Egypt Water Reform Programme Formulation Report

Water Reform Programme In Egypt
Formulation Report
26 April 2005
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Contents
List of Abbreviations iii
1 Introduction 1-1
1.1 Background 1-1
1.2 Scope of the Consultancy 1-1
1.3 Moving from Identification to Formulation 1-2
1.4 Outline of the Formulation Report 1-3
2 Objectives and Scope 2-4
2.1 Objectives and Outcomes 2-4
2.2 The Scope of the Proposal 2-4
2.3 Component A – Macro-Economic Framework 2-5
2.4 Component B – Water Resources Integration 2-5
2.5 Component C – Water Supply and Sanitation 2-5
3 Component B – Water Resources Integration 3-5
3.1 Intervention B.1 – National and Regional Co-ordination 3-5
3.2 Intervention B.2 – Adoption of the NWRP 3-5
3.3 Intervention B.3 – Public Awareness Programmes 3-5
3.4 Intervention B.4 – Water Resources Data 3-5
3.5 Intervention B.5 – Main System Management 3-5
3.6 Intervention B.6 – Limitation of Rice Areas 3-5
3.7 Intervention B.7 – Drainage Re-use and Non-conventional Sources 3-5
3.8 Intervention B.8 – Revision to Water Quality Standards 3-5
3.9 Intervention B.9 – Water Quality Management 3-5
4 Component C – Water Supply and Sanitation (WS&S) 4-5
4.1 Intervention C.1 – WS&S Policy and Institutional Reform 4-5
EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 i

4.2 Intervention C.2 – The Regulatory Agency 4-5
4.3 Intervention C.3 – Master Planning in the WS&S Sub-sector 4-5
4.4 Intervention C.4 – Rural Sanitation 4-5
4.5 Intervention C.5 – Utility Restructuring 4-5
4.6 Intervention C.6 – Utility Financial Performance 4-5
4.7 Intervention C.7 – WS&S Tariffs 4-5
4.8 Intervention C.8 – Staffing and Training Issues 4-5
5 Implementing the EU Programme 5-5
5.1 Introduction 5-5
5.2 Monitoring Outcomes 5-5
5.3 Characteristics and Risks 5-5
5.4 Consultation and Next Steps 5-5
Appendix A – Terms of Reference 5
Appendix B – Identification Report: Executive Summary 5
Tables
Table 1. Draft Matrix of Conditionalities 2-15
Table 2. Results Based Management Framework 5-50
Table 3. Intervention Characteristics, Risks and Importance 5-55
References 5-56
EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 ii

List of Abbreviations
BCM Billion Cubic Meter

BOD Biological Oxygen Demand
CIDA Canadian International Development Agency
COD Chemical Oxygen Demand
CSP Country Strategy Paper
CWO Cairo Wastewater Organization
DRI Drainage Research Institute
EEAA Egyptian Environmental Affairs Agency
EIB European Investment Bank
EU European Union
EURO-MED The European-Mediterranean Partnership
EUWI European Union Water Initiative
EUWI-MED European Union Water Initiative – Mediterranean Component
EUWSRP European Union Water Sector Reform Programme
Fed Feddan (equivalent to an acre)
GA General Authority
GDP Gross Domestic Product
GIS Geographic Information System
GOE Government of Egypt
HAD High Aswan Dam
HCDW&S Holding Company for Drinking Water and Sanitation
IIP Irrigation Improvement Project
IIIMP Integrated Irrigation Improvement and Management Project
IPC Inter-Ministerial Policy Committee (for the WS&S Sub-Sector)
IWA International Water Association
IWRM Integrated Water Resources Management
LE Egyptian Pound
M Million
Mfed Million Feddans
MALR Ministry of Agriculture and Land Development
MHUUC Ministry of Housing, Utilities and Urban Communities
M&I Municipal and Industrial
MIS Management Information System
MOF Ministry of Finance
MOI Ministry of Industry
MOHP Ministry of Health and Population
MOP Ministry of Planning
MOT Ministry of Transport
MWRI Ministry of Water Resources and Irrigation
NAWQAM National Water Quality and Availability Management Project
NEAP National Environmental Action Plan
NIP National Indicative Programme
NGOs Non-Government Organizations
NOPWASD National Organization for Potable Water and Sanitary Drainage
NWRC National Water Research Centre
NWRP National Water Resources Plan
O&M Operation and Maintenance
PBB Performance-Based Budgeting
PD Presidential Decree
PEA Public Economic Authority
EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 iii
PER Public Expenditure Review
RTA River Transport Authority
TA Technical Assistance
TDS Total Dissolved Solids
TOR Terms of Reference
UNDP United Nations Development Programme
USAID United States Agency for International Development
WQMU Water Quality Management Unit
WS&S Water Supply and Sanitation
WUA Water Users Association
EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 iv

1 Introduction
1.1 Background
The Identification Report (Jacobs, March 2005) discusses the background to the
Water Sector Reform Programme in Egypt. Briefly, the programme brings together
two major strands of EU policy: (i) the EURO-MED Partnership, which governs the
EU’s approach to economic cooperation and development assistance in the
Mediterranean Region (though it is understood that this is being reformulated within
the context of the European Neighbourhood Policy announced in 2004); and (ii) the
EU Water Initiative (EUWI) and its Mediterranean Intervention (EUWI-MED), which
together govern the EU’s approach to water in the region.
The EU-Egypt Association Agreement is set within the framework of the EURO-MED
Partnership, and the Country Strategic Paper (CSP) established the basis for EU co-
operation in Egypt for 2002-2006. The CSP’s main objectives (EU 2004) are to:
• Promote the effective implementation of the EU-Egypt Association Agreement;
• Sustain the process of economic transition: and
• Support stability through balanced and sustainable socio-economic development.
A Mid-Term Review of the CSP held in 2004 led to some adjustments. These were
set out in the National Indicative Programme (NIP) for 2005-2006. A global allocation
of €243 M in grant assistance was allocated for commitment in these two years, of
which an indicative budget of €80 M was provisionally allocated in support of a Water
Sector Reform Programme (EUWSRP). This activity was to have the overall
objective of assisting GOE to promote economic and sustainable water use,
decentralised management at operational level, and private participation.
It was envisaged that the EUWSRP would predominantly take the form of a budgetary
support operation in support of an agreed set of water sector reforms. It might also
fund interest rate subsidies for European Investment Bank (EIB) loans in the water
sector and include an allocation for monitoring, evaluation and associated activities.
The agreed reforms in principle might also be supported by technical assistance
activities funded outside the programme. Finally, the NIP stated that the Commission
anticipates allocating additional funding in support of trans-boundary river basin
management in Africa, but it is assumed that this lies outside the scope of the current
assignment.
1.2 Scope of the Consultancy
The EU has recruited Jacobs Consultancy to help identify and formulate the proposed
programme under terms of reference that are included as Appendix A. The
assignment is being undertaken in two phases: identification and formulation. The
identification stage was completed in early March with submission of the Identification
Report (Jacobs, March 2005). The aim of that report was to assess the status of on-
going water reforms in Egypt and to evaluate whether EU support could usefully
promote an integrated and coherent reform programme. The report concluded that,
EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 1-1
despite some risks (which were reviewed in the report), EU support would potentially
be useful. It therefore recommended that the formulation stage should proceed. This
recommendation was accepted by the EU and the formulation stage began
immediately, also in early March.
This Formulation Report focuses on the preparation of a project proposal in

accordance with the findings of the identification phase (Appendix A). It will provide a
major basis for a one-day Workshop at which the proposed areas of intervention will
be discussed with all relevant stakeholders. The timing of the workshop has had to be
postponed to accommodate the requirements of important participants and it is now
scheduled for May 2005. As a result, the formulation stage cannot be completed by
end-April as stated in the TOR. The final report will need to incorporate the outcome
of the Workshop along with any comments and instructions received from the EU. It
can therefore only be completed by mid- to end-May, depending on the extent of the
changes required. The final report will contain “the main recommendations together
with all the relevant documentation for a project proposal” (TOR - Appendix A).
1.3 Moving from Identification to Formulation
This report should be read in conjunction with the Identification Report, which it
neither supplants nor duplicates. Inevitably, some comments and conclusions in the
earlier report have had to be modified and/or augmented to reflect subsequent
reading, analysis and discussion. But the scope of the two reports is quite different.
Whereas the Identification Report aimed to provide a coherent review of the overall
water sector and its context, the Formulation Report focuses on the specific
interventions proposed for inclusion in a reform programme. Such interventions arise
out of the discussion in the earlier report but do not address the water sector in the
same comprehensive manner.
Based on guidance from the EU, the interventions proposed are grouped into two
categories (Component B: Water Resources Integration, and Component C: Water
Supply & Sanitation) rather than the three categories indicated in Chapter 6 of the
Identification Report (Integration across the Water Sector, Water Resources &
Irrigation, and Water Supply & Sanitation). The rationale for limiting the scope to two
categories is discussed in Chapter 2, along with a brief assessment of the macro-
economic measures provisionally proposed by the EU for Component A.
Given the objectives of the formulation stage, the discussions held were in general
less wide-ranging than those held during the identification mission, and mainly
focused on reviewing possible interventions with the stakeholders directly concerned.
In two important respects, however, the mission sought a broader understanding than
they had obtained during the earlier mission:
• First, meetings were held with their Excellencies Dr. Youssef Boutros Ghali,
Minister of Finance and Dr. Mahmoud Mohieldin, Minister of Investment.
Separate meetings were also held with senior officials of both the Ministry of
Finance and Ministry of Planning. These meetings deepened the mission’s
understanding of the economic context and were facilitated by recruitment – in
agreement with the EU – of Dr. Heba Handoussa as adviser to the mission1.
1
The Mission thus comprised: Jeremy Berkoff (Water Policy Economist & Team Leader),
Professor J.A. Allan (Institutional Reform Specialist), Dr. Mohamed Sha’aban Negm (Water
Supply & Sanitation Specialist) and Dr. Ashraf El-Sayed (Irrigation & Drainage Specialist) (all
• Second, two visits were made outside Cairo – to Alexandria and Fayoum
respectively – to enable the mission to obtain an appreciation of the perspectives
of selected affiliate companies in the WS&S sub-sector. These visits proved very
useful and complemented discussions held with the Holding Company in Cairo.
Before leaving Cairo, the mission met briefly with His Excellency Dr. Mahmoud Abu
Zeid (Minister of Irrigation & Water Resources). Throughout its stay, it received
sustained and helpful cooperation from numerous officials in MWRI, MHUUC and
their subsidiary agencies and was guided in its work by the EU Delegation.
1.4 Outline of the Formulation Report
Following this introduction, and in the light of the discussion in the Identification
Report, Chapter 2 presents the broad outline and rationale for the proposal. Included
in this chapter is an assessment – from the water sector’s point of view – of the
Macro-Economic Framework (Component A) provisionally suggested by the EU.
Each of the proposed water-specific interventions is then discussed in greater detail
in Chapter 3 (Component B: Water Resources Sector Integration) and Chapter 4
(Component C: Water Supply and Sanitation). Chapter 5 brings these together with
the aim of assessing how the proposed interventions might contribute to structural
change in the water sector, and how the overall programme could be monitored and
the impact evaluated. The chapter ends with a brief assessment of next steps in
furthering the proposal. For reference, Appendix A contains the TOR and Appendix B
the Executive Summary of the Identification Report.
of whom fulfilled the same roles as during the Identification Mission) as well as Dr. Heba
Handoussa (Economic and Social Sector Adviser to the Mission).
2 Objectives and Scope
2.1 Objectives and Outcomes
The global objective for this consultancy assignment is “to contribute to the process of
comprehensive reform of the water sector in Egypt with a view to preparing a project
proposal for an EU intervention in the sector”. Specific objectives are to (Appendix A):
• Assess the state of advancement of the institutional reform of the water sector
in Egypt towards an integrated, sector-wide strategy;
• Determine the required improvements for better management of water

resources taking into account conflicting interests of water users;
• Determine the level of participation by the different stakeholders in the process

of water reform, including through private participation in the water sector; and
• Define the scope of intervention for a EU comprehensive initiative in the sector.
The first three objectives were in principle accomplished by the Identification Report.
This Formulation Report aims to fulfil the fourth objective. The Terms of Reference go
on to state that by the end of the assignment the following results should have been
achieved:
• An assessment of the Egyptian strategy in the water sector is carried out;
• The main areas of intervention for a water reform programme are identified and
are carefully analysed and assessed;
• A process of dialogue with the authorities and with the major donors is
engaged; and
• A project proposal is submitted for discussion.
The first of these outcomes – an assessment of the Egyptian Water strategy – was
again in principle accomplished at the identification stage. Potential areas of
intervention were identified in Chapter 6 of the Identification Report, and have been
further analysed and assessed in this report. The third outcome – a process of
dialogue – was initiated during the identification stage, has been continued during the
formulation stage, and will culminate in the May workshop. Thereafter, the dialogue
will be sustained by the EU. The final outcome – the project proposal – is submitted in
this report.
2.2 The Scope of the Proposal
The scope of the proposal arises out of the discussion of the water sector provided in
the Identification Report. It also reflects the instructions of the EU delegation. It has
three major components (Table 1):

• Component A – Macro-Economic Framework
• Component B – Water Sector Integration
• Component C – Water Supply and Sanitation
The Macro-Economic Framework falls outside the responsibility and competence of

the Consultants. It has nonetheless been included in the Matrix of Conditionalities
(Table 1) in the provisional form given to the mission by the EU delegation. This has
been done for a particular reason. It is our strongly-held view that solutions to many of
water’s most pressing problems lie outside the water sector, and that progress on
water reforms will be conditioned to a large degree by national economic and political
developments. As stated in the Identification Report: “water does not constrain
economic growth, it is a sluggish economy that constrains what is possible in water.
No matter how creative are the water professionals, progress will continue to be
difficult in the absence of a sustained process of national reform and an improved
economic outlook. This is more than a question of financial resources, important
though these are. It is also a question of political support for what are necessary, but
in the short-term inevitably unpopular, decisions …” (see Appendix B).
Inclusion of the macro-economic framework provides the opportunity both for drawing
attention to this point of view and for providing an initial assessment of how the
measures identified by the EU might inter-act with and impact on the water sector. It
is, however, recognised that the Commission has yet to decide whether macro-
economic conditionalities should be included in the Matrix as suggested in Table 1 or
whether – as in some other recent budgetary support programmes (e.g. the Spinning
and Weaving Sector Support Programme, EU 2004) – discussion of the macro-
economic framework would be confined to the text, with specific measures if any
reviewed between the EU and Egyptian Authorities in a separate context. The review
given below in no way prejudges what the EU might in due course decide.
Reforms within the water sector were discussed in the Identification Report under three
headings: (i) Integration across Water Sub-sectors; (ii) the Reform Process within
MWRI; and (iii) the Reform Process within MHUUC. It was envisaged that these three
headings would correspond to three components (Chapter 6, Identification Report).
The decision to limit the number of water-specific components to two was taken by the
EU. The rationale for this decision is understood to be that:
• The focus of a component should in principle be presented in terms of priority

sector objectives rather than reforms within a particular organisation or ministry;
• The irrigation-specific measures tentatively identified in the Identification Report

were insufficient to justify a separate component and, to the extent they were
helpful, could be incorporated within the water sector integration component; and
• Strengthening reform in the Water Supply & Sanitation (WS&S) sub-sector

provides the primary justification for the EU programme, and this would best be
formulated so as to complement one other component (Water Sector Integration)
This rationale has been accepted for this report. The main contribution of the EU
Reform Programme will undoubtedly be to support implementation of reforms in the
WS&S sub-sector. The rationale also serves to emphasise that the EU programme
focuses on selected priorities and does not seek to address all aspects of the water
sector. This applies not just to the selection of the two components but also with
regard to the measures included in each component. The broad objectives, scope
and selection of components and their constituent interventions are discussed below
as an introduction to the more detailed comments on each intervention given in the
following two chapters.
2.3 Component A – Macro-Economic Framework
Introduction. Five interventions are included in the provisional proposals given to the
Consultants for inclusion in the Matrix of Conditionalities under Component A (Table
1). Three interventions have implications for the water sector that are predominantly
indirect (though still critical to water, at least in the case of the macro-economic
outlook): Intervention A.1 (Macro-Economic Outlook), Intervention A.2 (Budget
Classification) and Intervention A.5 (Consumer Price Index). Two are expressed
primarily in terms of the water sector: Intervention A.3 – Public Expenditure Review
and Performance-Based Budgeting, and Intervention A.4 – Decentralisation. In both
these cases, however, while the water sector can be illustrative, reforms in the water
sector fall within a much wider context with which it has to be consistent.
Component A in Table 1 is given in the format provided to the Consultants. It includes

neither the objectives of each intervention nor confirmation modalities/indicators. It is
assumed that these will in due course be provided by the EU. The five Interventions
can be discussed from the perspective of the water sector as follows.
Intervention A.1: Macro-Economic Outlook. Evidence that growth of Egypt’s

economy has been sluggish is given in the Identification Report. Long-term growth
has been comparable to that of other low and middle-income countries in the Middle
East, Africa and Latin America, but relative to much of Asia it has been disappointing.
Moreover, due to a mix of external and internal factors there was a marked economic
slow-down in the period 2000-04. Agricultural value-added has generally risen but
growth in industry and services – and hence structural change – has been modest.
Rapid population growth has further limited the rise in average per capita incomes.
Most unusually for a country at its stage in development, the share of rural population
in the total has over the past few decades stayed much the same. This is in part
explained by the relative success of agriculture, which benefits from stable water
supplies (especially since construction of the High Aswan Dam) and favourable
growing conditions. Along with the agricultural reforms initiated in the 1980s/90s,
these advantages have led to intensive cropping and to crop yields that are
remarkably high by world standards. Horizontal expansion has added to opportunities
for the rural population and promoted diversification into high value crops, while the
characteristics of the Nile Valley tend to retain rural communities in close proximity to
urban areas. Even so population growth, the small size of agricultural holdings, and
relatively low rural incomes, have all contributed to rural-urban migration and to the
expansion of Cairo and other centres. But high urban unemployment and living costs
have in turn limited the ‘pull’ of the cities. Even if horizontal expansion remains a
priority, it is hard to escape the conclusion that agriculture is unlikely to drive the
development process, and that future growth not only in urban but also in rural
incomes will depend predominantly on the pace of structural change in the Egyptian
economy, as has typically been the case in most other countries.
The medium-term outlook in recent EU documents suggests that there will be some
recovery in economic growth rates and this is supported by IMF assessments (IMF
2004). Policy indicators included in the EU medium-term outlook “are a mix of: (i)
macroeconomic forecasts … (ii) policy objectives and (iii) intermediate steps for the
attainment of such objectives … Egypt is expected to gradually reduce the budget
sector and consolidated fiscal deficits …” (EU 2004). The water sector could make a
significant contribution to reducing the budget deficit, which would in turn impact
favourably on public sector financing and the credit conditions faced by the private
sector. But whether the economic trends anticipated (i.e. growth rates of 5-6% per
annum) are adequate to provide the basis for significant acceleration in the pace of
structural change may be doubted. Sustained macro-economic reforms beyond
those anticipated by the EU will almost certainly be required if they are to accelerate
job and income creation in urban areas, and relieve the intensity of population
pressures in the Old Lands. And only then can rural incomes be expected to rise
appreciably over the long-term. Though reduced water subsidies would contribute to
improved economic prospects, and sustained improvements in water services would
impact directly on the quality life, prospects for irrigated agriculture and the water
sector generally will still be determined primarily by trends outside the sector itself.
Intervention A.2: Budget Classification. Reclassification of the budget and the

introduction of the “Single Treasury Account” system is a technical measure that
would greatly clarify the budgetary picture for the water sector along with all other
sectors. An illustration of the present lack of clarity is reflected in the difficulty of
identifying O&M costs in the present budget format. O&M-type expenditures are
currently budgeted partly in Chapter 1 (wages related to O&M as apposed to planning
& other central tasks), partly in Chapter 2 (goods and services for O&M), and partly in
Chapter 3 (regular/preventative rehabilitation as opposed to intermittent/major
rehabilitation) (World Bank 2005). Moreover, current practice will need to reflect not
just the budget re-classification itself but also institutional and organisational reforms
in the water sector, which may require a radical rearrangement of budget headings.
Intervention A.3: Public Expenditure Review (PER) and Performance Based

Budgeting (PBB). The World Bank is supporting a Public Expenditure Review (PER)
for which a substantial body of work is proposed for 2005-2006. It is envisaged that
this will be followed by the adoption of Performance-Based Budgeting (PBB).
Besides the macro-framework, the PER is addressing specific issues in four sectors:
education, health, transport and water. It will thus result not only in an overall
assessment of public expenditures and a clarification of inter-sectoral priorities, but
will also reflect a particular understanding of issues in the four selected sectors. With
regard to water, a recent policy note (World Bank 2005) contained six main findings
that can be paraphrased as follows:
1. Most investment and O&M costs of water services in Egypt are funded from the
national budget, with cost recovery levels below international comparators;
2. An increasing proportion of water-related expenditures have been allocated to

new investment and less to recurrent expenditures and debt repayment;
3. Water service coverage is adequate in the Nile delta area but less so in southern
Egypt and in low-income communities;
4. A fundamental rearrangement of budget planning and management is needed to

respond to institutional reform;
5. Three financing options are available for financing future O&M and investment
costs: (i) increased user contributions (ii) reduced costs and overheads through
decentralization and improved efficiency; and (iii) enhanced private participation.

6. The WS&S sub-sector must address the issue of debt overhang, with debt write-
offs contingent on achieving monitorable financial and operational performance
outcomes. Future donor financing could be structured to assist the holding
company over the medium-term, perhaps through sector-wide type operations.
Finding 4 is covered by Intervention A.3 (see above). The debt write-off referred to in
Finding 6 has already been agreed and has thus not been included in the Matrix of
Conditionalities (Appendix C). With regard to the other findings, and with some
exceptions, these are broadly consistent with the scope of the EU programme. They
are discussed below in connection with the assessment of the water Interventions
and in relation to specific Interventions in Chapters 3 and 4. The EU Programme as a
whole represents in many ways a ‘sector-wide operation’ (Finding 6) and thus should
complement the PER process. Monitoring of the EU programme is covered in
Chapter 5 where how it relates to Performance Based Budgeting is briefly considered.
One of the main exceptions to the World Bank findings is the lack of interventions that
address private sector participation in the water sector. This reflects the generally-
held view that, until the public WS&S companies will have to establish themselves on
a financially-sound basis before they can be expected to attract significant private
participation. Similarly, private investment in major new WS&S infrastructure may be
unlikely until order is imposed on investment priorities. Both these issues are
addressed by the proposed interventions, implying that the stage will have been set
for an acceleration of private involvement on completion of the EUWSRP. This does
not of course rule out ancillary private involvement (e.g. in outsourcing activities)
where these are justified. Nor does it underestimate the transfer of responsibilities in
the irrigation sector to the private sector in the form of water user associations and in
connection with horizontal expansion. It is just that these activities have been
deemed as being outside the scope of the proposed components.
Intervention A.4: Decentralisation. Egypt has traditionally been a highly centralised

country with budgetary revenues and expenditures consolidated predominantly in the
national budget. Taxation responsibilities at Governorate level have been
correspondingly weak. While Governors have a strong leadership role at the local
level, the disconnect between their political role and their lack of financial
accountability has had adverse effects, for instance in relation to the performance of
economic authorities reporting to them.
Decentralisation is in principle Government policy and moves to devolve powers to

the local level are in prospect. In particular, it is understood that responsibilities for
decisions on priorities in the investment budget may be steadily devolved to the
Governorates. Water is one of the sectors for which this is being considered. Such
devolution of powers would complement the reform programme in the irrigation
sector, with its gradual transfer of irrigation management and related functions to local
water users through the IIIMP, Water Board and Integrated Districted programmes. It
would also be consistent with the long-term objective of establishing autonomous
WS&S utilities at local level, and of promoting rural sanitation.
How such decentralisation will be phased is still under discussion. If it is implemented

in the short term, then it may be possible to specify measures such as those
proposed under Intervention A.4 in Table 1. But decentralisation issues extend far
beyond the water sector and any water interventions would have to be consistent with
the national policies and approaches. These are beyond the scope of this report.
Inclusion of such an intervention would need to evolve in parallel and be consistent
with the pace of the general decentralisation of government powers.

Intervention A.5: Consumer Price Index. Revising the Consumer Price Index based
on household survey data, and the targeting of inflation by the Central Bank of Egypt,
are technical issues that no doubt would strengthen economic performance but have no
specific bearing on the water sector.
2.4 Component B – Water Resources Integration
Introduction. The international discourse on water emphasises integrated water

resources management (IWRM) and a holistic approach. But, in all countries, water
enters into almost every facet of national life, and differing aspects must inevitably be
addressed by a wide range of public, co-operative and private agencies. Integration
cannot therefore mean integration within one entity. It must mean co-ordinated action
amongst numerous different entities within an appropriate legal and administrative
framework.
Component B addresses integration across responsibilities of the different ministries

and agencies. The proposed interventions are listed in Table 1: four directly address
integration across the whole water sector; three address issues primarily related to
utilisation of water resources; and two focus on improved coordination of water quality
management. The rationale for selecting these interventions is briefly reviewed
below, following a review of the formal legal framework. The rationale for the specific
interventions are discussed in greater detail in Chapter 3, taking into account the
assessments already made in the Identification Report.
Legal Framework. A robust legal framework is essential for effective water

coordination and management. In contrast to some other countries, Egypt has no
over-arching water law and the tradition has been to address water use (quantity) and
water protection (quality) separately. Two primary laws can be said to govern water
use and water protection respectively:
• Law 12/1984 "Concerning the Issue of the Law on Irrigation and Drainage"; and
• Law 48/1982 "Concerning the Protection of the River Nile and Waterways from
Pollution”
Law 12/1984 is primarily concerned with irrigation as the dominant water user and
empowers MWRI to act as water manager. Inter alia it: defines public and private roles
and responsibilities in regard to irrigation infrastructure; establishes the rules for water
allocation (winter closures, rotations, rice cultivation etc.); regulates use of groundwater
and drainage water and the development of new lands; provides for protection against
flooding, navigation and coastal damage; and prescribes for dispute resolution and
penalties for violations. The balance between the public and private roles was modified
by Law 213/1994 “Regarding Farmer Participation”, which facilitates government
intervention in the mesqa – the mesqa being private property – to undertake
infrastructural improvements and assist in the formation of water user associations. It
also enhances farmer participation and organisations more generally.
Law 12/1984 “does not provide an adequate legal basis for water resources
management in an age of scarcity” (MWRI 2004). While all water use must be licensed
by MWRI, no specific mention is made of other uses, nor of priorities in the event of
conflict. A revision to Law 12/1984 has been submitted to GOE and it is anticipated
that this will be approved shortly. There would thus be little advantage in including
conditionalities related to this in Component B. It is nevertheless understood that this
revision has been developed primarily in the context of IIIMP and related projects, and
that its primary aim is to facilitate user participation above the mesqa along with
complementary institutional reform in MWRI. It is unclear how far it addresses longer-
term issues of “water resources management in an age of scarcity” and the resolution
of potential conflicts between different uses. In due course, further revisions to Law
12/1984 may therefore be required.
Law 48/1982 provides the basis for the protection of surface water and groundwater
against pollution. It empowers MWRI to license all wastewater discharges and MOHP
to monitor effluents with a view to guarding against adverse health impacts. It defines
the Nile and canal water as ‘potable’, and drainage, lake and pond water as ‘non-
potable’. It provides that only treated wastewater can be returned to the system, with
the discharge of treated human and animal discharges confined to ‘non-potable’
water bodies. Law 48/1982 inter alia regulates reuse of drainage water, controls
weeds and protects against waterway pollution by agro-chemicals. Its executive
regulations establish water quality standards respectively for: (i) the Nile and irrigation
canals, (ii) treated industrial discharges to the Nile, canals and groundwater; (iii)
domestic and industrial discharges to drains, brackish lakes and ponds; (iv) reuse
water to be mixed with Nile river or canal waters, and (iv) the drains, lakes and ponds.
When Law 4/1994: “The Law for the Environment” was being prepared, a decision
was taken not to integrate the two laws. Law 4/1994 thus refers to Law 48/1982 for
specific regulations on water quality and provides supplementary regulations for
protection of seashores, ports etc. that had not previously been adequately covered.
However, it does not fully integrate these different aspects. It also established an
important new agency (EEAA) and provided for important new procedures, including
the conduct of environmental impact studies for all new projects. It has been found
that “the co-existence of Law 4/1994 and Law 48/1982 makes the division of
responsibilities between various agencies with respect to the management of …
water quality … not always clear” (MWRI 2004).
In contrast to those for Law 12/1984, revisions to Law 48/1982 are still under active
discussion and have yet to be finalised. Deficiencies in the executive regulations have
severely handicapped water quality management and are discussed below. The
question arises whether the EU Reform programme might also promote revisions to
the law itself. No doubt, clarification of agency responsibilities is desirable but this is a
contentious issue involving a number of ministries and agencies and their respective
powers. Moreover, it would require revisions also to Law 4/1995 “On the
Environment”, which has not been evaluated during this assignment. It would be
unfortunate if delays in reaching agreement on the joint revisions to Laws 48/1982
and 4/1995 were to delay adoption of realistic water quality standards.
The recommendation that the legal element of the EU Reform Programme should be
limited to the revision of the executive regulations of Law 48/1982 in no way prejudges
the need of more ambitious reforms in the laws themselves when these are clarified
and when agreement between the various Ministries and agencies becomes feasible.
Integration across the Sector. Egypt has a long history of seeking integration of its
water resources activities. These efforts date back at least to the 1980 National Water
Plan and have been reflected in successive water policy statements. Its approach to
water sector reform has been gradualist. Programmes have been implemented at
national, regional and local levels with varying degrees of integration across the
sector. Some activities have focussed on sub-sectors, others have explicitly addressed
cross-sectoral issues. The latter have included: (i) the now-completed Water Policy
Reform Programme (WPRP) supported by USAID; (ii) the National Water Resources
Plan (NWRP) supported by the Dutch Government: (iii) the Integrated Water
Resources Management (IWRM) Action Plan supported by the World Bank; and (iv)
the National Environment Action Plan (NEAP) supported by UNDP. These
programmes share common features derived from the international discourse on water
and the environment. While each has an important role to play, operationalisation of
the NWMP and its subsequent iteration in a rolling framework is thought likely to be
central to co-ordinated water reform in coming decades.
Approval of the NWRP and its subsequent operationalisation are thus considered
central to integration across the water sector. Permanent institutional arrangements for
guiding this process are also critical, both at national and regional level. Two other
Interventions are proposed that would complement these developments. First,
effective water management is not just a “top-down” activity. It must incorporate a two-
way process of information exchange and consultation, involving society at all levels
and delegating implementation to the lowest feasible level. Second, sustainable data
collection and dissemination are critical to informed decisions and to promoting
consistency and co-ordination action. Four Interventions are therefore proposed under
this heading:
• Intervention B.1 would support the formation of a National Water Council and a
Technical Secretariat in MWRI to: “initiate, supervise and approve policy making
and planning at a national level”; as well as the formation of Co-ordinating
Committees in selected Governorates;
• Intervention B.2 would schedule the approval of the NWMP and its subsequent
operationalisation and iteration. It is understood that approval of the NWRP
would ipso facto also approve the “Water Policy to 2017” that updates the
current national policy;
• Intervention B.3 would initiate a broad-based public participation and awareness

campaign to change perceptions of the value of water at national, regional and
local level; and
• Intervention B.4 would build on the MWRI’s water resources data system with a
view to contributing to its accessibility and sustainability.
Utilisation of Water Resources. The depth and breadth of MWRI’s reforms are
impressive. Under the leadership of the Minister, numerous initiatives have been
launched, with units in the Minister’s Office providing a central focus and promoting
coherence. Among important on-going programmes are the IIIMP, the Water Boards
Project and the promotion of Integrated Districts. Over time these will transfer
important water resources management responsibilities to water users and result in
major organisational reform of the MWRI itself. If carried forward, the reforms would
radically transform how irrigation is managed in Egypt, and promote the effective
utilisation of national water resources. Each of these programmes has its own internal
dynamic and implementation arrangements and there would be little merit in including
interventions related to these programmes within the scope of the EU Programme.
There are nevertheless measures that would complement these and other on-going
programmes with a view to strengthening the effective utilisation of available water
resources at a national level. Three interventions have been identified that could be
usefully supported by the EU programme:

• Intervention B.5 would evaluate the impact of on-going programmes on the main
system with a view to identifying options for strengthening management
capabilities in anticipation of possible future water shortages;
• Intervention B.6 would support announced Government policy, which has the
objective of limiting water use in respect of one use (paddy rice) that has
questionable returns to water and adverse impacts on other irrigators; and
• Intervention B.7 would promote the preparation of a drainage re-use policy aiming
to augment what is the largest single under-utilised source of additional supplies
while managing any adverse health and environmental impacts.
Water Quality Management. Declining ambient water quality is in the opinion of the
consultants perhaps the most critical issue facing Egypt’s water sector. The closed
Nile system tends to retain and concentrate pollutants. Above Cairo, the narrow
valley, the length of river, and limited development, together mean that natural
assimilation can maintain water quality at broadly acceptable levels even if quality
may be unacceptable locally in the drainage system. At Cairo, however, water quality
increasingly deteriorates in the river, in the Damietta and Rosetta Branches, in the
canals taking off from the river and its branches, and especially in the vast drainage
system. Industrial and domestic wastewater is often untreated or poorly treated and
TDS, BOD and COD (and sometimes nutrients) can be much higher than would
normally be expected in agricultural drains. This is a serious direct health hazard
besides limiting safe re-use in agriculture. Towards the coast, the salinity of drainage
water rises steeply due to evaporative enrichment from repeated use in agriculture,
leaching of soils, seepage of brackish groundwater and seawater intrusion.
Ultimately, rising salinity precludes re-use in irrigation and drainage water must be
disposed of to the sea
MWRI has created a Water Quality Management Unit in the Minister’s Office and has
greatly strengthened the monitoring of ambient water quality (Intervention B.4). Two
major issues are being faced: (i) current water quality standards are overly rigid,
ambitious and unrealistic: and, partly as a result, (ii) ambient water quality priorities
are inadequately reflected in programmes that impact on water pollution. These two
issues would be respectively addressed as follows:
• Intervention B.8 would lead to the adoption of revised water quality regulations
with the aim of developing an effective tool for pollution control; and
• Intervention B.9 would promote co-ordinated action by other ministries and

agencies to reflect the revised standards, and priorities for ambient water quality
priorities, in their investment and other programmes.
2.5 Component C – Water Supply and Sanitation
Introduction. Reform of WS&S institutions dates back at least to the 1990s when
most Governorate WS&S utilities were transformed into Public Economic Authorities
(PEAs) or General Authorities (GAs). With notable exceptions, and despite clarifying
some financial aspects, these failed to perform as expected and further reforms were
therefore proposed. These were set out in a draft presidential decree (PD) prepared
with USAID assistance in 2000 (MHUUC 2000). The draft decree provided for:

• An Inter-Ministerial Policy Coordination Committee (IPC), chaired by the Minister
of Housing, to develop and co-ordinate policies for the WS&S sector, with
NOPWASD providing the technical secretariat;
• A Water Regulatory Agency to balance the interests of self-financing public

utilities (PEAs/GAs) with those of water consumers and of the general public;
• An enabling environment for private participation, including the creation of a

MHUUC department to promote the private role in the sub-sector;
• A central MHUUC administrative department for utilities reporting to the Housing

Utilities Sector, to provide guidance to the PEAs/GAs and to the sub-sector
generally;
• Reorganisation of NOPWASD so as to strengthen its performance; and
• Progressive corporatisation of local departmental utilities by converting those

utilities still operating on a departmental basis into PEAs.
In the event, the comprehensive approach of the draft PD has not been adopted and
implementation has been piece-meal. A MHUUC department was created in 2001 to
promote private participation but proved impotent and has since been abolished. Two
presidential decrees issued in April 2004 are the most important recent changes: (i)
PD 135/2004, which provided for a Holding Company for Drinking Water & Sanitation
with fourteen affiliate companies, reporting to the Minister of Housing; and (ii) PD
136/2004, which provided for a Regulatory Agency, the Board of which also reports to
the Minister of Housing.
No substantive action has been taken on other aspects of the draft PD, for instance
as far as is known no action has been taken to restructure NOPWASD. Moreover,
though the objectives of the 2004 reforms are to promote financially autonomous local
utilities satisfying the needs of their customers, in practice the reforms have at the
same time tended to centralise authority, with the Holding Company, the Regulatory
Agency and NOPWASD all reporting to the Minister of Housing. It is too early to judge
the outcome of these reforms. Progress has been made in operationalising the
Holding Company and its affiliates (HCDW&S 2005) but little has yet been achieved
in regard to the Regulatory Agency. Beyond the Holding Company and its affiliates,
therefore, the WS&S sub-sector remains largely unreformed.
Further reforms before clarifying the impacts of those adopted as recently as in 2004
would probably be premature. It is suggested, therefore, that Component C should
aim to promote and broaden the decisions taken in 2004 while simultaneously
ensuring that implementation is kept under careful review. The proposed interventions
are listed in Table 1: two directly address the institutional framework; two address
issues related to investment and are designed to support achievement of ambient
water quality priorities; and four address issues related to creating sustainable WS&S
utilities. The rationale for selecting these interventions is briefly reviewed below and
the specific interventions are discussed in greater detail in Chapter 4.
WS&S Institutional Framework. A supreme Inter-Ministerial Policy Committee (IPC)

was included in the draft 2000 PD as a mechanism for co-ordinating the WS&S sub-
sector, and for directing, monitoring and evaluating, institutional and operational
performance. A national regulator was also included, which would replace the
previous system of local government regulation. Presidential Decree 136/2004
authorised the creation of such a regulator although progress has so far been slow. It
is proposed that establishment of the National Regulator should be expedited while
simultaneously keeping its performance and relationship to other organisations under
careful review. On completion of the EU Reform Programme, the IPC would be in a
position to judge what further reforms are required.
• Intervention C.1 would support the establishment of an Inter-Ministerial Policy

Committee (IPC) for the WS&S sub-sector, chaired by the Minister of Housing
and with an appropriate Technical Secretariat; and
• Intervention C.2 would expedite the creation of a Regulatory Agency to: “…

regulate, follow up and control all that is connected with the drinking water and
sanitary drainage activities at the level of the Republic…” (PD 136/2004, Art2).
Improved Ambient Water Quality. Addressing deficiencies in WS&S planning is a

high priority. This is so not just because planning and project implementation in the
WS&S sub-sector have often been unsatisfactory, but also because utilities and other
local interests have been insufficiently involved in the selection, implementation and
commissioning of new projects. Moreover, there has been a widespread failure to
incorporate water quality criteria adequately in the selection of new projects. MWRI
has greatly strengthened the monitoring of ambient water quality and has a much
better understanding of what this implies for national priorities inter alia in the WS&S
sub-sector. Two interventions would seek to rationalise investment priorities in
response to the priorities established by MWRI (Intervention B.9):
• Intervention C.3 would support the preparation of a revised, consolidated

master plan for investments in the WS&S sector; and
• Intervention C.4 would address the particular issues faced in the provision of
rural sanitation, contributing to institutional reforms and expanded investment in
appropriate low-cost technologies.
Sustained WS&S Utilities. The Holding Company for Drinking Water & Sanitation
(PD 135/2004) was established under Law 203/1991 (Law on Public Business Sector
Companies) with the Minister of Housing as the concerned Minister. Proactive
management by the Holding Company will seek to create self-financing WS&S public
companies at the Governorate level serving the needs of their customers on a self-
sustaining basis. Law 203/1991 precludes budget transfers to public companies. The
Holding Company anticipates that subsidies will be phased out in three stages. First,
O&M subsidies would be eliminated (other than those budgeted under the “New
Social Contract”). This would be followed by full provision for depreciation allowances
based on sound accountancy practice. Finally, investment subsidies would be
eliminated, with the affiliates funding all expansion, modernisation and rehabilitation
projects from their own resources. These are ambitious objectives. Four interventions
are proposed that would support achievement of the first phase and prepare the
ground for achieving the second and third stages in the longer-term:
• Intervention C.5 would restructure at least one pilot company based on an

understanding of international experience in the provision of commercial water
services;
• Intervention C.6 would require the phased elimination of O&M subsidies to the
affiliate companies, other than those budgeted under the “New Social Contract”;

• Intervention C.7 would require an assessment of the structure of water tariffs
and a phased increase in the sanitation surcharge from the current 35% to 75%;
and
• Intervention C.8 would require the preparation of a staffing and training plan for
the Holding Company and its affiliate companies.

Table 1. Draft Matrix of Conditionalities for EU Water Sector Reform Programme (€80,000,000)2
OBJECTIVES/ MEASURES FOR MEASURES FOR MEASURES FOR CONFIRMATION

COMPONENTS TRANCHE I (€20 M)1 TRANCHE II (€35 M) 1 TRANCHE III (€25 M) 1 MODALITIES/INDICATORS
A. MACRO-ECONOMIC FRAMEWORK
A.1 Macro-Economic Outlook 1.1 Preserve internal and 1.2 Publish a macroeconomic 1.3 Produce an analysis of gaps
external equilibria through a medium-term outlook between actual out-turns
flexible and unified ex- including a medium-term and medium-term forecasts.
change rate and continued fiscal strategy.
fiscal consolidation.
A.2 Budget Classification 2.1 Complete the budget 2.2 Implement the “Single 2.3 Issue a computerized final
classification restructuring Treasury Account” system law (budget -closing draft
on a fully automated basis. for the next budget law) using the new
execution. classification.
A.3 Public Expenditure 3.1 Complete Public 3.2 Launch Performance-Based 3.3 Evaluate the Performance -
Review and Performance Expenditure Review (PER) Budgeting (PBB) in the Based Budgeting (PBB)
Budgeting analysis of water sector water sector using the new ongoing experiment of
budget data and issue functional/economic implementing Performance-
guidelines for Performance- classification structure. Based Budgeting (PBB) in
Based Budgeting (PBB) of the water sector.
the water sector.
A.4 Decentralisation 4.1 Launch a study on 4.2 Create formal links between 4.3 Expand decentralised
decentralisation of water water management management of water in at
management, of local cost decentralisation and the least seven regions.
recovery and financial PBB exercise under way.
sustainability of local water
management.
A.5 Consumer Price Index 5.1 Launch work for improving 5.2 Announce date at which 5.3 Publish new consumer-price
measurement of consumer- Central Bank of Egypt level index and applied
price level changes, using (CBE) will start targeting methodology.
latest household survey inflation and set base rates
data. of bank refinancing
accordingly
2
The total amount of the proposed grant, and the division between tranches, was provided to the Consultants by the EU Commission.
Table 1 (cont). Draft Matrix of Conditionalities for EU Water Sector Reform Programme (€80,000,000)

Components TRANCHE I (€ 20 M)1 TRANCHE II (€ 35 M)1 TRANCHE III (€ 25 M)1 MODALITIES/INDICATORS
B. WATER RESOURCES SECTOR INTEGRATION
B.1 Co-ordination and 1.1 Establish National Water 1.2 Establish at least two 1.3 Establish at least two 1.1 Decree establishing
promotion of IWRM by Council, chaired by the Governorate Water further Governorate Water National Water Council.
concerned Ministries and Prime Minister or Minister Committees, chaired by Committees, and submit a
Agencies in the Water of Water, with members Governor with members report on achievements of, 1.2 Decree creating at least two
Sector at national and drawn from concerned drawn from local offices of and issues associated with Water Committees at
regional (Governorate) ministries and agencies, concerned ministries and the National Water Governorate level.
levels. with a Technical agencies, civil society and Council. 1.3 Decree creating two further
Secretariat in MWRI, the general public. Committees at Governorate
level. Report on
performance.
B.2 A national framework for 2.1 Adopt the National Water 2.2 Achievement of 2.3 Achievement of further 2.1 NWRP approved by GOE
IWRM to guide the Resources Plan [NWRP], milestones set for the milestones set for the and promulgated as
activities of concerned incorporating the Water operationalisation of the operationalisation of the appropriate.
ministries, agencies, civil Policy 2017 and Water NWRP as approved by NWRP as approved by
society and the general Strategy. National Water Council. National Water Council. 2.2 Operationalisation
public, milestones recorded as met.
2.3 Operationalisation
milestones recorded as met.
B.3 Broad acceptance by 3.1 Prepare a phased Public 3.2 Operationalise and pilot 3.3.Operationalise and pilot 3.1 Approval of Public
Parliamentarians, the Awareness Campaign, to the awareness campaign, the awareness campaign, Awareness Campaign.
media, water customers be implemented throughout at national level. at Governorate level.
and the general public of the country. 3.2 Execution of national
the value of water and campaign according to
the importance of IWRM. agreed milestones.
3.3 Execution of regional
campaign according to
agreed milestones.
B.4 A sustainable water 4.1 Conduct cost recovery/ 5.3 Sign protocol on cost 4.3 Integrate different MIS and 4.1 Signed protocols with other
resources data sharing study to ensure recovery and sharing of protocols in an integrated ministries and agencies.
collection/dissemination national monitoring quality data collection and National IWRM Information
system (quantity and network can be sustained dissemination system. Centre. 4.2 MIS system, and cost
quality) that meets the sharing and data exchange
needs of all and Sign protocols between Develop a MIS & a data protocols
integrates national and MWRI/NAWQAM and other exchange system and
agencies for connect national centres 4.3 Decision creating regulatory
local centres. system and National IWRM
sharing/exchanging data. with local levels.
Information Centre.

COMPONENTS TRANCHE I (€ 20 M)1 TRANCHE II (€ 35 M)1 TRANCHE III (€ 25 M)1 MODALITIES/INDICATORS
B.5 Coordinated main system 5.1 Initiate conceptual review 5.2 Submit interim options 5.3 Submit final report, 5.1 TOR developed and
management and a of revised Main System report on main system recommending revised recruitment of Consultants
capacity for responding to Management practices. management, evaluating Main System Management
potential water shortages. software & infrastructural practices and 5.2 Interim Consultants Report
investments needed. implementation plan 5.3 Final Consultants Report
B.6 Rice area confined to a 6.1 Impose penalties on 6.2 Impose penalties on 6.3 Impose penalties on 6.1Certification cultivated rice
long-term average of no unlicensed cultivation of unlicensed cultivation of unlicensed cultivation of area is less than 1.4 M fed
more than 1.1 M feddans. paddy under Law 12/1984 paddy under Law 12/1984 paddy under Law 12/1984
to contain the total to contain the total to contain the total 6.2 Certification cultivated rice
cultivated area under rice to cultivated area under rice cultivated area under rice to area is less than 1.25 M fed
1.4 M feddans. to 1.25 M feddans. 1.1 M feddans. 6.3 Certification cultivated rice
area less than 1.1 M fed
B.7 Optimised drainage re- 7.1 Initiate a review of drainage 7.2 Develop strategy and 7.3 Adopt water re-use policy, 7.1 Approval of TOR and
use so as to increase the reuse programmes. policy for drainage reuse implement the approved modalities for its
water available for and recommend programme, and monitor implementation.
agriculture while guarding implementation its impacts.
against adverse effects programme. 7.2 Interim report and
on surface and implementation programme.
groundwater quality. 7.3 Approval of policy and
implementation programme.
B.8 The appropriate legal 8.1 Revised version of the 8.2 The revised bylaws for Law 8.3 Revised version of the 8.1 Draft bylaws from MWRI
basis for effective Water bylaws for Law 48/1982 48/1982 approved by the bylaws for Law 48/1982
Resources Quality approved by the Minister, National Water Council adopted by the Peoples 8.2 Approval of bylaws f by
Management in Egypt. MWRI and submitted to Assembly. National Water Council.
National Water Council 8.3 Approval of bylaws by
Peoples Assembly.
B.9 Co-ordinated action on 9.1 Establish working 9.2 Approval and signing of 9.3 Incorporation of the 9.1 Decree establishing Water
water quality amongst all committee on water quality protocols between MWRI approved plan in the five- Quality committee and
concerned ministries/ and prepare a strategic and other ministries/ year governmental plan. strategic vision prepared
agencies, and integrated vision for water quality agencies, consolidated Deepen systems and
approach to quality management. within a National Water actions for enhanced 9.2 Protocols signed, approved
management of surface Quality Management Plan, coordination and included in National WQ
and groundwater system. participation of all Management Plan
stakeholders. 9.3 WQ Management Plan
incorporated in 5-Year Plan
monitoring report prepared.


COMPONENTS TRANCHE I (€ 20 M) 1 TRANCHE II (€ 35 M)1 TRANCHE III (€ 25 M)1 MODALITIES/INDICATORS
C. WATER SUPPLY AND SANITATION
C.1 Institutional processes 1.1 Create an Inter-Ministerial 1.2 Decide modalities for 1.3 Recommend revisions as 1.1 Decree creating Inter-
for, and improved co- Committee (IPC), chaired preparing an on-going required to the Operational Ministerial Committee and
ordination of, policy, by the Minister of Housing institutional review for the & Regulatory Framework appointing a Technical
planning and institutional with members from WS&S sub-sector and for the WS&S sub-sector. Secretariat.
reform in the Water concerned ministries and initiate this process.
Supply & Sanitation agencies, and a Technical 1.2 Report on the modalities for
(WS&S) Sub-sector with Secretariat. on-going institutional review.
a view to strengthening 1.3 A draft Presidential Decree
sub-sector performance for Institutional Framework
in the WS&S Sub-Sector.
C.2 An effective and 2.1 Establish a Regulatory 2.2 Progress on milestones in 2.3 Further progress on 2.1 Regulatory Agency set up,
sustainable regulatory Agency, appoint senior implementing programme. milestones including CEO and other senior staff
framework that governs staff, and approve an submission of tariff appointed. Implementation
utility performance and implementation programme recommendations for each Programme.
tariffs, balancing financial containing appropriate Affiliate Company.
targets for WS&S utilities milestones. 2.2 Report on milestones set
with interests of water for the Regulatory Agency
consumers and the 2.3 Monitoring report and tariff
general public. recommendations
C.3 A long-term investment 3.1 Determine modalities for 3.2 Report on status of WS&S 3.3 Adopt a National Master 3.1 IPC decision on modalities
programme for the WS&S carrying out a review of the master planning, create a Planning Study for the for master planning review.
sub-sector that reflects status of master planning in framework for completing a WS&S Sub-sector and
social and environmental the WS&S sub-sector, and consolidated master create a permanent 3.2 IPC report on status of
criteria based on ambient assign responsibilities for planning study, and recruit monitoring structure. master planning; TOR for a
water quality priorities. this task. consultants. consolidated Master Plan.
Appointment of consultants.
3.3 Approval of Master Plan
and monitoring structure.
C.4 Rural sanitation 4.1 Approve a World Bank- 4.2 Finalise a Rural Sanitation 4.3 Officially adopt and put in 4.1 Approval of World Bank
standards that reflect supported Rural Sanitation strategy building on the motion a Rural Sanitation Study and modalities for
appropriate low cost Sector Study, together with World Bank-supported Strategy, together with a implementation
technologies, resulting in the modalities for its Sector Study. permanent monitoring
reduced discharges of effective implementation. structure. 4.2 Submission of draft Rural
untreated wastewater and Sanitation Strategy.
improved health and 4.3 Adoption of a Strategy and
environmental conditions. monitoring structure.
OBJECTIVES/ MEASURES FOR TRANCHE MEASURES FOR TRANCHE MEASURES FOR TRANCHE CONFIRMATION
COMPONENTS I (€ 20 M) 1 II (€ 35 M)1 III (€ 25 M)1 MODALITIES/INDICATORS
C.5 WS&S Affiliate 5.1 Appoint international 5.2 Prepare detailed proposals 5.3 Implement restructuring of 5.1 Approval of TOR and
Companies operating advisors experienced in for restructuring one or one or perhaps two model recruitment of consultants.
based on international provision of commercial perhaps two model affiliate affiliate companies.
best practice, while taking water services in both companies reflecting Consultant report giving 5.2 Report on model affiliate
full account of the local developed and developing international best practice. proposals for a phased and implementation
context. countries. restructuring programme of programme adopted
other companies. 5.3 Restructuring of one model
affiliate company. Report
on future implementation
programme.
C.6 WS&S affiliate companies 6.1 Approval of a financial plan 6.2 Achievement of at least 6.3 Abolition of all O&M 6.1 Financial plan approved.
that all meet O&M costs that phases out O&M 50% of the reduction in subsidies, other than those
from their revenue, subsidies by Tranche 3, O&M subsidies as provided budgeted under the ‘New 6.2 Confirmation of reduction in
subject only to subsidies other than those budgeted in the plan Social Contract’ O&M subsidies.
budgeted under the ‘New under the ‘New Social 6.3 Confirmation that O&M
Social Contract’. Contract’. costs met from revenue
subject to social subsidies
C.7 Tariff structures that 7.1 Recruitment of Economic 7.2 Report evaluating tariff 7.3 Adoption of a programme 7.1 TOR and Recruitment of
promote efficient water Consultant to review tariff structures and scheduling revising tariff structures. An Consultant. Confirmation of
use and utility operations structures. An increase in their introduction. An increase in sanitation surcharge increase.
and better reflect the sanitation surcharge to at increase in sanitation surcharge to at least 80%
relative costs of providing least 50% of the water tariff surcharge to at least 65% of the water tariff, 7.2 Consultant Report.
water supply and supported by a targeted of the water tariff, supported by a continued Confirmation of sanitation
sanitation services, and Public Awareness supported by a continued on-going Public Awareness increase.
that are broadly accepted Campaign. on-going Public Awareness Campaign. 7.3 Decision on tariff structure
by customers and the Campaign. reform. Confirmation of
general public. surcharge increase.
C.8 Staff the Holding 8.1 Recruit Consultants for a 8.2 Approval of a Human 8.3 Implement the approved 8.1 TOR for Human Resources
Company and its affiliate human resources and Resources and Training Human Resources and and Training Plan adopted
companies at an training plan to enable Plan. Training Plan. Establish and consultants recruited
appropriate level and with HCDW&S and its affiliates redundancy schemes
the technical and to meet their commercial, where appropriate. 8.2 Approval of human
managerial skills needed technical, health and resources and training
to meet their evolving environmental tasks. development plan.
responsibilities. 8.3 Implementation of the
Human Resources and
Training Plan.

3 Component B – Water Resources Integration
3.1 Intervention B.1 – National and Regional Co-ordination
Background. Egypt has several high-level inter-ministerial committees that coordinate

aspects of water resources. One such committee was established on a temporary
basis under the chairmanship of the Minister of Water to guide and direct the
preparation of the National Water Resources Plan (NWRP). The NWRP in turn has
recommended that this committee should be upgraded and made permanent in the
form of a National Water Council to: “initiate, supervise and approve policy making and
planning at a national level” (MWRI 2004).
The Council would be supported by a technical secretariat located in MWRI that would
inter alia update and revise the National Water Resources Plan on a rolling basis
every five years. The NWRP further recommended that comparable coordination
arrangements should be established at regional (Governorate) level. It would be
desirable for membership in regional committees to be drawn not just from
Government (both local and Governorate offices of national agencies) but also from
civil society and the general public.
It is understood that a proposal for a National Water Council has been submitted by
MWRI to the Government and that action on this matter is awaited. As far as is known,
no action has yet been taken to create co-ordinating committees at Governorate level.
Rationale for Intervention B.1. The rationale for strengthened coordination in water
resources planning, development and management is self-evident. Intervention B.2
would promote the NWRP proposals by supporting the recommendation – already
submitted by MWRI – for creation of a National Water Council and subsequently
providing comparable committees at Governorate level. Specifically:
• Tranche 1. The National Water Council would be established, together with a

Technical Secretariat in MWRI.
• Tranche 2. Two Governorate Committees would be established at the instigation

of the National Water Council, with the selection of Governorate depending on
local responses and the priority attached to water resource issues.
• Tranche 3. Two further Governorate Committees would be established and a

progress report would be submitted assessing the impact of the various
committees on water resources coordination.
Intervention B.1 complements implementation of all other interventions. Its technical

secretariat would also provide a logical counterpart for the EU Programme. The
National Water Council would play a specific and direct role in approving and
operationalising the NWMP (Intervention B.2). It would also review progress of and,
where appropriate, co-ordinate activities related to all other interventions. It would in
particular need to cooperate closely with the “supreme” co-ordinating committee
proposed for the WS&S sub-sector (Intervention C.1)

Anticipated results and risks. The outcome of Intervention B.1 would be a
functioning National Water Council and at least four Governorate Committees co-
ordinating water resources at a local level.
The main risks are associated not so much as to whether the committees can be
established – this no doubt is a relatively straightforward administrative matter – but
whether standing inter-ministerial and/or stakeholder committees in practice will prove
helpful. Worldwide evidence has been mixed. With strong political support and
leadership, and the will to cooperate, such arrangements can contribute significantly
to effective IWRM. Where such support and leadership are lacking, and institutional
rivalries persist, they may have only limited impact – meetings typically become
increasingly rare, participation declines, and in extreme cases such committees have
been abolished. MWRI’s commitment to IWRM holds promise that this support and
leadership will be forthcoming in Egypt. Even so, success also depends critically on
the willing participation of other ministries, agencies and associations.
3.2 Intervention B.2 – Adoption of the NWRP
Background. Preparation of the National Water Resources Plan (NWRP) began in

1997 and has been supported by the Dutch government. A draft Plan was submitted
in 2004 (MWRI 2004), incorporating an implementation strategy and a draft National
Water Policy to 2017. It built on the earlier UNDP/World Bank-supported Egypt Water
Master Plan (UNDP/World Bank 1981) and on successive water policies adopted by
the Government. The draft plan argues that: “there has not always been sufficient
recognition of the interrelationships between the various sectors”. It therefore
adopted a participatory approach, incorporating the plans of other agencies and the
role of the private sector within a co-ordinated whole. It evaluated trade-offs between
different objectives for discussion with stakeholders. The draft plan was reviewed at a
national conference held in March 2005 and is currently under revision in the light of
the comments made. A second phase of the NWRP would schedule interventions
and measures in the context of regional and agency action plans. This process would
be central to the implementation of a co-ordinated reform program and provides the
major instrument for instituting integrated reform in coming years.
It is understood that approval and operationalisation of the NWRP would ipso facto also
approve the “Water Policy to 2017” that updates the existing policy adopted in 2000.
Rationale for Intervention B.2. The NWRP provides a coordinated framework for
promoting IWRM throughout Egypt and is the first of a series of rolling plans to be
updated every five years under the direction of the National Water Council.
Intervention B.2 would support the operationalisation of this process:
• Tranche 1. The NWRP, revised as appropriate following recent review and

discussions, would be formally adopted by GOE and the National Water Council,
and an implementation programme for its operationalisation would be prepared.
• Tranche 2. Milestones as specified in the implementation programme of the

NWRP would be achieved as agreed by the National Water Council.
• Tranche 3. Further milestones as specified in the NWRP implementation

programme as agreed by the National Water Council would be achieved.

The NWRP and its subsequent iterations will in principle provide the framework for
the development of the water sector as a whole. The planning process should thus
increasingly incorporate the provisions of all other Interventions and provide the
context within which inconsistencies can be ironed out and complementarities
between the programmes of differing ministries and agencies can be fully exploited.
Consultant requirements. It is assumed that the Dutch government will continue to

support the operationalisation (Phase 2) of the NWMP process. The milestones to be
achieved in relation to Tranches 1 and 2 would be developed with support from the
Dutch consultants, for submission to, and approval by, the National Water Council.
Anticipated results and risks. The main outcome would be an agreed planning
framework within which all ministries, agencies and entities would plan and implement
their policies, programmes and other water-related activities.
It must be accepted, however, that the NWRP has been prepared primarily by the
Planning Sector of the MWRI. The plans and programmes of other Ministries and
agencies have been explicitly incorporated in the NWRP, based on extensive
cooperation and discussions in the context of the NWRP itself and more broadly in
the context of inter-agency relationships in general. Nevertheless, the commitment of
other agencies to the NWRP and the NWRP planning process is variable and in
several instances unclear. Not only do other ministries and agencies each have their
own planning processes but some institutional competition is almost inevitable. The
National Water Commission would be one important mechanism within which to
resolve such issues and minimise the potential for inconsistencies and conflict.
3.3 Intervention B.3 – Public Awareness Programmes
Background. Water plays a central social and cultural role in every society with the
result that interventions in the water sector are typically sensitive and difficult. Societal
responses seldom reflect rational IWRM considerations and many – if not most – of
the population resist categorising water as an economic good. Charging for water is
particularly controversial, even when it is limited to cost recovery of infrastructural
investments that clearly have to be provided by human agency. This is especially so
in Muslim societies given traditions and religious sanctions maintaining that water is
“a Gift from God”. These traditions may be particularly strong in Egypt given the
contrast between river and desert, and the characteristics of the annual Nile flood that
over millennia brought water freely to the population for irrigation and domestic uses.
The idea of charging for water thus tends to encounter exceptionally strong
resistance, and helps explain why there are no explicit irrigation water charges in the
Old Lands and why WS&S tariffs are amongst the lowest in the world.
But public attitudes are not just a question of resistance to paying water charges. On
the one hand, the ubiquity of water generates extensive local knowledge and
practices that can inform water managers and contribute possible solutions to their
problems. On the other, widespread failure to recognise the true value of water also
contributes much to broader patterns of misuse and abuse of water – a classic
example of the “tragedy of the commons” – that can impact on the efficiency of water
use, adversely affect water quality and undermine the sustainability of the resource.
Awareness and participation are therefore two-way processes of information
exchange and consultation, informing both those responsible for water management
as well as those who are its beneficiaries. Furthermore, the discourse on water is
mediated by politicians and the media, and alarmist and misleading political
statements and publicity does much to colour the debate. Particular attention should
therefore also be given to informing and consulting with the legislators that set the
agenda, and the media and educators who have the power to inform or mislead water
users. The massive costs of the infrastructure that delivers and treats water and the
fact that these can only be implemented by human agency must be emphasised.
The importance of public awareness and participation has been recognised by MWRI,
notably in the context of preparation of the NWRP, and a Communications Unit has
been established in the Minister’s Office to provide a focus for tackling these issues.
Other Ministries and agencies e.g. the Environmental Authorities, have adopted
comparable approaches. Participatory approaches are thus increasingly integrated
within on-going activities with the aim of enhancing stakeholder involvement and
generating public support. However, these efforts have yet to make a decisive
impression on general public opinion and there appears to be a vital need to broaden
their impact and shift the public discourse on water.
Rationale for Intervention B.3. Public awareness and participation are required at
every level and in every context. Key roles could potentially be played by the
National Water Council at the national level; by co-ordinating committees at
Governorate level; and by the Water Boards and associated reforms at community
and/or branch canal levels. Innovative approaches are needed to address
parliamentarians and the media, the corporate sector, and women’s groups and
NGOs active in community, environment and related areas. Moreover, specific
publicity and awareness campaigns should to be associated with particular activities
and decisions. Intervention B.3 would aim to support such approaches as follows:
• Tranche 1. A phased Public Awareness and Participation Campaign would be

prepared and approved for country-wide implementation.
• Tranche 2. The national Public Awareness and Participation Campaign would be

operationalised and piloted at national level, according to agreed milestones, and
regional campaigns would be prepared and approved for selected Governorates.
• Tranche 3. The national Public Awareness Campaign and Participation would be

expanded according to agreed milestones, and regional campaigns would be
operationalised and piloted at Governorate level.
These campaigns would be approved and promoted by the National Water Council
and Governorate Committees (Intervention B.1) and coordinated with implementation
of all other interventions as appropriate. Specific campaigns should in particular be
implemented in coordination with the restriction of paddy areas (Intervention B.6) and
modifications to water tariffs and the increase in the sanitation surcharge (Intervention
C.7) in order to inform those effected and enhance their acceptance of the decisions.
Consultant requirements. The consultants funded by the Dutch Government in

support of operationalising the NWRP could provide general assistance in preparing
national and Governorate Public Awareness and Participation campaigns. Other
consultants would play a role in respect of specific programmes and activities.
Anticipated results and risks. The outcome would be the preparation of explicit
Public Awareness and Participation Campaigns at national, regional and programme-
specific levels, informing both those responsible for implementation and also the
beneficiaries and general public.

These longer-term outcomes are, however, somewhat diffuse and uncertain. The risk
that they are ineffective could be minimised by focusing in particular on informing
parliamentarians and the media with the aim of shifting the nature of the public debate
and discourse on water. The risks of not making progress with awareness raising are
so high that even limited success should be considered an essential achievement. At
the same time experience in other economies has demonstrated that reforms such as
tariff increases are much more feasible when an economy achieves diversity and
strength. Awareness of the link between the political feasibility of water reforms, such
as tariff increases and the strength and diversity of an economy could also be usefully
projected in the water sector itself.
3.4 Intervention B.4 – Water Resources Data
Background. The National Water Quality and Availability Management (NAWQAM)

project was initiated in 1998 with support from the Canadian Government. Building
on records dating back to the 19th Century and earlier, NAWQAM has consolidated all
relevant water resources data and analytical capabilities within an integrated
Management Information and Dissemination System. The main elements of this
system are (NAWQAM 2000):
• A National Water Resources Database comprising standardised and

consistent data organised in nine modules: basic data, irrigation, groundwater,
drainage, M&I, agriculture, environment, economic, and unconventional sources
(drainage reuse, wastewater treatment, desalination):
• A Geographic Information System (NAWQAM-GIS) that generates different

layers for the MIS inter alia containing agriculture, M&I, industrial, livestock &
fish farming layers, along with irrigation, drainage, groundwater etc.:
• A Computational Framework for water resources planning in Egypt, which

integrates and adapts the numerous available mathematical models for water
planning & management, inter alia providing capabilities for demand
forecasting, operational planning, water distribution etc.: and
• A Dissemination System for data use, data sharing and electronic interchange
within MWRI and between MWRI and other agencies using not only traditional
forms of dissemination, but also a computer-based information network within
MWRI, and deployment on the Internet.
Particular note can perhaps be made of: (i) the greater reliability of flow data that has
been a consequence of introducing measurement and control based on water
volumes in place of the traditional methods of measurement and control based on
water levels (Intervention B.5); and (ii) the much strengthened data collection and
reporting system on ambient water quality reflecting a greatly expanded coverage of
water quality data stations throughout the river, canal and drainage systems.
Rationale for Intervention B.4. Two major concerns have been raised concerning
the sustainability of the integrated MIS developed under the NAWQAM project. First,
Canadian support is declining year-by-year. While this aims to provide time for
alternative funding to be arranged, this still has to be secured. A major part of the
costs will no doubt have to be met from MWRI’s own budget, but additional sources of
funds are essential. Second, though MWRI staff are generally aware of NAWQAM’s
capabilities and the data that is now available, other ministries and agencies are
much less well-informed and have yet to make full use of the capability that has been
created. The system also needs to be extended to incorporate local centres and to
meet requirements at the Governorate level.
Intervention B.4 would address these two major concerns by: (i) providing for a cost-
sharing/cost-recovery study to identify potential sources of funds so that NAWQAM
can be sustained, and (ii) promoting agreements (protocols) to be signed between
MWRI/ NAWQAM and other ministries and agencies. Such protocols would inter alia
specify: (i) the terms of cooperation between the different agencies; (ii) reporting
formats and data exchange systems designed to meet the specific needs of each of
the cooperating agencies concerned; and (iii) the terms on which the costs of the data
exchange programmes are to be met. Specifically, Intervention B.4 would cover:
• Tranche 1. A cost sharing/cost recovery study would be prepared and protocols

would be drafted for signature with other relevant agencies.
• Tranche 2. The protocols would be signed and their provisions would be

activated and the system extended to connect national with local centres.
• Tranche 3. The protocols and reporting systems would be consolidated within an

integrated National IWRM Information Centre incorporating regulations governing
a cost sharing/cost recovery system that meets the costs of the Centre.
A comprehensive sustainable Data Collection & Dissemination system (MIS) is critical

to all aspects of water resources planning and management. It thus underpins the full
range of proposed Interventions under the EU programme. Particular mention can be
made of its critical contribution to a successful outcome for: (i) operationalisation of
the NWMP (Intervention B.2). (ii) the assessment of co-ordinated main system
management (Intervention B.5), (iii) co-ordinated action to address water reuse
(Intervention B.7) and prepare a water quality management plan (Intervention B.9),
and (iv) master planning for the WS&S sector (Intervention C.2).
Consultant requirements. The Canadian Government is expected to finance

continuing consultant advice on a declining basis. It may be desirable to recruit an
additional consultant to undertake the cost sharing/cost recovery study for Tranche 1.
Anticipated results and risks. The outcome of Intervention B.4 will be an integrated
National IWRM Information Centre serving the needs of all relevant agencies on a
sustainable basis.
The willingness of other agencies to cooperate on data issues and in particular to

contribute to the costs of such a centre has still to be established. Unfortunately, the
importance of a sound data system is not always fully recognised and this may result
in delays in the signing of the proposed protocols and in their subsequent activation.
3.5 Intervention B.5 – Main System Management
Background. MWRI is involved in a wide range of initiatives and programmes that

have implications for the water balance and the management of the main system
within Egypt. They include:

• Participation in a range of programmes, notably in the context of the Nile Water
Initiative, that will cast light on future Nile flows given possible climate change,
upstream developments and other factors.
• Large-scale horizontal expansion programmes that divert water out of the Nile
Valley for irrigation and other purposes, notably from Lake Nasser to the New
Valley and from the Rosetta and Damietta Branches to new lands bordering the
delta and in Sinai (the former comprising largely unpolluted water lost to the
system before passing the HAD turbines, the latter comprising often polluted
water that may have been diverted repeatedly in its passage down the Nile);
• The on-going review (with Dutch assistance) of the operating rules of the High
Aswan Dam (HAD) with a view to optimising inter-annual, seasonal and short-
term water releases in the light of evolving water demands and requirements;
• The on-going programme (with USAID assistance) introducing measurement

and control of water based on water volumes rather than – as has been
traditional practice in the past – on water levels. All structures between
Directorates have already been modified to provide for volumetric control, and
modification of structures and measuring devices within Directorates and at
lower levels in the system is in progress;
• The adoption of continuous rather than rotational flow for irrigation in the New
Lands and the gradual extension of continuous flow in the Old Lands in the
context of the IIIP/IIIMP and other programmes. Continuous flow provides
greater flexibility to farmers and has other advantages, but requires substantial
modification of the infrastructure in the old lands. From experience with pilot
programmes, it has generally been accepted that continuous flow in
distributaries/branches should be introduced in contiguous blocks wherever
possible and should employ traditional upstream control methods rather than
downstream control (on-demand) approaches;
• Improved real-time information exchange between MALR/farmers and MWRI’s

water managers on cropping schedules and patterns that has resulted in
improved procedures for indenting for supplies and improved scheduling of
water to satisfy crop water requirements. Comparable information exchange
programmes can be envisaged for M&I and other uses.
• Expanded drainage re-use programmes (Intervention B.7), along with improved

regulation and monitoring of unofficial water re-use, M&I use & wastewater
discharge, groundwater, and other water uses and sources.
System-wide and/or regional interventions and options within Egypt have been
evaluated using a variety of analytical models and tools, many of which have been
consolidated, developed and adapted within the context of the NAWQAM
Computational Framework (Intervention B.4).
Rationale for Intervention B.5. Each of the above activities has its own rationale
and each involves or is based on detailed studies and investigations. Some involve
costly physical investments and will only proceed gradually (horizontal expansion,
volumetric control, continuous flow in the old lands, drainage reuse etc.). Others are
more in the nature of management and operational changes that may have a shorter

time horizon. Taken together, they can be expected over time to have a significant
cumulative impact on water availability, water distribution and water operations.
Moreover, horizontal expansion, rising non-agricultural demands and possible

developments upstream of the High Aswan Dam (natural and/or man-made), may
combine together and result in water shortages of a kind that Egypt has so far largely
been spared. This suggests that it would be sensible to evaluate the combined
implications of these various programmes for water operations and management, and
evolve capabilities that anticipate how water operations might respond to shortages in
ways that optimise economic and agricultural development and incomes. In proposing
planning options, consideration would be given to criteria and priorities governing
water allocation in the event of shortages, e.g. between different categories of use,
between different regions and farming systems, and between the old lands and the
new lands.
Intervention B.5 aims to develop a broad conceptual understanding of how each of

these developments relates to each of the others, as a basis for assisting MWRI in
planning future water operations and its responses to possible future water shortages:
• Tranche 1. A broad conceptual study of main system management and water

operations would be initiated.
• Tranche 2. An interim ‘options’ report would be submitted, inter alia evaluating

software and infrastructural implications.
• Tranche 3. A final report would be submitted, recommending revised Main

System management procedures and practices, and incorporating an
implementation plan.
Intervention B.5 would critically depend on the database and computational

capabilities developed under Intervention B.5. It would incorporate the outcomes
from, and in turn reflect back upon, numerous other of the proposed Interventions, for
instance those related to restrictions on the rice area (Intervention B.6), drainage re-
use (Intervention B.7) and water quality management (Intervention B.9).
Consultant requirements. A conceptual study of this kind requires an analytical

approach that is creative and innovative. Such a study would build on options
analysed in the context of each of the individual programmes, as well as on the
analytical work already undertaken by NAWQAM and other staff and consultants. It
would utilise the data and computational capacities established under the NAWQAM
project. Care would be essential to ensure that competent consultants appropriate for
this task are recruited.
Anticipated results and risks. Intervention B.5 would result in an assessment of

options and recommendations for water operational procedures and practices,
reflecting on-going programmes that affect main system management and in
anticipation for possible future water shortages. While signing a contract for such a
study would be straightforward, the study itself would be an unusual and challenging
task. It would require a clear TOR and careful selection of consultants with a good
grasp of the issues involved.

3.6 Intervention B.6 – Limitation of Rice Areas
Background. Agricultural reforms introduced in the late 20th Century freed farmers to
grow crops of their choice but with one major exception – rice. Law 12/1984 specifies
that rice can only be grown under licence, with unlicensed cultivation subject to a fine
of between LE30-100 per feddan. MWRI has sought to restrict the rice area to 1.1 M
feddans. Enforcement has, however, been a major problem and rice is in practice
grown over a significantly larger area, and in 2003 totalled 1.51 M feddans or some
25% of the summer cultivated area (MALR 2004).
Rice’s popularity can be explained primarily by net financial returns that in 2003 were
estimated to be LE 2,110 per feddan, amongst the highest for any field crop and very
much higher than the theoretical penalty (MALR 2004). Average paddy yields in that
year were 4.1 t/fed (10.1 t/ha) or 10.1 t/ha (6.4 t/ha) of milled rice equivalent. This is
remarkably high by world standards, and reflects a secure water supply and
favourable growing conditions (long sunlight hours and high summer temperatures).
In contrast to other staple crops, rice is exported rather than imported, with exports in
recent years accounting for 5 - 15% of output (15% in 2003). Devaluation of the
Egyptian pound has greatly strengthened export incentives.
Paddy is largely confined to the lower and middle delta, although small areas are also
grown in the upper delta, Fayoum and even the New Valley. In the lower delta it fulfils
an important ecological function since flooded paddy fields leach salts and rice is the
only crop that may be satisfactorily cultivated if salinity is high. Elsewhere, the primary
reason for restricting rice cultivation is its notoriously high water requirement. A World
Bank report concluded that returns from rice decline relative to those of other summer
field crops, notably cotton, if price distortions are corrected for and if water is priced at
its estimated opportunity cost (World Bank 2001). Any such estimates are highly
uncertain, for instance it is unclear how far the World Bank adjusts for return flows.
But even if water is available, branch and mesqa canal capacities can be restrictive,
resulting in operational problems and tail-end shortages when head-end farmers
divert excessive amounts for rice. The World Bank further argues that financial
returns to rice are typically variable given the thin international market and the
instability of export prices. Finally, an important political factor is the preference for
food production for domestic consumption rather than utilising Egypt’s scarce land
and water resources for export, even when such exports are financially attractive.
Rationale for Intervention B.6. Intervention B.6 would seek to achieve MWRI’s
policy of limiting the total area under paddy to 1.1 M feddans in stages as follows:
• Tranche 1. The area under paddy would be confined to 1.4 M feddans.
Restrictions on paddy cultivation are consistent with the strategy of the NWMP
(Intervention B.2) and would need to be accounted for in the conceptual analysis of
main system management (Intervention B.5).
Anticipated results and risks. The outcome of Intervention B.6 would be a long-
term area under paddy cultivation of no more than 1.1 M feddans. As has been the
case in the past, restrictions on paddy cultivation are likely to prove politically
controversial and difficult to enforce. Achieving the objectives of Intervention B.6 will
require sustained will by MWRI’s local offices supported by the MALD extension
service. An increase in the penalty would be an option since the current level may be
insufficient to discourage farmers even if it is imposed.
3.7 Intervention B.7 – Drainage Re-use and Non-conventional Sources
Background. The Nile became a closed system as a result of the construction of the
High Aswan Dam (HAD). Reservoir capacity provides multi-year storage and,
although there have been occasional spills to the Toshka depression, minimal
freshwater now goes to the sea and the annual Nile flood has passed into history.
Drainage from irrigation, M&I and other uses returns to the system and re-use is
pervasive. Since the Nile aquifer is shallow and confined within the Valley, surface
and groundwater form a fully inter-connected system and recharge of the aquifer –
unless it is re-used – in due course returns to the Nile. Thus, while groundwater
withdrawals usually improve local control, they result in an equivalent reduction in
surface flows.
Much re-use is informal and arises from repeated withdrawals from the river and/or
groundwater. The first formal drainage reuse projects date back to the 1970s/1980s,
and involve pumping from main drains into main canals. In a number of cases,
however, water quality deteriorated due to M&I pollution and other factors to such an
extent that water users downstream of mixing points were threatened and projects
had to be closed. Re-use has therefore increasingly turned to pumping from smaller
drains into smaller canals, especially in the upper part of the system. This is termed
intermediate reuse and has the aim of retaining water as far as possible within the
irrigation system in areas where drainage water is not too saline. Proposals have
even been made for re-use at the tertiary level (e.g. from minor drains into mesqas)
although flows are much more variable at this level and feasibility has still to be
demonstrated. Finally, there has been an active debate on the direct use of treated
wastewater for forestry and irrigation of non-food crops (even food crops), with
terminal drainage to desert sinks. This approach reduces pollution loads in the main
system, enhancing water quality and facilitating re-use downstream, but its health and
environmental impacts are very controversial.
According to the water balance quoted in the NWRP, official reuse was about 4.5
BCM in 1997, unofficial re-use was about 8.4 BCM, and drainage taken to the sea
amounted to about 14.5 BCM (MWRI 2004). In its water balance projections, the
NWRP anticipates an increase of 5.4 BCM in total drainage re-use by 2017. Ignoring
the potential for augmentation projects upstream of the High Aswan Dam, this
represents by far the largest additional source of water foreseen for the country as a
whole. It implies that only 9.1 BCM will be disposed of to the sea, which approaches
the bare minimum necessary for salinity management in the lower delta.
A reduction in drainage flows to the sea of 5.4 BCM is thus a very ambitious objective
that inter alia depends on major reductions in the levels of pollution and well-
controlled mixing of saline water low down in the system. Careful salinity and pollution
management, enhanced wastewater treatment, and the diversion of low quality
wastewater to irrigation, forestry and/or disposal in desert sinks, could all no doubt
play a part (Intervention B.9). But the use of treated wastewater in irrigation is
actively debated on health grounds; large-scale wastewater treatment is very
expensive; and tackling rural sanitation issues is an extraordinarily difficult task,
dispersed as it is across the whole country (Intervention C.4). Furthermore, it is
planned that up to 4 BCM of high quality water will be diverted direct from Lake

Nasser to the New Valley project. Maintaining the Nile’s dilution capacity, let alone
keeping pace with rising wastewater flows, will thus itself be a formidable challenge.
Rationale for Intervention B.7. The Drainage Research Institute has initiated studies
of some inoperative drainage re-use projects with the aim of understanding the
specific causes and evaluating whether they can be restarted and what this would
involve. Numerous pilot programmes have also been undertaken to test the use of
treated wastewater in forestry and irrigation. Intervention B.7 would build on these
initiatives with a view to developing an overall policy for drainage re-use, both in the
old lands and in newly developed lands based both on drainage re-use and direct use
of treated wastewater. Specifically it would provide for:
• Tranche 1. TOR for drainage re-use review would be prepared and modalities for
its implementation would be agreed.
• Tranche 2. The drainage re-use review would be implemented and a report

would be prepared.
• Tranche 3. A drainage re-use policy, strategy and implementation programme

would be approved.
Quality control standards and procedures would be adopted with a view to optimising
drainage re-use while guarding against adverse effects on the surface and
groundwater system. The policy would incorporate revised legal regulations.
Intervention B.7 would contribute directly to, and be fully incorporated within, the
Water Quality Management Plan to be developed under Intervention B.9. It would
relate less directly to many other Interventions. Master planning in the WS&S sector
(Intervention C.3) would schedule opportunities for use of treated wastewater, and
this and the approach to rural sanitation (Intervention C.4) would have a general
bearing on the pace at which downstream re-use programmes can be envisaged.
Consultant requirements. The modalities for undertaking the review would need to
be agreed by the MWRI, MALR, MHUUC and other concerned agencies, with
responsibility possibly lying with the National Water Commission (Intervention B.1).
Without prejudging the outcome, a logical locus would be the Drainage Research
Institute supported by Consultants as required.
Anticipated results and risks. Intervention B.7 would result in a formal water re-use
policy and revised quality control standards and procedures for implementing re-use
programmes. Drainage re-use raises difficult issues and agreement on standards in
relation to direct use of treated wastewater has proved to be particularly difficult.
Delays in implementing the review and reaching agreement are therefore possible.
Much depends on whether co-operation amongst the various agencies can be
strengthened significantly in the context of the National Water Council (Intervention
B.1) and on progress notably in respect of data co-ordination (Intervention B.4) and
water quality management (Intervention B.9).
3.8 Intervention B.8 – Revision to Water Quality Standards
Background. As discussed above (Section 2.4), and in contrast to the proposed

revisions for Law 12/1982, which have been submitted to Government for approval,
revisions to Law 48/1982 and its executive regulations are under active discussion
and have yet to be finalised. Deficiencies in these regulations have severely
handicapped water quality management. In particular, the water quality standards are
overly strict and ambitious, being based on standards appropriate to a developed
rather than a developing country. Their implementation under present conditions is
unrealistic and the failure to enforce them brings the law into contempt, hampering
compliance and enforcement. “The application of Law 48 needs to become more
flexible; adaptations of the Regulations are necessary to convert (them) into an
effective tool in an overall action plan for pollution control” (MWRI 2004).
Rationale for Intervention B.8. For reasons given above (Section 2.4), it would be
very unfortunate if delays in reaching agreement on the provisions of Laws 48/1982
and Law 4/1995, in particular the reallocation of organisational responsibilities,
unnecessarily delayed adoption of realistic water quality standards. It is thus
recommended that Intervention B.8 should be confined to the adoption of revised
water quality standards scheduled as follows:
• Tranche 1. A revised version of the bylaws would be approved by MWRI and

submitted to the National Water Council.
• Tranche 2. The revised bylaws would be approved by National Water Council

and submitted to GOE.
• Tranche 3. The revised bylaws would be approved by the Peoples’ Assembly.
It might also be desirable to establish milestones relating to revisions to Law 48/1982

along with complementary revisions to Law 4/1995 itself. However, these would have
to be agreed in close coordination with other ministries and agencies, notably EEAA
and MOHP, with which the Consultants have failed to create a working relationship.
At this stage, these possibilities have therefore been excluded from Component B.
Realistic water quality standards would build on an improved system of water quality
data collection and dissemination being addressed under Intervention B.4; would be
essential for, and complement, the preparation of a drainage re-use policy under
Intervention B.7 and co-ordinated action in promoting water quality priorities under
Intervention B.9; and provide the critical foundation for WS&S master planning
(Intervention C.3) and preparation of a rural sanitation strategy (Intervention C.4).
Anticipated results and risks. The primary outcome of Intervention B.8 would be
the adoption of regulations that established realistic water quality standards
appropriate to current circumstances in Egypt. Delays are conceivable both in
agreeing on appropriate standards by the water professionals and in their adoption by
the Peoples’ Assembly. These risks would be minimised by disassociating revisions
to the regulations from modifications to the law itself. While the subsequent
monitoring and enforcement of the standards will continue to represent a substantial
challenge, they should be much easier to enforce than existing standards and would
thus much facilitate the effective control of water quality, besides strengthening
morale in the agencies concerned and supporting their effectiveness.
3.9 Intervention B.9 – Water Quality Management
Background. Poor and declining water quality not only impacts adversely on health
and environmental conditions but also in turn reduces the value of water for further
human use downstream. It is affected by a vast range of human activities. Of
particular note are direct or partially treated discharge of domestic and livestock
wastes; run-off and solid waste generated by human settlements; industrial return
flows and pollution; fertiliser and chemical run-off from agriculture and fisheries; and
fuel and other wastes generated by river transport. Addressing the issue of water
quality thus requires action by numerous ministries, agencies and public and private
entities, each of which has its on-going policies and programmes, and each of which
is affected by numerous political, social and economic criteria set both internally
within each sector and variously by the regulatory agencies for health, water and the
environment. The failure to co-ordinate these different programmes has resulted in
mismatches in terms of objective ambient water quality priorities in the various water
bodies, and to the squandering of substantial economic resources and effort.
Rationale for Intervention B.9. The NAWQAM project (Intervention B.5) has greatly
expanded and consolidated the monitoring and reporting of ambient water quality
data, and provides a much-strengthened basis for understanding water quality issues
and establishing future priorities. MWRI has also established a Water Quality Unit in
the Minister’s office, supported by the Dutch Government, to provide a focus for
addressing water quality issues. If, in the light of the improved database and
strengthened institutional arrangements, agreement can also be reached on revised
regulations under Law 48/1982 (Intervention B.8), then the necessary pre-conditions
would have been established for reaching agreement on revised priorities in the
different sub-sectors. Intervention B.9 would seek to promote a systematic and
phased agreement on revised water quality priorities:
• Tranche 1. A working committee on water quality would be appointed, with a

technical secretariat provided by the MWRI Water Quality Unit and a strategic
vision for Water Quality Management would be prepared.
• Tranche 2. Protocols would be drafted and signed between MWRI and each of
the other ministries/agencies, setting out water quality objectives, criteria and
priorities for the sub-sector concerned.
• Tranche 3. The signed Protocols would be incorporated in a National Water

Quality Management Plan and in the National Five-Year Plan, and systems for
enhanced water quality management would be further deepened and enhanced.
Intervention B.9 is central to ensuring co-ordinated action in addressing water quality

issues. The proposed protocols would directly complement those proposed in
connection with data monitoring and reporting (Intervention B.4) and would respond
to the Drainage Re-use Policy proposed under Intervention B.7. The Water Quality
Management Plan would be fully integrated in subsequent reiterations of the National
Water Resources Plan (NWRP) and the protocols agreed with MWRI would need to
be fully consistent with, and be reflected in, the plans and programmes of all other
concerned ministries and agencies.
Consultant requirements. The Water Quality Unit in the MWRI would play a key role
in implementing Intervention B.9. The unit has received continuing support from the
Dutch government and, subject to MWRI’s own assessment, sustained future support
– from the Dutch or another source – would appear to be a high priority. Depending
on specific circumstance, consultants may also be involved in supporting each of the
other participating agencies in their discussions with MWRI, and in establishing their
own programmes and priorities, e.g. for the WS&S sub-sector in the context of Master
Planning studies (Intervention C.3).

Anticipated results and risks. Intervention B.9 would result in signed protocols
between WMRI and each of the significant agencies impacting on water quality,
consolidated in a National Water Quality Management plan.
Negotiations on the protocols may prove controversial and would need to be given
sustained support by the leadership of MWRI and other ministries. There is
nevertheless a risk that agreement in at least a few cases may be delayed. The
National Water Council would be expected to direct this task and monitor progress,
and would be the logical body to approve the National Water Quality Management
plan once it has been completed.

4 Component C – Water Supply and Sanitation (WS&S)
4.1 Intervention C.1 – WS&S Policy and Institutional Reform
Background. A supreme Inter-Ministerial Policy Committee (IPC) was included in

the draft 2000 PD (Section 2.5). as a mechanism for co-ordinating the WS&S sub-
sector, and for directing, monitoring and evaluating institutional and operational
performance. Given the piece-meal nature of the reforms, it is important that some
coordinating mechanisms be identified and introduced. In due course, and once the
results of the recent reforms are better known, the IPC should be in a good position to
judge what further reforms are desirable.
Rationale for Intervention C.1. Intervention C.1 addresses these weaknesses

without pre-judging the outcome of the reforms. It is suggested that it might be
phased as follows:
• Tranche 1. An Inter-Ministerial Policy Committee (IPC), chaired by the Minister

of Housing and with members drawn from all relevant agencies both within
MHUUC and in other Ministries, would be established with broad responsibilities
for co-ordinating policy, planning and institutional reform in the WS&S sector.
• Tranche 2. The IPC would approve an Interim Report: (i) setting out its working
modalities; (ii) scheduling its overall activities; and (iii) approving an approach to
monitoring and evaluating the institutional reform programme.
• Tranche 3. The IPC would reach conclusions on institutional performance and

reform of the sub-sector and submit a revised presidential decree incorporating
and consolidating its institutional proposals along the lines of the 2000 draft.
Depending on the phasing of the EU programme, it might be possible to advance

both the establishment of the IPC proposed for Tranche 1 and the Report proposed
for Tranche 2. But even if this proves feasible, preparation of the draft presidential
decree should remain scheduled for Tranche 3 since a three-year period would seem
to be the minimum required to evaluate the performance of the recent reforms.
The IPC would have broad responsibilities for co-ordinating the WS&S sub-sector
and, to varying degrees, would be concerned with – and would monitor – the full
range of Interventions incorporated in Component C. It would also have direct
responsibility for WS&S master planning (Intervention C.3). Moreover, there are
inter-connections and complementarities with some of the Interventions in
Components A and Component B, notably the PER/PBB process (Intervention A.3),
decentralisation of water services (Intervention A.4), the National Water Commission
(Intervention B.1) and water quality management (Intervention B.9).
Consultant requirements. The IPC should determine the local and foreign
consultants – if any – that they require in order to deliver the above programme.
During the first two years or so, it is anticipated that consultants funded by USAID will
continue to support the Holding Company and Regulatory Agency. Subject to their
TOR and the agreement of USAID, their expertise could be employed as appropriate
to assist the IPC, at least until such time as their contract expired.

Anticipated outcomes and risks. The main outcomes of this Intervention would be
a standing Inter-Ministerial Committee (IPC) and a draft Presidential Decree. The
draft PD would incorporate proposals – if needed – for the reorganisation and
consolidation of institutional arrangements in the WS&S sub-sector and would have
been approved by the IPC for onward transmission to GOE.
Creation of the IPC would be an administrative decision that could in principle be

readily achieved and expedited. Membership of the IPC is perhaps self-evident
although assigning responsibilities for the technical secretariat may prove a more
contentious issue. Consolidating the full range of responsibilities within MHUUC risks
over-centralisation in apparent contradiction to broader decentralisation objectives. It
might also tend to weaken the voice of IPC members from other ministries and
entities. It is important that these dangers be recognised and an important indication
of how well they are being resisted will be contained in the draft presidential decree
prepared for Tranche 3.
4.2 Intervention C.2 – The Regulatory Agency
Background. Regulation by local Government has proved unsatisfactory in Egypt

mainly because of the centralised nature of the government and its financial systems.
Operating deficits are funded by the national budget rather than out of local taxation
and, though PEAs/GAs are in principle self-financing autonomous local entities, in
practice Governors have had little direct stake in operational or financial performance.
While they may press for new facilities, they are similarly unaccountable for planning,
construction and commissioning. Disconnects between expansion, operations and
regulation have contributed to generally poor operating and financial performance and
to some of the lowest water tariffs in the world. Governors and local councils have
resisted tariff increases and staff redundancies, and have transferred many unpopular
decisions to the national Government. The Ministry of Finance has of course a direct
stake in financial outturns but has been in no position to monitor operations, while
withholding subsidies – its only real sanction – is in effect politically impracticable.
Presidential Decree 136/2004 transforms regulation by creating a national Regulatory

Agency in place of regulation by local government. This agency is mandated to
balance the interests of water consumers and the general public against the need for
WS&S companies and other utilities to be efficient and financially self-sufficient. An
active regulatory approach is envisaged reflecting cost and efficiency targets set for
each WS&S entity based on techniques such as benchmarking and comparator
studies. The Agency will submit recommendations through its Board to the Minister of
Housing who “shall submit to the Cabinet of Ministers the Agency’s recommendations
and propositions that require issuing decisions from a higher authority…” (Art13).
Little progress has as yet been made in implementing PD 136/2005, although a

building has been identified and it is understood that staff are being identified.
Rationale for Intervention C.2. It is too early to judge the success or otherwise the
reforms introduced by Presidential Decree 136/2004, since the Regulatory Agency
has still to be made effective. With this in mind, the following schedule is proposed:
• Tranche 1. The Regulatory Agency would be established; senior staff would be

appointed; and the Board would adopt a formal implementation programme
setting out definite milestones for operationalising the Agency.

• Tranche 2. The milestones identified for Tranche 2 would be implemented and
monitored according to a time-bound programme.
• Tranche 3. Progress on milestones identified for Tranche 3 would be

implemented, to include tariff recommendations for each Affiliate Company.
Progress and performance of the Regulatory Agency would be monitored and

evaluated by the IPC along with other institutional changes under Intervention C.1,
leading perhaps to proposals for co-ordinated modifications to the institutional
framework as a whole. Co-ordination with the restructuring of the Holding Company
and its affiliates (Intervention C.5) and the review and revision of the water tariff
structures (Intervention C.6) would be essential.
Consultant requirements. It is envisaged that the USAID-funded consultant to the

Holding Company would also provide advice and support to the Regulatory Agency.
In the short-to-medium term this has the advantage of economies of scale and should
help ensure co-ordination and consistency. It may, however, be desirable to
supplement this consultancy with specialist regulatory advice, and in the longer-term
to recruit an independent consultant to support the Regulatory Agency.
Anticipated outcomes and risks. The results of Intervention C.2 would ideally be a
functioning Regulatory Agency as envisaged by PD 136/2004 and recommendations
for revised tariff structures and tariff levels for each affiliate companies as required at
the time of Tranche 3. This approach nevertheless carries certain risks:
• The Regulatory Agency and its Board will not have the power to determine tariffs
an other sensitive questions, but will submit their recommendations through the
Minister of Housing – to whom they are accountable – for GOE decision. This
may compromise the independence and authority of the Regulatory Agency.
• Centralised regulation is mirrored by the centralisation of operations under the

Holding Company and of investment and planning under NOPWASD, all of which
report to the Minister of Housing. This perhaps runs the danger of compromising
decentralisation objectives and in particular the creation of financially-
autonomous, locally-based utilities supplying WS&S services to their customers.
• Few countries have a national regulator of the type proposed under PD 136/2004
and establishing such an agency anywhere would be a formidable challenge. It
will be in competition with the Holding Company for skills and staff that are
scarce in Egypt, and there are risks associated with its potential competence and
effectiveness.
• Awareness of the special challenges of designing and establishing an economic

regulatory body are poorly understood and often underestimated and the risks of
getting it wrong are high. Those responsible for innovating an Egyptian water
regulatory body will need the best international advice as well as access the most
expert local knowledge on what is institutionally and culturally compatible for
Egypt. It will not be possible to import a regulatory system from elsewhere
Extended discussions led to the decision to establish the Regulatory Agency and
judging how serious these risks are would be premature. It is recommended
therefore that its performance should be closely monitored and evaluated in the
context of institutional arrangements for the sub-sector as a whole (Intervention C.1).
In the light of the conclusions to this exercise, further modifications and reforms as to
how the WS&S sub-sector may be organised can be considered in the medium-term.
4.3 Intervention C.3 – Master Planning in the WS&S Sub-sector
Background. On its creation under PD 197/1981, NOPWASD was assigned primary

responsibility for WS&S planning. In the words of the above-cited draft PD (MHUUC
2000), NOPWASD has the mandate to:
• Prepare, within the framework of the state development plans, strategic plans
and development programs at the national level for the water and wastewater
sector… (and) supervise implementation of the plans and programmes…
• Set principles and guidelines for the preparation of the sector plans at
governorate level…(and) for the selection of projects…
Soon after it was established, NOPWASD employed consultants to prepare a national

WS&S Master Plan and this has to a declining extent guided its choice of projects
ever since. Though the national plan has never been updated, master plans have
been prepared for some Governorates mostly with USAID assistance (e.g. Harza
2000, CDM 2000). In principle, but to an unclear extent, NOPWASD has guided such
Governorate plans. Planning as a whole has, however, been fragmented and has
failed to keep pace with emerging priorities. Planning and implementation for rural
sanitation has been particularly weak (Intervention C.4).
In contrast to its role in planning, NOPWASD is directly involved in particular projects

only when it is the channel for budgetary funds. In practice, project selection has often
reflected political priorities rather than planning. This is particularly so in
Governorates where WS&S services are provided departmentally rather than by
affiliates of HCDW&S (i.e. what were previously PEAs or GAs).
Rationale for Intervention C.3. Addressing deficiencies in WS&S planning is a high

priority. This is so not just because planning and project implementation have often
been unsatisfactory, but also because PEAs/GAs and other local interests have been
insufficiently involved in the selection, implementation and commissioning of new
projects. Moreover, there has been a widespread failure to incorporate water quality
criteria adequately in the selection of new projects. MWRI has greatly strengthened
the monitoring of ambient water quality and has a much better understanding of what
this implies for national priorities inter alia in the WS&S sub-sector (Intervention B.4).
Given the large investments anticipated in WS&S, it is critical that these deficiencies
be corrected. The IPC is the appropriate mechanism for directing Master Planning in
the sector and should help ensure full participation by MWRI, the Holding Company
and its affiliates, and other relevant ministries and agencies. It is suggested that
Intervention C.3 should be implemented in two main stages. First, the IPC would
evaluate the status of planning in the sub-sector, approve TOR and modalities for
preparing a revised National WS&S Master Plan, and appoint consultants. Second,
the Master Plan would be prepared. The Intervention might be phased as follows:
• Tranche 1. The Inter-Ministerial Policy Committee (IPC) would determine the

modalities for carrying out a review of the status of master planning in the WS&S
sub-sector, and assign responsibilities as appropriate.

• Tranche 2. The IPC would submit a report on the status of master planning in the
WS&S sub-sector, setting out a framework for completing a consolidated master
planning study, incorporating TOR, and appoint consultants.
• Tranche 3. A consolidated Master Planning Study for the WS&S Sub-sector

would be completed, and a permanent monitoring structure created.
It may be possible to advance the measures suggested for Tranches 1 and 2, giving
more time for Master Planning. It is, however, unlikely that the Master Plan itself can
be completed in significantly less than three years.
Two other timing aspects need to be considered. First, if investment decisions are
decentralised in 2006/07 (Intervention A.4), then this needs to be incorporated in the
TOR for the Master Plan. Second, the Sixth Five-Year Plan begins in July 2007, prior
to the earliest date for submission of the Master Plan. This is unfortunate since
allocations under the Five-Year Plan should reflect its priorities. This suggests that
the Five-Year Plan should be flexible so that Master Plan priorities can be
subsequently incorporated, and that the Planning Ministry should be intimately
involved through the IPC in the implementation of the Master Plan itself.
It is suggested that the Master Plan should be directed by the IPC (Intervention C.1).
It will recommend an investment programme for the WS&S sector and as such has
implications in the longer-term for most of the other objectives set for Component C.
However, it will only come available towards the end of the EU-supported
programme, which will be too late to influence the terms of the other elements, or to
be reflected in the specific outcomes of the PER/PBB process (Intervention A.3).
Consultant requirements. Consultants will be required for the Master Planning

Study and their appointment is proposed as a Tranche 2 measure. The IPC should
decide what combination of local or foreign consultants is desirable and whether
Technical Assistance is needed and, if so, from which source. It may also be
desirable to recruit consultants to help in the initial review of the prevailing status of
master planning in the sub-sector. If so, the IPC should decide whether these should
be the same as for the Tranche 3 study or whether the consultancy effort should be
divided in two, corresponding to the two main stages proposed.
Anticipated outcomes and risks. The principal outcome will be a revised WS&S
Master Plan that reflects agreed economic, social and environmental criteria. So long
as competent consultants are recruited, plan preparation should be relatively straight-
forward. The main risk is that in practice the Master Plan fails to guide investments in
the sub-sector over the medium and longer term due to political and related
pressures. This risk could be minimised be creating a permanent and effective
monitoring structure governing its subsequent implementation and periodic revision,
and by sustained support for effective planning by the IPC and other entities.
4.4 Intervention C.4 – Rural Sanitation
Background. Rural sanitation is a service, which generally arrives late in the socio-
economic development of an economy. Sanitation services are expensive to install
and maintain, significantly more expensive than water services.
Egypt’s position is special in a number of ways. First, its rural population is very
dense. Secondly its rural population is rising, and is unusually maintaining its share of

a larger national population, because people can reside in the countryside and easily
reach work in urban areas. Egypt’s rural area is a vast peri-urban world where the
pollution of rural water seriously impacts the whole society and economy. Thirdly,
Egypt has a relatively high level of water services in its rural areas by the standards of
most developing countries with the consequence that the achievement of MDGs
regarding water pollution is now the most urgent issue in terms of health and social
criteria.
There is widespread recognition of the urgency of the rural water sanitation problem.
It is being addressed by government bodies, by community development activities
and by local NGOs. Bi-lateral and multi-lateral international agencies and international
NGOs have also addressed rural water sanitation problems. The provision of rural
sanitation is an element of the most important water sector issue - the decline in
water quality generally. The initiative of the World Bank to bring some coordination to
the programmes addressing rural water sanitation is welcome and merits support by
the EU reform programme.
A primary strategy advocated by the World Bank sector study is to approach the
provision of rural sanitation within a hydrological framework, involving the water user
associations being created at mesqa, branch canal and district levels working in close
cooperation with local government, community development organisations, NGOs
and other entities. Such an approach would seek comprehensive coverage at local
level, compatible with the provision of other water services (notably irrigation and
drainage). Not only does this facilitate effective co-ordination but it would also provide
a context within which realistic water quality standards could be reflected more
systematically (Component B.8) and the contribution to satisfying ambient water
quality priorities could be met (Component B.9).
Given the scarcity of resources, it is critical that low cost technologies are employed
wherever feasible, so that discharges of untreated wastewater are reduced at realistic
cost with a view specifically to improving human health and environmental conditions.
Rationale for Intervention C.4. Given this background, Intervention C.4 would seek
to support the following:
• Tranche 1. Approval of the World Bank-supported Rural Sanitation Sector Study,

together with the modalities for its effective implementation.
• Tranche 2. Finalisation of a Rural Sanitation strategy building on the World

Bank-supported Sector Study.
• Tranche 3. Adopt and put in motion a Rural Sanitation Strategy, together with a
permanent monitoring structure.
Consultant requirements. The recruitment of consultants would be defined within

the context of the World Bank study. They are likely to be drawn from a range of
different local and international sources.
Anticipated outcomes and risks. The approach advocated under Component C.4
should result in a more consistent and coordinated strategy for addressing Egypt’s
serious rural sanitation problems. Over time this should contribute to a steady
improvement in ambient water quality.

Egypt’s diverse rural sanitation programmes require additional funding as well as
increased levels of supervision, monitoring and realistic regulation. The associated
activities are, and will continue to be, fragmented and interventions are by definition
decentralised. Local financial and social resources can be key to speeding up the
coverage of rural sanitation services. Awareness raising of the need for sanitation can
be difficult as the hydrological processes associated with rural pollution can be hidden
and complex. The managerial and leadership challenges are enormous and
practitioners and professionals will have to be flexible and imaginative.
Monitoring success will not be easy as many factors contribute to ill-health and to
deteriorating environmental conditions. While monitoring would be more readily
undertaken in the context of the hydrological approach advocated under the World
Bank study, progress on the necessary institutional reforms will be gradual and will
themselves encounter implementation constraints. Progress in the absence of formal
user organisations will depend more on the effectiveness of local government in co-
ordinating the activities of the numerous agencies involved.
The risks associated with this approach are relatively high. But the risks of not getting
the innovation of rural sanitation on a rising trajectory are so high that some failure is
acceptable.
4.5 Intervention C.5 – Utility Restructuring
Background. Under PD 135/2004, the Holding Company took ownership of seven

affiliate companies that had previously been Public Economic Authorities (PEAs), four
that had previously been General Authorities (GAs), and three that were already
public companies. They comprise:
• Eight companies responsible for water supply and sanitation respectively in

Aswan, Minia, Beni Sweif, Fayoum, Dakahleya, Gharbeya, Sharkeya (all
previously PEAs) and Kafr El Sheikh (previously a public company).
• Four companies confined to water supply, respectively in Cairo, Alexandria

(previously GAs), Beheira and Damietta (previously public companies); and
• Two companies confined to sanitation, respectively in Cairo and Alexandria

(previously both GAs).
These companies have highly variable financial strengths, organisational structures,

operating practices and planning capabilities. They range from effective entities with a
proven record of covering O&M costs and implementing and financing at least a part
of their investment programme, to others that have been heavily dependent on
budgetary subsidies both to cover their O&M costs and to fund and implement
investment. Some have received extensive technical and financial assistance from
donors; others have received little in the way of such assistance.
Law 203/1991 frees companies that were previously Public Economic Authorities or
General Authorities from numerous public sector restrictions inter alia including those
related to staffing, procurement and expenditure practices. It also allows them to
undertake profit-making businesses in areas other than their primary responsibility for
WS&S services. It is understood that various opportunities are being contemplated.
So long as public investment funds are channelled through NOPWASD and CWO,
the companies will be required to provide the assurances deemed necessary by
these entities. Most affiliate companies will also continue to depend on NOPWASD
for planning, design, construction and implementation of major investment projects.
Affiliates of the Holding company serve some 60-70% of the population. Elsewhere
WS&S services are provided by entities ranging from public departments and
development agencies in new urban communities, to local and NGO entities in rural
and slum areas, and private companies in a few isolated tourist locations. Under the
draft decree cited above (MHUUC 2000), Public Economic Authorities were to be
formed in nine further Governorates (Giza, Qaljubiya, Minufiya, Qena, Sohag, Luxor,
Red Sea, North Sinai and South Sinai). Now that the Holding Company has been
established, over time public departments in these Governorates are to be gradually
transformed into affiliate companies. A similar development may occur if and when
the new urban communities are transferred to the regular government administration.
Co-ordination with local and NGO programmes – notably in slums and rural areas –
will also be required.
Rationale for Intervention C.5. The Holding Company is addressing the full range of
affiliate company issues through a process of ‘active management’. For instance, it is:
building up a full database; seeking clarification of affiliate company performance;
developing comparator indicators and benchmarks; and establishing targets with the
aim of improving operational and financial performance over time. Intervention C.5
would augment the Holding Company’s approach through the recruitment of an
international firm with experience in the provision of commercial water services in
both developed and developing countries and the restructuring or at least one pilot
company:
• Tranche 1. An international firm, with appropriate experience in the provision of

commercial water services, would be recruited to advise the Holding Company.
• Tranche 2. Based on proposals from the international advisers, the Holding

Company would approve the restructuring of one – or perhaps two – pilot affiliate
companies based on international best practice.
• Tranche 3. The pilot affiliate would be fully restructured and a report would be
submitted suggesting a future implementation programme to extend international
best practice to other affiliate companies.
The restructuring of one or two affiliate companies would be undertaken within the
framework established by the Holding Company with regard to improvements in the
operational and financial performance of the affiliates as a whole, and of the
extension of the affiliate model to Governorates with departmental provision of WS&S
services. The pilot project(s) would thus need to be set within the context of the
overall institutional review (Intervention C.1) and respond to and be reflected in the
general objectives set e.g. for utility financial performance (Intervention C.6), tariffs
(Intervention C.7) and staffing (Intervention C.8).
Consultant requirements. Intervention C.5 requires recruitment of an international

firm with experience of the provision of commercial water services in both developed
and developing countries. Technical assistance would be essential, funded probably
by a bilateral donor that is the home country of a relevant firm with such experience.
Anticipated results and risks. Intervention C.5 should result in the restructuring of
one or perhaps two affiliate companies based on international best practice, together
with a programme for extending this pilot experience to other affiliate companies.
It would be relatively straightforward to recruit advisers. However, it is possible that
implementation of the structural reforms would encounter resistance e.g. from the
existing staff and/or the local government. Such risks could be minimised by the
careful selection of an appropriate company or companies; by the full participation of
local organisations and staff in the restructuring process; and by appropriate
redundancy, training and related programmes (Intervention C.8).
4.6 Intervention C.6 – Utility Financial Performance
Background. Subsidies to WS&S operating utilities for recurrent O&M expenditures,

when required, have been funded from the national budget, with the level of subsidy
clarified ex-post after outstanding debits and credits between public sector entities
have been accounted for in a year-end reconciliation. Government regulations also
require provision for depreciation allowances, though in practice these have seldom
been provided and are generally ignored in the budget reconciliation. With respect to
investment, budgetary funds have been channelled via NOPWASD and CWO and –
to a lesser extent – directly to some PEAs/GAs. Technical and financial assistance is
often provided on grant terms but in a few cases debt obligations have been incurred
by the utilities concerned. A decision has recently been taken to write-off these debts
(it is understood by incorporating them within the National Debt), so that affiliate debt
liabilities are no longer an issue.
Under Law 203/1991, public companies do not legally qualify for budgetary transfers.
In a formal sense, therefore, O&M subsidies are due to cease by the end of the
current financial year (30 June 2005). It is nonetheless recognised that some –
perhaps most – affiliate companies will require continuing subsidies if unsustainable
bank overdrafts are to be avoided. Intensive discussions are in progress on how
these subsidies can be legally provided. One option would be in the context of the
“New Social Contract” that is under consideration by the Government. The outcome
is unclear but it can be assumed that a mechanism for budgeting “social subsidies” –
perhaps on a declining basis – will be incorporated in the budgetary process.
Rationale for Intervention C.6. The Holding Company anticipates that subsidies will
be phased out in three stages. Under Stage 1, O&M subsidies would be eliminated
(other than “social subsidies”). Under Stage 2, full provision would be for depreciation
allowances based on sound accountancy practice. Finally, under Stage 3, investment
subsidies would be eliminated, with the affiliates funding all expansion, modernisation
and rehabilitation projects from their own resources.
Such an overall objective is very ambitious and Stage 3 in particular will take many
years to achieve, if it can in practice ever be accomplished. Intervention C.6 would
initiate this process with the aim of completing Stage 1 by the end of the EU
programme.
• Tranche 1. Approval of a three-year financial plan by the HCDW&S Board

indicating clearly how O&M subsidies will be phased out for each of the affiliate
companies, subject to any agreed remaining “social subsidies” clearly specified
under the “New Social Contract”.
• Tranche 2. Achievement of at least 50% of the reduction in O&M subsidies

specified in the Financial Plan in respect of each of the affiliate companies.

• Tranche 3. Achievement of 100% of the reduction in O&M subsidies specified in
the Financial Plan in respect of each of the affiliate companies, with all remaining
O&M subsidies clearly budgeted in the context of the “New Social Contract”.
The objectives set under Intervention C.6 could be achieved in a combination of

different ways including: improved technical efficiency (e.g. lower unaccounted-for-
water), increased bill collection, higher tariffs and/or lower costs. The strategy
adopted should reflect local conditions and priorities, and is a matter for the individual
companies concerned working closely with the management of the Holding Company.
Improvements in the financial performance of the affiliate companies is central to the

reform programme (Intervention C.1) and will be a primary objective of the Regulatory
Agency (Intervention C.2). Specific additional emphasis is given to tariffs
(Interventions C.7) and staffing (Intervention C.8) given that the critical importance of
these two issues. Improvements in technical and commercial performance will also be
an important consideration of the restructuring proposals (Intervention C.5).
Consultant requirements. It is anticipated that USAID will continue to fund technical

assistance to the Holding Company. No additional consultancy support is envisaged
although the international firm recruited in the context of Intervention C.5 would no
doubt contribute technical advice and provide an important basis for addressing
issues of financial performance over the longer term.
Anticipated results and risks. Intervention C.6 would lead to a reduction in O&M
transfers, relieving the burden on the national budget subject to any remaining O&M
subsidies under the “New Social Contract”. The objective would be to strengthen the
financial performance of the affiliates as a first step towards full financial autonomy.
The failure to address poor financial performance is both long-standing and central to
the reform programme. At its heart, the failure reflects lack of political will, noticeably
in respect of tariff setting. There are obvious risks that this will not change in future.
Much depends on the resolve of the financial authorities and the managements of the
Holding Company and its affiliates. The risk can also be reduced by effective public
awareness campaigns (Interventions B.3 and C.7).
4.7 Intervention C.7 – WS&S Tariffs
Background. Water tariffs in Egypt are amongst the lowest in the world (IWA 2004).
This is perhaps the single most important factor contributing to the poor financial
performance of the sub-sector. Without under-stating the vital contribution of other
measures, it is proposed that tariffs be given particular attention. Four aspects can be
highlighted: (i) tariff structures, (ii) tariff levels, (iii) the provisions for sanitation, and
(iv) publicity and public awareness.
Tariffs have in principle been regulated by the concerned Governor and local council.
In practice they have also been subject to limits at national level. So as to minimise
impacts on the poorer sections of the community, rising block tariff systems have
been widely adopted, with a very low tariff applied to the first 30 cubic metres (e.g.
20-25 piastres/cubic metre) and higher rates on additional use. Tariffs to commercial
and industrial units can also be very much higher than for domestic use. In an effort to
raise tariffs without generating adverse publicity, several authorities and companies
(e.g. that in Alexandria) have increased differentials, sometimes substantially, and
tariff structures now vary greatly across the different companies. Rising block tariffs

are thought to be more equitable, although this is less evidently so if water is
unmetered and charges are based indirectly on housing characteristics.
Of particular note is the maximum surcharge of 35% on the water tariff to cover the
costs of sanitation services. This surcharge is reported to be independent of the
proportion of population served or the type of treatment provided. While this may not
be universally the case, the surcharge for sanitation services is in general grossly
deficient given that, depending on the type of treatment, sanitation typically costs
more and perhaps much more per unit of water treated than does water supply. The
low surcharge penalises not only companies in Cairo and Alexandria that are
confined to sanitation but also those companies that have increased their sanitation
coverage. Partly as a result, there has been resistance to accepting the handover of
new plants, and some such plants are no longer in operation.
Perhaps more serious, a low sanitation surcharge discriminates greatly against those
that do not have access to wastewater treatment services. Those that dispose of their
wastes in a local drain or canal may not of course incur direct financial costs though
they are subject to the serious indirect health and environmental costs associated
with such practices. But those that seek a private alternative typically pay orders of
magnitude more than those with access to a public service. Recent studies by the
consultants for the Middle Egypt Utilities Institutional Strengthening Project (personal
communication) suggest that septic tank disposal can cost as much as LE50 every
three months. In areas with high watertables, this cost may be incurred each month.
This compares with a typical annual bill of perhaps LE 5-10 for those served by a
public wastewater connection who are often relatively wealthy. Comparable relative
costs have been recorded between water tariffs and tanker charges in countries
where access by the poor to public supplies is restricted. This is less of an issue in
Egypt since most are served by a public supply or have easy access to water.
A low sanitation cost therefore penalises the poor and benefits the rich. This fact
should be hammered home in publicity campaigns addressed in the first instance to
parliamentarians and the media, and then more widely to the general public
(Intervention A.3). While it is likely to remain politically difficult to raise the basic
water charge, it may be possible to raise the sanitation surcharge if this can be clearly
disassociated from the water tariff in the public’s mind.
Rationale for Intervention C.7. Intervention C.7 provides for the technical analysis of
tariff structures, specific commitments in respect of the sanitation surcharge and
targeted publicity programmes by the WS&S holding company and affiliates.
Water tariffs are no doubt on balance still generally much too low, and decisions have
rightly been taken to increase them (e.g. in Cairo). But rates vary greatly and
competent analysis of tariff structures is a precondition for coherent revision of water
supply tariffs. Moreover, the role of tariff increases relative to other measures aiming
to improve financial performance varies from company to company and perhaps
would be best left to the Holding Company and its affiliates to decide, on a case-by-
case basis (Intervention C.6). Not only would it be confusing to prejudge the outcome
of this proposed review, as the information readily available is incomplete as a basis
for reasonable judgements. In contrast the discrepancy between the sanitation
surcharge and the costs of providing sanitation services acts as such a severe
disincentive to tackling this critical issue that it would be amiss to forego any
opportunity to promote an early increase in the surcharge.
It is proposed therefore that Component C.7 should comprise the following:

• Tranche 1. Employment of a consultant to review water tariff structures; an
increase in the sanitation surcharge to a level at least equivalent to 50% of the
prevailing water tariff; and publicity campaigns targeting parliamentarians, the
media, schools and the general public on the justification for this increase.
• Tranche 2. Receipt of a report evaluating alternative tariff structures; a further

increase in the sanitation surcharge to at least 65% of the water tariff; and
intensified publicity campaigns.
• Tranche 3. Approval of a programme for revising tariff levels and tariff structures;
a further increase in the sanitation surcharge to at least 80% of the water tariff
subject to the outcome of the study; and further intensified publicity campaigns.
The increases in the sanitation surcharge are in a sense arbitrary and need further
review. The characteristics of the surcharge would moreover fall within the TOR of
the proposed tariff structure study. The Tranche 3 increase is therefore made
conditional on the outcome of that study and on other decisions relating to tariffs
levels and structures.
In the longer-term, the Regulatory Agency will have responsibility for proposing tariff
revisions and it is anticipated that the first such recommendations would be submitted
by Tranche 3 (Intervention C.2). The proposed tariff study would be scheduled to
assist the Regulatory Agency. In the meantime, and until such time as the Regulatory
Agency can perform its assigned role effectively, the study would also contribute to
initiatives by the Holding Company in its role of restructuring its affiliate companies
(Intervention C.5) and strengthening their operational and financial performance
(Intervention C.6). The Holding Company and its affiliates would also be responsible
for the targeted public awareness campaign, which should be closely aligned with the
broader public awareness campaigns proposed under Intervention B.3.
Consultant requirements. The tariff study would be carried out by an appropriate

consultant, if necessary funded by technical assistance.
Anticipated results and risks. The outcome of Intervention C.7 will be a considered
assessment of tariffs and tariff structures, and increases in the sanitation surcharge.
The major risk is that these increases will encounter adverse publicity and political
resistance and prove difficult for the Government to impose. The targeted public
awareness campaign would aim to minimise this danger.
4.8 Intervention C.8 – Staffing and Training Issues
Background. The commitment of the Holding Company and its affiliates to operate
commercially must be supported by measures to reduce costs if these enterprises are
to be successfully corporatised. Easily the largest single cost item is staff costs, which
typically account for 60-70% of the total though in a few more successful affiliates this
has been contained to as low as 50%. While achievement of Component C.6 would
almost certainly require action on staff costs along with other aspects needed to
achieve financial autonomy, their importance and particular characteristics merit the
inclusion of a separate intervention designed to address staffing issues directly.
The employment practices of the past have increased the costs of most water
managing entities. The social purpose of Government and more specifically of
Governors at regional level was often primarily to reduce unemployment. Not only has
this in many instances led to over-manning of the utilities but the qualifications and
skills of the staff employed have fallen well short of, and differ from, those required to
operate and sustain a commercially viable corporate entity. Any approach to staffing
issues must thus operate at two levels: training and staff levels.
Training can be viewed both over the short term and for the long-term. Short-term
training programmes need to address the immediate re-training of staff of the affiliate
companies to fulfil the tasks envisaged over the next few years, e.g. so as to achieve
the objectives set under the EU Reform Programme. At the same time, however, it is
essential to initiate the creation of the training infrastructure needed to sustain the
sub-sector in the long-term. It is tentatively envisaged that this might comprise:
• At graduate level, a formal course for water engineers (graduates) at one or

more Universities, issuing an appropriate graduate certification for water and
wastewater engineering that comprises both a sound theoretical base and an
orientation to the issues facing Egypt; and
• At technician level, the establishment of an Institute (Technical School) to teach

and train technicians and operators of water and wastewater facilities and issue
an official certificate after examination. Courses might last 2-4 years. The
certificates would ultimately act as a licence for operators to work in water and
wastewater and would require regular validation by the certification authorities.
Those that have been working in the sector for an adequate period could be
issued with the certificate on demonstration of their competence and without the
need to attend full time courses.
Given past over-staffing, there will undoubtedly be some need to reduce staff
numbers where re-training is not an option. While a number of companies have
already imposed constraints on the recruitment of new staff, and are encouraging
early retirement and other measures, these can be expensive and politically sensitive.
Rationale for Intervention C.8. The aim of this intervention would be to staff the
Holding Company and its affiliate companies at an appropriate level and with the
technical and managerial skills needed to meet their evolving responsibilities. There
are two main elements of the proposed intervention. The first is to training, both short-
term (e.g. in such areas as administration, financial planning, audit, accounting,
billing and debt recovery and human resources development, as well as in technical
operations and maintenance) and long-term to meet the future needs of the sub-
sector. The second is the politically difficult and potentially expensive measure of
reducing staff numbers. Component C.8 would address these issues as follows:
• Tranche 1. Recruit Consultants for a human resources and training plan to enable
HCDW&S and its affiliates to meet their commercial, technical, health and
environmental tasks.
• Tranche 2. Approval of a Human Resources and Training Plan, both for the short
and the longer-terms.
• Tranche 3. Implement the approved Human Resources and Training Plan, and
establish redundancy schemes where required.
Consultant requirements. Egyptian consultants should be appointed to assist with

the staffing reforms, in cooperation if necessary with international consultants. The

Consultants would assist in the preparation of the Human Resources and Training
Plan. They may also be needed to assist with implementation.
Anticipated results and risks. The mindset that water is a public good and that it is
the state’s responsibility to deliver water and sewage services at any cost is widely
held in Egypt. If over-staffing according to a corporatist perspective is unacceptable
this mindset will determine whether staffing reforms will be feasible. Transforming
public perceptions to recognise the need for staff reductions to achieve financial self-
sufficiency and elimination of government subsidies will be a serious challenge.
The neo-liberal principles associated with attempts to corporatise and reduce costs is
very different from the socialist principles that underlie Egypt’s employment practices.
They are also very different from the expectations of those employed in Egypt’s public
enterprises. The idea that public enterprises should balance their costs and revenues
has, however, been slowly gaining a place in public perception since the early 1990s.
And there have been some recent initiatives that have kept the issue on the political
agenda. But there is always a strong probability that the usual coalition of interests –
employees, legislators and the media – will be mobilised to prevent staffing reforms.

5 Implementing the EU Programme
5.1 Introduction
The water sector is large, complex and open and touches upon almost every aspect
of national life. It is not therefore feasible to address every aspect of the sector within
the scope of a three-year budgetary support programme. Moreover, reform is an on-
going process and any interventions must be realistic both in terms of timing and in
terms of consistency with current approaches. Otherwise they will fail to generate the
commitment and support required for their successful implementation.
The interventions identified and discussed in previous chapters are thus selective.
They seek to address priority areas in realistic and acceptable ways. The focus is on
strengthening national commitment to reform in ways that complement and promote
the numerous on-going activities and programmes within the sector itself. Given the
relative status of reform in MWRI and MHUUC, a somewhat different focus has been
adopted in each of these two cases:
• In the case of MWRI’s responsibilities for water resources, the emphasis is on

supporting current MWRI approaches that seek integration across the sector. This
will require strong and sustained political support from outside the sector, as well
as the active participation of other ministries and agencies. Success will depend
to a large extent on how far such support and co-operation are forthcoming and
on how far it can be mobilised by MWRI.
• In the case of MHUUC’s responsibilities in the WS&S sub-sector, the focus is on

promoting implementation of the 2004 reforms, in other words on assisting
implementation of internal MHUUC processes. Success will thus depend to a
large extent on the commitment of MHUUC leadership and its subsidiary
agencies. Given that these reforms represent a new departure and are in some
ways incomplete, attention is given to monitoring progress to establish what
further reforms – if any – would be desirable on completion of the EU programme.
This chapter first outlines a possible broad approach to monitoring implementation of

the EU programme. It then seeks to assess the characteristics of, and risks attached
to, each of the interventions. It ends with a brief discussion of future review processes
and next steps in implementing the programme.
5.2 Monitoring Outcomes
Table 2 provides a broad “Result Based Management Framework” for monitoring

implementation of the proposed programme. The outputs specified for each tranche
(Table 1) leading to the final outcome referred to in Table 2 are selected to be readily
monitorable. But they are typically a means to an end, rather than an end in
themselves. They have therefore also been grouped in six categories based on the
underlying rationale adopted in their selection (see Chapter 2), three in the area of
Water Resources Sector Integration and three in that of Water Supply and
Sanitation`. Three of these ‘underlying rationales’ are, however, expressed in terms of
improved co-ordination, respectively for the sector as a whole, for water quality
management and for the WS&S sub-sector. But coordination itself is also an

intermediate objective, a means towards achieving the real objective. The ultimate
objectives specified in Table 2 can thus in practice be considered to be three-fold:
• Improved Utilisation of Water Resources:
• Improved Ambient Water Quality: and
• Sustained Water Supply & Sanitation Utilities.
This does not mean that judgements cannot be made on how effectively the
intermediate objective of improved co-ordination in specified contexts has been
achieved. But these judgements will be broad and qualitative in nature, reflecting
assessments on how well the institutional framework is functioning and the extent to
which conflicts have been avoided and cooperation has been achieved. This in turn
will of course impact critically on whether the ultimate objectives can also be attained.
Improved utilisation of water resources corresponds to the second pillar of the

National Water Resources Plan: “making better use of existing water resources”
(MWRI 2004)3. The particular interventions proposed support both management of
the resource (Intervention B.5: Main System Management) and utilisation of existing
water resources in a more productive manner (Intervention B.6: Limitation of the Area
under Rice, and Intervention B.7: Drainage Re-use). Each of these would potentially
make a useful contribution to easing potential conflicts over water, satisfying high
priority uses, and promoting growth in economic value-added. Drainage re-use, in
particular, is the single largest anticipated source of additional water and if managed
carefully would substantially ease potential water shortages due to horizontal
expansion and other factors, and hence promote economic and agricultural growth
and incomes. Taken together these issues would complement the numerous other
on-going reforms being implemented by MWRI in water resource and irrigation
management, and in more indirect ways by other entities in other sub-sectors.
Monitoring implementation of each of the interventions separately should be relatively

straightforward. Their true impact – with the partial exception of constraints on rice
areas – will however only become apparent well after completion of the EU
programme. Moreover, measuring this impact on the utilisation of water resources,
and distinguishing their combined effect from that of other on-going programmes, will
be much less straightforward. Estimates could perhaps be made of the direct impact
on water availability arising out of constraints on the rice area and as a result of the
additional drainage re-use attributable to adoption of a revised re-use strategy.
These could then in principle be compared with water savings attributable to other
interventions incorporated in complementary programmes. This would not be easy.
However, attributing similar impacts to management improvements would be even
more problematic. On balance, therefore, evaluation of the combined longer-term
impacts of the proposed interventions will predominantly have to reflect qualitative
judgements within an objective assessment of general trends in the water balance.
Improved ambient water quality corresponds to the third pillar of the National Water
Resources Plan: “protecting public health and the environment” (MWRI 2005).
Improved co-ordination of water quality management (Intervention B.8: Revised
Water Quality Standards, and Intervention B.9: Water Quality Protocols and
Management Plan) would provide the essential basis for adopting the two relevant
interventions – Intervention C.3: WS&S Master Planning and Intervention C.4: Rural
3
The first pillar – “ developing additional water resources” – is not within the scope of the proposed
interventions.
Sanitation. As in the previous case, however, the success of these latter two
interventions will only become apparent in the long-term as investments in both urban
and rural wastewater treatment are increasingly aligned with ambient water quality
priorities and contribute to improved water quality outturns.
It would in principle be relatively straightforward to assess whether ambient water

quality is improving or not. Though the analysis would be complex, the monitoring
network extended and consolidated under NAWQAM provides the necessary data.
Interpreting how far any changes in ambient water quality are due to the interventions
included in the EU Programme would, however, again be problematic. While the
reforms are being implemented, pressures on water quality will continue to mount due
to continued population growth, economic development, urbanisation and other
factors. Moreover, it will take time to redirect the investment programme and to
accelerate investments in rural sanitation. Thus, even if the long-term objective of
improved water quality is clearly supported by the proposed interventions, it may be
many years before recorded ambient water quality can be demonstrably shown to be
improving and, even then, it would be difficult to attribute to identify the specific
contribution of improved urban and rural sanitation planning. Qualitative judgements
will therefore again have to be the primary way in which the impact of the EU
Programme on water quality will need to be assessed, within the context of shifts in
overall trends in water quality, at both national and local levels.
Sustained Water Supply and Sanitation Utilities is perhaps the most straightforward
objective to monitor convincingly. The four proposed interventions (Intervention C.6:
Financing O&M and Intervention C.7: Tariff Reform/Adjustments to the Sanitation
Surcharge, Intervention C.5: Utility Restructuring and Intervention, and Intervention
C.8: Staffing and Training) are each designed – to a greater or lesser extent – to have
a direct impact even within the three-year period of the EU programme. It should thus
be possible to assess through objective financial and technical criteria whether utility
performance is moving towards meeting the objective of creating sustainable WS&S
Utilities. Sustainable institutions would contribute directly to reducing the burden of
the WS&S sub-sector on the national budget and thus contribute directly to macro-
economic stabilisation and growth.
The outcomes measured during the course of the EU Programme would of course
only be a step towards longer-term improvements, and in two cases – Intervention
C.5: Utility Restructuring and Intervention, and Intervention C.8: Staffing and Training
– their impact in the short-term can be expected to be limited. Moreover, though the
objective of sustainable WS&S utilities is of great importance and was the central
objective of the reforms introduced in 2004, there is much more to the WS&S sub-
sector than this objective alone.
Improved co-ordination and control of the sub-sector as a whole (Intervention C.1: the
IPC, and Intervention C.2: the Regulatory Agency) aim to promote improvements
throughout the sub-sector. The contribution of sustainable water utilities would form
an important element in such a process but would need to be complemented by other
interventions and approaches. Moreover, the ultimate objectives can again in an
important sense be said to be “improved utilisation of water resources” and “improved
ambient water quality”. The proposed intervention would contribute marginally to
these objectives in the short-term (by achieving some water savings and by initiating
improvements in wastewater treatment practices). But their contribution in the longer-
term could be significant and could be evaluated, again, within the context of general
trends in the water balance and shifts in water quality, both locally and nationally.

Table 2: Result Based Management Framework for the Proposed Interventions
INTERVENTION ACTIVITIES MAIN PARTIES OUTPUT BY END OF EU PROGRAMME LONGER-TERM IMPACT

MWRI and other
B.1 Co-ordination and promotion of IWRM by National Water Commission and Technical
agencies at national
concerned Ministries and Agencies in the Water Secretariat; and up to Four Governorate Co-
and Governorate
Sector at national and Governorate levels. ordinating Committees
levels
B.2 A national framework for IWRM to guide the MWRI and other
NWRP adopted nationally and
activities of concerned ministries, agencies, civil
operationalised based on agreed milestones
society and the general public,
Improved sector-wide
B.3 Broad acceptance by Parliamentarians, the media, MWRI coordination
Operationalised Public Awareness
water customers and the general public of the value MHUUC
Campaigns
of water and the importance of IWRM.
B.4 A sustainable water resources data NWRC – MWRI and
Protocols signed with other ministries and
collection/dissemination system (quantity and MHUUC EEAA
agencies and implemented.
quality) that meets the needs of all and integrates MALR MOI
national and local centres MOHP
B.5 Coordinated main system management

Conducted Study to enable MWRI to respond
consolidating on-going initiatives and a capacity for PS - MWRI
to future possible water shortages
responding to potential water shortages.
B.6 Rice area confined to a long-term average of no Improved utilization of water

more than 1.1 M feddans to manage salinity, MALR Reduced area under paddy in the Upper resources
contain crop consumptive use and facilitate water MWRI Delta and in Middle and Upper Egypt
distribution.
B.7 Optimised drainage re-use to increase the water Harmonized Drainage Re-use policy prepared
available for agriculture while guarding against DRI- MWRI and adopted by MWRI
adverse effects on surface and groundwater quality
MWRI MOHP
Approved of bylaws for Law 48/1982 by
B.8 Revised Water Quality standards. MHUUC EEAA
Peoples Assembly.
MALR Improved coordination and
B.9 Co-ordinated action on water quality amongst all MWRI MOI implementation of water
concerned ministries/agencies, and an integrated MHUUC MOT Incorporated WQ Management Plan in Five quality management
approach to quality management of the surface and MALR Year Plan
groundwater system. EEAA

Table 2 (cont): Result Based Management Framework for the Proposed Interventions
INTERVENTION ACTIVITIES MAIN PARTIES OUTPUT BY END OF EU PROGRAMME LONGER-TERM IMPACT

MHUUC,
C.1 Institutional processes for, and improved co- A Supreme WS&S Inter-Ministerial Council,
NOPWASD,
ordination of, policy, planning and institutional chaired by Minister of Housing and Technical
HCDW&S, MWRI,
reform in the WS&S Sub-sector with a view to Secretariat
MOP, NIB,
strengthening sub-sector performance Improved WS&S institutional
MOHP/GDEH,
coordination and control
C.2 An effective and sustainable regulatory framework
governing utility performance and tariffs, balancing MHUUC A functioning Regulatory Agency and
financial targets for WS&S utilities with interests of HCDW&S recommendations for revised tariff rates
water consumers and the general public.
C.3 A long-term investment programme for the WS&S MHUUC,
Approved and adopted National Master Plan
sub-sector that reflects social and environmental NOPWASD,
for WS&S
criteria based on ambient water quality priorities. HCDW&S, MOP
Improved ambient water
C.4 Rural sanitation standards that reflect appropriate MHUUC, quality
low cost technologies, resulting in reduced NOPWASD, MOPD, Coordinated rural sanitation programme
discharges of untreated wastewater and improved Governorates, employing appropriate low cost technologies
health and environmental conditions. NGOs
C.5 WS&S Affiliate Companies operating based on MHUUC,
international best practice, while taking full account HCDW&S and At least one restructured affiliate company
of the local context affiliate companies
C.6 WS&S affiliate companies that all meet O&M costs HCDW&S and
Ending of O&M subsidies subject to those
from their revenue, subject only to subsidies affiliate companies
provided as “social” subsidies
budgeted under the ‘New Social Contract’. MOF
C.7 Tariff structures that promote efficient water use Sustained water supply and
and utility operations and better reflect the relative MHUUC A completed study of water tariff structures sanitation facilities
costs of providing water supply and sanitation HCDW&S and and an increase in the Sanitation surcharge to
services, and that are broadly accepted by affiliate companies 75%
customers and the general public.
C.8 Staff the Holding Company and its affiliate MHUUC
A completed review of staffing and training
companies at an appropriate level and with the HCDW&S and
issues in affiliate companies, and a long-term
technical and managerial skills needed to meet affiliate companies.
sub-sector training plan.
their evolving responsibilities. Selected universities

Concluding note. Enough has perhaps been said to illustrate the problems of
monitoring the structural impact of the proposed EU programme on the water sector
as a whole. While the aim is to contribute to such structural reform, the sector is too
diffuse and complex for a convincing case to be made of the particular contribution of
a selective set of interventions to the strengthening of overall IWRM practices. Partly
due to its relatively abundant water resource, and the regulatory capacity provided by
the High Aswan Dam, Egypt has already demonstrated the capacity to manage the
utilisation of its water resources effectively in support of economic and agricultural
growth. In contrast, water quality has continued to deteriorate with all the health and
environmental impacts that this implies, and the sector has proven to be a significant
drag on overall economic growth through the manner in which it has been funded and
in the composition of the investment programme. The extent to which the proposed
interventions help rebalance these elements will be the ultimate measure of whether
the EU Programme is successful in supporting structural change in the sector.
5.3 Characteristics and Risks
Table 3 presents a matrix assessing the characteristics of the proposed interventions

and milestones, and the risks of failure and of what is termed “EU Reputation”.
Judgements of this kind are inevitably more than a little arbitrary and more than a little
debatable. There can be no claim to certainty, nor do they suggest hard-and-fast
implications. Nevertheless, the table provides an alternative way of assessing the
impacts of the various proposed interventions.
Intervention characteristics are assessed under four headings as follows:
• Environmental Significance. Interventions with the most immediate environmental

significance are evidently those tackling water quality issues, notably B.8 (revised
water quality standards), B.9 (water quality management), C.3 (WS&S master
planning) and C.4 (rural sanitation). To these have been added B.4 (Data
Collection and Dissemination), B.7 (drainage re-use) and perhaps less directly
B.2 (operationalisation of the NWMP) and B.3 (public awareness). The impacts of
other interventions on the environment may be significant but would be
somewhat more indirect.
• Budgetary Impact. It is interventions in WS&S that can be expected to have the

most important and direct impact on the national budget, notably those on WS&S
investment (C.3: WS&S Master Planning) and the financial performance of the
utilities (C.6: Financial Performance and C.7: Water Pricing). Other interventions
in WS&S will have important but less direct impacts, e.g. C.2 (the Regulatory
Agency), C.4 (Rural Sanitation) and C.8 (Staffing and Training). The irrigation
sector, both due to intensification of the old lands and horizontal expansion, will
also have important budgetary implications and would in effect be covered by B.2
(Operationalisation of the NWMP). The protocols signed with MWRI covered in
B.9 (WQ Management) would implicitly have important impacts on the investment
priorities of a range of relevant agencies.
• Consultant Requirements. Several interventions depend critically on consultancy

services. These notably include B.5 (Main System Management), B.7 (Drainage
Re-use), C.2 (Regulatory Agency), C.3 (WS&S Master Planning), C.5 (Utility
Restructuring) and C.8 (Staffing and Training). The mix of domestic and
international consultants will vary depending on the nature of the tasks involved
although in each case it will be important to incorporate the lessons of
international experience. On-going technical assistance will also support B.2
(Operationalisation of NWMP, under Dutch assistance) and B.6 (Utility Financial
Performance, under USAID assistance) and indirectly in the case of C.4 (Rural
Sanitation, through the World Bank Sector Study). The study of tariff structures in
C.7 (Water and Sanitation Pricing) would also be carried out by consultants.
• Decentralisation Impact. Egypt is a centralised country that is adopting a policy of

decentralisation. This conflict between practice and intention is reflected in some
of the interventions, notably in the WS&S sub-sector where the intention is to
support local entities and solutions, but some of the interventions may tend to
consolidate authority at the centre e.g. C.1 (IPC), C.2 (the Regulatory Agency)
and interventions designed to create sustainable WS&S utilities under a central
Holding Company (C.5: Utility Restructuring, C.6: Utility Financial Performance,
C.7: Water & Sanitation Pricing, and C.8: Staffing and Training). The national
approaches under C.3 (WS&S Master Planning) and C.4 (Rural Sanitation) would
similarly aim to address local priorities, yet within a national approach, as would
B.1 (National/Regional Committees), B.2 (Operationalisation of NWMP), B.3
(Public Awareness) and B.9 (Water Quality Management). The judgements in
relation to decentralisation impact are thus perhaps more ambiguous than most.
The milestones relating to each of the tranches have in principle been selected so
that they are readily monitorable. Even so, some are less precisely formulated than
others, some may be relatively difficult to negotiate and/or implement, and their
political sensitivity varies:
• Clarity. Several of the Interventions have the merit that they are clear in intent,
notably those with specific targets, B.6 (Confining Rice Areas), C.6 (Utility
Financial Performance) and C.7 (Sanitation Surcharge Increase). However,
clarity in intent does not guarantee ease of implementation or political feasibility.
Clarity also characterises formation of commissions/committees (B.1: National
and Regional Committees and C.1: IPC) and the commissioning of some of the
studies (C.3: WS&S Master Planning). But other studies may not yet be fully
clarified (B.5: Main System Management and C8: Staffing and Training) and how
the EU might appropriately support B.2 (Operationalisation of NWMP) and C.4
(Rural Sanitation) needs to be further discussed with those directly involved.
• Ease of Negotiation. In some cases, the proposed interventions are official policy,
which will facilitate agreement (B.1: National Commission/Regional Committees,
B.1: Operationalisation of NWMP, B.5: Confining Rice Areas and B.8: Revised
Water Quality Standards, C.2: Regulatory Agency and C.6: Utility Financial
Performance). The others are also generally consistent with Government policy,
but the lack of clarity referred to above may complicate the negotiation process
(B.2: Operationalisation of NWMP, B.5: Main System Management, C.4: Rural
Sanitation, and C.8: Staffing and Training). Agreement on sanitation surcharge
increases may also prove controversial (C.7: Water and Sanitation Pricing).
• Ease of Implementation. Neither clarity nor ease of negotiation guarantee that the
proposed milestones will be easy to implement. On the contrary, implementation
is more problematic than negotiation, in particular in respect of: achieving targets
(B.6: Confining Rice Area and C.7: Raising the Sanitation Surcharge); where
agreement is required amongst different agencies (B.4: Data Collection and
Dissemination and B.9: Water Quality Management); or where the nature of what
is proposed remains somewhat uncertain (B.2: Operationalisation of NWMP, B.5:
Main System Management, C.4: Rural Sanitation, and C.8: Staffing and
Training). Creating a regulatory Agency (C.2) may also be a very difficult task.

• Political Sensitivity. Political sensitivity is likely to be highest where specific
targets are agreed (B.6: Confining Rice Area and C.7: Raising the Sanitation
Surcharge), mirroring the implementation issues discussed above. Interventions
addressing utility commercial performance (C.2: Regulatory Agency, C.5: Utility
restructuring, C.6: Utility Financial Performance, and C.8: Staffing and Training)
may also be relatively sensitive. Most of the other interventions should in
themselves be politically fairly neutral, even when inter-agency disputes impact
on ease of negotiation and/or implementation and even though their long-term
effects could well encounter significant political constraints (e.g. B.2:
Operationalisation of NWMP, and C.3: WS&S Master Planning).
A distinction needs to be made between the risks of failure in achieving the proposed
milestones and the longer-term risks associated with attaining the ultimate goals
discussed above in Section 5.2. Table 2 refers to the risks associated with achieving
the milestones. These have been generally discussed in Chapters 3 and 4 in relation
to each of the proposed interventions. Risks of failure typically reflect the factors
discussed above. They are in particular closely aligned with political sensitivity,
notably where specific targets are agreed (B.6: Confining Rice Area and C.7: Raising
the Sanitation Surcharge) or where a complex new agency is to be established (C.2:
Regulatory Agency). Risks of failure may also be relatively high where inter-agency
cooperation is required.
The associated risks to the EU’s reputation generally parallel the risks of failure,
although in a few cases the risk to the EU reputation is masked by its relative
distance from implementation of the intervention.
5.4 Review of the Report, Consultation and Next Steps
It had originally been the intention of the Consultants that they would prepare a draft
of the “Technical and Administrative Provisions” along the lines of the annex to the
Financing Agreement for the Spinning and Weaving Sector Support Programme (EU
2004). Given the uncertainties in treatment of the macro-economic framework, the
provisional nature of the proposals included in this report and other factors, this has
not been accomplished. Once the EU has reviewed this report, and following the
discussions at the proposed Workshop, the Consultants could be required to do this
for inclusion in the final version of the Formulation Report.
Guidance is also required on how the possible inclusion of EIB interest subsidies
should be addressed. Ultimately this would seem to depend on the timing of EIB loan
operations, which is not only uncertain but is unknown to the Consultants.
The Workshop originally proposed for 4 May 2005 in Cairo has been postponed, in
part due to the delayed submission of this current report. It is understood that it will
now be held at a later date, depending on the outcome of the EU’s review of this
report. A draft agenda for this workshop has been submitted by the Consultants
together with a proposed list of invitees. Subject to the decision of the Commission,
the Consultants will participate in the Workshop, following which, and on receipt of
any specific instructions from the Commission, they will finalise the Formulation
Report.

Table 3: Intervention Characteristics and Risks
OBJECTIVES/ COMPONENTS COMPONENT CHARACTERISTICS MILESTONE CHARACTERISTICS RISKS
Significance
Implemtent-
Consultant
Negotiation
Reputation
Decentral-
Budgetary
Sensitivity
Require-
Environ-
isationn
Political
Ease of
Ease of
nataion
Failure
ments
Impact
Impact
mental
Clarity
EU
B. Water Resources Sector Integration
B.1 National Commission/ Regional 1 1 1 3 4 4 3 1 2 2
Committees
B.2 NWMP Operationalisation 3 3 3 3 2 4 2 2 2 1
B.3 Public Awareness Programmes 3 1 2 3 2 3 3 2 3 2
B.4 Data Collection and Retrieval 4 2 1 2 3 3 2 2 3 2
B.5 Main System Management 2 1 4 2 2 2 2 2 2 2
B.6 Confining Rice Areas 2 1 1 1 4 4 1 4 4 4
B.7 Drainage Re-use 4 2 4 2 3 2 2 2 3 2
B.8 Revised Water Quality Standards 4 1 1 1 4 4 3 1 1 1
B.9 Water Quality Management 4 3 2 3 3 2 2 2 3 2
C. Water Supply and Sanitation

C.1 Inter-Ministerial WS&S Council 2 1 1 2 4 3 3 2 2 2
(IPC)
C.2 Regulatory Agency 2 3 4 3 3 3 1 3 4 3
C.3 WS&S Master Planning 4 4 4 3 4 3 3 2 3 3
C.4 Rural Sanitation 4 4 3 4 2 4 3 2 3 3
C.5 Utility Restructuring & Procedures 1 3 4 3 3 3 2 3 2 2
C.6 Utility Financial Performance 2 4 3 3 4 2 2 3 3 3
C.7 Water and Sanitation Pricing 2 4 3 3 4 2 1 4 4 4
C.8 Staffing and Training 2 3 4 2 2 3 2 3 3 3
1 – Limited. 2 – Moderate. 3 – Significant. 4 – Maximum.

References
CDM – Camp Dresser & McKee in association with Engineering Consultants Group,
Environmental Quality International and Pitometer Associates (2000): Alexandria Water
(AWGA) Master Plan, Project No, 263-0270, USAID, September 2000
EU (2000): EU Water Framework Directive, Directive 2000/60/EC of the European Parliament
and of the Council, dated 23 October 2000.
EU (2003): Water for Life: the EU Water Initiative – International Cooperation from knowledge to
action”, European Commission, 2003.
EU (2004a): EGYPT- National Indicative Programme 2005-2006. EURO-MED Partnership.
EU (2004b): Financing Agreement between the European Community and the Arab Republic of
Egypt: Spinning and Weaving Sector Support Programme. Project No. MED/2004/6223.
GOE/UNDP (2002), The National Environmental Action Plan of Egypt 2002/17, Capacity 21 Unit,
Egyptian Environmental Affairs Agency (EEAA).
Harza Environmental Services Inc. in association with Camp Dresser & McKee, Environmental
Quality International, ECG Engineering Consultants Group S.A., (2000): Strategic Master
Plans for Beni Suef, Minia and Fayoum Governorates, Middle Egypt Water & Wastewater
Master Planning Project, No. 263-0270, USAID.
HCDW&S (2005): Water Sector Reform – Background and Status, Mimeo, January 2005.
IMF (2004): IMF Concludes 2004 Article IV Consultation with the Arab Republic of Egypt, Public
Information Notice (PIN) No. 04/69
IWA (2004) International Statistics on Water Services, International Water Association, Specialist
Group for Economics and Statistics, Marrakech 2004.
Jacobs (2005): Egypt: Water Sector Reform Programme, Identification Report, Final report,
March 2005.
MALR (2004): Agricultural Statistics: Winter Crops 2003 and Summer Crops 2003, Volumes 1
and 2, September 2003 and June 2004.
MHUUC (2000): Draft Presidential Decree on Reorganisation of the Egyptian Water/ Wastewater
Sector, 2000.
MWRI (2004): Water for the future: national water policy 2017, draft version 1.0,July 2004, Cairo:
MWRI.
MWRI (2004): The National Water Resources Plan, Cairo: Draft Version 2.1, MWRI, 2004.
NAWQAM (2000): Poster on the National Water Quality and Availability Management Project,
Component 2000.
Presidential Decree 197/1981 for the Establishment of the National Organisation for Potable
Water and Sanitary Drainage.
UNDP/World Bank (1981), Master Plan for Water Resources Development and Use, UNDP
Project EGY/73/024, Phase 1, Main Report + 20 Technical Supporting Reports, March 1981.
World Bank (2005): Egypt Public Expenditure Review - Water Sector Policy Note No. 1.

Appendix A – Terms of Reference
Background
Like for most countries in the Euro Mediterranean region, the water sector represents a
high strategic interest for Egypt. Water is at the heart of most political and economic
initiatives for the region. Accordingly, as a major player in this part of the world, the EU
has a substantive interest in water and has developed several bilateral and regional
programmes4.
As regards Egypt specifically, the country is almost dependent, on the supply side,
upon the Nile waters, which are shared with ten other nations situated upstream with
an increased demand for water5. On the demand side, there is an increasing
competition for water from urban and industrial users, while more than 85% of the
water resources of the country are used for agricultural purposes.
To address this issue, Egypt has embarked into various initiatives aimed at dealing
with the water situation. These initiatives are advancing on several fronts with the
support of all major donors. In summary, the following examples show the scope and
diversification of the on-going reforms:
• Water policy development: development of a National Water Plan by the Ministry

of Water Resources and Irrigation -MWRI- (with Dutch support); definition of new
agricultural and other waters policy by the Ministry of Agriculture and Land
Reclamation -MALR- (with USAID support);
• Institutional improvement: decentralization of water management; development of

Water Users Associations (with support by KfW, Netherlands, USAID and World
Bank);
• Financial sustainability: introduction of cost sharing arrangements (study by KfW);
• Environmental sustainability: development of a Water Quality Unit and an

Environmental Quality Unit within MWRI in connection with the Ministry of
Environment (support by USAID, CIDA, Netherlands);
• Physical sustainability: through various projects for infrastructure upgrade

(irrigation, drainage, pumping stations, etc) with the support of the World Bank,
the European Investment Bank, and a large number of donors.
Without prejudice to the high quality and value of many of these initiatives, the
Egyptian Government has still encountered difficulties in delivering a coherent reform
framework based on a sector vision for the water sector. In this context, under the
NIP 2005-2006, the European Union and Egypt have agreed to develop an EU
programme to support the process of reform of the water sector either at global level
4
See for instance, in the context of the "European Initiative on Water" launched at the Johannesburg
summit in 2002, a specific Intervention is dedicated to the Mediterranean region including Egypt. The
integrated management of water resources is one of the three Interventions of the initiative which
foresees integrated management plans for water resources in all countries by the end of 2005.
Furthermore, under the MEDA programme, a specific regional initiative covers the issue of water
management: www.semide.org
5
See Nile Basin initiative promoted by the World Bank and other donors.
EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 A.1
or at sub-sector, depending on the state of advancement of the relevant reforms. An
indicative budget of €80 million has been allocated to this initiative.
In this context, the Egyptian authorities have committed themselves to address a

sector-wide institutional reform of the water sector. The adoption of a National Water
Resources Plan under the leadership of the Ministry of Water Resources and
Irrigation should be considered as important instrument for water resources
management policy. The Plan addresses, in a comprehensive manner, essential
issues such as promoting economic and sustainable water use; promoting
decentralised management at operational level; and advancing private participation in
the water sector. The Plan also aims at regrouping under one strategic policy
umbrella all the activities developed by the Government and supported by the donor
community.
However, this policy agenda for reform is still under development and would require
further refinement and integration of sub-sectors (such as potable water, wastewater,
sanitation, industrial water, water reuse, water treatment etc.) falling under the
responsibility of other Ministries, such as, inter alia, the Ministry of Housing, the
Ministry of Agriculture, the Ministry of Environment, the Ministry for Local
Development. Accordingly, a high level of political leadership and institutional
capacity will be required to support this process of policy integration for the water
sector. In this context, the European Commission is proposing to support the
authorities' reform in the water sector.
The purpose of the present terms of reference is the identification and formulation of
the relevant programme.
Description of the Assignment
Ø Beneficiary(ies)
The main Beneficiaries of assignment will be the Ministry of Water Resources and
Irrigation (as the pivotal Ministry for the elaboration and follow up of a comprehensive
water management policy) and the Ministry of Housing, as the main authority for
drinking water and sanitation. However, other Ministries competent for various areas
in the water sector, will be directly or indirectly involved, in particular the Ministries of
Agriculture, Environment, Local Development, Planning and Finance.
The Ministry of International Cooperation will act as National Coordinator and may
facilitate the work of the Contractor where appropriate.
It is noted that the programme should aim at promoting a holistic approach to water
policy and management and that the ultimate beneficiary should be the people of
Egypt.
Ø Global and specific objectives
The global objective for the assignment will be to contribute to the process of
comprehensive reform of the water sector in Egypt with a view to preparing a project
proposal for an EU intervention in the sector
The specific objective will be:

1. To assess the state of advancement of the institutional reform of the water sector
in Egypt towards an integrated, sector-wide strategy.
2. To determine the required improvements for better management of water

resources taking into account conflicting interests of water users.
3. To determine the level of participation by the different stakeholders in the process

of water reform, including through private participation in the water sector.
4. To define the scope of intervention for an EU comprehensive initiative in the

sector
Ø Requested services
The European Commission (AIDCO and the delegation of the European Commission
in Egypt) will closely monitor the development of this assignment.
In the context of the terms of reference and given the wide scope of this assignment,
the European Commission will provide the Contractor during the assignment with
updated instructions depending on the evolution of the mission. The instructions
from the Commission may require the Contractor to focus on an integrated strategy
for the water sector or may require the Contractor to focus on a specific sub-sector(s).
The Contractor should be in a position to respond immediately to such instructions.
The Contractor will be expected to make extensive use of the relevant work
carried out by other donors in Egypt, in particular the Netherlands, Germany,
Italy, USAID and the World Bank. The European Commission will organise several
meetings between donors to ensure a high level of integration and coordination
between all donors’ initiatives. The Contractor will actively participate in those
meetings and will integrate the conclusions of such meetings into its work, as
instructed by the Commission.
Furthermore, the Contractor is expected to develop a participatory approach and will

seek to involve all relevant Egyptian stakeholders in wide ranging consultations. In
particular, the Contractor is expected to organize up to two one-day workshops in
Cairo to present its initial findings to the relevant Egyptian stakeholders and to the
donor community.
The Contractor is expected to take into account cross-cutting issues, such as

environmental protection, sustainable development and the gender dimension.
In this context, the Contractor will deliver the following services:
• An analysis and motivated assessment of the current state of play of the Egyptian
water policy reform (taking into account the National Water Plan). The
assessment will include an analysis of the decision making process for sector
policy and strategy, the coherence between sector vision and spending and the
institutional capacity of the relevant stakeholders. The assessment should
address the major sectors where reform is taking place: water management,
irrigation, drainage, drinking water and sanitation, etc.
• An assessment of the initiatives by major international donors in the field of water,

the lines of intervention developed and the results obtained.

• A set of key policy and institutional recommendations on improvement of the
water reform process in Egypt; these recommendations will address water policy
in general and/or where appropriate sub-sector issues such as drinking water,
sanitation, irrigation and drainage, etc.
• The organisation of one or two one-day workshops in order to inform

stakeholders, discuss findings and recommendations, and assess the feasibility of
the Contractor’s proposals both at the identification and formulation phases.
• A motivated analysis of the possibility for an EU comprehensive intervention in the

water sector in line with the Government’s strategy, the NIP, the relevant
European water initiatives.
• On the basis of the above, a comprehensive project proposal including a clear

definition of support activities, modalities for European aid delivery, expected
targets and results, institutions involved and indicators for performance monitoring
and reporting.
Ø Expected results
The assignment will result in a project proposal.
1. An assessment of the Egyptian strategy in the water sector is carried out;
2. The main areas of intervention for a water reform programme are identified and
are carefully analysed and assessed;
3. A process of dialogue with the authorities and with the major donors is engaged;
4. A project proposal is submitted for discussion
Description of the Assignment
Experts Profiles
Four experts will carry out the mission. The Contractor will propose one of the two
international experts as a team leader.
The team leader will be responsible for reviewing the quality of the deliverables with
the following profiles:
1. Senior international expert (Category I): water policy economist
• University degree in a relevant field (Economist, natural resources or water

resources economist) or equivalent.
• At least 15 years of relevant experience in designing
(identification/formulation) water policy development programmes for bilateral
or multilateral organisations
• In depth knowledge of assessing medium and long term economic feasibility
of water policies
• Good understanding of environmental issues,
• Good knowledge of EC project cycle management, including familiarity with
donors’ procedures and regulations
• Experience with institutional reform and capacity building of Government
institutions
• Demonstrated reporting skills
• Previous experience in a similar cultural environment (preferably Egypt or
other MEDA countries) is desirable
• Fluent in English as a working language (including reporting skills)
2. Senior international expert (Category I): institutional reform specialist
• University degree in sociology, socio-economy or equivalent

• At least 15 years of relevant work experience in institutional reform,
decentralisation, private sector participation in infrastructure and capacity
building of Government organisations, including legal aspects
• Familiarity with appraisal and formulation of large sector programmes would
be an asset
• Good knowledge of the functioning of organisations in the water sector (such
as Water Users Associations, Water Boards, Water Supply and Sanitation
companies, etc)
• Good understanding of gender and environmental issues
• Good knowledge of EC project cycle management, including familiarity with
donors’ procedures and regulations
• Good understanding and experience in socio-economic aspects of water
policy issues
• Previous experience in a similar cultural environment (preferably Egypt or
other MEDA countries) is desirable
• Fluent in English as a working language (including reporting skills)
3. Local expert (Category II): specialist in water supply and sanitation
• University degree in civil engineering or equivalent

• At least 10 years of relevant work experience in cooperation projects in the
fields of water supply and sanitation in Egypt
• Acquaintance with the Government of Egypt’s policies and strategies in the
supply and sanitation sectors
• Full understanding and experience of modern technologies in the sector;
understanding of environment and social aspects
• Previous experience with international donor organisations in Egypt
(including methodologies and procedures) will be an asset
• Fluent in Arabic and English as working languages
4. Senior local expert (Category II): specialist in irrigation and drainage
• University degree in Civil or rural engineering or equivalent

• At least 10 years of relevant work experience in cooperation projects in the
fields of irrigation and drainage in Egypt
• Knowledge of the current Government of Egypt’s policies and strategies for
irrigation and drainage
• Experience in environmental, social and legal aspects of the sector in Egypt
• Fluent in Arabic and English as working languages
Ø Working languages
The working language will be English. The local experts are expected to be perfectly
fluent in English and Arabic.

Location and Duration
Ø Starting date 6
The expected starting date of the assignment will be 8 December 2004.
Ø Finishing date of the assignment
The assignment should be finished by May 2005 at the latest.
Ø Schedule and number of days for the assignment per expert
The foreseen starting date for the mission is December 8, 2004.
However, depending on the availability of the experts, the Contractor may propose
that only two of the experts will start in December (in principle one international and
one local expert). In this case, it is expected that the experts would deliver at least 10
calendar days during the month of December. In such a case, the Contractor may
propose a different starting date for the other expert which shall not be later than
January 10th, 2005. When some or all, of the experts have started their mission in
December, the Commission will accept a break of the mission, where requested, to
take into account the European holidays. Where the mission has been interrupted,
the second part should start not later than January 10th, 2005.
The expected total duration of the mission will be a maximum of 65 days per
international expert and 55 days per local expert (i.e. total of maximum of 240 days
for the team). Without prejudice to what is indicated below (see text box hereunder),
this duration will be tentatively divided in two parts:
* Identification mission: maximum of 25 days per expert

* Formulation mission: maximum of 40 days per expert
The first part of the assignment (identification) should be finished by February 15th
2005 at the latest. The second part of the assignment (formulation) should be
completed, in principle, by April 2005.
At the end of the identification phase, the Contractor will organise a one-day
workshop in Cairo, attended by the relevant Egyptian stakeholders and the donor
Community (the invitation list will be approved by the Commission). The purpose of
the workshop will be to present the main findings of the mission, to discuss
recommendations by the Contractor’s team and to explore main avenues for an
integrated programme for the water sector.
On the basis of the results of the workshop, of the Contractors’ report and of the
quality of the services provided by the Contractor, the Commission will take a
decision about launching the second phase of the mission (formulation) under
this assignment. Within ten working days upon receipt of the draft identification
report, the Contractor will be notified in writing about the continuation or termination of
the mission.
6
In event, this date cannot be before the date of signature of the letter of contract.

Where the Commission has approved the continuation of the assignment, the second
part of the mission (formulation phase) will start not later than at the end of February,
2005. The second part will focus on the preparation of a full project proposal in
accordance with the findings of the identification phase and the instructions from the
Commission. Where requested by the Commission, the Contractor will organise a
one-day workshop before the end of the second phase, in order to discuss the main
areas of intervention proposed with the relevant stakeholders.
Ø Location of assignment
The assignment will take place in Cairo. However, some travel within Egypt, to the
Delta region and to Upper Egypt, should be envisaged.
Reporting
The following reports will be submitted by the Contractor to the Commission (AIDCO
and Delegation):
• An executive brief (in electronic form), containing main findings, detailing any
present or foreseeable problems and/or obstacles, summarising contacts with
main stakeholders, including other donors will be submitted at the end of the first
7 days of mission.
• An interim identification report at the end of the first 25 days. The interim report
will contain a full assessment of the water reform situation in Egypt, together with
relevant policy recommendations. This report should be the basis for preparation
of the workshop, which will take place before the end of the first phase.
• An identification report at the end of the identification phase. This report will
update the interim report on the basis of the comments received from the various
stakeholders and the results of the workshop. The identification report will
conclude with a recommendation as to the area(s) of intervention for an EU
programme.
• A draft formulation report (including draft project proposal) submitted after 15 days
of the second phase.
• A final project report. The final project report will contain the main
recommendations together with all relevant documentation for a project proposal.
The timing for the delivery of the reports may be modified by the Commission in
accordance with the development of the assignment (in particular if the reserve days
are utilised). The Commission will make its comments to any report by the Contractor
within 5 working days of receipt.
Maximum Budget
The maximum budget is 199,000 EURO.
The Contractor should include a provision to organise up to two one-day workshops

during the assignment. These workshops are to be construed as working meetings
that would require conference room facilities, light meals and interpretation services
for a maximum of 50 participants. Travel expenses for international experts should
also include the possibility of a break during the first phase of the mission
(December), together with some small provision for travelling within Egypt.
Appendix B – Identification Report: Executive Summary
Scope of the report. An EU Water Sector Reform Programme (EUWSRP) for Egypt
would bring together two major strands of EU policy: the EU Water Initiative (EUWI)
and the EURO-MED Partnership. Within the scope of the latter, the 2005-2006
National Indicative Programme for Egypt provisionally allocates 80M€ to the
EUWSRP. It is envisaged that the programme would primarily take the form of EU
budgetary support, but it could also cover interest rate subsidies for EIB loans and
technical assistance to help achieve the reform agenda. Based on an assessment of
the current water reform situation in Egypt, this report concludes that such a
programme is potentially useful, and suggests possible areas of intervention.
Water quantity and quality. Egypt is exceptional in its dependence on a single

water source, the River Nile. Under the 1959 treaty with Sudan, it is allocated 55.5
BCM of inflows at Aswan, though in recent years inflows have tended to be higher.
The High Aswan Dam provides multi-year regulatory control and Egypt can normally
ensure a sufficient and stable supply to meet its current needs. Whether this
continues depends on natural changes and man-made developments upstream and
on the extent to which new demands emerge within Egypt. The Nile Basin Initiative,
sponsored by the World Bank, provides a context within which all riparians can
cooperate on basin issues without prejudice to the outcome. New demands in Egypt
depend on irrigation expansion out of the Nile Valley and to a lesser extent on rising
M&I needs. Other sources, including the deep desert aquifers and desalination, have
limited potential. Subject to quality considerations, re-use of Nile water already
pervasive could increase further. Even so, Egypt may face a future water constraint.
A closed water system – such as that of the Nile – retains pollutants. This not only
may limit water availability for productive uses but also has damaging health and
environmental implications. Water quality remains broadly acceptable in the main Nile
although problems are often encountered locally in the drainage system above Cairo.
Quality deteriorates progressively below Cairo, in the river branches, in the
groundwater, and in the canals and – more particularly – in the drainage system of
the delta. Minimal fresh water now reaches the sea. Some disposal of saline and
polluted effluent is necessary and future re-use also depends on the growth and
control of pollution. Environmental management has proved an elusive objective and
rapid population growth and economic development suggests that water quality
management will remain a major challenge. The extent to which water re-use can
increase thus remains uncertain.
Socio-economic and political context. Egypt has yet to reach the point in its socio-
economic development that allows it to combine its water with other factors of
production so as to achieve vigorous economic diversification and growth. But it is our
view that water does not constrain economic growth, it is a sluggish economy that
constrains what is possible in water. No matter how creative are the water
professionals, progress will continue to be difficult in the absence of a sustained
process of national reform and an improved economic outlook. This is more than a
question of financial resources, important though these are. It is also a question of
political support for what are necessary, but in the short-term inevitably unpopular,
decisions relating for instance to: new water management practices; institutional
restructuring and its impact on staffing and employment; water tariffs and cost
recovery; the role of the private sector; and environmental regulation. Public
awareness, ultimately rooted in the education system, can help promote acceptance
but political leadership will remain crucial, both at the national and at the local level.

Reform within the Water Sector. The international discourse on water emphasises
integration and a holistic approach. Egypt has a long history of seeking integration,
dating back at least to the 1980 National Water Plan. The water sector remains
committed to this ideal and this has been reflected in several initiatives including: (i) the
Water Policy Reform Programme (WPRP) supported by USAID, which is now
completed; (ii) the National Water Resources Plan (NWRP) supported by the Dutch
government – preparation of a draft national plan and policy statement were achieved in
Phase 1, which is now coming to an end, and the operationalisation of the plan is
proposed for Phase 2, which is scheduled to start in September 2005; (iii) the on-going
Integrated Water Resources Management (IWRM) Action Plan supported by the World
Bank; and (iv) the on-going National Environment Action Plan (NEAP) supported by
UNDP. These programmes provide differing perspectives though they share common
objectives and assumptions, and in many ways overlap. The NWRP in particular
provides a coordinated set of proposals covering the full sector, and will be an
important guide to the policy reforms that might be supported under the EUWSRP.
The breadth of the on-going reform programme in the water sector is impressive. This is
particularly true of the MWRI. Under the leadership of the Minister, a range of initiatives
has been implemented that inter alia aim to: strengthen IWRM practice in MWRI and
throughout the sector generally; decentralise irrigation and drainage O&M to farmer
organisations; and adjust MWRI’s own organisation and practice to respond to the new
conditions and complement the other reforms. Caution has been the watchword,
understandably given the ambitious nature of the reforms. Nevertheless, though they
may take time and there may be a few lacunae, if carried forward, they will radically
transform how water resources and irrigation are managed in Egypt.
Important initiatives have also been undertaken in difficult conditions by MHUUC with
the aim of establishing commercial and self-financing service WS&S utilities and
creating an independent regulator to balance the commercial interests of the utilities
with those of the customer. The Holding Company for Drinking Water & Sanitation has
made significant progress but the reforms as a whole are too recent to have had major
impact. As in the case of MWRI’s reforms, if successfully carried forward, they hold
promise of radically transforming the sub-sector. Nevertheless, it should be recognised
that: (i) they follow earlier reforms that largely failed to achieve comparable objectives;
(ii) important organisations remain largely unaffected, notably NOPWASD and utilities
reporting to Governorate administrations; (iii) questions can be raised relating to
administrative independence given that organisations responsible respectively for
planning & construction, (most) service provision, and regulation, all come under or are
supervised by MHUUC; and (iv) in the first instance they imply centralisation though in
the long-term the aim is autonomous utilities serving local interests within the local
government structure. Nor do they extend to complementary programmes in the
Ministries of Health, Environment and other entities with responsibilities for, or impacts
on, sanitation. Coordination between the many agencies involved has been elusive.
Role of an EUWSRP. The potential strength of a sectoral structural adjustment

exercise such as the proposed EU Water Sector Reform Programme is that it can
address not only issues within the competence of the water professionals but also
some that lie outside their control. In other words, it can help strengthen commitment
by those outside the sector to the reforms proposed within the sector. This is not
without considerable risks. The political leadership is subject to pressures that extend
far beyond any particular sector, and there can be no guarantee that it will support
reforms that may be in the interests of the sector concerned but raise problems in a
wider context. However, since the 1980s, GOE has promoted market liberalisation
policies and the role of the private sector, and this gives some assurance for the
future. It is true that, due to both external and internal factors, these policies have
had mixed success. Their impact in agriculture has been generally positive, which
gives promise for irrigation management reforms. On the other hand, structural
change has been modest, private investment disappointing and decentralisation has
made only limited progress. Irrespective of such setbacks, however, national socio-
economic policy and strategy is increasingly reflecting the lessons of international
experience and this suggests promise for the future.
There is another dimension to a sectoral structural adjustment operation, and that is

that, at least potentially, it can help develop a framework within which other donor-
supported programmes can be implemented with greater assurance of success. For
an EU programme, this may have particular value for the varied and extensive
programmes of EU member countries in water and the environment in Egypt. But it is
also true for a wider context. Since there is no hard-and-fast distinction between the
scope of a sectoral adjustment exercise and programmes within the sector, there is a
specific responsibility to ensure that the sector operation recognises, and is
complementary to, individual programmes funded by other donors.
Possible scope of an EUWSRP. For these reasons, and recognising the risks
involved, it is the considered opinion of the Consultant that the proposed EU Water
Sector Reform Programme (EUWSRP) should be implemented. Its primary focus
should be on strengthening national commitment to water sector reforms in ways that
complement the numerous on-going programmes within the sector itself. It should
not seek to second-guess the content of specific programmes, which are typically
based on detailed investigations, pilot projects and studies, often supported by other
donors. Given the relative status of reform in the MWRI and MHUUC, the EUWSRP
should focus in particular on the WS&S sub-sector, with the aim of contributing to the
success of the 2004 reforms. In the case of MWRI, the aim should be to support an
on-going process that shows much promise of success.
With these considerations in mind, potential areas of intervention are identified

relating respectively to areas that would contribute to: (i) integration across the water
sector, (ii) the reform process within the mandate of MWRI and (iii) the reform
process within the mandate of MHUUC. It must be emphasised that these
suggestions are tentative and will need to be fully reassessed and defined during the
formulation stage of the consultancy. The programme will primarily take the form of
EU budgetary support, and the proposed reforms, as revised, will have to be placed
within a time-bound schedule against which funds would be released.
The programme may also cover interest rate subsidies for EIB loans and TA. The EIB
can play a significant role both directly in project funding and indirectly by providing
assurance to other donors and the private sector. The extent to which interest
subsidies might be covered has yet to be assessed. With regard to possible TA, three
potential activities have been identified for possible funding by the EU or another
donor: (i) a review of main system management practices and require-ments; (ii) a
master planning exercise for the WS&S sub-sector; and (iii) recruitment of an
international company to advise the Holding Company on commercialisation of the
affiliate companies. Finally, funds should be allocated to monitor implementation of
the reform programme and evaluate the outcome of the EUWSRP.
Next steps. This report has concluded that the EUWSRP is justified and could play a
significant role in strengthening on-going reforms in the water sector. Subject to the
decision of the Commission whether or not to proceed, it is suggested that the
consultants should return to Egypt in early March 2005; prepare a draft Formulation
Report by mid-April as a basis of the workshop provided for in the Terms of
Reference; and submit the final report as required by the end of April 2005.

Egypt Water Reform Programme Formulation Report

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Water Reform Programme In Egypt

List of Abbreviations iii

1.1 Background 1-1

1.2 Scope of the Consultancy 1-1

1.3 Moving from Identification to Formulation 1-2

1.4 Outline of the Formulation Report 1-3

2 Objectives and Scope 2-4

2.1 Objectives and Outcomes 2-4

2.2 The Scope of the Proposal 2-4

2.3 Component A – Macro-Economic Framework 2-5

2.4 Component B – Water Resources Integration 2-5

2.5 Component C – Water Supply and Sanitation 2-5

3 Component B – Water Resources Integration 3-5

3.1 Intervention B.1 – National and Regional Co-ordination 3-5

3.2 Intervention B.2 – Adoption of the NWRP 3-5

3.3 Intervention B.3 – Public Awareness Programmes 3-5

3.4 Intervention B.4 – Water Resources Data 3-5

3.5 Intervention B.5 – Main System Management 3-5

3.6 Intervention B.6 – Limitation of Rice Areas 3-5

3.7 Intervention B.7 – Drainage Re-use and Non-conventional Sources 3-5

3.8 Intervention B.8 – Revision to Water Quality Standards 3-5

3.9 Intervention B.9 – Water Quality Management 3-5

4 Component C – Water Supply and Sanitation (WS&S) 4-5

4.1 Intervention C.1 – WS&S Policy and Institutional Reform 4-5

EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 i

4.3 Intervention C.3 – Master Planning in the WS&S Sub-sector 4-5

4.4 Intervention C.4 – Rural Sanitation 4-5

4.5 Intervention C.5 – Utility Restructuring 4-5

4.6 Intervention C.6 – Utility Financial Performance 4-5

4.7 Intervention C.7 – WS&S Tariffs 4-5

4.8 Intervention C.8 – Staffing and Training Issues 4-5

5 Implementing the EU Programme 5-5

5.1 Introduction 5-5

5.2 Monitoring Outcomes 5-5

5.3 Characteristics and Risks 5-5

5.4 Consultation and Next Steps 5-5

Appendix A – Terms of Reference 5

Appendix B – Identification Report: Executive Summary 5

Table 1. Draft Matrix of Conditionalities 2-15

Table 2. Results Based Management Framework 5-50

Table 3. Intervention Characteristics, Risks and Importance 5-55

EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 ii

BCM Billion Cubic Meter

EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 iv

• Promote the effective implementation of the EU-Egypt Association Agreement;

• Sustain the process of economic transition: and

• Support stability through balanced and sustainable socio-economic development.

1.2 Scope of the Consultancy

This Formulation Report focuses on the preparation of a project proposal in

1.3 Moving from Identification to Formulation

1.4 Outline of the Formulation Report

2.1 Objectives and Outcomes

• Determine the required improvements for better management of water

• Determine the level of participation by the different stakeholders in the process

• Define the scope of intervention for a EU comprehensive initiative in the sector.

• An assessment of the Egyptian strategy in the water sector is carried out;

• A project proposal is submitted for discussion.

2.2 The Scope of the Proposal

EU Water Reform Programme in Egypt - Formulation Report.doc/Feb-07 2-4

• Component B – Water Sector Integration

• Component C – Water Supply and Sanitation

The Macro-Economic Framework falls outside the responsibility and competence of