Egypt - Pollution Abatement Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No.: P-7181 EGT MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT OF US$20.0 MILLION TO THE NATIONAL INVESTMENT BANK WITH THE GUARANTEE OF THE ARAB REPUBLIC OF EGYPT AND A PROPOSED CREDIT IN AN AMOUNT EQUIVALENT TO SDR 10.9 MILLION TO THE ARAB REPUBLIC OF EGYPT FOR A POLLUTION ABATEMENT PROJECT November 17, 1997 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. CURRENCY Currency Unit: Egyptian Pound (As of November 1997) LE 1.0 = US$0.295 US$1.00= LE 3.39 LE = 100 Piasters (PT) ABBREVIATIONS AND ACRONYMS USED DANIDA : Danish International Development Agency EEAA : Egyptian Environment Affairs Agency EIB : European Investment Bank EMU : Environment Management Unit EPL : Environment Protection Law ER : Executive Regulations FES : Friedrich Ebert Stiftung FIM : Finnish Mark FINNIDA : Finnish International Development Agency GIPAP : Governorate Industrial Pollution Action Plan GOE : Government of Egypt GOF : Government of Finland IBRD : International Bank for Reconstruction and Development IDA : International Development Association IFC : International Finance Corporation LIBOR : London Interbank Offer Rate NBE : National Bank of Egypt NEAP : National Environment Action Plan NGO : Non-Government Organization NIB : National Investment Bank PAAP : Pollution Abatement Action Plan PAF : Pollution Abatement Fund PE : Public Enterprises PHRD : Policy and Human Resources Development Fund of Japan PIP : Project Implementation Plan PIU : Project Implementation Unit SA : Special Account SC : Steering Committee USAID : United States Agency for International Development WHO : World Health Organization FISCAL YEAR July 1 - June 30 Vice President: Kemal Dervi§ Country Director: Khalid Ikram Acting Sector Director: Salah Darghouth Task Manager: Sherif Arif ARAB REPUBLIC OF EGYPT FOR OFFICIAL USE ONLY POLLUTION ABATEMENT PROJECT Loan/Credit and Project Summary Borrower For IBRD Loan: The National Investment Bank (NIB) For IDA Credit: The Arab Republic of Egypt Guarantor The Arab Republic of Egypt Implementing Agencies : The Egyptian Environment Affairs Agency (EEAA), Apex and participating banks Beneficiaries : EEAA, Environment Management Units in the Governorates, local NGOs and professional associations, private and public industrial enterprises, and participating banks Loan/Credit Amount : IBRD Loan: US$20.0 million IDA Credit: SDR 10.9 million (US$15.0 million equivalent) Terms : IBRD Loan: 20 years including 5 years of grace, standard interest rate for LIBOR-based US dollar single currency loan IDA Credit: Standard for 35 years including 10 years of grace Commitment fee : For IBRD Loan: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver For IDA Credit: 0.50 percent on undisbursed credit balances, beginning 60 days after signing, less any waiver On-lending Terms : (i) The total amount of the IBRD loan and IDA credit would be made available to NIB, the Borrower, on standard IBRD and IDA terms respectively, for on-lending and awarding grants through an Apex Bank and participating banks; a guarantee fee of 0.125 percent would be payable to the Government of the Arab Republic of Egypt (GOE); (ii) NIB would on-lend funds to an Apex Bank at the Bank's standard interest rate for LIBOR-based US dollar single currency loans plus 0.25 percent per annum to cover its costs for Apex banking functions; and (iii) Sub-loans to borrowers This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ii Pollution Abatement Project would be at prevailing market rates of interest. In case sub-loans are made in Egyptian Pounds, the Apex Bank and participating banks would bear the foreign exchange risk for their borrowers. Financing Plan Local Foreign Total Source of Funds (US$ Million) GOE 4.0 4.0 Enterprises 4.0 - 4.0 GOF - 5.7 5.7 IBRD 20.0 20.0 IDA - 15.0 15.0 TOTAL 8.0 40.7 48.7 Economic Rate of Return It is difficult to estimate an ERR given the difficulty of quantifying the environmental benefits. Based on a sample of sub-projects appraised, accounting for 51 percent of project cost and for which health benefits could be quantified, the lower range of ERR varies from 13-30 percent (Schedule B). These estimates should be treated with caution given the uncertainties regarding the functional relationships between health impacts and reductions of various pollutants. Poverty Category Not applicable Environmental Rating "B" Project Identification No. 54958 Staff Appraisal Report : Report No. 17065-EGT Map No. IBRD 27757 MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS- ON A PROPOSED LOAN TO THE NATIONAL INVESTMENT BANK WITH THE GUARANTEE OF THE ARAB REPUBLIC OF EGYPT AND A PROPOSED CREDIT TO THE ARAB REPUBLIC OF EGYPT FOR A POLLUTION ABATEMENT PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan of US$20.0 million to the National Investment Bank (NIB), with a guarantee of the Arab Republic of Egypt, and a proposed development credit of SDR 10.9 million (US$15.0 million) to help finance a Pollution Abatement Project. The proposed loan will be on standard LIBOR-based interest rate for US dollar single currency loan with 20 years' maturity, including a grace period of five years, and the proposed credit would be on standard IDA terms with a maturity of 35 years, including a grace period of 10 years. NIB would on- lend to an Apex Bank to provide sub-loans to sub-borrowers at market interest rate, with a maturity of 5-8 years and 1-2 years grace period. 2. On May 21, 1996, the Board has previously approved a loan and credit for the same project for which the National Bank of Egypt (NBE), a local commercial bank, was the borrower of the IBRD loan with the guarantee of the Arab Republic of Egypt (ARE). The loan/credit agreements were terminated for non-effectiveness due to change of the Government of Egypt (GOE) policy of not guaranteeing loans to commercial banks. The GOE requested that the Borrower be the National Investment Bank (NIB), a state- owned non-commercial institution responsible for the Government's investment program. NIB would be a borrower of record, and would pass the IBRD loan and IDA credit to an Apex bank (identified by the Government to be NBE) at the same terms and conditions of the original agreement. The project objectives and scope remain the same. 3. Sector Background. Since 1960, Egypt has witnessed rapid industrialization with inadequate emphasis on the protection of the environment and the resultant impacts on the health of its people. A severe air and water pollution situation already exists in the two largest cities of Greater Cairo and Alexandria which account for over 80 percent of the industrial activity in Egypt. All the major drains and branches of the Nile are contaminated with bacteriological pollutants, chemicals, and heavy metals. A USAID-financed health-risk assessment study in Greater Cairo showed that air pollution due to lead and total suspended particulates (TSP) is the most severe health risk followed by water pollution. The TSP concentration in Cairo is 5 to 10 times higher and, on average, sulfur dioxide is 4 times higher, smoke and lead 3 times higher, and nitrogen oxides 2 times higher than WHO guidelines. A World Bank study estimated that 15,000-17,000 premature deaths per year are caused by excessive air particulates, lead and sulfur dioxide, predominantly emitted from transport and industry in Greater Cairo. Serious environmental problems are also likely to extend to the Suez Canal cities of Port Said, Ismailia and Suez where industrial activities of the private sector are rapidly expanding due to the establishment of free trade zones. 4. The major source of industrial pollution originates from the 314 public enterprises (PE) and small and medium-size private industries which are concentrated in highly populated urban areas. The PEs were re-organized under 17 financially autonomous holding companies and were cut off from access to the Government's budget and concessionary credits. They are presently in the process of selling their non- essential assets and some are subjected by their holding company to various degrees of restructuring. Their managers were directed to operate on a commercial basis in response to market conditions, and encouraged 2 Pollution Abatement Project through substantial performance incentives to maximize profits. As managers are focusing on financial costs and profits, they are faced with two major interrelated challenging constraints: unemployment and the degradation of the environment. Many of these enterprises are characterized by old and highly polluting capital stock, poor management, deferred maintenance and neglect of the health and safety of their workers. They require substantial investments to comply with environmental laws. The Bank estimates that the total cost of cleaning up the industrial sector in Egypt is in the order of $1.3 billion, or about 0.4 percent of GDP over a ten-year period. 5. In 1994, Egypt enacted the Environment Protection Law (EPL) No. 4 which provides general principles for environmental management and protection. It nominated a Minister of State for Environment in July 1997 and mandated the Egyptian Environmental Affairs Agency (EEAA) as the national agency to be responsible for the coordination and supervision of environmental affairs. In order to decentralize its activities on monitoring and enforcement, EEAA would establish eight regional branches throughout the 26 Egyptian governorates which in turn would establish environment management units (EMU) to assist in monitoring and follow-up of the environmental activities in each governorate. 6. The EPL gives existing industries a compliance period of three years (starting from the issuance of the Executing Regulations [ER] of February 1995) to abide by most provisions, with potential additional extensions of two one-year period; otherwise, the establishment could be shut down. The track record of enforcement and compliance under the previous sectoral environmental laws had been poor despite the provision of compliance periods. It is therefore likely that the implementation of all legally established requirements under the new EPL needs more than five years to be achieved. 7. The GOE realizes that implementation of the Environment Protection Law is costly and technically complex. It intends, therefore, to focus first on the major polluters and most polluted industrial zones and assist them to move towards compliance. In addition, the GOE believes that the large costs of industrial clean up and resource constraints could impede pollution control investments for which medium- and long-term (M&LT) financing is required. At present, local financial institutions do not provide M&LT loans for environmental investments because of lack of technical capacity and familiarity with environmental lending. Furthermore, in the absence of regulatory enforcement, enterprises have been unwilling to borrow at market rates for short to medium maturities unless they are convinced that there would be substantial financial benefits associated with pollution mitigation. The proposed project would establish a financial mechanism coupled with financial incentives to help alleviate the lack of M&LT financing for pollution abatement investments during the compliance period. 8. Project Design Alternatives. Three alternatives were considered for project design: (a) a technical assistance project which would put in place effective environmental monitoring and enforcement mechanisms to induce demand for environmental investments; (b) an investment project which would reduce exposure to hazardous pollution in a particular geographical area (such as Helwan in Cairo) or in a heavily polluting industrial sector (chemical and/or metallurgical); and (c) a pilot investment project which would establish a monitoring and enforcement mechanism and put in place in the local banks, a mechanism for financing industrial pollution prevention and control investments. The first and second alternatives were not selected because of the availability of grant funds for technical assistance and environmental management from international donors, and the unavailability of large capital funds to mitigate the numerous pollution problems in the most polluting sectors. The third alternative was specifically requested by the GOE as it would promote cost effective and voluntary pollution mitigation/prevention during the Pollution Abatement Project 3 compliance period and introduce the local financial institutions to environmental lending while the environmental regulatory and enforcement capacity is being developed. 9. The proposed project is a pilot operation and, as such, will not attempt to resolve the industrial pollution issues of the country, rather it will initiate the process of strengthening the Government's institutional capacities in monitoring and enforcement. It will simultaneously develop collaboration between the industrial enterprises, the financial sector and the regulatory and enforcement institutions through financing a limited number of environmental investments. The proposed project has been designed to complement the environmental management, technical assistance and investment activities in industrial pollution control which are currently being undertaken with assistance from thirteen international donors. Both the proposed project and these activities are consistent with the National Environment Action Plan (NEAP) which was developed by the GOE in 1992 with the assistance of the Bank and the international donors. During project preparation, the international donors were consulted to avoid duplication of efforts, to ensure that the project and their respective activities will be mutually supportive, and to take advantage of the results of the studies and activities currently in place. As a result of these consultations, the Government of Finland (GOF) provided a direct financing grant of FIM 26.0 million (US$5.7 million equivalent) to cofinance the technical and institutional support component of the project {para. 1 1(a)}. The European Investment Bank (EB) has provided a loan to the National Bank of Egypt of ECU 15.0 million (US$16.5 million equivalent) to finance additional pollution abatement investments {para. 11 (b)}. 10. Project Objectives. The broad objective of this pilot project is to assist the GOE in reducing industrial pollution causing adverse health effects and/or ecological degradation. Its specific objectives are to strengthen the monitoring and enforcement capabilities of the environmental institutions and establish technical and financial mechanisms for pollution abatement investments in Greater Cairo, Alexandria, and the two Suez Canal cities of Suez and Ismailia. 11. Project Description. The project would consist of two main components: (a) The Technical and Institutional Support Component: (US$6.9 million, 14.2 percent of the baseline cost). This component, which is parallel cofinanced from a grant of the Government of Finland, would provide technical assistance, training, monitoring equipment and field vehicles for: (i) establishing three EEAA regional branches in Alexandria, Cairo, and Suez; upgrading four provincial EMUs in Alexandria, Cairo, Qaliubiya and Suez; preparing Governorate Industrial Pollution Abatement Plans (GIPAPs) and strengthening the governorates' monitoring and enforcement of pollution control measures (para. 4); (ii) preparing Pollution Abatement Action Plans (PAAPs) for about 40 worst industrial polluters; (iii) supporting environmental audit programs for sub-projects which could be financed under the project's second component; this would include training in environmental audits, and provision of technical information on least-cost pollution prevention and abatement measures, and on workers' health and safety, to the relevant enterprises, ministries, financial institutions and private consulting firms; and (iv) promoting public awareness and education programs to increase the participation of local communities and NGOs in monitoring the governorates' and enterprises' actions to control pollution. (b) The Pollution Abatement Investment Component: (US$39.0 million, 80.1 percent of the baseline cost). This component would consist of a Pollution Abatement Fund of US$35.0 million and the enterprises' investment contribution of US$4.0 million equivalent. The 4 Pollution Abatement Project Pollution Abatement Fund (PAF) would be established at an Apex Bank identified by the GOE to be the National Bank of Egypt (NBE). Financing for environmental investment sub- projects for about 25 public and private enterprises will be provided to bring their effluent discharges and/or air emissions towards compliance with the Environment Protection Law (para. 6) in a cost effective manner. The PAF would provide, on a first-come first-serve basis, subject to environmental criteria, sub-loans and grants through the Apex Bank and other local participating banks. However, the sub-projects would be pre-screened through the identification of the largest contributors to environmental damage. The sub-projects would include waste minimization, pollution prevention, resource recovery, adoption of clean technology, fuel substitution, and end-of-pipe environmental control where no other alternatives are available. The PAF would comprise: (i) a Credit Facility to provide sub- loans with a maturity of 5-8 years with 1-2 year grace period, at market interest rates, and (ii) a Grant Facility to provide limited, one-time, transparent cost sharing of pollution abatement investments. The grant portion, which will be provided from the IDA financing, will be 20 percent of the investments with a simple pay-back period of more than two years. This would correspond to the pre- and post- investment costs such as engineering studies, commissioning, training and self-monitoring. The grant element, which would be included as a temporary feature during the compliance period of 3-5 years authorized by the EPL, is justified by the need to accelerate implementation of pollution control measures to address health impacts. 12. Project Cost and Financing Plan. The estimated project cost is US$48.7 million including physical and price contingencies. The project funds are expected to be fully disbursed in six years. Bank Group lending of US$35.0 million to the project would be in the form of a LIBOR-based US dollar single currency loan of US$20.0 million to NIB, with the guarantee of the Arab Republic of Egypt, and an IDA credit of SDR 10.9 million (US$15.0 million equivalent) to the Arab Republic of Egypt to be made available to NIB. The Bank loan and IDA credit would be utilized by the Apex Bank and the other participating banks for on-lending and grants, for which the Government of Arab Republic of Egypt would charge a guarantee fee of 0.125 percent. NIB would negotiate and sign subsidiary loan/credit agreements with the Apex Bank which would act also as a participating bank. Four additional joint venture banks have expressed interest to participate. These banks were screened on the basis of their market share of commercial lending and their financial performance and solvency. Participating banks would be provided funds in US dollars at the Bank's standard interest rate for LIBOR-based US dollar single currency loans plus 0.25 percentage points (considered to be the market on-lending rate in Egypt) and would on-lend to the industrial enterprises in US$ or Egyptian Pound (LE) at market interest rates at their own discretion. The Apex Bank and the participating banks would bear the foreign exchange risk for any sub-loan to industrial customers in Egyptian Pound. The Apex Bank would charge 0.5 percent as processing-charge for the grant amount. Each participating bank would bear the commercial lending risk of their own loans to enterprises. The GOF provided a grant of about US$5.7 million equivalent to cofinance the technical and institutional support component. The GOF agreement was signed on November 13, 1996. The GOE would provide US$4.0 million equivalent to finance the local cost of the first project component and the incremental operating costs. A summary of project costs and the financing plan are presented in Schedule A. 13. The GOE has also mobilized additional resources to expand pollution abatement investments. The European Investment Bank (EIB) has provided a loan in an amount of ECU 15.0 million (US$16.5 million equivalent) to the National Bank of Egypt (NBE) to finance additional pollution abatement projects, with priority given to water and wastewater pollution. Pollution Abatement Project 5 14. Project Implementation. Overall coordination of the project would be entrusted to a Steering Committee (SC) chaired by EEAA's chief executive officer and consisting of senior officials of sector ministries, and representatives of the participating NGOs and banks, the Federation of Egyptian Industries and the Egyptian Businessmen Association. The committee would provide overall policy guidance, and review and recommend to the participating banks any sub-project above $2.0 million. A Project Implementation Unit (PIU) with qualified staff has been established in EEAA to manage the first component of the project and assist the Apex Bank and the participating banks in the technical evaluation of the sub-projects, procurement, monitoring and follow-up. NIB is a state-owned non commercial financial institution in Egypt with total assets and deposits reaching LE 87.4 billion (US$25.7 billion equivalent) and LE 20.5 billion (US$6.0 billion equivalent). NIB is managed by an 10-member Board of Directors appointed by the Ministry of Planning, but management is free to determine the bank's policy and funding strategy and directs the bank's operations. Management is autonomous and dynamic. The NIB credit department will oversee the loan and credit agreements. Its loan approval and monitoring procedures are well developed. 15. Enterprises seeking financing should meet the following eligibility criteria. First the enterprise: (a) should be credit-worthy to the participating bank; (b) should be a source of potential health problems and /or adverse environmental impact: priority will be given to (i) air emissions of heavy metals, carcinogenic organic substances, dust and sulfur dioxide; and/or (ii) water discharges of heavy metals, organic substances and acids; and (c) be ready to undertake or already have undertaken an environmental audit. Second, to the extent practical, pollution control techniques in a given sub-project should be replicable by other firms. Third, the enterprise should be committed to developing a pollution abatement action plan. Fourth, plant managers should be willing to take the necessary measures for protecting workers' health and safety, perform self monitoring, evaluate the technical performance of the investments and the environmental benefits through a sub-project agreement to be signed with EEAA. If an enterprise does not comply with the project agreement, the grant would be converted to a loan. Finally, for any single enterprise, any sub- loan or a combination of sub-loans would. not exceed a total of US$5.0 million in order to allow financing of several sub-projects in different sectors. However, for sources situated in densely populated areas and which emit large amounts of toxic substances or heavy metals, the Project Steering Committee could increase the sub-loans to an enterprise to US$8.0 million, after agreement with the World Bank. A summary of the project analysis is provided in Schedule B. Amounts and methods of procurement and the disbursement schedule are shown in Schedule C. 16. Project Sustainability. The project would strengthen monitoring and enforcement capability of environmental institutions and establish the technical and financial mechanisms for pollution abatement investments. A nexus of factors is expected to yield sustained (and expanded) investment in pollution abatement technology after project completion. These factors include a credible enforcement threat; increased knowledge regarding the efficacy of pollution abatement investment; and an examination of the overall pricing and tax regime from an environmental point of view. The project directly addresses the first two factors. The credibility of the enforcement threat is enhanced through the Technical and Institutional Support component of the project and the Government commitment to enforce the law and to request that governorates and enterprises prepare their own pollution abatement action plans. Since the Egyptian firms are not familiar with pollution abatement investments, firms making the first investments of this type will incur significant information costs. Initially, the grant and technical assistance features of this project will provide the inducement for firms to incur these transaction costs and undertake this new type of investment activity. After a core of such investments are made, Egyptian firms will be more familiar with such investments. Furthermore, the funding mechanism, if successfully demonstrated, would stimulate lending 6 Pollution Abatement Project by the banking sector given that the proposed project would provide training to bank officers on how to evaluate potential environmental investments and to recognize and market such opportunities to their customers. The lower information cost will mitigate the need for technical assistance and grant inducements. The third factor mentioned above involves several mechanisms (in lieu of a grant component) that would increase the financial rate of return for firms seeking to make pollution abatement investments. The first mechanism is the possible introduction of environmental taxes on polluting energy fuels, leaded gasoline, agrochemicals, hazardous substances and polluting discharges which are being considered in the context of replacing tariff revenue that will be lost with the expected free trade agreement with the European Union. The second mechanism is further progress on cost recovery so as to provide incentives for efficient resource allocation. While cost recovery is still incomplete, Egypt has made progress in recent years. Electricity and domestic petroleum are now priced at 80 percent and 90 percent of their international level, respectively. 17. Lessons Learned from Previous Bank/IDA Involvement. The main lesson emerging from the Bank's environmental project experience is that broad-based policies supported by strong institutions should be in place if pollution abatement projects are to be successful. These polices include: (a) use of an integrated pollution prevention and control approach with a combination of command-and-control and market-based incentives; (b) strong institutional capabilities in monitoring and enforcement; (c) public participation; and (d) Government commitment and ownership. In recent Bank operations, support for such policies was supplemented with financial mechanisms in the form of credit lines. The latter were established through domestic banks (India, Brazil and China) or through a separate national Pollution Abatement Facility (Russia) for on-lending to polluting enterprises on long-term maturity of 7-10 years with 2-3 years grace period. Grants and concessionary loans were used in industrial pollution control projects for common treatment facilities (India), demonstration projects (India), and sanitary landfills (China). All the above policy elements would be strengthened in Egypt through the proposed project. IFC is currently designing a Mediterranean Environmental Fund for financing environmental investments. The Fund would alleviate the shortage of financing necessary to address among its project components, the environmental requirements of polluted enterprises. The proposed project would complement this innovative IFC initiative. 18. Rationale for Bank Involvement. The Bank's Country Assistance Strategy (CAS) for Egypt discussed by the Board on May 29, 1997, has four major thrusts: (a) export development; (b) private sector- led growth; (c) human resources development; and (d) natural resource management, environment and rural development. The Bank's Egypt Country Assistance Strategy Note on Environment (1995) as well as Egypt's National Environmental Action Plan [NEAP (1992)] identify industrial pollution, institutional capacity building and management of natural resources as the three major environmental priorities in Egypt. The proposed project would bring in the Bank's experience in environment and respond to both the GOE's and the Bank's objectives to improve the environment, reduce damage to human health, support an effective environmental management at the national and the local levels, and field test the Bank's approaches on industrial pollution control in Egypt. Furthermore, the GOE has requested Bank assistance for updating the NEAP focusing on investment priorities and resource mobilization. Such an update would enable the GOE to shape a sound environmental policy based on the use of a command and control approach and economic incentives in order to integrate effective environmental management into Egypt's micro-and macro- economic policies. 19. Agreed Actions. The condition for loan and credit effectiveness would be: (a) the execution of the financing agreements between the GOE and NIB for passing on the proceeds of the IDA credit; and (b) the Pollution Abatement Project 7 execution of a subsidiary loan and credit agreements between NIB and the Apex Bank. The condition for cross effectiveness would be $he effectiveness of the IBRD loan and IDA credit agreements, the NIB project agreement and the Apex agreement. Agreement has been reached that EEAA would carry out, together with the Bank and the GOF, a mid-term review of the project by October 2000 to assess the progress made towards fulfilling the key performance indicators (Schedule B) and the establishment of an incentive framework for environment protection. The GOE has already established a Steering Committee and a Project Implementation Unit (PIU) with a full-time project manager. It has also prepared a pipeline of sub- projects of 18 enterprises of which sub-projects in 11 enterprises (9 in the public sector and 2 in the private sector) could receive priority for a total amount of US$31.5 million. The nine public enterprises were selected on the basis of the sub-project eligibility criteria (para. 15) and eight are among the worst industrial polluters. Their sub-projects could be financed as soon as the PAF is operational. 20. Poverty Category. Not applicable. 21. Environmental Aspects. The project falls within category "B" in accordance with the provision in OD. 4.01, "Environmental Assessment." To prevent possible adverse environmental impacts, the project would require the preparation of environmental audits for all investment-financed operations. 22. Program Objective Categories. The project falls under the "environmentally sustainable development" category. 23. Participatory Approach. The Government has shown a great sense of ownership and interest in proceeding with the proposed project. In October 1995, a high level meeting involving the former Deputy Prime Minister (who is now the Prime Minister) as well as the Ministers of Economy, Public Enterprise and Environment was held with the Bank, to review the objectives and implementation arrangements of the proposed project. Project preparation was carried out by a project working group established by EEAA, and assisted by international and local consultants provided by USAID, PHRD, and the Italian and Canadian trust funds. Workshops were organized during Bank preparation missions to explain the project and seek feedback on its design by the project beneficiaries. The Friedrich Ebert Stiftung, a German NGO, has also provided technical and logistic support for the EEAA working group. In addition, the International Center for Environment and Development, an Egyptian NGO, has conducted industrial pollution awareness workshops for the industrial and financial sectors as well as for NGOs and the media. One project sub- component is dedicated to providing technical assistance and training to two local NGOs, the Association for Enterprises for Environment Conservation and Friends of the Environment Association in Alexandria, as well as to two professional associations, the Society of Writers on Environment and Development and the Management Engineering Society. 24. Project Benefits. The major benefit of the technical and institutional support component is the increased capacity for monitoring and enforcement. This added capacity would yield significant benefits in terms of contributing substantially to lowering the current social costs of environment degradation and reducing the inefficiencies of the previously fragmented system of enforcement in the country. The second project component -- pollution abatement investment -- is a line of credit for qualifying environmental investment sub-projects for which a cost/benefit analysis cannot be undertaken. Sub-project justification is based on pollution reduction in industrial enterprises aimed at the protection of human health and/or natural resources rather than on purely economic benefit. Most environmental benefits, and particularly those related to human health impacts, cannot be subjected to a benefit-cost analysis as functional relationships between health impacts and reductions in various pollutants are not yet adequately determined. However, 8 Pollution Abatement Project functional relationships have been relatively well established for total suspended particulates (TSP) and lead. Based on a sample of sub-projects related to the lead and TSP reduction and for which health benefits could be quantified, the lower range of ERR varies from 13-30 percent (Schedule B). These estimates should be treated with caution given the uncertainties regarding key parameter values, even though a conservative approach has been applied. In addition, the second component of the project would lead to better management and safety at the work place; and demonstration of cost-effective pollution reduction investments which could be replicated in other enterprises. The main beneficiaries of the project are the 220 environment staff of the ministries and the governorates, 200 trainees from the financial and industrial sectors, the local NGOs and professional associations, the enterprises' workers, and the general population exposed to pollution from the enterprises. 25. Project Risks. The project faces four significant risks: (a) if enforcement is not sufficiently strengthened, the industries may not have a sufficient incentive to undertake abatement measures. The technical and institutional component is designed to support the strengthening of the enforcement institutions; (b) the on-lending terms and conditions may become uncompetitive in an environment of concessionary terms. This risk would be, however, minimize through periodic consultations with the bilateral donors on the on-lending conditions and grant arrangements; (c) the enforcement and the financial institutions have limited experience and in-house capabilities for environmental management and environmental lending. To minimize this risk, the technical and institutional component is mostly directed to building up those capabilities through technical assistance and training; and (d) Egypt has a track record of inadequate implementation performance. This risk would be minimized by financing through the participating banks the priority sub-projects already appraised, and by delegating procurement review and disbursement monitoring responsibilities to the Resident Mission in Egypt. 26. Recommendation. I am satisfied that the proposed loan and development credit would comply with the articles of Agreement of the Bank and of the Association and recommend that the Executive Directors approve them. James D. Wolfensohn President by Caio Koch-Weser Attachments Washington, D.C. November 17, 1997 Pollution Abatement Project 9 SCHEDULE A ARAB REPUBLIC OF EGYPT POLLUTION ABATEMENT PROJECT ESTIMATED PROJECT COSTS AND FINANCING PLAN Project Costs Percentage Foreign of Project Local Foreign Total Local Foreign Total Exchange Baseline Cost Project Components LE (000,000) USS (000,000) % % A. Technical and Institutional Support 1. EMU/EEAA 4.1 5.8 9.9 1.2 1.7 2.9 58.6 6.0 2. PAAP's 0.7 5.7 6.4 0.2 1.7 1.9 89.4 4.0 3. Audit Support Program 0.3 3.4 3.7 0.1 1.0 1.1 90.9 2.3 4. Promoting Awareness 1.2 2.4 3.6 0.3 0.7 1.0 70.0 2.1 Sub-Total 6.3 17.3 23.6 1.8 5.1 6.9 73.9 14.2 B. Pollution Abatement 13.5 118.7 132.2 4.0 35.0 39.0 89.7 80.1 Investments C. Incremental Operating Cost 1. Staffing 3.8 3.8 1.2 1.2 5.1 2. Operation 2.4 2.4 0.7 0.7 -1.4 Sub-Total 6.2 6.2 1.9 1.9 4.0 Total Baseline Costs 26.0 136.0 162.0 7.7 40.1 47.8 83.9 100.0 D. Contingencies 1. Physical 0.4 0.3 0.7 0.1 0.1 0.2 50.0 0.4 2. Price 8.9 20.1 29.0 0.2 0.5 0.7 71.4 1.5 Total Project Cost 35.3 156.4 191.7 8.0 40.7 48.7 83.5 101.9 Financing Plan Local Foreign Total Source of Funds (US$ Million) GOE 4.0 4.0 Enterprises 4.0 - 4.0 GOF - 5.7 5.7 IBRD 20.0 20.0 IDA - 15.0 15.0 TOTAL 8.0 40.7 48.7 10 Pollution Abatement Project SCHEDULE B Page 1 of 4 ARAB REPUBLIC OF EGYPT POLLUTION ABATEMENT PROJECT SUB-PROJECTS BENEFITS AND COSTS Introduction 1. A complete economic and financial analysis of the proposed project cannot be undertaken as the project will finance technical assistance and training and an undetermined number of sub-projects on a first come-first serve basis subject to environmental criteria. The benefits of the elements of the technical and institutional support component cannot been quantified. However, this component represents a key element in the sustainability of overall project benefits. The second project component is a pollution abatement fund consisting of a line of credit and limited matching grants for financing pollution abatement sub-projects. Sub-project justification is based on pollution reduction in industrial enterprises in order to move towards compliance with the Environmental Law for the protection of human health and/or natural resources, rather than on purely economic benefit. Most environmental benefits, and particularly those related to human health impacts, cannot be subjected to a benefit-cost analysis as functional relationships between health impacts and reductions in various pollutants are not yet adequately determined. However, functional relationships have been relatively well established for particulates and lead. Economic analysis 2. A benefit-cost analysis was therefore undertaken for the sub-projects in the pre-screened pipeline which would reduce particulates and lead and could be financed under the PAF: Sub-project 1: Installation of a new lead smelting process to reduce lead emissions in a lead smelter in Helwan; Sub-project 2: Installation of a particulate arrestment system in the steel production unit in a metallurgical plant in Alexandria; and Sub-project 3: Conversion from fuel oil (mazout) to natural gas in a glass and crystal factory in Shubra El Kheima. Using a dose-response model, which provides a relationship between health impacts and changes in concentration levels of particulates (PM10) and lead, the benefit-cost analysis provided the following estimates in table below. Pollution Abatement Project 11 SCHEDULE B Page 2 of 4 Sub-Project Benefits and Costs (US$ Million - Base Year, FY97) Net Present Value of Benefits and Costs 2/ Source of Difference Cost 1/ Economic 3/ Financial Taxes Health Sub-project 1: 8.7 7.1 -2.3 0.6 8.8 Sub-project 2: 1.2 4.0 -1.7 0.1 5.6 Sub-project 3: 1.75/ 0.05 -1.0 0.15 0.9 1/ Excluding taxes. 2/ The applied discount rate is 12 percent 3/ The corresponding ERRs are 30 percent, 75 percent and 13 percent for the three sub-projects. 3. The estimates are conservative insofar as valuation and/or avoided health impacts in the analysis are at the lower end of commonly applied ranges, and the monetary benefit of reductions of other pollutants in sub-projects 2 and 3 are not included because the functional relationship between the health impacts and those pollutants are riot yet adequately determined. Cost-Effectiveness 4. Cost-effectiveness would be determined in the environmental audit to assess the viability of investment sub-projects for which the environmental benefits cannot be quantified. The approach to cost effectiveness is to emphasize pollution control and prevention through investment in process changes. Such investments often have significant financial benefits in terms of savings or elimination of the use of chemicals or other toxic substances, reductions in energy and water consumption and/or other production inputs. End-of-pipe investments, with no or low financial benefits, would be financed only if process change options are unavailable to move towards compliance with the Environmental Law. Major Benefits 5. The major benefit of first project component is the increased capacity for monitoring and enforcement. This added capacity would yield significant benefits in terms of contributing substantially to lowering the current social costs of environmental degradation and reducing the inefficiencies of the previously fragmented system of enforcement in the country. The second component of the project would lead to: (a) reduction in industrial pollution detrimental to human health; (b) better management and safety at the work place; and (c) demonstration of cost-effective pollution reduction investments which could be replicated in other enterprises. Main Beneficiaries 6. The main beneficiaries of the project are the 220 environment staff of the ministries and the governorates, 200 trainees from the financial and industrial sectors, the local NGOs and professional associations, the enterprises' workers, and the general population exposed to pollution from the enterprises.. 12 Pollution Abatement Project SCHEDULE B Page 3 of 4 Financial Summary for Revenues Earning of the National Investment Bank NIB Resources and Investment Financing - 1993-95 (LE Million)- Sources o,f FIiane~ Value Value* 4W Domestic Saving Channels 1/ 8747.7 91.5 12798.1 89.1 15928.8 77.5 NIB Surplus and Development Loans 21 807.7 8.5 1567.2 10.9 4619.4 22.5 Total 9555.4 100.0 14365.3 100.0 20548.2 100.0 Financing of Public Investment Investment Expenditure 3/ 8947.7 81.7 12763.6 85.3 14700.2 82.5 Capital Transfers 4/ 1634.3 14.9 1856.8 12.4 2818.6 15.8 Soft Loans 5/ 374.6 3.4 337.8 2.3 291.0 1.6 Total 10956.6 100.0 14958.2 .100.0 17809.8 100.0 ./ Includes: Resources from Social Insurance and Pensions Authorities, Post Office Savings Fund, surplus of public enterprises' self-finance, and proceeds of investment certificates. 2/ Includes: Government bonds (5% of public enterprises' profit) and development bonds in US dollar. 31 Includes investments of: central government, local governments, public economic authorities, and state-owned companies. 4/ Includes financing liquidity deficit, previous years dues, advance payments and contributions in the share capital of joint-venture projects. I/ Soft loans for low income housing. NIB Financial Performance - 1993-95 (LE Million) _____________________________ 1993 1994 1995 Total Assets 85313.5 70404.6 87397.2 Total Equity 100.0 100.0 100.0 Total Operating Income 5660.0 .7141.2 8943.3 Interest Income 5639.4 7044.4 8916.8 Interest Expense 4976.3 6391.7 8165.2 Provisions 673.0 740.3 768.0 Gross Yield on Assets (Total Operating Income) 6.6% 10.1% 10.2% Provisions Ratio (Annual Provisions/Total Operating Income) 11.9% 10.4% 8.6% Pollution Abatement Project 13 SCHEDULE B Page 4 of 4 KEY PERFORMANCE INDICATORS L Impact Indicators Baeine Mid-Prject End of Proiject No. of Environmental Professionals in EEAA and EMIus 44 120 220 Funding for Industrial Pollution Control (USS million) 0 80 200 H. Output Indicators No. of Plants Monitoring Completed (sampling and analysis) 0 15 30 No. of Audits Completed 20 30 40 No. of Pollution Abatement Action Plans 3 20 40 III. Sample of Environmental Indicators 1/ A. Air Emissions Enterprises Pllutan Baselin Mid-Projec End of Proect General Metals Lead 200-400tly 2/ ltly 25tly Plastic & Electric Lead 26.7 mg/n' 10.0 mg/m 13.0 mg/nm' SEMADCO Ammonium Nitrate 180tly 25tly 50t/y Nasr Glass Dust 800tly 50t/y 80t/y B. Water Discharges Pollutants/Actions Baseline Mid-Proje End of Project Nasr Tanning Chromium 30tly lt/y 2t/y SEMADCO Ammonium Nitrate 1,000tly 50t/y 55tly Amreya Spinning BOD 1,000tly lootly 150tly Suspended Solids 800tly 50tly 80tly Plastic & Electric Sulfuric Acid 3.15tly 0.2t/y 0.3tly IV. Input Indicators Baseline Mid-Project End of Project Counterpart Funds: EEAA (LE million) ---- 6.8 13.6 1/ Environmental indicators were estimated for the pipeline of sub-pr9jects which would be submitted to the Apex and participating banks for financing. Indicators for other sub-projects would be determined as part of the environmental audits. 2/ tons/year. 14 Pollution Abatement Project SCHEDULE C Page 1 of 2 ARAB REPUBLIC OF EGYPT POLLUTION ABATEMENT PROJECT PROCUREMENT METHODS AND DISBURSEMENTS Procurement Methods (US$ Million) Procurement Methodv Project Element ICB/LIB Other G/ NBF" TOTAL (1) Sub-Loans/Sub-Grants 32.4 2.6 4.0 39.0 (32.4) (2.6) (35.0) (2) Technical and Institutional Support - Vehicles, office, computer and 0.5 0.5 monitoring equipment - Technical assistance and training 7.3 7.3 (3) Incremental Operating Costs 1.9 1.9 32.4 2.6 13.7 48.7 TOTAL (32.4) (2.6) (35.0) I/ Figures in parenthesis are the respective amounts financed by the Bank loan and IDA Credit. Amounts include contingencies. h/ Industrial pollution control components would be disbursed against a credit line. The procedures for procurement would be the same as the those for Bank-financed Development Finance Institution (DFI) procedures. This includes applicable commercial practices procurement by the private sector. A limited number of equipment would be purchased through Limited International Bidding (LIB). Individual contacts in excess of an estimated value of US$5.0 million would be procured under International Competitive Bidding (ICB). g/ Consultant services (recruited in accordance with Bank's guidelines) and training (US$0.2 million); IS (US$1.6 million) and LS (US$0.8 million). d/ NBF denotes non-Bank financing. This includes items to be financed from the GOF grant of US$5.7 million equivalent. Pollution Abatement Project 15 SCHEDULE C Page 2 of 2 Disbursement Plan Category (US$ Million) Expenditures to be financed Sub-loans/sub-grants 35.0 100 percent of amounts disbursed by the Apex and participating banks The project is expected to be completed by March 31, 2003, and it is anticipated that the Bank loan and IDA credit would be fully disbursed by that date. The Closing Date would, therefore, be. September 30, 2003. The estimated schedule of disbursements is summarized below. Estimated Loan and Credit Disbursements (US$ Million) FY98 FY99 FY00 FYO1 FY02 FY03 IBRD/IDA Annual 0.2 1.6 5.0 16.5 6.0 5.7 IBRDIIDA Cumulative 02 1.8 6.8 23.3 29.3 35.0 16 Pollution Abatement Project SCHEDULE D ARAB REPUBLIC OF EGYPT POLLUTION ABATEMENT PROJECT TIMETABLE OF KEY PROJECT PROCESSING EVENTS (a) Time taken to prepare 12 months (b) Prepared by EEAA with Bank assistance (c) Identification Mission February 1995 (d) Pre-Appraisal/Appraisal Departure December 1995 (e) Negotiations November 4, 1997 (f) Board Presentation December 16, 1997 (g) Planned Date of Effectiveness April 1st, 1998 (h) List of Relevant ICRs and PCRs Report No. Type Date Title 14640 ICR 06/21/95 Egypt - Small and Medium Scale Industry Project 14634 ICR 06/20/95 Egypt - Construction Industry Project 14689 ICR 06/28/95 Egypt - Export Industry Development Project 9940 PCR 10/01/91 Egypt - Fifth Development Industrial Bank Project 8613 PCR 05/01/90 Egypt - Misr Iran Development Bank Project 8677 PCR 05/01/90 Egypt - El Dikheila Reinforcing Bar Project 7332 PCR 06/01/88 Egypt - Third & Fourth Dev. Finance Company Projects 7359 PCR 06/01/88 Egypt - Pulp and Paper Project 5656 PCR 05/01/85 Egypt - Tourah Cement Expansion Project 5334 PCR 11/01/84 Egypt - Kafr El Dawar and El Beida Textile Project 4455 PCR 04/01/83 Egypt - Second Talka Fertilizer Project (i) Responsibilities for Preparation Team Members Sherif Arif (Task Manager), MNSRE; Hans-Roland Lindgren, ECSRE; Bjom Larsen, MNSRE; and Rouchdy Saleh, MNCEG Acting Sector Director Salah Darghouth, MNSRE Country Director Khalid Ikram, MNCEG Regional Vice President Kemal Dervi§ Pollution Abatement Project 17 SCHEDULE E Page 1 of 2 ARAB REPUBLIC OF EGYPT POLLUTION ABATEMENT PROJECT STATEMENT OF BANK GROUP OPERATIONS IN EGYPT A. Statement of IBRD Loans and IDA Credits (As of September 30, 1997) Difference Between expected Original Amount in US$ Millions and actual disbursements al Project Loan or Fiscal Cancel- ID Credit No. Year Borrower Purpose IBRD IDA ladions Undisb. Orig Frm Rev'd Number of Closed Loans/Credits: 88 Active Loans 5169 IDAN0080 1997 Government of Egypt Ed.Enhancement Prog. 0.00 75.00 0.00 70.48 74.37 0.00 40507 IBRD40180 1996 Government of Egypt Pollution Abatement 20.00 0.00 0.00 20.00 35.00 0.00 40507 IDA28660 1996 Government of Egypt Pollution Abatement 0.00 15.00 0.00 14.10 35.00 0.00 43102 IDA28650 1996 Government of Egypt Social Fund li 0.00 120.00 0.00 100.60 108.00 0.00 5163 IDA28300 1996 Government of Egypt Population 0.00 17.20 0.00 16.29 17.18 17.17 5173 IBRD38320 1995 MPWR Egypt Irrigation Imp 26.70 0.00 0.00 26.70 80.00 0.00 5173 IDA26720 1995 MPWR Egypt Irrigation Imp 0.00 53.30 0.00 46.96 78.05 0.00 5157 IBRD37190 1994 GOE/PBDAC Agricultural Moderni 54.00 0.00 0.00 17.74 84.74 0.00 5157 IDA25850 1994 GOE/PBDAC Agricultural Moderni 0.00 67.00 0.00 24.05 77.58 0.00 5153 IDA25040 1993 Government of Egypt Matrub Res. Management 0.00 22.00 0.00 17.55 17.60 0.00 5161 IDA24760 1993 Government of Egypt Basic Education Proj 0.00 55.50 0.00 28.05 27.73 0.00 5168 IBRD36050 1993 Government of Egypt Pvt Sec Tourism Inf & Env 130.00 0.00 0.00 100.58 100.58 0.00 5146 IBRD34170 1992 Government of Egypt National Drainage 45.00 0.00 0.00 45.00 120.00 0.00 5146 IDA23130 1992 Government of Egypt National Drainage 0.00 75.00 0.00 11.60 50.59 0.00 5152 IDA24030 1992 Government of Egypt Schistosomiasis Cont 0.00 26.84 0.00 20.11 20.00 0.00 5111 IBRD33540 1991 EGPC Gas Investment Project 84.00 0.00 0.00 11.96 11.96 0.00 5140 IBRD31370 1990 Government of Egypt Engineering & Techni 30.50 0.00 0.00 9.70 9.70 0.00 5149 IBRD31980 1990 Government of Egypt Irrig./Pumping 31.00 0.00 0.00 5.01 5.01 0.00 Total 421.20 526.84 0.00 586.48 953.09 17.17 Active Ln Closed Loans o Total Disbursed (IBRD and IDA): 350.22 3,561.87 3,912.09 of which has been repaid: 8.50 1,898.60 1,907.10 Total now held by IBRD and IDA: 939.54 1,666.79 2,606.33 Amount sold 0.00 7.48 7.48 Of which repaid 0.00 7.48 7.48 Total Undisbursed 586.48 0.00 586.48 ai Intended disbursements to date minus actual disbursements to date as projected at appraisal. 18 Pollution Abatement Project SCHEDULE E Page 2 of 2 B. Statements of IFC Investments (As of September 30, 1997) Committed Disbursed UFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1982/88 Luxor Hotel 0.00 1.37 0.00 0.00 0.00 1.37 0.00 0.00 1983/91/94/92/96 ANSDK 18.57 11.44 0.00 0.00 18.57 11.44 0.00 0.00 1985 MFIC 0.00 .12 0.00 0.00 0.00 .12 0.00 0.00 1986/88/92 Meleiha Oil 0.00 30.82 0.00 0.00 0.00 .24 0.00 0.00 1991 Al Bardi 1.55 0.00 0.00 0.00 1.55 0.00 0.00 0.00. 1991 ETIC 0.00 1.95 0.00 0.00 0.00 1.95 0.00 0.00 1992 Misr Compressor 9.70 3.77 0.00 0.00 9.70 3.77 0.00 0.00 1992 Serena Beach 5.00 1.20 0.00 0.00 5.00 1.19 0.00 0.00 1992/97 Carbon Black-EGT 10.25 2.96 0.00 0.00 6.25 2.96 0.00 0.00 1993 Cmrcl Intl Bank 0.00 15.59 0.00 0.00 0.00 15.59 0.00 0.00 1994 Club Ras Soma 4.84 2.40 0.00 0.00 4.84 1.93 0.00 0.00 1994/96 Abu Soma Develop 0.00 1.20 0.00 0.00 0.00 .91 0.00 0.00 1996 Apache Corp. 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 1996 Apache Qarun 10.00 0.00 0.00 15.00 7.54 0.00 0.00 11.31 1996 Orix Leasing EGT 0.00 .89 0.00 0.00 0.00 .89 0.00 0.00 1996 Phoenix Qarun 20.00 0.00 0.00 30.00 14.36 0.00 0.00 21.54 1997 Egypt Trust 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 1997 MGDK 0.00 1.50 0.00 0.00 0.00 .37 0.00 0.00 1997 Orascom 20.00 5.00 0.00 0.00 12.00 5.00 0.00 0.00 Total Portfolio: 99.91 95.21 0.00 45.00 79.81 62.73 0.00 32.85 Approvals Pending Commitment Loan Enft Quasi Parti 1997 ANSDK GDR 0.00 0.00 0.00 30.00 1997 ECC 35.00 0.00 0.00 0.00 1997 MGDK 4.00 0.00 0.00 0.00 1995 MISR COMP-CAP IN 1.60 0.00 0.00 0.00 1996 ORIX LEASING EGT 5.00 0.00 0.00 0.00 1997 UNIPAK-NILE 5.00 0.00 0.00 5.00 Total Pending Commitment: 50.60 0.00 0.00 35.00 Pollution Abatement Project 19 SCHEDULE F Page 1 of 2 ARAB REPUBLIC OF EGYPT POLLUTION ABATEMENT PROJECT AT A GLANCE M. East Lower- POVERTY and SOCIAL & North middle- Egypt Africa income Development diamondP Population mid-1996 (millions) 59.3 279 1,126 GNP per capita 1996 (USS) 1,090 2,090 1,750 Life expectancy GNP 1996 (billions USS) 64.1 682 1,967 Average annual growth. 1990.96 Population r.) 2.0 2.6 1.4 GNP Gross Labor force (3) 2.7 3.3 1.8 per primary Most recent estimate (latest yearavallable since 1989) capita enrollment Poverty: headcount index 1% of population) Urban population (A offtotal populatIon) 46 57 W6 Life expectancy at birth (years) 63 66 67 Infant mortality (per 1,000 lIve births) 6 54 41 Access to safe water Child malnutrition rA of children under 5) 9 Access to safe water I% of populetion) 84 86 78 Illiteracy (% of populadion age 15+) 49 39 .. Gross primary enrollment (% of achool-ege population) 98 97 104 Egypt Arab Rep. Male 106 104 106 Lower-middle-income group Female 91 91 101 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1988 1996 1996 Economic ratlos' GOP (billions US$) 11.4 34.7 60.6 67.6 Gross domestic investment/GDP 33.4 26.7 16.3 16.6 Openness of economy Exports of goods and services/GDP 20.2 19.9 22.0 20.6 Gross domestic savings/GDP 12.3 14.5 14.0 14.0 Gross national savings/GOP .. .. 21.0 19.9 Current account balance/GDP .21.2 -9.3 0.8 .1.6 Interest payments/GDP 0.7 2.6 2.1 2.2 Savings Investment Total debt/GDP 42.3 104.1 66.4 46.2 Total debt servicelexports 10.3 26.8 13.0 13.6 Present value of debt/GDP .. .. 42.8 Present value of debtlexports . .. 140.7 Indebtedness 1976-85 1986-96 1996 1996 1997.06 (average annual growth) - Egypt, Arab Rep. GDP 7,8 3.9 4.7 8.1 2.8 GNP per capita 4.4 3.1 3.2 2.9 1.1 Lower-middlemncome group Exports of goods and services 3.8 7.3 1.6 4.2 3.4 STRUCTURE of the ECONOMY (% of GDP) 1975 1985 1996 1996 Growth rates of output and investment(%) Agnculture 29.0 20.0 16.8 17 3 2D Industry 26.9 28.6 32.3 31.6 Manufactunng 17.4 13.5 244 oro , Services 44.1 51.5 50 9 511 *20 Private consumption 62.9 68.2 75.5 75.6 .4 General government consumption 24.9 17.2 10.5 10.4 GD] GDP Imports of goods and services 41.3 320 24.3 23.2 197648 1986-96 1996 1996 (average annual growth) Growth rates of exports and Imports (%) Agnculture 2.8 27 2 9 31 is Industry 9.8 4.3 5.0 49 Manufacturing 4.7 71 62 1o Services 106 3.6 50 56 5 Prvate consumption 6.8 4 6 2 8 4o a General government consumption 4.4 -0 5 8 2 6 0 a 9a Gross domestic investment 78 -4.0 9.1 9.7 Imports of goods and services 3.9 0.8 1.0 6.4 Exports - i*-mports Gross national product 7 0 5.3 5.0 5 3 Note 1996 data are preliminary estimates Figures in italics are for years other than those specified. The diamonds show four key indicators in the country (in bold) compared with its income-group average If data are missing, the diamond will be incomplete 20 Pollution Abatement Project SCHEDULE F Page 2 of 2 Arab Republic of Egypt PRICES and GOVERNMENT FINANCE 1976 1986 1996 1996 Domestic prices inflation (%) (%/ change) 30 1 Consumer pnces 9.7 .. 9.3 72 Implicit GDP deflator 10.4 90 119 65 00 Government finance (% of GDP) o1 Current revenue .. 22.2 273 25.1 9 9 92 94 95 96 Current budget balance .. -13.7 4 1 2.5 GOP def CPI Overall surplus/deficit . -21.6 0.3 -1.3 TRADE 1975 1986 1996 1996 (millions USS) Export and import levels (mill. US$) Total exports (fob) . 5.366 4.593 is.coo Cotton 306 91 Other agriculture . 309 230 Manufactures . 2,202 3,540 1o.0o Total imports (cif) 12.811 13,826 Food 2,760 2,887 s.oo Fuel and energy Capital goods . 3.108 4,100 0 , , Export prce index (1987=100) 118 109 90 91 92 93 94 95 96 Import pnce index (1987=100) 140 127 aExports nlmports Terms of trade (1987=100) .. .. 84 86 BALANCE of PAYMENTS 1976 1986 1995 1996 (millions US$) Current account balance to GDP ratio (%) Exports of goods and services 2,503 6,866 13,470 13,422 1n Imports of goods and services 5,141 12,606 16,894 17,559 Resource balance -2,638 -5,741 -3,423 -4,137 5 - Net income -244 *991 -468 281 Net current transfers 456 3,522 4,358 2,800 a Current account balance, 92 s3 94 as before official capital transfers -2,426 -3,209 466 -1,057 .s Financing iterrs (net) 1,878 3,022 288 1.628 Changes in net reserves 548 187 -754 -571 .10 Memo: Reserves including gold (mill USS) 535 1,587 26.752 27,922 Conversion rate (localJSS) 0.5 1 0 3 4 3.4 EXTERNAL DEBT and RESOURCE FLOWS 1976 1986 1996 1996 (millions US$) Composition of total debt, 1995 (mill. US$) Total debt outstanding and disbursed 4,835 36.102 34.116 31,208 IBRD 14 1,048 1,320 1.075 G A S C IDA 84 602 1,035 1,090 F 2375 1320 os35s 03 2033 D Total debt service 305 2.817 2.395 2.619 2033 D IBRD 1 147 312 272 IDA 1 8 21 23 Composition of net resource flows Official grants 1.123 734 1,006 932 Official creditors 2,169 1.635 -90 Pnvate creditors 49 559 -306 Foreign direct investment 8 1.178 598 615 Portfolio equrty 0 0 2 50 25376 World Bank program Commitments 132 59 80 172 A IBRD E - Bilateral Disbursements 62 269 125 108 B - IDA 0 - Other mulblateral F - Priate Principal repayments 0 70 212 192 C- IMF G - Short-term Net flows 62 198 -87 -84 , Interest payments 1 84 121 102 Net transfers 61 114 -208 -186 Development Economics. 1996 extemal debt and resource flows data are staff estimates (preliminary) 8/20197 MAP SECTION s s IBRD 27757 GP,E E E -ARAB REPUBLIC OF EGYPT CYPRUS POLLUTION ABATEMENT PROJECT PROJECT AREA BOUNDARIES - _ Åria o map - - -Q PROJECT GOVERNORATES 40 SELECTED CITIES AND TOWNS Cairo * INDUSTRIAL POLLUTION HOT SPOTS ® GOVERNORATE CAPITALS A EEAA BRANCHES ® INTERNATIONAL CAPITAL A RA B m ENVIRONMENTAL MANAGEMENT UNITS ---- GOVERNORATE BOUNDARIES LIBYA REPUBLIC CANALS ---INTERNATIONAL BOUNDARIES OF EGYPT PERENNIAL RIVERS AND LAKES ---:11(9INTERMITTENT RIVERS AND LAKES - ---- -- 0 MARSH 0 50 100 KILOMETERS CHAD . SUDAN Po:e owna PORT I- \ - DAMIETTA SAID K F R, El SHEKH- -- El Doll a d Da e. r - - DAGAHL iA :1 !~ IaILh~, El sr ,: 0,i elB.)ri-d - \ I CHARBIY ALEXANDRIA> k-al B E H E fRA T 1 MEN nS Al A1 L A -tv) SM L1A -3 -, . _ . . . , r Hean C A l R-O\ M A R S A\ HM A T R U H¯ s U E Z -- G ZA - -' \ IF.. r E L FAYOU - - The boundaries, cåiors, "denominations on - .--- -" òther information shown . -29' onfhis map o noY inmply, on the pcH· of BENI SUEF TWIe'World Bank Grnpp, B L- any judgmeit on the'eggi oronyýcndorsement ' -)-.E5T AR ELAJMR or4'y°n°-r-n H R E AL Å-H M ÅR or acceptance of suh - boundaries. ~30° / - MARCH 1996