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Source: World Bank
21 December 1995

Project Name                  West Bank and Gaza-Water and Sanitation...
                             Services in Gaza

Region                        Middle East and North Africa

Sector                        Water Supply and sanitation

Project ID                    XOPA40505

Borrower                      Palestine Liberation Organization (PLO)
                             for the benefit of the Palestinian
                             Authority (PA)

Implementing Agency           Palestinian Water Authority (PWA)
                             Contact:  Mr. Nabil Al-Shareef,
                             Fax: 972-7-824-030;822-697

Date PID Prepared             December 21, 1995

Appraisal Date                January 1996

Board Date                    March 1996

1.   Sector Background.  Water and wastewater services in Gaza are
inadequate in terms of quantity, quality, and the adequacy of
management.  Groundwater resources are seriously and unsustainably
overdrawn and increasingly affected by rising salinity and nitrate
concentrations. Distribution systems suffer from serious losses (around
50%) as a result of poor construction and substandard materials, the
corrosive environment, and inadequate maintenance.  Wastewater services
are limited and treatment ineffective.  Despite the serious shortage of
water resources, water re-use is not practiced.  Approximately 3
households out of 4 are not connected to a sewerage system.  The massive
infiltration of non-treated wastewater contributes to groundwater

2.   Program Objectives and Description.  The proposed project aims at
continuing and reinforcing this effort.  It is designed within the
framework of the priority needs for the West Bank and Gaza as defined in
the water and wastewater component of the three-year Emergency
Assistance Program (EAP).  The objective of the program is to improve
the quality, quantity and management of water and wastewater services in
the West Bank and Gaza.  The program includes:  equipment procurement;
upgrading and extension of municipal water supply networks;
rehabilitation, extension and construction of municipal stormwater and
sewerage networks; improvement of village water distribution and related
programs; the drilling of new wells; and improving management of water
and wastewater services.  For Gaza, the program consists of:  (a) the
provision of an International Operator to implement a Service
Improvement Program; (b) the provision of operating capital for the
Operator; (c) finance for investment in rehabilitation projects and

provision of additional water and wastewater facilities in areas where
they are most urgently required; and (d) Technical Assistance and
Developing Institutional Capacity.

3.   Project Objectives.  Within the framework of the program, the
project would address urgent priorities aiming at improving the quality,
quantity and management of water and wastewater services in Gaza.  The
proposed management contract is a means to this end.  The project will
assist the PA in meeting urgent needs (not covered under the Emergency
Rehabilitation Project) through:  (a) improving water and sanitation
services through a private sector management contract for water and
wastewater operations; (b) strengthening and restructuring the
institutional framework for both service delivery and for sector
governance functions; and (c) creating the operational, institutional
and managerial conditions for priority rehabilitation, upgrading and
extension projects to be financed by donors.

4.   Project Description.  The proposed project would consist of the
following components:  (a) the provision of an International Operator
under a four-year Management Contract to implement a Service Improvement
Program.  Part of the Operator's payment will be a performance incentive
fee based upon the attainment of specific performance targets; (b) the
provision of operating capital for the Operator, not covered by the
revenues collected, essential to fund goods, equipment, works and
services required for improving services and for attainment of
performance targets; and (c) the provision of:  (i) a long-term
technical advisor to strengthen the newly created PWA; and (ii)
independent auditors to monitor the Operator's technical and financial
performance.  In parallel, it is expected that a minimum of
US$50 million of donor-funded works (rehabilitation and extension) would
be implemented.

5.   Project  Financing.  The estimated total project cost is US$28
million, which would be financed by:  (a) an IDA Credit of US$ million
out of the Trust Fund for Gaza and West Bank (TFGWB); and (b)
US$3 million in local funding.

6.   Project Sustainability.  The introduction of a private sector
operator to manage and operate water and wastewater services will ensure
sound financial management, improved cost recovery and better quality

7.   Program Objective Categories and Poverty Category.  The project
would support the Palestinians' program to improve and protect the
environment and to increase private sector participation in the
management of the water and wastewater sector.  Although the project is
not a part of a core poverty program, it will have a beneficial impact
on poor households which are sometimes forced to purchase water from
vendors at relatively high prices during service interruptions.
Improvement of the quality of the water and in sanitation will have a
positive impact on reduction of gastro-enteric and other water-related

8.   Environmental Aspects.  The proposed project would contribute to
improving the environment, primarily through reinforcement and improved
management of sewerage systems.  It would enable a substantial positive
environmental impact through reducing overflows of sewage and improving
quality of effluent from sewage treatment plants, as well as reducing
losses from the water distribution system, thereby allowing less water
to be pumped from the heavily overdrawn aquifer to meet demand.  The
proposed project has been placed in environmental screening category

9.   Benefits.  Overall, the project is expected to improve the quality
and quantity of water supplied and improve the management of the water
and wastewater sector.  Specifically, it will help protect, manage and
conserve sensitive and limited water resources; reduce the losses due to
network inadequacies and inefficient operations; provide better and more
reliable services; and improve health and sanitation and environmental
quality.  A management contract with an experienced utility operator
will also reduce constraints to expansion of services (especially
sewerage), and facilitate the flow of donor funds to the sector.

Contact Point:      Public Information Center
                   The World Bank
                   1818 H Street N.W.
                   Washington D.C. 20433
                   Telephone No.: (202)458-5454
                   Fax No.: (202)522-1500

Note:  This is information on an evolving project.  Certain components
may not necessarily be included in the final project.

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