Somalia - Technical Assistance For the Baardhere Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4611-SO MEMORANDMI AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 4.3 MILLION TO THE SOMALI DEMOCRATIC REPUBLIC FOR TECHNICAL ASSISTANCE FOR TRIE BAARDHERE PROJECT November 10, 1987 nis docment has a restiicted distibtion and u.ay be used by ipits only In the peMfonanace of their offiil dute Its content may not otherwise be dislosed without Wodd Bsak authrzallon.  CURRENCY EQUIVALENT Somali Shilling (So.Sh.) - 100 cents US$1.00 (at appraisal - June 1987) = So.Sh 130 US$1.00 (October 1987) = So.Sh 160 ABBREVIATIONS BDP - Baardhere Dam Project (within MJVD) EEC - European Economic Community GOS - Government of Somalia (Somali Democratic Republic) GTZ - German Aid Agency (Deutsche Gesellschaft fur Technische Zusammeniarbeit) .iJVD - Ministry of Juba Valley Development SCA - Somalia Construction Agency (quasi governmental contractor) USAID - United States Agency for International Development FISCAL YEAR January 1 - December 31  FOR OFFMCLAL USE ONLY SOMALI DEMOCRATIC REPUBLIC TECHNICAL ASSISTANCE FOR THE BAARDHERE PROJECT -CREDIT AND PROJECT SUlMARY Borrower: Somali Democratic Republic Beneficiary: Ministry of Juba Valley Development Anount: SDR 4.3 million (US$5.5 million equivalent) Terms: Standard, with 40 years maturity Onlending Terms: Not Applicable Financig Plan: Government US$0.3 million IDA US$5.5 million TOTAL US$5.8 million 4 Economic Rate of Return: Not Applicable Staff Appraisal Report: Technical Annex attached Map: IBRD 20624 This document has a restricted distribution and may be used by recipients only in the perforna. c. of their official duties. Its contents may not otherwise b disclosed without World Bank authoriz-tiAet  f-l) Wt  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR TECHNICAL ASSISTANCE FOR THE BAARDHERE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Somali Democratic Republic for SDR 4.3 million (US$5.5 million equivalent) on standard IDA terms with a maturity of 40 years to help finance technical assistance to strengthen the Ministry of Juba Valley Development (MJVD), so as to complete the preparation of the proposed Baardhere Project. 2. Background. Only about 13 percent of Somalia's land area of 638,000 square kilometers is suitable for cultivation, and with water being the main constraint, only a small fraction (8.5%) is presently cultivated. A recent agricultural study, carried out jointly by the Government of Somalia (GOS) and the Association, concluded that a growth rate in crop production of about 5% per annum could be sustained if substantial investments are made in irrigation rehabilitation in the Shebelli valley, in new irrigation development in the Juba valley, and in improved water management. Most of the water of the Shebelli River is already exploited, and the main potential for new irrigation and hydropower in Somalia now lies in the Juba River Valley through the proposed construction of a multi-purpose dam at Baardhere. This large project (estimated to cost about US$300 million) is included in Somalia's core public investment program and is a key component of the national development strategy for both the agricultural and power sectors. Starting in 1976, various feasibility studies (financed by a donor group which includes the EEC, Kuwait Fund, GTZ and Italy) were completed for construction of a concrete dam. Detailed designs and tender documents were commissioned with EEC financing before IDA, in 1983, recommended (a) exploration of a natural gas field in Somalia which, if proven, could have delayed the need for hydropower; and (b) studies of an alternative reservoir for irrigation on the Juba River. Both studies, however, reconfirmed selection and priority of the Baardhere Project. Subsequently, IDA agreed to assist GOS in completing the preparation of the Baardhere Project and, subject to appraisal findings, to consider financing it with other donors. In preparation for this, IDA financed the services of an independent panel of experts and a study of the future institutional arrangements under SPPF G018-SO (US$0.5 million). IDA also financed studies of agricultural and flood protection benefits and of resettlement needs through PPF 369-SO (US$0.75 million). A comprehensive environmental and social assessment study is under way with USAID financing, and a master plan for development of the Juba River Valley is being undertaken with GTZ assistance. Investigation and detailed design for an alternative rockfill dam are also under way, with Chinese assistance. A final choice of dam type may be made by GOS following bidding for both rockfill and concrete types, once designs are completed and found acceptable ou safety and technical grounds.  3. Riparian Rights. Almost all the water flowing In the Juba River in Somalia is derived from its catchment in Ethiopia, and a short stretch of one of the tributaries of the Juba River forms part of the boundary between Ethiopia and Kenya. In accordance with the provisions of OMS 2.32, the Association has informed GOS that it should aotify Ethiopia and Kenya of the proposed Baardhere project. GOS requested the Association to notify Ethiopia on its behalf, and Ethiopia has responded that it objects to the proposed Baardhere Project unless prior agreement is reached through negotiations on water allocations. The proposed technical assistance to determine the feasibility of the Baardhere Project is appropriate, however, in parallel to the steps being taken by the Association to resolve the riparian issues. To assess whether the proposed Baardhere project would be harmed by the uses of water that Ethiopia might make, the Association requested Ethiopia to provide details of its water use development plans within the Juba River catchment, and contracted consultants (Sir M. MacDonald and Partners, U.K.) to update an earlier review (1978) of likely future use of Juba River water within Ethiopia. 4. This review, and other studies by Electroconsult (Italy), concluded that Ethiopia has a p_-ential to develop some 60,000 ha of irrigation aloag the Juba River, which, together with other water uses, might reduce flows into Somalia by up to 35% at full development. Reduced flows of this magnitude have been accommodated in the project design and are repoxted by the consultants to be unlikely to jeopardize the project's viability. The proposed technical assistance project includes supplementa . power optimizatJon studies which would further test the sensitivity of the Baardhere Project's viability to reduced Juba River flows in the event of increased abstractions within Ethiopia. Thus the proposed project would assist in determining the feasibility of the Baardhere Project from the water allocation viewpoint. 5. Project Objectives. By providing technical assistance and training, the proposed project would strengthen the institutional capacity of the Ministry of Juba Valley Development (HJVD) to complete the preparation of the Baardhiere Project and to determine its feasibility and financing so that a sound decision can be taken about implementation. The proposed project would include the remaining studies and specialist inputs needed to complete preparation of the Baardhere Project, and would strengthen MJVD's capacity to make a significant contribution to the project's implementation in the event of a decision to proceed. 6. Project Description. The project would establish a core advisory team within MJVD consist'ng of six qualified Somali specialists and three expatriate resident advisors, supported by short term consultants. The team would complement technical assistance financed by the Kuwait Fund in the fields of irrigated agriculture and legal matters. The core advisory team would assist MJVD in supervising consultant studies and completing preparation of the Baardhere Project and its appraisal by IDA and other donors. The team would also assist in formulating plans for project implementation, including water and power charges, train local staff in preparing and evaluating complex projects, and assist in coordinating cofinancing arrangements. The project would a1..s: provide the continued  - 3- services of the panel of experts for the Baardhere Project. The project, to be implemented over a 30 month period, would provide funds for technical zssistance, training, vehicles, transit accommodation and storage, furniture and equipment and incremental operating costs. 7. Project Costs. The total cost of the project is estimated at US$5.8 million equivalent, with a foreign exchange cost of US$5.5 million (95%). A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Somalia are given in Schedules C and D, respectively. A Techni'-al Annex and a map are a) o attached. 8. Agreed Actions. During negotiations the Government agreed that the following would be satisfactory to IDA: (a) the quRlifications, experience, and terms and conditions of service of Somali staff appointed to the core advisory team; (b) the qualifications, experience and terms and conditions of employment of resident advisors; and (c) the qualifications and future positions of Somali staff selected for training. Government agreement was also obtained that consultant services would be employed in accordance with IDA guidelines; accounts would be properly kept and audited; and a special foreign exchange account would be established to easure timely availability of credit proceeds. 9. Project Justtfitation and Rationale for IDA Involvement. The ability of MJVD to effectively supervise the many consultant studies, evaluate their findings, ari properly integrate the power, irrigation and flood protection aspects is presently strained by lack of skilled staff experienced in such work. The proposed technical assistance would strengthen MJVD so that sound economic judgments can be made about the Baardhere Project, and if positive, the project can be properly implemented. The Baardhere Project, if successfully implemented, would provide the potential for a significant increase in growth of Somalia's power and irrigated agriculture, which is consistent with the Association's strategy for adjustment of the Somali economy towards a position of long term self-sustaining growth. IDA involvement would ensure proper coordination of the donors supporting project preparation studies and comprehensive preparation and appraisal of the Baardhere Project. IDA would also assist in mobilizing external financing, assuming a positive appraisal outcome and resolution of the riparian issues. 10. Risks. It is possible that the Baardhere Project may not be constructed, for riparian or other reasons. A decision on the Baardhere Project would be difficult to reach, however, without the proposed technical assistance, axd therefore the financial outlay involved is a reasonable amount to put at risk considering the potential gains from the Baardhere Project. If the Baardhere Project is not implemented, the manpower trained under the technical assistance project would still provide lasting benefits for the irrigation and power 4nstitutions in Somalia which are presently understaffed.  -4- 11. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association, aro recommend that the Executive Directors approve the proposed credit. M. Qureshl Acting President Attachments Washington, D.C. November 10, 1987  -5- Schedule A Estimueted Costs: a/ Local Forelgn Total -- (US$ million)-- Technical Assistance 0.02 2.54 2.56 Trslning - 0.72 0.72 Vehicles, Furniture, Equipment 0.04 0.34 0.38 Civil Works 0.06 0.17 0.23 Operational costs 0.10 0.15 0.25 Base costs 0.22 3.92 4.14 Physical contingencies 0.02 0.32 0.34 Expected price increases - 0.05 O.0S Total project cost: 0.24 4.29 4,53 Refinancing of PPF and SPPF - 1.25 1.25 TOTAL COST: 0.24 5.54 5.78 -=a ==a a/ Taxes and import duties are not levied on internationally financed goods and services for the agriculture sector. Financing Plan: Local Foreign Total --(USf million) - Government 0.24 0.04 0.28 IDA - 5.50 5.50 Total 0.24 5.54 5.78  -6- Schedule B a/ PROCUREMENT - ITEM PROCUREMENT MFTHOD TOTAL ICB LCB OTHER N.A. COST - -