Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB2952 Project Name Irrigation Development Additional Financing Region EUROPE AND CENTRAL ASIA Sector Irrigation and drainage (100%) Project ID P105171 Borrower(s) REPUBLIC OF ARMENIA Implementing Agency State Committee for Water Management Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 7, 2007 Estimated Date of Appraisal Authorization April 23, 2007 Estimated Date of Board Approval June 7, 2007 1. Key development issues and rationale for Bank involvement The additional financing is being requested for the purposes described in OP/BP 13.20, which are �implementation of additional or expanded activities that scale up a project�s impact and effectiveness�. As per OP 13.20, the Bank may provide additional financing under the following conditions, which are all currently met by the Irrigation Development Project (approved August 30, 2001), namely: � The project has had an important developmental and institutional impact on Armenia. Starting as a pilot program, the Government became convinced of its efficacy, and proceeded to roll out a system of 52 Water User Associations (WUAs) throughout the country. To date, irrigated land has increased by about 20%, water losses and energy consumption have been significantly reduced, and cost recovery in operations and maintenance has risen dramatically. � The Implementation Status Report (ISR) ratings from the project�s start, and including the most recent 12 month period, have always been �satisfactory� or better, for both Implementation Progress (IP) and Development Objectives (DOs). � The borrower is deeply committed to the project. The project was an essential element in helping Armenia to establish Water Users Associations (WUAs) throughout the country and the Government continues to seek Bank involvement in this sub-sector. � All project activities are being implemented by a very competent and highly effective Project Implementation Unit (PIU) under the leadership of a capable PIU Director. Page 2 2. Proposed objective(s) The additional funds would be provided within the context of the current Development Objective of the Irrigation Development Project �enhancing the profitability and sustainability of irrigated agriculture � and would simply expand an existing component under the IDP, i.e., the funding scheme for rehabilitating tertiary canals. The expanded activities are of the same nature as those already under implementation. The magnitude and scope could be easily accommodated within the context of the existing project without modification of the current implementation mechanisms or arrangements. The activities will be completed within two years of the original closing date. The target goals of the project would need to be only modestly adjusted, mainly increased. The amount of irrigated land and water savings would be increased. The additional time involved for implementation would also enable monitoring a higher level of cost-recovery over time. (a) Increase average farm income in project area; (b) Increase level and efficacy of O&M activities; (c) Promote community driven development in the irrigation sub-sector. 3. Preliminary description Following a preliminary discussion with the Bank team on February 5, 2007, the Government requested Additional Financing of US$5.0 million to be used primarily for continuing the financing of rehabilitation works on tertiary level irrigation canals. The need for rehabilitation works of tertiary canals remains high, highlighted by the fact that the State Committee for Water Management (SCWM) currently has received an additional sixty two proposals for rehabilitation works of tertiaries from WUAs that can not be satisfied due to lack of funds under the project. The SCWM has indicated that those additional proposals, if implemented, would cover 204 km of tertiary level canals that can provide irrigation water for more than 18,000 hectares. The total estimated amount needed for funding these proposals is about US$ 10.0 million. The credit for IDP would therefore increase from about US$ 25.0 million to about US$ 30.0 million, and would close in two years as currently scheduled (the closing date has been extended by two years, from March 31, 2007 to March 31, 2009, to allow implementation of the additional rehabilitation works). An alternative that could have been considered would have been a full follow-on project at this time. Indeed the original PAD envisaged a phase II program of about $35 million. However, since then several new donors have become involved in the sector. The Millennium Challenge Corporation (MCC) signed a compact in 2006 with Armenia, which could provide about $100 million for irrigation works. Also, Armenia recently joined the Asian Development Bank, and the ADB is exploring the possibility of supporting the rural sector (although its precise interventions are not yet determined). Funds from both of these new sources have not yet started Page 3 flowing and the Government would like to proceed with priority activities under the current IDA project to maintain continuity. The above donors have also indicated their interest in having IDA remain engaged in the sector for at least the next few years given our leadership to date in institutional and policy issues in the irrigation sector. This approach to extending the current project by two years with a smaller additional funding has therefore been endorsed by the Government and IDA and is provided for in the CAS Progress Report which will be discussed by the Board on March 8 2007. The CAS Progress Report indicates that further involvement of IDA in this sector will need to be carefully considered in the next CAS, in light of partnership activities. 4. Safeguard policies that might apply [Guideline: Refer to section 5 of the PCN. Which safeguard policies might apply to the project and in what ways? What actions might be needed during project preparation to assess safeguard issues and prepare to mitigate them?] The project has no unresolved fiduciary, environmental, international waterways, dam safety or other safeguard problems. The proposed additional financing will not raise the environmental category of the project nor trigger any new safeguards. The existing Environmental Management Plan (EMP) will continue to be applied. To date, compliance with the EMP has been satisfactory. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 International Development Association (IDA) 5 Local Farmer Organizations .85 Total 5.85 6. Contact point Contact: Giuseppe Fantozzi Title: Sr Operations Off. Tel: 5795+202 Fax: Email: Gfantozzi@worldbank.org Location: Rome, Italy (IBRD)