Somalia - Second Mogadishu Water Supply Project

Documentof FILE COPY The World Bank FOR OFFICIAL USE ONLY Iepwt No. P-3260-So REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR A SECOND MOGADISHU WATER SUPPLY PROJECT April 6, 1982 This doumet has a rerited distibutio and may be sed by recipients only In the perfdumm of their official duties. Its enteuts may o otherwise be disclsed withot World Bank autherzatim.  CURRENCY EQUIVALENTS Currency Unit Somali Shilling (So Sh) 1 Somali Shilling = US$0.07943 US$1 So Sh 12.59 WEIGHTS AND MEASURES 1 Imperial gallon (Ig) = 1.2 US gallon (gal) = 4.55 liters (1) 1 cubic meter (cu m) = 220 Ig, 264.2 US gal, or 1 kiloliter (K1) 1 Megaliter (MI) = 1000 cu m 1 liter per capita per day = lcd 1 meter = 3.28 feet = 39.37 inches 1 millimeter (mm) = 0.039 inches 1 kilometer (km) 2 = 0.62 mile (mi) 1 square kilometer (km ) = 0.386 sq mi 247 acres (ac) = 100 hectares (ha) ABBREVIATIONS Arab Fund = Arab Fund for Economic and Social Development EDF European Development Fund FAO = Food and Agriculture Organization GIBB Sir Alexander Gibb & Partners (Africa) GTZ = German Agency for Technical Cooperation MMWR = Ministry of Mineral & Water Resources MWA = Mogadishu Water Agency NWC National Water Committee SDR Special Drawing Rights USAID = United States Agency for International Development UK = United Kingdom of Great Britain WDA = Water Development Agency WHO = World Health Organization FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY SOMALIA SECOND MOGADISHU WATER SUPPLY PROJECT Credit and Project Summary Borrower: Somali Democratic Republic Beneficiary: Mogadishu Water Agency (MWA) Amount: SDR 13.4 million (US$15.0 million equivalent) Terms: Standard Relending Terms: The credit proceeds would be onlent to the Mogadishu Water Agency for a period of 20 years, including 3 years of grace, at an interest rate of 10 percent per annum. Project Objectives The Project objectives are to increase MWA's water production and Description: capacity and management capability, to extend Mogadishu's existing water distribution system, to investigate water resources for meeting Mogadishu's future water supply needs, and to assess the feasibility of introducing low- cost sanitation facilities in Mogadishu. To accomplish these objectives, the Project includes the following parts: (i) civil works including: extension of source of supply works at the Afgoi Road wellfield; distribution system reservoirs; distribution mains and public taps and test drilling in support of water resource investigations for a future project; (ii) mechanical and electrical equipment including pumping plant for wells and boosters, power supply lines and miscellaneous equipment and supplies; (iii) technical assistance and consulting services. Benefits and The Project would provide Mogadishu with reliable supplies Risks: of safe water, eliminate present water shortages, satisfy the city's future growth in water demand until 1987, and provide about 640,000 persons in 1987 with improved access to the water system. The urban poor would be the main beneficiaries of the project. The major project risks lie in MWA's institutional weakness which could have an adverse effect on project implementation and subsequently on the maintenance and operation of the project facilities. To minimize these risks, the Project provides for the employment of advisors to support MWA management during project implementation. The ongoing efforts under the first project would help to improve MWA's effectiveness through a comprehensive training program and the establish- ment of commercial accounting. 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.  Estimated Project Cost: US$ Million Local Foreign Total % of Total Civil Works 3.8 16.5 20.3 49 Plant, Equipment and Supplies 0.5 3.8 4.3 10 Advisory Staff 0.2 0.8 1.0 2 Consulting Services 0.1 3.0 3.1 7 Base Costs 4.6 24.1 28.7 68 Contingencies: Physical 1.0 5.1 6.1 14 Price 3.3 4.2 7.5 18 Total Project Costs 1/ 8.9 33.4 42.3 100 Financing Plan: US$ Million Local Foreign Total IDA 1.5 13.5 15.0 Arab Fund 3.1 14.4 17.5 EDF - 5.5 5.5 MWA 3.3 - 3.3 Government 1.0 - 1.0 Total 8.9 33.4 42.3 Estimated Disbursements: US$ Million IDA FY 83 84 85 86 Annual 3.3 5.1 4.95 1.65 Cumulative 3.3 8.4 13.35 15.0 Rate of Return: About 5.6 percent. 2/ Staff Appraisal Report: Report No. 3252-SO, dated March 26, 1982. Map: IBRD 15172 1/ Total Project costs are net of taxes and duties from which the Project would be exempted. 2/ The incremental financial rate of return, which is relatively low, underestimates the real economic return, because health and amenity benefits for a project such as this are impossible to quantify.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR A SECOND MOGADISHU WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed credit to the Somali Democratic Republic for SDR 13.4 million (US$15.0 million equivalent) on standard IDA terms to help finance a Second Mogadishu Water Supply project. The proceeds of the credit would be onlent to the Mogadishu Water Agency for a period of 20 years, including 3 years of grace, at an interest rate of 10 percent per annum. Additional financing will be obtained from the Arab Fund for Economic and Social Development (about US$17.5 million equivalent) and the European Development Fund (about US$5.5 million equivalent) on concessionary terms. PART I - THE ECONOMY 2. A Memorandum on the Economy of Somalia (Report No. 3284-SO) was distributed to the Executive Directors in March 1981. The report of a mission which carried out an Agricultural Sector Review was distributed to the Executive Directors in June 1981. Country Data Sheets are attached as Annex 1. 3. The Somali Democratic Republic gained independence in 1960 and the present Government came into power in 1969. Under a new constitution adopted in 1979, elections for a People's Assembly were held in December 1979. The Assembly appointed General Siad Barre as President in January 1980. The country is still affected by hostilities in the border areas in the Ogaden and by the disruptions caused by the phasing out of Soviet aid and technical assistance in 1977. During 1980, intensified war activities in the Ogaden caused a large influx of refugees (estimated at over one million) and led the Government to declare a state of emergency in November 1980. 4. Somalia is a large country with a 3,000 kilometer coastline; its varied topography includes a hot and arid coastal plain, rugged mountains and plateaus, and lowlands of varying fertility and rainfall. Only 13 percent of the land is said to be arable, but with water the limiting constraint, only a small fraction of this potentially-arable land is, in fact, cultivated. About 60 percent of the total population of approximately 4 million are nomads and semi-nomads who depend on livestock for their livelihood; about 20 percent are farmers cultivating land along the Juba and Shebelli rivers and in the higher- rainfall Bay and "orth-west regions; the rest are engaged in non-agricultural occupations. The existence of several minerals has been confirmed, but their exploration is still in an early stage, and the commercial viability of production remains to be proved. In the absence of other known resources, Somalia's prospects depend upon agricultural and livestock development, where progress will depend upon careful management of the scarce land and water resources.  5. Apart from the traditional export of livestock, commercial agriculture is centered mainly on the production and export of bananas (in which foreign concession holders are still important) and the production of sugar for the domestic market. Expansion of the manufacturing and service sectors is limited by the small size of the domestic market, poor infrastructure, and the shortage of capital and entrepreneurial experience. Bank staff estimate that about 70 percent of the population live at the subsistence level (equivalent to about US$200-250 per family of five). Social services are still very inadequate. Per capita income, which was provisionally estimated at US$185 in 1978, has probably remained stagnant in real terms over the past six years. Development Strategy 6. Since the revolution in 1969, the Government has adhered to a program of "scientific socialism", emphasizing "egalitarianism" and social justice, development through the public sector, nationalization of certain foreign enterprises, and the formation of cooperatives. The Government has maintained that there is scope for private initiative in Somalia, and some privately financed projects have been implemented. But the main emphasis has been given to development of the public sector. Public ownership and management have expanded both through nationalization and through the creation of new public enterprises. The parastatal sector now includes about 50 autonomous agencies which have eliminated private enterprises in wholesale trade and banking and which dominate manufacturing. The Five-Year Development Plan (1974-78) and the Three-Year Plan (1979-81) were essentially public investment programs that allowed for only a few small private ventures. Although the Plans have provided needed impetus to investment, they have not played a major role in the alloca- tive process. Despite the Government's initial intentions, industry, mining and infrastructure have received more public investment than agriculture. At the same time, public enterprises have operated without firm Government control owing largely to weak management and inadequate monitoring. 7. Somalia has made considerable progress in meeting some basic needs: a program of literacy and primary education has had noticeable results, and an effective system of food distribution has been established. In other respects, however, the record in the social sectors has been less impressive, particularly in water supply, sanitation, and health, where services have frequently been biased in favor of the urban population. Moreover, economic growth has been rather slow, making it difficult for Somalia to pursue vigorously its basic needs policies. 8. The major development goals of the Somali Government include self- sufficiency in foodgrains, the partial substitution of other agricultural imports (oils, sugar, cotton), and improvement of the lot of the traditional nomadic herdsmen through settlement programs and improvements in livestock poduction and marketing facilities. The current emphasis on irrigated agricul- ture is meant to make the country less dependent on the erratic rainfall and to assure more stable and predictable increases in output. However, rainfed agriculture, which occupies the largest number of farm families, is also being assisted. Improvements in livestock production and marketing are  - 3 - being promoted together with projects aiming at the rehabilitation of the rangelands. The Government's industrial development policy focuses on the processing of domestic raw materials such as cotton, edible oils, milk, sugar, to substitute for imports. Finally, the Government places emphasis on develop- ing infrastructure, especially transportation and communication. 9. Available indicators on production suggest that between 1972 and 1978, gross domestic product in real terms increased by about 2.5 percent a year. In the face of a population growth rate of 2.3 percent, this led to stagnation in per capita income. In the productive sectors, the growth was only one percent a year on average, while in the services sectors it was 6.5 percent, reflecting to a large extent the increase in Government employment. Within the productive sectors, the annual growth was 2.5 percent in livestock, minus 5 percent in crop production, and minus 0.5 percent in industry. Since 1978, output in agriculture and industry has most likely continued to stagnate. 10. The development of crop production has been particularly disappoint- ing. While foodgrain production stagnated, there was a sharp decline in banana production and a moderate decline in industrial crops. The causes of this decline in production are manifold, viz: the lack of an effective production- oriented development program; uncertainty among private banana growers; and management and agronomic problems on government production schemes. Above all, however, the lack of incentives was a major factor. For the most important crops, producer prices have decreased in real terms; in 1980, they were esti- mated to be lower than in 1974: by 43 percent for bananas, by 31 percent for maize and sorghum, and by 48 percent for sesame seed and cotton. In the industrial sector, where agro-industries predominate, growth has been hampered by the generally declining trend in agricultural output as well as by the many problems besetting public enterprises. 11. The 1974-78 Five-Year Development Plan (FYDP) was revised several times but remained overambitious with respect to both financial and implementa- tion capacities. Total expenditures on projects during the FYDP amounted to So. Sh. 4.3 billion (in current prices) as against the total planned investment of So. Sh. 7.0 billion. The Three-Year Development Plan (TYDP), covering 1979-81, called for total public sector invesment expenditures of So. Sh. 7.1 billion (in 1978 prices), of which more than half represented outlays on projects carried over from the 1974-78 development program. Of the total anticipated expenditure, about 64 percent was expected to be financed from foreign financing, the remainder from domestic savings and borrowing from domestic sources. The TYDP also faced difficulties in implementation similar to the FYDP owing to Somalia's low absorptive capacity and severe domestic resource constraints. In 1979, the first year of the TYDP, actual expenditure on projects was So. Sh. 1.4 billion, only some 47 percent of the planned expenditure. The Government is currently preparing the 1982-86 Development Plan. Past Performance and Main Issues 12. About 100,000 Somalis have migrated to work in neighboring oil-export- ing states. Total earnings of the migrants are equivalent to about ten times  - 4 - the total domestic value added in Somalia's modern sector. Labor migration has been neither organized nor controlled by the Government, and it has seriously depleted Somalia's already-low stock of qualified and skilled manpower, thereby weakening institutions and reducing the country's absorptive capacity. 13. Until 1977, budgetary policies remained satisfactory. Government expenditures were generally conservative, while efforts were made to mobilize resources through taxation. Although drought and border problems adversely affected the Government's budget during 1974-1977, inflows from sizeable external grants considerably eased the financial impact of the drought and the war. However, the border conflict of 1977/78 further accelerated the process of fiscal deterioration that was already evident. In fact, the expansion of government services nationwide, the rapidly rising defense expenditures and the rising recurrent costs associated with recent public investments made it increasingly difficult to generate savings. During 1978-80, the Government's financial situation deteriorated rapidly, mainly because of the sizeable expansion in expenditure consequent upon the border conflict, the cost of maintaining large numbers of refugees, and the wage bill associated with the Government's policy of guaranteeing employment for all school leavers. At the same time, official foreign aid declined. As a result, the budgetary situation worsened and the Government--which until 1978 had maintained a net creditor position with the Central Bank--resorted to heavy borrowing from the banking system. Deficit financing grew from So. Sh. 409 million in 1978 to So. Sh. 920 million in 1979 and was estimated at So. Sh. 671 million in 1980. This, in turn, led to a sharp increase in the rate of inflation, from 10 percent in 1978 to 24 percent in 1979 and to an estimated 60 percent in 1980. 14. The side-by-side existence of an official foreign exchange market and a free market, funded largely by migrant workers' earnings, has given rise to large unrecorded trade and monetary flows. A meaningful analysis of balance of payments developments, on the basis of officially published figures, is therefore not possible. Data for external reserves suggest that Somalia had a comfortable overall balance of payments position up to the beginning of 1979. Since then, a sharp deterioration has set in. Available data indicate that since 1972, export developments have been most unfavorable. Although livestock production has recovered from the drought in 1974/75, recorded exports of live animals have not yet recovered to pre-drought levels. The volume of other exports declined, owing mainly to the drop in banana production and the cessation of exports of canned meat to the Soviet Union. Exports have also become very vulnerable; over 70 percent of the total merchandise exports comprise live animals, and 90 percent of these are to one country, Saudi Arabia. Import statistics do not take into account all the goods imported under the franco valuta system. Nonetheless, recorded imports rose sharply from US$206 million in 1977 to US$394 million in 1979 but dropped to US$334 million in 1980. Although Somalia enjoyed considerable improvement in its terms of trade, owing to higher and rising prices paid by Arab countries for live animals, the current account deficit rose steeply, from US$22 million in 1977 to US$206 million in 1979. However, in 1980, the current account deficit declined US$74 million, mainly due to a 15 percent decline in imports and a large increase in official grants for the refugees.  - 5 - 15. Until 1978, the overall balance of payments position remained comfortable because of a sharp rise in official capital inflows. Disbursements from foreign loans and grants rose from US$57 million in 1972 to almost US$200 million in 1977, but declined in 1978 and 1979. A substantial part of the inflows was related to two events: the drought in 1974/75 and the war in 1977/78. The decline in official capital inflows, stagnant exports, and the rapid rise in imports since 1978 resulted in the worsening of the balance of payments position. Total foreign reserves, which had increased steadily from US$31 million in 1972 to US$158 million at the end of the first quarter of 1979, started to drop rapidly. By the end of December 1980, foreign reserves had fallen to about US$15 million (about two weeks' imports) and have remained at about US$30 million since then. 16. The sluggish growth of export earnings and the low level of domestic savings have rendered Somalia increasingly dependent upon external assistance for the financing of development. After joining the Arab League in 1974, Somalia mounted a major effort to attract funds from the Arab petroleum exporting countries. The large inflows of external capital and transfers from 1975 onwards indicate that the effort has been successful. After 1977, the sources of foreign assistance shifted from the socialist countries (except for the People's Republic of China which maintains a large program) towards Arab bilateral and multilateral institutions and Western countries, several of which have had substantial assistance programs for a number of years. 17. Somalia's public external debt (outstanding and disbursed) as of December 1980 was US$693 million, equivalent to five times the level of recorded exports. Although a large share of the external debt is on fairly soft terms and the debt service ratio up to 1979 remained well below 10 percent, the debt service burden is expected to become much heavier in the near future. This is because in recent years the Government has made commitments for loans with short maturity; it has also accumulated debt service payments arrears (estimated by the IMF at US$45 million at the end of 1980). The debt service ratio is projected to increase from about 18 percent in 1980 (after including arrears payments) to about 30 percent by 1983. 18. In sum, Somalia is currently in the midst of a deep economic and financial crisis characterized by: stagnation in production and exports; a rapidly rising budget deficit which is being met through recourse to deficit financing; steeply rising inflation; a sharply worsening balance of payments situation; a critical loss of foreign reserves; and a worsening external debt situation. This crisis reflects not only adverse developments in the inter- national economy, but also past and current weaknesses in economic management. Unless policy measures are taken immediately both to restore short-term finan- cial equilibrium and to stimulate growth, the economy may continue to stagnate at a low level of economic activity. Policy Changes 19. The Government has recently shown some awareness that corrective policy measures are needed to face the economic and financial deterioration. In January 1980, the Government entered into its first stabilization program  - 6 - with the IMF. This program aimed at restraining both public and private domestic demand, raising domestic output of food crops, and expanding exports through changes in product and factor prices. However, the program lapsed because Somalia was unable to conform to the agreed credit ceilings. A new policy framework suggested by the Bank in March 1981 (cf. the Memorandum on the Economy of Somalia, Report No. 3284-SO) for restoring the financial equilibrium and inducing growth in the economy was well received by the Government. Since then, the Government has taken a series of economic measures. In April 1981, the Government announced the introduction of higher producer prices for several agricultural crops. Later, on July 1, 1981, the Covernment entered into a one year stand-by program (July 1981-June 1982) with the IMF under which the Fund will provide SDR 43.13 million (about $50 million). 20. The stand-by agreement resulted in further economic measures aimed at restoring the short-term financial equilibrium. These included: introduction of a dual exchange rate, effective July 1, 1981 which effectively means a substantial devaluation of the Somali shilling; a two-fold increase in the producer price for bananas (an important export crop); an improvement in the fiscal situation through a new tax on livestock exports, cutbacks in Government expenditures, and improvements in tax collection; increase in interest rates; production of incentives to Somali workers abroad to encourage them to remit their savings through official channels; gradual elimination of payments arrears on external debt; and restrictions on new commitments on public and publicly-guaranteed external debt. The implementation of the program was reviewed by a Fund mission in December 1981. The mission concluded that in the first six months (July-December 1981) the implementation of the program was satisfactory. 21. The measures recently taken by the Government follow the general line of advice by the Bank. The adjustment of the exchange rate is expected to improve the balance of payments position through increased exports and hopefully through mobilization of Somali emigrants savings through the official channels, while higher producer prices will give incentive for increased production of bananas and other domestically consumed agricultural crops. The fiscal restraints imposed under the stand-by program should help in containing demand expansion and thereby reducing inflation. 22. Somalia-s export prospects are not very promising because of the concentration on two primary products -- livestock and bananas -- both of which face problems in expanding production. Livestock is subject to cyclical droughts which decrease export supplies. Banana exports have fallen because of supply (drought, floods, poor agricultural practices) and demand (increasing competition from multinationals in both Italy and the Middle East) constraints. Diversification efforts have been attempted with hides, skins, and fisheries, but without much success so far. In view of the country's poverty and uncertain export prospects, and because of the fiscal constraints, occasional financing of local costs should be provided.  - 7 - PART II - BANK GROUP OPERATIONS IN SOMALIA 23. Since 1965, IDA has made 22 credits totaling US$157.3 million, of which about 31% have been made for transportation development, including construction of three trunk roads and a new deepwater port and associated extensions at Mogadishu. IDA credits were also made for livestock development in FY74, for a development finance company project in FY77, and for education in FY71, FY75, FY78 and FY81. Lending for crop agriculture commenced in FY76 with two credits for a Drought Rehabilitation Project and a North-West Region Agricultural Development Project. Additional credits for Central Rangelands and Agricultural Extension and Training and Bay Region Development projects were approved in FY79 and FY80. Agricultural and livestock credits approved represent 37% of total lending. A credit for development of water supply in Mogadishu and a technical assistance credit for project preparation were approved in FY78. A credit for promotion of petroleum exploration was approved in FY80. IFC recently made its first loan to Somalia. No Bank loan has been made to Somalia. Annex II contains a summary statement of IDA credits as of September 30, 1981 and notes on the execution of ongoing projects. 24. Performance on ongoing projects has been somewhat weak due mainly to shortage of qualified personnel. As the pace of development continues to rise, absorptive capacity constraints are becoming increasingly evident, especially in the field of agriculture where projects are rather complex and implementation experience is limited. Therefore, in preparing and appraising new projects, close attention is being paid to implementation capacity and the adoption of measures to ease this constraint when necessary. Partially to address this problem, the Government has established a Project Implementation Unit in the Ministry of National Planning which has considerably strengthened the capacity for project implementation by providing monitoring and logistical support to the projects, including assistance in procurement and recruitment of consultants. Difficulties encountered in project implementation are reflected in Somalia's disbursement performance. The disbursement rate, i.e. actual disbursements during the year as a percentage of the undisbursed balance at the beginning of the year, has declined over recent years from 35.9 percent in FY1977 to 16.3 percent in FY1980, but has slightly improved in FY1981. The FY1981 disbursement rate was 20.7 percent, as compared with a rate of 18.1 percent for Eastern Africa and 21.5 percent Bank-wide. This negative trend in disbursement performance has been brought to the attention of Government authorities, and efforts are being intensified to help improve it. 25. Somalia-s statistical service lacks the capacity to fulfill the data needs of development programs. The Bank's operations have experienced difficulties in obtaining statistical data. We have therefore included funds for strengthening the Central Statistical Department in the Ministry of National Planning under the Agricultural Extension and Farm Management Training Project (Credit 905-SO). 26. We plan to concentrate our future efforts on the country s directly productive sectors, agriculture, livestock and fisheries, and also on educa- tion, transportation, water supply and sanitation. While agriculture and livestock offer potential for development, most rural development activities are only in the early stages. Moreover, agricultural development in Somalia is particularly difficult because most of the people in rural areas are  - 8 - nomadic. To increase our knowledge of agriculture iLn Somalia, the Bank has recently made a comprehensive review of the sector (para. 2). In addition to these sectors, we plan to support the Government's iLndustrial development efforts (and assist in the formulation of an industrial development policy) through our country economic and sector work and future industrial development finance projects. We also plan to continue assistance to the energy sector. PART III - THE WATER SUPPLY AND SANITATION SECTOR Water Resources 27. Water resources in Somalia are unevenly distributed and scanty. There are only two perennial rivers, the Juba and the Shebelli, which originate outside Somalia and traverse the southern part of the country. Although generally limited both as to quantity and quality, groundwater is Somalia-s principal source of water supply. Population Served 28. Approximately 20 percent of the rural population and 58 percent of the urban population had reasonable access to safe water in 1976. More recent information indicates that this percentage has declined. The rapid expansion of Mogadishu since 1973 (from an estimated 350,000 to about 580,000 persons in 1980), means that less than 50 percent of the presently developed area has reasonable access to the water distribution grid, and most of the population depend upon water delivery by vendors or must transport water from public taps by other means. There are no public sewers in Somalia and sanitation facilities consist of individual disposal systems serving an estimated 35 percent of the rural, and about 77 percent of the urban population. Public Health 29. Despite inadequate statistics relating to water related diseases, morbidity and mortality due to common enteric and parasitic diseases are known to be exceptionally high throughout the country. Tuberculosis, malaria, diarrheas, dysenteries and parasitic infections directly attributable to environmental deficiencies, are the more commonly observed of the important communicable diseases. However, basic health services are improving and centers for treating communicable diseases are being established at the district level. Sector Organization 30. Although six different ministries, several autonomous agencies and numerous Government organizations are active in the sector, no agency is in charge of overall planning and programming of community water supplies and sanitation in the country. At the central Government level, three organiza- tions - the National Water Committee (NWC), the Hydrogeology Department of the Ministry of Mineral and Water Resources (MMWR) arid, potentially the most important, the Water Development Agency (WDA) - have key roles in water development. Local government agencies are responsible for both water supply and sanitation but, except for rudimentary waste disposal systems in Mogadishu, only water supply is currently provided. Autonomous water supply agencies exist in three major cities, i.e. Mogadishu, Hargeisa and Kismayu.  - 9 - 31. The NWC is a national advisory group consisting of representatives of the Ministry of Planning and other ministries and organizations active in the sector. It was created as a coordinating body with respect to all water resource projects, but has not yet been effective in shaping sector policies. MMWR's Hydrogeology Department is responsible for research and hydrogeological studies, the collection and assessment of hydrometeorological data and the design and implementation of groundwater exploration projects. Shortage of staff, however, has reduced its effectiveness. 32. WDA is one of four autonomous agencies under the MMWR, the other three being the Mogadishu Water Agency (MWA), and the Hargeisa and Kismayu water supply utilities. WDA was established in 1971 and is empowered to provide technical assistance to both rural and urban communities through several regional offices and a headquarters office located in Mogadishu. Shortage of staff has limited its activities to minor construction. Design and construction of piped water supply systems, financed through bilateral assistance, generally are carried out by foreign consultants and contractors. However, under the first Mogadishu Water Supply Project (Credit 822-SO), WDA carried out test drilling and, as part of a joint venture, is also participa- ting in the construction of the project's production wells. 33. WDA is headed by a General Manager appointed by the President on the recommendation of the Minister of Mineral and Water Resources. WDA is partially funded through Government budgets and partially through revenue- producing activities such as construction for other ministries. Various development agencies are supporting WDA. The German Agency for Technical Cooperation (GTZ) is supplying training and technical assistance, and the United States Agency for International Development (USAID), under a grant to MMWR for development of national water resources, will provide WDA with commodity aid and the drilling required in several ongoing Bank Group-financed agricultural projects. 34. The Mogadishu Water Agency (MWA), an autonomous agency under the MMWR, is responsible for water supply and, to a lesser extent, surface drainage in Mogadishu. Sanitation currently is the responsibility of the Mogadishu City Council. Upon the completion of the ongoing Mogadishu Sewerage and Drainage project, the Government intends to give MWA the responsibility for operation and maintenance of sewerage. 35. Within the sector, the Ministry of Health has responsibility for control over water quality and advising urban and rural committees on sanita- tion. The Ministry of Agriculture implements projects which involve the construction of tube wells and dug wells, and the Ministry of Livestock provides watering points in rural areas for nomads. The Ministry of Industry is involved in water development to meet irrigation water needs on its sugar plantations and to meet process water and potable water needs at various plant sites. However, none of these organizations has the capability of indepen- dently planning and implementing water supply projects, and must depend upon WDA, expatriate advisors, or consultants for such expertise, generally on a project-by-project basis.  - 10- Manpower and Training 36. A severe shortage of technically-trained manpower, which derives partly from Somalia's generally low education participation rates, exists in all sectors and at all levels. The largest single factor in this situation is the emigration of skilled manpower (including secondary teachers) to neighbor- ing oil-producing countries. Others are the extremely low level of remunera- tion throughout the public sector (the largest single employer) and the inability to attract sufficient numbers of students to technical and vocational schools. The National University in Mogadishu will not produce enough qualified graduates, particularly in civil engineering, to meet Somalia's immediate needs. 37. A training component in the first Mogadishu Water Supply Project is intended to address these needs in two stages, the first being an overall assessment of sector training needs and the design of a training program for MWA; the second, implementation of MWA's training program. Moreover, a GTZ-financed project to strengthen WDA has a substantial training component which would be closely coordinated with the training component of the first project. The well drilling component of a recently approved USAID project would also strengthen WDA through training of WDA staff. Sector Objectives 38. The Government's objectives for the sector, which so far have been expressed only in general terms, are to provide adequate, reliable and safe water for domestic use and water for livestock, industry and agriculture at modest prices throughout the country. These objectives are now being developed through a cooperative program administered by WHO/Geneva and financed by GTZ. This program, which was initiated in 1979 at Government's request, would assist Somalia in meeting the sector objectives corresponding to the recommendations adopted for the International Drinking Water Supply and Sanitation Decade (1980-89) at the 1978 UN Water Conference in Mar del Plata. The program would also provide the means by which an improved sector coordina- tion could be achieved and would provide the basis for preparing sector proposals relative to the next Five Year Development Plan (1982-86). Sector Development 39. In the early 1970's, USAID provided technical and financial assis- tance for the construction of water supply systems in Kismayu and Mogadishu. The People's Republic of China provided similar assistance in the mid and late-1970's for the construction of water supply systems in Hargeisa and Baidoa. 40. The Five Year Development Plan for 1974-78 allocated So.Sh. 344 million for water supply. Sector projects included were for water supply only and, with the exception of the Mogadishu water supply, were administered by WDA. About 31 percent of planned investment was for urban water supply projects (mainly Mogadishu, Berbera and Burao), 49 percent was for rural water supply components (boreholes, shallow wells and basins), while the balance of 20 percent was for equipment, supplies and research. Due to Somalia's drought  - 11- of 1973 to 1975, poor performance in project preparation, and financial problems accentuated by the international energy crisis, planned expenditure levels were not achieved. Total expenditures during 1974-78 amounted to only So.Sh. 4.3 billion, while sector expenditures were only So.Sh.106 million. 41. Somalia's Three Year Development Plan, 1979-81, which was launched in January 1979, was mainly a composite of projects carried over from the 1974-78 Plan, although some new projects have also been added. The planned expenditure based upon 1979 price levels was So.Sh. 7.1 billion, of which about So.Sh. 0.4 billion was for the water supply and sanitation sector. Donor assistance was committed for about So.Sh. 267 million, or about 68 percent of the total program cost for the sector. The Three Year Development Plan emphasizes improving urban water supply and sanitation and gives somewhat lower priority to rural water supply and supporting research. Because of Mogadishu's high rate of population growth, its importance as Somalia's center of government and its conspicuous deficiencies in water supply and sanitation, the Government places a particularly high priority on sector improvements in Mogadishu. Accordingly, the Bank's ongoing first water supply project is in Mogadishu, directed mainly to the urban poor, living in low cost and temporary houses. An initial phase of a Mogadishu sewerage and drainage project, financed by the African Development Fund, the Islamic Development Bank and the OPEC Special Fund, will serve a portion of those areas in Mogadishu which have individual water connections. Previous Bank Group Projects 42. A US$6 million Credit was made in 1978 for the first Mogadishu Water Supply Project (Credit 822-SO) to increase the water supply capacity of the Mogadishu Water Agency (MWA), to strengthen MWA, and to assist in the preparation of the proposed Second Mogadishu Water Supply Project. From the first project, we have gained a fuller realization of the extent of institutional weaknesses, and of the difficulties of estimating project costs in Somalia's environment which is relatively unstable for contracting civil works. Finally, we have learned to schedule project implementation more realistically. In the proposed project, we are attempting to address these difficulties by requiring MWA to appoint additional advisors, while improved accuracy of cost estimates has been assured by basing them on bids recently received on all major contracts included in the Project. Four other ongoing Bank Group projects for agricultural and livestock development are also assisting the development of the water supply sector through significant water supply components. PART IV - THE PROJECT 43. A report entitled "Staff Appraisal Report, Second Mogadishu Water Supply Project - Somalia" (No. 3252-SO) dated March 26, 1982 is being dis- tributed separately. A Credit and Project Summary appears at the beginning  - 12- of this report and a Supplementary Project Data Sheet is given in Annex III. A map (No. IBRD 15172) of the proposed project area is attached. The project was prepared by MWA with the assistance of consultants, and appraised by an IDA mission in July 1980. Negotiations were held in Washington, D.C. from March 1 to 5, 1982. The Somali delegation was headed by H.E. Mohamud Haji Nur, Ambassador of Somalia in Washington, and included Messrs. Osman Haji Ali, Project Manager, MWA, Abbas Ahmed Yassin, Director of Budget, Ministry of Finance and Ibrahim Abdillahi Deria, Economic Counselor, Embassy of Somalia. 44. The Government first expressed interest in Bank Group financing of a Mogadishu water supply project in 1975 when water demands were approaching supply capacity. A project to increase water production capacity through the extension of Mogadishu's Balad road wellfield was originally envisaged but, due to declining yield and deterioration of water quality, it was recognized that effective augmentation would have to be preceded by water resource investigations to identify the optimum locations and yields of other more suitable alternative sources of supply. The first project (Credit 822-SO), which was prepared by Sir Alexander Gibb and Partners (Gibb), was designed as an interim project to assist in the preparation of the proposed project through the inclusion of investigations of groundwater resources of the Afgoi-Balad-Mogadishu triangle. These investigations were completed in November 1979. A March 1980 report by the Institute of Hydrology (UK) sum- marizing the results of the investigations and Gibb's "Stage II Final Report of Feasibility Study for Mogadishu Water Supply Expansion" (May 1980) formed the basis of the appraisal of the proposed project. 45. The first project, which includes a modest increase in water supply capacity, has also attempted to improve MWA's institutional effectiveness by providing advisors and consultants for training, and for the design and implementation of accounting systems and tariff studies. Although progress in this institutional development effort has been slower than anticipated, advisors were appointed, accounting consultants have completed their assignments, and the work of tariff consultants and training consultants is underway. Contracts for all major water supply additions have been awarded and work on these contracts is approaching completion. Efforts tnder the first project to improve the organization, management and effectiveness of MWA would be continued and strengthened under the proposed project. 46. Construction work under the first project iLs expected to be completed by mid-1982, about two years behind schedule. Slippage in project implemen- tation has been caused mainly by administrative delays on the part of MWA and the Government. These delays, together with a change in the siting of the production wells and the resulting need for additional transmission main capacity, have caused a cost overrun of about US$7 million. Assurances have been received from the Government that it will providle additional funds to complete the project. Project Objectives and Description 47. The objectives of the proposed project are: (a) to increase MWA's water production capacity from 31 Mld to about 57 Mld; (b) to extend Mogadishu's  - 13- existing water distribution system; (c) to continue efforts being made under the first project to strengthen MWA as an institution through training, consultancy and advisory services; (d) to develop an appropriate program for meeting Mogadishu's future needs for sanitation; and (e) to assist in prepara- tion of a future Mogadishu water supply project. The objectives are in conformity with Somalia's sector objectives and the Bank's goals of encouraging the optimum development of the country's water resources and helping Somalia to achieve long-term, sector-wide institutional improvements. Project Description 48. The proposed project comprises the following: (a) Civil works including: (i) extension of source of supply works at the Afgoi Road wellfield consisting of access roads, fencing, production wells, observation wells and collector mains; (ii) distribution system reservoirs; (iii) trunk mains, distribution mains and public taps; (iv) a treated water pump station; (v) extension to MWA's Afgoi Road power generating station; and (vi) test drilling in support of water resource investigations for a future Mogadishu water supply project. (b) Mechanical and electrical equipment including: (i) a diesel- drive electric generator set; (ii) transformers and switch- gear; (iii) power supply lines and appurtenances; (iv) pumping plant for wells and boosters; and (v) chlorinators; (c) Miscellaneous equipment and supplies including: (i) vehicles; (ii) workshop, tools and equipment; (iii) office furniture and equipment; (iv) customer meters; and (v) other miscellaneous equipment and supplies; (d) Services of expatriate advisory staff; and (e) Consulting services for: (i) accounting; (ii) low-cost sanitation studies; (iii) construction supervision of the proposed project; and (iv) water resource investigations and engineering design of a future Mogadishu water supply project. Project Cost Estimate 49. The total cost of the project, net of duties, taxes and interest during construction is estimated at US$42.3 million equivalent. Foreign exchange costs would amount to US$33.4 million, or 79 percent of total project costs. 50. Cost estimates are based on bids received in late 1981 from contrac- tors on five main contracts (three civil works contracts and two mechanical  - 14 - and electrical plant contracts). Although the two plant contracts are being retendered in conformance with the European Development Fund's procurement procedures, the cost estimates for these two components are based on the previously received bids, which appear to be reasonable. Base costs are expressed in January 1982 price levels. Allowances for physical contingencies have been added for the various project components, ranging from 10 percent to 30 percent for civil works, 15 percent for plant, equipment and supplies, 20 percent for engineering, and 10 percent for advisors and accounting consult- ants. Price escalation for all components has been estimated at the following inflation rates: (a) for the foreign exchange component: 8.5 percent for 1982 and 7.5 percent for 1983, 1984 and 1985; (b) for the local component: 30 percent for 1982; 25 percent for 1983, 20 percent for 1984, and 15 percent for 1985. The Government has waived duties and taxes on all imported goods and services required for the first project and a similar waiver would be provided for the proposed project. Estimated average man-month costs for consultants, including salary, fees, international travel, and local subsistence cost, range from US$9,000 to US$12,300. Financing Plan 51. IDA would co-finance the Project with the Arab Fund for Economic and Social Development (Arab Fund) and the European Development Fund (EDF). The proposed IDA credit of SDR 13.4 million (US$15 million equivalent) would cover about 40 percent of the foreign costs, and about 16 percent of the local costs. Local cost financing is justified in view of the country's poverty. The IDA credit would be used to help finance civil works contracts, advisors and consulting services. The Arab Fund's loan of US$17.5 million equivalent, which is provided on concessionary terms, would be used to help finance the cost of civil works contracts, advisors and engineering services. IDA and the Arab Fund would jointly finance one of the civil works contracts and foreign costs associated with advisory services and supervision of construc- tion. The EDF's grant of about US$5.5 million equivalent would finance the two main plant contracts, miscellaneous equipment and supplies, and low-cost sanitation studies. US$3.3 million equivalent of the local costs would be met from MWA's internal cash generation, and US$1.0 million equivalent would be provided by the Government. As a condition of Credit effectiveness, all conditions precedent to the effectiveness of the Arab Fund Loan Agreement and the EDF Grant Agreeement shall have been fulfilled (draft Development Credit Agreement, Section 5.01(b)). 52. The terms of the onlending of the credit proceeds to MWA would be twenty years maturity, including three years of grace, at an interest rate of 10 percent per annum. These terms are similar to those of Government loans to revenue-earning public agencies in Somalia. The Government would also lend to MWA on the same terms an amount of 12.5 million Somali shillings (draft Development Credit Agreement, Section 3.01(b)). The execution of the subsidiary loan agreement between the Government and MWA would be a condition of Credit effectiveness (draft Development Credit Agreement, Section 5.01(a)). To provide for the prompt availability of local funds for the proposed project, the Government would open a special bank account for the Project in the name of MWA and deposit an initial amount of So. Sh. 6 million by September 30, 1982, and the remainder promptly as MWA shall request for the carrying out of the Project (draft Development Credit Agreement, Section 3.01(c)).  - 15 - Project Implementation 53. The Project would be carried out by MWA through their Project Management and Planning Unit (PMPU) which was established to implement the first project. MWA, however, will require considerable support from its consultants and expatriate advisors. Sir Alexander Gibb and Partners (Africa), a Nairobi-based firm involved in the first project, has been retained by MWA as engineering consultants for the proposed project, and this is acceptable to the Association. Detailed engineering design was substantially completed in September 1981. Bids were received and awards on the three civil works contracts are expected by mid-1982. The completion of construction and the commissioning of the mechnical and electrical plant are expected by mid-1984. Assurances have been obtained at negotiations that MWA would continue to retain engineering consultants whose qualifications, experience and terms and conditions of employment would be satisfactory to the Association (draft Project Agreement, Section 2.02). 54. MWA is headed by a General Manager who, together with MWA's Directors, is appointed by the President on the advice of the Minister of Mineral and Water Resources. Most other staff are recruited through the Ministry of Labor and Social Affairs. MWA has four departments, each headed by a Director. The departments are responsible for: (i) operations and maintenance; (ii) finance and administration (including accounting, purchasing and personnel); (iii) project planning and management; and (iv) sewerage and drainage. 55. MWA's management performance during the implementation of the first project has so far been weak, as evidenced by delays in procurement and in the appointment of personnel and consultants. Furthermore, staff morale and motivation are low and there appears to be a lack of disciplined effort. However, the retention and appointment of advisors, and the implementation of a training program are expected to bring about improvements in the longer term. The first project includes an important training component to assess training needs of the water supply sector and to strengthen MWA. Consultants commenced their work in June 1981, and submitted a draft report on the training program in March 1982. A second report covering the assessment of sector training needs is expected shortly. Under the first project, to strengthen MWA's management capability, a Technical Advisor and a Financial Advisor were appointed in 1979 to help improve MWA's financial and technical operations. The need for this technical support continues to be important, and during negotiations, it was agreed that the covenant under the first project would be extended to include the appointment, by December 31, 1982, of a Management Advisor to assist the General Manager and an additional Technical Advisor to provide support in the effective development and management of MWA's water resources. It was also agreed that the selection, qualifications, experience and terms and conditions of the advisors would be satisfactory to the Associa- tion (draft Project Agreement, Section 2.04). The costs of these advisors are included in the proposed project. To ensure that the quality of MWA's manage- ment is maintained during the period of Project implementation, assurances have been obtained during negotiations (i) that the Project Management and Planning Unit (PMPU) established under the first project would be maintained until at least the completion of the proposed project, and (ii) that future appointments to the positions of General Manager, Director of Technical  - 16 - Operations, Dir-::-or of Finance and Administration, Director of the Sewerage and Drainage Department and Head of the PMPU would only be made after consul- tation with the Association (draft Project Agreement, Section 2.03). Financial Aspects 56. MWA's accounting system needs to be reformed to provide adequate information to evaluate and control its financial operations and also to provide information for financial planning. The first project provided for the appointment of accounting consultants to design and assist in imple- menting a commercial accounting system, conduct staff training and identify additional staffing needs. The consultants completed the accounting system design and the preparation of an accounting manual in October 1980. MWA subse- quently has prepared an accounting implementation and related training program, and the system is expected to be in operation by mid-1982. During negotiations, it was agreed that: (i) the commercial accounting system designed for MWA under the first project would be implemented by December 31, 1982; and (ii) accounting consultants would be employed by December 31, 1982 to assist MWA in its accounting operations (draft Project Agreement, Siection 2.05). MWA's accounts are presently audited by the Magistrate of Aiccounts, who is indepen- dent and reports directly to the President of the Supreme Revolutionary Council. These audits are of a satisfactory standard. Assurances were obtained during negotiations that MWA will annually submit its audited accounts to the Association, and not later than four months after the end of MWA's financial year (draft Project Agreement, Section 4.02). 57. Although information provided by MWA's accounting system is inadequate to make a detailed evaluation of its past financial performance, available information indicates that its revenues between 1977 and 1980 have been adequate to meet cash operating expenses and debt service as well as finance a small amount of capital spending and inventory additions. However, if it had been possible to measure MWA's annual rates of return on revalued assets in recent years, these would have been negative. MWA's accumulated cash at December 31, 1981 was adequate to meet its current lia- bilities. At negotiations, assurances have been obtained that MWA's fixed assets, which were revalued at December 31, 1981 at a replacement cost of So.Sh. 371.28 million, less accumulated depreciation of So.Sh. 150.09 million, would be further revalued annually using methods acceptable to the Association (draft Project Agreement, Section 4.06). 58. NWA's water tiriff has been maintained unchanged at a uniform metered rate of So. Sh. 3 per m (US$0.90 per thousand US gal;) since MWA commenced ope- rations in 1973 until May 19 1 when the uniform metered rate was increased to So. Sh. 4.50 (US$0.36) per m . Further tariff increases will be required to meet increases in MWA's costs caused by recent high inflation in Somalia and the devaluation of the Somali shilling, and to bring IIWA's tariff levels closer to long run marginal water supply cost,,. The cost of water production Is high in Mogadishu because of the relatively low yield characteristics of the supply sources. Under the first project, MWA was to employ consultants to undertake a tariff study, but the appointment was delayed until the latter part of 1981 when local consultants were employed. A draft report has been pre- pared and completion of the study would be a condition of Credit effectiveness  - 17 - (draft Development Credit Agreement, Section 5.01(c). During negotiations, assurances have been obtained that the Government would ensure that any adjustments in the level or structure of MWA-s water tariffs will take into account the recommendations made in the above mentioned study and the Associa- tion-s comments on such recommendations (draft Development Credit Agreement, Section 3.03). To ensure that MWA earns a reasonable rate of return on its net fixed assets, it was also agreed during negotiations that MWA would maintain its tariffs at levels sufficient to provide a minimum annual rate of return on average revalued net fixed assets of not less than 2% in 1983 and 1984, 3% in 1985 and 1986, and 4% thereafter (draft Project Agreement, Section 4.04). It was also agreed that MWA will not incur any debt without the Association's approval unless future debt service is covered at least 1.4 times by internal cash generation (draft Project Agreement, Section 4.03) and that, until project completion, MWA will not incur annual capital expenditures, other than for the proposed project, in excess of US$250,000 equivalent, without a financing plan agreed with the Association (draft Project Agreement, Section 4.05). 59. MWAs outstanding accounts have deteriorated to an unsatisfactory level and, at the end of 1980, were equal to about 111 days annual sales compared to about 80 days at the end of 1979. This is mainly due to the slow payment of Government accounts which represented about 72 percent of receivables at December 31, 1980. During negotiations, assurances were obtained that the Government would by September 30, 1982, reduce and thereafter maintain its indebtedness to MWA to a level not exceeding 60 days of MWA's annual water sales (draft Development Credit Agreement, Section 3.04). Procurement 60. The project includes five main contracts (three civil works and two plant contracts) and one or more minor goods contracts totalling about US$36.5 million including contingencies, or about 86% of total project costs, to be financed by IDA, the Arab Fund and the EDF. IDA and the Arab Fund would each separately finance one civil works contract and jointly finance the remaining civil works contract. These three contracts, for which prequalification was required, are estimated to total about US$30.6 million, about 72% of total project costs, including contingencies, and would be awarded on the basis of international competitive bidding in accor- dance with Bank Group procurement guidelines. Power plant, pumping plant and associated equipment together with vehicles, tools and miscellaneous equipment and supplies, totalling about US$5.9 million equivalent including contingencies and to be financed by the EDF, would be grouped in two main plant contracts and one or more minor supply contracts. Procurement would be made according to EDF competitive bidding procedures. Disbursements 61. Retroactive financing of up to US$100,000 equivalent is proposed for payments made after March 1, 1982 to finance the initial cost of consulting services for water resource investigations. The Credit would be disbursed  - 18 - to meet selected portions of the project costs as follows: a) for civil works: (i) 100% of total expenditures for well construction and test drilling, and (ii) 32% of total expenditures for construction of roads, mains and other wellfield works and the construction of reservoirs, a pump station, trunk mains and other works in Mogadishu; (b) 40% of foreign expenditures for advisors; (c) for consulting services: (i) 100% of foreign expenditures for accountants, (ii) 50% of foreign expenditures for construction supervision, and (iii) 100% of foreign expenditures for water resource investigations and design engineering. Any undisbursed funds remaining from the Credit after completion of the project would be cancelled. The proposed closing date for the Credit would be December 31, 1985. This allows a period of about 18 months after the scheduled completion of project facilities and approximately 6 months after the scheduled completion of detailed engineering for the future Mogadishu water supply project. Environmental Impact 62. As a result of the project, some improvement to public health is anticipated due to provision of safe water to an increased proportion of the population. The project would have no adverse environmental impact. Benefits and Risks 63. The proposed project would meet Mogadishu's water requirements until 1987. It would resolve the city's present water supply shortages by increa- sing MWA's firm production capacity by about 80% (from 31 Mld to 57 Mld) and would extend MWA-s distribution grid from a service area of about 20 sq. km. to about 45 sq. km., thus making potable water more accessible to Mogadishu's population. The project would also continue efforts that have started under the first project to strengthen MWA by continuation and expansion of advisory support for MWA management and their Project Management and Planning Unit. The benefits of improved water supply facilities will not be fully effective without corresponding improvements in sanitation; the proposed project would, therefore, include the financing of low-cost sanitation studies. 64. An estimated 640,000 persons (including about 320,000 of the urban poverty group) which do not presently have reasonable access to public water supplies, would be provided with water service by the proposed project in 1987. A recent survey undertaken as part of the tariff study mentioned in paragraph 58 indicates that projected tariff levels would be affordable by all consumers, including those in the poverty group, many of whom would pay considerably less than the high price presently payable to private water vendors. 65. The incremental financial rate of return (IFR) is estimated at about 5.6 percent, based upon the estimated 1985 average tariff level of So.Sh. 9.40 per cu. m. (expressed in constant 1982 prices). A 20% increase in capital costs of the project would cause the IFR to decline about 1.9 percent. Due to the extent of unsatisfied water demands, a decrease in water sales from projected levels is unlikely. The financial rate of return, which is rela- tively low, underestimates the real economic return because health and amenity benefits for a project such as this are impossible to quantify.  - 19 - 66. The main project risks lie in MWA's institutional weaknesses which could have an adverse effect on project implementation and subsequently on the maintenance and operation of the project facilities. To minimize these risks, the proposed project provides for the employment of advisors to support MWA management during project implementation. The ongoing efforts under the first project would help to improve MWA-s effectiveness through a comprehensive training program and the establishment of commercial accounting. 67. Given the present status of investment planning, the need for immediate action to remove current water supply deficiencies and financial constraints, the proposed project represents the most acceptable of the several technical alternatives considered. These alternatives include two projects dependent upon local groundwater and a project dependent upon a surface water supply from the Shebelli river. PART V - LEGAL INSTRUMENTS AND AUTHORITY 68. The draft Development Credit Agreement between the Somali Democratic Republic and the Association, the draft Project Agreement between the Associa- tion and the Mogadishu Water Agency and the recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association are being distributed to the Executive Directors separately. Special conditions of the project are listed in Section 3 of Annex III to this report. 69. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 70. I recommend that the Executive Directors approve the proposed credit. A. W. Clausen President Attachments Washington, D.C. April 6, 1982  -20 - -mx Page 1 of 4 SOMALIA - SOCtAL INDICATORS DATA SHEET SOMALIA REFERENCE CROUPS (WEIGHTED AVE8AGES LAND AREA (THUUSAND S4.) - MOST RECENT ESTIMATEA TOTAL 637.7 MOST RECENT LDW INCOME MIDDLE INCVF4E .S RICCULTURAL 299.2 1960 7b 1970 /b ESTIMATE 2b AFRICA SOUTH OF SAMARA AFRICA SOUTH OF SAHARA GNP PER LAPITA (USS) 70.0 90.0 185. O/e 2:18.3 794.2 .SNRCY CONSUMPTION PER CAPITA (KtLOLGRAILS OF COAL EQUIVALENT) 17.1 34.9 77.7 70.5 707.5 POPULATION ANL VITAL STATISTICS POPULATION, MID-YEAR (THOUSANDS) 2450.0 3113.0 3828.0 URbAI. POPULATION (PERCENT OF TOTAL) 17.3 23.1 29.4 17.5 27.7 POPULATION PROJECTIONS POPULATION IN YEAa 2000 (MILLIONS) 6.5 STATIONARY POPULATION (MILLIONS) 17.0 YEAR STATIONARY POPULATION IS REACHED 2130 POPULATION DENSITY PER SQ. KH. 3.8 4.9 6.0 27.7 55.0 PER SQ. KM. AGRICULTURAL LAND 7.0 9.0 12.5 73.7 130.7 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 43.8 46.5 43.8 44.8 46.0 15-64 YRS. 53.5 51.6 54.1 52.4 51.2 65 YRS. AND ABOVE 2.7 1.9 2.1 2.9 2.8 POPULATION GROWTH RATE (PERCENT) TOaAL 1.9 2.4 2.3 2.6 2.8 URIlAN 4.9 5.3 5.0 6.5 5.1 CRUDE SIRTFZ RATE (PER TFZOUSAND) 49.3 46.9 46.4 45.9 46.9 CRUDE DEATK RATE (PER THOUSAND) 28.7 24.4 20.1 19.3 15.8 GROSS REPRODUCTION RATE 3.2 3.0 3.0 3.1 3.2 FANZILY PLANNING ACCEPTORS, AINNUAL (THOUSANDS) .. .. USERS (PERCENT OF MARRIED WOKEN) .. .. FOOU AND NUTRIrION UNDEX OF FOOD PRODUCTION F?R CAPITA (1969-71-100) 97.0 100.0 82.0 89.5 89.9 PER CAPITA SUPPLY Ur CALORIES (PERCENT OF tEQUIREMXNTS) 85.0 85.0 88.0 90.2 92.3 PROTEINS (GRAMS PER DAY) 73.0 72.0 70.0 52.7 52.8 OF WHICH ANINAL AND PULSE 45.0 45.0 41.0 17.8 16.1 CHILD (AGES 1-4) tIORTALITY RATE 42.5 35.4 29.8 27.3 20.2 HEALTH TTFI EXPECTANCY AT 8IRTI (YEARS) 36.1 40.0 43.9 45.8 50.8 INFANT MlORTALITY RATE (PER TNDUSAND) .. .. ACCESS T SAVE WATIS (PERCENT OP POPULATION) TOTAL .. 13.0 33.0 23.9 27.4 UgLAN .. 17.0 58.0 55.0 74.3 MORAL * 14.0 20.0 18.5 12.6 ACCESS TO EXCRETA DISPOSAL (PERCENT Of POPULATION) TOTAL .. .. 47.0 26.2 URBAN .. .. 77.0 63.5 RURAL .. .. 35.0 20.3 POPULATION PER PHYSICIAN 36567.2 23583.3 18484.8 31911.8 13844.1 POPULATION P1R NURSING PERSON 6218.3 4112.3 *- 3674.9 2898.6 POPULATION PER 6X8PITAL BED TOTAL 693.7 637.6 614.5 L238.8 1028.4 URAN 144.6 271.1 *. 272.8 423.0 RULAL 5643.1 7102.5 *- 1745.2 3543.2 ADNISSIONS PER DQSPITAL 6ID bUUS INC AMUGE SZ