Document of TheWorld Bank FOR OFFICIAL USE ONLY j^/ 3301- IfAA Public Disclosure Authorized Report No. P-5482-IRN MEMORANDUMAND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT Public Disclosure Authorized TO THE EXECUTIVEDIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENTTO US$250 MILLION TO THE CENTRALBANK OF THE ISLAMIC REPUBLICOF IRAN FOR AN Public Disclosure Authorized EARTHQUAKERECOVERY PROJECT FEBRUARY12, 1991 Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorizatioA CURRENCY EQUIVALENT (As of February 1991) USS 1.00 IranianRials (Rls) 216 1/ Rls 1.00 - US$ 0.0046 MEASURES AND EQUIVALENTS 1 millimeter (mm) - 0.04 inches 1 meter (m) - 3.28 feet 1 kilometer (km) - 0.62 miles 1 hectare (ha) - 2.47 acres ABBREVIATIONSAND ACRONYMS ACB - AgriculturalCredit bank AED - AgriculturalEngineering Department AMDC AgriculturalMachinery Development Company BHRC - Building and Housing Research Center CBI - Central Bank of the Islamic Republic of Iran ECSRCC - EarthquakeCommittee of the Supreme Research and CulturalCouncil EERP - E&rthquakeEmergency Reconstruction Program FFYP - First Five-YearPlan GDP - Gross Domestic Product GFMSC - Ghazvin Farm MachineryServices Company GNP - Gross National Product GSI - Geological Survey of Iran 1CB - InternationalCompetitive Bidding IRI - Islamic Republic of Iran IGTU - Instituteof Geophysicsof Tehran University IIEES - InternationalInstitute of EarthquakeEngineering & Seismology KV - Kilovolts MEF - Ministry of EconomicAffairs and Finance MOA Ministry of Agriculture MOE - Ministry of Energy MOHU - Ministry of Housing and Urban Development MOI - Ministry of Interior MW - Megawatts NPC - National Project Coordinator OIETAI - Organizationfor Investment,Economic and Technical Assistance for Iran PBO - Plan and Budget Organization SPC - Sector Project Coordinator UNDRO - United Nations DisasterRelief Organization USGS - United States GeologicalSurvey FISCAL YEAR March 21 - March 20 l/Staff estimate of a trade-weightedaverage of existingmultiple rates. FOR OFFICIL USE ONLY ISLAMIC REZUBLICOF IRAN EARTHOUAKEREC0VERY ?ROJECT Loan and Pr; set Sumnarv Borrower: CentralBank of the IslamicRepublic of Iran Guarantor: IslamicRepublic of Iran Beneficiaries: The Housing Foundation Ministry of Agriculture The EarthquakeCommittee of the Supreme Research and Cultural Council Amount: US$250 million equivalent Terms: 15 years, includinga five-yeargrace period, at the Bank's standardvariable interestrate. FinancingPlan: Government US$3,922 million World Bank USS 250 million Total US$4,172 million Economic Rate of Return: Not applicable Staff Appraisal Report: Not applicable. A TechnicalAnnex is attached. Maps: Nos. IBRD - 22682, 22664 This document has a restricteddistribution and may be used by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout World Bank authorization. MEMORANDUMAND RECOMMENDATIONOF THE PRESIDENT OF THE INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT TO THE EXECUTIVEDIRECTORS ON A PROPOSED LOAN TO THE CENTRAL BANK OF THE ISLAMIC REPUBLICOF IRAN FOR AN EARTHQUAKERECOVERY PROJECT 1. I submit for your approval the followingmemorandum and recommendationon a proposed loan to the CentralBank of the IslamicRepublic of Iran (CBI), with a g,uaranteefrom the Islamic Republic of Iran (IRI), for US$250 million equivalentto help financean EarthquakeRecovery Project (ERP), which is part of a larger EarthquakeEmergency Reconstruction Program (EERP). The loan would be at the Bank's standardvariable interest rate with a maturity of 15 years, includingfive years of grace. 2. The Maniil-RudbarEarthguake of 1990. On June 21, 1990, the provincesof Cilan and Zanjan in northwesternIran were hit by one of the worst earthquakes in the country'shistory, measuring 7.7 on the Richter scale. The epicenterof the earthquake was located between the cities of Rudbar and Manjil in the southernCaspian (Maps No. 22682 and 22664). The rupturearea, as inferredfrom the distributionof aftershocks,has dimensionsof 90 km by 30 km. The impact of the earthquakewas widespread. Some 35,000 persons lost their lives; 60,000 were injured;half a million were left homeless;and nearly 30,000 people lost their jobs. The 106 m high Sefid Rud Dam suffered extensivedamage. Irrigation systems for some 60,000 ha of farmlandwere damaged and another 60,000 ha will need relevelling.About 80,000 heads of livestock perished and an estimated 120,000 houses were destroyed,most of them completely.A 360 MW thermal power stationwas renderednon- operations . Over 7,000 classroomsin 1,300 schoolsand a major regionalhospital were desL-uyed.Total damages are estimatedat about 2.5 percent of GDP (1989/90). Estimates of production losses in industrial output have been placed at nearly US$350 million, in addition to about US$180 million lost in value added. The affected region produces most of Iran's rice and barley. Sectoral damages are describedin detail in the Technical Annex, paras. 32-51. Total reconstructioninvestment costs (includingcontingencies) are estimatedat US$5.25 billion, of which US$990 million would be in foreign exchange. The foreignexchange needs by sector are estimatedas follows:about US$600 million for housing, US$220 million for agriculture,US$60 million for energy, US$30 million for water supply and sanitation, US$10 milli4n for transport, US$40 million for health, US$10 million for industry and US$20 million for other sectors.In supportof the reconstructionefforts, the United NationsDevelopment Program (UNDP)has made a US$0.5million grant for technical assistance to the Housing Foundation, and the Islamic Development Bank is providingUS$10 million equivalentfor reconstructionof educationalfacilities. 3. Recovery Strategy. The Government formulateda three-stagestrategy for responding to the earthquake. The first stage, rescue and relief, was well organized and started immediatelyunder the coordinationof the Ministry of Interior (MOI) and the Red Crescent. Each sector agency quickly designated teams experiencedwith relief during the recent war years. Bilateral donor support for relief was coordinated by the United Nations Disaster Relief Organization (UNDRO), and the InternationalRed Cross. The second stage, temporary rehabilitation,began soon after relief started, again under the -2- coordination of MOI. Volunteers and staff from various regions with experience in flood and earthquake recovery were transferred to the stricken areas. This stage, which is almost fully implemented, centered on removing rubble from main roads and rehabilitating them, repairing key bridges, partially re-establishing power substations, tapping temporary water svurces, setting up a prefabricated hospital, and providing temporary, prefabricated shelter for families and sheds for livestock. The completion of temporary housing is critical before winter sets in. By mid-August, attention turned to the third phase, peXment Xeconstructdonand rehabilitation of damaged structures. The Ministry of Economic Affairs and Finance (MEF) was given the overall responsibility of organizing and coordinating this stage. Sector agencies created special reconstruction units to coordinate their specific reconstruction programs. The Plan and Budget Organization (PBO) adjusted the 1990 public investment program and, by October 1990, the final damage assessment, the EERP and financing plan were completed. 4. Bank Resoonse and Strate2y. The Government requested Bank assistance for emergency reconstruction in early July 1990. A first mission visited Iran between August 16-26, 1990, to assess damages, review reconstruction plans and organizational arrangements, and discuss strengthening of seismic risk prevention and mitigation measures. This was followed by a project appraisal mission during October 10-30, 1990. The Bank's strategy is to focus on the short and medium term recovery of the two sectors most heavily affected - housing and agriculture - and support the introduction of a national program for seismic risk prevention and mitigation. The lessons learned from Bank experience in emergency projects in other countries have been taken into account, particularly by simplifying project design and managing reconstruction through existing institutions. 5. Rationale for Bank Involvement. The project meets all criteria for Bank emergency recovery assistance. The project represents a portion of the Government's overall EERP which was prepared within two months; the housing stockin the affected area will either be rehabilitated or rebuilt; agricultural land and infrastructure will be restored for resumption of production; and the Government is committed to undertaking long-term measures to reduce hazards from similar natural disasters. 6. Proiect Objectives. The objectives of the proposed project are: (a) to assist Iran in setting up an effective organizational framework for managing reconstruction; (b) to assist in the development of long-term measures for seismic risk prevention and mitigation; (c) to improve seismic design standards in the reconstruction of housing; and (d) to ensure greater efficiency and economy through international procurement. 7. Project Description. The proposed project consists of the housing, agriculture, and the seismic risk prevention and mitigation components of the EERP. The Bank loan will be disbursed