PROJECT INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB2404

Project Name / Upper Egypt Integrated Governorates Development Project
Region / MIDDLE EAST AND NORTH AFRICA
Sector / General agriculture, fishing and forestry sector (30%);Agro-industry (20%);Other social services (20%);Agricultural marketing and trade (20%);Sanitation (10%)
Project ID / P097326
Borrower(s) / EGYPT GOVERNMENT
Implementing Agency
Environment Category / [ X] A [] B [ ] C [ ] FI [ ] TBD (to be determined)
Date PID Prepared / November 9, 2006
Estimated Date of Appraisal Authorization / September 14, 2007
Estimated Date of Board Approval / December 17, 2007
  1. Key development issues and rationale for Bank involvement

Rural Upper Egypt is lagging behind.

During the last decade, Egypt per capita income[1] grew at a rate of 0.8 per cent per annum. Poverty headcount has been stable, with just under 20% of the population falling below the poverty line.[2] However, these global results cover important spatial heterogeneity. Between 1995 and 2005, per capita income has been falling in Upper Egypt and the percentage of people living under the poverty line increased.[3]

Rural Upper Egypt is the region most severely touched by worsening poverty. In Upper Egypt (UE), those living in rural areas are twice as likely to be poor than those living in urban areas. In 2005, rural Upper Egypt’s poverty headcount rate was twice as high as the national rate. The severity of poverty is also worse in rural Upper Egypt, where more than 60% of the poorest of the poor are located.

Concerning non-income poverty, the 2005 Human Development Report confirms that Upper Egypt governorates are consistently at the bottom of the Human Development Indicator scale. Rural UE suffers from a developmental gap in terms of health, education and access to basic infrastructures (water supply and sanitation, electrification and road access).

There are two key reasons for this situation[4]:

-  Rural Upper Egypt is on the economic periphery, lacking the benefits of proximity to markets, intermediaries, information and skills.

-  Rural Upper Egypt has until recently been marginalised in the budgetary process, losing out on public investment to more influential and prosperous areas closer to the metropolis. The fifth year plan is beginning to correct some earlier imbalances, but because of accumulated deficits Upper Egyptian governorates need more than an equivalent amount of spending to catch up with Lower Egypt and achieve similar levels of human development indicators and incomes.

Opportunities and challenges for development. This inequality, which is source of serious social tensions, does not need to continue and Upper Egypt can be brought about to realize its potential in creating jobs and growth and providing services to its people through a two-pronged approach:

(i) Investments in basic infrastructure and social services. Rural Upper Egypt suffers from development gaps regarding access to health, education, and basic infrastructure (water supply and sanitation, electricity, roads, and communication). Improving access to services and basic infrastructure not only contribute to poverty alleviation but support economic development as well. Adequate infrastructure has long been considered key to a country’s (or region’s) ability to diversify production, take advantage of trade liberalization by allowing its export market to grow, cope with population growth, reduce poverty, and improve and protect the environment.

(ii) Promoting rural economic growth. The potential sources of economic growth are limited in rural Upper Egypt. The agriculture sector accounts for 63 percent of rural employment in rural Upper Egypt and contributes to 40 percent of rural income. It is critical to the poorest rural Egyptians, landless men and women who, largely for lack of education, have limited access to nonfarm activities except in low-productivity jobs in construction or trade. The importance of agriculture and off-farm employment for rural Upper Egypt is confirmed through an analysis of HIECS 1999/2000 data using the Sen welfare index, which shows how welfare[5] responds to exogenous changes in income from various sources. The largest overall income- and equity-enhancing effects in Upper Egypt result from increases in farm income from self-employment, followed by nonfarm wages (El-Laithy 2005).

In Lower Egypt, horticulture production and agribusiness-related activities (transportation, processing and packaging, exporting and input servicing) explain in large part the relatively strong growth observed between 1996 and 2005[6]. Horticulture and animal production which are highly labor intensive would help create jobs and increase the incomes of small holders and landless laborers: for example, one feddan of cereals including post-harvest activities generates 0.25 worker/year, while the same feddan under grape cultivation employs 2.5 worker/year, 10 times more. In addition, crop diversification can be envisioned with minor displacement of the traditional crops.

However, investing in high value horticulture and livestock products in Upper Egypt requires addressing UE locational disadvantages in terms of market access (poor connectivity to major consumption, processing ad export centers which are situated in the delta) as well as UE diseconomy of scale compared to Lower Egypt. The size of landholdings in UE is smaller and more fragmented: 85% of the farms are less than three feddan. Exporters, supermarkets and processors prefer to procure from large farms, which can supply large quantities of same quality products. It is more difficult for small farmers to access information and to benefit from economies of scale in certification and quality control.

Rationale for Bank involvement

This operation stems from two economic and sector works, on poverty and on Upper Egypt rural development. The report “Poverty Reduction in Egypt: Diagnosis and Strategy” already drew the attention of the GOE on the fact that poverty in Egypt was not only along the usual rural-urban divide, but was a regional phenomenon as well, between Upper and Lower Egypt. This analysis was expanded in the work that lead to the report “Upper Egypt: Challenges and Priorities for Rural Development” which sought to further understand the constraints to UE development as well as potential avenues for change. On the basis of the results of this analysis, an objective of addressing regional inequalities was included in the CAS, supported through a lending operation: “Integrated Governorate Development Project II” focusing on rural Upper Egypt. The World Bank’s Country Assistance Strategy states that, “inter-regional equity is to be improved in part through targeted investments in Upper Egypt.”

Hence, a key justification for the Bank to support development in Rural Upper Egypt is the intervention’s poverty and equity focus. In the case of rural Upper Egypt, the Bank’s poverty mandate coincides with strong client concerns for economic inclusion and social stability. The Egyptian Government is under pressure to respond to population growth. Egypt’s population increased from 36 million to 59 million between 1976 and 1996 (an increase equal to Egypt’s total population in 1956) and has now reached 70 million. Slowing the rate of out-migration from Rural Upper Egypt by creating job opportunities is among the major challenges facing the Government of Egypt. A reflection of the client’s concern is its request to consolidate Bank funding for the two projects earmarked in the CAS: “Integrated Governorate Development I “targeting Lower Egypt and “Integrated Governorate Development II “targeting Upper Egypt into one single operation, focusing on rural Upper Egypt.

2. Project development objective(s)

The project development objective is:

To contribute to creating economic opportunities and improving services in Upper Egypt by: (i) improving the stock and quality of basic infrastructure at the governorate and district levels; and (ii) reducing costs, improving quality and connecting buyers and producers along the supply chain of competitive agricultural products.

3. Preliminary project description

Project Area: It covers the Governorates of Asyut, Menia, Beni Suef and Fayoum, which are among the lowest ranking of the 26 Governorates in terms of HDI and income per capita. A total of 12.75 million people live in the project area. Since they are a group of adjacent Governorates just south of the metropolitan area of Cairo/ Giza, their proximity to markets will enable higher rates of return to investments in agricultural development than more southerly Governorates. The selection also takes into consideration on going and planned GOE and donor programs in other UE Governorates, including the on-going WB project in Sohag, the planned IFAD project in Asyut and Qena, and the synergies with USAID and UNDP programs on rural development and governance.


Component 1: Infrastructure at governorate level

This component would support infrastructure investments at Governorate level. The investments to be co-financed by the project would be part of a strategic Governorate development plan that would take into account the planned investments of line agencies. Thus, the project would co-finance key economic and service infrastructure that have a Governorate-wide or multi-district scale, including regional and connecting roads, supporting infrastructure for industrial and commercial zones, water supply and sanitation. Because other World-Bank financed projects are already addressing heath and education, investments in these sectors would not be targeted.

This component would also include support to governorate services to develop their governorate development plans as well as support to manage the project, specifically in the area of procurement, financial management, reporting and monitoring and evaluation.

Component 2: Infrastructure at district level

The project would contribute to improving rural Upper Egypt’s access to basic infrastructure and social services. The local investments to be co-financed would be identified through participatory district level planning and budgeting. It will involve the co-financing of social infrastructure (water supply, schools, social and youth centers, health clinics, postal services, etc), complementary to line ministries’ and other donors’ investment plans. Access to district-level funding may be based on a combination of: (i) priority for the lowest district in terms of the HDI; (ii) competitive allocation for the other districts based upon the successful completion of an integrated and participatory planning process.

This component would also include support to formulate district development plan. This would take the form of contract with community-participation facilitators to provide support to district officials and help them engage civil society and other actors while preparing their development plans. Social accountability mechanisms such as community score cards and social audits will be incorporated to ensure transparency and good governance.

The community-participation facilitators would use the participatory district level planning methodology that will be developed in collaboration with the Social Fund for Development, the MISR program of UNDP, and the USAID Democracy and Governance program. The participatory planning pilot work carried out previously in Fayoum and Sohag[7] and under the Sohag Rural Development project will serve as a basis for the development of the methodology.

This component would provide a concrete opportunity for the Egyptian Government to implement its policy objectives on de-concentration at the Governorate level. Through a learning-by-doing approach, it will strengthen the capacity of Governorate and district officials for planning and implementation, while furthering the decentralization process through engaging civil society in planning and implementation.

Component 3. Supply chain development

The project would promote integrated supply chain development for those high value crops and livestock products that can benefit small holders and for which Upper Egypt has a potential for competitiveness. The component would finance some infrastructure, equipment and services in support of contractual arrangements between producer organizations and buyers (exporters, agro industries, supermarkets)

Productive investments will be made to: (i) modernize and improve old irrigation systems at tertiary and quaternary canals (branch canals, mesqa and marwa) to save water; (ii) promote water-saving irrigation techniques for horticulture crops; (iii) create an enabling environment for private sector to invest in small post-harvest and marketing centers under a public-private partnership arrangement; (iv) upgrade public laboratories (equipment cum training) for quality control, i.e compliance with sanitary and phytosanitary standards (SPSS).

These centers would be a meeting point, where farmers would be able to prepare their products for sale (grading, pre-cooling and packaging) and where buyers could buy standardized horticulture products that meet quality requirements in large quantities.

Productive investments would have to benefit a majority of UE small and landless farmers. Public sector investments to support productive activities is justified on three grounds: (i) sharing the risks involved for agribusiness development in Upper Egypt; (ii) reducing UE locational disadvantages; (iii) bringing into the economic development stream the poorest segment of the population (economic inclusion).

Services would include: (i) support to grass root and regional professional associations, such as producer organizations (to offset the disadvantage of UE small farm size), and commodity-specific supply chain associations; (ii) information services, linking farmers with buyers, and advisory services and professional training to members of integrated supply chains; (iii) applied marketing research and intelligence for new products and outlets.

The services could be provided through: (i) a professional NGO or firm which will be contracted to establish a team of two to three resource persons per governorate with expertise in marketing and producer organizations; (ii) specific time-bound contracts with professionals from faculties of agriculture and branches of research institutes to support farmers’ organizations for product quality. Such services would be provided to support contracts between food processing industries, food exporters or domestic supermarket chains and farmer organizations. Lessons learnt under the Agriculture Export and Rural Income USAID-financed project will be built upon.

Target population A total of 12.75 million people live in the four Governorates. Component 1 will benefit the entire population of the four governorates. In each governorate, Component 2 will benefit in priority two or three of the poorest districts (to be determined during project preparation). Component 3 will benefit the rural population of the four governorates that is about 74% of the total population. These will benefit from better access to basic infrastructure and services, and more economic opportunities either from increased farm income or job creation (either directly or indirectly related to supply chain development).

  1. Safeguard policies that might apply

Safeguard Policies Triggered / Yes / No / TBD /
Environmental Assessment (OP/BP 4.01) / X
It is likely that the key economic and service infrastructure envisaged under Component 1 will be classified as Category A, requiring sub-project EIA's prior to appraisal, to be completed based on the final list of agreed strategic infrastructure investments per Governorate.
Concerning Component 2 & 3 sub-projects, which will be defined based on participatory local planning/ local economic development during implementation, the Operational Manual will include the EMP guidelines for screening, environmental review and mitigation features during the design, construction and operation stages.
Natural Habitats (OP/BP 4.04) / X
Forests (OP/BP 4.36) / X
Pest Management (OP 4.09) / X
Physical Cultural Resources (OP/BP 4.11) / X
Indigenous Peoples (OP/BP 4.10) / X
Involuntary Resettlement (OP/BP 4.12) / X
It is not yet clear whether any of the potential sub-projects will include any relocation or land aquisition. During preparation, and before appraisal, a resettlement policy framework will be developed to address any emerging relocation and land acquisition issues. If the policy is later triggered, a RAP will be prepared and teh Operational Manual will include a section on social safeguard screening and instructions for dealing with anticipated mitigation measures to ensure compliance with World Bank policies.
Safety of Dams (OP/BP 4.37) / X
Projects on International Waterways (OP/BP 7.50) / X
Projects in Disputed Areas (OP/BP 7.60) / X
  1. Tentative financing

Source: / ($m.)
BORROWER / 32
Other donors / 20
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT / 200
Total / 252
  1. Contact point

In Egypt: