PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA899 Public Disclosure Copy Project Name IRRIGATION SYSTEM ENHANCEMENT PROJECT (P127759) Region EUROPE AND CENTRAL ASIA Country Armenia Sector(s) Irrigation and drainage (90%), General energy sector (10%) Theme(s) Water resource management (70%), Rural policies and institutions (20%), Rural services and infrastructure (10%) Lending Instrument Specific Investment Loan Project ID P127759 Borrower(s) State Committee for Water Management Implementing Agency Water Sector Projects Implementation Unit State Agency (WSPIU SA) Environmental Category B-Partial Assessment Date PID Prepared/Updated 19-Mar-2013 Date PID Approved/Disclosed 09-Apr-2013 Estimated Date of Appraisal 06-Apr-2013 Completion Estimated Date of Board 21-May-2013 Approval Public Disclosure Copy Decision I. Project Context Country Context 1. Over the past two decades the performance of Armenian economy ranged from a real GDP contraction of 42 percent following the collapse of former Soviet Union to a sustained annual growth rates always over 10 percent between 2001 and 2008. The growth achieved in the past decade has been fueled primarily by the construction industry, foreign investments and remittances and made Armenian economy increasingly market oriented and based on services and light industry. The advent of the global financial crisis in 2008 led to a contraction in the economy in the order of 14 percent in 2009. Since then the economic growth is gradually picking up again from 2.1 percent in 2010 to 4.6 percent in 2011 and to an estimated 6.2 percent in 2012. This past recent years growth is driven mainly by the mining sector and, to a lesser extent, by agro-industries. The effect of the 2008/2009 financial crisis on rural and urban poverty has been dramatic—the poverty rate increased from 27.6 percent in 2008 to 35.8 percent in 2010. The poor have been supported through targeted social expenditures, pension increases and through programs aimed at creating employment in the short term through increased public investments. Sectoral and institutional Context Page 1 of 4 Relevance of irrigated agriculture for agricultural GDP and for employment. The agricultural sector in Armenia contributes about 20 percent to the national GDP and provides about 40 percent of the employment for active population or over 75 percent of employment generation in rural areas. Public Disclosure Copy Irrigated agriculture is crucial to the agricultural sector performance since it accounts for about 80 percent of the sector contribution to GDP. The irrigated area is currently about 140,000 ha, it is slowly increasing and, more important, water shortages have decreased substantially during the past decade although they can still take place, intermittently, in some areas. Increased reliability of water supply and better time delivery allowed for a relevant shift of cropping patterns towards higher added value crops and, ultimately, to the growth of the agricultural GDP. The Government program and past operations in the irrigation sub-sector. Starting in 1994, the Government initiated a program to slow down the deterioration of the irrigation infrastructure, to improve its operation wherever feasible and to make it more financially sustainable by introducing also changes in its management. The program started by addressing emergency requirements and on ensuring the safety of upstream infrastructure that were largely financed by the Bank under the Irrigation Rehabilitation Project (1994-2001) and the Dam safety Project I and II (2000 – 2011). In parallel the program aimed at developing a plan to rehabilitate the system and to make its Operation and Maintenance (O&M) less expensive (mainly through reduction of energy consumption) and at starting an institutional reform process based on participatory irrigation principles. The Bank and the US Government supported this effort through the Irrigation Development Project (2001 – 2009) and the Millennium Challenge Corporation (MCC) program (2006 – 2011). Furthermore the Bank also financed a two-phase Irrigation Rehabilitation Emergency Project (2009 – 2013) that, although had the development objective of generating temporary employment, complemented some of the activities implemented and of the objectives sought by the overall Government program for the sub- sector. Issues and Opportunities. The system has been largely conceived during Soviet times with very scarce attention to energy consumption. There are several schemes for which conversion from Public Disclosure Copy pumping to gravity is still possible from an economic, technical, environmental and social point of view. Some of them have been implemented under IDP, some others under the MCC program. These previous project/program already brought the annual need of energy from about 200 million kw/h per year to about 130 million kw/h per year (48 million kw/h were saved by IDP only). Some conversion schemes studied under the MCC program but not implemented due to shortage of funds are proposed for financing under ISEP. The reduction in energy costs will clearly involve a reduction of the overall system O&M cost independently from the source of funds (subsidies or users’ fees) that will be used to cover them. II. Project Development Objectives The PDO is (i) to reduce the amount of energy used and to improve the irrigation conveyance efficiency in targeted irrigation schemes; and (ii) to improve the availability and reliability of important sector data and information for decision makers and other stakeholders. III. Project Description Component Name Irrigation System Enhancement Management Information Project Management and WUAs’ Support Group and Institutional Activities Page 2 of 4 IV. Financing (in USD Million) For Loans/Credits/Others Amount Public Disclosure Copy Borrower 7.50 International Bank for Reconstruction and Development 30.00 Total 37.50 V. Implementation VI. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ VII. Contact point World Bank Contact: Giuseppe Fantozzi Public Disclosure Copy Title: Senior Rural Development Specialist Tel: 5795+202 / 3 Email: gfantozzi@worldbank.org Borrower/Client/Recipient Name: State Committee for Water Management Contact: Andranik Andreasyan Title: Chairman Tel: 37410540909 Email: scwe@netsys.am Implementing Agencies Name: Water Sector Projects Implementation Unit State Agency (WSPIU SA) Contact: Adibek Ghazaryan Title: Head Tel: 37410277943 Email: aghazaryan@wsdp.am Page 3 of 4 VIII. For more information contact: The InfoShop The World Bank Public Disclosure Copy 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy Page 4 of 4