Armenia - Earthquake Reconstruction Project

Docment of The Woild Bank FOR OFFICIAL USE ONLY Report No. P-6091-AM MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 20.1 MILLION TO ARMENIA FOR AN EARTHQUAKE RECONSTRUCTION PROJECT JANUARY 5, 1994 MICROGRAPHICS Report No: P- 6091 AM Type: MOP This document has a resticed distribution and mav be ud by recipients only in the performance of their official duties. Its contents may not otherwise be di.s"osed without World Bank authorization.  CURRENCY EQUIVALENT Currency Unit - Ruble (R)/Dram EXCHANGE RATES: RUBLES/DRAMS PER $ (End of Period) Ruble: Dec 1991 169.2 Jun 1992 144.0 Dec 1992 400.0 Jun 1993 1000.0 Dram: Nov 22 1993 14.0 (introduction) Dec 18 1993 80.0 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS EBRD = European Bank for Reconstruction and Development EC = European Comnmission EQZ = Earthquake Zone EU = European Union FSU = Former Soviet Union GOA = Government of Armenia ICB International Competitive Bidding IDA = International Development Association IFC = International Finance Corporation LCB = Local Competitive Bidding MOE = Ministry of Economy MOF = Ministry of Finance PPU Project Preparation Unit PIU = Project Implementation Unit UN United Nations UNDP = United Nations Development Program USAID = United States Agency for International Development FISCAL YEAR January 1 - December 31  TFOR OMCLIL USE ONLY ARMENIA EARTHQUAKE RECONSTRUCTION PROJECT CREDIT AND PROJECT SUMMARY Borrower: Armenia Execu'ing Agency: Ministry of Economy Benerfciaries: Approximately 2,000 households will receive shelter and 2,500 workers will be employed in reconstructed factory shells. Residents of temporary housing areas will benefit from sanitary iailities (e.g., community bathhouses). Credit Amount: SDR 20.1 million (US$28.0 million equivalent) Terms: 35 years, 10 year grace period Enancing Plan: IDA US$28.0 million Government US$ 0.3 million Japan' US$ 0.4 million TOTAL US$28.7 million Economic Rate of Return: Not applicable for housing, municipal and TA components; estimated at an average of 50% for factory shell completion. Poverty Category: Program of Targeted Interventions Staff Appraisal Report: 11964-AM Map: IBRD 23943R 1 The US$0.4 million is provided by a Japanese Grant utilized for preparation of Phase II of the Project. 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.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCiAT siO` TO TIUE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO ARMENIA FOR AN EARTHQUAKE RECONSTRUCTION PROJECT 1. The following memorandum and recommendation on a proposed credit to Armenia of SDR 20.1 million, US$28.0 million equivalent, is submitted for approval. The proposed credit would be on standard IDA terms with a maturity of 35 years, including a 10-year grace period. It would help finance reconstiuction of housing, infrastructure and factory shells in the axea destroyed by the 1988 earthquake, develop a plan for the further reconstruction of the Earthquake Zone (EQZ), and support reform of housing sector policies to promote the transition to a market-oriented economy. 2. The situation in the countries of the Caucasus region -- Armenia, Azerbaijan and Georgia - is unstable at this time. Humanitarian assistance is being provided to these countries in the context of the Humanitarian Appeal for Newly Independeit States, a U.N. Inter-Agency Task Force chaired by the United Nations Department of Humanitarian Affairs. This eftort is being supported by a large number of bilateral donors. The proposed operation for Armenia will provide housing and sanitary facilities in the zone which was severely damaged in the 1988 earthquake and where adequate shelter and human services are still not available for many. This has been exacerbated by the influx of refugees from the regional conflicts. The processing of this operation at this time would alleviate the hardship for those who get shelter, and it will increase incomes to those employed in the reconstruction works. Part I: Country Outlook A. Recent Economic Performance and Social Conditions 3. Armenia is a small, landlocked country with a land area of 29,800 square kilometers. Turkey lies to the west, Georgia to the north, Iran to the south, and Azerbaijan to the east. The population numbers 3.65 million (January 1992). GNP per capita was estimated at $780 in 1992. With few natural resources, the Armenians have survived through a strong tradition of entrepreneurship and trade with those around them. Armenia formally declared independence on September 23, 1991. The President, Levon Ter-Petrossian was elected to a five-year term in October 1991 with 80% of the popular vote, and the parliament of 260 members was elected in May 1990, also with a five year term. 4. Armenia's development into a modem economy is constrained by the legacy of Soviet central planning. It has inherited a structure of production and trade that is not always justified on the grounds of comparative advantage and which generates large external trade deficits. Armenia's product composition also yields a high degree of dependence on trade with other republics, with exports and imports representing over 50% of GDP during the 1980s. 5. Due to the progressive deterioration of Soviet production and trade and payment arrangements in the second half of the 1980's, Armenia's real GDP started falling in 1987. Then in December 1988, the country experienced a severe earthquake which destroyed substantial productive capacity, caused 25,000 deaths and rendered 500,000 people homeless. Since then, Armenia has also been running a deficit on FSU trade. Apart from a rebound in real GDP in 1989 caused by the post earthquake construction boom, GDP has been declining steadily since 1987. The privatization of agricultural land produced a 15% surge in output in that sector in 1991. But the recovery in agriculture  -2- could not outweigh the decline in other sectors caused by the breakdown of the former Soviet economy and the iack of foreign exchange. nese problems are acutely exacerbated by the blockade of Armenia's conventional trade routes due to civil strife in Georgia and the conflict over Nagorno Karabakii. 6. The decline in economic activity is aggravated by a proportionately even greater decline in fiscal revenue which leaves the Government unable to finance public investment or basic services at the same level as in the past. In addition, following initial price increases as a consequence of price liberalization and removal of margin controls in the first quarter of 1992, inflation soared, as it has in the rest of the FSU. through accommodating monetary and fiscal policy. 7. However, the effects of the trade blockade overshadow all other economic problems. From the winter of 1991/92 on, economic activities have been heavily constrained by the transport blockade imposed by Azerbaijan, and by civil strife in Georgia, blocking Armenia's second major trade route. The consequent shortage of fuel and other imports closed two-thirds of enterprises. In the first four months of 1992, read and rail transport fell to 18% of the volume in the same period in 1991, while industrial production fell by 48% in 1992. By November 1992, fuel reserves had been exhausted. Repeated sabotage of the gas pipeline running through Georgia further reduced Armenia's energy resources. This shortage has compelled the government to use its remaining resources of hydroelectric power to keep essential industries going: hospitals, bakeries and a small number of industries with export orders. The heavy reliance on hydroelectric power has had a serious environmental impact, as it has caused a decrease in the water level of Lake Se/an, the country's most important water resource. Despite the government's efforts to circumvent the blockade by exploring alternative trade routes, GDP fell by 52% in 1992, to just above a third of its level in 1989. The introduction of the new Russian Ruble in the summer of 1993 led to a strong influx of pre-1993 Rubles into Armenia. Thls Iaused the currency to collapse. Therefore, in November 1993, a new currency, the Dram, was introduced. Since its introduction the Dram has depreciated rapidly as a consequence of insufficient reserves and the country's inability to export. 8. By February of 1993, approximately 700,000 people were unemployed in industry in addition to the 60,000 officially registered as unemployed. The grim situation was further compounded in early 1993 by the harshest winter in 46 years, resulting in high death rates among old age pensioners and children. The continuing economic decline in 1993 has led to conditions being even worse in the current winter. The food and water supply in large parts of the country, especially in the earthquake zone, is already at a critically low level. There is widespread acute poverty which will reach disaster proportions without adequate assistance. B. External Environment 9. In the present situatioL., with the trade blockade in effect, the medium-term outlook of Armenia's economy will be characterized by continued constrained output, macroeconomic instability, and widespread poverty. However, once the blockade is lifted, exports, particularly to the FSU, could recover, though the composition will change over time. In the short run, Armenian exports will remain largely dependent on markets in the Russian Federation and Ukraine. In addition, the country will continue having to rely on imports for the bulk of its energy supplies. In the medium term, however, exports are likely to shift towards high value added products in new markets. Armenia's strategic position at the intersection of regional trading routes, together with the high level of education of its population and its entrepreneurial talent, indicate good prospects for shifting the trade patterns.  -3- C. Armenia's Development Objectives and Policies 10. Despite the extremely difficult circumstances described above, the government has launched a far-reaching reform program. The prnmary objectives of the reform program are: (i) limiting the degree of macrc-instability until prospects for achieving macroeconomic stability improve; (ii) the creation of a strong private sector within the framework of a market-oriented economy; (iii) increasing the efficiency of the public sector; and (iv) the protection of vulnerable groups in society. To create a more stable macroeconomic environment and succeed in the implementatior of the reform program, the government's immediate priorities are: (i) to arrest the fall in output by ensuring energy supplies and building up stocks of fuel; (ii) to sustain industrial production for export and continue to expand export markets outside the FSU to earn foreign exchange; (iii) to assure social assistance to those most in need; and (iv) to strengthen tax administration to achieve an effective fiscal policy and reassert control over money and credit. 11. The government launched its reform program immediately after taking office, starting with the privatization of agricultural land in two stages: in the spring and fall of 1991. Producer prices have been fully liberalized and consumer prices have been liberalized in successive stages, and are now deregulated in all spheres except bread, public utilities, and public transport, where there have been substantial increases. The legal framework for the reform program was initiated with the passage of the Property Law and Land Code (1990). Legislation in the areas of personal and corporate taxation, commercial banking, mortgages and bankruptcy, among others, have all been passed or are under Parliamentary review. Progress has also been made with the privatization program, and over 300 small enterprises have already been privatized. The government has put in place a Privatization Commission and Board to guide and implement the- privatization process. D. Outlook for Bank Group Assistance 12. Despite its reforming government and early success with privatization, as explained earlier Armenia's economic problems are among the most serious of the countries of the former Soviet Union. The severity of the economic downturn is in large part a consequence of the blockade due to the conflict over Nagorno-Karabakh. Negotiations h".ve been in progress for some time and while there have been some encouraging developments in recent weeks, the prospects for peace remain very uncertain. The Earthquake Reconstruction Project will provide assistance in the near term to many people in the earthquake zone who are currently suffering great hardships. In view of this, the Association is proceeding with this operation at this time. The next operation for Armenia would be accompanied by a limited CAS, including a discussion of creditworthiness. 13. Assistance to date. The first Country Economic Memorandum on Armenia was distributed to the Board in March 1993. An Energy Sector Review was distributed to the Board in June 1993, while an Agriculture and Food Sector Review has recently been completed. These reports have provided the basis for an active dialogue with the government on economic policies and investment priorities. In March 1993, the Bank's first operation for Armenia, a US$12 million Institution Building Loan (Loan 3585 AM) was approved. Under this loan technical assistance will be provided to the government to strengthen the institutional basis for economic reform through institutionbuilding programs in four functional areas: (i) economic management, including social safety net and employment issues, (ii) resource mobilization, (iii) enterprise reform, and (iv) financial sector reform. The loan became effective on June 15, 1993. Its implementation has started slowly due to the difficult circumstances in the country and the lack of familiarity with Bank procedures. Recently, however, considerable progress  -4- has been made through intensive supervision efforts, which is likely to lead to substantial activity in most components by :h,.. coming spring. 14. Future assistance. Tbe Bank group will continue to monitoi the situation in Arnenia and its neighbors closely and will bring operations forward only when there is increased certainty about the continued cessation of hostilities. In that case the Bank group would move to a scenario of limited investment lending for rehabilitation of the irrigation and energy systems. If, in addition, the government takes steps to implement macroeconomic stabilization and further structural reforms, the Bank group would move to a more comprehensive program, which could include a Rehabilitation Imports Credit. 15. Other Bank Group Activities. Armenia became a member of IDA in August of 1993 and is presently in the procf;ss of completlrg the requirements for membership in IFC. 16. Coordination of External Assistance. A pre-Consultative Group meeting for Armenia was held on May 25, 1993. The preparation of this meeting involved close coordination with the IMF, UNDP, EU and EBRD. The IMF completed Article IV consultations in February 1993. Extensive coordination is taking place with the Fund on the implementation of the technical assistance under the Institution Building loan, particularly in the financial sector and the tax administration component. In addition, the EU and USAID are providing parallel financing for the Institution Building Loan, while the Government of Japan provided financing for the preparation of the Earthquake Reconstruction project. Coordination and collaboration is taking place with these and other donor agencies on the preparation of possible future activities. Part II: The Project 17. Project background. Efforts to recover from the devastation of the 1988 earthquake have been thwarted by the upheaval following the breakup of the Soviet Union. International rescue efforts in December 1988 and early 1989 were followed rapidly by reconstruction projects led by committee directly under the Supreme Soviet of the USSR. Work continued until mid-1991, whe the Soviet work crews were withdrawn to their newly independent home countries, leaving vast areas of partially completed apartment blocks, factories, and infrastructure projects. Subsequent relief measures have focused on assistance to refugees from Azerbaijan, often ignoring victims of the earthquake in the same communities. 18. As a consequence, the Earthquake Zone (EQZ) continues to have severe shortages of shelter, basic infrastructure and industrial facilities. Unemployment in the EQZ remains as high as 75%; tens of thousands of families continue to live in "container communities' comprised of adapted railroad boxcars, steel shipping containers and large fuel tanks supplied by the Soviet Union immediately after the earthquake; and one of the affected cities (Spitak) has virtually nc piped water. These problems are compounded by the transport blockade imposed by the conflict with Azerbaijan which has disrupted the trade flows from Georgia and other neighboring countries and reduced energy supplies. Temporary houses are unheated and uninsulated, and temperatures inside them fall well below zero during the winter. The temporary housing installed after the earthquake has some access to sanitary services, but there is a high risk of envirommental and health problems. Finally, the long delay in finishing the reconstruction effort, combined with the high rate of unemployment, is weakening public confidence, and the crime rate is beginning to rise in some EQZ communities. Thus, despite the passage of five years since the earthquake, the population of the EQZ continues to require urgent assistance.  -5- 19. In spite of the difficult conditions, the Government of Armenia (GOA) has demonstrated commitment to undertake ihe etoiomtiic refnuis necessary to restructuru its ecno.my . With respe-t to housing, privatization legislation has passed the first stage of review in Parliament and other housing policy reforms are being designed (see Annex 1.2 of the SAR for Housing Policy Reform Statement of Intent). A policy to privatize industrial enterprises has strong support. The immediate task for the government is to weather the current crisis and re-build its infrastructure in a manner consistent with long-term reform goals. 20. This project seeks to alleviate the current crisis in the Earthquake Zone. Thus, though termed an investment operation, the project has a strong humanitarian impact. A project unit has been created and is ready to manage implementation. The GOA has displayed a strong commitment to the project and has acted rapidly to provide facilities (such as offices, staff and equipment) necessary for the preparation of the project. The project will not solve all the problems of the EQZ; the actual volume of reconstruction necessary is well beyond the scope of a single operation. However, it will provide an opportunity for the Government to reaffirm its commitment to the reconstruction effort and provide for a coherent plan for continuing the process. 21. Rationale for IDA Involvement. Despite the passage of 5 years since the earthquake, a crisis continues to exist in the earthquake zone. At present no international or bilateral assistance programs in Armenia focus on capital investments in housing or employment, either for earthquake, relief or to stimulate a faltering national economy. The current economic situation makes it difficult tor the Government to continue reconstruction without international financing. Financing a reconstruction program will alleviate pressing economic and social problems and provide a unique opportunity to support implementation of basic economic reforms in housing and infrastructure. The suffering of the population during the colder months demands action to complete a maximum number of shelters. 22. Project Objectives. The primary objectives are: (i) to provide improved housing and living conditions to residents of the Earthquake Zone; (ii) to reconstruct basic infrastructure which will support employment creation; and (iii) to develop a longer term sustainable program for rehabilitation in the Earthquake Zone. 23. Project Description. The project will complete the reconstruction of housing, factory shells and municipal infrastructure that could provide immediate assistance and employment to the needy population in the earthquake zone. It will also support :ome key reforms in housing policy (e.g., privatization, cost recovery, single family self-help housing, etc.) and help develop the overall housing reform agenda for Armenia. Additionally, it will prepare a long-term regional development strategy to rehabilitate the Earthquake Zone and will provide equipment to the Earthquake Engineering Center. 24. The project will include four components, as listed below: Housing: (i) Completion of presently unfinished apartments; (ii) Repair and strengthening of damaged apartment buildings; and (iii) Land development and construction of serviced plots and starter houses for single family ownership and self-help expansion.  -6- Municipal Services: (i) Provision of bathhouses for temporary housing areas, some of which will incorporate solar heating; (ii) Completion of selected water supply and sewerage subprojects in Spitak, Vanadzor, and Stepanovan; and (iii) Community facilities. Unfinished Factory Shells: (i) Completion of factory shells for existing profitable industries. Technical Assistance, Training, Equipment and Studies for: (i) Procurement and construction supervision; (ii) Housing reform; (iii) Regional development of the Earthquake Zone; and (iv) The Earthquake Engineering Center. 25. Pro3ect Costs. Costs are estimated at US$46 million equivalent with US$28.7 million equivalent incremental costs, including US$20.7 million in foreign costs and US$8 million equivalent in local costs. Sunk costs of US$17.3 million equivalent, covering land, sites and investmnents in infrastructure and partially completed housing shells are included in the overall cost estimates. Project costs and financing arrangements are summarized in Schedule A. Procurement and disbursement arrangements are shown in Schedule B. A timetable of key processing events and the status of IDA operations are given in Schedules C and D respectively. 26. Project Implementation. Primary responsibility for managing the project will reside within the Ministry of Economy. A Project Implementation Unit has already been established within the Ministry to supervise the design and construction process. Municipal governments will serve as the agent of the central government in the management of housing and municipal services components at the local level. 27. The project will be divided into two phases. The first phase was initiated under Japanese Grant funding during 1993 and will continue through the 1994 construction season. The second phase will take place during the 1994 construction season and will be completed in 1995. All feasibility studies, the detailed engineering, and cost estimates for Phase I have been completed by the Project Preparation Unit and appraised by the Association. Final engineering and appraisal for Phase 11 will be carried out during the course of Phase I. A substantial portion of project startup activities has been completed under grant financing. This will allow rapid implementation upon effectiveness. Contracting has proceeded since negotiations according to Bank/IDA guidelines. At negotiations it was agreed that up to 10% of the credit amount was eligible for retroactive financing to facilitate early initiation of works. 28. Procurement arrangements will conform to Bank/IDA guidelines. For civil works, up to US$19.6 million will be contracted using Local Competitive Bidding. For goods such as construction materials, US$2.5 will be contracted using International Competitive Bidding. Significant technical assistance and training activities have been devoted to procurement to assist timely implementation of works. 29. Project Sustainability. The project will support housing policy initiatives such as private ownership, cost recovery, private responsibility for maintenance of housing, lower cost building  -7. standards, and single family housing. In addition, assistance will be given for the development of a housing poiicy reform agenda. Finally, the project will support the Government's industrial privatization program by employing cost recovery for industrial facilities and support for the industrial privatization program. These efforts will contribute to the Govermnent's overall strategy to transform the economy to a market-oriented basis. 30. Lessons Learned from Previous Projects. The proposed project will be the first to Armenia in the housing and infrastructure sectors. Other Bank/IDA experience in reforming socialist economies as well as in emergency reconstruction programs will be utilized fully. Such experience shows that: (i) we can be optimistic regarding legislative reforms concerning property rights and privatization of housing; (ii) we should not entertain unrealistic expectations regarding full cost recovery of housing at the household level in the near term; and (iii) emergency-type efforts should not be constrained by requirements for reforms or institutional change but, nevertheless, can be used as an opportunity to introduce reforms. 31. Environmnental Aspects. The project has been placed in category 'B" in accordance with Operational Directive 4.01. All housing rehabilitation will include the pro- sion of environmentally sound disposal of sanitary (including reconnection to sewage treatment plant, azuid solid wastes; this will be a significant improvement over the present post-earthquake situation. Reconstruction o. water supply systems will be implemented in a manner which prevents cross-contamination with waste water lines in case of future disturbances. Building standards have been reviewed to ensure public health issues are addressed and seismic considerations are included to mitigate any potential future damage by earthquakes. The enforcement of these standards v.dll be evaluated during supervision missions. 32. Program Objective Categories. As described in para 18 of this report, the EQZ continues to have severe shortages of shelter and basic infrastructure, while unemployment remains as high as 75%. The project will create employment in factories completed under the project and in construction components of the project. In addition, bath houses will be constructed which will contribute to improved public health, and shelter will be provided to 2000 families that are currently without adequate facilities. The project is therefore categorized as a Poverty Targeted Intervention. 33. Benefits. Benefits of the project include the reduction of the incidence of poverty in the EQZ through employment creation and improved housing and other welfare infrastructure. It will also support policy development in '.-e housing sector and promote the institutional development of a private construction industry through training, competitive procurement, and improved construction supervision. A rate of return for housing is impossible to calcu!ate in the absence of a housing market; however housing investments have been selected based on their efficiency (lowest cost solution) and their contribution to sector goals (e.g. privatization, cost recovery, promotion of individual initiative in housing provision). The factory shells component was subject to a standard economic analysis. Selected factories show a weighted average rate of return on incremental project investments of 50% and collective creation of 2,500 permanent jobs. Selected factories would also increase exports. 34. Risks. This is the first time that the Bank/IDA has financed physical works in Armenia, and neither Bank staff, nor Government officials and Armenian professionals can fully anticipate problems that might occur. This difficulty has been mitigated by allowing for a review during the implementation of Phase I of the project, by keeping the project small in scale and scope, and by including larger contingencies than usual. In addition, there is a blockade affecting the main supply routes into Armenia, and civil strife in Georgia can interfere with shipments. This has been mitigated by carefully reviewing  -8- transportation constraints during preparation and maximizing the use of private sector importers and suppliers, who have a better record of overcoming these problems. In other Bank/IDA operations in the FSU, it has been found that local unfamiliarity with Bank/IDA procurement regMlations can slow implementation. The training of PIU staff, government officials and local contractors in Bank/IDA procurement procedures should reduce any delays from this source. Furthermore, a major portion of the Technical Assistance and Training program has been dedicated to this potential problem. There is a risk that changes in staff assigned to the project will delay implementation of the project. However, the commitment to the project the GOA has displayed suggests that every effort will be made to reduce this risk. Finally, there is a risk that occupants might be unwilling or unable to pay maintenance for the units, making the housing component less sustainable than desired. Reduced design standards and costs will make the project more cost effective than its original design, and payments from beneficiaries under the project are expected to be larger than they would have been without the policy changes that are being attempted. 35. Agreed Actions. At negotiations several agreements were reached on both policy and implementation issues. First, it was agreed that an action plan on housing policy reform would be presented by the GOA at the time of the mid-term review. In the housing components, it was agreed that the criteria for allocating housing units in the apartment completion and single family housing subcomponents would not be changed without prior consultation with the Association. Agreement was also reached on the terms and conditions for cost recovery in these subcomponents as well as the factory shell completion component. It was also agreed that the factories completed under the project would have priority access to electricity. Agreemer.t was reached that the community bathhouse subcomponent would be operated under a concessionary contract and households would pay a fee towards operation and maintenance. Finally, agreement was reached on implementation arrangements; the Government provided assurances that a Project Implementation Unit would be maintained with staff acceptable to the Association. A list of project monitoring indicators was also devised to be used to measure performance during implementation. Agreement was also reached that the specific works to be completed under Phase UI would be agreed during the mid-term review. 36. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. Lewis T. Preston President Attachments Washington D.C. January 5, 1994  -9- ARMENI EARTHQUAKE RECONSTRUCTION PROJECT Schedul A Summary Project Cost Estimate (net of taxes and duties) Project Components _ US$ Million | Local Foreign | Total Land Sites and Infrastructure 1.7 _ 1.7 Construction: Sunk Costs Housing 5.9 5.9 Factory Shells 9.7 - 1 .7 Construction: Incremental Costs 5.7 13.2 18.9 ] TA & Training I 0.2 2.1 2.3 Supervision and Administration 0.1 0.5 0.6 TOTAL BASE COSTS 23.3 15.8 39.1 Contingencies Physical 1.0 2.2 3.2 Price 1.0 2.7 3.7 Total 2.0 4.9 6.9 GRtAdND) T)GnOTAL 25.3 20.7 46.0 Financing Plan (Net of Taxes and Duties) (UJS$ million equivalent) l______________ US$ MILLIC T ________________________________ _________ LFocal Foreign Total State Authorities (land, infrastructure, sunk costs) 17.3 17.3 (5% of incremental local costs) 0 3 0.3 IDA (incremental costs) 7.7 20.3 28.0 Japan2 0.4 0.4 Total 25.3 20.7 46.0 Note: Figurs niay not add up to totals due to rounding. 2/ The US$0.4 million in donor funds listed is Japanese Grant Funds utilized for preparation Phase II of the Project.  -10- Schedule B Page I of 2 SUMMARY OF PROPOSED PROCUREMENT ARRANGEMENTIV (US$ million) Procurement Method Procurement Method ICB LCB OTHER N.B.FY,v TOTAL 1. Land Sites & Infrastruc. 1.7 1.7 2. Sunk Costs 15.6 15.6 3. Housing a. Completion 6.0 0.2 6.2 (6.0) (6.0) b. Strengthening 1.9 0.1 2.0 (1.9) (1.9) c. Single Family Hous. (2.4) (0.8) - (3.1) 4. Municipal Services a. Bathhouses (1.2) (0.4)0k - (1.6) b. Infrastructure (0.5)' (1.5) -(2.0) c. Communitv Facil. _ (0.8) (0.8, 5. Factory Completion (2.0)r (6.6) (0.7)I - (9.3) 6. TA & Training - - (2.3)p 0.5 (2.3) 7. Supervision & Admin. (0.8) (0.8) TOTAL 2.5 19.6 5.8 18.1 46.0 (2.5) (19.6) (5.8) - (28.0) Note: Figures in parentheses are the respective amounts financed by IDA/13RD. a/ Figures may not add to totals due to rounding. b/ Non-Bank Financed; financed 100% by the Government or other financing agency. c/ Local shopping d/ Consultancies e/ Construction materials  -11- Schedule B Page 2 of 2 Disbursements Disbursement of IDA Credit IDA Credit Disbursement % Expenditures to be Amount of Credit financed a Category Allocated (US$ million) 1. Equipment 0.2 80% local, _100% international 2. Civil Works 18.5 100% 3. Technical assistance, 2.4 100% training and studies 4. Unallocated 6.9 100% TOTAL 28.0 100% a/ Of amounts net of taxes IDA DISBURSEMENT SCHEDULE (net of taxes and duties) US$ million IDA Fiscal Year Total Annual Cumulative 1994 7.1 7.1 1995 11.5 18.6 I1996 9.4 28.0  -12- Schedule C Timetable of Key Project Processing Events (a) Time Taken to Prepare: 6 months (b) Prepared by: Government with IDA Assistance (c) First IDA Mission: December 1992 (d) Appraisal Mission Departure: April 22, 1993 (e) Negotiations: July 9, 1993 (f) Planned Date of Effectiveness: April, 1994  -13- Schedule D Status of Bank Group Operations in Armenia A. Status of IBRD Loans/Credit Loan # Ya Borrower Puros Bak I Undisbursed 3585-AM 1993 Armenia Institution Building 12.0 12.0a' B. 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