Guinea - Conakry Water Supply and Sanitation Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-2400a-GUI REPORT AND RECOMMENDATION OF THE PEIDENT OF THE INTERTIONAL DEVELOPM ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEYELOPMENT CREDIT TO THE EUMBLIC OF GUINEA FOR A FIRST WATER SUPPLY AND SANITATION PROJECT December 5, 1978 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 authorization.  CURRENCY EQUIVALENTS Currency Unit = Syli US$1.00 = 20 Sylis Syli 1.00 US$0.05 MEASURES 1 m2 3.28 ft. 1 m 2 10.76 sq. ft. 1 km 0.38 sq. mile ABBREVIATIONS ADB = African Development Bank COMECON - Council for Mutual Economic Assistance DCA = Development Credit Agreement DEG = Entreprise Nationale de Distribution d'Eau de Guinee DPH = Division of Preventive Hygiene EEC - European Economic Community MIE 3 Ministry of Industry and Energy MLHW - Ministry of Large Hydraulic Works OCOFI - Office de Coordination Financiere de l'Industrie OECD - Organization for Economic Cooperation and Development OPEC - Organization of Petroleum Exporting Countries RAC f Region Administrative de Conakry WHO World Health Organization FISCAL YEAR January 1 - December 31 (since 1977)  FOR OFFICIAL USE ONLY THE REPUBLIC OF GIJINEA WATER SUPPLY AND SANITATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Guinea Beneficiaries: DEG and MIE. Guinean law makes no provision for onlending of loan proceeds from one segment of a state-owned sector to another. The proceeds of the Credit would thus be treated as a grant from the Government, with DEG and MIE receiving substantial technical assistance. MIE would also use part of the Credit to construct the project's major civil works components. These assets would be transferred to DEG and to the City of Conakry (drainage works) which would in turn ensure their efficient operation and maintenance. Amount: US$12.5 million Terms: Standard Project The project aims to fulfill the immediate water supply Description: and drainage needs of Conakry, provide satisfactory sanitation to most of its population, and strengthen institutions operating in the sector. It would be executed over the period 1979-1983 and would: (a) construct trans- mission and distribution mains and pipes, reservoirs, a booster pumping station, and a treatment facility, and drill, rehabilitate and equip boreholes; (b) provide house connections, standpipes, water meters and related equipment and materials; (c) purchase chemicals and small vehicles for services responsible for well inspection and disinfec- tion; (d) upgrade drainage ditches; (e) install 10 sanitary blocks (for drinking and washing) in low-income parts of Conakry; (f) provide 39 man-years of technical assistance and consulting services and 20 man-years of fellowships; (g) establish a training program within DEG; and (h) construct housing, and training and office space. The project would increase the access to potable water of Conakry's population from 41 percent to 64 percent, reduce the incidence of disease through improved drainage of contaminated water, and help the sector institutions (i) increase Conakry's water supply capacity by 60 percent by 1983 and (ii) prepare to manage 7 new water systems by 1985. The project faces no significant technical risks. The probability of achieving the institutional and manpower improvement objectives is high due to strong Government interest and ample technic:al assistance provided. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - Estimated Cost:* (Net of Taxes) Local Foreign Total -------(US$ million)------ Category of Expenditure Equipment 0.1 4.5 4.6 Civil Works 2.1 5.1 7.2 Construction (Housing and Offices) 0.1 0.3 0.4 Training 0.1 0.3 0.4 Technical Assistance and Consultants 0.0 4.2 4.2 BASE COST 2.4 14.4 16.8 Contingencies Physical 0.3 1.2 1.5 Price 0.7 2.9 3.6 TOTAL PROJECT COST 3.4 18.5 21.9 * Taxes are not included in the project cost except for US$0.4 million of taxes on the local cost component of the sanitation and drainage works. Internal Economic Rate of Return: 16% at the official exchange rate of Sylis 20/US$1; 7% at the shadow exchange rate of Sylis 35/US$1 Financing Plan: Local Foreign Total -------US$ million------- IDA Credit - 12.5 12.5 African Development Bank - 6.0 6.0 Government 3.4 - 3.4 TOTAL 3.4 18.5 21.9 Estimated Disbursements: FY79 FY80 FY81 FY82 FY83 -----------------US$ million------------- Annual 0.62 3.63 4.87 2.88 0.50 Cumulative 0.62 4.25 9.12 12.00 12.50 Staff Appraisal Report: 2127-GUI, dated November 16, 1978  INTERNATiONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF GUINEA FOR A WATER SUPPLY AND SANITATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Guinea for the equivalent of US$12.5 million on standard IDA terms to help finances a Water Supply and Sanitation Project. The African Development Bank (ADB) has approved a loan to the Republic of Guinea for the equivalent of US$6.0 million to help finance in parallel specific project components. The ADB loan would have a term of 17 years including grace with interest at 7 percent per annum plus a statutory commission of 1 percent and a service charge of .75 percent. PART I - THE ECONOMY* 2. The last economic report (No. Af-63b, dated September 1, 1967) was distributed to the Executive Directors on January 22, 1968. From 1970 to 1977 a number of economic missions visited the country during which a wide-ranging and active dialogue was conducted with the Government on several economic, monetary, and other development issues. Our last economic mission took place in March 1978, and its findings and those of earlier missions are reflected in the following assessment of the state of the economy and its prospects. Structure of the Economy 3. Guinea is potentially one of the richest countries in West Africa with substantial natural resources in the rural sector, mining, and to a lesser extent hydroelectric power. Its broad range of eco-climatic zones, from the sub-Saharan north to sub-tropical mountain areas in the center and tropical forest in the south, allows the production of a variety of agricul- tural commodities. At the time of Independence in 1958, Guinea had been the leading African exporter of bananas (100,000 tons per year) and also exported considerable quantities of coffee, pineapple and palm oil; it was able to meet most of its basic foodstuff requirements, whereas it is now a food importer. The country is particularly well suited for rice and livestock production. Guinea's extraordinarily rich mining potential includes bauxite reserves tentatively estimated at 4.5 billion tons, the second largest in the world, while readily exportable high-grade iron ore deposits are estimated at over one billion tons. Prospects for diamond and uranium mining and offshore oil exploration are being actively investigated. * The text of this section is largely unc'hanged from the President's Report for the First Education Project which was distributedd to the Executive Directors on August 30, 1978.  -2- Long-Term Trends 4. In spite of this outstanding resource endowment, economic perform- anice from the time of Independence until 1972 was disappointing. While lack of adequate data prevents a detailed assessment, estimated real growth of GNP during this period was less than 2.5 percent annually. This was somewhat lower than the annual estimated population growth rate of 2.6 percent and therefore real per capita incomes actually declined. The years following Independence were characterized by a comprehensive reorganization of all economic and social activities in Guinea with a view to building a social- ist economy. This entailed (a) a sharp curtailment of the private sector and the establishment of Government trading companies operating at con- trolled prices, (b) the creation of numerous public enterprises, and (c) extensive State investment in industrial and social infrastructure. Returns on many projects were limited by managerial inexperience and planning inadequacies, and public enterprises absorbed high and rising amounts of Government resources. The capital and recurrent costs of public investment soon exceeded budgetary savings and the Government resorted to heavy foreign borrowing and Central Bank advances to finance them. Foreign borrowing from both Western and Eastern bloc countries was carried out on an ad hoc basis with little longer-term planning and soon resulted in unmanageable debt obligations that could not be met by declining export proceeds. At the same time the liberal advances of the Central Bank led to a huge increase in money supply and galloping inflation. Consequently the public trading enterprises could neither obtain adequate supplies of local goods at official prices nor distribute them widely enough, and an active parallel market developed with prices as much as ten times their official level. Furthermore, the lack of foreign exchange caused sharp reductions in imports of intermediate inputs, which constrained production in both manufacturing and agriculture, and in consumer goods, all of which limited incentives throughout the economy. The economy thus stagnated in a vicious circle of foreign exchange shortages and declining investment, output and exports. 5. While lack of foreign exchange sharply limited the supply of im- ported goods, and indirectly of local products as well, excess money supply strongly stimulated local demand, contributing from that side to the growing imbalance between supply and demand at official prices. As a result of 15 years of deficit financing, money supply reached a high level of nearly 70 percent of GDP in 1972 or over three times the level attained in most other West African countries. Most of this money overhang was concentrated in the urban areas where it aggravated the severe excess demand situation and absorbed much of the limited supply of goods that would otherwise have been available to the rural areas. 6. At a socio-economic level, these trends created considerable diffi- culties. The rural population, about 80 percent of the total, operated prin- cipally at a subsistence level, selling as little as possible in the official market, and was largely excluded from the official distribution of imported consumer goods. On the other hand, the urban population had to compete for the limited supply of goods it could buy through official channels with rationing cards and supplement its needs in the unofficial market at very high prices. Large segments of the urban population were thus affected by the system as much as the average farmer.  -3- Recent Developments 7. The start of operations at two large bauxite mines in 1974 marked the end of this long period of economic stagnation. Since then, real per capita incomes have increased year by year at an average of nearly 7.5 per- cent, although they have not yet reached pre-Independence levels in real terms. By 1977 GDP in current terms was estimated at US$1,192 million, and based on an estimated population of 4.7 million, annual per capita GNP was US$230. 1/ The rural sector continues to dominate the economy, although with the recent growth of the mining sector, -the share of GDP at factor costs contributed by the rural sector has fallen, declining from 56 percent in 1974 to 48 percent in 1977. The share of GDP in other sectors during 1977 was 21 percent in mining, 6 percent in manufacturing, power and con- struction, 15 percent in public administration, and 10 percent in other services. Although administration of the economy is still extremely cen- tralized, mining has been a mixed sector since Independence and the Govern- ment works extremely well with private foreign companies, encouraging further private mining investments. Agricultural policies are under review, with Government abandoning attempts to collectivize farming activities in favor of promoting voluntary farm cooperatives. Banking and manufacturing remain entirely State controlled. While, de jure, all trading takes place through official State channels, the Government has recently become more tolerant of private trading; improving relations between Guinea and the Ivory Coast and Senegal have led to some lessening of restrictions on the circulation of goods and people, and this has relieved part of the pressure on prices in the private markets. Performance 8. Guinea's overall economic performance has improved significantly since 1972, although fundamental structural problems continue to hamper the country's economic development. The markedly faster growth of GDP is mostly attributable to the start of the two new mining operations, and is in itself not a sufficient sign of better performance. More important, however, are the Government policies concerning the use of the additional foreign exchange resources created by the two mines, which to the extent possible have been carefully allocated in an effort to overcome the economy's structural con- straints. Thus, while nearly half of these export earnings has had to be used to pay for direct foreign exchange costs of the two mining operations, the remainder has gone mainly to increase imports of essential raw materials and 1/ Although an official government census put total 1972 population at 5.5 million, a critical evaluation of this census and later data on test regions do not support a figure above 4.2 million for 1972 and 4.7 for mid-1977. All population-related data in this report are based on this latter figure. GDP is based on the findings of a recent UNDP/government agricultural survey and is higher than past estimates. Therefore, population and GDP figures differ from those in the Bank Atlas, now being updated to reflect these changes.  certain consumer goods with a view to (a) providing more inputs for manufac- turing and agriculture, (b) improving rural producer incentives, and (c) reducing excess demand. In the agricultural sector these measures have been complemented by a number of actions intended to increase production, such as more rural public investment, a slight increase in some producer prices, and more deliberate efforts to improve distribution of consumer goods in the hinterland. As a result, food imports have declined slightly over the last two years, further improving Guinea's foreign exchange situation. 9. Higher bauxite exports also contri-buted substantially to increased Government revenues, which were to a large extent turned over to the Central Bank to amortize the high amounts of accumulated Central Bank advances. At the same time Government expenditures increased only slowly. As a result of these deflationary measures, the net increase in money supply slowed down well below the rapid growth of GDP, leading to a inarked reduction in the money overhang. This was an important factor in the nearly 50 percent fall in prices on the parallel market over the last two years, which led to an improve- ment in the real purchasing power of most of Guinea's poorest population. 10. Since 1974, public revenues have been growing at 33 percent annually, but public recurrent expenditures have increased at only 12 per- cent per year. Government has nevertheless begun to allocate a larger propor- tion of its recurrent budget for maintenance expenses and for the purchase of spare parts, which reflects its growing desire to maintain and fully exploit existing capital assets. There is such a backlog of necessary maintenance, however, that even with higher allocations Government services and public enterprises have difficulty operating normally. Finally, the viability of the extensive system of public enterprises is under examination; a few of the least successful have been closed down while a rehabilitation program has been embarked upon for some others. The Government's objective is to make these enterprises self-sufficient, and it is becoming increasingly realistic in recognizing thie need to revise pricing policies to enhance cash flows, ensure adequate credit to maintain working capital and stocks, and call upon foreign technical assistance to strengthen operational efficiency. Development Planning and Objectives 11. Development planning in Guinea has so far met with limited success, and implementation of the 1973-1978 Plan was suspended in 1974 when Plan goals became unrealistic and the economy was undergoing substantial change. Since then capital expenditures have been determined annually, subject to the availability of foreign credit. Between 1973 and 1975 investment had to be financed entirely by foreign capital inflows. In 1976 and 1977 net domestic public savings were positive and financed a substantial share of public in- vestment, which was, however, less than half the 1973-75 level. Thus total investment outlays fell from US$79 million in 1974 to US$28 million in 1976 and US$31.5 million in 1977 due especially to the completion of the two major bauxite mining projects. Finally, the sectoral distribution of public investments also varied considerably, with the proportion of rural investment rising from some 11 percent in 1974 to almost 33 percent in 1975 and falling back to 18 percent in 1976. The share of industry and mining declined from 46 percent in 1974 to 24 percent in 1976.  -5- Prospects 12. While the Government's first investment priority is now rural devel- opment, in the short and medium term Guinea's overall economic development prospects hinge critically on the rate of growth in the mining sector. Mining exports increased from US$61 million in 1973 to US$312 million in 1977 and are likely reach US$494 million by 1980 when the two bauxite mines that started production in 1974 reach full capacity. This level of exports is expected to be maintained until 1984. New projects scheduled for completion by 1985 would permit exports to exceed US$1.5 billion in 1985 and reach more than twice that amount by 1990 when new mines begin producing at full capacity. In the meantime, however, the foreign exchange situation will almost certainly remain tight and would become particularly critical if there were major delays in the realization of new mining projects. Two main factors explain this difficult situation: first, according to the Bank's detailed projections, less than half of the incremental mining export revenues will accrue to Guinea in the form of freely available foreign exchange, since 50-60% of the gross export proceeds are needed to cover the operating costs of these mining operations in foreign exchange including debt service and transfer of dividends. The net benefits the country is likely to derive from its mining projects will thus be much smaller than the gross export receipts might suggest. Second, the high debt service payments, including substantial arrears, as discussed below, will necessarily be a major drain on the balance of payments. Furthermore, Guinea's laudable policies of improving producer incentives and better maintaining its transport and manufacturing investments will require additional foreign exchange. Consequently, Guinea will need large amounts of foreign aid to support the balance of payments until at least 1985 to enable it to carry out vital mining investments without reducing its already low standard of living. 13. The prospects for Guinea's general macroeconomic development are good. The Government is determined to further improve the monetary situation, to correct the results of past overly expansionary policies, and to do away with the profound disequilibrium between supply and demand which caused the flourishing parallel market and the rationing of basic consumer goods in the towns. The question still remains as to how best these goals may be achieved. It is unlikely that any sudden, fundamental changes will be enacted to restruc- ture the macroeconomic system as a whole. In the interests of political and economic caution, a gradual approach will probably be taken. This would involve the revision of industrial and producer prices, a reassessment of the public enterprises sector, and a continued shrinking of the money supply in relation to GDP. Both the Bank and IMF have begun and are maintaining an increasingly effective dialogue with Government on these questions, including foreign debt. Foreign Assistance and Debt 14. In the past few years Guinea has been diversifying its sources of foreign assistance. It has obtained multilateral aid from ADB, EEC, and IDA, as well as from OPEC countries (Algeria, Iraq, Libya, Kuwait Fund, Saudi Fund), and is likely to receive increased financial assistance from a variety of bilateral sources (notably France). The country has had a heavy foreign debt burden for many years which has siphoned off a large portion of its limited foreign exchange. In spite of several debt rescheduling agreements,  the situation became unmanageable in the early 1970s, and by mid-1976 Guinea had accumulated arrears of US$88 million. Debt service obligations in that year (excluding arrears) reached some US$54 million or 25 percent of total export proceeds, although actual payments were at most 20 percent of what was due. Of these arrears, some 85 percent was due to Western countries, parti- cularly the Federal Republic of Germany. At the end of 1976, total debt outstanding including undisbursed reached some US$950 million, nearly 88 percent of which was in the form of long-termi loans and only 12 percent was supplier credits. The USSR and the People's Republic of China are by far the two largest creditor countries (holding respectively 30 and 13 percent of Guinea's total debt) while COMECON countries together with China account for 50 percent. OECD countries hold close to 23 percent, multilateral agencies and the OPEC countries 10 and 6 percent each, while minor amounts are owed to a number of developing countries. 15. Notwithstanding Guinea's favorable long-term balance of payments prospects, the accumulated claims on the country's foreign exchange earnings will remain so heavy in the next few years that not all debt servicing obli- gations can be covered. With debt service charges of at least US$100 million per year, little amortization of foreign debt will be possible during the late 1970s and early 1980s, even if foreign capital inflows cover the entire foreign exchange cost of new investments, and arrears are thus likely to rise further. Guinea is already negotiating debt rescheduling programs bilaterally with some of its creditors and has requested Bank advice on the design of a program of debt management. With continued tight control and monitoring of imports of spare parts and raw materials and restraint on the importing of consumer goods, foreign exchange earnings should start to exceed minimum import requirements by about 1980 and debt amortization could then begin again. During the next few critical years, however, Guinea will have to rely on substantial amounts of foreign assistance on concessionary terms not only for investment purposes but also to provide foreign exchange for essential imports including consumption goods. PART II - BANK GROUP OPERATIONS IN THE REPUBLIC OF GUINEA 16. To date, the Bank Group has financed four operations in Guinea. Two loans totalling US$73.5 million in 1968 and 1971 financed infrastructure for the Boke bauxite mining project. IDA credits of US$7.0 million, US$14 million, and US$8.0 million respectively were granted in June 1975 for a pine- apple development project, in December 1975 for a road maintenance project, and in September 1978 for a first education project. Annex II contains a summary of Bank loans and IDA credits and notes on the execution of ongoing projects. 17. In view of the general shortage of foreign exchange and the poor state of infrastructure in Guinea, the Bank Group's first projects aimed at promoting mining and agricultural exports and rehabilitating the road system. The Boke project was completed satisfactorily and bauxite output has increased steadily, reaching about 7.4 million tons in 1977. Despite some delays in execution, the Daboya project is now exporting fresh fruit to Europe and a second pineapple project based on expanded smallholder development is under  consideration. The First Highway project followed shortly after the Daboya Credit and aims at rehabilitating and maintaining the essential road infra- structure network vital for agricultural development. 18. Our experience in the execution of these earlier projects has been encouraging, reflecting the fact that Government priorities generally coincide with the Bank Group's. We will therefore expand our efforts to maintain and upgrade basic infrastructure through additional road maintenance projects and efforts in the water supply sewerage, and electric power sectors, initially concentrating on the deteriorated system in Conakry, the capital. A US$1.13 million IDA Credit for a Power Engineering and Repair Project is being processed simultaneously with the proposed water supply and sanitation project described in this report. The need for the Engineering and Repair Credit became evident during preparation (financed under PPF) of the proposed First Power Project to be appraised in 1979. It was apparent that repairs to certain generating units would have to be undertaken immediately to preclude the total collapse of Conakry's power system and also that further preparatory work was required on the forthcoming power project. The Association's First Education Project recently approved by the Board arose out of the clear need for more trained technical manpower and aims to assist the Government in improving and expanding training programs for industrial technicians and skilled workers with emphasis on institution building. Because of the vital importance of mining in helping alleviate the country's foreign exchange shortage, the Bank Group is also considering further intervention in this sector. Feasibility studies are almost completed for the Nimba Iron Ore Mining project. 19. The Government of Guinea gives a high priority to development of its agricultural and livestock potential; it is in this rural sector, however, that the country is experiencing the greatest difficulty in harnessing its development potential. The Bank Group has attempted to support this Govern- ment priority but has itself experienced considerable difficulty in finding non-enclave projects suitable for financing. This is due largely to the absence of a rational system of economic incentives to farmers and herdsmen, the lack of basic institutional support for the rural sector, and the effect these problems have on the willingness of the Guinean peasant to respond to rural development attempts. We are nevertheless preparing projects in the rice and livestock sectors with the hope of beginning to deal with these fundamental issues. This effort will obviously come to fruition rather slowly. Our future rural development projects as well as all others under preparation in Guinea will emphasize improved management, investment planning, and project implementation. 20. The Bank Group's share in Guinea's external debt outstanding and disbursed and of total debt service amounted to 7 percent and 4.6 percent respectively in 1977 with IDA representing only a negligible proportion. By 1985 IDA's contribution to Guinea's total external debt will increase to about 2 percent while IBRD's will fall to roughly 5 percent. Because most of the debt presently owed the Bank Group will be amortized by the mid-eighties and payments on new borrowings will not yet be due, IBRD's share of debt service will drop to 2 percent, while that of IDA will remain insignificant.  - 8 - PART III - THE WATER SUPPLY AND SEWERAGE SECTOR Water Resources 21. Compared to Sahelian countries, Guinea is well endowed with water resources. The country relies mostly on surface water as there have been no serious attempts, except in the Conakry area, to investigate the extent and possible utilization of ground water. Most of the rivers tapped are perennial and even during the dry season adequately supply the needs of nearby popula- tion centers. There are springs close to some centers, but they usually yield insufficient water to satisfy these cities. A first UNDP project is now being implemented with World Meteorological Organization's assistance and is devised to set up monitoring of river flows and selected ground water resources in Central Guinea and to assist and strengthen the national hydro- logical bureau of the Ministry of Large Hydraulic Works (MLHW). 22. The Government of Guinea has recently approached the Association to request assistance in the preparation of a natianal water master plan for the use of its surface water resources for power, irrigation, water supply and, possibly, for river transport. Discussions are under way both to define a pragmatic approach to this multi-sectoral study, and to obtain the partici- pation of other development agencies. Levels of Service 23. Presently, the rural population obtains its water supply essen- tially from shallow wells and running streams. They depend primarily on hand dug wells which often dry out in the dry season and, until recently, little exploration of ground water had been undertaken to find alternatives to often long and weary travel in search for water. 24. While three mining centers have piped water systems serving their entire population, the level of service in other urban centers is not signi- ficantly better than in rural areas. It is estimated that about 10% of the urban population benefits from a piped system. Apart from the mining centers, Conakry has probably the highest level of service, with 42% of the population served through about 6000 private connections and 100 standposts. In urban areas four other centers have piped water operated by-Entreprise Nationale de Distribution d'Eau de Guinee (DEG). The remainder of urban centers have piped water supplies limited to areas occupied by public services such as ministries, hospitals and schools. The large portion of the population not served by these piped water systems obtain their water supplies from shallow wells, ponds or running streams, all of which may be polluted. Service is poor even from the piped water systems and is often provided intermittently for a few hours a day. Moreover, the water is seldom chlorinated. In general, water works are old and in poor condition; many of the standpipes are not operative, and in cases where they do operate, the surrounding sanitary conditions are so bad that they frequently constitute a health hazard.  - 9 - 25. Only Conakry and the mining centers of Kamsar and Fria have sanitary sewage systems. The Conakry network of sewers is limited to pre-Independence city limits and appears clogged in many points; connections between the drain- age and sewerage systems have been made to help dispose of sewage, but these arrangements do not constitute satisfactory long-term alternatives. Septic tanks, soakaways, and pit latrines are in common use in urban areas and a fre- quent source of contamination to private wells too closely located. Sector Organization 26. The management of the water supply and sanitation sector is divided among a large number of government agencies. While primary responsibility for planning and executing new installations and extensions of water supply and sewerage systems lies with the Ministry of Industry and Energy (MIE), the Ministry of Plan is responsible for the financing of new investments and the Central Bank for mobilizing foreign loans for the sector. Once new installations and extensions are completed, their ownership and operation are transferred to the DEG. However DEG does not control the Conakry drainage system, which is under the authority of the city of Conakry, nor water supply systems in mining towns, which are run by mining companies, nor a number of embryonic municipal systems managed by the regional offices of the Ministry of Rural Development. In rural areas, the Ministry of Large Hydraulic Works (MLHW) is responsible for water supply as well as for water resources inventory and allocation. 27. The Division of Preventive Hygiene (DPH) within the Ministry of Public Health is responsible for water quality control and supervision of all water supply sources, but its manpower and material shortage limits its role to urban areas. Drainage and solid wastes disposal are handled by Regional Administrative Authorities. Their related activities are minimal because of deteriorating equipment, lack of resources, inadequate planning and shortage of qualified staff. 28. The main problems the Government faces in trying to rationalize and expand the operations of he sector are the paucity of information on the potential of the sector, the lack of qualified personnel to plan, build and operate works, and the lack of necessary data that officials could use to determine the cost of maintaining and operating the present water and sanita- tion system. The Government is aware of the situation and is focussing on providing the main operating entity, DEG, with qualified staff to manage and maintain the newly built or improved systems. As more information on water resources and design requirements become available, the planning and designing functions within MIE would be enlarged and receive greater emphasis. As a start the Government agreed to strengthen the planning role of MIE, through assistance from a technical expert provided under the proposed project. DEG's Organization, Management and Finances 29. DEG, which was established in 1961 following nationalization of the private company that operated the Conakry water and sewerage systems, has been  - 10 - entrusted with nation-wide operations of such systems. Not only does it operate the water and sewerage network in Conakry, and the water systems in a number of other urban centers, but it is also expected to manage all new systems for which long-term borrowing is foreseen. 30. Like all state enterprises in the industry and energy sector, DEG is a subsidiary of the Office de Coordination Financiere de l'Industrie (OCOFI) the holding company of the sector, which is responsible for overview- ing the financial operations and managing the funds of DEG. OCOFI is under- staffed and in fact plays a minor role in the present management of the sector. DEG is run by an experienced Director General appointed by decree. However, the performance of DEG has been generally unsatisfactory, as evidenced by the deteriorating condition of the network it operates. 31. DEG's poor performance is due to a combination of staffing, organi- zational and financial problems. Clearly overstaffed at the lower levels, DEG is critically short of staff at the middle and upper technical and managerial echelons. A number of supervisory positions are exercised by former laborers who acquired their skills with the former concessionaire but are now close to retirement age. Several middle level technicians, who were trained by expatriates hired by DEG in 1965, have since left the agency. Many of the newly recruited engineers had little experience before assuming their present responsibilities. DEG has agreed to keep new recruitment at lower levels to a minimum while emphasizing training and redeploying of existing staff. DEG is expected to prepare a manpower plan involving detailed projections of manpower requirements at each skill level and proposals for related training activities. The proposed project also includes a large technical assistance and training program designed to help DEG improve its present operations and meet the requirements of its expanding activities. 32. Understaffing at the upper technical and managerial levels largely explains some of the deficiencies in DEG's organizational structure. Out of necessity the Director General has assumed a number of day-to-day operational functions, including direct supervision of operations in secondary centers, which should normally be handled by functional departments. Several functions crucial to the long-term planning of DEG's activities are not assigned to any organizational unit. DEG's management is aware of its problems. A revised organizational structure has been approved by the Government and will be implemented during project execution. As part of its recent auditing of DEG's financial statements, Price Waterhouse has analyzed the agency's finan- cial function and identified needed improvements in its accounting system and procedures. Follow-up technical assistance and further annual audits (para. 45) would help implement these improvements. The Government has also agreed to relax some of the bureaucratic controls by MIE and OCOFI which inhibit DEG's operational and financial initiatives. However, the effectiveness of the reorganization of DEG's structure and operations largely hinges on the success of the proposed technical assistance and training programs.  - 11 - 33. DEG's operations are also hampered by severe financial constraints. Water tariffs are set by MIE, in agreement with other Ministries, and until this year have had no relationship to the cost of operating the water systems, nor to the need to replace worn out installations and equipment. As a result, DEG's operations have resulted in heavy deficits which would have been even higher if normal maintenance had been performed. In April 1978, however, the water tariff was doubled and the new tariff is expected to cover DEG's cash operating expenses plus depreciation during the project implementation period. Sector Investments and Financing 34. Over the past decade, capital expenditures in the sector have been very low and have depended entirely on external financing. Total public investment in the water sector has amounted to only US$12 million over the past 5 years. Since the extension of the Conakry production and transmission works in 1965, water supply and sewage and drainage investments suffered severe cutbacks until 1973 when the Government received financial aid from Italian bilateral aid and supplier's credit ( approximately US$6.4 million) to expand water systems in four provincial centers. Eventually the scope of this expansion program had to be limited to the cities of Kindia and Kankan because of cost increases. In 1971, the Russian Government provided a US$1.9 million loan for the town of Nzerekore, and in 1975 the African Development Bank (ADB) provided about US$3.7 million to rehabilitate the production facilities and improve the transmission network of the Conakry operations. Investments in the rural areas have been negligible, though recently the European Development Fund awarded a grant of about US$4.5 million to finance drilling equipment and technical training for drillers and maintenance units within the MLHW. 35. Following cholera outbreaks in Conakry in early 1974, the Government decided to give a high priority to the development of an adequate water supply and sanitation program for the capital city. Feasibility studies of water supply and drainage/sanitation systems required by the city of Conakry over the next decade are being financed respectively by ADB and UNDP with WHO as executing agent. These studies are now nearing completion. The water supply study indicates that investments for the water sub-sector may reach some US$75 million over that period. Final conclusions of the UNDP-financed feasibility studies concerning extension of drainage and sewage disposal facilities to the entire urban area of Conakry have not yet been reached, and final cost estimates will depend on the level of service to be provided. However, on the basis of the preliminary findings of these studies, it is estimated that the costs for rehabilitating the city's existing sewerage network and for extend- ing appropriate service to new sections of the city might reach some US$110 million over the next ten years while the cost for the drainage network might be on the order of US$70 million. At the request of the Association and before they are finalized, these UNDP feasibility studies will also investigate less costly alternative sanitation systems for the city. 36. In addition to these studies, the Government is planning a series of feasibility studies of water supply and sanitation systems for seven large administrative centers where infrastructure is currently inadequate. At  - 12 - Government's request, provision to finance these studies has been included in the proposed credit. It is estimated that the cost of the works might reach approximately US$30 million over the next decade; however, more precise estimates will depend on the findings regarding availability of ground water resources in the area of these centers and on the level of service to be provided. 37. The Government has also obtained a $7 million supplier's credit to begin construction of water supply systems for two additional, high priority secondary centers, Faranah and Gueckedou. Construction of these schemes, based on technical studies prepared in 1965, would start by the end of 1978. In an agreed effort to avoid the overuse of suppliers credit, the Government would review with the Association financing plans for any future expenditures in the water sector over US$1 million per year (para 55). 38. In connection with the 1981-1990 International Drinking Water and Sanitation Decade, the Government of Guinea has requested WHO's support to conduct with its own services a rapid assessment of the country's most urgent investment needs in areas other than Conakry with a view to resume active Government participation in providing basic water and sanitation to the popu- lation. This assessment was completed in July 1978 and will help the Govern- ment refine its next five-year development program. 39. An additional problem confronting the sector is its near total dependence on foreign imports for its operational needs and for minor replace- ments and extensions. This heavy dependence on foreign supply could be partly remedied for water operations with the production of aluminum sulphate and plastic pipes in Guinea. Alumina is now produced in Fria, Guinea by the Societe Friguia through a process that would allow the production of aluminum sulphate. Management of the Fria plant and the Guinean Government have indicated that, although they had not heretofore considered whether a viable market exists in Guinea and neighboring countries, they would favor invest- ments for local production of aluminum sulphate if market studies determined its viability. The proposed credit would include provisions for these market studies. During negotiations the Government agreed that if the conclusions of the studies were favorable it would submit to the Friguia shareholders the findings and recommendations for purposes of a prefeasibility study. Conakry, moreover, has a concrete pipe manufacturing plant which is not working, and studies are underway for its rehabilitation. The present process is accept- able for pipes for drainage and sewerage but not for water supply and house uses. Market studies to determine the opportunity of changing the process presently used or having a separate plastic pipe manufacturing unit are included in the proposed credit. Bank Group Role 40. The project proposed in this report represents the Bank Group's first attempt to respond to the most immediate needs in the water supply and sewerage sector: rehabilitation of the badly deteriorated Conakry water  - 13 - supply and sanitation systems; technical assistance to DEG and MIE; training of key staff in these organizations (the Bank Group's First Education Project provides for the training of skilled labor and lower level technicians who may find employment in the framework of the proposed project); provision of accounting support essential to enable the Government to put the sector on a sound financial footing; and studies aimed at helping the Government begin planning long-term development of its urban water supply and sanitation systems, and at reducing its dependence on imported supplies and materials for the operation of this system. PART IV - THE PROJECT 41. In March 1977 the Guinean Government requested the Association and ADB to finance the first phase of the rehabilitation and extension of the Conakry water system. In August and November 1977, two IDA missions reviewed the ADB-financed feasibility studies of the long-term expansion of the city's water system (paragraph 35). Upon completion of the studies, the proposed Water Supply and Sanitation Project was appraised in January 1978 by a joint ADB and IDA mission. Negotiations were held in Washington in November 1978; the Guinean delegation was led by His Excellency Mamady Kaba, Minister of Industry and Energy. A report entitled "Republic of Guinea - Staff Appraisal Report - Conakry First Water Supply and Sanitation Project" No. 2127-GUI of November 16, 1978 is being distributed separately. Project Objectives and Description 42. The project's objectives are to upgrade water supply and sanitary conditions in Conakry and to improve the operations and maintenance of the city's systems. In addition, it aims at strengthening sector institutions and upgrading staff. The project would be carried out over the period 1979- 1983 and consists of the following components: (a) construction of transmission and distribution mains and pipes, reservoirs, a booster pumping station, and a treatment facility, and drilling, rehabilitating, and equipping of boreholes; (b) provision of house connections, standpipes, water meters and related equipment and materials; (c) purchase of chemicals and small vehicles for services responsible for well inspection and disinfection; * See Map IBRD 13735 for location within Conakry area.  - 14 - (d) conversion of unlined drainage ditches to concrete drainage canals in 3 Conakry districts; (e) installation of 10 sanitary blocks (for drinking and washing) in low-income parts of Conakry; (f) provision of 39 man-years of technical assistance and consulting services and 20 man-years of fellowships; (g) establishment of a training program in DEG; and (h) construction of housing, and training and office space. Project Unit 43. The physical components of the project will be implemented and their construction will be supervised by a Project Unit created within MIE. In addition to the water and sewerage components, this Project Unit will be responsible for implementing and supervising the drainage works executed under the project. Since the city of Conakry normally assumes responsibility for these works (see paragraph 26) but cannot discharge it effectively, it agreed to temporarily transfer its authority to the Project Unit for implementing this component. Once completed, the drainage works will be transferred to the administrative authority of the city for operation and maintenance. A Guinean project director with qualifications acceptable to both the Government and IDA has been appointed to head the Project Unit. In addition to the Guinean director and engineers, the Unit will be staffed, under technical assistance financed by the proposed credit, by (i) an engineer acting as technical adviser to the director, responsible for the day-to-day coordination and supervision of all activities related to work carried out by contractors; and (ii) two civil works technicians responsible with Guinean engineers for the monitoring of works, execution, contracts and commissioning of new instal- lations and equipment. These three experts would have qualifications, experi- ence and terms and conditions of employment satisfactory to the Government and IDA (Section 3.02(b) of the draft Development Credit Agreement (DCA)) and their employment would be a condition of Credit effectiveness (Section 6.01(b) of draft DCA). Consulting Services and Technical Assistance 44. The above-mentioned technical assistance to staff the Project Unit would be part of approximately 13 man-years (at an average cost of US$9,000 per man-month including about US$1,500 of reimbursable expenses) of technical assistance to MIE designed to strengthen its planning and project implementa- tion capabilities. In addition to the three experts seconded to the Project Unit, a planning expert to help MIE implement recommendations of the WHO water and sanitation review and other water studies would be included in this tech- nical assistance package.  - 15 - 45. The project would also provide about 13 man-years (at an average cost of US$7,500 per man-month) of consulting services and technical assistance to DEG to help the entity set up appropriate operations and maintenance prac- tices, and to strengthen its meter reading, billing and collection procedures. This assistance would consist of: (a) five operations experts -- a technical adviser to DEG's management, a distribution engineer, a water treatment technician, an electromechanics technician, and a meter repair and mechanics workshop technician; and (b) a commercial expert for the meter reading, billing and collection procedures. The project would also finance audits of DEG's 1976 and 1977 accounts and technical assistance to examine its account- ing system with a view to helping establish an efficient accounting unit and introducing financial discipline (paragraphs 31 and 32). As a condition of effectiveness MIE would employ and second to DEG the five operations experts with qualifications and experience and on terms and conditions of employment satisfactory to IDA (Section 6.01(b) of the draft DCA). Training 46. In addition to the above assistance and in order to remedy DEG's staffing problems mentioned in paragraph 31, the project would provide for the following: (a) the services of a training officer for 27 man-months (at an average cost of US$7,500 per man-month) to help DEG set up and follow up a training program for its labor force; the employment of this expert with qualifications and experience and on terms and conditions satisfactory to the Government and IDA would be a condition of effectiveness (Section 6.01(b) of draft DCA); (b) the creation of a training unit within DEG; and (c) the provision of about 20 man-years of fellowships for: (i) 5 baccalaureate graduates to pursue 3-year university programs abroad in public works and sanitary engineering; (ii) 3 university graduates to extend their education by one year in the sanitary, urban hydraulics, and water resources management fields; and (iii) 12 DEG technicians to perform apprenticeships and attend seminars at foreign water supply entities for about 2 months each. Studies 47. The project would provide for about 11 man-years (at an average cost of US$9,000 per man-month) of consulting services for studies to determine: (a) the availability and methods of protecting ground water resources to supply Conakry; (b) the feasibility of water supply systems in seven secondary urban centers; (c) the market for alumina subproducts for possible local processing of aluminum sulphate for water treatment with a view to replacing imports; (d) the feasibility of a plastic pipe manufacturing unit, also for import substitution; and (e) ways of assisting and promoting a local civil works construction industry and of training local contractors. These studies would be conducted under MIE's supervision by consultants with qualifications, experience and terms and conditions of employment satisfactory to IDA (Section 3.07 of the draft DCA). Project Cost and Financing 48. The total cost of the project is estimated at US$21.9 million. Apart from drainage works, all cost estimates are net of taxes and duties as  - 16 - the Government has agreed to exempt from duties all plant equipment, materials, and services imported for this project. Sanitation and drainage works, however, would be tendered in small enough contracts to permit Guinean state- owned cooperative contractors, who can only obtain raw materials tax inclusive, to offer bids on this basis. Taxes estimated at US$0.4 million have therefore been included in the local cost of the drainage works component. Cost esti- mates are based on early 1978 price levels and include physical contingencies ranging from 8 percent to 15 percent and price contingencies ranging from 7 percent to 10 percent depending on the project component. 49. The foreign exchange component is estimated at US$18.5 million and would be financed by the proposed IDA credit of US$12.5 million and an ADB loan of US$6.0 million under parallel financing. The ADB loan signed in October 1978 would be at 7% for a term of 17 years and would cover the foreign exchange costs of part of the equipment and civil works of the water supply component while the IDA credit would finance the remaining equipment and civil works for the water supply and sanitation, technical assistance, training and studies. The local cost requirements of about US$3.4 million would be met by a Government contribution from its equipment budget and DEG's internal cash generation. Project Preparation Facility 50. To speed up project preparation the Government obtained in early 1978 an advance of US$270,000 under the Project Preparation Facility. The PPF financed the following items: (a) detailed design and bidding documents for the drainage component; (b) services of the commercial expert (para. 45) and the training officer (para. 46) before arrival of the operations team to be seconded to DEG; (c) an audit of DEG's 1976 and 1977 accounts and an analysis of its accounting practices (para. 45); and (d) detailed design, bidding documents, and site supervision of housing and office space. The PPF would be refunded from the proceeds of the proposed IDA Credit. Project Implementation 51. Most of the sanitation and drainage works provided by the project would be executed by contractors under the supervision of the Project Unit. The only exceptions would be the small pipe replacement and connection program and the standpipe expansion program which would be designed and carried out by DEG's own forces. Tender calls for most of the supply contracts would be launched in early 1979 and for civil works contracts in Spring 1979. Construc- tion of housing and office space for technical assistance and additional DEG  - 17 - staff is scheduled to begin end-1978 and would be finished by March 1979 before the arrival of the technical assistants. All construction and supply of water and sewerage facilities would be completed by end-1983, the expected completion date of the project. 52. In view of the financial and operational constraints facing DEG, and in view of the status of the water and sewerage sector in general, agreement was reached at negotiations that the Government and DEG will carry out an Improvement Plan aimed at alleviating these problems. This plan will be carried out during project execution and is designed to improve institutional and financial performance in the sector as a whole. As part of this Plan, DEG will take a number of measures during 1979 to redress its organizational, managerial, staffing and financial deficiencies. The technical assistance described in paragraph 45 would help DEG implement these measures which would include: (i) reorganization of DEG's administrative and organizational structure; (ii) inventory of unregistered water supply connections and their inclusion in metering and billing procedures; (iii) improvement in collection of receivables so as to bring it by 1980 within 4 months of billing; (iv) revaluation of assets; (v) adequate definition of internal planning and budgetary control; (vi) review of insurance coverage of liability and of losses of and damage to buildings and vehicles; (vii) submission to IDA of a manpower development plan; and (viii) submission to the Government of proposals for modifications to the contracts for water supply to ministries and other Government agencies to reflect DEG's tariffs in effect on January 1, 1979 (Section 3.01 (c) of the draft DCA and annex to draft supplemental letter). 53. Also as part of the Improvement Plan and in order to support and supplement it, the Government will undertake the following actions: (i) modify the lump sum contract for water supply by DEG to Government ministries to reflect DEG's tariffs in effect on January 1, 1979; (ii) cause the munici- palities in the Conakry area to provide sufficient funds in their budgets to pay for standpipe consumption and sanitary blocks; (iii) enact revised by-laws for DEG; and (iv) increase the expenditure limit in Sylis above which a priori approval is needed when requested by DEG. 54. In addition, Government's knowledge of the sector's finances will be expanded through improvements in DEG's (i) planning and budgeting functions through creation of a budget unit under the direct control of one of DEG's managers, and (ii) financial accounting, through reviews by auditors (Section 4.02 of the draft DCA). In order to obtain a better basis for planning sector borrowing and related debt service, DEG will also keep separate proforma accounts for all debt - including the proposed IDA Credit - contracted on or after January 1, 1978 by the Guinean Government for the financing of construc- tion and installation of water supply and sewerage facilities in the area under DEG's jurisdiction (Section 4.01(d) of the draft DCA). 55. In addition, the Government has agreed to provide IDA a reasonable opportunity to comment on a financing plan before undertaking additional investments in the water and sanitation sector exceeding US$1 million per year (Section 4.05 of the draft DCA). Furthermore, DEG will submit to IDA annual  - 18 - operation and investment budgets, quarterly reports on its operations including technical and financial monitoring indicators (Section 4.06 (a) of the draft DCA), and audited financial statements within 6 months of each fiscal year (Section 4.02 of the draft DCA). Special Account in Foreign Exchange 56. The Project foreign costs include a wide variety of small items (essentially spare parts and supplies) needed to replenish DEG's depleted stocks to permit normal operations and maintenance. In view of the country's critical shortage of foreign exchange, both the Government and DEG would have considerable difficulties financing these expenditures. To overcome this problem, a special foreign exchange account (Sections 2.02 and 3.06 of the draft DCA) would be established by the Banque Guineenne du Commerce Exterieur (BGCE) to which DEG would have access for the purchase of replace- ment parts and supplies without passing through the present chain of Government controls. The proposed system would function as follows: At the beginning of each fiscal year, the Government will grant an import licence to DEG for a lump sum amount sufficient to cover replenishment of its stock of spare parts and supplies. BGCE, at DEG's request, will open letters of credit to DEG's foreign suppliers within the limit of the amount of the licence. For the first and second project years (1979, 1980), IDA and the Government will each contribute US$300,000 to this account; for project year three (1981) the Government alone will finance the account with a contribution of US$600,000 and for the years thereafter will grant DEG similar annual lump sum import licences in appropriate amounts as needed. Quarterly financial reporting by DEG will permit IDA to monitor the level of commitments against the account as well as replenishment by the Government. It is expected that use of this procedure during the project period would demonstrate to the Government the improved efficiency which results from eliminating some of the unnecessary bureaucratic and a priori controls that prevent not only DEG but other national enterprises from carrying out normal maintenance of their installations. Tariffs 57. The water tariff was increased from 4 to 8 Sylis (US$0.40) per cubic meter effective April 1, 1978. To alleviate the effects of this increase on small consumers, the Government cancelled at the same time the fixed meter rental and meter connection charges. The present tariff is expected to cover DEG's operating expenses, including depreciation, during the project implemen- tation period. The Government will be required to maintain the tariff at a level adequate to cover all of DEG's cash operating expenditures plus depre- ciation or debt service, whichever is higher (Section 4.04 (b) of the draft DCA). In addition, in order to assist the Government in defining a tariff policy compatible to the long-range financial viability of the water and sewerage sector, the DEG will carry out by June 30, 1981 and in accord- ance with terms of reference satisfactory to IDA, a study of water tariffs, including house connection charges (Section 4.04 (a) of the draft DCA). The DEG will be aided in this task by the technical assistance described in paragraph 45.  - 19 - 58. The sewerage tariff is 1 Syli (US$0.05) per cubic meter of water consumed for customers connected to the sewerage system. Once sewerage operations become more important and separate cost accounting for these operations are established by DEG, it will be necessary to determine whether the present tariff is still adequate. Although no cost recovery mechanism exists at present for drainage, studies financed by UNDP are underway to determine possible means of cost recovery to finance the drainage program that is being prepared (see paragraph 35). Procurement 59. Procurement of goods and construction services to be financed from the Credit will be by International Competitive Bidding and in acccordance with the Bank Group guidelines for procurement (except for force account works worth US$600,000, para. 51). Contracts for equipment and vehicles of less than Sylis 1 million (US$50,000) aggregating to not more than Sylis 10 million (US$500,000) would be procured through local competitive bidding procedures acceptable to IDA. The items financed by ADB (the water supply component with the exception of secondary pipelines and connection materials) will be procured in accordance with ADB's guidelines. Disbursements 60. Disbursements from the Credit account would cover 100 percent of foreign expenditures for equipment and materials (tJS$2.7 million), civil works (US$3.2 million), and consulting services and technical assistance (US$4.2 million). The allocation for consulting services and technical assistance includes US$270,000 to refund the PPF advance (Schedule 1 of the draft Development Credit Agreement). Economic and Social Justification 61. As a result of the rehabilitation and expansion of water production, transmission, and distribution facilities in Conakry, access to safe water is expected to increase from 41% of the city's inhabitants to 64% by project com- pletion in 1983. Standpipe service would be the principal means of achieving this increase for a population which itself will grow from about 575,000 in 1978 to 725,500 in 1988 at an annual rate of 6%. The percentage of popula- tion served by standpipes would nearly double from 18% 1978 to 34% in 1982. About 200,000 people would gain access to service by house connections or from standpipes as a consequence of the project. 62. Since the benefits of the water supply component of this project cannot be separated from those to be derived from subsequent water supply projects to be executed as part of the 1978-88 investment program, the Internal Economic Rate of Return (IERR) has therefore been calculated on the entire water supply portion of the investment program. This rate is about 16 percent using revenues from sales valued at the current tariff of 8 Sylis per cubic meter as a proxy for benefits and calculating costs using the official  - 20 - exchange rate (20 Sylis/US$1). If the foreign exchange component of the costs is calculated on the basis of a shadow exchange rate 1.75 times the official rate (35 Sylis/US$1), the IERR is about 7 percent. The IERR as calculated does not represent the full economic return on the investment since it does not include unquantif!able health benefits that can be expected. 63. The management and operations of DEG are expected to improve significantly as a result of the technical assistance and training components of the project, enabling DEG not only to expand service in Conakry but also in secondary centers. 64. The sanitation component of the project, which would be concentrated in the most densely populated areas of Conakry, would lead to an immediate improvement in sanitary conditions by removing both storm water and a portion of waste water that at present stagnate and provide breeding grounds for malaria mosquitoes and cause a number of waterborne diseases. Risks 65. There are no significant technical risks associated with the physical components of the project given the well defined nature of the works. The in- stitutional and manpower improvement objectives which condition the realization of the project benefits are reasonable and the probability of achieving them is improved through the technical assistance and training components. The availability of foreign exchange essential for DEG's day-to-day operation would be assured through the establishment of the special account referred to in para. 56. PART V - LEGAL INSTRUMENTS AND AUTHORITY 66. The draft Development Credit Agreement between the Republic of Guinea and the Association and the Recommendation of the Committee provided for in Article V Section I (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. 67. Features of the draft Development Credit Agreement of special interest are referred to in paragraphs 43 to 47 and 52 to 57 and in Section III Annex III of this report. As conditions of effectiveness of the proposed Development Credit the Borrower should: (a) fulfill the conditions of disburse- ment of the ADB Loan; (b) employ the consultants, experts, and technicians referred to in paras. 43, 45, 46; and (c) open the special account in BGCE in the name of DEG (para 56). 68. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association.  - 21 - PART VI - RECOMMENDATION 69. I recommend that Executive Directors approve the proposed Development Credit. Robert S. McNamara President December 5, 1978  - 22 - Annex 1 TARLR 3A Page 1 GUINEA - SOCIAL INDICAT0RS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES GUINEA /. LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE) TOTAL 246.0 SAME SAME NEUT HIGHER AGRICULTURAL 71.7 MOST RECENT GEOGRAPHIC INCOME INCOME 1960 Lb 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /e GNP PER CAPITA (US$) 90.0 140.0 230.0 223.6 182.9 432.3 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 65.0 98.0 92.0 86.7 88.9 251.7 POPULATION AND VITAL STATISTICS TOTAL POPULATIGN. MID-YEAR (MILLIONS) 3.7 4.0 4.8 URBAN POPULATION (PERCENT OF TOTAL) 9.6 15.9 19.5 13.6 15.0 24.2 POPULATION DENSITY PER SQ. Km. 15.0 16.0 20.0 18.4 46.8 42.7 PER SQ. KM. AGRICULTURAL LAND 53.0 56.0 67.0 53.6 254.1 95.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRs. 42.1 42.5 43.1 44.4 43.6 44.9 15-64 YRs. 55.1 54.7 54.0 52.7 53.3 52.8 65 YRS. AND ABOVE 2.8 2.8 2.9 2.8 2.9 3.0 POPULATION GROWTH RATE (PERCENT) TOTAL 3.1 0.8 2.7 2.6 2.4 2.7 URBAN 9.0 8.1 7.1 5.8 4.0 8.8 CRUDE BIRTH RATE (PER THOUSAND) 47.4 47.3 44.6 46.9 44.3 42.Z CRUDE DEATH RATE (PER THOUSAND) 30.4 26.4 22.9 20.6 19.7 12.4 GROSS REPRODUCTION RATE 3.5 /1R 3.1 3.1 3.1 2.9 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. .. .. USERS (PERCENT OF MARRIED WOMEN) .. .. .. 2.5 14.6 14.2 FOOD AND NUTRITION INDEX OP FOOD PRODUCTION PER CAPITA (1970-100) 102.2 100.0 94.2 94.2 96.4 104.3 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 83.0 /h 90.0 84.0 90.1 92.3 99.5 PROTEINS (GRAMS PER DAY) 41.0 h 44.0 42.7 55.2 50.0 56.8 OF WHICH ANIMAL AND PULSE .. 29.0 L *. 17.1 13.9 17.5 CHILD (AGES 1-4) MORTALITY RATE 52.0 .. .. .. .. 7.5 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 33.5 38.5 41.0 43.7 45.8 53.3 INFANT MORTALITY RATE (PER THOUSAND) 216.0 f .. .. 138.4 102.7 82.5 'rF5S5 TO SAFE WATER (PERCENT OF POPULATION ) TOTAL .. .. 14.0 22.4 26.4 31.1 URBAN .. 68.0 69.o 66.3 63.5 68.5 RURAL .. .. .. 10.4 14.1 18.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 13.0 .. 23.9 I6.1 37.5 URBAN .. 70.0 .. 70.3 65.9 69.5 RURAL .. 2.0 .. 14.2 3.4 25.4 POPIULATION PER PHYSICIAN 48000.0 31090.0 27890.0 21757.5 13432.7 9359.2 POPULATION PER NURSING PERSON 3620.0 5000.0 3600.0 L 3473.8 6983.3 2762.5 POPULATION PER HOSPITAL BED TOTAL 3270.0 980.0 /k 740.0 /k11 645.4 1157.6 786.5 U'RBAN 240.0 280.0 .. 172.9 183.3 278.4 RURAL 2640.0 1020.0 .. 1292.6 1348.8 1358.4 ADMISSIONS PER HOSPITAL BED .. 16.0 *. 19.2 19.5 19.2 HOUS ING AVERAGE SIZE OF HOUSEPOLD TOTAL .. .. .. 4.9 5.2 URBAN .. .. .. 5.0 4.8 RURAL .. .. .. 4.7 5.3 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. .. URkBAN .. .. .. .. 1.8 2.3 RURAL .. .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. .. .. 25.9 28.3 URBAN .. .. .. RURA. .. .. .. .. 8.7 10.3  - 23- Annex 1 TABLE 3A Page 2 GUINEA - EOCIAL IfDICASORS DLATA SHEET REFERENCE GROLPS (ADJUSrED AVERAGES GUINEA 8 - MOST RECENT ESTIFATE) SAME SAME NEXT RIGHER MOST RECENS GEOGRAPHIC IS-07E INCOME 1960 Lb 1970 Lb ESTIMATF /b REGION Ic GROUP d GROBP /e IDUCATION ADJUSTED E!ROLLKENT RATIOS PRIMAARY: TOTAL 30.0 33.0 28.0 52.1 62.9 75.8 FE1ALE 16.0 21.0 37.6 45.9 67.5 SECONDARY: TOTAL 2.0 13.0 14.0 8.0 14.4 17.1 FEKALE 0.4 5.0 .. 5.0 8.8 12.9 VOCATIONAL (PERCENT OF SECONDARY) 22.0 3.4 .. 7.2 6.6 7.4 NPUIL-TEACHER IATIO PR LMARY 66.0 36.0 .. 43.2 38.5 34.3 SEGONDARY 26.0 23.0 .. 22.8 19.8 23.5 ADULT LITERACY RWTE (PERCENT) 7.0 /m .. * 20.3 36.7 63.7 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2.0 2.0 2.0 3.9 3.1 7.2 RADIO RECEIVERS PER THOUSAND POPULATION 13.0 23.0 24.0 40.1 31.1 71.1 TV RECEIVERS PER THOUSAND POPULATION .. .. .. 2.2 2.8 14.1 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCUtLATION PER THOUSAND POPULATION 0.2 1.0 1.0 3.9 6.0 16.3 CINTA ANNUAL ATTENDANCE PER CAPITA .. .. .. 1.2 1.4 1.6 IPL0YMENT TOTAL LABOR FORCE (THOUSANDS) 1400.0 1900.0 2100.0 FEIALE (PERCENT) 40.3 40.3 40.1 32.6 24.2 28.0 AGRICULTURE (PERCENT) 88.0 84.7 84.1 73.3 60.7 54.1 IIUISTRT (PERCENT) 6.1 8.5 .. PARTICIPATION RATE (PERCENT) TOL 49.6 47.7 46.1 42.0 39.8 37.8 MALE 59.5 57.4 55.8 54.8 53.3 50.3 P1EALE 39.9 38.1 36.6 27.3 19.6 20.9 CDoMIC DEPENDENCY RATIO 1.1 1.2 1.2 1.2 1.3 1.3 INCOME DISTRIB1rTIO0 PERCENT OF PRIVATE INCOME RECEIVED BY IGlHEST 5 PERCENT OF HOUSEHOLDS .. .. .. 25.7 20.3 19.5 RIGHEST 20 PERCENT OF HOUSEHOLDS .. .. .. 55.1 45.1 48.9 LOWST 20 PERCENT OF HOUSEHOLDS .. .. .. 5.8 5.7 5.9 t.O'EST 40 PERCENT OF HOUSEHOLDS . .. .. 14.5 lO. ; POVERtTY TARGET GROUPS ETIMATED ABSOLOTE POVERTY INCOME lEVEL (US$ PER CAPITA) IIRBAN .. .. .. 108.8 88.5 155.9 RURAL . .. .. .. 74.1 71.9 97.9 ESTIMATED RELATIVE POVERTY INCOME - LEVEL (US$ PER CAPITA) URBAN .. .. 52.0 124.4 100.8 143.7 tURAL .. .. 50.0 59.6 42.0 87.3 3F7lMUArD POPULATION BELOW POVERTY 1UEX LEVEL (PERCENT) H3.BAN .. .. 33.0 26.8 46.0 22.9 tONAL .. .. .. 47.6 48.0 36.7 Not available Not applicable. NOTES /a The adjusted group averages for each indicator are population-weighted geo tric neaus. excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the Indicators depends on availability of data and is not uniform. jb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 &ad 1971; and for Most Recent Estinate. between 1973 and 1977. Lc Africa South of Sahara; /d Low Income ($280 or less per capita, 1976); /e Lower Middle Income (8281-550 per capita. 1976); jf 1955; /l AfricanPopulatioo only; ft 1961-65 average; Li 1964-66; Li Includilg midwives; Ik Government hospitals only; L1 1972; /n Prior to 1965. September. 1978  -24 - Annex 1 Page 3 DEFINITIO'S Ot OSOlIL IND7CATORS Notea: Although cho data are drawn frcm sources generally judged the most authoritative end reliable, it should also be noted that they may not be inter- nationally comparable because of the lack of standardiIed definitions and concepts used by different countries in collecting the dat. The date are, nonetheless, uaeftl to deacribe orders of magnitude, indicate trends, and characteri.e certain major differences between countries. The adiusted group aver-ges for each indicator are population-xeighted georaetric means, excludiog the extreme values of the indicator and the mast populated country in each group. Cverage of co'ntries among tho indicators depends on availability of data and is not uniform. Due to lack of data, group avergeoS for Capital Surplus Oil Etporters umd indicators of access tc water and excreta disposat, housing, income distribution and poverty arc sfiple pupulation-weighted geonetric means without the exclusion of eutreme valu s. LAND AREA (thousand sq. k) Popolation per hospital bed - total, urban. and rural - Population (total, Total - Total surface area comprising land area and inland waters, urban, and rural) divided by their respective number of hospital bads Agricultural - Most recent estimate of agricultural area used temporarily available in public and private general and specialized hospital and ra- or permanently for crops, pauturce, market and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffed by lii fallow at least one physician. Establishments providing principally custodial car are not included. Rural hospitals, however, include health and madi- GNP PER CAPITA (US$) - GNP per capita estimates at current market prices, cal centers not permanently staffed by a physician (but by a medical a- calculated by same converuion method as World Bank Atlas (1975-77 basis); istant, nurse, midwife, etc.) which offer in-patient accommodation asd 1960, 1970, and 1977 data. provide a limited range of medical facilities. Admissions per hospital bed - Total number of admissions to or discharges ENERGY CONSUMPTION PER CAPITA - Annual consumption of commercial energy from hospitals divided by the number of beds. (eoal and lignite, petroleum, natural gas and hydro-, nuclear and geo- thermal lectricity) in kilograms of coal equivalent per capita. HOUSING Average siae of husuehold (persons per household) - total, urban, and rural- POPULATION AND VITAL STATISTICS A household consists of a group of individuals hob share living quarters Total Popsiatitn, mid-year (millions) - As of July 1; if not available and their main eals. A boarder or lodger may or may not be included in average of two end-year estimates; 1960, 1970, and 1977 data, the household for statistical purposes. Statistical definitions of house- Urban population (percent of total) - Ratio of urban to total popula- hold vary. tion; different definitions of urban areas may affect comparability Average number of persons per room - total, urban, and rural - Average nus- of data among countries. her of persons per roam in a11, urban, and rural occupied conventional Population density dwellings, reapectively. Dwellings exclude non-permanent structures and Per sq. km. - Mid-year population per square kilometer (100 hectares) unoccupied parts of total area. Access to electricity (percent of dwellings) - total, urban, and rural - Per oq hm agricul ure land - Computed as above for agricultural land Conventional dwellings with electricity in living quarters as percentage only. of total, urban, snd rural dwellings respectively. Population age structure (percent) - Children (0-14 years), warking-age (15-64 years), and retired (65 years and over) as percentages of mid- EDUCATION year populaticn Adjusted enrollment ratioe Population growth rate (percent) - total, and urban - Compound annual Primary school - total, and female - Total and female enrollment of all ages growth rates of total and urban mid-year populations for 1950-60, at the primary level as percentages of respectively primary school-age 1960-70, and 1970-7. populations; normally includes children aged 6-11 years but adjusted for Crude birth rate (per thousand) - Annual live births per thousand of different lengths of prinary education; for countries with universal edu- mid-year population; ten-year arithmetic averages ending in 1960 and cation enrollment may emceed 100 percent since some pupils are below or 1970 end five-yoar everage euding in 1971 for most recent estimate above the official school age. Crude death rate (per thousand) - Annual deaths per thousand of mid- Secondary school - total, and female - Computed as above; secondary educe- year population; ten-year arithmetic averages ending in 1960 and 1970 tics requires at leaat four years of approved primary instruction; pro- and five-year average ending in 1975 for most recent estimate. vides general vocational, or teacher training instructions for pupils Croas reoroduction rate - Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondence courses are generally in her normal ceproductive period if she experiences present age- oxcluded. specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (percent of secondary) - Vocational institutions in- 1970, and 1971. clde technical, ind-strial, or oeher programs which operate independently Pamily planning - acceptors, annual (thousands) - Ancual number of or as departments of secondary inatitutions. acceptors of birth-control devices under auspices of national family Pupil-teacher ratio - primary, and secondarv - Total students enrolled in planning program. primary and secondary levels divided by numbers of teachers in the corre- Pamily planing - user (percent of married women) - Percentage of sponding levels. married women of child-bearing age (15-44 years) who use birth-control Adult litera rats (percent) - Literate adults (able to read and write) as de-ices to all married women in sane age group a percentage of total adult population aged 15 years and over. FOOD AND NUTRITION CONSUMPTION Inde- of food Production per capita (1971-100) - Index nueber of per Passenger cars (per thousand population) - Passenger cars compriase otor carc capita annual production of all food conmodities. seating less than eight persons; excludes ambulances, hearses and military Per capita supply of calories (percent of requirements) - Computed free vehicles. energy equivalent of net food supplies available in country per capita Radio receivers (per thousand population) - All types of receivers for radio per day. Available supplies comprise domestic production, imports less broadcasts to general public per thousand of population; eacludes unlicensed enports, and changes in stock. Not supplies exclude animal feed, seeds, receivers in countries and in years when registration of radio sets was in quantities used in food processing, and lasses in distribution. Re- effect; data for recent years nay not be comparable asin. most countries quirenents were estimated by FAO based on physiological needs for nor- abolished licensing. mal activity and health considering environmental temperature, body TV receivers (per thousand population) - TV receivers for broadcast to genera weights, age and sex distributions of population, and allowing 10 per- public per thousand population; excludes unlicensed TV receivers in coma- cent for waste at household level, tries and in years when registration of TV sets wan in effect. Per capita supply of protein (grums per day) - Protein content of per Newspaper circulation (per thousand population) - Shows the average circula- capita net supply of food per day. Net supply of food is defined as tion of "daily general interest newspaper", defined as a periodical publi- above. Requirements for all countries established by USDA provide for ction devoted primarily to recording general news. It is considered to a minimun allowance of 60 grams of total protein per day and 20 grams be "daily" if it appears at least four tines a week, of animal and pulse protein, of which 10 grams should be animal protein. Cinema annual attendance per capita per year - Based on the number of tickets These standards are lower than those of 75 grams of total protein and sold daring the year, including admissions to drive-in cinemas and mobile 21 grams of animal protein as an average for the world, prop.oed by units. FAO in the Third World Food Survey. Per capita protein supply from aninal and pulse - Protein supply of food EMPLOYMENT derived from anim:als and pulses in grams per day. Total labor force (thousands) - Eoano=ically active persona, including armed Child (ages 1-i) mortality rare (per thousand) - Annual deaths per thous- forces and unemployed but axcluding housewives, students, etc. Defini- and in age group 1-4 years, to children in this age group. tions in various countries are not comparable. Female (percent) - Female labor force as percentage of total labor force. HEALrH Agriculture (percent) - Labor force in farming, forestry, hunting and fishing Life expectancy at birth (years) - Average number of years of life as percentage of total labor force. remaining at birth; usually five-year averages ending is 1960, 1970, Industry (percent) - Labor force in mining, construction, manufacturing and and 1975. electricity, water and gas as percentage of total labor force. Infant mortality rate (per thousand) - Annual deaths of infants under Participation rate (percent) - total, male, and female - Total, male, and one year of age per thousand live birhts. female labor force as percentages of their reapective populations. Access to safe water (percent of population) - total, urban, and rural - These are ILOIs adjusted participation rates reflecting asge-ses Number of people (total, urban, and rural) with reasonable access to structure of the population, dnd long time trend safe water supply (includes treated surface waters or untreated but Econo=ic dependency ratio - Ratio of population coder 15 and 65 and over to u_o-ta=oinated water such as that from protected boreholes, springs, the labor force in ago gr-up of 15-64 yers. and sanitary wells) us percentage- of their respective papulatious. In on urban area a public fountain or standposc located not more INCOME DISTRIBUTION thou 200 meters from a house may be considered as being withic rea- Percentage of private income (both in cash and kind) re--iv-d by richest 5 sonable access of chat house. In rural areas reasonable access would percent, richest 20 percent, poorest 20 percent, and poorest 40 percent imply that the housewife or =enbers of the household do not have to of huhlds. spend a disproportionate part of the day in fetching the fasily's water needs. POVERTY TARGET GROUiPS Access st excreta disposal (percent of population) - total, urban. and Estimated absolute povecty iucene level (UE$ per capita) - urban and rural - rural - Number of people (total, urban, and rural) served by excreta Absolute poverty income level is that income level below which a minimal disposal as percentages of their respective populations. Ecreta nutritionally adequate diet plus essential non-fnod requireaents is not disposal may include the collection and disposal, with or without affordable, treatnent, of human ecreoCa and waste-water by water-borne systems Estimated relative poverty income level (US0 per capita) - urban and rural - or tho -sa of pit privies and similar installations. Relative poverty income level is that income level less than one-third Population per physician - Population divided by number of practicing per capita personal income of rho coastry. physicians qualified from a medical school at suivorsity level. Estiated population below poverty income level (percent) - urban and rural - Pupalation Per nurling Person - Population divided by number of Percent of population (urban and rural) who are either "absolute poor" or practicing sale and female graduate nurses, practical nurses, and "relative poor" whichever is greater. assistact nures. Economic and Social Data Division Econo=ic Analysis and Projections Department  - 25 - ANlIIEXI PageT4 THE REPUBLIC OF GUINEA ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GROWIJH (%, constant prices) US$ Mln. % 1975-76 1976-77 1977-85 PROJEC=TD ON? at Market Prices 1,076.0 100.0 2.3 5.6 9.0 Gross Domestic Investment 31.5 2.9 -61.0 4.8 23.4 Gross National Saving 29.1 2.7 -52.4 51.6 23.4 Current Account Balance -7.3 o.6 Exports of Goods, NFS 311.9 29.0 5.1 8.2 14.4 Imports of Goods, NFS 264.3 24.6 1.5 0.0 17.4 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1977 Value Added US$ Mln. 1 Agriculture 521 46 Industry and Mining 252 23 Services 128 12 Unallocated 210 19 GDP AT FACTOR COST 1,111 100.0 GOVERNMENT FINANCE -