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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY PROJECT PAPER ON A PROPOSED ADDITIONAL LOAN IN THE AMOUNT OF US$330 MILLION TO THE ARAB REPUBLIC OF EGYPT FOR THE EGYPT NATIONAL RAILWAYS RESTRUCTURING PROJECT Sustainable Development Department Middle East and North Africa Region November 12, 2010 Report No: EG 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.

2 CURRENCY EQUIVALENTS7 (Exchange Rate Effective November 12, 2010) Currency Unit = Egyptian Pounds Egyptian Pounds 5.75 = US$1.00 FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS AC Air Conditioned Trains IBRD International Bank for Reconstruction and Development APL Adaptable Program Loan IFI International Financial Institution CBE Central Bank of Egypt IFR Interim Financial Report CFAA Country Financial Accountability Assessment IFRS International Financing Reporting Standards CMA Capital Market Authority IRR Internal Rate of Return CPAR Country Procurement Assessment ISA International Standards on Auditing Review CPI Consumer Price Index LA Loan Agreement CTC Central Traffic Control MIS Management Information System DA Designated Account MoF Ministry of Finance DPL Development Policy Loan MoI Ministry of Investment EAD Environment Affairs Directorate MoIC Ministry of International Cooperation EAS Egyptian Accounting Standards MoT Ministry of Transport EEAA Egyptian Environment Affairs NIB National Investment Bank Agency EIA Environmental Impact Assessment NPV Net Present Value EIRR Economic Internal Rate of Return PFS Project Financial Statements EMP Environmental Management Plan Egyptian National Railways PMU Project Management Unit R Egypt National Railways PA Project Agreement P Restructuring Project ERR Economic Rate of Return PSO Public Service Obligation ESAL Equivalent Standard Axle Load RBPIP Results Based Project Implementation Plan ESW Economic Sector Work RSRU Railway Safety Regulatory Unit FIDIC Federation Internationale des SBD Standard Bidding Documents Ingenieurs-Conseils SBU Strategic Business Unit FM Financial Management SC Steering Committee FMR Financial Management Report SIL Specific Investment Loan FMS Financial Management System SLA Subsidiary Loan Agreement FR Financial Reports SOE Statement of Expenditure GDP Gross Domestic Product USAID United States Agency for International Development GoE Government of Egypt Vice President: Country Director: Sector Director: Sector Manager: Task Team Leader: Shamshad Akhtar A. David Craig Laszlo Lovei Jonathan Walters Michel Bellier

3 ARAB REPUBLIC OF EGYPT EGYPT NATIONAL RAILWAYS RESTRUCTURING PROJECT ADDITIONAL FINANCING PROJECT PAPER CONTENTS Project Paper Data Sheet I. Introduction... 1 II. Background and Rationale for Additional Financing... 1 III. Proposed Changes... 3 IV. Appraisal Summary... 6 Annex 1: Revised Project Results Framework and monitoring indicators Annex 2: Operational Risk Assessment Framework (ORAF) Annex 3: Detailed Description of Proposed Project Scale Up Annex 4: Economic Analysis Annex 5: Map... 25

4 EGYPT, ARAB REPUBLIC OF EG-EGYPT NATIONAL RAILWAYS RESTRUCTURING ADDITIONAL FINANCING PROJECT PAPER MIDDLE EAST AND NORTH AFRICA MNSSD Basic Information (Original Project) Project ID: P Project Name: Egypt National Railways Restructuring Team Leader: Michel Bellier Expected Closing Date: September 30, 2015 Environmental category: Lending Instrument: Specific Investment Loan Partial Assessment Joint IFC: Joint Level: Basic Information (Additional Financing) Date: November 12, 2010 Country Director: A. David Craig Sector Manager/Director: Jonathan D. Walters Team Leader: Michel Bellier Sectors: Railways (100%) Themes: Infrastructure services for private sector development (67%); Trade facilitation and market access (33%) Project ID: P Environmental category: Partial Assessment Lending Instrument: Specific Investment Loan Additional Financing Type: Scale Up Joint IFC: Joint Level: Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): Proposed terms: Variable Spread Loan payable in 28.5 years, including 7 years grace period and level repayment. Financing Plan (US$m) Source Local Foreign Total Borrower International Bank for Reconstruction and Development Total: Borrower: Government of Egypt Egypt, Arab Republic of Responsible Agency: Egyptian National Railways

5 Ramses Square PO Egypt, Arab Republic of Tel: (20-2) Fax: (20-2) Estimated disbursements (Bank FY/US$m) FY Annual Cumulative Project implementation period: Start January 3, 2011 End: December 31, 2016 Expected effectiveness date: July 4, 2011 Expected closing date: March 31, 2017 Does the project require any exceptions from Bank policies? Ref. Section Appraisal of Project Activities Have these been approved by Bank management? Does the project include any critical risks rated substantial or high? Ref. Section Project Risks and Mitigating Measures [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No Project development objective Ref. Section Bank Response The objective of the proposed scale up activity is the same as the original project, the Egypt National Railways Restructuring Project (RP), which is to assist the Government in improving the reliability, efficiency and safety of the railways' services through signaling and track renewal investments by and the modernization of its management and operating practices in order to enhance the railways' sector responsiveness to economic and social needs and to strengthen the financial viability of the Project Implementing Entity. Project description Ref. Section Bank Response The R Project scale up consists of two sub-components: -Signaling Modernization(US$337 million, of which US$329 million from Bank Financing): will finance the modernization of the signaling system on the line Beni-Suef-Asyut. -Modernization of Management and Operating Practices(US$2 million financed by ): will scale up to include additional activities for the modernization of management and operating practices. Which safeguard policies are triggered, if any? Ref. Section Appraisal of Project Activities The project remains classified as Category B according to the World Bank's Operational Policy 4.01 on Environmental Assessment, requiring partial assessment through the preparation of an Environmental and Social Impact Assessment (ESIA) report.

6 I. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide an additional loan in the amount of US$330 million to the ongoing Egypt National Railways Restructuring Project (RP). The proposed additional financing will be a scale up to RP and will allow the Egyptian National Railways () to expand and accelerate the modernization of signaling systems that are critical to the safety of rail services, specifically on the Beni Suef Assyut section of the rail network, as well as to amplify initiatives for strengthening management and operating practices thereby enhancing the impact of the initial project. II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 2. Government Railways Strategy. The railway sector plays a significant role in the Egyptian economy and is an essential mode of transport for low-income Egyptians., a public entity reporting to the Ministry of Transport, is a predominantly passenger railway. The Government of Egypt (GoE) launched in 2006 a restructuring program for to address the very poor performance of the sector, notably the very low safety, the deteriorating quality of services and the significant fiscal liability of the sector. There has been significant progress in the implementation of the restructuring program: was re-organized along strategic business lines in early 2008 (Long-distance Passenger Services, Short-distance Passenger Services, Freight Services, and Infrastructure Services), it is modernizing its working methods with the support of a group of experts seconded by the Italian National Railways and is undertaking large investments to modernize the railway network and increase its transport capacity, financed by a 5 billion EGP budget contribution and Donors. GoE is compensating for the reduced tariffs offered as Public Service Obligation (PSO) and for the loss making local railway services. The current Minister of Transport, appointed in January 2010, has confirmed GOE s commitment to improve s performance by giving priority to: (i) improving safety and quality assurance, (ii) developing human resources, (iii) increasing freight transport traffic with an intermodal perspective, (iv) enhancing operational reliability, and (v) modernizing assets and introducing new technologies. 3. Project performance. The ongoing RP is supported by a Bank loan of US$270 million approved on March 17, 2009 (Loan 7656-EG) and effective since June 24, The RP has three components: (i) signaling modernization between Arab El Raml Alexandria in the delta, (ii) track renewal, and (iii) modernization of management and operating practices. Approval procedures in Egypt, compounded by the resignation of the Minister of Transport and Chairman in October 2009 followed by the appointment of a new Minister three months later, have contributed to delaying the loan approval by Parliament and thereby project effectiveness. 4. The last rating of the RP progress toward achieving project objectives was Satisfactory, and the overall implementation progress was rated Moderately Satisfactory. Actually, has been moving ahead with the project implementation, particularly in relation to the establishment of the project Steering Committee in October 2009, the creation and staffing of a Project Management Unit (PMU) from May 2009, and the ongoing procurement of works 1

7 and consultants. Disbursements are expected to start on December 2010 once the first works contract regarding track renewal is signed. 5. Rationale for the Additional Financing. The RP scale up will at first enhance the Bank support to efforts to improve railway safety which remains a major challenge. Poor signaling and infrastructure systems and outdated operational practices which heavily rely on human judgment and interference continue to hinder the safety of railways operations. Human error remains the most common cause of accidents, meaning that both modern and safe equipment and systems have to be implemented to reduce the chance of human interference. An example is the deadly railway accident in October 2009 which resulted in 18 fatalities. 6. Improving safety is therefore a key priority for the Government. During the RP preparation, MoT and had identified a series of priority corridors where signaling systems needed to be modernized, based on a multi-criteria assessment of the railway network (2007) which gave special attention to safety conditions and congestion levels. Following the assessment, the modernization of signaling on the Cairo Alexandria line, financed by the RP, was identified as the highest priority, followed by the modernization of signaling on the Beni Suef-Asyut line, to be supported by the proposed additional loan, as this line is part of the busiest corridor of the network. 7. With the Bank assistance during the preparation of RP, had carried out studies to assess the technical and safeguards aspects of Beni Suef Asyut line. Nevertheless, GoE did not follow through with a request for a Bank financing at that time in order to speed up the approval of the operation and intended to seek other financing options. However, these efforts were largely unsuccessful, hence the GoE s new request for Bank additional assistance in December 2009 for the modernization of the Beni Suef Asyut signaling system. Meanwhile, during the preparation of the scale up activities, also expressed its wish to expand the scope of the RP component regarding the strengthening of management and operating practices. 8. The Bank s involvement in the railways sector and its support to the ongoing reforms has been very much appreciated by the counterparts. The increase of Bank assistance to critical investments and the overall strengthening of performance will reinforce the existing dialogue on strategic objectives, safety improvements, the development of the commercially critical freight business, and on complex technical matters and modern management practices. 9. Consistency with the Country Assistance Strategy (CAS). The RP scale up is fully consistent with the CAS priorities. The CAS Progress Report for Egypt identifies enhancing the provision of public services as a key objective to be supported by Bank operations, and identifies a railway sector project as one of the inputs contributing to CAS outcome 2.2 expanded supply and improved efficiency of infrastructure services. The proposed additional financing would seek to support this strategic objective by improving the performance of the railway sector. 10. Alternatives considered. The main alternative to an additional financing would be to prepare a second project. However, an additional financing is a preferred option because the proposed new investments and the management strengthening initiatives will directly contribute 2

8 to achieving RP s development objectives. Furthermore, the RP implementing arrangements, including those related to procurement and financial management, are fully applicable to the additional investment. Moreover, outcome indicators will remain the same to the exception of the addition of an outcome indicator specific to the new investment, and some refinement of the initial data and the original target indicators. Finally, given that the proposed scale up activity had undergone substantial preparation as explained above, an additional financing could be swiftly delivered to the Board, whereas the preparation of a separate project would require more time, thereby delaying the installation of the new signaling system. Speed is the key to the success of this operation as there are economies of scale and cost efficiencies if the RP investment and the new signaling program are implemented in sequence. III. PROPOSED CHANGES 11. The proposed scale up fully supports the RP s development objectives which are to assist the Government in improving the reliability, efficiency and safety of railways services through signaling and track renewal investments by and the modernization of its management and operating practices in order to enhance the railways sector responsiveness to economic and social needs and strengthen the financial viability of the Project Implementing Entity. These objectives remain therefore the same. 12. The proposed additional financing will scale up components 1 and 3 of RP by introducing sub-component 1.2 for the modernization of signaling between Beni Suef and Asyut, and by including additional activities to sub-component 3.3 for the support of the modernization of s managerial and operational practices. The new activities are detailed below: 13. Sub-Component 1.2 (US$337 million, of which US$329 million from the Bank loan and US$8 million from s budget) will finance the modernization of the signaling system on the Beni Suef Asyut line and will comprise the following: a) Supply and installation of signaling equipment, including a few works, for US$329 million, including contingencies, by a single contractor to be selected under the Bank International Competitive Bidding (ICB) procedures. This will be financed by the Bank loan. b) Supervision contract estimated at US$8 million, to be undertaken by an engineering firm with a strong expertise in modern automatic signaling systems, selected competitively, and based on terms and conditions satisfactory to the Bank. The contract will be financed by s own budget. 14. The modernization of the signaling system on the Beni Suef Asyut line consists of the installation of a new signaling system on the rail line between those cities and a computerized Central Traffic Control system (CTC) for that section. Works will take place on the existing right of way and the system comprises an automatic block signaling system (on open line), electronic interlocking systems (in stations), and a level-crossing protection system. The computerized CTC will offer sophisticated information to railway staff, including: (i) command and monitoring of train circulation, (ii) a presentation-of-train graph, (iii) event recording, and (iv) dispatcher communications. 3

9 15. Sub-Component 3.3 (US$2 million and financed by ) will be scaled up to include additional activities for the modernization of management and operating practices: a) Support to the modernization of railway maintenance practices, particularly the review and evaluation of existing maintenance procedures at. The emphasis of the activities is to strengthen the suitability of maintenance spending in the current environment of important investments in track renewal, modernization of signaling systems, and acquisition of new locomotives and wagons. b) Support to the improvement of operational rules at, allowing the possibility of using the full functionality provided by the new modern signaling equipment to be installed (control of one entire line from only one CTC, telephone system linking all operators and dispatchers and allowing them not to use the radio for communication between signaling boxes, signaling towers and dispatching centre, contra-flow facilities with crossover between upstream and downstream main tracks, automation of level-crossing, etc.). c) Improvement of project management capacities at. will carry out during the next years a large investment program requiring strong implementation capacities of large projects. The activities will be aimed at creating the institutional structures and the skills at for achieving the expected results in planning, evaluating and implementing complex railway projects. d) Improvement of financial planning and the financial management system at. should acquire adequate financial planning tools and methods to assess and prioritize its investment needs and the time for their implementation based on proper project economic and financial appraisal techniques. Proper financing planning techniques will also allow to identify the various potential sources of financing for its investments (Government,, partnerships with private sector or other public companies) to secure the necessary funds while ensuring s financial sustainability. In addition, and in the context of the implementation of the SAP system at, a new financial management system, based on commercial operation of activities in each business unit should be envisaged. 16. The Table below summarizes the proposed changes and additions to the financing of the project by the Bank. 4

10 Activities Component 1: Signaling Modernization Sub -Component 1.1: Signaling Modernization of Cairo - Alexandria Modernize signaling systems on the Arab El Raml - Alexandria route including CTC Table 1: Cost Summary (in US$ million) Original Project RP Bank financing Gvt financing Total financing Bank financing Additional Financing RPAF Gvt financing Total financing Supervision of works Sub -Component 1.2: Signaling Modernization of Beni Suef - Asyut Modernize signaling systems on the Beni Suef - Asyut route including CTC Supervision of works Component 2: Renewal of 200 km of track Renewal works of 200 km of Track Acquisition of 400 km of Rail Supervision of works Component 3: Modernization of Management and Operating Practices Sub -Component 3.1: Support to the Railway and Transport Academy Sub -Component 3.2: Support the Reengagement of With International Railways Bodies Sub -Component 3.3: Support to Modernize Managerial and Operating Practices Sub Component 3.4: Business Development Activities Contingencies and Front-End Fee Physical Contingencies Price Contingencies Front-End Fee Total Cost (incl. contingencies) RP s institutional and implementation arrangements and RP s safeguard and fiduciary procedures, all further described in section E below, will generally apply for the proposed scale up activities. Nevertheless, the overall project implementation schedule will be 5

11 changed to allow sufficient time for the implementation of the proposed activities. Accordingly, the mid-term review is rescheduled on September 30, 2013 and the project closing date delayed to March 31, Regarding the monitoring indicators, confirmed that in light of the ongoing transformation plan, it is periodically collecting the necessary data to monitor P s outcome. Nevertheless, requested that the methodology and measurement method for collecting two indicators for RP, mainly punctuality and locomotive availability, be further harmonized with developed methods. These revisions will facilitate the estimation of the indicators using existing methods and procedures, while not affecting the overall quality and relevance of the indicators. Following the extension of the project s closing date, target values were also revised accordingly. Monitoring indicators, including revised definitions, baseline figures, and target values are provided in Annex 1. Two new indicators, summarized below, were added to specifically measure the impact of the additional financing. New Indicator Table 2: Additional Financing New Indicators Long distance passenger traffic on Beni Suef Asyut (Total annual passenger-km (million)) o AC trains o Non AC long distance trains Punctuality of AC trains on the line Beni Suef Asyut (Measured as the total number of AC train arriving 15 minutes late to final destination during one year divided by the total number of AC trains operated in the same time period). Baseline FY08/FY Target FY17/FY18 IV. APPRAISAL SUMMARY 19. Institutional and Implementation Arrangements. All arrangements agreed upon with RP remain unchanged for the Additional Financing. is the implementing agency, under the oversight of the established Steering Committee comprising representatives of the Ministries of Transport, Finance, and International Cooperation. The current Project Management Unit (PMU), to be maintained throughout the duration of the Project with organization, functions, staff and terms of reference satisfactory to the Bank, will continue coordinating and implementing RP and the scale up activities, including liaising with the Bank. The job descriptions for the main positions at the PMU (specialists in procurement, financial management, environment, and monitoring and evaluation) have been revised to take into account the additional investment. has also revised the terms of reference for the consulting firm, currently being selected, which will provide assistance to the PMU and deliver on-the-job training to staff during the first two years of project implementation. will finance all PMU costs from its own budget. 6

12 20. Economic Analysis. The economic analysis of the proposed additional investments was undertaken as part of the Project appraisal; the investments were found to be economically viable. The analysis generally followed the same methodology and assumptions adopted for the economic analysis of the Cairo Alexandria Signaling under the RP which is greatly detailed and documented in Annex 9 of the R Project Appraisal Document. The results of the analysis are presented in Annex 4. Summaries of the methodology and results are provided below. 21. The economic internal rate of return of the additional financing was estimated by the use of a stylized model that considered the actual and forecast freight and passenger traffic on the Beni Suef Asyut line, and the impact of the proposed investments on available line capacity in a defined do-minimum scenario and a defined do-something scenario. 22. The economic analysis considers the following main benefits: (i) time savings to existing and forecasted rail freight and passenger traffic; (ii) directly generated rail traffic which would not have traveled before but travels as a result of the reduction in journey time; (iii) generalized cost savings (including operating cost and time value) for diverted traffic from road to rail resulting from the saturation of the line capacity in the do-minimum scenario; (iv) savings in highway maintenance costs through the diversion of freight and bus traffic from road to rail; and (v) generalized cost savings particularly in term of safety improvements. 23. The economic analysis indicates that signaling investments on Beni Suef Asyut are economically viable, returning a positive NPV of US$323 million. The estimated Benefit/Cost ratio is 2.22 and the Economic Internal Rate of Return (EIRR) is 21.8 percent higher than the 12 percent threshold, therefore confirming the viability of this investment. The economic analysis revealed that most economic benefits are derived from improvements in safety, representing about 57 percent of total discounted benefits. Time savings for existing traffic represent 28 percent of total discounted benefits, whereas savings in maintenance costs of the signaling system are about 7 percent. 24. A sensitivity analysis has been carried out and reveals that the proposed investments are relatively robust to defined variations in key parameters, including: (i) capital costs of the project; (ii) forecasted freight and passenger growth rates; and (iii) delayed construction period. Significant variation in all of these parameters still results in a positive NPV and an EIRR higher than the 12 percent threshold. 25. Technical Aspects. The Beni Suef Asyut section is part of the Alexandria-Asyut corridor which has the highest rail traffic density in Egypt. The modern signaling system, including electronic interlocking systems in the main stations, and the CTC will increase the safety of traffic and create conditions for better utilization of the line. The section was selected based on the results of several rounds of assessment of the network condition and congestion. The technical option was chosen after a detailed comparison by design consultants of a range of alternative standards used in the world. The preparation of the bidding documents is in advanced phase of elaboration, being assisted by a railways consulting firm with large experience in railway signaling. The design will draw upon lessons from the preparation of similar documents 7

13 for the modernization of signaling system on section Arab El Raml-Alexandria. The same consultant has also prepared bidding documents according to the provisions of the World Bank Standard Bidding Document (SBD) Procurement of Plant Design, Supply, and Installation and will provide assistance to during the pre-qualification of bidders, evaluation of bids, and contract award. Based on the high interest from firms specialized in rail signaling systems for the Arab El Raml Alexandria modernization program, it is expected that very strong international consortia will bid. During the execution of works, a consultant with strong expertise in modern signaling systems will supervise the quality of works as the Project Manager according to World Bank rules. will need to modernize the Automatic Train Protection (ATP) system (locomotives and track equipment) at a later stage, under financing arrangements yet to be determined. 26. Procurement. Procurement for the proposed additional investment will be carried out in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 2004, revised October 2006 and May will be in charge of carrying out procurement activities, in accordance with the different procurement methods: the need for pre-qualification, estimated costs, prior review requirements, and time frame have been agreed between the Borrower and the Bank. Procurement for installing and modernizing the signaling system will be done using the Bank Standard Bidding Documents for Procurement of Plant Design, Supply, and Installation through International Competitive Bidding. Since prequalification is required for this contract, the Bank Standard Prequalification Documents will be used. The revised RP Procurement Plan to take into account the Beni Suef Asyut investment will be updated, at least, annually or as required to reflect the actual project implementation needs. 27. experience with World Bank procurement has been reinforced during the preparation of RP. Requirements and procedures for the Beni Suef Asyut investment were discussed with during appraisal, and are similar to those being undertaken for component 1 of RP (Signaling Modernization of Arab El Raml Alexandria section). Bidding documents are being finalized. The PMU s procurement specialist is expected to provide support in procurement related matters. The Bank will continue to strengthen procurement capacity through supervision missions and the organization of additional workshops to the one previously organized in February 24 th, Financial Management (FM). The existing FM as well as disbursement procedures used for the RP will be followed for the additional loan. PMU s financial management specialist is responsible for all financial management matters, including reporting to the Bank. He will be able to draw on the resources of the consulting firm which will support the PMU during the first two years. 29. The RP project design, from an FM perspective, addressed potential risks identified during project preparation, particularly the fact that had no recent experience in managing Bank projects. Nevertheless, since the project is not yet disbursing, the FM arrangements are yet to be tested. The project s financial accounting and reporting system are currently being developed and expected to be finalized by end October Project transactions will be recorded on the system which will also produce the IFR reports. An external auditor, acceptable 8

14 to the Bank, will be hired by to audit the projects annual financial statements which will be submitted to the Bank. In accordance with the Bank revised Policy on Access to Information, following the formal receipt by the Bank of the project and s audited financial statements, the borrower shall ensure that they are made publicly available in a timely fashion and in a manner acceptable to the Bank. 30. Since the proposed additional financing is similar, at least in terms of fiduciary aspects, to RP component 1, the agreed FM arrangements and risk mitigating measures incorporated in the FM design are assessed to be adequate to have the project and the additional financing operating in a moderate FM risk environment. 31. Disbursement. Disbursement procedures used for RP will also be used for the additional financing. The project s loan disbursement, including the disbursement of the additional loan, will take place using the direct disbursements and special commitments methods. The Bank loan proceeds with be on-lent by GoE to under an amendment to the Subsidiary Loan Agreement (SLA). Payments to contractors and suppliers will be made directly by the Bank with respect to works and goods, while will finance supervision costs. 32. Environmental Safeguards. The project remains classified as category B according to the World Bank s Operational Policy 4.01 on Environmental Assessment, requiring partial assessment of the new investment through the preparation of an Environmental and Social Impact Assessment (ESIA) report. An environment consulting firm hired by according to terms of reference cleared by the Bank prepared an ESIA specific to the Beni Suef-Asyut section. The ESIA includes an environmental management plan (EMP), detailing the institutional settings, the mitigation measures, and the monitoring plan for the potential impacts resulting from the project during the construction and operation phases. 33. Stakeholder consultations were carried out during the preparation of RP s ESIA through: (a) interviews and data collection in public scoping for train users, users of level crossings, and residents in areas adjacent to construction sites (totaling 1,166 individuals representing the different groups); and (b) two public consultation meetings in Minya and Cairo, which were well advertised in a major daily newspaper, and were attended by a total of 184 participants. Information on the project as well as a summary of the findings of the ESIA, were posted on the consulting firm s website for public review, prior to the consultation meetings. The meetings attracted a pool of stakeholders representing different sectors of society, including various social and economic class, gender, and affiliation. 34. The ESIA report for the proposed scale up was disclosed by in English and Arabic on their website on May 4 th 2010 and was approved by the Egyptian Environmental Affairs Agency (EEAA) on May 17 th The ESIA documents were disclosed by the Bank infoshop on June 30, As agreed during the preparation of RP, will create an Environmental Affairs Directorate (EAD) and will select a specialized environmental consultant to assist the PMU on project environmental matters and for the implementation of the EMP. has made significant 9

15 progress to implementing these requirements and has agreed to establish the EAD by March 31, 2011 with organization, functions, staff and terms of reference satisfactory to the Bank. 36. Social Safeguards. The modernization of Beni Suef Asyut signaling system does not entail any land acquisition or resettlement as all works will be carried out on existing rights-ofways. There are likely to be some socio-economic impacts during the implementation of the project related to construction, for example, some delays in train travel along affected corridors, but overall the proposed scale up activities are expected to strengthen the RP s positive impacts resulting from project investments in signaling through improved rail services and safety on core routes. 10

16 Annex 1: Results Framework and Monitoring EGYPT: Egypt National Railways Restructuring Project Results Framework Revisions to the Results Framework PDO Current (PAD) Assist the Government in improving: Proposed No Change Comments/ Rationale for Change a) the reliability; b) the efficiency; and (a) Rate of utilization of assets; long distance passenger traffic on Cairo Alexandria (b) PSOs paid; freight traffic c) the safety of railways services. PDO indicators (c) Number of fatalities due to rail accidents. Current (PAD) Proposed change (a) Rate of utilization of Indicator Revised to: assets; (a) Rate of utilization of assets (new definitions); (b) long distance passenger Indicator revised to : traffic on Cairo Alexandria Long distance passenger traffic on line; Cairo Alexandria and Beni Suef Asyut lines. (c) PSOs paid; No Change Total annual amount of PSO paid by the government to (expressed in EGP million). (d) freight traffic; No change Total annual net-ton-km of freight traffic (million) (e) Number of fatalities No Change due to rail accidents. Average number of fatalities due to railway accidents on the network Intermediate Results indicators Current (PAD) Proposed change Punctuality on Cairo- Indicator revised to: Alexandria Line. Punctuality on Cairo-Alexandria and Beni Suef Asyut lines. Maintenance costs on renewed tracks. Indicator revised to: Maintenance costs on sections were tracks are renewed ( Change in method Include Beni Suef Asyut Line to reflect impacts of proposed investments under additional financing. Include Beni Suef Asyut Line to reflect impacts of proposed investments under additional financing. To harmonize the collection of necessary information with revised practices. 11

17 Revisions to the Results Framework Training time of management. of calculation and target value) No Change Average management training time Comments/ Rationale for Change 12

18 Project Development Objective (PDO): No change to the initial PDO which is to assist the Government in improving the reliability, efficiency and safety of the railways services through signaling and track renewal investments by and the modernization of its management and operating practices in order to enhance the railways sector responsiveness to economic and social needs and strengthen the financial viability of the Project Implementing Entity. Responsibilit y for Data Collection Comment Target values are yearly and not cumulative Target values are yearly and not cumulative Target values are yearly and not cumulative Target values are yearly and not cumulative ANNEX 1: REVISED PROJECT RESULTS FRAMEWORK AND MONITORING INDICATORS PDO Level Results Indicators 1. (i.a) Locomotive productivity o Long Distance Passenger o Short Distance Passenger o Freight o All activities Core UOM Availability ratio of the useful fleet [%], defined as the number of daily available locomotives divided by the total number of assigned locomotives for each SBU, averaged on a yearly basis. Baseline Original Project Start FY07/FY Progress To Date FY08/ FY11/ Target Values FY13/ FY15/ FY17/ Frequency Once every two years Data Source/ Methodology statistics 1. (i.b)locomotive productivity Kilometrage per available locomotive: o Long Distance Passenger o Short Distance Passenger o Freight o All activities Total number of km (000s) run by all locomotives during a year divided by the average number of yearly available locomotives Once every two years statistics 1. (ii) Long distance Passenger traffic on Cairo Alexandria o AC trains o non-ac long distance trains 1. (iii) Long distance Passenger traffic on Beni Suef - Asyut o AC trains o non-ac long distance trains Total annual passengerkm (million) Total annual passengerkm (million) Once every two years statistics statistics 13

19 1 Calculated as the total annual number of victims on network per one billion passenger-km. shall develop an internal system for collecting data concerning the number of fatalities (persons killed in the accident and deceased after the accident). Figures about the total annual number of fatalities and the total volume of passenger-km will be presented for the annual evaluation of the indicator. 2 Accidents produced as a consequence of railways malfunctioning or railway staff human error. 3 Other accidents involving railways (level crossing accidents ignoring the signaling warnings, people s negligence in the railway area, etc.). Target values are yearly and not cumulative Target values are yearly and not cumulative Target values are yearly and not cumulative 2. Payment of PSOs: PSO compensation for 3. (i) Social and Economic Needs: Average number of fatalities due to railway accidents on the network 1 o Typical accidents 2 o Non Typical accidents 3 o Total 3. (ii) Social and Economic Needs: Freight traffic carried by Total annual amount of PSO paid by the government to [expressed in EGP million]. Average number of fatalities Total annual net-ton-km of freight traffic (million) Once every two years Once every two years 2,020 1, Once every two years annual accounts statistics statistics 14

20 Responsibilit y for Data Collection Comment Target values are yearly and not cumulative Target values are yearly and not cumulative Target values are yearly and not cumulative Target values are Intermediate Results and Indicators Intermediate Results Indicators Core Unit of Measurement Baseline Original Project Start FY07/FY08 Progress To Date FY08/09 FY11/ 12 Target Values FY13/ 15 FY15/ 16 FY17/ 18 Frequency Data Source/ Methodology Intermediate Result 1: Component 1: Punctuality of AC trains on the Cairo-Alexandria and Beni Suef Asyut Lines 1. Punctuality of AC trains on the line Cairo-Alexandria Total number of AC train arriving 15 minutes to final destination late during one year divided by the total number of AC trains operated in the same period of time Once every two years statistics 2. Punctuality of AC trains on the Beni Suef-Asyut line Same as above n/a Once every two years statistics Intermediate Result 2: Component 2: Maintenance costs on sections were tracks are renewed 3. Annual total cost of track infrastructure maintenance on sections renewed under the project. Million EGP Once every two years statistics Intermediate Result 3: Component 3: Average management training time 4. The ratio between the number of staff-days allocated for training during a year and the average Number staff days/average management staff at n/a Once every two years statistics 4 Five year rolling average of the cost of mechanical maintenance and materials cost for the Project sections. 15

21 Responsibilit y for Data Collection Comment yearly and not cumulative Intermediate Results and Indicators Intermediate Results Indicators Core Unit of Measurement number of management staff at 5. Baseline Original Project Start FY07/FY08 Progress To Date FY08/09 FY11/ 12 Target Values FY13/ 15 FY15/ 16 FY17/ 18 Frequency Data Source/ Methodology 5 shall communicate the categories of staff considered as management staff (first six levels of management). 16

22 The Development objective of the Project is to assist the Government of in improving the reliability, efficiency and safety of the railways services through signaling and track renewal investments by and the modernization of its management and operating practices in order to enhance the railways sector responsiveness to economic and social needs and strengthen the financial viability of the Project Implementing Entity. ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) Project Development Objective(s) PDO Level Results Indicators: 1. Locomotive productivity 2. Long distance passenger traffic 3. Payment of PSOs 4. Yearly average number of fatalities due to railways accidents on network 5. Freight traffic carried by Risk Category Risk Risk Description Proposed Mitigation Measures Rating Project Stakeholder Risks Medium-L Country Level Engagement with government and stakeholders: Egypt s engagement with the Bank is very strong. Over the past few years, the World Bank Group has scaled up its support to Egypt, with a comprehensive program of activities by IBRD, IFC, and MIGA. This effort is geared towards supporting the implementation of the ongoing reform program. The Government sees the Bank as a reliable partner and has requested further Bank support in a broad range of sectors. The Bank will continue to reinforce the ongoing dialogue with key stakeholders in Egypt. Implementing Agency Risks Medium-L Implementation capacity within is weak, although improving under the company s transformation and modernization plan, due among others to outdated internal procedures and lack of experience working with international financial institutions. As a consequence of the ongoing transformation plan and under the project, a number of measures have been or are planned to be taken into account to mitigate the implementation risks. The reorganization of along business units, initiatives to strengthen capacity of staff, the introduction of new practices with the assistance of experienced foreign railway specialist are enhancing capacity over the board. A high level steering committee involving the 17

23 ministries of Transport, International Cooperation, and Finance, has been created to oversee the implementation of the Project. A PMU has been established and is fully staffed. is also selecting an outside consulting firm to support the PMU in project management during the first two year of implementation and to provide on-the-job training to PMU staff. Throughout direct practice and training provided by the Bank, is becoming more familiar with safeguard and fiduciary requirements, particularly procurement. Construction supervision consultants will support with respect to contract progress certification. Project Risks Medium-L Design Medium-L The preparation of the technical specifications and bidding documents for signaling modernization requires deep technical skills and good knowledge of state-of-the-art solutions. lacks this capacity for the most part. Social and Environmental Medium-L Environmental impacts are expected mostly during construction phase and include high noise levels, increased levels of local air pollutants, and detours around level crossings. The technical specifications and bidding documents for the RP signaling investment have been prepared by an independent international consultant. Moreover,, with the assistance of the same consulting firm, has already prepared similar technical documents for the Beni Suef Asyut operation. During execution of works, the Project Manager being hired by for each construction contract in accordance with Bank rules will supervise the quality of works. As all project investments are on existing rail rightsof-way. Railway corridor has no sensitive environmental habitats. has prepared an Environmental Management Plan to address environmental and social impacts. It has confirmed that the impacts of investments are manageable, and agreed upon mitigation measures during and after construction are detailed in an environmental monitoring plan and an institutional capacity building plan. An environmental consultant 18

24 will be selected by to assist on the implementation of the environmental management plan. The environmental consultant will also help the establishment of an Environmental Affairs Directorate within the structure to help the sustainability of managing the environmental and social aspects during the operation phase of the project. Delivery Quality Medium-L Project indicators are complex and difficult to assess. In light of the implementation of the modernization and strengthening plan, is periodically collecting indicators reflecting its overall performance. The project performance indicators were thoroughly discussed and agreed upon with and the definition and methods for estimating these indicators were harmonized with existing procedures and methods. Program and Donor Medium-I While the project design permits the implementation of the project as a standalone operation, the full benefits of the project can only materialize if implement the plan or an equivalent reform program. As mentioned above, the modernization of is an important Government priority. The ongoing initiatives present an important and well thought road map for s modernization. While some modifications to the initial plan have occurred as progresses in its implementation and further to the appointment of an new Minister of Transport last January, the overarching principles and objectives remain and restated priorities comfort them given the broad understanding, especially at high governmental levels, for the need of the modernization of. The Bank team will continue assessing the progress of the modernization of during project supervision missions. Overall Risk Rating at Preparation Overall Risk Rating During Implementation Comments Medium-L Medium-L 19

25 ANNEX 3: DETAILED DESCRIPTION OF PROPOSED PROJECT SCALE UP A key itinerary, Beni Suef-Asyut, was selected for the modernization of the signaling system. When completed, this section will be the most modern part of the Egyptian railway network in terms of signaling and safety standards. The modernized system could become a model to be replicated throughout the core railway network of. With a length of 250 kilometers, the section Beni Suef Asyut currently consists of a nonelectrified double track line run by diesel electric locomotives hauling mixed traffic (freight and passenger). This section is part of the busiest railway corridor in Egypt, Alexandria Asyut, and is a bottleneck in terms of transport capacity because of the obsolete signaling system in place: a) Existing signaling boxes are equipped with old mechanical interlocking of points and signals (some built in 1928 & 1936) ensuring safety of the trains through arrangements of rods that physically prevent conflicting moves being set up. b) Unidirectional lines that can be operated on the wrong direction only through heavy and time consuming procedures when it is necessary to allow for single working over one track of a two track railway. In such cases, safety is only ensured through procedures applied by signalmen and no technology (through interlocking tables) is providing safety. c) The mechanical signaling system compels big time intervals between following trains as no train is allowed to enter in an interval before this interval has been freed by the previous train and confirmed by a signalman through mechanical devices. The modernization of the signaling system will comprise the complete removal of the existing equipment and the installation of state-of-the-art solution. The signaling system to be implemented will mainly comprise an automatic block signaling system (on open line), electronic interlocking systems (in stations), and a level-crossing protection system. All necessary cables and cabling equipment related to the signaling system will be installed, all signaling equipment will be remote controlled, and diagnosis systems for all components will be available. All components of the signaling system, protection systems in level crossings, and train and security brake systems will be in conformity with a train speed of 160 km/hour. The contra-flow facilities with crossover between upstream and downstream main tracks on the whole section of the line and the bi-directional signaling will be installed. Bi-directional signaling provided on the double track will allow traffic to run safely in either direction along a running line improving the safety of traffic in cases of failures of trains or emergency works and allowing track maintenance works more easily. An Operation Control Centre (OCC) that will be working 24/24 and 7/7 will be put in place for the efficient and reliable operation of the railway line. It will organize the traffic on the whole section of the line and it shall deal with running train traffic, according to its priority between 20