Document of

The World BankFIL OPY

FOR OFFICIAL USE ONLY

Report No. P-3506-EGT

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE.

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$38 MILLION

TO THE

ARAB REPUBLIC OF EGYPT

FOR A

VOCATIONAL TRAINING PROJECT

March 30, 1983

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

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ARAB REPUBLIC OF EGYPT

Currency EquivalentsPo,

Official Foreign Exchange Rate

1 Egyptian Pound (LE) US$1.431 US Dollar (US$) = LE 0.70

Rate for Commercial Bank Transactions

I Egyptian Pound (LE) US$1.201 US Dollar (US$) = LE 0.84

Fiscal Year

July 1 to June 30

Abbreviations

ICB - International Competitive BiddingILO - International Labor OrganizationITI - Instructor Training InstituteMDHLR - Ministry of Development, Housing and Land

ReclamationMOE - Ministry of EducationMOIMR - Ministry of Industry and Mineral ResourcesPVTD - Productivity and Vocational Training Department of

the Ministry of Industry and Mineral ResourcesTOMOHAR - Training Organization of the Ministry cc

Development, Housing and Land ReclamationUSAID - United States Agency for International DevelopmentVTC - Vocational Training Center

FOR OFFICIAL USE ONLY

ARAB REPUBLIC OF EGYPT

VOCATIONAL TRAINING PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Arab Republic of Egypt

Beneficiaries: Ministry of Development, Housing & LandReclamation (MDHLR)Ministry of Industry & Mineral Resources (MOIMR)

Amount: US$38 million equivalent, including capitalizedfront end fee.

Terms: 20 years including 5 years of grace, at thestandard variable interest rate.

ProjectDescription: The project would support the Government's

efforts to increase the supply and upgrade thequality of skilled and semi-skilled manpower inorder to alleviate acute shortages in two keysectors, construction and industry. It would(i) for construction trades: establish 22 newvocational training centers (VTCs), and equip anew production center for training materials;(ii) for industrial trades: establish one newVTC, extend and/or re-equip five existing VTCsand an instructor training institute; and (iii)provide technical assistance and training toimprove training curricula and materials,upgrade instructors' skills, and strengthen thecapabilities of MDHLR and MOIMR to plan, manageand evaluate vocational training programs. Theproject would provide lower income groups withopportunities to acquire skills which would makethem competitive in the job market. There areno major risks.

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

EstimatedProject Costs: 1/

Local Foreign Total--- … US$ Milion-------

22 Training Centers (MDHLR) 15.4 15.9 31.36 Training Centers (MOIMR) 2.7 7.4 10.11 Instructor Training Institute (MOIMR) 0.6 2.1 2.71 Training Materials Center (MDHLR) 0.1 0.5 0.6Fellowships 0.3 1.1 1.4Technical Assistance 0.7 2.6 3.3

Base Costs 19.8 29.6 49.4

Physical Contingencies 1.9 2.8 4.7Price Contingencies 14.8 10.1 24.9

Total Project Costs 36.5 42.5 79.0

Front End Fee - 0.3 0.3

Total Financing Required 36.5 42.8 79.3

Financing Plan: Local Foreign Total------US$ Million-------

Bank - 38.0 38.0Government 36.5 4.8 41.3

Total 36.5 42.8 79.3

EstimatedDisbursements: Bank FY 84 85 86 87 88 89 90 91

----------------US$ Million---------------

Annual 0.6 4.0 8.5 13.5 8.2 2.4 0.7 0.1Cumulative 0.6 4.6 13.1 26.6 34.8 37.2 37.9 38.0

Rate of Return: Not quantifiable

Appraisal Report: No.4155-EGT, Dated March 23, 1983

1/ Net of duties and taxes.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THEINTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE EXECUTIVE DIRECTORSON A PROPOSED LOAN TO THEARAB REPUBLIC OF EGYPT

FOR A VOCATIONAL TRAINING PROJECT

1. I submit the following report and recommendation on a proposed loanto the Arab Republic of Egypt for the equivalent of US$38 million to helpfinance the foreign exchange cost of a Vocational Training project. Theproposed loan would be repayable in 20 years, including 5 years of grace, atthe standard variable interest rate.

PART I - THE ECONOMY 1/

2. A report on "Recent Economic Developments and External CapitalRequirements" (SecM80-933) was distributed to the Executive Directors onDecember 24, 1980. This section updates the economic situation and outlookdiscussed in that report; revised country data sheets and macroeconomicaccounts are presented in Annex I. An economic mission visited Egypt inJanuary 1983 and its report is currently being prepared.

Background

3. The last ten years have been a period of rapid growth for theEgyptian economy. Following an extended period of inward-looking andcentralist economic policies, the late President Sadat in 1974 announced a new"Open Door" policy with the objective of accelerating the pace of developmentby liberalizing the economy and stimulating foreign and domestic privateinvestment. Parallel to the changes in economic strategy, there was progresstowards peace which brought with it expectations of rapid economic expansionand greater prosperity.

4. Throughout the second half of the 1970s, external circumstances anddomestic developments were on the whole favorable to the economy. Theemergence of a strong petroleum sector with a substantial exportable surplus,large flows of workers' remittances, the successful reopening of the SuezCanal and the growth of the tourism industry, complemented by substantiallong-term capital inflows, allowed Egypt to reduce considerably the stringentresource shortages of the early 1970s. Egypt entered the 1980s with a muchstronger resource base; but the needs of the rapidly growing populationremained and are still immense. At present, 43 million people have only about39,000 km2 of usable land. While Egypt's population has doubled in the lastthree decades, the cultivated area has increased by less than 5%. Moreover,

1/ This section is substantially the same as Part I of the President's Reportfor the Second Agroindustries Project (P-3426-EGT) dated February 8, 1983.

the physical and social infrastructure of the country has suffered from longyears of insufficient investment, inadequate maintenance and the effects ofwar. Low productivity and underemployment affect many parts of the economyand the consumption capacity of the poor has improved only marginally.Maintaining rapid growth will require sustained efforts aimed at overcomingthese constraints. In particular, continued progress depends crucially on:(i) the mobilization of large national and foreign resources to finance highlevels of investment; (ii) substantial increases in the productivity ofcapital and labor based on institutional reforms and effective investmentplanning; and (iii) an equitable distribution of the sacrifices and benefitsassociated with economic growth.

5. After taking office in October of 1981, President Mubarak expressedhis firm intention to accord top priority to economic issues. The outward-looking "Open Door" strategy favorable to foreign investment will bemaintained. The process of liberalization is to be complemented, however,by increased emphasis on population and human resource planning, therationalization of consumption with a view to ensuring greater social equity,and a more comprehensive process of investment planning designed to economizeresources and channel a greater share of investment into the productivesectors in order to foster increased productivity and employment. These aresome of the key conclusions emerging from a special economic conferenceconvened by the President in February 1982. The Government has been workingtoward an economic program aimed at achieving these objectives and meeting thedifficult challenges that lie ahead.

Recent Economic Developments

6. Recent economic trends may be separated into two successive phaseswith quite different characteristics: (i) a period of unprecedented resourcegrowth starting in 1975 and peaking in 1980, and (ii) starting in the summerof 1981, a period of re-emerging resource shortages triggered by the declinein oil prices and an apparent slowdown in workers' remittances.

7. From 1975 to 1980 inclusive, overall GDP growth averaged about 10%in constant (1980/81) prices.l/ This very high growth rate reflects theemergence of the petroleum sector, and rapid growth in industry,transportation, trade, finance and Suez Canal traffic. Agricultural growthremained very modest at around 2.2%. Egypt's severe land constraint makesrapid agricultural growth a very difficult task.

8. Production of crude petroleum in 1980 averaged close to 600,000barrels per day (bId) (30 million tons a year), compared to 220,000 b/d in1975 and 420,000 b/d in 1977, with the Egyptian share of exports (net ofpartner companies' shares) reaching 240,000 b/d by the end of 1980. This veryrapid growth in output coincided with sharp rises in spot prices on the worldmarket, leading to large increases in export revenues, from US$289 million in1975 to US$4.4 billion in 1980/81.

1/ In 1980 the Government of Egypt changed its fiscal year from January--December to July-June, with a consequent change in data series.

9. During the same period, workers' remittances also grew at unprece-dented rates, reaching US$2.7 billion in 1980, compared to US$366 million in1975 and US$897 million in 1977. Moreover, Suez Canal earnings and tourismrevenues reached US$663 million and US$775 million respectively, compared toUS$85 million and US$322 million in 1975. As a result, and despite largeincreases in imports (US$8.1 billion in 1980 compared to US$4.6 billion in1975), the current account deficit narrowed to less than 7.4% of GDP (US$1.6billion) in 1980, compared to 18.8% in 1975.

10. While the balance of payments improved steadily during this period,the fiscal situation remained relatively more precarious and showed greaterfluctuations. The overall public sector resource gap which was 29% of GDP in1975, narrowed to 17% in 1977, widened to 27% in 1979, before declining again

* to 18% in 1980/81. At the same time, inflation emerged as a principal policyconcern. Prior to 1975, Egypt was essentially a fixed price economy, andresource allocation and investment decisions were centrally determined.Moreover, international and domestic inflation was low, so that while relativeprices may have been out of line with world prices, price rigidity did notcreate undue macroeconomic imbalance. The situation has since changedradically. The opening of the economy coincided with an acceleration inworld inflation. At the same time, labor migration and the rapid expansionof the economy led to supply problems in several key sectors, such asconstruction and related activities, and agriculture. Effective demand,especially for consumer goods, also rose sharply following the income gainsthat resulted from the growth of tourism, remittances and other receipts. Allthese factors have exerted sharp upward pressure on domestic prices. In acountry unaccustomed to inflation and flexible prices, and where there are noeasily functioning mechanisms for cost-of-living adjustments in wages andsalaries, the required price changes appeared large and inequitable, given thesubstantial effect they would have on lower income groups. In theuncontrolled parts of the economy, prices and wages did in fact surge upward.However, in the controlled sector, which still dominates the economy, althoughsome small price increases were allowed for, major adjustments could not beachieved. Therefore, the gap between world prices and domestic selling pricesof key traded goods continuously increased, leading to large implicit andexplicit subsidies and resulting in an increasingly distorted system ofrelative prices and incentives.

11. Despite the persistence of structural problems relating to incomedistribution and resource allocation, the growth achieved by the economy inthe 1975-1980 period was very impressive. To a large extent, however, itwas dependent on factors over which Egypt does not have full or evenpartial control. In the summer of 1981 some of the key variables that hadshown steady growth since 1975 suddenly began to reverse. First, oil pricesstarted to decline. The premium Suez Blend Crude declined from the US$40/barrel peak reached in the spring of 1981 to around US$32 by March of 1982 andUS$27 by early 1983. The heavier crudes also declined in price: compared tofiscal year 1980/81, the average barrel exported showed a 10.5% decline invalue for fiscal year 1981/82. Almost simultaneously with the decline in oilexport prices, workers' remittances decreased below the levels achieved in1980/81. Finally, Suez Canal revenues that had been expected to increase

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substantially after the enlargement of the Canal, have failed to showsignificant growth, reflecting excess supply conditions on the internationaloil market as well as the effect of the worldwide recession on the volume oftrade.

12. These developments have led to a deterioration of the balance ofpayments, a widening of the public sector resource gap and an acceleratingpace of monetary expansion. The impact of the export shortfall on the currentaccount deficit was to some extent contained because of the decline in pricesfor food imports, the reduction in non-food imports through tighter importrestrictions and a cutback in investment spending. Nevertheless, the currentaccount deficit widened from US$2.3 billion in 1980/81 to US$3.3 billion in1981/82. The bulk of this deficit was covered by medium- and long-termcapital inflows, although the deterioration in the overall balance hasrequired some recourse to short-term borrowing. Similar difficulties areaffecting the fiscal situation. The overall public sector resource gapwidened to 23% of GDP in 1981/82 (from 18% in 1980/81). As a result, therehas been a large increase in domestic bank financing of the budget, from aboutLE 450 million in 1980/81 to about LE 2.2 billion in 1981/82. Accompanied byrapid expansion of credit to the private sector, this financing has led to amarked acceleration in monetary growth, with money supply (excluding foreigncurrency deposits) increasing at a rate close to 40% per annum, thus creatingadditional inflationary pressures.

13. So far, the primary policy response to the deteriorating trend hasbeen a tightening of imports and credit, and an apparent slowdown ininvestment spending. Largely because of these short-term measures, thedeteriorating trend in the balance of payments has stabilized, and the currentaccount deficit is expected to be somewhat lower in fiscal year 1982/83 thanin the preceding year. The budget deficit is, however, expected to remainlarge at about 20% of GDP. Moreover, although Egypt has recorded a very highrate of growth in recent years (around 8% per annum), the tight credit andimport controls are now beginning to have an impact on the pace of economicactivity and growth.

14. While the above situation is causing concern and requires immediatepolicy measures, to some extent its source can be found in the recessionaffecting the world economy. The Egyptian economy was also affected byinternal and external political events that increased the degree ofuncertainty and slowed down the flow of remittances and private capitalinflows. With the full recovery of the Sinai completed in April 1982 and theconsolidation of the internal political climate, and given adequate incentiveand exchange rate policies, conditions could again be favorable for largerremittances, tourism revenues and an expansion of foreign private investment.This, together with some improvement in Suez Canal traffic, could helpstrengthen the balance of payments and Government finances. Nonetheless,while such an improvement is possible, the long-run structural problems remaina major challenge which the Government needs to address if the country is tosustain rapid economic growth and achieve greater well being for its people.

- 5-

Development Potential and Constraints

15. Egypt has considerable potential for continued rapid development.The reasons for this are, in brief: a large domestic market, a relativelyliterate population, an agricultural potential not yet fully developed, variedraw materials (including oil, gas and phosphate), and a key geographicallocation. Future economic growth may come less easily, however, than duringthe past years. The gradual need to substitute domestic for foreign savingswill become more pressing as foreign aid and net factor income decline inrelation to GNP. Capacities are now strained in a number of areas, includingphysical infrastructure. The expansion of new capacities has been slowed byadministrative inefficiency, inadequate financial resources and weaknessin national coordination and sector programming. Managerial effectivenessin public enterprises and financial incentives for production are ofteninadequate. Higher levels of economic activity together with laboremigration have led to shortages in critical professional and technicalskills. Educational facilities in Egypt still reflect a non-technical biasand their quality needs to be upgraded.

16. In addition, the rapid economic growth of recent years has been basedon the performance of sectors with only weak linkages to agriculture, industryand services where the bulk of the labor force is occupied. For example, theSuez Canal and the petroleum sector currently account for about 22% of GDP butonly 1% of total employment. While tourism and remittances directly touch thelives of a much greater number of people, they cannot provide a solid basisfor employment expansion and technological development. Moreover, thelong-term real growth potential for receipts from petroleum, Suez andremittances is uncertain. The challenge for Egypt lies in the necessity ofchanneling a good part of the surpluses and revenues derived from thesesources into productive investment in agriculture, industry and socialinfrastructure in order to lay the foundations for self-sustaining growth andemployment expansion in the domestic economy.

17. Another key issue is population. At an estimated 43 million, Egypt'spopulation is already very large for its limited usable land area, with anaverage density exceeding 1100 per km2, higher than that of Bangladesh orIndonesia. Recent census results show that the population has continued togrow rapidly, adding over one million people every year. Moreover, almosthalf of this increase is concentrated in the Greater Cairo area. Thiscontinues to create pressures on resources for consumption and investment andaggravates the employment problem in the longer run. Although the Governmenthas initiated a more aggressive population program, it will take considerabletime and further steps to achieve measurable results.

18. A serious side effect of recent inflation appears to have been adeterioration in the relative distribution of income and a growing disparityin consumption levels. Although inequality and the incidence of absolutepoverty are no worse in Egypt than in most economies at similar income levels,continued inflation and lack of progress in more effective taxation of highincome groups could lead to serious distortions.

- 6 -

19. To maintain the momentum of development and to meet the challengesof the future, major efforts are required to overcome the structural con-straints cited above. Specifically, action is needed to: (i) increase theefficiency of the administration through organizational and proceduralmodifications and selective changes in salary structures; (ii) increasereal domestic savings through an effective mobilization of resources andfiscal reform; (iii) strengthen the general use of prices as meaningfulindicators of relative scarcities; (iv) develop a long-term export promotionpolicy, including appropriate management of incentives and real effectiveexchange rates; (v) pursue a vigorous and balanced program to upgrade thecountry's physical infrastructure; and finally (vi) intensify efforts todevelop a coherent and effective population policy. There is an ongoingdialogue between the Egyptian authorities and the Bank on all these importantissues. They have also been the focus of discussions among the members of theConsultative Group for Egypt. Much work remains to be done in trying toformulate practical policy packages that would help Egypt overcome theseconstraints in a gradual yet effective manner. Particular consideration isbeing given by the Government and the Bank to the social implications ofalternative strategies in the full realization that progress can only lastif it ensures broad based participation in the process of economic growth.

External Debt and Creditworthiness

20. Egypt's non-military medium- and long-term public debt outstandingand disbursed in 1982/83 is estimated at about US$15.5 billion. Bilateralloans comprised about 61% of the debt outstanding while the shares ofmultilateral credit and suppliers' credit were about 22% and 10%,respectively, with the remainder being held by financial institutions. Majorcreditors were the USA and Gulf Organization for the Development of Egypt,followed by Saudi Arabia, Kuwait, and the Federal Republic of Germany.IBRD/IDA debt comprised about 7% of the total disbursed debt. Despite thesharp increase in the level of external debt during the last decade--fromUS$2.2 billion at end-1973 to an estimated US$15.5 billion in 1982/83--thedebt service ratio declined from 33% in 1973 to 15% in 1979 and rose to only21% in 1981/82.

21. External financing requirements are likely to remain sizeable in themedium term given Egypt's immense development needs and the more moderategrowth of foreign exchange earnings projected. At the same time, in view ofthe adverse global aid outlook, Egypt may have to rely more on conventionalfinance than in the past and at significantly higher interest rates. As aresult, the debt service ratio is projected to rise over the next five yearsbut should remain manageable in the 20-25% range. Over the longer term, thebalance of payments and debt servicing capacity will depend crucially ondomestic trade and export promotion policies and on developments in the oilsector. With continued exploitation of its national resources and improvedeconomic management, Egypt should be able to maintain its creditworthinessthroughout the period.

PART II - BANK GROUP OPERATIONS IN EGYPT V

22. The proposed loan would be the World Bank's sixty-fourth lendingoperation to Egypt and would bring Bank and IDA commitments to US$2665.1million. Through these operations, the Bank Group has assisted thedevelopment of agriculture, industry, energy, water supply, family planning,transportation, telecommunications, tourism, urban and education. Annex IIcontains a summary of Bank loans and IDA credits as of September 30, 1982, andnotes on the execution of ongoing projects.

23. The Bank has tailored its response to Egypt's basic structuralproblems in a very broad fashion and in close cooperation with other donors.Its strategy involves entry into a broad spectrum of sectors in order toprovide not only direct finance with its relatively limited resources but,equally, to act as a catalyst for other bilateral and multilateral agencies,and as a spur for initiating discussion and positive action on a coherentframework of policies and investment proposals which can tackle thesubstantive issues. The approach also includes delivery of technicalassistance, not only for sound execution of specific projects but fordeveloping the domestic institutional capability to articulate and implementfuture policies and investment programs. The Bank's deliberately broadmultisectoral intervention has been differentiated by sectors and tailored tothe pace at which the Egyptian authorities can reasonably be expected toaddress these issues and implement the programs.

24. Industry, which has been over the past five years the sectorreceiving the largest portion of Bank resources and significant attention,illustrates the nature and scope of the Bank's intervention. The Governmentlooks upon rapid industrialization as a means to stimulate growth of theeconomy, create productive employment, cater to basic consumer needs, andgenerate an "export surplus". Efforts under Bank financed projects have gonebeyond the immediate objective of improving capacity utilization (two importsloans/credit) and increasing production capacity and supply of essentialcommodities in resource-based industries (cotton ginning, textiles, cement andfertilizer projects). The more fundamental effort has been directed atintroducing policy and structural improvements. Towards this end, the Bankhas financed six subsector studies in textiles, building materials, pulp andpaper, food processing, metallurgy, and engineering industries, in order toassist the Government in formulating a package of policy and investmentproposals, which are embodied in our projects. To complement these effortsthe Bank has carried out a study on small-scale industries. The Bank has alsoassisted the Government in a comprehensive study of the construction/contracting industry (one of the major bottlenecks facing Egyptian industrytoday). The Bank proposes to support the Government's efforts in carrying outthe recommendations of these studies. Finally, the Bank is discussing withthe Government a study on Trade Strategy and Investment Planning which focuseson the sectoral allocation and timing of Egypt's investment program in thecontext of a viable foreign trade strategy.

1/ This section is substantially the same as the corresponding part of thePresident's Report for the Second Agroindustries Project (P-3426-EGT)dated February 8, 1983.

25. The illustrative sketch provided above of the Bank's intervention inone sector is representative of the multifaceted approach that it has adoptedin varying degrees in the entire spectrum of the Egyptian economy. It is arole that is in harmony not only with the Egyptian Government's wishes but iswelcomed by the various bilateral and multilateral donors as an appropriatefunction for the Bank as the Chairman of the Consultative Group. Preparationof projects for future lending follows this strategy, and the pipelineincludes projects in vocational training, gas development, urban development,transportation, water supply, agriculture (including drainage), developmentfinance and industry.

26. Bank Group disbursements in FY82 represented 5% of Egypt's medium-and long-term capital inflow. The Bank and IDA shares of total external debt:outstanding and disbursed were about 4% and 3%, respectively, as of June 30,1982. In FY85, the Bank and IDA shares of total external debt outstanding anddisbursed (excluding military debts) are estimated to reach about 6.0% and3.1%, respectively. It is estimated that in FY85, debt service payments dueto the Bank and IDA will represent about 4.6% and 0.2%, respectively, ofservice payments due on Egypt's external debt. Reflecting the increased levelof commitments and delays in the initiation of some of the projects, loandisbursements slowed down in FY82. (In FY82 the disbursement percentage ratewas 16.5%; the EMENA Regional average was 19.3%.) As project executionaccelerates, loan disbursements should improve gradually.

27. IFC participation and lending for projects in Egypt now total aboutUS$83 million and include a ceramics project, a ready-made garment project, aproject for an agricultural complex primarily for sugar beet, a poultryproject, a fish farming project, a building material project, and a tourismproject. IFC is discussing several other private sector and joint ventureprojects. A summary of IFC operations in Egypt is given in Annex II.

PART III - MANPOWER DEVELOPMENT AND VOCATIONAL TRAINING

The Industrial and Construction Sectors

28. Egyptian industry has a large potential for growth given itsproximity to promising markets in Europe and the Middle East and a large andrapidly growing domestic market. Since the possibilities for agriculturaldevelopment are limited, and the service sector is already overstaffed, theGovernment looks to industry to provide stimulus to growth through continuedexpansion, efficient import substitution, and increased exports, as well as toabsorb the growing labor force. Starting in 1974, the performance of industryhas improved considerably and the sector's output has grown at an average rateof about 8% annually during 1974-81. In FY81 industry accounted for about 15%of GDP, was responsible for 13% of commodity exports, and employed about 1.5million people or nearly 13% of the domestic workforce. In order for Egypt'sindustry to play a more dynamic role and thus provide the momentum forsustained economic growth, it will be necessary to overcome several existingconstraints, prominent among which is an inadequate supply of skilledmanpower. The development of an efficient vocational training system to

complement an industrialization strategy is, therefore, an essentialingredient for the growth of Egypt's economy.

29. The construction sector is also vital to the Egyptian economy. Thedevelopment of virtually all sectors including industry, power, transporta-tion, and in a period of rapid urbanization, housing, is affected by thecapability of the construction sector. And the performance of the sector inthe 1970s has been an impediment to the achievement of the Government'sdevelopment goals. As in the case of industry, a sizeable shortage of skilledmanpower is among the key constraints faced by the sector; therefore, there isan immediate need to rapidly build up a supply of well-trained constructionworkers and simultaneously work towards creating a strong cadre ofconstruction management personnel.

30. The 1982/83-86/87 Plan includes growth targets averaging about 10%annually for industry and about 7% annually for construction. This growth,which will yield an important benefit to Egypt's rapidly growing labor forceby significantly increasing opportunities for productive employment, dependsto a large extent upon the rapid expansion and upgrading of vocationaltraining programs.

Skilled Manpower Shortages

31. The stepping up of economic activity since the early 1970s coupledwith an accelerated pace of labor migration has led to severe shortages ofskilled manpower. Equally serious is the low skill profile of the existinglabor force. The underlying cause is the low level of investment for trainingprior to the early 1970s, which resulted in insufficient and poor qualityphysical facilities, teaching materials and teachers.

32. Since 1974, the Government has increased investments in the educationand training sector considerably. As a result, an improved picture isemerging and the gap between demand and supply is gradually narrowing(although the quality is still deficient). For example, Bank estimates basedon Government data suggest that inclusive of the output from the proposedproject, about 85% and 60% of the demand for construction and industrialworkers respectively will be met by 1992. However, there are still severaldifficulties. First, higher education continues to receive disproportionatelyhigh allocations in the investment budget for the education and trainingsector. The demand for this type of education is probably influenced by theGovernment's policy of guaranteeing employment to university graduatescombined with an open admission policy for higher education. Changes in thesepolicies would improve sector performance considerably, but because ofpolitical sensitivities, there is no expectation of change for the timebeing. Second, although labor emigration has eased unemployment and isgenerating substantial foreign exchange, it has created a skill drainparticularly in the industrial and construction sectors. Third, in attemptingto achieve the twin objectives of preparing students for job entry and for thenext level of education, the Ministry of Education (MOE) has been unable toprovide school leavers with the practical proficiency required for the skilledworker level. Fourth, the Ministry of Industry and Mineral Resources (MOIMR),which is the only other major source for supply of skilled industrial labor,

- 10 -

has a limited capacity, which will take time and significant effort to buildup. Finally, given the magnitude of the problem, the Government hasconcentrated its efforts on increasing the overall supply levels and has notas yet been able to attend adequately to the skill upgrading needs of theexisting work force.

Industrial and Construction Trades Training

33. In a situation of severe and continuing shortages of skilledmanpower, the Government is relying, justifiably, on a variety of vocationaltraining modes to utilize the potential of both the formal and non-formalsystems to the extent possible. Currently, training for skilled andsemi-skilled industrial workers is provided at vocational training centersunder MOIMR and technical secondary schools under MOE, and that forconstruction workers at Ministry of Development, Housing and Land Reclamation(MDHLR) training centers.

34. Since its establishment with ILO assistance in 1957, the Productivityand Vocational Training Department (PVTD) of MOIMR has become a main sourcefor the supply of skilled industrial manpower to the large public enterpriseswhich dominate the industrial sector (employing some 60% of totalmanufacturing labor), as well as to the private sector. Through its networkof vocational training centers (VTCs) established or upgraded with Bankassistance, in-plant training centers and an instructor training institute,PVTD offers training in 72 specialized fields within 15 broad trade areas.These are: metalwork, electrical work, electronics, automotive, mining,metallurgy, maintenance, heat treatment, printing, precision mechanics,textiles, chemicals, air conditioning and refrigeration, leather, and glassprocessing. Today over 90% of PVTD's trainees (after completing preparatoryschooling) attend its three-year apprenticeship program, and the remainderavail themselves of accelerated and upgrading courses offered by PVTD. Inorder to make its training system more responsive to current industrial needs,PVTD has delineated the country into ten regions and has established aregional consultative council in each region consisting of PVTD staff andrepresentatives of employers and educators.

35. In attempting to meet some of the demand for skilled and semi-skilledlabor, MOE has increased enrollments in its three-year secondary technicalschools (grades 10-12). However, because the quality of instruction providedis inadequate, graduates lack the level of skills needed for effective entryinto the job market.

36. The training organization (TOMOHAR) of the Ministry of Development,Housing and Land Reclamation is responsible for the manpower needs of theentire construction sector. Through its network of 42 VTCs and threeinstructor training centers being established with Bank assistance, TOMOHARoffers mainly a six-month training course (two months of which consist ofsupervised on-the-job training) in 10 trades. These are: masonry, tiling,plastering, steel reinforcement, formwork, carpentry, painting, plumbing,metalwork and electrical work.

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37. The effectiveness of the training agencies is limited by a variety ofconstraints. A chronic deficit of instructors has adversely affected thequality of training provided. In addition, the qualifications of theinstructors need improvement. Underlying causes for these inadequaciesinclude large wage differentials between the civil service and the privatesector, making instructors' jobs uncompetitive, an overemphasis on theoreticalinstruction in the education system, a lack of suitable materials andequipment, and an inadequate instructor training curriculum. To makeemployment prospects more attractive, MDHLR has introduced a system offinancial incentives, and MOIMR is preparing to follow suit. Both ministriesare also looking into other alternatives to increase staff, including the useof part-time instructors from industry. With Bank assistance, MDHLR hasestablished three instructor training centers under the First EducationProject to augment the supply of instructors for construction trades. As aresult, MDHLR would meet all but 5% of the demand by 1992. The proposedproject includes a comprehensive package of financial and technical assistancefor MOIMR which would effectively reduce the gap between the demand for andsupply of instructors from 60% to 30% by 1992.

38. Equipment, materials and curricula in vocational training centers andinstructor training centers, which are indispensable for effective vocationaltraining, have not kept pace with enrollments and technological change. Thiscompounds the difficulties of providing good quality practical instruction andleaves graduates ill-equipped to perform effectively. Substantial amounts ofexisting equipment dating back to the 1950s have outlived their useful livesand need replacing urgently. Similarly, training materials and curricula needupdating on a continuing basis. These needs have been incorporated into thedesign of Bank financed projects, which include provisions for re-equippingand adding new equipment to training centers, and updating materials andcurricula with expert assistance as necessary.

39. With the help of agencies such as USAID, ILO and the Bank, theGovernment has for some time been attempting to address the difficult task ofmanpower planning to try to achieve a better balance between demand andsupply. Efforts have been hampered by the rapidity of economic and socialchange, a general lack of functional data, and insufficient coordinationbetween agencies. The Government has recently set up a task force to lookinto the issue and try to identify viable solutions.

40. The overlap in the functions of the various agencies providingtraining and the need for coordination among them are two of the mostdifficult and complex issues in the sector. Recognizing this, in 1981 theGovernment created a Central Committee for Orientation and Supervision,chaired by the Minister of Education with representation from relevant facetsof the economy. MOIMR is guided by a Consultative Council for Training inIndustry comprising representatives of the Government and public and privatesector industries. While these changes constitute some progress, additionalefforts are needed to improve coordination further.

- 12 -

Government's Strategy and Educational Finance

41. The main theme of the Government's education and training strategy inthe 1982/83-86/87 Plan is the rapid development of skilled manpower to meetthe economy's needs. Emphasis is to be placed on: distributing trainingopportunities equitably with special attention to the needs of the regions;correcting the imbalance between the demand for and supply of manpower with afocus on industrial training; improving the quality and relevance of theskills of the new and existing labor force; and strengthening theinstitutional base for manpower development.

42. Education accounted for about 4.5% of total Government expenditure in1981, with recurrent education expenditure representing 11% of the totalrecurrent expenditure, and capital expenditure 2.7% of the correspondingtotal. Total Government expenditure on education for the 1975-80 period wasabout 3.1% of GDP, which is slightly low compared with other countries in theregion at the same level of development. Within the education and trainingsector, although the budgetary allocations for general secondary anduniversity education continue to be disproportionately high, there is anincreasing emphasis on vocational training. For example, during 1975-81,MOIMR's capital expenditures increased by 59% annually and recurrentexpenditures by 17%. Similarly, MDHLR's capital and recurrent expendituresshow annual increases averaging 40% and 23% respectively during 1978-82.Projected increases in capital and recurrent budgets during the next fiveyears average 25% and 22% annually for MOIMR and 24% and 29% annually forMDHLR.

The Bank's Role

43. The Bank's support for education and training in Egypt has beenconsistent with the Government's priorities, prime among which are theestablishment of a stock of skilled manpower, a better balance between thedemand for labor and its supply, and equity in the distribution ofopportunities.

44. In support of the sector the Bank has lent a total of US$105 millionfor three projects. The main focus of these projects is to expand and upgradethe training of managers, technicians, and skilled and semi-skilled workers inindustrial, agricultural, construction and commercial trades; improve andexpand teacher and instructor training in selected areas; achieve modestimprovements in education and manpower planning; and provide limited supportfor health education. The project completion mission for the recentlycompleted first project has concluded that the project succeeded in achievingits main objectives. Enrollments and annual outputs of project institutionsare expected to meet project targets by 1984. The studies on education andmanpower planning did not, however, result in improved manpower planning.Accordingly, a more focussed effort in this area is planned for MDHLR andMOIMR in the proposed project. The second and third projects are ongoing, andthe overall progress is good.

- 13 -

45. In view of Egypt's continuing need to prepare manpower to carry outthe high levels of investment planned, the Bank proposes to build upon theongoing support for the vocational training programs in priority sectors.Construction and industry would be emphasized and special efforts would bemade to ensure that training programs support the Government's objective ofachieving a more balanced regional distribution of industry. Separately,assistance planned for the construction sector will help develop a strongmanagement cadre. Over the years, a good rapport has been established betweenBank staff and the agencies responsible for training which should facilitatecontinuing cooperation in the sector.

PART IV - THE PROJECT

46. The project was identified and prepared with the assistance of Bankmissions in December 1981 and February 1982. Appraisal took place in June1982 and negotiations were held in Washington from March 2 to March 8, 1983.The Government's delegation was led by Mr. Samir Koraiem, SeniorUndersecretary in the Ministry of Investment and International Cooperation.A Staff Appraisal Report entitled "Vocational Training Project" (No. 4155-EGT)dated March 23, 1983 is being distributed separately. The main features ofthe project are summarized in the Loan and Project Summary and in Annex III.

Project Objectives

47. The main objective of the proposed project is to increase the pool ofskilled manpower in order to alleviate acute shortages in two key sectors,construction and industry, which are essential for Egypt's continuingdevelopment. The project also aims to improve the quality of trainingprograms for construction and industrial trades, update their content to makethe labor force technically more competent, strengthen vocational instructortraining, improve the capabilities of participating ministries to plan, manageand evaluate vocational training programs, and provide low-income groups witha means to acquire skills which would make them competitive in the job market.

Project Description

48. To achieve these objectives, the project would (i) for constructiontrades: establish 22 new vocational training centers (VTCs), and equip a newproduction center for training materials; and (ii) for industrial trades:establish one new VTC, and extend and/or re-equip five existing VTCs and aninstructor training institute. The project would also provide technicalassistance and training for several purposes: to develop new and improveexisting curricula and training materials, upgrade the technical and teachingskills of instructors, improve the organizational and managerial skills of VTCdirectors, upgrade the skills of maintenance staff, and enable the trainingdepartments of participating ministries to better plan, manage and evaluatetraining programs.

Construction Trades Training

49. The training organization (TOMOHAR) of the Ministry of Development,Housing and Land Reclamation (MDHLR) would add 22 new VTCs to the 43 VTCs

- 14 -

established under earlier Bank financed projects, thus completing theirplanned target of a nationwide network of 65 VTCs for the five year period1982-86. Although the future demand for skilled and semi-skilled constructionworkers is difficult to assess accurately, the 65 VTCs are estimated to meetsome 85% of the annual demand by 1992. The 22 VTCs to be built and equippedunder this project would train 18,000 students annually in ten constructiontrades: carpentry, masonry, painting, tiling, plastering, plumbing, formwork,metalwork, electrical work and steel reinforcement. Over time, as the supplyof graduates begins to meet the sector's immediate needs for manpower withbasic skills, the existing course duration of 6 months would be extended to 8months and for more complex trades to 10 months to bring graduate skills torequisite levels. The 660 instructors needed for the 22 VTCs would come fromthree instructor training centers established under the Bank-financed FirstEducation Project. The existing three-month instructor training course is,however, inadequate. Agreement was therefore reached that by June 30, 1986,the course would be expanded and its duration increased to six months (LoanAgreement, Section 3.06(a)). In the longer term, TOMOHAR plans to turn itsattention to another high priority need, namely in--service training for theexisting labor force.

50. The project would also provide equipment, furniture and technicalassistance to set up a production center for training materials and to reviseand update the training materials and curricula. TOMOHAR is receivingbilateral assistance from the Federal Republic of Germany for the revision oftwo of the ten courses; the proposed project would adapt the material andcurriculum for the remaining eight trades.

Industrial Trades Training

51. The Productivity and Vocational Training Department (PVTD) of theMinistry of Industry and Mineral Resources (MOIMR) would upgrade five VTCs forindustrial trades to better meet the manpower needs in Alexandria, Assiut,Aswan, Gharbeya and Daqhalia, where industrial activity is growing rapidly.In addition, a new VTC would be established at Sohag which has a population ofabout 2 million and considerable potential for small-scale industrialdevelopment but lacks training facilities. Together the six VTCs would havean annual output of some 730 skilled and semi-skilled workers in theautomotive, electrical, metal, chemical, air-conditioning, maintenance andprinting trades. The VTCs offer a three-year apprenticeship program: thefirst year combines theory and practice in equal proportions, the second andthird consist largely of on-the-job training interspersed with relatedtheory. This program would be updated and adapted to suit current needs.Existing training materials would be updated and new materials prepared forindividual trades as appropriate. The estimated 140 instructors required forthe new VTC and for new courses to be added to existing VTCs would be selectedfrom graduates of MOIMR's instructor training institute (see para. 52 below).

52. To help meet the need for more and better trained instructors,MOIMR's instructor training institute (ITI) in Cairo would be upgraded.Obsolete equipment would be replaced, additional equipment provided for newcourses, and the one-year training program and related training materials

- 15 -

updated and expanded to include new courses. Graduates from MOE's technicalsecondary schools and MOIMR's three-year apprenticeship program would beeligible for this training. The capacity of the ITI would be increased from150 to 225 trainees, and boarding facilities provided for 100 trainees. Thislatter addition would increase training opportunities for students fromoutlying regions previously unable to avail of the training because of thehigh costs of living in Cairo.

Technical Assistance

53. MDHLR and MOIMR would need substantial technical assistance toimplement the project components, and in addition, to achieve the broaderobjective of establishing TOMOHAR and PVTD as efficient and well-managedtraining organizations. Accordingly, the services of 27 consultants for atotal of about 25 man-years would be provided to help upgrade the instructortraining course, and curricula and training materials for construction tradestraining; to update the apprenticeship program, curricula and trainingmaterials for industrial trades training; and to improve the ability ofTOMOHAR and PVTD staff to plan, organize, manage and evaluate vocationaltraining programs. In addition, about 33 man-years of fellowships for 120project staff would help improve the technical and teaching skills of the VTCand ITI instructors and the organizational and managerial abilities of VTC andITI directors. Efficient management of the sizeable technical assistanceprogram would be necessary to ensure the timely recruitment of consultants andplacement of trainees. Agreement was therefore reached that by December 31,1983, qualified training institutions would be contracted on terms andconditions satisfactory to the Bank to provide both the required consultantsand fellowship training (Loan Agreement, Section 3.02), and an understandingwas reached that MDHLR and MOIMR would carry out the technical assistanceprogram substantially as scheduled.

Training for Women

54. Women students are likely to be interested in acquiring skills inlimited areas of the industrial trades training. An estimated 12% of thegraduates from the industrial VTCs are expected to be women. With the help ofUSAID, MOIMR is in the process of identifying training programs likely toattract women trainees, and the Bank would draw on their conclusions inhelping to design future projects.

Project Costs and Financing

55. The total project cost, net of duties and taxes (from which theproject is exempted), is estimated at US$79 million, of which US$42.5 millionor 54% would be in foreign exchange. These estimates are based on theassumption that all civil works and furniture contracts would be awarded tolocal firms and all equipment would be directly imported. Physicalcontingencies of 10% of base costs of civil works, furniture and equipment andprofessional services, and 5% of technical assistance have been added. Pricecontingencies for local costs have been estimated at 16% for 1983, 15% for1984, and 14% thereafter, and for foreign costs at 8% for 1983, 7.75% for

- 16 -

1984, 7.5% for 1985 and 7% thereafter. Total contingencies amount to about60% of the base costs. Consultant services are estimated at US$11,000 perman-month for expatriates and US$6,000 for local experts, and fellowships atUS$3,500 per man-month (including all overheads).

56. The proposed Bank loan of US$38 million would finance about 89% ofthe foreign exchange cost of the project and the front end fee of US$0.3million.

Recurrent Expenditures

57. The recurrent expenditure requirements of the project institutionswhen they become fully operational in 1989/90 are estimated at about 34% and5% respectively of MDHLR's and MOIMR's training-related annual recurrentexpenditures. MOIMR's expenditures, a 5% increase over existing levels, wouldnot be difficult to accommodate in the recurrent budget. The 50% increase inMDHLR's expenditures would be absorbed gradually into the budget as projectinstitutions are completed and become operational over a three year period.Because these increases compare well with annual increases of 17% and 23%respectively in MOIMR's and MDHLR's recurrent expenditures in recent years,and because the Government accords high priority to the project, theseexpenditures are expected to be fully met.

Project Execution

58. TOMOHAR and PVTD would execute the project. Their existing projectimplementation teams, which are executing the ongoing second and thirdprojects efficiently, have the experience and ability to carry out theproposed project successfully. However, with the rapid and significantexpansion in the scope of TOMOHAR's overall activities (some 65 centers willbe operational with the completion of this project), its capability tocoordinate and oversee three specific activities needs strengthening.Accordingly, agreement was reached that by June 30, 1984, TOMOHAR wouldrecruit adequately qualified and experienced staff as follows: a coordinatorfor curriculum development, an instructor training supervisor, and a datasystems supervisor (Loan Agreement, Section 3.06(b)).

59. The preparation of architectural designs, tender documents, equipmentlists, and job descriptions for specialists, and the process of siteacquisition, are well under way. TOMOHAR would adapt a prototype buildingdesign developed under previous projects for centers to be built under thisproject. Technical assistance would be completed by December 31, 1986, andthe construction, furnishing and equipping of all institutions is expected tobe completed by March 31, 1990. The closing date of the loan would beSeptember 30, 1990.

Procurement and Disbursements

60. Contracts in excess of of US$100,000 for equipment and furniture(totalling about US$30.4 million) would be awarded on the basis ofInternational Competitive Bidding (ICB). Domestic preferences of 15% or the

- 1 7 -

applicable customs duty (whichever is lower) would be granted. The Bank wouldreview and approve detailed furniture and equipment lists prior toprocurement. Small items or groups of items costing less than US$100,000, oritems for which the Bank would agree with the Government that ICB would beunsuitable, would be procured under local procurement procedures acceptable tothe Bank. The aggregate of these would not exceed US$3 million. Domesticsuppliers are expected to win all the furniture contracts totalling US$2million (including contingencies). Because of the wide geographic dispersionand the relatively small cost of individual institutions (US$1.6 million onaverage including contingencies), MDHLR civil works contracts (totallingUS$34.3 million) would be awarded on the basis of local competitive biddingprocedures which do not exclude foreign bidders and are satisfactory to theBank.

61. The proposed loan would be disbursed over 7-1/2 years as follows:civil works: 12% of total expenditures; furniture: 100% of foreignexpenditures and of local expenditures ex-factory for locally manufacturedgoods, and 80% of local expenditures for other items procured locally;consultants: 100%; and fellowships: 100% of foreign expenditures.

Accounts and Audits

62. The existing system of maintaining separate accounts in TOMOHAR andPVTD for Bank-financed projects, which has worked well, would be continuedunder the proposed project. Separate project accounts would be maintained andannual audited accounts would be submitted to the Bank within six months ofthe end of each fiscal year.

Benefits

63. Sustained economic growth in Egypt depends upon an accelerated paceof industrial development and an efficient construction sector. And thedevelopment of a sound vocational training system to build up a supply ofskilled construction and industrial workers is an essential element in thisprocess. The proposed project would continue the task of building up askilled industrial and construction work force to help meet Egypt'sdevelopment needs and priorities. Accordingly it would bring direct benefitsto industry (both manufacturing and construction) and to the overall economy.

64. The project would upgrade the quality of training and help toalleviate critical shortages of skilled manpower in the construction andindustrial sectors. It would further reduce the gap between manpower demandand supply, enabling the Government to meet altogether some 85% of theprojected demand for construction workers and about 60% of the demand forindustrial workers by 1992. The project would also strengthen theinstitutional base for planning and delivering sound and up-to-date vocationaltraining programs in the industrial and construction sectors. An importantfeature of the project is the widespread geographical distribution of trainingfacilities. This would support the Government's efforts to achieve a betterbalance in the regional distribution of industry and help reduce regionaldisparities in development levels.

- 18 -

65. The project would provide lower income groups in outlyinggovernorates with opportunities to acquire skills that would make them morecompetitive in the job market, and thus equip them with the means to increasetheir incomes and improve their standard of living. The provision of boardingfacilities at the instructor training institute would also increase trainingopportunities for students from remote areas.

66. The major quantifiable benefits of the project, when fullyoperational, would be an annual output of about 18,000 construction workers,some 200 well-qualified industrial trade instructors and about 730 skilledindustrial workers (12% of whom would be women). Programs accounting for some75% of the loan proceeds would directly address the training needs of about45,000 rural and urban poor.

Risks

67. The experience gained by MDHLR and MOIMR under previous projects andthe fact of their efficient implementation indicate that there are no unduerisks associated with this project. As the technical assistance proposed inthe project is large, efficient management would be required to ensure thetimely recruitment of specialists and the placement of fellowship trainees inappropriate institutions. Consequently, the participating ministries wouldagain use the method of contracting qualified institutions which has been verysuccessful in the previous projects in the sector.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

68. The draft Loan Agreement between the Arab Republic of Egypt and theBank, and the Report of the Committee provided for in Article III, Section4(iii) of the Articles of Agreement are being distributed to the ExecutiveDirectors separately.

69. Special features of the project are listed in Section III ofAnnex III.

70. I am satisfied that the proposed loan would comply with the Articlesof Agreement of the Bank.

PART VI - RECOMMENDATION

71. I recommend that the Executive Directors approve the proposed loan.

A. W. ClausenPresident

AttachmentsMarch 30, 1983Washington, D.C.

-19 - ANNEX IPage 1 of 6

TABLE 3A

EGYPT - SOCIAL INDICATORS DATA SHEET

EGYPT REFERENCE GROUPS (WEIGHTED AVERAGCSAREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE) -

TOTAL 1001.4 MIDDLE INCOMEAGRICULTURAL 28.5 MOST RECENT NORTH AFRICA & MIDDLE INCOME

1960 /b 1970 /b ESTIMATE /b MIDDLE EAST LATIN AMERICA & CARIBBEAN

GNP PER CAPITA (US$) 110.0 190.0 580.0 * 1253.6 1902.0

ENERGY CONSUMPTION PER CAPITA(KILOGRAMS OF COAL EQUIVALENT) 283.0 305.8 538.5 713.5 1259.4

POPULATION AND VITAL STATISTICSPOPULATION, HIS-YEAR (THOUSANDS) 25929.0 32341.0 39773.0

URaAN POPULATION (PERCENT OF TOTAL) 37.9 42.3 45.4 47.3 65.7

POPULATION PROJECTIONSPOPULATION IN YEAR 2000 (MILLIONS) 60.1STATIONARY POPULATION (MILLIONS) .. 103.6YEAR STATIONARY POPULATION IS REACHED 2080

POPULATION DENSITYPER SQ. KM. 25.9 32.3 38.8 35.8 35.2PER SQ. KM. AGRICULTURAL LAND 985.9 1137.6 1364.7 420.9 92.5

POPULATION AGE STRUCTURE (PERCENT)0-14 YRS. 42.2 41.8 39.8 44.3 39.7

15-64 YRS. 54.7 54.9 56.7 52.4 56.165 YRS. AND ABOVE 3.1 3.2 3.5 3.3 4.2

POPULATION GROWTH RATE (PERCENT)TOTAL 2.4 2.2 2.1 2.8 2.4URBAN 4.1 3.3 2.8 4.6 3.8

CRUDE BIRTH RATE (PER THOUSAND) 43.5 38.4 36.6 41.2 31.4CRUDE DEATH RATE (PER THOUSAND) 19.0 15.1 12.1 12.2 8.4GROSS REPRODUCTION RATE 3.0 2.7 2.4 2.9 2.1FAMILY PLANNING

ACCEPTORS, ANNUAL (THOUSANDS) .. 206.0 187

.0/cUSERS (PERCENT OF MARRIED WOMEN) .. 9.0 17.0C.

FOOD AND NUTRITIONINDEX OF FOOl PRODUCTION

PER CAPITA (1969-71-100) 96.0 99.0 92.0 100.4 110.0

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 109.0 108.9 117.6/d 108.5 108.4PROTEINS (GRAMS PER DAY) 77.9 75.1 81.1i7 71.9 66.0

OP WHICH ANIMAL AND PULSE 18.5 17.4 19.97/ 18.0 34.0

CHILI (AGES 1-4) MORTALITY RATE 34.0 25.4 14.2 15.1 5.6

HEALTHLIFE EXPECTANCY AT BIRTH (YEARS) 46.1 51.3 56.6 56.9 64.2INFANT MORTALITY RATE (PERTHOUSAND) 128.0 .. 103.4 104.3 64.2

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL .. .. 66.0 59.1 65.6URBAN 39.5 .. 88.0 83.1 78.9RURAL .. .. 50.0 39.8 43.9

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPULATION)

TOTAL .. .. .. .. 59.3URBAN .. .. .. .. 75.3RURAL .. .. .. .. 30.0

POPULATION PER PHYSICIAN 2556.1 1856.7 1046.0/d e 4015.5 1617.3POPULATION PER NURSING PERSON

1 9 3 3.3/.,f 1588.4/e 1096.67 1802.2 1063.5

POPULATION PER HOSPITAL BEDTOTAL 465.9 448.7

4 5 9.

2/c 641.7 477.4

URBAN 509.7/f 352.7 652.077 538.3 679.8RURAL 2190.57? 2126.1 2297.377 2403.3 1903.4

ADMISSIONS FER HOSPITAL BED .. .. 3

0.8/c 25.5 27.3

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL .. .. 52/cURBAN 4.8 .. 5.07..RURAL .. .. 5.5/c

AVERAGE NUMBER OF PERSONS PER ROOM -

TOTAL .. .. 1.8/cURBAN 1.6 ..RURAL .. ..

ACCESS TO ELECTRICITY (PERCENTOF DWELLINGS)

TOTAL . .4 5 7

/cURBAN 37.8 . 76.97TcRURAL .. .. 18.67E

* The updated 1981 GNP per capita and population estimates to beshown in the 1982 World Bank Atlas are $650 (at 1979-81 prices)and 43,290.0 thousands.

- 20 - ANNEX IPage 2 of 6

TABLE 3AEGYPT - SOCIAL INDICATORS DATA SHEET

EGYPT REiERENCE GROUPS (WEIGHTED AERAlGLS- MOST RECENT ESTIMATE) -

MIDDLE INCOMEMOST RECENT NORTH AFRICA & MIDDLE INCOME

1960 /b 1970 lb ESTIMATE lb MIDDLE EAST LATIN AMERICA & CARIBBEAN

EDUCATIONADJUSTED ENROLLMENT RATIOS

PRIMARY: TOTAL 66.0 72.0 75.0 88.7 104.3MALE 80.0 88.0 88.0 104.5 106.4FEMALE 52.0 56.0 61.0 72.0 103.3

SECONDARY: TOTAL 16.0 34.0 48.0 39.7 41.3MALE 23.0 46.0 59.0 49.3 40.4FEMALE 9.0 22.0 36.0 29.0 41.8

VOCATIONAL ENROL. (X OF SECONDARY) 22.0 19.0 19.5 10.1 33.7

PUPIL-TEACHER RATIOPRIMARY 39.0 38.0 33.8 34.1 29.9SECONDARY 16.0 25.0 25.2 23.7 16.7

ADULT LITERACY RATE (PERCENT) 26.0 .. 44.0/d 43.3 79.1

CONSUMPTIONPASSENGER CARS PER THOUSAND

POPULATION 2.7 4.0 7.6/d 17.8 42.8RADIO RECEIVERS PER THOUSAND

POPULATION 57.9 136.1 138.9 131.3 270.5TV RECEIVERS PER THOUSAND

POPULATION 1.9 16.4 33.4 44.1 107.7NEWSPAPER ('DAILY GENERALINTEREST') CIRCULATION PERTHOUSAND POPULATION .. 23.0 63.7 31.5 63.7CINEMA ANNUAL ATTENDANCE PER CAPITA 2.6/f 2.2 1.

8/j 1.7 2.7

LABOR FORCETOTAL LABOR FORCE (THOUSANDS) 7481.4 9041.9 11063.5

FEMALE (PERCENT) 7.3 7.2 7.9 10.6 24.4AGRICULTURE (PERCENT) 58.0 54.0 50.0 42.4 31.3INDUSTRY (PERCENT) 12.0 19.0 30.0 27.8 23.9

PARTICIPATION RATE (PERCENT)TOTAL 28.9 28.0 27.8 26.0 33.6MALE 53.2 51.5 50.7 46.2 50.4FEMALE 4.2 4.1 4.4 5.6 16.8

ECONOMIC DEPENDENCY RATIO 1.6 1.6 1.6 1.9 1.3

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

HIGHEST 5 PERCENT OF HOUSEHOLDS 17.5/h 17.4/h.i 22.0/.HIGHEST 20 PERCENT OF HOUSEHOLDS 44.4Th 42.8/h.i 49.27.LOWEST 20 PERCENT OF HOUSEHOLDS 6.67T 7.O/th 5.17 LOWEST 40 PERCENT OF HOUSEHOLDS 17.57h 18.7h, 14.8..

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCCMELEVEL (US$ PER CAPITA)

URBAN .. .. 131.0 279.2RURAL .. .. 94.0 178.6 184.1

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. 180.0 403.6 518.0RURAL .. .. 118.0 285.6 371.1

ESTIMATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)

URBAN .. .. 21.0 22.1RURAL .. .. 25.0 30.9

Not availableNot applicable.

NOTES

/a The group averages for each indicator are population-weighted arithmetic means. Coverage of countriesamong the indicators depends on availability of data and is not uniform.

/b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969and 1971; and for Most Recent Estimate, between 1978 and 1980.

/c 1976; /d 1977; /e Registered, not all practing in the country; /f 1962; /I 1975; /h Rural expenditures;/i 1965; /f National, 1974-75.

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T XgMNV i

- 22 -

ANNEX IEGYPT - ECONOMIC INDICATORS Page 4 of 6

-- rlation: 43.3 million (1980/81)per capita: US $650 a/ (1980/81)

A.ount (millionUS$ at current A N N U A L G R 0 W T H R A T E S (2)

prices) A CTU AL EST. PROJ E C TE D1980/81 1975 1976 1977 1978 1979 1980/81 1981182 1982/83 1983/84 1984/85 1985/86 1986/87

s,AIONAL ACCOUNTS..oss Domestic Product b/ 24233.0 10.4 10.3 10.9 11.9 8.2 9.2 7.6 7.8 7.2 7.1 6.5 6.1

Agriculture 4901.0 6.3 1.6 -3.0 5.5 3.9 4.3 3.0 2.3 2.5 2.6 2.7 2.9Industry 4379.0 10.6 4.8 9.8 12.3 6.5 7.6 7.3 9.0 9.2 8.8 9.1 8.5Petroleum 4440.0 39.4 52.3 55.2 22.0 10.3 18.9 6.0 8.6 6.3 7.4 5.5 4.4Services 9415.0 9.2 11.6 9.4 12.0 10.2 10.8 9.9 11.0 9.8 8.5 7.4 6.6

; onsu=ption 20147.0 -3.8 8.3 11.0 11.2 4.5 12.6 9.0 9.2 8.3 7.1 6.7 6.0,Sross Investment 7309.0 54.2 -8.2 9.3 -2.4 9.4 5.5 7.1 6.0 5.8 5.7 5.7 6.1Expo-ts of CNFS 8205.0 27.2 30.8 9.0 3.0 5.8 10.7 8.1 8.2 6.0 6.8 5.8 5.3Dsports of GNFS 11429.0 16.0 -5.3 2.5 4.2 8,9 13.7 7.9 6.8 6.7 5.4 5.1 4.7

ross National Saving 5019.3 133.0 74.8 25.7 17.4 -13.4 - - - - - - - 9R }JfSGDP Deflator 50.6 55.9 60.5 65.8 81.0 100.0 - - - - - -

-change Rate c/ 2.15 1.97 1.75 1.54 1.43 1.35 -

Share of GDP at Markec Prices (Z) Average Increase (X) at Constant Prices(at current prices) 1965 Prices 1975 Prices 1980/81 Prices

1960 1970 1975 1979 1980/81 1984/85 1960-1970 1970-1975 1975-1979 FY81-FY86

_ 05 Domestic ProductAgricult-re 27.9 25.3 28.2 19.9 20.2 15.7 4.7 5.1 1.9 2.4lndustry 8 Petroleum 23.7 26.1 26.1 34.1 36.4 35.8 3.0 2.6 17.5 8.6

Services 42.9 40.8 42.7 41.2 38.8 43.7 6.3 4.4 10.8 8.6

-- sumptios 87.3 90.6 87.7 79.8 83.1 88.0 4.4 8.0 6.8 8.5

--oss Investment 13.3 13.9 33.4 32.8 30.2 28.5 5.8 4.2 1.8 5.8

-,.ort of GNFS 19.5 14.2 20.2 30.7 33.9 33.0 4.9 22.8 11.6 6.8

or of GNFS 20.1 18.8 41.3 45.7 47.2 49.6 1.1 13.5 2.5 6.4

National Saving 12.9 7.7 14.6 27.0 20.7 14.6 7.2 17.2 22.2 -

As X of GDP1960 1970 1975 1979 1980/81 1981/82

oLIC FINANCErrroent Revenue 18.5 21.3 34.1 32.9 46.6 43.2Current Expenditure 21.5 22.0 40.5 36.0 38.6 40.6

-urrent Surplus (i) orDeficit (-) -3.0 -0.7 -6.4 -3.1 8.0 2.6

Investment Espenditure 11.8 11.1 11.8 20.0 22.2 21.3Foreign Financing - - 5.9 8.9 6.5 5.8

1960-70 1970-75 1975-80 FY81-FY87J-HER INDICATORS

GNP Growth Rate (X) 4.5 5.0 11.5 7.3GNP per capita growth

rate (X) 1.9 2.7 8.7 5.4Energy consumption growth

rate (X) d/ 14.9 13.2 11.0

ICOR - - 3.6 3.3-arginal Savings Rate - - 0.46 0.12

Eport Plasticity 0.9 1.7 0.9 0.8

Based on EPD methodology (three year average exchange rate).,, GDP for 1980/81 at current prices is valued at market prices. Sectoral shares and rates of growth concern GDP at factor coat.

Effective rate computed as a weighted average of official and parallel market rates.Electricity only.

yH DA1arch 1983

- 23 -

ANNEX IPage 5 of 6

EGYPT - EXTERNAL TRADEPopulation: 43.3 million (1980/81)GNP per capita: US$650a/(1980/81)

Amount (million) Annual Growth Rate (%) at Constant 1980/81 PricesUS$ at current

prices) A C T U A L EST P R 0 J E C T E D1980/81 1975 1976 1977 1978 1979 80/81 81/82 82/83 83/84 84/85

EXTERNAL TRADE

Merchandise Exports 6002 27.2 19.6 3.1 7.7 9.6 10.5 8.4 7.2 5.6 6.7

- Primary b/ 664 -15.3 -8.5 25.7 -29.8 4.5 10.1 -3.5 0.9 1.2 1.4

P - Manufactures b/ 920 24.8 -14.6 -27.3 17.9 2.1 -12.5 -6.2 6.2 6.8 7.4

- Petroleum 4442 72.0 63.3 11.1 16.1 22.6 12.1 13.7 8.3 5.9 7.2

Merchandise Imports 10039 14.1 -5.0 -1.1 8.5 5.9 18.0 7.5 6.3 6.5 5.1

- Food 2556 27.4 16.9 -18.1 25.8 -7.0 21.2 11.8 3.0 5.5 3.1

- Petroleum 333 -34.2 -23.3 -53.3 2.7 -11.8 17.7 6.4 3.3 1.8 0.4

- Machinery and Equipment 3900 59.5 24.8 21.4 -0.7 25.6 14.3 7.4 7.3 6.7 6.6

- Others 3250 17.9 -26.2 10.7 7.5 0.2 20.0 4.4 8.3 7.5 5.5

Prices

Export Price Index 51.5 49.9 52.3 52.9 76.0 100.0 93.8 100.7 109.1 119.4

Import Price Index 60.6 63.5 70.4 76.1 87.9 100.0 105.8 116.9 126.2 135.7

Terms of Trade Index 85.0 78.6 74.3 69.5 86.5 100.0 88.6 86.1 86.5 88.0

Composition of Merchandise Trade (Z) Average Annual Increase (%)(at current prices) at constant 1980/81 prices

1970 1975 1979 80/81 84/85 1975/79 FY81/FY85

Exports 9.8 6.8

Primary b/ 64.2 28.3 13.6 11.1 12.1 -4.1 2.9

Petroleum 4.8 25.2 71.0 74.0 71.0 26.8 7.3

ManufacturesŽ/ 31.0 46.7 15.4 14.9 16.8 -15.3 6.9

Imports 1.9 6.1

Food 13.4 23.6 22.9 25.5 24.8 2.9 5.1

Petroleum 8.2 6.9 3.3 3.3 2.4 -24.5 2.8

Machinery 23.4 23.7 38.8 38.8 40.2 17.2 6.8

Others 55.0 45.8 35.0 32.4 32.6 -3.1 6.1

Share of Trade with Share of Trade with Share of Trade withIndustrial Countries (%) Developing Countries (%) Capital Surplus Oil Exporters (%)

1965 1970 1975 1965 1970 1975 1965 1970 1975

DIRECTION OF TRADE

Exports 27.0 17.0 14.0 18.0 22.0 10.0 1.0 1.0 4.0Primary 29.0 19.0 18.0 17.0 22.0 11.0 - 1.0 3.0Manufactures 19.0 12.0 3.0 23.0 23.0 9.0 4.0 3.0 5.0

Imports 55.0 42.0 65.0 18.0 25.0 14.0 - - 4.0

a/ Based on EPD methodology (three year average exchange rate).b/ Not including oil and oil products.

EM1DAMarch 1983

-24 -

ANNEX IPage 6 of 6

EGYPT - BALANCE OP PAYMENTS I EXTERNAL CAPITAL AND DEBT(million US at current prices)

EST. P R 0 J E C T E D1974 1975 1976 1977 1978 1979 1980/81 1981/B2 1982/B3 19B3(84 1984/85 19B 5/ 86 -1-986/787

bALANCE OF PAYMENTS

port of Goods and Nov-FactorServices 2251 2503 3319 3888 4099 5585 8205 8070 8320 11496 13367 15298 17442of which merchandise f.o.b. 1818 1875 2169 2346 2558 4024 6002 5580 5650 8110 9467 10846 12359

: ports of Goods and Non-FactorServices -3959 -5141 -5182 -5879 -6612 -8300 -11429 -11500 -10850 -17739 -20079 -22389 -24875of which merchandise c.i.f. -3618 -4608 -4659 -5110 -5998 -7336 -10039 -10350 -11204 -15418 -17427 -19396 -21520

'ct Factor Income 70 122 413 472 1098 1143 850 48 70 1198 1086 941 778

Net Private Transfers 42 90 87 63 54 88 60 66 73 80 88 97 106 q

urrent Account Balance -1596 -2426 -1363 -1456 -1361 -1484 -2314 -3316 -2387 -4965 -5538 -6053 -6549

Private Direct Investment 87 225 444 477 387 710 1170 1350 1472 1782 2016 2250 2512

.57 Loans and Grants (Net) 69 270 647 730 1141 1471 1516 1291 1165 2263 2303 2430 2622-official loans and grants -21 210 490 803 1028 1034 1213 1461 1177 1633 1829 2161 2320private 90 60 157 -73 113 437 303 -170 -12 630 474 269 302

Jther Capital (Net) _/ 1393 1907 191 339 -181 -599 -705 768 -250 920 1219 1373 1415

L-noge in Reserves 47 24 81 -90 14 -98 333 -93 0 0 0 0 0

cteroational Reserves 1/ 516 678 642 880 1106 1098 1300 900 900 1154 1079 1018 960- of shich gold 102 102 102 104 104 104 -- -- -- -- -- -- --

c-sor.es as Months Imports 3/ 1.7 1.8 1.7 2.1 2.2 1.8 1.5 1.0 0.9 0.9 0.8 0.7 0.7

=XTERNAL CAPITAL AND DEBT

-ross Disbhrsements 2185 3522 2218 3286 2758 2291 2562 2731 3012 5259 5978 6469 6965

Official Grants 5/ 1261 986 705 382 291 72 279 395 519 626 719 775 860Coscessional Loans 120 1444 668 1855 1600 996 1276 1034 952 1472 1524 1628 1646

- DAC 55 199 421 591 799 833 1103 900 798 1292 1329 1421 1388- OPEC 3 1142 171 137 93 43 69 28 16 1 0 0 0- IDA 12 49 42 42 45 55 48 99 127 103 82 44 22- Others 50 54 34 1085 663 65 56 7 11 76 113 163 236

Nos-Concessional Loans 804 1092 845 1049 867 1223 1007 1302 1541 2162 2428 2598 2850

- official export credits 379 639 214 24 44 50 83 185 292 145 182 204 23Q- IBRD - 14 36 37 57 118 146 139 190 282 347 411 472- other multilateral -- 6 - 256 18 5 4 18 27 61 83 102 120- private 425 433 595 732 748 1050 774 960 1032 1674 1816 1881 2028

Gap Financing 999 1307 1468 1608

EIternaL Debt

Debt outstanding and disbursed 2830 4830 5770 8090 9920 11330 13505 14849 15517 20216 23179 26377 29720

- official 1990 3890 4720 6800 8500 9470 11296 11370 12051 14306 15488 16948 18468- primate 840 940 1050 1290 1420 1860 2210 3479 3466 3736 4210 4479 4781- gap financing 2174 3481 4950 6471

Undisbursed Debt 1602 2426 3014 4515 4390 4629 5951 9836 8559 7315 7713 8211 8830

Debt Service

Total Service Payment 517 595 665 1099 1211 1040 2334 1928 2380 3400 4037 4768 5587- interest 70 115 111 340 387 236 684 910 800 914 1036 1156 1275- payment as Z exports 2/ , 21% 21.6% 16.8% 23.9% 21.8% 14.6% 15.6% 21.2% 25.4% 21.1% 22.2% 22.1% 22.22

Average Interest Rate on New Loans 6.3 4.7 5.1 5.1 4.6 6.4 6.5 7.3 7.3 7.3 7.2 7.2 7.2

- official- private

Average Maturity of New Loans (yearn) 17.2 18.5 23.3 18.7 27.9 24.5 19.5 16.9 16.0 15.8 15.7 15.6 15.6

- official- private

/ Foroignanse-ts of Central Bank._/ Exports of goods and services not including foreign oil companies exports.3/ Merchandise only.

/ Including -nomercial banks operations, residual foreign financing and special balance of payments financing.5/ Including special balance of payments grants.

EMIDAvarch 1983

ANNEX IIPage 1 of 11

THE STATUS OF BANK GROUP OPERATIONS IN EGYPT

A. STATEMENT OF BANK LOANS AND IDA CREDITS

(As of September 30, 1982)

Amount in million US dollarsLoan/Credit Approved Borrower Purpose (less cancellations)

Numbers FY Bank IDA Undisbursed16 Loans and Credits fully disbursed 1/ 246.8 239.3 -Cr 423 74 ARE Cotton Ginning Rehabilitation -- 18.5 0.3Ln 1064 75 SCA Suez Canal Rehabilitation 50.0 -- 8.4Ln 1085 75 ARE Tourah Cement 40.0 -- 0.9Ln 1239 76 APA Alexandria Port 45.0 -- 23.5Ln 1276-T 2/ 76 ARE Fruit and Vegetable Dev. 50.0 -- 16.6Cr 637 76 ARE Upper Egypt Drainage II -- 40.0 6.9Ln 1285 76 ARE Upper Egypt Drainage II 10.0 -- 10.0Ln 1292 76 ARE Textile Rehabilitation 52.0 -- 6.8Ln 1369 77 AWA Alexandria Water Supply 53.2 -- 22.9Cr 719 77 ARE Nile Delta Drainage II -- 27.0 1.6Ln 1439 77 ARE Nile Delta Drainage II 27.0 -- 25.3Ln 1440-T 2/ 77 ARE Nile Delta Drainage II 12.0 -- 11.3Ln 1456 77 ARE Industrial Imports 70.0 -- 6.4Cr 774 78 ARE Telecommunications II -- 53.0 38.0Ln 1533 78 DIB Development Industrial Bank III 40.0 -- 2.8Cr 830 78 ARE Agricultural Development -- 32.0 22.9Cr 831 78 ARE Urban Development -- 14.0 11.7Cr 850 79 ARE Population II -- 25.0 12.3Cr 868 79 ARE Education II -- 40.0 23.9Ln S-14 79 ARE New Valley Phosphate Engineering

and Technical Assistance 11.0 -- 3.3Cr 909 79 ARE Tourism -- 32.5 26.4Ln 1732 79 ARE Gulf of Suez Gas 75.0 -- 12.3Cr 935 79 ARE Shoubrah El Kheima Thermal Power -- 37.0 25.8Ln 1733 79 EEA Shoubrah El Kheima Thermal Power 3/ 102.0 -- 101.3Cr 988 80 ARE Agroindustries -- 45.0 24.0Ln 1804 80 DIB Development Industrial Bank IV 50.0 -- 13.7Ln 1842 80 ARE MIDB 30.0 -- 29.5Cr 1024 80 ARE Cairo Gas Distribution -- 50.0 7.5Ln 1849 80 ARE Pulp and Paper 50.0 -- 50.0Ln 1886 80 EEA Power III 7.0 -- 7.0Cr 1052 80 EEA Power III -- 120.0 108.3Cr 1069 81 ARE Education III 4/ -- 40.1 37.2Ln 1928 81 EGPC Western Desert Exploration 25.0 -- 10.3Cr 1083 81 ARE New Land Development 4/ -- 80.0 75.9Cr 1111 81 ARE Fish Farming 4/ -- 14.0 13.0Ln 2002 81 HADISOLB Hadisolb Rehabilitation 64.0 -- 63.5Cr 1156 81 ARE Beheira Water Supply 4/ -- 56.6 56.6Cr 1162 81 ARE Technical Assistance 4/ -- 6.9 6.9Ln 2041 82 ARE Telecommunications III 5/ 64.0 -- 64.0Ln 2074 82 DIB Development Industrial Bank V 120.0 -- 117.5Ln 2103 82 EGPC Abu Qir Gas Development 5/ 90.0 -- 90.0Ln 2176 82 ARE Greater Cairo Urban Development 5/ 59.0 -- 59.0

Totals 6/ 1443.0 970.9 1255.5Of which has been repaid 89.1 1.4Total now outstanding 1353.9 969.5Amount sold 7.5Of which has been repaid 7.5Total now held by Bank and IDA 1353.9 969.5

1/ Excludes 3 credits for engineering which were subsequently refinanced, and a US$1 million PPF advance grantedfor the Greater Cairo Urban Development Project.

2/ Third Window Loan.3/ Not included is EEC Special Action Credit 20 of US$35.0 million.4/ Credit denominated in SDRs. Amount shown is US$ equivalent at time of negotiations for the IDA amount, and US$

equivalent at September 30, 1982 for the undisbursed amount.5/ Became effective after September 30, 1982.6/ Excludes a US$132 million loan for an El Dikheila Port Project and a US$81.2 million loan for a Second

Agroindustrias Prpject which have been approved by the Board, but not yet signed.

(231J)

- 26 -

ANNEX IIPage 2 of 11

B. STATEMENT OF IFC INVESTMENTS

(As of September 30, 1982)

FiscalYear Obligor Type of Business Loan Equity Total

…-----(US$ Million)------

76, 82 Arab Ceramic Company Ceramic Industry 6.63 1.15 7.78

78 Nile Clothing Company Ready-Made Garment Industry 0.43 0.16 0.59

78 Delta Sugar Company Agricultural Production, 20.00 3.00 23.00

mainly sugar

79, 83 Ismailia Misr Poultry Food and Food Processing 12.10 2.38 14.48Company

80, 81 Ismailia Fish Food and Food Processing 1.93 0.55 2.48Farming Company

80 Suez Cement Company Building Materials 30.00 - 30.00

81 Luxor Hotel Crocodile Tourist Project 4.41 0.72 5.13

Total gross commitments 75.50 7.96 83.46

Less: Cancellations, terminations, repaymentsand sales 11.83 - 11.83

Total commitments now held by IFC 63.67 7.96 71.63

Total Undisbursed 10.04 3.00 13.04

231J

- 27 - ANNEX II

Page 3 of 11

STATUS OF PROJECTS IN EXECUTION I/AS OF SEPTEMBER 30, 1982

Cr. No. 423-UAR - Cotton Ginning Rehabilitation Project; US$18.5 millionCredit of July 30, 1973', Effectiveness Date: February 15, 1974; ClosingDate: December 31, 1982. 2/

The project is expected to be completed in 1983. Previoussubstantial delays, primarily due to lack of adequate local funds and slowimplementation of civil works, have been overcome. All new ginneries havebeen commissioned and the remaining eight are expected to be commissionedduring 1983. Progress of civil works on these ginneries is satisfactory,and procurement of equipment under the Credit is also complete. The Creditfunds are expected to be disbursed by the closing date.

Ln. No. 1064-EGT - Suez Canal Rehabilitation Project; US$50 million Loan ofDecember 20, 1974; Effectiveness Date: April 21, 1975; Closing Date:December 31, 1983.

Project execution is generally satisfactory although some itemshave lagged behind appraisal schedule. Contracts for all items have beenawarded. The financial situation of the borrower is sound.

Ln. No. 1085-EGT - Tourah Cement Expansion Project; US$40 million Loan ofFebruary 10, 1975; Effectiveness Date: June 9, 1975; Closing Date: December31, 1982. 2/

Civil works and procurement of machinery and equipment have beencompleted. Erection work is nearing completion. Start-up of facilitieshas commenced and the project is expected to be completed by the closingdate.

Ln. No. 1239-EGT - Alexandria Port Project; US$45 million Loan of April 19,1976; Effectiveness Date: August 30, 1976; Closing Date: December 31, 1983.

Progress on the execution of the main civil works contract isproceeding slowly and other civil works are behind schedule, due largely tochanges in the senior management of Alexandria Port Authority and delays inthe provision by Government of funds to pay the contractor. Procurement ofmost equipment is progressing satisfactorily although the award of acontract for radar equipment is badly behind schedule. A resumption offull funding is expected within the next few months. The Bank's views havebeen given on the evaluation report of radar tenders. Project completionmay be delayed by up to 6 months.

1/ These notes are designed to inform the Executive Directors regardingthe progress of projects in execution, and in particular to report anyproblems which are being encountered and the action being taken toremedy them. They should be read in this sense, and with theunderstanding that they do not purport to present a balanced evaluation

of strengths and weaknesses in project execution.2/ Credit/Loan closed as scheduled.

- 28 -

ANNEX IIPage 4 of 11

Ln. No. 1276-EGT - Fruit and Vegetable Development Project; US$50 millionThird Window Loan of June 11, 1976; Effectiveness Date: December 20, 1976;Closing Date: December 31, 1982. 1/

While substantial progress has been made on most components ofthis loan, the El Nasr Canal component is three years behind schedule.After extensive discussion with the Government, a new schedule has beendeveloped for the repair of the Nasr Canal, and progress is now beingmade. On this basis it is proposed to extend the project initially for oneyear. All funds are committed for the credit component; and although therehave been significant problems in the development of the seed farm, theBank has been discussing with Egyptian officials revised modes ofmanagement which should improve performance.

Ln. No. 1285-EGT and Cr. 637-EGT - Upper Egypt Drainage II Project; US$10million Loan and US$40 million Credit, both of June 11, 1976;Effectiveness Date: January 31, 1977; Closing Date: June 30, 1983.

Progress on construction of open drains is satisfactory withcompletion in about 80 percent of the project area. Tile drains have beeninstalled covering 89,000 feddans, about 18 per cent of the projecttarget. This activity is behind schedule due mainly to constructionplanning and management constraints in the Drainage Authority and in publicsector contracting companies, as well as because of delays in importingplastic pipe laying machines. Progress on the Bilharzia Control Program ison schedule, but it will need continued integrated strategy of snailcontrol measures and treatment of infected patients, and improved qualitycontrol.

Ln. No. 1292-EGT-- Textile Project; US$52 million Loan of September 20,1976; Effectiveness Date: February 16, 1977; Closing Date: March 31, 1983.

The project is proceeding with a delay of more than two yearscaused by a later and slower than anticipated start of the civil works,shortage of steel and cement, and a fire on the construction site of one ofthe two beneficiary companies. The project is now estimated to cost aboutUS$20 million equivalent (all in local currency) more than appraised, dueto the increased scope of civil works and increase in cost of constructionmaterials. Early management problems have now been overcome and bothcompanies have developed effective project execution units. Disbursementsare slower than anticipated, reflecting initial delays in procurement.

1/ Closing Date extended to December 31, 1983.

- 29 -

ANNEX IIPage 5 of 11

Ln. No. 1369-EGT - Alexandria Water Supply Project; US$56 million Loan ofMarch 7, 1977; Effectiveness Date: July 6, 1977; Closing Date: March 31,1984.

Of the nine additional contracts agreed to by the Bank, one hasbeen completed. Tenders for another seven contracts have been received andevaluated, and two of these have been awarded. The remaining contract hasbeen advertised and tenders are due shortly. Of the original work,

9 pipelaying is essentially completed. Work on construction of treatmentplants is experiencing some delays. At one treatment plant site two testpiles have failed and additional piling is now required. Projectcompletion is now expected to be February/March 1984. Work is proceedingto curb the resurgence of unaccounted for water in the city which nowstands at about 50%. A computer for billing and other statistical andfinancial activities is being installed.

Cr. No. 719-EGT, Ln. No. 1439-EGT and Ln. No. 1440-EGT - Nile DeltaDrainage II Project; US$27 million Credit, US$27 million Loan and US$12million Third Window Loan of July 15, 1977; Effectiveness Date: April 17,1978; Closing Date: December 31, 1983.

Construction and remodelling of open drains in about 580,000feddans is on schedule. Tile drains have been installed covering some81,000 feddans, about 20 percent of the project target. This activity isbehind schedule mainly because of construction planning and managementconstraints in the Drainage Authority and in public sector contractingcompanies. The progress is expected to improve with the delivery ofplastic pipe laying machines being imported by the contractors. Moderateprogress has been made with the civil works of four new pumping stations.The Bilharzia Control Program is on schedule, but it needs continuedintegrated strategy of snail control measures and treatment of infectedpatients, and improved quality control.

Ln. No. 1456-ECT - Industrial Imports Project; US$70 million Loan of July15, 1977; Effectiveness Date: November 7, 1977; Closing Date: June 30,1982. 1/

The loan has been fully committed and about 92 percent disbursed.Based on discussions with Government, the Bank has agreed to reallocatefunds among the various categories to take account of projectedover-commitments in Category I and provide additional funds in Category IVfor financing engineering services for National and Rakta paper companies.The study of the Construction Industry in Egypt financed under Category IVis now completed. The Government has not utilized the funds under the loanto develop any programs to improve preventive maintenance practices inpublic enterprises. The loan has been closed as scheduled butdisbursements will continue until end-1982 on an informal basis.

1/ Loan closed June 30, 1982; account is being held open to allow

disbursements against contracts signed before closing date.

- 30 -

ANNEX IIPage 6 of 11

Ln. No. 1533-EGT - Development Industrial Bank III; US$40 million Loan ofApril 12, 1978; Effectiveness Date: July 18, 1978; Closing Date: December31, 1982. 1/

Progress is satisfactory. The loan is fully committed and $37.2million has been disbursed.

Cr. No. 774-EGT - Second Telecommunications Project; US$53 million Creditof March 21, 1978; Effectiveness Date: September 19, 1978; Closing Date:December 31, 1982. 2/

Out of the credit of $53 million about $40 million has beencommitted and about $10 million is under commitment. Due to earlier delaysin procurement, the project has been delayed by about three years. At thistime an extension of the closing date from December 31, 1982 to December31, 1983 is proposed. ARENTO revised its telecommunications tariffs inJanuary/February 1982 and the resulting increased revenues are expected tobe sufficient for ARENTO to achieve the agreed minimum rate of return of10% on its revalued assets. Progress has also been made in the settlementof receivables from Government agencies.

Cr. No. 830-EGT - Agricultural Development Project; US$32 million Credit ofJuly 24, 1978; Effectiveness Date: February 20, 1979; Closing Date:December 31, 1983.

Project tractors have been procured and distributed. Agreementshave been reached and steps taken which have resulted in improved projectexecution. Project organization and management have been strengthened andthe project has been simplified to reduce coordination problems. A studyof the agricultural bank's policies, organization, operations and financewill be initiated shortly. Establishment and operation of machineryworkshops under the project are now under way and procurement of farmimplements is progressing.

Cr. No. 831-EGT - Urban Development Project; US$14 million Credit of August30, 1978; Effectiveness Date: April 30, 1979; Closing Date: December 31,1982. 3/

The Assuit Governorate is making reasonable progress inimplementing its components; and project items in the Cairo Governorate areprogressing, although slowly. The Alexandria components presenteddifficult problems until recently these now appear to be resolved. Thecredit closing date is proposed tc be ext iaded initially for one year onthe basis of an agreed detailed ac-ion prt,gra'n.

1/ Loan closed as scheduled.2/ Closing Date extended to June 30, 198J.

3/ Closing Date extenaed to December 3i, 1983.

- 31 -

ANNEX IIPage 7 of 11

Cr. No. 850-EGT - Second Population Project; US$25 million Credit ofOctober 30, 1978; Effectiveness Date: May 1, 1979; Closing Date: December31, 1983.

Civil works and procurement of furniture, equipment and vehiclesare proceeding satisfactorily. All sites have been selected andconstruction has been completed on over 70% of the facilities.Institutional arrangements have been completed to carry out the delayedsoftware activities, particularly the home visiting program, IEC andtraining. Project management has improved considerably and MOH has agreed

* to recruit additional staff to further strengthen supervision andmonitoring.

Cr. No. 868-EGT - Second Education Project; US$40.0 million Credit ofJanuary 26, 1979; Effectiveness Date: July 18, 1979; Closing Date: March31, 1984.

Overall project execution is satisfactory. Implementation oftechnical assistance components on schedule. Although disbursements aresomewhat slower than appraisal estimates, no major problems are envisaged.

Ln. No.S-14-EGT - New Valley Phosphate Engineering and Technical AssistanceProject; US$11 million Loan of May 25, 1979; Effectiveness Date: October19, 1979; Closing Date: June 30, 1983.

The experimental mine started operations in January 1981, a delayof about 10 months. The chemical tests on the phosphate rock have beencompleted and reviewed by the Bank. An optimization study on thealternative configurations of the project, its scope and output volume aswell as locations of phosphate processing facilities was completed inSeptember 1981 and has been reviewed by the Bank. The conclusion reachedis that the initial target of 7 million tons per year of phosphate rockproduction is not justified by projected market demand and should bereduced drastically. Agreement on scope of proposed project has not beenreached. However, the closing date has been extended 12 months to June 30,1983, to facilitate completion of studies under Part C (ii) of theproject. The detailed project report on the mining operation has beenreceived and is under review.

Cr. No. 909-EGT - Tourism Project; US$32.5 million Credit of June 13, 1979;Effectiveness Date: March 26, 1980; Closing Date: December 31, 1985.

Design work is under way on most project components. Contractshave been signed for several studies and tendering procedures havecommenced on the others. Contracting and tendering are well advanced forthe following components: telecommunications, electricity, roads, Luxorairport terminal buildings, and the hotel training school. Execution ofmost components remains behind schedule, but recent steps to strengthen theproject unit have resulted in reductions in further slippages.

- 32 -

ANNEX IIPage 8 of 11

Ln. No. 1732-EGT - Gulf of Suez Gas Project; US$75 million Loan of June 29,1979; Effectiveness Date: January 29, 1980; Closing Date: December 31, 1983.

The project was delayed initially but is now progressingsatisfactorily. Commissioning and start-up of the main plant facilitiesshould be completed by end-1982. The Ras Bakr component is scheduled to becompleted in June 1983, and the loan is expected to be fully disbursed byDecember 1983.

Ln. No. 1733-EGT - US$102 million, Cr. No. 935-EGT - US$37 million andSpecial Action Cr. No. 20-EGT - US$35 million - Shoubrah El Kheima ThermalPower Project of September 6, 1979; Effectiveness Date: April 8, 1980;Closing Date: June 30, 1986.

Bids for most major equipment packages have been received andorders have been placed. With concerted efforts by project management, itmight be possible to overcome the delay of about six months that hasalready taken place in project execution and to complete the project ontime. EEA's rate of return is well below the agreed level. Measures toimprove EEA's financial situation are being discussed with the authorities.

Cr. No. 988-EGT - Agroindustries Project; US$45 million Credit of May 1,1980; Effectiveness Date: December 3, 1980; Closing Date: December 31,1985.

Construction of the Cairo abattoir is more than half completed andthe contract for construction of the Alexandria abattoir has beenratified. The credit component through the three participating banks isvirtually committed.

Ln. No. 1804-EGT - Fourth Development Industrial Bank Project; US$50million Loan of May 1, 1980; Effectiveness Date: August 8, 1980; ClosingDate: December 31, 1984.

Progress is satisfactory. The loan is almost completely committedand US$36.3 million has been disbursed.

Ln. No. 1842-EGT - Misr Iran Development Bank Project; US$30 million Loanof June 4, 1980; Effectiveness Date: December 31, 1980; Closing Date: June30, 1985.

After a change in ownership structure, MIDB has been reorganizedand has resumed its full operations. Disbursements have been slow; howeverMIDB has recently revised its operation forecast for 1982 and, as a result,expects to commit a substantial portion of the loan by end-1983.

Ln. No. 1849-EGT - Pulp and Paper Project; US$50 million Loan of June 4,1980; Effectiveness Date: May 12, 1982; Closing Date: December 31, 1984.

Procurement is proceeding satisfactorily. Engineering work forthe project is in an advanced stage of preparation.

- 33 -

ANNEX IIPage 9 of 11

Cr. No. 1024-EGT - Cairo Gas Distribution Project; US$50 million Credit ofJune 4, 1980; Effectiveness Date; December 4, 1980; Closing Date: December31, 1985.

The project is making good progress. An ongoing intensivetraining program and accumulated on-the-job experience have resulted in alarger trained work force and significant productivity gains. A concertedeffort is being made to complete all the household connections by the endof 1983 as originally planned.

Cr. No. 1069-EGT - Third Education Project; SDR 30.3 million (US$40.1r million equivalent) Credit of November 7, 1980; Effectiveness Date: April

16, 1981; Closing Date: June 30, 1985.

Satisfactory progress is being made and no major problems areenvisaged. Although disbursements are currently below appraisal estimatesdue to initial start-up delays, significant improvements are expected withdisbursements taking place against recently concluded contracts.

Ln. No. 1886-EGT - Third Power Project; US$7 million, Cr. No. 1052-EGT,US$120 million of November 7, 1980; Effectiveness date: July 7, 1981;Closing Date: June 30, 1987.

Progress in the physical components of the project issatisfactory. The tariff study has been completed. EEA's rate of returnis well below the agreed level, and measures to improve EEA's financialsituation are being discussed with the authorities.

Ln. No. 1928-EGT - Western Desert Petroleum Exploration Project; US$25million Loan of January 13, 1981; Effectiveness Date: May 13, 1981; ClosingDate: December 31, 1983.

Four exploration wells in the eastern part of GPC's permit areahave been drilled and gas has been found in what appear to be commercialquantities. Appraisal drilling aimed at firming up the reserves isongoing. Four more exploration wells are expected to be drilled under theproject.

Cr. No. 1083-EGT - New Land Development Project; SDR 60.9 million (US$80million) of December 16, 1980; Effectiveness Date: October 2, 1981; ClosingDate: December 31, 1987.

Development works on Phase I (7,500 feddans) started in July 1982,and the work will be accelerated after the arrival of the orderedconstruction equipment. The design and tender documents for Phase II(17,000 feddans) are progressing satisfactorily and expected to becompleted in November 1982. Field trials continue on schedule.

- 34 -

ANNEX IIPage 10 of 11

Cr. No. llll-EGT - Fish Farming Development Project; SDR 11 million (US$14million) of April 24, 1981; Effectiveness Date: January 25, 1982; ClosingDate: December 31, 1986.

In mid-1982, the Government selected consultants to provideconstruction supervision and fisheries technical assistance. (The samefirms were previously engaged under the PPF). Despite the selection ofconsultants, the project authorities are making slow progress with respectto: (i) formulation and implementation of training plans; (ii) procurement;and (iii) preparation of production plans for the Maryut Fish Farm. Thesematters are being addressed by a supervision mission scheduled to visitEgypt in November 1982.

Ln. No. 2002-EGT - Hadisolb Rehabilitation Project; US$64 million Loan ofJuly 28, 1981; Effectiveness Date: December 28, 1981; Closing Date:September 30, 1986.

The technical assistance contract has been signed, and procurementaction is under way. The other components of the first stagerehabilitation program, namely the KfW-financed rehabilitation of the oldDemag rolling mills and the USSR-supplied equipment packages, areproceeding well.

Cr. 1156-EGT - Beheira Provincial Potable Water Supply Project; SDR 46.1million (US$56.6 million) of November 25, 1981; Effectiveness Date: April30, 1982; Closing Date: December 31, 1986.

There is a delay of some five months in project implementation dueto difficulties in finalizing engagement of engineering consultants afterthe previous contract expired. Services for the next phase of managementconsulting work are still under negotiation. Six contracts have beenadvertised and tenders for five have been received. Responses have alsobeen received for prequalification of contractors for two rehabilitationcontracts. The taking over of services by the Beheira Water Company islargely on schedule and the company is now supplying over 90% of thetreated water in the governorate. Total staff of the company is now 559and about another 300 will be added in FY83. Successful attempts toimprove system operation have been made by the company staff.

Cr. No. 1162-EGT - Technical Assistance Project; SDR 5.7 million (US$6.9million) of August 26, 1981; Effectiveness Date: January 15, 1982; ClosingDate: December 31, 1987.

Progress is satisfactory. The Ministry of Irrigation hasfinalised a contract for employment of consultants (Harza Engineering).The Ministry of Land Reclamation has selected consultant and is nownegotiating a contract.

- 35 -

ANNEX IIPage 11 of 11

Ln. No. 2041-EGT - Telecommunications III Project; US$64 million Loan ofAugust 20, 1982; Effectiveness Date: (Not yet effective); Closing Date:December 31, 1986.

Action on effectiveness is under way. 1/

Ln. No. 2074-EGT - Development Industrial Bank V Project; US$120 millionLoan of January 12, 1982; Effectiveness Date: June 14, 1982; Closing Date:December 31, 1986.

Progress is satisfactory: US$25.9 million has been committed andUS$2.5 million has been disbursed as of September 30, 1982.

Ln. No. 2103-EGT - Abu Qir Gas Development Project; US$90 million Loan ofMay 3, 1982; Effectiveness Date: (Not yet effective); Closing Date:December 31, 1985.

Action on effectiveness is under way. 2/

Ln. No. 2176-EGT - Greater Cairo Urban Development Project; US$59 millionLoan of October 26, 1982; Effectiveness Date: (Not yet effective); ClosingDate: December 31, 1987.

Action on effectiveness is under way.3/

1/ Loan became effective on February 28, 1983.2/ Loan became effective on December 23, 1982.3/ Loan became effective on February 16, 1983.

- 36 -

ANNEX IIIPage 1 of 1

ARAB REPUBLIC OF EGYPT

VOCATIONAL TRAINING PROJECT

SUPPLEMENTARY PROJECT DATA SHEET

Section I - Timetable of Key Events

(a) Time taken to prepare the project: 5 months (January-May 1982)

(b) Agencies which prepared the project: Ministry of Development,Housing and Land Reclamation(MDHLR); and Ministry ofIndustry and MineralResources (MOIMR)

(c) Date of Government request to the Bank: November 1981

(d) Date of departure of appraisal mission: May 28, 1982

(e) Date of completion of negotiations: March 8, 1983

(f) Planned date of effectiveness: September 1983

Section II - Special Bank Implementation Actions

None.

Section III - Special Conditions

1. The instructor training course for MDHLR would be expanded and itsduration extended to six months by June 30, 1986 (para. 49).

2. By December 31, 1983, qualified training institutes would be contracted toprovide consultants and fellowship training (para. 53).

3. TOMOHAR would recruit three additional staff by June 30, 1984(para. 58).

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ARAB REPUBLIC OF EGYPT

VOCATIONAL TRAINING PROJECT

?ROJECT COM .PONINTS E

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Ministry of Inustry and Mineral Renonce

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