Jordan - Eight Cities Water Supply and Sewerage Project

Document of The World Bank FOR OMCIAL USE ONLY Report No. 4972a-JO STAFF APPRAISAL REPORT HASHEMITE KINIDOM OF JORDAN EIGHT CITIFS WATER SUPPLY AND SEWERAGE PROJECT April 24, 1984 Water Supply and Sewerage Division Europe, Middle East and North Africa Regional Office This document has a restricted distribution sad My be wsed by recipients oly in the performnce of their official duties. Its contents may not oderwise be dislosed withot World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Jordan Dinar (JD) JD 0.365 = US$ 1.00 1/ JD 1.00 = US$ 2.74 JD 1.00 = 1,000 fils MEASURES AND EQUIVALENTS Kilometer (km) = 0.62 mile Square Kilometer (km2) = 0.386 square mile Hectare (ha) = 2.47 acres Millimeter (mm) = 0.03937 inches Centimeter (cm) = 0.3937 inches Meter (m) = 39.37 inches Cubic Meter (m3) = 264 US Gallons Cubic Meters per second (m3/sec) = 22,800 US Gallons per day Liter (1) = 0.264 US Gallons Liters per second (1/sec) = 22,800 US Gallons per day Liters per capita per day (lcd) = 0.264 US Gallons per capita per day Milligram per liter (mg/l) = 1.0 part per million ABBREVIATIONS AND ACRONYMS AWSA = Amman Water and Sewerage Authority EGMC = East Ghor Main Canal GOJ = Government of Jordan JVA = Jordan Valley Authority KfW = Kreditanstalt fuer Wiederaufbau LRAIC = Long Run Average Incremental Cost NPC = National Planning Council NRA = Natural Resources Authority USAID = United States Agency for International Development WA = Water Authority WSC = Water Supply Corporation ABBREVIATIONS ft = foot min = minute lcd = liters per capita per day ppm = part per million m = meter sec = second In3 = cubic meters kg = kilogram mm = millimeter gm = gram km = kilometer kw = kilowatt MCM = million cubic meters kwh = kilowatt-hour BODs = five day biochemical oxygen demand GOJ'S AND WA'S FISCAL YEAR JANUARY 1 - DECEMBER 31 I/ as of December 5, 1983  STAFF APPRAISAL REPORT FOR OMlCIAL USE ONLY HASHEMITE KINGDOM OF JORDAN EIGHT CITIES WATER SUPPLY AND SEWERAGE PROJECT TABLE OF CONTENTS Page No. LOAN AND PROJECT SUMMARY .. i-ii THE WATER SUPPLY AND SEWERAGE SECTORS ...................... 1 Water Resources ............................................ 1 Water Supply ............................................... 2 Sewerage ................................................... 2 Sector Organization .. 3 IDA/Bank Role in Water Supply and Sewerage . . 3 II. PROJECT AREA ............................................... S General Features ........................................... 5 Existing Water Supply Systems .. 6 Sources of Water Supply .. 7 Existing Wastewater Disposal System ............. 7 Population ................................................. 8 Water Demands .............................................. 8 Sewage Flows and Organic Loads .. 9 III. THE PROPOSED PROJECT ....................................... 10 Project Objectives .. 10 Project Description ........................................ 10 Project Elements ........................................... 10 Cost Estimates ....................... 11 Project Financing Plan .. 13 Status of Engineering .. 14 Procurement ................................................ 14 Disbursements .............................................. 15 Project Implementation .. 16 Land Acquisition and Access .. 16 Monitoring Criteria .. 16 IV. THE BENEFICIARY ............................................ 18 Introduction ..8...................... i Organization and Management .. 18 Institutional Development .. 19 Staffing ................................................... 20 This report is based on the findings of an appraisal mission to Jordan in November/December, 1983. Mission members included John W. Huang, Arun Banerjee and Xavier Legrain. .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.  TABLE OF CONTENTS (continued) Page No. IV. (cant.) Training ................................................... 20 Billing and Collection .. 21 Accounting ................................................. 21 Audit ...................................................... 21 Insurance .................................................. 22 V. FINANCE .................................................... 23 Past Performance and Present Position ... 23 Tariff-Cost Recovery ...................................... 23 The WA's Sources and Applications of Funds . . . 24 Future Financial Performance . . . 25 VI. ECONOMIC AND SOCIAL ASPECTS ................................ 26 Health Benefits and Environmental Impact . . ................. 26 Least-Cost Solution . . . 26 Economic Efficiency of Sector Investments . . . 26 Affordability .............................................. 27 Institution Building . . . 27 Risks ..................................................... . 27 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ..................... 29 ANNEXES 1 Population Projections .30 2 Estimated Household Sizes and Household Incomes .31 3 Details of Existing Water Distribution Systems .32 4 Projected Water Production . . .33 5 Projected Sewage Flows . . .34 6 Details of Sewer Construction in the Eight Cities............ 35 7 Details of Water Supply Components . . .37 7 Details of Sewerage Components . . .38 8 Detailed Annual Project Investment... 39 8 Summary of Total Project Investment . . .40 8 Cost Elements by Contracts . . . 41 9 Procurement Tablee.... 42 10 Estimated Schedule of Disbursements . . .43 11 Project Implementation Schedule . . .44 12 Monitoring Criteria for Water Authority Operations . . . 45 13 Organization Chart of the Water Authority . . .46  TABLE OF CONTENTS (continued) Page No. ANNEXES (cont.) 14 Current Water and Sewerage Tariffs .. 47 15 Assumptinns used in Financial Projections .. 49 15 Income and Expenditure Statement - Project Water Operations ....... 51 15 Income and Expenditure Statement - Project Sewerage Operations .... 52 15 Income and Expenditure Statement - Water Authority Consolidated ... 53 15 Source and Applications of Funds - Water Authority Consolidated ... 54 15 Balance Sheet - Water Authority Consolidated .. 55 15 Test of Financial Covenants .................................-. 56 16 Selected Documents and Data Available in the Project File . . 57 MAPS Map No. Water Sources and Supplies to Municipal Systems in Jordan. 17961 Ramtha -- Water Supply Distribution System and Sewerage . .17962 ?Iafraq -- Water Supply Distribution System and Sewerage . .17963 Anjara, Ajloun, Ein Janneh and Kufrinja - Water Supply Distribution System and Sewerage ..17964 Madaba -- Water Supply Distribution System and Sewerage . .17965 Ma'an -- Water Supply Distribution System and Sewerage . .17966  HASHEMITE KINGDOM OF JORDAN EIGHT CITIES WATER SUPPLY AND SEWERAGE PROJECT LOAN AND PROJECT SUMMARY Borrower: The Hashemite Kingdom of Jordan. Beneficiary: Water Authority. Amount: US$30 million equivalent. Terms: 15 years, including three years of grace, at the standard variable interest rate. Relending Terms: Same as the Bank loan. The WA will bear the foreign exchange risk. Project Description: The project would improve water supply service and provide new sewerage service in the cities of Ramtha, Mafraq, Anjara, Ajloun, Ein Janneh, Kufrinja, Madaba and Ma'an. It would include: (i) construction of about 110 km of trunk and distribution water mains, 8,000 m3 of reservoir storage and supply of water meters; (ii) construction of about 177 km of trunk and collection sewers, 14,000 house laterals, 4 waste stabilization pond systems, an imhoff tank and trickling filter system, one sewage pumping stations and force mains; (iii) supply of operating equipment; and (iv) consultant services for supervising the construction contracts. The project will follow through the institutional development efforts of a previous Bank loan and of the USAID for which adequate funds have been provided. The main beneficiaries of the project would be the low and middle-income families of the eight project cities. The Water Authority (executing agency) has good experience with the construction and operation of water supply and sewerage systems, but has less experience with water and sewage treatment. While there is a risk of delay in construction and of inadequate operation of the sewage treatment plants, this risk is minimized through the use of experienced consultants, progress monitoring, the use of simple treatment processes, and the available institutional development assistance.  Estimated Cost*: Local Foreign Total (US$ Millions) -- Water Supply 2.50 5.83 8.33 Sewerage and Sewage Treatment Plant 10.59 20.44 31.03 Meters and equipment 0.07 0.62 0.69 Construction supervision 1.36 2.04 3.40 Land 2.47 - 2.47 Base Cost 16.99 28.93 45.92 Physical Contingencies 1.93 3.98 5.91 Price Contingencies 2.75 4.69 7.44 Total Cost 21.67 37.60 59.27 Interest and other charges during construction - 6.42 6.42 Total Financing Required fi2 Financing Plan Proposed World Bank loan - 30.00 30.00 Government loans and contribution 19.98 14.02 34.00 Funds from operations 1.69 - 1.69 Total Financing ;1.A i.RZ Estimated Disbursements: Bank FY 1984 1985 1986 1987 1988 1989 1990 Annual 0.1 3.6 8.8 9.2 3.9 3.6 0.8 Cumulative 0.1 3.7 12.5 21.7 25.6 29.2 30.0 Rate of Return: Not applicable Staff Appraisal Report: No. 4972a-JO, dated April 24, 1984 * Cost estimates do not include import duties and taxes, from which the project is exempt.  STAFF APPRAISAL REPORT HASHEMITE KINGDOM OF JORDAN EIGHT CITIES WATER SUPPLY AND SEWERAGE PROJECT I. THE WATER SUPPLY AND SEWERAGE SECTOR Water Resources 1.01 About 80 percent of Jordan's land area is desert. Availability of water depends largely on rainfall, which ranges from 600 millimeters per year in the northern uplands to negligible amounts in the southern and eastern deserts. Over 85 percent of the water precipitated as rainfall is lost through evaporation. Most of the municipal water supply systems and industry at present depend upon groundwater and springs. As these sources have become fully used, surface and groundwater in other areas, hitherto used for agriculture, will have to be transported over long distances and high lifts to meet municipal and industrial needs. The rapid growth of the economy in recent years and the associated increase in municipal, industrial and agricultural water demands have put serious pressure on the country's limited water resources and water scarcity may become a principal constraint to economic development. Prudent water resources management is therefore one of Jordan's most important objectives. 1.02 The Government has embarked on a program of large water projects to help relieve water shortage in the major urban areas, particularly in the upland areas of northwest Jordan. Among the principal projects, the Azraq pipeline (in operation), and the water transmission system from the East Ghor Main Canal in the Jordan Valley (under construction) would provide about 55 million cubic meters of water per annum from ground and surface water sources to the Amman area. Facilities to transfer another 20 million cubic meters per year of groundwater in the Jordan Valley near Wadi Arab to the Irbid area are also under construction. The Government has also adopted a policy for adequately treating all sewage from industries and municipalities which are  - 2 - sewered so that effluents may be suitable for reuse in agriculture. The most important sources of effluent are Amman, Zarqa, and Ruseifa, which discharge via the Zarqa River into the King Talal Reservoir, an important source of irrigation water supply. Water Supply 1.03 Almost 90 percent of the urban population is supplied through house connections. Due to source inadequacy, the supply in many areas are intermittent. In 1979 about 60 percent of the rural population was provided with piped water supply, but with ongoing extension works this is expected to reach about 80 percent by 1985 . The population not receiving piped water is supplied through tankers operated by the Water Authority (WA) or by private tankers which draw water from nearby springs, or wells, or from WA water points. Sewerage 1.04 At present, only four cities, Amman, Salt, Aqaba, and Jerash have sewage collection systems. These serve about 25 percent of Jordan's population. Sewerage systems being constructed in Irbid, Zarqa, and Ruseifa will provide service to another 15 percent. Amman has a treatment plant utilizing the activated sludge process, which meets part of the capital city's needs; Salt operates an extended aeration system; Aqaba uses primary treatment; and Jerash has oxidation ditches. The treatment plant in Irbid will use the activated sludge process, while Zarqa and Ruseifa will have trickling filters. Also under construction are stabilization ponds, which will add to the treatment capacities of the systems in Amman and Aqaba. Other towns and villages with piped water systems, serving about 40 percent of the total population, discharge their wastes in septic tanks, cesspools and similar facilities. The remaining population uses pit privies and latrines or has no sanitation system at all. Despite efforts to provide sewerage in recent years, many urban centers are still served by inadequate individual waste disposal facilities. In densely populated parts of cities, the soil is no longer capable of disposing of the increasing amount of effluents. Consequently, cesspool overflows and improper disposal of cesspool waste occur, creating major health hazards. Severe outbreaks of cholera have occurred in Jordan, the latest in 1981. 1.05 An increase in nitrite concentration is noted in the groundwater in the main limestone aquifer underlying communities using cesspools. This groundwater is used for potable water supply. Fortunately, in most cases this source is still bacteriologically safe. The danger exists, however, of direct entry of cesspool effluents into water mains during periods of depressurization.  -3- Sector Organization 1.06 Until recently all water development activities were coordinated and assisted at the national level by the National Planning Council (NPC), Jordan's central planning authority. In December 1983, a law created and assigned responsibility to the Water Authority (WA) Lor the planning, development, allocation, and management of all water resources, as well as for the provision of potable water supply and sewerage services. This law also decreed that henceforth all water resources, whether surface or underground, would be considered property of the state. The major roles assigned to the WA are (a) the elaboration of policies for the appropriate allocation of water among potential users; (b) the development of water resources and bulk transfer to water-short areas; (c) the setting of tariffs to encourage water conservation and to ensure the Authority's financial viability; and (d) the protection of water resources. The WA is in the process of taking over all agencies providing water supply, the departments of certain agencies concerned with water resources monitoring, planning and development, and the water systems of some 400 communities which still operate their own water supplies. The takeover will involve the transfer to the WA of all physical assets of these entities as well as the liabilities incurred by them. IDA/Bank Role in Water Supply and Sewerage 1.07 The Bank commenced its assistance to the Jordanian water supply sector in the 1960s. Credit 18-JO of 1961 for US$ 1.5 million and Credit 43-JO of 1963 for US$ 2.5 million supported water supply development respectively in Amman and in the cities of Ramallah-El Bira, Jerusalem, Nablus, Azraq, Irbid, and Zarqa. These aforementioned projects, which included provision of new wells, pumping stations, transmission mains, storage capacity, and improvement and extension of the distribution systems, have been successfully completed. In the 1970s, the Government concentrated its efforts on developing the water supply and sewerage services of Amman. In this context, the Bank supported the creation of the former Amman Water and Sewerage Authority (AWSA), an autonomous water supply and sewerage agency. The US$ 8.7 million credit (Cr. 385-Jo) of 1973 and the US$ 14 million credit (Cr. 780-JO) of 1978 assisted in the development of AWSA and helped finance investments for Amman's rapidly expanding water supply and sewerage services. The completion report (Sec. 79-491) for the 1973 project (Cr. 385-JO) noted that while substantial effort had gone into the institutional development of AWSA, some inherent weaknesses remained, particularly in its financial department. The institutional development effort was continued and the remaining problems were addressed under the Third Amman Water Supply and Sewerage Project (Cr. 780-JO) which has just recently been completed, and for which a completion report is under preparation. 1.08 In 1983, the Bank provided further assistance through Loan 2213-JO of US$ 17.0 million for the improvement of the water supply distribution systems of the cities of Zarqa and Ruseifa and for sewerage in the densely populated  - 4 - areas of these two cities. A prime project objective was to strengthen the Water Supply Corporation (WSC), the project implementing and operating agency. Technical and financial advisors have already been engaged, and measures to improve operation and financial management are underway. With the recent reorganization of the sector, responsibility for the implementation and operation of the project has been taken over by the WA, which has decided that these advisors will provide assistance to the new organization. 1.09 The Bank's objectives in the sector are to assist the Government to efficiently develop, manage, and distribute the country's scarce water resources and to adequately dispose of waste and wastewater in order to enhance the quality of life, with particular emphasis on the lower income population. The strategies for doing this are outlined in the Bank Water Sector Study (report No. 4699-JO, dated October 13, 1983). These include (a) development of policies and plans to efficiently manage and allocate the country's scarce water resources; (b) development of technically sound and economically feasPNle projects to increase the country's usable water resources; (c) development of projects to adequately dispose of wastewater and to allow reuse; (d) improvement of water distribution systems and reduction of leakage; (e) improvement in sectoral planning and strengthening of sector institutions and (f) establishment of sound pricing policies to assure economic use and conservation of water and to allow operating entities to be financially viable and self-sustaining. The Bank objectives have been taken into account in formulating this and the recent Zarqa/Ruseifa projects and will also be reflected in future projects.  - 5 - II. PROJECT AREA General Features 2.01 The project area consists of eight cities with a combined estimated 1984 population of about 136,000. Six are located north and two south of Amnan, the capital city. Detailed population, family size and household income of these cities appear in Annexes 1 and 2. A brief description of their main features follows. 2.02 Ramtha is Jordan's principal border city with Syria, located about 87 kilometers north of Amman. Its population of about 32,200 is supported mainly by rain-fed wheat land and some olive groves. The new Yarmouk University campus is located about four km to the south. 2.03 Mafraq has about 25,300 inhabitants. It is situated on a high semi-desert plateau at one of the crossroads to Saudi Arabia, about 70 kilometers northeast of Amman. The Mafraq region has a harsh climate not congenial to agriculture. Rainfall averages less than 200 mm per year. 2.04 The four mountain cities of Anjara, Ajloun, Ein Jannneh and Kufrinja have a combined population of about 30,800. They are clustered near the headwaters of the beautiful Kufrinja Valley in one of the few areas in Jordan where oak, pine, cypress and acacia forests can still be found. The area enjoys the highest annual rainfall in the country--a mean annual rainfall of 650 mm--and despite the precipitous nature of the terrain, agriculture is developed, with olives as the main crop. The area is rich with antiquities from Roman times, and consequently has good potential for tourism. 2.05 Madaba has a population of about 34,700. It is built on several gently rolling hills surrounded by good farm land about 30 kilometers south of Amman. The climate is mild with an average annual rainfall of about 350 mm. Madaba is noted for its Byzantine mosaics which attract some tourists. Because of their proximity to Amman, the areas north and west of Madaba are becoming residential suburbs for some workers from the capital. For this reason, Madaba's population is expected to grow rapidly in the coming years. The city has no major industry. 2.06 Ma'an has a population of about 13,400. It is situated at the intersection of the Desert Highway linking Amman to the seaport of Aqaba and Highway 15, a major land route to Saudi Arabia. It is the seat of the Governorate of Ma'an. Since the start of the hostilities in the Gulf Area, the Desert Highway has served as a main route for imports to Iraq through Jordan, and this has added to the importance of Ma'an as a transportation center. Ma'an is also a major stopover point for pilgrims during the "Raj' season. The climate is arid, with an average annual rainfall of only about 50 mm. Potential for agriculture is limited. The main industry of the city is a  - 6 - glass factory, but the Government intends to foster industrial development in this area as part of its long term regional development plan. Existing Water Supply Systems 2.07 Details of the existing systems in the eight cities are shown in Annex 3. With the exception of the Madaba system, all other systems are presently operated by the water departments of the respective cities and will be taken over by the WA. In Madaba, the system was operated by the WSC since 1980 before it was taken over by the WA. A brief description of each system follows. Ramtha 2.08 Existing water source is from two relatively low yield local wells, supplemented by bulk supply from the WA. The water distribution system is weak; some older parts of the system suffer from excessive leakage. Mafrap 2.09 The city has no local water resources and relies exclusively on the WA for its source of water. Part of the distribution system of the city is currently under renovation with funds from the Government. Anjara, Ailoun, Ein Janneh and Kufrinja 2.10 Water sources are from local springs: two in Anjara, two in Ajloun, three in Ein Janneh, and two in Kufrinja. These sources are inadequate and will be supplemented from the WA's Northern District Water Supply System (para. 2.13) in the future. The water pipes in the existing distribution systems of Anjara, Ajloun and Ein Janneh are generally in good condition. In Kufrinja, some older pipes are leaking badly. Adequate elevated storage is available in all four cities. Madaba 2.11 The city receives its potable water from the Oyyun Musa Springs, the Qastal wellfield, and the recently developed Swaga wellfield. In addition the system will also be connected to the Dier Alla supply system from the East Ghor Main Canal (para. 1.02), scheduled to commence production in 1985. The distribution system is presently operated as a single pressure zone. Because of substantial ground elevation differences within the city as a result of urban expansion, some sections suffer from inadequate pressure, while in others excessive pressures are causing serious pipe leakages. Ma'an 2.12 Water source is from the Tawaheen wellfield located about eleven km northwest of the city. The distribution pipe system in the city center has  - 7 - recently been improved. More distribution storage will, however, be required, together with the laying of some arterial mains to deliver additional water to the service areas. Sources of Water Supply 2.13 The six cities north of Amman (Ramtha, Mafraq, Anjara, Ajloun, Ein Janneh, and Kufrinja) will eventually be included in the WA Northern District Water Supply System (NDWSS) in Irbid Governorate. This system serves a present population of over 600,000 people through direct or bulk supply. The sources of supply are presently from the Azraq springs and wellfields in Wadi Duleil, Wadi Ajib, and Sumayia areas. Present production due to source limitation is estimated to be only about 12 MCM/year, or an average of about 55 lcd. Groundwater of an estimated yield of about 20 MCM/year has recently been discovered in the Jordan Valley near Wadi Arab about twenty kilometers northwest of Irbid (para. 1.02). A pumping station and pipeline system is currently under construction by the government to transport this water to Irbid to be used in the NDWSS. This work is expected to be completed by 1985, at which time the water available to NDWSS would be almost tripled, permitting demands in the areas served to be met to almost 1995. Beyond this date additional sources found at Mukheiba located north of the Wadi Arab wells can be utilized. Plans are already under preparation by the NPC (responsibility to be passed over to the WA shortly) to strengthen the NDWSS in order to bring the additional water to the various areas and to provide adequate links to the system for the six project cities. During negotiations assurance was obtained from WA that sufficient water resources would be made available for the systems in Ramtha, Mafraq, Anjara, Ajloun, Ein Janneh, and Kufrinja in a timely manner commensurate with the project implementation schedule to meet present and future water demands. 2.14 Madaba is presently served from Oyyun Musa Springs and wellfields in Qastal and Swaga, which also provide a supply to areas south of Amman. The present developed yield of the groundwater sources is about 14,400 m3 /day, but the ultimate yield is expected to be almost double this amount and the delivery system has been designed accordingly. These sources are adequate to meet the demands of Madaba and the area south of Amman well into the 1990's. Beyond this date water from the Dier Alla supply system (para. 2.11) can be used. 2.15 The capacity of the Tawaheen wellfield serving Ma'an is estimated to be about 10,000 m3/day. This amount should be adequate to meet the domestic demands of the city as well as for modest industrial use up to the turn of the century. Existing Wastewater Disposal Systems 2.16 The eight project cities have no sewers. They are served by cesspools and septic tanks. In their densely populated areas, the soil is no  - 8 - longer capable of absorbing effluents, and costly pumping and transportation to appropriate dump sites are carried out frequently to prevent overflows from cesspits and septic tanks. To reduce pumping cost, sullage water is often thrown out into the streets and this runs untreated into nearby water courses. In older parts of some of these cities, prolonged seepage of cesspit effluents has given rise to ground subsidence, endangering the safety of structures. In addition, there is the risk that the sewage effluent which is present in the soil may seep into the water systems when these are depressurized for whatever reasons. Population 2.17 Population data for the eight project cities is obtained from the results of the National Housing and Population Census conducted in November 1979. Their population growth rates were derived from the Census and observations of the national population growth rate in recent years, adjusted to take into account the impact of socio-economic factors associated with each city. Their combined population is expected to grow from 114,200 in 1979 to about 169,000 in 1990 (i.e., 3.6 percent per annum) and 270,000 in 2005 (i.e., a further 3.2 percent per annum). The detailed population projections are shown in Annex 1. Water Demands 2.18 Past water consumptions in these cities do not reflect the potential demands since supply is frequently restricted due to source limitations. Inadequate record keeping and unreliable metering are also problems. Examination of the sales records of the eight cities shows per capita consumption ranging from 21 to 50 lcd in 1980, 30 to 54 lcd in 1981 and 28 to 69 in 1982. Based on this limited information 42 lcd was taken as the average daily per capita consumption in all eight cities in 1979. This was then projected to reach 74.5 lcd in 2005, i.e., an average annual increase of 1.25 lcd, or a growth rate corresponding roughly to the demand growth arising from a six percent per year growth in per capita income at an income elasticity of demand of 0.35. 2.19 Unaccounted-for water is about 42 percent of water produced in Ramtha and Ma'an and about 40 percent in the other cities. Improvement of the systems together with the anticipated strengthening of operational management under the project should bring unaccounted-for water down to about 30 percent. Projections of water production and sales for the eight cities can be found in the project file, and the increase in water production for the cities is shown graphically in Annex 4.  -9- Sewage Flows and Organic Loads 2.20 Sewage flows were estimated from the water use projections. Approximately 67 percent of the population will be connected to the proposed sewerage systems. These represent the residents in the more densely populated areas. About 64 percent of the water produced for the sewered population will appear as sewage. This is estimated by assuming an evaporation loss of about 20 percent on the estimated 80 percent of the produced quantities reaching the consumer. Another 5 lcd is added to account for rain water infiltration. 2.21 There is no sewage flow at present in the eight cities and organic loads have therefore to be inferred from those observed in other cities in Jordan. Test samples collected in Amman indicate a per capita BODS (five day biochemical oxygen demand) of 60 grams per day. These results are considered somewhat high because the samples used could have contained septage from cesspool emptiers dumped into the city manholes. For the purpose of forecasting BODs loads for treatment plant design, a total per capita BODs load of 60 grams per capita for the connected population is used comprising of 50 grams per capita for the direct pollution load caused by this population, plus another 10 grams per capita from cesspool septage of the unconnected population which has also to be treated in the treatment plants. Projected sewage flows and organic loads are in the project file, and the projected sewage flows are again shown graphically in Annex 5.  - 1tQI- III. THE PROPOSED PROJECT Proiect Obiectives 3.01 The project will provide much needed improvements in the water supply distribution systems and will eliminate problems associated with inadequate cesspools in eight cities in Jordan. This should lead to a general upgrading of the health and environment of these cities and is in line with the Government's intention of improving these services in secondary cities. Project Description 3.02 The water supply component of this project will strengthen the distribution systems in the eight cities in order to meet demands up to 1995, and provide for future expansion. Distribution pipes within populated areas will be sized for the saturation -population. Transmission mains will be laid to bring additional water from external sources which have been or are being developed. Additional storage will be provided for some cities. In Madaba the system will also be redesigned and divided into three pressure zones instead of one. 3.03 Sewers will be constructed to serve the densely populated areas of these cities. In these areas collection sewers will carry effluents by gravity to trunk sewers sized to take year 2020 flows. This design year was found to be the most economic size for the trunk sewers. The project will also provide for sewer laterals to be laid to the properties to be connected. The treatment processes have been selected after consideration of possible alternatives and are the least cost solutions. Treated effluent will be used for restricted irrigation. Details are given in Annex 6. Project Elements 3.04 The project elements are listed in Annex 7 and shown on IBRD maps 17962 to 17966. The components are summarized below: (a) Water Supply: Construction of about 110 km of trunk and distribution mains, 8000 m3 of reservoir storage and supply of about 10,000 supply and production meters (b) Sewerage and Sewage Treatment: Construction of about 177 km of trunk and collection sewers, about  - 11 - 14,000 laterals for house connections, four waste stabilization pond systems to treat a total average sewage flow of 6,500 M3/day, a sewage treatment plant comprised of Imhoff tanks and trickling filters for an average flow of 1,800m3/day, and one sewage pumping stations and force u.i.is. (c) Supply of Operating Equipient (d) Consultants for Construction Supervision 3.05 The proposed project should reinforce the institutional development activities started under Loan 2213-JO by extending the scope of coverage to include the needs of the newly created WA. The funds al:eady provided under that loan and from USAID (paras. 4.06 and 4.0;) are considered to be adequate for this purpose and no additional funds for institutional development are therefore proposed to be included in the proposed project. Cost Estimates 3.06 Project cost estimates are detailed in Annex 8 and summarized below:  - 12 - PROJECT COST ESTIMATES JD million USt million S of local foreign total local foreign total nrolect cost Water supply distribution 0.911 2.127 3.038 2.S00 5.833 8.333 14.1 Sewerage 2.438 5.687 8.125 6.685 15.601 22.286 37.6 Sewage treatment Plants 1.423 1.767 3.190 3.903 4.847 8.750 14.8 Meters & operating equip. 0.025 0.225 0.250 0.069 0.617 0.686 11.6 Construction supervision 0.496 0.744 1.240 1.361 2.041 3.402 S.7 Land 0.900 - 0.900 2.469 - 2.469 4.2 Base cost 6.193 10.S50 16.743 16.987 28.939 45.926 77.S Physical contingencies 0.703 1.451 2.154 1.928 3.980 5.908 . 10.0 Price contingencies 1.001 1.710 2.711 2.747 4.692 7.439 12.5 Total Project Cost LA.Z .ZJ 1J.1l Z.L.MZ U.Lh= SLZZZ WIlLA Interest during - 2.320 2.3zo - 6.340 6.340 construction Front-end fee - 0.027 0.027 - 0.075 0.075 on Bank loan Total financing 7.897 16.059 23.956 21.662 44.025 65.687 required  - 13 - 3.07 The quantity estimates in the feasibility studies were updated at appraisal to reflect the work completed by the design consultants. Cost estimates are based on unit prices in recent construction contracts resulting from competitive bidding for similar work undertaken by AWSA under Credit 780-JO and other work carried out by WSC, adjusted to mid-1984 prices. Physical contingencies of 15% have been allowed for the construction of sewers and water mains and l0Z for other items such as water storage reservoirs and sewage treatment plant (excluding land). Price contingencies of 7.5% for 1984; 7.0% for 1985; and 6.0S for 1986 and beyond have been used for foreign costs, and 7.5X for 1984 and beyond for local costs. The cost estimates do not include direct import duties and taxes as the WA is exempt from these. Project Financing Plan 3.08 The project financing plan may be summarized as follows: Local Foreign Total Z CUS$ million) Requirements Water supply distribution 3.34 7.68 11.02 17 Sewerage 8.96 20.59 29.55 45 Sewage treatment plants 4.88 5.99 10.87 17 Meters and operating equipment 0.08 0.70 0.78 1 Construction supervision 1.75 2.64 4.39 6 Land 2.66 - 2.66 4 Total 21.67 37.60 59.27 90 Interest during construction and front-end fee - 6.42 6.42 10 Total 21.67 44.02 65.69 1Q Financing Proposed Bank loan 30.00 30.00 45 Government loans & contribution 19.98 14.02 34.00 52 Available from operations 1.69 - 1.69 3 Total 21.67 44.02 65.69 ___  - 14 - 3.09 The proposed Bank loan would be made to the Government of Jordan (GOJ), which coordinates all foreign financing for public sector investments through NPC, on standard terms for Jordan, i.e. for 15 years including 3 years grace. GOJ will on-lend the Bank loan to the WA on substantially similar terms and conditions under a separate subsidiary loan agreement. The WA will bear the foreign exchange risk. Interest and other charges during construction over the grace period and the front-end fee will be added to the subsidiary loan and be paid for by GOJ. The execution of the above subsidiary loan agreement would be a condition of loan effectiveness. 3.10 Financing to meet any foreign exchange costs in excess of that covered by the Bank loan would be provided by the Government. The Government would also provide all local funds required for the project in the form of an equity cont-ibution to the WA. During negotiations agreement was obtained from the Government that it would provide all necessary finances whether foreign or local, required for the project, and that the local funds provided for the project would be passed on to the WA as an equity contribution. Status of Engineering 3.11 Feasibility studies were carried out by two US consultants financed by USAID. The proposed water supply networks and sewerage systems were decided after careful study of alternative configurations and pipe sizes. The waste stabilization ponds proposed for four of the five sewage treatment plants gave the least cost-solution as well as provided for ease of operation. The mechanical process selected for the fifth plant made necessary by land constraint was the least cost-solution. Preparation of design and contract documents is carried out by three local consultants (Jouzy & Partners, Consulting Engineering Center and Arab Tech) with funds provided by the Government, supported by three consultants from the United States (Engineering Science, Black & Veatch and CH2M Hill) funded under USAID assistance. The work is almost completed and tendering is expected to take place in June 1984. An amount of US$ 3.4 million has been provided in the project for consultant services required for supervision of the construction work. Estimated consultant time required is 140 man-months at $14,500 for foreign consultants, 185 man-months at $3,700 for professionals of local consultants and 390 man-months at $1,750 for local technicians and support staff. The man-month costs include salary, overheads, fees, international travel and subsistence for foreign consultants and salary plus overhead for local personnel. Consultant costs are more expensive than in neighboring countries because of the high cost of living in Jordan. Procurement 3.12 All major contracts will be awarded on the basis of international competitive bidding in accordance with the Bank's guidelines for procurement. A procurement table outlining the proposed procurement methods to be used is found in Annex 9. The proposed contract packaging is in page 3 of Annex 8. For all civil contracts expected to last more than one year, allowance for  - 15 - price increases is considered desirable. However, in the past the Government has had poor experience with price adjustment provisions and has passed regulations to discourage their inclusion in construction contracts. During negotiations, understanding was nevertheless reached with. the Government and the WA that for civil works contracts expected to last longer than 12 months, bid documents would allow inclusion of a price adjustment orovision for major construction materials with administered prices. This reqvirement, to which the Covernment has agreed in previous Bank loans, provides some measure of protection to the contractor against unforeseen price increases. Because of the number of consultants (three) involved in the preparation of the contract documents, the number of contracts that will be handled by each consultant is small. Due to the diversity in the nature of the contracts under each consultant, procurement documents for all contracts would receive prior review by the Bank. Disbursements 3.13 The proposed Bank loan of US$ 30 million would be disbursed over a period of approximately six years as follows: 1. Civil works ...................... 52% of total expenditures (including related equipment for water supply & sewerage) (US$ 24,000,000) 2. Meters and operating ............ 100% of foreign expenditures, equipment 85% of expenditures for locally (US$ 600,000) procured items 3. Consultant services ............. 100% of foreign expenditures (US$ 2,400,000) 4. Unallocated (US$ 3,000,000) 3.14 The forecast disbursement schedule (Annex 10) is based on the Project Implementation Schedule (Annex 11) and takes into consideration the standard disbursement profile for water supply projects in Jordan. The slightly shorter forecast of disbursements compared to the standard profile is supported by the advanced stage of the design, the relative simplicity of the work to be carried out, favorable site conditions such as absence of traffic congestion or other situations that could impede construction work, and the fact that the Bank is the sole financier of external funds. The implementation schedule from which the disbursement schedule is derived has, in addition, included a very large time contingency over that recommended by  - 16 - the consultants. All disbursements will be made against fully documented expenditures. The loan closing date would be June 30, 1990. Project Implementation 3.15 The project would be executed from 1984 to 1989. The WA would be responsible for project execution and has agreed to set up a project management unit headed by an experienced project manager to be responsible for the work. The project manager has already been appointed. Staffing of the unit by experienced personnel is essential to ensure successful project implementation. During loan negotiations, assurances were obtained from the WA that all key administrative and technical personnel for the project management unit would be employed by December 31, 1984. 3.16 Sewer laterals will be constructed by the project up to the individual properties, while the plumbing systems will have to be altered at the owner's expense. The WA has sewer regulations which require properties to be connected once the system has been extended to an area. The expense required for sewer connection may pose some financial difficulty for the lower income group. The WA has found that in Amman about two percent of the homeowners had needed financial assistance. For the project cities it is expected that this percentage will be somewhat higher. Over a period of three years, the total funds required to finance sewer connections of the about 10 percent of the consumers who are considered to be needy would be about JD 140,000 (US$ 384,000), a sum within the financial capability of the WA. During loan negotiations assurance was obtained from the WA that it would if required assist in making arrangements to enable low income families in these cities to be connected to the sewer systems. Land Acquisition and Access 3.17 The land required for the sewage treatment plants, the sewage pumping stations and part of the trunk sewers is privately owned. No land is presently in use. Expropriation Law No. 6 of 1980 allows land to be expropriated with equitable compensation for projects of public interest. Expropriation approval by the Council of Ministers usually takes less than six months. The WA has already commenced taking measures for land acquisition, and from past experience of previous loans this is not considered to be a problem. Monitoring Criteria 3.18 The proposed project implementation schedule is shown in Annex 11, and key indicators for the measurement of the technical, financial,  - 17 - institutional and training objectives for the WA are shown in Annex 12. During negotiations the project implementation schedule and the key indicators were discussed with the WA and understanding was reached on an acceptable schedule and set of key targets to be achieved by the WA. Furthermore, assurance was obtained from the WA that quarterly progress reports would be prepared in sufficient detail on all aspects of the project and sent to the Bank for review not later than one month after the end of each quarter, and that the WA would promptly carry out any agreed remedial actions resulting from discussions with the Bank following such review. 3.19 Assurance was also obtained that within six months following the closing date of the Loan, the WA would prepare and submit to the Bank a project completion report reviewing the planned objectives and the achievements of the project, including costs and benefits derived and performance and contribution of all parties associated with project execution and system operation.  - 18 - IV. THE BENEFICIARY Introduction 4.01 The Hashemite Kingdom of Jordan will be the Borrower of the proposed US$ 30.0 million Bank loan, the proceeds of which will be on-lent to the newly created Water Authority (WA), which will implement the project and operate and maintain all the water supply and sewerage systems. The water supply systems in all of the project cities except Madaba, which is already under WA operation, are operated by the respective municipal departments. Operational responsibilities for these therefore will have to be assumed by the WA. Assurances were obtained from the Government during negotiations that the water supply systems of the project cities except Madaba would be legally transferred to the WA no later than June 30, 1985. Organization and Management 4.02 The WA, created in December 1983 under Law No. 34 of 1983, has been assigned wide responsibility for water resources management, water supply and sewerage in Jordan (para. 1.06). It is an autonomous agency reporting to the Prime Minister's office, enjoying independent financial and administrative status. It has a twelve-member Board of Directors, of which ten are ex-officio and two are from the private sector. The Board is chaired by the Prime Minister. Headquarters in Amman are managed by a President and a Secretary General who deputizes for him. Both positions are appointed by the Council of Ministers. The WA is gradually taking over the functions and staff of all water agencies in Jordan and has set up with this staff a new organization which is expected to evolve as it develops to fully assume its role. The present organization is shown in Annex 13. The headquarters in Amman has the following departments: Water Supply Operations, Sewerage Operations, Finance and Accounting, Administration, Water Resources Management, Planning and Project Implementation. Operation and maintenance of water supply and sewerage will be carried out in three regional offices, each under a manager, but supervised by the headquarters departments of Water Supply Operations, Sewerage Operations and Finance and Accounting. The regional offices will also be subject to control by water councils composed of representatives of private and public sectors. 4.03 The WA has already taken over the Amman Water and Sewerage Authority (AWSA), previously responsible for water supply and sewerage in the city of Azmnan, the Water Supply Corporation (WSC), previously responsible for bulk water supply and for water supply and sewerage in areas of Jordan outside of Amman and the Jordan Valley and the water resources branch of the Natural Resources Authority (NRA). Additional agencies to be taken over include the water department of the Jordan Valley Authority (JVA), responsible for developing water resources in the Jordan Valley and providing water supply to  - 19 - communities in the valley. and the water systems of some 400 coamunities that still operate their own water supplies. 4.04 The number of WA staff engaged in water supply and sewerage operations now number about 2,850, composed principally of equal numbers of employees taken over from WSC and AWSA. This number corresponds to about 13 employees per one thousand connections served and is reasonable given the fact that the WA's responsibilities are spread over the whole country and the population density outside Amian is low. In addition, another 850 employees have been added to the WA from its takeover of the functions of the water resources branch of the NRA. 4.05 Through the creation of the WA many overlapping functions are being eliminated and staff from the different organizations brought together to work in consolidated units. While this will contribute to increased productivity, additional staff will still have to be recruited to operate the new sewerage systems being built under this project and others, as well as those in existence and those projected for Amman. By mid 1989 when this project is to be completed, the WA staff is projected to grow to about 5,000. Institutional Development 4.06 Institutional assistance is being provided to the WA by the Bank under the Zarqa/Ruseifa Project (Loan 2213-JO) and by the United States Agency for International Development (USAID), with whom the Bank is cooperating closely in this work. Bank funds under Loan 2213-J0 will be used to engage a management advisor to assist the WA to design a sound organization structure, establish staffing and training needs, develop an appropriate management information system and propose personnel policies. A technical advisor has already been engaged who will review and make recommendations to improve operating and maintenance practices in the WA, set up a data collection system for project planning purposes, and assist in the preparation of major projects. The Bank funds will also finance a study which will look into the design of appropriate tariffs, taking into consideration the need for conservation, the affordability to the poor, and the generation of adequate revenues to allow the enterprise to remain financially viable. Selection of consulants for this work is now in hand. 4.07 USAID assistance is being provided through two projects for improvement of water supply and provision of sewerage in the city of Irbid and the cities of Zarqa and Ruseifa (cofinanced by the Bank), and a special technical assistance project aimed at training sector personnel and local consultants and contractors. Through these projects USAID funds are made available for engaging financial advisors to help build up the WA's accounting system and to assist in developing its financial management capability, as well as for the development of training facilities and programs for local sector staff training and for training abroad. Under the last project. experienced consultants from the United States have been engaged to provide technical support to three local consulting firms engaged by the Jordanian  - 20 - Government for designing the water supply and sewerage systems of ten cities, eight of which are included in this project. Staffing 4.08 The WA's salary levels for its technical staff are competitive; attracting and retaining qualified technical staff does not pose a problem. The situation regarding financial staff is different in that salary levels are substantially lower and there is a general shortage of qualified accountants in Jordan. The issues related to salary structure and other personnel policies which would enable the WA to attract and retain staff with necessary qualifications will be addressed by the Management Advisor (para. 4.06). Also, at present the WA's sewerage operations are limited to Amman, Salt, Jerash, and Aqaba. Future WA's responsibilities in operating sewerage will require additional qualified and experienced sewerage system operators and managers. Such skilled personnel are not easily found in Jordan and a program for training in such skills is being planned (para. 4.09). The WA will recruit for project implementation suitable staff who will eventually be responsible for operations, so that they can acquire useful knowledge of the systems as they are constructed. Consultants will be retained to provide additional training during system start-up. Training 4.09 The WA has an ongoing training program financed largely by the United States Agency for International Development (USAID). The program provides for training of managerial and professional staff abroad and operating staff at local institutions. The financial advisors financed by USAID (para. 4.07) are providing on-the-job training to the accounting staff in implementing a public utility accounting system. Several facilities exist in Jordan--the Amman Polytechnic Institute, the Vocational Training Corporation, the University of Jordan and the Yarmouk University--which now provide training for technicians in civil, mechanical, electrical and chemical engineering. Plans exist to offer training in water supply and wastewater engineering in the near future and a training proposal is being prepared specifically for sewage treatment plant operators, taking into account the number of such plants to be commissioned in the future. 4.10 The USAID has also studied the overall training requirements in the sector as a whole and prepared a report which details the required short and long term technical advisors, training materials and equipment to assist and implement a long term training program. It has incorporated this program in its "Water Systems and Services Management Project" and has provided sufficient funds for its implementation.  - 21 - Billing and Collection 4.11 The WA bills some of its large volume customers in its Amman operations on a monthly basis and residential consumers quarterly. The consumers outside Amman are on a two month billing cycle. The billing for the Amman area is fully computerized and operated by the WA's staff, while that outside Amman is done by a service bureau and some billing is done manually. The WA is planning to expand its own computer facilities to do all its billing in-house by the end of 1985. 4.12 The WA's accounts receivable represent about four months of sales and can be improved. WA's management is devising systems to provide incentives to bill collectors for improving collection. Progress in reducing the proportion of outstanding receivables would be monitored throughout project implementation (Annex 12). Accounting 4.13 The WA's accounting system in the Amman area follows the standard public utility format, is on an accrual basis, and is reasonably well kept; that outside Amman is on a cash basis, as prescribed for government agencies. Although these accounts may be readily translated into the more generally used utility format, they are not entirely satisfactory from an operating point of view. The WA recognizes this weakness and has decided to extend the accrual system of its Anman area to its entire operations. The system will be computerized and, through appropriate coding, will produce accounts to satisfy both the government-prescribed system and the public utility format with accruals. 4.14 The financial advisor provided under USAID assistance (para. 4.07) has already prepared a manual of accounts for implementation in early 1985. Meanwhile the accounting personnel are being trained. Implementation will be monitored through periodic progress reports. Audit 4.15 The WA's Amman operations have been annually audited by a local independent auditing firm. The audit reports have been of acceptable quality and prepared in sufficient detail. The operations outside Amman have until now been subject to a system of expenditure control and final audit by the Government Auditing Department. Since the accounting system of all the WA operations will be converted into a standard public utility format beginning in 1985, assurances from the WA were obtained at negotiations that (i) from  - 22 - fiscal 1985 onwards all the WA's accounts would be audited by auditors acceptable to the Bank and experienced in public utility accounting systems; (ii) that the audited financial statements and the auditors report would be forwarded to the Bank within six months after the end of each fiscal year; and (iii) that prior to 1985, the Government's Auditing Department would continue to audit the WA's accounts for its operations outside Amman a..d that copies of its audit report, financial statements, and the report of the Auditing Department would be forwarded to the Bank within six months after the end of each fiscal year. Insurance 4.16 The WA carries insurance with a Jordanian insurance company which follows the general guidelines regarding insurance for a government agency. These primarily relate to workmen's compensation and third party liability for vehicle and equipment operators. In view of the WA's expanding operations, the adequacy of the insurance coverage would be reviewed periodically through the progress reports.  - 23 - V. FINANCE Past Performance and Present Position 5.01 The financial position of the WA has to be interpreted in the context of the past performance of the organizations (AWSA and WSC) which it has taken over. It reflects the nationwide scope of its operations, the scarcity of water which makes it imperative to protect sources and to treat and where feasible to recycle effluents, the low average consumption levels, the locational mismatch between water sources and consumption centers which necesitates the transportation of water over long distances and steep gradients, and the relatively high cost of construction in Jordan. 5.02 In communities where the WA has a piped water supply system, the WA derives most of its revenues from water and sewerage charges based on metered water consumption. In addition, once a decision has been made to construct sewerage in a municipality, the WA also collects a one-time sewerage connection fee equal to 25% of the annual rental value of the property and a 4Z annual tax on the same rental value for twenty years. For small communities without a piped water supply and for a substantial nomadic population, the WA provides a tanker supply or a free supply from water points. The cost of providing this supply is up to ten times that in the larger centers. For reasons of equity and affordability, the Government assumes a portion of this cost. On this basis, the WA's net revenues have been sufficient to cover its operating costs, debt service and a portion of its investment costs. 5.03 At the end of 1983 the WA had a current ratio of 2.6 and a debt/equity ratio of 24/176 which reflect the significant role of the Government in the financing of the WA's facilities. Tariff-Cost Recovery 5.04 The WA's tariffs are proposed by its Board of Directors and subject to approval by the Council of Ministers. In the past, water tariffs in its Amman and non-Amman urban operations were slightly different,and these tariffs were high. Annex 14 provides detailed information on existing tariffs. Water tariffs in its piped supply operations are in line with -the cost of these services, while the cost of providing tanker supply and free water point service is partially supported by the Government (para. 5.02). The structure of the water tariff is adequate with an average tariff for municipal areas of about JD 0.264 per cubic meter. 5.05 At present the WA's sewerage operations are limited only to parts of Amman, Salt, Aqaba, and Jerash. Projects to construct sewerage in Irbid, Zarqa and Ruseifa and to expand the sewerage systems in Amman and Aqaba are underway. The proposed Bank project would introduce sewerage in eight  - 24 - medium-sized cities, while a USAID-financed project would cover two more cities. It is clear, therefore, that the WA's sewerage operations will grow extremely rapidly in the next five to six years with significant financial implications. 5.06 Bas-.l on the current system of sewerage charges, the WA's average revenue is abnut JD 0.230 per cubic meter, which is financially adequate. However, as sewerage systems are expanded and new systems built, the cost of providing these services will also go up and higher sewerage charges will be necessary. Such charges are still seen to be within the customer's willingness to pay in view of the substantial savings from not having to empty cesspools, and the higher quality of service provided by sewerage. It thus appears possible to recover the cost of sewerage. The Bank loan for the Zarqa/Ruseifa Project (Loan 2213-JO) provides for a tariff study which includes the determination of appropriate sewerage charges for cost recovery and the means for collecting such charges which may be through a combination of tariffs, user charges and levies. While the original study was to have covered only the operations of the former WSC, its scope has now been revised to include the WA's entire operations. Consultants for the study are being recruited and the results of the study are expected to be ready and sent to the Bank for review by December 31, 1984, following which appropriate sewerage charges will be implemented. The execution of this study and the implementation of its recommendations are being monitored under the Zarqa/Ruseifa project (Loan 2213-JO). The WA's Sources and Application of Funds 5.07 The table below shows the estimated sources and applications of funds for the WA for the period 1984-1989. FY1984-1989 JD US$ --------(Millions)--- Sources of Funds Internal Cash Generation 66.84 183.14 21 Government Contribution 118.30 324.14 37 Customer Contributions 6.29 17.24 2 Loans 124.65 341.54 40 Total 316.0 866.06 1Q Application of Funds Capital Expenditures 257.67 706.02 82 Debt Service 57.46 157.44 18 Increases in Working Capital .95 2.60 - Total __0 __6.6 1QQ  - 25 - 5.08 The WA's investments during the period would be substantial, whereas the benefits would be derived over a long period. It will also have to assume the liabilities associated with the substantial capital expenditures on water resources development being undertaken by the JVA (para. 1.06). Funds generated from internal sources and customer contributions would provide about 23 percent of the overall funds required of which 18 percent would be for debt service, leaving 5 percent towards capital investments and increases in working capital. Future Financial Performance 5.09 The financial forecasts for the proposed eight cities project as well as for the WA as a whole and the assumptions on which they are based appear in Annex 15. 5.10 The period covered by the projections will be one of rapid growth for the WA. By the year 1990 its volume of water sales is expected to be 60Z higher than that of 1984, and with the new sewerage systems the volumes which will be billed for sewerage will go up almost four times. The volume of water supplied by tankers and at water points will not increase very much. The revenues from water sales would go up about 2.6 times and the revenues from sewerage and the taxes collected for sewerage services would go up about seven times. In the same period operating expenses would go up about 2.5 times. The difference between revenues and expenses would leave a margin which would be sufficient for the WA to meet its financial obligations. Agreement was reached at negotiations that the WA will from fiscal year 1985 onwards (i) for its metered water services maintain or adjust tariffs to provide sufficient revenues to cover its operating and maintenance expenses (excluding depreciation), debt service and increases in working capital and to finance commencing in fiscal year 1987 not less than 5% and from fiscal year 1989 onwards not less than 10% of the average annual investment cost in each consecutive three-year period comprising one actual and two forecast years; (ii) for its sewerage operations, implement a system of sewerage user charges, fees and levies sufficient to cover full operating and maintenance cost (excluding depreciation) and debt service or depreciation whichever is higher. For its water services by tankers and at water points, agreement was obtained from the Government that it would compensate the WA for any deficits resulting from such operations. Agreement was also reached at negotiations that the WA would provide the Bank three months before the beginning of each fiscal year with copies of its forecast budget for the fiscal year, financial projections for the following two years as well as its proposals for adjustments in tariffs. 5.11 In the period 1984-90, the WA's debt-equity ratio would vary from 28:72 to 36:64, which is very satisfactory. In the same period its assets would grow about 2.5 times. Average water tariffs would have to go up about 60X in this period, only slightly above the adjustment necessary for inflation, which also confirms the adequacy of the present water tariffs. Charges for sewerage would not have to grow as much because of savings from economies of scale. Internal cash generation should cover debt service adequately.  - 26 - VI. ECONOMIC AND SOCIAL ASPECTS Health Benefits and Environmental Impact 6.01 While improvements have been made, the present level of water supply service in all the eight project cities is still far from satisfactory. Parts of the systems are old and undersized and in need of replacement and frequent repair. Trunk line sizes are inadequate, and distribution storage is short. Consequently, water pressures are low in many parts of the cities and likely to deteriorate further with population growth. In the densely populated areas of the cities, the intermittent service and pressure drops cause polluted groundwater to seep into the systems. Health hazards are caused by overflow of cesspools due to saturation of soil seepage capacity and the foundations of many buildings are threatened by soil subsidence problems from the presence of cesspool effluents. The project would rectify this situation by improving the distribution systems to provide sufficient quantities of water at adequate pressures, and by reducing the discharge of effluents into the soil through the replacement of cesspools and septic tanks with sewerage. Furthermore, the wastewater in densely populated areas of the cities would be collected and used for irrigation purposes after appropriate treatment. Least-Cost Solution 6.02 Facilities to be constructed under this project would serve the needs of the population up to the year 1995. Designs of the proposed systems are in accordance with sound engineering principles, utilizing acceptable design criteria and valid approaches. The overall designs were reviewed by the mission, including pipe sizes, configuration of the water mains and distribution systems, reservoirs, sewer systems and the sizes and processes of the sewage treatment plants. The consultants studied between three and five alternative systems for each of the cities and the proposed systems were found to be the least cost solution at discount rates of 8, 10 and 12 percent. Economic Efficiency of Sector Investments 6.03 Tariffs for water are roughly similar all over Jordan (Annex 14), thus providing cross-subsidization from large to small consumers and between larger and smaller agglomerations. A uniform tariff structure is expected to be used all over Jordan following the completion of the tariff study in December 1984 (para. 5.06). 6.04 In Jordan the long-run average incremental cost (LRAIC) of water at a discount rate of 10Z varies between JD 0.370/m3 in areas where water is locally available to JD 0.490/m3 for areas such as Amman, where water has to  - 27 - be pumped over long distances. The appropriateness of the investments in the sector is substantiated by the fact that more than 302 of the water sold by the WA is charged at the highest block tariff, which exceeds the LRAIC. These consumers have therefore shown their willingness to pay for the cost of providing additional water and for expanding services to larger segments of the population. 6.05 For sewerage the LRAIC for overall sector investment is about JD 0.300 per cubic meter at a discount rate of 10X. The average sewerage charge in 1988 to meet financial requirements would be about JD 0.213 per cubic meter in real terms and would be collected through a combination of sewerage surcharges, taxes and levies. Affordability 6.06 The water tariffs and sewerage charges envisioned for the project should not impose any serious burden on even the lowest income segment of the project area households. The lowest quintile of average household income in the project area is about JD 82/month (Annex 2). Assuming an average household size of seven persons and an average per capita water consumption of 40 liters/day, the average water and sewerage bill would be about JD 3.00/month, which represents about 3.6% of the family income. This is considered to be well within the affordability to pay of the lowest income segment of the population in the project area. For purposes of comparison, a family would pay up to JD 3 per month for emptying cesspools alone. Institution Building 6.07 The project will continue the Bank's assistance to Jordan in reinforcing and strengthening sector institutions started under previous credits and loans. Bank assistance in this project is particularly timely because of the recent creation of the WA, which, in a pronounced way, demonstrates the Government's determination to improve the institution of the sector. The project will provide a continuing opportunity to help develop the technical and financial management capabilities of the WA staff through association with supervision consultants and Bank staff. It will also help to extend to the entire WA organisation the technical assistance intended for the former WSC under Bank Loan 2213-JO. Risks 6.08 There are some risks associated with the implementation of the proposed project. While the WA has good experience with constructing water supply and sewerage systems it has less experience with treatment plants. The possibility of delays and higher costs which might result have, however, been  - 28 - taken into account in the project implementation schedule and in the project cost estimates. The WA staff has experience in operating sewerage systems but the municipal staff that it would be taking over would have to be trained. Slippage in deriving the expected benefits from the project can therefore occur from delays in implementing the large sewer connection program. 6.09 Substantial effort will be required of the WA to minimize the risks mentioned above. Success will eventually depend on the commitment and dedication of the WA's management, its ability to recruit experienced staff in certain critical areas, and the development and training of its existing personnel. Measures to assist the WA management in these efforts have been taken under previous Bank loans by providing (i) consultants for construction supervision and carrying out tariff studies; (ii) experts to assist in the development of a new accounting system and training staff in its use; (iii) experts to conduct an organizational study and to assist in implementing organizational changes; and (iv) training for WA staff. Asssistance in training on a much larger basis rwill also be provided under a concurrent project that USAID is undertaking. This project will provide consultants for construction supervision and will reinforce the institutional assistance described previously. Assistance by the WA to low income families in making arrangements for sewer connections will help to ensure that the sewer connection program will be carried out expeditiously. Given the past good record, the importance of the sector for Jordan, and the actions recommended in this report, the risks associated with the project would be minimized.  - 29 - VII. AGREEMENTS REACHED AND RECOMMENDATIONS 7.01 During negotiations agreement and understanding were reached on various issues referred to in Chapters II through V of this report. 7.02 A condition of effectiveness is the submission of a subsidiary loan agreement satisfactory to the Bank between the Government and the WA (para. 3.09). 7.03 Agreement having been reached on the issues set forth in this report, the proposed project is suitable for a Bank loan of US$ 30.0 million to the Government of the Hashemite Kingdom of Jordan.  - 30 - HASWI XMDG OF JD N I EIOlI CITILS W.h SPitY AND S3 Z PIV!CT FGu;AnTG PNaEfl Population Crawth Rate (Percent per Year) (it2es Population (Acual 196WL/ 197I 1984 1990 1995 2000 2005 1961-79 1979-90 199W-2005 hamtha 10,791 27,130 32,220 39,600 45.910 53.230 61,700 5.3 3.5 3.0 f.afraq 9,499 21,280 25,270 31,060 36,010 41.750 46,400 4.6 3.5 3.0 Anjiara. Ajlom, I-in JnAeh & Kutrinja n.a. 25,920 30,780 37,840 43,870 50,80 58,960 n.a. 3.5 3.0 haaaba 11,224 28,510 34,680 43.880 52,630 63,110 75,690 5.3 4.0 3.7 ;ia'an n.a. 11,310 13,430 16,510 19,140 22,190 25,720 n.s. 3.5 3.0 L.igiht cities totAl n.a. 114,150 136,380 168,890 197,560 231,140 270,470 n.n. 3.6 3.2 Jordan (East BanJO n.a. 2,147,000 2,573,000 3,197,W00 3,724,000 4,351,00D 5,068,000 n.B. 3.7 3.1 I/ kesults of population census canducted in 1961. k hesults oi the Housing and Population Censa conducted in 1979.  - 31 - HBAiF4 KTIX4 Cr JORDI ANN! 2 ElOff Cf;S M S"MY AND SERAW PMC ESrIMEL HOUSEHLD SIZES AND HOUiDtD INtE:S Estin.ted household sizes and household inccnes Average at percentiles in JD/inth at 1984 prices Cities household size 20 40 50 60 80 kimntha 7 97 145 182 242 363 .-afraq 7 73 97 121 142 182 Anjara, Ajloun, Ein Janneh & Kufrinja 7 85 105 121 150 232 Madaba 7 1lo income graop 76 101 126 150 202 higi incaie group 202 253 253 253 253 Na'an 7 76 101 114 126 152 Source: Feasibility study oI the Municipal Water Distribution Iqronfvmts and Sewerage and Stornwater Drainage Systens in ?iadaba, Karak, Tafila and Ma'an - James M. ?!icntgcmery/Brwan and Caldwell. March 1983. Feasibility study of the Water Distributicn, Storwater and Sanitary Sewerage Systems in Baitha, Mafraq, Anjara, Ajloun and Ein Janneh - Engineering Science/Jouzy & Partners. July 1983.  - 32 - IUMA1Y . K1Nci1 OF JORDN ANN 3 LICM ClU1 hAThR JMWLY AM SF1UN PHCI IE'AILS (* ETIGA11. S S O hIC* Aniara, Ajlxn. nthaiw Idkraq hin Janneh 6 Kutrinja Madaba Ma'mn 5u nn 12,5(1A l,lf0k 14,490nr ll,mO( ,93bir i' nor. ;,Wl. 12,20(x Jfl,595r 3,63rm. 3,220n 1[t nni. 5,(114,3xo 8,245Ch I,530i 22,621> i.,n - 5Wn 1,OOOn 1,47n 15., nt, 1,3Uxi 1 ,Plp- 2,51fx - 2,?1(1l 2(11 un 1,51AnI ,4(1b. - 'IVIAL La17Uv 31j 3bAn n16 25.r IPjI30m Stc,rz. i,2X ;d :7,3 1> 1,651b3 X3 1,545n0 buze,: Lar. as ler Arm 2.  - 33- ANNEX 4 HASHEMITE KINGDOM OF JORDAN EIGHT CITIES WATER SUPPLY AND SEWERAGE PROJECT Prolected Watr Production MCM 30 . . 25- 2.0 1Q80 1985 190 1995 2000 2COS Veot Va 3o*-2S5"1  - 34 - ANNEX 5 HASHEMITE KINGDOM OF JORDAN EIGHT CITES WATER SUPPLYAND SEWERAGE PROJECr Projected Sewag Rows m3/dciy aSOCI I Rawntho peiod offlow bukkupwith canm!Ilnsloning dc new Systm Z500->_^ s zswio Maktag AnJar. Aoprn En Jonneh , < - :~ ~~~~~~~ Kuflinjo I~~~~~~~ 500 f -