1. Water Regional Seminar - Dead Sea - Jordan, March 2011 1 Water Sector Reform in Egypt Ahmed Badr, PhD Water and Energy Specialist Delegation of the European Union to Egypt EUROPEAN UNION DELEGATION OF THE EUROPEAN UNION TO EGYPT

2. Water Regional Seminar - Dead Sea - Jordan, March 2011 2 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Table of Content Brief History of the EC Support to the Water Sector in Egypt Water National Sector Framework for the EU Sector Policy Support Programme Other Development Partners Active in Water Sector in Egypt …Including Those of Coordinating Mechanisms… Major Challenges / Opportunities Facing Water Sector in Egypt Major challenges / Opportunities in the Provision of External Support to the Water Sector in Egypt Areas of Uncertainty and Doubt in Programming Lessons Learnt and Avoidable Errors

3. Water Regional Seminar - Dead Sea - Jordan, March 2011 3 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Brief History of the EC Support to the Water Sector in Egypt - I Water Sector Reform Programme – Phase I (2005 – 2009) Grant Amount: 80 million, 1 st Sector Policy Support Programme Institutional Strengthening to Egyptian Water Regulatory Agency – Phase I (2008 - 2010) Grant Amount: 06 million Institutional Twinning to Nile Water Quality Sector (2008 -2011) Grant Amount: 1.3 million

4. Water Regional Seminar - Dead Sea - Jordan, March 2011 4 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Brief History of the EC Support to the Water Sector in Egypt - II Water Sector Reform Programme – Phase II (2011 – 2015) Grant Amount: 120 million Institutional Strengthening to Egyptian Water Regulatory Agency – Phase II (2011 - 2013) Grant Amount: 1.5 million Institutional Strengthening to Holding Company for Water and Wastewater (2011 – 2013) Grant Amount: 1.5 million

5. Water Regional Seminar - Dead Sea - Jordan, March 2011 5 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Brief History of the EC Support to the Water Sector in Egypt - III Improved Water and Wastewater Service Programme – Phase I (2008 – 2014) – Lower Egypt Total Amount: 295 million (EU Grant: 34 million (as 29 - NIP + as 5 - NIF); KfW (as Lead Donor) loan: 60.5 million + Grant: 8.3 million; EIB loan: 70 million; AFD loan: 40 million and GOE: 82.2 million in EGP equivalent) Improved Water and Wastewater Service Programme – Phase II (2011 – 2017) – Upper Egypt Total Amount: 285 million (EU Grant: 13 million (NIF); KfW (as Lead Donor) loan: 59 million + Grant: 8.3 million; EIB loan: 62 million; AFD loan: 57 million and GOE: 94 million in EGP equivalent)

6. Water Regional Seminar - Dead Sea - Jordan, March 2011 6 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Water National Sector Framework for the EU Sector Policy Support Programme – I National Water Development Policies Nile Water Stratgies (2005-2017 & Water Vision up to 2050) Water and Wastewater Sector Development Policies – 2010 Sector budget and medium term financial perspective: Development of GOEs Medium Term Expenditure Forecast (MTEF) Coordination process: EU together with Dutch Development Cooperation is co-chairing Water Donor Group.

7. Water Regional Seminar - Dead Sea - Jordan, March 2011 7 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Water National Sector Framework for the EU Sector Policy Support Programme – II Institutional capacity: Ministry of Housing, Egyptian Water Regulatory Agency and Holding Company for Water and Wastewater are leading a very wide and comprehensive programme for strengthening the institutional capacity of the water sector. Performance Monitoring: WSRP-I & II used to be (and they be continued) to be used by the GOE and all development partner group one of the main tools for monitoring the performance of the water sector reform process, among others of EWRA and HCWW.

8. Water Regional Seminar - Dead Sea - Jordan, March 2011 8 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Water National Sector Framework for the EU Sector Policy Support Programme – III Macro-economic environment: Stable till 24 January 2011…to be re-evaluated after 25 January 2011. Public financial management: Public Financial Management (PFM) has been advanced due to provided substantial support from several donors…further support would be expected after 25 January 2011.

9. Water Regional Seminar - Dead Sea - Jordan, March 2011 9 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Other Development Partners Active in Water Sector in Egypt …Including Those of Coordinating Mechanisms… - IV Main Coordination Form EU Neighborhood Investment Facility – Pool Funding : EU, KfW, AFD and EIB Joint / Parallel Financing: The World Bank, African Development Bank, Dutch Cooperation, and Swiss Development Cooperation Other Bilateral Donors: JICA, Italian Development Cooperation; Spanish Development Cooperation

10. Water Regional Seminar - Dead Sea - Jordan, March 2011 10 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2004 – 2010 - I Decentralization of Water and Wastewater Services in order to improve the service provisions (i.e., reliable accessibility to services and quality of services). This is represented by the establishment of Holding Company for Water and Wastewater (HCWW) and subsequent 16 affiliated companies to cover all 30 Governorates of Egypt – Done with the support of EU-WSRP-I, among other donors; Improving the financial sustainability of the HCWW and its affiliates by gradually reaching 100% of cost recovery for O&M services. This is as phase one of Egypt long term strategy for reaching complete cost recovery for capital investment as well – Partially Done with the support of EU-WSRP-I (increase of tariff), among other donors;

11. Water Regional Seminar - Dead Sea - Jordan, March 2011 11 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2004 – 2010 - II Introducing the management principals of private sector for managing HCWW and its affiliates so that HCWW is privately managed and receive NO budget from GOE, except for water production subsidy. In other words, GOE owns the assets of HCWW and its affiliates but doesnt manage – Done with the support of EU-WSRP-I, among other donors. In an integration with the above steps and in order to ensure the proper provided services to Egyptian citizens by HCWW, the GOE has created the Egyptian Water Regulatory Agency (EWRA) to control the quality and services provisions of the services provided, plus balancing the relation between consumers and services providers i.e., HCWW and its affiliates – The operationalization of EWRA has received a substantial support through EU-WSRP-I, among other donors.;

12. Water Regional Seminar - Dead Sea - Jordan, March 2011 12 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2004 – 2010 - III Moreover, the operationalization of EWRA plus the political commitment of GOE has led to the award of the first PPP contract for building Wastewater Treatment Plant in Egypt with total amount of USD 280 million to Spanish-Egyptian Consortium. Another two are currently under tendering stage - Done with the support of EU-WSRP-I, among other donors. Due to limited Nile water resources since 1959 vs. population increase as well as huge development in industrial activities, GOE had to limit water-dense cropping like rice in order to adjust its Nile water balance - Done with the support of EU-WSRP-I, among other donors.

13. Water Regional Seminar - Dead Sea - Jordan, March 2011 13 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2004 – 2010 - IV Along the context of adjusting its water balance, Egypt developed its first of kind National Master Plan for Water Supply and Sanitation including its first of kind Rural Sanitation Strategy. This is mainly to ensure the highest efficiency capital investment + the rational of using Nile Water Resources – The master plan was approved by GOS for horizon 2037 and with total capital investment 20 Billion - Done with the support of EU-WSRP-I, among other donors. Moreover, along the same of line of the above rationale, GOE has ratified in 2009 the enhanced plan of recycling of treated agriculture drainage water with the Nile fresh water in order to increase its Nile water resources.

14. Water Regional Seminar - Dead Sea - Jordan, March 2011 14 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2004 – 2010 - V Based on all previous achieved reforms, GOE has developed and subsequently ratified its first Water and Wastewater Development Polices in order to have a universal-class services provision by horizon 2037. From the Nile Water Resources perspectives and given the current blockage in the Framework Agreement of the Nile Basin, GOE is now finalizing its Water Vision upto 2050 …this includes Expansion of efficient use of Groundwater, Expansion of environmentally-friend efficient and effective recycling of agriculture drainage, expansion of safe use of sea-water desalination especially for sea-boarder Governorate (like Alexandria) and with the use of advanced use of renewable technologies especially solar power (mainly CSP)

15. Water Regional Seminar - Dead Sea - Jordan, March 2011 15 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2011 – 2015 – I At Short Term: Expanding water and wastewater services, especially rural sanitation services at the nearest possible time to release the social unrest by Egyptian citizen for these basic social services. This includes materialization of more PPP contracts; further strengthening the operational functions of EWRA; reaching 100% of O&M cost recovery for water and wastewaters services; improving the treated effluents for both W&WW and agriculture drainage. Moreover, from the Nile Water Resources perspectives, helping the GOE starts the implementation phase for the recently- under-completion Water Vision upto 2050

16. Water Regional Seminar - Dead Sea - Jordan, March 2011 16 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major Challenges / Opportunities Facing Water Sector in Egypt Egypts Key Reforms 2011 – 2015 – II At Medium Term: GoE maintains a strong leadership and ownership of the reform process of the water supply and sanitation sector especially to overcome expected resistance for tariff increases. At Medium to Long Term: Water scarcity due stagnation of Nile Basin Initiative – Framework Agreement

17. Water Regional Seminar - Dead Sea - Jordan, March 2011 17 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Major challenges / Opportunities in the Provision of External Support to the Water Sector in Egypt Over the past 7 years Egypt used to have a substantial opportunities to receive huge package of funds (grants + soft loans): …between 2005 – 2010 GOE receive more than 1.0 billion, out of which more than 30% is grant aid and the remaining is soft loans with an average interest rate of 1%. After 25 January 2011, all multilateral and bilateral donors confirmed their commitments to provide further funding to Egypts social infrastructure ( i.e., Water and Energy among those related to Education and Health)

18. Water Regional Seminar - Dead Sea - Jordan, March 2011 18 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Areas of uncertainty and doubt in programming Before 25 January 2011: GOE and in mutual agreement with most of donors active in the water sector were including the water sector in the first priority areas of support and then there was no doubt in programming for the water sector. After 25 January 2011: GOEs caretaker Government together with most of active donors to the water sector will be responding to the following three areas of support: Job creation projects Social housing projects Social infrastructure project… for this area water still considered to be a key area of support, …however due current transitional stage that Egypt passed through there is always a possibility for uncertainty and some doubt in programming

19. Water Regional Seminar - Dead Sea - Jordan, March 2011 19 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt Lessons Learnt and Avoidable Errors EU and other donors active in the water sector have to continue their collateral coordination with GOE through policy-based water programmes (i.e., like WSRP-I & II) in order to ensure the sustainability and irreversibility of the on-going water sector reform process Water policy-based programmes (reform benchmarks) should be more Performance-Based (PB). WSRP-I was very successful due to the nature of its reform benchmark as PB- SPSP. Accordingly, this feature should be widened to other SPSP programmes as they are highlighted the incentive mechanism to receive more flexible funds from EU.

20. Water Regional Seminar - Dead Sea - Jordan, March 2011 20 DELEGATION OF THE EU TO EGYPT Water Sector Reform in Egypt THANK YOU !