Algeria - Emergency Reconstruction Project

L-V 'K) VJ / - P7 L Doumpumt of The World Bank FOR OMCLAL USE ONLY port ND. P-6455-AL ND(OANDU AJID IEOHRND&TION OF THE PRESIDENT OF TUE INTERNATIONAL BANK FOR ECONSTRUCTION ANID DEVELOPNEIET KEXECwILv DIRECTOkS ON A PROPOSED LOAN IN THE AMOUNT EQIALENT TO US$51 MILLION TO THE DEOCRAIC AND POPULAR REPUBLIC OF ALGERIA FOR AN EMERGENCY RECONSIRUCTION PROJECT NOVEMBER 10, 1994 This doc_met has a resticted diStution and may be used by recipient only in th pefoman of their officia dutes. Its contents may not otws be dclosed witout Wod bk autoiabtiloM  EXCHANGE RATE Currency Unit: Algerian Dinar (DA) = 100 Centimcs Equvalency of 1 US$ in DA since 1985 1985 5.03 1986 4.70 1987 4.85 1988 5.92 1989 7.46 1990 8.60 1991 17.35 1992 22.49 1993 22.00 1994 (Sept. 9) 38.00 ABBREVIATIONS I g.a 32.2 ft/s/si of gravitational acceleration bbl/d barrels per day ft feet: 0.30 meter ha hectare Km : kilometer MW/3 : cubic meters per second Mm3 : million of cubic meter Mnmt : million of metric tons GLOSSARY OF ACRONYMS AGID : Agence Nationale de RFalisation et de Gestion des Infrastructures Hydrauliques pour Irrigation e. le Drainage BAD Banque Algerienne de D6veloppement BEFL : Banque de D6veloppement Local CGS : Centre National de G6nie Parasismique DHW : Direction de l'Hydraulique de la Wilaya de Mascara DSA : Direction des Services Agricoles de la Wilaya de Mascara DTlP : Direction des Travaux Publics de la Wilaya de Mascara DUC : Direction de l'Urbanisme et de la Construction de la Wilaya de Mascara EPEOR : Entreprise de Production, de Gestion et de Distribution d'Eau d'Oran EPIC : Entreprise Publique, Industrielle et Commerciale GOA : Government of Algeria MA : Ministere de l'Agricutre ME : Ministere de I'Equipement MICLERA : Ministbre de l'Interieur, des Collectivit6s Locales, de l'Environmement et de la RWforme Administrative ONCTC : Organisme National de Contr6le Technique de la Constucton SONELGAZ : Soci&t6 Nationale de l'Electricite et du Gaz WILAYA(TE): Province(s)  FOR OMCIAL USE ONLY PEMOCRATI An POPULAR REPUBLIC OF ALGERIA MASCARA EMERGENCY RECONSTRUCTION PROJECT Loan and Project Sumna Borrower : Democratic and Popular Republic of Algeria Beneficiaries Mistry of Agriculture, Ministry of Education, Ministry of Housing, Ministry of Public Health, and Ministry of Public Works Amount : US$51 million equivalent Terms . Repayable in 17 years, including S years of grace, at the standard variable interest rate povery CLategory : Not applicable Financi Plan Local Foreign Total -== -U-IS$ Million--- Requirements: 32.6 51.0 83.6 Financed by : IBRD : -- 51.0 51.0 Government: -332.6 TOTAL SOURCES M6 Eco0nomic Rate of Return : Not applicable Staff Appraisal Report No. : Not applicable - A Technical Annex is attached Ma: IBRD No. 26457 lils document has a resticted distrbution and may be used by recipients only in the performance of their ofricia dutes Ils content may not otherwi be dbclosed without World Bank authorization. i  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO TUE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA FOR AN EMERGENCY RECONSTRUCTION PROJECT I submit for your approval the following memorandum and recommendation on a proposed loan to the Democratic and Popular Republic of Algeria for the equivalent of US$51 million to help fmance an Emergency Reconstruction Project. The loan would be at the Bank's standard variable interest rate, with a maturity of 17 years, including 5 years of grace. 1. Background On August 18, 1994, at 1 Hour 13 GMT, an earthquake with a magnitude of 5.6 on the Richter scale, struck a mountainous area known as Beni Chougrane in the Province of Mascara in Algeria. The epicenter of the seism was located near the village of Sehadlia, with the mpture area extending over a radius of 13 kilometers. In the aftermath of the earthquake, ten aftershocks with magnitudes varying from 3.9 to 5.1 occurred within a period of 36 hours. The impact of the earthquake was devastating, as 172 people lost their lives, 295 were injured and had to be hospitalized, and 10,000 were left homeless. Basic infrastructures, public and residential dwellings suffered major damages that resulted in the interruption of road traffic and public services right after the seism. These damages, estimated at US$128 million, to a large extent occurr. because of the nature of the traditional village houses in the area. They were made of irregular stones bonded with clay, and covered with wooden-framed roofs. The whole structure was not conceived to resist the shock of an earthquake with a magnitude like the one that took place. 2. Algeria is prone to seismic hazard. The largest one measuring 7.2 occurred in the city of Chelf on October 10, 1980, causing widespread damages in this agglomeration. Tectonic activities and the associated seismicity in North Africa stem from the closing of the African and the Eurasian plates at an estimated rate of 0.9 cm per year. This convergence has generated major earthquakes along the Mediterranean coast over the last three centuries. The Algerian authorities are conscious of this risk, and have issued seismic safety regulations. With the assistance of foreign experts, they have proceeded with seismic zoning and microzoning, with a view to assessing earthquake hazard at different places in the country. They have also issued regulations spelling out prevention measures to put in place in case of natural catastrophes, and ways to orgadze relief efforts. 3. Government's Response. All vital sectors in the region were damaged by the earthupake. Potable water supply was cut off, four road sections were destroyed, and part of an irrigation system collapsed. Prior to the seism, most economic activities in this pastoral land consisted of livestock raising, supplemented by the culture of dry crops, such as grapes, olives, and almonds. The seism caused the loss of 1,400 heads of cattle. The Government was quick to respond to this emergency. Within hours following the earthquake, a rescue and medical team arrived ih the area. Its first action was to bury the dead and to transfer the injured to nearby hospitals. Next, 3,600 tents were installed to shelter the homeless population. To prevent epidemics, potable water was trucked to the area, and medicines and assistance given to the population. Food and clothing were distributed free to the population.  4. As the situation has now stabilized in the area, the authorities have begun to install weather-resilient steel structures for public dwellings, such as schools, health centers, and other offices, as well as for the affected population. This is necessary to protect the population from decreasing temperatures with the approaching winter. These structures will be integrated within the permanent dwellings that will be rebuilt for the homeless families. As most of them do not want to return to the land where they used to live for fear of more aftershocks, they will be housed in neighboring areas. These new settlements are in the same villages where the destroyed houses were located. The authorities are now planning the reconstruction phase with a view to restoring assets and economic activities in the affected region. 5. Bank Response and Strategy. On August 22, 1994, the Algerian authorities requested emergency Bank assistance for reconstruction of the earthquake-devastated area in Mascara. A reconnaissance mission visited Algeria between September 9 and 15, 1994, to assess the damages. This was followed by an appraisal mission in mid-October 1994, with negotiations taking place in Paris, France, in early November 1994. The Mascara earthquake came at a particularly bad time for Algeria. The country is going through a political turmoil with civil unrest stirred up by a depressed economy. Unemployment is at 25 percent. As a compounding factor, a severe drought since 1985 has substantially reduced water availability for urban supply and irrigation. The drought was so intense this summer that it generated a number of uncontrolled forest fires, particularly in the western part of the country, where Mascara is located. The losses resulting from these fires are estimated at US$50 million. 6. The Bank's assistance strategy for Algeria aims to support macroeconomic stabilization and accelerated structural reform. It is geared toward establishing the necessary conditions for a strong supply response that would help to meet the basic social needs of the population. This strategy is part of a broader effort by Algeria's external partners to promote economic reform, ease the debt service burden, and contribute to greater stability in the country. Under the proposed strategy, an economic rehabilitation loan, appraised in September, will support economic reform measures that would set the foundation for a new phase of adjustment lending starting in 1995. The proposed reconstruction loan would provide further badly needed external assistance to Algeria. It would help to minimize budget disruptions that the additional resources requwired to reconstruct the eartuake-devastated area, might have in other Government programs and initiatives. 7. The proposed project meets all the criteria for Bank emergency recovery assistance. The earthquake impact together with that of the continuous drought and of damages caused by the forest fies, are significant enough to furer increase the budget deficit and slow down the economic recovery process. A quick, effective Government response to the emergency in Mascara is vital for promoting further political and economic stability in the country. The Bank has gained much experience in disaster recovery, having so far participated in a large number of emergency reconstruction programs, and thus could be of great assistance to Algeria.  8. Pt ObLeje s. The proposed Bank assistance will focus on the short- and medium-term recovery of the sectors most affected by the seism. The project aims at rebuilding the economic, social, and physical assets that were destroyed by the earthquake, with a view to restoring essential facilities and services in the shortest possible time. To this end, it will assist the authorities in sefting up an effective organization to manage the reconstruction program. It will help to develop long-term measures for seismic damage prevention and mitigation. It will further evaluate the institutional framework for dealing with natural disasters, and make appropriate recommendations. Although the primary goal of the project is asset reconstrction, it will nevertheless proceed within a larger view of promoting more economic development in the region. 9. Past Experience in Emergency Operations. The Bank has not before given emergency assistance to Algeria, though the country has suffered major earthquakes like the one in Chelf City in October 1980. The Bank, however, has gained valuable experience in disaser- recovery assistance. The lessons learned in past operations have been taken into account in designing the proposed reconstruction project. As the project is essentially targeted toward restoring normal economic and social conditions, broader policy issues have been set aside and left to be pursued later. Project execution should begin immediately, since there are no up-front conditions to bet met. Such conditions have caused major delays in the execution of past emergency operations. The project advocates the establishment of a strong implementation unit, a key element for the success of those operations. Also, based on past experience, the project includes a public education program on disaster mitigation, and guidance in disaster-resistant building techniques. 10. Project Description and Implementation. The project would include the reconstruction and repairs to facilities in the following sectors: (a) in education, 2 schools would be rebuilt, and 10 others repaired (US$2.7 million); (b) in housing, steel structures would be provided to the homeless, repairs would be made to damaged houses, public buildings would be reconstucted, and 2,131 new housing units would be built (US$55.7 million); (c) in agriculture, repairs would be made to the irrigation system, 6 holding basins would be constructed at the foot of hills, damaged irrigation equipment would be replaced, and a reforestation program would be carried out (US$3. 1 million); (d) in public health, all health centers in the affected villages would be rebuilt (US$1.2 million); (e) in roads, six sections of three national roads would be repaired (US$11.4 million); (f) in water supply and sewerage, the water and sewer networks in the affected villages would be rebuilt, water and sewerage services would be provided in the new housing development areas, and lagoons would be constructed for reuse of treated water in irrigation (US$7.8 million); (g) in earthquake hazard reduction and prevention, seismic zonimng and microzoning studies would be carried out, a revision of seismic design coefficients and spectra followed by an evaluation of building codes would be undertaken, and a public awarencs program dealing with natural disasters would be implemented (US$1.5 million); and (h) in social rehabilitation, the needs of women and children affected by the earthquake would be addressed with a view to restoring their productive facilities and activities (US$0.2 million).  -4 - 11. D:>amages to the power sector were minor, and the national power utility, SONELGAZ, should be able to repair them without outside assistance. Two factories, a wheat flour grinder and a brick making facility, were destroyed by the seism. The recommendation was made to the authorities to take advantage of this situation to sell these public enterprises to the private sector. This replacement cost as well as that of the livestock is not included in the proposed project. About two-thirds of the investments would be made in the housing sector, and to some extent this cost would need to be recovered within the limits of the population's income. The population in the area is largely rural, low-income, living on limited revenues from livestock raising and subsistence agriculture. On this basis, and given the losses suffered by the population as a result of the earthquake, the Government has decided to provide a subsidy of US$8,940 equivalent to each homeowner to start the reconstruction of his/her dwelling. It is estimated that this amount will finance only the core of the dwelling. To complete the reconstruction process, the Government is prepared to make sub-loans to the affected homeowners on concessionary terms. These sub-loans would be managed by the Banque de D6veloppement Local (BDL), an institution that the Government has been using to finance rural housing. For homeowners whose dwellings were only damaged by the seism, the Government will provide a subsidy of US$2,980 equivalent to each of them to fmance repairs to the dwellings. Sub-loans should also be made available to them for additional finishing works. 12. A Bank loan of US$51 million is proposed to finance the foreign exchange component of the project. Part of the loan equivalent to US$4.8 million, together with equal counterpart funds, will be used by the Government to make sub-loans to homewoners as previously desebed. The remaining proceeds of the Bank loan would be used to match the Government subsidies for reconstruction of the destroyed houses and public dwellings, and for rebuilding in the other sectors. 13. Agreed Actions. The proposed project is not conceived as a vehicle for policy changes, and as such there would be no conditionality attached to it. Nevertheless, certain actions need to be taken that would ensure speedy project execution, given its emergency nature, and adheence to existg policies. The first one dealt with project implemenation. Because of the involvement of several sectors, it was agreed with the Government to decentralize the project at the provincial level. In addition, a project implementation unit would be set up at this level to coordinate project execution among the different sectors. Staffing and managing this unit adequately would be an important parameter for project success. To this end, the Government appointed the project manager of the unit, who participated in the negotiations. It was further agreed that, not later than amnuvay 31, 1995, the rest of the unit staff will be appointed by the Govermnent. The unit organization, as well as staff qualifications, should be acceptable to the Bank. 14. As indicated before, BDL would make sub-loans to homeowners to finance finishing works in their dwellings. BDL is an established bank in the project area, with experience in providing loans for rural housing. One half of the funds for the sub-loans would come from the Bank loan proceeds, and would be onlent on the same terms of the Bank loan, except that the foreign exchange risk would be borne by the Government. The other half would  be contributed by the Govermnent. To make the sub-loans affordable to the population, it was agreed that the Govenunent counterpart funds would be lent on a repayment term of 25 years, including 4 years of grace, at an interest rate of one percent. This will provide a blend of funds in equal shares between the Bank loan proceeds and the Government contribution for each sub- loan, with a resulting repayment term of 20 years, at an interest rate of 4.5%. In this context, the Govemment and the Bank are currently discussing policies in he housing sector, as part of a Housing Completion and Sector Development Project (Loan 3561-AL). Any new policies that would come out from these discussions would be applied for fimte loans that BDL would make in the earthquake aea. 15. Cost recovery will be fully achieved in the water supply sector. Under current policies in this sector, lease fees paid by operators of water supply systems should increase whenever new installations are built by the Government and handed over to these operators for exploitation. Accordingly, in conformity with the provisions of such lea'; agreemet, the Government will increase lease fees charged to the operator in the earthquake area, once the water supply works in the newly developed areas have been completed. 16. Project Benefits. The project would assist in restoring physical assets and economic activities in the earthquake-stncken area. It would alleviate human suffering through the provision of shelters to 2,131 families. It would provide the whole population with the necessary school and public health facilities, and with adequate water supply and sewerage services. A new impulse would be given to agriculture through repair of the irrigation system, the constuction of holding basins to increase the availability of water, and the execution of a reforestation program. The project would also spell out measures that the authorities should inplement to reduce damages by earthquakes, through a revision of the building codes, seismic zoning and microzoning, and preparedness of the population to the occurrence of natual disasters. Cost-benefit caklculations cannot be carried out readily, but the project's economic benefits are expected to be substantial. 17. Social and Environmental Aspects. The project will address the population's social and envirornental concerns that have surfaced in the aftermath of the eartquake. Particular attention will be paid to the needs of women and children. As part of project execution, a social survey will be carned out. Its aim would be to determine living habits of the population, so as to design a project which conforms to these habits. The survey would also look at the women's livelihood prior to the seism, to explore ways to restore it and possibly improve it. It would also invesdgate the pre-seism social environment of children, proposing an agenda for improving it. The population has been much traumatized by the devastation, and has to deal with its fear for the area. Counselling to this effect would be provided under the project. 18. The project will have a major positive impact on the environment. Through rebuilding of the area, the quality of the environment would greatly improve, as more strcturally sound and functional houses would be provided to the population, accompanied by good access roads, and better water supply and sewerage services. The project would also  - 6 - ensure that education and public health facilities are made available to the population. Lagoons would be built to allow recycling of treated wastewater in agricultLue. Increased water availability together with the proposed reforestation program would promote a more pleasant, greener environment in the region. Because lagoons and the construction process in itself might have some limited adverse environmental effects, the project has been rated "Category B."- 19. &iLks. There are some risks associated with the execution of the proposed project. The current political instability in Algeria might disrupt bidding and construction, and project supervision. Project success depends on the selection of one or several experienced local finns for the construction of the housing component. If this does not materialize, construction might drag for years, making the project lose its emergency character. To minimize this risk, prequalification of bidders will be made, so as to ensure that only qualified and fiancially sound construction firms participate in the bidding. Additionally, the Government should engage itself to provide full security for the staff and the installations of the contractors. As long as the current security risk persists, the Bank will rely on trustworthy, qualified local consultants to carry out project supervision, with regular review of this task by Bank staff. 20. Other risks would be involved in the availability of construction materials in the country. To safeguard against this situation, contract documents should provide for the possibility for contractors to import materials, whenever they are not available on the market. To protect the Govermnent against possible speculation by the contractors, prices of imported materias should be quoted in bids. 21. Recommendation. I am satisfied that the proposed loan would comply vith the Articles of Agreement of the Bank and recommend that the Executive Directors approve it. Lewis T. Preston President Attacbments. Washington, D.C., U.S.A. November 10, 1994  -7- S&bgedule A DEMOCRATIC AND POPlULAR REPUBLIC OF ALGERIA MASCARA EMERGENCY RECONSRUCTION PROJECT ESTIMATED PRO COS AND FINANCING PLAN A. Estimated Cost In &rUc to be rebuiltin Local Fordm Total -US$ Million- E3ducation 1.1 1.3 2.4 Housing 19.1 30.1 49.2 Agriculture 1.0 1.7 2.7 Public health 0.3 0.7 1.0 Roads 3.7 6.4 10.1 Water supply and sewerage 2.9 4.0 6.9 Subtota 28.1 44.2 72.3 Social rehabilitation 0.1 - 0.1 Institutional development Microzoning, land slide study 0.6 0.8 1.4 Total Base Cost (Sep. 1994 Prices) 28.8 45.0 73.8 Physical contingencies 2.9 4.4 7.3 Price escalation 0.9 1625 TOTAL PROJECT COST 32.6 83.6 B. _nmgg Plan Goverment 32.6 - 32.6 IBRD - 51.0 51.0 TOTAL SOURCES 32.6 5.6 L/ Includes US$15.4 million equivalnt in taxes anm duties.  -8- Schedule B Page I of 2 DEMOCRATIC AND OPULR RELIC OF AlGhRIA MSCARA EMICRGENX REONSM^UCTION PILOJECT 1. Siummarv of PrOf ow 4 curement Anasuements (US$ Xbr.zou Equivalent) PROCUREMENT METHOD PROJECT ELEMENT TOTAL ICB LCB OTHER N.B.F COST 1. Works 1.1 Housing developraent, schools, public dwellings 33.3 33.3 and bealth centers (21.2) (21.2) 1.2 Repairs to houses, 4.7 1.1& 5.8 irrigation, roads (2.4) (0.6) (3.0) 1.3 Water supply and sewer, 10.8 10.8 holding basins, road RN 17 (5.4) (5.4) 1.4 Steel structures, public 3.4 16.02 19.4 services, curbs and roads (2.4) (11.2) (13.6) 1.5 Land acquisition 5.3 5.3 2. Goods 2.1 Equipment and machinery: school, hospital, pumps, aerators, trucks, lorries 3.6 3.6 telephone, tansport (3.3) (3.3) 2.2 Materials: Pipes and fitings, 2.1 2.1 asphalt, seeds (1.8) (1.8) 3. Consultancies 3.1 Project implementation 1.6b 1.6 (1.3) (1.3) 3.2 nstitutional development 1.7b 1.7 (1.4) (1.4) TOTAL 5.7 52.2 20.4 5.3 83.6 (5.1) (31.4) (14.5) (51.0) NOME: Figures in parentheses ar the respeciive amounws finaced by die Bank loan. N.B.F.: Not Bank finaned. a. Direct connaccg. b. Procured in accordance with World Bank's Guidelins: Use of Cons4an by World Bank Borrowers and by dc World Sink as Executing Agency, August 1981.  -9- Schedule B Page 2 of 2 DfEMQCATIC A OIPULAR REPIBLIC OF ALGERIA MASA EEGE RECONSTUCTION PROJECT 11. gsbursemet of the Loan Proceeds A. Disbursement Categories and Loan Allocaton Amoud of the Loan Allocated % Expenditures Category In US$ Milon Equivalent to be Fliced (1) Civil work: (a) Recons on of residential and public dwellings 27.8 70% (b) Others 6.8 50% (2) Equipment and matrials 4.6 100% of foreign expenditures and 80% of local expendius (3) Sub-loans for housing completion 4.3 50% (4) Consultants' services for: (a) project implention 1.2 80% (b) Earthquake studies 1.2 80% (5) Unalioaed TOTAL 1 B. I3t_d Loan Disbsemen s Bank FY 19 9 1997 1998 1_99 Annual 7.9 13.8 14.4 11.5 3.4 Cumulative 7 9 21.7 36.1 47.6 51.0 * Expectd to mn over four (4) calendar yeas, the tdwe nee4d to execute the project and me fnl payments on contrt.  - 10- Schedule C DEMOCRATIC AND POPULAR REPUBLIC OF AIGE_RIA MASCARA EMERGENCY RECONSTRUCTION PROJECT KEY PROCESSING EVENTS AND RESPONSIBILIfIfIES Project identification August 22, 1994 First Bank mission to review the project September 9, 1994 .^Apraisal mission departure : October 20, 1994 Date of negotiations : October 31, 1994 Planned date of effectiveness January 31, 1995 List of relevant PCRs : Project Performance Audit Report No. 13203 on Loan 2379-CO Popayan Reconstuction Project Project preparation by A. Amir Al-Khafaji Division Chief Fritz Rodriguez Task Manager Frangois Amiot Sr. Economist Samia El-Baroudy Principal Country Officer, Algeria Charles Sterling Sr. Operations Analyst  d~~~~~~~~~~~~~~~~~~ 0i 1 il~~~~~~~~~~~l V i 5 8 8 8 8 8.8 .8.8 8 S8 8 8.8]