consumption rate of potable water by the entire project under Phase Ia is estimated at 0.90 m3/room/day(450 liters per guest) for hotels, 0.70 m3/room/day(350 liters per guest) for housing units, and 0.25 m3/employee/day(250 liters per employee).The conswnptionrate of recycled water by the enire project under Phase Ia is esimated at 80% of the rate of consumptionof potable water, or 0.72 m3/room/dayfor hotels, 0.56 m3froom/day for housing units, and 0.20 m3/employee/day. Based on this, the unit cost of producing each KWh of power and each cubic meter of potable and recycled water, considering labor, fuel, lubricants, maintenance, and depreciation of fixed assets would amount to LE 0.28/KWh for power, LE 8.1 l/m3 for potable water, and LE 3.52/M3 for recycled water. Furthermore, SHBD would incur an annual expense of about US$0.71 million (LE 2.3 million)associated with the operationsand maintenanceof the 882,M)0m2 of shared facilides. SHBDgFinancial BXformance:

13. The following table gives a summary of project performance in terms of the Retun on Equity (IRR) and the economic IRR, of the hotels and SHBD. Though revenue projections from the sale of land are conjectural at this early stage of the project's development and prior to the actual completionof the infrastrucure construction,the analysis would neverthelessattempt to measurethe impact of this revenue, as weil as dividend proceeds from SHBD's shares in the hotels, on the project's econonucs in terms of the level of utility rates that SHBD would need to charge the three hotel companies in order to fully service its debt to TDA. It was also assumed that the resulting utilty rates would remain constant in real trms for the life of the projec The base case perfaomance shown in table 5.2 assumes that (i) SHBD would acually be able to sell 100%of the sellablearea of developed land; (ii) equity at both the infastructure and superstucture levels would not fall below 50% of total financing; and (iii) SHBD would remin a ninimum of 50% shareholding in the hotel companies in order to maximizeits share of hotel dividends. MOr's share of the profit on such land sales woud amount to about US$12 million (LE 40 million) during the period 1996-2003. - 77 - AnrL 5 Page6 of 23

TAtRL S-t SAHL NASHESN DAY DEVELOPMENT CO. PHASETo. f2ONO .2) BASSCASE RESULTS PoeedUfiltbr Rate Powr (LEIKWh) 0.40 poabe Wate (LU/M3) 11.00 Recobd Waer (LUim3) 5.00 SrAwleFe"s (LEhu2) 4.50 8M8- ml. DW SerAv CovamRaio (08R) 1.22 SHD - Rotm on eqt*y (IRW) 10.4% S90- Eemi IRMf/ 27.7% Mmalsis.AvecuqGO 4.4% HotsR-Rwmnaequty(IRRw 17.1% "leftei -u l, MR 19,0%

adje' olimd as dwa .ad prui ondadouiu. 14. The abovetable clearly demonsaes h at the udlityrates shown above, SHBD would be ale to flly cover its debt serviceobligations to TDA. Whilethe econonic retus of the hotl comies and SHBDare strong,SHBD's s oldersat th infrastructur level,however, would realze a marnal return on their equity mvestment, which at this stage does not take into cons~dcMionthe futureappreciation in the valueSHBD's shares in the hotelcompanies. A&uminz gho hotels =Wolrepayv their loca debtin foreigncurnyat 10%intes pramnjum.instead of the 20% on localcurecy repayment,return on hotel equityis foundto be betterthan the cted 12- 15%range customarilyobserved in many hotels in Egypt.The hotel's aveage Gross Opamting Profit(GOP) is alsowel withinthe 40-50% range expeienced i Egypt

SAHL HASHEESHBAY DEVELOPMENT PHASEla - SUPE sRUCTR (3 H.sts) PROJECTIONSOF FINANCIALPERFOMNCE (DBmCM) LW LW LW 1 l 3L 19 W LW 2L Roams 3.37 14.86 16.76 16.09 19.18 19.18 19.18 19.18 Food& &sveag 2.71 12.69 14.65 15.52 16.80 16.60 16.80 16.80 Cthwo WL1A 4 LU L5 LU LU La LU Gars OFp PAvewnues 8.23 32.11 36.77 39.69 42.02 42.02 42.02 42.02 OPKA4E*W" / A.2 ±LJA 2=J 2=2 ZIJA ZLM 2J 2A ow COpeFstngPhica(GM 3.20 13.03 16.11 17.57 10.69 18.60 18.69 18.69 Nio m 12 2.01 3.34 5.50 7.23 8.61 9.43 14.46 9.60

TotdSDoeM Sen Obgtis 0.00 4.97 8.02 10.08 9.86 9.61 0.00 0.00 OftewviosOoC Raft 0.00 2.53 1.82 '1.57 4.70 1.74 0.00 0.00 /1 Inckdes depastmeel and overheadcoil. Q2 hbInn depreaotn & amcllain. n en om , and manageme fos 15. The udlity cost to the hotelsunder the base case representsabout 8.6% of the hotd's gross annualrevenues, not too far fromthe industry'saverage of about5%, considering the fact thatthese rates woud need to be set at an adequatelevel to coverSHBD's invesment in new inatt The mostrecent and curent levelsof uility ratespaid by hotelsin Hurghadahave experenced shap incramsesover the past few years. A summaryof SHBD'spedformalce under the base case is shown below. Tables 5.2 and 5.3 above provide a summaryof combinedperfonrmace of the 3 homlw esortsunder Phase la, highlightingtheir financialviability under conservative leves of room rateL Even under lower room rats, the hotels are expectedto mnain the requireddebt service

.~c~y - 78 -

Pnge7 of 23

SAHL HASHEESHBAY DEVELOPMENT CO. PHASEI18 INFRASTRUCTURE(2,00000 =aI) PROJECTIONSOF FINANCIALPERFORMANCE (Ban Coo

Sbdeat UtWiies 0.73 2.00 3.22 3.42 3.58 3.66 3.58 3.56 3.68 3.68 3.58 Owvidncdlninanett Fdm4otI 0.00 3.09 2.71 3.57 4.10 3.53 3.6i 4.21 6.54 8.1, 8.25 Saleof ObewapedLand1 2Ll JAmLa, AmSt s fLULUi9 Lu Lma =La LAS Tot rPvntaumgS-mIIw3.81 10.92 11.79 11.66 9.53 7.60 7.70 8.14 10.21 11.74 11.83 Opifn nees a LS gJ8 5JA= L28 Lj L2 gU Jgf Lf L Not nmme 0.68 4.87 5.79 5.63 3.74 1.99 3.20 3.87 6.20 8.07 8.63

T.WODeIe 10.,i1Ogaima 1.28 2.80 3.06 2.01 1.61 1.23 1.23 1.31 2.06 2.43 2.46 Debt8SCamrFall 1.26 3.43 3.78 3.80 3.26 2.74 3.08 3.76 5.77 8.26 10.95

/1 Maiin SHODmw*Mes to ad 100%at goe dewslspaWMd we. in adiflimto Oe WMiusd by IwUk&WMd gm MOT'wowa htd 50%d Fe pO b fmm sje sai. /2 Incld* dapti & a,w_zsla. 16. The prformance of SHBDis basedon consevative assunptions about the selling potential Ofland once the prope infrastructurewas established.GOE has fim plns in the near future to beg a regular fely service across the Red Sea between Safaga and Saudi Arabia. This would most definitelyserve to boosttourism demand in the Red Seaarea, and providean upwardpressure on iand prices,potenially leadingto the sale of SHBD'sdeveloped land in a muchshorter period than the 5 years.anticipated by SHBD and at potentiallyhigher value. Furthermore,hotel rates are expected to continuoudy increase with the industry's dereguladon to pemit SHBD's hotel companiesto chargehigher rates than used in thisanaysis. The hotelrates used in the analysiswere in line with existing4-S starhotels in Hurghadawhich are consiered by manyinteraional hotel andtour operatorsto be well below the standardof their clsifion.

17. Table 5.5 belowprovides a summaryof the resultsfrom the sensitivityanalysis in orderto assessSHBD's projected performance under less favorable conditions at the hotelleveL Two cases wereexamined; the first case uilizes lowerhotel average room rates, whilethe secondassumes that hotel occupancy would drop by 10% from the base case levels throughoutthe project's life. Under both cases, SHBD would suffer a severe setback in performance, though not sufficient to compronise its debt service capability to TDA. The drop in DSCR to the 1.0 level would seem to occur aftera few yearsof operdon and once there are no more revenuesfrom land sales. SHBD would be able to accumulate sufficient cash reserves during the early years of operation to accommodatesuch an eventuaity.Since SHBD's development plans underphase la involvethe sale of largerareas of developedland (non-hotel area sold represents 27% of developedland under phase [a), whilereceiving smaLler dividend proceeds from hotel investmets thancontemplated by ASD,it follows that SHBD's performance would therefore be more sensitive to fluctuations in land sale volumeand prces than to incomefrom hoteldividends or uility consumption.To alleviatethis vulnerabilityand improveSHBD's performanc underless favorablehotel operadons, an additonal 200-roomclub resort may need to be addedto the Phasela developmentplan. - 79 - AmLS Page8 of 23

SAIL HASHEEH DEVELOPMENTCO. PHASEla l2 0.00 M3) RESULTSOF SENS1trVrTYANALYSIS

O_~ ~ ~ ~ ~~~Sl 3m -10% NoedRoom Rates (USMghtk $-st $100.00 90.00 100.00 4-sta 60.00 70.00 80.00

P_W "XEt) 0.40 0.40 0.40 11.00 11.00 11.00 Pt_Wodwow ".Mm 5.00 6.00 5.00 Swwm Few Wm2)o *4.50 4.60 4.60

8D0.Mhi0sbtSm8ssCowrRde(0S0R) 1.23 1.01 1.01 D -Nums d yv09Cfk1.0 0 0 0 SM-Romeaftftom 10.4% 7.2% 7.1% a0-_Uwsomon t27.7% 23.5% 252%

IWA-AIi_D8umCR 1.5? 1.37 1.41 1 e- Nugw d Yo 0CFk1.0 0 0 0 H _.^b-AvsmpGCP 44.4% 43.3% 44.1% HfilmmR_obMQ"&8*w

_ _ _-AuadWUs %t w 1 avow"um 6.6% _ 9.6% Annex S -80 - Page 9 of 23

EGr SAH14SHEESH 8Y OEVEWPMUNTCO. ~6N~Pl1ALA*TE fnVLOmNN LN ba fM

IK4SE.k 2.000.000 m2 PHASEIb 4.000.000 m2 PHASu .000. GIEMC~~TI0N 12 Ams (m2)1 Ur* I$ f At" Lm2ig Uis I Ro Afea (nm2) Urle _H - Norh WatoVh -i _m

st $-4g hotl 200,000f 3001 300 2nd 5-l hisl 200,0001 3001 300 f t chwm i00,000f 11 24 ! f O~m 100.0001 1 30 i SXoatmelna *0,000J Is8 iso

_-f~~ 1 ~~~~~~ I I, i VUiqa Qial 177.000 27 125 261.000 48 20 ewwim20 40 4 s 300 so Vft" Chmk% 244.000 411 194 242,0001 4 193 obmgi 3 60 3; s0 VUg¢ CEdm 193,000 3 147 19S,OOOj 2t 12 Vft" CW"@Sc 234.000! 40 18 _ai0 2 VU90O C@"b 25 s5 214.000 37 i75 sbnaJb 23 |hU V n C()200 46 01 8 224,000 40

is VUb@@CtubZs 284*000i 4t 221~~~~~~~~~~~~~95

j~~~owm hoUsingimim ca"d8" 0 1 42500 260 iso 2q 6so

housiRl" T J ut f~~ (a 120,000t 4401 880 i. ~~~ S ~~b§4djsk unh (b 45,000i 4401 SOOS M Gom*o"nt 85,000i i s PaIm,sAri,am 150.000 l Iso 1,o.o0,0' ioof L. vuilAn. *os 100,500j 071 335 169.5001 1131 560 1.290,000i 129a@ SitO XL2MWin.SA 700,0001 1sO 6B4

Vlllil -. I K} f, 3id 541w hot1 1i60,000! 3001 300 4th 5-#a hote i 150,000! 300! 300 Chokft 100.000 sol I0O 'TOTAL.6LS AREA(mg) 1.117,500 93d 1.484 2,706.5001 1,637 4,668 3,429.000 2.4751 7.661 PWUO REAS 882,soo!.1 .0t !t'°°.t __sxltCArtoaW $82e000,00 ! 4,1,293.500! J 2.571,000, TOTALARIEA 4,OO,000 6,0io00

Pt*o emumAMI asfand tued tot oads,pmmesfts walwmay.beands. grows, amd.undevloped lan. Annex 5 Page 10 of 23

SAM HASHES UVDVLOPHET Co. eNETAL MAsTFR o nPLAN fab 20tf2)

MlWDEdCPl_ P{ASEIa 2,000.000 m2 PHASEb 4.000.000 m2- PHASEU6,000.000 m2 J_~~~~~~~~9l4 nbmfofte amp _m1 navmnts ,ara i9 amnt ma m

Naot Enuancetoad 5.400, 132.300 30 . Sou Erance }. 3.800i 93r100 MhnRMMoad 3001 8,100 3.4001 91,800 3.9001105.300 Readof Perdisa Ana 2,000i 49.000 . ColsaorA.ao 5401 7,060 11.1201135,280 COsn Sem RoadM 2.0001 34,000 bWSma1Servc Road 2.2001 22.000 6.0001 55.000 1.9001 338.350

'1QWater Dannilnuien& Suanv N.nwIk

DeednadanPUN &We*b 2000 m31day 4000 m3/day 7500 mSlday awd St"oP Td. 2000 m3 4000 m3 7500 m3 w:w PYr 2 x 3S lim 4 x25 Oves¢e 4 x 65 Iftreseec Eb_ed WaterTank 1000 m3 PIpeN netwrk 150300mm 0 7Km 150400 mm 0 22 Km 200-400mm 0 5.2 Km

II rleaie & tr wti

RrePUm4. 2 x 60 Otssec 2 x 60 tessec 2 x 60 Ihtrsec FiS PIne Nawark 200.250mm 0 4.75Km 150-250mm 0 6.5 Km 150-250mm 0 4.0 Km on Pum" IngloO P Network M15000mm 0 10Km i150 A 20 mm D 6.5 Km .50 - 300 mm D 11.6 Km

Iv Wae Tmtmn A0 Omis.

GavtY Seers (27 kbn) 200400 mm 0 7.1 Km 200-500mm 0 23.9 Km 200-500mm 0 5.5 Km Fte Main (8.1 km) 150-2 mm 0 11.3 Km 200.300 mm 0 8.5 Km 160300 mm D 16 Km SewPup Stions 4 2 2 Sitrw _TnrM PlIn 1500 m3/day 3500 m3idty 6000 m3/day

Y Pna tafatIA fllinti

GOerlof Urdb 2x52MW 2X5S2MW n/a

VI TMaAhOflaIiI¶a1 140 920 290 n/l detls nota&alalde at thi8 time ...... e...... ae 00I oapo' 9vIII 10013 a a 0 o 66'a 015 5300 6685 tBee cisa Aat-* "-"I plobtU

0 0 0a S80W CarSI 0 aS 0 0 0 0so Gii a0. - Ca at s pe 0 0 0 0 0s i VP St *00Aj11 se 19s. tie's WIt 0 0 00 0 0 P5p8I o casp sat £201)U4og8"f003 Ot"S51u r-OW314

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Set01 0065,10 1*6.301 119.05 a 0 0 0 4911'0I 8*'s $11118.5 6,115 16001 C I's. Wamo 9 "n"udot.a.g gwto 0 661 I,~~~~~~~~~~~~~~...... bdwl t M1 gt'r a o a 0 …et ti't, eo *s…-ood LOSPI JItS. 603. *683l 0 a 0 -0 110 O 110?all' 4 1069s 906 tit's 10041018qmda

Be Its tee 0 %a %O~~11 0a 11006 sat 6 106 05t sa0t I18 6suqd.o stowdi *s I 0OP

a a" 0 0 stC Fl I 518 0i 04 --

.1 0o GC9 IP 0 110 110 %00 119 00P 11" 11 4%JA.541mdASum-%nuAm

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0 0 055 Fit-6-30 ------1551s *g9'p sn't 102'P 4- Too10 %110 0 01 1 0 1106 01O 1108a E118u4s6Ih U0f9I 41AdOS`0W"A

a to$ OGG's4 ~~~~~~~~~~~0"'0 0 t8s

a 0 0 0 0 a 0 0 Su4ezve£pdis$s..u&d..PAsP o 06II 0009 066.68 0a 0 0 0 06665 . 3OI*0p&" v

.I 000.$ I3 000.S 0031 000.6 31 0.0 0.3 00..31 9OOt 00.31 000.0 8180120110*d *661~~~~~~~~~~~fe 061668 C6I66

m£1da3OdMsfItmm MLOAISMI q1WftVd alVrO

A-10 0 f~~~~~~~1~U

SAIL.ASHEESH AYDEVELOPMETCO.

TOTAL 1993 1994 1995 1996 1997

BaseCost 5$.505 14.090 33.075 8.339 0.000 0.000 Addiional Equiy In Hotel 6.607 1.802 4.805 0.000 0.000 0.000 Interest Durg Const (IDC) 1.677 0.255 1.422 0.000 0.000 0.000 Fianal Costs 0.495 0.184 0.311 0.000 0.000 0.000

Tota Proet Cost 64.24 10.331 39.613 6.339 0.000 0.000 a

Tota - EqUity 31.715 8.561 20.130 3.003 0.000 0.000

Land Loan 5.174 4.922 0.252 0.000 0.000 0.000 WBITDALoan - Local 5.536 0.104 3.724 1.761 0.000 0.000 WB/TOALoan - Foregn 21.606 2.724 15.506 3.576 0.000 0.000 ForeignDebt 0.000 0.000 0.000 0.000 0.000 0.000 LocalDebt 0.000 0.000 0.000 0.000 0.000 0.000

Told - Debt 32.569 7.750 19.483 5.336 0.000 0.000

S . 000 6*0 es I t Sit A' s St8 opt03 9re " *3 $ia 60 68* IMq'11as

"'o ee o to aC O& se Ite s tO sC 9e e es 6 t's Gooo Go o pasc W I" ooo "'0 60Ose0 ofe060 a I6 0*6 6 " 0s3 0S0 000 iA S 1G 106 0oo Oo00 oo *00oa 00 $60. soS 6 0es 0tos atI e00c r%06 1JIAsW&I00 cooO oOsa e ae el goI Mt a n Get St'#t # t oi tole59IO -- iO PO~n pft3S p 0O' OO 000 00 ODO o oo 0oeo o o o 00oo 0000 6o IA80" ... Ad8- %I4*3 WI 000 00o0 00o0o o I 6e "3 3ts "As S*3 O 0083t CS I- - l--- 1t Wi 000S ------000 0 00 000 000 00 0 00 0 00,0 0010 000 00008 *6* 3PEa qqOq* 0306W.s.1 000 I sM000 000esM S301 63 **8 008s 'at 91 a0*sit36G6O6Set1 600t its SW" pt903~pes- 000 000000 000 000 000 000 000 We 000 0013 000~~~~~owo0I"'IUU o0oo oo0 Soo o0 oooset 011 to t40 o6e-0 8 00oo S 00001 1 WA-AMgoF"#dAet ""

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S xwuu 86- Annex 5 - Page iS of 23 -a

AeoCqovIll KM 01I tlt Is S iSis it5.U SOWUS ti4s 20004 S zuot S.OftAS

o.... % % 7% 7%60LL~ 76% 60% "Ob 60% M0 ft% AdamkV^ CorAw0 0 3.00.2 3.56.30L S615,20 SAW6.43 6.06.402 3*06.40072CM0.?"413 .06S.4

0XA.. PA%W0 0% 0% 50% 0 0% 0 70% ,

ellA 0~~~~~~ 0 0 0 ~~~~~4.603.800.540,004 0."6.17 0.700.73 0?.?M076 k.760.0 6.74L.71

0 0 0 ~~ ~~a ~ ~~00 0 0 0 foodw_Pt" Os rr a n .s as.06 SIn oss M S ." "&oe SS. A00166'0 o sties IIIGOS 166.000 '20600 131.30 103~S.060134.600 164.00 Ad663M 0.emaN 0 a 101,03760 6.60.50 0."00.d0 SASLOW6 0.26.60 GA2.20 0.410.40 0.410.40 * ?omP.wo30,- N 0 0 9100.03 11.60.17 *&040.1*7S21.740.10 43.4. S.04.0.01;u 20.010.66

Ou..s 9gm. 0 ~ ~~~~~~~~0 I00.040 314.040 3100* 10.140 36Q.04 W0.620 346.SW 386.20 0.sgbmaK~~~~~~sv~0Am- 0 l.060.0 0.610.604,2.717.000, *.62611 00.1.6141 0.010.010 0.661606 .021.600

Toone" of". 0 100.O0 261.660 27.As4 260.012 "a.m6 001.600 S00.0 300.16

107.100 157.100 101.140 oftm * a6 KW 12is 0 0 0 107107.1 .10WA 197.100 107.100 191.100

W-cue o ser c saw _n6064me.30Io -a-,at er *me 0.00 0.00 1." 4.03 4.61 . 1.0? 0.10 6.11 6.11

Rum*Ysw 0 0 42.180 4S.13$ 48.100 444160 40.10 "6.10 "A.6 4".1" Afdd$CetMuW 0 0 37.640 40.06 40.466 43.S6 43.866 43.3400 4"An 43.30

PAMSOwIm o 0 0 14M0 60.70 71.110 7Ms6" 76.00 70.06 70.06 A 46 O0 0 0o 0 40.27 80.160 04.460 SU.60 60.60 00.66 60.6 ftpwvw~- 0 0 0 14.700 62.100 71.118 mm60 10.4600 7000 7006 AM ad 0.tims 0 0 0 0.0 0.0 04.00 66a6n 00.60 00.0N 00. - e - - e - - - 0e A~Pwlw0 _ = -0~ 0 0 0 0 00 0 A 4 60 0 0 0 0o 0 0 0 0 0 134.600 1:4.400 __~ em18wy4N a - 0 01.260---- Ill."*0 120.60 166.200 11.04 133,00 AG"7.66 M6 0att' 4 0 0 00 160.661.6 01.66"1060 271.704403oe 44*10.81 201.1AM0ee 01.66640.406 202.1047'.186 260.147.160

746 WW04f 681465OW as 0 0 S0.Sft 110.26 200.04 210.400 U7;67.1026*2 226.812

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R~Om7w 0 00 0 0 0 0 00 0 Aw4604tm06 0 0 a 0 00 ~~W,W 0 0 6~~~~~~~~S1.200111.000 1216041 13.000 111.3 131.000 104.060 134.3 as 46 @AMm4 0MISS16 31.24 38.24 38.660 310.736 37.462 3?.704 31,74 160.18 100.61 T46 wa 00"MP or Home MS 0 417.40 142.810 102104" 173.166 161.60 162.16

C06A6 Aa460~~~~k~~246q6s. 0~*A 0.0 16.600 1.30 0.06 IL"30 S0."4 10.06 10636

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0 Annex5 -89- Page 18 of 23

p U *~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o rr I D IS 1t14 16. 1161 111 r_ _ r4yw

*.f. .n fi. *.n ...... n ns. ._.

_^el*, ~ ~ ~ ~ ~ ~ ~ 1.4 s7411.a e e II.o 1446 ltt.41 464a 167 1i17 ~~~~~ 2.1~~~~~~~~~~~~~I Us.113 41.1211 1.6qt 261 U4 _1 t _ 70 ,., t I 3,061e

_ . 1 7J ue1 * O410 0 0 0 e0 62411 e06 33.11

no ?,4 r42za p ON ga Zs

0 0 _1_0 0 0 Ise 1t.416 11.47r ftwot htC8 13.1_ t44 1.G .7111.62 1,4"1 isS'GGOOe15 s is. 32

_ C __4 w r4 OI God 7t 11 1e2ee os eIT0. 0 0 to 7n7 2,111 31 71 11ws* 641 4C_B ~ ~ ~ ~ ~ ~ ~ ~ ~ 3 71 Ii a " Chor le . _s3 3.e 0e 0 00 3a 47A4 1.01 11.164

0o O e o 0 1JO417t0 4AN... 181411se71 4.406ee. o slaw*bew04a OdWrft e61m1. a0 1.016tZI 30.46Z17.4 .01 01.4 0

1.1_ S,01 41.610 _6u~ 1.017 I. 1.01i 1. 0~~~~~~a04 a u~~~~~~~~~ ISuI 0 0 34.0144 S. 746 314211

311 SAS4 0 271 " 0 1.11?40~~~~~~~~~~~~U .4013 1.7 L.o"6 OWN ~~~40WSS~~~~~~~~~~0 it7 0 0 e 4tm 18.6 4.621t 16.4 ,_@4 0 0 t171 4. 3 0. 0en 1.417 1.416 a___a__ I."3f .44 6.4 1.= 6136. 3.6 _~ ~ ~~~o *t Siew Ow 0t 0 2.10 64 3.4141 3,n00 141 ~~~~~~~~~~~~~~~~~~MM44341 16.436 ~~~~~~~~~~~USSS~~~~~~~~~~~~~~ 41s4. 1.244 1.410 Tow o GM 0 a0 e1 s2. 3. 2a 0 0 0 '

- - -umme n. -e

0o 10. t1M 0 _ -_ 0_ _t|0. 0 0 1.1141 0.100 0 26. 4 __t 7.e7 * _ 211.1654e e $ -a6wgw 7n e e 0 0SA Is ou68 ramI~ ZO"A e *

S Anst S.@4es e_~~~~~~~~~~~~~~~~~~~~~~~~5 e s 1.017I .41t 1.017_ I. e" e Jo 1.011 2.40 2.00 0.011 1.64372.0 ?411P.. 0 =l_ 0 1.0?44.11_ _ 1.411_ as._ ; _ _ a _ __0 _ _ 0 .1706.1_~~32 ~~~~'.a~~~~~~~~~~6mSI 0 0 0 160~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~S034M 3. 0 ~~~~~~~~~~~~~~~~3.1201M.79 3.6160 716~~~~~n8411 710 83 1.1117 1.M7 2.000 61.421 * 419wm6s0~~~~~~~~~~~~~~~~S~~~m_ ^_- - e e e - FIs4p~~~~~~~~~~~~~~~~~~0~~~~~~~ 141 141~~~~~~~~~~~~~~~~~~~~~U334 348 1.136 4. 70. t1.0 8.16e od wrs 36.4 s 0 1.7 4AT3 1.341 1.Z4 0 -0 0 a sr? 414 4.43 1.6241.SAN ftVNid . gNI a 0 17 1I." M361.4 0 a 0 a we.Ta _g 4~~~~~~~

'0 I1t

AN HASHEE9HBAY DEVELOPMENTCO. CAPITALOm8t & RHNO EMUM b - 2tdo ) (MmlMon)

TOTAL 1993 1994 1995 1996 1997 ~- ; - - --- *------f - Bas Cost 79.9 8.501 42.218 28.890 0.000 0.000 Interest Duing Conot (1C) 0.oo0 0.199 1.432 3.378 0.000 0.000 Finnca Costs 1.004 0.108 0.536 0.360 0.000 0.000

l Totl Proo Cost 85.821 6.606 44.186 32.627 o 0.000 0.000

SAHLHASHEESHBAYDEVELOPMEWcO.21.011 4.194 16.817 0.000 0.000 0.000 OtherEquiy 21.570 0.590 6.486 14.494 0.000 0.000

Total. Equdty 42.560 4.703 23.303 14.494 0.000 0.000

ForeignDebt 14.031 1.011 5.888 7.132 0.000 0.000 LocalDobt 29.010 3.014 14.994 11.001 0.000 0.000

Total - Debt 43.041 4.025 20.863 18.134 0.000 0.000 Annex5 91 - Page 20 of 23

E~~~~~~~~~~~~ SAMNSIH4 BAY IDAOPMWI CO. IC,bR_ PKA S.IA

8a; 1993 1994 1998 1996 199? 1998 1929 2000 2001

GessperRoem 2.0C 2 2 2 2 2 2 2 2 2 Odly Rate (S/night) $80.00 $80.00 $80.00 Sao.oo $80.00 880.00 880.00 $80.00 $80.00 _=41MWRat. _umma=" 0% 0% 70% 76% 75% 80% 60% 80% 80% .HatolCopadtyRoeom 166 165 168 165 168 165 165 165 165 168 OumpedR -oanw.Oajy 0 0 115.5 123.75 123.76 132 132 132 132 OaWiedRems.AMumy 0 O 42.158 45,169 45.109 48,180 Ann" Nmberd g 48,180 48,180 48.180 ! of 0 0 84.315 90,338 90,338 96,360 98.360 96.360 90,360 Z-o 7 a-, - - . - Revuigas- Rogue (s mum) 0.00 0.0 3.37 3.61 3.61 3.88 3.88 3.85 3.68 = ~ wooo- -m mmm wommo mNm - -m Rmnhum-FIB(Smllien) 0.00 0.00 2.71 2.91 2.91 3.10 3.10 3.10 3.10 Rtwo. Corm(S muln) 0.00 0.00 2.14 2.29 2.29 2.44 2.44 2.44 ^.4 ToldRenues. (s mun) 0.oo 0.oo 8.23 a.81 6.61 90 9.940 9.40 9.40 . ~- mm- _ _m - PIFI8-SW Hawe

so= 1093 19i" 195 19 1997 1894 1990 2000 2001 Od RawWeM;M 1. .S 1.8 1.8 I.s i.8 1.8 P100$00 $10100.00 $100.00$100.00 $100.00 $100.00 1.8 $100.00 I.8 $100.00 1.a 0042MsRats 0% 0% 0% 50% 60% 45% 70% 70% 70% HadCpa*._.r 30A 300 300 300 300 300 300 300 300 300 OOSWlpsedRAnAsOu 0 0 0 1IO 180 19S 210 210 210 OWm*dRaems.AuMly 0 0 0 54,730 65,706 71.175 76,680 76,8s0 76,OS0 AauwdMbwatGoes 0 0 0 90,580 118.260 126,115137.970 137,970 137.970 Rewns.-RoOM (8 mia) o.0o 0.00 0.00 5.48 6.57 7.12 7.67 7.67 7.67 POWASOMMM MMU Atomm, urnwaa Saon mmo -mm nam mo Raumig.F&B 1( mlon) o.oo 0.00 0.00 4.89 5.87 6.36 6.88 6.68 6.66

R-wwes.Odmtw$(SmU ) 0.00 0.00 0.00 1.26 1.54 1.67 1.79 1.79 1.79

TOW sVau-e(S mm" 0.0000 0.0 0.00 11.68 13.98 16.14 16.31 16.31 16.31

Second 54t moe

ROOM 1993 1994 1995 1996 199? 1998 1999 2000 2001

Guampe Ream 1.8 1. 1 1.8 1.6 1.8 1.8 1.8 Daly Rate ($lg) I 00.0 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 $100.00 ouiiw Rats 0% 0% 0% 50% 60% 65% 70% 70% 70%

HOlWap - P_iRoom 300 300 300 300 300 300 300 300 300 OmpletlRoamOal 0 0 0 1SO 180 196 210 210 210 OCCUpndRooms.AnJ-- oAy- 0- - - 0-* 54.-150- 68,700 - 71,175 76,650 76.650-76,850 AMahNuM atGae-s 0 0 0 98,560 118,260 128.115137,970 137,970 137,970

Rewnu * RoOms(S mUon) 0.00 0.00 0.00 5.48 6.57 7.12 7.67 7.67 7.67

Rwn_ - FUa(S mian) 0.00 0.00 0.00 4.69 5.87 6.36 6.85 .8S 6.85

RaSWe -Oe0Iw (mUn) 0.00 0.00 0.00 1.26 1.54 1.67 1.79 1.79 1.79 TOWR _wua-e( no") °0-° 0-.0 0.00 11.68 13.96 18.14 16.31 6.31 16.31 Annex 5 -92 - Page 21 of 2; saw SARLMAsKeH AY C EM CO PtM4U.SUP8bSlRLWI WI'..-l . CbA Rse~n 1993 1994 1996 1996 1997 1996 1999 2000 2001 0 glS~: ___._-____ _* __.*____

Guel & Adoi"WAda 0.00 0.00 0.66 0.71 0.71 0.75 0.75 0.75 0.76 Mwkn&Se 0.00 0.00 0.16 0.16 0.16 0.19 0.19 0.19 0.19 Pmpsny ?4aMng a cOpsuO 5m 0.00 0.00 0.41 0.44 0. 0.47 0.47 0.47 0.47 RmW (% - t.000-) 0.00 0.00 0.68 0.06 0.06 0.06 0.6 0.06

OWdVtiijt 0.00 0.00 12 1.37 1.38 1.47 1.47 1.47 1.47

_____ ~~~~~~%OZ0L Rev. RPM is 0.00 0.00 O.6t 0.68 0.40 0.89 0.69 0.8§ 0.0§ Food & ftaw0.00 0.00 t1.09 t .18 t .1 1.24 1.24 i.24 1 .24 o~~~~~~~~~~~~~ 0o.oo o oo 1.28 1.37 1.37 1.47 t.47 i.47 i.47

S.hteai. Opmoepwa 0.00 0.00 2.96 3.19 3.19 3.40 3.40 3.40 3.40 sams ama tmma msm aeo am am00 mum m TOta O 0.00 0.00 4.2 4.57 4.57 4.87 4.67 4.67 4.67

1993' 1994 1995 196 1997 1998 1999 2000 2001 -_____ i rTomRev. Wa &Aduk*Ui a*rats 8 0.00 0.00 0.00 0.93 1.12 1.21 1.30 1.30 1.30 Misbgq&Sawe 0.00 0.00 0.00 0.23 0.2S 0.30 0.33 0.33 0.33 PrpsiwtyMhkwioas & up9nsWIS 0.00 0.00 0.00 O.58 0.70 0.76 0.82 0.82 0.62 I XS%bda5 LI 0.00 0.00 0.00 0.14 0.14 0.14 0.14 0.14 0.14

Stoodt Ovadwods 0.00 0.00 0.00 1.89 2.24 2.41 2.66 2.6S 2.58 marna sommn eamn -omm aomuma, emmm n

______~~~~~ s CoL Rev. Rem It8% 0.00 0.00 0.00 0." 1.16 1.26 . 1.38 1.38 1.31 Foed&Sev&Ww I3gnI 0.00 0.00 0.00 1.71 2.05 2.23 2.40 2.40 2.40 Others eos....a~ o0.00 0.00 0.00 o.7 0.92 1.00 1.08 1.06 1.06

SubW4- Oep 0.000,0tu 0 0.00 3.47 4.16 4.51 4.85 4.5 4.85 assm"a mmmma- mam sama am~ searn gomeai TotW OCU 0.00 0.00 0.00 5.36 6.40 6.92 7.44 7.44 7.44 mammasamaxmrasmeaomininmo am Mamma - " m'

1993 1994 1995 1998 197 1998 1999 2000 2001 0VId .e _ _ .e . ______-______% Tota Rev. Gno A&AdMkn*isvv 8% 0.00 0.00 0.00 0.93 1.12 1.21 1.30 1.30 1.30 mulufln &Sabe 2* 0.00 0.00 0.00 0.23 0.26 0.30 0.33 0.33 0.33 Ptvesy Malawsau & Opsules5% 0.00 0.00 0.00 0.56 0.70 0.76 0.82 0.62 0.82 bIsurwo (% fd aus ) .% 0.00 0.00 0.00 0.14 0.14 0.14 0.14 0.14 0.14

submw . Oveeud"S 0.00 0.00 0.00 1.69 2.24 2.41 2.SS 2.S 2.5S maaing mamamano, ammas m rma a sr

______% O ot ~~Rev. Rsme tI8 0.00 0.00 0.00 0.99 1.1S 1.28 1.38 1.38 1.36 Foed& Sewuaws 3t# 0.00 0.00 0.00 1.71 2.06 2.23 2.40 2.40 2.40 C_s ~60% 0.00 0.00 0.00 0."7 0.92 1.00 1.08 1.08 1.09

SL*WSI O4pwtnnw 0.0O 0.00 0.00 3.47 4.1t 4.51 4.65 4.65 4.5 rna ,,ama0am am am am am am TOWdOWM 0.00 0.00 0.00 5.36 6.40 6.92 7.44 7.44 7.44 V1 o . I. HEM 18BAYWOVEUPMICQ O PHhAb-FUISINWUR

Cd14_sw t993 1994 1995 t996 "99 1999 1999 2090 2001 2002 2003 2004 2005 2006 '2007 2006 2009 201 PsdsY.W 42 -1 0 1 2 9 4 5 6 7 6 9 1o It ' 12 13 14 1 alNIIE ~~~~~~~~~~~------~------...... ---- ; ------.. ... ------'--'--- - OOMReVene oo00 00 3O37 14.56 tS76 t9.09 t9.9 16.16 1919 19tll 19.18 It.1s 118 8 19.1 0.168 Sa. 19.t 19.16 Fooda Bemages 0.00 O. 2.71 12.6 I4.65 It.2 6.60 16.0e 16.0 ogo 16.80 WOO 16.0 166o $6.60 16.WO 16.6 1O a Reveushi 0.09 0.0 2.14 4.65 S7 5.76 6.0 6.03 6.03 6.03 6.03 6.0 6.03 6.06 6.03 6.09 6.023 60

0 WssaMUU Esp 0.uo o00o 6.23 12.11 2s77 830.66 420 42.02 42.2 42.02 42.02 42.02 42.02 4.02 42.02 42.02 42.2 4.02

t00 0.00 0.91 62 1s92. 1.26 Ia 2.45 3.4 As.. 1A 2.4 351.4 71.46 145 .45 1.45 1.45 Fooda &ovwwsL0. 0.00 Q.OO 4.59 6.27 6 9 4 6.04 6.04 6.04 6.04 6.04 6.04 6.04 GM 6.04 .04 604 0.00 .O0 1.28 "1 9.l2 8.47 SA2 162 3.62 3.2 162 162 862 16 .3.62 .2 1.62 .2

WMOPA_ ENA 00 Qooan 2ss 10.12 StAll Mill WI. S.1WaWl *.x x.3.11WI t.t MS. I&I1 WS.1 13.11 WS. WXS

tw &Az0oo^l 0.0 0.6 2i 2.94 8.16 3J. 8s.8 2S8 316 as6 3.36 a.86 3.a0 3.86 16 3.26 SA8 merito" a nswe 0.00 0.oo 0.16 0.64 0.4 0.79 0.4 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.64 0.34 0.4 Pmeb M1_ir.wace 0.00 0OA 0.41 1.61 1.4 1. 21 z2o 2.10 2.lO 1o t2O t10 2.O Li1d 2.10 z2o 2.1o I_s too0 OO 0.7S 28o S.22 9.42 1.56 1.68 1.5s 6.59 1ea 8 e.56 8.56 8.5 856 1.56 3.56 hiswmnce 0.00 O.0 0.00 0.o4 0.14 0.4 08 .0.A4 0.34 0.14 0.14 0.34 0.14 034 0.34 0.4 0.14 0.4

OTALu WAvS 000 0.00 1.96 6.06 .0 9.71 10210 .0-.2-2---0.22 10.22 10.22 10.22 10.22 10.22 10.22 10.22 10.29 10.22

IOtaLm?k U6ES 00.--00ooQ 4O94.1411s 20.56 22.12 - 323 28.33 293.a8 23.33 23.ss 28.3 2a.3 23.33 23.33 23.33 2228 23M3

0JSSAEMTFt INPIW 0.t00 0OO 8.29 1.93 1t69 17.57 16.8 116.69 16.8 69 116.6 18.69 16.6 16.69 9 16.56 16.6l9 16.69 tmws.ene se.so. sees... sees.. 0.00sees sue.... 0000000 =0eseee esasft.tf CeoUfen ease.. 0000seeiee 0000000 0 ss.S.s mfse... 000n.. es.

tsmlEWned n u usa 0.00 0.00 0.00 0.15 0.11 0.17 0.10 0.02 0.02 0.02 0.02 003 0.04 0.04 0.03 0.03 0.3 003 MIt_nhs Feus 0.00 0OO (0.25) (0.96) (1.10) 11.19) (1.26) (1.26) (1.26) (1.26) (1.26) (1.26) (1.261 (1.26) (1.26) (1.26) (1.26) 11.26) ManimmntPioll cen"es 0.00 0.00 0.00 0.00 0.0 0.00 0.00 0.00 000 0.00 0.00 0.00.0 0.00 .0.00 to0 0.0 0.00 Rejacemen cosls 0.00 0.00 (0.13) (0.656 (0.651 (0.70) (0.75 f(0.76) (0.75) (0.75) (0.75) (0.76) (.7 05)7) (0.7) (0.75) (0.75) (0.75 ODedalon A Amxtall,n 0.00 OJOO 0.00 (4.93) (4.92) (4.9S) (4.98) (4.92) (2.26) (2.26) (2.26) (2.26) (2.26) (0.71) (0.71) (0.711 (0.71) (0.71 0e" F 0.00 o00 0.00 0.00 0QOO 0.00 0.0 0.00 0.00 0.00 0.o0 0 0.00 0.00 0.00 0.00 0.00 0.00 EquiyFee$ 0.00 0.0 0.00 0.00 O00 (mm F chgFew o.00 on0 00 0.00 0.00 o0o o0o 0 0.00 0.00 O.0 0 0.00t .00 0.0 0.0 0.00 OO C0

TotALUC014PERAT01091WCtbMJ0.00 QO0 (0.381 (6.01 (5.65) (6.65) (8.64) (6.91) (4.25) (4.25) (4.25) (4.24) (4.-2 22.6) io)1 i-(2.69) (2.69) (t.63 t. en.... .5 . 50 _s.ss w.eSs.._n....__ _e..... _._e *e*5.. es__. se _. ... _ ------sumeee ss .. a.._ Eand_ Before lt{od &Tom QEBIT)0.000.00 2.91 7.61 O.4 10.92 11.65 1t.76 14.44 14.44 14.44 14.45 14.46 t8.O0 16.00 16.o 16.00 N1O kuests Pa,nsnh on Lot 0.00 0.00 0.00 4.29 4.14 S.66 3M 235 1.61 0M 0.2 0.00 0.0 0.O Q0.OO 0.00 QOO 0.00 PMoti (Loss)- beforetaxes 0.00 o0o 2.91 3234 6.0 7.23 661 9.43 12683 13.56 4.t2 14.45 14.46 16.02 160 1.00 1WO. 16.00 Taxes 0.00 0.00 0.00 00 0.0 00 0.0 0.00 0.00 0.0 0.00 0.00 0.00 6.41 6.40 6.40 6,40 6.40

NETNXH IE 0.00 O0 2.91 3.34 6.O 7.21 86.1 9.41 12.69 12.5 14.22 14.45 14.46 9.61 9.600 .tO 9.60 6.10 tees..._. _.-_-_. 553055 .oss__ss _eses. eSseese sees...... emen._ asses.._ ww-"s_e sOmn ss. 000555 asese. Possese __- _- LESS - aDuids 0.00 0.00 o00 S." S.SO 7.23 93.0 7.16S 7.S 8.52 11.25 16.56 16.72 104 10.38 10.1 10.11 101

PETANDENNOW 0OO O.00 12. 0.0M0 0.0 0.1 2 6.St 5.07 0.90 (2.09) (2.2) (1.01) t0.73) (0.71) (0.71) (0.71 CtAATnE RE1D1NDEA1O1D 0.00 0.00 29 00 00 00 0.1 278 6.29 _All8 14.81 12.24 0.6 6.95 .22 7.51 69. 6.03 Anex 5 Page 23 of 23

- 94 -

ESM SAHL HASHEESHBAY DEVELOPMENT PHASE to & lb (6,000,000 m2)

GMss Saleof Consrn & Operaing & Changesin Net Hotel Developed Develop't Maintenance Working Economic lRaxmnues LAW Caos Co Caolw Iensfl 1993 0.00 0.96 (14.13) 0.00 (0.19) (13.36) 1994 0.00 3.24 (36.33) 0.00 (0.99) (34.08) 1995 8.23 6.36 (27.43) (6.34) (2.38) (21.57) 1996 32.11 8.64 0.00 (19.54) (2.00) 19.20 1997 36.77 9.82 (21.93) (22.07) (0.37) 2.23 1998 39.69 11.36 (56.37) (23.66) (0.83) (29.82) 1999 50.24 14.90 (42.56) (30.37) (1.74) (9.54) 2000 74.13 18.11 0.00 (41.12) (1.37) 49.74 2001 78.79 16.45 0.00 (43.19) (0.17) 51.88 2002 81.71 10.11 0.00 (44.48) (0.10) 47.24 2003 84.04 4.46 0.00 (45.49) (0.10) 42.90 2004 84.04 1.68 0.00 (45.50) (0.01) 40.20 2005 84.04 1.27 0.00 (45.50) (0.01) 39.79 2006 84.04 0.71 0.00 (45.50) 0.16 39.40 2007 84.04 0.18 0.00 (45.50) (0.08) 38.63 2008 84.04 0.00 0.00 (45.50) -(0.07) 38.47 2009 84.04 0.00 0.00 (45.50) 0.00 38.53 2010 84.04 0.00 0.00 (45.50) 0.13 38.66 2011 84.04 0.00 0.00 (45.50) 0.01 38.54 2012 84.04 0.00 0.00 (45.50) 3.13 41.66

SHBD'sE4RR 21.8% | 95 -

Page 1 of S EGYPT PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTALMANAGEMENT PROJECT

Infrastructure Devdopment In the Red Sea CAst and For Nile Cruises

A. Bogru2d 1. r

1.1 aWteDag 1.1.1 Theseare tee differentsources of watersupply in the Red Seacoasal regionbetween Hada and Safaga:(i) Nilewater from Qenato Safagaand Hurgada (ii) a cental desalinationplant at Hurghada and (Iii)smalL local dealiaton unitsusig either sea wateror brackishwater fiom undergroundwells. Noneof thesesources is s y. 1.1.2 he old Qena-Safagawater supply line had a capacty of 70 Us and was poorlyconstructed. It is beingreplaced by a new system(financed by US-AID)with a dsign capacityof 200 V/s(about 17,000m 3 per day) which has been completedbut requiressome itaton (the asbestos cemet pipes have developedleaks and the joints are being replaced). It is expectedto be operatonalby April,1993. It will provide mainy to Saaga and Hurghadatwnshps, and does not havethe excesscapacity needed to ly wat to thetist resrts. 1.1.3 The Al-YusrDesaination plan in Hurghadahas a capacityof 4,800 m3 per day. However,of four units. only thee are opeatonal; the fourthunit requiresreplacement. The plant was built with the g that it would supplywater to the Red Sea Govemoratein bulk, with a miimum guaranted dailyproduion of 2,400m 3. Thesale price was agreed at LE.450 per m3, with an annualincrease of I0% for inflation.While the costof productionhas risenmore steeply (chemicalshave doubledin prie), theC}overnorate insists t the pla abidesby the tems of the originalcontract. As a result, the ownershave let the plant deteriorate;production is less than 2,000 m3 per day and the waterquality is sub-standard.(There we large traces of ion m the water. The Govemorateclaims that this is a result of low pH in the treated w,er, causing corrosionin the pipes. The ownersof the desalinationplant claim dth thecorrosion is takingplace in theopen-air wat reseoi buit by the Glovernomtewith many farous metalLicparts) 1.1.4 Someresorts (ike the Cord Beach)have built dteir own desalinaton plas but havehad problems with nmanainingthe quality. They have had to tank the waterfrom Hurghada(either from the Qenapipeline or theAl-Yusr Plant) at a costof aboutLE 14.00per m3. 1.2 W as 1.2.1 Thre a no centralsewea systemsin thc proectar All developments,both existingand plamnd,rely on packe on-site plants. IreatmentIn all cases, the effluentis usedfor irrigado Whilethe quaty of opin and min is adequatein somecases, it is verypoor in odtr However, m al cases, the degreeof p uificaon is inadequatebecause of the short retention period, which is inufficient to eliminatemost of the pathogens. Tnus, the effluent used for iigation is belowthe pemissible sndards dered qua can only be attainedin a cental Plat -96 - sne6 Pag 2 of S

1.3 Solid Wafte 1.3.1 Thereis no commonwaste collctdon or disposalsystem. The solidwaste is dppedhaphazardly andincinered in theopen air by individu resorts. 2. Nile Cruises 2.1 i 5gEl 2.1.1 With the increasein the numberof cruise shipsplying the watersof the Nitebetween Aswan and Luxor,the numberof bering facilidteshas becometotally iaduate. Durig the high season, cruiseships pak four or five abreast,resulting in nuisancefor the touristsand maldng it difficult for theland crews to provideservice to the ships. Parallelberthing of four-fiveships at a dme also increasesthe risk of fi Furtmore, pae paring makesit easier for operaor to dump refise and unteatedwastewater into the ziver. 2.1.2 In additionto the loadingand off-loadingof passengers,the berthingfacilites are used for the provisionof sevies such as watersupply, power supply,and waste disposalto the cruise hs. Most of the existingberths lack the facilitiesfor the provisionof dteseservices. Someberthing facilitiesae privatey ownedby lae cruis opeators whogive priority tO dteir own crunise ships whenit comesto berthingand servicing,and the smalleroperats are left to their owndevces which ane not always s r. 2.2 Tf 2.2.1 Ther are no failities for ship-to-shor or ship-o-ship mmuicaton amongthe cruiseships. C,nsequeitlj' there ate no faciliti for emergency 2.2.2 Thereis no superviopof pasenger bokings or =uise timetablesduring the season. Ship ownershave tohandhe ndpendentpromotionof ;heirservices. Furthmo tere are no firm and timetablesare modified to suitdemand. wre is a sumg needto relate,g andcoordinate the flow of taffic. 2.2.3 Cruiseships are licnsed at their initial launchbut there is no regua inspectionof operaions. Someof the older shipsmay no more be seaworthy.Also, the older ships are not equippedwiffi proper cold stg facilit for food, nor are they equippedwith adequatewaste atment equipment.It is commonfor passengersto complainof intestnaldiorder 2.3 A= 2.3.1 At manyof the majortouist ceners, the antquitiesare located at a consideabledistance frm dte River. Access roads to the antiquitiesae often narrow, unpaved roads that pass through congsted settlements Tourbuses have to maneuverthrough these roads and evenuay end up at simiarly inadequatepaking lots near the antiquities.Both the antiquitiesand settlementscould beneft fromimprovements to theaccess roads and the areasaond thetemples. B. Th 11SP

t1.n of lbr, QZMM= - 97 - Page3 of 5 1.1.1 The publicsector implemented project component will consistof two majorsub-components: (i) provisionof infrastr.ure servces to the Red Sea coast betweenthe municipalboundaries of Hurghadaand Safaga,comprsing the thee developmentsat Sout Hu SahelEl-Hasheesh, and Ras AbuSoma; and (ii)improvements to cruiseship operations at the sitesof andquideson the Nile,between Aswan and Luxor. 2. Dzaild BjILDuciDdg 2.1 RedSea The infastuctue facilitiesto be providedalong the Red Sea coastwill comprise(i) watersupply to SouthHrhada; (fi) sewagecollection and tatment for SouthHughada; and (iii) solidwaste collectionand diWsal for SouthHrghada, SahelEl-Hasheesh and Ras AbuSoma. 2.1.1 WaterSuiwly Althoughunderground war sourceshave been idendfied in theHurghada area, their development will be left to a futurephase. The sourceof waterwill be sea waterfrom the Red Sea at South Hurghada.The projectwill finnce a reverse-osmosisdesalination plant, with a capacityof 6,000 m3 per day. Te waterwill be storedin a eservoirof 6,000m3 capacityand will be distibuted througha waterman of about7.5 kmnlengt. A pumg stiAonof 7,500m3 per day will pump the waterto the variousreso; power for the desalinationplant and pumpingstaion will be generatedon site. In the initialphases of developmet, the systemcoufd have sufficientexcess caacity to servethe soutmost resorbswithin the Hurghada municipal bounarie 2.1.2 The Mistry of Housingand Public Udtlies has alreadycommissioned a publicsector conuacng companyto builda seweragenetwork for the city of Hurghada However,provision has not been made to serve the southenmoresorts witi municipal boundaries. On the other hand, the prvate devkelopesof SahelEl-Hash_sh and Ras Abu Somaplan to build separatestabiizaon pondsto the wes of dte Hughada-Safga road, to te the sewagefrom their ownreorts. The sed sewa lectonand ment systemwill serveSouth Hurghada only. Again,it could proide serviceto theresots at the southemlimits of Hurghadaundl thecity networkis extended their area The proposedsewerage system would compnsea series of stabilizadonponds with an initial capacityof 3,000 m3 per day, about 1.0 km to the west of the Hurghada-Safagaroad. Two pumpingstatons would be buik with capaes of 70 I/s and 140 lls, vely. Sewage would be colected td gh a gravitysystem of about7.5km lengthana wouldbe pumpedthrough two fce mains with a total length of about5.5 km. A 7.0 km long gravitysystem of uPVCpipes wouldcazy theeffluent from the teaunnt plamto therst For environmentalreasons, al existingrso would be required to graduallyphase out the individualsewage trament units on their sites and to connect to the main treament plant. Furthermore,the locato of the teament plantwould be convenientfor the connectionof the first stageof deelpment in the nore sec of El-Hasheesh.The opeadon andmai nce of£thesystem woud be entrustedatoth pivate sector. 2.1.3 SoidWaft The solidwaste collectionand disposalsystem would serve the wholecoastal ara from South Hurgbadain the Northto Rs abu Somain the South. The volumeof wasteis esdmatedto reach 21 tonnesand 189 toumesin 1995 and 2020,respecdvely. Resortswould be providedwith 1.1 - 98 - Pag 4 of 5

cubicmeter capacitycontainers. Four compactortrucks (reaching 32 by the year 2020)would collectthe wastedaIly from theresorts and car it to a sanitarylandfil aboutmid-point between Hurghadaand Safaga. The landfil site would have a total area of 80 hectares and will be developedin modulesof 5 hectares 2.2 'Me NDJe QWss This componentwould comprise the (i) constructionof additionaberthing faities at the tourist centers;(ii) construction of a shiprepair facility at Qena;(iii) establishment of a ControlCenter to regule crise sWipoperations and provide emergency sevices; and (iii) upgradingof the tourist centersand theirenvron 2.2.1 Bering Failiies The projectwould comprise the constuction of addidonalbetig facilitiesat two majorcentes of Aswanand Luxor,and four smallercenters of Kom Ombo,Edfu, Esna and Dandaa, to reduce congestionand avoid parallel berthing. Each center would be providedwith fresh water to replenishthe watersupply on the cruiseships. A powerconnection would be prvided to opert the on-boardsystems duning bertiing. Furthermore,facilities would be providedto dischargethe effluentfrom the sewagetatment plantsof the shipsto the city networks,wher avalable, and provisionwould be madefor te collectionand dsposal of sold wastefrm the ships. The number of new berths is a functionof demandand exisdng facilities. Under the present projectit is proposedto constructthe followingnumber of newberihs: Luxor :28 Aswan : 14 Dandam : 11 Edfu : 8 KomOnbo : 8 Ena :4 2.2.2 Coantrl.Q r A Control Centerwould be establishedunder TDA in Upper Egypt to (i) regulae cnruseship schedulig,i ies andoperations; (Hi) establish ship-to-shore and ship-to-ship communicatins systems;and (iii) provideemergency fire fightingand medicalservices. It wouldalso provide cruiseships wih suchessential infmaon as weath ecasts, congestons,the flowof taffic at te lock, acdnts, etc. In additon to the provisionof serviceto the cruise ships, the ControlCenter would cany the authoity ofamamtddmeregulatory body whichwould (i) rete rivert spotof ain mpesin fte Nile; (ii)caiy out safetyand sea-wortine ins on mecruise ships; (iii) inspet foodand healthfacilities on the cuie ships;and (iv) issueannual operation licenses to cruiseships, crews and operatcrs. In the initial stage8 it is proposed to place Me Conrl Center under the joint drection of TDA,the Riveine Transpo Authority,and the Associationof cruiseship operatr. As things get established and developed, Iesponsibilit for the Control Center could be sffed entirely to the Associationof CruiseSip eratos r an indepdent maritimeoizato Duing negodations as nddn a peiod of 36 monthsannual inspectonand licensingof cruiseships and cews wouldbe impleme -99 -

PageS of S

2.2.3 Upgadinggof uis Areas Accessfrom the Riverto the sitesof aniquidesat KomOmbo, Edfu, Esna and Dandarawould be cleanedup and improvedaWhere necessary, and possible,access roads would be widenedto facilitatethe passageof tow buses. At the antiquties themselves,parking facilitieswould be provid for the tour buseo Rest areas wouldbe built for the tourists,with toilet facilitiesand food and beveage srvices. - 100- ZAM= Page 1 of 4 EGYPT PRIVATESECTOR TOURISM INFRASTRUCTURE ANDENVIRONMENTAL MANAGEMENT. PROJECT

CoreInvement Pwn Annal Review Pricingpolicy ApBl1993 Issueof a newland locationpolicj by TDA December1993

Intaing publicoffering of ShemonPackage Marh 1993 Initiatingpublc offei of Obei Packae Sepmber 1993 Ftin of sarsmicurn planfor BOaOT Septeber 1993 Peation ofdi a a planfor the remaning components September1993 OfEGOTH

Im ato of planfor sdety regulaon on the Nlle December1993

SignedAreement of ASDand SHBD Apil 1993 SignedLou Agment wth commeci bank leng to ASDand April1993 SHBD Signedcouion contactsfor al relevaninfatucture fal April1993 Siged O&Mconuw/ SaSffmngaaemn wheeappicae Aprl 1993 Compledonand opation of infstructurefacl Dcember1996

Sharhold Agreementfor the fist twohotels April1993 LoanAgeeme withcommercial banks lending to the fist two Aprl 1993 hotels SignedO&M Concts widthotel operatos for the fir two Apdl1993 hotel . SigpedUtility Cont withte fist twohotels Aprl 1993 -101- Annex7 Page 2 of 4 EGYPT PRIVATESECTOR TOURISM INFRASTRUCTURE ANDENVIRONMENTAL MANAGEMENT PROJECT

Agements on saleIbase of land to fit two hoels Apil 1993 Signedcnsruction contact for e fis wo htels Ap 1993 Schedulefor fancial closre, corucon, completionand qeon Apil 1993 of te remainingPhase I hotels Competionof constru n andco ement of opratn of hols December1996

Updatedfeasibility study for PhaseU June 1996 Mid-TamReview of impl n of inufmrcue and suprsuct compOnents Dember 1996

Updatedfeasibity studyfor PhaseII Dember 1995 MidTermReviewof im npt -leo of infrastructureand _sue tu components Jume199S

Selectionof PS sponsorsby TDAfor all facilies December1993

WaIALSMud1 Jul 1994 Compkdonof watr supply December1996

Yas= watad SoLidwaste Startconsuctio July 1994 Complein of sewageand soLidwate June 1996

Ntre B tb- .g Startconstucton Apri 1994 * Compleon of berthingfacilities December1999 iaxgaganalland Co LmmlS3sa1 Sat consucon Apl 99 Compltonof navigadonaland control sysms Deceaber1998

Set up ProjectMagemet GWP April1993 Appointa Pjea Co-ordinaorand Opert Mager Apil 1993 Emablisha CairoOffice Apil 1993 Prume a draftwork plan for Ist e of the PIoct Auril1993 - 102 - Page 3 of 4 EGYPT PRIVATESECTOR TOURISM INFRASTRUCTURE ANDENVIRONMENTAL MANAGEMENT PROJECT

TDAEnviromental Unit staffed ApOl1993 EEAAstaffs units for Waer and Cos ZoneManagement Apil 1993 Depranaentand Park andProtected Areas Depa_tm Appoitmentof threePoject Advisesfor the Proect Api 1993 Appoirntentof PmectedArem Manager and a Recreation September1993 AreasManager to theProject core team

Appoitmentof ChiefPoludon Control Ofricer to thecore December1993 ProjectTeam

GOEApoa of theCZM Pan andappl of boundariesand Mach 1994 legalstoas of partcted aeas

Bstab nt o£Proected Areas office Estblsment of Mach 1994 Rerpatn AreasM e Unit Mmb 1994 EstablishmentofEnvironmental Moiring andEnforcement March1994 CoordintionUnit

GOEapproval of final reportof the CZMPgam Reviewand Mach 1996 commitmentto actionsto be taken

Prvision of ProgressReports on Projectactivies Quaty Provisionof Deied MidTerm Pgess Reportfor the Project December1995 MidTetm Rtview of the oject Febry 1996 AnnualAudit Repom on theProject Accounts Annul DraftProlct Comleo Rtmetne00 ARABREPUBLIC OF EGYPT TOURISMDEVELOPMENT AUTHORITY PRIVATESECTOR TOURISM INFRASTRUCTURE ANDENVIROWMENTAL MANAGEMENT PROJECT

PROJECTIMPLEMENTATION SCHEDULE j 4 Year 1993 1994 1995 0 Item_ 1996 1997 1998 1999 _ 2000 ______4 No. Descriptton ______Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1234 1 2 3 4 1 2 3 4 1 2 3 4 w 1. Ras Abu SomaOeveloument To

Roads -- - Water Supply ---- Wastewater ---- Power Supply ------xxxxxm x"^tsann---"-a--- Telecommunications ------xxxxxxxxonannu===0unummunn ===a=*= Landscaping ----

2. Sahl HfasheeshBay Develounent Roads ----- XXXXXXUUS^ U0 =S3-UUnl3Wnar- Water Supply -----x _*g-2R=00 Wastewater -----xxxxxxaUs=-- PowerSupply ------XXXXXXU'.*U583 b Telecoaunications ----- xx landscaping x au33----. n.-.m. .r ----- xxxxxxmafufu mm--nouu- °3. SouthHurohada

Water Supply ------XXXXXXX'-n Wastewater ------Solid Vaste --xx ma - -w=^a_=nu== 4. Wile Cruises Berthing Facilities ------RagNatfon 6 Control Center ------5. GEfCoLoDot

------m*3*w~M23m=

6. Tecdmical Assistance

------Engineering Design xxxxxxx Tendering and Mobilization =-== Constructionllmplementation

* - 104 - A=nnL&

EGYPT

PRIVATE SECTOR TOItRISM INFRASTRUCTURE A-NDENVIRONMENTAL MANAGEMENT PROJECT

Loan Dibursement Schedule (in USSwll)

BankFiscal Year Quartery Cumulive Disbursement BRAU mnw pas %Totalwofa M4uch31, 1993 - 0.0 0.0 0.0 June30,1993 Q09 09 0.7 FTJ994 September30, 1993 5.0 59 4.5 December31 1993 2.0 79 6.0 March31, 1994 2.0 9.9 7.6 June 30. 1994 2.0 11.9 9.0 I; 1995S September30, 1994 4.5 16.4 12.6 Deenber 31. 1994 445 209 16.0 Miatch31. 1995 4A. 255 19.6 June 30.199S 4.6 30.1 23.1 PY1996 September30. 1995. 5.8 35 7.5 rkxxnaber 31, 1995 5.8 ' 32.0 M4arcb31. 1996 5.8 475 36.5 June 30, 1996 5.8 533 . 41.0 i 71997-. September30. 1996 8.1 61.4 472 Dw£xxxnber 31, 1997 8.2 69.6 535 MSbiatch 31. 1997 82 77.8 59.8 J m,n30, 1997 &I8.1 859 66.0 September30. 1997 5.8 91.7 705 lkxxnnber31, 1997 S.8 975 75.0 Mlatch31,1998 5.6 103.1 79.3 June 30, 1998 55 108.6 83.4 PrY1999 Septembe 30, 1998 55 114.1 87.8 Decemnber31, 1998 .5 119.6 92.0 hSlrh 31, 1999 2.6 122.2 94.0 June 30. 1999 2.6 124.8 96.0 lNr2000 September30, 1999 13 126.1 97.0 December31, 1999 13 127.4 98.0 March31, 2000 13 128.7 99.0 June 30.2000 13 130.0 100.0

Note: Beaedon the didabsementpmfb for Egypt.modified to take into accounta 75 year impemeta- onperio instea of 8 due to the fact that the bulk of the loan wdlibe disbrsd on privat sector invesmen pmject& - 105 - Am2 EGYPT PRIVATESECTOR TOURISM INFRASTRUCTURE ANDENVIRONMENTAL MANAGEMENT PROJECT P"oect. SupervidonForecast Projec implemenion wouldtae placeover seven and a halfyeam - staig in thesecond half of FY 1993and complet,in FY 2000. TheBank would supervise the projectte tmes a yearin thefit t Years an a ge of twicea yearin the five md a lf yeas. Ihe tablebelow gives the staffweeksetimaed for thesupervision effort and consists of sconuat inputsboth in the fieldand atheadquartrs.

Staf JLeksn i&

MunEnc inpar 4 4 4 4 4 4 4 4 32 4 4 4 4 4 4 4 4 32 4 4 4 4 4 4 4 4 32 IUi E 16 184 164 3 143 2 2 - 22 I ToudsmM g - ~2 ------2 I=AL ~~16 18 16 iS 1S 14 14 12 120 - 106 - Annex1 Page1 of 3 EGYPT PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTAL MANAGEMENT PROJECT TourismDevelopment Authority: Orgadzation and Function Figure 1

.. I CHIEF

| f.~

DEV TLO PEPRSO.NE

1"IMANNING~~FNANIA

~ .~. ENCONTROLLE~

DEPARTMENTATIONEELP DP.

-Provide I - and legal supprt; and - Identify traiing needs, design and prepare training plans, and organiz tramnig sessions and programs. - 107 - Annex 10 Page2 of 3

Fincial ContmJje

- Prepare budgets, including identifying sources and application of funds, and making recommendationsfor fillingany projectedfinancial gaps; - Handling all fund transactions on behalf of TDA including payments to contractors, and submittingwithdrawal applcations to WorldBank and other donoragencies; - Keepproper financial and accountingrecords; - Prepareaccounts for interimand annualaudits; - Negoiate and follow-upwith donors and lendingagencies; and - Negotiateand follow-upwith servicevendors.

a&wmamnMawgmw Unit

- Design and developmentof a comprehensiveand specialized database for project planning, prepartion, and implementation,including environmental data. This wouldinclude identification of objectives,scope and implementationschedules, data collectionand processing,development of managementand analyticalsystems, and updatingprocedures; and

- Design and implementationof programsfor the exchangeand desseminationof informationto support and complement developmentalefforts in the tounism sector. This would include publicationof periodicalsor statusreports, and srrangingspecialized seminars Business Deedon D s Thisdepartment will be responsiblefor communicatingTDA activitiesto the sectoras a whole,as well as providingassistance in promotingand marketingtourism development projects both domesdcally and interationally. Activitieswill also includeformulating programs for promotingsmall scale enterprise developmentat local levelsin a mannerresponsive to the needsof the tourismsector. TechtnicalDarmn This departmentwill be responsiblefor the guidance and supervisionof activitiesin the areas of urbanplanning, arhitectur, infrastucturedevelopment, environmental protection, and construction.The departmentwill also be responsiblefor preparationand technical assessmentof projectsand feasibility studies;development of proceduresand techniquesfor managementand implementationof projects;and analysis of costs, prices, bids, proposals,contract documents, including the preparationof procurement guidelines.The departmentis organizedin threeunits: o Planningand ProjectPreparation O Environment o ProjectImplmentation The functionsand responsibilitiesof the ftfreeunits are as follows: Planningand Ej:ctriaEwradoan Unit

- Policy analysis and formulationof physicaldevelopment objectives and plans to ensure that the developmentprocess proceeds as effectivelyas possible; - Project identification, preparation and appraisal including establishment of related guidelinesand procedures; - 108 - Annex lO Page 3 of 3

- Reviewand provisionof guidancein the preparationof projectsand studies; - Surveyand documentationof existingconditions at the level of detailrequired for planning and project implementation,including natural characteristics, physical development conditions,and statusof currentprojects and panned developments; - Developmentof procurementguidelines, procedures and standarddocuments, provision of guidanceand adviseand preparationof tems of referenceand work schedules;and - Carryingout specialstudies to deal with pardcularissues affecting physical development

Environment Unit The primary function of this unit is to ensure that natural and cultural resource factors are integratedinto the planningprocess for tourismdevelopment. Its responsibilities,which will be camried out in close coordinationwith the Egyptian EnvironmentalAffairs Agency (EEAA), includedefining environmental goals and policies,developing suitable standards and procedures that help protectand/or improvethe environmentalquality of tourist areas, and monitoringthe environmentalimpact of growthand development.The specificactvities will include: - Surveyof exising conditionsand updatingof properlydocumented baseline data; - Developmentof environmentalpnning standards,regulaions, and guidelines; - Developmentof reviewprocedures and monitoringplan; - Provisionof nessary inputs and guidance relaive to the preparationof private sector proposais and - Provisionof adviceon envi nalmanagement and training. - Carying out specdalstudies dealing with touism-related environmental issues: r &aiject1nwlemem~anonUnit

- Development of planning, design and construction standards and specifications and appropriateimplementation mechanisms; - Formulationof projectassessment and follow-upprocedures; - Assessmt of projectsand projectproposals; - Supervision and monitoring of various phases of project implementation, including assistance in issuing invitations to bid, evaluating bids, and in coordination with the Fnancial ControUefs departmentapprove conTraors' payment certificates; and - Developmentof operation and maintenance standards, guidelines, and proceduresfor developmentprojects and forquality controL

Investment DefefDmen earn This departnent will be generallyresponsible for investment,financial, and economicfunctions relatedto tourismdevelopment Mkespecific responsibilities are to: Coordinateinstitutional actions by TDA, financial institutionsand other institutionsregarding resourcemobilization; Carry out economic and financial appraisal of market conditions to identify investment opporunities; Makerecommendations on investnentand credit decisions; Supervisethe financialaspects of TDAloans to the privatesector, Analysefeasibility sudies and proposalsprepared by the privatesector to checktheir viabilityand assistin structuringthe transactions,and Providefmancial and economicadvise on developmentprojects EGYPT 0 PRIVATESECTOR TOURISM INFRATRUCTURE K &ENVPRONMENTAL MANAGEMENT PROJECT

ECONOMICANALYSIS OF RED SEA INFRASTRUCTURE COMPONENT

Year Water Seoweg SoadWate Total Wale Volum Averaoe So.waste Toal TOtl Toal Not Capita) O&M Capit 0& Capita O&M Codt Cons. Sol.wse WatAww. Chwge Watisew. .wwate Revenue Benefts Costs Coa Cos Cost CosseCosts .000 Ch"roe Rewenue Rvenue --LE'000 CIyr tonsW. LEICM LEAton LE'000

1992 0 ,0 0 0 0 0 0 0 0 0 0 0 0 0 1993 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1994 3977 591 327 99 0 0 7904 0 0 0 0 0 0 0 -7S04 1995 1s58s 2365 6474 394 3272 0 2413 0 0 0 0 0 0 0 -26413 1ow 1988 5 2a57 6474 403 3272 123 33204 1s0 2555 t2 110 2364 281 2645 -30550 l907 0 297 0 493 0 137 3567 7s 247 12 110 s456 313 0769 0183 1098 0 2957 0 493 0 151 3601 06 3139 12 110 11632 345 12177 8577 1999 0 2957 0 493 0 165 3615 0se 3431 12 110 11632 377 12209 n5o5 2000 0 29s5 ,0 403 0 170 3629 06 3723 12 110 11632 410 12242 8613 1 2001 795 2057 324 403 327 103 50860 go 4015 12 110 11632 442 12274 7t65 2002 0 295 0 403 0 203 .3653 9806 4234 12 110 11832 468 12296 6645 0 2003 0 2957 0 493 0 214 3664 9s6 4453 12 110 11632 490 12322 8S58 -4 2004 0 2957 0 493 0 224 3674 666 4672 12 110 11832 514 12340 6072 1 2005 0 2957 0 493 0 235 3685 6s6 4691 12 110 11632 536 12370 6665 2006 795 2957 324 403 327 245 5141 666 5110 12 110 11632n 52 12394, 7253 2007 0 2057 0 403 0 256 3706 Sm 5320 12 110 11632 56s 12418 8712 2008 0 2957 0 493 0 26 3716 6es6 554 12 110 11632 61o 12442 6726 2009 0 2957 0 493 0 277 3727 966 5767 12 110 11632 634 12406 6740 2010 0 2957 0 403 0 264 3734 s06 6613 12 110 11632 650 12402 6749 2011 795 2957 324 493 327 294 5190 S88 6132 12 110 1163w 675 12507 T316 2012 0 2057 0 493 0301 3751 066 6276 12 110 1132 091 12523 87m 2013 0 2067 0 493 0 308 3756 mo 6424 12 110 11632 707 12539 g760 20t4 0 2057 0 493 0 315 3765 as 657 12 110 11632 73 12565 a760 2015 0 2957 0 493 0 322 37 01 ale76 12 110 11632 730 12571 6790 2016 795 2057 324 493 327 a2s 8225 sso 6662 12 110 time 75 12567 7302 2017 0 2957 0 493 0 335 3765 sss 671 12 110 lien 767 12600 8814 2016 0 2957 0 493 0 340 37S9 986 7061 12 110 11832 779 12911 6621 2019 0 2957 0 493 0 345 s795 966 7190 12 1to 1iim 791 1262s 8626 2020 0 2057 0 403 0 350 3600 666 73C0 12 110 ilea 603 12635 sas

IRR (OaseCase 10.45 |IRA(SensitIvIty . 6.4

Note: TheIRR Is senste to Irnplmotston delay. In caseof a dely of uptotwo yeas. the IRRfaIls to .4%. c', EGYPT o°~ PPIVATESECTOR TOURSMW INFRASTRUPRE C4 AND ENVIRONMENTALMANAGMENT PROJECT

to ECONOMICANlLYSIS OF ASWANBERTHING FACIlTIES

Year Capital O TOd Behino Uility MIc. Toa Net Cod Cod Cod Chal. Charge Choes Rvwenue Revenues

1003 2100 0 2100 0 0 0 0 -2100 1964 4200 0 4200 0 0 0 0 -4200 1ls5 4200 1200 5400 1470 210 263 1043 -3456 69o 0 1250 1250 2940 420 526 3885 263 t60 0 1300 1300 2940 420 526 3685 2585 19S11 0 1300 1300 2640 420 2S 3885 2665 169o 0 1300 1300 2040 420 52S 3865 2658 2000 5 1300 1600 2640 420 525 368t 2065 °200 0 1300 1300 2940 420 526 3665 2585 2002 0 1300 1300 1 2940 420 526 38S 268S m200 0 1300 1300 2940 420 526 385S 2685 2004 0 1300 1800 2040 420 525 368 g2a5 2005 S00 1300 1600 2940 420 626 3685 2586 200g 0 1300 1300 2040 420 526 385 2666 2007 0 1300 1300 2940 420 525 3685 2658 2008 0 1300 1800 2640 420 525 3685 2665 2006 0 1300 1300 2940 420 525 3685 2685 2010 500 1300 1600 2940 420 56e 3885 2085 2011 0 1300 1300 2940 420 525 38S 2565 2012 0 1300 1300 2940 420 525 386S 256

1IRRf(la)- 20.6 IRR(eealo 1) 17,5 IR(Smeae) t0 Note: ScenarI 1:One yea delayIn condtrudon;prIe InemW by 58 In l rnm; benite delayedby oneyea.

ScenrIo 2: Twoye dey In cometructlon;pfim Ineae by 10%In ree Iotam benmitsdelWd by wo year. - 111. - Annex 12 Page 1 of 6

EGYPT

PRIVATE SECTOR TOURISM INFRASTRUCTURE AND ENVIRONMENTAL MANAGEMENT PROJECT

SUMMARY OF ENVIRONMENTAL ASSESSMENTS

1. Both the developmentson the Red Sea coast and the Nile River were classified as Category A environmentalprojects and detailed environmentalimpact assessments (EIAs) were caried out for all of them The studiesindicated that the project would be an enhancementto the environment and would not have any hannful effects. The followingis a summaryof the findings of the EIAs.

Red Sea Coas 2. The primary project area extends for about 40 Ens. along the edge of the Red Sea coast between the towns of Hurghada in the north and Safaga in the south. However, the GEF component attached to this project will also address tourism and conservationopportunies in the Ras Banas and Gebel Elba coastal areas. TMiswhole zone is known for its extensive coral reefs, mangrove swamps and extremely diverse nmine life. However,the land area is of an arid desert nature and uninhabited. There are no traces of animal life and few signs of birds, mostly on some offshoreislands. Also, there are no taces of any cultur resourcesor archeologicalfindings.

3. Due to the lack of infrasructure and the high cost of extending national systems, existing resorts have had to depend on their own resources for water, wastewater,electricity and solid waste disposal. Generally, water supply is through a series of small, resort-based desalination plants with submarine seawater intakes and discharges of potentially harmful waste brine (concentrate) to the sea. The locations of desalinationplants and submarinepipelines have been selected haphazardly with no considerationfor marine life or the environment. Efforts to bring Nile river water to the coast hlaveso far proved unsuccessfulbecause of problems witi the pipe mateial and pumping equipment Resort operators have to tank the water from disteat sources at a high cost and water supplyis often rationedbecause of price and scarcity.

4. Wastvater is treatedin small,packaged, extended aeration treatmentplants and the treated effluent is used for irrigation. These units are often poorly maintained; they smell very badly and the quality of the effluent is far below Egyptian and international standards. Yet, unscrupulous operators divert the excess effluent towards the sea, causing eutrophication and damage to the coral.

5. The existingresorts do not have a solid waste collectionsystem. Refuse is dumped into remote areas of the desert and incinerated. In addition to being an eyesore, the result is air pollution,an increase in flies and insects and the possibilityof transfer of disease. 6. Despite the efforts made by the Ministry of Electricity,the national power grid has not reached the touristic zones of the Red Sea. Resorts have to generate their own power, using small diesel generators. The noise from these generatorsis unpleasantand creates noise pollution. Furthermore,improper maintenance leads to the leakage of fuel and lubricantsinto the ground and, evenually to the sea. - 112 - Annex 12 Page2 of 6 The NileRiver Cruises 7. The Nile Valley, with its abundanceof antiquities,attracts thousands of tourists who takethe 4-5 day NileRiver cruiscs from Aswan in the southto Luxorin the North. 1989 and Between 1992, the number of cruise ships increasedfrom 104 to 183. Cruise ships operate independently,with little regulation,leading to congestionat the landingstages. where berthedsix ships are or seven abreast,creating a hazardfor the tourists. Parallelparldng also affectsthe river currentsand can lead to scouringin the vicinityof the berthingfacilities. Although Ministryof the Tourism(MOT) has temporarilystopped issuing new licensesfor cruise ships, it is expectedthat their number will reach 350 by theyear 2,000.

8. Crise ships are expectedto operateunder strict sanitary conditions. low seasons However,in whencompetition is highand revenuesare low,cruise operators fail to maintaintheir ships properlyto cut costs. Cruiseships have to carry enoughdrinking water for the cruise, the durationof but due to lack of cleaning,the waterin the tanks becomesstale and polluted. Many touristshave complained from abdominal ailments caused by the drinking equipped water. Cruiseships are with packaged sewagetreatment plants that are requiredto treat the effluent before dischargingit into theriver. Recenttests have shown that these ults areineffective of the effluent andthe quality is not acceptable.Cruise ships are requiredto storesolid wastes on boardship and emptytheir containers at thelanding stages. However, cruise operators have been of dumping caughtin the act the waste into the river at night Drainagewater from the bathrooms,laundries and kitchens,with high concentrationsof detergentsare drainedinto the river deleterious without reaument,with effectson marinelife. Theseproblems are furtherexacerbated by the dischargeof fuel and oil fromthe enginesduring brief mai c acies. mraGA,iOXMEASURES 9. Inpacts on the environmentare of two genera tpes: (i) short-termimpact, during construction;and (ii) long-termimpact as a resultof the developmentitself. Underthe project, measureswill be taken both to preventfurther degradation of the environment creation and to avoidthe of new hazards. Duringconstruction, contractors' working plans will'be checked and reviewedto ascertin thatthey comiply with thefollowing: (a) all constructionwaste and debris,and wastefrom the contractor'scamps will be disposedto designatedsites only;

(b) all campsand officesare provided with approved sanitary facilities; (c) contrctors and theirpersonnel comply with regulations regarding access to and use of the sea,especially in theareas conaining coral reefs; (d) contracts will include appropriatepressure testingprocedures for pipelines to preventfuture lakage, (e) all excavatiopswill be backfllledand reinstated to theiroriginal condition - excess matrial will be hauledto approveddumps in thedesert; (f) submrine pipes will be laid in sucha mannerthat damage to anyexisting reef flat comnmunitiesis limited to as narrowa regionas possible; - 113 - Anex 2 Page3 of 6

(g) temporaryservice roads will be wateredwhilst in use to reducethe productionof dust;

(h) limitationswill be set on the noiseand exhaustsgenerated by constructionplant; and

(i) upon completionof construction,all temporaryworks and equipmentwill be removedand the sitecleared of allremains.

10. With the assistance of grant funds from the GEF a dual action plan will be implementedaiming at the creationof a coastalmanagement zone and the strengtheningof the TDA and the EEAAin monitoringand enforcementof tourismand pollution. It is also worth mentioninghere that all water,wastewater, solid wasteand other serviceswill either be owned, operatedand maintained,or at thevery least operated and maintained, by theprivate sector. Red Sea Coast

ii. Water Supnfi: In the initialstages of development,the demandfor waterwill be relativelylow. This is expectedto increasesufficiently by 1997to startthe implementationof a water supply system from the Nile river (not part of this project). However,to avoid the proliferadonof smalldesalination plants along the coast,three central plants will be established, one eachfor SouthHurghada, Ras Abu Soma and Sahl Hasheesh.The sitingof these plantswill be selectedfor wminun damageto the environment Intakeand outfallpipelines will be located at an ample distance from the coral reefs to nmnimizetheir effects on the coral. Submarine pipelineswill be laid throughexisting gaps in the coral reef or at locationswhere damage to the reef may be limited. Theywill be raisedabout 0.5 m abovethe level of thereef flat on a seriesof concrete supportsto ensure that water flow is not impeded. Thus, the effects of laying the pipelineswill not be felt beyonda 5.0 m widestrip whichwill fullyrecover and regenerate itself withina few yearsfollowing construction.

12. The installationof larger,centralized plants has the furtheradvantages of reducing maintenancecosts and ensuringbetter qualitycontrol. The existing,small desalinationunits, which are alreadyoperating at a loss, will be closeddown and resortswill be suppliedfrom the new system. A surveyof resortopeators indicatedthat theyare willingto purchasewater from a cental plant, providedthe qualityof the wateris in conformitywith nationaland international standards.

13. Wastewa: Threecentral sewage treatment plants will be constructed,for South Hurghada,Ras Abu Somaand SahlHasheesh. They wil consistof a seriesof stabilizationponds, with tertiarytreatment using sand filters, to ensurea safeeffluent quality. The treatmentplants will be locatedat a minimumdistance of 1.0km westof the Hurghada-Safagaroad and will be sited downwindof the resort developmentsto avoidunpleasant odors. The effluentfrom the treatment plants will be safe for irrigation. However,no effluentwill be dischargedinto the sea,even after teray treatment.

14. All existingpackage treatment plants at theresorts will be demolishedand existing resortswill be forcedto connecttheir sewers to the centralsystems. The developersof Ras Abu - 114 - A 2 Page4 of 6 Somaand SahlHasheesh have alreadyagreed to buildstabilization ponds acceptable to TDA,and planto use theeffluent f r theirown irrigation needs. 15. SoIidWa.st: Under the project.a suitablesite has been selectedfor a sanitary landfill. Refusecontainers, with sufficient storage capacity for the periodicityof collection,will be placed at suitablecollection areas withinthe resorts. Compactortrucks will pass by the resorts regularly,collect the refuseand transport it to the landfill. Truckswill be weighedat the entrance andan equitablesystem for collectinguser charges will be installed. 16. The landfill will be fenced to prevent encroachment(by the goats of roaming nomadicshepherds). It will be equippedwith adequateearth-moving equipment to cover the refuse with earth and compactit to prevent the breedingof flies and rodents. A parking and maintenancegarage will be built withinthe compoundfor the maintenanceand parkingof the compactortrucks. All existingresorts will be requiredto participatein the system;it will even be possibleto servethe citiesof Hurghadaand Safagawith thelandfill, especially as thepopulations of thesecities will increasein directproportion to thenumber of resorts. 17. ElwatiQi : TDA realizesthe nuisancecaused by the noise from small power generatorsand the unseemlysight of a multiplicityof smallgenerating sets billowingsmoke into the air. Everyeffort is beingmade to expeditethe extensionof the NationalGrid to the tourism zones of the Red Sea. As the supplyfrom the gridbecomes available, resorts will be requiredto eliminatethe use of theirgenerators (except for emergencies). In the meantime,generator sets will be properlyhoused to minim the noise. Specialfilters will be installedon theexhaust pipes for smokeattenuation.

18. One of the principalelements of the NileCruise component is the establishmentof a traffic and navigationalcontrol center. Its objectivesare (i) the regulationand control of navigationin the River to ensure safety; (ii) the inspectionand licensingof cruise ships for seaworthiness,hygiene, and compliancewith environmentalregulations; and (iii) monitong and control of cruise operationsand berthingfacilities for cleanliness,sightliness, and preventionof pollutionand environmental degradation. BerthingFal&iSes 19. The constructionof additionalberthing facilities along the NileRiver with adequate water supply,liquid and solid waste disposalfacilities, and power connectionswill reduce the pollutioncreated by the cruise ships. The berthingof cruise ships single file will reduce the turbulencealong the river banksand preventscouring of the river bed. This will also reducethe risk of a catastrophicfire that couldprevent passengers from the outer shipsfrom reaching safety on the shore. Furthermore,the allocationof a separateberth per cruise ship will facilitatethe connectionof the ship'sservice lines to thoseon shore. Berthoperators will be requiredto clean up the berths every two weeks to prevent the build up of algae. Berths will be located at a reasonabledistance from major water intkes to preventcontamination of thewater. 20. Berthing ficilities will be of three types: (i) short-stopsof four to five hours' durationwhere tourists would disembark, visit the antiquities, and return on boardto go to the next stop. Theseberths will not haveany servicefacilities except for emergency;(ii) overnightstops - 115 - Page5 of 6 where water supply, wastewater,solid waste and power supplywould be available;and (iii) terniinalberths where a cruiseship would spendlonger time and wherelaundry services would also be provided. The chargefor the utilizationof theseservices will be includedin the rate for berthing. 21. Wa er 5 : Drinkingwater will be storedon boardships in adequatequantities to meetthe needsof the touristsbetween service stations. To preventrecontamination of the water in the storagetanks, ships would be providedwith ultmaviolet treatment units at the outletsfrom the tanks into the distributionsystem. Regularhealth inspectionsof the water supply and food handlingsystems will be carriedout to ensurethe safety of passengers. 22. Wastewater: The existingsewage treatment plants on board cruise ships have proven to be entirelyinadequate. Apart from the frequentbreakdowns of the system,these units are inefficientand go no furtherthan primary treatment. It is proposedto storethe wastewateron board ship in watertighttanks and dischargethe wastewaterinto urbansewerage networks at the service stations. While on board ship, the wastewaterwould be disinfectedto prevent the spreadingof unpleasantodors. All newlyconstructed cruise ships will be requiredto complywith these standards;existing ships will be refurbishedto be in full conformity. 23. ajjiL : Solid waste will be collectedin plastic bags and then stored in special,airtight containers on boardship, for disposalat the nearestservice sation. Shipboard containerswill be disinfectedwith rodenticides and insecticides.Heavy penalties will be iposed on any cruiseship seendumping its wastesinto the river. 24. Drainag.: Several measureswill be taken to prevent the dischargeof high concentrationsof detergentinto the river. Laundryservices will not be providedon board ship; they will be availableonly at the terminalberthing stations. Soft,biodegradable detergents only will be used for thebathrooms. Kitchen wastes will be treatedbefore being discharged to prevent the additionof nutrientsto the receivingwater. Fmally,the waterfrom the swiming poolswill be testeddaily and disinfectedbefore discharge into the nver. 25. Power SUlV: To minimizepollution from the ships'engines during berthing, ships'engines will be stoppedand theywill be providedwith full powerat the berthingfacilities. Nationalstandards for dieselengines are very stringentand vast sumshave been spent adapting or convertingships' engines to makethem pollution free. Shipsare wellinsulated to reducethe load on the power systemsfor air conditioning. Maintenancerequirements also are very strict to preventair pollutionas wellas oil andfuel spills.

26. Thereis no issueof resettlementunder the project.The Red Seacoast forming part of the project is a barrendesert withouthabitation, except for the two towns of Hurghadaand Safaga. On the contrary,the projectwill providejob opportunitiesdirectly within the resortsand indirecdy in the provisionof services. Thus the project will act as a pole of attractionfor the densely populatedregions of the Nile Valleyand the Delta. On the other hand, the berthing facilitiesalong the Nile river will be constructedon vacantGovernment owned land within the right of way of the river. - 116 - Page6 of 6 Consultationwith NLQ's 27. The NGO's in the Red Sea coast are the owners and operatorsof the existing resortsarid a few voluntarynature conseivation organizations. They are supportiveof the project becauseit will providethem withguaranteed sanitary services which will maketheir ownresorts more attractiveand lead to higheroccupancy and profitability.Similarly, the NGO'sin the Nile Cruisecomponent are the ownersand operatorsof the cruise ships. They also are supportiveof the projectas it wil leadto a saferhealth and navigationalenvironment within the project zone and providebetter servicesfor the cruiseships. Severalof them have formedan associationthat is consideringto financethe construction, operation and maintenance of berthingfacilities to improve cruiseship operations.

28. Existingresorts along the Red Seacoast and cruise ship operations in the Nilehave provedto be harnful to theenvironment: they will continue to be so withoutintervention, which is one of the main objectivesof this project. The projectcontains mitigatory measures to prevent problemsfrom newdevelopments and to cleanup the old resorts;it will enhancethe environment in the Red Sea and Nile Valleyas it will help arrestfurther degradation of the environmentand establish the institutionalset up that would monitorthe developmentof tourism and enforce environmentrelated controls and regulations.The projectwill makea significantcontribution to protectingcoral reefs,endemic island wild life, riverinelife, and diversemarine environment. It aitrmsto assistinteragency coordination and joint managementof a planbetween different public andprivate sector entities. The projectwill allocateresources and promote policies for susainable economicdevelopment and incomegeneration from tourism,oil and gas, fishing and nature conservation. The lessons learnt in the Red Sea coast und Upper Nile Valley, and the strengtheningof the TDA and EEAA,will eventuallybe used to improvethe environmentalong the Sinaicoast he Meditanean coast andthe LowerNle Valley. ItDe24046 l t MoRaOhtbMWTRAAN - ~ ~ ~~ ~ ~ ~ ~ ~ ~ ~ ..~ , ~ ~~~~~-

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