2. BACKGROUND INFORMATION Population: 8.53 million ( end 2006 ) Rural 49 Urban 51% Area: 86,600 sq. km Climate: Summer temperature: 30 degrees C Winter temperature: 4 degrees Rainfall: 200 – 300 mm Evapotranspiration 5x effective rainfall

3. Some Socio Economic Indicators 200020032006 sector% GDP oil industry27.627.551.6 other industry8.49.75.9 agriculture15.912.26.9 construction6.511.27.5 services41.439.227.9 GDP per capita:2000: US $ 665 2003: US $ 900 2006: US $ 2,375

4. Main Features on Irrigation AGRICULTURAL LAND Total agricultural land:4.72 million ha Pasture:2.92 million ha Cultivable land:1.8 million ha Area developed for irrigation:1.43 million ha By gravity:0.87 million ha By lift:0.56 million ha Actual irrigated area1.10 million ha Irrigated area with drainage0.65 million ha AVAILABLE WATER Renewable water supply:32.2 billion cubic m Overall storage capacity:22.6 billion cubic m Average annual water use:12 billion cubic m Agriculture 70%:8.4 billion cubic m Irrigation water available per ha5874 cubic m per ha

5. Developments in Irrigation Sector Responsibility for management and O&M of I&D infrastructure from independent Irrigation Ministry to State Amelioration and Irrigation Committee (1993) (Since 2006 Amelioration and Irrigation Open Joint Stock Company) Management according administrative boundaries. About 60 rayon Agency offices. Abolition of state farms created a vacuum in management at tertiary. Since 2000 on-farm infrastructure transferred to AIOJSC. Insufficient funds for O&M. In 2002 budget US $ 36 million. Estimated required budget two times higher Introduction of Irrigation Service Fee in 1997, volume based. 0.12 to 0.60 US $ per 1000 cubic m, providing about 5% of the too low SAIC budget Formation of WUAs at tertiary level.

6. WUA Development: 1th stage Formation of informal WUAs ?

7. WUA Development 2 nd stage Formation of legal WUAs under some type of law WUA development in Azerbaijan started in 1997 Until June 2004, when the amended Law on Amelioration and Irrigation was signed in by the President, Azerbaijan did not have an adequate and appropriate legal framework in place to establish WUAs. WUAs established till June 2004 are limited liability enterprises established in accordance with the Law on limited Enterprises and are from a legal perspective no associations at all.

8. WUA Development 2 nd stage Formation of legal WUAs under some type of law Formation of 6 pilot WUAs (1000- 3900ha) under Farm Privatization Project (FPP) in 1997 with the assistance of IDA/IFAD funds Rehabilitation investment US$ 220- US$ 1.070 /ha Increased ISF collection and improved water distribution and higher yields Prepared standard model charter No distinction between governance and management However model not fully replicable. (Chairman and executive staff paid by project on declining basis)

9. WUA Development 2 nd stage Formation of legal WUAs under some type of law Impressive campaign in 2000/2001more than 500 Established according to procedures and documents developed under the FPP WUAs are allowed to collect 25% of the amount required to be paid to AIOJSC for their own O&M costs Effective in ISF collection But not effective in informing general membership and merely seen as an organization to distribute water and collect ISF for AIOJSC.

10. WUA Development Major lessons learned from 2 nd stage Major lessons learned from FPP and the campaign of 2000/2001 in order to establish sustainable WUAs successfully were: A specific legal framework is needed Clear distinction between governance and management level to stimulate self management character of WUA and active membership Neither board members nor WUA staff should be paid from outside sources WUA concept needs broad promotion to get support from other governmental (municipalities, local administration, ministry of justice) and non-governmental (media) organizations. Newly established WUAs need training in fields like good governance, water distribution plans and financial management Newly established WUAs need support after training to strengthen knowledge learned during the training Newly established WUAs need access to credit to rehabilitate the deteriorated infrastructure on their territory

11. Transition between 2 nd and 3 rd stage Based on the lessons learned the GOA took following action simultaneously January 2003 GOA established within AIOJSC Central Support Units in Baku and Nakhchivan and Rayon Support Units in 60 rayons. Development of appropriate legal framework started early 2003 and finished June 2004 Preparation of Irrigation Distribution System and management Improvement Project (IDSMIP) with the technical and financial assistance of the WB to promote new WUA concept and to restructure the existing WUAs according to the amended law

12. WUA Development 3 rd stage Restructuring WUAs to clearly separate governance and management: Amended Law on Amelioration and Irrigation The amended Law on Amelioration and irrigation provides a special chapter, consisting of 15 articles, regulating the foundation, registration, organization and supervision of WUAs in Azerbaijan. In order to implement the amended Law, the CSU prepared : Model WUA statutes (both for General Assembly and Representative Assembly Long-term (10 years) Water Supply Agreement Annual Water Supply Contract Long-term (20 years) System Transfer Agreement (usufruct) System Inventory Act

13. WUA Development 3 rd stage Restructuring WUAs to clearly separate governance and management: Project to implement new WUA concept (IDSMIP) The development objective of the Irrigation Distribution System and Management Improvement Project is: To improve the effectiveness and financial viability of irrigation water distribution and management on 56,000ha (project rayons) Through provision of support to WUAs and the AIOJSC Project period 2004-2009

14. WUA Development 3 rd stage PROJECT COMPONENTS (IDSMIP) 1. Development of WUAs (US $6.95 million) 2. Irrigation and Drainage Infrastructure Rehabilitation (US $30.00 million) 3. Project Management (US $2.15 million)

15. WUA Development 3 rd stage Component 1: Development of WUA Activity 1: Development of capacity to train and strengthen WUAs Activity 2: WUA strengthening

16. WUA Development 3 rd stage Activity 1: Development of capacity to train and strengthen WUAs Project assists development of institutional capacity of newly established SU by financing: office and training equipment, vehicles, and incremental operational funds of the 2 CSUs and RSUs in 11 project rayons small allocation for office and equipment for other 48 RSUs TA to train the staff of the SUs to develop the capacity of the SUs to establish, train and support and strengthen WUAs

17. WUA Development 3 rd stage Activity 2: WUA strengthening Awareness campaign to launch new WUA concept. Sensitizing water users by means of organizing awareness seminars Awareness meetings with national and local government and staff of relevant ministries Public information campaign After initial awareness campaign formal training and active guidance by RSU staff. WUAs selected for rehabilitation will receive limited amount of equipment related to O&M tasks of the WUA

18. WUA Development 3 rd stage Present State of Affairs: capacity building Training of staff of Support Units Together with the CSU staff the TA team prepared training material on the following main subjects: WUA formation procedures Training skills Administration Financial management Annual operation plan Annual maintenance plan Together with CSU staff TA team trained RSU staff in 12 project rayons in above mentioned subjects. Finished by the end of 2006 The close cooperation between CSU staff and TA team established the required capacity within the AIOJSC organization to train RSU staff in non project rayons. This training in non-project rayons is still going on.

19. WUA Development 3 rd stage Present State of Affairs: WUA restructuring Awareness campaign to launch new WUA concept RSU staff organized together with four Mobilization Specialists (local consultants) numerous awareness meetings CSU staff organized in each rayon awareness meetings with representatives of local government and municipalities CSU with support of the PIU conducted public information campaign 4 brochures, 5 posters From Nov. 2005 onwards 30 minutes/quarter radio broadcasting Since beginning of 2007 quarterly newsletter on WUA news Numerous articles in newspapers (at least 3 per quarter) Recently the preparation of video clips started Number of restructured WUAs 186 of the 197 planned WUAs in the project rayons Average size WUA: 2,049ha Average plot size farmer ±2 ha 220 of the ± 400 in the non project rayons

20. WUA Development 3 rd stage Present State of Affairs: WUA strengthening Strengthening of WUAs consists mainly of training WUAs on financial management and drafting annual operation and maintenance plan RSUs in project rayons started training WUAs from January 2007 onwards In 12 project rayons 679 training sessions were held Initial evaluation of the WUA training program shows that RSU staff is able to apply the skills and knowledge they learned during their training Level of WUA board members and executive staff is rather diversified, which asks for intensive guidance of WUAs after training them

21. WUA Development 3 rd stage Present State of Affairs: WUA strengthening Besides training of WUAs in a selected number of WUAs rehabilitation works of the I&D infrastructure is going on In four WUAs rehabilitation works are under construction For four WUAs evaluation of tenders are carried out For four WUAs designs have been prepared

22. WUA Development 4 th stage WUA federation ?