project appraisal document onna proposed credit in …

Document ofThe World Bank

ReportNo: 19362 AM

PROJECT APPRAISAL DOCUMENT

ONNA

PROPOSED CREDIT

IN THE AMOUNT OF US$SDR 19.7 MILLION (US$ 26.6 MILLION EQUIVALENT)

TO THE

GOVERNMENT OF ARMENIA

FOR

DAM SAFETY PROJECT

MAY 25, 1999

Environmentally and Socially Sustainable Development UnitArmenia and Georgia Country UnitEurope and Central Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective as of May 1999)

Currency Unit = SDRLC = AMD

US$1 = LC 536.26

FISCAL YEAR1999

ABBREVIATIONS AND ACRONYMS

BP Bank Procedures IP Implementation ProgressCAS Country Assistance Strategy IS International ShoppingCQ Consultants' Qualifications MW Minor WorksDO Development Objective NA Not ApplicableDME Dam Maintenance Enterprises NCB National Competitive BiddingDSP Dam Safety Project NGO Non-Governmental OrganizationECA Europe and Central Asia NS National ShoppingEMA Emergency Management Agency O&M Operation and MaintenanceEPP Emergency Preparedness Plans OME Operation Maintenance EnterprisesERR Economic Rate of Return OP Operations PolicyEWS Early Warning Systems PAD Project Appraisal DocumentFAO Food and Agriculture Organization of the PAR Population at Risk

United Nations PIU Project Implementation UnitIBRD International Bank for Reconstruction and PMB Project Management Board

Development PMR Project Monitoring ReportIC Individual Consultant PMF Portable Maximum FloodICB International Competitive Bidding QCBS Quality and Cost Based SelectionIDA International Development Association RFP Request for ProposalsIDP Irrigation Development Project SOE Statement of ExpenseIFAD International Fund for Agricultural TA Technical Assistance

Development TOR Terms of ReferenceWUAs Water Users Associations

Vice President: Johannes LinnCountry Director: Judy O'ConnorSector Director: Kevin M. Cleaver

Team Leader: Salem Gafsi

iii

REPUPBLIC OF ARMENIADAM SAFETY PROJECT

CONTENTS

A. Project Development Objective ...................................................... 2

1. Project development objective and key performance indicators .2

B. Strategic Context .2

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project .22. Main sector issues and Government strategy .23. Sector issues to be addressed by the project and strategic choices .3

C. Project Description Summary .4

1. Project components .42. Key policy and institutional reforms to be sought .53. Benefits and target population .54. Institutional and implementation arrangements .5

D. Project Rationale .7

1. Project alternatives considered and reasons for rejection .72. Major related projects financed by the Bank and/or other development agencies .93. Lessons learned and reflected in the project design .94. Indications of borrower commitment and ownership .105. Value added of Bank support in this project .10

E. Summary Project Analysis .10

1. Economic .102. Financial .113. Technical .114. Institutional. 15. Social .126. Environmental .127. Participatory approach .138. Checklist of Bank Policies .14

F. Sustainability and Risks .14

1. Sustainability .142. Critical Risks .153. Possible Controversial Aspects . 15

iv

G. Main Credit Conditions ........................ 15

1. Effectiveness Conditions ........................ 152. Other ........................ 15

H. Readiness for Implementation ........................ 17

I. Compliance with IDA Policies ........................ 17

Annexes

Annex 1. Project Design SummaryAnnex 2. Project DescriptionAnnex 3. Estimated Project CostsAnnex 4. Economic AnalysisAnnex 5. Financial SummaryAnnex 6. Procurement and Disbursement Arrangements

Table A. Thresholds for Procurement Methods and Prior ReviewTable B. Procurement ArrangementsTable C. Procurement PlanTable D. Allocation of Loan ProceedsTable E. Withdrawal of the Proceeds of the Credit

Annex 7. Project Processing Budget and ScheduleAnnex 8. Documents in Project FileAnnex 9. Statement of Loans and CreditsAnnex 10. Armenia at a Glance

Map

U -

ARMENIADam Safety Project (DSP)

Project Appraisal Document

Europe and Central Asia Regional OfficeECCO3

Date: 5/25/99 Task Team Leader: Salem GafsiCountry Director: Judy O'Connor Sector Director: Kevin CleaverProject ID: 64879-AM Sector: Agriculture Program Objective Category: Environmentally

Sustainable DevelopmentLending Instrument: SIL Program of Targeted Intervention: [] Yes [X] No

Project Financing Data [ Loan [X] Credit [] Guarantee [ Other [Specify]

For Loans/Credits/Others:

Amount SDR 19.7 million (US$26.6 million equivalent):

f ng Plan (US S M):Source Local Foreign Total

Government 37 0.0 3.7Co-financiersIBRDIDA 8.8 17.8 26.6Other

Total 12.5 17.8 30.3

Borrower: Government of ArmeniaGuarantor: N/AResponsible Agency: Ministry of AgricultureProject implementation period: October 1999-September 2004

Est!-Ated Disbursement (Bank FY/USSM)

-- Y | 2000 2001 2002 2003 2004 2005Annual 4.0 5.8 5.0 4.5 4 3.3

Cumulative 4.0 9.8 14.8 19.3 23.3 26.6

For GuaranteesProposed coverage:Project sponsor:Nature of underlying financing:Terms of financing:

Principal amount (USSM):Final maturity:

Amortization profile:Financing available without guarantee: [ Yes [ NoIf yes, estimated cost or maturity:Estimated financing cost or maturity with guarantee:

OSD PCD Form: July 30, 1997

ArmeniaDam Safety Project (DSP)

Project Appraisal Document

Europe and Central Asia Regional OfficeECCO3

Date: 5/25/99 Task Team Leader: Salem GafsiCountry Director: Judy O 'Connor Sector Director: Kevin CleaverProject ID: 64879-AM Sector. Agriculture Program Objective Category: EntvirotntenttallivSustainable

DevelopnentLending Instrument. ERL Program of Targeted Intervention: [] Yes [X] No

Project Financing Data [] Loan [XI Credit [] Guarantee [] Other [Specify'

For Loans/Credits/Others:

Amount SDR 19.7 million (US$26.6 million equivalent):

Financing plan (US $ m):Source Local Foreign Total

Government 3.7 0.0 3. 7Co-financiersIBRDIDA 8.8 17.8 26.6Other (specify)

Total 12.5 17.8 30.3

Borrower: The Government ofArmeniaGuarantor: N/AResponsible agency: The Ministry of AgricultureProject implementation period. October 1999-September 2004

For GuaranteesProposed coverage:Project sponsor:Nature of underlyingfinancing:Ternis offinancing:

Principal amount (US$in)Final m1aturity

Amortization profileFinancing available without guarantee: [] Yes [] NoIf yes, estimated cost or maturity:Estimatedfinancing cost or maturity with guarantee:

OSD PCD Form: July 30. 1997

A: Project Development Objective

1. Project development objective and key performance indicators (see Annex 1):

Three complete dam failures occurred in Armenia in 1974, 1979 and 1994 respectively. Considering theapproximate number of dams existing in Armenia in those years, the percentage of failures (number offailures/ number of existing dams) can be estimated in the order of 2.1% (1974), 3.5% (1979' md 3.9%(1994). Two aspects are of concern: (a) the values are considerably higher than the world-average valueof 0.5% for dams built after 1951 (ICOLD); (b) the percentage values show an increasing trend. From1994 to 1998, six significant dam-related accidents occurred that might have as well led to complete damfailure. All reported accidents could have been avoided if proper surveillance and O&M were in place.Such observations suggest that other failures cannot be ruled out if the situation of dam safety in Armeniais allowed to remain out of control. Considering that no dam is reported to have a functioninginstrumentation system and that country-wide around 460,000 people are at risk, the situation should beregarded as an emergency.

In light of this situation, the primary objective of the project is to protect the population and thesocio-economic infrastructure downstream of the dams facing the highest risk of failure. Achieving thisobjective will also enhance the sustainability of darn-based economic activities in Armenia. Progresstowards the project objective would be measured in terms of: (i) the reduction of the risk, related to damfailure, to socially acceptable levels for 360,000 people currently living under threat of high probabilityof failure of the riskiest 20 dams; and (ii) the improvement of the risk profile for the totality of the damsystem in Armenia (as indicated in annex 2).

B: Strategic Context

1. Sector-related Country Assistance Strategy fCAS) goal supported by the project (see Annex 1).

CAS document number. 16988-AM Date of lates! CAS discussion. August 26, 1997

The Bank's main country assistance goal in the agricultural sector as indicated in the CAS is to facilitateprivate sector development by helping the Government address basic infrastructure and institutionalconstraints. This goal translates into supporting critical investments to (i) rehabilitate the irrigationinfrastructure; and (ii) create the enabling conditions for greater private sector participation in themanagement, maintenance, and further development of that infrastructure. With dams supplying over25% of the irrigation water, 10% of the domestic water supply, and 20% of the power generation, theirstructural integrity is of great importance to the well being of the population as a whole, and of criticalimportance to those people living downstream of unsafe dams.

2. Main sector issues and Government strategy:

Because of its heavy reliance on irrigation, many important issues facing Armenian agriculture are waterrelated. These include: (i) irrigation system inefficiency due to deterioration of the water storage andconveyance infrastructure; (ii) high cost of irrigation due to heavy reliance on energy intensive pumping;(iii) excessive reliance of the system on limited budgetary allocations for O&M combined with limiteduser participation in the management of the system and in contributing to financing the cost of requiredO&M, and (iv) ineffective institutional set-up for operating and maintaining the system. The persistenceof these issues over time led to extensive deterioration of the irrigation, drainage and dam infrastructure.While continuing attempts are being made by Government to address these issues, limited success hasbeen achieved to-date due to limited expenditures on system maintenance compounded by, as yet, aninconsistent strategy for adapting the institutions responsible for managing the water supply- system to

the realities and requirements of a private sector controlled agriculture. Recently the Governmentinitiated the preparation of a Water Resources Maniagement Plan to help assess these other cross-sectorissues.

To address these issues, the Government adopted a strategy aimied at the rehabilitation of' the irrigationsystem along with the creation of the necessary conditions to ensure its susatinahility. [his strategy is atan early stage of implementation, and some of its critical elements, particularly on the instititiollal sideare still being defined. 'I'he approach to the physical rehabilitation of the infrastructure and to reducinigthe cost of irrigation water delivery has been clearly detined in the context of' thc on-goinig IrrigationRehabilitationi Project. A serious and successful attempt is also underway to create hlie cnablingconditionis for user participation in the managemiient ot' thc irrigationi inf'rastrticture al the tertiary lcvcl.T'he Government is yet to decide, however, on the appropriate institutional arrangemilenit for operating andmainitaininig the infrastructure above the tertiary level. An institutional review of tlie system-wi(le ( )&Mfunction (including dams, water conveyanice system. and drainage) is underway. 'I'lic (iovcrilmcnt hasalso adopted a plan for complete O&M cost recovery by 2,005.

3. &'ector issues lo he addresse(d hy the project cand sia wlegc choices.:

'I'he project was initially definied as a componcint of 'a more compreihensive programii aimied at a(ldressinlgall issues listed abovc in the context of the Irrigation Development Project (DP). 13ecaLIse of' potential.catastrophiic consequenices of dam failtire, however, the Governiment decided to give priority toaddressing the dam safe'ty issulC by proceedinig with thlc dam compoilenit as a separate pr'oject on anlcmergeincy basis. 'this decision docs not, howevcr, a'lect the (iGovernment's inteiitioni to address theabove issues in the conitext ol'thc IP)l', withi I;il provision hbeiig niade for addressing all issues rclatcd todam rchabilitation, operationl and maintcnance unlder the l )am Sallty ProJect (I)SP). In partiCUlar thICDSP' will provide for upgradinLg the institutional capability lfor moiioitoring ilic state of' all dams and lofocnstirinig preparedness and timely iniervcitionis to allow For their sustainable and safc usc in conniLiIctionwitlh other in frastruicturc to be rehahilitate(l and othier (O)&M institutions to he strengthienicd unider the I 1)'.

Durinig project preparation, preliminary investigationis were undertaken on all dams to assess the actualstate of dam structures and the associated level of risk of' failurc. On that basis, and keeping inl miid theresourcc constraints, the Government made the strategic chioice to conccitrate immediatc efforts on 20priority irrigation dams identified as potentially most dangerous. The remaininlg 54 irrigation damills(generally of smaller size) and 6 cncrgy dams will not, however, be neglected in the coursc of'implementationi of the l)SP. 'I'lhy will be the sub ject of'close monitorinlg, firtlher technical investigationsas required, and possible intcrvenitioni in case of cmergenicy. Imcrgency preparedness plans will also bcdeveloped and adopted as an integral part ol' thc operation and maiiteinance plan for each dam. larlywarning systems will be provided in thiose situations whele traditional warning methods may heinefficient.

The DSP will also provide for strcngthelning the instituitionial capability of the Dam MaintenanceEnterprise (DME) to meet the safety rcquiremeicnts of' all dams, including the energy dams. A specificprogram was agreed with Governmlient oni lhow to strengthieni DME in the course of the implementation ofthe DSP. In addition, it was agreed that this programii will he reviewed and adjusted, as required, in lightof the findings of the overall institutionial reforml program to be defined and agreed between theGovernmenit and the Bank in the context of the institutional audit of the O&M function which is expectedto be completed by September, 1999. This institutional strengthening will include the development of aneffective national system for monitoring dam safety, and for maintaining a constant state of preparednesswhich will allow a timely response to potential emergencies.

C: Project Description Summary

1. Project components (see Annex 2for detailed description ):

The project will constitute a five-year program for improving the safety of 20 priority dams, and forestablishing an effective system for monitoring the safety of all dams in Armienia. Thie project is basedon an optimized implementation program composed of a mix of both structural and non-structuralmeasures. Structural measures are the rehabilitation works proper. Such works require relatively longconstruction times and represent the greatest part of the cost of the program. Non-structural dam safetymeasures include: (a) instrumentation and monitoring devices, (b) Operation and Maintenianice (O&M)Plans; (c) Emergency Preparedness Plans (EPP): (d) Early Warning Systems: and (e)Telecommunications. The technique used for optimizing the implementationi program is the RiskReduction Profile which is described in annex 2. Non-structural measures can be implemented morerapidly and at a much lower cost than the structural ones. The former are not a substitute for the latter.rather it is through the balancing of the two types of measures that a souLid dam safety program isimplemented. Non-structural measures also play a fundamental role in assurinig sustainiahility of therehabilitation works. The project will have three comilponienlts:

Component Category Costs, including 2( IDA % of IDAcontingencies and Total financing financinsg

taves (USSM) (USSM)

A. Rehabilitation of 20 irrigation dams:

A. 1. Design and supervision of works Consulting 1.3 4. 1.3 /00Servtces

A.2. Rehabilitation Works C(ivil Works 20.7 68.3 /7.6 85

B. Dam safety sustainabilitv:

B 1. Dam Safety Plans (Consulting 0.2 0. 7 0.2 / 00Services

B2. Darn Safety Site Installations Equipmnent 1 7 5.5 1.6 93Civil Works

B3. Sirengthening DME Equipmtent 3.0 2.3 76Rec urrent

Cost

B4. Investigation and EmergencY Civil Works 2.4 8.1 2.2 90Repair Fund Consulling

Services

C. Project management: Equipment 1.0 3.3 0.9 85ConsultingServices

__________Total 30.3 100.0 26.7 87.9

2. Key policy and institutional reforms to be sought:

Provisions are made under the project in support of measures that would (i) directly enhance thecapability of the DME to allow it to effectively assume responsibility for the operation and maintenanceof the dams rehabilitated under the project, as well as to monitor the safety status of all dams in thecountry; and (ii) ensure adequate funding for required O&M activities during the project period andthereafter. In addition, the project will enhance the effectiveness of policy and institutional interventionsinitiated under other projects to promote the sustainability of irrigated agriculture and the institutionsserving it. In the context of the preparation of the proposed IDP, the Government is undertaking acomprehensive review of the current arrangements for O&M of the irrigation system, including the dams.The findings of that review will provide the basis for strengthening/amending, if proven necessary. themeasures to be undertaken under this project to strengthen the DME. In this manner, all O&M reformmeasures under the DSP will be closely coordinated with those to be introduced under the IDP tostrengthen the O&M function for the totality of the water conveyance and drainage infrastructure.

3. Benefits and target population:

Project Area:

The project is practically national in scope as the 20 dams to be rehabilitated are located in 9 out of the 10Marzes (Regions). In fact the geographical scope of the project impact extends beyond the territory ofArmenia as 3 of these dams are close to the border with Azerbaijan. The area which could potentially beaffected by floods resulting from dam failure is estimated at close to 680sqkm. Irrigation of up to 68,000ha (34 per cent of the irrigated area in Armenia) could be partly or wholly undermined in case of damfailure and would directly benefit from the rehabilitation of the dams as a result of a more reliableirrigation water supply.

Target Population:

On the Armenia side alone, about 360,000 people living downstream of the 20 dams to be rehabilitatedunder the project face the risk of dam failure. The number of people who could potentially be affected inAzerbaijan is not known, but is thought to be substantial, particularly in the case of the dams located nearthe border.

Project Benefits:

This is an emergency type project aimed at addressing severe safety risks for a population of close to360,000 people living downstream of major dams. The primary direct benefits from project interventionwill be the reduction in the risk of dam failure - currently considered to be very high by internationalstandards - that would affect the population and economic assets downstream. In addition, the projectwill contribute to building an institutional capability for operation and maintenance of the irrigationinfrastructure. The project will also have secondary benefits which are important to the economy. It willhelp secure the dams' productive function in improving the reliability of water supply for over 68,000 haof irrigated agriculture, for fisheries, and for domestic water supply to about 170,000 people.

4. Institutional and implementation arrangements:

Implementation Period:

Project implementation is anticipated to take five years (from October 1, 1999 to September 30, 2004).On that basis, the credit closing date is expected to be March 31, 2005.

Executing Agencies and Implementation Arrangements.

Overall project management will be the responsibility of the existing Project Implementation Unit (PIU),currently in charge of the Irrigation Rehabilitation Project. Specifically, the PIU will be responsible forthe co-ordination of all project interventions, and for providing the necessary support services(procurement of goods and services, financial control, monitoring of project activities, preparation ofannual work plans, and reporting on status of project implementation). While PIU will, at the onset of theproject, be responsible for the supervision of construction activities, this function will be progressivelytaken over by the DME, as the latter develops the capability to manage that function. To that end, theproject provides for strengthening the institutional capability of DME and for equipping its central andfield offices to allow them to take over, by the third year of the project, full responsibility for overseeingthe actual implementation of project activities contracted out, performing quality control, developing andexecuting dam specific monitoring, operation, and maintenance plans, and ensuring that emergencywarning systems are operational. The project will finance the incremental cost of operation of the PIUand the DME, including the required institutional and manpower strengthening. In addition, the PIU willretain the services of an experienced internationally recruited dam safety specialist who will work withPIU supervision engineers to undertake, twice a year, an independent review of the scope and quality ofthe dam safety programs, and on that basis, advise PIU, DME and IDA on any necessary improvements.Another international expert in dam design management will assist the PIU in the initial part of theproject to ensure compliance with the design schedule.

Project Oversight.

The PIU will continue to work under the leadership of the existing Project Management Board (PMB)chaired by the Minister of Agriculture.

Accounting, Financial Reporting, and Auditing Arrangements.

The Finance Division of PIU was reviewed by a Bank-accredited Financial Management Specialist whoconcluded that the PIU has adequate and competent staff, satisfactory accounting systems and softwaresupported by a simple but functional operational manual and that the internal control procedures in placeare generally satisfactory. The PIU will need one additional staff to help handle the increased volume oftransactions when the operations under the new Dam Safety Project commence towards the end of 1999.The PIU management is fully aware of the need to keep the Finance Division adequately staffed; it hasrecently added a junior accountant to the Division and provided the assurance that the additional staff willbe recruited in time to provide the necessary support under the Dam Safety Project.

The appraisal mission has discussed and explained in detail to the financial staff of the PIU and itsauditors, the Bank's new procedures for disbursements against the quarterly Project Monitoring Reports(PMRs), as required under the LACI Handbook and Project Financial Management Manual of February1999. The PIU has the required capabilities to generate the PMRs in the format and with the contents asrequired by the Bank. However, in order to make the transition to the new systems as smooth as possible,the PIU has requested: (i) that the DSP commence disbursements under the traditional method (i.e.,periodic replenishments of Special Account via SOEs) and remain on this method for the first three tofour quarters after the project becomes effective; (ii) Commencing with the quarter ended June 30, 1999and essentially as a learning exercise for preparing PMRs, the PIU will begin submitting the PMRs forthe ongoing Irrigation Rehabilitation project, for review, comments and further modifications as agreedbetween the Bank and the PIU. It is expected that with this plan of action, and assuming the Dam SafetyProject becomes effective during the last quarter of 1999, the Dam Safety Project should be able to switchto PMR-based disbursements at the latest by October 1, 2000 based on the PMRs for the quarter ended

September 30, 2000. The financial staff of the PIU (and the auditors) have fully understood the 12Tables (6 for financial control, 4 for Procurement Management and two for Physical Project Progress),which will constitute the quarterly PMRs. The financial unit of PIU will need to coordinate with theprocurement unit to complete the four Procurement Tables. The Bank Project Team will assist the PIU indesigning an appropriate format for the Output Monitoring Report (in line with the Table 2-A and/or 2-Bof the Bank's Project Financial Management Manual of February 1999).

As part of the review of financial management of the PIU. the mission reviewed the 1997 audit of IRP(by HIYAUDIT). While the auditors provided an unqualified opinion and raised no significant financialmanagement issues, the quality of the audit report was poor as it failed to cover important areas such asadequacy of internal controls and did not provide clear recommendations on improvements of systemsand procedures. The PIU has since changed its auditors for IRP (for 1998 and 1999 audits) to beexecuted by an international firm, Amyot Exco Armenia (part of the Grant Thornton InternationalGroup). The firm had audited the 1995 and 1996 accounts of IRP and is also the present auditors ofabout eight other Bank financed projects in Armenia.

The Ministry of Agriculture indicated their intention to appoint the auditors of the Dam Safety Project byDecember 31, 1999. The Bank would agree to this when the PIU management makes a formal request inthis regard, under audit TORs acceptable to the Bank. All other usual arrangements regarding audit willcontinue to apply to this project (i.e., audit report to be submitted within six months of end of each fiscalyear, the cost of audits to be financed under the Credit).

Monitoring and Evaluation Arrangements and Reporting.

The Monitoring and Evaluation Unit established under the IRP and reporting to the PMB will beresponsible for monitoring project inputs, outputs, and impact. This unit will prepare quarterly progressreports which will include information, analysis, and recommendations on: (i) progress in the executionof various elements of the agreed work program, including institutional development; (ii) procurement;(iii) expenditures; (iv) difficulties encountered in the course of project implementation, proposedsolutions or required assistance; (v) updated project cost estimates, procurement plan, andimplementation schedule; and (vi) updated estimates of performance indicators. An annual work plan andthe associated budget will be prepared and agreed with IDA at the beginning of each project year. Aproject implementation completion report will be prepared within six months of project completion.

D: Project Rationale

1. Project alternatives considered and reasons for rejection.

The project was initially conceived as a component of a proposed Irrigation Development Project. As aresult of the initial field investigations, however, the Government came to the conclusion thatenhancement of the safety of dams should be addressed urgently because: (i) many dams havedeteriorated to the point where dam safety enhancement has become a prerequisite for any sustainableintervention in the development of water resources where water supply depends on the performance ofdams; and (ii) under the current state of many dams, there is a real threat for major loss of life andeconomic assets in case of dam failure. Accordingly, the Government decided to advance theimplementation of the dam safety component as a stand-alone emergency type project to precedecomplementary interventions under the proposed Irrigation Development Project, currently underpreparation.

The following technical alternatives have been considered:

* The option of basing the design of dam safety enhancement interventions on the basis of the ProbableMaximum Flood (PMF) standard was rejected. The return period of the floods for sizing thespillways has been fixed at 1 :10,000 years. This is considered acceptable in view of the fact thatArmenian reservoirs are at their full capacity level for less than a month each year and much of therun-off is from snow melting. The PMF option would not be socially equitable either, as it wouldlead to a concentration of all potentially available resources on two or three dams, thus leaving mostof the vulnerable population completely unprotected. The solution adopted by the Government will,thus, extend a high level of protection to the people currently most exposed to a high risk of damfailure.

* Initial stability analysis under seismic loading was based on the pseudo-static approach which isinternationally considered to be no longer acceptable. This prompted the preparation team toundertake further refinement of the stability analysis using a more representative dynamic approachbased on the Krasnikov method (FSU version of the Newmark method). Based on the period ofrecord and on the past performance of dams, the seismic coefficients fixed by Armenian norms arebelieved to provide an adequate safety level.

* The alternative of limiting project interventions to the rehabilitation of 20 priority dams only wasrejected in favour of providing for a program for monitoring the safety of all 80 dams (including theenergy dams) along with the provision for a reserve fund (component B.4) to ensure timely andeffective intervention in case of emergency on any dam other than the 20 being rehabilitated.

2. Major related projects financed by the Bank and/or other development agencies (completed, ongoingandplanned):

Sector issue Project Latest Supervision Ratings (Bank-financed projects only)

Implementation DevelopmentProgress (IP) Objective (DO)

Bank-financedDeteriorating Irrigation Infrastructure Irrigation S Sand ineffective water managenment Rehabilitation Project

Irrigation Development NA NAProject

Lack of credit resources for agro- Enterprise S Sindustry Development Projeci

Weak agricultural support services. Agricultural Reform S Sincluding ruralfinance Suppori Project

Weak land market. Land Titling and NA NARegistration Project

Other development agenciesWeak agricultural support services Northwest Agricultural NA NA

Services Project(IFAD).

Lack of budgetary resources to fund Food Securitypriority programs in agriculture Programs (EU) NA NA

IP/DO Ratings. HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (HighlyUnsatisfactory)

3. Lessons learned and reflected in proposed project design:

The main lesson learnt from the Bank supported program in Armenia and in the other FSU countriesrelates to the importance that must be given to institutional development as a prerequisite for achievingsustainability in the development and management of irrigation and drainage infrastructures. Experiencegained in the implementation of successful dam safety projects around the world points to the need for (i)proper documentation of the pre-project status of dam safety; (ii) careful attention to both structural andnon-structural remedial measures; and (iii) putting in place effective mechanisms for maintaining thelevel of safety achieved at the end of the project. Dams and related structures require relatively long leadtimes for the preparation and the implementation of rehabilitation works. At the other end, a dam safetyprogram is, by definition, of an emergency nature and this is particularly true in the case of Armenia.Bank supported projects have also demonstrated that long times may be necessary for reaching agreement

on key design criteria (e.g., design floods or design earthquake). Another important lesson from theseprojects is that, at the start of the project, design for remedial works for at least the first year should becompleted. These lessons have been fu!0y reflected in the design of the DSP in Armenia.

4. Indications of borrower comntitment and ownership:

Senior officials expressed on several occasions Government interest in this project because of the highrisk many dams pose to the population downstream, and because of the grave disruption to socio-economic conditions a dam failure would cause in the affected area. Government commitment isreflected in their decision to give implementation of dam safety measures top priority among allinterventions being planned for implementation under a proposed Irrigation Development Project. TheMinistry of Agriculture has allocated the necessary resources for preparation of the DSP and initiated theprocess to introduce it as a line item in the Government budget. Another indicator of Governmentcommitment to the project is their pledge to finance up to 15% of project costs from internal budgetaryresources.

5. Value added of Bank support in this project:

There are not very many stand alone dam safety projects in developing countries world-wide and theBank is involved in some of the most important ones (India, Indonesia). The Bank is also involved in anumber of projects which include, to a higher or lower extent, a dam safety component (Aral Sea basin,Albania, Tarim Basin 11 and Guangzhong in China, Kyrgyz Republic, Mexico, Vietnam, Ecuador). Banksupport will help in identifying and introducing best practices in: (i) assessing the hazards of dam failure,prioritising dams for rehabilitation, and selecting appropriate approaches to the actual rehabilitation ofdams; (ii) monitoring of dam safety and establishing a system for emergency preparedness; (iii) thedevelopment and introduction of sustainable O&M systems; and (iv) the creation of the necessaryconditions for increasing beneficiaries' interest and participation in securing the safety of dams.

E: Summary of Project Analysis

1. Economic

[] Summarize issues below (e.g., fiscal impact, pricing distortions)[]To be defined (indicate how issues will be identified) [x] None

Economnic evaluation methodology:

[X1 Cost-benefit [ ICost effectiveness [ Other [specify]

It is difficult to estimate the probability of failure of any given dam. The historical probability of failureof dams in Armenia was examined for the past forty years. The conclusion was that, during any twentyyear period, one in twenty dams has failed. More importantly, the probability of failure has doubled overthe past twenty years. On that basis, the following potential losses resulting from dam breaks on each ofthe twenty dams covered by the project were calculated: reduction in net farm income as a result of lossof access to irrigation water, flood damages to household structures and other household assets, and flooddamages to other non-household assets (roads, irrigation structures, other public infrastructure andenterprises).

The total value of these potential losses is then weighted by the reduction in the annual probability fordam failure in the system as a whole on a yearly basis to yield a stream of values over a twenty yearperiod. Since the project is designed to reduce the risk level of dam failure to socially acceptable levels(ten times less than current levels), the forestalled losses are then accordingly treated as project benefits,without inclusion of human life at risk. The benefits are set off against the project investment costs, and

Page I 1

the economic rate of return is then calculated. The base level ERR for the project is 32% (further detailin Annex 4). Sensitivity analysis was performed which showed that the threshold level of ERR of 15% ismet when the probability of dam break in the system over twenty years is set at 3.6% (which is wellbelow historically observed levels).

2. Financial

f] Summarize issues below[] To be defined (indicate how issues wvill be identified) [x ] None

3. Technical[X] Summarize issues below (e.g., appropriate technology, costing)[]To be defined (indicate how issues will be identified) []None

Most of the 20 dams proposed for rehabilitation were visited by FAO/CP preparation and IDA pre-appraisal teams. The urgency of the proposed repair and rehabilitation works was confirmed. Duringproject preparation, emphasis was placed on ensuring that the limited resources available for remedialworks are used in the most efficient manner possible and on dams which present, the highest risk offailure. Hazard and risk classification, including flood handling capability, and a group order ranking ofdam safety was undertaken for all large dams. Similar investigations will be continued on other damsduring project implementation. In addition. physical simulation will be done to ensure properreconstruction of spillways and effective monitoring of the operation of structures. Well definedoperational and management plans will also be introduced for all rehabilitated dams. While detaileddesigns are ready for the structures to be rehabilitated during the first year, detailed designs for otherstructures will be done in the course of project implementation following detailed investigations forwhich provision is made under the project. Cost estimates were done on the basis of actual civil workscontracts awarded by PIU at the time of project preparation. Physical contingencies of 5 - 15 per centwere included in the cost estimates for civil works and 5 per cent for equipment. Price contingencies werebased on annual inflation rates as estimated by the Bank ( 6.0 - 9.6 for local costs and 2.5 per cent forforeign cost). In addition, given the level of uncertainty associated with dam rehabilitation, projectimplementation has to be approached with a reasonable level of flexibility to be able to adjust for anypossible cost overruns or under-runs by respectively reducing or increasing the number of damsconsidered for rehabilitation.

4. Institutional [X] Summarize issues below (e.g., project management, ME capacity, administrativeregulations) [] To be defined (indicate how issues will be identified) [ None

Although no major issue is foreseen with regard to the local capacity to design, implement, manage,monitor and evaluate the project interventions and their impact, executing agencies are handicapped byvery low salaries, limited operational budgets, inadequate mobility, and very limited exposure tointernational experience. The project provides for filling these gaps during the project period and for thecreation of the enabling conditions for Government to ensure proper operation of the dam infrastructurethereafter. The institutional reforms needed to improve the longer term O&M of the infrastructuresupported by the project will be part of the project and the necessary reforms for the DME will beintroduced on the basis of the institutional review of the management and O&M arrangements for theirrigation infrastructure as a whole. Training activities and study tours planned under the project will helpexpose project staff to international experience and, thus, enhance their knowledge and infrastructuremanagement skills. Exposure to international practice will also be available through theinteraction with the 2 international dam specialists who will be recruited as independent expertsduring the course of the project.

5. Social

[] Summarize issues below (e.g., significant social risks, and ability to target low income and othervulnerable groups)[]To be defined (indicate how issues will be identified) [l xNone

No negative social impact is foreseen. Enhancing the safety of dams will have a favorable impact on thepopulation as a whole. Preparation of the Emergency Preparedness Plans will entail public participationtogether with the training to support the introduction of the project funded early warning systems. Thiswill contribute to increase awareness and participation in the population.

6. Environmental

a. Environmental issues.fX] Summarize issues below (distinguish between major issues and less important ones)[] To be defined (indicate how issues will be identified) f] None

Major: None

The nature of the works to be supported under the project are primarily of the delayed O&M type. Inaddition, some work will be needed to correct the design of spillways and outlets and to stabilize theslopes of a few dams to make them safer. These works will not alter the original capacity of the dams,nor the quantity and quality of the water flow. In those cases where safety considerations will call forenlarging the discharge facilities, the peak flood downstream will remain lower than the flood intensity inthe natural conditions of the rivers (without the dams), and lower than the flood flows with the dams intheir current state.

Other: The only foreseeable environmental issues faced by the project are the ones associated with themanagement and disposal of excavated materials and construction concrete rubble and debris and the useof quarries.

The positive impacts of the project are expected to be significant. Over 350,000 persons (not includingriparians) will benefit from better protection and safety after completion of the project. The waterresource and dam-based socio-economic activities and infrastructures downstream will also be betterprotected. Existing erosion will be reduced and sedimentation will be analyzed, controlled and managed.Dam operations will be better managed and sustained (reducing the need for new dams and for moreimpacts on the environment). Emergency warning systems will be improved and the O&M function willbe strengthened.

A preliminary Environmental Management Plan (EMP) specifying the mitigation measures required hasbeen prepared and agreed between Government and IDA. All works contracts envisaged under theproject will conform to the requirements under this plan. In addition, the Government agreed to fully takeinto consideration the recommendations of the IDP Environmental Assessment (expected to be ready inSeptember/October, 1999) in dealing with any DSP environmental issues. The EMP will be finalized inthe light of the IDP Environmental Assessment.

b. Environmental category: [] A [XI B [] C

c. Justification/Rationale for category rating: The project has been rated as environmental category "B"taking into account the nature of the works (rehabilitation/reconstruction of existing infrastructures), theexpected environmental benefits, and the need for appropriate disposal of excavated materials andconstruction rubbles/debris, and for appropriate use of quarries. The physical works supported by theproject are all remedial works resulting in limited local physical disturbance, in contrast with new large-

scale construction.

The only foreseeable environmental issue faced by the project is the one associated with the disposal ofthe ;epair construction materials/debris. An Environmental Management Plan specifying the mitigationmeasures required has been prepared and agreed between Government and IDA. All works contractsenvisaged under the project will conform to the requirements under this plan.

d. Status of Category A assessment: EA start-up date: N/ADate offirst EA draft:Current status:

e. Proposed actions:

f Status of any other environmental studies:

g. Local groups and NGOs consulted. (List names).

h. Resettlement

[] Summarize issues below (e.g., resettlement planning, and compensation)[ITo be defined (indicate how issues will be identified) [x]N/A

Remedial works on the dams are not expected to necessitate the acquisition of additional land for newrights-of-way, and therefore the issue of resettlement of people is not expected to arise.

i. Borrower permission to release EA: [] Yes f] No [X] N/A

j. Other remarks:

7. Participatory Approach:

a. Primary beneficiaries and other affected groups:

[ IName and describe groups, how involved, and what they have influenced

[X] Not applicable (describe why participatory approach not applicable with these groups)

The planned rehabilitation program addresses safety concerns known to the beneficiaries as a result of thefailure of three dams over the past twenty-five years. The program is, therefore, demand driven. Thepeople downstream are aware of the potential safety hazard many dams pose to their physical well beingand to their livelihood. They are aware of project objectives and implementation arrangements.Representatives of local communities have been and will continue to be informed and consulted, asappropriate, during project implementation. Priority was given to the design of an EmergencyPreparedness Plan, including an early warning system. Beneficiaries will be informed about theprocedures to follow in case of threat of dam failure and clearly instructed in what to do and where to goin case of emergency. Provision is also made under the project for a series of workshops to be organizedto facilitate the sharing of ideas between beneficiaries, central and local Government representatives, andcontractors. In addition, water users served through the dams are expected to actively participate throughthe Water Users Associations (WUAs) in: (i) organization of WUAs; (ii) the management of water at thecommunity level (including collection of water fees); and (iii) the design and actual rehabilitation of thetertiary and quaternary irrigation networks supplied by the dams.

b. Other key stakeholders:

[] Name and describe groups, how involved, and what they have influenced

[XI Not applicable (describe why participatory approach not applicable with these groups)

8. Checklist of Bank Policies

a This project involves (check applicable items):

f] / Indigenous peoples (OD 4.20) [X] Riparian water rightsl(OP 7.50) (BP 7.50) 'GP 7.50)

[I Cultural property (OPN 11. 03) [XI Financial management (OP 10. 02) (BP 10. 02)[XI Environmental impacts {X] Financing of recurrent costs (OMS 1.21)

(OP 4.01) (BP 4.01) (GP 4.01)[] Natural habitats [X] Local cost sharing

(OP 4.01) (BP 4.01) (GP 4.01) (OP 6.30) (BP 6.30) (GP 6.30)[I Gender issues (OP 4.20) [ Cost-sharing above country three-year average

(GP 6.30) (OP 6.30) (BP 6.30j[] Involuntary resettlement (OD 4.30) [ Retroactive financing above normal limit

(OP 12.10) (GP 12.10)[] NGO involvemnent (GP 14.70) [ Disputed territory

(OP 7.60) (BP 7.60) (GP 7.60)[XI Other (provide necessary details) Dam Safety (OP 4.37)

F: Sustainability and Risks

1. Sustainability

Adequate and regular maintenance of the rehabilitated dams is critical for the sustainability of projectbenefits. Such maintenance will require sufficient institutional and financial resources which have notbeen readily available over the last few years. The Dam Maintenance Enterprise is responsible for theoperation and maintenance of dams. Their capacity to perform their job depends on allocations from thestate budget and on the revenues they generate from selling water to the Operation and MaintenanceEnterprise which is responsible for the supply of irrigation water to farmers. Arrangements will beagreed with Government on effective modalities for the DME to be paid by OME at a rate that will ensurethat the maintenance requirements of dams are met, or that any underpayment by OME is met from thestate budget. Provision is also made under the project for strengthening the DME to ensure that theyacquire and maintain the necessary technical and management capability to effectively operate andmaintain the rehabilitated dams. An agreement has been reached with Government under the IRP toachieve full O&M cost recovery by the year 2005. Assurances to the effect that Government intends toabide by this time table will be obtained during credit negotiations. To ensure adequate O&M financingfor the dams in the interim period, the project will finance the expected deficit.

'All the darns to be rehabilitated under the project are on international waterways, as defined in OP 7.50. The Bankhas determined, however, that the project would not cause any adverse impact on the quantity and quality of waterto downstream reparians. On that basis the project was exempted from the notification requirement.

2. Critical Risks (reflecting assumptions in the fourth column of Annex I)

Risk Risk Rating Risk Minimization Measure

From Output to ObjectiveInadequate resources for O&M S Government committed itself tofull

O&M cost recovery by 2005. Theproject willfinance incrementalcosts on a declining basis.

From Components to OutputsCost overruns during implementation M Cost estimates were based on

careful survey work and on actualcontract cost data. In additionproject design is keptflexible toallow for the project scope to beadjusted to the available budget.

Limited in-country construction capability M Civil works contracts for many of

the dams are expected to be largeenough to attract internationalbidders.

Insufficient management and construction The project provides for thesupervision capability in DME institutional strengthening of DME.

In the interim period PIU willassume responsibility for overallproject management andforconstruction supervision. DME willlake over this responsibilityprogressively.

Overall Risk Rating M

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)

3. Possible Controversial Aspects (Project Alert System): None

G: Main Credit Conditions

1. Effectiveness Conditions

I. PIU will select a dam safety specialist with proven international experience, under terms ofreference acceptable to IDA, for a cumulative assignment of about 6 months over the five-year projectperiod to undertake periodic visits of about two weeks each to (i) undertake reviews of the rehabilitationprogram twice a year; (ii) participate in the continued reassessment of the project methodologies andapproach; and (iii) identify any implementation issues and develop concrete and practicalrecommendations to be proposed for consideration by PIU, DME and IDA to address those issues.

11. PIU shall: (a) open a Project Account in a Commercial Bank with an initial deposit in localcurrency equivalent to at least $250,000.

2. Other [classify according to covenant types used in the Legal Agreements]:

Condition of credit negotiations ( it has been fulfilled):

Selection by PIU of an internationally selected design management specialist, under terms of referenceacceptable to IDA, for a period of 5 months to help (i) oversee the design of the first seven dams; (ii)prepare a detailed plan for design of the other 13 dams to be rehabilitated, including dam-specific termsof reference and other documentation required in the bidding process; and (iii) prepare a detailed plan fortechnical investigations on the 60 dams which are not the subject of rehabilitation under the project.

Project imiplementation

1. The PIU will be maintained within the Ministry of Agriculture.

I. At the onset of each project year (September 15), the PIU will prepare and submit to IDA forreview an annual work plan and the associated budget.

Ill. Government will finalize by October 1. 1999 the Environmental Management Plan in respect ofmitigating measures for the disposal of construction debris and the opening of quarries at dam sites in thelight of the Environmental Assessment expected to be completed in September 1999 and will iicorporatethe recommendations in all civil works contracts.

IV. On the basis of the findings of the social assessment, the social unit of the PIU will organizeinformation campaigns to ensure that beneficiaries (i) are given ample opportunity to be involved in thedesign and introduction of the Early Warning Systems and the associated Emergency Evacuation Plans;and (ii) can communicate with DME and contractors in the course of planning rehabilitation works tominimize the interruption of the flow of irrigation water.

V. The Project Account will maintain a minimum balance, through quarterly replenishmentsequivalent to $100,000, or such amount as may be agreed by the Association from time to time. The useof the funds of said Project Account will exclusively be for financing the implementation of the project.

VI. A Dam Safety Expert will be maintained for all the life of the Project and his recommendationswill be implemented.

VII. Government will monitor and evaluate project implementation and achievement, on an ongoingbasis, in accordance with indicators satisfactory to IDA (Annex 1).

VIII. Government will prepare by December 31, 2001, under terms of reference satisfactory to IDA, amid-term progress report integrating the results of the monitoring and evaluation activities and setting outa strategy for the timely completion of project implementation. This report will be discussed with IDA byMarch 31, 2002 with the aim to agree on any necessary changes in project design and implementationstrategy.

IX. By December 31, 1999, the Government will establish an independent Technical ConsultativeCommission on O&M of dams to provide every three years an independent assessment of the state of thedams and their O&M requirements. This assessment, along with the revenues effectively received byDME from the sale of irrigation water, will be used as the basis for budgetary allocations to DME overthe following three years. The recommendations of the State Expert Commission will be binding andfully reflected in the O&M budget of DME.

H. Readiness for Implementation

[X] The engineeringdesigndocumentsare beingfinalized forthefirsttwodamsand thoseforan additionalfive dams are expected to be ready in Jutly, 1999. This will allow PIU to float thetenders in August, 1999 for all the civil works expected to be initiated during thefirst year of theproject.

[XJ The bidding documents for the first year 's rehabilitation program are under preparationand are expected to he ready, in July, 1999.[X] The Project Implementation Plan was appraised in March, 1999.

L Compliance with IDA Policies

[X] This project complies wvith all applicable IDA policies with particular reference to OP4.37 (DamSafetyV).fX] The following excepnon to IDA policies was recommended and approved: Excepnon to therequirement under OP 7. *0 that the other riparian States he notified of projects on international waterways. This was done on the basis that this project meets the criteria for exemption specified in para. 7 ofBP 7.50.

Task Team Leader: Salem Gafti

Sector Director: Kevin Cleaver

Country Direc

Annex ]

Project Design SummaryArmenia: Dam Safety Project

Narrative Summary Key Performance Monitoring and CriticalAssumptionsIndicators Evaluation

Sector related CAS goal: (Goal to Bank Mission)

1. Accelerate the growth 1. 1 Decreased 1. 1 Ministry of Consistent with Bank

andseor infastructure bottlenecks Economic Reforms Missionsector

Project Development (Objective to Goal)Objective.

To protect the population 1.1 Achievement of the 1.] Ministry of Government remainsand the socio-economic Risk Reduction Profile Agriculture committed to theinfrastructure down- envisaged under the rehabilitation ofstream of the dams facing project (Annex 2) infrastructure and to itsthe highest risk offailure. effective operation and

maintenance.

1.2 Number of people 1.2 Statistics of Other IDA supportedprotected downstream of Cabinet projects (IRP, IDP) areeach rehabilitated dam. department of successfully

Emergency implemented.Situations

Outputs: (Outputs to Objective)

1. Safety and operation of 1.1 Timing of risk 1.1 Risk Reduction DME gets paidfordams improved reduction of 20 dams Profile Tabulated water delivered

progressively reduced as by PIU through the dams.planned

Government makes up1.2 Summary risk 1.2 PIU and DME for any shortfall in thecoefficient for each of the monitoring reports O&M budget required20 targeted is for the sustainedsubstantially reduced operation of dams(constructed ion the basisof main sub-indicators)

1.3 Number of Dams for 1.3 DME reportswhich Safety equipment isfully installed

1.4 Number of villages 1. 4 Cabinetbetween those under Department forthreat of inundation for emergencywhich emergency warning situationssystem is installed

2. DME strengthened in 2.1 DME equipped with 2.1 PIU and DME DME properlydam safety monitoring, dam safety monitoring monitoring reports equipped, it hires andconstruction supervision, equipment and with plant retains qualifiedand dam operation and for emergency repair. personnel and gets amaintenance full set of information

2.2 Number of dams for 2.2 DME on the state ofwhich program and monitoring report. remaining dams..schedule of inspection andevaluation (executed byconsultants) is formulatedand implemented

2.3 Number of DME staff 2.3 DMEwho have undergone monitoring report.training in emergencypreparedness and damoperation procedures.

Project Components/Sub- Inputs: (budget/or each (Components tocomponents: component) Outputs)

.. Rehabilitation of 20 1. US$ 22 million Progress reports, No cost overrun duringprimary irrigation dams: procurement implementation.1.1 Rehabilitation works 1.1 USS 20.7 million reports,1.2 Design and supervision 1.2 US$ 1.3 million disbursement Necessary budget

reports prepared by allocation by2. Dam safety sustainability.- 2. US$ 7.4 million PIU. Government.

2.1 Dam Safety Plans 2.1 US$ 0.2 million Project works will2.2 Dam Safety Site 2.2 US$ 1.7 million aract wores wllInstallations attract the interest of2.3 Strengthening DME 2.3 US$ 3. 0 million sufficient local and2.4 Investigation and 2.4 US$ 2.5 million foreign contractors.Emergency Repair

PIU and DME will3. Project management 3. US$ 1.0 million retain qualified staff

Annex 2

Dam Safety ProjectProject Description

General

There is a total of 80 existing dams in the Republic of Armenia with a total capacity of about 1400 Mm3.Three additional dams are under construction. The operating dams can be divided in the followingcategories: (i) 20 priority irrigation dams; (ii) 50 other irrigation dams; (iii) 6 hydropower dams; (iv) 3irrigation/domestic water supply dams, and (v) one irrigation recreation dam. The seventy three damsused for irrigation have a capacity of about 1250 Mm3 .

The peak decade for construction of the main irrigation dams was 1960 to 1970 although several wereconstructed between 1970 and 1990. The break-up of the Former Soviet Union in 1991 resulted in aserious reduction in budget which basically stopped the maintenance activities of the irrigationinfrastructure. This has resulted in the deterioration of the irrigation dams and related safety problems.In addition to the maintenance related safety issues, several dams suffer from design deficiencies, such asinadequate spillway capacities. A further concern is the stability of the dams under seismic conditionssince the Republic of Armenia is prone to sizeable earthquakes (the Spitak earthquake in December 1988had a magnitude of 6.9 resulted in about 25,000 victims).

Prior to 1982, the operation and maintenance of all reservoirs was the responsibility of regional Operationand Maintenance Enterprises (OME). For both institutional and budgetary reasons, these OMEs wereunable to maintain the technical integrity of the dams. As a result, the Government decided in 1993 toestablish a Dam Maintenance Enterprise (DME) to be responsible for the operation and maintenance ofthe 14 biggest (and potentially most dangerous) irrigation reservoirs. In 1998, responsibility for the fiftyfour other irrigation reservoirs was transferred to DME. This left the four biggest reservoirs (Akhuryan,Aparan, Azat, and Jogaz) under the responsibility of a separate specialized enterprise, while the Ketchutreservoir remains the responsibility of the Arpa-Sevan Tunnel regional OME. Technical inspectionscarried out in 1994 by international experts on 18 dams revealed that most of these dams pose a serioussafety hazard to the populations downstream. Subsequent technical investigations revealed that, byinternational standards, most dams in Armenia do not meet acceptable safety norms.

Project components

The project will have three components: (i) Rehabilitation of 20 primary irrigation dams; (ii) Dam safetysustainability; and (iii). Project management, which are described in detail in the present annex, followinga presentation of the basic project criteria.

Emergency nature of the project

The safety conditions of the dams involved in the project are very serious, probably alarming. Thereported deficiencies (i) insufficient stability of dam bodies; (ii) inadequate spillway capacities; (iii)inadequate bottom outlet capacities; (iv) leakage and internal erosion of dam bodies; (v) settlements ofdam crests] represent the most dangerous limit states in the case histories of failures of embankmentdams2. All dams included in the project are embankment dams.

2 Re: ICOLD (International Commission on Large Dams) Bulletin 99 "Dam Failures- Statistical Analysis"

Three significant dam failures have already occurred in Armenia as detailed in table 1.

Table 1: RECENT DAM FAILURES IN ARMENIA

Dam Type Failureyear Age of dam Cause offailure and consequences

Agarak Earthfil 1974 20years Leakage, sloughing, crest settlement andovertopping. One villageflooded

Marmarik Earthfill 1978 End of Excessive pore pressure build-up

construction Reservoir empty.

Artik Earthfill 1994 15 years Progressive failure of u/s slope and

consequent overtopping. Two villages

flooded, 2 casualties, many losses.

Considering the years in which the failures occurred and the number of dams existing in Armenia in thoseperiods, the percentage of failures (number of failures/number of existing dams) can be estimated in theorder of 2.1% (1974), 3.5% (1978) and 3.9% (1994). Two aspects are of concern:

(i) the percentage values show an increasing trend;(ii) the values are considerably higher than the value of 0.5% found by ICOLD3 worldwide for

dams built after 1951;(iii) in all cases, a proper surveillance could have detected the incipient distress in time to avoid

failure.

In addition to complete failures, several significant accidents have been reported at dam sites at anaccelerated rate in very recent periods. Table 2 lists them.

Table 2: SIGNIFICANT ACCIDENTS ASSOCIATED WITH DAMS

Year Dam Age Location Of Description Of Accident | Consequences And RemedialActions

(Years) Distress __ |

1989 Sovietashen 24 Dam body |Leakagefrom dam body at Spillway capacity increased byIhigh level. demolition offront wall. Reservoir

, I '. ~~~~~~~~~~~~~~lowered.[1991 Sarnarpur 24 Conduit IErosion of dam body inside Irrigation stopped 2 months. Repaired

underneath conduit by backfilling conduit with concrete.

I x__ _ _ _ _ _ _ _ _ _ _ jdam body 'I _ _

1991 Spandaryan 2 Pressure tunnel 1 Water outburst > 5Om3/s Town of Sisian partly flooded

1993 lKarnout 20 !Dam body Crest settlement 1.2 m Spillway capacity increased by

demolition offront wali. Reservoir

1994 Aparan 28 Bottom outlet Steel lining dislocation loegateon stopped I mond

tunnel because of poor steel- Rehabilitated under !RP.

concrete contact

1996 Joghaz 30 Conduit Erosion of dam body inside Irrigation stopped. Repaired by

underneath (conduit grouting.

dam body

1997 David-Bek 7 Irrigation Outlet valve destroyed by Irrigation stopped I month. Repaired.

intake I ice swelling inside steel

pipelineI

1998 Hazat 22 Bottom outlet tErosion of in situ soil inside iRepaired by grouting.

tunnel jtunnel, tunnel lining locally

ldestroyed

Re: Bulletin 99 (1995) "Dam Failures- Statistical Analysis"

1998 Sovietashen 33 (Spillway Soil erosion into drainage Underpinning by grouting operations.gallery underneath spillway IConcrete cover to eroded channelchannel. Progressive lwaterway.settlement of channel liningon clayfoundations. I

1998 Aygezor 24 Conduit Erosion ofdam body inside Repaired by grouting. D/s populationunderneath Iconduit levacuatedfor I month.

,____ ___dam body

Evidence suggests that other failures cannot be ruled out if the situation of dam safety in Armenia isallowed to remain out of control. Considering that no dam is reported to have a functioninginstrumentation system and that around 460,000 people are at risk, the situatioki should be regarded as anemergency.

Matching Emergency with Lead Times

Dams are special structures, each of them requiring ad hoc consideration. Rehabilitation of dams whichhave been in operation for several years poses the additional difficulty of accessing design and operationrecords that are often lost or not available in sufficient detail. All this leads to relatively long lead timesfor the preparation and the implementation of rehabilitation works. At the other end, a dam safetyprogram is, by definition, of an emergency nature and this is particularly true in the case of Armenia.Bank's experience with dam safety programs in other countries4 has shown that this disconnect isconstantly present. Therefore matching emergency with the relatively long lead times required forrehabilitation works is a key issue in dam safety programs.

International experience has shown that this problem can be efficiently mitigated by the optimization ofan implementation program based on a mix of both structural and non-structural measures.

Structural measures are the rehabilitation works proper. They include works on the dam body such asrehabilitation or enlargement of the water discharge facilities, and sealing.Non-structural dam safety measures include5:

a) Instrumentation and monitoring devicesb) Operation and Maintenance (O&M) Planc) Emergency Preparedness Plan (EPP)d) Early Waming Systeme) Telecommunications

The technique used for optimizing the implementation program is the Risk Reduction Profile which isdescribed later. Non-structural measures can be implemented more rapidly and at a much lower cost thanthe structural ones. The former are not a substitute for the latter, rather it is through the balancing of thetwo type of measures that a sound dam safety program is implemented. Non-structural measures alsoplay a fundamental role in assuring sustainability of the rehabilitation works.

4 Notably India (Credit.....) and Indonesia (Loan.

5 In the Armenia DSP, service buildings, workshops and emergency energy supply have also been included under the non-structural

measures.

Structural measures

Most of the dams in Armenia are of the embankment type and Armnenia is a seismically active territory.These two circumstances draw the attention on two main safety aspects6:

i. discharge capacity of the spillway7 ,ii. embankment stability under dynamic loading.

Return period of the floods for sizing the spillways has been fixed in 1: 10,000 years. This is consideredacceptable in consideration of the fact that Armenian reservoirs are at their full capacity level for lessthan a month each year and much of the run-off is from snow melting.

Data on seismicity in Armenia are available over a period of about 2,000 years. The territory is divided inzones with values of horizontal ground acceleration (kH) varying from 0.2 to 0.4 g. There are three damfailures on record in Armenia, as shown in Table 1. It is important to note that the three dams were of theearthfill type and, in all cases, failure was unrelated to dynamic loading. Also none of the other dam-related accidents (Table 2), can be attributed to seismic actions.

In international practice, annual probabilities ofexceedance in the range of 1:1,000 to 1 :10,000 have beenused. Such probabilities are selected in such a way to provide a safety level consistent with the global pastperformance of existing dams, acceptable to the regulator and the public. Based on the record period andon the past performance of dams, the kH values fixed by Armenian norms are believed to provide anadequate safety level.

Dynamic stability analysis are carried out by the Krasnikov method8, using kH values giveui by thenorms. Cumulated deformation are compared with the available freeboard9. The analysis will also becarried out using higher kH values (next category in the norns) to assess sensitivity of associateddeformations. Dams with higher incremental deformnations will be equipped with strong motion,recording accelerographs. This will permit to ascertain the response of the structure during heavyshaking and review the design hypothesis correspondingly.

Risk reduction profile

As the basis for starting the process of upgrading the safety of dams, the rehabilitation requirements of 20primary irrigation dams have been identified and prioritized. For this purpose the Risk Reduction Profile(RRP) approach has been used in which the overall risk of the whole portfolio of dams is progressivelyreduced towards an acceptable, final level. A summary picture of the RRP is presented in Figure 1.

On the vertical axis, the number of dams (DAMS) and the population at risk (PAR) are shown usingdifferent scales. The implementation period is represented on the horizontal axis.

The progressive reduction of the number of risky dams from the initial situation to the end of the projectimplementation is shown. The effectiveness of a program in improving dam safety levels can be judgedby the shape of the RRP. Concave profiles are preferred in the sake of early safety improvement, but

6 Other safety aspects addressed by structural measures involve hydraulic steel structures and sealing of zones ofexcessive leakage.7 Overtopping is, by large, the most critical failure mechanism for embankment dams.' The Krasnikov method is understood to be equivalent to the Newmark method which is commonly used for thiskind of analysis in international practice.9 The procedure is suitable in the absence of earthquake-induced liquefaction. This is the case for all dams, exceptTavshud dam, for which a liquefaction-potential analysis is warranted.

lead times play against this aim. The effect of non-structural measures is evident by comparing the twoprofiles shown in Figure 1. The selected program (solid line), based on the anticipation of non-structuralmeasures, present substantial advantages with respect to the rejected alternative. The latter addressedstructural measures without prioritization of the non-structural ones. It must be pointed out that theselected implementation plan involves a substantial coordination effort of design activities in the initialperiod. To mitigate the risk of non-performance of PIU in this task, an international dam design specialistwill provide technical assistance to PIU over a period of 5 months.

The left-most profile represents the progressive reduction of the total population at risk (PAR). The fastplunging of the profile reflects the choice to anticipate the rehabilitation of Aparan dam (PAR-I 85,000people).

Figure 1: RISK REDUCTION PROFILE

1< . m ~- -% _.~~ v~ era19 ........... I klM.1 rehabilitated

300000 11

141312

200000 ' 10 . . , x X i.

-8~~Selected program: 1,...,. ,< 7 |Population at Risk (PAR) -i X

IV1111P I I11111II ll i11IT 111-PIfl1i19 ' I' F.'V I I I I II I IV L X m 2003 200 1

Program sustainability and Performance Indicators

Sustainability of a successful dam safety programs depends on the ability to maintain the level of safetyachieved at the end of the program. Component B of the DSP is entirely devoted to such a purpose. Fourinstruments have been used in the design of component B:

(a) dam safety plans, i.e. Operation and Maintenance Plan and Emergency Preparedness Plan;(b) an international expert on Dam Safety Programs will advise the PIU during the implementation of the

project, he/she will make at least 2 visit each year;(c) strengthening of the Dam Management Enterprise (DME) to put it in the conditions to take over the

O&M of the rehabilitated dams;(d) periodicall0 dam safety inspections by an independent technical Consultative Commission to be

established by Government resolution.

0 The frequency of inspections depends on the consequence category of the dam. Tentatively: very high = 5 years;high = 7 y; low= 10 y.

In addition to the above, provision has been made for DME to carry out surveys of reservoirsedimentation in order to assess the current active storage. Based on visual observations during reservoirdrawdown, and on visual investigations of erosion, accumulation of sediments was recognized as aproblem in at least 6 reservoirs (Tavshud, Khalavar, Sevaberd, Tavouch, Vardakar and Aigedzar).Procurement of equipment for survey of sediments is foreseen within the DSP. With such equipment,measurements can be made by surveillance staff on regular basis. Surveys will start at the abovementioned reservoirs and progressively extended to the others. The operational rules of the reservoirsshould be revised taking into account the residual capacity (after deduction of the silted portion).Reservoir conservation measuresl I may be identified during the implementation of the DSP and plannedfor future implementation.

Indicators will be used during supervision to monitor performance in DSP management. The sameindicators should be retained by the DME for long term O&M of the dams.

Table 3. PERFORMANCE INDICATORS

Performance indicator Measured byMaintain an updated inventory and hazard classification of all Number of dams inspected with data80 dams included in the inventoryEstablish a program of inspections and evaluations of all existing Program availability, supervision reportsdams and on-going construction (20 dams)Implementation of rehabilitation works on 20 irrigation dams. Progress of works compared to construction

programRisk Reduction Profile Comparison of planned and achieved profileMaintain O&M Plans including documentation of rehabilitation Number of O&Mplans available.activities (20 dams).Maintain a training and awareness program for operation and Number of dams with trained staffsurveillance personnel (20 dams).Maintain Emergency Preparedness Plans (20 dams) Number of EPPs prepared.

Project Component A - Rehabilitation of 20 Primary Irrigation Dams ($ 22 million, includingcontingencies)

This component will support repair works on critical parts affecting dam safety. 20 primary irrigationidams, listed in Table 4, will be rehabilitated including: design and supervision, field tests, civil works,hydraulic steel structures. All the 20 dams are of the embankment type (either earthfill or rockfill).

Table 4: MAIN IRRIGATION DAMS

Reservoir Catchment Population Dam Volume Irrigated Area HazardArea at Risk Height Category

_____ (Km 2 ) (x 1000) (m) (Mm 3 ) (ha x 1, 000)

I Arpilich 220 6.2 16 105 19 High2 Aygedzor 152 0.4 36 3.55 0.9 High3 Khalavar 40 1.9 31 5.5 0.6 High4 Azat 526 88.2 77 70 2.7 High5 Vardakar 363 11.6 16.2 5 1.1 High6 Tavshud 17 1.6 37 6 1.5 Very High7 Sovietashen 31 0.6 42 1.4 0.4 Very High8 David-Beck 56 0.7 41.2 3.2 0.6 Very High9 Sevaberd 64 8.4 42 6 1.2 High

Interventions in the catchment area, debris dams, by-passing, flushing, dredging, etc.

10 Aparan 6S6 185.6 50.6 90 7.5 Medium11 Karnout 93 11.5 34.5 22.62 7 High12 Mantash 21 14.6 30.4 8.2 3. 7 Medium13 Sarnskhpiur 68 7.7 29.2 1. 1 High14 Hakhoum 211 0.3 46 12 2.4 High15 Tavoush 154 0.2 42.4 5 1.2 High16 Gegardalich 2 2.7 13.8 3.4 0.2 Very High17 Gegarkounik2 0.7 2.9 16.5 0.33 0.1 High

18 Kakavadzor2 3 0.7 33.4 1 0.5 High19 W. Bazmaberd 0.5 0.7 8 0.22 0.1 High20 Her-Her 160 8.0 71.5 26 1.1 High

TOTALS 354.55 2.9Note: Populationfigures exclude persons living outside Armenia

The method used by PIU to arrive at a risk classification of the dams is considered satisfactory andrepresentative of the national appreciation of dam safety. The nature of the dam's foundations is takeninto account (in terms of strength parameters) in the calculation of the factor of safety of the dam which isone of the classification parameters. It must be pointed out that there yet are no internationallyrecognized risk classification methods which can be considered comprehensivel2 . An elementarymethod, based on 4 parameters only, has been proposed by ICOLD in relation to the selection of seismicparameters for large dams13 (re: Bulletin 72).

Needed repairs are classified in four categories: (i) upstream protection works; (ii) spillway structuralrepairs, (iii) leakage reduction; and (iv) irrigation/bottom outlet repair. Within each category, repairworks were allocated a priority ranking from I to 4. Because of resource constraints, only works rankedas priority I and 2 along with some of priority 3 have been included in the project. Cost estimates forthese high priority works are given in Table 5. At eleven of the dams (Arpilich, Khalavar, Vardakar,Sovietashen, David Beck, Aparan, Kamout, Mantash, Sarnakhpiur, Kakavadzor2 and Her-Her ) provisionis made for increasing the capacity of the spillway to allow the safe passage of the flood with a returnperiod of 10,000 years. At seven of the dams (Aparan, Tavshud, Sovietashen, Kamout, Sarnakhpiur,Gegardalich and W.Bazmaberd) provision is made for improving the stability of the dams underearthquake loading.

Table 5: REHABILITATION WORKS AT MAIN IRRIGATION DAMS(INCLUDING DESIGN - EXCLUDING SAFETY EQUIPMENT)

Reservoir Rehabilitation Works Cost Estimate (incLContingencies) USS

I Arpilich Increase spillway capacity and reinstate M&E equipment 381,1812 Aygedzor Repair irrigation outlet and reinstate M&E equipment 1,170,5453 Khalavar Increase spillway capacity and reinstate M&E equipment 894,6484 Azat Reduce leakage and reinstate M&E Equipment 720,0575 Vardakar Increase spillway capacity and reinstate M&E equipment 1,290,2416 Tavshud Repairs to dam and spillway and M&E equipment 3,154,1377 Sovietashen Increase spillway capacity, rectify leakage, repair outlet and 1,912,707

_ ___________ repair M&E equipment

8 David-Beck Increase spillway capacity and reinstate M&E equipment 1,599,3969 Sevaberd Reinstate M&E equipment and repair irrigation outlet 596,08910 Aparan Increase spillway capacity and repair spillway and outlet 1,705,54011 Karnout Increase spillway capacity and repair dam 884,868

22 However, an ICOLD Committee is at work on the subject and its recommendations are expected within 1999.'3 Bulletin 72 (1989) "Selecting seismic parameters for large dams"

12 Mantash Increase spillway capacity 805,05913 Sarnskhpiur Improve dam stability and increase spillway capacity 1,056,36714 Hakhoum Rectify leakage, repair outlet and reinstate M&E plant 2,147,42415 Tavoush Repair irrigation outlet and M&E plant 526,49516 Gegardalich Repair dam and improve stability 1,044,18117 Gegarkounik2 Repair dam and rectify lea/cage 332,48918 Kakavadzor2 Increase spillway capacity and rectify leakage 239,46219 W. Bazmaberd Improve dam stability 224,63320 Her-Her Increase spillway capacity and reinstate M&E equipment 1,309,720=___ TOTAL 21,995,239

Project Component B - Dam Safety Sustainability ( US S 7.2 million including contingencies)

Bl. Dam Safety Plans for O&M and Emergency Preparedness (EPP) ( US S 0.2 million includingcontingencies)

This sub-component refers to two, strictly non-structural., safety measures:A plan (the O&M Plan) shall be prepared, documenting operation, maintenance and surveillance for eachof the 20 dams. The plan shall contain suitable and sufficient information to allow operators to operatethe dam in a safe manner, maintain it in a safe condition, and monitor its performance well enough toprovide early warnings of any distress. The plan shall include, in a specific section, the InstrumentationPlan. The O&M plan shall be implemented, followed, and updated at appropriate intervals.

An Emergency Preparedness Plan (EPP) shall be prepared, tested, issued and maintained for any darnwhose failure could be expected to result in loss of life as well as for any dam for which advancedwarning would reduce upstream or downstream damage. A notification process should be initiated, asspecified in the EPP, immediately upon finding a hazardous condition that could lead to a dam breach, orupon discovering a potential dam breach or dam breach in progress. The dam owner, or operator shallassess whether dam breach warnings should be issued directly to inhabitants in areas immediatelydownstream of the dam, due to the short period of time before the anticipated arrival of a flood wave.Where preventive actions are needed and feasible, these actions shall be initiated, as appropriate, toprevent failure or to limit damages where failure is inevitable.

B2. Dam Safety Site Installations (US $ 1.7 million including contingencies)

Under this headings those site installations are included, which are necessary to make the dam safetyplans operative. Although they could not strictly be classified as non-structural, it is general practice toinclude them under such category. This is justified by the fact that the associated costs are far lower thanthose for the rehabilitation works proper.

Dam safety site installations include:

1. Instruments and monitoring devices to keep dam behavior under control during operation2. Early warning systems at selected dams, composed of danger signals (sirens) to be activated

following a dam breach warning; table 6 shows the number of sirens to be installed, the list has beenagreed with the Armenian Emergency Management Agency (EMA) 14.

'4 EMA has the same status of a ministry and, as such, it reports directly to the prime minister. The function ofEMA, together with those of other different actors (local governments, municipalities, minister of interior), isdescribed in the law 1998/265 on "Civil protection in case of emergency situation" approved by the Parliamient on 2December 1998. The law classifies dam-related hazards as "technological catastrophes", as opposed to "naturalcatastrophes".

3. Energy supply, in the case of emergency, will be secured by building-in redundancy in the system;stand-by generators will be installed and connected to the system.

4. Small buildings for generators, watchman houses and workshops.5. Short wave radio stations.

Table 6: EARLY WARNING SYSTEMS (EWS)

Dam fPopulation at risk 1Number of sirensAparan - 185631 88Azat 88186 44Mantash 14654 47Karnut 11467 _ 6Sarnapur i 7722 _ 4Sewaberd 8407 ! __-4

Her-Her 793 4Arpalich 6250 3

Gegarkun r 2900 t 3Gegardalich -6-02650 -

Kalawar 1871 i 2

Vardakar 11590 2Tawshut 1564 1 |

Sowetashen 600 11

Note: The list includes 14 of the 20 dams. According to EMA, there is no need for EWS downstream of Bazmabertand Kakav dams because population is low and mostly not permanent in the potential inundation area. In the case ofAhum, Tawush, Aygedzor and David-Beck, it is not possible to install EWS because those dams are located on theborder with Azerbaijan.

B3. Capacity Building: Strengthening the institutional capacity of the Dam Maintenance Enterprise (US

$3 million including contingencies)

The project provides for the operation and maintenance of rehabilitated dams. The incremental O&M

costs include DME incremental staff, central and regional offices, transport, and utilities. In view ofGovernment current budgetary constraints, and to ensure timely performance of O&M activities, fundingwill be provided for O&M under the IDA credit on a sliding scale, thus ensuring that full O&Mrequirements are reflected in the Government budget by the last year of the project period.

The Dam Maintenance Enterprise 'Jrambar' will be responsible for the 20 primary irrigation dams beingrehabilitated under the project. It will also assume direct responsibility for the monitoring of the 54remaining irrigation dams, and will coordinate the monitoring of the other dams with the agenciesoperating them. To enable DME to assume this responsibility, the project will provide for DME toacquire the necessary survey, communication, and monitoring equipment, as well as the necessary plantand vehicles to ensure that it has the capacity to remain fully informed about the current safety status ofall dams, and that it has the means to intervene in case of emergency.

In addition to this, provision has been made, in the project budget, for the realization of 2 or 3 pilot mini-hydro power plants 1 5 (installed capacity of a few lOOs kW). Such facilities generate income or, at least,reduce costs associated with power supply from the grid for the operation of the dams.

15 A study on the hydropower potential in Armenia was carried out for the Ministry of Energy by Lahameyer Int.(Germany) and a national consultant in 1993. The study identified about 350 possible sites for small hydropowerplants (less than 3 MW) and 6 for large plants (the largest being about 100 MW).

B4. Investigations and Emergency Interventions on 54 Irrigation Dams and 6 Energy Dams (US $2.5million including contingencies)

This component will support safety investigations into all remaining dams in Armenia. The 54 remainingirrigation dams16 are listed in Table 7. The first 3 dams (Joghaz,Akurian and Kechout) were originallyincluded in the rehabilitation list of the DSP. They have subsequently been removed based on theassessment of project preparedness and their relatively higher safety conditions. The rest of the dams aregenerally of smaller size than the main irrigation dams. They range in height from 1.5 meters to 20meters. The impounded reservoirs range in volume from 10,000 cubic meters to 5.4 million cubic meters.Many of these dams have one or more villages located downstream. In nearly all cases, it is thought thatloss of life would result from failure of any of these dams. Based on the limited infornation available,most are thought to be in poor conditions. Because of lack of resources, however, no allocation isincluded under this project for the rehabilitation of these dams. Instead, provision is made for their closemonitoring, along with detailed technical investigations to clarify the safety state of each dam. Inaddition, a limited provision is made to create an emergency fund to allow DME to intervene in caseswhere further deterioration of any of these dams poses an imminent threat to human life.

Table 7: REMAINING IRRIGATION DAMS

Reservoir Reservoir

Dam name Height Capacity Dam name Height (m) Capacity (Mm3)

I ________ (m) (Mm3)

I Joghaz 65 4S 28 Marmarik 6.0 0.40

2 Akhurian 59 525 29 Ors 6.3 0.10

3 Kechout 48 23 30 Karahundj 6.0 1.30

4 Karagloukh 20.0 0.18 31 Landjaghbiur-2 5.9 0.12

5 Gndevaz 19.0 0.20 32 Irind 5.6 0.06

6 Shenik 18.0 0.80 33 Djili-litch 5.5 0.70

7 Aghavnadzor 18.0 0.30 34 Ashnak-l 5.2 0.11

8 N. Sasnashen 17.4 1.20 35 N. Talin 5.0 0.04

9 Landjaghbiur-2 16.7 0.40 36 V. Talin-2 5.0 0.03

10 Gegharkounik-l 14.5 0.30 37 Aknalitch 4.5 3.90

11 Djadjour 13.0 0.30 38 V. Sasnashen 4.5 0.06

12 Tsilkar 13.0 1.20 39 Bazmaberd 4.5 0.02

13 Katnaghbiur-l 10.4 0.40 40 Aragatsh 4.0 0.59

14 Aghakchi 10.3 0.09 41 Mastara 4.0 0.08

15 Kosh 9.0 0.50 42 Katnaghbiur-2 4.0 0.01

16 Agarak 8.0 0.20 43 Kakavadzor-I 3.8 0.02

17 Talish 8.0 0.05 44 Martiros-2 3.5 0.04

18 Varisrouni 8.0 0.09 45 Saralitch 3.0 0.21

19 V. Talin-1 7.5 0.30 46 Eghnik -3.0 0.01

20 Hatsashen 7.3 1.10 47 Khashtarak-I 2.5 0.12

21 Metsavan 7.0 5.40 48 Khashtarak-2 2.0 0.08

22 Brnakot 7.0 0.90 49 V Karmir 2.0 0.04

23 Ashnak-2 7.0 0.30 50 Artavan 2.0 0.03

24 Vosketas 7.0 0.11 51 Aghkghlou 1.5 0.01

25 Davidashen 7.0 0.30 52 Martiros-l 1.5 0.12

26 Hovit 7.0 0.30 53 Gazigel 1.5 0.21

27 Shgharshik 7.0 0.10 54 Marmarik 60.0 22.00

Note: Marmarik is presently kept empty because of high pore pressures and possible cracking of the core.

16 Out of these, 3 dams have dual purpose (irrigation and domestic water supply), another one is for environmental(lake Sevan levels) and recreational purposes.

The sub-component also includes an allocation of $ 0.2 million to support technical investigations on the6 Hydropower Dams for which details are given in Table 8. These dams were built betweeln 1953 and1989.

Table 8: ENERGY DAMS

iCatchmenJ area Height [ Storage capacit | Reservoir area(km-') (in) ('Mm3) (/7a)

Spandaryan 5507 83 | '5 7 1025

Achparin .60 !4.5 5.6 170

Argel 12?(0 24.8 I|5 ! I

Angechakot _8 35 3 4 _54

Tolors 380 69 l 96,Y 480.Shamh 1600 41 13.6 112

|TOT.4L 3717.4

Project Component C - Project Management (S I million including contlingen7cies)

This component will provide for the incremental operating cost of the existing Project ImplementationUnit throughout the duration of the Project.

Annex 3

Damn Saeftv ProjectEstimated Project (Cost.

Project Component Local Foreign Total-------------------- US S million----------------

Rehabilitation of 20 primary irriggation dams 8.8 10.4 18.5Dam Safety Suslainability 2.5 4.0 6.5Project management 0.4 0.5 0.9

Total Baseline Cost il 14.9 25.9Physical Contingencies 1.4 1.9 3.3Price Contingencies 0.1 1.0 1.1

Total Project Cost 12.5 17.8 30.3

Annex 4

Dam Safety ProjectEconomic Analysis

Benefits

(a) Severe safety risk reduced for 360,000 people living downstream of 20 highly risky dams. Thenumber of population at risk per dam varies from 1,000 to 157,000.

(b) Risk reduced for potential flooding and loss of 34% of total irrigated area in Armenia, through theguaranteeing of water supply to an area of 68,000 hectares. which produces annual farm net income of$35 million.

(c) Risk reduced of potential destruction of 78,000 homes and damage to over $2 billion worth of roads,irrigation structures, and other public infrastructure and enterprises (especially the inundation area of theAzat dam with over $800 million in infrastructure at risk).

Cost-Benefit Indicators:

Base level of economic rate of return (ERR) of 32%, with sensitivity analysis showing a range of valuesfrom 15% to 36%. Counting potential losses only of agricultural income and household assets, the valuesof the ERR range from 14-24%. See Table XX in this Annex.

The methodology usedfor estimating the ERR is as follows:

The potential losses of farm net income are derived using the average net income data revealed in the1998 study executed by the Bank "Armenia's Private Agriculture: 1998 Farm Survey" and the value of49,000 hectares of agricultural area which would loss access to water from dams and therefore be unableto withstand the summer period, thereby going out of agricultural production. Roughly 19,000 of the68,000 hectares of agricultural land in the inundation area of the 20 dams covered under the project haveaccess to alternative water sources (though they would not be completely supplementary). With averageannual net farm income per hectare of $515. the total potential losses associated with 49,000 hectares ofagricultural area going out of production are $25 million, or $500 million over the twenty year periodconsidered under the project.

Potential losses of household assets were estimated by taking the average size of rural households (100sq. meters) at a replacement cost of $250 per sq. meter, adding another roughly $5000 of household andfarm assets (consumer durables, livestock, etc.). Losses from flooding were taken at 60% of thehousehold total of $30,000 in dwelling and other assets, and then multiplied by the number of householdsexpected to be affected in each dam's inundation area.

Potential losses of non-household assets was estimated by taking an inventory of the various structures ineach dam's inundation zone and estimating the replacement cost of roads and irrigation structures (perkm) and other infrastructure. Given the rough estimate that was reached, a 30% damage rate was usedfor estimating the potential value of losses from dam breaks. This is reasonable, as structures such asroads and canals which would be damaged are likely to be damaged to a degree greater than 30% ofreplacement value.

The potential losses were summed across all dam inundation areas for the three categories and thenintegrated into a 20 year calculation considering benefits of foregoing these losses by reducing the ratesof expected dam failure. The reductions of dam failure rates are expected to be on the order of 90%,from 7.5% to .75%, for the 20 year period. This amounts to reducing the dam failure rate for a singledam in a singe year by an order of magnitude, but to a rate which is still above the internationallyobserved rate of 0.5% for dams built since 1951 ("Dam Failures Statistical Analysis", InternationalCommission for Large Dams, Bulletin 99, 1995).

When the reduction of the dam failure rate is distributed over the twenty years and multiplied out by thethree different types of losses, a stream of benefits is generated to compare with the stream of projectinvestments. The base level of ERR for the project is 32%, using an average dam failure rate of 7.5%,which corresponds to a reduction of 6.75% in the dam failure rate to 0.75% owing to project investments.Sensitivity analysis shows that for an average dam failure rate of 5%, the ERR is 25%, and even if allbenefits from foregoing damage to non-household assets are excluded, the ERR still reaches a level of13%. If the average dam failure rate is as high as 10%, then the ERR reaches 36%. Sensitivity analysisperformed also shows that the threshold level of ERR of 15% is met when the probability of dam break inthe system over twenty years is set at 3.6% (and when the foregone damages to non-household assets areincluded in the benefit stream). This 3.6% rate is below historically observed levels.

Republic of Armenia - Dam Safety Project: Economic Crop Budgets (1998 constant drams and $US)

Irrigated Wheat per hectare basisTotal

INCOME quantity price DramsExpected yield (kg/ha) 2,520Economic Import Parity Farmgate price/kg 80Income (Dram/ha) 201,600

EXPENDITURESInputs

Seed (kg/ha x price/kg) 200 125 25,000Equiv. of-Urea,KCL,TSP(kg/ha x price/kg) 175 142 24,850Pesticides (kg/ha x price/kg) 2 3,500 7,000

Mechanized Work (rental basis)Ploughing 15,000Cultivation 7,500Levelling 7,000Ridging 7,000Combining 15,000Fuel costs (0.15 L/hp/hr x 82hp x 10hrs) 123 2002 24,600On-farm transport and Miscellaneous [|20,000

Total Expenditures 76% 152,950

GROSS MARGIN (excluding labor, cost of 24% 48,650water & taxes)

USD 122equiv.

Irrigated Vegetables per hectare basisTotal

INCOME quantity price DramsExpected yield (kg/ha) 9,760Estimated Average Farrngate price/kg 50Income (Dram/ha) 488,000

EXPENDITURESInputs

Seed (kg/ha x price/kg) [77 1 5000 5,000Equiv. of-Urea,KCL,TSP(kg/ha x price/kg) 300 142 42,600Pesticides (kg/ha x price/kg) 7 3,500 24,500

Mechanized WorkPloughing (rental) 5,0001Cultivation (rental) | ,00|Fuel costs (0.15 L/hp/hr x 82hp x 7hrs) | 86 200 17,200On-farmn Misc. (spraying, transport etc) F150,000



USD 566equiv.

Irrigated Forage Crops per hectare basisTotal

INCOME quantity price DramsExpected yield - hay equivalent (kg/ha) 8,000Estimated Average Farmgate price/kg 18Income (Dram/ha) 144,000

EXPENDITURESInputs

Seed (kg/ha x price/kg) 351 200 7,000Equiv. of-Urea,KCL,TSP(kg/ha x price/kg) 100| 1421 14,200

Mechanized WorkMowing and Raking 18,000Baling 35,000Baling Twine 10,000On-farm transport 45,000



USD 37equiv.

Irrigated Fruit per hectare basisTotal

INCOME quantity price DramsExpected yield (kg/ha) 10,155Estimated Average Farmgate price/kg 90Income (Dram/ha) 913,950

EXPENDITURESInputs

Planting materials (replanting) 3,0001Equiv. of-Urea,KCL.TSP(kg/ha x price/kg) | 3001 142| 42,600Pesticides (kg/ha x price/kg) | 71 3,500 24,500

Mechanized WorkSpraying I I75,000On-farm transport and Miscellaneous | 0,0pj



USD 1,722equiv.

Irrigated Vineyard (grapes) per hectare basisTotal

INCOME quantity price DramsExpected yield (kg/ha) 4,800Estimated Average Farmgate price/kg 72Income (Dram/ha) 345,600

EXPENDITURESInputs

Planting materials 3,000Equiv. of-Urea,KCL,TSP(kg/ha x price/kg) 1 3001 142 42,600

Pesticides (kg/ha x price/kg) 71 3,500 24,500Mechanized Work

Spraying 75,000On-farm transport and Miscellaneous 70.0

Total Expenditures 62% 215.100


USD 326equiv.

Republic of ArmeniaDam Safety ProjectMajor Assumptions forEconomic Cost andBenefit Analysis

Gross farmgate Base Cropping PatternMargins under Blockade

from crop price Yieldbudgets

USD USD/ton ton/ha

Wheat 122 2001 2.5 30%Vegetables 566 125 9.8 26%

Forage 37 45 8.0 17%Fruit 1,722 225 10.2 17%

Grapes 326 1801 4.8 10%100%

Average Gross Margin PerHectare

$515

300 This parameter reflects that 30% of the value of non-farm assets(roads, irrigation structures, andother infrastructure) that would be lost as a result of the dambreaks and consequent flooding

$ This parameter reflects the costs of repair or replacement for the 60% of18,144 homes and household assets

in households damaged as a result of the dam breaksand consequent flooding

4.6 This is the average number of inhabitants perhousehold

Summary of Potential Losses from Dam Breaks - Agricultural Areas, Associated Incomes, Homesand Household Assets, and Other Non-Household Assets

Potential Annual Potential Potential

Poltential I ost Farm i Number if l.osses of I.osses fromllectares l.ost Net Inconme Households hlouseholds Other Assets

DamagedlDams (Thousand St H lhotsarudsi t I housand S) (ihousand S)

Arpilich 19 S 1.348 S $9,789 24.455 360

Aygedzor 0.9 S .391 S S464 25,244 633

Khalavar 0.6 S 0.413 $ $309 7,494 1.881

Azat 2.7 S 19.174 $ $1.391 347.891 259.500

Vardakar 1.! s 2.522 S $567 45,754 450

Tavshud 1.5 S 0.348 $ $773 6,311 -

Sovietashen 0.4 $ 0.130 $ S206 2.367 60

David-Beck 0.6 $ 0.152 $ $309 2,761 27,210

Sevaberd 1.2 $ 1.826 $ $618 33,133 3,420

Aparan 3.5 $ 40.348 $ S1,803 732,071 429,900

Karnout 7 $ 2.500 $ $3,606 45,360 24,060

Mantash 3.7 $ 3.174 $ $1,906 57,587 30,000

Sarhakhpiur I.] s 1.674 $567 30,371

Hakhoum 2.4 $ 0.065 $ $1,236 1,183 120

Tavoush 1.2 $ 0.043 S $618 789 810

Gegardalich 0.2 $ 0.587 $ $103 10,650 3,090

Gegharkounik2 0.1 $ 0.587 $ $52 10,650 222

Kakavadzor2 0.5 $ 0.152 $ $258 2,761 420

W. Bazmaberd 0.1 $ 0.152 S $52 2,761 180

Her-Her 1.1 $ 1.739 S $567 31,555 30,000

Totals 48.9 $ 78.3 $ $25,193 1,421,149 812,256

Reduction of Losses from Investments under the Dam Safety Project - Calculations of Net Benefits andEconomic Rates of Return

Reduction of Reduction of Reduction of Reduction of

4% Probability Loss of Loss of Losses of Other Investment Net BenefitsCosts

of Loss Farm Income hlousehold AssetsAssets Damaged

2000 0.23% $ $ $ $ $- - - 6,700 (6,700)

2001 0.23% $ $ $ S $59 3.328 1.902 7.200 (1,911)

2002 0.24% $ $ $ $ $120 3,463 1,979 5,700 (137)

2003 0.25% $ $ $ $ $184 3.604 2,060 5,700 148

2004 0.26% $ s $ $ $251 3,751 2,144 5,100 1,045

2005 0.27% $ $ $ $320 3,903 2,231 6,454

2006 0.29% $ $ $ $392 4,062 2,322 6,775

2007 0.30% $ $ $ $467 4,227 2,416 7,110

2008 0.31% S $ $ $545 4,399 2,514 7,458

2009 0.32% $ $ $ $626 4,578 2,617 7,821

2010 0.34% $ $ $ $710 4.764 2,723 8,198

2011 0.35% $ $ $ $798 4,958 2,834 8,590

2012 0.36% $ $ $ $890 5,160 2,949 8,999

2013 0.38% $ $ $ $985 5,370 3,069 9,424

2014 0.39% $ $ $ $1,084 5,588 3,194 9,866

2015 0.41% $ $ $ $1,187 5,815 3,324 10,326

2016 0.43% $ $ $ $1,294 6,052 3,459 10,805

2017 0.44% $ $ $ $1,406 6,298 3,600 11,304

2018 0.46% $ $ $ $1,522 6,554 3,746 11,823

2019 0.48% $ $ $ $1,643 6,821 3,899 12,363

6.75% $ $ $ ERR 32%14,485 92,695 52,980

NPV $25,234

Summary of Sensitivity House and Farm Losses Only House, Farm, and 30% of OtherAnalysis Considered Assets Lost

ERR NPV ERR NPV

Current Dam Break 113% 1283 25% 13302Probability - 5% over 20Years

Probability of Dam Break 19% 9128 32% 25234- 7.5% over 20 Years

Probability of Dam Break - 23% 16358 36% 3625110% over 20 Years

With 3.6% Dam Break probability, the ERR minimum threshold of 15% is met when losses of non-farmassets are included with household and farm income losses.This level is below the historical level observed over the past fortv years in Armenia(which is 5% and increasing).

Annex 5

Dam Safety ProjectFinancial Summary

Project Years 1-5(US$ million. PY October] to September 30)

Implementation PeriodPYI PY2 PY3 PY4 PY5

Project CostsInvestment Costs 6.6 7.1 5.5 5.3 4. 7Recurrent Costs 0.0 0.1 0.2 0.4 0.4

Total 6.6 7.2 5.7 5.7 5.1

Financing SourcesIDA 5.9 6.5 5.1 4.9 4.3

Government 0 7 0.7 0.6 0.8 0.8Total 6.6 7.2 5.7 5.7 5.1

Annex 6

Dam Safety ProjectProcurement and Disbursement Arrangements

Procurement

Procurement methods.

Procurement of works and goods would be in accordance with the "Guidelines - Procurement underIBRD Loans and IDA Credits," (January 1995, revised January, 1999). The Borrower would use theBank's standard bidding documents for goods and works for ICB contracts and ECA regional sampleNCB documents for NCB and Minor works. Selection of consultants would be in accordance with the"Guidelines - Selection and Employment of Consultants by World Bank Borrowers," (January 1997,revised January 1999). For the consulting assignments the Borrower would use the relevant World Bankstandard forms of contract.

Implementation:

The responsibility for all procurement will rest with the PIU presently in charge of the IrrigationRehabilitation Project in the Ministry of Agriculture. The Procurement Unit at the PIU is headed by aProcurement Specialist who is assisted by two junior procurement engineers. A formal assessment of thePIU procurement capacity was undertaken by the Bank. The major findings and action plan werediscussed with Government and were incorporated in the Project Implementation Plan. While the presentprocurement capacity at the PIU was adequate to meet the initial startup procurement activities of theDam Safety Project, it will be necessary to add an additional procurement specialist to the ProcurementUnit to cope with the additional volume of procurement work resulting from the proposed project. Thenew procurement specialist should have at least 2-3 years of experience in Bank-financed procurement.The new procurement specialist should be selected as soon as possible (before project start-up). Inaddition the new specialist along with the existing two junior specialists should receive training in Bankprocurement procedures. Information regarding procurement administration would be collected andrecorded to serve as the basis for quarterly progress reportsl7 to be submitted to the IDA. These reportsshould indicate: (i) revised cost estimates for individual contracts and for the total project; (ii) revisedtiming of procurement actions and completion time; (iii) an updated procurement plan; and (iv)compliance with aggregate limits on specified methods of procurement.

Local Design and Construction Capacity and Capability.

A review of the engineering consulting industry, particularly in the field of hydraulic structures, indicatesgenerally acceptable technical capacity and capability in the country to meet project requirements.However, the design organizations somewhat lack the management skills needed to organize andcoordinate design work to meet the requirements of the tight project procurement schedule. Thisdeficiency may hamper the timely delivery of the designs for undertaking the most urgent rehabilitationworks during the first year of the dam safety program. To bridge this gap, the services of an internationaldesign management specialist are required to assist PIU in overseeing the design activities and to provideon the job training over the first phase of design activity. It is expected that after this on-the-job training,the design management capacity will reach acceptable standards. Regarding the construction industry, the

'' Semi-annual reports after two years.

Bank assessment indicates generally adequate capacity and capability for handling small value civilworks contracts of up to $1.0 million each. The General Procurement Notice has been published in theUN Development Business of 30 April, 1999. A Notice for Pre-qualification of Contractors has beenpublished in the UN Development Business of 18 May. 1999. A project launch workshop is planned forSeptember 1999.

Procurement arrangements:

These are summarized in tables A and B. The Procurement Plan is presented in table C Details are asfollows:

Works: Contracts for dam safety works valued at above US$0.518 million and above per contract wouldbe procured through ICB for an estimated aggregate amount of US$20.3 million. Contracts valued at orbelow US$0.5 million would be procured through NCB up to an aggregate amount of US$2.2 million.Contractors for civil works both under ICB and NCB procedures would be pre-qualified in accordancewith Bank Guidelines. The domestic contractors will be eligible for a 7 1/2% domestic preference underthe ICB procurement of civil works in accordance with Bank Guidelines. Works were grouped intolarger packages to the extent feasible to take advantage of geographical proximity and implementationschedules.

Goods: ICB procedures would be used for contracts valued at US$200.00019 and higher (procurementpackages for maintenance equipment and machinery) up to an aggregate amount of US$2.8 million.International Shopping procedure (IS) will be used for contracts (vehicles, snowmobiles, and equipmentto be financed under ERF) estimated to cost less than US$200,000 up to an aggregate amount ofUS$600,000. National shopping (NS) would be used for small items, estimated to cost less thanUS$50,000 per contract, up to an aggregate amount of US$50,000 on the basis of at least three quotationsfrom at least three qualified suppliers.

Consultant Services (US$2.7 Million): The proposed IDA Credit would finance (i) technical assistanceand consulting services for design work related to rehabilitation work and safety equipment installation,dam safety studies, supervision of civil works, audit services; (ii) TA for design coordination andmanagement and preparation of technical specifications for civil works; and (iii) the services of aninternational dam specialist to periodically provide advisory services to the PIU during the life of theproject on dam safety aspects. The procurement of TA and consulting services would be in conformitywith the Bank's Consulting Guidelines. Procurement methods for consulting packages are summarizedbelow:

(i) QCBS ($2.3 Million): This method will be used to contract the services for design work on thetechnical investigations on all dams and the audit services for a period of five years. For contractsestimated to cost less than $200,000 each, the short-listing may be restricted to qualified eligibleArmenian consulting firms and eligible design institutes.

(ii) Individual Consultants(US$0.5 Million): The services for design management and coordination,and the services of an international dam specialist will be contracted on an individual basis in view oftheir short duration and specialized nature. The total aggregate amount for the two consultants would beabout $239,000. In addition, the services of a Sociologist would be contracted for one year on anintermittent basis (US$2,000). the PIU would also require the services of additional consultants to meetthe incremental staff requirements resulting from the Dam Safety Project. The total aggregate for these

18 If after one year of operation, the number of foreign firns participating in the bidding process is non-existing,then the Bank will consider increasing the threshhold to US$1.0 million.'9 Set at this high level due to the emergency nature of the project.

consultants would be in the order of $215,000, including an additional procurement specialist, a financialmanagement specialist and two engineers. The selection of the individual consultants shall be based oncomparison of qualifications among those expressing interest in the assignment. The selection of theinternational experts shall be based on consultant's qualifications and on the basis of comparison of atleast three CVs.

(iii) Training (US$1 16,000):The IDA credit would also finance some training activities, includingstudy tours. These activities will be procured in accordance with Bank Consultant Guidelines. A detailedtraining program will be submitted by the Borrower to IDA for its prior approval.

Emergency Repair Fund ($2.0 million): This fund is being createdfor the following purposes:

(i) Emergency interventions which may become necessary as a result of the investigation work onthe 60 dams, which are not scheduled for rehabilitation under the project. For each case the Borrowerwill obtain prior IDA approval before drawing upon this fund.

(ii) To finance two or three pilot mini-hydro stations at a total cost of about $100,000. Theprocurement of goods, works, and services, for the proposed pilot stations would be governed by thesame procurement and prior review thresholds as for goods, civil works and consulting services for theDam Safety Project. The Borrower shall submit to the IDA a detailed procurement plan beforeundertaking the work for the two pilot mini-hydro stations

Civil works under the Emergency Repair Fund valued at above US$ 50,000 would be procured throughNCB procedures. Works estimated to cost less than US$ 50,000 would be procured through Minor Worksprocedure. Equipment procured under the Emergency Fund is expected to be procured under ISprocedure.

Incremental Operating Costs($1.2 million): The IDA Credit would finance on declining basis theincremental operating costs for the Dam Maintenance Agency (DME), an organization which willeventually assume the responsibility for overseeing the dam maintenance in Armenia, and the ProjectPIU. The incremental operating costs include fuel, utilities, supplies, and staff salaries of DME from thedate this organization takes over responsibility for rehabilitated dams. These costs will be reimbursed onthe basis of annual budgets to be approved by IDA

Prior Review by IDA:

The following procurement documentation will be subject to prior IDA review:

(i) Goods and Civil Works: All ICB contracts for goods and works; all NCB contracts for civilworks estimated to cost $200,000 and more, including bidding documents, evaluation reports; and firsttwo contracts and bidding documents for civil works under NCB, and first two contracts for goods underiS .

(ii) With regard to services contracts, prior IDA review would be required for all Terms of Reference(TOR), irrespective of the contract value. Contracts with consulting firms estimated to cost more thanUS$50,000 would be subject to IDA's prior review (the IDA would, in addition to the TOR, review theRequest for Proposals (RFP) and the short-list). For each contract with a consulting firm ,estimated tocost US$50,000 or more, after the technical proposal has been evaluated, the technical evaluation reportwould be submitted to the IDA for its review prior to the opening of the financial proposals. Forcontracts estimated to cost between US$ 25,000 and US$ 50,000 the IDA would be notified of the resultsof the technical and financial evaluations. For contracts with individual consultants costing US$ 20,000

or more, in addition to the TORs, the corresponding individual qualifications, experience and terms ofemployment shall be furnished to the IDA for its prior review and approval.

All works, goods and services contracts and contract items not subject to prior review would be subject toex-post review by the IDA on a random basis of one in five contracts.

Retroactive Financing: In view of the urgent need to start up implementation of the project, the PIUinitiated the procurement process for the first year dam rehabilitation program in consultation with theBank. The total amount for retroactive financing shall not exceed the equivalent of US$1.0 million forexpenditures incurred after April 1, 1999. provided the procurement of goods, works, and consultingservices, was in accordance with the Bank Guidelines and specifically cleared by IDA.

The proposed IDA Credit of US$ 26.0 million equivalent would be disbursed over a period of five years,and the expected closing date of the Credit would be March 31. 2005. It is estimated, based onexperience with ongoing IDA operations in Armenia. that the country's ability to implement the projectover a five-year period is reasonable. especially given that the PIU is well established and experienced,and that many national design and construction firms are now generally familiar with similar IDAsupported project requirements. The allocation of the proceeds of the IDA credit is summarized in tableD.

Use of Statements of Expenditures (SOEs)

The following disbursements would be made against certified Statements of Expenditures (SOEs): (a)goods under contracts costing less than US$200,000 each; (b) works under contracts costing less thanUS$ 200,000 each; (c) maintenance costs; and (d) services under contracts less than US$50,000 each forconsulting firms, and less than US$20,000 each for individual consultants, under such terms andconditions as the IDA shall specify. Supporting documentation for SOEs would be retained by theBorrower and made available to the IDA during supervision.

Special Account (SA)

To facilitate disbursements against eligible expenditures, the Government would establish in acommercial bank, acceptable to IDA, a Special Account (SA) to be operated by the PIU under terms andconditions satisfactory to the IDA. The IDA would, upon request, make an authorized allocation ofUS$2.6 million. Initially the allocation would be limited to US$ 1.3 million until disbursements havereached US$ 5.0 million (SDR 3,700), at which time the full authorized allocation could be claimed.Applications for the replenishment of the SA would be submitted monthly (or when 20 percent of theinitial deposit has been utilized, whichever occurs earlier). The replenishment application would besupported by the necessary documentation, the SA bank statement and a reconciliation of this bankstatement. The SA would be audited annually by independent auditors acceptable to the IDA.

Armenia: Dam Safety ProjectAnnex 6 - Table A - Thresholds for Procurement Methods and Prior Review

Section 1: Procurement ReviewGoods/Works ICB NCB Is NS Other metlhodsI Procurement Works \k orks I Works: Works: Minor works:method thresholds >S5000 <$500 0000 nonie none <$50.000

Goods: Goods: Goods: Goods: Goods:>$200.000 none NoIIe <$50.000 none

2. Prior Review All ICB and All First ' goodseach contract >SN00.000 corn,tfor goods and and first tuo X

works above NCB$0.2 million contracts for

__________________w orks

Consultanlt Services QCBS QBS Sole Sourcitg: Consultanit s Otlher metllodsqualification Individuall s Consultants

3. Procurement $1.9 million nonet none I$015 $0.5 millionimethiod and l millionaggregates4. Prior Review >S50,000 >$50,000 All >$50,000 >$20,0005. Ex-post Review Explain briefly the ex-post review mechaniism:

The Bank will monitor procurement activities, contract management andproject record keeping during periodic supervision missions. Roughly 10%of contracts will be ex-post reviewed.

Section 2. Capacity of the Implementing Agency in Procurement and TechnicalAssistance requirements

The current PIU has a Procurement Unit which is headed by a Procurement Specialist. In additionthere are two junior procurement engineers who assist in the routine work pertaining to bidding andin the evaluation process. In view of the urgent nature of procurement requirements of the DamSafety Project, the volume of the procurement work and its complexity will require an additionalexperienced procurement specialist who should be thoroughly familiar with the Bank's procurementguidelines and procedures and should preferably have 2-3 years of experience in Bank-financedprocurement. In addition, the two junior procurement engineers could be provided furtherprocurement training and be used to cope with the increasing volume of procurement work relatingto the DSP. There is also a critical need for urgent technical assistance for overseeing the design ofdam rehabilitation works and preparation of technical specifications for the ICB process for civilworks. This will be met by a short-term international dam design management consultant. Inaddition, the PIU would have at its disposal, during the life of the project, the expert advisoryservices of an international dam expert who would periodically review the ongoing damrehabilitation program and provide appropriate advice to PIU.

6. Brief statement: Primary responsibility for overseeing implementation of procurement procedureswill rest with the staff of the Project Implementation Unit.The prime responsibility for procurement work at the PIU would rest upon the Project Manager.He will be supported by a Procurement Unit consisting of two experienced ProcurementSpecialists and two junior procurement engineers.

7. Country Procurement Assessment Report or Country Procurement Strategy 8 Are the biddingPaper status: documents for theA country procurement note was prepared in 1997 based on a procuremenit procurement actions ofdecree (N.577 dated 12/15/1994). The decree was replaced by two decrees in the first year ready by1997 and a draft procurement law is currently before the Armenian Parliament. negotiationis? Partially

Section 3. Training, Information and Development on ProcurementThe two junior procurement engineers at the PIU should be provided extensive procurement

training especially in Civil Works.9. Estimated start date 10. Estimated date of 1 1 I Indicate if 12. 13. Domesticof Project General Procurement contracts are subject to Domestic Preference forOctober 1. 1999 Notice publication. mandatorN SPN in Preference Constiltanit:

April 30, 1999 Development for Works:I Busiiness: Yes Yes Yes14. Retroactive financinig Yes 15. Advanced

up to US$ 1.0 millioll ProcuremeitNo16. Explain briefly the Procurement Monitorinig System and Informiationi System:The PIU will submit PMRs on quarterly basis starting Oct 1. 2000.

Section 4. Procurement Staffing17 Indicate name of Procurement Staff as part of Project Team: Snezania Mitrovic Division: ECSSD

Ext. 3218218. Explain briefly the expected role of the Field Office in Procurement: None foreseen at the present time.

Armenia: Dam Safety ProjectAnnex 6 -Table B - Procurement Arrangements

Procurement Arrangements(US$ '000)

International NationalCompetitive Competitive

Bidding Bidding Other N.B.F. Total

A. Civil Works 20,279.4 1,198.4 - - 21,477.8

(17.237.5) (1.018.6) (18,256.1)B. Emergency Repair Fund ((a) - 802.4 1,203.8(d) - 2,006.2

(852.6) (852.6) (1,705.3)C. Equipment 2,987.6 - 45.7 - 3,033.3

(2,987.6) (45.7) (3,033.3)D. Consulting Services (b) - 2,678.6 - 2,678.6

(2,588.9) (2,588.9)E. Operation and Maintenance costs of Dam - - 1,053.1 - 1,053.1Maintenance Enterprise (c)

(349.1) (349.1)F. Operation and Maintenance costs of Project - - 81.1 9.5 90.6Implementation Unit

(36.9) (36.9)Total 23,266.9 2,201.5 4,861.6 9.5 30,339.6

(20,225.0) (1,871.3) (3,873.2) - (25,969.5)

Note: Figures in parenthesis are the respective amounts financed by IDA

(a) with prior approval and in accordance with procedures approved by the Bank(b) in accordance with Bank's consultant guidelines(c) Reimbursement on the basis of annual budgets, approved by the Bank(d) Following procedures for minor works

Armenia: Dam Safety ProjectAnnex 6 - Table C - Procurement Plan (US$)

Description Type No. of Cost Procurement Document Invitation Contract Contract

Contracts Incl. Cont. Method Preparation to bid signing completion

Consulting Services Firms 2,022.027

Design rehabilitation and design safety equip. installation Kamut' CF I - CQ Nov-98 Dec-98 Jan-99 Jun-99

Design rehabilitation and safety equipment installation Aparan * I - CQ Nov-98 Dec-98 Jan-99 JUn-99

I Design rehabilitation works Gegardalich. Bazmaberd CF 3 146,643 CQ Mar-99 Apr-99 May-99 Jul-99

Tavshud, Khalavar, Arpitich

2 Rapid Dam Appraisal Cl' 1 46.414 QCBS Mar-99 Apr-99 Jun-99 Nov-99

3 Design of equipment Installation works Gegardalich. Bazmaberd. CF t 50.020 QCBS Mar-99 Apr-99 Jun-99 Sep-99Tavshud, Khalavar, Arpilich

4 Supervision rehab and safety equip. inst. works Karnut. Aparan CF t 160.341 QCBS Jun-99 Jul-99 Sep-99 Oct-00 to D)ec-

Gegardalich, Bazmaberd, Khalavar, Arpilich, Tavshud

5 Technical Investigation remaining 60 dams (DB) CIl 1 419.033 QCBS Jul-99 Aug-99 Oct-99 Oct-0)l

6 Audit I CF 1 113.963 QCBS Jul-99 Sep-99 Dec-99 Apr-01

7 Design rehabilitation and safety equipment inst. - all superv. CF i 70.949 QCBS Jun-99 Jul-99 Sept 99 Apr-00*0Sarnapur

8 Design rehabilitation and safety equipment inst. + all superv. CF t 135.888 QCBS Aug-99 Sept-99 Dec-99 Jun-00)*Sovetashen

9 Design rehabilitation and safety eq. inst. + all superv. Sewaberd & Cl' 1 103.909 QCBS Oct-99 Dec-99 Mar-00 Oct-00'Kakavdz

t0 Design reh. and saf Eq. Inst. + all superv. David-Beck. CF I 224.994 QCBS Apr-00 Jun-00 Sept-00 Apr-01**Gegarkunik, Azat

11 Design rehab. and saf Eq. Inst.+ all supervision Mantash, Her 1icr ClF 1 193,242 QCBS Jan-01 Mar-01 Jun-01 Jan-02-*

12 Design rehab. and saf. Eq. Inst.+ all supervisions Hakum. Tavush CF 1 193.616 QCBS Mar-01 May-01 Aug-01 Mar-02**

13 Design rehabilitation and safety equipment inst. - all superv. CF i 84.521 QCBS May-01 Jul-01 Nov-01 Jun-02**Vardakar

14 Design rehabilitation and safety equipment inst. + all superv. CF: 1 78.594 QCBS Sept-01 Nov-01 Feb-02 Oct-02*-Aygedzor

Note * Design financed under IRP

Note: ** date of completion of design work. Supervision will be carried out until the end of the constructionperiod.Consulting Services Individuals 450,574

1 Short term international assistance for design Mngmt and Cl 1 106.313 IC Apr-99 Apr-99 May-99 Sep-99Technical Specifications

2 Long term international dam specialist Cl 1 133.025 IC May-99 Jun-99 Aug-99 Sep-04

3 Local consultant. Sociologist Cl I 1.852 IC Jun-99 Jul-99 Aug-99 Oct-0)2

4 Consultants for PIU Cl 10 209.384 IC Jul-99 Aug-99 Sept-99 Sept-()4

Civil Works CW 21,477,795

IRehabilitation works Gegardalich, Bazmaberd. Khalavar, Arpilich. CW I 7.982.364 ICB Apr-99 Jun-99 Oct-99 Oct -00 to Oct-Kamut, Aparan, Tavshud 01

2 Safety equipment installations works Kamut. Aparan. Gegardalich. CW I 197.261 NCB Jun-99 Aug-99 Oct-99 Sept 00 to SeptBazmaberd, Khalavar. Arpilich. (I

3 Safety equipment installations works Tavshut CW I 51,183 NCB Nov-00 Dec-00 Feb-00 Aug-00

4 Rehabilitation and safety equipment inst. Works Samapur CW I 1.025,832 ICB Feb-00 Apr-00 Aug-00 Feb-02

5 Rehabilitation and safety equipment inst. Works Sovetashen CW I 1.855.495 ICB May-00 Jul-00 Nov-00 Nov-02

6 Rehabilitation and safety eq. inst. works Sewaberd & Kakavdz CW I 781.637 ICB Oct-00 Dec-00 Feb-01 Jul 02 to Jan 03

7 Rehab. and saf. Eq. Inst. Works David-Beck CW 1 1,571,743 ICB Dec-00 Feb-01 Jun-01 Apr-03

8 Rehab. and saf. Eq. Inst. Works Gegarkunik CW I 301.583 NCB Mar-01 Apr-01 Jun-01 Feb-03

9 Rehab. and saf Eq. Inst. Works Azat CW I 699,586 ICB Mar-01 Apr-01 Jun-01 Feb-04

10 Rehab. and saf Eq. Inst. Works Mantash CW 1 820.772 ICB Dec-02 Jan-02 Mar-02 Oct-03

1I Rehab. and saf. Eq. Inst. Works Tavush Cw I 484.045 NCB Jan-02 Feb-02 Apr-02 Jul-04

t2 Rehab. and saf Eq. Inst. Works Her Her CW I 1,250,174 ICB Aug-01 Oct-01 Feb-02 Sep-04

13 Rehab. and saf Eq. Inst. Works Hakum CW I 2,093,581 ICB Dec-01 Feb-02 Jun-02 Sep-04

14 Rehab. and saf Eq. lnst. Works Vardakar CW I 1,243,602 ICB May-02 Jul-02 Nov-02 Sep-04

15 Rehab. and saf Eq. lnst. Works Aygedzor CW I 1,118.937 ICB Aug-02 Oct-02 Feb-03 Sep-04

TOT ICB 20.443,723

TOT NCB 1.034.072

Goods 2.993.303 Deliver

I Computer Equipment PIU and software for Dam Break Analysis G 1 40.399 NS Mar-99 Apr-99 May-99 Jun-99

2 Portable Monitoring Equipment for DME G 1 690.878 ICB Apr-99 Jun-99 Sep-99 Oct-99Telecommunication Equipment for DMESafety Equipment Aparan, Karnut. Gegardalich, Arpilich. Kalawar.Bazmaberd, Tawshud, Sarnapur. Sovetashen, Sewaberd.Kakavadzor

3 Cars and snowmobiles G 1 192.872 IS Jul-99 Aug-99 Sep-99 Oct-99

4 Fumiture PIU G 1 5.316 NS Mar-00 Apr-00

5 Excavators, Tractors, bulldozers, trailer, mech. Workshop. G I 1.577.232 ICB Jul-00 Aug-00 Sep-00 Oct-00compressors and welding machines

6 Control Center DME Equipment G i 487.606 lCB Mar-00 Apr-00 May-00 Jutt-0lSafety equipment David-Beck, Gegarkunik. Azat. Mantash, HerHer, Hakum. Tavush, Vardakar. AygedzorTOT ICB 2.754,71h

TOT IS 192.872

TOT NS 45.715

Training 116.253

Training in procurement and study tour in dam safety management 116,253are foreseen. All activities have to be agreed with the Bank.

Operating Costs 1.143.781

Incremental Operation - DME (Vehicle and equipment maintenance and sparc 1.053,148parts, fuel, utilities, office supply and incremental salaries)Operation - PIU (Vehicle spare parts and maintenance, fuei, 90.583Communication and utilities. stationery and printing services. wvorkshopconference expenses, bank services)

Fund 2,006.185Y

Emergency Repair Fund (use to be agreed and with prior approval 2.006,185by IDA) including about US$ 100,000 to pilot 2 minihydrostations.

Other 89.736

Social Security Contributions for PIU consultants 89.736

GRAND TOTAL 30.299,645

Legend: ICB=lnternational Competitive Bidding: NCB=National Competitive Bidding; IC=lndividual consultant:IS=lntemational Shopping: NS=National Shopping: CQ=Consultants'Qualifications; QCBS=Quality and Cost Based Selection:MW=Minor Works*=The procurement under the Emergency Repair Fund shall be as per provisions of the DCA (NCB-US$802,400; MW-US$802,400: and IS-US$401,200)

Armenia: Dam Safety ProjectAnnex 6 - Table D - Allocation Of Loan Proceeds

Suggested Allocation of Loan ProceedsIDA (US$ '000) Total Project Cost Average Disbursement % lLoan Amount Disbursement Total Local Foreign Total Local Foreign

l. Operating and 325.4 33.21 1E053.1 1.053.1 - 33.2 332 -

maintenance costs DME2. Civil Works 17,970.3 88.0 23,484.0 9.105.6 14,378.4 88.0 69.1 100.03. Equipment 2.850.9 100.0 2,993.3 - 2.993.3 100.0 - 100.04. Consultant Services 2,465.6 96.6 2.678.6 2,209.0 469.6 96.6 95.9 100.05. Operating and 33.5 40.7 90.6 90.6 - 40.7 40.7 -

Maintenance Costs of PIUUnallocated 2,988.5 - - -

Total 26,634.5 87.91 30,299.7 12,458.4 17.841.31

IDA Loan Amounts(US$ '000) IDA (USS '000) Unallocated Allocated

Total Total Local Foreign Total Local Foreign1. Operating and 349.1 23.7 23.7 - 325.4 325.4 -

maintenance costs DME2. Civil Works 20,665.9 2.695.6 820.1 1,875.4 17,970.3 5,467.4 12,502.93. Equipment 2,993.4 142.5 - 142.5 2,850.9 - 2,850.94. Consultant Services 2,588.9 123.3 100.9 22.4 2,465.6 2,018.4 447.25. Operating and 36.9 3.4 3.4 - 33.5 33.5 -

Maintenance Costs of PIUUnallocated - - - - - -

Total 26,634.2 2,988.5 948.1 2,040.3 23,645.7 7,844.7 15,801.0Loan amounts financed by IDA

Armenia: Dam Safety ProjectAnnex 6 - Table E - Withdrawal of the Proceeds of the Credit

Amount of theCredit Allocated % of

(Expressed in ExpendituresCategory SDR Equivalent) To be Financed

(1) Goods, equipment 2,110,000 100% of foreign expenditures, 100% of localand vehicles expenditures (ex-factory cost) and 80% of

local expenditures for other items procuredlocally

(2) Works 13,270,000 88%

(3) Consultants' 1,830,000 100%services and training

(4) Operation and 240,000 90% of expenditures incurred prior tomaintenance costs of September 30, 2000, 70% for expendituresDME incurred prior to September 30, 2001, 50%

for expenditures incurred prior to September30, 2002, 30% for expenditures incurredprior to September 30, 2003 and 10% forexpenditures incurred thereafter

(5) Operating Costs 30,000 90% of expenditures incurred prior toof the PIU September 30, 2000, 70% for expenditures

incurred prior to September 30, 2001, 50%for expenditures incurred prior to September30, 2002, 30% for expenditures incurredprior to September 30, 2003, and 10% forexpenditures incurred thereafter

(6) Unallocated 2,220,000

TOTAL 19,700,000

Annex 7

Dam Safety ProjectProject Processing Budget and Schedule

A. Project Budget Planned Actual(At final PCD stage)S 70.000 S 70,000

B. Project Schedule Planned Actual(Atfinal PCD stage)

Time taken to prepare the project (moonths) 6 6First Bank mission departure (identification) 11/09/99 11/09/99Appraisal mission departure 3/22/1999 3/22/1999Negotiations 05/17/1999 05/13/1999Planned Date of Effectiveness 10/01/1999 10/01/1999

Prepared by: Preparation Team of the Project Imiplementation Unit for the Irrigation RehabilitationProject under the Ministry ofAgriculture. Manager. Adibek Kazarian

Preparation assistance: PHRD TF027096-AM

Bank staff who worked on the project included:Name SpecialtySalem Gafsi Team LeaderJoseph Goldberg Sector LeaderAlessandro Palmieri Dam safetyMark Lundell EconomicsGiuseppe Fantozzi Financial analysis, Social issuesEzedine Hadj-Mabrouk Environmental issuesJagdish Jassal ProcurementAbdul Haji Financial managementSharifa Kalala Team assistantDavid Bontempo Team assistant

This project was initially a component of a larger project (Irrigation Development Project), thepreparation of which is still underway.

Annex 8

Dam Safeny ProjectDocuments in the Project File*

Ministry ofAgriculture - Preparation Report: Deam .Safetv Project - Januarl, 1998Ministry ofAgriculture - Project Implementation Plan - .4pril. 1999

Annex 9

Statement of Loans and Credits

Differencebetween exp.and actual

Project Fiscal Original Amount in US$ Millions disburs. a/Cancellati Undisb

ID Year Borrower Purpose IBRDIDA ons ursed Orig Frn Rev'd

Number of Closed Projects: 5Active Projects

AM-PE-51171 1999 REPUBLIC OF SAC III 0.00 65.00 0.00 49.95 6.39 0.00ARMENIA

GOVERNMENT TITLEAM-PE-57560 1999 OFEAMENI REGISTRATIO 0.00 8.00 0.00 8.40 0.00 0.00

AM-PE-35805 1998 REPUBLIC OF MUNICIPAL 0.00 30.00 0.00 29.12 -.28 0.00ARMENIA DEVELOP.

AM-PE-35806 1998 REPUBLIC OF AGRIC. 0 00 14.50 0.00 13.69 3.75 0.00ARMENIA REFORM SUPP.

AM-PE-50140 1998 REPUBLIC OF HEALTH 0.00 10.00 0.00 9.63 2.74 0.00ARMENIA

AM-PE-51026 1998 REPUBLIC OF SATAC II 0.00 5.00 0.00 3.80 3.45 0.00ARMENIA

AM-PE-8281 1998 REPUBLIC OF EDUCATION 0.00 15.00 0.00 13.22 -.03 0.00ARMENIA

AM-PE-8279 1997 REPUBLIC OF ENTERPRISE 0.00 16.75 0.00 10.88 6.38 0.00ARMENIA DEVELOP.

AM-PE-35765 1996 REPUBLIC OF HIGHWAY 0.00 31.00 0.00 10.75 -4.85 4.38ARMENIA

AM-PE-35768 1996 REPUBLIC OF SOCIAL 0 00 12.00 0.00 2.70 .11 0.00ARMENIA INVEST. FUND

AM-PE-44387 1996 ARMENIA ADJUST. TA 0.00 3.80 0.00 1.50 1.67 0.00

AM-PE-35757 1995 GOVT. OF POrER 0 00 13.70 0.00 .24 .60 0.00ARMENIA MAINTENANC

AM-PE-8277 1995 GOVTA OF IRRIGATION 0.00 43.00 0.00 19.88 16.09 0.00ARMENIA REHAB.

Total 0.00 267.75 0.00 173.76 36.02 4.38Active Projects Closed Projects Total

Total Disbursed (IBRD and IDA) 91.97 221.81 313.78of which has been repaid: 0.00 .19 .19

Total now held by IBRD and IDA 267.75 218.51 486.26Amount sold 0.00 0.00 0.00of which repaid 0.00 0.00 0.00Total Undisbursed 173.76 0.00 173.76

a. Actual disbursements to date minus intended disbursements to date as projected at appraisal

Annex 10 Armenia at a glance

Europe &POVERTY and SOCIAL Central Low. _

Armenis Asia income Development dlamond-1997Population, mid-year (millions) 3.8 476 2,048 Life expectancyGNP per capita (Atlas method, USS) 530 2,320 360GNP (Atlas method, USS billions) 2.0 1,106 722

Average annual growth, 1991-97

Population (%) 0.8 0.2 2.1Labor force (0.6 0.5 2.3 GNP . Grosper -~~~~~-----' primaryMost recent estimate (latest year available, 1991.97) capita enrollmentPoverty (% of population below natonal poveruy line) ..

Urban population (% of total populaton) 89 67 28Life expectancy at birth (years) 73 69 59Infant mortality (per 1,000 live bliths) 14 26 78Child malnutrition (% of children under 6) .. .. 61 Access to safe waterAccess to safe water (% of population) 71Illiteracy (% of population age 15+) .. . 47Gross primary enrollment (% of school-age population) 85 92 91 DArmenla

Male .. .. 100 Low-income groupFemale .. .. 81

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1976 1986 1996 1997Economic ratlos-

GOP (US$ billions) 2.5 1.6 1.6Gross domestic investment/GDP .. 32.7 7.7 10.7Exports of goods and services/GOP .. .. 23.1 20.3 TradeGross domestic savings/GDP .. 36.9 -25.1 -27.9Gross national savings/GOP .. .. -7.9 -8.8

Current account balance/GDP .. .. -26.8 -29.0 DomestIc InvestmentInterest payments/GDP ,. 1.3 1.5 SavingsTotal debt/GDP .. .. 38.6 49.8Total debt service/exports ., ,, 17.7 11.9Present value of debtGDP .. .. 24.4Present value of debt/exports .. .. 91.7 Indebtedness

1976-86 1987.97 1996 1997 1998-02(average annual growth)GDP 5.8 -14.5 5.8 3.1 5.9 ArmeniaGNP per capita 4.1 -12.9 8.0 5.4 5.7 --- Low-income groupExports of goods and services .. -4.2 14.6 1.2 7.8

STRUCTURE of the ECONOMY`1976 1988 1998 1997 Growth rates of output and Investment (%)

(% of GDP) sAgriculture 19.8 44.6 44.7 1Industry .. 55.4 35.6 35.7 0 _d*_

Manufacturing .. .. 25.2 25.4 . 97Services .. 24.8 19.8 19.6 t50o

Private consumption 45.7 113.1 114.9 .100-

General government consumption 17.4 12.1 13.0 _GDI - DPImports of goods and services .. .. 55.9 58.9 G-I .G.P

1976-86 1987-97 1996 1997 Growth rates of exports and Imports (%(average annual growth)Agriculture 0.8 -5.2 1.0 2.7 75-Industry 5.5 -21.4 1.2 3.0 to -

Manufacturing 5.6 -14.3 1.4 3.3 25Services 7.6 -15.3 8.3 20.8 2sc -- - go -7

Private consumption 4.2 -13.1 6.5 0.3 26 . ' 2 k w ss s6General govemment consumption 3.5 -2.2 14.1 6.2 so Gross domestic investment 7.3 -16.2 -17.4 40.9 7 -Imports of goods and services .. -4.4 8.1 2.8 Exports * importsGross national product 5.8 -12.0 8.4 5.6

Note: 1997 data are preliminary estimates.The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond willbe incomplete.

PRICES and GOVERNMENT FINANCE1976 1986 1996 1997 Iinfitlorn(%j)

Domestic pricesi(% change)Consumer prices 18.6 14.0 4,000Implicit GDP deflator o.6 1.1 19.5 17.3 13,00

12,000 tGovernment finance 11.0o(% of GDP, includes cufrent grants) - -

Current revenue 16.2 17.8 92 93 94 9s 05 97Current budget balance , -3.5 -3.0 i -GDP deflator O CPIOverall surplus/deficit -10.1 .8.0

TRADE

(USSmillions) 1976 1986 1996 1997 F Export andImport levels (USS milions)Total exports (fob) 290 234 1so00

Gold, jewelry, and other precious stones 126 102 TMineral products and metals , 55 47 tManufactures 45 36 13000t

Total imports (cif) 758 793Food .. 259 270Fuel and energy 220 226 ' _Capital goods 32 34 0 _ _ _ _ _

91 92 93 94 90 go 97Export price index (1995-100) .. .. 1O5 93 jImport price index (1995=100) 104 109 U Exports U Imports

Terms of trade (1995=100) .. .. 102 86

BALANCE of PAYMENTS

(US$ millions) 1986 1996 1997 [Current account balance to GDP ratlo (%)Exports of goods and services 368 330 °Imports of goods and services 892 959 91 _ _ m m m mResource balance -524 4e28 .10 l.

Net income 22 95

Net current transfers 74 61 -20

Current account balance -428 -472 flE E-30

Financing items (net) 438 528Changes in net reserves , -10 -56 401

Memo:Reserves including gold (US$ millions) .. .. 168 247Conversion rate (DEC, locaUS$) .. 1.62E-2 414.0 491.0

EXTERNAL DEBT and RESOURCE FLOWS1976 1916 199I 1997

(USS millions) Composition of total debt, 1996 (USS millIons)Total debt outstanding and disbursed e1s 810

IBRD 10 12 G:62 A: 10IDA . .. 174 240

Total debt service 75 55 B:174IBRD 0 1

IDA 1 1

Composition of net resource flows E: 200Official grants , , 179 154Official creditors 173 185Private creditors `1 2Foreign direct investment 18 51 C 117Portfolio equity 1 2 D: 46

World Bank programCommitments 64 107 .ISRD E - BilateratDisbursements 92 77 B DA D - Other multilateral F - PrivatePrncipal repayments 0 0 - IMF G - Short-terNet flows 92 77Interest payments 1 2Net transfers 91 76

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