Annex 1. Project Costs and Financing

Annex 2. Outputs by Component

1. 
   Component 1 generally comprised all the infrastructure rehabilitation and modernization required to achieve the project objective of improving the management of irrigation and drainage in the project area. The project was an integrated package with the benefits targeted at the individual small-scale subsistence farmers at the tail end of the system through the modernization of the mesqas and marwas, but this process was dependent on improving and modernizing all the upstream infrastructure so that the benefits can be achieved. Thus, the first zones targeted by the project were the two main canals serving the area—the Mahmoudia and Meet Yazeed main canals—and 27 contracts were completed for works including dredging of the Mahmoudiya canal, rehabilitation of major structures including locks, cross-regulators, and bridges, installation of bored and sheet pile bank protection works, reprofiling and stabilizing embankments with stone pitching and internal drains, construction of reinforced concrete ‘U’ sections to replace unstable sections of the main canal, seepage control works, and the replacement of syphons.
   
2. 
   The second zone targeted under the IIIMP covered all the branch canals which served the mesqas selected for upgrading. A total of 445 km of branch canals were upgraded under the IIIMP. A total of 43 branch canals were rehabilitated with works including bank stabilization, new road and foot bridges, repair or replacement of cross-regulators, improved mesqa offtakes, construction of boxed culverts through residential areas, and construction of some lined sections. Contracts were awarded to install ultrasonic flow measurement systems in the main and branch canals. Gauges were installed at 28 sites.
   
3. 
   Mesqa improvement is the largest part of the IIIMP and a total area of some 85,347 feddans was completed with works including providing intakes from the branch canal, gravity pipelines to the concrete pump sump, pump house with electric pump units and a standby diesel pump, suction and delivery pipework, electrical fittings including a meter, and a buried PVC pipe distribution network. In some contracts, provision was made to extend the pipe distribution system to include the marwas. A total of 52 contracts were awarded for all these works.
   
4. 
   Providing electricity to the pump houses and handing over operational mesqa pump stations to their WUAs were less successful. While 1,530 WUAs were targeted to be operationalized, only 1,162 were handed over as fully operational at project closure, largely because of the poor performance of the electrical contractors. Government funds, which are already budgeted, will complete the electrical contracts, ensuring that all 1,530 mesqas receive project benefits.
   
5. 
   SSD works were also a large part of the IIIMP, with over 92,085 feddans provided with either new or rehabilitated drainage systems, exceeding the 85,000 feddan target. Payment of crop compensation is a critical element in this component, and EPADP and its site staff ensured that the regulations were followed on the amounts to be paid to the farmers.
   

6. 
   Component 2 focused on improving on-farm water management carrying out on-farm demonstrations for farmers, and arranging farmer excursions to other successful areas on the project or to demonstration plots. Other activities under this component included capacity building through training of teachers for Irrigation Advisory Service (IAS) and Central Department for Irrigation Advisory Services (CDIAS) extension staff in coordination with the MWRI Training Centre. With the adaptive research handed over to the EWRMP, this component focused on the remaining areas including demonstrations and farmer excursions.
   

7. 
   A major focus of this component was the proper establishment, expansion, and upscaling of the WUA concept to other levels within the system. The project established some 308 BCWUAs and provided 208 training courses to strengthen and develop the overall concept. DWBs were established at nine centers, and start-up workshops and training courses were organized at each center. Establishment and strengthening of the WUAs at each mesqa was a major part of the work under this component; the project established 2,070 WUAs in total and provided 242 training courses for these WUAs. The project also established three IWRIGDs in Beheira, Gharbia, and Kafr-El-Sheikh, rehabilitating the offices and providing equipment. Finally, the project also established 22 IWMDs. Under this component, 15,525 people, including 1,926 females, were trained in various aspects of project management and operation.
   

8. 
   The PMU is established under this component with a coordinating, monitoring, evaluation, and problem-solving role on all the separate components. The PMU assigned the responsibility for implementation of the project works to the HEPS, IIS, IS, and EPADP. This approach for project implementation was effective, utilizing the specialties and expertise available within the MWRI. In addition, the PMU appointed a consultant to provide technical support for assistance to the PMU, to prepare the designs for rehabilitation of the selected canals, and to provide support during project implementation. During the latter years, this technical support from the consultant was focused on the mesqa improvement works rather than the major civil works carried out by HEPS. The PMU was responsible for all procurement activities and during implementation all disbursements were made through the PMU. The PMU prepared the overall project activity chart and reported progress regularly on all activities carried out on the project. The PMU was prepared to be proactive in searching for solutions to accelerate progress and took action when necessary on slow-moving contracts.
   

9. 
   Component 5 aimed to develop public awareness and environmental mainstreaming for the project components. This component, funded under Dutch Aid, aimed to ensure that standard environmental concerns were addressed by the project; the component ensured that numerous technical studies and evaluations were carried out including the preparation of the ESMP, environmental impact assessments, social mitigation plans, and updating of RAPs and these were completed in the early years of the project. Completion of these studies and reports were generally required before approval for implementation of the works. In 2014, all remaining environmental mainstreaming activities were taken over by EWRMP. Some awareness campaigns continued under the IIIMP to board members of 56 BCWUAs and 1,668 WUAs with some 11,140 direct beneficiaries receiving awareness related to proper sewage and solid waste disposal and water quality impacts, who in turn were expected to reach five family members on average.
   

Annex 3. Economic and Financial Analysis

Summary of the Ex Ante Economic and Financial Analysis

1. The appraisal’s economic analysis assessed the economic soundness of the project based on the ERR and NPV, both of which had been calculated from projected incremental costs and benefits to society as a whole, using the with- and without-project approach. The expected establishment of continuous (on-demand) water flow in branch canals and mesqas, together with the off- and on-farm investments and activities such as marwa improvements and on-farm water management, were expected to attain water savings of 10 percent to 30 percent depending on the initial situation of the areas (unimproved or partially improved by previous projects), while at the same time crops were irrigated more efficiently. Complementary on-farm improvements (piping of marwas, use of hoses, gated pipes, improved furrows, laser land leveling (LLL) where needed, and water management assistance) would result in improved water use efficiency and distribution as well as water savings. Yields were expected to grow gradually during five years, increasing from 4 percent to 25 percent depending on crop, improvement, and location.

2. Financial and economic prices were set using field data at constant 2004 values. Project economic costs were derived by excluding taxes, duties, and subsidies and corrected with the corresponding conversion factor (CF) to eliminate market distortions. Water savings were expected to reach on average about 22 percent or 838 million m³ per year at project maturity.¹⁵ Assigning no economic value for the water saved, the project would have an ERR of 20.5 percent. The NPV at a discount rate of 12 percent (representing the opportunity cost of capital) was estimated at EGP 847 million (about US$141 million equivalent). If the previous high-cost design criteria used in the preceding IIP remain unchanged,¹⁶ and no marwa or on-farm activities were improved (as under the IIP), the ERR would drop to 7.6 percent. If water was assigned an economic value equivalent to the residual imputed economic value derived from the without-project situation (EGP 0.46 per m³) which could be considered the opportunity cost of water,¹⁷ the ERR would be 30.4 percent. The latter could be the adequate estimation of the IIIMP results if water saved could be used in alternative new irrigation areas.

3. The financial analysis at farm level showed that farmers’ incremental income would allow not only for the cost recovery of investments but also for a significant increase in family income in the range of 12 percent to 26 percent. The main conclusions of the financial analysis were (a) irrigation improvement would allow for significant savings in water use, with a parallel average increase in gross value of production of about 20 percent after the fifth year; (b) before debt service, family benefits were expected to increase between 13 percent and 27 percent from the fifth year on, and the amount to be paid as debt service would represent only about 23 percent of the expected increases on farm benefits in the third year; and (c) the project would lead to higher farm income for all the farm sizes. After debt service, family benefits were expected to increase by an average of 20 percent after the fifth year, for all three models. The project would contribute toward alleviating poverty in Egypt’s rural areas where it is most intense.

Actual Implementation

4. There were significant differences between what was planned and what was actually implemented because what was actually spent in real terms was only half the planned amount to be invested. Table 3.1 shows that the actual expenditure in 2004 real U.S. dollar terms only reached US$150.7 million.

Table 3.1. Current and Constant 2004 Projects Cost (US$, million)

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