Document of sr &

The World Bank FtoE Cur'FOR OFFICIAL USE ONLY

Report No. 1817a-JO

THE HASHEMITE KINGDOM OF JORDAN

STAFF APPRAISAL REPORT

AMMAN WATER SUPPLY AND SEWERAGE PROJECT III

March 2, 1978

Water Supply and Sewerage DivisionEurope, Middle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Jordan Dinar (JD)JD 0.33 = us$ 1.00JD 1.00 = US$ 3.03JD 1.00 = 1,000 fils

MEASURES AND EQUIVALENTS

Kilometer (km) = 0.62 mileSquare Kilometer (km2) = 0.386 square mileHectare (ha) = 2.47 acresMillimeter (mm) = 0.03937 inchesCentimeter (cm) = 0.3937 inchesMeter (m) = 39.37 inchesCubic Meter (m3 ) = 264 US gallonsCubic Meters per second (m3/sec) = 22.8 million US gallons per dayLiter (1) = 0.264 US gallonsLiters per second (1/sec) = 22,800 US gallons per dayLiters per capita per day (lcd) = 0.264 US gallons per capita per dayMilligram per liter (mg/l) = 1.0 parts per million

ABBREVIATIONS AND ACRONYMS

AWSA = Amman Water and Sewerage AuthorityIDA = International Development AssociationJVA = Jordan Valley AuthorityJVC = Jordan Valley CommissionMOH = Ministry of HealthMRA - Ministry of Rural AffairsMVLF = Municipal and Village Loan FundNPC = National Planning CouncilNRA = Natural Resources AuthorityODA = Overseas Development Administration (UK)USAID = United States Agency for International DevelopmentVBB = Vattenbyggnadsbyran/Fawzi AssociatesWSC = Water Supply Corporation

ABBREVIATIONS

ft = foot min = minutelpcd = liters per capita per day ppm = part per millionm = meter sec = secondm3/sec = cubic meters/second U.S. = United StatesMm3 /yr = million cubic meters/year

AWSA's Fiscal Year

January 1 - December 31

FOR OFFICIAL USt, )NLY

JORDAN

STAFF APPRAISAL REPORT ON THE

AMMAN WATER SUPPLY AND SEWERAGE PROJECT III

TABLE OF CONTENTS

Page No.

I. THE WATER SUPPLY AND SEWERAGE SECTOR . .............. 1

General **.*. *****............... * ............................ 1Water Resources and Sewerage ....................... 2Sector Organization ................................ 3Sector Program ........ .. ................. ... 4Sector Priorities .................................. 5Performance in Previous IDA Lending .. .............. 6IDA's Objectives for the Sector .................... 6

II. PROJECT AREA ........ ............................... 7

Water Resources - Amman .......................... . 7Existing Facilities - Water and Sewerage ........ ... 8Urban Poor ................................... . 8Areas to be Served by AWSA's Program:

Table 1 - Estimate of Level of Servicefor the Urban Poor - Water Supply .... ....... 9

Table 2 - Estimate of Level of Servicefor the Urban Poor - Sewerage ............ ... 10

Unaccounted-for Water ... .............. .......... 11Sewerage Connections ..................... . ......... 12Other Works ........................................ 13

III. THE BENEFICIARY ...................... ,,......... .. 14

Introduction ............................................... 14Organization and Management ..... ................... 14Personnel .......................................... 14Training .................................................. 15Accounting .......... ,. 15Audit and Insurance ....... .......... ............... 16

This report was prepared by Messrs. William J. Hayden and Steven G. Serdahely.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABLE OF CONTENTS (Continued)

Page No.

IV. DEMAND AND MARKET ASPECTS ............. ............. 17

Population Forecast ................... *. , 17Present Consumption ...... .......................... 17

Consumption Forecast ...... ......................... 18Figure 1 - Population Development in Amman

(Chart WB 18092) .............................. 19Figure 2 - Population, Water and Sewerage

Connections (Chart WB 18090) .... .............. 20Figure 3 - Forecast of Water Consumption and

Production (Chart WB 18091) .... ............... 21

V. THE PROJECT ........................................ 22

Project's Objectives ...... 22Scope of the Project ...... 22Project Description ................................ 23Cost Estimates .. ........... 24Project Implementation .............. .. ............. 25Procurement ...................... .................. 25Figure 4 - Network Diagram of Project Activities . 26

Prior Contracting and Retroactive Financing ........ 27Disbursements ...................................... 27Monitoring Criteria .................... 28

Table 3 - Monitoring Indicators .29

VI. FINANCIAL ANALYSIS ................................. 30

Tariffs ............................................ 30

Financing Plan ....... .............................. 32Future Financial Performance ........ ............... 33Table 4 - Income & Expenditure Statements/

Water Supply .................................. 34Table 5 - Income & Expenditure Statements/

Sewerage ...................................... 35

Table 6 - Cash Flow Statements ......... .. ........ 36Table 7 - Balance Sheets . . 37

VII. ECONOMIC ANALYSIS .................................. 38

Least Cost Solution ............... .. ............... 38Average Long-Term Incremental Cost - Water Supply .. 38Internal Economic Rate of Return ......... .. ........ 38Risks ........................ ...................... 39Environmental Impact ............... .. .............. 39

TABLE OF CONTENTS (Continued)

Page No.

VIII. AGREEMENT REACHED AND RECOMMENDATIONS ............... 40

Selected Documents and Data Available in theProject File ........................................... 41

IBRD Maps Nos: 131941319312120 Rl

CHAPTER I

THE WATER SUPPLYAND SEWERAGE SECTOR

General

1.01 The Hashemite Kingdom of Jordan, located in the arid zone of theMiddle East has an area of approximately 87,000 Km2, of which about 81,000Km2 lies on the East Bank of the Jordan River. The last official censuswas conducted in 1961, and as substantial movement of population has occurredsince then, population statistics referred to in this Report should beregarded as approximations only. Population distribution at year-end 1975was estimated by the Jordan Statistics Department as follows:

Governorate Estimatea Population

Amman 1,098,000Irbid 564,000Balqa 130,000Karak 108,000Ma'an 52,000

Total Population 1,952.000

1.02 The overall pattern of settlement in Jordan is characterized bya large metropolitan area (Amman Region), a few medium-sized towns and manysmall villages. The annual rate of population growth in Amman Region ex-ceeded 11% during the period of 1966 to 1976, while the national growth ratewas a significant 3.5% per annum.

1.03 Not only is the city of Amman the capital of Jordan, but it is alsothe center of the country's main commercial activity. With a population thathas more than doubled twice during the past two decades the need for adequatewater supply and sewerage services in Amman continues to accelerate. Addi-tionally, the influx of refugees into Amman has exacerbated the growth problemwithin the 13 municipal areas of the city. Although there are several smallerenclaves of refugee population totalling approximately 20,000 residents,the two large camps, Hussein and Wahdat, account for approximately 165,000residents.

1.04 The Government is now making a major effort to expand and improvethe water supply and sewerage services in Amman through a combined programwhich will directly benefit an estimated 270,000 persons with improved watersupplies and 316,000 persons with improved sewerage services. As part ofthe financing arrangements for this program, the Government has requestedIDA's assistance for a project which will provide piped water supplies toapproximately 92,000 users and piped sewerage systems to more tian 121,000.

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Water Resources and Sewerage

1.05 Rainfall in Jordan averages from 50 mm/year in the desert areas to600 mm/year in the highland areas. Surface water sources in the Jordan Valleyare estimated by the National Planning Council (NPC) to provide an averageannual flow of 635 Mm3, and in the Dead Sea Basin 194 Mm3 is the estimatedflow. However, exploitation of surface water resources for community watersupplies has not occurred to any great degree as yet, largely due to thesporadic flow patterns and the relatively long distance from populationcenters. Any future exploitation of such resources will involve high develop-mental costs due to the large capital investments required for transmissionsystems, and high operating costs inherent in the 600 to 800 m. lifts fromsource to distribution.

1.06 Most of the community water supply systems in Jordan presentlydepend upon groundwater. Even with full development of these groundwatersources, demands still exceed supply. Average national per capita consumptionin 1975 was estimated at 28 lpcd. A 1973 Ministry of the Interior reportshowed that of 794 villages covered in the survey, 391 did not have properwater supplies. Further, in the remaining communities (with piped watersupplies) demands exceeded supply in all cases. Water tankers were dependedupon to bridge the gap.

Types of Domestic Water Supplies in Towns and Villages

-----------Governorate-----------Amman Irbid Balga Karak Ma'an Total Percentage

Villages with distri-bution throughhouse connections 87 178 9 78 20 372 47

Villages with distri-bution withouthouse connections 10 6 7 - 8 31 4

Villages with nopiped water supply 131 134 49 32 45 391 49

Total Villages andTowns 228 318 65 110 73 794 100

1.07 Physical and chemical quality of drinking water is acceptable inmost areas of Jordan, although the nitrate level has reached 80 mg/l in theAmman-Zerqa area. However, the bacteriological quality of water in severalareas is poor, indicating contamination of groundwater supplies throughunhygienic domestic waste disposal or through back-siphonage due to inter-mittent service.

1.08 Only three cities in Jordan, Amman, Salt and Aqaba, have sewagecollection systems and treatment plants. In other communities cesspoolsare used for domestic sewage disposal. Under the aegis of the Ministryof Municipal and Rural Affairs (MRA) the Salt collection system is beingrenovated and extended, and the ineffective treatment plant is being con-verted to aerated lagoons. Overflowing cesspools in most communities area constant nuisance as well as a continuing health-risk indicating the needfor improved design, construction and maintenance. A study is underway forthe Irbid sewerage system and studies for Zerqa and Jerash are planned.

Sector Organization

1.09 The Natural Resources Authority (NRA) has overall responsibilityfor water resources studies and water planning throughout Jordan. In con-sultation with IDA, the Government created the Amman Water and SewerageAuthority (AWSA) through Law 19 in 1973, which has the responsibility forwater supply, sanitary sewerage and surface drainage in Amman (paras. 3.03and 3.04).

1.10 In 1973 the Water Supply Corporation (WSC) was established, succeed-ing the NRA Water Supply Department. WSC assists the smaller municipalitiesin the design and construction of water supply projects. After commissioning,WSC transfers the system to the municipalities which, in turn, assume main-tenance and operation responsibilities. WSC also acts as a bulk supplier ofwater to a large number of towns and villages. The WSC Board of Directors isheaded by a Director-General and is responsible to the MRA. WSC employs about700 persons, 70 technicians and 630 unskilled workers. At present, a reorgani-zation is being undertaken after the departure of some key staff; and it isnot clear how the final organization will evolve. In any event the Corpora-tion will require substantial strengthening of its technical, operationaland administrative staff in order to effectively develop and execute theGovernment's water supply program in WSC's area of responsibility.

1.11 The East Jordan Valley is under the jurisdiction of the Jordan Val-ley Authority (JVA), and domestic water supplies in the valley fall withinthe JVA purview. As a successor to the Jordan Valley Commission (JVC) whichhad been established in 1973, JVA was incorporated in 1977 to assume JVC'sprogram of development, policy making, project financing, and constructioncontract administration. In the area of water supply, JVA has three geogra-phical sub-divisions: Northern Ghor (10 settlements); Central or Middle EastGhor (18 settlements); and Southwest Ghor (8 settlements).

1.12 The MRA is responsible for design and construction of seweragesystems outside Amman. Responsibility for maintenance and operation of theexisting rudimentary systems, principally cesspool pumping, rests with themunicipalities. In 1973, consideration was given by the Government to forma National Water and Sewerage Board; and enabling legislation was drafted.However, no further action has yet been taken.

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1.13 The Municipal and Village Loan Fund (MVLF) assists the WSC withthe financing of small projects in some villages, and also lends directly tomunicipalities and village councils. Established within MRA as a specializedcredit institution to provide finance for municipal and village projects, theMVLF depends upon WSC and MRA for technical assistance in processing its watersupply and sewerage loans. The Government has requested Bank assistance inreviewing the operation of MVLF with the objective of the Bank's future tech-nical and financial support for the institution.

Sector Program

1.14 Within the context of the current Five-Year Plan (1976-80), whichemphasizes the extension of public services to all communities in the country,based on a rational relationship between economic and regional planning, theprogram for water supplies and sewerage is as follows:

(i) drill new wells to increase the quantity of drinking waterproduced in the various regions;

(ii) expand water networks and contruct new storage tanks inthe various governorates;

(iii) adopt a progressive water tariff structure to controlconsumption; and

(iv) undertake sewerage projects to improve facilities in Ammanand Salt and sewerage studies in other main cities.

1.15 The sector investment programs as presented in the Plan and asrevised to reflect the proposed project for Amman and Salt is tabulated asfollows:

Water Supply Sewerage Total-------- (JD Millions)---------

Area:

Amman 26.50 9.80 36.30Jordan Valley ' 3.30 - 3.30

Governorates:

Amman/Balqa 2.17 1.60 3.77Irbid 7.44 - 7.44Karak/Ma'an 13.71 - 13.71Irbid, Zerqa, Jerash (Studies) - 0.08 0.08

Total 53.12 11.48 64.60

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Sector Priorities

1.16 At present over 60% of the urban population in Jordan has houseconnections to piped water supply systems and about 10% of the urban popula-tion has service connections to sewage collection systems. By the end ofthe current Five-Year Plan (1980) it is estimated that 66% of the total urbanpopulation will enjoy water connections and 25% sewerage system connections.

1.17 The continuing major problem will be to increase the amount of wateravailable for community water supplies. The scarcity of water or high costof transportation is reflected in the low national per capita consumption,estimated at 28 lpcd in 1975 and expected to rise to 38 lpcd by 1985. Insmall villages and in refugee camps consumption figures of 10-15 lpcd arenot uncommon. Water allocation problems occur between irrigation needs andpotable water needs, particularly in the Jordan Valley. The King Talal Damwas originally intended for irrigation purposes, and planning for the MaqarinDam is on the same basis. However, recent AWSA water resources studies haveindicated that Amman must depend on these resources to meet the bulk of itsfuture demand. Consequently, about 17 Mm3 per year of the King Talal Damoutflow is being allocated to Amman in connection with this project. Mean-while, Government engaged consultants to conduct an overall review of theexisting policies and organization of the sector, and the recommendationsof the consultants' study will be taken into account by the Jordanians indeveloping an overall policy and strategy for the future planning of opera-tions in the sector.

1.18 Although the Government plans to proceed with a number of urbanprojects, the rural sector has not been neglected. Of the current Five-YearPlan budget of JD 53.12 million for domestic water supplies, approximatelyJD 26.62 million (about 50%) will be invested to serve rural areas withurgently needed water supplies outside the city of Amman. However, becauseof the concentration of population in Amman and the constant threat of seriousepidemics of waterborne diseases due to unsanitary conditions, the highestpriority at present is given to the provision of safe water supplies and wastedisposal systems in the municipality.

1.19 Continuing budgeting constraints limit the investments which canbe made by Government and so bilateral assistance will continue to be heavilyrelied upon to meet the financial requirements of the water supply and sewer-age projects. The United States Agency for International Development (USAID)has expressed an interest in participating in the financing of AWSA's program;US$28.5 million has been allocated for FY78, and an additional US$12.0 millionis under consideration for FY79. The Saudi Fund for Development has indicatedinterest in providing a loan of US$20.0 million to assist AWSA in financingthe King Talal Dam Transmission Project. Ongoing water supply and sanitationprograms have been assisted by the Federal Republic of Germany, Iran, UnitedKingdom and the United States.

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Performance in Previous IDA Lending

1.20 IDA Credit 18-JO was extended to the Government in 1961 in order tocover the foreign exchange costs of augmenting and improving the Amman watersupply. The Credit was on-lent by the Government to the Amman Municipal WaterDepartment. Subsequent to overcoming initial delays due to political distur-bances and to lack of local funding the Credit amount of US$1.5 million wasfully disbursed by January 1968. Among the objectives of this project wasthe institutional development of the Department. This objective was not fullyachieved. In December 1963 the Credit 43-JO, for US$2.5 million was utilizedby the Government to assist with the financing of water supply projects inRamallah-El Bira (Jerusalem), Azraq-Irbid and Zerqa. Credit 385-JO, which wasthe first to support AWSA's establishment and program, became effective in1973. The US$8.7 million Credit was to cover 75% of the estimated US$11.5million project cost for extending the water supply and sewerage services andreducing unaccounted-for water. As of November 1977, all major constructionhad been completed, and the civil works elements have entered the guaranteedmaintenance phase. A balance of US$300,000 remained in this credit and shouldbe disbursed within three months. Substantial progress was made in achievingthe project objectives, particularly in expansion of the systems and improve-ment in AWSA's operational and managerial effectiveness.

IDA's Objectives for the Sector

1.21 IDA's immediate objective in the sector is to continue the develop-ment of AWSA's institutional and operational capabilities to enable it toprovide effective water supply and sewer services in the major urban area inJordan. This objective is expected to be achieved under the present Credit.IDA's further objective should be to assist WSC in overcoming its present tech-nical, organizational and administrative problems to enable it to effectivelyimplement the Government's strategy of improving water and sewerage servicesin other urban and rural areas in Jordan.

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CHAPTER II

PROJECT AREA

Water Resources - Amman

2.01 Amman now depends on two aquifers in the Amman-Zerqa basin for its

water resources. AWSA has at present 48 wells, but only 28 are in actual

production. Instability of production typifies the performance of the exist-

ing well fields. A review of the performance of the wells was conducted in

August 1977, and from examination of the data obtained it can be concluded

that the aquifers are being mined. The combined capacity of the operating

wel:Ls is such that approximately 1,800 m3/hour (500 1/sec) can be pumped

into the Amman system. AWSA has embarked on a rehabilitation program covering

12 wells and expects to restore at least six wells to their former capacity.

2.02 Thorough investigation of the two aquifers has led to the conclusionthat the future demands of Amman cannot be met from these sources. Therefore

studies have been conducted by AWSA and its consultants in which alternative

potential sources have been examined to determine their possible utilization

for the Amman water supply.

2.0:3 Six groundwater and four surface water sources were studied.

Recommendations for the use of one groundwater source at Qastal were made

(para. 2.04). The groundwater in the Azraq area, presently supplying Irbid,

can be diverted to Amman when an alternative source will be available to

Irbid after construction of the proposed Maqarin Dam. The Zarqa-Maeen spring

water is unsuitable for potable water use because of the high degree of

mineralization, and Zarqa-Maeen has been designated as an historic tourist

site. The remaining three small groundwater sources were unsuitable for

development due to unpredictable production following exploration and major

investment in transmission which made their development uneconomic. Of the

four surface sources only the King Talal Dam reservoir is available fordevelopment to meet Amman's immediate needs. Dams for the other three have

yet to be designed and constructed. Only one of these sources, Upper Wala

Dam, would be suitable for future use in Amman as the other two will depend

upon rainfall flood for water storage.

2.04 Several wells in the Amman municipality provide water to outside

areas within the purview of WSC and NRA. While the reported capacities of

these wells varies, the average total yield is over 1.0 Mm3/year, which rep-

resents an average of about 6% of AWSA's present annual production. Thewater supply for Madaba, for example, is pumped from two wells in Amman

through a 300 mm main to Madaba. Passing in close proximity to the Qastalarea, in which limited groundwater is available, the transmission main could

be used to augment Amman's supplies (if producing wells were developed in

the Qastal area) and to meet Madaba's need as well. During negotiations

agreement was reached that the Government will cause WSC to develop alterna-

tive sources for Madaba prior to June 30, 1980 in order to allow retention

of this source for use in the Amman water supply system.

Existing Facilities - Water and Sewerage

2.05 The existing water distribution system serves over 80% of the Ammanpopulation through house connections, and the sewage collection system servesabout 28% through service connections. Approximately 75% of the water supplysystem and 100% of the sewerage system have been constructed during the past15 years.

Urban Poor

2.06 AWSA's work program for the five years, 1977-1981, of which theproposed IDA project is a part, has given high priority to water and seweragesystem construction in urban poor areas. All of the urban poor have accessto public water and as a result of AWSA's program it is estimated that waterservice through house connections for the urban poor will increase from 34%in 1977 to 84% in 1981 and sewer connections from 18% to 74% (Tables I andII). The estimated number of urban poor to be provided with improved waterservice through this project will increase from about 41,000 to 56,000.Sewerage service will benefit about 36,000 users as compared with an ini-tially served urban poor population of 11,000. Approximately 20% of thetarget population is to be directly affected by the project; and concur-rently, approximately 20% of the project cost for water and 19% of theproject cost for sewerage will have a significant impact on the urban poor.Per capita expenditures on urban poor in the project will be approximatelyUS$175 for water supplies and US$157 for sewerage.

TABLE 1

AREAS TO BE SERVED BY AWSA'S PROGRAM

ESTIMATE OF LEVEL OF SERVICE FOR THE URBAN POOR - WATER SUPPLY l/

(Population in '0OOs)

IDA Project

------------- 1977 ------------- ------ 1981 ---------------

Area Total Urban Popula- Urban Total Urban Popula- UrbanPoor tion Poor Poor tion Poor

- Served Served - Served Served

Jebel Amman 47 1 40.0 0.9 58 1 55.0 0.9

Sport City 3 - 0.3 - 4 - 3.8 -

Jebel Hussein 40 2 38.0 1.8 50 2 45.0 1.8

Wadi Hadada 12 7 7.0 4.0 13 7.5 7.0 4.0

Nazzal 40 10 30.0 7.0 42 11 34.0 8.0

Nadif 30 7 15.0 4.5 40 10 20.0 6.0

Ashrafiya 39 12 20.0 6.o 45 13 30.0 9.5

Qussour 15 It 12.0 3.3 18 5 15.0 4.5

Hashemi 24 5 20.0 4.0 31 6 25.0 5.0

Shar.sani 2 - - - 3 - 2.2 -

Abdoun 6 - -- - 8 - 6.0 -

Smissani 7 - 5.0 - 10 - 10.0 _

Marka 40 8 20.0 3.8 50 10 30.0 6.o

Nuzha 24 6 20.0 5.0 29 7 24.o 5.5

Shaleh 10 4 3.0 1.0 15 6 12.0 4.0

Zuhour 3 0.5 - - 4 1 3.0 o.6

342 66.5 230.3 41.3 420 79.5 322.0 55.8

Other AWSA Projects

Tadj, Mahatta,Jofeh, andQuala 112 20 58.0 14.8 176 30.0 80.0 18.3

Refugeecamps (Wahdatand Hussein)2/ 165 160 33.0 28.0 189 183.0 189.0 170.0

277 180 91.0 42.8 365 213.0 269.0 188.3

TOTAL 619 246.5 321.3 84.1 785 292.5 591.0 244.1

/ This table was prepared by the mission in consultation with AWSA and their

consultants' staff. Because of overlapping and differences in area delineation

as well as lack of accurate data on income distribution, the figures should be

considered as rough estimates only.

2/ The mission assumed that the vast majority of the refugees are urban poor and

that about 10% will continue to rely on neighbors' connections for water

supply in 1981.

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TABLE 2

AREAS TO BE SERVED BY AWSA'S PROGRAM

ESTIMATE OF LEVEL OF SERVICE FOR THE URBAN POOR - SEWERAGE 1/

(Population in '0OOs)

IDA Project

…------------ 1977 -…---------- ------------- 1981 -- …-… ---

Area Total Urbar Popula- Urban Total. Urban Popula- UrbanPoor tion Poor Poor tion Poor

Served Served Served Served

Jebte Anm.an 47 1 19.5 0.5 58 1.0 33.9 0.7

Sport City '3 - 0.3 - 4 - 3.8 -

Jebel Hussein 40 2 17.0 1.0 50 2.0 26.5 1.5

Wadi Hadada 12 7 3.0 1.7 13 7.5 6.o >0

liazzul 4o 10 2.1 0.5 42 11.0 13.8 4.5

Nadir 30 7 12.8 4.0 40 10.0 16.4 5.1

Ashraf'iya 39 12 8.4 2.8 45 13.0 13.7 4.0

Qussour 15 4 3.8 0.9 18 5-0 7.8 2.2

Hasheni 24 5 - - 31 6.0 24.7 5.0

Shamsani 2 - - - 3 - 2.2 -

Abdoun 6 - - - 8 _ 2.6 -

Smissani 7 - 3.5 - 10 - 9.0 -

Marka 4o 8 0.7 - 50 10.0 10.2 2.0

Nuzha 24 6 - - 29 7.0 11.1 2.7

Shaleh 10 4 - 15 6.o 8.0 2.3

Zuhour 3 0.5 - 4 1.0 2.0 0.5

342) 66.5 71.1 11.4 420 79.5 191.7 35.5

Other AWSA Projects

Tadj, Mahatta,Jofeh andQuala 112 20 36.9 9.6 136 30.0 62.4 13.4

Refugeecamps (Wahdatand Hussein) 16' 160 - 189 183.0 170.0 164.0

27' 180 36.9 9.6 325 213.0 232.4 177.4

TOTAL 619 246.5 108.0 21.0 745 292.5 424.1 212.9

1/ This table was prepared by the mission in consultation with AWSA and theirconsultants' staff. Because of overlapping and differences in areadelineation as well as lack of accurate data on income distribution, thefigures should be considered as rough estimates only.

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Unaccounted-for Water

2.07 The principal operating problem in the water supply sector in Ammanis the high percentage of unaccounted-for water. Details for the period 1975through 1977 are shown as follows:

% of Unaccounted-Year Population Water Produced Water Sold for-Water

('000) ---… --- ('000 m3)…--------

1975 626 17,560 9,140 47.91976 655 14,210 8,330 41.31977 /1 685 17,500 10,850 38.0

/1 Projected.

2.08 The leakage survey conducted by AWSA in 1974 estimated an annualloss of 1.9 Mm3/year, or approximately 12% of production, through leakage,above ground defects, and substandard repair methods. In 1975 more than3,000 leaks were reported and properly repaired; therefore, it is essentialthat the program should be continued. No illegal connections were detectedduring the survey. AWSA now estimates that, as a result of the ongoing leakdetection and repair program, the annual loss due to leakage is less than 10%.

2.09 Through the installation of improved telephone systems and withthe inauguration of the portable radio communication system, AWSA has greatlyimproved communication between key elements of the water distribution system.This has led to a reduction in losses to less than 1% caused by overflowingreservoirs.

2.10 Inaccurate metering is responsible for the largest element ofunaccounted-for water. Production meters were found in 1972 to be over-registering by at least 6% of the gross production. In 1975 over-registrationwas estimated to have reached 10% of production. While AWSA is now testingand monitoring production meters, the procedures need further improvement.The bulk supply from Wadi Sir to Amman was initially recorded at 80 1/sec,but a recent AWSA check at the point of entry into the Amman system showedthe flow to be negligible due to increased off-taking by Wadi Sir Municipality.AWSA pays all the operating costs of the Wadi Sir system in addition to anannual fee to the Municipality of Wadi Sir for the right to use surplus water.Dur:Lng negotiations an assurance was received that the Government shall ensurethat the Wadi Sir Municipality and AWSA shall make, by December 31, 1978,arr<angements whereunder AWSA shall receive a specific daily supply of waterfrom the Wadi Sir springs in return for operating the facilities and thepayment of a specific fee to the Municipality of Wadi Sir.

2.11 Undoubtedly, the greatest determinant of unaccounted-for water isthe large number of consumer-owned meters on house services. Since these aregenerally velocity meters, registration of low flow is inaccurate, partic-ularly in view of the equalizing effect induced by the roof tanks. In 1975

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AWSA's consultants estimated an annual discrepancy of 4.8 Mm3 or 27% of pro-duction through unmetered flows. Under Credit 385-JO, AWSA purchased 12,000volumetric meters to replace the unsatisfactory consumer-owned meters. How-ever, the majority of these meters were in stock until recently as a courtdecided that AWSA was not authorized to remove private meters, install theAuthority's meters and charge a meter rent. The problem has now been resolved(para 3.03). Under AWSA's recently established meter replacement program,6,000 meters were replaced through January 1978. AWSA has initiated a waterconservation program among Government agencies. In the program, AWSA isconducting a continuing survey of water meters and replacing defective andinoperative meters in schools, hospitals and institutions. Faulty valvesand fittings are replaced by the agencies under AWSA direction.

2.12 As a result of all the above activity, the level of unaccounted-forwater has been reduced from 64% in 1972 to 41% in 1976 and is projected as 38%in 1977.1/ During 1975, for example, the total of over 47% unaccolnted-forwater was based upon the following estimates: 10% due to leakage, 10% to in-accurate production metering and 27% to under registration in users' meters.However, fragmentation of responsibility has precluded the implementation of asuccessful program for reduction of unaccounted for water. In order to ensurethat top priority is assigned to continuing the efforts to reduce unaccounted-for water and to achieve the targeted 28% in 1984, agreement was reachedduring negotiationis that AWSA will, prior to September 30, 1978:

(a) appoint a senior engineer to be responsible for coordinatingthe program for reducing unaccounted-for water with directresponsibility for (i) leak detection staff; (ii) calibrat-ing and testing production meters; (iii) consumer meterreplacement staff; and

(b) establish a meter replacement program to replace not lessthan 750 meters per month.

Sewerage Connections

2.13 The Law establishing AWSA provides that all premises in areas pro-vided with sewer laterals must have a connection installed and the cesspoolclosed within three months following official notification by AWSA. The Lawalso provides that, if the property owner fails to comply within the statutoryperiod, AWSA should install the connection and recover the cost plus a 20%penalty. AWSA has been experiencing difficulties in securing voluntary com-pliance with this provision, especially for rental properties. Landlordshave not been allowed to increase the rent of sitting tenants during the lastfive years and therefore are reluctant to improve their properties. AWSA hasbeen more active recently in using its statutory power to connect properties.Up to June 1977, about 300 properties have been compulsorily connected, andAWSA at present has an ongoing contract of JD 500,000 to connect most of thepremises presently in default. Connections to the sewer system in the two

1/ For comparis;rn. percentage unaccounted-for water for other cities isas follows: Istanbul, Turkey - 44% (1977), Hodeida, YAR - 40% (1977),Aleppo, Syria - 29% (1976).

- 13 -

refugee camps under an ongoing contract (para 2.17) will be installed free ofcharge. The average connection cost of JD 70.0 has not caused a major problemfor owner-occupants. The existing covenant under Credit 385-JO requires thatAWSA will take all necessary steps to ensure that all premises for which sewerlaterals are constructed under the project will have sewerage service connec-tions made not later than nine months following completion of the sewerlaterals. This covenant was repeated in the new Project Agreement. Inaddition, agreement was reached that AWSA will levy a sewerage surcharge onproperties that are not connected to the sewerage system within the statutorythree month period.

Other Works

2.14 In addition to the IDA project, AWSA will undertake additionalworks to improve water supply and sewerage service in Amman.

2.15 USAID will finance part of the AWSA program in which sewerageextensions will be installed in the Tadj-Mahatta area whose total populationfor 1981 is estimated at 136,000. Upon completion of the works, the numberof persons served will be over 62,000 of which approximately 13,500 urbanpoor will be included. The USAID project also has a component in which theexisting sewage treatment plant will be upgraded. Major emphasis will be onimprovement of sludge handling and disposal operations.

2.L6 The King Talal Dam reservoir, located about 35 km northwest ofAmman on the Zarqa River, has been defined (para 2.03) as the only presentlydevelopable water resource for Amman. In order to utilize this resourcein an amount of up to 17 Mm3/year (2 Mm3/year for villages en route), finalengineering designs and documents are being prepared by the French consul-tants, SOGREAH, for AWSA. The first stage elements in this surface watertransmission project include: floating intake, treatment plant, pumpingstations, transmission line and terminal reservoirs. Water will be pumpedfrom the intake directly into the treatment plant which has an approximatecapacity of 650 lps and thence into an 800 mm transmission line. Threepumping stations will provide the 900 m lift from the dam reservoir to twoterminal reservoirs in Amman, which have planned capacities of 10,000 m3 each.These reservoirs will be installed at an elevation approximately 100 m belowthe highest service area in Amman, and the final lift into a high level dis-tribution system will be via booster pumps. Final designs and tender docu-men,ts are scheduled for completion by mid-1978. Saudi Fund and USAID haveexpressed an interest in participating in the financing of this project; inthis regard the delivery date of the documentation may be revised to corre-spond with these agencies' contracting procedures. Completion of this projectis essential to the provision of sufficient water for Amman's needs by 1982.Agreement was reached with the Government on a schedule for the preparation oftender documents and the date of contract award for the King Talal Dam intake,treatment and transmission facility that will enable construction of thefacility to be completed by 1982. Confirmation of the Government's recentdecision to allocate 17 Mm3 per annum to AWSA from King Talal Dam was secured.

2.L7 AWSA is presently providing piped water supply and sewage collectionsystems to the refugee camps (Hussein and Wahdat) and will supply approxi-mat:ely 165,000 people with both services when construction is complete.

- 14 -

CHAPTER III

THE BENEFICIARY

Introduction

3.01 The Hashemite Kingdom of Jordan will be the borrower of the proposedcredit of US$14.0 million and will on-lend the Credit to the Amman Waterand Sewerage Authority (AWSA). This is the third Credit to be provided forthe expansion of the Amman water supply and sewerage systems (para 1.20).

Organization and Management

3.02 A major objective of Credit 18-JO to develop the Amman MunicipalWater Department into an efficient organization was not fully achieved. TheDepartment was handicapped by poor organization and lack of delegation ofauthority, and the engineering and accounting unit remained weak. The opera-tion and maintenance of water supply facilities suffered from a shortage oftrained supervisory, operational and maintenance staff, caused in part by thelow salary structure. Substantial progress has been made by AWSA in solvingthese problems during the last four years, but a considerable amount of workremains to be done to consolidate the progress made and to improve the opera-tional and managerial practices.

3.03 AWSA was established by law in 1973 as an autonomous authority totake over and operate from the Amman Municipality all water supply, sanitarysewerage and stormwater drainage functions. A new law was enacted onDecember 16, 1977, the principal function of which was to authorize AWSA'scompulsory acquisition of customers' meters and to charge meter rent. Thenew law was required after a court had held that AWSA did not have this powerunder its original law. AWSA's legal structure is adequate.

3.04 Control of AWSA is vested in an eight-member board consisting ofthe Lord Mayor of Amman as Chairman, the General Manager of AWSA, two membersof the Municipal Council, one representative each of the Ministry of Healthand the Natural Resources Authority and two representatives of the privatesector. The General Manager, appointed by the Prime Minister on the recom-mendation of the Board, is responsible for implementing the board's policyand for the day-to-day operation of the Authority.

Personnel

3.05 AWSA has established a salary structure which is competitive withthe private sector in Jordan and which has enabled it to recruit qualifiedstaff. Staff turnover is high, averaging 16% per annum during the last threeyears, due mainly to the high salaries offered in neighboring Arab countries.AWSA, in common with the private sector, cannot attempt to offer competitivesalaries to stem this movement and consequently is undertaking an activetraining program to maintain the capability of its staff (para 3.06). In

- 15 -

addition, AWSA has overstaffed its departments in order to ensure that adequatestaff are available at all times. Staff increased by 32% in the three-yearperiod ending July 1977, which was not justified by the increased operationalresponsibility. At present, AWSA has 1,040 employees, 770 in the watersection and 270 in the sewerage section, compared with 620 recommended by theirconsultants. AWSA is overstaffed by international standards, but not by thestandards of neighboring countries. However, AWSA has an adequate salarystructure and so should be able to achieve increased productivity, therebyreducing overall staff requirements. Assurance was obtained during negotia-tions that prior to December 31, 1978 AWSA will undertake a review of staffingrequirements through 1984, prepare a report and discuss the report with IDAprior to implementation and that during the interim, AWSA will maintain itsstaff level under 1,100.

Training

3.06 During the four years, 1974-77, AWSA undertook an active trainingprogram for its staff. Seventy staff members attended courses in Jordanconducted by foreign consultants and local institutions, and ten membersattended foreign institutes. With the turnover of staff at 16% per annum,AWSA loses some of the benefits of its training. However, remittances fromthese emigrant workers contribute substantial amounts of foreign exchangeto the Jordanian economy; and eventually the majority are expected to return.To sustain and improve the competence of AWSA's staff, it is essential thatan active training program be maintained. Provision has been included inthe Credit for US$180,000 for the foreign exchange cost of training. Theemphasis in training will be to upgrade the capability of incumbent staff inorder to meet the additional requirements imposed by the expanded facilitiesevolving from the proposed investment program. The British Overseas Develop-ment Administration (ODA) has provided three engineers for design, construc-ticin supervision and training of counterparts; and training will be providedby the engineering consultants. AWSA also expects to avail itself of otherbilateral training assistance. During negotiations agreement was reached thatAWSA would prepare a training program by September 30, 1978 and would implementthe program after discussions with the Association.

Accounting

3.07 AWSA had the assistance of an accounting advisor from ODA untilDecember 1976. An adequate billing and collection and stores control systemis now in operation. However, since the departure of the ODA advisor, diffi-culties and delays are being experienced in processing of the financialaccounts. To overcome these problems, AWSA has signed a contract with itslocal auditor, Shair and Company, to assist in developing the accountingsystem and coding the accounts for future transfer to a computer afterimplementing the manual accounting system. It is planned to introducethe new accounting system next year, but a decision to computerize willnot: be made until the manual system has been properly established. Thisarrangement is satisfactory and should enable AWSA to overcome the presentaccounting problems by mid-1978.

- 16 -

Audit and Insurance

3.08 As required by under Credit 385-JO, AWSA's accounts are auditedannually by independent auditors. AWSA also has standard insurance coveragefor water supply and sewerage installation. The requirements for insuranceand audit under Credit 385-JO are adequate and were repeated in the newCredit Agreement.

- 17 -

CHAPTER IV

DEMAND ANDMARKET ASPECTS

?2pulation Forecast

4.01 The AWSA consultant, Vattenbyggnadsbyran/Fawzi (VBB), projectedfuture population for Amman on the basis of the 1961 population census(246,000), the 1967 Government estimate (330,000) and the 1971 estimate(521.000). A medium level projection with an annual rate of increase of 5%gradually decreasing to 3% was used by the mission as the basis for populationforecasting (Figure 1). With this assumption the population of Amman in 1977would be approximately 700,000 and would reach 850,000 in 1982, and 1,800,000in 2005. With no official population census since 1961 the only confirmationof the above forecast is the broadly estimated 25,000 per year populationincrease which seems to coincide roughly with the forecast. Average popula-tion densities vary from 30/1,000 m2 to 60/1,000 m2.

Preseant Consumption

4.02 During the past few years there have been water shortages duringthe summers due to seasonally increased demands and to drought conditionswhich have prevailed until 1977. As of mid-1977 the water shortage wasalleviated to a degree, and the reliance on ad hoc measures such as thewidespread use of mobile tankers was reduced considerably. However, percapita usage has remained relatively low because of the limited groundwaterresources which makes it impossible for AWSA to provide a continuous supply.In 1977 the consumption was 43 lpcd which is considerably lower than thatfor other cities such as Damascus (159 lpcd) and Aleppo (90 lpcd). Atpresent AWSA provides a minimum of one 24-hour day continuous supply perweek. Through the use of roof tanks this supply assures continuous serviceto a majority of AWSA's consumers. Water conservation by individual usersis evident in Amman, and only through the increase in water supplied can acorresponding increase in demand occur. Maximum day demands therefore areconfined to the very limited area in which daily continuous supply is pro-vided. The variation in maximum day factor in this area is expected toreflect a reduction from 1.50 in 1975 to 1.40 in 1981 due to growing popula-tion and urbanization.

4.03 Water consumption in Amman is principally made up of domestic andcommercial and Government institutional consumption. Industrial consumptionwith,in the municipality is limited, because industrial development is gener-ally, concentrated in the neighboring municipality, Zerqa.

4.04 An analysis of the number of meters in use in 1976 and the rangeof consumption in which the meters were operative shows that 69% of theconnections use 31% of the water consumed.

- 18 -

Consumption Forecast

4.05 In 1976 there were 41,607 water connections in the Amman system, andit is projected that there will be 60,000 connections in 1984. It should benoted, however, that in Amman, multi-purpose buildings may be served by singlewater meters. Therefore, with the recent introduction of the stepped-tariffand increased rates, it could be advantageous for users to install individualmeters in apartments; and the result would be a relatively substantial increasein the number of meters installed without an accompanying increase in waterusage. Projections of water connections to the year 2000 are shown in Figure2.

4.06 The mission's forecasts of water production and consumption as agreedupon by AWSA are shown in Figure 3. Per capita consumption is expected toincrease from 35 lpcd in 1976 to 58 lpcd in 1984 and approximately 90 lpcd in2000. This projection of relatively low consumption is reasonable, given thepast history of consumption, high costs of the service, and the scarcity ofwater. No provisions for public standpipes have been made in this project.The non-connected population has traditionally depended upon water tankerservice and roof tanks as well as temporary connections to neighbors'-pipedsupplies. AWSA has 31 stationary tankers serving non-connected users.

4.07 Sewerage connections in 1976 totalled 7,900. By 1984 it is estimatedthat a total of 40,000 service connections will have been installed in Amman.Figure 2 shows the projection of service connections to the year 2000. Connec-tion to the collection system is compulsory, and a sewer surcharge is leviedon the water rates for properties connected to the sewage collection system.

- 19 - FIGURE 1

APPRAISAL OFAMMAN WATER SUPPLY AND SEWERAGE PROJECT Ill

JORDAN

Population Development in Amman

Population1 000 p

3000 -

High level estimate

2000

g bl~~~~~~~~~~~~~~~~~~edium level estimate/

1000 evletmt

800-

600 _

400 _

200 -

0 I I I I I I II I I II I I II I I I I i196,0 1970 1980 1990 2000

World Bank - 18092

-20- FIGURE 2

APPRAISAL OFAMMAN WATER SUPPLY AND SEWERAGE PROJECT III

JORDANPopulation, Water and Sewerage Connections

Population Connections(X 1000) iX 1000)

1500 100 _

90

80-

1000

70 - Population

/ / W~~~ ~ ~ ~~ater 60 - Connections

500 50-

/ / Se~~~~~~~~werage

40 / / ~~~~~~~~~~~~~~Connections40-

30-

20-

10

0 l I I I I l1970 75 80 85 90 95 2000

YearWorld Bank - 18090

FIGURE 3- 21 -

APPRAISAL OFAMMAN WATER SUPPLY AND SEWERAGE III

JORDANForecast of Water Consumption and Production

80

70 -

Upper Wala DamTransmission

!50

King Talal Dam ProductionTransmission

o Phase 11

:30 igTla a \

~0>- 4

& 2

30King Talal Dam-0Transmission Consumption

20 1

10 Groundwater

1970 75 80 85 90 95 2000

Year

World Bank - 18091

- 22 -

CHAPTER V

THE PROJECT

Project's Objectives

5.01 The overall project objective is to continue the development of

AWSA's institutional and operational capabilities by:

(a) assisting AWSA in its expansion program of the watersupply and sewer service, for all of the population of

Amman, in accordance with the priorities establishedfor them by the Government;

(b) establishment of a more progressive tariff structurewhich will ensure AWSA's financial viability, provideaccess to the services by the poor at a price they can

afford, and establish a rate for large consumers in line

with the marginal cost of supplying the service to ensure

the economic allocation of resources and the conserva-tion of water;

(c) assisting AWSA during project supervision and monitoringprogress to improve its operation by increasing produc-

tivity, continued emphasis on reduction of unaccounted-for water, and to assume increased responsibility forproject supervision which has hitherto been undertaken

by expatriate consulting firms;

(d) improving AWSA's maintenance and operation activities

through the furnishing of needed specialized equipment;and

(e) upgrading the technical and professional skills of theAWSA staff by assisting in the implementation of a

training program.

Scope of the Project

5.02 The proposed project, which is part of AWSA's ongoing work program,

was prepared by VBB and consists of extending the Amman water distribution

system and the sewage collection system in order to improve the levels of

service in Amman including those areas in which the urban poor reside. Con-

nections to the water supply system are expected to increase from 41,600 in

1976 to 52,200 in 1980, with a concomitant increase in consumption from 35

lpcd to 48 lpcd. Water produced will increase from 14.21 Mm3/year in 1976 to

20.00 Mm3/year in 1980, while the figures for water sold in the same years are

8.33 Mm3 and 13.80 Mm3, respectively. Percentage of unaccounted-for water is

- 23 -

expected to improve as well, moving from 41.3% in 1976 to 31.0% in 1980.AWSA will continue its policy of metering new connections. Sewerage connec-tions are expected to increase from 7,900 in 1976 to 28,000 in 1980. Sewageflow will increase from 2.3 Mm3/year in 1976 to 8.0 Mm3 in 1980.

5.03 Present limitations in the number and types of maintenance equip-ment available for AWSA use which are reflected in existing time-consumingapproaches to maintenance, repair and system augmentation will be reducedthrough the provision of such equipment in the proposed project. Routine orpreventive maintenance such as scheduled sewer cleaning, will be expeditedthrough the use of mechanical rodding equipment, and emergency action willbe reduced considerably. The availability of well-acidizing equipment willallow for a planned program of well-rehabilitation on a continuing basis.

Project Description

5.04 Project Components:

A. Water Supply:

Included in the water supply element of the project are:

(i) approximately 207 km of mains, laterals and houseconnections, a 4,000 m3 capacity reservoir and abooster station;

(ii) supply of electrical and mechanical equipment for thebooster station;

(iii) supply of pipes, valves, and fitting for water mains,laterals, and house connections;

(iv) purchase of 15,000 water meters for installation innew services and for replacement of existing meters;and

(v) consulting services for construction supervision.

B. Sewerage:

Included in the sewerage element of the project are:

(i) approximately 225 km of mains, laterals and serviceconnections and two sewage lift stations;

(ii) supply of electrical and mechanical equipment forthe lift stations; and

(iii) consulting services for construction supervision.

- 24 -

C. Maintenance Equipment and Vehicles:

Purchase of equipment is required to improve the efficiency ofAWSA's maintenance programs.

D. Training:

Provision of training for professional and sub-professional staffof AWSA.

Cost Estimates

5.05 The total estimated cost of the project is JD 11.19 million(US$33.91 million) with a foreign exchange cost of JD 6.19 million (US$18.78million) equal to 55% of the total cost. Details of the cost estimate areshown below.

Local Foreign Total % ofItem ----- $ '000 us$… …0--Total

A. Water Supply Component:Civil Works 3,227 2,197 5,424 16.0Materials and Equipment 376 6,502 6,878 20.3

B. Sewerage Component:Civil Works 7,584 5,196 12,780 37.6Materials and Equipment 55 203 258 0.8

C. Maintenance Equipmentand Vehicles 24 476 500 1.5

D. Consulting Services 421 745 1,166 3.5

E. Training 36 146 182 0.5

Sub-Total 11,723 15,465 27,188 80.2

Physical Contingencies 1,127 1,458 2,585 7.6Price Increases 2,279 1,860 4,139 12.2

TOTAL PROJECT COST 15,129 18,783 33,912 100.0

5.06 The cost estimates were prepared by VBB and revised by the missionand are based on actual construction price levels prevailing in Jordan inAugust 1977. As AWSA is tax exempt, no import taxes were included. Becausefinal engineering designs have reached or are nearing completion, physicalcontingencies of 10% of the base costs are adequate. Construction supervisionis estimated at 5% of base costs. To provide for price escalation duringproject execution the expenditures for equipment supply were increased at anannual rate of 7.5% for 1977, 1978 and 1979, and 7% for 1980. Civil works

- 25 -

expenditures were escalated at annual rates of 15% for 1977, 12% for 1978 and

1979, and 10% for 1980. These relatively high rates for civil works reflect

the effects of protracted shortages of skilled labor in Jordan compounded by

considerable construction activity under way and planned. Calculations of the

foreign exchange component were based on detailed analysis ot works in progress

where applicable, and also on previous experience of AWSA and VBB in Jordan.

Project Implementation

5.07 The network diagram for project activities, covering as well the IDA

functions as they relate to the construction schedule, is attached as Figure4. Final designs and tender documents are being prepared by VBB and will be

completed by May 1978. These cover the water supply and sewerage aspectsof the project as well as other activities such as sewage treatment plant

modifications. According to the project time schedule ac+reed upon by AWSA,IDA and VBB, construction would be completed by mid-1980. The Credit would be

fully disbursed by end 1980.

5.08 The level of construction capability in Jordan is such that the

installation of pipelines and construction of pumping stations and reservoirs

can be competitively executed by local contractors. Several projects withconstruction elements of similar scope and complexity are in progress atpresent or have recently been completed. This allows for realistic estimatingof the various components of the project.

5.09 Although foreign consulting engineers will be engaged by AW4SA tosupervise construction it is noted that some of this responsibility can be

readily assumed by AWSA, since AWSA has already demonstrated its ability in

this aspect of project implementation. During negotiations an agreementwas reached that AWSA would directly supervise water system installationand sewer construction in Jebel Hussein, Jebel Amman and Sport City and

sewer construction in Smissani and Nuzha. Agreement was also reached thatAWSA will continue to employ engineering consultants satisfactory to IDAfor supervision of other works.

Procurement

5.10 Procurement of civil works contracts for the water and sewerage

services in Abdoun, Shamsani, Smissani, Nazzal, Nadif and Zuhour areas, which

forms part of the project, will not be procured under ICB procedures as AWSA

expects to secure USAID financing for this work. No IDA financing will beprovided for these civil works contracts. All major contracts financed by theAssociation would be procured through international competitive bidding in

accordance with the Bank Group Guidelines for Procurement. For bid evaluation

purposes, a 15% margin of preference or an amount equal to customs duties,whichever is lower, would be applied in the case of equipment manufactured

in Jordan. Contracts for civil works, materials and equipment of less thanJD 66,000 (US$200,000) aggregating to not more than JD 330,000 (US$1,000,000)would be awarded on the basis of competitive bidding advertised locally.

APPRAISAL OFAMMAN WATER SUPPLY AND SEWERAGE PROJECT III

JORDANNETWORK DIAGRAM OF PROJECT ACTIVITIES

1977 1978 1979 1980ACTIVITY _ _ __ _ __ __ACTIVITY~~~~ 2 _ .3 4 1J. 3 1 2 341 2

ASSOCIATION A_At NIDS- -EENASSOCIATION _ _jr ITIAL DISBU RSEMENT SNAL DISBURSEMENl f

CO NTRADTS

SEWERAG DESIGN & TENDER PREPARATION Rv T I E Mt- CONSTRUCTION

SHAMSANI, SMISSANI, NUZHA I - -&WADI HADADA

SEWERAGE - I I I& WATER DISTRIBUTION W/RESERVOIR-_ LDESIGN & TENDER PREPARATION J Rv T E _ _ CONSTRUCTION

SEEAGE __PEAAIN R&WATER DISTRIBUT ION W/RtESERVOIR -EI T RPEAATO v T E- CONSTFUCION---NAZZAL, NADIF, ASHRAFIYA, _ TQUSSDOUR & HASHAMI I |

SEWERAGE STATION ESIGN & ENDER PRPARATIN Rv T CONSTRUCION

WATER DISTRIBUTION & PUMP STATION _ABDOUN, SHAMSANI & SMISSANI I |

SEWERAGE I & LIFT STATION DESIGN & TENDER PREPARATION Rv T En M CONSTRUCTIONWATER DISTRIBUTION /MARKA I I

71' I//Rf \I \

7MW R~TI IP PREAPPRAISAL MISSIONWATER SUPPLY -DESIGN & TENDER PREPARATIO- T E_ APPRAISAL MISSIONPIPES & FITTINGS DELIVERY | R\ APPRAISAL REPORT

\ I I l | \ l | N NEGOTIATIONS

BMW l l l l | \ § \ l 3 =B BOARD APPROVALSEWERAGE I RV= DOCUMENT REVIEW F& WATER SUPPLY TENDER PREPARATION RE R =RETROACTIVE FINANCINGELECTRIVAL/MECHANICAL EQUIPMENT , , ,FOR PUMP STATIONS l l i DELIVER & INSTALLAFDOUN, SMISSANI & MARKA T TENDERINGABDDUN, SMISSANI & MARKA j S~~~~~~~~~~~~~~~~~~~~~~~~~~ EVALUATION &AWARD

M \ MOBILIZATIONTENDER

9MW PREPARATION | TWATER METERS |EIALL AREAS DELIVER & INSTALL|1

NoCd B-, 18168

- 27 -

Prior Contracting and Retroactive Financing

5.11 The bulk supply of water distribution system materials should beprocured urgently to expedite the water supply civil works by about threemonths. AWSA intends to use ICB procedures for this contract. The missionrecommends that the purchase of water supply material be eligible for retro-active financing from the credit up to a limit of US$1.5 million.

Disbursements

5.12 The proposed IDA Credit would be disbursed against the cost of theproject elements as follows.

(a) Water Supply and Sewerage Component

(i) Equipment and Materials 100% of the C.I.F. cost of(US$6.95 million) directly imported equipment,

pipes and materials; 100% ofthe ex-factory cost of locallymanufactured equipment, pipesand materials; and 85% of locallypurchased imported equipment.

(ii) Civil Works : 30% of the cost of civil works.(US$3.67 million)

(iii) Consultants Services 100% of foreign expenditures.(US$0.74 million)

(b) Training (US$0.15 million) 100% of the foreign exchangecosts of training.

(c) Unallocated (US$2.49 million)

5.13 Estimated disbursements of the IDA Credit are shown in the follow-ing table. The closing date of the IDA Credit would be December 31, 1981.

- 28 -

ESTIMATED SCHEDULED OF DISBURSEMENTS

FY and Quarter Disbursement at end Cumulativeof Quarter Disbursement

US$ Millions ------- -----1978:

End of 2nd Quarter 0.86 0.86End of 4th Quarter 1.28 2.14

1979:

End of 2nd Quarter 5.76 7.90End of 4th Quarter 4.71 12.61

1980:

End of 2nd Quarter 1.39 14.00End of 4th Quarter - 14.00

Monitoring Criteria

5.14 Key indicators for the monitoring of project implementation andexecution through the measurement of the technical, financial, institutionaland training objectives for the project are shown in Table 3. During theproject's evolution AWSA will report to the Association on a quarterly basis,and AWSA will inaugurate any remedial actions suggested by IDA. The keyindicators will serve as a basis for AWSA's performance during IDA supervi-sion missions.

APPRAISAL OF

AMMAN WATER SUPPLY AND SEWERAGE PROJECT III

JORDAN

TABLE 3 - MONITORING INDICATORS

Indicators 1977 1978 1979 1980 1981 1982 1983 1984

1. Staffing and Training

Number of employees - Total 1,040 1,040 1,040 1,040 1,040 1,100 1,170 1,180

Number of employees- Water Section 770 770 770 770 770 800 860 870

Number of employees- SewerageSection 270 270 270 270 270 300 310 310

Staff per 1,000 served - Water 1.41 1.34 1.30 1.25 1.22 1.19 1.24 1.21

Staff per 1,000 served - Sewerage 1.42 1.02 0.80 0.69 0.63 0.61 0.58 0.54

2. System Operations

Water Produce (Mm3/year) 17.50 18.00 19.00 20.00 21.00 23.50 25.20 26.70

Water Sold (Mm3/year) 10.85 11.70 12.73 13.80 14.70 16.70 18.00 19.20

Unaccounted-for Water 38.0 35.0 33.0 31.0 30.0 29.0 28.5 28.0

Number of Water Connections 45,600 47,800 50,000 52,200 54,000 56,000 58,000 60,000

Water Surcharged for Sewerage(Mm3/year) 3.70 4.90 6.10 8.00 9.00 10.50 11.50 12.80

Number of Sewer Connections 11,000 18,000 24,000 28,000 31,000 34,000 37,000 40,000

3. Finances

Rate of Return - Water % - 13.1 9.3 15.7 14.3 9.5 6.3 6.4

Cash Operating Ratio - Water % 92 60 64 53 56 50 53 55

Cash Operating Ratio - Sewerage % 79 66 68 68 64 65 64 65

Debt Service Coverage 0.4 1.8 1.6 2.6 3.1 1.4 1.2 1.2

Average Water Tariff (fils/m3) 120 196 196 250 250 355 355 355

Average Sewer Surcharge (fils/m3) 30 50 50 50 80 80 90 90

Accounts Receivable (JD Thousands) 420 600 860 960 1,000 1,130 1,500 1,800

- 30 -

CHAPTER VI

FINANCIAL ANALYSIS

6.01 AWSA's financial results in the water supply sector during thethree years 1974-76 were unsatisfactory, with operating losses of JD 69,000in 1974 rising to JD 509,000 in 1976 (Table 4). The major cause of theselosses has been the high rates of inflation during these years resulting inan increased operating cost of about 100% in the two years 1975-76. Othercontributing factors were overstaffing and the severe drought experiencedduring this period which resulted in a 20% shortfall in volume of water soldin 1976 compared to projections. However, during this period AWSA adhered tothe financial covenant of Credit 385-JO of charging not less than 75 fils/m3for water sold. AWSA achieved a small profit on the operation of the seweragesection in 1974-76 which was satisfactory in view of the high inflation ratesand better than the break-even financial performance required under theprevious credit.

6.02 On January 1, 1977, AWSA increased average water tariff by about50%, in order to cover operating costs and generate the required 6% rate ofreturn for 1977. Early in 1977, electricity charges were doubled and AWSAsalaries and wages were increased by 25%. Revised projections for 1977indicate that AWSA will break-even on operating costs including depreciationfor the water supply and sewerage sections. AWSA performance in taking thenecessary actions to comply with the revenue covenants has been satisfactory,but mainly due to inflation and lack of cost control the desired financialresults have not been achieved. Work on maintaining the systems and com-pleting the project work has not been disrupted by shortage of funds as theGovernment has provided the necessary finance on time.

Tariffs

6.03 On January 1, 1973, AWSA introduced a flat tariff for water sup-plied of 75 fils/m3 (US$0.23). In April 1975 a progressive tariff system wasintroduced which maintained the average 75 fils/m3 rate, but provided for a20% decrease to 60 fils/m3 for low consumption to ensure access to potablewater supply by poor members of the community. This tariff was in line withthe agreement reached during negotiation of the first Credit to AWSA. OnJanuary 1, 1977 and 1978, AWSA increased the average water tariff by about50% and 63% respectively, but maintained the 60 fils/m3 rate for the firstblock. The average tariff for water sold is presently 196 fils/m3 (US$0.65).The tariff progressivity (ratio between maximum and minimum) at 4.33 is satis-factory. The present cost of water supply and sewerage services to about 20%of AWSA's poorest customers represents about 1% of the estimated urban house-hold income of those at the poverty line. The sewerage surcharge on waterconsumed has remained unchanged for the last four years but was increased byabout 65% to 50 fils/m3 (US$0.16) on January 1, 1978. At present, AWSAderives 31% of its sewerage income from the surcharge and the balance of69%, from connection charges (29%), sewerage tax (31%) and other income (9%).The water surcharge is projected to yield 52% of AWSA's sewerage income in

- 31 -

1981 as the present sewerage tax is fixed by law at 4% of the rental valueof all property in Amman.

6.04 AWSA is presently committed under the Project Agreement for Credit385-JO to earn a rate of return on water supply net fixed assets in operationof 7-1/2% in 1978. The new tariff introduced in 1978 is projected to yield13.1% which is sufficient to meet the current rate of return and to make upthe shortfall for 1977. The Project Agreement also requires AWSA to breakeven on operating costs in the sewerage section, and the current surchargeis sufficient to meet this requirement. AWSA's performance in adhering tothe revenue covenants has been excellent.

6.05 AWSA's investment program for the four years 1978-81 to extend thewater supply and sewerage systems and to transport water from King Talal Damis estimated to cost JD 36.8 (US$111.5) million. This is very high andreflects the considerable expense of supplying water to Amman. AWSA's ownresources available for development over the program period are limited by:(i) high cost of providing water, (ii) the need to preserve a low first blocktariff to cover the requirements of the poor, and (iii) the timing and sizeof the increases which can be reasonably asked from other consumers. Never-theless, in addition to providing revenue for AWSA a highly progressive tariffis rLeeded to insure a more equitable distribution of the limited amount ofwater which will be available during the next few years and assist in theessential task of conserving water in semi-arid regions. Taking all of thesefactors into account, it is considered that AWSA would only be able to con-tribute a moderate 10% towards its investment program from its own resourcesover the period 1978-81. This would require on average a higher rate ofreturn than the 7-1/2% presently covenanted. To meet the 10% contributionAWSA would need to increase tariffs again by about 30% in 1980. Assuminga 30% increase is implemented in 1980, present forecasts indicate rates ofreturn on historically valued assets of 13.1% in 1978, 9.3% in 1979, 15.7% in1980 and 14.3% in 1981. When this increase has been implemented the top step

of the tariff will approximate the average long-term incremental cost of water(para 7.02); but the average revenue per m3 will still be about 40% below thiscost, and further tariff increases would be required. After project comple-tion and assuming a further tariff increase of 40% in 1982, it is expectedthat AWSA would be able to increase its contribution to development to about20%, with rates of return on historically valued assets in the 6-9% range.During negotiations, agreement was reached that prior to September 30, 1979(when all major contracts would have been awarded) AWSA will review the watersupply tariff and will implement revised rates, not later than January 1,1980, which are adequate to cover operating expenses (excluding depreciation),debt service and increased working capital and to provide revenue sufficientto finance, during the period 1978-81 not less than 10% of the investmentcost, and beginning with the year 1982 AWSA will implement tariffs which willfinance each year not less than 20% of the average cost of investment duringeach consecutive three-year period comprising an actual and two forecastyears.

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6.06 The present Credit requirement for the sewerage section that ratesbe fixed so as to yield sufficient revenue to meet operating and maintenancecosts, provision for depreciation, and debt service requirement to the extentthey exceed the provision for depreciation, is satisfactory and was repeatedunder this credit. This provision will require AWSA to raise charges by about37% in 1981 when the sewer system in new areas come into completion.

Financing Plan

6.07 The following table shows AWSA's estimated financing requirementand the sources of funds for the four years 1978-81.

FY 1978-81

Sources of Funds JD US$ %-000's- -million-

Internal Cash Generation 6,849 20.7 18Less Debt Service 2,995 9.1 8

Available from Operations 3,854 11.6 10IDA Credit 4,620 14.0 13Government Loans 22,008 66.7 59Government Contribution 6,600 20.0 18

Total 37,082 112.3 100

Application of Funds

Increase in Working Capital 248 0.7 1Proposed Project - Water 4,990 15.1 13

- Sewerage 6,202 18.8 17Other Investments - Water 1,237 3.7 3

- Sewerage 3,587 10.9 10King Talal Dam Transmission 18,440 55.9 50Interest Capitalized 2,378 7.2 6

Total 37,082 112.3 100

NPC is holding discussions with the Saudi Fund for Development, USAID andbilateral agencies to secure funds for AWSA's investment program. Most of thefunds will be borrowed by the Government and onlent to AWSA at the current Gov-ernment onlending terms for water authorities, 25 years, including four years'grace at an interest rate of 6% per annum. It was agreed that IDA funds wouldbe onlent on the same terms. Because of AWSA's major investment program atthis stage the Government has decided to make an equity contribution of US$20.0million. The Government has requested the Saudi Fund to provide a loan ofUS$20.0 million for AWSA's investment program and USAID proposes to provide aloan of US$28.5 in FY1978. A condition of effectiveness of the credit is that

- 33 -

the SaLudi Fund Loan Agreement and the USAID Loan Agreement have been signed.USAID is expected to make a further loan of US$12.0 million for AWSA's programin 1979. This would leave the Government with a balance of US$19.0 million(excluding interest during construction of US$7.2 million) to be providedfrom its own resources or other bilateral agencies for the financing of thisproject.

Future Financial Performance

6.08 The projected firnancial statements of AWSA for the period 1978-84are in Tables 4-7. The principal financial assumption used in the projectionwere as follows:

(a) AWSA would maintain its present staff levels until theKing Talal transmission system comes into operation in1982;

(b) the King Talal transmission system will supply 2 millionm3 of water per annum to villages en route. The pumpingcost of this water was not included, and it was assumed thatAWSA would be reimbursed for this cost by the Governmentor villages supplied; and

(c) operating costs were inflated by 11% in 1978-79, 9% in 1980-81,7% in 1982-83 and 5% in 1984.

AWSA"s capital structure is projected to increase by about 300% during thefour years 1978-81 to JD 46 million. The debt equity ratio is projected tochange from 40:60 in 1977 to 65:35 in 1981 due to the Government's policyof providing the major part of finance to water authorities in the form ofloans. The water supply section's net fixed assets are projected to increaseby about 500% to JD 30 million in 1982 while the sewerage fixed assets areprojsected to increase by about 175% to JD 14 million.

6.09 AWSA's debt service will increase over threefold between 1977 and1983, and the percentage of gross revenue required to meet debt service willincrease from 30% to 38% during the same period. Net cash generation fromoperations is projected to cover debt service 1.2 times in 1983. Under theProject Agreement for Credit 385-JO, AWSA is committed not to incur anylong-term debt without the Association's concurrence, unless its net revenueis not less than 1.5 times the maximum debt service. During 1977 AWSA securedthree loans amounting to JD 1.3 million to finance its ongoing water andsewerage investment program without securing IDA's agreement as required bythe Project Agreement. One loan is repayable within twelve months, and theother two loans are for a period of five years at an interest rate of 8% perannum. Such short term borrowing is unsuitable for financing long-terminvestment in water and sewerage systems, and the Government has agreed toassume liability for these three loans as part of the proposed financing plan.The current covenant was repeated in the new Project Agreement.

APPRAISAL OF

AlMAN WATER SUPPLY AND SEWERAGE PROJECT III

JORDAN

TABLE 4 - INCOME AND EXPENDITURE STATEMENTS/WATER SUPPLY

Year Ending December 31 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984*--------- Actual ----------- * 4-- -- - ----- ----------- --------------- Projected -- ---- ---------------------

Water Produced (m3

million) 15.97 17.56 14.21 17.50 18.00 19.00 20.00 21.00 23.50 25.20 26.70

Water Sold (m3

million) 8.34 9.14 8.33 10.85 11.70 12.73 15.88 14.70 16.70 18.00 19.20

% Water Unaccounted-For 47.8 47.9 41.3 38.0 35.0 33.0 31.0 30.0 29.0 28.5 28.0

Total Population 602 626 655 685 716 748 780 813 847 881 915

Consumption of Population Served (lpcd) 38 40 35 43 45 47 48 49 54 56 58

Number of Water Connections 37,003 39,024 41,607 45,600 47,800 50,000 52,200 54,000 56,000 58,000 60,000

Average Tariff (fils/m ) 68 76 79 120 196 196 250 250 355 355 355

REVENUE iD------ -- ---- JD THOUSANDS ---- _____________________________________-__

Water Sales 566 696 659 1,302 2,293 2,495 3,470 3,675 5,929 6,390 6,816

Meter Rent - - - 10 42 45 47 49 51 52 54

Other Charges 73 80 111 122 141 164 187 213 238 267 293

Total 639 776 770 1,434 2X476 2.704 3,704 3,937 6,218 6,709 7,163

OPERATING COSTS

Salaries and Wages 244 374 499 674 758 852 959 1,059 1,206 1,308 1,393

Fuel and Power 184 188 182 340 387 451 515 587 1,260 1,506 1,745

Chemicals 7 7 8 10 12 14 16 18 23 26 29

Maintenance Materials 42 74 184 161 194 236 285 341 401 470 543

Other Expenses 50 75 184 136 151 168 180 199 213 227 238

Depreciation 123 128 141 150 246 298 377 395 1,192 1,233 1,273

Total 650 846 1,198 1,471 1,748 2,019 2,332 2,599 4,295 4,770 5,221..... ===== _ ZZ== __=== _,== ===_= ===

Surplus Before Interest (11) (70) (428) (37) 728 685 1,370 1,338 1,923 1,939 1,942

Interest 58 69 81 183 175 204 241 222 1,507 1,442 1,361

Net Surplus (Deficit) (69) (139) (509) (220) 553 481 1,129 1,116 416 497 581

Rate of Return on Average Net Fixed - - - - 131 9.3 15.7 14.3 9.5 6.3 6.4Assets

Cash Operating Ratio 82 92 137 92 60 64 53 56 50 53 55

February 1978

APPRAISAL OF

A1Ž11,a WATER SUPPLY AND SFWERAGE PROJECT III

JORDAN

TABLE 5 - INCOME AND EXPENDITURE STATEMENTS/SEWERAGE

Year Ending December 31 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984----------- Actual ----------- 4------------------------------------------------ Projected -----------------------------------

Number of Connections 4,419 6,400 7,900 11,000 18,000 24,000 28,000 31,000 34,000 37,000 40,000

Water Surcharged (m3millions) 1.4 2.1 2.3 3.7 4.9 6.1 8.0 9.0 10.5 11.5 12.8

Surcharge (fils/m3

30 30 30 30 50 50 50 80 80 90 90

REVENUE -----------------------------------------------------JD THOUSANDS ------------------------------------------__- _____________-___-___

Surcharge on Water 42 62 67 111 245 305 400 720 840 1,035 1,152

Connection Fees 139 136 101 147 234 301 375 306 327 351 369

Sewerage Tax 191 229 233 240 245 250 255 260 265 270 275

Other Revenue 28 47 65 59 65 72 78 86 92 97 102

Total 400 474 466 557 789 928 1,108 1,372 1,524 1,753 1,898

OPERATING COSTS

Salaries and Wages 110 168 222 289 325 366 404 447 485 526 560

Fuel and Power 19 23 26 41 59 80 112 137 170 202 230

Chemicals 4 4 5 9 13 18 25 31 38 45 51

Maintenance Materials 6 6 20 30 42 58 81 103 127 154 184

Other Expenses 32 34 75 69 88 108 134 154 177 200 218

Depreciation 132 133 144 148 203 271 396 480 483 596 609

Total 303 368 492 586 730 901 1,152 1,352 1,480 1,723 1,852

Surplus Before Interest 97 106 (26) (29) 59 27 (44) 20 44 30 46

Interest 2 19 22 68 82 149 208 219 221 208 201

Net Surplus (Deficit) 95 87 (48) (97) (23) (122) (252) (199) (177) (178) (155)

Cash Operating Ratio 42 50 74 79 66 68 68 64 65 64 65

February 1978

APPRAISAL OP

AMhAN WATER SUPPLY AND SEWERAGE PROJECT III

ORDAN

TARLE 6 - CASR FLOW STATEMENTS

S'2TALYear Endirg December 31 1974 1975 1976 1977 1978 1979 1980 1981 1978-81 1982 1983 1984

--------------------------------------------------------- _ ---- _____-- _--- JD T80USANDS ----------- ---------------- ------------------ ------------------------------ _____________

-------- ----- Aru-1 -------- ~--- -------------------- --------------- -- -------------------- E.ti-t.td ------ ------------------ ---------------------------------- -------

INTERENAL CAEh GENERATION

Net Eevanue Reface Depreoti-

tiEn and Interest

Water 112 SR (287) 113 974 983 1,747 1.733 5,437 3,115 3,172 3,215

Seuerege 229 239 118 119 262 298 352 5SO 1,412 527 626 655

Total 341 297 (1695 232 1,236 1,281 2,099 2,233 6,849 3 642 3.798 3,870-'l L91 .1 ss.ss2s3..

OPERATING RtEUIEEMENTS

W-rking Capital - 315 (166) 27 (892) (2,500) 1,600 1,900 108 100 260 210

Debt ervite - 7teres

Enlating IDA Luau. - 69 67 181 178 167 159 146 650 136 126 116

EaiuttAg Lecal LeAeR - 19 36 70 58 40 28 18 144 13 a 4

Prepased IDA Leans - - - - 21 146 262 277 706 274 258 247

Prep..ed Other R a-a- - - - - - 1,305 1,258 1,195

TeC- Interest - 88 103 211 237 353 449 441 1,5GO 1,728 1,65= 1,562

Debt Seryice - R..-cevt

Enittitg IDA L-ea- - 27 26 100 174 174 174 174 696 174 174 174

Eni-tito Local Leant - 169 295 256 256 256 181 106 799 106 106 106

Orop-ep d IDA Lan - - - - - 110 220 220

Other Leana - - - _ - - _ 524 1,048 1,049 1

Total lapaysntE - 106 321 356 430 430 355 280 L,495 , 2h., :'f L

Total DRbt Servicc - 284 424 607 687 783 804 721 2,995 2,642 3,198 3,110

Total Operatitn RWoui-lt ecnts - 599 258 634 (205) (1,717) 2,404 2,621 3,103 2,742 3,458 3,320

Total Available Foom oRe-ti.ont - (302) (427) (402) 1,441 2,998 (305) (388) 3,746 900 340 550

CO.stEOtti-t Ceatc

proejat - Water - - - - 1,068 3,080 842 - 4,990 - - -

- S-egrage - - - - 1,328 3,827 1,047 - 6,202

Ktng Ta1al Tracmiasion - - - - 1,577 7,248 7,658 1,957 18,440

Inter- t Capiteli-ed - - - - 58 381 822 1,117 2,378 - - -

Other Icvea eta..

- Wacer - 1,208 945 548 137 500 500 100 1,237 1,100 1,200 1,300

- Sewerage - 544 556 553 1,913 964 510 200 3,587 1,400 1,600 1,800

Tot I Construction C.Ln4 081 14,000 11,379 3,37436,83 2SO 28 31a ===== ==&== .A=,,, ,,A,, ,,:::: , ........ .. = ==.: o ... 5 ... & ... P==== -- --- .2

RelAIoc to bh Finano.d - 2,054 1,928 1,503 4,640 13,002 11,604 3.762 33,080 1,600 2,460 2,550

Finanoed by:

IDA Credit - 1,167 526 433 705 3,455 460 - 4,620 - - -

Eni-titn LoanI Loans - 835 - - - - - - - -

Pr-p.e-d C-veroaent Lean _ - - - 2,958 7,281 8,622 3,147 22,008 1,670 2,490 2,590

Covernnent Contributiao - 73 1,356 1,190 1,007 2,306 2,622 665 6,600 -

T4taR 2, = f075= 1882 1 423 44670 13,042 10,204 3,812 33,220 1,470 2,490 2,590

Serplee (Deficit) - 21 (46) 120 30 40 20 30 140 70 30 40

C.oh BRIAeoe no End af Year 75 96 30 170 200 240 260 310 - 380 410 450

Debt Service C-ecrage 1.0 - 0.4 1.8 1.6 2.6 3.1 1 0.4 1.2 5.2

FeSr-y 1978

APPRAISAL OF

AMN WATER SUPPLY AND SEWERAGE PROJECT III

_ORDAN

TABLE 7 - ALIANCE SHEETS

A. AL Dece-ber 31, 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

4---------- Actual ---------- t 4--------------- EstiLatd ------------------------------------------

A88ETS -------------------------------------------- ------------ JD THiOUSANDS ----------------------------------------------------------------

EURSSSNT ASSETS

Cash 75 96 50 170 200 240 260 310 380 410 450

Inventories 287 438 489 562 620 690 750 820 900 940 980

Accounts Raceivable 258 420 600 960 940 1,000 1,150 1,500 1,800

275 629

Advanced Paynects 314 200 - - - - - -

Total 637 1,163 1,111 1,352 1,420 1,790 1,950 2,130 2,450 2,030 3,230

FIXEiD ASSETS

*ater Supply 3,112 3,338 3,677 6,000 7,268 10,196 10,696 12,237 34,131 35,231 36,531

Le.s Depreciation 548 674 815 965 1,211 1,509 1,886 2,281 3,473 4,706 5,979

NSt Water Supply 2,564 2,664 7,862 5,035 6,057 8,687 8,810 9,956 30,658 30,525 30,552

S-wer-eg (i-cludig stuns 3,885 4,299 4,507 6,177 8,210 12,009 14,566 15,666 16,966 18,466 20,166

drainage)

Less Depreciation 666 799 943 1,091 1,294 1,565 1,961 2,441 2,924 3,520 4,129

Not Sewerage 3,219 3,500 3,564 5,006 6,924 10,444 12,605 13,225 14,042 14,946 16,037

Work is Pr-gress 1,614 2,722 3,678 786 3,558 12,839 21,161 21,894 1,200 1,400 1,500

Total Ficed Assets 7,397 8,886 10,104 10,907 16,539 31,970 42.576 45,075 45,900 46,871 48,089

TOTAL ASSETS 0,034 10,049 10,205 02,239 17,959 33,760 44,526 47,205 40,330 49,721 51,319

LIABILITIES

CURRENT LIABILITIESS

Accounts Payable 249 372 468 500 1.400 4,200 2,700 900 1,000 1,100 1,200

Depcsits 237 304 368 430 460 490 530 560 590 620 650

Total 486 676 036 930 1,860 4,690 3,230 1,460 1,590 1,720 1.850

LONG TERM DEBT

Rxisting TDA Leans 1,170 2,311 2,811 3,145 2,971 2,797 2,623 2,449 2,275 2,101 1,927

Proposed IDA Ioan - - - - 705 4,160 4,620 4,620 4,510 4,290 4,070

EuistinS Lccal Loans 1,280 1,946 1,652 1,395 1,139 883 702 596 490 384 278

rop-esd Gov't. Lcun (Phase I) , 2,958 10,239 18,861 22,008 21,484 20,436 19,388

Propeo.d Loan. (PThse II) 1,670 4,160 6,750

Tetal 2,450 4,257 4,463 4,040 7,773 08,079 26,806 29,673 30,429 31,371 32,413

EQUITY

Eqgity. Retained Earnings 5,098 5,116 5,916 6,789 B,326 10,991 14,490 16,072 16,311 16,630 17,056

sod Capital Contrlbucco-s _- - - - --

TOTAL LILAIZIES 8s034B 10,049 11,215 12,229 17,939 33,760 44,526 47,205 48,330 49.721 51,319

DEBT EQUITY RATIO 32:68 45:55 43:57 40:60 48:52 62:38 65:35 65:35 65:35 65:35 66:34

February 1978

- 38 -

CHAPTER VII

ECONOMIC ANALYSIS

Least Cost Solution

7.01 The proposed project aims at improving the water supply and seweragefacilities in Amman. Design of the proposed systems is in accordance withsound engineering principles utilizing acceptable design criteria and validapproaches. The proposed project will utilize existing principal mains. Theoverall design of the proposed system was reviewed, and the pipe sizes andconfiguration of the mains and laterals as well as the location and design ofthe reservoirs and pumping and lift stations were reviewed by the mission.Several alternative options were studied in connection with sewage force mains,and the force mains and lift station proved to be the least cost solution.A discount rate of 10% was used for the calculations. The project worksrepresent the least cost solution for expanding and improving the Amman watersupply and sewerage systems.

Average Long-Term Incremental Cost - Water Supply

7.02 The average long-term incremental cost of water supply in Amman,including the King Talal transmission system, is estimated at about 330 fils(US$1.00)/m3 at a discount rate of 10% which is the estimated opportunity costof capital in Jordan. AWSA is expected to maintain the present relationshipbetween the average tariff and the highest step of the progressive tariffstructure. So the tariff to be levied on consumption in excess of 100 m3 perquarter would be 471 fils/m3 (302 fils/m3 in 1977 prices) and would comparefavourably with the long-term incremental cost of this seivice. Based onpresent consumption patterns, over 30% of AWSA's water sales would be chargedat the high rate.

Internal Economic Rate of Return

7.03 There are a variety of benefits associated with the provision ofa convenient and safe water supply and sewerage system i. Amman. Among themore important benefits of the improved water supply and sewerage systems willbe the health benefits and the control of water pollution. These benefitsare partially revealed through medical cost savings, a general improvement inindividual well-being, and a cost savings to, or an increased productivityof, business enterprises. This follows from the fact that a healthier popula-tion will require less health care, tend to have lower employment absenteerates, and to be more productive while in the job. These benefits, however,cannot be accurately quantified. The major justification for the projectinvestment is that the provision of adequate water supply and the collectionand treatment of sewage in Amman is necessary for healthful and orderlydevelopment of the area and that the proposed extension of the water supplyand collection and treatment of sewage is the least cost solution.

- 39 -

7.04 The internal economic rate of return on the water supply componentof the project, was calculated using incremental water sales at 1978 prices asa minimum measure of benefits. The internal economic rate of return on thewater supply investment is estimated at 9%. Because connection to the sewer-age system is compulsory, the consumer's willingness to pay cannot be based onthe present tariff and therefore an internal economic rate of return for thesewerage investment based on incremental revenue is not meaningful.

Risks

7.05 AWSA's experience in project supervision, in addition to the assis-tance to be received from engineering consultants, will ensure that the risksin construction of the project will be normal for a water supply and sewerageproject. The willingness of the Amman users to pay for water supply is evidentat present. The conservative increase projected in per capita consumption ofwater will not be difficult to absorb even at the higher tariff levels in viewof the widespread shortages in the recent years. Except for a recurrence ofthe severe drought conditions of 1974-75 which would limit the groundwaterresources, the risk of not achieving the technical, financial and organiza-tionial objectives of the project is low.

Environmental Impact

7.06 Through implementation of this project the Authority will supplysafe water to a larger number of persons including urban poor, therebyreducing possible dependence upon unsafe water. Similarly, the provision ofpiped sewage collection systems to a larger segment of the population ofAmman will reduce the use of cesspools and thereby lessen the greatest dangerof contamination of the aquifers which are the source for Amman water supply.

- 40 -

CHAPTER VIII

AGREEMENT REACHED ANDRECOMMENDATIONS

8.01 During negotiations, agreement was reached on various issuesreferred to in Chapters 1 through 4 and 6 of the report, including the fol-lowing which is of particular significance:

AWSA will review the water supply tariff prior toSeptember 30, 1979 (when all major contracts wouldhave been awarded) and will implement revised rates,not later than January 1, 1980, which are adequateto cover operating expenses (excluding depreciation),debt service and increased working capital and toprovide revenue sufficient to finance, during theperiod 1978-81 not less than 10% of the investmentcost, and beginning with the year 1982 AWSA willimplement tariffs which will finance each year notless than 20% of the average cost of investment duringeach consecutive three-year period comprising anactual and two forecast years (para 6.05).

8.02 A condition of effectiveness of the Credit is that the Saudi FundLoan Agreement and the USAID Loan Agreement have been signed (para 6.07).

8.03 Agreement having been reached on the issues set forth in this report,the project is suitable for an IDA Credit to the Hashemite Kingdom of Jordanof US$14.0 million.

- 41 -

STAFF PROJECT REPORTAMMAN WATER SUPPLY AND SEWERAGE PROJECT III

JORDAN

SELECTED DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILE

Al. Feasibility Study for Amman Water Supply and Sewerage Facilities- VBB/FAWZI - November 1977

A2. Feasibility Study and Master Plan for Amman Water and Sewerage Works- VBB - July 1972

A3. Water Resources Study for Amman Water Supply - VBB/FAWZI - November 1976

A4. An Outline for Water Planning in East Jordan - Natural ResourcesAuthority - 1975

A5. Amman Water Supply from King Talal Dam- SOGREAR - March 1977

A6. Bacteriological Pollution in the Drinking Water - Ministry of Health -September 1976

B1. Detailed Cost Estimates, Calculations, Operating and Maintenance Expenses

B2. Assumptions for Financial Projections

B3. Calculations of Economic Return in the Proposed Investments

B4. Calculation of Long-term Incremental Cost of Water

B5. Tariff and Fee Schedules - AWSA - August 1977

B6. Analysis of Water Consumption by Number of Meters

Cl. Water Quality Data

C2. Details of Existing Water Supply and Sewerage Systems

C3. Existing and Proposed Pumping System Diagram for Amman Water Supply

C4. Borehole Status Report and Pumping Data

C5. Basic Information for Calculating Project Impact on Urban Poor

C6. Detailed Project Contract Components

C7. List of Required Construction and Maintenance Equipment

C8. English Translation of the Amman Water Supply and Sewerage Law - 1977

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* I| RcA ,PABIA

IBRD-1212OR1

NOVEMBER 1977

Jeffe \ \ 5eAu SY ) Y R IA

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JERU S ,- M. eb R AM - ~Bethlehem ! M vdSbO De 91 Khoreat

To~ ~ IJ ,arsheI- \ ARABIA

'(< J ORDAN'( asoZ, Pipe Lines\

_ j *<<....=0Q'e m Refinery\S / )Frsh]diyo ,/ , -- -,,, - ., , Xs~~~~ Phosphote Deposits\

el : / / 6t , . ',a' National Highways

r=) | / 11 , , _ ~~~~~~~~~~~~~~~~~Second Class Roads( X 7> - -~~~- -~~-Ot her Roads

r/ Petrr- .o a International Boundaries

i JV ~ ~ {>= >0rf ri5 _____ _Wodis /Go,, Muw_ =', ==q=;;rMudftats and Wodi Beds !

/ tX 8) X ( 8 ~~~~~~~~~~- Dams

30° I Roe en Nr,qb r; I\A 30o_

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! ~ ~~~~~~~~~~~~~ ~~ // _n ,g . IRAR IA

Fo dff Oas el Khor E.fanu.tf.? IA

Aqobo 0 10 20 30 40 50 60 70 / SI<$ORA

2 ;[ ~KILOMETERS 7 .\ ' K -.O tr /l ° IO 1 20 30 40 /'

<g'1 '- - MILES 7 SAU)I A RUADA

'~ B .. _ t /~ _e _ a 0 ' EGaPe a a

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LO Second Class Roads .ae.. GYP