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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: PAD550
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVLOPMENT AND
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED GRANT FROM THE MENA TRANSITION FUND
IN THE AMOUNT OF US$6.5 MILLION
TO THE
ARAB REPUBLIC OF EGYPT
FOR AN
ENERGY/SOCIAL SAFETY NETS SECTOR REFORMS TECHNICAL ASSISTANCE
PROJECT
November 26, 2013
Energy and Environment Unit
Sustainable Development Department
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective November 14, 2013)
Currency Unit = Egyptian Pound (LE)
[LE6.887] = US$1
FISCAL YEAR
July 1 – June 30
Abbreviations and Acronyms
AfDB African Development Bank
bbl/d Barrels per day
bcm Billion Cubic Meter
CAPMAS Central Agency for Public Mobilization Statistics
CCGT Combined Cycle Gas Turbine
CGE Computed General Equilibrium
COA Central Organization Audit
CSO Civil Society Organization
CSP Concentrated Solar Power
CTP Cash Transfer Program
DA Designated Account
EAAP EU-Egypt Association Agreement Program
EE Energy Efficiency
EEHC Egyptian Electricity Holding Company
EETC Egyptian Electricity Transmission Company
EGPC Egyptian General Petroleum Corporation
EgyptERA Egyptian Electric Utility and Consumer Protection Regulatory Agency
ESPSP Energy Sector Policy Support Program
EU European Union
FCS Family Smart Card System
FM Financial Management
FY Fiscal Year
GDP Gross Domestic Product
GFMINS Government Financial Management Information System
GHG Green House Gas
HIECS Household Income Expenditure and Consumption Survey
IPP Independent Power Producer
ISA Implementing Support Agency
ISN Interim Strategy Note
IT Information Systems
JICA Japanese International Corporation Agency
KfW Kreditanstalt für Wiederaufbau
LNG Liquefied Natural Gas
LPG Liquefied Petroleum Gas
MENA Middle East And North Africa
Regional Vice President: Inger Andersen
Country Director: Hartwig Schafer
Sector Director: Junaid Kamal Ahmad
Sector Manager: Charles Joseph Cormier
Task Team Leader: Husam Mohamed Beides
Co-Task Team Leader: Mohab Awad Mokhtar Hallouda
MMBTU Million British Thermal Units
MOEE Ministry of Energy and Electricity
MSAD Ministry of State for Administrative Development
mtoe Million Tonnes of Oil Equivalent
NEEAP National Energy Efficiency Action Plan
NGO Non-Governmental Organization
NID National Identification
OM Operational Manual
ORAF Operational Risk Assessment Framework
PC Project Coordinator
PDO Project Development Objectives
PFM Public Financial Management
PMT Project Management Team
PPA Power Purchase Agreement
PSC Project Steering Committee
PV Photovoltaics
SCAF Supreme Council of Armed Forces
SOE State Owned Enterprise
SSN Social Safety Net
TA Technical Assistance
TWU Technical Working Unit
EGYPT, ARAB REPUBLIC OF
Energy/Social Safety Nets Sector Reforms Technical Assistance Project
TABLE OF CONTENTS
Page
I. STRATEGIC CONTEXT .................................................................................................1 A. Country Context ............................................................................................................ 1 B. Sectoral and Institutional Context ................................................................................. 2 C. Higher Level Objectives to which the Project Contributes .......................................... 9
II. PROJECT DEVELOPMENT OBJECTIVES (PDO) ....................................................9 A. PDO............................................................................................................................... 9 Project Beneficiaries ........................................................................................................... 9
PDO Level Results Indicators ............................................................................................. 9
III. PROJECT DESCRIPTION ............................................................................................10 A. Project Components .................................................................................................... 10
B. Project Financing ........................................................................................................ 13 Project Cost and Financing ............................................................................................... 14
IV. IMPLEMENTATION .....................................................................................................15 A. Institutional and Implementation Arrangements ........................................................ 15 B. Results Monitoring and Evaluation ............................................................................ 16
C. Sustainability............................................................................................................... 16
V. KEY RISKS AND MITIGATION MEASURES ..........................................................17 A. Risk Ratings Summary ............................................................................................... 17 B. Overall Risk Rating Explanation ................................................................................ 17
VI. APPRAISAL SUMMARY ..............................................................................................18 A. Economic and Financial Analyses .............................................................................. 18
B. Technical ..................................................................................................................... 19 C. Financial Management ................................................................................................ 19 D. Procurement ................................................................................................................ 20
E. Social (including Safeguards) ..................................................................................... 21 F. Environment (including Safeguards) .......................................................................... 21
Annex 1: Results Framework and Monitoring .........................................................................22 Annex 2: Detailed Project Description .......................................................................................25
Annex 3: Implementation Arrangements ..................................................................................31 Annex 4: Operational Risk Assessment Framework (ORAF) .................................................40 Annex 5: Implementation Support Plan ....................................................................................43
PAD DATA SHEET Egypt, Arab Republic of
EGYPT Energy/Social Safety Nets Sector Reforms Technical Assistance (P144305)
PROJECT APPRAISAL DOCUMENT
MIDDLE EAST AND NORTH AFRICA
MNSEE
Report No.: PAD550 .
Basic Information
Project ID EA Category Team Leader
P144305 C - Not Required Husam Mohamed Beides
Mohab Awad Mokhtar Hallouda, Co-TTL
Fowzia Hassan, Co-TTL
Lending Instrument Fragile and/or Capacity Constraints [ ]
Investment Project Financing Financial Intermediaries [ ]
Series of Projects [ ]
Project Implementation Start Date Project Implementation End Date
25-November-2013 30-Jun-2016
Expected Effectiveness Date Expected Closing Date
02-Dec-2013 30-Dec-2016
Joint IFC
No
Sector Manager Sector Director Country Director Regional Vice President
Charles Joseph Cormier Junaid Kamal Ahmad Hartwig Schafer Inger Andersen .
Borrower: Arab Republic of Egypt
Responsible Agency: Ministry of Electricity and Energy
Contact: Eng. Mohammed Omran Title: Undersecretary for Research Planning
Telephone
No.:
(202) 2261-6523 Email: [email protected]
.
Approval Authority
Approval Authority
RVP Decision
please explain
Middle East and North Africa Transition Fund operations are approved by Regional Vice President. .
Project Financing Data(in USD Million)
[ ] Loan [ X ] Grant [ ] Guarantee
[ ] Credit [ ] IDA Grant [ ] Other
Total Project Cost: 6.50 Total Bank Financing: 0.00
Financing Gap: 0.00 .
Financing Source Amount
Borrower 0.00
MNA VPU Free-standing Trust Funds 6.50
Total 6.50 .
Expected Disbursements (in USD Million)
Fiscal Year 2014 2015 2016 2017 0000 0000 0000 0000 0000
Annual 0.25 3.00 2.50 0.75 0.00 0.00 0.00 0.00 0.00
Cumulative 0.25 3.25 5.75 6.50 0.00 0.00 0.00 0.00 0.00 .
Proposed Development Objective(s)
The proposed project will strengthen the Government of Egypt's capacity to (i) design a comprehensive
fuel subsidy reform strategy; (ii) establish concrete measures for improved financial viability of key
energy sector actors; and (iii) identify households that would be most vulnerable to the impacts of the fuel
subsidy reform. .
Components
Component Name Cost (USD Millions)
Power Sector Institutional Development and Financial
Viability
2.70
Energy Pricing and Fuel Switching Reform Technical
Assistance
1.80
Strengthening Social Safety Nets (SSN) Technical Assistance 2.00 .
Institutional Data
Sector Board
Energy and Mining .
Sectors / Climate Change
Sector (Maximum 5 and total % must equal 100)
Major Sector Sector % Adaptation Co-
benefits %
Mitigation Co-
benefits %
Health and other social services Other social services 35
Energy and mining General energy sector 65
Total 100
I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable
to this project. .
Themes
Theme (Maximum 5 and total % must equal 100)
Major theme Theme %
Public sector governance Other public sector governance 35
Financial and private sector development Infrastructure services for private sector
development
35
Social protection and risk management Social safety nets 30
Total 100 .
Compliance
Policy
Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] .
Does the project require any waivers of Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X .
Legal Covenants
Name Recurrent Due Date Frequency
Description of Covenant
.
Conditions
Name Type
Execution and delivery of Grant Agreement on behalf of the Recipient Effectiveness
Description of Condition
The execution and delivery of this Agreement on behalf of the Recipient have been duly authorized or
ratified by all necessary governmental actions.
Name Type
Submission of Legal Opinion Effectiveness
Description of Condition
The Agreement will become effective when the World Bank receives from the Recipient a formal
notification satisfactory to the World Bank that the Recipient has duly entered into this Agreement and its
terms and conditions are fully valid and binding and all the necessary internal procedures have been
completed by the Recipient.
Team Composition
Bank Staff
Name Title Specialization Unit
Banu Setlur Environmental Specialist Environmental Specialist MNSEE
Badr Kamel Senior Procurement
Specialist
Senior Procurement Specialist MNAPC
Nina Bhatt Lead Social Development
Specialist
Lead Social Development Specialist MNSSU
Fowzia Hassan Energy Specialist Co-Task Team Leader MNSEE
Gustavo C. Demarco Lead Economist Lead Economist MNSSP
Chaogang Wang Senior Social Development
Specialist
Senior Social Development Specialist MNSSU
Hayat Taleb Al-Harazi Program Officer Program Officer MNARS
Lire Ersado Senior Economist Senior Economist AFTP2
Maria Vagliasindi Lead Economist Lead Economist SEGEN
Mark M. Njore Program Assistant Program Assistant MNSEE
Husam Mohamed Beides Lead Energy Specialist Task Team Leader MNSEE
Mohab Awad Mokhtar
Hallouda
Senior Energy Specialist Co-Task Team Leader MNSEE
Eman Fouad Wahby Communications Officer Communications Officer MNAEX
Wael Ahmed Elshabrawy Financial Management
Analyst
Financial Management Analyst MNAFM
Amr S. Moubarak E T Consultant E T Consultant MNSSP
Norhan Mohamed Sadik Temporary Temporary MNCEG
Non Bank Staff
Name Title Office Phone City .
Locations
Country First
Administrative
Division
Location Planned Actual Comments
1
I. STRATEGIC CONTEXT
A. Country Context
1. More than two and a half years after the January 2011 Revolution, Egypt is embarking on
a new transition following the ousting of President Morsi in July 2013. A new political road map
is in place with a timeline of nine to twelve months that includes amending the suspended 2012
Constitution, holding a referendum to approve the amended constitution, and conducting
parliamentary elections followed by presidential elections. An interim Government was
appointed on July 16, 2013.
2. The Gulf States have pledged a large amount of exceptional financial assistance during
this transition period. In early July 2013, Saudi Arabia, the United Arab Emirates (UAE), and
Kuwait pledged an aid package totaling US$12 billion to support Egypt. The Gulf aid package
has helped boost dwindling reserves and stabilize markets. Reserves recovered to almost US$19
billion at end-July 2013 (equivalent to about three months of FY14 projected merchandise
imports) from a US$14 billion at end-June, which was the lowest point despite the US$10
billion in aid received in FY13 from Qatar, Turkey, and Libya. The exchange rate is now
stabilized following the strong depreciation (nearly 15 per cent) during the first half of 2013
while the parallel market premium has been largely eliminated. Also, Treasury Bill rates have
moved lower in response to improved liquidity conditions.
3. However, growth remains weak, inflationary pressures are increasing, and the fiscal
position is becoming increasingly unsustainable. Economic activity was dampened throughout
FY13 by political rivalry, disrupted business activities, frequent power cuts, inadequate fuel and
foreign exchange supplies, and lack of policy certainty. Output growth remained subdued during
the first nine months of FY13 at just over two per cent, similar to the year before. This pushed
the unemployment rate higher, reaching over 13 per cent in June 2013. Headline inflation has
reached double digits, with food inflation at 14 per cent in July 2013, the highest rate in almost
two years. The fiscal stance weakened sharply in FY13, with preliminary estimates indicating an
increase in the budget to nearly 14 per cent of Gross Domestic Product (GDP) from under eleven
per cent of GDP the year before. Gross public debt (domestic and external) is estimated to have
reached almost 100 per cent of GDP at end-June 2013.
4. Subsidies for fuel consumption remain a major budget burden and have accounted for
18–20 per cent of budget expenditures in recent years, amounting to 5–7 per cent of GDP. Egypt
had developed a two phase fuel subsidy reform program and fully implemented in 2012 its first
phase including a wide range of targeted fuel price increases reducing subsidies for mainly
energy-intensive industries. However, a broader rationalization of fuel subsidies to other
producers and consumers remains work in progress.
5. The Government has been working on containing the economic and fiscal crisis engulfing
the country and the deteriorating public services including nationwide power cuts, chronic fuel
and water shortages, suffocating traffic and accumulating trash in the streets. Under the pressure
of increasing macroeconomic imbalances and the need to seek exceptional balance of payments
and budget financing, the Government continues to consider programs to tackle the legacy of
huge energy subsidies that have distorted the economy and led to an unsustainable fiscal
situation.
2
B. Sectoral and Institutional Context
6. Egypt’s total primary energy demand has grown at an average annual rate of 4.6 per cent
during the last two decades. This high growth is due to the country’s economic expansion,
industrialization, population growth and change life style. Although all energy forms have been
subject to high growth, electricity consumption in particular has increased substantially causing
serious concerns about the power sector’s fuel requirements and imposed an excessive burden on
the Government budget.
7. Oil and Gas Sector. Egypt had a significant level of oil export through the 1980s and
1990s. Total oil production has declined since the country’s 1996 peak of about 935,000 barrels
per day (bbl/d) to current levels of about 685,000 bbl/d.1 In the meantime, domestic oil
consumption has increased steadily absorbing almost all of the oil production since 2006. As a
result, Egypt has become a net importer of petroleum products.
8. In 1976, the Egyptian General Petroleum Corporation (EGPC) was established as a
holding corporation. It owns twelve public sector companies and shares in 58 petroleum
companies with foreign partners. Over the last three years, EGPC faced many challenges in
covering Egypt’s needs in the Oil and Gas sector. These were compounded by the growing
energy subsidies associated with the increasing market needs. This resulted in financial deficits
for EGPC, limiting its capability to import required amounts of oil for the market. In 2002,
EGPC’s total debt stood at half a billion Egyptian pounds (LE). In 2012, that debt exceeded LE
100 billion.
9. Natural gas has substituted oil both in domestic use and in export of energy. During the
1990s, Egypt made substantial new gas discoveries tripling its proven gas reserves. Gas
production tripled from 21 bcm in 2000 to 61.3 bcm in 2010. The rise in gas reserves had led the
Government to promote the domestic use of gas (representing about 70 per cent of production)
and to seek export options in the form of liquefied natural gas (LNG) and piped gas (representing
about 30 per cent of production). It successfully created a domestic market for gas with an
estimated demand of about 50 bcm/year, built three LNG trains with a capacity of 17 bcm/year,
and implemented the Arab Gas Pipeline system with an approximate capacity of 10 bcm/year.
10. Although domestic gas prices were low, the Government offered international oil
companies substantially higher prices in order to create the incentives necessary for upstream
producers to develop existing reserves and explore for new gas reserves. Foreign oil companies
were obliged to sell up to two-thirds of their share of gas to the Egyptian gas company for which
they received a price of US$2.65/MMBtu. This price has been adjusted upwards several times in
recent years and is currently reportedly in the range of US$3.7US$6 per MMBtu.
11. The power sector is a major user of gas, domestically accounting for about 60 per cent of
total demand. The industrial sector consumes about 30 per cent, while the fertilizer and cement
industries account for 10 per cent and 8 per cent, respectively. Natural gas is also delivered to the
1 The decline in crude oil production was even more rapid than the above numbers indicate. Part of this decline has
been compensated by an increase in natural gas liquids. According to the Oil and Gas Journal’s estimate, Egypt’s
total oil production averaged 685,000 barrels per day (bbl/d) in 2009, of which approximately 440,000 bbl/d was
crude oil. This indicates that despite the use of enhanced oil recovery techniques at mature fields, crude oil
production is still declining rather rapidly. At the same time, new natural gas field production has led to increases in
the production of natural gas liquids and lease condensates which have offset some of the declines in total oil liquids
production.
3
residential sector through low pressure pipeline distribution systems and LPG cylinders supplied
by retailers. Combined, they account for 2 per cent of total gas demand but are expected to grow
at a fast pace (about 15 per cent per annum). Finally, the use of Compressed Natural Gas (CNG)
in vehicles accounts for about 2 per cent of total gas consumption
12. The gas sector, which was until a few years ago considered a primary source of Egypt’s
wealth, is in a financially unviable situation while being unable to meet the domestic gas
demand. Presently, the gas sector is experiencing a supply gap of about ten bcm/year. The
Government is considering importing gas in the form of LNG which would cost in excess of
US$10/MMBtu. While the economic cost of insufficient gas supply is well understood, the
financial viability of a gas import proposition is questionable, as long as gas is sold at the
negligible price of US$1/MMMBtu to the electricity sector.
13. Power Sector. The power sector’s financial performance is poor. Over the years, the
Government has invested heavily in expansion of the supply capacity. Consequently, generation
capacity doubled during 2000 to 2010, reaching 24,000 MW, however, this is still insufficient to
meet peak load demand which is growing at seven to eight per cent per annum (p.a.) The
investment requirement for this period was about LE 46.5 billion (US$8.4 billion). A small
portion (US$ 350 million) of the investment was undertaken by the private sector, but the bulk of
the requirements was funded by the public sector and implemented by Egyptian Electricity
Holding Company (EEHC). The Government is the sole owner of EEHC and also the National
Renewable Energy Agency (NREA) that is currently implementing a number of wind and solar
power projects.
14. Power generation capacity includes twelve per cent hydropower while the remaining 88
per cent is based on subsidized natural gas and fuel oil. Reliance on fuel oil increases when there
is a shortage of gas supply. The country’s energy strategy aims at increasing the share of
renewable energy from 12 per cent in 2010 to 20 per cent by 2020. The share of wind power is
expected to reach twelve per cent, while the remaining eight per cent would come from hydro
and solar. This translates into a wind power capacity of about 7,200 MW by 2020. The solar
component at this stage remains limited to plans for development of a 100MW of Concentrated
Solar Power (CSP ) project and 200 MW of Photovoltaic (PV) power projects. It is expected that
40 per cent of wind energy will be developed by the public sector and 60 per cent by the private
sector.
15. The Government recognized the need for reforming the power sector and in the early
2000s, the reorganization and corporatization of the power sector into an Egyptian joint stock
(holding) company under the name of Egyptian Electricity Holding Company (EEHC) was
undertaken. As a result of this reform, the unbundling of generation, transmission and
distribution assets took place (six generation companies, nine distribution companies and the
Egyptian Electricity Transmission Company (EETC) were created, all of which are affiliated and
controlled by EEHC). The EETC operates the transmission system and is the single buyer of
power from all generation companies and the seller of electricity to distribution companies and
large consumers. The Electric Utility and Consumer Protection Regulatory Agency (EgyptERA)
was established in 2001 and began operation in early 2002, however, its authority falls short of
an independent regulatory agency and it does not have the authority to set tariffs. Private sector
investment in generation of power is limited to three Independent Power Producers (IPPs)
developed in the 1990s. Despite these initial reform steps, the reform process significantly
4
slowed down as it approached the financial, governance, management and operations
performance of the power sector and its utilities.
16. A new electricity law was drafted in 2008 and approved by the Cabinet of Ministers, but
was not presented for Parliamentary ratification. The draft law is expected to be presented for
approval when the new Parliament is elected. The draft electricity law was designed to allow
significant changes in the electricity sector market structure, governance and operations and in
how the sector is financed and electricity is supplied to consumers, including emphasis on the
development of renewable resources and energy efficiency. Key elements of the law include:
A mandate to the Regulatory Agency to promote private investment in generation and
distribution activities within the context of a competitive market and with due regard to
consumer interests.
A mandate of the Regulatory Agency as the entity responsible for tariff setting.
Creation, in stages, of a two-tiered electricity market, with a competitive market for
eligible customers (extra high voltage and high voltage customers free to choose among
electricity suppliers on a bilateral contract basis) and a regulated market for ineligible
customers (low voltage customers who are not free to choose among suppliers).
Separation of EETC into a Transmission System Operator that grants third party access to
the network and while also acting as the single buyer and seller of wholesale electricity.
Establishment of a feed-in tariff for renewable energy to encourage private sector
participation.
17. The Need for Subsidy Reform. Energy subsidy reform is essential for Egypt because the
country is no longer the plentiful oil and gas producer it was, while also facing an unsustainable
fiscal deficit. Energy subsidies are known to: (a) result in inefficient use of energy resources and
distortion in related technologies; (b) benefit the rich who consume the major share of the
subsidized energy; and (c) impose a heavy burden on the Government budget and jeopardize
fiscal sustainability. Although all these issues are of serious concern, the immediate issue is
fiscal unaffordability of energy subsidies, and hence the need for immediate reform. Since the
2005-2006 fiscal year, the first time in which subsidies for petroleum (oil and gas) fuels started
to be accounted for in the budget, subsidies in Egypt have increased from about LE 45 billion
(equivalent to about US$ 7.2 billion) in 2005-2006 fiscal year to LE 66 billion (equivalent to
US$ 11.8 billion) in the 2009-2010 fiscal year and to LE 95.5 billion (equivalent to about US$
16 billion) in 2012.
5
Figure 1 Energy subsidies represent a significant fiscal drain
Source: World Bank Staff calculations based on Egypt Arab Republic’s Ministry of Finance data
18. The high budget burden of energy subsidies is indicated by the fact that these subsidies
accounted for about 7 per cent of GDP in 2012, while also exceeding the combined expenditures
on health and education (Figure 2).
Figure 2 Fuel Energy Subsidies crowd out social expenditures
Source: World Bank Staff calculations based on Egypt Arab Republic’s Ministry of Finance data
19. Recognizing the budget burden of fuel subsidies, the Government developed in 2012 a
program aimed at reforming electricity tariffs and fuel subsidies. This program will be
implemented in two phases of which the first phase is fully implemented.
20. Phase 1, that started in November 2012 involved a broad range of reforms for petroleum
products and electricity tariff:
Increase in heavy fuel oil price from LE 1,000 to LE 2,300 including for the electricity
sector.
6
Increase in natural gas price for households, keeping the first block (up to 30 cubic
meters per month) unchanged and increasing the price of the second block by about 50
per cent, and 25 to 44 piasters2 for the electricity sector.
Increase in electricity tariffs by 15.6 per cent on average, and a budgetary transfer to
compensate the electricity sector for the increase in input costs (heavy fuel oil and natural
gas). For households, the first tariff block (up to 50kwh) remained unchanged, while the
price for the second block (50-200kwh per month) increased by 9.1 per cent. The highest
block (over 1000kwh) saw a price increase of 39.6 per cent. Prices for commercial users
rose 15 per cent.
Elimination of the subsidy for Octane 95 gasoline, by bringing its price from LE 2.75 to
LE 5.85.
New distribution system for LPG cylinders was developed and piloted in a few
governorates. An increase of LPG prices became effective April 2013 – the new retail
price for a 12.5 kg cylinder has increased to LE 8 and for 25 kg cylinders to LE 16.
21. Phase 2 is under development and would tackle the sale of gasoline and diesel to the
transport sector through deployment of smart card schemes initially intended for fuel
management and distribution which in later stages could be used for rationing subsidized
gasoline and diesel quantities. Further to these measures, the Government of Egypt is very keen
to develop a comprehensive energy pricing strategy that ensures price levels are reflective of the
economic costs of different fuels and explicitly considers carefully and effectively manages the
potential negative impacts of subsidy reform on the economy as a whole and on vulnerable
customers, in particular.
22. Social Safety Nets. Reforming energy subsidies should go hand-in-hand with reforming
Egypt’s social safety nets, whose consolidation is needed both for providing better protection to
the existing poor and vulnerable families as well as \ mitigating adverse impacts of energy
subsidy reform. Subsidies reforms pose formidable challenges as the proportional adverse
impact of energy subsidy removal is expected to be the greatest for the poor, even though the
rich receive the highest share of the subsidy. According to the results of the recent household
surveys, energy subsidies represented over twelve per cent of household expenditure for the
bottom quintile, while the corresponding percentage for the top quintile is less than nine per cent.
Studies have shown that female-led households use a higher average percentage of their income
for purchasing energy than male-led households because of their lower income. Therefore,
reforming safety nets will have important gender dimensions to consider.
23. Egypt lacks a well-designed social safety net (SSN) that can provide a mechanism for
mitigation against adverse impacts of fuel subsidy reform programs that would be developed and
implemented by the Government. The current social safety net programs, including the main
cash transfer program called Social Solidarity Pension, have a number of weaknesses, including
fragmentation and poor coordination; low coverage of the poor and vulnerable including
consideration of gender dimensions; weak links to promotion of human capital; low poverty
impact; and social and economic inefficiency. Beyond the economic rationale, there is also
political and social pressure for the new Government to deliver on the promises of the 2011
revolution. A recent opinion survey shows that Egyptians’ satisfaction with their government
2 1 LE = 100 piasters
7
efforts to help the poor are among the lowest in the region, while the need for Government
services is among the highest.
24. Reforming and strengthening the fragmented SSN system is key. This requires improving
targeting of SSNs, and consolidation of existing SSN programs into a more efficient one that
would allow the Government to provide a larger and more meaningful benefit to the poor. A
well designed cash transfer program (CTP) that could provide an effective mitigation mechanism
against any adverse social impact of any fuel subsidy reform strategy developed under this
technical assistance. International experience shows that having one comprehensive program,
designed to reach different segments of the poor and vulnerable, can address current
vulnerabilities and social protection gaps, by increasing coverage, improving targeting,
increasing benefit size and reducing duplications. Currently, there is a decree pending with the
Office of the Prime Minister to establish a cash transfer program (CTP) that targets the poor and
vulnerable. The decree will pave the way to reform and consolidate the existing fragmented SSN
programs.
25. The first step in the reform process is to develop a database of the poor and vulnerable.
This would start by combining existing databases, such as the ration cards database that is
managed by the Ministry of State for Administrative Development (MSAD). Other databases,
like the traffic office, and the electricity bills, can be used to eliminate non-poor and ineligible
households from the ration card database. The MSAD, which currently manages the database of
the food ration/smart cards with about 17 million families, is in the best position to perform this
task. By combining this data with other databases, a large number of the poor can be identified.
Therefore the proposed technical assistance would support MSAD in establishing such database
which could target vulnerable consumers to mitigate impact of fuel subsidy reform. The
database would be used to roll out a long term and poverty targeted CTP, ensuring a sustainable
safety net for the poorest and most vulnerable families.
26. Rationale for Support from the Transition Fund and Bank Involvement. The
availability of reliable energy supply is not only considered a pre-requisite for economic growth
but also for attracting private sector investments in the country. Although Egypt was earlier
considered an important exporter of oil and gas, it is now struggling to meet its own energy
needs. The unreliability of energy supply threatens the already fragile prospects for economic
expansion, job creation and social prosperity, with severe, frequent and wide-spread electricity
shortages having been experienced in the last three years. The shortage of electricity supply is in
turn caused by the lack of sufficient availability of natural gas to fuel the country’s power plants.
27. Subsidy reform can have a significant impact on the fragile socio-political situation in
Egypt today, and formulating policies and programs to develop social safety nets to soften the
blow of subsidy reforms on the poorest, is of high priority and relevance.
28. The above complex picture of gas and electricity financial unviability has led the
Government to consider preparation of a transformation plan that comprises three interrelated
tracks: (i) reforming energy subsidies through a coordinated program of price adjustments; (ii)
moving away from a subsidized public supply of electricity and gas to a public-private supply
that would operate on a commercial basis with transparent and targeted subsidy when and where
needed; and (iii) putting in place a social protection scheme that would protect the vulnerable
groups of the Egyptian population. The transformational work required to underpin each of these
tracks will need to be prepared and implemented in a well-designed and consistent manner.
8
29. The technical assistance proposed by the Government of Egypt for financing by the
MENA Transition Fund will focus on pursuing the above three tracks of transformation through
three components:
Component 1: Power Sector Institutional Development and Financial Viability
Component 2: Energy Pricing and Fuel Switching Reform Technical Assistance
Component 3: Social Safety Nets (SSN) Strengthening Technical Assistance
30. To ensure that activities under the program are well coordinated, the Government of
Egypt has formed a high level multi-sectorial steering committee under the chairmanship of the
Ministry and Energy represented by its first undersecretary to lead the program and with
participation of senior representatives nominated by stakeholder ministries. In each of these
components the proposed program takes account of the work supported by other donors and
identifies the required assistance for formulating policy and implementation plans. It is
particularly noted that the European Union (EU) is funding a series of partnerships with Egypt to
strengthen the reform mechanism. A main program is the EU Energy Sector Policy Support
Program (EU ESPSP) that aims at improving the policy and regulatory framework in the gas
sector, promote energy efficiency, mitigate greenhouse gas (GHG) emissions, and update
Egypt’s long term energy strategy. A parallel technical assistance will be provided by the EU to
EgyptERA to strengthen its institutional capacity for implementation of the electricity law. The
EU in partnership with the German, Kreditanstalt für Wiederaufbau (KfW) is also supporting the
preparation of the Egypt Renewable Energy Master Plan.
31. The proposed technical assistance also builds on the energy program supported by the
World Bank in the power and gas sectors, which is contributing to the security and reliability of
electricity supply, development of renewable energy, and scaling up natural gas connection to
households. The World Bank has furthermore provided technical assistance including studies on
energy pricing, generation planning, energy efficiency as well as sector governance and
transparency. This technical assistance draws upon the range of previous activities, while
focusing on formulating implementable action plans to move the energy sector towards long-
term sustainability.
32. The rationale for the World Bank support for this technical assistance, by acting as its
Implementation Support Agency (ISA) as requested by the Government of Egypt, is to continue
the Bank’s partnership in developing the energy sector in Egypt by utilizing the extensive
experience that the Bank has in implementing sector reform in difficult transitional stages.
Furthermore, the proposed component under this technical assistance for strengthening the social
safety nets in Egypt by consolidating databases of the poor and vulnerable will complement the
ongoing dialogue related to governance and social safety nets. One of the areas of focus of the
Bank support is protection of the poor and vulnerable from the impact of ongoing economic
reforms and strengthening the social safety net in Egypt. Among the policy actions to be
supported is the introduction of a CTP targeting the poor and vulnerable, given the fragmented
nature of existing social safety net programs and their poor targeting, coverage, and the adequacy
of benefits, thereby laying the foundations for mitigation against the adverse impacts of the fuel
subsidy reform measures through future CTPs.
9
C. Higher Level Objectives to which the Project Contributes
33. The proposed project is consistent with the World Bank Group’s Interim Strategy Note
(ISN) FY13- FY14 (Report 66443-EG) for Egypt discussed by the Board of Executive Directors
in June 2012 and supports its three pillars of: (i) economic management (ii) jobs; and (iii)
inclusion.
34. The proposed project supports mainly the objectives of the first and third pillars by
identifying barriers to, and setting strategic plans for, energy sector reforms in order to ensure a
sustainable growth of the energy sector and hence the economy; promote an enabling
environment for private sector participation in energy sector development; and reduce the fiscal
burden of fuel subsidy on the Government deficit while mitigating its social impact on
vulnerable and poor households. The proposed project also supports the objectives of the MNA
Regional Update presented to the Board of Executive Directors in February 2013 and in
particular its pillars of governance strengthening and economic and social inclusion.
35. The proposed project with its three tracks of transformation aiming to reform the fuel
subsidy in Egypt while improving the financial viability of the energy sector institutions and
strengthening the social safety nets, conforms with eligible activities supported by the MENA
Transition Fund. It is also consistent with the Fund objective of supporting country-led policy
and institutional reforms for strengthening governance and public institutions and fostering
sustainable and economic growth.
II. PROJECT DEVELOPMENT OBJECTIVES (PDO)
A. PDO
36. The objective of the project is to strengthen the Government of Egypt’s capacity to (i)
design a comprehensive fuel subsidy reform strategy, (ii) establish concrete measures for
improved financial viability of key energy sector actors; and (iii) identify households that would
be most vulnerable to the impacts of the fuel subsidy reform.
Project Beneficiaries
37. The ultimate beneficiaries of the development and successful implementation of these
reforms will be the people of Egypt. Sustainable development of the energy sector is a key
driver of economic growth and a reduced fiscal burden of fuel subsidy system would allow the
Government to achieve greater fiscal sustainability and the space to invest more in pro-poor
programs and in productive economic sectors to improve the standard of living of the population.
A more targeted SSN system will benefit the most vulnerable groups of the population including
women.
38. Primary beneficiaries will be the Ministry of Electricity, EEHC, Ministry of Petroleum,
Ministry of State for Administrative Development, Ministry of Finance and the Prime Minister’s
Office who will benefit from the capacity building and implementation support activities
provided under the proposed technical assistance. The proposed activities would help improve
the overall performance and productivity of their organization and staff in developing and
implementing sector reform and efficiency improvement strategies.
PDO Level Results Indicators
39. The project development objective will be measured using the following indicators:
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(i) Reform options analyzed to improve the financial viability and governance of
EEHC is prepared;
(ii) The long term strategy for the fuel supply to power generation is prepared;
(iii) An action plan is prepared for (1) the establishment of an Energy Efficiency Unit
at the Ministry of Electricity and (2) for at least two of the energy efficiency
projects in NEEAP
(iv) A comprehensive energy pricing and fuel switching strategy for Egypt including
detailed action plans for compensatory measures to mitigate the impact of subsidy
removal is developed;
(v) A communication strategy for fuel subsidy reform including public consultation is
prepared;
(vi) A database of the poor and vulnerable is developed with 10 million of households
registered in the new poverty database; and
(vii) Direct project beneficiaries (number3), of which female (per cent)
III. PROJECT DESCRIPTION
A. Project Components
40. The Project will include the following three components:
a) Component 1: Power Sector Institutional Development and Financial Viability (US$ 2.7
million): Provision of technical assistance to: (i) support the analysis of reform options by
developing a concrete action plan to improve the financial viability and management of
the electricity utilities in Egypt and their governance structure; (ii) develop effective
strategies including implementation plans for fuel to power generation entities; (iii) develop
an action plan to establish an energy efficiency unit housed at Ministry of Electricity and
Energy (MOEE) to implement the National Energy Efficiency Action Plan (NEEAP) for the
electricity sector; and (iv) support the Project Management Team to carry out its functions.
The following subcomponents will be financed under this component:
(i) Subcomponent 1.1: Electricity Utilities Financial Management and Governance
(US$ 1.25 million). This subcomponent will include a comprehensive analysis and
assessment of the current structure of the public sector power utilities (EEHC and
affiliated companies) including organizational, governance, financial and accounting
management, and performance monitoring and evaluation. The assessment will propose
options for the power utilities to improve their organization and corporate structure,
financial management and governance structure. The capacity building and training
programs should be designed and detailed by the main consultancy assignment
developing the required assessment and action plans. Capacity building and training
programs can be initiated in part by the main consultancy assignment, as well as by
follow up consultancy services.
3 Direct project beneficiaries are staff of the stakeholder ministries and utilities that we will be receiving capacity
building through training, workshops, study tours, etc. which will be covered under the subcomponents of this
technical assistance.
11
(ii) Subcomponent 1.2: Fuel to Power Strategy (US$ 0.75 million). This subcomponent
will support the development of a long term strategy to inform the Government in
formulating and undertaking reforms related to efficient, sustainable fuel and gas supply
for power generation.
The subcomponent will support the Government to analyze options to upgrade fuel
transmission infrastructure, taking into consideration environmental aspects, to cope with
increasing local demand, as well as reviewing the electricity sector generation and
investment plan in view of fuel allocation, availability and impact of renewable energy,
as well as energy efficiency considerations. The analytical support under this component
will inform Government efforts to formulate draft policies required for gas allocation to
power generation, and other industrial sectors, as well as gas pricing and contracting
mechanisms to both public and private generation. The Ministry of Petroleum is planning
to establish a regulatory agency for the gas sector and restructuring the gas market to
enable private sector participation in the supply of gas (including imports) to satisfy
increasing local demand.
(iii) Subcomponent 1.3: Action Plan for the Establishment of an Energy Efficiency Unit
at the Ministry of Electricity and Energy (MOEE) (US$ 0.5 million). This
subcomponent will support the development of an action plan to establish an energy
efficiency unit that could be housed at MOEE4 which would have as its primary objective
the implementation of the National Energy Efficiency Action Plan (NEEAP) for the
electricity sector. The responsibilities of the proposed unit will include, among others,
(a) administering energy efficiency funds allocated to NEEAP; (b) monitoring and
evaluating implementation of NEEAP activities;, (c) aggregating the electricity sector
energy efficiency data at the national level and developing and monitoring sectorial
energy efficiency indicators and targets; (d) designing and implementing policies and
programs to meet the energy efficiency targets; and (e) developing organizational plans
and long-term capacity building programs for scaling up implementation of Energy
Efficiency (EE) activities in the electricity sector.
This subcomponent will support engaging local and, as needed, international consultants
in support of the establishment of the energy efficiency unit at the MOEE and the
preparation its various activities. The subcomponent will also support supply of
Information Technology (IT) equipment and databases for the operations of the energy
efficiency unit.
(iv) Subcomponent 1.4: Implementation Support to the PMT (US$ 0.2 million). This
subcomponent will provide support to the Project Management Team (PMT) in
implementation of the proposed technical assistance. The support will be limited to
consultancy services to build the capacity of the PMT in undertaking its responsibilities
and for the preparation of the required project annual audit reports.
4 The recommended energy efficiency institutional framework for Egypt consists of specialized energy efficiency
units to be created in each of the major consuming sectors with a central energy efficiency unit (CEEU) being the
main coordination body to lead and coordinate the nation’s Energy Efficiency (EE) agenda. The CEEU will
coordinate all energy efficiency activities of the various “energy consuming” ministries/sectors and in particular the
energy efficiency units at the line ministries. The CEEU is established as part of the Prime Minister office and a
new technical assistance is being mobilized by the EU to support capacity building of the CEEU and implementation
of its activities including coordination with energy efficiency in line ministries.
12
b) Component 2. Energy Pricing and Fuel Switching Reform Technical Assistance (US$
1.8 million). Provision of technical assistance to: (i) developing a comprehensive strategy for
energy subsidy reform, and measures to mitigate impact of reforming energy subsidy; and (ii)
developing a communication strategy for energy subsidy reform. The following
subcomponents will be financed under this component:
(i) Subcomponent 2.1: Energy Pricing and Fuel Switching Reform Strategy (US$ 1.5
million). This subcomponent will develop a comprehensive strategy to phase out energy
subsidy including assessment of the effects of such strategy on the economy, specifically
on GDP, inflation, employment, including any gender considerations, as appropriate as
well as impact on various economic sectors.
The analytical work under this subcomponent will simulate the direct and indirect
impacts of energy subsidy removal throughout the economy, through backward and
forward linkages in order to identify the sectors that are expected to be most affected
from high amount of subsidized fuel used production processes, and the appropriate
mitigation and compensatory measures needed. The analytical work will also assess the
differential impacts of energy subsidies across categories of users/vulnerable groups,
particularly related to gender to ensure the effectiveness of the proposed mitigation
measures. The analysis will be translated in a detailed action plan for each relevant
stakeholder group. This subcomponent will finance consultancy services to undertake the
above assessment and to develop a road map and detailed plan for the subsidy reform.
(ii) Subcomponent 2.2: Development of a Communication Strategy for Fuel Reform
(US$ 0.3 million). The Government needs to ensure stakeholder and public awareness
and engagement with the reform agenda through broad strategic communication that
mitigates or reduces the risks for the implementation of reform. This subcomponent is
expected to deliver a communication strategy and communication road-map. The
strategic communication component will also offer consolidated internal arrangements
for communication of reforms.
In the earlier stages of the subcomponent’s implementation, areas for coalition building
and collaborative engagement among the different stakeholder groups will be identified.
Coalition building efforts will include defining and undertaking general consultation
processes as well as targeted consultations and message testing. The strategy will also
include assisting in launching the communication and awareness campaign to inform
public opinion about the need for change and the compensating measures that will be
undertaken. Given the inter-linkages in the objectives and scope, the communication
strategy will be developed in close coordination with the pricing strategy (component
2.1) and the safety nets mitigation measures (Component 3) in order to offer strategic
communication and sequencing options (from a political economy perspective).
c) Component 3. Strengthening Social Safety Nets (SSN) Technical Assistance (US$ 2
million). Provision of technical assistance to: (i) develop database of the poor and
vulnerable; (ii) undertake baseline survey of beneficiary families; and (iii) establish
Technical Working Unit (TWU) to support social safety net reform. This component supports
strengthening social safety net systems in Egypt through measures aimed at improving
targeting and consolidation of existing fragmented SSN programs and development of a
database of the poor and vulnerable with attention to gender aspects as appropriate. The
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proposed activities under this subcomponent include analysis of the distribution of family
smart cards to assess card coverage and access, the carrying out of baseline surveys and
consolidation of household databases. The Ministry of State for Administrative
Development (MSAD) will be the main counterpart and lead of this component.
This component and in particular sub-component 3.3 envisages the issuance by the Prime
Minister’s (PM) Office of a decree to establish a new CTP that targets the poor and
vulnerable. The decree would establish a ministerial level committee to oversee the
preparation and introduction of the CTP and to develop a vision and strategy for the social
protection system over the medium term. The following subcomponents will be financed
under this component:
(i) Subcomponent 3.1: Support the Establishment of the Database of the Poor and
Vulnerable (US$ 1.1 million). The activities under this subcomponent will support the
development of a database of the poor and vulnerable. The Ministry of State for
Administrative Development (MSAD)5 has designed, implemented, and operated, an
electronic system, referred to as the Family Smart Card System (FCS) database. The FCS
is being used to provide citizens with different support services, such as food ration
subsidies, pensions, and LPG subsidies using smart cards. The FCS database has close to
18 million families receiving various benefits. However, the FCS needs to be refined in
order to make it useful for targeted social assistance programs, such as a CTP. As the
FCS database contains nearly 80 per cent of the population of Egypt, the information in
the other databases will be used to filter out from the FCS database families that are
ineligible for SSN programs targeted to the poor through characteristics that show, by
proxy, their likelihood of ineligibility for enrollment. The purpose of this assignment is to
support MSAD’s efforts to develop database of the poor drawing on the FCS database.
(ii) Subcomponent 3.2: Baseline Survey of Beneficiary Families (US$ 0.4 million).
Under this sub-component, the design and collection of nationally representative baseline
data will be undertaken to gauge the efficiency in social service delivery as well as the
impact on the beneficiaries of the ongoing and planned reform programs. The survey
will establish a baseline for monitoring and evaluating the medium-term and long-term
impacts of these reform initiatives.
(iii) Subcomponent 3.3: Establishment of Technical Working Unit (TWU) to Support
SSN Reform (US$ 0.5 million). This sub-component will support the Government in
establishing and financing a technical working unit of three to four professionals under
the auspices of the Office of the Prime Minister. The TWU will support the committee in
charge of overseeing the preparation and introduction of the CTP and developing a
medium term social protection strategy and vision.
41. Draft Terms of References (ToRs) for all the Project subcomponents have been prepared
in consultation with the Bank.
B. Project Financing
42. This technical assistance project will be financed by an Investment Project Financing
grant from the MENA Transition Fund in the amount of US$ 6.5 million. The grant will be
5 With the coordination of the Ministry of Supply and Internal Trade, Ministry of Insurance and Social Affairs, and
Ministry of Petroleum.
14
recipient executed in accordance with applicable World Bank and the MENA Transition Fund
policies and procedures.
Project Cost and Financing
43. Indicative project costs and financing per components are summarized in Table 1:
Table 1: Indicative Project Cost and Financing
Project Components Project
cost
MENA
Transition
Fund
Financing
% Financing
(including
taxes)
1. Power Sector Institutional Development
and Financial Viability
2.7 2.7 100%
(i) Electricity Utilities Financial
Management and Governance
1.25 1.25 100%
(ii) Fuel to Power Strategy 0.75 0.75 100%
(iii)Action Plan for the Establishment of an
Energy Efficiency Unit at the Ministry
of Electricity and Energy
0.5 0.5 100%
(iv) Implementation support to the PMT 0.2 0.2 100%
2. Energy Pricing and Fuel Switching
Reform Technical Assistance
1.8 1.8 100%
(i) Energy Pricing and Fuel Switching
Reform Strategy
1.5 1.5 100%
(ii) Development of a Communication
Strategy for Fuel Reform
0.3 0.3 100%
3. Strengthening Social Safety Nets (SSN)
Technical Assistance
2.0 2.0 100%
(i) Support the Establishment of the
Database of the Poor and Vulnerable
1.1 1.1 100%
(ii) Baseline Survey on Beneficiary
Families
0.4 0.4 100%
(iii)Establishment of Technical Working
Unit to Support SSN Reform 0.5 0.5 100%
Total Project Costs 6.5 6.5 100%
Total Financing Required 6.5 6.5 100%
44. The project will mainly finance local and international consultancy services, training,
seminars, study tours and goods limited to IT equipment and software.
45. The MENA Transition Fund financing of the proposed project is complemented by in-
kind financing provided by the Government of Egypt in terms of staff and financing for
additional IT systems necessary for required for capacity building and institutional development
under this technical assistance and which will not be financed by the Transition Fund. In parallel,
the EU is supporting energy sector reform programs through a technical assistance in the amount
of 6 million Euros.
15
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
46. The proposed technical assistance was submitted by the Ministry of International
Cooperation for financing to the MENA Transition Fund and was approved by the Transition
Fund Steering Committee on May 15, 2013. The Implementing Agency of the technical
assistance Grant will be the Ministry of Electricity and Energy. The envisaged implementation
arrangements for the Project are shown in Figure 3.
Figure 3: Implementation Arrangements
47. A multi-sectoral Project Steering Committee (PSC) has been established to provide
strategic direction for the technical assistance and support, coordinate, and make resources
available for implementation of its components with various line ministries, government
authorities and national programs. The PSC will monitor the implementation progress according
to semi-annual progress reports prepared by the Project Coordinator, approved by the PSC, and
submitted to the World Bank. The PSC will also recommend to the line ministries and
government authorities implementation plans and sector strategies that would be developed by
the technical assistance.
48. To ensure timely and efficient project implementation, the Ministry of Electricity and
Energy has also appointed a Project Management Team (PMT) headed by a Project Coordinator
(PC) who will be the key interlocutor for the Word Bank team and for coordinating the
implementation of Technical Assistance (TA) activities with the PSC, line ministries and
government authorities. The PMT comprises a legal advisor, the technical leads of the technical
assistance subcomponents, a Procurement Officer, and a Financial Officer who will be
responsible for handling in accordance of World Bank procedures and guidelines all aspects of
the financial and procurement issues related to the technical assistance project.
49. The PC will coordinate the Project implementation with the subcomponent leads
appointed for each of the subcomponents. The subcomponent leads will be responsible for the
Project Steering Committee
Power Sector Institutional Development and Financial Viability
Component Lead: Ministry of ElectricityTechnical Team
Project Management Tam• Project Coordinator• Procurement Officer• Financial Management Officer• Legal Advisor• Subcomponent Leads
Energy Pricing and Fuel Switching Reform
Component Lead: Ministry of PetroleumTechnical Team
Social Safety Nets Strengthening
Component Lead: MSADTechnical Team
16
design and preparation of the Terms of Reference of the activities included under their
subcomponents, participation in the consultant selection process with the Procurement Officer,
facilitation and supervision on a day to day basis the consultant activities, recommending for
PC approval, the release of payments of the consultants’ deliverables according to the signed
contract as well as the receipt/inspection and acceptance of goods that could be financed by the
technical assistance project.
50. The Procurement Plan, dated November 13, 2013 has been agreed upon and an
Operational Manual (OM) approved by the Bank. The OM describes the Project implementation,
arrangements for inter-ministerial coordination, organization, roles, responsibilities, and the
financial management, procurement and disbursement arrangements.
B. Results Monitoring and Evaluation
51. The agreed Results Framework and monitoring arrangements are described in Annex 1.
The PMT in coordination with the technical leads of the Project subcomponents will be
responsible for monitoring the progress against the agreed performance indicators included in
Annex 1 and accordingly report to the World Bank. Semi-annual reports on the Project
implementation will be prepared and submitted by the PMT to the PSC and World Bank as
agreed during Negotiations and indicated in the Grant Agreement. Based on the Bank’s review
of the semi-annual reports and outcomes of the supervision missions, measures will be taken by
the PSC and PMT to ensure the Project’s subcomponents are completed without delay and
achieve their planned results. The gender impact of the proposed technical assistance will also be
closely assessed and monitored by ensuring that the terms of reference and outputs of the
analytical activities incorporate as necessary gender dimensions.
C. Sustainability
52. The Government has shown strong interest in dealing with the fiscal impact of fuel
subsidies and started implementing a two phase program aimed at reducing energy subsidies to
select sectors and consumers. The Government is keen on developing a more comprehensive
strategy for phasing out fuel subsidy over a transitional period and strengthening of the social
protection system. Faced with emerging shortages of fuel and electricity supply, the
Government would like to develop and implement programs for improving the energy sector
performance and maintaining the reliability of electricity services to consumers.
53. The participating ministries have shown strong ownership of their perspective
subcomponents and have been involved from inception in the design of the technical assistance
and implementation arrangements. The World Bank will maintain close coordination among the
participating ministries to for successful implementation of the technical assistance and to ensure
sustainability.
17
V. KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings Summary
Table 2: Risk Ratings Summary
Stakeholder Risk High
Implementing Agency Risk
- Capacity Substantial
- Governance Substantial
Project Risk
- Design Moderate
- Social and Environmental Moderate
- Program and Donor Low
- Delivery Monitoring and Sustainability High
Overall Implementation Risk High
B. Overall Risk Rating Explanation
54. The overall implementation risk is assessed as high. Implementation of the technical
assistance will require close coordination between the participating ministries including
sustained ownership and commitment of the Government to support policies and reform
programs, especially related to fuel subsidy, that would be developed under this technical
assistance and therefore the implementation risk is rated high.
55. The main risks to this technical assistance are: a) the Project seeks to build capacity in a
wide-ranging and sensitive reform program in a fluid economic and political environment (b) a
weakening in the Government support for implementation of policy, regulatory, governance, and
fuel subsidy reform measures that would be recommended and produced as outcomes of this
technical assistance; b) the Project will be implemented by a new and inexperienced Project
Management Team (PMT) that has limited exposure to the World Bank’s procedures, with
limited experience with fiduciary implementation; c) the implementation will require very close
coordination and cooperation between several sector ministries especially in undertaking the
subcomponents related to fuel subsidy reform and fuel to power strategy and d) Procurement
Capacity Assessment of the MOEE concluded that MOEE over the past decade did not perform
any selection of consultant activities and procurement activities was limited to office supplies
and stationary.
56. These risks are mitigated by the fact that the scope of this technical assistance has been
proposed and fully owned by participating ministries and that the implementation arrangements
include establishment of a multi-ministerial Project Steering Committee. The committee will
play an important role in keeping ownership and commitment of key stakeholders throughout the
design and implementation of the technical assistance and will ensure that the PMT will be
provided the sufficient resources and coordination mechanisms to implement the technical
assistance.
18
57. Furthermore, the PMT team including Procurement and Financial Management Officers
have already been designated and will receive extensive training on Bank procurement and
financial management procedures. The risk to the Project related to the capacity of the
counterpart will be mitigated by proper Bank implementation support and regular training
provided to the PMT on Bank procedures.
58. Finally, there is a reputational risk in the event that the envisaged recommendations
relating especially to fuel subsidy reform are not implemented effectively and efficiently. While
the risk is partly mitigated by the fact that the Bank is providing policy options for consideration
by the Government based on best international practices, and the Government is ultimately in the
driver’s seat regarding the choice of policy, the risk cannot be mitigated in its entirety.
Furthermore, the design of the technical assistance which includes development of a public
outreach and communication strategy will ensure full participation of relevant stakeholders
including consultation with and information dissemination to the public. The Bank team
preparing and supervising the technical assistance will include a Bank communications specialist
to advise the team and counterparts on public awareness and consultation and monitor and
mitigate the likelihood of a reputation risk to arise.
VI. APPRAISAL SUMMARY
A. Economic and Financial Analyses
59. The rationale for public provision: Egypt is at a critical juncture with some
fundamental and profound socio-political and economic transformation underway, and with
many underlying challenges that await resolution. Popular unrest continues to simmer and is only
exacerbated by the country’s existing economic fragility. A sharp deterioration in the fiscal
position, a rapidly growing budget deficit (projected to reach 12 per cent of GDP in FY13),
serious deterioration in public service delivery, national power cuts and chronic fuel and water
shortages, present an urgent case for rapid intervention. The proposed project seeks to support
Government of Egypt's efforts at socio-economic transformation via an ambitious agenda
including measures aimed at reform of the fuel subsidy in Egypt while improving the financial
viability of the energy sector institutions and strengthening social safety net system for
mitigating the impacts on the poor and vulnerable.
60. The value-added of the World Bank: The World Bank, a long-standing development
partner with substantial international experience of assisting in the reform of energy subsidies
accompanied by appropriate social protection measures, is well-placed to provide a program of
timely and targeted support that will assist the Government in identifying options to reform
energy subsidies through a coordinated program of price adjustments; supporting a transition
from state-subsidized energy provision to a more transparent public-private model; putting in
place social safety net protections to address the poorest and most vulnerable, including women
who would otherwise be disproportionately affected by any reduction in energy subsidies.
61. The World Bank support for this proposed technical assistance will continue the Bank’s
partnership in developing Egypt’s energy and social protection sector. The proposed technical
assistance builds on the Bank’s energy program in the country and draws upon lessons learned
from the previous wide range of activities supported by the Bank, while focusing on formulating
options to move the energy sector towards long-term sustainability. Furthermore, the proposed
component under this technical assistance for strengthening the social safety nets in Egypt by
19
consolidating databases of the poor and vulnerable will complement the ongoing dialogue related
to governance and social safety nets.
62. The impact of the Project: There is a strong case to be made for the proposed project,
principally that the evolving fiscal situation is unsustainable and that, if left unresolved, the
impact would be significant and severe, particularly on the poor. Viewed in the context of the
guidance and assistance being provided by Egypt’s other development partners, the proposed
technical assistance program has the potential to contribute to greater fiscal stability while also
supporting the Government's commitment to address the country's most pressing economic and
social needs.
63. Improving the economic and financial viability of the electricity sector through reforming
fuel subsidy is expected to bring significant benefits in terms of improved service delivery.
When fully implemented, such a reform makes the electricity subsidy explicit, transparent and
accounted for in the budget rather than leaving it as contingent liability. Therefore, improving the
electricity sector transparency and public management and the financial sustainability of EEHC.
Additional benefits for the economy are expected to derive from the reduction of the fiscal
burden of subsidies, the expected reduction in consumption and the related environmental
benefits. In addition strengthening social safety net (SSN) will provide a mechanism for
mitigation against adverse impacts of fuel subsidy reform programs developed and implemented
by the Government.
B. Technical
64. The Project components were identified by the beneficiary ministries and from detailed
reviews carried out by the Bank. The Project design and selection of components also assume a
holistic approach to improving the financial viability of the electricity sector while reforming
fuel subsidy and strengthening social safety nets for the poor. Under each of the Project
components, the proposed program takes account of the work supported by other donors and
identifies the required assistance for formulating policy and implementation plans. Draft terms of
reference for the Project components have also been prepared and will further be revised to
ensure completeness before the request of proposals are issued.
C. Financial Management
65. An assessment6 of the Financial Management (FM) arrangements for the envisaged
Project was undertaken in March 2013 to assess the capacity of the proposed implementing
entity of the Project and assist in determining the required FM arrangements for the
implementation of the Project. The proposed implementing entity for this project is the Egyptian
Ministry of Electricity & Energy (MOEE).
66. The Project’s implementation arrangements were discussed at length with the evaluation
of all FM options to be applied during implementation and their impact on the various
stakeholders under the Project. The Project activities will be implemented by a PMT within
MOEE which has the overall responsibility for Project oversight, coordination, and
implementation.
67. At the country level, FM risk is considered as substantial due to the stagnant Public
Financial Management (PFM) reform agenda for several years. The main challenges affecting
6 The assessment was conducted during meetings held with the MOEE Head of International Cooperation &
Agreements Department.
20
the FM risk at the country level, as assessed by the 2009 PEFA report and the 2008 CFAA, are a)
weak intricate internal control system; b) absence of Government Financial Management
Information System (GFMIS); c) lack of transparency; and d) weak regulatory framework and
capacity of the Egyptian Supreme Audit Institute. The current political and post revolution
changes in the country represent an opportunity for tackling the PFM reform agenda provided
that the Government becomes more engaged in the PFM reform.
68. At the Project level, FM risk is considered substantial before mitigating measures due to
the lack of previous experience within the implementing entity.
69. To mitigate the FM risks, the following mitigating measures have been agreed upon:
A PMT within the MOEE is assigned to assume the FM responsibility of the
envisaged project. It includes a Financial Management Specialist and a Financial
Officer, both of adequate expertise and appropriate capacity to carry on the required
tasks.
The PMT has developed an FM manual for the new project. The manual elaborates
on the cycles pertaining to reporting, recording, reviewing and approving the
Project’s transactions.
The PMT will be using spreadsheet applications to report on the Project activities and
generate the semiannual Interim Financial Reports (IFRs). The Project reports will
reflect the financial status of the grant as at the issuance date. All original supporting
documentation of disbursements under the umbrella of the Project will be in the
custody of the envisaged project PMT.
A US Dollars Designated Accounts (DA) will be opened and operated by the PMT at
a bank acceptable to the Bank for the sole purpose of executing the Project activities.
Deposits into and payments from the DA will be made in accordance with the
disbursement letter.
70. The PMT will contract an independent external auditor based on Terms of Reference
(ToR) acceptable to the Bank, for the purpose of carrying out an external audit of the Project’s
Financial Statements and review of the semiannual IFRs.
D. Procurement
71. A Procurement Capacity Assessment of the MOEE Procurement Department was
undertaken. The assessment concluded that the Implementing Agency experience is limited to
purchase of office supplies and stationary only. Also, the assessment indicated that the
Implementing Agency did not have any experience in selection of consultants during the past
decade nor is it exposed to international / multi-national donor procedures.
72. The assessment identified such limited experience as constituting a “Substantial” overall
Project Risk for Procurement. This Risk will be mitigated by providing (a) targeted capacity
building training on World Bank Guidelines and Procedures; and (b) close monitoring and
implementation support to the PMT during Project Implementation
73. Procurement for this Project will be carried out in accordance with the World Bank’s
Guidelines: Procurement of Goods and Works and Non-Consulting Services Under IBRD Loans
and IDA Credits & Grants by World bank Borrowers published by the World Bank in January
2011 and Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA
21
Credits & Grants by World Bank Borrowers published by the World Bank in January 2011.
Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD
Loans and IDA Credits and Grants", dated October 15, 2006 and updated January 2011, shall
apply to the Project.
74. A Project Procurement Plan dated November 13, 2013 to cover the first 18 months
procurement and consultants’ selection activities has been approved.
E. Social (including Safeguards)
75. The technical assistance does not present significant social issues and will not trigger any
World Bank social safeguards policy. The technical assistance includes activities that will aim at
strengthening social safety nets in Egypt to mitigate social impact of subsidy reforms and will
also develop a communications strategy for consultation, participation, and dissemination of
information with the civil societies and the public at large. All appropriate gender considerations
will be attended to appropriately in the context of this project.
F. Environment (including Safeguards)
76. In accordance with the World Bank Safeguard Policy OP 4.01 on Environmental
Assessment, the Project is classified as environment category C indicating that the Project will
not result any adverse environmental impact. This is based upon the Project design which is
primarily technical assistance and does not include any physical construction activities. World
Bank safeguard policies are not triggered as a result of project activities.
22
Annex 1: Results Framework and Monitoring
Country: Egypt, Arab Rep
Project Name: EGYPT Energy/Social Safety Nets Sector Reforms Technical Assistance (P144305)
Results Framework .
Project Development Objectives .
PDO Statement
The proposed project will strengthen the Government of Egypt's capacity to (i) design a comprehensive fuel subsidy reform strategy, (ii) establish concrete
measures for improved financial viability of key energy sector actors and (iii) identify households that would be most vulnerable to the impacts of the fuel subsidy
reform.
These results are at Project Level
.
Project Development Objective Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of
Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency
Methodology Data Collection
Direct project
beneficiaries
Number 0.00 50.00 250.00 350.00 500.00 500.00
Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT and World
Bank Team
Female
beneficiaries
Percentage
Sub-Type
Supplemental
0.00 35.00 35.00 35.00 35.00 35.00 Semi-
annually
Progress
Reports,
Implementati
on Support
Reports
PMT and World
Bank Team
Reform options
analyzed to
improve the
financial viability
and governance of
EEHC is prepared.
Yes/No No No No Yes Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, and World
Bank Team
A long term
strategy for the
fuel supply to Yes/No No No No Yes Yes Yes
Semi-
Annually
Progress
Reports,
Implementati
PMT, and World
Bank Team
23
power generation
is prepared.
on Support
Reports
An action plan is
prepared for the 1)
establishment of an
Energy Efficiency
Unit at the
Ministry of
Electricity and 2)
for at least two of
the energy
efficiency projects
in NEEAP.
Yes/No No No No No Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, and World
Bank Team
A comprehensive
energy pricing and
fuel switching
strategy for Egypt
including detailed
action plans for
compensatory
measures to
mitigate the impact
of subsidy removal
is developed.
Yes/No No No No No Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, World Bank
Team
A communication
strategy for fuel
subsidy reform
including public
consultation is
prepared.
Yes/No No No No Yes Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, and World
Bank Team
A database of the
poor and
vulnerable is
developed with 10
million households
registered in the
new poverty
database.
Yes/No No No No No Yes Yes Semi-
Annually
Progress
Reports and
Implementati
on Support
Reports
PMT, and World
Bank Team
.
24
Intermediate Results Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of
Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency
Methodology Data Collection
EEHC Capacity
building program
in financial and
governance is
developed and
number of training
workshops/events
for EEHC.
Yes/No No No Yes Yes Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, and World
Bank Team
Ministry of
Petroleum and
Ministry of Energy
established
coordinating
committee to
develop and
implement fuel to
power.
Yes/No No No Yes Yes Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, and World
Bank Team
Inter-ministerial
coordination is
established and
maintained to
facilitate and
implement energy
subsidy and
communication
strategies and
social safety nets
program.
Yes/No No No Yes Yes Yes Yes Semi-
Annually
Progress
Reports,
Implementati
on Support
Reports
PMT, and World
Bank Team
.
.
25
Annex 2: Detailed Project Description
EGYPT: EGYPT Energy/Social Safety Nets Sector Reforms Technical Assistance
(P144305)
Energy/Social Safety Nets Sector Reforms Technical Assistance Project
1. The Project will include the following three components:
a) Component 1: Power Sector Institutional Development and Financial Viability (US$
2.7 million): Provision of technical assistance to: (i) support the analysis of reform
options by developing a concrete action plan to improve the financial viability and
management of the electricity utilities in Egypt and their governance structure; (ii)
develop effective strategies including implementation plans for fuel to power generation
entities; (iii) develop an action plan to establish an energy efficiency unit housed at
Ministry of Electricity and Energy to implement the National Energy Efficiency Action
Plan (NEEAP) for the electricity sector; and (iv) support the Project Management Team
to carry out its functions. The following subcomponents will be financed under this
component:
Subcomponent 1.1: Electricity Utilities Financial Management and Governance
(US$1.25 million): This subcomponent will include a comprehensive analysis and
assessment of the current structure of the public sector power utilities (EEHC and
affiliated companies) including organizational, governance, financial and accounting
management, and performance monitoring and evaluation. The assessment will
propose options for the power utilities to improve their organization and corporate
structure, financial management and governance structure. The capacity building and
training programs should be designed and detailed by the main consultancy
assignment developing the required assessment and action plans. Capacity building
and training programs can be initiated in part by the main consultancy assignment as
well as by follow up consultancy services.
The Power sector’s financial viability would depend, among others, on the price at
which electricity is sold, the price at which fuel is bought, and the amount of
government subsidy that would be provided to the sector. Aside from these
parameters, the financial flows throughout the sector and the decision making process
will have significant impact on the financial performance of the power sector. A
further complexity that should be embedded in the decision making and institutional
arrangements is the need to create a balanced financial standing for the public and
private suppliers of electricity. This is particularly important for Egypt as it moves
towards a two-tiered electricity market in which the public and private suppliers
would need to sell to the same wholesale market and therefore be able to compete
with each other.
Subcomponent 1.2: Fuel to Power Strategy (US$ 0.75 million). This
subcomponent will support the development of a long term strategy to inform the
Government in formulating and undertaking reforms related to efficient, sustainable
fuel and gas supply for power generation.
The subcomponent will also support the Government to analyze options to upgrade
fuel transmission infrastructure, taking into consideration environmental aspects, to
26
cope with increasing local demand as well as reviewing the electricity sector
generation and investment plan in view of fuel allocation and availability and impact
of renewable energy and energy efficiency development. Draft policies required for
gas allocation to power generation, and other industrial sectors, and gas pricing and
contracting mechanisms to both public and private generation will be developed
under this subcomponent. The Ministry of Petroleum is planning to establish a
regulatory agency for gas and restructuring the gas market to enable private sector
participation in the supply of gas including imports to satisfy increasing local
demand. This subcomponent will support the development of a long term strategy to
inform the Government in formulating and undertaking reforms related to efficient,
sustainable fuel and gas supply for power generation.
This subcomponent will be led by the Ministry of Petroleum with close coordination
with the MOEE and EgyptERA and will include cooperation in preparation of its
terms of reference, providing input data to the activity assessment, supervising the
quality of the consultant analyses and reviewing and approving the consultant reports
and recommendations. The analytical work undertaken by this subcomponent will
also provide input to the energy subsidy technical assistance included under
Component 2.
Subcomponent 1.3: Action Plan for establishment of an Energy Efficiency Unit
at the Ministry of Electricity and Energy (US$0.5 million). This subcomponent
will support development of an action plan to establish an energy efficiency unit that
would be housed at MOEE7 which would have as its primary objective the
implementation of the National Energy Efficiency Action Plan (NEEAP) for the
electricity sector. The responsibilities of the proposed unit will include, among
others, (a) administering energy efficiency funds allocated to NEEAP, (b) monitoring
and evaluating implementation of NEEAP activities, (c) aggregating the electricity
sector energy efficiency data at the national level and developing and monitoring
sectorial energy efficiency indicators and targets, (d) designing and implementing
policies and programs to meet the energy efficiency targets, and (e) developing
organizational plans and long-term capacity building programs for scaling up
implementation of EE activities in the electricity sector.
This subcomponent will support engaging local and, as needed, international
consultants in support the establishment of the energy efficiency unit at the MOEE
and the preparation of its various activities. The subcomponent will also support
supply of IT equipment and databases for the operations of the energy efficiency unit.
Subcomponent 1.4: Implementation Support to the PMT (US$ 0.2 million). This
subcomponent will provide support to the PMT in implementation of the proposed
technical assistance. The support will be limited to consultancy services to build the
7 The recommended energy efficiency institutional framework for Egypt consists of specialized energy efficiency
units to be created in each of the major consuming sectors with a central energy efficiency unit (CEEU) being the
main coordination body to lead and coordinate the nation’s EE agenda. The CEEU will coordinate all energy
efficiency activities of the various “energy consuming” ministries/sectors and in particular the energy efficiency
units at the line ministries. The CEEU is established as part of the Prime Minister office and a new technical
assistance is being mobilized by the EU to support capacity building of the CEEU and implementation of its
activities including coordination with energy efficiency in line ministries.
27
capacity of the PMT in undertaking its responsibilities and for the preparation of the
required project annual audit reports.
b) Component 2. Energy Pricing and Fuel Switching Reform Technical Assistance
(US$ 1.8 million). Provision of technical assistance to: (i) developing a comprehensive
strategy for energy subsidy reform, and measures to mitigate impact of reforming energy
subsidy; and (ii) developing a communication strategy for energy subsidy reform. The
following subcomponents will be financed under this component.
The technical assistance included under this component will support development and
implementation of a comprehensive strategy for energy subsidy reform in Egypt and
implementation of measures to mitigate impact of reforming energy subsidy and to
provide protection to the poor and vulnerable in the long-run through social safety nets.
The following subcomponents will be financed under this component:
Subcomponent 2.1: Energy Pricing and Fuel Switching Reform Strategy (US$ 1.5
million). This subcomponent will develop a comprehensive strategy to phase out energy
subsidy including assessment of the effects of such strategy on the economy, specifically
on GDP, inflation, employment, as well as impact on various economic sectors including
any gender considerations, as appropriate. The proposed short term and medium term
price increases will provide input to both the Computed General Equilibrium (CGE)
model and the household analysis in order to determine the economy-wide and household
distributional impacts, respectively. Important inputs to the household analysis, other
than the energy price increases, will be the consumption data derived from the most
recent (2009 and 2011) Household Income Expenditure and Consumption Survey
(HIECS) undertaken by the Central Agency for Public Mobilization and Statistics
(CAPMAS), and the prices for non-energy products derived from the CGE model.
The analysis will also simulate the direct and indirect impacts of energy subsidy removal
throughout the economy, through backward and forward linkages in order to identify the
sectors that are expected to be hit hardest as they utilize a relatively high amount of
subsidized fuel in their respective production processes, and the appropriate migratory
and compensatory measures needed. The analytical work will also assess differential
impact of energy subsidies across categories of users/vulnerable groups, particular related
to gender to ensure the effectiveness of the proposed mitigation measures. The analysis
will be translated in a detailed action plans for each relevant stakeholder group. This
subcomponent will finance consultancy services to undertake the above assessment and
to develop a road map and detail plan for the subsidy reform.
Subcomponent 2.2: Development of a Communication Strategy for Fuel Reform
(US$ 0.3 million). The Government needs to ensure stakeholder and public awareness
and engagement with the reform agenda through broad strategic communication that
mitigates or reduces the risks for the implementation of reform. This subcomponent is
expected to deliver a communication strategy and communication road-map. The
strategic communication component will also offer consolidated internal arrangements
for communication of reforms.
In the earlier stages of the subcomponents’ implementation, areas for coalition building
and collaborative engagement among the different stakeholder groups will be identified.
Coalition building efforts will include defining and undertaking general consultation
28
processes as well as targeted consultations and message testing. The strategy will also
include assisting in launching the communication and awareness campaign to inform
public opinion about the need for change and the compensating measures that will be
undertaken. Given the inter-linkages in the objectives and scope, the communication
strategy will be developed in close coordination with the pricing strategy (component
2.1) and the safety nets mitigation measures (component 3) in order to offer strategic
communication and sequencing options (from a political economy perspective).
c) Component 3. Strengthening Social Safety Nets Technical Assistance (US$ 2
million). Provision of technical assistance to: (i) develop database of the poor and
vulnerable; (ii) undertake baseline survey of beneficiary families; and (iii) establish
Technical Working Unit (TWU) to support social safety net reform. This component
supports strengthening social safety net systems in Egypt through measures aimed at
improving targeting and consolidation of existing fragmented SSN programs and
development of a database of the poor and vulnerable with attention to gender aspects as
appropriate. The proposed activities under this subcomponent include analysis of the
distribution of family smart cards to assess card coverage and access, the carrying out of
baseline surveys and consolidation of household databases. The Ministry of State for
Administrative Development (MSAD) will be the main counterpart and lead of this
component.
This component supports strengthening social safety net systems in Egypt through
measures aimed at improving targeting and consolidation of existing fragmented SSN
programs and development of a database of the poor and vulnerable with attention to
gender aspects as appropriate. The proposed activities under this subcomponent include
analysis of the distribution of family smart cards to assess card coverage and access, the
carrying out of baseline surveys and consolidation of household databases. The Ministry
of State for Administrative Development (MSAD) will be the main counterpart and lead
of this subcomponent.
This component and in particular its sub-component 3.3 envisages the issuance by the
PM’s Office of a decree to establish a new CTP that targets the poor and vulnerable. This
decree would assign the responsibility of developing the database for the program to
MSAD. The decree would establish a ministerial level committee to oversee the
preparation and introduction of the CTP and to develop a vision and strategy for the
social protection system over the medium term. The following subcomponents will be
financed under this component:
Subcomponent 3.1: Support the Establishment of the Database of the Poor and
Vulnerable (US$ 1.1 million). The consolidation of the existing and fragmented cash
and in-kind benefit programs and improvement of coordination among different agencies
would allow the Government to achieve better coverage of the poor and pave the way for
transitioning away from the costly and ineffective subsidy system, thereby transforming
Egypt’s SSN into a more efficient system that would allow the Government to provide a
larger and more meaningful benefit to the poor. The activities under this subcomponent
will support the development of a database of the poor and vulnerable.
29
The Ministry of State for Administrative Development (MSAD)8 has designed,
implemented, and operated, an electronic system, referred to as the Family Smart Card
System (FCS) database. The FCS is being used to provide citizens with different support
services, such as food ration subsidies, pensions, and LPG subsidies using smart cards.
The FCS database has close to 18 million families receiving various benefits. However,
the FCS needs to be refined in order to make it useful for targeted social assistance
programs, such as a CTP. As the FCS database contains nearly 80 per cent of the
population of Egypt, the information in the other databases will be used to filter out from
the FCS database families that are ineligible for SSN programs targeted to the poor
through characteristics that show, by proxy, their likelihood of ineligibility for
enrollment. The purpose of this assignment is to support MSAD’s efforts to develop
database of the poor drawing on the FCS database.
The process involves integrating existing databases, such as the FCS database, with other
databases, including that of the traffic office, pension fund, electricity bills, phone bills
and car ownership records. This requires the availability of a unique and common
identifier variable in the various databases of interest. In order to achieve this, it is
important to ensure that such a common variable, such as the National Identification (
NID) number, exists in the various databases scattered throughout many ministries and
agencies of GOE. The Project under this sub-component will finance collection of NID
for various databases, data entry, data matching, determination of eligibility criteria,
targeting mechanisms, and ultimately the establishment of the database of the poor and
vulnerable. It will also finance a technical workshop highlighting the potential use of the
database of the poor in particular and the FCS database in general. The event will bring
together various ministries and agencies and international leading practitioners to share
the experience in building poverty and smart card databases and their use.
The database of the poor and vulnerable, once established, can be used to identify future
avenues for delivery of services by line ministries, as well as a more integrated way of
record keeping, enrollment of qualified beneficiaries, monitoring implementation, and
enhancing program efficiency.
Subcomponent 3.2: Baseline Survey of Beneficiary Families (US$ 0.4 million). This
sub-component’s objective is to undertake the design and collection of a nationally
representative baseline data to gauge the impact on efficiency in social service delivery
and on the beneficiaries of the ongoing and planned reform programs, including the
introduction of the smart card system, the planned cash transfer scheme, re-targeting of
fuel subsidies, re-targeting of the bread subsidy, social health insurance for the poor and
so son. The proposed survey will establish a baseline for monitoring and evaluating the
medium-term and long-term impacts of these reform initiatives.
Given that the timing, pool of beneficiaries and geographic context may differ, baseline
collection process may differ across initiatives. The baseline survey will allow for
comparison groups. The baseline survey will include 1 per cent of the total pool of card
holders. The Project under this sub-component will finance: (i) design of the
questionnaire for the baseline survey; (ii) designing of the sampling strategy, taking into
8 With the coordination of the Ministry of Supply and Internal Trade, Ministry of Insurance and Social Affairs, and
Ministry of Petroleum.
30
account various policy reforms and implementation modalities; (iii) identifying and
working with a survey firm with extensive large-scale survey experience in the
administration of fieldwork and collection of the data; and (iv) data entry, data validation,
analysis of the pre-reform conditions of service delivery, and beneficiary living
conditions and their level of satisfaction.
Subcomponent 3.3: Establishment of Technical Working Unit (TWU) to Support
SSN Reform (US$ 0.5 million). This sub-component will support Government in
establishing and financing a technical working unit to support SSN reform. The proposed
sub-component is contingent on the PM’s Office issuing a decree to establish a new CTP
that targets the poor and vulnerable. The decree would establish a ministerial level
committee to oversee the preparation and introduction of the CTP and to develop a vision
and strategy for the social protection system over the medium term. This high level
committee would be assisted by a small dedicated and competent TWU of three to four
professionals to be placed in the PM’s office.
The TWU would work closely with a technical advisory team drawn from each of the
ministries and agencies in the Inter-Ministerial Committee and a representative each from
the private and non-government sectors. The TWU would a) at the immediate term,
develop a program document for the CTP that determines the main features of the
program to be discussed and approved by the Government and later reflected in a Prime
Minister’s decree; b) oversee the development of the registry of beneficiaries; and c) at
the medium term, develop a broader vision for social protection in Egypt including
guidelines for partnering with NGOs and other stakeholders. The Project under this sub-
component will help in the establishment of the TWU and finance its staff and activities
for one year. In order to ensure sustainability, the TWU expected to be financed by the
Government budget or other more medium to long-term funding sources at the end of the
first year of its establishment.
31
Annex 3: Implementation Arrangements
EGYPT, ARAB REPUBLIC OF
Energy/Social Safety Nets Sector Reform Technical Assistance Project (P144305)
Project Institutional and Implementation Arrangements
1. The proposed technical assistance will be submitted by the Ministry of International
Cooperation for financing to the MENA Transition Fund. The Implementing agency of the
technical assistance Grant will be the Ministry of Electricity and Energy. The envisaged
implementation arrangements for the Project are shown in Figure 3-1.
Figure 3.1 : Implementation Arrangements
2. A multi-sectoral Project Steering Committee (PSC) has been established to provide strategic
direction for the technical assistance and support, coordinate and make resources available for
implementation of its components with various line ministries, government authorities and
national programs. The PSC will monitor the implementation progress according to semi-annual
progress reports prepared by the Project Coordinator, approved by the PSC, and submitted to the
Bank. The PSC will also recommend to the line ministries and government authorities
implementation plans and sector strategies that would be developed by the TA.
3. To ensure timely and efficient project implementation, the MOEE has also appointed a
PMT headed by a Project Coordinator (PC) who will be the key interlocutor for the Bank team
and for coordinating the implementation of TA activities with the PSC, line ministries and
government authorities. The PMT comprises the technical leads of the technical assistance
subcomponents, a Procurement Officer, and a Financial Officer who will be responsible for
handling in accordance of Bank procedures and guidelines all aspects of the financial and
procurement issues related to the technical assistance project.
4. The PC will coordinate the Project implementation with the subcomponent leads
appointed for each of the subcomponents. The subcomponent leads will be responsible for the
Project Steering Committee
Power Sector Institutional Development and Financial Viability
Component Lead: Ministry of ElectricityTechnical Team
Project Management Tam• Project Coordinator• Procurement Officer• Financial Management Officer• Legal Advisor• Subcomponent Leads
Energy Pricing and Fuel Switching Reform
Component Lead: Ministry of PetroleumTechnical Team
Social Safety Nets Strengthening
Component Lead: MSADTechnical Team
32
design and preparation of the Terms of Reference of the activities included under their
subcomponents, participate in the consultant selection process with the Procurement Officer,
facilitation and supervision on a day to day basis the consultant activities, and recommending for
PC approval, the release of payments, of the consultants’ deliverables according to the signed
contract as well as of the receipt/inspection and acceptance of goods that could be financed by
the technical assistance project.
5. The Procurement Plan dated November 13, 2013 has been agreed upon and an
Operational Manual (OM) approved by the Bank. The OM describes the Project implementation,
arrangements for inter-ministerial coordination, organization, roles, responsibilities; and the
financial management, procurement and disbursement arrangements.
Financial Management, Disbursements and Procurement
Financial Management
A. Summary
6. An assessment9 for the Financial Management arrangements (FM) for the envisaged
project was undertaken in March, 2013 to assess the capacity of the proposed implementing
entity of the Project and assist in determining the required FM arrangements for the
implementation of the Project. The proposed implementing entity for this project is the Egyptian
Ministry of Electricity & Energy (MOEE).
7. The Project’s implementation arrangements were discussed at length with the evaluation
of all FM options to be applied during implementation and their impact on the various
stakeholders under the Project. The Project activities will be implemented by a PMT within
MOEE which has the overall responsibility for Project oversight, coordination, and
implementation.
8. At the country level, FM risk is considered as substantial due to the stagnant PFM reform
agenda for several years. The main challenges affecting the FM risk at the country level, as
assessed by the 2009 PEFA report and the 2008 CFAA, are a) weak intricate internal control
system, b) absence of GFMIS and c) lack of transparency; d) and weak regulatory framework
and capacity of the Egyptian Supreme Audit Institute. The current political and post revolution
changes in the country represent an opportunity for tackling the PFM reform agenda provided
that the GOE’s becomes more engaged in the PFM reform.
9. At the Project level, FM risk is considered substantial before mitigating measures due to
the lack of previous experience within the implementing entity.
10. To mitigate the FM risks, the following mitigating measures have been agreed upon:
A PMT within the MOEE is formally assigned to assume the FM responsibility of the
envisaged project. It includes a Financial Management Specialist and a Financial
Officer, both of adequate expertise and appropriate capacity to carry on the required
tasks.
9 The assessment was conducted during meetings held with the MOEE Head of International Cooperation &
Agreements Department.
33
The PMT has developed an FM manual for the project. The manual elaborates on the
cycles pertaining to reporting, recording, reviewing and approving the Project’s
transactions.
The PMT will be using spreadsheet applications to report on the Project activities and
generate the semiannual IFRs. The Project reports will reflect the financial status of
the grant as at the issuance date. All original supporting documentation of
disbursements under the umbrella of the Project will be in the custody of the
envisaged project PMT.
A US Dollars Designated Accounts (DA) will be opened and operated by the PMT at
a bank acceptable to the Bank for the sole purpose of executing the Project activities.
Deposits into and payments from the DA will be made in accordance with the
disbursement letter.
The PMT will contract an independent external auditor based on Terms of Reference
(ToR) acceptable to the Bank, for the purpose of carrying out an external audit of the
Project’s Financial Statements and review of the semiannual IFRs.
B. Project Financial Management Risk.
Table 3-1: General Risks:
Risk Before MM Mitigating Measures (MM) After MM
The Observance of Standards and Codes
(ROSC) report (2007), Country Financial
Accountability Assessment (CFAA) report
(2007), identified weaknesses in the
Egyptian financial accountability, in both
the public and the private sector. Another
issue that affects inherent risk is the level
of corruption within Egypt, according to
the 2012 Corruption Perception Index
Egypt is at 32 and at rank 118.
Substantial - Hire an independent
qualified private audit firm.
- Ring-fence the Project
implementation and funds.
Moderate
Overall Inherent Risk Before MM Substantial Overall Inherent Risk after
MM
Moderate
Specific Risks
Risk Before MM Mitigating Measures (MM) After MM
Staffing: Lack of experienced staff with
WB-financed projects
High - The PMT within the MOEE
will be formally assigned to
assume the FM
responsibility of the
envisaged project. It
includes a Financial
Management Specialist and
one Financial Officer, both
of adequate expertise and
appropriate capacity to carry
on the required tasks.
- The Bank FM team will
arrange for an in-house
training for the Project’s FM
Significant
34
staff on Bank’s
requirements and
guidelines.
Accounting, Reporting and Budgeting: Accounting system may not provide
comprehensive information on all sources
and uses of funds
Substantial - The PMT will be using
spreadsheet applications to
report on the Project
activities and generate the
semiannual IFRs. The
Project reports will reflect
the financial status of the
grant as at the issuance date.
All original supporting
documentation of
disbursements under the
umbrella of the Project will
be in the custody of the
envisaged project PMT.
Moderate
Flow of Funds: Delays in flow of funds Substantial - The Project will open a DA
which is to be operated by
the MOEE through the
PMT. The DA is to be
reconciled on a monthly
basis and will be
replenished periodically.
- The PMT will prepare cash
forecast taking into
consideration the budget
year through which the
Project counterpart funds
will be allocated
- The flow of funds process is
to be included in the FM
manual to be developed by
the PMT.
Moderate
Internal Controls: Inconsistent
application and adherence to unified and
documented policies and procedures
Substantial - The PMT is to develop an
FM manual (before
negotiations) for the new
project. The manual is to
depict the cycles pertaining
to reporting, recording,
reviewing and approving the
Project’s transactions.
Moderate
Auditing: Lack of timely audit/review
reports on Project FS/IFRs
Substantial - An independent and a
qualified private auditor is
to be hired in accordance
with ToR acceptable to the
Bank.
Moderate
Overall Control Risk before MM Substantial Overall Control Risk after
MM
Moderate
C. Project Arrangements
11. Institutional Arrangements: It was agreed that a Project Management Team (PMT) will
be established in the MOEE. The Project will be implemented by the MOEE in collaboration
with Ministry of Petroleum and the Ministry of Administrative Development. The PMT will be
responsible of carrying out all the Project FM arrangements.
35
12. Staffing: The MOEE has no previous experience in managing World Bank projects
accordingly, it was agreed to appoint, from the MOEE, a Financial Management Specialist and
one Financial Officer, both of adequate expertise and appropriate capacity to carry on the
required tasks under the umbrella of the Project. Adequate segregation will be established
according to which, the Financial Management Specialist will be responsible for the review of
the recording of journal entries, coordination in regard to financial matters with Central
Department for Financial and Administration Affairs, in MOEE, in addition to reporting on the
financial performance of the Project to the World Bank. The Financial Officer will be
responsible for the day to day transactions including recording the journal entries in addition to
preparing the monthly bank reconciliation.
13. Accounting, Record Keeping, Reporting and Budgeting: The PMT FM personnel will
be responsible for recording their relevant component’s transactions and reporting on semiannual
basis, through Interim Financial Reports (IFRs), to the Bank. The report will include i) Sources
and Uses of Funds; ii) Disbursements by component; iii) Cash Forecast and to be accompanied
by the iv) Designated Account (DA) reconciliation. The IFR package will include reporting on
the commitments established by the PMT (i.e. i) Commitments Value, ii) Disbursed Amount and
iii) Committed not yet Paid Amount). All original supporting documentation of disbursements
under the umbrella of the Project will be in the custody of the envisaged project PMT. As part of
the semiannual project IFRs, the PMT will prepare a forecast of the Project expected
disbursements for the next six months for proper cash management with a deviation analysis of
differences between actual and planned figures of previous periods.
14. Internal Controls: The PMT will ensure that proper segregation of duties is maintained
and formally documented through an FM manual for the new proposed project. The manual
should illustrate the documentation of all the various types of financial transactions, approval and
authorization steps, the flow of documents within and between the PMT and the Financial
Department of the MOEE, along with the retention of original documents and copies and a job
description of each staff. It was explained to the Financial Management Specialist that the
manual should put, in writing, all the financial aspects of the Project at hand including but not
limited to i) The Project and its Context (i.e. project purpose ,deliverables, donors...etc.); ii)
Internal Controls (i.e. Roles and Responsibilities) ; iii) Disbursing Arrangements ( i.e. method(s)
adopted by the Project for disbursing the donated funds); iv) Bookkeeping and Reporting, v)
Reporting (i.e. Reports Periodicity and Contents); and vi) Audit (i.e. Project Audit
Arrangements).
Technical Approval: represented in the involved implementing entity’s approval on
the rendered service or goods received, who approves and signs the contractors’
suppliers’ certificates, in the respective ministry before sending the request for
payment to the PMT.
Contractual Review: The payment package is reviewed by the “Procurement and
Contracts” officer (in the PMT) to ensure that the requested payments are as per the
established contract with the contractor and calculates the due amount given into
consideration the contractors’ down payment and previous payments. The Head of the
“Procurement and Contracts” Department reviews and signs the certificate before
forwarding the entire package for further processing
36
Financial Review: The FM officer is responsible for preparing the journal entries to
record the financial transactions under the umbrella of the Project also for preparing
the monthly bank reconciliation of the DA. Bookkeeping is done at this stage. The
FM specialist reviews the prepared journal entries, prepared by the financial officer,
and signs them to evidence the review exercise also reviews the monthly bank
reconciliation. The FM specialist signs the request for payment after the review and
recording processes this is followed by the Project Director Approval and signature.
MoF Representative: Another review is performed by the MoF representative who
signs the issued check along with the Project director.
15. Flow of Funds: To ensure that funds are readily available for Project implementation, a
US Dollars Designated Accounts (DA) will be opened and operated by the PMT at a bank
acceptable to the Bank for the sole purpose of executing the Project activities. The ceiling of the
DA will be set to US$ 500,000. Deposits into and payments from the DA will be made in
accordance with the disbursement letter. Upon effectiveness, the PMT will submit an application
to withdraw the initial advance (up to the ceiling of the DA) to the DA. Subsequent advances
will be made upon submission of withdrawal applications supporting with supporting
documentation (e.g. Records or Statements of Expenditures) which reports on the use of the
initial/previous advance for eligible project expenditures. Withdrawals from the DA must be
authorized by at least two authorized signatories and replenishment requests of the account will
also be signed dually. The PMT will have access to the client connection website and on a
monthly basis the Financial Management Specialist within the PMT will perform reconciliation
between the Project records and the Bank’s records as shown on the "Client Connection" website
in addition to the monthly DA bank reconciliation. The PMT will also submit applications by
electronic means using the Client Connection website.
The flow of funds starts by providing the supplier/consultant invoice to the PMT
for payment after gaining the approval of the team head in each respective
implementing entity.
The payment package is delivered to the PMT and the “Procurement and
Contracts” officer (in the PMT) ensures that the requested payments are as per the
Project approved plan, gained the Bank’s No Objection and the established
contract with the supplier/consultant.
The package is forwarded to the Project FM officer to be reviewed for
mathematical accuracy and Bookkeeping. The Project FMS reviews the package
and forwards it to the Project director.
The Project Director approves payment and issues the corresponding check.
The issued Check is then signed by the Project director and the Ministry of
Finance (MoF) representative.
16. External Audit: The PMT will be responsible for appointing an independent external
auditor, acceptable to the Bank, to audit the entire project according to the ToR agreed with the
Bank. The auditor will assess the need of technical audit, which will be in addition to the
financial audit. The due date of the external auditor report will be six months after the end of
each fiscal year. The external auditor will be granted access to all project’s original supporting
documentations and relevant agreements. The external auditor will review the Project’s
37
semiannual IFRs before submission to the Bank and provide negative assurance on the IFR
contents of the Project. This will require timely preparation and submission of the IFRs from the
PMT in order to comply with the grace period of 45 days after each semester for the submission
of the report to the Bank. The External auditor will be hired within two months of effectiveness.
17. Below is the agreed-upon action plan that needs to be implemented by the PMT at
MOEE:
18. Table 3-2: Agreed FM Action Plan
Action When Responsibility
Open a Designated Accounts (DA) for the sole
purpose of executing the Project activities.
6 weeks from effectiveness MOEE/PMT
Establish a Project Financial Manual. Completed before
negotiations
MOEE/PMT
Hire an Independent External Auditor. Two months from
effectiveness.
MOEE/PMT
Procurement
19. A Procurement Capacity Assessment of the MOEE Procurement Department was
undertaken. The assessment concluded that the Implementing Agency experience is limited to
purchase of office supplies and stationary only. Also, the assessment indicated that the
Implementing Agency did not have any experience in selection of consultants during the past
decade nor is it exposed to international / multi-national Donors procedures.
20. The assessment identified such limited experience as constituting a “Substantial” overall
Project Risk for Procurement. This Risk will be mitigated by World Bank Procurement
Specialists providing (a) targeted capacity building training on World Bank Guidelines and
Procedures, and (b) close monitoring and supervision to the PMT during Project Implementation.
21. A positive action by MOEE to mitigate Risk is to have the PMT members already
seconded from MOEE International Cooperation and Agreement Department who have
previously some exposure to International / Multi National Donors and have relatively better
language skills than MOEE Procurement Department members.
22. Also as another risk mitigation factor is to have the PMT receive intensive hand-on
training on World Bank Guidelines and procedures for the selection of Consultants as well as
procurement of IT equipment and software.
23. The PMT will be responsible for all activities related to the selection of consultants and
procurement of goods under this Project. Ministry of Petroleum and Ministry of Administrative
Development teams will provide Technical and Administrative support to the PMT activities.
24. Procurement for this Project will be carried out in accordance with the World Bank’s
Guidelines: Procurement of Goods and Works and Non-Consulting Services Under IBRD Loans
and IDA Credits & Grants by World bank Borrowers published by the World Bank in January
2011 and Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA
Credits & Grants by World Bank Borrowers published by the World Bank in January 2011.
Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD
Loans and IDA Credits and Grants", dated October 15, 2006 and updated January 2011, shall
apply to the Project.
38
25. Advance Procurement will be exercised and preparation and issuance of Expressions of
Interest and preparation of Consultant Services Terms of Reference and Requests for Proposals
documents will be in place prior to Grant Agreement signature in order to jump-start project
implementation.
26. A Procurement Plan (PP) dated November 13, 2013 to cover the first 18 months of
procurement and consultant’s selection activities has been approved. The PP indicates, against
each activity (as a minimum) Cost Estimate, Consultants Selection Method, Procurement of
Goods Method, World Bank Procurement Prior / Post Reviews requirements and time frame for
the activity. The Plan will be updated on a semi-annual basis prior to World Bank
Implementation Support Missions or as required.
Environmental and Social (including safeguards)
27. In accordance with the World Bank Safeguard Policy OP 4.01 on Environmental
Assessment, the Project is classified as environment category C indicating that the Project will
not result in any adverse environmental impact. This is based upon the Project design which is
primarily technical assistance and does not include any physical construction activities. World
Bank safeguard policies are not triggered as a result of project activities.
28. The technical assistance itself does not present significant social issues and will not
trigger any World Bank social related safeguards policy. The technical assistance includes
activities that will aim at strengthening social safety nets in Egypt to mitigate social impact of
subsidy reforms and will also develop a communication strategy for consultation, participation,
and dissemination of information with the civil societies and the public in large.
Monitoring & Evaluation
29. The PMT will submit semi-annual project reports on the progress of all project
components in a format to be agreed with the Bank. The Project report will also include details
on the key indicators most of which will be monitored on a semi-annual basis. These are
presented in Annex 1 which includes baseline data and agreed targets for each of the future
years. The subcomponent focal leads will be responsible for providing the PMT with periodic
updates on the implementation progress of the execution and implementation of the consultancy
contracts for their subcomponent. The semi-annual project reports will be submitted no later than
45 days of the reporting period.
Role of Partners To improve energy security and sustainable development in Egypt, the EU has
embarked on a series of partnerships with Egypt to strengthen reform mechanisms in the energy
sector. Two such programs include 1) The Energy Sector Policy Support Program (ESPSP), with
a sub component on a TA to improve fiscal transparency and 2) support to the EU-Egypt
Association Agreement Program (EAAP). The specific objectives of the proposed ESPSP are to:
(i) Improve the energy policy and regulatory framework; (ii) Improve the energy sector financial
transparency and performance; (iii) Promote development of renewable energy sources; and (iv)
Promote energy efficiency. The EAAP supports a TA component with the overall objective of
strengthening the institutional capacity of EgyptERA on implementing the regulatory framework
necessary to create the bases for transparency and nondiscriminatory market operations and
assist in the development and implementation of international best practices of regulations in the
energy sector consistent with development of an internal electricity market.
39
30. While the EU funded technical assistance activities are focusing on development of
energy market policy and regulations, and capacity building of EgyptERA, this technical
assistance proposed for financing by the MENA Transition Fund is aimed at transformation of
electricity and gas sector to financial viability while protecting the most vulnerable sectors and
the poor from undesirable impacts of energy subsidy reform.
40
Annex 4: Operational Risk Assessment Framework (ORAF)
Egypt, Arab Rep: EGYPT Energy/Social Safety Nets Sector Reforms Technical Assistance (P144305)
. Project Stakeholder Risks
Stakeholder Risk Rating High
Risk Description: Risk Management:
A weakening in the Government support for implementation of
policy, regulatory, governance, and fuel subsidy reform measures
that would be recommended and produced as outcomes of this
technical assistance.
This risk is mitigated by the fact that the scope of this technical assistance has been proposed and
fully owned by participating ministries and that the implementation arrangements require
establishment of a multi-ministerial Project Steering Committee (PSC). The committee will play
an important role in keeping ownership and commitment of key stakeholders throughout the
design and implementation of the technical assistance including recommendations to the
Government authorities for implementation of policies and reform program that would be
developed under this technical assistance. The Bank will also ensure during supervision that the
PSC will continue to exist and function, empowered and maintain oversight and engagement.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Implementation
30-Dec-2016
Implementing Agency (IA) Risks (including Fiduciary Risks)
Capacity Rating Substantial
Risk Description: Risk Management:
The Project will be implemented by a new Project Management
Team (PMT) that has limited knowledge of the World Bank’s
guidelines and procedures and limited initial capacity to meet the
Bank procurement and financial management requirements.
Procurement and Financial Management Officers members of the PMT have already been already
been designated and will receive extensive training on World Bank procurement and disbursement
arrangements. Furthermore, the procurement and financial management activities under this
technical assistance will be limited by the small number of consultancy contracts and supply of IT
equipment and software and the World Bank will also provide guidance to the PMT in
undertaking effective selection process of the consultants and monitoring the quality of the
consultant’s work and deliverables.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Both
30-Dec-2016
Governance Rating Substantial
Risk Description: Risk Management:
The implementation will require close coordination and
cooperation between several sector ministries especially in
undertaking the subcomponents related to fuel subsidy reform
and fuel to power strategy.
A multi-sectoral Project Steering Committee (PSC) has been established to provide strategic
direction for the technical assistance and support, coordinate and make resources available for
implementation of its components with various line ministries, government authorities and
national programs. The PSC will monitor the implementation progress according to semi-annual
work plans prepared by the Project Coordinator, approved by the PSC, and submitted to the World
Bank. The PSC will also recommend to the line ministries and government authorities
implementation of recommendations and sector strategies that would be developed by the
41
technical assistance.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Both
30-Dec-2016
Risk Management:
Assessment of fiduciary risks (procurement and financial management) has been made during the
Project preparation including procurement and financial management capacity assessments of the
PMT and action plans for mitigation were developed. The Bank will put in place adequate
controls to ensure the Project is appropriately monitored through procurement and financial
management reviews.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Client In Progress Implementation
30-Dec-2016
Project Risks
Design Rating Moderate
Risk Description: Risk Management:
Project design is fairly simple and straight forward and therefore
is not risky. It will include limited number of consultancy
assignments and probably supply of IT systems for capacity
building.
The participating ministries have already initiated preparing the draft terms of reference for the
subcomponents financed by the technical assistance. The Bank team will assist in preparing high
quality terms of reference and will ensure that the consultant’s deliverables are of high quality as
well.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Both
30-Dec-2016
Social and Environmental Rating Moderate
Risk Description: Risk Management:
The technical assistance itself does not present significant
safeguards issues and will not trigger any World Bank safeguards
policy. However, the technical assistance will deal with
preparation of subsidy reform strategies and that will have future
social impacts.
The technical assistance includes activities that will aim at strengthening social safety nets in
Egypt to mitigate social impact of subsidy reforms and will also develop a communication
strategy for consultation, participation, and dissemination of information with the civil societies
and the public in large.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Both
30-Dec-2016
Program and Donor Rating Low
Risk Description: Risk Management:
There is minimal risk of overlap between this technical assistance
and donor financed technical assistance to the energy sector.
The Bank, EU and participating ministries are closely coordinating donor funded technical
assistance activities.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Both
30-Dec-2016
Delivery Monitoring and Sustainability Rating High
Risk Description: Risk Management:
42
Project sustainability may be impacted by the fact that Project
seeks to build capacity in a wide-ranging and sensitive reform
program in a fluid economic and political environment and (b) a
weakening in the Government support for implementation of
policy, regulatory, governance, and fuel subsidy reform measures
that would be recommended and produced as outcomes of this
technical assistance;
These risks are mitigated by the fact that the scope of this technical assistance has been proposed
and fully owned by participating ministries and that the implementation arrangements include
establishment of a multi-ministerial Project Steering Committee. The committee will play an
important role in keeping ownership and commitment of key stakeholders throughout the design
and implementation of the technical assistance and will ensure that the PMT will be provided the
sufficient resources and coordination mechanisms to implement the technical assistance.
Resp: Status: Stage: Recurrent: Due Date: Frequency:
Both In Progress Both
30-Dec-2016
Overall Risk
Overall Implementation Risk: Rating High
Risk Description:
The ORAF assesses the overall risk rating as high during implementation. Implementation of the technical assistance will require very close coordination between
the participating ministries including sustained ownership and commitment of the Government of Egypt to support policies and reform programs, especially related
to fuel subsidy, that would be developed under this technical assistance and therefore the implementation risk is rated high.
43
Annex 5: Implementation Support Plan
EGYPT, ARAB REPUBLIC OF
Energy/Social Safety Net Sector Reforms Technical Assistance Project (P144305)
Strategy and Approach for Implementation Support
1. The strategy for implementation support has been developed based on the nature of the
Project which is financing cross sectoral technical assistance for development of strategic
policies, action plans and institutional capacity building for improving the financial viability of
the electricity sector and reforming fuel subsidy in Egypt while strengthening the social safety
nets to mitigate impact of future fuel subsidy on the poor. Also the implementation plan takes
into account the limited knowledge of the PMT on Bank procedures.
2. Therefore, during the first year of the Project, the Bank will conduct intensive
implementation support missions to ensure that major consultancy services for the Project
subcomponents are mobilized and contract execution commence without delays. Draft ToRs for
of the Project components have been prepared and will be finalized before issuing the Request of
Proposals (RFPs). Four Requests for Expression of Interest are prepared and will be issued
immediately after the TA approval. During this period, the Bank will provide training to build
the capacity of the PMT on the Bank procurement, contract and financial management
procedures.
3. The Bank will not be involved directly in formulating policies developed under this
technical assistance which should be fully owned and supported by the Government of Egypt.
However, the Bank implementation support of the technical assistance will also focus on
ensuring its effective implementation and the quality of the consultant’s deliverables. The Bank
team supervising the technical assistance will include Bank staff and consultants experts in
various analytical activities undertaken under the technical assistance.
Implementation Support Plan
4. The main focus of the implementation support is summarized below and will be further
reviewed and finalized during fiscal year budget planning. A mid-term review mission is also
tentatively planned for November 2015.
Table 5-1: Implementation Support Plan
Time Focus Resource Estimate SW Trip
Year 1 Implementation Support Project Task Management/Power Experts 4 2
Procurement Procurement Specialist 4 0
Financial Management Financial Management Specialist 4 0
Gas and Fuel Sector Energy subsidy Specialist 3 2
Social Safety Nets Database and Targeting Expert 3 2
Communication Communication strategy experts 2 0
Year 2 Implementation Support Project Task Management/Power Experts 4 2
Procurement Procurement Specialist 3 0
Financial Management Financial Management Specialist 3 0
Gas and Fuel Sector Energy subsidy Specialist 4 3
Social Safety Nets Database and Targeting Expert 4 2
Communication Communication strategy experts 3 1
Year 3 Implementation Support Project Task Management/Power Experts 4 2
Procurement Procurement Specialist 3 0
44
Time Focus Resource Estimate SW Trip
Financial Management Financial Management Specialist 3 0
Gas and Fuel Sector Energy subsidy Specialist 4 3
Social Safety Nets Database and Targeting Expert 4 2
5. The Co-task team leader, procurement and financial management specialist and
communication specialists members of the team are based in the Bank’s Cairo office and other
members of the team will be from country offices in the region or headquarters staff.
6. The World Bank and the EU will also seek to carry out joint missions to coordinate the
implementation of this proposed technical assistance and the EU technical assistance to the
energy section.