PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB4737 Eastern Nile First Joint Multipurpose Program Identification (JMP1 ID) Region

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB4737 Eastern Nile First Joint Multipurpose Program Identification (JMP1 ID) Region AFRICA Sector General water, sanitation and flood protection sector (40%); Irrigation and drainage (30%); Power (30%) Project ID P Borrower(s) NILE BASIN INITIATIVE Implementing Agency Eastern Nile Technical Regional Office (ENTRO) Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared June 9, 2009 Date of Appraisal May 28, 2009 Authorization Date of Board Approval June 30, Country and Sector Background The Eastern Nile (EN) Basin, located at the northeastern part of the African continent, is home to the most populous countries in Africa and some least developed countries in the world. Geographically it covers major part of Ethiopia, part of Sudan, Egypt and minor part of Eritrea (less than 3,500 km 2 ). Its economy is about the same size as Greece, while its land area (estimated at 1.66 million km 2 ) and population are some 35 and 20 times of Greece respectively. In spite of the impressive economic growth in recent years in the region, the poverty incidence is still very high with almost 15, 20 and 2 million people living on less than one dollar a day in Ethiopia, Sudan and Egypt respectively. The following table provides a brief summary of selected development indicators in Egypt, Ethiopia and Sudan (2007/08). Country Populatio n (million) Population Growth Rate (%) GDP (US$b) GNI Per Capita (US$) Agriculture as % of GDP GDP/Agri. Growth (%) Population below national poverty line Egypt , / (2000) 98 Ethiopia / (2005) 42 Sudan / Access to clean water (%) Key Development Issues: The population of approximately 135 million in the EN basin depends heavily on water for livelihoods and socio-economic development: agriculture is a source of income for the majority of the population in Egypt, Ethiopia and Sudan. Water has played, and will continue to play a central role in the history and political economy of the region. The key water-related development challenges of the EN basin can be grouped in two categories: (i) productive development - maximizing productive use of water resources to meet water security and food security requirements and rapidly growing renewable energy demands; and (ii) risk management - reducing the risks associated with water and climate-related disasters and shocks to minimize their destructive impacts on the regional economy.

2 Maximizing productive use of water resources to meet water security and food security requirements and rapidly growing renewable energy demands for continued socio-economic development. The major rivers which constitute the Eastern Nile form strategically important, shared resources linking Ethiopia, Sudan and Egypt. This includes the Abay-Blue Nile, the Tekeze-Atbara, the Baro-Akobo-Sobat, and the Main Nile tributary systems. These rivers have a rich endowment of water resources, with a mean annual flow of 84 billion m3 (BCM) at Aswan High Dam, and with a high potential for hydropower development. The Blue Nile alone has a potential installed capacity in the order of 4,000-5,000 MW and annual firm energy output of 15,000-20,000 GWh. The productive potential of this valuable resource is underutilized and river system losses (mainly from evaporation) are extremely high, representing 35-40% of total available water. Additional regulation capacity upstream of Aswan Dam could help substantially reduce system water losses, and benefit the agricultural production and environmental management in the region. The long history of tensions over sharing of these resources among EN countries has leto uncoordinated development of water resources and contributed to constrained economic growth. The region is characterized by extreme poverty, political instability, rapid population growth, and environmental degradation. Access to water and energy services are generally unreliable and inadequate. Less than 20% of the population in Ethiopia and 30% of the population in Sudan has access to electricity. In existing irrigated agricultural areas of the basin, crop intensities, yields and irrigation efficiencies are comparatively low, and have large potential for improvement through better flow regulation, irrigation infrastructure development, water management upgrading, and agricultural inputs. No more than 5% of the hydropower potential in Ethiopia has been developed, less than 5% of cultivated land in Ethiopia has been developed for irrigation, and Sudan has developed less than half of its irrigation potential. Energy demands are projected to increase dramatically in the near future: power demand in Egypt is expected to increase by 6-7% annually over the next 10 years, and in Sudan and Ethiopia power demands are expected to double every 5-10 years. Hydropower in the EN basin, being renewable and low cost, has a comparative advantage over other sources of energy in contributing to energy security in the region. Reducing the risks associated with water and climate-related disasters and shocks will minimize the destructive impacts on the regional economy and livelihoods. Hydrological and climate variability risks are significant in the Eastern Nile basin, with frequent droughts and floods taking their toll on the economy. Rainfall and river flows in the basin are highly variable, with annual rainfall ranging from over 2,000 mm concentrated in a few months in the Ethiopian highlands to no more than 100 mm in Egypt where the evaporation is extremely high (annual evaporation at Aswan is over 10 BCM). The infrastructure and institutions (both national and regional) needed to manage water in the basin are far from adequate. Flooding along the Blue Nile in Sudan is a major issue. For example, the 1999 floods alone led to an estimated loss of up to USD 450 million, with over 1 million people affected. Similarly, it is estimated that a single drought event in Ethiopia in a twelve year period would decrease average GDP growth rates by 7-10%. Further, it is estimated that Ethiopia loses over 150 million tons of soil annually in Blue Nile sub-basin because of deforestation and poor natural resource management practices. The heavily silt-laden flows from upper reach of Blue Nile are causing rapid reduction in the storage

3 capacity of existing reservoirs for irrigation and power generation in Sudan, land and environmental degradation, and low soil productivity in Ethiopia. This contributes to droughts, floods, chronic poverty and food shortages. Over 5 million people in Ethiopia require food assistance in a normal year. 2. Objectives The objective of this Recipient-Executed Technical Assistance project is to assist the three Eastern Nile countries in identification of the JMP1 investment package, through a series of studies and consultative activities that take into account economic, social and environmental sustainability issues in an integrated manner. By the end of the JMP1 Identification project, ENCOM will be in a position to commission detailed preparation for the selected JMP1 investments, as appropriate. At that time and under separate funding, preparation would include full feasibility studies and designs for the selected projects, along with detailed environmental and social impact assessments, financing studies, implementation planning, etc. 3. Rationale for Bank Involvement EN cooperation and joint investment are aligned with the Bank s mission of poverty alleviation and facilitation of economic growth. Regional cooperation furthered by the JMP could provide the kinds of transformational opportunities required to help the countries achieve their MDG targets and sustain their economic growth, all of which are central to the Bank s Africa Action Plan. Furthermore, the high-risk high-reward regional development opportunities of the Eastern Nile are in line with the Bank s Water Resources Strategy, and the focus on sustainable economic development and poverty alleviation is in alignment with the Egypt Country Assistance Strategy (CAS), Ethiopia CAS, the Joint Assistance Memorandum (JAM) for Sudan, and the Regional Integration Assistance Strategy (RIAS) for Sub-Saharan Africa. The Bank has a comparative advantage for further fostering cooperation on the Eastern Nile because of experiences in inclusive and sustainable development of regional and trans-boundary water resources investment programs, and provision of financing and guarantees for large and complex infrastructure projects. The Bank has also been the primary facilitator of the Nile Basin Initiative, since 1999; coordinates the NBI donor partnership (17 partners) ; and supervises the Eastern Nile Subsidiary Action Program (ENSAP) Fast Track projects, a series of regionally agreed and primarily nationally implemented investments in irrigation, watershed management, flood management, and power interconnection, as well as regional analytical work. The Bank is also conducting a Strategic Basin Assessment (an AAA work) to quantify the economic benefits of joint investments. In these processes, the Bank has developed a close working relationship with the NBI, ENTRO, and the countries involved, and fostered a strong regional integration program. The World Bank has also recognized that development of large-scale regional investments is a critical factor in facilitating conclusion of on-going legal and institutional discussions on the Nile. This is evidenced by the World Bank s support of the JMP process, expressed in recent letters from President Zoellick (March 2009), as well as the Vice Presidents of the Middle East and North Africa and the Africa Regions (January 2009), to the Egyptian and Ethiopian Ministers of Finance.

4 The Bank has also been one of the region s largest development partners and has strong sector and multi-sector development programs in Egypt, Ethiopia, and Sudan. These diverse country programs would be an essential part of any joint multipurpose program to align with and influence regional investments. 4. Description Project Components: The Project will include two components: (i) JMP1 Identification Studies; and (ii) Capacity-Building and Implementation Support. It will build on the previous studies and analytical work, and be coordinated closely with other related studies as described below. Component 1 JMP1 Identification Studies: Sub-component Information/Knowledge Base Enhancement: There are identified gaps in the present knowledge and information base pertaining to the development of the Eastern Nile Basin. This sub-component aims to bridge the information and knowledge gaps to the extent needed to allow confident assessments of decisions on development alternatives, and adequate studies for identifying the first priority set of investments. This work will build upon the EN One System Inventory (OSI), and will be coordinated with modeling and information management activities planned under the NBTF-funded ongoing Eastern Nile Planning Model (ENPM) and the Nile Basin Water Resources Planning and Management Project (particularly the Nile Decision Support System (Nile-DSS) Component), which include development of databases and analytical tools for the Eastern Nile and overall Nile basins. Sub-component JMP1 Identification Studies: These studies will build on the related analytical work listed in Annex 1. They are intended to: (i) carry out strategic assessment of water resources development alternatives (in the form of a Strategic Social and Environmental Assessment (SSEA); (ii) identify the optimum cascade development scenario and first priority project, and subsequently define an Anchor Project; and (iii) identify the Non-Anchor Projects, including high-priority irrigation, watershed and floodplain management interventions in the Eastern Nile. 1.2.i. The Strategic Social and Environmental Assessment (SSEA) will be a participatory assessment of the environmental and social issues associated with various development options, to allow for informed and transparent decision-making in identification and selection of investments for water resources development. It will inform two key decision making points: (i) strategic analysis of different development alternatives for water resources development of Blue- Main Nile, namely, no JMP (continued unilateral development), many small dams on Blue Nile tributaries and one or more major multipurpose dam(s) on the Blue Nile main-stem, on the basis of the JMP Launch Phase studies; and (ii) the identification/selection of a Cascade Development Option. Accordingly, the SSEA will be conducted in two distinct and consecutive phases, in close consultation with key stakeholders in Egypt, Ethiopia and Sudan. In addition to safeguards assessment and impact mitigation measures, the SSEA will be guided by the regional

5 long-term socio-economic development and poverty reduction goals, and explore options and mechanisms for benefit-sharing among countries and local communities in the basin. The SSEA is designed to inform, and be complemented by, a series of project-specific Environmental and Social Impact Assessments (ESAs), detailed resettlement actions plans, and other safeguards instruments. The project-specific ESAs as part of investment project design would need to move beyond impact mitigation and help identify ways of inclusive development of communities in the project areas, although these assessments are outside the scope of JMP1 ID. Independent reviewers would advise ENTRO and the Consultant throughout the SSEA. The results of the first phase will then serve as an input to the Cascade Development and Sequencing Study. 1.2.ii. Anchor Project Identification Studies have four parts: (a) cascade and development sequencing study; (b) identification of critical hotspot watershed interventions; (c) economic and financial analysis of the Anchor Project; and (d) defining the Anchor Project. The studies are intended to identify the optimum cascade development scenario for integrated regional water resources management providing a high degree of regulation of Blue Nile flows, water loss reduction, drought mitigation, flood alleviation along the Blue-Main Nile and reliable energy generation. Subsequently the studies will identify the first priority project through a sequencing study on the basis of techno-economic comparison of individual projects, under the constraints of power generation requirements and acceptable downstream impacts. The studies will be closely coordinated with the Norway-supported site-specific feasibility studies to be implemented by the Ministry of Water Resources, Ethiopia. 1.2.iii. Non-Anchor Projects Identification Studies will include an irrigation development and modernization study, and watershed and floodplain management studies, building on the Cooperative Regional Assessments (CRAs) for irrigation and watershed management and the EN Flood Preparedness and Early Warning Project studies, among others,. The irrigation studies are intended to: (a) develop good practice for designing modern water-efficient irrigation system; (b) identify priority irrigation schemes in the region for inclusion under JMP1 for national investments; and (c) identify the areas of recession agriculture to be impacted by the first priority multipurpose project and the likely costs of mitigation measures. The watershed management study is to identify: (a) the most critical hotspot watersheds, from a larger area requiring watershed interventions recommended by the CRA, through delineating micro-watersheds within the broadly identified critical hotspots, for inclusion in the Anchor Project; and (b) the remaining areas requiring watershed interventions, for national government interventions. The floodplain management study is to identify: (a) areas prone to flooding and bank erosion downstream of the Anchor Project, for possible inclusion in the Anchor Project or national investments under JMP1; and (b) impact of Anchor Project operation on downstream flooding, for factoring the impact into Anchor Project definition. Sub-component 1.3- Special Studies. These studies will be undertaken on need basis, and will likely include, among others: (i) studies of water saving measures to minimize system water losses; (ii) socio-economic studies on recession agriculture along the Blue Nile in Sudan. This will be coordinated with the on-going Bank-executed EN Strategic Economic Assessment as part of the EN Strategic Basin Assessment to ensure both direct and indirect benefits and costs are accounted for to the extent practical; and (iii) studies on financing and institutional arrangements for the Anchor Project. Upon completion of the SSEA, additional studies on benefit sharing mechanisms may be pursued.

6 Component 2 Capacity Building and Implementation Support Sub-component 2.1 -Regional Consultation and Information Sharing: During the JMP Launch Phase, broad consultations with key stakeholder took place at different levels. In the JMP1 Identification Phase, the geographic/spatial focus will be more specific. The Project will identify, in more refined and concrete ways, key stakeholders, develop consultation strategies, information sharing mechanisms and instruments, and will incorporate consultative activities and information-sharing into the implementation program. The main output for this sub-component is a well-implemented Stakeholder Involvement and Communication Strategy with clear objectives, target audiences, timelines, organizational arrangements and activities. Sub-component Project Management and Capacity-Building: This sub-component seeks to strengthen the capacity of ENTRO and related agencies from the three countries involved in the project. To successfully complete JMP 1 Identification and to prepare for subsequent investments, ENTRO needs to strengthen its technical and management capacity, and requires a dedicated multi-disciplinary project team including a regional project coordinator and technical, economics, social, environmental, communication, procurement, financial management and financing specialists. The ENTRO and country teams will be directly involved in the project implementation and on the job training. Additional training will be organized for ENTRO and three countries on different aspects of project planning and preparation including social and environmental assessment and management. Sub-component Development of a Roadmap for the Preparation of the JMP1 Investment Project(s): This will include a recommended approach, process, time schedule, financing options, and implementation modalities and arrangements for preparation. Detailed financing and institutional options will be developed to provide sufficient information for potential bi-lateral and multi-lateral donors and private investors eventually considering financial assistance or investment in JMP1. 5. Financing This technical assistance will be recipient-executed with grant funding of US$7.0 million from the multi-donor Nile Basin Trust Fund (NBTF) administered by the World Bank. About US$0.6 million will be in-kind contributions from the EN countries/entro. 6. Implementation The project will be implemented by the Eastern Nile Regional Technical Office (ENTRO). ENTRO, acting on behalf of the three Eastern Nile countries, under the general auspices of the NBI, will enter into a project Grant Agreement with the World Bank for NBTF grant financing. A dedicated JMP team headed by a full-time regional project coordinator will be established within ENTRO to manage JMP identification and consultative activities, supervise the consultants for the different studies, and coordinate related studies. ENTRO will form a regional technical committee, small ad-hoc technical task teams, and strengthen the national reference

7 groups from the Eastern Nile experts in relevant fields to ensure ownership, consultations and quality. A JMP national coordinator, appointed during the launch phase of the JMP-1 in each country will continue to coordinate and oversee activities at the national level. ENTRO will work with the EN countries to identify the target stakeholders, and develop and implement a stakeholder involvement & communication strategy to engage and consult multi-layer stakeholders in option assessment, identification studies and definition of the Anchor Project and associated investments as well as in exploration of costs and benefit-sharing options and mechanism among the countries and local communities in the project areas. In addition, ENTRO will organize consultation and facilitate information sharing for the site-specific feasibility studies of potential multipurpose dam sites on the Blue Nile to be implemented under the Ministry of Water Resources, Ethiopia through Norwegian funding. 7. Sustainability Sustainability is the central theme of the project design and focus. It is the single most important criterion for development alternative screening, option assessment and various studies, covering all aspects of the project: technical, economic, institutional, and social and environmental. First, a top notch international firm will be hired to undertake the main identification studies, and a panel of independent reviewers will be engaged to review the outputs of studies, both to ensure the quality of the project products. Second, a widely accepted economic analysis methodology will be adopted to evaluate the costs and benefits of various development options and scenarios to identify the investments that provide the maximum net joint benefits to EN countries. Last but not the least, wide range of stakeholders will be engaged throughout the TA project to consult them and seek inputs and feedbacks on the strategic assessments and identification studies, etc so as not to miss major development issues related to the EN JMP1. Finally, the EN countries and ENTRO have both demonstrated strong commitment to the JMP 1. Extensive and structured stakeholder consultation through targeted multilayer involvement and communication efforts, included under the project will help secure strong ownership of the EN countries and other stakeholders, and lead to good results in public acceptance and mitigating the critical risks identified. Finally, regarding social and environmental sustainability, the main mechanism is the SSEA to be carried out in two phases for screening out the socially unacceptable and/or environmentally unsustainable options, and for assessing the cumulative social and environmental impacts and benefit-sharing options to ensure sustainability of investments. 8. Lessons Learned from Past Operations in the Country/Sector Lessons learned from past and ongoing similar activities in the Nile Basin and elsewhere have been incorporated in the project design to the extent practical, which include: Integrated approach for water resources development is made central to the project design. This technical assistance integrates the engineering, economic, social and environmental aspects in the assessment and analytical studies with focus on sustainability of investments to be identified. Multi-criteria analysis will be used for the

8 assessment of development alternatives and for the selection of the preferred option. Identification and definition of the joint investments will be undertaken on the basis of careful evaluation and optimization of various trade-offs and benefit-sharing options, so that the benefits and costs are accounted. The watershed and floodplain management and irrigation modernization investments to be identified under the project will have a strong livelihood enhancing support activities. By the same token, both structural and nonstructural measures will be considered in the irrigation and flood management studies for achieving the development goals of JMP1 investments; both soil and water conservation and livelihood development measures will be included for watershed management to ensure sustainability. Stakeholder involvement, consultation and communication form an integral part of the project. Strategy and plan for such activities will be developed to engage the stakeholders and obtain their inputs throughout the project, to ensure government ownership, consensus of the outputs of the identification studies and their acceptance by the general public. A roadmap for preparing the identified investments and special studies on recession agriculture, financing and institutional arrangements of JMP1 are included in the project to provide for smooth transition to the next phase JMP1 Preparation. This will speed up the pace of cooperative investment program without sacrificing quality. Consultancy services under the project would be packaged to the extent possible into bigger contracts to reduce the lengthy recruitment procedures and capacity overstretch in monitoring and management of these contracts. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ ] [X] Involuntary Resettlement (OP/BP 4.12) [ ] [X] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP 7.60) * [ ] [X] Projects on International Waterways (OP/BP 7.50) [X] [ ] * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties claims on the disputed areas

9 10. List of Factual Technical Documents JMP1 ID Specific Documents NBTF Financing Proposal for JMP1 ID from ENTRO (October 2008) Letters from Governments of Egypt and Ethiopia to World Bank President in January/March 2009 ENCOM s March 2009 Meeting Minutes (endorsing ENTRO to proceed with JMP1 ID) Terms of Reference for JMP 1 ID Identification Mission Aide Memoire from JMP 1 ID Identification Mission JMP1 ID Project Concept Package and Review Meeting Minutes Terms of Reference and Aide memoire from JMP1 ID Preparation mission Draft Project Implementation Plan Final Draft Stakeholder Involvement and Communication Strategy Terms of Reference for the main identification study consultancy Other Related Documents JMP Launch Phase Summary Reports Eastern Nile One-System Inventory (hydrologic, environmental and socio-economic data) Scoping Study of Opportunities for Cooperative Development of the Eastern Nile (2008). Comments on the Scoping Study of the JMP (Egypt, Aug 2008) JMP Briefing Note: Financing Options for an Anchor project A Report on Institutional and Legal Considerations Associated with Achieving a JMP EN Watershed Management Cooperative Regional Assessment (CRA) Report Reports of EN Regional Power Trade Study Phase 1, including pre-feasibility studies of Mendaya, Border and Dal multipurpose dams EN Irrigation and Drainage Cooperative Regional Assessment (CRA) Report A Report on the Implications of Climate Change on Potential Multipurpose Storage on the Abbay/Blue Nile Initial Rapid Appraisal of Flood Damages along the Blue and Main Nile in Sudan (by Cawood & Associates, 2005) 11. Contact point Contact: Xiaokai Li Title: Sr Water Resources Mgmt. Spec. Tel: (202) Fax: Xli@worldbank.org 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202)

10 Fax: (202) Web: