Document of

The World Bank Public Disclosure Authorized Report No: ICR00001161

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-72220 IBRD-75140)

ON A Public Disclosure Authorized

LOAN

IN THE AMOUNT OF US$375 MILLION

TO THE

ARAB REPUBLIC OF EGYPT

FOR

Public Disclosure Authorized AIRPORTS DEVELOPMENT PROJECT

December 24, 2009

Sustainable Development Department Middle East and North Africa Region

Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its content may not otherwise be disclosed without World Bank authorization CURRENCY EQUIVALENTS

(Exchange Rate Effective December 14, 2009)

Currency Unit = EGP 1.00 = US$ 0.183 US$ 1.00 = 5.46

FISCAL YEAR

ABBREVIATIONS AND ACRONYMS

BOT Built-Operate-Transfer ADPI First Airport development Project AVIT Aviation Information Technology CAC Cairo Airport Company CAI Cairo Airport International CVN Contract Variation Notice EAC Egyptian Airport Company EHCAAN Egyptian Holding Company for Airports and Air Navigation EIA Environmental Impact Assessment EMP Environmental Management Plan FSL Fixed Spread Loan GDP Gross Domestic Product GOE Government of Egypt ICAO International Civil Aviation Organization ITS Information Technology System MCA Ministry of Civil Aviation NANSC National Air Navigation Services Company PDO Project Development Objective PMU Project Management Unit SSH Sharm El Sheikh Airport EMU Environmental Management Unit ISR Implementation Supervision Reports DO Development Objectives IP Implementation Plan M&E Monitoring and Evaluation OP Operation Policy BP Bank Policy

Vice President: Shamshad Akhtar Country Director: A. David Craig Sector Manager: Jonathan Walters Project Team Leader: Michel Bellier ICR Team Leader: Michel Bellier Arab Republic of Egypt Airports Development Project

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 5 3. Assessment of Outcomes ...... 9 4. Assessment of Risk to Development Outcome...... 13 5. Assessment of Bank and Borrower Performance ...... 15 6. Lessons Learned...... 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...... 20 Annex 1. Project Costs and Financing...... 22 Annex 2. Outputs by Component...... 23 Annex 3. Economic and Financial Analysis ...... 28 Annex 4. Bank Lending and Implementation Support/Supervision Processes...... 32 Annex 5. Monitoring Indicators...... 33 Annex 6. Stakeholder Workshop Report and Results...... 35 Annex 7. Summary of Borrower’s ICR...... 36 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders...... 43 Annex 9. List of Supporting Documents ...... 44 MAP...... 45 A. Basic Information EG-AIRPORTS Egypt, Arab Republic Country: Project Name: DEVELOPMENT of PROJECT IBRD-72220,IBRD- Project ID: P082914 L/C/TF Number(s): 75140 ICR Date: 12/27/2009 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: EGYPT Original Total USD 335.0M Disbursed Amount: USD 374.9M Commitment: Revised Amount: USD 374.9M Environmental Category: A Implementing Agencies: EHCAAN Cofinanciers and Other External Partners:

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 06/10/2003 Effectiveness: 08/24/2004 Appraisal: 01/19/2004 Restructuring(s): Approval: 03/30/2004 Mid-term Review: 06/30/2006 06/30/2006 Closing: 06/30/2009 06/30/2009

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Highly Satisfactory Risk to Development Outcome: Moderate Bank Performance: Highly Satisfactory Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Highly Satisfactory Government: Highly Satisfactory Implementing Quality of Supervision: Highly Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Highly Satisfactory Satisfactory Performance: Performance:

i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Highly Satisfactory Closing/Inactive status:

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Aviation 97 99 Central government administration 3 1

Theme Code (as % of total Bank financing) Regulation and competition policy 33 33 State enterprise/bank restructuring and privatization 33 33 Trade facilitation and market access 34 34

E. Bank Staff Positions At ICR At Approval Vice President: Shamshad Akhtar Christiaan J. Poortman Country Director: A. David Craig Mahmood A. Ayub Sector Manager: Jonathan D. Walters Hedi Larbi Project Team Leader: Michel Bellier Michel Bellier ICR Team Leader: Michel Bellier ICR Primary Author: Bengt B. M. Bostrom

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The Project will support the Borrower's ongoing efforts to eliminate capacity bottlenecks to growth in airport traffic, raise the quality of services to international best practice standards at Cairo International and Sharm El Sheikh Airports, and promote private sector participation in airport management and service delivery.

Revised Project Development Objectives (as approved by original approving authority) Not applicable

ii

(a) PDO Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Traffic Development at CAI (domestic and international). Value quantitative or 8.7 million 10.3 million 14.4 million Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Fully achieved with actual traffic higher than target by close to 40 percent. achievement) Indicator 2 : Traffic Development at SSH (domestic and international). Value quantitative or 3.2 million 4.3 million 7.8 million Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Fully achieved with traffic exceeding target by 81 percent. achievement) Indicator 3 : Passenger per Staff Ratio at CAI (total CAI passengers/total CAC staff). Value quantitative or 2,260 2,900 2,443 Qualitative) Date achieved 03/05/2004 12/31/2008 06/30/2009 Comments (incl. % Final value meeting target is after opening of TB3. achievement) Indicator 4 : Passenger per Staff Ratio at SSH (total SSH passengers/total SSH staff). Value quantitative or 30,769 28,666 5,372 Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Final value is achieved after the full operations of new SSH terminal. achievement) Indicator 5 : Cumulative Private Investment in Airport Infrastructure. Value quantitative or US$50 million > US$80 million Not available Qualitative) Date achieved 03/05/2004 12/31/2008 06/30/2009 Comments (incl. % achievement)

iii (b) Intermediate Outcome Indicator(s)

Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Commercial Revenue per Passenger at CAI (in US$). Value (quantitative 2.1 2.9 3.9 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments Final value is before opening of TB3/actual value excludes concessions, leasing (incl. % (usufruct), utilities and rentals. achievement) Indicator 2 : Commercial Revenue per Passenger at SSH (in US$). Value (quantitative 2.4 5.6 4.5 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % achievement) Indicator 3 : Private Sector Airport Service Delivery Jobs at CAI (Egypt Air/others). Value (quantitative 12,700/6,275 12,700/8,275 13,473/7,925 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Actual values included permanent jobs only. achievement) Indicator 4 : Private Sector Airport Service Delivery Jobs at SSH (Egypt Air/others). Value (quantitative 286/256 416/488 802 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Actual value agregates jobs with Egypt Air/Other companies' jobs. achievement) Indicator 5 : Commercial Revenue per Passenger at CAI (in US$). Value (quantitative 2.1 2.9 4.4 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Final value is before opening of TB3. achievement) Indicator 6 : Commercial Revenue per Passenger at SSH (in US$). Value 2.4 5.6 4.5

iv (quantitative or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % Final Value is after opening SSH terminal. achievement) Indicator 7 : Private Sector Airport Service Delivery Jobs at CAI (Egypt Air/others). Value (quantitative 12,700/6,275 12,700/8,275 13,473/7,925 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2008 Comments (incl. % achievement) Indicator 8 : Private Sector Airport Service Delivery Jobs at SSH (Egypt Air/others). Value (quantitative 286/256 416/488 1015/733 or Qualitative) Date achieved 03/05/2004 12/31/2008 12/31/2007 Comments (incl. % achievement)

G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/31/2004 Satisfactory Satisfactory 0.00 2 06/18/2004 Satisfactory Satisfactory 0.00 3 09/21/2004 Satisfactory Satisfactory 0.00 4 03/09/2005 Satisfactory Highly Satisfactory 31.52 5 07/14/2005 Satisfactory Highly Satisfactory 34.97 6 12/27/2005 Satisfactory Highly Satisfactory 47.92 7 03/09/2006 Satisfactory Satisfactory 54.28 8 09/11/2006 Satisfactory Satisfactory 84.45 9 03/02/2007 Satisfactory Satisfactory 130.72 10 07/09/2007 Satisfactory Satisfactory 189.00 11 03/04/2008 Satisfactory Satisfactory 260.70 12 09/17/2008 Satisfactory Satisfactory 334.31 13 01/12/2009 Highly Satisfactory Satisfactory 334.76

H. Restructuring (if any) Not Applicable

v

I. Disbursement Profile

vi 1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

Following the government’s increased commitment to a market-led economic reform in the mid 1990s, Egypt’s economic growth strengthened sharply to around five percent per annum. In most recent years, however, both internal and external shocks have combined to slow growth to around three percent. The need for considerable infrastructure and the growing population required large inflows of foreign assistance since the 1980s to finance major projects which managed to keep the well developed construction industry growing at an annual rate of more than 20%. However, the industry growth slowed down noticeably in 1999, as a result of cuts in Government’s funding for infrastructure projects.

At appraisal, the country was recovering slowly and economic recovery gained momentum in 2004, resulting in growth rising to an estimated 4.2% driven by rising exports of goods and services and a sharp depreciation of the pound which enhanced the country’s export competitiveness. Egypt population stood at 70.5 million in January 2004 and was expected to rise to almost 80 million by 2010 and to reach 95 million by 2020. The growing population put considerable pressure on the labor market as well as social services. To promote economic development and curb unemployment, faster growth was urgently needed. To that end, the Government of Egypt’s (GOE) policy focused on promoting private sector development, attracting more foreign direct investment, and maximizing foreign exchange earnings from tourism and exportable commodities.

Tourism is the country’s most significant industry and according to independent studies, it accounted for as much as 10% of GDP and in 2004 the sector’s revenues averaged US$6.1 billion, representing, by far, Egypt’s most important current account credit. In addition, the sector contributed greatly to providing employment but remained vulnerable to a decline in the number of visitors because of international concerns in the context of both domestic and regional security.

Following the decline in the share of agricultural commodities between 1965 and 2004 from 71 percent to 9 percent, reflecting the development of the oil industry and a greater portion of petroleum industrial products, economic reforms focused more on stimulating non-oil exports. Besides poor marketing and undependable services, transport continued to constrain exports, aside from domestic inefficiencies such as low labor productivity, outdated technology and high bureaucracy.

Air transport sector had and still has a key role to play in increased growth, but this role was undermined by four factors: (i) Airport Capacity constraint: Airport capacity in the country was increasingly short of need and to allow for the projected rise in tourist numbers. (ii) Legal and Institutional framework: institutional and capacity building in airport regulation was needed to attract more private sector investment in airport infrastructure. Therefore, reforms in the civil aviation started in 2001. The Ministry of Civil Aviation (MCA) was created and entrusted with the responsibility of the country’s airports and civil aviation matters. It is overseeing both the Egypt Air group and the Egyptian Holding Company for Airports and Air Navigation (EHCAAN) which owns four affiliate companies: the Cairo Airport Company which manages Cairo platform (CAC), the Egypt Airport Company responsible for main airports in other Directorates, the National Air Navigation Services Company in charge of operating air traffic and air 1 navigation services (NANSC), and the Aviation Information Technology Company which provides services connected to information technology (AVIT). (iii) Narrow Revenue Base: to the exception of Cairo Airport International (CAI), airports were not profitable as tariffs were still low by international standards. Action was still expected to align tariffs with regional market level to make the project profitable and the CAC still needed to take the necessary steps to strengthen marketing of airport- based services and facilities in order to generate more revenues. (iv) Regulated Air Transport: although the liberalization is progressing for international flights between Egypt, Africa, and the Arab countries, liberalization of key routes with Europe and other major markets would only be possible if Egypt Air were to become competitive.

Prospects for private financing for airport development were limited at the time of project preparation, given the adverse infrastructure concession climate in the world and in the region. The incomplete legal framework for Public Private Partnerships (PPP) and gaps in the available financial and operational data also justified dropping the concession approach. Nevertheless, EHCAAN was looking to mobilize private sector expertise and opted for the signature of management contracts with international airport operators, by CAC on Cairo platform and EAC regarding the other main country airports, including Sharm El Sheikh (SSH).

For the construction of the proposed new terminals, public financing was then a valid alternative. The Bank’s involvement would ensure that the required necessary actions are taken, including those designed to develop competition within and between airports, and it would provide experience in financing large and complex transport infrastructure projects. The Bank was also to contribute to ensuring proper consideration of environmental and social issues, enhancing the chances of attracting high quality bids for private management contracts and supplying specific technical expertise.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

In the Loan Agreement, the Project development objective was to increase the levels of performance at CAI and SSH, and promote public-private development of such airports. The Project Appraisal Document also indicated that the project aimed at (i) eliminating capacity bottlenecks to traffic growth, particularly for tourism and associated foreign exchange earnings; (ii) raising CAI and SSH service quality to international best practice standards; and (iii) promoting efficient private participation in airport management and airport service delivery in a more competitive market.

The project’s lending instrument was a Fixed Spread Loan (FSL) with level repayments. The Loan has a 17 year maturity, including a five-year grace period. The Loan was denominated in US Dollars.

The following Key performance indicators were agreed upon: i. Economic Development ¾ traffic at CAI: ƒ 10.3 million domestic and international passengers. ¾ traffic at SSH: ƒ 4.3 million domestic and international passengers ¾ foreign exchange earnings from tourism: ƒ CAI: US$1,481million; and SSH: US$1,360 million

2 ii. Airport Operational Performance: ¾ certification (International Civil Aviation (ICAO) standards) obtained from Civil Aviation Authorities before commissioning of terminals ¾ occupancy rate at peak hour: ƒ Third terminal at CAI : 1.0 / 1.0(actual traffic / rated capacity) ƒ SSH terminal: 0.38 / 0.80 (actual traffic / rated capacity) ¾ passenger processing times (arrivals/departures): ƒ CAI: 35 minutes/ 45 minutes ƒ SSH: 35 minutes/ 40 minutes iii. Private Participation in Infrastructure: ¾ cumulative private investment in airport infrastructure more thanUS$80million ¾ average commercial revenue earned per passenger ƒ CAI: at least US$2.9; and SSH: at least US$5.6 ¾ increased private sector service jobs (Egypt Air / other firms): ƒ CAI : 12,700/8,275 ƒ SSH: 416/ 488

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

Not applicable

1.4 Main Beneficiaries

The expected primary beneficiaries of the project were all passengers received at CAI and SSH airports further to an improved level of service and less waiting time. In addition, agriculture production and employment were also to benefit from the project through increased freight transport capacity and a study on air cargo development. Finally, Egypt economy as a whole was to benefit from the project through the additional spending by tourists that could have been lost without the project.

1.5 Original Components (as approved)

The project included three components: (i) Construction of a third terminal at Cairo International Airport (TB3) and enabling works; (ii) Construction of a new terminal and enabling works at SSH; and (iii) strengthening of sector operations and environmental management.

Component 1. Construction of a Third Terminal at CAI (TB3)-(US$485 million)

The objective of this component was to contribute to solving capacity constraint issues at CAI. It was expected that TB3 would have, at its completion, a total capacity of 11.0 million passengers (5.0 million domestic and 6.0 million international passengers), compared to the current 9.5 million provided by Terminals l and 2. It was anticipated that at completion, TB3 would be integrated with Terminal 2, which was then used primarily by foreign airlines. Terminal 1, which had Egypt Air as its main user, was expected to continue receiving domestic and regional flights. The TB3 was foreseen to consist of a new terminal building including electromechanical systems and equipment and connected to TB2. To better accommodate an aggressive construction schedule, a separate enabling works contract was financed by CAC and signed early. Finally, to accommodate the future generation of wide body aircraft expected to carry between 600 and 800

3 passengers, the design work for a third runaway at CAI was underway and while not financed by this Loan, was supposed to be made operational at the time TB3 was planned to open.

Component 2. Construction of a New Terminal at SSH (US$60.5 million)

The objective of this component was the construction of a new terminal at SSH, with a design capacity of 4.5 million passengers annually and enabling works. SSH was and still is the third largest airport in Egypt in terms of passenger volumes, and was then operating at its designed capacity of two million passengers per annum. The new terminal was expected to consist of one new building including electromechanical systems and equipment. As for TB3 in Cairo, two packages of works were planned for SSH’s new terminal – an "enabling package" (some US$2.5 million) and the main construction contract. The construction period was set to begin in October 2004, with the goal of making the new terminal operational by April 2006.

Component 3. Strengthening sector operations and environment management (US$26.2 million)

The objective of this component was to strengthen sector operations and environmental management. It was comprised of two components respectively financed by the Government and the Bank. Indeed, on the one hand CAC and the Egyptian Airport Company (EAC) hired and financed Project Managers and Legal Advisors to assist them throughout the preparation and the implementation of their civil works contracts. The Bank financed: (i) the preparation of a national airport master plan; (ii) the preparation of an action plan for gradual air transport liberalization; (iii) the definition of a strategy for reorganization and development of air cargo; (iv) the deployment of air quality and noise monitoring equipment, and the establishment of environmental units in CAI and SSH; and (v) management capacity building (including provision of IT equipment) at EHCAAN, CAC and EAC related to commercial, financial, regulatory and monitoring functions.

1.6 Revised Components

Not applicable

1.7 Other significant changes

In late January 2008, approved contract variation notices (CVNs) under the main construction contract of TB3 resulted in cost overruns above 15 percent of the original contract amount. Therefore, GOE requested, from the Bank, an additional financing in the amount of US$40 millions to finance these cost overruns, in addition to a reallocation in the amount of US$2.6 million from categories goods and consultant services under Component 3. The total cost of TB3 under the project was then estimated at US$403.9 million (at the contractual exchange rate).

The amount of additional expenses was, among other reasons, due to the GOE’s decision, in 2003, to speed up the project implementation by using, for bidding documents, designs that were developed for a passenger terminal in the mid-1990s. The old design had to be updated during the bidding process and early implementation, to include state-of-the art IT systems, in addition to taking into account numerous changes in GOE’s and ICAO standards since 1995. In particular, to comply with the more rigorous seism design criteria introduced in the Building Code in 2004, and to accommodate new, larger A380 aircraft on the taxiway, apron system and in the terminal.

Following the assessment of the then successful implementation of the project since its launch and the GOE’s continued deep commitment to the project and confirmation of the possible 4 completion of TB3 works by the closing date, the Bank Board approved the additional financing on April 24, 2008.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

In January 2003, the Government sent to the Bank a formal request for a US$150 million loan to support the development of the airport sector. Large investment needs in the airport sector were not the only reason for the request, as the Government was also seeking to test the Bank’s capacity to efficiently and swiftly put in place a large financing as part of broader discussions on an increased and revived cooperation. The Bank’s prior involvement in a transport project in Egypt dated back to 1999, and the transport portfolio had never included an airport project.

From the start, there was nevertheless, a high quality dialogue with the EHCAAN, under the oversight of the MCA, and preparation activities developed rapidly to culminate in Board approval in March 31, 2004. The very strong commitment of all Government counterparts was instrumental for the swift preparation of the project (nine months from the first preparation mission).

Early discussions identified the two large investments which the project financed, the third terminal building in Cairo and the second terminal at SSH. These projects were justified by the under-capacity of Cairo airport (9 million passengers per year vs. traffic of 8.3 million passengers in 2002/2003) and the rapidly developing tourism activity in Sharm El Sheikh. Since preliminary designs for a new airport terminal were finalized during 1994-1997 and updated in 2002, EHCAAN could start the procurement process before Board decision based on those designs. For SSH terminal, the preparation of bidding documents started later, but at appraisal, engineering studies were advanced enough to enable the Bank to assess main construction risks and put in place mitigation measures.

EHCAAN also agreed upon an institutional component aimed at strengthening airport sector capacity, in line with the MCA’ policy for the development of air transport. This component strengthened the rationale for Bank’s involvement as it called upon its expertise in civil aviation and experience in financing large and complex transport infrastructure projects. Another GOE’s priority supported by the Bank was the international competitive contracting out of airports’ management to private airport operators.

In the design of the project, the Bank applied the main following lessons: • the importance of a strong commitment from counterpart authorities for consistent project implementation and achievement of project objectives;

• the completion of key steps, early on, improves quality at entry and reduces uncertainty;

• taking smaller but practical steps with a good probability of success is a more effective means of bringing market liberalization to fruition, than would more aggressive and riskier actions;

• complex operations require close interaction between the Bank and a strong project team on the Borrower’s side; and

• the quality of monitoring and reporting systems is essential.

5 In terms of implementation arrangements, it was agreed that the Bank funds would be on-lent by the Ministry of Finance of Egypt to EHCAAN, as a holding company of the airport sector and main Bank counterpart, which in turn, would transfer funds to the CAC and EAC, the implementing entities of the construction contracts. Actually, EHCAAN entered into a Project Agreement with the Bank as the implementing entity, but works contracts were signed by CAC and EAC respectively, which booked assets on their balance sheet. As the initial financial management assessment concluded that the systems did not meet the Bank’s minimum requirements, the Bank requested the establishment of a fully functional project Financial Management System and the appointment of a qualified Finance Officer familiar with Bank’s guidelines, and the signature of on lending agreements between EHCAAN and CAC/EAC satisfactory to the Bank. It was also agreed that, for works contracts, the Bank would directly pay contractors’ invoices processed by CAC or EAC and approved by EHCAAN. For consultants’ contracts, funds were to flow through a special account.

The EHCAAN established a Project Management Unit (PMU) and staffed it with experienced employees to liaise with the Bank, coordinate the project implementation, oversee procurement, monitor disbursements and prepare progress and financial management reports. Finally, at the request of the Bank, EHCAAN established a Steering Committee with representatives of key stakeholders in the project, such as the Ministry of Civil Aviation (MCA), the Ministry of Finance, EHCAAN’s affiliates, CAC, and EAC.

2.2 Implementation

The continued commitment of GOE’s counterparts, the thorough oversight of the project by EHCAAN’s top management, and the dedication and effectiveness of the PMU have all been critical in the successful and timely implementation of the project. Efforts made by EHCAAN and affiliated companies to complete the design and launch procurement of works early on, were also instrumental in this timely completion, despite issues encountered on both construction sites.

Under the Cairo TB3 investment component, CAC signed the main construction contract on December 4, 2004, with a contractual duration of 900 days. The contract initially included the installation of the Information Technology System (ITS) by a designated sub-contractor, to be selected by CAC at a later stage. However, irreconcilable issues on provisions allocating some risks between the main contract and the ITS contract led EHCAAN and CAC to decide to execute a separate ITS contract and rely on the project manager to ensure the coordination of works and commissioning. Therefore, the ITS contract was only signed on August 1, 2006.

Despite the above and a series of contract extensions, works were completed and the terminal was fully operational by the closing date. TB3 was officially inaugurated on December 18, 2008 and opened for commercial operations on April 27, 2009, after trial operations by limited Egypt Air flights, and in the middle of 2009 the terminal was fully operational for Egypt Air’s domestic and international flights, and for its Star Alliance partners.

Regarding SSH, EAC signed a single construction contract including ITS on December 9, 2004, for duration of 550 days. The new passenger terminal at SSH was inaugurated on May 24, 2007 with the full opening to commercial traffic on June 11, 2007.

In addition to regular supervision missions two to three times a year, the Bank undertook the mid- term review in the middle of 2006. This mission was crucial in clarifying major issues under the large works contract for the Cairo passenger terminal TB3. It was noted that the main contractor would need to significantly accelerate works to prevent slippages in the construction program. 6 Despite these efforts, a series of six extensions of the original construction period amounting to 679 days brought the final duration of the contract to 1,579 days. The duration of a separate IT subcontract, initially 547 days, was also doubled because of delays incurred under the main contract.

TB3 works contract was also affected by a large number of cost variations which increased the price by 55 percent above the value at signature and 22 percent above the planned value of works in the PAD, despite the financing by CAC of artworks and loose furniture initially included into the contract. This relatively large price increase was due, for a large part to changes in the design, which started in the late 1990s, after the signature of the contract and in order to: (i) meet new seismic standards and enable the handling of very large aircrafts, (ii) improve the quality of the facility to enhance the experience of passengers, and (iii) reflect technological improvement through better ITS. Throughout implementation, the Bank reviewed construction progress and assessed cost variations and requests for extension of time submitted by CAC, before approving them.

With regards to the smaller SSH terminal, the original contract duration of 550 days had to be extended several times by a total of 281 days. The main reason was the frequent stoppage of works for security concerns on the occasion of official visits to SSH. Final contract price was also affected by cost variations in Cairo and was 35 percent higher than the planned amount in the PAD.

By the closing date, consultants had completed all studies and other capacity strengthening activities had been successful, including the training of CAC’s and EAC’s staff on environment and the installation of noise measurement systems at both airports. During preparation, EHCAAN had drafted terms of reference with the Bank’s assistance, which enabled the start of procurement of consultants from September 2004. In most instances, EHCAAN and MCA followed upon consultants’ recommendations and took them into account for policy or investment decisions.

CAC’s and EAC’s ability to repay the loan was predicated upon an increase in departure fees planned in May 2005. In fact, the change was effective from January 2007 due to the later than expected establishment of the Higher Council for Pricing Strategy and protracted negotiations with airlines which initially opposed the increase. However, EHCAAN’s accounts and financial results of affiliated companies were not significantly affected, as the Ministry of Finance gave an extraordinary contribution to EHCAAN (EGP 440 million) to offset lost revenues.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

Various monitoring indicators aimed at assessing outcomes related to development objectives, such as passenger growth, quality of services and commercial revenues, while other indicators focused on economic development, with the number of private jobs created at both airports, volume of exports and imports at Cairo airport and private participation growth. Finally, results indicators assessed the progress of the project.

EHCAAN regularly collected data, which in some instances, were internal performance indicators used to guide operations, and in other instances required surveys. EHCAAN dutifully included results in quarter and annual progress reports. The Bank used this very useful and up to date information to monitor the project performance and assess progress towards the development objectives.

2.4 Safeguard and Fiduciary Compliance

7 In the absence of land acquisition and resettlement, only policy OP/BP 4.01 regarding environmental assessment was triggered by the project which was classified as Category A, since project works at CAI and SSH and the new runway planned at CAI (CAC financing) were expected to produce noise and air pollution, possibly significant for surrounding residential areas. In accordance with Bank’s safeguards policies and domestic regulations, EHCAAN prepared an Environment Impact Assessment (EIA) for each airport, examining project alternatives and identifying main negative impacts. Scoping sessions and public consultations were also conducted during the different phases of the EIA preparation. The detailed Environmental Management Plan (EMP) proposed mitigating measures and monitoring arrangements. The Loan financed training sessions for CAC and EAC environment staff responsible for overseeing the implementation of the EMP and also the installation of noise monitoring equipment at Cairo and SSH airports.

CAC and EAC fully implemented this EMP. In particular, they included mitigation measures in works contracts and enforced all EMP’s requirements during implementation. Furthermore, they established environment units and started regular monitoring of noise and pollution at Cairo and SSH airports. Benefits for CAC and EAC from this in-house environment capacity will be long lasting, as they had decided to mainstream environment assessments and pollution monitoring.

Fiduciary requirements were also addressed through institutional arrangements, staffing of the PMU and established procedures. Regarding procurement, the same Project Manager oversaw Cairo and SSH construction contracts, and that firm was familiar with Bank procurement procedures. In addition, the PMU staff included a Procurement Coordinator, whose primary responsibilities included guidance and monitoring of EHCAAN functions vis-à-vis CAC and EAC. Finally, the Bank reviewed procurement documents and reports throughout the selection of all contractors and consultants, in accordance with guidelines as all contracts were subject to prior-reviews.

The selection method of the ITS supplier for TB3 was the main issue during implementation. As mentioned earlier, the main contractor was to also install the ITS but through a sub-contract with a supplier procured at a later stage. The main reason was that ITS bidding documents could not be prepared on time for the tender of main works. However, insurmountable difficulties arose when EHCAAN attempted to harmonize provisions of both contracts. The matter was discussed at length with the Bank, and EHCAAN and CAC finally decided to take ITS supply and installation out of the main contract, and directly procure the ITS supplier. Consequently, the ITS contract was only signed in August 2006. The coordination of both contracts also proved to be a challenge for the project manager and somewhat delayed the completion of works.

On financial management, specific arrangements designed to allocate responsibilities and organize the flow of funds between EHCAAN and CAC/EAC proved effective. Those arrangements were fully implemented by all three companies which satisfactorily met the financial requirements. A great care was given to secure those arrangements upfront, as the Bank reviewed contracts between EHCAAN and CAC/EAC. The project was rated satisfactory on financial management throughout its life span with steady 100 percent financial management reports and audit compliance. This is attributed to: i) the high level of commitment of the government teams which dealt with issues in a timely manner and with efficient Bank support, ii) the readiness of the project since inception, as a result of the high performance of the PMU’s qualified staff and adequate system to meet the FM requirements, and iii) the use of direct disbursements under the project. The latter made it easier for both the PMU and the Bank to monitor the flow of funds and helped streamline the project financial management in swiftly dealing with large amount of foreign currency contracts.

8 2.5 Post-completion Operation/Next Phase

Upon completion of the hand-over phases, CAC and EAC integrated new terminals into airport facilities managed by the private operators. Operations started smoothly with test periods entailing a partial opening in both cases. Terminals are fully operational and both the airport companies and the airlines are very satisfied with the overall performance of terminals. At CAI, Egypt Air and its partners in Star Alliance moved all flights to and from Cairo to TB3 within four months of the beginning of operations. At SSH, a passenger survey carried out in 2008 evidenced a high satisfaction rate with 84.7 percent satisfied or very satisfied. Airport companies had to increase staff to run facilities and cater to the rapidly increasing traffic, in the tune of 1,000 people at Cairo; but the support of airport managers and efforts made to train staff have enabled CAC and EAC to efficiently cope with the increased traffic. Several M&E indicators will continue to be monitored by CAC and EAC, including passenger traffic, occupancy rates and processing times, commercial revenues and jobs on both airport platforms. Today, these are, in many instances, used to guide management decisions.

EHCAAN and MCA have followed upon the recommendations of the studies carried out under the institutional and capacity strengthening components. For example, MCA opened Cairo airport to charter flights and revised the legal framework for civil aviation, in order to facilitate the establishment of new carriers; EHCAAN set up an air cargo association at Cairo which involves main airlines carrying freight and CAC launched studies for new cargo facilities in Cairo, to provide state-of-the-art facilities and support the growth in freight traffic; finally, CAC and EAC are basing investment decisions on regularly updated airport master plan recommendations.

GOE wished to continue benefiting from the Bank support and on May 7, 2009 requested another loan to finance the construction of a new terminal TB2 at Cairo airport. This investment was included into the long-term development plan of Cairo, but EHCAAN and CAC had to accelerate construction to cope with passenger traffic which grew during 2004 -2008 much faster than estimated during preparation. This new project should also include an institutional component through which the Bank will assist GOE on air transport policy issues.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

Throughout implementation the Government’ strategy to promote development and curb unemployment through faster economic growth remained unchanged, and there was even an increased focus on economic reform to accelerate productivity and mitigate the impacts of the financial and economic crisis through a much higher growth track.

The high growth of passenger traffic, both at Cairo and Sharm El Sheikh, which collectively handle 62 percent of all air passenger’s traffic in Egypt, has vindicated the PDO on the performance of both airports. Thus, until 2007/2008 traffic exceeded, by far, forecasts made during preparation, with an annual average increase of 11.9 percent in Cairo and 18 percent in SSH since 2003/2004. Airports are the primary points of entry for international tourists, which are one of Egypt’s largest sources of foreign exchange. Tourism earned Egypt $11 billion in FY2008 since it attracted a total of 12.8 million visitors (foreign exchange earnings from tourism arrivals in CAI and SSH have exceeded US$5.4 billion). The increasing traffic at Cairo has also resulted in job creation, with the employment of more than 45,000 persons at the airport itself in 2008.

9 During the course of the project, Government moved ahead with the gradual liberalization of air transport. Thus, the project supported the development of a plan for gradual liberalization of air transport. Accordingly, Cairo airport opened for charter flights in early 2009, bilateral air service agreements are in force with 25 states, and financing requirements for establishing new air carriers have been lowered. In addition, the airports master plan for Egypt paves the way for capacity development in the future at Cairo airport in the other five main country airports, while the national strategy for the development of air cargo has resulted in initiatives facilitating exports of goods and enhancing logistic services, such as the development of a cargo village at Cairo airport. Actually, two-thirds of cargo traffic is export, most of which is perishable agricultural goods, and it is concentrated in CAI. Since 80 percent of air cargo is carried by passenger planes, the project had a direct impact on exports.

Finally, the public private partnerships for the operations of Cairo and regional airports through management contracts with experienced airport operators was also very timely and contributed to improving the performance of the airport sector up to quality levels needed to satisfy the large number of international passengers visiting Egypt.

3.2 Achievement of Project Development Objectives

3.3 Efficiency

The Project Development Objectives were fully achieved at project completion and throughout implementation the PDO indicator was rated Satisfactory or Highly Satisfactory.

Further to the completion of both facilities before the closing date and the smooth commercial operations, the additional capacity enabled CAC and EAC to cope with large traffic increases since project approval and significantly improve the quality of service in both Cairo and SSH. Public media coverage of project achievements, efficiency and environmental impact, was intense.

The signature of management contracts regarding Cairo airport and five regional airports owned by EAC in early 2005 has materialized Government’s policy objective to increase private participation in the airport sector. CAC has also allowed a second handling company to serve airlines at Cairo airport and has concessioned parkings at CAI and commercial areas in terminals to private investors.

The above achievements are reflected in project outcome indicators in table 1 below:

Table 1: Outcome Indicators PDO Outcome Indicator Results at Completion Remove Bottlenecks to: a) Traffic growth at CAI and Increased Traffic Growth at CAI: 11.9% annual average 2003/2004 – SSH. CAI and SSH. 2007/2008 vs. 3.5% expected.

SSH: 18% annual average 2003/2004 – 2007/2008 vs. 4.7% expected. b) Growth in Tourism. Increased foreign exchanges CAI: US$2,564 million vs. US$1,481 earnings from tourism. million expected.

SSH: US$2,844 million vs. US$1,360 million expected. c) Growth in exports from Increased exports at CAI. 287,000 T vs. 221,000 T expected.

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PDO Outcome Indicator Results at Completion CAI.

Raise CAI and SSH performance to international For both CAI and SSH best practice norms a) Passenger processing CAI: 33 min per passenger for arrival vs. times. 35 min planned (45 min vs. 45 min at departure).

SSH: 20 min per passenger for arrival vs. 35 min planned (12 min vs. 40 min at departure). b) Certification obtained CAI certification in progress. from Civil Aviation Authorities before SSH certified by ICAO in April 2008. commissioning of terminals.

Promote Airport Investment by a) Boosting airport a) Average commercial CAI: US$4.4 per passenger after commercial revenue. revenue raised in opening TB3 vs. US$2.9 planned. CAI/SSH (US$ per passenger). SSH: US$ 4.5 per passenger vs. 5.6 planned. b) Developing private sector b) Private sector jobs CAI: 13,473 jobs at Egypt Air in 2007 service jobs. created at CAI/SSH. vs. 12,700 planned and 7,925 jobs in other firms vs. 8,275 planned. (permanent jobs only)

SSH: 802 in 2007 vs. 904 planned. Increasing private sector c) Growth of PSP in airport Management contracts of Cairo and role in the aviation activities nationwide. regional airports signed end 2004. industry.

The full list of monitoring indicators and values at closing is provided in Annex 5.

Revised economic rates of return for both TB3 and SSH confirm the projects benefits. Based on the methodology used in the PAD and available data, the estimated Net Present Value and Economic Rate of Return results (Table 2 below), show that economic benefits of Cairo TB3 and SSH are significantly higher than estimated at appraisal, despite significant cost increases.

Table 2: Economic Rate of Return Ratio Value at Appraisal Updated Value Comments Cairo TB3 NPV (US$ million) 252 422 10% discount rate ERR (%) 16.2 17.2

SSH NPV 122 278 10% discount rate 11

ERR 28 37.8

The higher economic rate of return is mostly the result of higher than expected traffics, whose growth was fueled by general economic development, tourism flows, the establishment of Egypt Air Express (a subsidiary of Egypt Air established in 2006) to develop domestic routes, and Egypt air membership in Star Alliance which induced European partner airlines to increase services to Egypt. As a result, the Government’s ambition to transform Cairo into a regional hub had already been partly fulfilled.

The financial analysis of accounts for FY08, and financial ratios monitored during implementation, show that the airport companies’ financial situation has remained sound, although the repayment of the Bank loan from 2009 will affect debt service ratios of CAC and EAC (Table 3).

Table 3: Financial Ratios Forecast vs. Actual Net Income Debt Service Ratio(1) Current Ratio(2) (US$ million) EHCAAN 193/ 314.9 CAC 253.2 / 479.1 1.74 / 5.6 1.99 / 0.7 EAC 154.8 / 317.9 1.3 (objective) /1.6 1.0 (objective)/1.2 (1) Current ratio (2) Debt service ratio

Financial ratios were achieved despite the late increase in departure fees which has somewhat affected CAC and EAC’s cash-flows, as compensations given by the Ministry of Finance could not fully fill in the gaps.

3.4 Justification of Overall Outcome Rating

Rating: Highly Satisfactory

The project was successfully completed on time and achieved its development objectives, especially the expected outcomes, in terms of employment generation and increased foreign exchange earnings. In a country where economic growth is critical for increasing employment and generating the required resources to address social needs, developing tourism is an exceptional opportunity for Egypt because of the wealth of unique historical sites and resort areas along the Red Sea. Today, tourism is both a major earner of foreign exchange and also a provider of a very important part of the formal and informal employment in Egypt. In that sense the project objectives to enhance transport services for tourism were fully relevant. The project design also made it possible to alleviate major infrastructure bottlenecks and improve the airport sector performance, while mobilizing private initiative.

The Borrower achieved the development objectives in a cost effective manner, as evidenced by the high economic rates of return and the financial soundness of the airport companies, despite the investment costs of the new terminals. This was done while maintaining the competitiveness of airport fees compared to other countries in the region and in Africa.

Since all outcomes were very positive, the highly satisfactory rating is justified.

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3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

Social development and gender aspects were not specifically part of the Project Development Objectives. However, services in general and tourism support, in particular, are labor-intensive with high multipliers for impact on the overall economy of Egypt. There are also opportunities, in this modern sector, to use skilled labor without particular gender bias. In relation with the development of TB3, CAC hired close to 1,000 staff during 2004-2008, while strengthening technical departments with about 400 staff. With around 45,000 employees at the Cairo airport, the sector development had a significant social impact, direct as well as indirect through multiplier effects on the local economy, especially through businesses attracted to the CAI platform.

(b) Institutional Change/Strengthening

As previously stated the ongoing process of gradual air transport liberalization and enhanced airport services are fostering the efficiency of the sector, increasing transport supply, and improving quality of air transport services in the long run.

(c) Other Unintended Outcomes and Impacts (positive or negative)

The project was instrumental in mainstreaming environmental practices in the airport sector, through the establishment of environmental units at CAC and EAC and the installation of noise and air pollution monitoring systems, in strengthening the procurement capacity of airport companies, and in transferring efficient project management practices.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

The project monitoring and evaluation framework included passenger surveys, both at Cairo Airport and Sharm El Sheikh, on Quarter basis. These covered various aspects of airport terminal services and were generally positive.

For Sharm El Sheikh, there was a very favorable reaction after the beginning of commercial operations at the new terminal. At Cairo, there remained a persistent difference between processing times for arrivals and departures in 2008, which can be explained, in part, by the enhanced security formalities after September 2001 and the opening of the TB3 in the first half of 2009 only.

4. Assessment of Risk to Development Outcome

Rating: Moderate

There were several risks associated with the development outcome at appraisal and various mitigation efforts contributed to reducing them. The main risks at the ICR stage are as follows:

Lower private sector involvement

Management contracts with international airport operators were signed in December 2004 both with CAC for Cairo (with a closing date in 2014 which can be extended by 3 years) and with 13

EAC for the five regional airports with a closing date in 2011, which again can be extended by three years. So far, EHCAAN and its affiliates are very satisfied with the results of contracts and do not intend to terminate them early. There is no plan, so far, regarding new arrangements from contracts completion dates, in two years at the earliest for regional airports, but this is not an urgent matter. In any event, lasting benefits from the management contract, for EAC and CAC, include enhanced operational performance and stronger capacity as a result of staff training and exposure to best practices.

Private firms are also more involved in providing airport services. Thus, 37.3 percent of CAC’s income comes from private firms operating within the airport area under concessions and competitively awarded (parking, Air Mall, commercial areas in terminals) and Government policy should maintain or expand this share.

The gradual liberalization of air transport remains a priority for GOE. GOE is willing to extend the existing 25 bilateral agreements to other countries (the Bank may assist in this area through the new TB2 construction project). Chartered flights are also allowed in all airports.

Rating: Moderate

Capacity bottlenecks at CAI and SSH

The successful completion of TB3 and SSH terminals have addressed capacity bottlenecks identified during preparation. The additional capacity allows for large traffic increases. However, based on trends during 2005-2008 and taking into account the impact of the economic crisis, CAI would be again saturated in 2017, and SSH would need a new terminal to meet traffic around 2015. Therefore, CAC is planning the reconstruction of TB2 with an additional capacity of 4 million passengers per annum, and EAC has started design studies of a new terminal at SSH.

Rating: Moderate

Degradation of CAI and SSH performance

CAI’s and SSH’s performance have significantly been enhanced by the opening of new terminals and improved operations, thanks to the additional skills brought to companies by management contracts. Future degradation may be caused by low operational performance, but there are financial incentives built into these contracts to entice operators to meet quality standards. Although, the financial risk is still present, CAC preparatory studies of TB2 reconstruction have shown that the company would remain financially sustainable, under more conservative traffic estimates than the industry forecasts. Since the airport tariffs are still low in comparison with other countries in the region, there is also room for further increases, if justified by the costs of the services provided.

Rating: Moderate

Stagnation of job creation at Cairo Airport

Employment trends in CAI evidence job creation mechanisms by and around large airports. Unless major security issues divert tourists from Cairo and Egypt resulting, in the long-term, in an expected slowdown of economic growth, passenger traffic should continue to increase at Cairo airport and support the creation of additional jobs. Cairo airport also owns 9 million m2 around the platform, which it intends to sell or lease to businesses, interested in the proximity of the airport. 14

Rating: Moderate

Accordingly, the overall risk to development outcome is rated Moderate.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry

Rating: Highly Satisfactory

The project was prepared on a fast track basis. The identification mission took place in January 2003 and was followed by a preparation mission in June 2003. The project was submitted to the Regional Operation Committee meeting on November 6, 2003 and the team undertook a pre- appraisal mission, the same month, to accelerate preparation while final versions of EIAs for both terminals were not yet available. Project appraisal was completed through an in-house desk review once EIAs satisfactory to the Bank were disclosed. Negotiations took place during February 22–29, 2004 and the Board approved the Loan on March 30, 2004.

To carry out preparation, the Bank put together a team comprising policy, economic, financial, and technical expertise, and benefiting from strong internal support on safeguards and fiduciary issues. The Bank paid high attention to identifying and mitigating the potential risks of a very large project to be implemented by Agencies unfamiliar with Bank’s guidelines and safeguards policies. A specific and detailed risk assessment was prepared. Furthermore, in order to assess the technical risks, the Bank hired an engineering firm, specialized in airports to review the design of TB3 and SSH terminals and EHCAAN agreed to make changes suggested to address the identified issues. Regarding safeguards, the Bank guided the Borrower to ensure the quality of the EIAs, including recommendations on the terms of reference for the selection of an environment consultant and a careful review of draft reports. On fiduciary issues, since EHCAAN had no prior experience with Bank projects, the Bank team paid a particular attention to develop tailored implementation arrangements, addressing the institutional complexity arising from the respective roles of EHCAAN, as a recipient of the Loan funds and its affiliates, which were to manage works and book assets on their balance sheets. Financial management provisions were reflected in the Loan and Project Agreement and ensured a proper control of the flow of funds. Similarly, concerns about EHCAAN’s and CAC’s little knowledge of procurement guidelines led the Bank to request the appointment, by the PMU, of a qualified procurement specialist. More generally, the Bank advised EHCAAN on the roles and structure of the PMU, during preparation and throughout implementation, with suggestions on key jobs description. In parallel, the Bank developed a matrix for Monitoring and Evaluation (M&E), focusing on key performance indicators of airports across a range of outcomes relevant to the development objectives, and endorsed by EHCAAN at appraisal. Throughout the process the Bank made good use of its resources and experience.

A major achievement, at entry, was to get GOE’s full agreement on a project scope entailing both large investments and a range of policy and institutional initiatives. At the time of the design, several aspects of institutional improvement and efforts to liberalize air transport sector were recognized. Consequently, the Bank advised EHCAAN on the objectives and the scope of those initiatives which resulted in the drafting of terms of reference by the time of project appraisal.

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On account of satisfactory preparation addressing critical aspects for the implementation of an investment loan, in a very short period of time, the Bank’s performance is rated Highly Satisfactory.

(b) Quality of Supervision

Rating: Highly Satisfactory

Thanks to the excellent collaboration with the implementing agencies, the supervision process, while complex, yielded in general very good results. Early on, the supervision focused on the project compliance with institutional and financial management provisions, the selection process of consultants for institutional studies and capacity strengthening initiatives, and the procurement of TB3 and SSH contracts. Financial management aspects were closely supervised by the Bank Financial Specialist of the project team who, in addition to participating in supervision missions, reviewed financial sections of quarterly progress reports and analyzed the annual audit reports. The Bank also closely monitored the competitive selection of private operators for airports management contracts, although EHCAAN was advised by its own financial advisor. A key milestone for the development of private sector involvement in the airport sector was achieved early on during implementation through the signature of two contracts in December 2004, one for Cairo and one for regional airports. EHCAAN was advised by its own financial advisor.

The Bank thoroughly supervised the procurement of contractors – especially on TB3 – as well as contracts implementation and provided many no objections. At the outset (April 2004), the Bank organized a procurement workshop on the selection of consultants under Bank Financed Projects. It was attended by about fifty participants from key departments of EHCAAN and affiliates. A five-day workshop on procuring works under Bank Financed Projects was also held in Cairo in June 2004. The biggest task consisted in the review of the number of design changes made all along the implementation of TB3 contract, and to a much lesser extent, SSH contract. Under the former the Bank had to review over 167 Contract Variation Notices (CVN) - and finally cleared them given positive impacts on the terminal quality and performance. Six requests for extension of time amounting altogether to 679 days were also submitted to the Bank under the TB3 contract. To embed technical expertise in the supervision team, the Bank hired an airport engineer consultant. During implementation, the Bank had to issue a number of procurement No Objections. One explanation is the complexity of the issues associated with the procurement of such large contracts.

On safeguards, the environment specialist in the Bank team closely supervised the implementation of the EMP and the Bank usefully advised EHCAAN, CAC, and EAC in many instances on a series of design issues for environment protection equipment. The Bank also provided guidance on the terms of reference for the training initiative on environment and reviewed the training material.

Under the institutional and capacity strengthening component, after a series of exchanges with EHCAAN to finalize the TORs of institutional studies, the Bank provided detailed comments on the draft reports during implementation with a view to help the EHCAAN and the Ministry of Civil Aviation take fully into account the consultants’ recommendations.

The additional loan justified by cost overruns was swiftly processed by the Board on January 30, 2008, three months from the date of the request.

Supervision missions took place about every three months during 2004 – 2005, then every six months, which was reasonable, given the complexity of the project and the initial lack of 16 knowledge of the implementing agencies of Bank’s procedures. All supervision missions assessed progress of the project as well as the fiduciary and safeguards aspects. There were two Task Team Leaders since project inception, and the second took charge right before negotiations which helped ensure continuity. The rapid turnover of fiduciary specialists should be noted, although that has not significantly affected the Bank’s performance. Supervision mission teams always included the airport engineer and addressed fiduciary and safeguard issues.

Throughout implementation, the project Development Objective was rated Satisfactory, until January 2009, when it was upgraded to Highly Satisfactory, further to the resolution of issues under negotiation with the contractor on the contract completion date and the effective handover of TB3 facility. The Overall Implementation Progress was rated Satisfactory, early on during implementation, then upgraded to Highly Satisfactory in March 2005 to be downgraded to Satisfactory in March 2006, when the Bank found that delays in implementing construction contracts of TB3 and SSH had significantly increased, and was advised about cost variations exceeding the threshold of Bank’s no objection under the first contract. The successive revisions to the above ratings are, therefore, relevant.

The team rated the project management Highly Satisfactory until January 2009, when it lowered the rating to Satisfactory. However, there were reasons to lower this rating earlier, given the various implementation issues related to TB3, faced by EHCAAN and CAC, since March 2006.

Given the generally consistent good performance of the Bank, the overall implementation rating is Highly Satisfactory.

(c) Justification of Rating for Overall Bank Performance

Rating: Highly Satisfactory

For an Investment Loan, the full completion of the project by the closing date, despite the large financial commitment and the fact that the EHCAAN had no prior experience working with the Bank, has been a significant success. As for many other large-scale and complex construction projects, delays in the construction program and significant cost overruns resulted in an additional financing. Those issues were satisfactorily addressed during supervision with the Bank’s assistance through regular supervision missions and provision of No Objections, although the underlying construction and cost risks of such large projects, especially TB3, could have been better appreciated at preparation through larger contingencies.

An important additional element for assessing the Bank’s performance is the Borrower’ high satisfaction with the transfer of knowledge and best practices and its praise of the Bank’s responsiveness and the value added of its support. The Bank performance under the project was also instrumental in restoring GOE’s confidence in the Bank’s ability to address critical development issues for Egypt.

For the above reasons and in view of consistent ratings of both dimensions, the overall Bank performance is rated Highly Satisfactory.

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5.2 Borrower Performance (a) Government Performance

Rating: Highly Satisfactory

The Government’s continued ownership and extreme commitment to achieving the development objectives were a very positive factor through the various stages of project definition, preparation, and implementation.

The request for a Bank loan by the Minister of Finance in response to the Minister of Civil Aviation’s concerns about the financing of the airport sector evidenced the high level of Government’s commitment from the outset. This high level involvement ensured the basic policy support which presided over the preparation and implementation. Government’s commitment also materialized with the Letter of Sector Policy signed by the Minister of Civil Aviation before negotiations, to state Government’s objectives and policy for the development of air transport and its gradual liberalization.

Further to the Board’s decision, the Government swiftly met the conditions of effectiveness, including the approval of the Loan by Parliament in June 2004, the establishment of a fully staffed PMU as of July 1, 2004, the signature of agreements between EHCAAN, CAC and EAC by the end of June 2004 and that of the Subsidiary Loan Agreement on July 22, 2004. The Steering Committee had been set up earlier in March 2004.

Throughout implementation the Government demonstrated the extreme seriousness of its support to the transformation of the air transport sector. Thus, management contracts of Cairo and country airports entered into force in early 2005. Passengers fees were increased in 2007, upon the recommendation of the Higher Council for Price Strategy, established in 2004. Finally, conditions for opening new air transport services were simplified and the MCA opened Cairo airport to charter lines in early 2009.

Based on the above, Government Performance rating is Highly Satisfactory.

(b) Implementing Agency or Agencies Performance

Rating: Satisfactory

The higher management of EHCAAN and affiliates, CAC and EAC, was fully supportive of the project throughout preparation and implementation, and their in-depth involvement was instrumental in steering it to success through implementation issues. However, the physical implementation of works was slower than expected and costs were higher than planned, to some extent due to factors out of the Borrower’s grasp and implementing agencies’ direct control.

EHCAAN and affiliates devoted significant efforts to accelerate preparation. The availability of a detailed design for TB3, and the well advanced studies for SSH at the beginning of preparation, enabled CAC and EAC to start drafting bidding documents right at the beginning of project preparation and resulted in the tender for TB3 works in December 2003 (following the Bank’s no objection) and for SSH terminal, in April 2004. This was instrumental in ensuring a swift project start.

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EHCAAN and affiliated fully implemented arrangements stated in the Project Agreement. Among others, EHCAAN appointed the head of the PMU in May 2004 and key positions advertised in local newspapers were filled in by the end of June 2004. EAC and CAC hired procurement officers shortly afterwards and financial officers as well. Despite some turnover during implementation, EHCAAN always maintained the capacity of the PMU until project completion. The PMU was highly effective in coordinating project implementation, addressing fiduciary matters, monitoring M&E indicators and preparing high quality progress reports. For the implementation of measures prescribed by the EMP, EHCAAN hired an environmental consultant in September 2004 and his contract was effective until the completion of works.

At the same time, the implementation of TB3 works and ITS contract, and of SSH contract to a much lesser extent, ran into serious issues, sometimes unforeseen and outside the control of the implementing agencies. For example, CAC had to redesign parts of TB3 to meet new seismic rules for construction in Egypt and ICAO updated international security rules. TB3 bidding documents were also issued before the IT system was fully designed, which led to revisions of bidding documents and extensions of contract end dates. The most difficult issue was the ITS, as detailed above. This and various design changes decided during contrition were very challenging and led to further delays and unplanned cost increases, which CAC had to finance out of its own resources and the additional loan. All issues were finally resolved, construction could go through until completion, and the terminal is fully operational.

SSH contract was also affected by significant delays due to the regular closing of the works site motivated by security measures for official visits resulting in final cost significantly above the initial contract amount. Nevertheless, this second terminal is fully operational, gives satisfaction to EAC and is highly appreciated by passengers.

Despite the overall excellent performance of EHCAAN and affiliates, the significant delays in the completion of TB3 and large cost overruns could have been mostly addressed by more thorough design studies and delaying tender by a few weeks, notably to complete the IT system design beforehand.

Therefore, due to the above minor shortcomings, the rating is Satisfactory.

(c) Justification of Rating for Overall Borrower Performance

Rating: Satisfactory

In addition to completing fully operational new terminals at Cairo and SSH which accommodate the large traffic increases since the project launch, the Government enhanced liberalization and privatization in the sector, and the continuing presence of two experienced airport operators should ensure a good transition for future operations. There had also been significant growth in employment at the Cairo airport platform.

Due to the Satisfactory rating in one instance, the overall Borrower’s performance is rated Satisfactory.

6. Lessons Learned

The following lessons can be drawn from the project:

• Sector reform can only be progressive and the Bank’s support through a large scale investment lending operation can make a difference, if provided through an early 19

dialogue during implementation, and focused on strategic aspects, high policy advice, and game changing issues.

• Management contracts are an effective PPP model to foster the modernization of economically viable public entities, enhance operational and financial performance, and transfer know-how, especially when private partners are competitively selected at an early stage, on the basis of well prepared bidding documents.

• Large infrastructure investments like airports can successfully contribute to a country’s economic development, through regional integration, facilitation of trade, increased currency earning tourism, and direct job creation from attracted economic activities when a critical mass is achieved.

• The Bank’s attention and responsiveness during preparation and a strong support all along the project implementation is instrumental for the success of a project.

• The demonstration of solid knowledge and timely delivery of projects enhances the Bank-country relationship.

• Government’s commitment and ownership of the project is essential.

• Full support and attention of the implementing entity’s management and a strong Project Management Unit (PMU) are critical.

• The quality, completeness, and relevance of the design, as well as a strong engineer during construction, can significantly contribute to controlling final costs.

• In future airport operations, as terminal construction projects involve integrated facilities, a single turnkey contractor should carry out all works, equipment supply, as well as the responsibility of sub-contracting the IT system, rather than have two separate contracts, one for terminal works and equipment, and a second one for the IT system.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

The Borrower prepared its own completion report, which summarizes the storyline of the project, describes main events during implementation and confirms outputs. The report also evaluates the achievement of project objectives through results of monitoring indicators. Outcomes and key performance indicators confirm the viability of the PDOs and highlight the project positive impact on the civil aviation sector. The Borrower stresses that results achieved throughout implementation and the way Government, stakeholders, and the Bank responded to substantial challenges faced during the previous five years of implementation until project completion, contributed to an improved image of the Egyptian airports and associated services.

The Borrower candidly acknowledges issues that affected implementation, especially cost overruns and extensions of time under both contracts and delays in procuring TB3 IT system. In addition, the following benefits from collaborating with the Bank are highlighted in this report: • The very fruitful learning process from using World Bank’s guidelines and procedures;

• First time use of standardized performance indicators to guide in forecasts updates and plan ahead;

• The vital role of the PMU in smoothing implementation and reporting. 20

• The positive discipline from regular World Bank missions and reports.

• The value added of the Bank’s review of consultants’ reports.

• The positive outcome of the consultation process on environment issues in terms of developing a common understanding.

• The added value from public media coverage and public awareness of the project investment, economic, and environmental aspects.

Finally, the Borrower acknowledges lessons for future contracts, in terms of using an up-to-date design for bidding documents, keeping realistic construction schedules, and integrating an IT system into the main contract for new terminals.

(b) Cofinanciers

Not applicable

(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

Not applicable

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) CONSTRUCTION OF A THIRD

TERMINAL AT CAIRO INTERNATONAL AIRPORT (TB3) AND ENABLING WORKS. 108 8.6 9.3 - Enabling works 122 383.5 469.0 - Terminal 139 61.8 86 - Runway 124 453.9 564.3 Total CONSTRUCTION OF A NEW

TERMINAL AT SHARM EL SHEIKH AIRPORT AND ENABLING WORKS 65 - Enabling works 2.3 1.5 135 - Terminal 56.8 76.9 133 Total 59.1 78.4 STRENGTHENING SECTOR OPERATIONS AND ENVIRONMENTAL MANAGEMENT -IT equipment 2.1 0.5 23 - Environment equipment 1.3 1.8 140 - Studies locally financed (CAC and EAC) 17.9 0.1 - Studies Bank financed 5.0 1.7 35 Total 26.3 4.1 Total Baseline Cost 539.3 646.8 Physical Contingencies 38.6 0.0 0 Price Contingencies -4.0 0.0 0 Total Project Costs 573.9 646.8 Front-end fee IBRD 3.3 1.775 54 Total Financing Required 577.2 648.58 113

(b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 242.3 275.775 114 International Bank for Reconstruction 335.00 375.0 112 and Development

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Annex 2. Outputs by Component

Component 1: Construction of TB3 in CAI

The new terminal more than doubled the capacity of CAI with a new capacity of 11 million passengers annually (6 million International and 5 million Domestic passengers per annum). TB3 is located adjacent to Terminal 2, and the two terminals are connected by a bridge. The terminal processes all international and domestic flights of the national carrier Egypt Air and its domestic subsidiary Egypt Air Express, as well as Star Alliance partner airlines.

TB3 project was comprised of the construction of a terminal building in addition to airside and landside works. The total built up area is 209,274 m2, including the associated buildings which are: power plant, sewage plant, water tank 18 000 m3 and apron control tower. The project meets the ICAO standards, as well as the Egyptian seismic codes.

The terminal features a main building and two connected fingers A and B with 3 main levels processing all departures and arrivals: the first level serves international arrivals; the second level is dedicated to international departures, and the third level to domestic flights. The two fingers have 15 contact stands of which 5 with multiple uses, and each finger can accommodate A380 category planes. Holding lounges allow services for 23 aircraft simultaneously, in addition to 37 remote stands of which 4 stands for A380. A skyway connects TB3 with TB2 which will enable joint operations of both terminals, once TB2 is reconstructed with Bank support.

The terminal is outfitted with the latest technology in baggage handling system which can process up to 4800 items of luggage per hour for departure, and 1200 bags hour for arrival. The airside has 35 departure belts and 12 arrival belts. The system is equipped with 6 screening machines.

TB3 is equipped with advanced IT system for airport and airline passenger specially-developed for it. Systems are designed to eventually include terminal 1 and 2.

The terminal inaugurated on December 18, 2008, was partially opened for traffic in April 2009 for a ramp up period which ended in July 2009, when all Egypt air flights and those of its partners in Star Alliance were moved to TB3.

Component 2: Construction of New Terminal Building in SSH

The new terminal developed under the project can accommodate 4.5 million passengers per annum, thereby bringing the capacity of SSH airport to 7 million passengers. The building includes architectural specificities with tent like roofs covering the international Departure and arrival halls. The new terminal building comprises two main levels. The ground level is the main level for passengers’ circulation from city side, where most of the passengers’ facilities are located.

The check-in counters, passport control, and public hall complemented with retail areas and food outlets are located at the departure hall. The arrival hall comprises the domestic arrival hall, international arrival hall with visa processing area, immigration control area, baggage claim, customs control, and a public hall with duty free, banks and other respective facilities. The lower level of the building is the level of the apron, where the main waiting area of the concourse, duty free and retails, and the hold gates are all located. On the opposite side, are two arrival gates for domestic and international passengers.

23

The first domestic flight landed on April 16, 2007 under a trial period and the official inauguration took place on May 24, 2007, with a full opening to commercial traffic on June 11, 2007.

Component 3: Strengthening Sector Operations and Environmental Management

Technical Studies and Technical Assistance

All technical studies under the project were successfully completed. EHCAAN and affiliates formed technical committees to consider the recommendations of final reports, including liberalizing air transport, developing an air cargo strategy, building airport management capacity, formulating national airports master plan, and strengthening sector management capacity.

1-Formulation of the Liberalization Study:

Contract amount: US$260,900 Signature date: 05/29/2005 End date: 04/16/2006

In accordance with the study recommendations, the following actions were taken: Charter flights are permitted in all Egyptian airports.

Competition law provides protection and prevents monopoly.

40 licenses awarded for passenger transport.

5 licenses awarded for cargo transport.

Gradual liberalization is ongoing with 25 bilateral agreements signed and negotiations ongoing for 42 additional agreements.

20 code sharing agreements in force.

Pricing policy of airports was modified.

Civil Aviation law 28 of year 1981was amended.

2-The Airport Management Capacity Building Study:

Contract amount: US$298,335 Signature date: 6/6/2005 End date: 19/9/2006

Results: Improved organization charts for the Egyptian Holding Company for Airport and Air Navigation and its subsidiaries.

Improved human resources procedures manual and bylaws.

Training plan for each subsidiary.

Improved IT system to communicate between the different management levels.

Improved earnings rates of employees; average salaries increased 269 per cent since 2003. 24

3-The National Strategy of Developing Air Cargo Study:

Contract Amount: EUR 277,500 Signature date: 5/8/2005 End date: 12/12/2005

Results: Air Cargo Association–Cairo (AC2) established with the following main objectives:

• Support and manage the interest of the Cargo industry of Egypt by enhancing the communication, coordination and cooperation between all stakeholders.

• Set up measures to enhance the Cargo industry at the Airport.

• Maintain and manage excellent relationships with relevant ministries and authorities.

Studies on the import procedures to develop the IT system available in the existing warehouse facilities and to accelerate the Customs process.

Cargo Agents: Civil Aviation submitted a project to certify the Cargo agents in the market to be officially licensed for cargo activities to impose more control and reject intruders.

Egypt Air – Cargo: A feasibility study to develop Egypt Air Cargo terminal (Cargo Village) – the construction is taking place at this stage to meet international standards and the Cargo future vision at Cairo Airport.

Existing Cargo Facilities Development:

• Beside the renovation of Egypt Air warehouse, other warehouses in the area were improved or expanded.

Complete renovation of the Egypt Post building for better mail handling.

Plan to introduce E-Freight for all Airlines in Cairo, by the end of 2009.

Safety and Security: introducing personnel X-ray gates in all Cargo facilities to impose more control and avoid unlawful admittance, in particular, in the restricted areas.

Warehouse regulation: CAC is working with Civil Aviation Authorities and Egypt Air Cargo and to produce a proper document that will govern Cargo activities, process, security, handling, safety and fire fighting, training, and equipment requirements.

Development of new Cargo Facilities at Cairo Airport: Egypt ambition is to develop its Air Cargo sector into a larger and more profitable industry with Cairo International Airport.serving as a successful international Cargo hub. The major objective of the national strategy for Air Cargo is to stimulate and develop, in the long term, a financial and healthy air Cargo industry in Egypt.

4-Preparation of National Airport Master Plan

Contract amount: US$ 530,699 and L.E 229,185 Signature date: 6/2/2005 End date: 8/20/2007 25

Results:

The need to coordinate investment plans for Egypt’s Airports was eminent as development progressed to accommodate the much increased passenger’s flow, especially for tourism purposes. It was, therefore, compulsory to prepare a 20 year Master Plan. This plan addressed: overall country strategy for the development of airport infrastructure; sequence and optimize investments;

guidance on future development of private concessions;

funding scheme of infrastructure, identifying responsibility for maintenance; and

issues faced by small airports such as tailoring subsidies to identify socioeconomic functions.

The Master Plan Module, produced by the international consultant was used to train EHCAAN’s officials. The plan was continuously adjusted to take into account the unprecedented traffic growth (especially in SSH). The plan has been instrumental in accelerating the decision to build another terminal and a runway in SSH, and implement other investment plans in Egypt international airports.

5- External Auditor

Contract amount: L.E 241,061 Signature date: 3/30/2005 End Date: 12/15/2009 (contract was amended in July, 2007 to extend the Auditor Contract to cover the closing of the Loan Agreement)

Environmental Management

Two Environmental Management Units (EMUs) were established in CAC and EAC to monitor the project EMP and develop environment practices within Egyptian airports for the first time. EAC management has already started to implement environmental measures on landside and imposes fines on the violating party. Concerning the implementation on airside, ICAO standards are being adopted and implementation will commence as soon as executive measures are certified.

6- Environmental Consultant

Contract amount: EGP 289,000 Signature date: 9/23/2004 End date: 06/15/2008

The consultant supervised the implementation of the EMP, assisted the PMU to establish Environmental Management Units (EMU) and assisted in procuring and installing the air and noise monitoring systems. The consultant also provided training on environmental issues to the EMUs. Advanced environmental training conducted by a specialized firm contributed to building the capacity of the EMU staff. The consultant coordinated closely with the project management to address all environment concerns during the construction of terminals in CAI and SSH, regarding the treatment of hazardous waste and solid waste, the construction and rehabilitation of

26 chlorination stations associated with airports and the implementation of other environment measures.

7- Environmental Training

Contract Amount: EUR108, 221 and L.E. 408,663 Signature date: 10/27/2005 End Date: 09/21/2006

8- Advanced Environmental Training

Contract amount: US$149,645 Signature date: 12/03/2006 End date: 09/04/2007

9- Noise Measurement for CAC and EAC

Contract amount: EGP 272,984 Signature date: 09/12/2005 End Date: 01/15/2006

2. Goods Procurement

The Financial Management System and environmental equipment were successfully installed and the designated staff was trained to effectively utilize them.

1- IT equipment for the Financial Management System (FMS)

Contract amount: US$552,044 Signature date: 09/18/2005 End Date: 06/15/2008

2-Environmental Equipment

2.1 Noise Monitoring System (LOT # I)

Contract Amount: EURO 742,957 Signature date: 06/29/06 End date: 07/2/2006

Twelve Noise Monitoring Terminals were installed in CAI, and after the completion of the new runway, two other terminals were expected to be installed. In addition, eight other terminals were installed in SSH.

2.2 Ambient Air Quality Monitoring System (LOT # II)

Contract amount: EGP 5,447,835 Signature date: 07/5/2006 End Date: 10/29/2006

Two Air Monitoring Units were installed in CAI and one unit in SSH. 27

Annex 3. Economic and Financial Analysis

A. Economic Analysis for Cairo Airport

Main Assumptions Used for the TB3 Economic and Comparison with the PAD

Traffic at Cairo

Traffic data were revised to take into account: (i) the rapid growth until 2008 (+11.9 percent annually) driven by tourism and the transformation of Cairo into a hub; (ii) the impact of the economic crisis which has stopped growth so far. With the project, passenger traffic would accordingly grow at 0 percent in 2009/2010, 5.4 percent annually during 2010/2011–2013/2014, then 3.3 percent under the best case scenario (same percentages for each category of traffic). The above figure can be compared to PAD forecasts of 3.5 percent annually from 2002. Domestic charter and business related traffic was escalated at just one percent p.a. between 2008 to 2015, thereafter at 0.5 percent p.a. beyond 2015, assuming that no growth of these traffic segments would be unrealistic.

Without the project, it was expected that traffic would not grow beyond fourteen million passengers p.a. (traffic handled by CAI in FY2007/2008 before the opening of TB3).

Tariffs

Departure fees were increased to US$15 per international passenger, and US$3 per domestic passenger in 2007. Tariff increases were substantial, but remained market-based. Because of the increased commercial spaces, commercial income per passenger increased to US$4.8 in the first half of 2009. This trend remained unchanged over the evaluation period (vs. US$2.9 in the PAD for the year 2008). Revenue from other sources will be based on the same rates.

Expenses

Additional working expenses would be incurred as a result of TB3 operations.

Benefits for Cairo TB3 (Table 5)

As in the PAD, it is assumed that benefits would accrue as a result of:

ƒ Existing traffic. With the project, the 14 million passengers received in Cairo, would benefit from an improved level of service once TB3 is opened. Since the expenditure in Egypt by each foreign visitor did not increase substantially from 2004 estimates, the same as the US$3 rate for each passenger in the PAD.

ƒ Additional traffic. Traffic that would not come to Cairo because of capacity bottlenecks would generate benefit based on the tariff that would apply to them (close to US$11 per passenger vs. US$10 in the PAD, excluding incremental revenue from commercial functions).

ƒ Incremental commercial revenue base. The revenue base expanded, as a result of more space and more commercially oriented management, brought in under the management contract. The economic analysis assumes that the commercial and rental revenue earned by CAC would raise to US$4.8 equivalent per in-and-out international passenger, from an

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estimated revenue of US$1.8 under conditions at appraisal and based on the CAC Statement of Income for FY2008.

ƒ Revenue netted by Egypt from tourism. Without the project, it is assumed that not all tourists lost to Cairo would be lost to Egypt. As in the PAD the evaluation retains a net benefit to Egypt of tourist (namely US$22) and applies it to half of in-and-out tourist traffic.

Table 5: Economic Evaluation TB3 Year Investment O/M costs Existing Added Tourism Commerce Net costs (US$ (US$ mios) Traffic traffic benefits (US$ mios) benefits mios) (mio) (mio) (US$ mios) 2003 2004 8.4 -8.4 2005 67.1 -67.1 2006 58.4 -58.4 2007 167.6 -167.6 2008 218.5 -218.5 2009 78.7 21.5 35.6 33.9 -32.4 2010 0.2 21.1 35.6 7.4 3.2 35.8 60.7 2011 20.7 35.6 15.8 7.4 37.7 75.8 2012 20.7 35.6 24.8 11.7 39.7 91.1 2013 20.7 35.6 34.2 16.2 41.9 107.2 2014 20.7 35.6 44.2 20.9 44.1 124.1 2015 20.8 35.6 50.6 24.3 45.6 135.2 2016 20.8 35.6 57.2 27.3 47.1 146.3 2017 20.8 35.6 64.0 30.3 48.6 157.7 2018 20.8 35.6 71.1 33.4 50.2 169.5 2019 20.8 35.6 78.3 36.7 51.9 181.7 2020 20.8 35.6 85.9 40.0 53.6 194.3 2021 20.8 35.6 93.6 43.4 55.4 207.2 2022 20.8 35.6 101.7 46.9 57.2 220.6 2023 20.8 35.6 110.0 50.5 59.1 234.4 2024 20.8 35.6 118.6 54.2 61.1 248.6 2025 20.8 35.6 127.4 58.1 63.1 263.3 2026 20.8 35.6 136.6 62.0 65.1 278.5 2027 20.8 35.6 146.0 66.0 67.3 294.1 2028 20.8 35.6 155.8 70.2 69.5 310.3 2029 -299.5 20.8 35.6 165.9 74.5 71.8 626.4 ERR 17.2% NPV US$422 million

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B. Economic Analysis for Sharm el Sheikh Airport

Traffic at Sharm El Sheikh

With the project, the international passenger traffic would grow annually by 5.5 percent from 2009/2010, which takes into account the impact of the economic downturn after the rapid growth during 2002/2003 – 2008/2009 and refers to estimates by the ACI1; domestic traffic would grow by two percent. Based on these assumptions for long–term growth and the actual traffic in 2008, the airport’s overall capacity of around 8 million passengers would be saturated by 2015. Once the new capacity is saturated, international traffic could not increase further, which would be consistent with an overall capacity constraint.

Without the project, existing capacities would have saturated further from early 2006 and overall traffic would have stagnated even more. Domestic traffic is still assumed to grow by around 0.5% until 2015, consistent with the PAD.

Expenses

Investment costs are expressed in constant dollars.Working expenses, which are limited to operation and maintenance of the new terminal building, are estimated at US$8.5 million in 2006. They will grow at the same pace as traffic.

Benefits

ƒ Additional traffic. Benefits are based on an average revenue of US$9 per passenger, excluding incremental commercial revenue, as originally estimated in 2004.

ƒ Expansion of the commercial revenue base. The “with project” international traffic would spend an incremental US$2.5 per passenger, using the data prepared by the PMU for the monitoring indices.

ƒ Revenue netted by Egypt from tourism. Average spending by tourist is taken as the one calculated for CAI, or some US$850 net of taxes. Accordingly, it is estimated that on average, about US$2.2 per international passenger would be lost. This is consistent with the revenue of the PAD, updated with traffic volume of 2008.

ƒ Time savings. Most passengers come to vacation, and time lost in transit has no impact on economic production.

1 Airport Council International

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Table 6: Economic Evaluation - Sharm El Sheikh Benefits International Initial O&M Additional from Commerce Net Year passengers Investment Costs (US$ traffic tourism (US$ million) Benefits (million) (US$ million) million) traffic 2003 2.841 2004 4.014 0 2005 4.13 19.6 -19.6 2006 4.439 78.5 8.5 -87.0 2007 5.9 11.9 3.2 14.8 2008 7.1 12.5 5.9 17.8 2009 7.5 13.2 6.7 18.7 2010 7.9 13.8 7.7 19.8 2011 8.4 14.5 8.6 20.9 2012 8.8 15.2 9.7 22.1 2013 9.3 16.0 10.7 23.3 2014 9.8 16.8 11.9 24.6 2015 10.1 16.8 12.5 24.6 2016 10.4 16.8 12.5 24.6 2017 10.8 16.8 12.5 24.6 2018 11.1 16.8 12.5 24.6 2019 11.4 16.8 12.5 24.6 2020 11.8 16.8 12.5 24.6 2021 12.1 16.8 12.5 24.6 2022 12.5 16.8 12.5 24.6 2023 12.8 16.8 12.5 24.6 2024 13.2 16.8 12.5 24.6 2025 13.6 -39.2 16.8 12.5 24.6

98.1 ERR 0.1 37.8% US$278 NPV 0.1 million

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Responsibility/ Names Title Unit Specialty Lending Archi Ben Achour Lead Social Development Specialist AFTCS Elena Gagieva-Petrova Program Assistant FPDVP Hany Shalaby E T Consultant Environment Hisham Waly Sr. Financial Management Specialist MNAC S Hocine Chalal Regional Safeguards Advisor MNAC S James A. Reichert Sr. Infrastructure Specialist EASCS Klaas Peel Aviation Specialist Michel Loir TTL Michel Bellier Lead Transport Specialist MNSS TTL D Panneer Selvam Regional Safeguards Advisor EAPC O Sherif Arif Consultant Hovsep M. Melkonian Consultant AFTRL James A. Reichert Sr. Infrastructure Specialist EASCS

Supervision/ICR Abduljabbar Hasan Al Qathab Senior Procurement Specialist MNAPR Akram Abd El-Aziz Hussein Sr. Financial Management MNAFM El-Shorbagi Specialist Badr Kamel Sr. Procurement Specialist MNAPR Elisabeth Sherwood Financial Analyst AFTU1 Hassine Hedda Finance Analyst LOADM Hocine Chalal Regional Safeguards Adviser MNACS James A. Reichert Sr. Infrastructure Specialist EASCS Maged Mahmoud Hamed Sr. Environmental Spec. MNSSD Maiada Mahmoud Abdel Fatt Consultant Financial Management Kassem Michel Bellier Lead Transport Specialist MNSSD TTL Mikael Sehul Mengesha Sr. Procurement Specialist MNAPR Mohamed Yehia El Karim Financial Management Specialist MNACS Fatiha Amar Program Assistant MNSSD

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(b) Staff Time and Cost

Table 7: Allocation of Staff Time and Costs Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY03 14 52.83 FY04 59 342.14 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00 Total: 73 394.97 Supervision/ICR FY03 0.00 FY04 11 70.32 FY05 40 198.05 FY06 38 159.81 FY07 29 197.24 FY08 18 132.16 FY09 7 0.00 Total: 143 757.58

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Annex 5. Monitoring Indicators

Table 8: Outcome indicators Monitoring Indicators Baseline Target Values

Outcome Indicators 20032 2004 2005 2006 2007 2008 Traffic Development at CAI - million pass. 8.7 .mil 9.0 mil. 9.3 mil. 9.6 mil. 10.0 mil. 10.3 mil. (domestic and international) Actual 8.4 mil 9.5 mil. 10.2 mil 10.8 mil 12.6 mil 14.3 mil Traffic Development at SSH 3.2 mil. 3.5 mil. 3.8 mil. 3.9 mil. 4.2 mil. 4.3 mil. (domestic and international) Actual 3.4 mil. 4.6 mil. 4.8 mil. 5.1 mil. 6.4 mil. 7.8 mil. Occupancy Rate at Peak Hour at TB3 – 6.8 / 5.3 7.1 / 5.5 7.3 / 5.7 7.5 / 6.3 1.0 / 1.0 1.0 / 1.0 domestic / international Actual arrival (actual 0.9/2.1 0.4/1.26 0.48/1.0 traffic/rated capacity) departure 0.96/1.03 0.89/1.25 Occupancy Rate at Peak Hour at SSH – 1.2 / 2.3 1.2 / 1.4 1.2 / 1.5 .35 / .75 .37 / .80 .38 / .80 domestic / international Actual (actual 1.4 1.94 0.72-0.83 traffic/rated capacity) Processing Times for Arriving Passengers at CAI 34 / 41 36 / 46 38 / 51 40 / 56 25 / 35 25 / 35 (minutes) Actual 30 29 30

Processing Times for Departing Passengers at 35 / 65 37 / 70 39 / 75 41 / 80 20 / 45 20 / 45 CAI (minutes) Actual 45 45 45 Processing Times for Arriving Passengers at SSH 30 / 45 30 / 45 20 / 40 20 / 35 20 / 35 20 / 35 – domestic / international (minutes)3 74 54 19 Actual Processing Times for Departing Passengers at 60 / 75 36 / 45 36 / 45 30 / 40 30 / 40 30 / 40 SSH – domestic / international (minutes)4 Actual 54 33 13

Table 9: Results Indicators

Results Indicators for 2003 2004 2005 2006 2007 2008 Each Component Component One : n.a. 0% 25% 50% 75% 100%. Percentage of project completed (TB3 and new runway) Actual 0% 14.1% 26.5% 60% 87.7%

Component Two : 0% 5% 50% 80% 100% n.a. Percentage of project completed (new terminal) Actual 23.2% 23.2% 70% 100%

Component Three: x

1) Airport Master Plan adopted by MCA. x 2) CAI opened to foreign charters, private domestic air services. 3) Feasibility study CAI Cargo Village approved. 4) - consultant hired to implement EMPS (CAI & SSH). x - Equipment installed x x 5) Training completed, systems installed at EHCAAN and affiliates.

2 Expected where indicated otherwise, figures are for 2003. 3 Processing times for arriving international passengers at SSH exceed those at CAI because many tourists arrive without visas, which must be processed on the spot. 4 Processing times for departing international passengers at SSH exceed those at CAI because of the many charter flights at SSH, all of which have similar departure times and create bunching effect. 33

Baseline Target Values Outcome Indicators 2003 2004 2005 2006 2007 2008 Commercial Revenue per 2.1 2.2 2.4 2.5 2.7 2.9 Passenger at CAI 2.0-2.3 2.4-2.7 3.8-4.1 3.4-3.7 3.5-3.8 4.0-4.4 (in US$) Actual Commercial Revenue per 2.4 5.4 5.2 5.4 5.5 5.6 Passenger at SSH 4.8 4.5 (in US$) Actual Passenger per Staff Ratio 2260 2350 2470 2600 2750 2900 at CAI 2135 2441 2850 2812 3290 3512 (total CAI pass. / total CAC staff) Actual Passenger per Staff Ratio 30769 31250 31932 30232 30215 28666 at SSH 28292 37971 39261 35520 25030 23317 (total SSH pass. / total SSH staff) Actual MCA Certification, Based n.a. n.a. SSH n.a. n.a. CAI on ICAO Standards, Obtained for CAI/SSH Actual SSH Foreign Exchange 1,260 1,289 1,333 1,380 1,424 1,481 Earnings from Tourism at 1080 1590 1789 1963 2316 2564 CAI (in US$ million) Actual Foreign Exchange 1,001 1,095 1,189 1,220 1,314 1,360 Earnings from Tourism at 815 1318 1515 1738 2334 2844 SSH (in US$ million) Actual Exports at CAI (in tons) 124,894 127,392 129,940 132,539 135,190 137,893 Actual 148,000 146,500 158,700 171,300 172483 Imports at CAI (in tons) 75,369 76,877 78,414 79,982 81,582 83,213 Actual 70,600 82,500 91,600 101,100 107778 Private Sector Airport 12,700 / 12,700 / 12,700 / 12,700 / 12,700 / 12,700 / Service Delivery Jobs at 6,275 6,275 6,275 6,275 6,275 8,275 CAI (Egypt Air / other 17,307/2641 16,985/2786 13911/6551 13473/7925 firms) Actual Private Sector Airport 286 / 256 308 / 286 332 / 321 358 / 369 386 / 424 416 / 488 Service Delivery Jobs at 365/628 1015/733 SSH (Egypt Air / other firms) Actual Cumulative Private $50 mil. >$80 Investment in Airport million. Infrastructure Customer Satisfaction at 3.5 / 3.5 n.a. n.a. 3.8 / 3.8 n.a. 4.4 / 4.4 CAI4 40-53% 46-89% 49-86% (arrivals / departures) Actual Customer Satisfaction at 3.0 / 3.3 n.a. n.a. 4.0 / 4.0 n.a. 4.5 / 4.5 SSH 53% 33-45% ?? (arrivals / departures) Actual Debt Service Coverage 5.3 n.a. n.a. n.a. 1.3 1.3 Ratio for CAC 4.1 4.5 7.0 6.1 4.7 4.9 Actual Current Ratio for CAC 3.0 n.a. n.a. n.a. 1.0 1.0 Actual 0.08 0.26 0.61 0.76 0.75 0.72 D S C 34

R EAC A

Annex 6. Stakeholder Workshop Report and Results

N/A

35

Annex 7. Summary of Borrower’s ICR

Project Rationale

During the late nineties and the early years of 2000s the airport sector had experienced different approaches in Public-Private financing on a limited scale, given that local airport investments were overdue, but development plans were hindered by a deteriorating business climate for infrastructure concessions worldwide. Private financing for airport development in Egypt was therefore unlikely, and public financing for the proposed new terminals was the most valid alternative.

The Airports Development Project was first presented to the Bank in January 2003. The World Bank’s involvement was to assist the Egyptian civil aviation sector in overcoming the traffic bottlenecks, improving the level of service and promoting the direction towards removing obstacles to private participation in airport infrastructure.

The Egyptian civil aviation management used growth scenarios forecasts before project inception to predict capacity bottlenecks in main international airports. Actual traffic statistics largely surpassed growth estimates especially in 2008 (in CAI 40 percent higher than PAD’s estimation, and in SSH 80 percent higher than PAD’s estimation).

The following are actual traffic statistics in 2008: ¾ 80.7% of total traffic in Egyptian airports are international passengers (in CAI 80.5% while in SSH 86.6%, Hurghada 92.5%, Burg El-Arab 99.6%). ¾ 40.1% of Egypt’s passenger traffic is handled at CAI compared to 50% in 2004 (PAD) marking significant growth in Egypt other international airports (SSH, Hurghada, Luxor, Aswan had the largest passenger traffic, respectively). ¾ Egypt’s other International Airports experienced growth rates exceeding international norms. ¾ Annual passengers’ growth in 2008 reached 14.2% in CAI, 20.8% in SSH, 13.4% in Hurghada, 147% in Luxor, and 9.7% in Aswan. The growth was in correlation with the completion of major development plans in these airports and the augmented tourism movements witnessed during 2007 and 2008, until the beginning of the global economic downturn which has deeply affected the aviation industry worldwide. ¾ Maximum rated capacity in CAI was 9 million passengers in 2004; traffic reached 10.7 million in 2006. By the time TB3 was opened for operation in April 2009, annual traffic reached 14.4 million passengers. Current rated capacity of the airport is 21 million passengers p.a. (but will go down to 17.5 million p.a. when TB2 is closed for renovations and expansion plans). ¾ Sharm El-Sheikh Airport (SSH) still handles the second largest tourist traffic in Egypt since project appraisal. In the last ten years, SSH passengers’ traffic grew five times.

Traffic congestion has put quality of service at risk and damaged Egypt’s image, and hence affected tourism inflows and foreign exchange revenues since tourism industry is the country’s biggest source of foreign currency. Egypt attracted a total of 12.8 million visitors in FY2008 and earned $11 billion from tourism. In the second quarter of 2009, tourism revenue amounted to about $2.6 billion, similar to the earlier year and signaling a recovery from a slump caused by the global financial crisis.

The Bank rating of PDOs during project implementation has consistently been either “satisfactory” or “highly satisfactory” and EHCAAN has thoroughly delivered reports content.

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Project Development Objectives (PDOs) and Design

Project Objectives were to support the Borrower’s efforts to eliminate capacity bottlenecks to growth in airport traffic, raise the quality of services to international best practice standards at Cairo International and Sharm El Sheikh Airports, and promote private sector participation in airport management and service delivery.

Project outcomes and Key Performance Indicators reflected in this document confirm the viability of the PDOs and highlight the project positive impact on the civil aviation sector. Results achieved throughout implementation and the way the Government, stakeholders and the Bank responded to substantial challenges faced during the five years of implementation until project completion, reveal the serious commitment to improve the image of Egyptian airports and associated services. This was also reflected in the level of profitability perceived by the sector, as reflected in the income statements of the Owners.

Project Development Objectives Results Framework-Outcome Indicators

• Eliminate capacity bottlenecks to growth in airport traffic

a) Traffic growth at CAI and SSH: higher than expected passenger growth since the project’s original forecasts at appraisal. It was higher than PAD estimate by 5% in 2004 and by nearly 40% in 2008. The highest passenger traffic growth in CAI was recorded in Jan-08 with + 45.3% on a month-on-month comparison. In SSH, the highest was by 32% in Nov-08 on a month-on-month basis.

b) Growth in tourism: foreign earnings from tourism in 2008 increased from an expected US$1,481 million to US$2,564 million in CAI (revenues has grown 2.4 times since 2003); and from an expected US$1,360 million to US$2,844 million in SSH.

c) Growth in cargo exports through CAI: after stagnating at around 200,000 tons p.a. from 1999 until project inception, cargo traffic has increased to 287,000 tons compared to the anticipated 221,000 tons. The Cairo Cargo City project, currently under implementation will add an additional capacity of 200,000 tons.

• Raise the quality of services to international best practice standards at CAI and SSH

a) Processing time in CAI and SSH: (i) passenger processing time in CAI for international arrival passengers reached an average of 33 min (PAD plan was up-to 35 min) compared to 41 min in 2003; and processing time for departure was on average 45 min (as planned) down from 65 min in the base-year. (ii) passenger processing time in SSH for international arrival passenger reached an average of 20 min (PAD plan was up-to 35 min) compared to 45 min in 2003; and processing time for departure reached 12 min on average down from 75 min in 2003.

b) Certification for SSH from ICAO was issued on 13 Apr-08; the certification from ICAO for TB3 in CAI is in progress.

37

• Promote private sector participation in airport management and service delivery

a) Boosted airport commercial revenues.

b) Developed private sector jobs.

c) Increased private sector role in the aviation industry.

d) Private firms are more involved in providing airport services. These firms comprise 7.3% of all CAI staff within the airport area. In 2009, airlines staff increased by 7.8%; the number of retail companies was up by 6% to reach 36 companies; 14 cargo companies increased staff by 64%; while Egypt Air staff increased by 6.8%.

e) Support to gradual liberalization of the sector and promote operational efficiency and cost-effective delivery of airport services. MCA’s commitment to liberalize the sector began to materialize immediately in December 2004 when it signed contracts with international operators to assist in managing CAI and five regional airports in Egypt, including SSH. The liberalization of air transport study implications are detailed in “Project Components” section in Annex 2.

Project Cost

Following the signing of the Additional Loan Agreement (EGY-7415) on June 27, 2008, and its effectiveness on March 8, 2009, the Government of Egypt received a total of US$375 million of IBRD financing for: (i) the construction of the third Terminal at Cairo International Airport with investments of US$328.30 million; (ii) the new terminal at Sharm El Sheikh Airport, with investments of US$42.70 million; and (iii) consultancy services for both airports at about US$4.00 million. It is worth noting that, until June 2006, this project was the largest WB Loan to Egypt in 30 years.

Following is a brief of the project expenditures financed by the Bank (table 10):

Table 10: Allocation of Loan Proceeds (US$) Original Loan Revised Agreement Component A: Construction of TB3 262,700,000.00 288,366,617.89 Component B: Construction of SSH 39,300,000.00 42,670,430.00 Component C: Goods 3,500,000.00 2,265,848.04 Component C: Consultants Services 3,600,000.00 1,697,104.07 Un-allocated Funds 25,900,000.00 Additional Loan for Component A 40,000,000.00 Total 335,000,000.00 375,000,000.00

Civil Aviation Investment Plan (2007-2012)

The Civil Aviation Ministry has proceeded with its mission to expand and improve Egypt’s airports and the national carrier, Egypt Air, at a time when many other countries and carriers have temporarily reduced, and in some cases suspended, activities as a consequence of the worldwide economic downturn. This shows the importance of fully utilizing the findings of the studies to anticipate future problems and bottlenecks and securing the funding for projects aimed at equipping the borrower with efficient means to eliminate them. The following table displays

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EHCAAN and affiliates projects in the 2007-2012. The investment plan over 2002–2012 is estimated at EGP 15,500 million broken down as shown in table 11: Table 11: Breakdown of investment Plan

Airport Project Name Cost (million EGP) Total Cost Cairo International Airport Cairo Cargo City 384 TB2 Rehabilitation 2000 Automated People Movers 568 TB1 Façade Cladding 42 Construction of New Power 250 Station and Renovation of TB2 Current Station Airport New Road 100 Long-term Parking Multi- 226 3570 storey Garage (capacity 3000 cars) Sharm El-Sheikh International Airport (SSH) Extending and maintaining the 120 current Runway Construction of New Terminal 2300 2420 Building and New Runway Hurghada International Airport Rehabilitation of Current 152 Terminal (phase II) Construction of New Terminal 2000 Building and New Runway Additional Infrastructure 100 2252 works and Service Buildings 100 100 Nozha Airport Extending and maintaining Current Runway Burg El-Arab New Terminal 547 547 Building, Taxi ways, Cargo Facility, and Infrastructure Works Abu Simbel Rehabilitation of Current Terminal Airport Building, Tarmacs, Taxi 85 85 ways Assiut Airport Construction of 100 100 New Terminal Building Taba Airport Rehabilitation and expanding current Terminal from 2700 m2 to 6100 m2 NANSC New Control Tower in 66 66 Hurghada 100 New Control Tower in CAI 196 Rehabilitate ILS-VOR/DME 114 Navigation aids Rehabilitate VHF radio 58 equipment Development of Air Control, 150 618 Simulation, Back-up Systems in Cairo Navigation Center ITS 181 181 ITS Development at EAC International Airports 39

Key Factors Affecting Implementation and Outcomes

Part I - Major delays in Project Schedule and Justifications

COMPONENT 1: TB3 Construction Contract

1. Main contract of TB3 (TAV)

• Delay during prequalification phase: N/A • Delay during Tendering phase: N/A • Delay during contract implementation phase as follow: Main duration of contract implementation 900 days phase: Extension of time: 679 days Final and revised contract implementation 1579 days duration: Clarifications are provided in table 12 below:

Table 12: Clarifications and justifications regarding major delays Explanation Delay (days) Application of new seismic code caused redesigning more than 120 75 shop drawing, in addition to electrical and mechanical boards. Design changes to comply with ICAO and A380 requirements. Changes required by CAC Private Operator.

The extended period required to award the ITS Contract. Although 102 not a major delay, there were interface issues which do affect contract coordination. Upgrading of Passenger Boarding Bridges to incorporate glazing. Expansion/redesign of toll station on all airport approach roads.

Five New Toll station and related facilities design and shop- 184 drawings approval. Implementation of changes arising out of Fire Strategy. Changes to Steel and Aluminum Rolling Shutter Doors.

Generator fuel tanks supply and installation. 92 Skyway connection and interface with TB2. Master Key system. Fuel hydrant System based on revised hydrostatic testing and fuel flushing.

Egypt Air Storm water Drainage Pond. 125 New Toll Station Site 5.Core and Shell Areas. Concessionaire’s Technical Requirements. Outdoor WLAN Access Point.

Egypt Air Storm water Drainage Pond. 103 BAS connections to Oil Separators.

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2. Information Technology Systems contract of TB3 (ARINC)

Table 13: Clarifications and justifications regarding major delays

Explanation Contract Duration/Delays (days) During prequalification phase: SITA’s complain was impacted on 109 the time schedule of tendering phase by shifting the time. Main duration of contract implementation phase. 547 Main Contractor’s revised program of Works BAS5. In respect of a 196 delay to Biometric Immigration Gate. Main Contractor’s revised program of Works BAS6, and the main 170 contractor’s subsequent failure to work in accordance with the program. Main Contractor’s revised program of Works BAS7. Delay in 127 respect of intermittent power supplies to equipment rooms and a lack of continuous air-conditioning supply.

COMPONENT 2: SSH Construction Contract (Saudi Bin Laden Group)

The contractual duration of the contract was 550 days at signature. During implementation, extensions of time detailed in table 14 below have lengthened the contract by 281 days.

Table 14: Clarifications and justifications regarding major delays Explanation Delay (days) Security suspensions (VIP stoppages) and ADP changes 178

Security suspensions(VIP stoppages) 22

Delays in the customs clearance process between June and Mid- 92 September 2006. Continuing Security reason beyond the control of the contractor New requirement by the airports operator to amend layout and fit out details at several locations. The impact of the Bairam and Christmas holidays

Part II: Modifications and changes of Components 3

The following changes were made to the schedule of component 3 activities (table 15)

Table 15: Changes in contracts Tender description Revised Action Revised Description PMU Support Cancelled Auditor (phase I& II) Transfer & amended Environmental Equipment Transfer to consultant Noise measurement for CAI & services SSH Environment Divided into: Environmental Consultant * Consultancy Services Environmental Training and * Training Advanced Environmental Training

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Private Sector Delivery Jobs at CAI

Volume of private sector permanent jobs in Egypt Air is compared with that of other Private Firms working in CAI. Airport services included in the survey covered all activities of the airport such as airline companies, retail, cargo, or tourism. The following table compares actual volumes of permanent jobs in Egypt Air and other firms with that of planned figures in the PAD.

Table 16: Private Sector Delivery Jobs in CAI compared with PAD 2003 2004 2005 2006 2007 2008 2009 Egypt Air • PAD 12,700 12,700 12,700 12,700 12,700 12,700 12,700 • Actual 17,307 16,989 16,884 13,911 13,473 See below See below Other Firms • PAD 6,275 6,275 6,275 6,275 6,275 6,275 • Actual 2,641 2,786 3,638 6,551 7,925 See below See below

Further analysis shows that by including temporary staff working in the airport area, in different airport related activities, the total number of staff in CAI reaches 45,138.

The following table provides detailed data on the total of staff (permanent and temporary) working in the airport area, divided by activity showing private, government, and Egypt Air Staff Distribution: Table 17: Employment Analysis/Private/Egypt Air/Activity 2007 2008 2009 Airlines 14,878 16,346 17,622 less Egypt Air Express 0 33 201 less Egypt Air Holding Company 2,744 3,895 4,903 less Egypt Air Airlines 6,709 6,244 6,468 less Egypt Air Maintenance 3,922 3,785 3,969 Airlines -Private 1,503 2,389 2,081 Airport 12,637 13,264 16,019 less Egypt Air Ground Services 3,899 4,418 4,673 Airport 8,738 8,846 11,346 Retail 5,064 5,181 5,500 less Egypt Air Tourism and Tax 1,429 1,475 1,636 Free less Egypt Air In-flight Services 2,089 2,103 2,156 Retail -Private 1,546 1,603 1,708 Tourism 574 566 310 Cargo 1,559 1,637 2,699 less Egypt Air Cargo 1,054 1,090 1,205 Cargo –Private 505 547 1,494 Government 648 671 848 Other 1,945 2,020 2,140 less Egypt Air Hospital 1,085 1,112 1,151 less Egypt Air Supplementary 657 702 763 Industries Other -Private 203 206 226 TOTAL PRIVATE 12,495 13,591 16,855 GRAND TOTAL 37,305 39,685 45,138

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

N/A

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Annex 9. List of Supporting Documents

• Project Appraisal Document

• Aide Memoires

• Monthly, quarterly, and annual progress reports

• Mid-Term report

• EHCAAN, CAC and EAC financial statements

• Borrower’s Implementation Completion Report

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MAP

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IBRD 37418

ARAB REPUBLIC OF EGYPT AIRPORTS DEVELOPMENT PROJECT TERMINAL FINANCED UNDER THE PROJECT MAIN AIRPORTS SECONDARY AIRPORTS ARAB REPUBLIC OF EGYPT NATIONAL CAPITAL GOVERNORATE CAPITALS MAIN CITIES AND TOWNS MAIN ROADS RAILROADS INTERNATIONAL BOUNDARIES

25°E 30°E WEST BANK AND GAZA M e d i t e r r a n e a n S e a To To 0 50 100 150 200 Kilometers Darnah Tel Aviv Salûm Marsa Matruh Damietta Kafr El El 0 50 100 150 Miles Alexandria Sheikh Port Said Arish El Mansura Damanhur ISRAEL Khalda Tanta El Gora Meleiha Zagizig This map was produced by theJORDAN Map Design Unit of The World Bank. Shibin El Kom Ismailia The boundaries, colors, denominations and any other information Benha shown on this map do not imply, on the part of The World Bank 30°N 30°N Badr El Din Giza Suez Group, any judgment on the legal status of any territory, or any Abu El CAIRO endorsement or acceptance of such boundaries. Ghradieq Qâra TabaTaba Sîwa El Fayoum G a ulf of Suez Beni Suef Abu 35°E Rudeis

Gulf of Aqab St. Catherine Râs Ghârib SAUDI El Tor Ras Shu Keir Al Minya ARABIA Zeit Bay Sharm El Sheikh LIBYA Nile Assiut Al Ghurdaqah

River Bîr Seiyâla Sohag Qena Quseir.

Luxor Mût. El Kharga

25°N Marsa 'Alam 25°N

Kom Ombo

Aswan Red Sea

Lake Nasser

Shark El Oweinat Abu Simbel Halaib

To To To Port Sudan SUDAN Dongola Berber 20°N 20°N

25°E 30°E 35°E DECEMBER 2009 47