Report No. 31993- EG Arab Republic of Egypt Country Environmental Analysis (19922002) April 1, 2005 Water, Environment, Social and Rural Development Department The Middle East and North Africa Region Document of the World Bank GTZ GermanTechnical Cooperation I C Z M IntegratedCoastalZone Management I M S W M IntegratedMunicipal SolidWaste Management IPM IntegratedPestManagement I S W M IntegratedSolid Waste Management JICA Japanese International Cooperation Agency Kfw Kreditanstalt fur Wiederaufbau (German Construction Bank) LULUCF LandUse, LandUse Change andForestry MALR MinistryofAgriculture andLandReclamation MDG Millennium Development Goals ME" Middle East andNorthAfrica METAP : MediterraneanEnvironmentalTechnical Assistance Program MHUNC MinistryofHousing, Utilities andNewCommunities MOALR MinistryofAgriculture andLandReclamation MOEE Ministry o fElectricityandEnergy M O W Ministry o fHealth andPopulation MOMP MinistryofManpower MOTCA Ministry o fTransport and CivilAviation MPN MeanProbableNumber MSEA Ministry o f State for EnvironmentalAffairs MwRl MinistryofWaterResources andIrrigation NEAP NationalEnvironmentalAction Plan NEES NationalEnergyEfficiency Strategy ' NGOs Non-governmental Organizations NOPWASD National Organization for Potable Water and Sanitary Drainage NWRC National Water Research Center NWRP National Water Resources Plan O&M Operation andMaintenance OSP Organizational Support Program PCF Prototype CarbonFund P M ParticulateMatters PPP ParityPurchasing Power RBOS Regional Branch Offices (of MSEA/EEAA) . SEAM Strategic Environment andManagement Project SFD Social Fundfor Development SGB State Government Budget TDS Total Dissolved Solids TIFA Trade andInvestment Framework Agreement UNDP UnitedNations Development Program USAID United StatesAgency for International Development WWTPs: Wastewater Treatment Plants Country Director EmmanuelMbi Sector Director IngerAndersen Sector Manager Vijay Jagannathan . Sherif Kame1F.Arif iii TABLEOFCONTENTS Paae Number ACRONYMS ii ACKNOWLEDGEMENTS vii EXECUTIVESUMMARY viii C W T E R S Chapter 1: Introduction 1 Chapter 2: Environmental Issues and Sustainability inEgypt 6 Chapter 3: Air Quality 19 Chapter 4: Water Quality 37 Chapter 5: Solid Waste Management 62 Chapter 6: Integrated CoastalZone Management inEgypt 72 Chapter 7: Environment Policies and Institutions 83 Chapter 8: Environmental Expenditures 109 Chapter 9: General Conclusions andRecommendations-The RoadAhead 119 S U m Y M A T m 138 TABLES Table 2.1 Status ofMDGAchievements inEgypt 7 Table 2.2 Annual Cost ofEnvironmentalDegradation MeanEstimate 9 Table 2.3 EgyptDecompositionofNational Saving(1970-2001) 11 Table 2.4 Textile andFurnitureIndustryExports 17 Table 3.1 MarketPricesandOpportunityCosts ofIndustrialFuels 24 Table 3.2 Comparison o fMarketPrices and Opportunity Costs o fElectricity 24 Table 3.3 Major Contributors to Local Damage Costs (1999/2000) 28 Table 3.4 PackageofPoliciesfrom EERAction Plan 31 Table 3.5 IncreasesinMarketPrices of SelectedFuels Requiredto Generate LE 150 miYyear 32 Table 3.6 Projects with Positive Costs o f Saved Carbon (CSC) 34 Table 3.7 Revenuesfiom the InternationalMarketfor Certified Emission Credit 35 Table 4.1 Pollution HazardClassification(source ", 2002) 41 Table 4.2 Recurrent UnitCosts andAssociated Subsidies inWS&S 44 Table 4.3 Pertinent Institutions and Water Quality Measures 50 Table 4.4 NationalPlanfor Protection of Water ResourcesinEgypt(2001-2012) 52 Table 5.1 Solid Waste Management Stakeholders 66 Table 5.2 ProjectedInvestmentRequirements for I S M 67 Table 5.3 Lessons Leanied 70 Table 6.1 Tourism Data in Egypt 72 Table 6.2 Major ICZMIssues inthe Mediterranean and the RedSea 76 Table 6.3 Issues and Actions on ICZMinEgypt 82 Table 7.1 Review o fthe ProgressofNEAP of 1992 85 iv Table 7.2 EEAAFive-Year Action Plan(2002-2007) 87 Table 7.3 ProposedActions for Harmonizingthe National EL4 System with OP 4.01 93 Table 7.4 LineMinistriesDJationalInstitutions -Mandatedwith EnvironmentalIssues . 96-97 Table 8.1 Organizations andMinistries included inthe Assessment o f Budget Expenditures 110 FIGURES Figure1.1 EconomicGrowthinEgypt 1 Figure2.1 Annual Cost ofEnvironmentalDegradation 9 Figure2.2 Annual Cost ofEnvironmentalDegradationbyEconomic Categories 9 Figure2.3 The Cost ofEnvironmentalDegradation-An Indicator for EnvironmentalSustainability 10 Figure2.4 EgyptNational Savings Effort (1970-2001) 12 Figure2.5 Overall Rank ofEgyptinSustainabilityEvaluation- Results Achieved for Various Indicators 13 Figure2.6 EgyptRegionalPoverty (million) (1999/2000) 14 Figure2.7 EgyptAll Environment Categories Per Capita Damage Cost 14 Figure2.8 Impact onthe Poor, EgyptIndexofPerCapitaCost ofEnvironmental Degradation, Poor vs Non-Poor 15 Figure 3-1 Distributionof Subsidiesby Sector 25 Figure3.2 LocalDamage CostsbyPollutant, 1999/2000 28 .Figure 3.3 LocalDamage Costs byFuel, 1999/2000 28 Figure3.4 GrowthofEnvironmentalDamage inEgyptto 2011 30 Figure3.5 Damage Costsin2010/2011withprice reform and SectoralMeasures Compared with Business as Usual(LEmillion) 33 . Figure4.1 Simplified (Renewable) Water Balance 37 Figure 4.2 Change inPer Capita Share Water with Respectto PopulationGrowth 1897-2025 38 Figure4.3 PovertyandAccess to Water andWastewater 38 Figure 4.4 RuraVperi-urban SanitationLgs far Water Supply 40 Figure 4.5 Groundwater Vulnerability to Pollution (mainlyfrom reuse) 42 Figure 4.6 Institutional Frameworkof Water Quality Management inEgypt 46 Figure4.7a-d Damage Cost Dueto Water Quality 56-57 Figure 5.1 ProjectedWaste Generation 2001-2025 62 Figure 5.2 Solid Waste, HospitalWaste andIndustrialwaste, Three Largest Priorities 69 Figure7.1 DistributionofEnvironmentalOfficialDevelopment (1991-2001) Includingboth Bilateral andMulti-lateral Items 102 Figure 7.2 Distributiono fEnvironmentalOfficial Development Assistance BySector 102 Figure 7.3 OngoingDonor Allocation in Specific Sectors 103 Figure7.4 WorldBankPortfolio 106 Figure 7.5 Lending for Environment& Natural ResourcesManagement inEgypt 107 Figure 8.1 Percentageof Environment-Related Investment(1992-2002) 111 Figure 8.2 Environmental-Related Investments by Sector 112 Figure 8.3 Distribution ofInvestments inNEAP 112 Figure 8.4 Comparison of Damage Costs and Investments in 1999 114 Figure 8.5 Financingo fEnvironment-Related Investments 114 V Attachment 1: EgyptProgress Towards Selected MillenniumDevelopment Goals 18 ANNEXES: Annex 2, Table 1 EgyptTrade and Environment Rapid Assessment Summary Table o fResults o fExport Sectors (High Supply Elasticity) 147 Annex 2, Table 2 E;ypt Trade andEnvironmentRapidAssessment Summary Table o fResults ofImport Sectors (High SupplyElasticity) 149 Annex 2, Table 2.1 Millennium Development Goals (MDGs) 150 Comparison of MDGo f Egyptwkh other Countries o fthe Mediterranean 150 Annex 3.1 Summary o f Previous Energy Work inEgypt 151 Annex 4.1 Overview o f Water Quality RelatedLaws and Decrees 154 Annex 4.2 Spatial Presentation for Key Water Quality Parameters inthe NileDelta IrrigationSystem 155 Annex 5.1 Key Characteristics andData for Solid Waste inEgypt 158 Annex 5.2 Waste Management DonorLender Activity 159 Annex 5.3 Solid Waste Management Stakeholders 160 Annex 7.1 Strategic Actions ofNEAP 1992andNEAP 2002 161 Annex 7.2 Principal EnvironmentalLaws,Decrees and Regulations 163 Annex 7.3 Summary ofthe EgyptianEL4 System and Comparison with the World Bank 164 Annex 7.4 EEAAFunctions and Responsibilities 169 Annex 8.1 Environment Funds Supportedby Jitemational Donors and Financing Institutions inUS$Equivalent (million) 170 MAP Arab Republic o f Egypt 172 V i ARAB REPUBLICOF EGYPT COUNTRY ENVIRONMENTALANALYSIS ACKNOWLEDGEMENT This report could have not been made possible without the excellent collaboration between H.E. The Minister o f State for Environmental Affairs (MSEA), the Egyptian Environmental Affairs Agency (EEAA) and the World Bank (WB). The report was prepared by a team consisting o f MessrsMmes. Sherif Arif (Regional Environment and Safeguard Advisor and Team Leader), Anders Alm (Senior Environmental Specialist), Dahlia Lotayef (GEF Coordinator), Laila El Baradei (Senior Consultant on Environmental Institutions), Conchita Castillo (Senior Program Assistant for Country Services), Ahmed El Kholi (Senior Environmental Consultant), Tarek Genena (Senior Environmental Policy Consultant), Ahmed Mostafa (Solid Waste Management Consultant), Hany Shalaby (Senior Environmental Consultant), Ahmed Shawky (Water Resources Management Specialist), and Youssef Sultan (Senior Financial Management Consultant). The team would like to express its gratitude to H.E. Eng. Maged George, Minister o f State for Environmental Affairs, Dr Mamdouh Riad Tadros, former Minister o f State for Environmental Affairs, Dr. Mohamed Sayed Khalil, Chief Executive Officer o f the Egyptian Environmental Affairs Agency (EEAA), as well as all senior staff and advisors andjunior staff o f EEAA. The team is also very grateful for all the institutions and their senior staff, and intemational donors inEgyptthat provided valuable information. The team would like to thank MessrsMmes Ellysar Baroudy (METAP Officer), Carol Chouchani Cherfane (Environmental Consultant), Kirk Hamilton (Lead Environmental Economist), Bjom Larsen (Environment Consultant), Rita Lohani (Junior Professional Associate),) and Maria Sarraf (Environment Economist and Messrs. Nigel Lucas, and Peter Wooders (ERM Consultants) and Yasser Sherif and Ezzat Abdel Hamid (Environics) for providing relevant background documents, information and data. The team would also like to thank Vahid Alavian (Lead Water Resources Specialist) and Ede Jorge Ijjasz-Vasquez (Senior Environmental Specialist) for acting as peer reviewers for this document. Thisreport was financedby the Environment MainstreamingFundo f the World Bank. vii ARAB REPUBLICOF EGYPT COUNTRY ENVIRONMENTAL ANALYSIS EXECUTIVE SUMMARY GENERALCONTEXT 1. Egypt's current severe environmental problems are the legacy o f the country's economic and social policies o f the past four decades. Despite undeniable progress made by the Government o f Egypt in protecting the environment, the cost o f environmental inaction i s a binding constraint for economic growth that Egypt cannot afford to neglect. The two key principles that are essential if Egypt would like to engage into the path o f sustainable development are: 0 The conservation and development o f its own natural resources (oil/gas, water and land); and 0 An agreement on a new share o f responsibilities between the State, the Producers (or Service Providers) and Beneficiaries in the conservation and development o f these resources. 0 2. Inthe past, the GovernmentofEgypt(GOE) was unilaterally responsible for managing Egypt' natural resources and directing its economy. This top-down approach has led to many inactions that increased the burden on the State revenues, and affected the quality life led by citizens. The country has heavily invested in the social, educational, agricultural and industrial sectors, which aimed, on the one hand, at employment creation and provision o f social services, and on the other hand, at increasing capital investment and enlarging the productive capacity o f the economy. Heavy industry, state and collective agriculture, intensive extraction o f natural resources, massive subsidies, and trade and exchange rate control, were the key features driving economic policy. 3. Inthe new era ofmarket-based economy, there is a needfor clear articulationbetween environmental policies with overall economic policy. Environmental benefits should now flow from the deregulation o f the economy (started in the 1990s), which aimed at improving the administrative management of the economy, including price and fiscal reforms, trade and foreign exchange liberalization, and aiming at creating an enabling environment for attracting local and foreign investment. Such strategic approach towards sustainable development implies a new way of thinkingand working in Egypt. As a private good, the environment is the responsibility o f the ordinary citizen through change in his behavior, through his involvement as part o f the decision- making process, as well through the private sector which should now be the engine o f growth. As a public good, the responsibility lies with the Government through the adoption o f environmental policies and incentives, and the financing o f environmental investments that are focused primarily to protect the poor. As a global good, the environment should be an incentive for the Government to take advantage o f the existing financing mechanisms such as GEF, CDM, PCF in viii order to improve local environmental benefits and build on overlaps with regional and global benefits. THE ENVIRONMENTALCONTEXT 4. Until 1991, development in Egypt was totally dissociated from the environment. The country was in a state o f environmental neglect with serious problems related to lack o f water supply and sanitation, land and ecological degradation, air and water pollution as well as municipal, toxic and hazardous agro-industrial wastes. These issues were W h e r exacerbated by weak policies and institutions besides the inadequacy o f governance structures. After the successful implementation o f the Economic Reform and Structural Adjustment Program (ERSAP), in which large debts were rescheduled in 1991, Egypt attempted to reconcile its development with environmental improvement. In 1992, the Government o f Egypt endorsed its first National Environment Action Plan (NEAP) which marked a turning point in tackling the challenge o f environment and development in Egypt. NEAP was the first policy instrument that has mobilized efforts and investments o f both the Government and international donors towards addressing major environmental issues in this country, and building its environmental infrastructure. An Environment Protection Law was enacted in 1994, and a Minister of State for Environment Affairs was appointed in 1997, as the key spokesperson in the Egyptian Council o f Ministers. The Egyptian Environmental Affairs Agency, the official environmental operating agency, has expanded its functions and responsibilities in all field o f the environment. As a result, the state o f the environment has improved particularly inthe provision o f water supply, in waste water treatment and solid waste management, and indecreasing air and water pollution. 5. The report reviews four major environmental issues (air quality, water quality, solid waste and coastal zone management) during the period 1992-2002. It assesses progress, trends, expenditures and challenges so that lessons can be learned for engaging Egypt into the path o f environment sustainability beyond 2002. Since that period, a number o f notable achievements on addressing these issues were made by the Government o f Egypt, M S E N E E A A and other sector ministries. These achievements were included to the extent possible, inthis report. 6. Despite large public and donor investments during the last decade, totaling LE 231.8 billion including very large subsidies on water, energy and transport amounting approximately LE200 billion, Egypt continues to face serious environmental issues as extensively described in NEAP update of 2002. Irrespective o f whether these investments were fully justified, there is strong evidence that such level o f expenditure cannot be sustained. The Egyptian economy i s faced now with problems partly because o f unfavorable external environment and domestic policies. The environment cannot therefore remain a liability but should become an asset to improve socio-economic development. A NEW APPROACH TO ENVIRONMENTALSUSTAINABILITY 7. Egypt made some progress towards achieving its Millennium Development Goals (MDGs) targets. In terms o f eradicating extreme poverty and hunger (MDG #1), significant reductions from 1.7% to 0.4 % were achieved for population living below $l/day; however, 17% percent o f the population still lives below US$2/day. Improvements in youth literacy and net primary enrollment were made towards achieving universal primary education (MDG #2) though 43% o f the population above age 15 i s still illiterate. Gender equality (MDG #3) i s being promoted with significant improvements in education of females and in job opportunities. Significant reductions in children under 5 mortality rate (MDG #4) was achieved (85.0/1000 to 52.2) and in infant mortality rate (67.8/1000 to 41.8). There are also indications o f improving ix maternal health (MDG #5); however, there are still incomplete data on combating HIV/AIDS and other diseases. 8. At present, the social cost of environmental degradation is already quite significant, and it will continue to increase ifpolicies and institutionalmeasures are not provided first then followed by targeted priority investments. The direct health and resource degradation have been conservatively estimated in a study published by the World Bank in 2002, at LE 14.5 billion or 4.8% o f GDP (1999 data) with air, soil and water pollution inflicting the largest damage. The Environment Sustainability Indicator (ESI) o f 48.8, ranks Egypt in the 74th position among the 145 nations. Air and water quality as well as reducing air pollution and water stress all display negative indicator values with environmental health affecting human vulnerability. The Adjusted Net Saving (ANS), which i s an indicator o f the future status o f the resources assets, showed that Egypt maintained modest annual increase o f 3.4% o f Gross National Income (GNI) in total national wealth. Environment degradation was found to affect mostly the poor rather than the non-poor in Egypt. Furthermore, it i s the poor that suffer mostly fi-om indoor air pollution, lack o f clean water and sanitation and municipal waste collection and disposal in Egypt. The environmental issues in Egypt are more prevalent inregions with highpoverty relevance. These issues are predominantly rural and account for more than 55% o f damage cost with urban air pollution accounting for more than 40% o f damage costs. The scope and magnitude o f these social costs are likely to offset some o f the economic growth gains over time, and could undermine the effectiveness o f the govemment economic reformprogram. 9. With Egypt'scommitment to sustainable development and its attempt to achieve its first target o f environment sustainability inthe Millennium Development Goals (MDG) No. 7, there i s a need to adopt a new approach for clear articulationbetween environmental policies with overall economic policy, and ensuring that environmental considerations enter the development planning process at an early stage. Such strategic approach towards sustainable development implies a new way o f thinlung and workmg in Egypt so as to move from: (i) a focus on inputs (projects, laws) to output-oriented outcomes (impacts o f projects and legal changes); (ii)a top-down approach and centralized decision making into a system o f information sharing, and improved governance; (iii) a dependence on extemal assistance to national resources mobilization; and finally (iv) a process o f measuring performanceto track actions and accommodating learning. 10. It is within this MDG's framework that the World Bank is assisting the Government of Egypt in preparing a think piece on MDG No. 7 related to environment sustainability in Egypt and entitled the Country Environmental Analysis (CEA) o f Egypt. The CEA would offer some new tools for mainstreaming the environment into policies, programs and projects by focusing on four major priority issues that are: (a) causing detrimental impacts on public health and/or serious degradation o f key natural resources; (b) resulting in irreversible damage; and (c) requiring multi-sectoral interventions and coordinated policies and efforts. The four major issues are air quality, water quality, solid waste management and costal zone management. They were primarily selected as a result o f President Hosni Mubarak's directives o f M a y 28, 2002. They were also derived from the analysis o f the cost o f environmentaldegradation and the environment sustainability indicators. 11. The two main objectives o f the CEA are to facilitate mainstreaming o f selected environment issues into relevant sector activities for improving development and poverty alleviation, and sustaining the capacity-strengthening process o f environmental mainstreaming. 12. Taking into account the achievements, experiences and lessons o f the past decade, the CEA is a document for the Government o f Egypt, the World Bank, and the international donors' X audience. It attempts to assess environmental policies, trends and priorities as well as financial and institutional capacity inmanaging environmentalresources and risks since NEAP of 1992. It would recommend mainstreaming environmental tools to influenceheshape key sector policies, and define the priority actions that the World Bank should assist Egypt with to help meet its environmental sustainability targets. The CEA will also serve as an input to the forthcoming Country Assistance Strategy (CAS) o f 2005-2007, that the Bank will prepare with the Government o f Egypt. It will allow the Bank to continue its policy dialogue inthe environmental field inEgypt. Key EnvironmentalIssues,Achievementsand Challenges Air Quality 13. The degradation o f air quality in Greater Cairo and in the metropolitan and secondary cities i s one o f the most serious environmental issues. Values o f pollutant parameters (PMIO, SOX, NOx, Lead and Ozone) in Cairo have exceeded the WHO and national ambient concentration limits in certain months. The appearance inNovember o f 1998 o f a "Black Cloud" inthe slues of Cairo, and the systematic occurrence of these phenomena every autumn, is strong evidence that the capital city i s exceeding its allowable pollution loads during certain periods o f the year. However, there has been improvement o f air quality in the two recent years particularly in PM 10, SOX and Lead. For example, the upper 24 hours ambient concentration o f P M 10 decreased from a peak o f 280 microgramdm3 in September 2003 to 190 micropandm3 in September 2004. 14. Major contributors to air pollution inCairo are vegetative burningo f agricultural residues and municipal waste, public and private transport, lead smelters, fertilizers and cement factories. Similar pattern i s also found inAlexandria. Particulate matters (PM10 and P M 2.5), sulfur oxides and nitrogen oxides are the major prevailing pollutants and are the cause o f premature mortality o f 20,000 people and 483,000 cases o f chronic bronchitis and respiratory symptoms. 15. There was no unified strategy to reduce air pollution in Egypt and the Supreme Energy Council has never met since 1982. Despite this policy vacuum, Egypt has had some success in reducing environmental impacts caused by air pollution. There has been a widespread introduction o f natural gas inthe power and housing sectors. Natural gas utilization reached 99% o f total fuel for all power plants connected to the gas gnd. Lead in gasoline has been eliminated. Private cars, including taxis, have also been encouraged to switch to natural gas. The construction o f the Underground, ring roads and freeways have decreased congestion inside cities, reduced travel time and consequently improved fuel efficiency and decreased pollution. Recently the Egyptian Environmental Affairs Agency (EEAA) formulated a strategy for air quality management in Egypt which was endorsed by its Board o f Directors. This strategy was developed through a consultative process with national stakeholders. It mentions the most polluting sectors as energy, transport, industry,asculture with proposed actions for each one and could be considered as a national strategy when approvedby the Government 16. Inview o fthe large healthimpacts, anin-depth studywas subsequently conductedas part o f the CEA to quantify the environmental problems induced by the energy and agricultural residues sector, assess the local and global damage resulting from these sectors, and recommend win-win solutions for mitigating adverse environmental impacts. 17. The total damage cost caused by the energy and agricultural residues sectors was estimated to be LE 6.5 billion for 1999/2000 and would increase to LE 8.0 billiodyear in the xi year 2010/2011. One o f the causes o f these damage costs i s the substantial subsidies to all fuels and to certain groups o f electricity consumers, especially the residential and agricultural sectors. The total amount o f subsidies i s o f the order o f LE 14.5 billion in 199912000 and will increase to LE 29.6 billion in2010-11. InSeptember 2004, the Government increasedby 50 % the price o f Diesel in an effort to reduce subsidies. 18. Reducing damage costs through price readjustment and through the implementation o f the 19 sector policies packages would result in foregone benefits o f LE 2.8 billiodyear (USS0.6 billion) by the year 2010. Furthermore, the implementation o f the policies package would generate LE 3.0 billiodyear (US$0.64 billion) by the year 2010; the total revenue from the Certified Emission Credits o f the Clean Development Mechanisms (CDM) projects would also generate an additional LE 94.3 milliodyear (US$20.28 million) by the year 2010. Clearly, this i s a "win-win" solution for the energy and transport sectors inEgypt. 19. Improving air quality i s technically and financially feasible if the Government adopts, among others, the recommendations o f the EER action plan. Mitigating measures are possible; they are economically and financially attractive for the Government, and would improve both economic growth and the environment. Water Quality 20. The general assessment o f the water quality status o f the Nile indicates generally good water quality conditions untilthe river reaches Cairo. Deterioration in water quality occurs when the Nile divides into the Damietta and Rosetta branches in a northward direction due to disposal of municipal and industrial effluents and agricultural drainage with decreasing flows. Inthe Nile, Delta confined between these two branches, fecal coliform (FC) bacteria counts are 3-5 times higher than the permissible national standards. For dissolved oxygen (DO) which can be one of the key parameters inferring fishery healtldproduction, concentrations ranging between 2 and 5 mg/lare observed inthe northernlakes andthe Delta agriculturaldrains, and also infew locations towards the downstream o f the two Nile Delta branches (the standard lowest permissible level being 5mg/l). As for the total dissolved solids (TDS), an indicator o f salt concentrations, TDS often exceed the limit above 1000 mg/ldue to repeated reuse o f drainage water and to presence o f saline groundwater in the north. Sources o f inferior quality are due to sewerage in rural areas, agricultural and industrial discharges and municipal solid waste management. Groundwater i s also vulnerable to deterioration due to percolation o f apcultural chemicals and seepage from agricultural drains. 21. Diarrhea diseases caused by poor sanitation facilities/practices, lack o f healthy nutrition mortality for children under the age o f 5, especially in rural areas . and domestic-hygiene behavior would lead to an estimated 20% o f the overall yearly child Child mortality rates, particularly in rural areas, could significantly be higher than the average for other countries with the same income per capita level.* 22. Egypt's general performance in water quality environmental aspects has been moderate over the last decade: Access to water supply has reached almost 100% and 80% in urban and rural areas respectively, as witnessed by large investments in the water sector, totaling LE 13.1 billion fiom 1992-2002. Access to sanitation improved to about 98% for urban areas whereas in 'Arab Republic ofEgypt: CostAssessment of EnvironmentalDegradation-IBRDreport 25175-RGT (June 29, 2002) * GlobalWS&S Assessment, 2000 Report,WHO/UNICEF. xii rural areas they remained as low as 5%. Industrial effluents along the Nile have decreased. With respect to rural sanitation, the Government, with the assistance of international donors, has also invested in pilot operations, including artificial wetlands and the use o f primary waste water treatment for forest plantation. N o decision was taken for adopting these non-conventional technologies. 23. All the above investments and activities were made with large subsidies which resulted in providing social benefits to citizens irrespective o f their income levels. Municipal water and wastewater services are currently heavily subsidized by the government. Such subsidies amounted to LE 2.5 billiodyear for drinking water and LE 2-3 billiodyear for irrigation water. These subsidies were not, but will be made explicit in the Government State Budget as declared by the Ministry o f Finance, Revenues generated from wastewater tariffs inCairo and Alexandna are low and insufficient to adequately maintain the existing system, let alone provide for improvements or reconstructions. 24. On another level, the institutional framework i s relatively fragmented but i s being o f improvement especially after the institutional re-organization inthe water sector. There are eight ministries directly or indirectly involved in water quality activities for policy, planning, operational purposes, research as well as monitoring and regulation activities. Responsibilities and functions are not clear as a result o f a fragmented legal framework composed o f a total o f 26 laws and presidential and ministerial decrees, forming the legal basis o f water resources management in Egypt. The Ministry o f Water Resources and Irrigation (MWRI) has recognized such fragmentation and i s proposing to adopt an integrated approach in water resources. Amongst a number o f achievements in that respect, including the scaling up of water-user organizations and the recent establishment o f two holding companies, the MWRIhas developed in its National Water Resources Plan (NWRP) an approach aiming to stimulate the coordinated development and management of the water resources inEgypt. The MWRIestimated that for the years 2002-2012, additional investments o f LE 10.2 billion are needed to improve water quality. 25. Also in 2004, two Presidential Decrees were issued to regulate the WS&S sector under the responsibility o f the MHUNC. The first decree relates to the establishment o f a Holding Company for DrinkingWater and Sanitation and its affiliated companies that include the General Economic Authorities for Drinking Water and Sanitation operating in the Governorates. The second decree covers the creation o f the Central Authority for the Drinking Water and Sanitation Sector, and Protection of the Consumer. This decree aims at regulation and monitoring, for quality control and consumer-price control. 26. As part o f the CEA, a cost benefit analysis was undertaken to evaluate the full social costs o f water quality deterioration and wastewater disposal in Egyptwith particular emphasis on rural water and sanitation. Poor water quality was found to affect both people's health, land productivity and fisheries with damage costs reaching LE 5.35 billion in 2003 or 1.8% o f National GDP. This percentage i s higher than the figure o f 1% o f GDP estimated under the cost assessment o f environmental degradation. The lower figure takes into consideration the health impact only but did not include impact on land productivity and fisheries. Ifno actions are taken to improve the water quality parameters, the damage costs could increase to LE 9.5 billiodyr or 3.2% o f national GDP. The analysis showed that water quality improvement is not only a function o f increasing the investments (e.g., LE 1.O billiodyear). As proven in many countries, "blanket" watedwastewater subsidies can be regressive, thus undermining the equity and efficiency o f water quality investments. The total watedwastewater subsidies in Egypt are estimated at LE 5 billiodyear. A policy of top-down conventional investments, and blanket- subsidies, may not be sustainable in the long term and will reduce only 30% o f damage costs. In xiii fact, this policy could lead to aggravating Government debts. Recently the Government o f Egypt has declared its intention to review its policy for blanket subsidy and to replace it with target subsidies and incentives. In order to reduce further the damage costs to 80%, a combination o f pricing policies and sector polices are required. The pricing'policy would be based on developing a system o f gradual cost recoveryhost sharing for improving the water quality services in accordance with increased income, while targeting the subsidies to serve the poor and being transparent by making these subsidies explicit in the State Budget. Sector policies will include the adoption o f community driven-and-financed low-costhnconventional rural sanitation processes, and suggesting a win-win option for addressing rural sanitation that exhibits minimal investments and low forgone benefits. Solid Waste Management 27. Both air and water quality are also affected by lack o f proper collection and disposal o f municipal solid waste. Burningo f municipal solid waste in urban areas and o f agncultural waste inrural areas is a serious source ofair pollution. Improper solid waste disposal inthe ruralareas i s a source o f surface and groundwater pollution especially inthe Nile Delta. 28. Until the autumn of 1998 when the "black cloud" phenomena first appeared, the Government did not have a S W M policy. N o w the GOE has adopted for the first time inEgypt the principles o f the Integrated Municipal Solid Waste Management (IMSWM). As an urgent action, a fast track-programme to deal with 12 million cubic meters o f accumulated waste in major 11 Governorates was implemented. The waste was collected and transferred to dumping sites in the desert, for prevention o f self ignition and open-burning by the public, as means o f disposal. Agricultural waste and residues were also collected; and farmers and consumer associations are encouraged to reuse agncultural wastes as fodders, compost, etc, after necessary treatment. On the other hand, the strategy allowed the international and local private operators to provide integrated solid waste management services, including, collection, transportation, treatment, and disposal services in sanitary landfills for municipal, health care and industrial non- hazardous waste on a Design-Build-Operate (DBO) basis inthe urban areas. The system provides financial incentives to the operators through a tax break and custom exemption. It also suggested a cost-recovery mechanism. At present, DBO contracts with private firms, amounting to for LE 475 milliodyear, are operational in Alexandria, Cairo, Giza, Suez, Aswan Governorates and Luxor and Al-ArishCities covering 20% o fthe urbanpopulation. 29. The EEAA with the Ministry o f Local Development have made major achievements in the rehabilitation and upgrading o f existing dump sites to controlled dump sites in some Governorates and in identifying 53 landfill sites. In addition to that, 55 municipal solid waste composting plants have been established with a total cost o f 265 million L.E., financed by the State. 30. It is still too early to assess the outcomes and the impacts o f such strategy, but there are however signs o f positive results: (a) solid waste management services are now provided by the private sector in several governorates with success following an integrated approach that will dispose solid waste; (b) strong leadership and commitment by the Governors and the Governorates to the success o f the S W M services; (c) the international and local private sector have penetrated the market o f solid waste management services at a reasonable cost; (d) partial cost recovery i s being applied; (e) the international donor community has rallied around the implementation o f the strategy and provided technical support in a coordinated manner; (f) awareness for improving solid waste management services has increased at all levels; and (g) the xiv Ministryof State for EnvironmentalAffairs / EEAAhas produceda series of guidelines related to the effective implementation o f ISWM. 31. The strategy has been put at the early stages by several governorates rapidly into implementation with insufficient attention to public awareness, community buy-in, social consideration, and public consultation; and there are some challenges that need to be addressed if the I S W M i s to succeed. The most important ones are: (a) a social analysis and assessment should be conducted early in the process to provide appropriate measures for protecting and improving the livelihood o f the scavengers; (b) public awareness campaigns and public hearings should be organized to engage the public and increase it willingness to pay for the services (c) capacity at the local level should be strengthened to plan, design, monitor and follow-up the implementation o f SW contracts; and (d) risk guarantees for private sector contracts are still lacking and should be developed so that the private sector remains interested into the I S W M services. 32. N o sufficient attention was given to the collection and disposal o f municipal waste in the peri-urban and rural areas which should be addressed differently from the urban areas. Local action plans are urgently required to deliver effective and affordable management services to the local community usingsimple and efficient technologies. INTEGRATEDCOASTALZONE MANAGEMENT 33. The activities inEgypt's coastal areas are vital for the national economy. Together with the oil industryand income from the Suez Canal, tourism i s one o f the top three foreign exchange eamers in Egypt amounting to US$4.5 billion in 2000 and projected to reach US$lO billion in 20053and was given special attention in this report, notwithstanding revenues accrued from oil and industry. Until the early eighties tourism has been traditionally along the Mediterranean Coast between Alexandria inthe West Delta to Port Said inthe East Delta, and reserved primarily for Egyptians vacationing in summer. As a result o f the Peace Process, new regions have expanded for tourist use along the Mediterranean Coast from Mersa Matrouh to West o f Alexandria where tourist compounds and villages, belonging to Egyptian private sectors and professional syndicates, mushroomed for local tourism; on another level, the Red Sea Coast has provided to international tourists diverse and spectacular natural and marine resources attractions. Such growth has created a tremendous pressure on Egypt's coastal resources with numerous ecological threats. 34. The coastal management problems in Egypt can be divided in three fundamental categories. The first category o f ICZM issues i s basically related to the development o f new land in areas with little or no traditional land-use, but with highmarinehoastal values such as those situated along the 1,800 k m s of Red Sea coast. The second category o f I C Z M issues i s common on the 1,200 Kms o f the Mediterranean coast, and produce extremely complex and inter-linked issues with intensive user conflicts. The coast around the Nile delta has population densities which are among the highest in the Mediterranean region and also include major industries and petrochemicals. The low-lying coastal areas, around the Nile delta also have important agricultural areas and has been affected by the lack o f siltation and sea water intrusion as a result o f the construction o f the High D a m which was beneficial for regulating the water resources o f the Nile and for generating electricity. The third category includes issues related to global warming and climate changes. The Nile Delta i s geologically unstable, and during the last 150 3 www.uktradeinvest.gov.uk years water erosion and subsidence has basically converted the Delta to an eroding coastal plain vulnerable to climatic changes and associated sea-level rise. 35. Achievements towards sustainable integrated costal zone management (ICZM) in Egypt give a mixed picture. Until the early 1990s, the Government adopted a very aggressive development strategy aimed at promoting mass tourism both in the Mediterranean and the Red Sea coasts. New coastal areas have undergone strong tourism growth, along the Mediterranean Coast from Mersa Matrouh to West o f Alexandria where tourist compounds and villages, belonging to Egyptian private sectors and professional syndicates mushroomed for local tourism; on another level, the Red Sea coasts have provided to international tourists diverse and spectacular natural and marine resources attractions. Such growth created a tremendous pressure on Egypt's coastal resources withnumerous ecological threats. 36. By the mid-nineties, the Government adopted a different policy for sustainable tourism aimed at promoting environmental conservation and sustainable use o f natural resources. However, the rapid development o f coastal land resulted in a continuous degradation o f coastal areas and an ever increasing threat to pristine areas. 37. Sustainable tourism is handicapped by the fragmentation in the functions and responsibilities divided among eight ministries and the governorates. A National Integrated Coastal Zone Management Plan was prepared but was not implemented. However integrated local costal zone management plans are being prepared in Alexandria and in Suez. EEAA i s also preparing an integrated management plan for controlling land-based sources (LBS) o f pollution. Tourism can be used to raise funds for I C Z M activities, for example, through entrance fees to protected areas. Unfortunately, Egypt'smarine protectorates are only capturing a small portion o f their potential, desperately neededrevenues. 38. Despite such institutional fi-agmentation, there has been a change in the attitude o f institutions and interest groups towards conservation and preservation o f Egypt's unique marine resources. The Egyptian coastlines are a major source o f income to the Egyptian economy. It needs to be managed in a sustainable manner by balancing tourism with environmental protection. Egypt policy has changed towards sustainable tourism. This should be demonstrated through concrete actions by applying I C Z M to new pristine areas west o f Matrouh and along the Gulfso f Suez and o fAqaba. EnvironmentalPolicies andInstitutions The ProcessofPolicy Formulation 39. Environmental policy formulation in Egypt has been an evolving process which has been fluctuating with time, modifiedwith major unexpected environmental events and often influenced by the leadership and senior decision makers. There is no effective mechanism, other than the Cabinet of Ministries, for coordinating the policy(ies) formulation processes. 40. Four milestones could be distinguished in the evolution o f the environmental policy process in Egypt. The NEAP o f 1992 was the first public document that has clearly articulated the'environmental issues o f Egypt and provided a series o f policy, institutional and investment actions to help resolve these issues. A rapid assessment o f the results o f the actions proposed in the NEAP o f 1992, demonstrated a strong emphasis on investments and institutional strengthening with neglect o f implementing policy actions particularly those related to input pricing o f water and energy and development o f market-based instruments for environmental compliance. 41. In 2002, NEAP was updated with UNDP assistance, to delineate Egypt's agenda for environmental actions over the next 15 years. It is a demand driven national report, developed through a very wide consultation and participation o f the different segments o f the Egyptian society. It underlies a comprehensive program o f policies, institutional and investment actions aimed at establishing the foundations o f sustainable development. In contrast to the NEAP o f 1992, its update was qualitative in nature as it did not rank the environmental priorities on the basis o f cost and benefits and did not provide cost estimates o f the strategic actions proposed which could make its implementation difficult. Inapproving NEAPupdate o f 2002, EEAABoard o f Directors reiterated that "The integration o f the environmental dimension in all national policies, plans and program^"^ is Egypt's strategic environmental objective, and recommended the implementation o f 11programs duringthe next five years, emphasizing the need to introduce strategic planning inMSENEEAA. 42. A Presidential Statement on sustainable development was made by President Hosni Mubarak on M a y 28,2002, inwhich he stated that "Environment i s not a luxurybusiness, but it is the protection o f our natural resources for our generation and generations to come" and that the "environmental dimension shouldbe integrated into the modernization process." The Presidential Directives were the improvement o f freshwater, the development o f an air pollution abatement plan, the importance of undertaking EIA in all projects, especially in coastal zones, and implementing the environmental laws and regulations. The President's directives need to be followed with thorough implementation, monitoring and follow upplans. The LegalFramework 43. Over the past four decades, Egypt has adopted a substantial body o f environmental and environment related laws, decrees and regulations addressing various aspects o f environmental protection and natural resources management. The most important environmental unified laws enacted were the Natural Protectorates and Natural Resources Management law No. 102 o f 1983 and the Environmental Protection L a w No. 4/1994. The latter was enacted as a compromise to satisfy all the parties concerned without giving the real authority to MSEA and EEAA to enforce the provisions o f the law. 44. The record in Egypt for implementing and enforcing environmental laws was not very successful. With limited exceptions, violations o f environment-related laws went undetected and requirements went often unendorsed especially with the public sector polluting enterprises. The main impedimentsto effective and meaningful implementation and enforcement of environmental and environment-related laws are due to the fragmentation among regulatory institutions, licensing agencies, police authorities ... etc., at both national and governorate levels to the effect that no single institution can apply enforcement actions effectively. 45. Since 2003, there have been substantial efforts made to improve monitoring and enforcement at the national and local levels. Major institutional and organizational reforms have taken place within the Environment and Surface Water Police o f the Ministry o f Interior. The general directorate for environmental inspections in EEAA was hrther strengthened. Periodic monitoring and inspections are made by this directorate, especially for controlling air emissions and waste water discharges. Furthermore, the preparation o f environmental registers and 4 EEAA Web-site(www.eeaa.gov.eg) xvii compliance action plans has increased as a result o f the continued monitoring o f the various commercial and industrial establishments. 46. The Law No. 4 and its executive regulations require that an EIA be prepared for all new projects as well as the expansions and renovations o f existing ones. A system of project screening, EM preparation, guidelines and review i s in place at EEAA which has a qualified department for EIA and which receives on the average 800 EIA reports a month. The EIA system i s reliable for the tourism and petroleum sectors as well as with projects financed by international donors and foreign investors. It i s often circumventedinmega-projects and the quality o f the EA reports for large nationally funded projects needs improvement. Strategic Environmental Assessments are not required by law, but are undertaken on an ad hoc basis by international donors. 47. Any o f the features o f the Egyptian EL4 system are generally compatible with the corresponding features o f World Bank Operational Policies (OP 4.01). However, there are differences in certain features such as in the preparation and follow up o f the environment management plan, and the consultation, disclosure and dissemination o f the EA reports. Public participation i s not mandatory in the Egyptian EIA system, and as a result, is not undertaken. Public participation is mainly takmg place for overseas funded projects, when required by the international donors and public hearings have been organized by NGOs for debating environmental issues. Ingeneral, EIA reports are regarded as confidential documents. There i s a widespread view among those involved in EIA in Egypt, that it i s a technical and administrative requirement for issuance o f permits. ,Irrespective o f the limitations which it places on decision- making processes, the lack o f openness inthe Egyptian EIA system limits its on effectiveness by restricting: (i)co-ordination between govemment departments, (ii)the awareness o f public concerns, (iii) the use o f public knowledge, and (iv) the actions to improve EIA quality. Since 2004, there have been serious efforts by EEAA to improve the EIA information dissemination through the design o f an EIA database. Support i s needed for promoting awareness o f the potential benefits o f consultation and public participation. The InstitutionalFramework 48. The number o f environment-related institutions in Egypt i s seventeen. They could be classified in the following three categories: (a) the national environmental organization represented by the Minister o f State for Environmental Affairs, the Egyptian Environment Affairs Agency and its Regional Branch offices which are charged with overall monitoring and regulatory coordination; (b) institutions with specific operational functions on the environment which are performed by environment units in line ministries, and by environment management units inthe governorates; (c) institutions with environment support role such as universities and research institutes. 49. The Environmental Protection Law provided new mandates for the Egyptian Environment Affairs Agency (EEAA). Given its coordinating and horizontal role among all ministries, EEAA was put under the responsibility o f the Council o f Ministers, and a minister was assigned to oversee the work o f the agency, and chair EEAA Board o f Directors. The Chief Executive Officer (CEO) o f the Agency i s nominated by the Council o f Ministers and has a first undersecretary rank. Until the early nineties, the Agency was weak and seriously understaffed. This was due to new EEAA mandates for which the required skills were not readily available in the Egyptian market. Soon after NEAP, several measures were undertaken to enhance the institutional and human resource capacities o f the Agency with the help and support o f xviii international donors. EEAA i s currently a much better-established organization than it was ten years ago. 50. At the regional level, EEAA has decentralized part o f its functions to eight Regional Branch Offices (RBO) o f which, five were established and strengthened by international donors. At local level, each o f the 26 governorates has an Environmental Management Unit (EMU), attached to the Governorates. The organization and operations o f the EMUSvary across the 26 governorates. Under the existing institutional framework, the EMUSrepresent the primary local authority on environmental issues and, in many cases, operate as the monitoring agencies for EEAA's environmentalpolicies andprograms butunder the technical supervision ofthe RBOs. 51. There are on-going efforts, within the context o f decentralization and mainstreaming of the environmental management at governorates level, to up-grade these EMUSto General Directorates which would then increase their effectiveness and guarantee a separate budget for their operations. These units would retain their administrative affiliation to the Governorates and would be technically affiliated to EEAA. Successful piloting has taken place in several governorates including Sohag, Damietta, Quena and the Red Sea. 52. At the sector level, many line ministries andor national institutions have a department or unit mandated with environmental management issues. These vary in terms o f their capacities and experiences. However, except for the environmental units of MOHP, MOMP, and MOI, they all share two common features: they are relatively newly-established or mandated with environmental concerns, and accordingly, they have limited environmental management capacity and experience. The mechanisms for coordination with EEAA and among each other are unclear. 53. Inaddition to the environmental infi-astructure at the national and local levels, Egypthas a core o f well-trained academics and researchers that are involved inthe field o f the environment. Many universities have environment department and research institutes and their involvement ina consultative capacity or expertise i s increasing. Despite such talents no university/or research center offer a degree or develop training in the field o f policy analysis and environmental economics which are now required if the ministries are to be involved in strategic planning as stated intheir action plan. 54. The private sector i s involved in the environment through: (a) providing consulting services for EIA, environmental studies, and environmental engineering principally in the field o f water, wastewater, irrigation, industry and energy sectors; (b) financing environment-related investments in tourism, petroleum ago-business, and industrial sectors; (c) operating environment-related activities, as inthe solid waste sector and energy conservation and efficiency (ESCOs); and (d) producing environment equipment such as for the wastewater, energy and cement sectors. The private sector i s getting more and more environmentally responsible through complying with environmental regulations, especially when it exports its products or i s injoint ventures with international firms. Many private companies are investing in new and cleaner technologies to increase their profitability while complying with environmental regulations. Some companies have already acquired I S 0 14000 and I S 0 14001 certification. Inorder to assist the private sector in environmental diligence, international donors and financing institutions such as KfW,the World Bank, and EIB are also providing concessionary lending through local banks. InformationDissemination,Coordination, PrivateandPublic Participation 55. A remarkable Egyptian Environmental Information System (EEIS) and Environmental Information and Monitoring Programme (EIMP) were established at EEAA, to assist GOE xix decision makers to formulate and implement timely and appropriate environmental policies, legislation and programs. The EEIS produces timely and accurate environmental status reports, based on real time data on air and water quality generated by the EIMP. Their diffusion i s only limited for highlightingpositive achievements; this information i s not being used to make sound decisions regarding environmental protectionand management. EEAAhas also not published the yearly State o f the Environment Report as requiredby the Environment Protection Law. 56. The civil society is becoming increasingly active inthe environmental field. Egypt has also a number o f NGOs actively participating in the environmental arena. Estimates are that more than 270 environmental NGOs are working on various aspects o f environmental management in Egypt, on issues ranging from public awareness and environmental education to waste collection and community self-help programs. NGOs have been increasing involved in project implementation, inpublic debate and also in ensuring compliance with the environmental laws. Court rulings were also won by NGOs. However, very few environmental NGOs have grass root linkage to influence the public or the community they serve, and their leadership is more important than the nature o f their activities. However, NGOs continue to depend primarily on external donor assistance for funding, and find it difficult to sustain their activities depending on local resources. 57. The media is also becoming a major active partner inthe protection o f the environment in Egypt. All the major newspapers and magazines have their special correspondents in the environment field. They also have a weekly page dedicated to the environmental issues; they do freely report on environmental issues and activities, and do not hesitate to bring to the public the major violations undertaken either by the State or by private and public sector entities. The national and local TV and radio stations have also professional programs and talk shows reported very professionally by very capable staff. OverseasDevelopmentAssistanceinthe Environment 58. Since the establishment o f NEAP o f 1992, Egypt has been assisted by 19 international organizations to move forward its environmental agenda. The total amount o f donor funds allocated to the field o f Environment and coordinated through M S E N E E A A has almost reached the equivalent o f LE 2.4 billi~n.~ The highest percentage o f support (42.9%) was channeled through policy support and environmental management programs (sponsored by USAID6and Denmark') while industrial pollution abatement and air pollution together account for 26% o f the total support (KfW and the World Bank). The least supported sectodfield i s solid and hazardous waste management (1.8%). Almost 91% o f the total assistance was in the form o f grants while only 9% was inthe form o f loans. 59. In addition to the grants and concessionary loans channeled through EEAA and intemational donors (USAID, the EU member states, EIB, Japan and the World Bank) provided an on going allocation o f US$2.3 billion for three sectors that are considered environment-related investments. These are: water supply and sanitation, irrigation and drainage as well as solid and hazardous waste management. OrganizationSupport Program: Reportreviewing donorprojectsimplementedincooperationwith EEAA over the past ten years 1991-2001, August 2001. ' USAID: EgyptianEnvironmentalPolicy Programand Sector Policy Reform111. DANIDA: EnvironmentalSector ProgramSupport. xx 60. With such a level o f assistance, donors have succeeded not only in putting the issue o f environment on the GOE's policy agenda, but also inbuildingthe environmental infrastructure at the national level inmajor sector ministries and at the local level within governorates. They have encouraged the participation o f NGOs and local communities in addressing, and resolving, their environmental issues. Without the injection o f technical assistance, capacity building, laboratory and monitoring equipment, the environment-related agencies would have not been now in a position to carry out their present functions o f environmentalmanagement. 61. One major concern that will have to be .facedby the GOE i s the establishment by donors o f large physical assets without ensuring that these assets could be maintained using local resources. This could compromise the sustainability o f these projects in the long term in case insufficient local resources would not be available for operation and maintenance o f these assets . 62. The World Bank has in its portfolio, 21 active projects totaling an amount o f US$680.5 million. Irrigation and agriculture projects constitute 40% o f the total portfolio, and environment and natural resources constitute 6.8% (US$47.35 million) o f the total portfolio. The components on environment and natural resources in the on-going Bank portfolio are very limited as a result o f the portfolio focus. EnvironmentalExpenditures 63, A review o f the expenditures made bythe Government o f Egypt and internationaldonors and financing institutions showed that the environment-related investments were estimated during 1992-2002 to be LE 31.9 billion, representing 5% o f the total investments o f LE 847 billion financed by the State. Of the LE 31.9 billion, LE 23.01 billion (72.4% o f total investments) is financed by local resources, and LE 7.22 billion as foreign loans and grants 22.6% o f total investments) although the last figure could be underestimated as it does not capture all grants made by the donors for EEAA/MSEA. 64. Included in this assessment i s the support budget in the form o f subsidies. Subsidies mainly cover general transportation in Cairo and Alexandria as well as water supply in some governorates. The total amount o f these subsidies i s LE 300.0 milliodyear. Subsidies related to water and electricity are not explicitly stated in the State General Budget. These subsidies are large, o f the order o f 19-20 billiodyear. They consist of energy subsidies, reachingthe amount o f LE 14.5 billiodyear (1999/2000)*; in drinkingwater to the amount o f LE2.5 billiodyear, and in irrigatedwater to the amount o f LE2-3 billiodyear (Chapter 4). The total amount o f implicit and explicit subsidies was estimated at 19.3-20.3 billiodyear corresponding to 5.2 % o f GDP. Recently, the Ministry o f Finance declared that it intends to make subsidies explicit in the State budget. 65. InNEAP 1992,' environmental investments untilyear 2002 were estimated at a total of LE 8.2 billion for various sectors and environmental categories. Priorities were given to water and wastewater followed by air pollution and solid waste management. In comparison with the budget expenditures for the same period, the Government spent a total o f LE 31.9 billion, i.e., four times the total estimated expenditures in NEAP, with water and wastewater investments estimated at LE 17.4 billion in contrast with LE 4.75 billion in NEAP. With the exception o f water and wastewater, there seems to be a disconnection between environmental priorities and development priorities, indicating that NEAP was not used by the GOE for directing Egypt: Energy-Environment Review, Consultant Report, April 2003. National Environment Action Plan of Egypt-May 8, 1992. xxi environment-related investments. Also discrepancies between NEAP figures and budget figures are anticipated since it was difficult to reconcile both expenditures by sectors and by environmental categories. 66. A s part o f or in addition to the State Government Budget (SGB) and the international donors contributions, the Government and the International donors have established 14 environmental protection and environment-related funds for the amount o f US$0.5 billion and LE 0.37 billion (1992-2002) totaling LE 3.0 billion." Two funds in the amount o f LE 366 million are anchored into Egyptian laws and are managed entirely by a public entity outside the SGB. These are the Environment and Tourism Services Fund (ETSF) and the Environment Protection Fund (EPF). Twelve separate environmental and environmental-related funds" ''for a total amount o f US$0.5 billion were established and have been operational since 1995. All these funds were allocated for different purposes, sectors andrecipients, and have different lending conditions and procedures. The Social Fundfor Development i s the largest financier o f environment-related investment projects. The general characteristics o f these funds are: (a) they are non-revolving; (b) they are a mixture o f grants and loans (too often on a concessionary basis); and c) they are managed for the first time inEgyptby local commercial banks. 67. Duringthe last decade, the total amount o f environment-related expenditure has been in the order o f LE 231.8 billion with subsidies on energy and watedwastewater covering nearly 80 percent. This level o f financing can no longer be sustained with the decline in Govemment revenues. The Government should pursue the gradual removal inphases o f the energy subsidies, and continue to increase the user charges to cover the costs o f water, wastewater and solid waste services for industry and the domestic sector. This may not be enough. Economic instruments for levying incentive charges to change the polluter's behavior should be introduced not as an objective in itself, but as a tool for applying the polluters-pay principle. GeneralRecommendations-- The RoadAhead A NEW VISION WITHWIN-WINOBJECTIVES 68. Despite undeniable progress in implementing its National Environmental Action Plan environmental and natural resource projects and programs were financed - Egypt is still at the (NEAP) for which a legal and institutional framework was established where important early stage of its transition to sustainable development. Despite considerable Government efforts, the issue o f water and air quality, solid waste and costal zone management remains the most pressing environmental inter-sectoral problems in Egypt. Solutions to these problems should be anchored in the economic, institutional, and social reforms proposed by Egypt within the scope o f its free market economy. These solutions should respondto the following two inter- related goals: (a) Reductioninthe prevalence o frespiratory and water borne diseases due to poor air and water quality and inadequate collection and disposal o f municipal waste; and (b) Improvingthe quality o f growth o fEgypt's coastal areas. Io Using an average exchange rate of 1US$ =LE 5.0 Egypt-PollutionAbatement Project: Study o f Sustainable Mechanisms for Financing o f Industrial Environmental Investments in Egypt, ART Consulting report, 2003. I2 Social Fundfor Development-Annual Report, 2000. xxii 69. The proposed approach to address the priority actions defined below, i s essentially based on policy and institutional measures ranging from: (a) rationalization to embody price-signals that induce a switch to environmentally-benignpractices (renewable energy for instance); (b), cost for environmental services (sanitation and solid waste management for instance); and (c) development o f information systems and strategic environmental assessments (disclosing and disseminating data on inferior water quality, for instance). All such measures are summarized in the Matrix attached to Chapter 9. This matrix describes both objectives and intermediate objectives for the next five years, the proposed policies, institutional and legal measures, the responsibility o f different stakeholders as well as the anticipated outcomes resulting fi-om the implementation o f these measures. Very few investments are proposed. Such investments should not be a burden on the State budget but should generate revenues on the basis o f costs and benefits based on strategic environmental assessments. The priority actions summarized below, consider the environment as public, private and global goods that could generate benefits. 70. The prevention and decrease o f air pollutionrisks can be achieved through the following: (a) The Govemment adopting a pricing policy o f gradually increasing (the currently- subsidized) price o f fuel oil and gas oil, combined with sector policy (b) Reducing concentration o f pollutants o f PMlO and SO2 in the transport and agncultural residues sectors; (c) Increasing the share o f natural gas in the industrial sectors (with emphasis on small-and-medium industry)and inthe transport sector particularly for city buses and micro buses; and (d) Using the Clean development Mechanisms (CDM) and the Prototype Carbon Fundto increase revenues from the trading o f certified emission credits inorder to improve further air quality inurban and rural areas; and (e) Providing and disseminating through M S E N E E A A health risks related to air pollution.. 71. Applyingthese win-winpolicies would not only decrease health damage costs by at least LE 2.0 billiodyear inthe year 2010, that is a reduction o f 33 % o f the damage costs but will also generate revenues from the trading o f methane and carbon dioxide. 72. The improvement of water quality in rural areas particularly in the Nile Delta will reduce the burden from water-bome diseases as well as improve crop and fishery production. This can be achieved by: (a The government reviewing gradually its pricing policy in water and wastewater and establishing a cost recovery for at least operation and maintenance; (b) Improving sanitation in rural areas through the adoption o f low cost technologies and through establishing a cost recovery system (in kind and cash), thus fostering community participation in devising, financing, implementing, and overseeing such unconventional undertakings and empowering the water board and water users associations; (c) Integrating the soil and water quality in the development o f regional strategies for optimization o f crop production, decreasing salt accumulation through a decrease o f xxiii total dissolved solids (TDS) in the drainage and irrigation canals in order increase yield production; (d) Increasing awareness campaigns through NGOs and the media on the impact o f diseases due to bad hygiene and poor water quality; and (e) Enhancing local environmental benefits by protecting the global environment, using the CDM for land use and land use change and forestry projects, the PCF for improving energy efficiency in the irrigation sector and GEF for combating desertification and land degradation. 73. Improvement o f water quality due to rural sanitation and decrease in salinity will both have environmental and economic benefits. The poor water quality resulting from mixing surface and drainage water both contaminated by wastewater create both economic damage due to a decrease inyields and health damage. 74. Both air and water qualities are also affected by lack o f proper collection and disposal o f municipal solid waste. Burningo f municipal solid waste inurban areas and o f agricultural waste inrural areas is a serious source of air pollution. Improper solid waste disposal inthe rural areas i s a source o f surface and groundwater pollution especially in the Nile Delta. Adopting an integrated approach to municipal solid waste and agricultural waste management systems can be achieved through: (a) Re-enforcing the effective and successful implementation of the Integrated Solid Waste Management Strategy in the urban areas with private sector participation, backed with the appropriate legal framework, with a cost recovery system based on a full cost accounting and with incentives for the local private sector and local communities; (b) Extending solid waste management collection and disposal in the rural areas on a priority basis, by involvingNGOs and local contractors; (c) The provision o f an incentive system by the local government to enable the local market for the production o f recyclable and agriculturalproducts (feed, fodders and compost) from municipal solid waste, and agriculturalresidues; and (d) Protecting the global commons by reducing the emission o f methane and carbon dioxide usingthe C D M P C F and GEF mechanisms. 75. The improvement o f the quality o f growth in Egypt's coastal areas can be achieved Ensuring equilibrium between development o f mass tourism and preservation of Egypt's unique natural and marine resourcesby applyingregion-specific integrated coastal zone management; Improving tourism profits by targeting the clients in search o f quality environment and in ecology-based products, and charging appropriate fees for the preservation and conservation o fthese resources; Increasing awareness campaigns for tourists and operators for protecting the unique marine and natural resources; Enforcing the existing regulations complemented with local funding mechanisms through the increase o f entrance fees and tourist taxes; and xxiv (e) Making use o f GEF for protecting the pristine areas in the Red Sea from further degradation. Towards an ImprovedEnvironmentalManagementSystem 76. Achieving the proposed objectives described in the previous sections would require the establishment o f strong public institutions and a realignment o f institutional responsibilities, necessary to achieve an efficient environment management system on the basis o f the recommendations stated above. However, the most important factor in managing the environment i s a strong political will. This should be manifested not only by promulgated or documented statements but also by the performance record o f the entire Government to engage in environmental sustainability. Egypt has demonstrated its political will by providing clear statements in NEAP and in EEAA action plans. Such statements should, however, be translated into policy as well as institutional and legal changes that would: (a) increase inter-ministerial coordination on environmental sustainability through the HighCommittee onPolicies o fthe Council o fMinisters; (b) strengthen environment-related institutions o fMSEA, EEAA and sector ministries; (c continue and reinforce the basic environmental functions o f regional coordination, monitoring and enforcement from EEAAto its Regional Branches Offices (RBOs) and the Governorates' Environment Management Units (EMUS);and (d) sustainable private sector development and harness the advocacy and participatory role o f civil society. 77. A four-tiered organization is proposed for Egypt. Itwould involve: (a) a highCommittee on policies as a decision forum for environment sustainability at the policy level; (b) MSEA, and the sector ministries as a coherent core for strengthening environmental policies at the national level; (c) EEAA's existing FU3Os as a new decentralized structure at the regional level and the EMUSat the governorate level; and (d) the private sector, civil society, the media and the international donors. 78. In order to fill in the institutional gap in the development o f sustainable development policies, it i s recommended that the High Committee for Policies o f the Council o f Ministers be the body responsible for articulating the sustainable development policy o f Egypt. This inter- ministerial committee i s chaired by the Prime Minister and includes a number o f line and sector ministries. When this committee would address sustainable development, it could be enlarged to include the Minister o f State for Environmental Affairs, key Governors as well as the head o f the Federation o f Egyptian Industries, the Egyptian Chamber o f Commerce, and selected NGOs. The Minister o f State for Environmental Affairs could be the secretary o f this committee for all matters related to sustainable development. 79. The Minister of State for EnvironmentalAffairs (MSEA) has responsiblyundertaken the environmental functions and but with limited staff and resources has succeeded in putting environment at the core o f the Government policy agenda. M S E A office would continue to be a "horizontal" outward structure responsible for formulating environmental strategies and policies that would result in economic growth, poverty alleviation and support Egypt in competing in the global economy while protecting its environment. The role o f M S E A will continue to be mostly strategic, going beyond the national environmental issues (i.e. the symptoms) to address the key xxv underlying environmental and social causes o f economic growth and poverty alleviation. The Minister's office will concentrate on national and international interlinkingtopics o fpoverty and environment, trade and environment, energy and environment,Jinance and environment, tourism and environment, climate change and local environment. 80. A Sustainable Development Unit should be established in the office o f the Minister of State for Environmental Affairs. This unit will be supported by EEAA staff and be responsible inter-alia to: (a) undertake the appropriate policy and economic analyses for the definition o f environmental goals and objectives, and serve as a secretariat for the HighCommittee on Policies whenever this committee addresses sustainable development issues; (b) evaluate the environmental implications of major economic and sectoral policies, and formulate environmental policies and strategies to respond to the MDGs targets; (c) assess policy options for pollution abatement and natural resources management; and (d) establish performance indicators and review the over all progress o fNEAP 2002. 81. The EgyptianEnvironmental Affairs Agency (EEAA)wouldremainthe operating arm of MSEA, and would continue its basic regular fbnctions but would need to further coordinate and work laterally among its sector departments. EEAA departments would realign their role and responsibilities based on the standard environment management functions o f environmental prevention, environmental monitoring and compliance, environmental enforcement of laws, environmental awareness, implementing pilot projects in integrated pollution control and overseeing national and international programs. 82. The major role o f the sector ministries would be to implement with M S E A and EEAA's assistance the sustainable development policies, as applicable to the operations o f the specific ministry. The sectoral ministries would have primary responsibility for policy formulation but would delegate the implementation o f these investments to the local authorities, User Associations and Water Boards as could be the case for the Ministry o f Water Resources and Irrigation. Of particular importance i s the strengthening o f the Committee o f Environment and Trade at the Ministry o f External Trade in order to ensure that Egypt does not lose market competitiveness as a result o f applying stringent environmental regulations as described in Chapter 2. M S E A and the Ministry o f External trade should work in collaboration with the Federation o f Egyptian Industries and the Egyptian Chamber of Commerce providing them with information and technical support. 83. The HighLevel Governorate Committee on the environment as well as FU3Os and EMUS will constitute the most cost-effective mechanism to carry out the decentralization o f environmental management functions. This high level committee should be the local body to support sustainable development at the local level. The main responsibilities o f the FU3Os and EMUSare inter-aliato (a) to monitor and enforce environmental laws andregulations on the local level; (b) conduct periodic surveys on the state o f the environment; and (c) and advise the governors and local government on all environmental matters. 84. The Private Sector should be an engine o f growth for sustainable development. The Government could not continue to provide large scale environment related investments, and should depend on the private sector to play a major role provided that the right policies and incentives exist to create markets for environmental goods and services. This can be accomplished with the help of: (a) the Government to introduce environmental' regulations that allow flexible market mechanisms to achieve environmental objectives, and to introduce good xxvi governance, increased transparency as well as access to environmental information; (b) The private sector through investments, environmental and social responsibility and good environmental management, and to make use o f existing incentive mechanisms such as the PCF, C D M and GEF; (c) The local banking sector to provide long-term loans with flexible repayment facilities; (d) International donors to assist in formulating market policies and incentives for private sector development; (e) The sector ministries and the local government to empower the associations and the communities in managing their resources in accordance with local plans developed by the community; and (f) The private sector introducing environmental accounting in order to ensure sustainable consumption andproduction 85. Buildingbridges with NGOs and civil society will reinforce the bottom-up approach for environmental sustainability. So far many NGOs were vocal but were not influential inchanging behavior and policies. Unless civil society and NGOs take initiative and reinforce their advocacy role, limited progress will be achieved towards the transition to sustainable development. NGOs could play a major role at all levels: At the policy level, NGOs could take the lead in organizing a forum for sustainable development. This forum will discuss the major inter-sectoral environmental issues confronting Egypt, and propose practical recommendations on how to integrate the environment into policies and programs. It will also draw on the lessons from other countries to identify the policies to be considered by the government for meeting the MDGs. Internationaldonors could play a major role insupportingthis forum; At the operational level, NGOs should continue to organize and participate in public hearings and consultations on all environmental assessments for national and mega projects. They should be able to have access though the Government and outside the Government's channels o f environmental information analyzing and publishing environmental data and trends, and usingthe media to provide facts and solutions on the major environmental issues, and organizingnational campaigns. At the local level, NGOs should continue to assist the community they serve indesigning and managing their own development plans. They will design and implement awareness campaigns particularly on water resources, water pollution, and hygiene. They should continue to take the lead in participating in the design and implementation o f community development projects in the rural areas particularly in the solid waste, sanitation and water resources sector. 86. A stronger partnership with the media could be achieved if its role is further strengthened, as requestedby the media itself, through: 0 The development o f a communication strategy and campaign for MSENEEAA to address the major environmental issues xxvii 0 The development o f the necessary communication materials in print, radio, TV, and other media as may be appropriate; 0 The provision o f training and technical support for developing an outreach and mobilization program for different targeted groups such as the public at large, the decision makers, the investors, ... etc; and regularly update the communication and the informationbased on actual facts 0 Conducting periodic assessment and public opinion surveys on the programs and activities offered by the media 0 The Role of International Donors 87. The proposed restructuring o f the policy and institutional framework would require a change in the conventional system o f donor support in the environmental field. Donor support should be based on: (a) a national environmentally-sustainable strategy anchored in specific social and economic benefits; the proposed strategic measures in this document could constitute the elements o f such strategy; (b) quantitative targets to be identified at the outset o f each program with emphasis on meeting specific policy and institutional measures inrelation to the MDGs; with the provision o f an exit strategy builtinthe design o fthe program; and (c) the extent o f the Government to mobilize primarily local resources and revenues. Donor financial support would bridge the gap between the public expenditures and the local resources generated from cost recovery or economical instruments. Donors would be also expected to support projects on the ground that would fulfill sustainable development policies. 88. The World Bank would also assist the GOE in meeting its environmental MDG targets through four mainstreaming tools: (a) A preventive tool o f enhancing the quality and effectiveness o f countries' environmental and social assessments and harmonizing the national system with the World Bank safeguard policies; (b) an economic tool o f demonstrating the economic importance o f a clean environment by undertahng: (i)studies to assess the cost o f environmental degradation; and (ii)analytical work on identifying linkage between the environment and health, the environment and poverty reduction and the environment and banking; (c) a curative tool o f integrating environmental components into the World Bank's Country Assistance Strategy (CAS) as well as in targeted sectoral projects in water resources management, wastewater management and pollution management; and (d) partnership with international donors and financial institutions inthe form o f parallel financing o f operations and technical support for the MDGs. 89. The success o f implementing the CEA will require more than the proposed Bank assistance, which is quite modest compared to the magnitude and severity o f the environmental problems. Inthe end, the GOE needs to be inthe driver's seat and maintain political commitment and a sustainable policy and institutional reforms without which environmental sustainability cannot be achieved in the medium future. Implementing the CEA remains a challenge for both the GOE and the World Bank inorder to improve the quality o f life and the quality o f growth o f the Egyptianpeople. xxviii CHAPTER 1 Introduction GeneralContext 1.1 Since its Revolution in 1952', Egypt's economic regime swayed between a socialist system (with stringent government controls and dominant public sector) and a liberal market-oriented system (with a bigger role for the private business sector). Naturally, different economic policies were implemented under these regimes, all o f which have, in general, made considerable progress towards improving the well being o f the Egyptian people. But, until recently none has given the due attention to environmental related issues. The main objectives were always to enlarge the provision o f social services, increase o f the productive capacity o f the economy and promote industrial development in order to create enoughjobs. 1.2 On the social front, large investments in the education and social sectors led to the improvement o f the social indicators2. Between 1970 and 2001, illiteracy fell to 34 percent, primary education enrollment increased from 64 to 88 percent, and life expectancy from 53 years to 67.1 years. On the economic front, Egypt's historical performance has exhibited sharp swings. This has also been true since the 1990s, when Egypt achieved a success story in the macro-economic stabilization front principally through the Economic Reform and Structural Adjustment Program(ERSAP). 1.3 Macroeconomic adjustment and stabilization efforts, pursued in the 1990s, have considerably redressed internal and external imbalances. ~~ Inflation and fiscal deficit to GDP were brought down to the one digit level, current account balance improved Economic Growth Rate in Egyptsince 1989/1990 (especially in the first half o f the' 1990s), international 7Yo reserves built up enormously, and economic growth 6% accelerated inthe second half o f the 1990s to peak to 5.9% 5% in 1999/2000. However, due to unfavorable external 4% 3% environment, and mainly because o f slight progress on 2% needed structural reforms, the Egyptian economy 1% displayed since 2000101 a weak performance with the growth rate averaging 3.2 percent during 2000/01- I 1 0%1989/90 1992/93 1995/96 1998/99 2001/02 1 2002/03 compared to an average o f 5.1 percent in the period 1995/96- 1999/2000 (see Figure 1.1.). Moreover, concems have been increasing with regard the growing fiscal deficit and domestic public debt besides foreign exchange rate market instability. Total GDP in2002 was US$83.7 billion. 1.4 On the other hand, Egypt'spopulation increased from 36 million in 1973 to 66.4 millionin2002 and could reach 86 million in 2020. The rapid population growth used to be coupled with ambitious development and industrializationpolicies with no attentionpaid to the environmental consequences. This has put a heavy pressure on Egypt's water and land resources and was at the origin o f severe air, water ' Egypt occupies the northeastem comer o f Africa and stretches over into Asia, with a total area o f about 1,002,000 square kilometers. It borders Libya in the west and Sudan in the south. Inthe north its Mediterranean coastline stretches for about 1,200 kilometers, and in the east its coastline along the Red Sea and the Gulf o f Suez stretches for about 1,800 kilometers as well. Egypt is divided geographically into four main zones: the Nile valley and the Delta, the Westem Desert, Eastem Desert and the Sinai Peninsula. Egypt Country Brief, the World Bank 2003. -1- and soil pollution. Egypt today i s paying a heavy price o f two decades o f environmental neglect which has affected its economic growth and the health o f its population. But since the early nineties, the environmental situation has changed with the govemment's commitment to addressing environmental issues 1.5 In retrospect, two phases of environment and development evolution can be distinguished in Egypt. The first phase (from the Egyptian Revolution to the end of the 1980s) is a dissociation o f the environment from development. This stage o f environmental neglect was characterized by the exploitation o f Egypt's natural resources at the expense o f a rapid and un-sustained physical development. Duringthat phase, Egypt built its heavy and polluting industries along the Nile and created industrial states starting from Aswan in the South (Kima Fertilizer Company and Misr Aluminium Company) passing by Cairo (Helwan and Shoubra El Kheima) and ending inAlexandria inthe North (fertilizers, and refineries). All power plants and heavy industries used heavy fuel with highsulfur content. As a result o f the Aswan HighDam, changingNile silt deposition on land Egypt increased its dependence on fertilizers causing soil pollution and deterioration o f surface water and groundwater quality. In terms of environmental institutions, the Ministry o f Water Resources and Irrigation (MWRI) was the ministry in charge o f implementing the Water Sector Law No. 48/1982, related to pollution control of water resources as well as the Sector Law No. 12/1984, goveming the management o f water resources in the irrigation and drainage systems. In 1982, the Egyptian Environment Affairs Agency (EEAA) was established as a coordinating body reporting to the Council o f Ministers through a minister in charge o f environment. EEAA consisted o f a core o f 15 staff members, and was concerned primarily with the protection o f the marine resources in Sinai as well as monitoring water quality. 1.6 The second phase ranging from the early 1990s to date i s a transitional phase o f reconciliation o f environment with development in Egypt. In 1992, the Government o f Egypt (GOE) endorsed the first National Environment Action Plan (NEAP) in 1992. NEAP which was prepared with the assistance o f the World Bank and international donors marked a tuming point in tackling the challenge o f environment and development in Egypt. It was the first policy instrument that has mobilized the Government and international donors' efforts towards addressing major environmental issues inthis country and building its environmental infrastructure. Since 1992, Egypt took very important steps towards establishing its legal framework with the promulgation o f first Environment Protection L a w No. 4/1994 which strengthened the EAAA as the national environmental institution responsible for policy formulation, coordination, monitoring and enforcement. In 1997, recognizing the importance given to the Environment, a Minister o f State for Environmental Affairs (MSEA) was established to be the spokesperson o f the Environment in the country, to oversee all environmental activities and chair EEAA Board of Directors. Furthermore during 1992-2002, total environment-related expenditures amounted to LE 231.8 billion and including very large subsidies on water, energy and transport amounting approximately to LE 200 billion. Whether these investments were fully justified, there is strong evidence that such level o f expenditure cannot be sustained. The Egyptian economy i s faced now with economic problemspartly because o f unfavorable external environment and also due to domestic policies. 1.7 Despite major progress made during the 1990, Egypt i s faced with two major challenges: (i) reversing the course o f environmental degradation; and (ii) doing so, ensuring that environment i s in integrated in policies, projects and programs. Both challenges were recognizedby H.E. President Hosni Mubarak intwo separate statements. The first one in 1997 in which he stated that "as we approached the 2lStcentury, it i s imperative that we change our general attitude towards the environment, "[We must] deal seriously with these problems and enforce environmental regulations strictly and without hesitation." InMay 28, 2002, the President met with 11 ministers and three Governors to discuss the environment strategy in Egypt until the year 2017. The President reaffirmed the importance o f the environment by stating "Environment work i s not a luxury but a necessity to protect our natural resources for the generation to come." In doing so, the President laid down in very clear terms, the principles of -2- sustainable development through environmental integration in policies and projects, improving environmental governance (NGOs and civil society), strengthening the role o f women in environment protection, improving water and air quality as well as securing natural protectorates. 1.8 The President's directives, which were also included in Egypt's report presented at the World Summit on Sustainable Development in Johanne~burg,~are fully consistent with the agreement signed at the Summit for implementing the eight Millennium Development Goals (MDGs). It i s within this MDG's framework that the World Bank has assisted the Government o f Egypt in preparing a think piece on environment sustainability inEgypt and entitled the Country Environment Analysis (CEA) o f Egypt. The CEA would allow Egypt to adopt a new way o f thinking o f environmental policies and will also offer some new tools for mainstreaming environment into its policies, programs and projects that would be financed from its own resources and with the assistance o f international donors. The CEA will also serve as an input to the forthcoming Country Assistance Strategy (CAS) o f 2005-2007 that the Bank will prepare with the Government o f Egypt and will allow the Bank to continue its policy dialogue in the environmental field in Egypt. In doing so, the CEA pays particular attention to environmental policy analysis and to the economic valuation o f environmentalresources and o f their degradation. 1.9 Incontrast to the National EnvironmentalAction Plan (NEAP)4update which was completedby Egypt in 2002, the CEA does not attempt to address the environmental concerns in a comprehensive manner. It i s sharply focused on the sustainability of key environmental issues that are: a) causing detrimental impacts on public health andor serious degradation o f key natural resources; b) resulting in irreversible damage; and c) requiring multi-sectoral interventions and coordinatedpolicies and efforts. It focused primarily on the period o f 1992-2002.in order to take advantage of the lessons learned so that Egyptcouldbe engaged inthe patho fEnvironmentalSubstainability. 1.10 These different themes that respond to the above criteria were selected as a result o f the President's directives and the results o f the environment sustainability indicators (Chapter 2). These are: air quality, water quality, municipal waste management and coastal zone management. The analysis o f these themes does not undermine notable achievements made in the years 2003 and 2004 by the MSEMEEAA, and sector ministries in addressing these four issues. Since 2002, a number o f notable achievements on addressing these issues were made by MSEMEEAA and sector ministries and are referred to the extent possible, in this report. The CEA does not also diminishthe importance o f other environmental themes and or activities, such as biodiversity or land degradation for which important progress were also achieved. The CEA, therefore, should be considered as a dynamic document which could be subsequently revised to include other priority themes analyzed from the lens o f environmental sustainability. Objectives of the CEA and Methodology 1.11 The two main objectives o f the CEA are: To facilitate mainstreaming o f selected environment issues into relevant sector activities for improving development and poverty alleviation; and Improve the capacity and strength process of environmental mainstreaming. Arab Republic of Egypt: Country Profile 2002. The Environmental Profile of Egypt and the National Environment Action Planwere preparedin 2002 by the Ministry of State of Environment incollaborationwith UNDP and the Capacity 21 Program. -3 - 1.12 Taking into account the achievements, experiences and lessons o f the past ten years (1992-2002), the CEA attempts to assess environmental trends and priorities, policies, and institutional capacity in managing key environmental resources and risks. Inparticular, the CEA attempts to answer in a sharply focused manner a number o f key questions: Have environmental priorities changed over the past ten years? And, if so, what are the current priorities? What are the current national policies when it comes to environment? What i s the country's environmental management capacity? What are the national environmental management needs? Finally, what are the mainstreaming tools for environment to influenceheshape key sector policies; and what are the priority actions that the Bank should assist Egypt with to help meet its targets on environmental sustainability. 1.13 The CEA will draw on past analytical work supported by the Bank, such as the sector strategies and the Country Assistance Strategy (CAS). The CEA will also be guided by the results o f the Cost Assessment for Environmental Degradation (COED) in Egypt, the Energy-Environment Review (EER), the Clean Development Mechanism (CDM) study and the Environment and Trade Screening Analysis. All these assessments were based on cost benefit analysis for identification of policies and demonstrate the economic importance for a clean environment. They are considered to be tools for the decision- making process insetting priorities. 1.14 The CEA will also draw upon country-led analyses and strategies such as Egypt's National Environmental Action Plan (NEAP) update o f 2002, its sector strategies in energy, soil and water conservation, and its national sector paper on sustainable development. National documentsh-eports already reviewed include the Environmental Profile o f Egypt, the National Environmental Quality Reports, Environmental Plans and Programs addressing specific issues such as National Solid Waste Management Programand the National Plan for Protectionof Water Resources. Recent reports, strategies and studies prepared with the support o f international institutions and donor agencies were also consulted. 1.15 The CEA was initiated in October 2002. Interviews were held with top level officials and stakeholders, including H.E.the Minister o f State for EnvironmentalAffairs, top level officials within the Ministry o f Water Resources and Irrigation, Public Enterprise Companies, govemorates' officials responsible for solid waste privatization programs, selected NGOs representatives, and donor country representatives. 1.16 The first version of this draft was reviewed internally by the World Bank on June 17, 2004. It was subsequently reviewed by M S E N E E A A on September 9, 2004 and also in two internal workshops on September 11, 2004 and on November 25, 2004. It was further discussed in a consultation workshop in Cairo on December 26-27, 2004, which was attended by 160 representatives from ministries, public sector agencies, research centers and universities, governorates, NGOs, media and the private sector. Comments were received from 12 sector ministries. An additional consultation was undertaken on February 27, 2005 with the environment and energy subgroup o f the international donors and financial institutionsknown as the Development Assistance Group (DAG). The relevant comments collected from all these reviews were also incorporatedto the extent feasible. CEA Content 1.17 The report consists of the following sections: 0 Chapter 2 addresses environmental issues and environmental sustainability inEgypt; 0 Chapters 3-6 provide an overview o f the policies, institutions, achievements and challenges o f the four major environmental issues: air quality, water quality, solid waste management and coastal zone management; -4- 0 Chapter 7 focuses on the achievements since NEAP o f 1992, and assesses the policies and institutions o f the environment; 0 Chapter 8 analyses the environmental expenditures duringthe period 1992-2002; and Chapter 9 provides recommendations on priorities for action by the Government and the World Bank. -5- CHAPTER 2 EnvironmentalIssues and Sustainability in Egypt Overview of the MainEnvironmentalIssuesinEgypt 2.1 Egypt's highrate o f population growth and density along the Nile valley and delta coupled with industrial activities concentrated primarily along the river Nile and in the large cities o f Cairo and the Delta, has resulted in an increased burden on the country's limited natural resources, and has adversely affectedpublic health. The main environmental problems faced by the country are: e Acute water scarcity: Per capita water availability is expected to fall from the current 900m3for all purposes to about 670m3inthe year 2017. The causes are due to the use o f 85 percent o f Nile water for irrigation, highnetwork losses in potable water and poor service water coverage inrural areas (see Chapter 4); e Decliningwater quality. Water quality in the River Nile and the canals deteriorates in a northward direction due to the disposal o f municipal and industrial effluents and agncultural drainage as well as the decreasing flow (see Chapter 4). Drainage canals are heavily polluted, with average Biological Oxygen Demand (BOD) values reaching 300 mg/l and mean probable number (MPN) o f total coliforms being in the range o f 8000- 10,000 compared to the Egyptian environment guidelines o f 20-40 mg/l and 500-1000 (MPN), respectively. While sanitation coverage has been estimated at 97% for urban and 70% for rural households, only a fraction o f households with access to sanitation are actually connected to the sewerage system, with rural areas having coverage o f less than 5%. A s a result, public health is seriously affected. Waterborne diseases are major causes o f deaths; e Land degradation: Annual loss o f agricultural land due to urban encroachment i s estimated between 15,000 and 30,000 acres. The major causes o f land degradation are poor irrigation drainage, soils salinization; inadequate crop rotation and selection, fragmented land tenure and soil erosion. Approximately 35% o f agncultural land suffers from salinity resulting inthe inability to meet rising food demand; e Increasingpollutionand untreated urban and hazardouswaste disposal. The cause o f outdoor pollution are hazardous air emission and water discharges form the heavy metallurgical industries, refineries, cements and power plants as well from an aging transport sector (see Chapters 3 and 5). In addition, 15.3 million tons o f municipal solid waste are generated annually o f which almost 2.5 million remain uncollected and no appropriate sanitary landfills exist for their disposal. Hazardous waste, agricultural and hospital waste are also mixed with municipal waste in open dumps where burning is the most used method for elimination. Air pollution and water pollution are sources o f respiratory and allergic ailments especially among children. PoorlyProtectedCultural andNatural Heritage.Air pollution, wastewater, uncontrolled urban encroachment and tourist development as well as large influx o f tourists are the major causes o f the poorly preserved cultural and historical monuments. About 8% o f the total area o f Egypt has been declared Protected Areas, and i s envisioned to extend to 17% by 2017. The coastal areas along the Mediterraneanand the Red Seas have suffered serious -6- ecological threat because o f rapid development and land sources o f pollution (see Chapter 6). Only a small fraction o f these invaluable resource areas have in place proper monitoring, conservation and sustainable management systems. EnvironmentSustainability inthe MillenniumDevelopment Goals (MDGs) 2.2 At the Millennium Summit in Johannesburg in September 2000, all nations including Egypt reaffirmed their commitment to working toward a world in which eliminating poverty and sustaining development would have the highest priority, and adopted the Millennium Development Goals (MDGs) as a framework for measuring development progress. Ensuring environmental sustainability i s fundamental to achieving the MDGs, as it constitutes the seventh MDG, and progress towards environmental sustainability will contribute to achieve some o f the other MDGs through impacts on livelihoods and human health. 2.3 Egypt has made considerable progress towards attaining the social indicators o f its MDGs, as shown inAttachment 1. An MDGcomparison with other countries inthe Region is provided in Annex 2, Figure 1. Egypt improved the literacy, mortality, and health status. Progress to date has been slower on other goals such as poverty reduction, education, gender empowerment and environment. A review made by UNDP on the reporting o f the seven MDGs in Egypt5showed that only the social indicators could probably be achieved, while the other four could be potentially achieved as shown in Table 2.1. UNDP will be assisting EEAA in developing sector specific MDGs and sustainable development indicators are also being developed by EEAA Table 2.1: Status ofthe MDGAchievements inEgypt Goals Targets Probably Potentially Unlikely to be Lack o f Data Acheved Achieved achieved 1.Eradicate ExtremePoverty and Hunger X Education X 3.Promote Gender Equality and Empower Women X 4.Reduce Child Mortality X 5.Improve Matemal Health X 6.Combat HIV/AIDS and other X Malaria and Other Diseases X (HIVIAIDS) 7. Ensure Environmental X Sustainability 2.4 The environmental MDG No. 7 comprises three objectives: (i)integrate the principles of sustainable development into country policies and programs and reverse the loss o f environmental resources; (ii) halve by 2015, the proportion of people without sustainable access to safe drinking water, and (iii) achieve by 2020 a significant improvement inthe lives o f at least 100 million slum dwellers. The first objective, which i s the main focus of the CEA, i s considered the core o f the environmental MDG. Two distinctive elements can be identified in that core objective. First, the need to integrate environmental considerations in sectoral policies (environmental mainstreaming), as a fundamental way Reporting on the MilliniumDevelopment Goals at the Country Level-Egypt 2002. -7- of achieving progress on environmental outcomes. Second, the focus on environmental outcomes themselves, and the associated need for baseline environmental information and environmental monitoring. 2.5 Inthis chapter, three analytical indictors are usedto situateEgyptalongthe pathofenvironmental sustainability. These indicators are based on an economic approach to sustainability: cost assessment o f environment degradation (COED), adjusted net savings (ANS) and the environment sustainability index (ESI). Cost Assessment of EnvironmentalDegradation 2.6 One o f the strategic tools for environment mainstreaming i s to provide a foundation for defining strategic environmental priorities based on cost benefit analysis for better allocation o f scarce government resources, time and capital. A systematic approach i s neededto ensure that environmental considerations enter the development planning process at an early stage by taking a multi-sectoral and long-term view o f development. Assessing the cost o f environmental degradation at the macro and sector level inwater and energy provides an opportunity to more explicitly internalize the value o f the environment in the social and economic development process. It i s the basis o f the CEA analysis. Specifically, damage cost assessments can serve as an instrument towards: e Identification o f areas o f the environment that impose the largest cost to society; 0 Identification o f areas that most significantly undermine the social and economic development process; e Providing a basis for integrating environmental issues in the financial and economic evaluation o f investment projects, and sector and economy-wide policies and regulations; and e Providing a monetary basis for allocation o f scarce private and public resources towards environmentalprotection. 2.7 The cost assessment o f environment degradation (COED) in Egypt6provides a first order macro-economic perspective for mainstreaming environmental management into policy development. The detailed methodology was described in Annex 2 o f the original report on the cost assessment o f environmental degradation and i s not described in this report. N o trends before or after this assessment was made, however the present results could be considered as a conservative baseline upon which future COED could be made. The study has been carried out looking at the country-wide cost o f degradation in terms o f impacts on health and quality o f life inthe following areas: water, air, soil/land/forest, waste, and coastal zones. Remediationcosts were not calculated yet as they largely depend among others parameters, on the level o f pollution reduction above the Egyptian standards and the use o f the technology for reducing pollution. As shown inTable 2.2 and Figure 2.2, the cost o f environmental degradation inEgypt is of the order o f 4.8% o f GDP (1999 data). Almost two third o f the damage cost (3.2% o f GDP) i s due to impacts on health and the quality o f life and one third (1.6% o f GDP) is due to degradation o f natural resources. Another assessment was made by the Bank in 2004 on the impacts o f water quality on health, land productivity and fisheries and i s described in Chapter 4. The cost o f environment degradation due to water quality was found to be 1.8% o f GDP higher than the COED estimate o f 07-1.2% o f GDP ( para. 4.37). Arab Republic of Egypt: Cost Assessment of Environmentaldegradation-1BRD report 25175-EGT.( June 29,2002). -8- Figure 2.1. Annual cost of environmental degradation by environmental categories (mean estimate as% of GDP). 2 00% 1.50% 1.00% 0.50% 0 00% I Air Soil Water Coastal Waste I Figure 2.2. Annual cost of environmental degradation by economic categories (mean estimate as% o f GDP). 3 5 0 % , 3 0 0 % 2 5 0 % 2 0 0 % 1 5 0 % 1 0 0 % 0 5 0 % 0 0 0 % I I 2.8 A s shown in Table 2.2, urban air pollution, especially in Cairo as well as indoor air pollution constitutes a serious impact on health followed by diarrhea diseases and mortality, affecting primarily children, and due to lack o f access to safe water and sanitation, and adequate domestic, personal and food hygiene. The last category i s municipal waste management with potential impacts on health from uncollected municipal and industrial waste, hazardous waste and health sector waste. Agricultural soil degradation i s the major cause o f natural resource degradation and i s caused by salinity and erosion. Natural resource degradation is also caused by coastal zone degradation associated with losses in coastal zone tourism due to degradation o f coral reefs and coastal water pollution. 2.9 Incomparison with other countries ofthe Middle EastandNorthAfrica (MENA)Region, Egypt has the highest cost o f environmental degradation and the highest cost due to air pollution as shown in Figure 2.3 Table 2.2: Annual cost of environmentaldegradationmeanestimate Million EGP per year Percent o f GDP Air 6,400 2.1% Soil 3,600 1.2% Water 2,900 1.O% Coastal zones and cultural heritage 1,000 0.3% Waste 600 _.. 0.2%" Sub-Total 14,500 4.8% Global environment 1,900 0.6% -9- Figure 2.3 The CostofEnvironmentalDegradation An Indicatorfor EnvironmentSustainability EnvironmentalCategory: Percentageof GDP _ _ - I .- - .. - Water Tunisia Jadan Lebarm Syria Al@a Maocu, Egypt Adjusted Net Savings(ANS) 2.10 Adjusted Net Savings (ANS) is a general environmental indicator that measures the net saving o f a country in a macro-economic scale taking into consideration the investments in human resources, depreciation o f physical assets, and decrease in natural resources. This indicator i s still imperfect as it does not take into account the physical assets and degradatioddepletion o f groundwater, agncultural soils, etc. While the Gross National Income (GNI) per capita i s a widely usedmeasure o f current welfare, the adjusted net saving indicates the prospects for future welfare. 2.11 The trends and composition o f saving inEgypt fkom 1970 to 2001 are shown inTable 2.2. Figure 2.4 displays the distinctive features o f saving effort in Egypt over 30 years, focusing on gross national saving, net national saving, and `adjusted' net saving, a measure which treats education expenditures as investments and resource depletion as capital consumption. 2.12 Egyptian saving behavior clearly displays four phases. Prior to the 1973 oil crisis, the gross saving rates were low, at 10% o f GNI. Post-1973 gross savings jumped to roughly 20% o f GNI, a level that has remained fairly constant (with the exceptions noted below). The oil price spike o f 1979 did not boost gross saving, but adjusted net saving turned sharply negative, a clear indication that Egypt was consuming its oil windfall. The oil price collapse in 1986 was accompanied by a sharp deterioration in gross saving, while adjusted net saving turned positive, particularly after gross saving rebounded to the 20% level. The first Gulf War in 1991 led to a sharp influx o f transfers from abroad, boosting all measures o f national saving (domestic saving actually fell). Post-1991 adjusted net saving has settled at less than 10% o f GNI - above regional averages, but below the lower middle income country average - with some deterioration evident in 2000 and 2001. Particulate emission damages in 2001 were high by regional and income group standards, at an estimated 1.4% o f GNI. By the mid-1990's education expenditures roughly equaled the value o fresource depletion in GNI. -10- 2.13 As Table 2.3 shows, oil depletion shrank as a share o f GNIfrom roughly 30% in 1980 to less than 5% in 2001, while mineral depletion and net forest depletion have beenminor. C02 damages as a share o f GNI are relatively high, but below the region and income-group averages. Investment in human capital has been fairly stable around 4% o f GNI, beingbelow regional but higherthan income-group averages. 2.14 The broad picture that emerges from these figures i s that after consuming oil wealth in the early 1980's, Egypthas maintainedmodest annual increases o f 3.4% o f GNI intotal national wealth since then. Incomparison with other countries, Egypt ranks as the only MENA country among the middle-income group of nations that have a modest positive A N S . Table 2.3: Egypt- Decomposition of National Savings, 1970-2003 1970 1980 1990 1999 2000 2001 Grossnationalsaving 9.1 22.0 21.9 18.5 17.3 15.4 Consumptionof fixed capital 8.3 7.1 8.3 9.5 9.6 9.6 Net nationalsaving 0.8 15.0 13.6 9.0 7.6 5.9 Educationexpenditure 4.4 3.3 3.5 4.4 4.4 4.4 Energydepletion 2.1 31.1 11.0 2.1 5.6 4.5 Mineral depletion 0.0 0.2 0.1 0.0 0.0 0.0 Net forest depletion 0.3 0.5 0.5 0.2 0.2 0.2 C02 damage 0.4 0.7 0.9 0.8 0.8 0.8 Adjusted net saving 2.3 -14.2 4.6 10.3 5.4 4.7 Particulatedamages 1.4 Adjusted net saving * 3.4 NOTES:SOURCE: WORLDDEVELOPMENTINDICATORS, - INCLUDINGPARTICULATEDAMAGES. * -11- 30 20 z ; zW ->10 $ 0 Source : WorldDevelopment Indicators Environment Sustainability Index @SI)' 2.15 This indicator ranks Egypt's sustainability among 145 nations on the basis of five groups of indicators which in turn consist o f 68 basic indicators. The five groups o f indictors are: the status of environment systems, environment stress and risks, human vulnerability, social and institutional capacity, and global stewardship. Inthis evaluation, with an ESI o f 48.8, Egypt i s at rank 74, which indicates low sustainability. 2.16 Figure 2.5 below shows the overall rank o f Egypt inthis sustainability evaluation as well as the results achieved for the various indicators. Some o f these indicators are o f high relevance in the CEA context, and they reflect fairly well the situation as described in this Report. The main items in this respect are: e Air Quality and Water Quality have a negative indicator value. This is definitely a problem for air quality and water quality inboth urban and rural areas. 0 Reducing air pollution and water stress show also negative indicator value as reflected in the respective indicators; 0 Environmental health i s affectinghuman vulnerability; and ' Esty and Cornellus, at M;Lvcv.ciesin.columbia.ectu, 2002. -12- 0 Reducing public choice as indicatedby a negative capacity o f debate reflect the top-down approach for addressing environmental issues which lead to sub-optimal resource use and related environmental damage. This i s a very important issue for the CEA. Figure 2.5 n Poverty andEnvironmentinEgypt 2.17 Environment degradation was found to affect mostly the poor rather than the non-poor in Egypt. Although Egypt made substantial progress by reducing by 80 percent the number o f population living under one dollar a day' (3.1% o f total population); however, 29.8% o f the population still live under US$2/day. The regional poverty incidence as highlighted in Figure 2.6' shows that rural Upper Egypt displays larger poverty incidence and environmental degradation is also affecting poor rather than non- poor areas as shown inFigure 2.7. PovertyReductionIn Egypt, Diagnosisand Strategy, IBRDNo. 242334-EGT (2002). Bjom Larsen, Presentationat the World Bank, November 20,2002. -13- Figure 2.6 Egypt Regional Poverty (million) total 11million (199912000) (total regional population inparenthesis) (12) Metropolitan (8) Lower Urban (20) LowerRural (7) Upper Urban (16) Upper Rural 0 1 2 3 4 5 6 Figure 2.7 Egypt- All Environment Categories Per Capita Damage Cost 600 500 I 400 300 200 100 i All Egypt Upper Rural Upper Urban -14- 2.18. Furthermore, it i s the poor that suffers mostly from indoor air pollution, lack o f clean water and sanitation and municipal waste collection and disposal inEgypt as shown inFigure 2.8 Figure 2.8 Impact on the poor Fgypt: Index of Pcr Capita Cost olEn+ironinental Dcgradalion - Poor \s Non-Poor. 100 80 6 0 4 0 20 0 Urban Indoor Water Soil Mun. Coastal A ir A ir Waste 2.19 On the basis o f the above results, it can be concluded that the environmental issues inEgypt are more prevalent inregions with highpoverty relevance. These issues are predominantly rural and account for more than 55% o f damage cost with urban air pollutionaccounting for more than 40% o f such damage costs. EnvironmentandTrade 2.20 In2003, Egypthas signed the EUAssociation agreement which will establish a FreeTrade Area over a transitional period o f 12 years, and would provide for reciprocal liberalization o f all industrial commodities and, to a significant extent, agricultural trade. Egypt i s also increasing its trade ties, investment and business opportunities with the United States, as Trade and Investment Framework Agreement (TIFA) has recently been signed being a primary step towards establishing the free trade area between the two countries. Egypt became a member o f the COMESA (Common Market for Eastern and Southern Africa) which has great ambitions to set up a Free Trade Area and customs union inthe medium term. 2.21 In the last decade or so, the potential for conflict between environmental concerns and international trade has been mounting steadily. In fact, the trade community has been concerned for a number o f years about the trade impacts o f environmentally related measures. These measures include both domestic and international environmental regulations, which can affect a country's competitiveness and its export share inforeign markets. 2.22 Exports have played an important and instrumental role in the Egyptian economy, and are expected to have yet more significant contributions. For that, Egypt has been fostering policies to promote its exports and improve its competitiveness ininternational markets. However, such efforts were -15- coupled by the enforcement o f more stringent environmental standards both domestically and internationally. 2.23 Export-related firms in Egypt are increasingly burdened by the additional costs for the adoption o f a new environmental regulatory measure. These increased costs can negatively affect output and exports and also result inhigher volume o f imports inthe import-relatedsectors. 2.24 Based on such inherent linkages present between trade and environment and their significance for Egypt, a number o f studies were needed to examine these issues more closely., In this context, the rapid assessment o f environment impact on trade was introduced for such a purpose. 2.25 Given the importance o f trade and environment issues, Egyptian policymakers need empirical guidance to evaluate sector-specific trade impacts o f environmental regulatory changes. As part o f the MEDPOLICIES initiative under the Mediterranean Environmental Technical Assistance Program (METAP)," a rapid assessment was usedto evaluate the impact o f changed environmentalregulations on exports as well as on imports. It aims at informing decision makers o f the key issues affecting their economies in line with the emerging free trade agreements. The analysis addresses seven main import and export sectors o f the Egyptian economy as regardthe sensitivity o fproduction and competitiveness to cost changes induced by domestic and foreign environmental regulations. The inputs considered are costs o f chemicals, labor, energy, capital and materials. The seven sectors are divided into four export sectors while three are related to imports. The export sectors examined are: textiles, raw cotton, leather, and furniture. Chemicals, paper wood and cork represent the three import sectors examined. 2.26 The main reasons for selecting these export sectors are that the textiles sector in Egypt i s being increasingly faced with environmental issues that need to be addressed in order to enhance full export potential. The use o f banned dyes and chemicals i s the main environmental issue in this sector. On another level, the issue o f eco-labeling that i s now required as a necessary prerequisite for exports to many countries i s yet a further issue for Egyptian textile firms. The main environmental problem facing the leather sector's potential for increased export share i s the use o fbanned chemicals (such as chromium) and dyes. Moreover, the sector's industrial effluent i s mostly discharged to the public sewers without any treatment. One o f the main environmental issues in the raw cotton sector in Egypt i s related to the use of chemicals for pest control as well as for increasing productivity in general. In this regard, there i s a growing international demand for organic agriculture and the use o f integrated pest management (IPM) approach. That is, there i s now what is known as bio-cotton, which i s becoming a new trend in some international markets. 2.27 The sensitivity analysis in this study i s based on the Larson model (2000)" for evaluating the impact o f environmental regulations on production and trade. The model, which i s a simple partial- equilibrium model, determines the sensitivity o f the seven sectors to changes inthe cost o f a specific input (e.g., water, energy, labor, chemicals) due to compliance with a higher environmental standard. Based on generic input cost increases as result o f reducing subsidies, the sensitivity between sectors i s assessed (e.g., 10% or 20% increase in the price o f water input costs). The model is designed to address a wide range o f issues with minimal data requirements in addition to the rapid assessment. 10 See www.metap.org. l1 Evaluatingthe Impact of Specific EnvironmentalRegulationson Exports;Bruce Larsen(2000)-LandEconomics. -16- 2.28 The results o f the sensitivity analysis are provided inAnnex 2 and are summarized as follows: 0 A twenty percent in the cost of inputs such as labor or energy inputs due to more stringent environmental standards -- imposed domestically or by importers in foreign markets -- will have a small to moderate negative effect (0 to -3%) on the output o f the raw cotton, textile, leather & furniture industries. However, the exports o f these sectors will be more impacted with the textile and furniture industry exports are more sensitive to an increase in energy prices (that i s -2 to -3%) and the raw cotton sector and furniture industry are most sensitive to an increase in labor prices (-16 to -21%) as shown inTable 2.4 below. Table 2.4 : Textile and FurnitureIndustry Exports Sector Energy L a b o r Raw Cotton -2.8% -15.9% Textiles -4.2% -5 .O% Leather -1.O% -4.2% Furniture -3.5% -20.8 0 20% increase in the cost o f wood inputs for furniture production (possibly due to forestry protection initiatives or an increase in world timber prices to support implementation of forestry principles) could adversely impact Egyptian furniture output by 8.3% and Egyptian - furniture exports by 83.2%. Such initial assessment should be followed by further studies on - the furniture sector so that Egypt competitiveness will not be affected. 2.29 A National Committee on Trade and Environment (NCTF) was established by the Ministry o f External Trade to identify the implications o f trade policies on the environment that i s the "impact o f trade on the Environment" approach. Given the complexity and controversy involved in valuating environmental resources and benefits, these studies were more qualitative than quantitative. This committee was also introduced to the MEDPOLICIES study o f "impact o f the environment on trade." This committee should be further strengthened by having a permanent secretariat to respond to detailed, forward-looking questions about the impacts which existing and future environmental regulations have on production, trade and economic development. With such kind o f analysis, the environment cannot be mainstreamed inthe trade sector. Conclusion 2.30 The results o f the environmental indicators showed that Egypt economic growth was not accompanied with an improvement in environmental sustainability which remains low. In order to protect the welfare and the quality o f life o f present and future generations, Egypt needs to address air quality, water quality and waste management issues as shown in the COED and ESI. Since Egypt's coastal areas are a source o f income and growth, the coastal zone management should also be addressed. Furthermore, Egypt needs to focus better on those environmental issues in the rural areas where the poor are mostly affected. The rapid assessment on environment and trade also showed that gradual strengthening o f environmental regulations (or gradual enforcement/compliance with environmental standards) for the purpose o f improving natural resource management through increase in pricing or decreasing susbsidies may be possible without greatly effecting sector competitiveness except in textile and furniture sectors. A further in depth study should be undertaken in these sectors. The Ministry o f -17- State for Environmental Affairs/ EEAA could be challenged by the policymakers to respondto detailed, forward-looking questions about the impacts existing and proposed environmental regulations have on production, trade and economic development; however, environmental institutions un Egypt are not prepared for this. Attachment I: Egypt's Progress towards Selected Millennium Development Goals 1990 1995 1999 2000 1Eradicateextreme povertyand hunger 2015 target =halve 1990$1 a day poverty and malnutrition rates I l2 Egyptian Ministry o f Health Statistics -18- CHAPTER 3 AIR QUALITY Background 3.1 For the past five years, there has been continuous public concern related to the degradation o f air quality in the major cities o f Egypt and, inparticular, inGreater Cairo. This concern was sparked by the occurrence o f a Black Cloud appearing in the skies o f the capital in November 1998. The cause was a thermal inversion climatic phenomenon trapping air pollutants from a multiple of sources in and around Cairo. One major cause attributed this to the open burning o f solid waste in general, and agricultural residues in particular. As a result o f strong media attention, the Government decided to search for rapid solutions for decreasing air pollution in Greater Cairo. 3.2 The poor air quality was recognized to be one of the major environmental issues for which the National Environmental Action Plan (NEAP) o f 1992 recommended a series o f policy and investment actions. Only one policy action related to the reduction o f lead in gasoline was implemented. Lead in gasoline was subsequently eliminated; other actions such as introducing a tax on gasoline and lowering import duties innew efficient vehicles (see Chapter 7) were not implemented. Other positive actions were undertaken as stated in sections 3.12-3.18 which resulted inpartial improvement o f air quality. 3.3 The major cause o fpoor air pollution i s that pollutant loads exceededthe allowable limitsthat can no longer be absorbed in the Cairo atmosphere. It i s not yet clear by how much this load limit was exceeded. However, even with a small incremental increase o f pollutants helped by thermal climatic phenomena, citizens would feel the effects. Despite major efforts made by the Government, the "black cloud" phenomena have been systematically repeated every autumn season since 1998. Overview of air quality measurements 3.4 Detailed air quality measurements available at the EEAA web- site and published on a monthly basis showed that the level o f PM 10 i s improving from 1999-2004. In1998-1999, coarse particulate matter (PM10) concentrations ranged between 145-275 microg/m3, and could reach 850 microgradm3in some areas with significant seasonal variations. The upper 24 hours ambient concentration o f PM 10 decreased from an average o f 280 microgramdm3 in 2003 to 190 microgradm3 in 2004. InCairo, 4-5 out o f 11-17 monitoring sites are exceeding the average limit o f 70 microgradm3 3.5 According to the Environment Information and Monitoring Program's (EIMP) annual reports o f December 2002, and monthly reports inSeptember 2003 and 200413on air quality inEgypt, the annual air quality limit value of 60 microg/m3 for SO2(according to Egyptian Law No. 4) has been exceeded only in four monitoring sites, three of which are in Greater Cairo. K o m Ombo in Southern Egypt exhibits a higher SO2 concentration. Also the WHO limit for NOzi s 40-50 mg/m3.This value has been exceeded at four to six monitoring sites, five of which are in Greater Cairo particularly in the city center, and the residential areas o f Maadi ,Nasr City. . 3.6 The only source attribution study (SAS) was undertaken by the Cairo Air Improvement Project in 2001 also estimated the contributions of various sources to particulate matters (PM) and volatile l3 EgyptianEnvironmentalAffairs Agency Air QualityReport, December 2003. -19- organic compound (VOC) levels in Cairo. No further SAS update was undertaken. The results o f the study showedthat: 0 Vegetation burning i s the primary contributor to the five particulate matter (PM2.5) fractions and accounts for 52% o f pollution. It i s also the number two contributor in the PM10 fraction, which, with desert dusts, contributes to 60% o fPM10 pollution; 0 Mobile sources are secondary and tertiary contributors to PM2.5 and PM10, respectively. Mobile sources are therefore the second most important contributor to Cairo's poor air quality; 0 Ammonium chloride comes in third position on the list o f the most important contributors to poor air quality inCairo. The main source o f this are fertilizer plants; and 0 Lead smelters and motor vehicles account for 80% o f Volatile Organic Compounds (VOCs) emissions in Cairo's air. 3.7 Inadditionto the problemofdeteriorationofair quality ofGreater Cairo, there are anumber of well-defined large industrial sources o f air pollution scattered around Egypt. These sources have relatively limited geographical impact, but have serious health impacts on communities adjacent to them. Among these are the Iron and Steel and Coke Companies in Tebbin (south o f Cairo), the cement factories inHelwan and Tebbin which emit cement dust that could be recycled ,the KIMA Chemical Industry in Aswan, the Misr Chemical Industry and the RAKTA pulp and paper mill inAlexandria. 3.8 Indoor air pollution i s also critical as young children and housewives spend more than 80 percent of their time intheir homes. There i s very little air quality monitoring data available for indoor pollution. However, a household survey from 1993 indicates that 30-40% o f rural households rely partially on biomass for cooking and heating (biomass fuel use in Egypt i s estimated at 3% o f total energy con~umption).'~Inwork conducted recently by the UK-funded Strategic Environment and Management Project (SEAM), it was noted that children in some villages o f a rural governorate might be showing signs o f increased exposure to air pollutants. In rural areas, the use o f agricultural residues as fuel in simple stoves can lead to high levels of particulates and other pollutants inside the house that can be especially damaging to the health of young children. This problem is alleviated by the increasing affordability, availability and reliance on commercial energy. This in turn releases agricultural residues from domestic use and alternative means o f disposal through open burningwhich, in turn, generates new problems. L o w temperature combustion o f wet materials produces many particulates and a wide range of complex chemicals, including tars that are associated with cancer. 3.9 Based on the above, the energy sector and as well as the agricultural residues sector are considered to be the major sources o f air pollution inthe main and secondary cities o f Egypt. The energy sector i s of vital importance to Egypt's economy. It: a) i s a major source o f income; b) generates a large share of Egypt's foreign currency receipts; c) has a major impact on Egypt's balance o f payments; d) manages key natural resources, both for the present and for the future; but (e) i s a source o f pollution. The agricultural sector i s also o f paramount importance and supports a large part o f the population. Approximately 20 million tons o f agricultural residues are produced in Egypt every year; the majority i s disposed in a manner with low environmental impacts (e.g., animal feed or fertilizer); however, approximately 20% i s disposed o f using methods which result in high environmental impacts due to the burning o f these residues either in the field or in rural homes. Burning in the field is a relatively new l4 Egypt:Assessmentof Cost of EnvironmentalDegradation. -20- phenomenon inEgyptbrought on by a number o f factors such as the introduction o f combined harvesting, regulations to control pests, and greater availability o f commercial energy sources to the rural population. 3.10 The "Black Cloud" (visible particulate matters, o f relatively large-sized particles) which i s primarily caused by burning o f agricultural residues, occurs at the time o f the highest pollution levels o f the year. This i s inpart due to the increased quantities o fpollution at this time o f year but has more to do with meteorologicalconditions: 0 Cairo suffers from low temperature inversions over prolonged periods. These inversions act as an effective barrier to pollution escaping to the atmosphere; and 0 The wind during this period i s generally from the Mediterranean Sea (northerly), which bringsany pollution from the Delta (Lower Egypt)upthe Nile and into Cairo. 3.11 Pollution from the burning o f agricultural residues attracts little attention outside the September- January season. Within this period, rice straw, cotton stalks and fruit trees are harvested and their residues are burnt. Rice straw and cotton stalks are by far the most important contributors to pollution in Cairo at this time o f year: h i t tree residues are burnt inmany locations across Egypt; the burningo f dry leaves from sugar cane over the period o f December through M a y has far lower impact on air pollution in Cairo. These residues have been burned for decades without major complaints and the sugar cane plantations are located in Upper Egyptrather than inthe Delta. Progresstowards reducingair pollutioninEgypt 3.12 A large number o f projects and studies covering energy and environmenthave been conducted in Egyptover the past decade. These have either been producedby Egyptian organizations, by donor-funded projects or typically by a combination o f the two. A short summary o f the projects, their completion dates and their relevant main findings/outputs are given in Annex 4.1. The following general points are made withrespect to the work undertaken over the past decade: 0 Many o f the reports contain details o f the socio-economic data driving energy consumption and emissions. The principal omission i s consolidated energy balances, disaggregated GDP forecasts and emissions balances for the future; 0 There i s a lack o f data on air pollution and its causes, particularly indoor air pollution. A study on the causes and effects o f indoor air pollution is needed. Further work on attribution (linking emissions inventories to pollution and then to impacts) i s urgently required for both outdoor and indoor air pollution; 0 There i s no valuable Cost-Benefit Analysis (CBA) within the set o f existing reports with analyses having been conducted on a financial basis only; 0 It i s difficult to ascertain the precise impacts or sustainability o f the studies and projects reviewed. Many o f these were undertaken under donor-funded projects and thus their recommendations are o f an advisory nature: Egyptian Ministries and policy makers are clearly free to take on or to reject the advice o f these programs as they see fit; and 0 Many o f the studies allude to energy pricing and liberalization / privatization. Clearly, these are major political issues where decisions can be taken only at the highest levels. -21- 3.13 Despite these gaps, Egypt has had some success in reducing environmental impacts due to air pollution. There has been a widespread introduction o f natural gas in the power and housing sectors. Natural gas utilization reached 99% o f total fuel for all power plants connected to the gas grid. The efficiency o f the transmission and distribution systems has been improved through a program for reducing losses within these networks. Between 1981 and 1999, the total losses in the National United Power System declined from 18% to 13.2% and it decreased further to 12.4 % in 2004l'. For environmental benefits, all power plants built during the last decade were dual fired to enable substitution o f heavy fuel oil by natural gas, and the Ministry o f Electricity and Energy elaborated a continuous program for rehabilitating old generating units by ones o f higher efficiency. Recently the Egyptian Environmental Affairs Agency (EEAA) formulated a strategy for air quality in Egypt which was endorsed with its board of directors. This strategy was conducted through a consultation process with national stakeholders. It mentions the most polluting sectors as energy, transport, industry, agriculture with proposed actions for each one 3.14 Private cars, including taxis, have been encouraged to switch also to natural gas. By the end o f 2001, 50 public and municipal transportation buses and 51,000 cars had been converted to natural gas since 1993 using 250 million cubic meters o f natural gas. Compressed natural gas (CNG) conversion in taxis costs now LE 4,00O/unit. This amount can be advanced by a local bank and i s paid by the taxi driver every time he fills his tank at the gas station. This incentive created by the Government has been successful and should be sustained. Cars have only access to lead- free gasoline and the government has introduced in 2004 an Octane 92 gasoline at a higher price L.E. 1.2/liter than the usual Octane 90 gasoline offered at LE 1.O/liter. With the assistance o f USAID-CAIP, the first vehicle emission testing, tune-up and certification system (VET) aiming at the reduction o f pollutants and improvement in fuel efficiency i s operational in the Governorates o f Qalyoubieh and Guizeh where more than 360,000 vehicles were inspected. In accordance o f the Ministry o f Interior, 85 percent o f the inspected cars are complying with the emissions standards. VET will be expanded in Alexandria, Dakahlia and Beni Souef Governorates. 3.15 Furthermore, in order to decrease congestion inside cities and reduce travel times and consequently improve fuel efficiency and decrease pollution, ring roads are being established to avoid passing through cities. Under the BOT system, Egypt has recently started applying it to the transport sector, especially for constructinghighways such as the one linkmgAlexandria with Fayoum. The second Greater Cairo undergroundMetro line i s currently in operation and a third line i s under preparation. The underground-electrified mass transit system i s expected to decrease travel times, decrease pollution and encourage users o f surface modes to shift to this fast transportation facility. 3.16 The international donor community has also supported the Government effort to monitor and reduce air pollution. The Japanese International Cooperation Agency (JICA) supported the preparation o f a master plan for the transport sector in Cairo and established in EEAA a regional monitoring laboratory. DANIDA financed the establishment o f air quality monitoring stations and provided technical assistance and training. USAID supported C A P which financed among many activities the source attribution study, the VET and the conversion o f buses to CNG. The Canadian International Development Agency (CIDA) provided grants for the conversionof the polluting brick factories o f Helwanto natural gas. 3.17 Under the Egyptian Environment Policy Program (EEPP), USAID provided technical assistance to 17 Energy Saving Companies (ESCOs) which outsourced its energy services to an outside company. Projects are undertaken in partnership with financing upgrades in energy reception, distribution, and in some cases, usage, and manage the power infrastructure for its customer. The benefits for the customer company are cost savings as a result o f increased efficiency in energy consumption and usage. l5Communications from the Ministry of Electricity and Energy -22- Furthermore, the investment required for upgrading the power infrastructure i s kept off balance sheets. The ESCO i s remunerated from energy savings realized. Typically up to 80% o f the energy savings are paid to the ESCO and 20% to the customer company. USAID expenditures on energy efficiency/clean energy were about US$7.0 million in technical assistance and USS7.0 million in cash transfer. In addition, 118 public sector companies are reported by the Ministry o f Investment to have complied with Egyptian environmental regulations for the total investment o f L.E. 5.34 million. 3.18 The World Bank financed under the Egyptian Pollution Abatement Project (EPAP), a blend o f loans and grants to 11projects totaling US$19.6 million to reduce air pollution inthe fertilizer, chemical, refinery, aluminum and cement industries. UNDP through the Global Environment Facility (GEF), i s assisting in the execution o f the Fuel Cell DemonstrationProject ineight buses as well the introduction o f the Hybrid-Electric Transportation Bus Technology in highpriority historical sites starting with the Giza Plateau where the ancient pyramids are located. The Canadian Intemational Development Agency (CIDA) i s also financing a demonstration project using Canadian technology to reduce the emissions o f greenhouse gases (GHG) by converting two-stroke engines usedinmotorcycles to compressednatural gas (CNG). 3.19 Inanattempt to finda solution for reducingthe effectofthe "black cloud," MSEA, the Ministry o f Agriculture have set up a series o f collection trials on the agricultural residues, such as central collection and densification (shredding and baling) mainly for animal feed. The true costs have not been yet established, and they will also bringup some pitfalls inherent inlarge-scale collection, such as lack o f storage sites, problems with pests and vermin or bottlenecks in the system. The Ministry o f Local Development has also worked with MSEA to reduce pollution from smelters, cement plants, and bricks manufacturing. A cost benefit analysis on these and other proposed measures (see Table 3.4) indicates that rationalizedburningappears to offer the potentialto significantly reduce damage costs at low cost. The Institutionaland PolicyResponseto Air quality degradation 3.20 The means and effectiveness o f implementation depend on the structures and the capabilities o f institutions. There i s no unified strategy to reduce air pollution in Egypt. However, there are sector policies in energy, transport and refineries; but these do not adequately adhere to environmental issues in these sectors. Government policy in the area i s limited, and activities related to energy efficiency planning and environment control are largely donor- driven. 3.21 The Energy policy i s intheory under the Supreme Energy Council. This body bringstogether the relevant Ministries in the sector under the chairmanship of the Prime Minister. It has proved difficult to obtain agreement within this body, and it has not met since 1982. Consequently, there i s a significant policy deficit, particularly with regard to energy efficiency. The policy vacuum has been filled by donor- projects, but this i s by no means an adequate substitute for policy. In 1998 an Energy Efficiency Council (EEC) was created, chaired by the organization hosting the meeting in question. It is a voluntary consortium o f 12 public and private sector organizations involvedinthe energy sector. 3.22 The EEC has drafted a National Energy Efficiency Strategy (NEES) by drawing on the resources o f its constituent institutions. A draft Framework for the NEES has been prepared for the EEC with technical assistance from USAID. The draft was submitted to the EEC in December 2000 and approved by the EEC membership inMay 2001. There is little evidence that the NEES has yet been taken up by policymakers as part o f an energy efficiency strategy. 3.23 A major policy constraint that also has a serious impact on the environment is the prevailing subsidies inthe energy sector. These subsidies have huge implications for the use o f fuel; they encourage waste and they discourage substitution. They also have a significant impact on the state budget. In -23- September 2004, the Govemment increased the price of Diesel by 50% from L.E. 0.4 to L.E. 0.6 /liter. This increase does not apply to the local bakeries. The political pressures to maintain these subsidies are understandable, but the augmented environmental impacts from excessive use impinge on the very people that subsidies are meant to assist. 3.24 The Energy Environment Review (EER)*6commissioned by the World Bank under a Norwegian Trust Fund calculated the subsidies to industrial fuels to be as shown in Table 3.1 and to electricity as shown inTable 3.2. Table 3.1: MarketPrices and OpportunityCostsof IndustrialFuels Fueltype Market Price opportunity cost YOsubsidy (LEIMMBTU) (LEIMMBTU) Natural Gas 4.06 8.09 50% Heavy FuelOil 4.72 11.3 58% LPG(commercial 4.48 20.8 78% propane and butane) Diesel 11.69 22.0 47% Gas Oil 11.35 23.4 51% Table 3.2: Comparisonof MarketPricesand OpportunityCostsof Electricity Customer MarketPrice OpportunityCost YOsubsidy ~ (Pt*/kWh) (Pt*/kWh) Industry 17.5 13.5 -30% Agriculture 10.0 14 29% Commercial 33.2 38 13% Residential 10.8 31 65% ~ ~ ~~ *Where 1 Piastre (Pt) = LE 0.01 3.25 Evidently, there are very substantial subsidies to all fuels and to certain groups of consumers of electricity, especially the residential and agricultural sectors. The total i s estimated by the EER at LE 14.5 billion in 1999/2000 and will increase to LE29.6 billion in2010-11. This corresponds to 2.2 and 3.7 times the estimate of the total damage costs in these years. The figures for electricity are averages and disguise a variety o f special cases; the subsidies to poor consumers o f electricity are still higher. The distribution o f subsidies by consuming sector in 1999/2000 i s summarizedinFigure 3.1. l6 Egypt: EnergyEnvironmentReview, Consultant Report, April 2003. -24- Figure 3.1: Distribution of subsidies by sector 8 6 * E 4 P v) a 2 0 -2 The LegalFramework related to Air Quality 3.26 The main legal instrument pertaining to air pollution i s in the Environmental Protection Law No. 4 and its Executive Regulations. The provision o f the law and its implementation can be summarized as follows: 0 The air quality standards are broadly in line with WHO guidelines but are in themselves a restricted policy tool. They are o f direct relevance to the establishment o f new facilities where air quality i s already below acceptable standards or would be brought below acceptable standards by the new development. They are o f little help where existing established activities already result in air quality below the permissible standards or where there are so many actors that control is impossible, as in the case o f vehicles. Inthese cases, the environment can only be improved by the exercise o f emission standards on existing plants. EEAA i s preparing new guidelines that will be incorporated in the revised executive regulations; 0 The emission limits for stationary sources established by Decree No. 495/2001 essentially reflect what should be possible with high sulfur fuel oil and existing technology, but they do not provide a stronger drive towards significant improvement. Large improvements in air quality could be achieved by a wider use of natural gas in industry. As demonstrated below, such fuel substitution is generally economic as well as environmentally beneficial; 0 The standards for vehicles exhaust standards o f 1994 are not applied and not enforceable. Existing limits should relate to the performance expected from a well-tuned engine, and should be achievable by a large majority o f vehicles; and 0 Burningo f agricultural residues is not regulatedinLaw 4. Article 37 prohibits the burning, disposal or treatment o f solid waste except in designated areas distant from housing, industrial or agricultural areas as well as from waterways; and Article 38 defines the specifications, conditions and constraints concerning these designated areas. The local units o f the Ministry o f Housing, in agreement with EEAA, assign the sites for dumping, -25- treatment, or buming solid waste according to the requirements o f this article. Revisions to L a w 4/94 have been drafted, and once enacted, agricultural residues would be regulated as a solid waste. In effect this would ban open burningin the fields and lead to the collection o f residues, either on a decentralized or centralized basis. Health and Economic Impacts resulting from air quality degradation 3.27 Principal impacts from air pollution are on human health. These impacts are both direct (e.g. respiratory diseases, such as bronchitis and asthma) and indirect (a weakening o f the populations' resistance to other diseases). Apart from reducing the quality o f life o f the population, these impacts also result in lost economic productivity. These `damage costs' are real and can be quantified. The assessment o f the cost o f environmental degradation showed that the annual damage from air pollution i s about LE 6.4 billiodyear corresponding to 2.1% o f GDP o f 1999 resulting largely from premature mortality o f 20,000 persons and morbidity due to 483,000 cases o f chronic bronchitis and respiratory symptoms in Greater Cairo and Alexandria. Local damage costs due to the buming o f agricultural residues were approximately LE 700 million (US$l50 million in 1999/2000). Damages are split almost equally between buminginthe field and burningat home. Unless more remedial actions are taken, further economic activity will lead to damage increaseby almost 25% in2010. 3.28 Giventhe significant social and environmental impacts o f energy supply and use, it is reasonable to ask what can be done to mitigate or avoid them, and what it will cost. Impacts may be reduced by switching to cleaner fuels, by being more efficient in the use o f energy, by removing pollutants from the fuels, or by cleaning the gaseous products o f combustion as they leave the flue or exhaust. 3.29 These measures cannot be studied in isolation. It might be possible to avoid the construction o f one power station by introducing energy efficiency measures, but the same set o f measures cannot be used to challenge all new power station development. It may be possible to substitute gas for heavy fuel oil in some industry, but maybe not in all. The environmental advantages from using natural gas to substitute for heavy fuel oil may outweigh the benefits to be obtained from export. A holistic vision i s needed to find a suitable balance between the need for energy and the preservation o f the environment and among all the varied and constrained options available to mitigate impacts o f many different types. Such holistic vision as proposed below was based on a strategic environmental assessment in the energy sector that was carried out by EEAA with assistance from the World Bank. The Energy-Environment Review and Clean Development Mechanisms inEgypt 3.30 Inview of the very large damage costs due to air pollution, an in-depth study was subsequently conducted to quantify the environmental problems induced by the energy and agricultural residues sector, assess the local and global damage resulting from these sectors and recommend win-win solutions for mitigating adverse environmental impacts. The EER was founded in detailed cost-benefit analysis that used opportunity costs o f energy and damage costs to identify policies o f genuine economic value to Egypt. In addition to the EER, the Egypt's National Strategy Study on the Clean Development Mechanism (ENSS CDM) which also was commissioned by the World Bank", and funded by the Government o f Switzerland was published in March 2003. The ENSS CDM was designed primarily as a capacity buildingtool to enhance awareness and understanding o f the flexible mechanisms o f the Kyoto protocol and to help develop the national slulls needed for Egypt to respond effectively to the opportunities. " Egypt:Egypt's Strategy in CDM, Emst Basler andTabbin Institutefor Metallurgical Studies, March2003. -26- 3.31 The scope o f the studies i s completely complementary. The EER provides a systematic methodology for assessing environmental damage, for policy assessment and for dialogue with line Ministries using the reduction for damage costs as a basis for prioritizing investments. The prime EER application i s to the local environment and to internal discussions among Egyptian institutions -- on an action plan to mainstream the environment into the energy sector. The ENSS C D M provides a preliminary portfolio o f projects for implementation under the C D M and arrangements for international dialogue to market and implement that portfolio. The main outcome o f both studies presented below i s to identify win-win solutions whereby investing in more efficient equipment and processes reduce both environmental impacts and conventional costs. 3.32 The action plan proposed by EER and ENSS C D M are also intended to provide guidelines for implementingNEAP o f 2002 inthe energy sector. For ambient air quality, NEAP o f 2002 recommended five major programs to be implementedby 2017, namely: e Forming a strategy for controlling pollution and preventingthe black cloud episode; e Managing auto exhausts inurban and rural areas; e Protect air quality inrural areas; e Reducing pollution from industrial activities within human settlements; and e Managing and controlling air pollution from exiting large industrial facilities and electricity power stations. 3.33 The EER therefore chose to assess damage from air pollution in the energy sector by using unit damage costs for the major pollutants, estimated by modifying damage costs derived from Western Europe standards. The European estimates were the product o f the long and costly Extern study funded by the Commission o f the European Communities that has extended over ten years and is still in progress." A first-order estimate o f the benefit values for reduction inlocal pollutants inEgyptwas made by scaling these values according to the relative GDP per capita measured at parity purchasing power (PPP). The damage cost values were therefore further calibrated to take into consideration the longer residence times o fpollutants inthe dry, low wind-speed conditions o f most o f Egypt. ~~~ Full details o fthe methodology of ExtemE, the results for all fuel-cycles and the applications to EUlegislation and Member States can be found on www.exteme.jrc.es -27- 3.34 The total damage cost due to the energy and agriculturalresidues sectors were found to be LE 6.5 billion for 1999/2000. The distribution o f damage by pollutant and by fuel i s assessed as shown in Figures 3.2 and 3.3. Figure 3.2: Local Damage Costs by Pollutant, 1999/2000 Total Local Damages = LE 6.5 billion I Figure 3.3 Local Damage Costs by Fuel, 1999/2000 Total Local Damages = LE 6.5 billion 44% 3.35 Local damage costs by pollutant, by fuel and by sectors were combined to identify the major contributors. Clearly significant reductions in local damage costs will require reductions in emissions from these sectors. Table 3.3 identifies five key sources o f local damage costs. Together these account for over 80% o f total local damage costs. Each o f the following three areas each account for approximately 20% o f local damage: 0 SOzemissions from the consumption o fFuel Oil inIndustry; 0 SOz,NOx and PMloemissions from the consumption o f Gas Oil in Transport;and -28- 0 SOz emissions from the consumption of Fuel Oil for Power Generation (which has declined significantly since 1999/2000). Two further areas account for over 10% o f total local damage costs namely: 0 CO emissions from Gasoline consumption inTransport; and 0 PMlO emissions from the burningo f Agricultural Residues inthe field at home. Contributor LE billion % of Total Industry- Fuel Oil - SO 1.4 21% Transport Gas Oil I 1.2 19% I Power Gen Fuel Oil SO -- - so NOX, IO - 2, 1.2 19% Transport Gasoline CO - - 0.8 12% Agriculture Others PM - - ,,, 0.7 11% Others 1.2 18% Total 6.5 100% 3.36 The damage assessments o f the EER show an estimate for damage from SOzthat i s quite high compared to the PMlo value. This in turn derives fi-om unit damage costs that are relatively high for SO2 andN0,compared to particulates. Most studies inEgyptshow PMlo to be more important. This i s largely a question o f methodological choice. There i s a choice as to where in the life-cycle of the pollutant the damage costs are attributed. The EER attributes damage costs to the pollutants produced directly in combustion. This procedure ties in damage directly to the source; emissions factors for exhausts are relatively easily available and there i s no need to describe how pollutants react and mix to get the final ingested mix. Thus the SOzand NO, values appear highin comparison to other studies that are based on the ingested concentrations o f products: the damage caused by sulfate and nitrate particulates i s assigned to the particulate mix in these studies and to the original products o f combustion (SOz and NO,) in the EER. The damage from ozone is also assigned to NO, inthe EER study as it is the only precursor among the species included. For this reason, the damage costs of VOCs are not directly represented because they appear inthe cost o fNO,. Breakdown o f damage by pollutant i s not a straightforward exercise. 3.37 The EERmakes estimates o f the evolution o f damage inthe absence o f policies to control it. The pattern i s broadly similar to that observed in 1999/2000, with the same key pollutants, fuels and sectors malung the major contributions to local damage costs. The impacts are larger, with local damage costs approximately 25% higher, with a total o f LE 8.0 billion per year projected for 2010/11, -29- Figure3.4: Growthof environmentaldamageinEgyptto 2011 1999/00 2010111 ProposedActions for ReducingLocalDamageCosts 3.38 Inorder toreduce the localdamage costs, three complementary alternatives were considered: (a) Price readjustment; (b) Package o f energy policies without price readjustment; and (c) Combined price readjustment and the package o f energy policies. (a) Price Readjustment 3.39 The expected reduction in local damage costs from price readjustment to opportunity cost levels was found to be LE 1.3 billiodyear in the year 2010-2011. This represents a reduction o f 16% in comparison to `business as usual' (BAU) scenario. The most important reductions in local damage costs are: 0 LE 700milliodyear due to reduced use offuel oil (mazut); 0 LE400 milliodyear due to reduced gas oil demand; and 0 LE 100 milliodyearreductions fromreduceduse o fnatural gas, principally inpower generation. (b) Sectorpolicies withoutprice adjustment 3.40 The EER also developed a package o f 19 sectoral measures through a consultative process. Each measure could significantly reduce environmental impacts within the next ten years. Using Cost-Benefit Analysis, the measures were categorized under three headings: (a) "Win-Win," i.e., cost-effective without including damage cost reductions; (b) Cost-effective to Egypt ifreductions inlocal damage costs are included; and -30- (c) Cost-effective to Egypt ifreductions inglobal damage costs are also included. Policies selected and their levels o f cost-effectiveness are shown inTable 3.4 below. ResponsibleAgencieslMinistries I 1 I Mainstreamingofthe Environment All A MSEANEEAA, ESCO,MOI 2 DemandSideManagement I EnernvEfficiencv _. I A MinofElectricitvandthe Eevutian ElectricityAuthdrity(EEA),-,I Department ofElectricalDemand 3 Standardsand Labeling EnergyEfficiency A Standardorganizations 4 Promotionof IndustrialEnergyEfficiency(Fund) EnergyEfficiency A MOI, MOF 5 Promotionof IndustrialEnergyEfficiency(ESCOs) EnergyEfficiency A Industries 6 FuelSubstitution: Fundfor Conversionof IndustrialFacilities Fuel Substitution A MOE,E MOI, Private Sector 7 ReductionofTransmissionandDistributionof EnergyLosses PowerGenerationand A Min.of Electricity,andEEA,Electrical Distribution Distribution 8 Promotionof GenerationfromWind for ElectriccalEnergy PowerGeneration C MOE andtheNew & RenewableEnergy CentralizedCollectionof AgriculturalResidues AgriculturalResidues MOALR, Govemorates AgriculturalResidues MOALR Govemorates 3.41 There i s a wide range o f operational policies within Category `A' (which are cost-effective without including reduced local damage costs, i.e., "Win-Win") and within Category `B' (where the including local damage costs makes the policies cost-effective). Since the burning o f the agncultural residues was the major cause o f the black cloud, a CBA was undertaken on the proposedpolicy measures. It was found that rationalized burning is the only immediate solution. Avoided local damage costs will cover the cost o f the centralized collection and not the cost o f their disposal. There appears also to be no potential for cost effective, reliable energy generation for agricultural residues, and agricultural products appear to be the most cost effective solution in the medium term. Briquetting o f residues currently burnt innew, more efficient appliances canbe cost effective iflocal damage costs are included, but converting agricultural residues to building materials has potential for long term; however, inthe proposed measures someone has to apply for these schemes. 3.42 Ifall policies were successfully implemented, local damage costs in20104 1 as projected by the EERwould be reduced by LE2,155 billiodyear and by 2010/11 would be 12% below current levels Five key policies have the potential to reduce local damage costs by at least LE 100 milliodyear by 2010: Policy 6 - Fuel Substitution: Fundfor Conversion o f Industrial Facilities [LE 805 milliodyear reduction in2010/11]; Policy 4/5 - Promotion o f Industrial Energy Efficiency (Fund& ESCOs) [LE470 million]; Policy 9 - Exhaust Emissions Standards for ExistingVehicles [LE430 million]; Policy 15 - Centralized Collection o f Agricultural Residues [LE 205 million]; and ,Policy 13 - Catalytic converters for New Gasoline Vehicles [LE 125 million]. -51- I . 3.43 The EER demonstrated how programs o f financial incentives to energy efficiency and fuel substitution in a context o f heavy subsidies can actually be of benefit to the state budget as a consequence o f the avoided subsidy. The EER recommended that the Funds under Policies 4, 5 and 6 be designed as revolving Funds in which a portion o f the avoided subsidy i s returned to the Fund. Such a procedure would require good cooperation within ministries because the immediate state beneficiary from an energy-efficiency investmentthat saves oil products i s Egypt General PetroleumCorporation (EGPC) that either exports more or imports less. This benefit has somehow to be transferred through the state budget back partially to the Fund. This exercise would be facilitated if subsidies were made explicit inthe state budget, i.e., if EGPC paid to the state a rent tax on the mineral resource that was then returned to EGPC as an explicit subsidy per unito f domestic sale. 3.44 The above measures that are "win-win" are on the basis o f economic costs rather than financial costs and require financial incentives to be provided by the state, the benefits returning to the state as avoided subsidies, i.e., higher revenues in the net trade o f petroleum products. The cost o f financing the package o f policies identified in the project was estimated to be LE 525 million. This i s the lowest point on the cumulative net present value o f cash flow so it represents the maximum net expenditure by the proposed Fund; this occurs four years into the proposed implementation program. So, at the 10% discount rate assumed, a sum o f LE 150 million will be required for each o f the four years to finance the program. Some o f the sectoral measures are already implemented such as (i) increase in the cost o f diesel; (ii)expansion o f the use o f natural gas, oil, and (iii) inspection o f vehicles' emissions. 3.45 This expenditure i s small compared to the subsidies attributed at present to the energy sector. The necessary finance could be raised from very modest increases in energy prices. The two fuels with the largest environmental impacts are gas oil and mazut; those with the largest projected increase in subsidy are residential electricity and LPG. Table 3.5 shows the scale o f increases in each o f these fuels needed to generate LE 150 milliodyear. These estimates are based on 1999/2000 consumption levels and will clearly generate a stream o fbenefits after the end o fthe four-year period. 3.46 The results show that the package of policies could be easily financed by price increases o f any one o f the four options considered; a 4% increase in either the price o f gas oil or residential electricity would be sufficient, with even lower increases ifthe prices o f more than one option were increased. Even the higher increases indicated for mazut (heavy fuel oil) and LPG would still leave these fuels significantly below their opportunity costs. Table 3.5: Increases in Market Prices of selected fuels required to generate LE 150 milliodyear Fuel Revenue at Market Prices, 199912000 Increase inprices to generate LE 150 (LE millioniyear) milliodyear (%) Gas Oil 3472 4.3% Mazut 813 18% Residential Electricity 3801 3.9% LPG 455 33% (c) Combined price reform and sectoral policies 3.47 Finally, the EER estimated the impact o f a combined program o f price reform and sectoral measures. Many o f the 19 policies inthe package are designed to correct for the impacts o f low prices: so there is some overlap. The EER estimates that price readjustment would add a further 30% (LE 650 milliodyear) o f reductions to local damage costs estimates in 2010/11. Even a limited price readjustment program could have major impacts if it concentrates on fuels with high environmental impacts most -32- important o f which are mazut (heavy fuel oil) and gas oil. The interaction between sectoral policies and price reform can be summarized as shown below: Savings from sectoral policies by 2010/11 2155 billion LE Savings from price reform by 2010/11 1300 billion LE Overlap -650 billion LE Total reduction from measures and price reform 2805 billion LE 3.48 With the combined price reform and sectoral measures, damage in2010 is brought to around LE 5200 billion, somewhat less than the 2001 figure. This corresponds to 35% reduction indamage costs. It i s therefore appropriate to conclude that a combination of price readjustment and the implementation o f the package o f policies will result in the highest reduction o f damage costs and a net improvement in public health. Figure 3.5 shows the impact o f price reform and sectoral measures separately and combined. Figure3.5: Damagecosts in 2010/11 with pricereformand sectoral measurescomparedwith businessas usual(LE million) 10000 8000 Y 6ooo K E 4000 2000 0 Actual BAU Price reform Sector Combined (1999/2000) measures -33- The Clean Development Mechanism: An additional revenuefor reducing green housegases. 3.49 In addition to the economic and environment benefits generated as a result of the adoption of specific energy sector policies with price readjustment, Egypt can also generate additional revenues as a result o f the clean development mechanism (CDM) agreed upon under the Kyoto protocol. 3.50 To qualify for C D M status, projects must show "additionality." The additionality criterion requires that the C D M project truly be additional to what the host country might reasonably be expected to do for itself. A first order indication o f additionality would be that projects have a positive Cost o f Saved Carbon (CSC) and that their non-adoption at present can be related to technical and information barriers rather than to policy barriers arising from the subsidizedprices. 3.51 Table 3.6 shows all projects analyzed by the ENSS C D M that fall into this category. Projects with a CSC between 0-30 $/tC would seemto be the prime options. For example, the LandUse, LandUse Change and Forestry (LULUCF) projects have costs o f carbon saved that fall into the appropriate band, and they exhibit definite additionality as they would not be undertaken except for the global climate change benefits. The Ministry o f State for Environmental Affairs and the Ministry o f Agriculture have already piloted, in 19locations, the planting o f fast growing trees usingprimary treated wastewater. 3.52 The recovery o f landfill gas from municipal solid wastes is also promising. The technology i s widely adopted throughout the industrialized world, and i s recognized as a technology that is not cost- effective without global benefits. It would seem to be an eminently suitable candidate for CDM funding. The major benefits arise from the capture and flaring o f methane. The productive use o f methane has high incremental costs and relatively low incremental carbon benefit. So the conversion o f gas to electricity i s a more problematic step. The option needs to be further analyzed. Table 3.6: Projectswith positiveCost of Saved Carbon (CSC) -34- 3.53 The ENSS CDM estimated the share o f the international market in carbon credits and the revenues that Egyptmight expect in various scenarios. With full implementation o f all options the ENSS C D M calculated that Egypt could sell up to 2.6 M t C o f credits generating an income o f US$20.28 million, assuming a price o f 7.8 $/tC (Table 3.7). This amount represents 0.67% o f the total market as assessedby the study. Scenario Quantity sold Revenue (MtC) (US$ million) Full(100%) 2.6 20.28 Medium(70%) 1.8 14.04 Low (50%) 1.25 9.75 Conclusion 3.54 The energy and agricultural residues sectors are an important source o f financial revenues for Egypt. They are also an important source o f pollution, often exceeding national and international standards. Appropriate actions need to be taken to mitigate the increasing and adverse environment impacts on health and resources degradation. The EER and CDM studies showed that such mitigating measures are possible and are economically and financially attractive for the Government. They would improve both economic growth and the environment. 3.55 Reducing damage costs through price readjustment and through the implementation o f the policies package would result in foregone benefits o f LE 2.8 billiodyear by the year 2010. Furthermore, the implementation o f the policies' package would generate LE 3.0 billiodyear by the year 2010 and the total revenue from the CERs of the CDMprojects would also generate an additional LE 94.3 milliodyear by the year 2010. Itbecomes clearer that this is a "win-win'' solution for the energy sector inEgypt. 3.56 Through the energy-environment review and C D M processes, significant outcomes can be achieved, including: a more effective energy policy at national and local level; an improved efficacy and coherence inEgypt's environmental policy; effective due diligence inthe implementation o f environment and energy investment programs and; financial return for Egypt to offer attractive energy-environment products and to participate inthe international GHG offset market. 3.57 In order to implement these policies, it is recommended that Egypt takes a proactive approach towards EER and CDM programs and projects. The Government o f Egypt needs to maintain a political commitment and a sustainable reform program on which much o f the environmental improvements will depend. The first steps would be to address the market distortions inthe energy sector and readjust energy prices o f Egypt's energy products. Parallel to addressing the pricing policies, it i s recommendedthat an energy policy support unit be established within the Ministry o f State for Environmental Affairs, to oversee the implementation o f the EER and CDM action plans and build capacity in the sector ministries and inEgyptianprivate companies for project preparation, monitoring and follow up. Domestic resources complemented by support from international donors will also be needed to build the intellectual capacity, raise public awareness, prepare a package o f economically attractive projects, and continuously monitor progress o f environmental improvement inthe energy sector. . 3.58 Five key policies each o f which has the potential to reduce local damage costs by at least LE 100 milliodyear by 2010 shouldbe considered as a priority: -35- Fuel Substitution: Fundfor Conversion o f Industrial Facilities [LE 805 milliodyear reduction in2010/11]; Promotion o f Industrial Energy Efficiency (Fund& ESCOs) [LE470 million]; Exhaust Emissions Standards for ExistingVehicles [LE 430 million]; Centralized Collection o f Agricultural Residues [LE205 million]; and Catalysts for New Gasoline Vehicles [LE 125 million]. 3.59 Egypt should take advantage o f the C D M by marketing its projects on Land Use, Land Use Change and Forestry which can result in an increase o f Government revenue from the Prototype Carbon Fund. -36- CHAPTER 4 WATER QUALITY Overview of water resources inEgypt 4.1 Egyptis an arid country with limitedrainfall. The Nile-Lake Nasser system i s considered the only renewable supply source for surface water. At present, this system constitutes 95% o f Egypt's total water resources. Egypt's allocation o f the Nile i s 55.5 BCM/a as agreed inthe 1959 treaty with Sudan. The rest o f Egypt's water resources i s mainly fossil (non-renewable) groundwater in the coastal zones, the desert and Sinai, estimated at some 3-4 BCM/yr. The annual water balance i s provided in Figure 4.1. This balance (dating back to 2002) i s based on average estimates o f "consumptive uses", as opposed to "gross demands/diversions". The figure below illustrates the consumptive views o f 55.5 BCM/year ( excluding the fossil groundwater (0.5 BCM/y). Such water balance i s a simplified version o f the demand-based water balance. Fig. 4.1 National annual water balance I Irrigation consumption: 39 BCM/yr M&Iconsumption: 3 BCM/yr Inflow: 55.5 BCM/yr 4I 4 Open-water I II evaporation: II I I I I 3BCM/vr Terminal drainage: 10.5 BCM/yr 4.2 Egypt's water requirements are increasingas a result o f population increase, rising living Povertyand Access to Water and standards, as well as the need to foster Waste Water industrialization and reclaim new lands. Water consumption i s about 70% for agriculture; 1.5% for 90 industry; and 3.5% for drinking. The balance 80 estimated at some 25% attributes to, first, the open- .- 70 water evaporation (5%), and more significantly -tij60 [ilDrinkingWater (20%) the terminal drainageheturn-water at the 50 40 0Waste Water seaward end and desert fringes o f the Nile system 30 Povertv which largely contributes to the environmental flows $ 20 spilled into the northem lakes. 10 0I I I I I Ill. Ill. 111.; -37- LL Govenorates ~ 4.3 A major challenge facing Egyptis to close the increasing gap between the limited water resources and the escalating demand for water as shown inFigure 2. Available water per capita per annum currently amounts to some 900m3, already below the water poverty index (1000 m3/capita/annum). This figure i s expected to fall to 670m3 by 2017, unless demand-oriented and participatory institutional and financial remedies are devised and implemented. Although the declining availability o f water resources i s an alarming issue, it has not been yet placed on a "crisis" status. Until the mid nineties, Government attention was focused on balancing water and supply demand by exploring and exploiting the available resources. At present, the Government i s given more attention to the water quality/quantity nexus to improve its water resources. ---------- Years . . l x e r(Cubic meter/capila) -m- ---- _--- Population (lhousand) I I.--. -_ - ~ Source Environmental Profile of Egypt (2002) 4.4 The limitation in water resources (also exacerbated by the lack o f awareness and Figure 4.3: Poverty and Access to Water and Waste Water centralizedhnefficient services/finance) befall an imminent burden on water quality, thus compromising both public health and productivity, 90 especially as concerns the poor and the vulnerable. 5 80 70 Currently, there are reported serious water quality 60 issues in surface water (and in some areas served by -f2 50 0Waste Water groundwater), especially with regard to drinlung 40 water and sanitation in the rural areas. Figure 4.3 30 shows the relation o f poverty to access to water and $ 20 10 wastewater in Egypt's governorates. As expected in 0 Upper Egypt (from Beni Suef Governorate to Aswan Governorate) where poverty i s the highest, both access to water and wastewater i s the lowest despite large investments made by the Government. It is clear that Upper Egypt has not received so far much Govenorates attention to improve the basic services to the poor. -38- 4.5 The general assessment o f the water quality status in Egypt i s based on the results o f the monitoring activities carried out by the MWRI, including 240 locations for surface water and 205 locations for groundwater monitoring." Monitoring o f Lake Nasser indicates generally good water quality conditions, albeit nutrientssamples indicate a trendtowards eutrophic conditions. However, water monitoring data indicate that the water bodies within the River Nile stretching from Aswan in Upper Egypt to the Delta barrages in Lower Egypt are relatively clean in view o f their current uses and functions. Most water quality parameters along the main river Nile record values within the standards set by Law 48/1982 (entitled: Protection of the RiverNile from Pollution). However, about 40% o f the total sites along the Nile recorded Chemical Oxygen Demand (COD) exceeding the standards. The Fecal Coliforms (FC) level/trend along the Nile and Rayahs (principal canals) up to Cairo are within the standards. This is mainly attributedto the Nile/Rayah's highassimilationcapacity. 4.6 Deterioration in water quality o f the Damietta and Rosetta branches occur in a northward direction due to disposal o f municipal and industrial effluents and agricultural drainage as well as decreasing flows. Monitoring o f both branches indicates they suffer from organic pollutants and deficiency o f dissolved oxygen. The water quality inthe canals depends on the quality o f the Nile water at the withdrawal point, and on the canal-flow that decreases along the canal due to irrigation abstractions. Due to domestic and industrial effluents, the quality o f the canals gradually deteriorates towards the downstream. Because o fthe alarming deterioration o f water quality inthe Nile Delta, the emphasis on this chapter has been inthe Nile Delta. 4.7 In the Nile Delta, water quality deteriorates as indicated by the following parameters and illustratedby Figures AI, A2 and A3 inAnnex 2: 0 Fecal Coliform Bacteria (FC): The average values show that most o f the Delta sites exceed the standard being 5000 mean probable number [(MPN)/l00 ml] as o f Law No. 48/1982. The FC counts are within 20,000 MPNI100ml. The highest values are found in middle Delta while the lowest are in western Delta as shown in Figure Al, Annex 4. Besides the impact on public health, biological contaminants especially FC would also impact badly on livestock health and production as they reach livestock dinlung and/or washing water. Inaddition, the parasites may remain inthe animal's intestines for a long time producing eggs and multiple-parasite generations exerted inthe animal's feces. 0 Dissolved Oxygen (DO): The DO is one o f the parameters that can infer fishery health/production. Figure A2, Annex 4, illustrates the spatial variability o f average DO (mg/l) concentrations in the irrigatioddrainage system o f the Nile Delta regions, for 2002/2003. The temporal average at a number o f locations in the northern lakes and the Delta drains often lies between 2 and 5 mg/l (while the standard being 7.0 mg/l). The two Rosetta and Damietta branches are also subject to remarkable oxygen deficit at their seaward end, 0 Total Dissolved Solids (TDS): It i s a good indicator o f salt concentrations. TDS ranges from 0-500 in most o f the Delta irrigation system. It may exceed the limit only in the northern Delta, and score above 1000 mg/l due to repeated reuse o f drainage water and the presence o f saline groundwater inthe north l9 National Water Research Center, Water Quality Report. -39- Major sources and impacts of water pollution 4.8 The sources o f inferior water quality in Egypt are sewage from cities/villages, industrial effluents into Nile/canals/drains (especially from large industries), agricultural discharges to the Nile (containing pesticideifertilizerresidues and salts leach out from lands), municipal wastes from village and secondary cities disposed into adjacent waterways, and disposals from inlandnavigation. Specifically: Figure 4.4: RuraVperi-urban sanitation lags for water supply 100 90 10 1960 2000 2007 2017- Time 0 Amongst these sources, raw sewage i s the most critical, especially in the rural areas o f the Nile Delta. Wastewater collection and treatment in secondary cities and rural areas lag far behind potable water supply as shown in Figure 4.4 above. Most waterways receive raw sewage either directly from housing units and sewage/sludge emptying trucks, or indirectly through agricultural drains loaded with semi-treateduntreated wastewater. Piped sewage i s a point-source pollution to the Nile, drainage water, lakes, and groundwater. 20% o f urban and 92% o frural sewages are not covered by sewerage. This widespread discharge o f untreated discharges being mostly severe in the Delta, as drainage water i s mixed with canal water for reuse purposes (as per the mixing standards provided by Law 48/1982, to guide the official mixingheuse plants erected at the main canal/drain level). The serious biological pollution in agricultural drains in secondary and tertiary canals impedes implementation o f the drainage-reuse expansion policy. Five out o f 25 mixing plants in the Delta had to be closed due to excessive pollution. Several others are prone to closure, most importantly, the planned El-Omoumplant. 0 Industrial wastewater has potentially been the second crucial source o f Nile-system water pollution. Untilthe late 90's some 387 MCM/yr o f effluents used to be discharged to the Nile, its canals and drains. Some 34 large industrial facilities discharged polluted effluent into the Nile between Aswan and Cairo, 78 industrial establishments into the drains spilling into fresh waters or into the northern lakes, and 36 establishments discharged into the Mediterranean Sea and the Gulf o f Suez. Duringthe past few years, the riverNile was given a special priority and declared a protected zone especially against industrial effluents and a serious campaign was undertaken by MSEA and MWRI to prevent their untreated discharges into these water bodies in compliance with Law 48. However, as of February 2000 ten facilities were still not incompliance with some o f the effluent standards set by the law. As firms redirect their effluents to public sewers, municipal wastewater treatment plants (WWTPs) become overloaded and their efficiency -40- compromised. Some industries diverted their effluents to adjacent agncultural drains, seriously degrading their water quality, and renderingit unusable. 0 Salinisation as a result o f drainage reuse has been a cause o f productivity losses inthe Nile Delta. The repeated reuse o f drainage water raises salinity to 3,000 mg/l or higher in the drains bordering the northem lakes. Water salinity originates and builds up all over the Delta old lands where fertilizers and soil residues are leached out in the absence o f well-functioning field (tile) drainage. The annual volume of agricultural drainage discharging back to the Nile system i s estimated at 6000 MCM, containing dissolved salts washed from agricultural lands and residues o f pesticides and fertilizers. An additional source o f salinity i s the shallow groundwater interfering with surface drainage water. Surface and ground waters used to exhibit toxicity from agrochemicals while surface waters suffering eutrophication due to the nutrients resulting from the excessive fertilisation and; 0 Dumpingo f municipal wastes inwaterways has become a serious and widespread phenomenon, blocking drainage and irrigation canals. 4.9 Groundwater quality is also vulnerable to deterioration. Sources o f potential degradation of groundwater, especially in the Delta aquifers, are manifold including diffuse pollution from agriculture (dissolved salts, pesticides and fertilizer residues), (semi-diffused) leakage of wastewater trenches and (linear-source) seepage from agricultural drains, solid waste dumpsites, and leaching from liquid waste disposal sites (examples o f which are numerous, most importantly being the fuel stations where leakage occurs from underground storage tanks and lubrication sites), and direct industrial effluents into groundwater (e.g. Shubra El-Kheima district). 4.10 Groundwater pollution hazard i s however a function o f vulnerability as shown in Figure 4.5 of pollutant type and load (Table 4.1). The groundwater quality inthe reclamation areas in the Nile basin i s relatively deteriorating as indicated by a number of groundwater quality parameters. High nitrate and sulphate concentrations have been observed in several priority areas. Pollution i s often close to areas where groundwater i s extracted for drinking. The groundwater quality outside the priority areas in the Nile basin often exceeds the critical values for iron and manganese. Discharges to the desert fringes may pollute deep/fossil groundwater. The non-renewable groundwater at the Nile-valley desert fringes and oasis are potentially affected by disposal o f treatedhemi-treated domesWindustria1 wastewater. Table 4.1 : Pollution hazard classification (source NWRP?' 2002) Vulnerability PollutionLoad 2o National Water Resources Project (Dutch-funded; ongoing project), of the Planning Sector, MWRI. -41- Figure4.5: Groundwater vulnerability to pollution (mainly from reuse) 4.11 Inferior water quality compromises public health, the overall national economy (productivity and added costs o f service provision), income of the poor, the ecosystem and natural resources. 4.12 Effecton public health. Itis estimated that 20% o fchildmortality rates every year canberelated to poor water quality, especially inrural areas. This mortality rate attributes to diarrhea diseases caused by inadequate water quality for drinking/domestic uses, poor sanitation facilities/practices, and lack o f healthy nutrition and domestic-hygiene behavior. Child mortality rates, particularly in rural areas, are significantly higher than the average within other countries with the same income per capita level.'l Diarrhea disease incidences have been considerably frequent although 87% o f the population (97% in urban areas and 77% in rural) has access to safe water; however, these incidences are attributed to poor hygiene, lack of sanitation, and lack o f wastewater treatment. The morbidity rate for intestinal infections inpublic andcentralhospitals in2003 was respectively 14.81% for menand 11.9% for women22.In2003, 11,500 case o f viral hepatitis was reported. The National Control o f Diarrhea Disease Program has only relatively contributed to reducing child morbidity and mortality in the past decade, especially in avoiding the deadly dehydration symptom. Global WS&S Assessment, 2000 Report, WHO/UNICEF. 22 EgyptianMinistry of Health Statistics -42- Egypt's current capacity to address water-related environmental issues: opportunities and challenges 4.13 Egypt's general performance inwater-related environmental aspects has been moderate over the last decade: 0 Access to water supply has reached almost 100% and 80% in urban and rural areas respectively as witnessed by large investments in the water sector totalling LE 13.1 billion from 1992-2002 ( chapter 8). These compare favourably with countries o f the same income, despite local problems o f water quality due primarily to lack o frural sanitation. 0 Access to sanitation improved to about 98% for urban areas, while remaining as low as 5% for rural access. The government, however, plans to improve sanitation in the uncovered areas and to expanding urban-sewage treatment. 0 Industrial effluents along the Nile have decreased. Many public sector firms continue to discharge in drainage canals f i m s though most newly-established industries are equipped with at least primary effluent-treatment plants. 4.14 On the financing/pricing side, municipal water and wastewater services are currently heavily subsidized by the government and amount to LE 2.5 billiodyear for drinking water and LE 2-3 billiodyear for irrigation water. These subsidies are not explicit in the Government State Budget. Estimates are given in Table 4. 2 for delivery cost, level o f subsidy, and revenue raised. Inthe municipal areas outside o f Greater Cairo and Alexandria, the subsidy level i s almost 75 percent. L o w recovery of costs fkom consumers reduces revenues generated that water and wastewater agencies can use to repair leaks and improve services. The public municipal water and wastewater agencies are caught in a vicious cycle o f low tariffs and poor service. Revenues generated are insufficient to adequately maintain the existing system, let alone provide for improvements or reconstruction. Although they were meant to be autonomous on O&M costs, economic authorities are not legally capacitated to adjust rates. Rates are generally set by local or governmental councils. Today, water and sewerage services are charged at much less than cost. Until recently (prior to establishing the WS&S holding company), Governors had the authority to set water prices up to a ceiling o f LE 0.23 per cubic meter. This ceiling i s below actual cost by a factor of 3-4, yet not all Governors have utilized this authorization. -43- Table 4.2: Recurrentunit costs and associated subsidies inWS&S - System NOPWASD' GOGCWP AWGA3 (Municipalities) (CAIRO) (ALEXANDRIA) LEper m3 Estimated Capital, 0 & M costs 1.O 1.1 NA Subsidy 0.8 0.9 NA Average User Fee' 0.2 0.2 0.3 Rate: piastre per cubic meter 43 15-25 15-25 25-35 Notes: 1. National Organization for Portable Water and Sanitary Drainage. 2. General Organization for Greater Cairo Water Supply. 3. Alexandria Water General Authority. 4. Wastewater tariff is 20% o fwater tariff for Cairo and 35% for Alexandria. 5. These are applicable to the residential units, which have water meters. Those who do not have meters, or their meters are not working, pay a fixed monthly charge for water consumption (LE 5-20 monthlyhnit). The charge changes with house area. 4.15 Noteworthy are the considerations below: There i s a pronounced regional bias inWS&S service coverage towards the major cities inthe Delta and along the Suez Canal. Cities in Upper Egypt have been neglected, and they have only recently begun to implement sewerage systems. There i s almost no sewerage in rural areas although rural population densities and sizes are high. Appropriate policies for penalizing non-paying customers are not in place; and the government and public sector institutions often evade paying their water bills. Improvements in revenue collection at the governorate level do not result in increased budgets for O&M as an incentive. Inaddition, sanitary drainage has been defined as an urbanpublic service, and accordingly n o institutions/agency has taken responsibility for drainage inrural areas.. The significantly low user-charges levied inboth o f the water supply and irrigation sectors undermine any para-state or private-sector capability to maintain existing facilities or to expand the service. Not mentioning the financial sustainability o f the facilities, the environmental sustainability o f these sectors i s at stake. As elaborated above, the high water supply coverage together with the low sewerage coverage especially in the rural areas, and the lack o f maintenance o f existing sewers and treatment plants eventually impact on public health and on the entire economy, and particularly, on the disadvantaged poor. 4.16 In many rural/peri-urban areas, water vendors supply potable water to households having standpipes that can no longer be used for drinking due to diffusion o f wastewater into groundwater. Vendor prices are already more than ten times higher than piped-water prices. As for sanitation, poor farmers already pay as much as 10% o f their income for wastewater removal from cesspools, which indicate their willingness to pay for a better service-provision option. Hence, there i s a legitimate opportunity to foster Private-Public Partnership (PPP) even in rural/peri-urban Water Supply and Sanitation (WS&S). Due to high groundwater tables in the delta, some communities opted for self- finance localized sewerage systems. 4.17 The cost of water treatment and distribution has not been fully borne by industrial users due to government subsidies supporting O&M costs for both water and wastewater treatment. Water-supply -44- costs are insignificant compared to overall plant operating costs, and as such, industries have little incentive to conserve water and often tend to dilute their effluent discharges. On average, industries are billed one Egyptian Pound per cubic meter for water, which depending on the location, i s approximately 70-80 percent o f the full cost to provide water, not including wastewater treatment. 4.18 Furthermore, several ministries are directly or indirectly involved in water quality activities for planning, operational purposes, research, monitoring and regulation activities. The main ministriedagenciesare: Ministryo fWater Resources and Irrigation (MWRI) Ministryof State for EnvironmentalAffairs/ EgyptianEnvironmentalAffairs Agency (MSENEEAA Ministryo fHealthandPopulation(MHOP) MinistryofAgriculture and LandReclamation(MALR) MinistryofIndustryand the General Organization for Industrialization (GOFI) Ministryof Scientific Research Ministryo fHousing, Utilities andNew Communities (MUNC) Ministryo fLocalDevelopment, and Organizationfor Development o fEgyptian Villages (ORDEV) 4.19 The institutional framework for water quality management could be schematically presented in Figure 4.6 as follows: -45- Figure 4.6: Institutional framework ofwater quality management inEgypt Water quality management I III Pollution control I Prevention MoHUNC (Law93-1962) Inland:NWRC andEHD agro-chemicalsMALR MWRl (Law48-1982) Coastal:EEAA licencing MWRl EEAA (Law4-1994) NRC/N/Of (spec.projects) env.actionplanEEAA Inlandwater MWRl Comp1iance:MoHP Municipal: NOPWASD/GOSD/ Drinkingwater MoHP AGOSD/Governorates/ORDEV Coastal water EEAA Industrial: GOFlflacilities I DistributionlReuse MWRVMin. of lnten'or EEAA/ WaterPolice 4.20 The main and foremost problem regarding water quality and pollution in Egypt i s the absence o f an integrated coordinated approach that i s policy driven and takes into account agreed priorities. There i s no joint strategy or action plan that coordinates the different tasks of the involved ministries and institutions. The redundancies and split responsibilities between the different ministries, particularly in applying the different laws and inensuring monitoring and complianceneed to be mainstreamed. 4.21 The government has however been very keen to establish autonomous "holding companies" in most o f the service sectors, with the goal o f reducing the recurrent fiscal burden on the government, while improving efficiency and sustainability o f O&M services. In2004, two presidential decrees were issued, regulating the WS&S sector under the responsibility o f the MHUNC. The first decree, 135 for 2004, i s concerned with the creation o f a Holding Company for DnnkingWater and Sanitation and its affiliated companies that include the General Economic Authorities for DrinlungWater and Sanitation operating in the Governorates. The company will seek new financial resources to sustain the O&M budget and relief the burden on the government. The company i s however challenged by the political resistance to raising tariffs and by the need to write-offlrestructure the overhanging debt or, for the longer term, to foster full corporatization. The second Presidential Decree, 136 for 2004, covers the creation o f the Central Authority for the Drinking Water and Sanitation Sector, and Protection of the Consumer. This decree aims at regulation and monitoring, for quality control and consumer-price control. Also the establishment o f two holding companies for the South Valley and West Delta and for Northern Sinai ushers a reform towards autonomy o f service delivery in the newly reclaimed lands. The holding companies are challenged by the needto write-off the domestic debts. -46- The Legal Framework for Water Management 4.22 A total o f 26 laws and presidential and ministerial decrees form the legal basis o fwater resources management in Egypt, and are summarized in Table A1 in Annex 4. The most important are Law No. 48/1982 for protection o f the river Nile and waterways fi-om pollution, Law No. 12/1984 on irrigation and drainage, and L a w 4/1994 on Environmental Protection. Generally, the laws related to municipal/industrial effluents are characterized by being inflexible and punitive with stringent standards that cannot be enforced. The legislation related to the irrigation/agncultural sector i s scant. The MWRI assessedthe present laws and recognized that: - There i s a need to integrate Laws No. 4 and Law No. 48 into one unambiguous environmental law covering the entire environment with enough flexibility and clarity on institutional matters. The use o f function-related ambient standards is presently not possible according to Law 48/1982; - Pollution prevention and non-conventional sanitatiodtreatment should be added to these laws, as they currently consider only conventional treatment; - The enforcement o f the present effluent standards in Law No. 48/1982 i s not practically achievable, requiring at least the introduction o f compliance plans, but preferably differentiated standards based on Best Available Technology; - Although the principle o f cost recovery i s possible in the present legal framework, the implementing entities, such as Economic Authorities, are not legally capacitated to adjust the rates to achieve autonomous cost recovery. Rates are still generally set by local or governmental councils; - The Ministry o f Health has enacted law 108/1995, regulating the standards o f potable water. - Within the scope o f the USAID-financed EPIQ/WPRPZ3project, extensive attention has been given to improvement o f Law No. 48/1982 and Law No. 12/1982. In 1999 considerable efforts have been made to propose improvements to Law 48. Unfortunately, discrepancies in insights between the different ministries proved to be insurmountable (MOH canvassing for stricter standards, and others for more lenient standards). It does not seem realistic to assume that Law 48 or L a w 4 will be altered easily. - With respect to Law 12/1984 related to h g a t i o n and Drainage and Licensing o f Groundwater Wells, the EPIQ project has in 2000 prepared a draft for a revised law, integrating Law 213 o f 1994 related to Water User Organizations into Law 12, after extensive discussions with stakeholders. The draft law will also establish a legal basis for various levels o f user organizations inall land categories, and for the role o f the private sector inwater management. It will further include groundwater and treated wastewater being unconventional water sources (as o f NWRP, 2002). This law has not been enacted yet, as it is currently awaiting the inter- ministerial revision process. 23 EnvironmentalPolicy andInstitutional StrengtheningIndefinite QuantityContractWater Resources;Water Policy Reform Activity. -47- Water quality monitoring and identification of priority areas and pollutants 4.23 The development o f sustainable monitoring programs started in the nineties. Gradually more emphasis was placed on pollution parameters besides salinity. Good monitoring programs are established by the NWRC/MWRI, the Ministry o f Health and EEAA. Coordination between these institutions is needed for the efficient monitoring and for data dissemination to concerned institutions. Currently, responsibilities and implementation o f monitoring programs being complex and several overlapping activities exist. There i s also a serious shortage o f environmental health statistical data. Enforcement is also weak, where mostly licensed discharges are those monitored, while the majority of dischargers do not have a license. Actual enforcement in the case o f public facilities (publicly-owned industries and municipal discharges), which comprises the majority o f pollution sources, i s almost non-existent due to the lack o f funds and to employment considerations. 4.24 Priority pollutants. In 1993, a thorough research by the National Water Resources Center considered that the most critical water quality parameters are as follows (in the order o f their significance): pathogens, pesticides, trace elementdheavy metals, and salinity (which are however seen as a "parameter", not a "pollutant"). At present, pathogens inparticular remain insufficiently tackled. 4.25 Priority areas for action. A Task Force was appointed by MWRI to draft the water quality priorities/strategies. The priority areas were identified as the larger urban conglomerates, where high bacteriological and chemical pollution levels are encountered together with highly populated areas increasing the dose-exposure probability. The Nile was not considered so seriously polluted except for the two Delta branches that exhibited highlevels o f pathogens and toxic substance. The drainage system was of highconcern. Highpriority areas are: - -- Withinthe EasternDelta: Greater Cairo and Greater Mansourah; Withinthe Middle Delta: Tanta, Mansourah, Mahalla and Samanoud; and Withinthe Western Delta: Greater Alexandria. 4.26 Areas intending to use drainage water for irrigation were also considered o f high priority. The groundwater system was given an overall priority; water standards should be met for the intended use, which i s mainly drinkingwater (", 2002). Achievementsinthe national planningtowards improvedwater quality 4.27 Despite these challenges, the Ministryo f Water Resources and Irrigation (MWRI) has recognized the need to adopt an integrated approach in water resources, and has developed in its National Water Resources Plan (NWRP) an approach aiming to stimulate the coordinated development and management o f the water resources in Egypt. This horizontal approach consists o f certain measures with the involvement o f the different stakeholders in implementing and incorporating these measures. MWRI has proposeda redefinition o f the responsibilitiesand functions o f the different stakeholders. 4.28 Table 4.3 provides an overview matrix o f the above defined roles o f stakeholders in the implementation o f the various measures o f NWRF' for Water Quality and Institutional Measures. The implementation matrix for the NWRP translates the strategy into specific actions and assigning clear responsibilities for carrying out the involved activities. The matrix horizontally specifies the concrete actions that have to be taken: These are divided among stakeholders who will take the lead in the implementation of the action shown in the Table as 0; the stakeholders that have an important say in the implementation o f the measure but i s not the first responsible shown in the Table as 0, and the -48- stakeholder that need to be consulted shown in the Table as X. On the other hand, the matrix vertically shows that MWRI i s responsible for the largest number o f measures, as can be expected from NWRP. The second largest entity i s MHUNC because o f the construction of water and wastewater treatment plants and reduction o f leakage losses in the drinking water systems. In addition, the private sector i s important because o f its expected investments in modern irrigation systems and the collection and pre- treatment o f industrial wastewater. The delineation o f responsibilities and measures are a good start, though inthe Egyptian context it will be difficult to implement and administer if there i s no political will from the senior decision makers to ensure that water quality management should be approached inter- sectoraly. -49- Table 4.3: Pertinent institutionsand water quality measures(MWRI/NWRP, 2003) I == s w0 ? % E Recommended MeasureslActlons 4 Water Quallty and lnstltutlonal Ef- '3 - V B 22 E Reform Introduce financial incentives to promote unpolluted industrial wastewater x o Start public disclosure pollution control program - Start public disclosure pollution control program for industries II I I II II"n 0 Introduce compliance action agreementsfor industries I I I I U Initiate public awareness campaigns for clean industrial production 0 - 1 1 I I E /Initiatewater quality awareness campaings 0 0 f Phase out and relocate polluting industries along vital waters jx j j m E rural areas Encourage treatment or pre-treatment of industrial wastewater bv industries 0 0 Collect and/or pre-treat industrial wastewater separatelv 0 0 Define functions of waterways 0 0 0 Definewater quality standards based on receiwng -8; water 0 Include reduction of human contact with pOllUted water in local action plans 0 Divert pollutionfrom NormernLakes 0 V protect groundwater from pollutioninparticular 0 around wells 0 select proper sources for public water supply 0 Provide sewage disposal systems in unconnected * % areas Enhancewater quality monitoring and information iiE dissemination 0 Train MWRI and WB staff on pollution and water quality m -50- 4.29 On the operational management side, MWRI has moved beyond the visions o f decentralized management to on-the-ground application via forming Water User Associations (WAS),Water Boards, and para-state Integrated Water Resources Management districts. Work on about 2,800 WUAs has been initiated in the delta as part o f the World-Bank/KfW assisted Irrigation Improvement Project. Bottom-up modalities o f community participation have been more upfront inrecognizing the water pollution in rural areas and the dire need to resolve it through proactive measures. Donors including the World Bank envisage assisting MWRI on the legislative and financial arrangements whereby bottom-up user-groups could help secure the community-driven resources neededto tackle water pollution and other externalities at the branch-canal command level besides improving O&M at this level. The best candidate for this so far has been the Water Boards since they operate at the branch canal level which captures multi-sector users and could be backstopped by representation from the Ministry o f Water Resources and Irrigation (being mandated for water quality management and monitoring), NOPWASD/MoHUNC (being mandated for overseeing sanitation services), and the Ministry o f Local Administration (being entitled to help raise local revolving funds). The challenge i s to empower the Water Boards through backstopping by these Ministries (andor by water-related NGOs and consultants) thus enabling them to assume a multi-disciplinary regulating body at the community level, with a legal personality and creditworthiness to: Sub-contract the private sector (through the various PPP models); Deal with donors as a lending intermediary; and Raise revolving funds for a community-level financial autonomy (at least on O&M). Piloting low-costhnconventionaltechnologies 4.30 The Government, with the assistance o f international donors, has also invested inpilot operations for rural water and sanitation. Economics o f scale make conventional wastewater collection and treatment cost prohibitive in small/sparse rural settlements. Several alternatives that vary inefficiency and cost have been piloted in Egypt. For instance, upgrading the self-purification capacity o f open drains (by construction o f in-stream wetlands or by aeration gabions) proved to be a viable non-conventional approach. EEAA has initiated design and construction o f a 20 hectares engineered wetland, which has been in operation since March 2004. The GEF/UNDP funded the project to treat 25,000 m3per day of drainage water as a demonstration for a low-cost technique to protect the ecology o f Lake Manzala and the Mediterranean. 4.31 Other low-cost and unconventional technologies are also being piloted in Egypt's rural areas, including the application o f double septic tanks, small-bore sewers, biogas technology, gravel bed hydroponics (GBH) system, and bioremediation. As implied above, scaling up these pilots requires improved financial and institutional arrangements. 4.32 The M W R V M A L R horizontal-expansion policy also pertains to reusing treated wastewater to reclaim about 250,000 acres, with some emphasis on new lands in Upper Egypt, Middle Egypt, Suez Canal cities (Ismailia and Suez), Alexandria, and Cairo. The MSOEA also plans a major national program for the reuse o f primarily-treated wastewater, exclusively for irrigating trees along roads, greenbelts around cities, landscape and timber forestry/production. The program targets to reuse 2.4 BCM/yr of treated wastewater to irrigate 400,000 acres at a cost estimate o f L.E. 4.9 billion. The first phase targets 82,940 acres, served with 72 treatment plants. Already accomplished are pilots in 19 locations. The entire program focuses on protecting water and land resources from pollution, provision o f greenbelts, and improving air quality. The financing mechanismhiability and the impact o f using 2.4 BCM o f water out o f the yearly national-water-balance should however be studied. A consensus on plantation selection i s -51- also needed amongst MOSEA, MWRI, MOHUNC, and MOHP. The reuse o f treated wastewater could be socio-economically viable for cities at the desert fringes and for which no other beneficiaries being envisaged in availing from the (primary treated) wastewater. 4.33 But much remains to be done: There is a need now to rationalize the investments proposed by MWRI in order to improve the water quality on socioeconomic criteria. Investments in water quality continue to be based mainly on engineering and technical grounds, without due emphasis on the economic and financial criteria. MWRI developed a "National Plan for the Protection o f the Water Resources o f Egypt" (2001-2012). The plan elements, cost and the lead national institution are presented in the following Table 4.4 in which the largest share i s attributed to the Ministry o f Housing Investment Plan and New Communities. Table 4.4: National Investment Plan for protection of the water resources of Egypt" (2001-2012) Action Lead National Institution Cost LE Million Treatment o f industrial MinistryofPublic Sector Enterprises 3,000 discharges to waterways and Holding Companies groundwater (only publicly Industries ~ Municipal wastewater treatment MinistryofHousing Utilities andUrban 5,605 facilities for cities and Markaz Communities only (not villages). Upgrading, Operating and Ministryo fWater Resources and Irrigation 292 MaintainingNational water quality monitoring network. Coverage o f Irrigation and Ministry ofWater ResourcesandIrrigation 1300 drainage canals passing through residential areas. Awareness Campaigns. Ministry ofWater Resources andIrrigation 3 Total 10,200 4.34 The above plan and investment assessment are based on the assumption that resources are or would be available. They are mainly estimated on the basis o f sector-specific requirements and/or "cost effectiveness" analysis, rather than comprehensive multi-sectoral cost-benefit (CBA) o f improving water quality nationwide. N o insights as to the socio-economic implications o f the various options for water quality improvement were undertaken. Rural sanitation was not addressed and the proposed estimate for awareness companies appears under-estimated. Generally, no choices were considered as to whether it will be more prudentto: 0 Pay for the consequences o f the problem (to establish new wastewater treatment plans or repair infrastructures); 0 Remedy the problem (to pump more surface water or groundwater); 0 Attempt to minimize the problem (treatment o f industrial discharges and pollution abatement); and 0 Undertake any o f the above, but also factoring in the forgone opportunity benefits o f not perusing a more efficient allocation o f water within and/or across the different sectors o f the economy, including industry, irrigation and drainage. -52- Towards a full social accountingfor water 4.35 Full accounting measures are, however, essential for evaluating decisions in order to minimize Egypt budgetary expenditures while maximizing the sustainability of its water resources. As part o f the CEA, a study was undertaken to demonstrate a framework towards evaluating the full social costs o f water use and disposal in Egypt with particular emphasis on rural water and sanitation. Its objectives are twofold: first to apply the environmental economics tool o f cost-benefit analysis (CBA) to better incorporate the full social costs o f altemative policies and investments into decision-making; and second, to provide estimates o f full social costs within an evaluation of several policy options that may be considered for the water quality improvement in Egypt. Various options were considered (described below) centering around: (1) Business as Usual (BAU); (2) centrally-planned actions as o f the National Planfor the Protection of the Water Resources of Egypt; and (3) the latter in addition to the measures requiredto control rural water pollution (assuming both partial and full coverage). 4.36 For each option, the study has factored in: (a) water quality processes (also factoring inthe assimilative capacity of the water resources system) thus calculating three key at-recipient parameters: Fecal Coliforms (FC) (besides using "exposure-risk" parameter^)^^ to infer health benefits; Dissolved Oxygen (DO) for fishery production benefits; and Total Dissolved Solids (TDS) for crop production benefits; (b) corresponding "dose-response'' for estimating the fishery/crop losses, and the corresponding "exposure-risk" for estimating the disease incidence^^^; (c) the monetization o f the response/incidence (i.e., assessment o f forgone benefits); and (d) the weighing o f the (discounted) forgone benefits against the (discounted) expenses respective to each o f the three inactionlaction options. 4.37 With regards to the option of Business As Usual (BAU), the damage cost assessment undertaken for water pollution was revisedto include additional forgone benefits of: using polluted water which is income/welfare related, e.g., crop/fishery/livestock production losses due to critical pollutants such as salinity and toxicity, as well as well-being related, e.g. from water-related diseases, food chain contamination, and occupational health impacts; 24 Agricultural damages were estimated at the "Consumer and Producer Surplus". forgone as a result o f the quantity producedmarketed losses due to the high TDS concentration (using FA0 yield-to-salinity production functions). Health damages were based on relating the diarrhea incidence rates to the risk factors associated with the level o f "water. sanitation and hygiene", as these factors are determined bv the following transmission pathways: 1.Transmission through ingestion o f water; 2. Transmission caused by lack o f water linkedto inadequatepersonal hygiene; 3. Transmission caused by uoor uersonal, domestic, or agricultural hygiene; 4. Transmission through contact with (through bathing or wading) containing organisms such as Schistosoma ; 5. T o certain extent, transmission through vectors proliferating inwater reservoirs or other stagnant water or certain agricultural uractices; 6. Transmission through contaminated aerosols from poorly managedwater systems. Thereof, six exuosure scenarios were considered, each i s associated with a combination o f different levels o f water supply. sanitation. and hygiene. Thus, each scenario reflects a different fecal-oral pathogen exposure. Pouulations were grouped up according to their level o f water and sanitation access, and each group was attributed a different relative risk (obtained from the literature) of contacting the disease. Hence. the total resuective incidence rates o f diarrhea were estimated. -53- 0 cost o f avoiding the usage o f polluted water such as: (1) added cost o f pumping groundwater when surface drainage water i s too polluted to be reused; and (2) forgone benefits when farmers unofficially/directly reuse highly-saline water from secondary drains and when official drainage reuse from main drains (which ensures a mixing with fresh water to dilute salinity) i s halted as these main drains are heavily polluted by untreated sewage. The study included the additional costs o f the erected hydraulic, mechanical and electrical facilities that became idle due to the halting o f a number o f drainage reuse schemes. 4.38 The following three action scenarios were considered: 0 T h e Central Action Scenario. This action scenario i s based on the existing MWRIinvestment plan. This involves the construction o f several centralized, traditional, wastewater treatment plants and associated collection (and pumping)systems inurban areas. Effectively, this scenario means that the entire urban population will have access to sewerage (100% urban sewer coverage inall governorates). The situation with respectto the rural populationdoes not change except in relation to water quality improvements associated with the additional urban treatment capacity. 0 T h e Central + Decentralized Action Scenario. This scenario i s based on a combination o f the existing MWFU investment plan (that i s the Central Action scenario) with additional investments in low-cost, sanitation and treatment plants rural areas. This involves the construction of the same centralized, traditional, wastewater treatment plants inurban areas BUT without expanding the associated urban collection systems. The savings in urban collection system costs (60%) is used to construct the low-cost rural systems. The low-cost systems include, among other technologies, enhancing self-purification o f open drains through the construction o f in-stream wetlands or by aerating gabions, facultative ponds (lagoon treatment), cesspits and/or low-cost collection systems (small-bore sewers, biogas technology, gravel bed hydroponics systems, and bioremediation are some other examples). During the interim (until collection systems are implemented) wastewater would need to be transported by vacuum tankers from cesspits and intermediate collection points to the treatment plants. This adds a certain risk with tankers (not taken into account in the coddamage assessments) which will need to be managed through improved monitoring and enforcement o f tanker activities (e.g., to prevent illegal discharges at points other than the treatment plants). Under this scenario, the status o f sanitation access in Urban areas i s maintained at current rates o f coverage in each governorate; however, in rural areas the percentage o f the population with access to sewers becomes 85%, and those with another form o f sanitation access (e.g. cesspits, latrines, low-cost treatment plants, etc.) reach 15%; none o f the rural population are left without any form o f sanitation. Effectively, this means that slightly over an additional 11 million rural people are provided with some sort o f improved sanitation at the expense o f connectingall o f the urbanpopulations. 0 The Full Coverage Scenario. Under such scenario the entire urban and rural population provided with sewers and treatment at the end o f the pipe. The proportions o f populations with specific types o f sanitation access remain unchanged. Water quality i s not affected. This simply involves delivering hygiene awareness raising / promotion programs to the entire population, thus only limiting "exposure", and therefore, the disease incidence. -54- Results ofthe study 4.39 The results o f the study showed in Figure 4.7 a that the forgone benefits (or damage costs) are estimated at a total of L.E. 5.35 billion in 2003 or 1.8% o f National GDP which i s significantly higher than the initial estimate o f LE2.1-3.6 billion or 0.7-1.2% o f GDP for water pollution inthe Assessment of Cost o f Environmental Degradation (World Bank, 2003). It should be noted that: (1) slightly different impact categories were included in the two studies; (2) methods are also slightly different, (3) the initial study covered the entire country and not just the Nile Delta area as in this study, and (4) the benefits assessment inboth studies did not scrutinize the added value o f avoiding ecosystem deterioration, nor the incremental costs of treating the polluted water. Analysts could therefore argue that the overall cost o f water pollution may exceed the estimates provided in this chapter. Nevertheless, the estimates provided in this chapter could still serve as the low benchmarks against which water quality improvementdinvestments can be planned. 4.40 The forgone benefits in 2014, factoring population growth, if no further actions are taken would reach as highas L.E.9.5 billiodyr or 3.2% o f national GDP. On average, duringthe period 2003 to 2014 the costs o f inaction are roughly 7.4 billion LE/year (undiscounted). As for the intervention corresponding to the National Plan for the Protection of the Water Resources of Egypt (Central Action) which would cost about 1billion LE/year, it would only reduce the damages in 2014 to 6.7 billion LE/yr, i.e. only a decrease of 30%. For the intervention corresponding to the national plan but adapted to include community driven-and-financed low-cost/unconventional remedies for rural areas (Central + Decentralized Actions including improved hygiene), carried out at a total cost o f 2-2.5 billion LE/yr, the value o f the damages avoided will be reduced by an additional L.E.2.5 billiodyr in2014 (see Figures 4.7 b to fbelow). 4.41 The above results suggest that the win-win option (i.e., that exhibits minimal expenditure cum forgone benefits) i s the latter, where government central/sectoral plans for the urbaddistrict areas are augmented with community driven-and-financed unconventional plans for controlling rural water pollution. The results exemplify the payoff o f applying a comprehensive Environmental Quality Objective (EQO) approach that can assist decision makers inrevisiting and adjusting the effluent'ambient standards across polluters/water-bodies, on the basis o f analyzing the user-specific functions and assimilative capacities o f different receiving water bodies. The adjusted standards may be more enforceable, as the treatmenVprevention actions (cost) will be more objectively justified, and can be financed through a decentralized "polluter-pays" policy which could be applied to polluting industries provided the cost of water i s not subsidized. Further, as the EQO approach closely links the "at-source preventiodtreatment polluter" to "at-recipient forgone benefits," it may provide (a fairness) basis whereby immense preventiodtreatment costs are shared between polluters and beneficiaries (especially for non- point sources such as agricultural residues). -55- Figures 4.7a: Damage Costs Corresponding to Different Levels of Water Quality and Hygiene 10 9 8 Forgone Benefits (damage costs) Costof added I-wA 3 treatmenVcontrol 2 1 0 BAU Centraltreasures Central + comnity & hygienetreasures -56- Figure4.7 b and c: Loss of healthbenefits. 6,OO 5,OO 1l14,OO 3,OO 2,oo 1,oo - P7 2014 = C 2014 5 8 2014 0 0 f b.P N Inaction NGas Central + LL3 Hygiene Decentral f S!o 0 promotion N O en -57- Actions and Associated Foregone Benefits ( b m g e Costs remining) Health:TreatmntCosts --....-- 2003 2014 No 2014 2014 2014 Full 2014 Action Central Central+ Coverage kiygiene Action Decentral Ron-utron Action Interventions Figure4.7 d: Foregone benefits due to loss in fisheries 900 800 700 600 500 400 300 200 100 2003 2014 No 2014 Central 2014 Central + 2014 Full 2014 Hygiene Action Action Decentral Coverage Promotion Action -58- Figure 4.7 e and f: Foregonebenefits due to loss of agriculture Actions and Associated Foregone Benefits (DamageCosts remaining) AgricuIture/infrastructure Losses 3,500 3,000 2.500 Agriculture UnofficialCrop "00 1,500 1,000 500 2003 2014 No 2014 2014 2014 Full 2014 Action Central Central + Coverage Hygiene Action Decentral Promotion Action Actions and Associated Foregone Benefits(Damage Costs remaining) Agriculture Lost Consumer Surplus 7 6 W 5 2; 2 1 2003 2014No 2014 2014 2014Full 2014 Action Central Central + Coverage Hygiene Action Decentral Promotion Action Conclusion 4.42 The water quality o f surface and groundwater is deteriorating. Its adverse impact affects both the health and productivity o f its land with damage costs reaching L.E. 5.35 billion (2003) or 1.8% o f -59- National GDP. The Government, with the assistance o f international donor community, has made progress in improving water quality, and i s now ready to adopt a horizontal approach for managing its water resources in an integrated manner. These efforts should be continued but supplemented by additional measures at the policy, institutional, investment and information levels. 4.43 On the policy level, it should be recognized that the driving force for water quality improvement i s not an increase in investments only (LE 1.0 billiodyear) while maintaining the current level o f water/ wastewater subsidies o f LE 4.5-5.5 billiodyear. The analysis shows large damage costs o f LE 6.7 billiodyear, and indicates that such policy i s not sustainable in the long term. In fact it could lead to deepening the Government debt. In order to decrease the damage costs due to poor water quality, the Government should consider two complementary policies; a pricing policy and sector policies. The pricing policy would be based on a system o f cost recovery / cost sharing for improving the water quality services, o f targeting the subsidies to serve the poor and o f being transparent by making these subsidies explicit in the State Budget. The "polluter-pays "principle advocated by the local legislation and by the Rio Summit cannot be considered in Egypt as long as the true price o f watedwaste water i s not applied. 4.44 Sector policies should be based on setting priorities on the basis o f the magnitude and severity o f water quality and carrying out cost benefit analysis on these policies. Our preliminary conclusion indicates that Government and non-government water quality investments and programs need to be reallocated to the priority pollutants (being mainly pathogens and salinity) and by priority areas being the Delta drains and the two Nile Delta branches because o f the high population / health and productivity impacts o f water pollution. They will entail that preparation o f water quality improvement plans should be decentralized on a regional basis and an inter-ministerial consensus be reached on the selection o f crops (and other potential uses) o f treated wastewater, and on the respective level o f treatment based on financial and economic cost and benefits analysis. A sector regional environment assessment will be a very useful tool to address the environment and socio-economic impacts on these policies. This decentralization will have an impact on the present institutional and legal framework as well as on the selection o f the investments. At the institutional level, MWRIrole will focus primarily on establishing the policies and the incentive structure o f targeting subsidies by handing-over specific investment and O&M roles to decentralized (multi-stakeholder) entities and empowering the Water Boards. 4.45 At the legal level, such decentralization will also require the adoption o f a different approach in amending the present legal framework and ensuring compliance and enforcement, a solution should be found to consolidate the existing Law No. 48/1982 and Law No. 4/1994. Meanwhile, the MWRI cannot bejudge and party. It should consider delegating to MSEA's regional branch offices the responsibility o f monitoring and enforcement. Furthermore until the proposed Law 12 on Irrigation and Drainage (assigning O&M responsibilities to water user groups) i s amended, considerable cross-sectoral awarenesdefforts are needed to expedite enactments o f laws, bylaws, and deregulations, required to effectuate the water quality management nationakegional plans. 4.46 Given the current scant enforcement o f.(stringent) environmental-related lawdstandards that are based on ambient or developed-country objectives, there i s a dire need to divert towards a full social accounting for water, and to pilot then scale-up Environmental-Quality-Objective (EQO) approaches in designing and implementing standards. The challenges associated with fostering the EQO approach would include minimizing the related transaction costs, fostering inter-ministerial consensus, and ensuring flexibility in amending the legislatiodbylaws whenever needed. 4.47 Conventional investments in improving the water quality through the construction o f wastewater treatment plants in rural areas would be rather costly (and therefore uneconomical in reducing damage costs). The CBA indicates that the low-costhnconventional technologies being currently piloted in the rural areas (e.g. construction o f in-streadengineered wetlands, aeration gabions, double septic tanks, -60- small-bore sewers, biogas technology, gravel bed hydroponics systems, and bioremediation) are cost- effective in reducing the socio-economic "damages" from water pollution. Thus, there exists a socio- economic rationale for scaling-up the application o f such technologies. The scaling-up may, however, tailor these technologies to the international good practice and community-level prevalent practices. To this end, technology choice should be based on stakeholder participation at all levels. Community- targeted awareness and technical-backstopping programs are needed where such technologies are to be scaled up. Their financing should be based on cost-sharing arrangements between the local- and community-level polluters and beneficiaries, both inkindand cash. 4.48 Finally, there should be forceful and periodic information sharing in the media about the water quality situation in Egypt. Egyptian citizens at all levels, especially farmers, are entitled to know the magnitude and severity o f the water quality situation in their land, or in their neighborhood. It is only through dissemination o f the right information that the credibility and trust could be built between the community, the local and national government. -61- CHAPTER 5 SOLID WASTE MANAGEMENT Solid Waste Management Overview 5.1 Egypt generated an estimated 15.3 million tons o f municipal solid waste in 2001 (Annex 5.1). It also generates annually 20 million tons o f agricultural waste, 6.2 million tons o f special waste o f which 0.3 million tons i s hazardous waste, 4 million tons o f demolition waste and 130,000 tons o f medical waste. 88 percent of collected waste i s disposed o f in open dumps in urban areas, or left in the streets or dumped in drainage canals in rural areas. Composting o f 8 percent o f the organic waste i s practiced; however, it has not generally been sufficiently treated. Some recycling activities are undertaken in some cities (particularly Cairo). Burningwaste at site or as a result o f aerobic decomposition (self ignition) in open dumps were common methods o f waste disposal. Until 1998, smells o f burningwastes were not felt inthe metropolitan city of Cairo. The appearance of the black cloud inthe autumn o f 1998 over Cairo has in fact made o f solid waste management a national issue that requested the Government immediate intervention. The collection and disposal o f medical waste i s either financed through the Ministry o f Health or included in privatization contracts. Collection and disposal o f hazardous waste i s not being undertaken. There i s only one sanitary landfill for the disposal o f hazardous waste in Alexandria, but it has not been operational. 5.2 Organic content o f the municipal waste i s about 60%. Non-organic waste such as papedpaperboard, glass, and plastics constitutes 27% o f the waste; the balance o f 13% constitutes other types o f waste. There i s a large gap in the coverage o f solid waste collection, ranging from 30-95% in urban and metropolitan areas, and from 0-25% inrural areas. Untilrecently, waste collection in all cities (with the exception o f Alexandria) and towns left large areas (up to 70 percent) un-serviced or under- serviced. 5.3 Increase in population growth; per capita income and the rapid rural migration have led to an increase of waste generation. As shown in Figure 5.1, assuming the same population growth, the total amount o f municipal solid waste generated i s projected to grow between the years 2002-2025 from 15.1 million tons in 2001 to 32.7 million tons with an average growth rate o f 3.2 percent. Approximately 75 percent of this quantity i s generated in urban centers, a proportion that will grow as some o f the population continues to migrate to cities.25 5.4 Based on actual contract price agreed with the private sector, delivery o f Integrated Solid Waste Management (ISWM) services for urban communities was estimated to cost LE 600 - 700 million per year. Considering rural areas constitute about 57% o f the population. That puts an additional S W M services costs o f approximately LE 800-930 million and totaling to about LE 1.5 billiodyear. Assuming a 70 percent coverage, deliveringthese services will cost the economy LE 1.O billiodyear. Figure 5.1: Projected Waste Generation 2001 2025 - 450 400 Projected Total MSW 350 Projected Per Capita Generation 300 MSW f 250 Generation 25 METAP/Regi&%l?%dd Waste 200 (Kiloslpersonlyear) 150 " I ' -62-I 100 2001 2005 2010 2015 2020 2025 Year Solid Waste Management pre-1998: Institutionaland LegalFramework 5.5 Until the autumn of 1998, solid waste disposal was not a pressing issue and as a result the Government did not have a policy on SWM. Collection and disposal o f solid waste were the responsibility o f the govemorates which used their scarce public fund to improve waste collection. The two governorates o f Cairo and Giza were an exception. The Government established Greater Cairo and Giza Cleansing and Beautification Authorities for managing municipal solid waste collection and disposal. It also provided a subsidy amounting to 10 mi1lion/yeai6 for the last ten years in addition to the proceeds o f a 2% monthly levy on the controlled rental value o f housing units, which did not exceed LE 1.O-1.5 per year. Suchamount was totally insignificant. 5.6 Solid waste collection and disposal are regulated by Law 38 o f 1967 and the Environment Protection Law No. 4/1994 which are both in effect. Law No. 38/1967 addresses waste management specifically and includes provision that: (a) the local administration agencies are responsible for waste collection and disposal, and provide licensing for waste collectors and contractors; (b) provision for occupants o f buildings to set out waste for collection which was not enforced; and (c) a levy o f 2 percent of the rental value. A penalty o f LE 100 may be imposed for violation o f the law; however, because o f its insignificance, this penalty was rarely enforced. 5.7 Consistent with the terms o f Law No. 38/1967, the municipality, or the Cleansing and Beautification Authorities (Cairo and Giza) were responsible for street cleaning and servicing municipal refuse containers, operate dump sites and composting plants or supervise their operationby private sector. Door-to-Door collection for high-income neighborhoods in Greater Cairo, Giza, and to a much lesser degree, in Alexandria and few other cities was well performed by the strong indigenous garbage collectors o f 40,000-60,000 families, popularly known as the Zabbaleen community27which has provided these services since 1930. The Zabbaleen system was extremely reliable. Waste was collected daily and each household paid a monthly fee o f LE 1-5. Inthe largest Zabbaleen settlement in El Mokattam (inthe outslurts o f Cairo), each family sorts the collected waste, recyclable materials sold to local entrepreneurs, and organic materials are used as pig feed. The privatization policy o f the Government had an adverse effect on the livelihood o f this community. Since the Zabbaleen could not collect more than 10% percent o f the waste in Egypt, the Cleansing and Beautification Authorities contracted national private companies for providing solid waste management services particularly in larger cities. The terms o f payment i s based on annual payment received from the local municipalities in addition to a monthly fee that was collected from the generator. Moreover, national private sector companies were established in the tourist cities, and improved solid waste collection and transportation significantly. 5.8 Due to the nature of solid waste composition inperi-urban and rural areas (highorganic content, and very low non-organic or recyclable waste), national private companies and the Zabbaleen were not interested in collecting their waste. Accordingly, the responsibility o f S W M in those areas rests with the municipality, and the local governorate. In general, the rural govemorates manage their solid waste problems in an unsafe manner, hygienically and environmentally. Organic waste i s fed to farmers' animals, residual wastes (organic and non-organic) are dumped alongside waterways, drains, deserted lands, and neighboring dumpingsites, which are set on fire, inorder to prevent flourishing o f insects, rats, etc, and prevent solid waste accumulation. Municipalities remove accumulated solid waste from time to time, inefficiently, and operating at a loss. *' 26 State General Budget 1992-2002. Mounir Neamatallah, Zabbaleen Environment and Development Program, the Mega-Cities Publication MCP-OlgD, 1998. -63- 5.9 For peri-urban and rural areas, the municipalities were responsible for collection and transportation o f solid waste. Despite the fact that those areas comprise about 57% of the total population inEgypt, and are the most affectedby solid waste problems, solid waste management for those areas was seriously under serviced. However, NGOs were very active in those areas, and have introduced composting, locally made plastic crushers and cloth grinders (recycling purposes). This tended to gradually encourage recycling and composting activities. 5.10 Approximately 20 million tons o f agricultural residues are produced in Egypt each year. Sugar cane, maize; wheat and rice are the main contributors to residue production, with cotton and vegetables also important. Much o f these are disposed o f in a manner with low environmental impacts (e.g., as animal feed or fertilizer). However, a significant fraction o f the residues (approximately 50%) are disposed in methods which result in high environmental impacts as explained in Chapter 3. Principal among these are: The burningo f residues inthe field, causing local and national air pollution; and The burningo fresidues at home, causing significant indoor air pollution and consequent health impacts. 5.11 Burninginthe fieldis arelativelyrecent phenomenon, brought aboutbyanumber o ffactors (e.g., the introduction o f combine harvesting, regulations to control fire risks and pests, greater availability o f commercial energy sources to the rural population). The burning o f residues at home, using traditional stoves, ovens and water heaters, i s in decline; however, it still imposes serious impacts on a large part o f the rural population. Integrated SolidWaste Management Phase (1998 to date) 5.12 As a result o f the social discontent from the black cloud phenomena, the GOE actedresponsibly, and applied for the first time in Egypt the principles o f Integrated Municipal Solid Waste Management (IMSWM) by adopting two approaches: The first one was an urgent solution; collection and transfer o f approximately 12 million cubic meters o f accumulated wastes from 11 major Governorates, which presented a major source o f air pollution, due to self ignition, or set on fire by the public as a means of disposal, to dumping sites in the desert. Concerning agricultural wastes and residues, the MSEA and MALR has provided the Municipalities with the appropriate equipment for collection, shredding and compaction o f agricultural wastes. The bales formed were transferred to storage destinations by the municipalities, for avoiding on site burning.Moreover, the MALRcarried out training programs, inorder to educate and encourage farmers and NGOs for the reuse o f agricultural wastes and residues after necessary treatment, as fodder, compost, land conditioners, etc. The second approach was a systematic one, comprising the following actions: (1) establishing a joint ministerial committee co-chaired by the Ministry o f State o f Environmental Affairs (MSEA) and the Ministry o f Local Development (MOLD) to coordinate implementation o f the strategy; (2) preparation o f the National Strategy for I M S W M which was structured around five policy directives: (a) strengthened supportive capacity o f central government; (b) "delegation" o f solid waste management to the private sector; (c) application o f the polluter pay principle; (d) application o f the principle o f attaching an economic value to wastes as being recoverable resources; and (e) enhanced public awareness and community participation in waste management systems; -64- ( 3 ) establishing a cost recovery system for SWM services on the basis of a fee proportional to the electricity consumption and charged to the electricity bill; the amount ranged between LE 1-12per household and is even higher for commercialand industrial enterprises; (4) providing a tax break for at least 5 years and custom duties exemption o f the S W M equipment as well as guaranteeing payment o f private sector contracts in case o f non- payment by the governorates; cost recovery i s being implementedinAlexandria and Cairo. (5) delineating the responsibilities o f different stakeholders as shown in Table 5.1, and empowering the governorates for the implementation o f all S W M activities in various localities under their jurisdiction. This responsibility can be presumed through their own infrastructure or indirectly by private sector contracting. In principle, every governorate will have a landfill site; however, in practice some will not, but are expected to negotiate use o f a landfill ina neighboring governorate; (6) providing technical assistance and guidance by the international donors and organizations in a coordinated manner to fill inthe knowledge gap, and strengthen the capacity of the governorates inthe planning, implementation, monitoring and follow up o f S W M services. Annex 5.2 provides a summary o f international assistance; and (7) enhancing public awareness and participation, through information dissemination o f all related-SWM issues. Central government and governorate planning shall be integrated and shall foster a "Government-Public-Private-Community Partnership." The Government will undertake enhancing measures for public awareness, education and training, information", and NGOswill play a major role for enhancing public awareness, educationand training. 5.13 As shown in Table 5.2, the strategy estimated the implementation cost to be LE 170 million as capital investments and annual operating costs o f LE 809 milliodyear serving 26 governorates (divided among three priorities). These estimates were based on average unit costs provided by local experts and were not calculated on the basis o f proper analytical accounting and cash flow estimates. Since the government did not have the local resources, the strategy indicated that it will provide an initial capital investment cost and the private sector will bear the annual operating costs. It also assumed that 100 percent o f cost recovery will be reachedin 2010. 5.14 The strategy also fixed very ambitious objectives that were not properly analyzed on the basis o f costs and benefits. It foresees an increase by the year 2010 o f the collection and disposal coverage o f 90 to 99 percent for large cities respectively and a collection coverage o f 70 percent for small villages. It also assumes that 50% o f waste,generated to be composted, 20% o f waste to be recycled; 50% o f waste to be source separated. Given the recent trend in the implementation o f this strategy, these indicators may not be realistic. -65- Table 5.1: Solid Waste Management Stakeholders 1 Stakeholder InstitutionalLevel STAKEHOLDERIN S W M MinistryofAgriculture and LandReclamation MinistryofHousing Ministry ofIndustry MinistryofHealthand Population MinistryofLocal Development (EE" All Governorates Governorates All Greater Municipalities Municipalities All Municipalities INGOs Intemational Contractors Private Sector National Private contractors, Contractors Consulting firms Intemational Donors Consulting Firms -66- Table 5.2: ProjectedInvestment Requirements for ISWMP" Institutional Actions Projected investment 1 level requirements( LEMillion ) National SWM activities, including: rehabilitatiodclose up o f existing 145 (Capital investment) dumps, constructionof compostingplants, technical assistance and capacity building. ' Agricultural waste management program. 25( Capital investment) 25 (annual operating costs) Governorates ISWMP for first priority Governorates (Cairo, Alexandria, Giza, 543 (annual operating costs) Qaluobia, Gharbaya, Monofya, Aswan, South Sinai, Hurgada, Fayoum, Luxor). ISWMP for secondpriority Governorates (North Sinai, Suez, 145 (annual operating costs) Dakahleya, Port Said, Sharkeya, El-Behira, Wadi Al-Gadid, Marsa Matrouh). ISWMP for third priority Governorates (Ismailia, Damietta, 96 (annual operating costs) Kafr El-Sheikh, BeniSuef, Minia, Asuit, Sohag, Qena). Strategy Implementation 5.15 Once approved by the Council o f Ministers, the strategy was put into implementation by several governorates with insufficient attention to public awareness, community buy-in, social consideration and public consultation. Generic tender documents were quickly prepared and released for international bids. Alexandria was the first governorate to have awarded a 15-year contract to a French group for an integrated solid waste management services including collection and disposal o f medical wastes. After more than 18 months of contract negotiation, the design-build-operate (DBO) contract i s fully operational, waste management services significantly improved and are greatly appreciated by the public. Landfill sites were adopted as the most appropriate disposal mechanism municipal waste. Subsequent DBO contracts were competitively awarded to Spanish, Italian, and Kuwaiti operators for three out of four districts in Cairo, two urban districts in Giza as well as Suez ,Aswan Govemorates and Luxor and Al-Arish Cities, for a contract duration o f 15 years. The amount o f DBO contracts were LE 475 milliodyear covering 20% o f the urbanpopulation. 5.16 The EEAAwith the MOLDhave made extensive work inthe rehabilitatiodupgrading o f existing dumping sites to controlled dumping sites inCairo, Giza and Qalubiah Governorates. These Governorates contributeto approximately 50% o f the total quantity o f solid waste generated inEgypt. 5.17 A total o f 56 municipal solid waste composting plants have been established by the Ministry of Local development costing the GOE 265 million L.E, and manufacturedby the General Organization for Military Production. These plants are covering all the country, however, many o f them are not operating satisfactorily, due to lack o f technical expertise and operational know-how within the municipalities, as well as technical drawbacks on the design o f the plants. However, the private sector has shown great interest and the Govemment started the privatization o f the composting plants through leasing non- operating composting facilities to Nationalprivate sector, at a leasingcost o f up to US$l500 per month. 5.18 Using Geographical Information System (GIs), and the minimum siting criteria established by EEAA, the EEAA has identified 53 landfill sites. Each Governorate will have a landfill site, however, in practice some will not, but are expected to negotiate use o f a landfill ina neighboring Governorate. 5.19 It is too early to assess the outcomes o f the implementation o f such strategy. However, there have been positive achievements: -67- The private sector i s providing integrated solid waste management services, including collection, transportation, treatment and ultimate disposal to sanitary landfills for municipal, health care and non-hazardous industrial wastes, on a design, build operate basis (DBO)inthe urbanareas. The international and local private sector has penetrated the market o f solid waste management services at reasonable cost; The reformed sector (such as the Zabbaleen or scavengers) have now been interpreted as part for the private sector labour force as well as allowed to form a company for municipal solid waste collection and transportation o f one o f the four districts o f Greater Cairo. Strong leadership i s provided by the Governors and their staff who are committed for the success o f the S W M services; Partial cost recovery has been applied through fee proportional to electricity consumption and charged on electricity bill. However, this mechanism has been terminated recently by the High Supreme Court. Currently the GOE i s investigating other most appropriate cost recovery mechanism; The international donor community has rallied around the implementation o f the strategy and provided technical support ina coordinated manner; Awareness for improving solid waste management services has increased at all levels; and The Ministry o f State o f Environmental Affairs/EEAA has compiled a series o f guidelines related to the effective implementation o f S W M (regarding sitting o f recycling and treatment facilities, landfill design and operation, upgrading o f uncontrolled dumping sites to controlled dumping sites). These guidelines represent a good beginning in establishing a sound environmental basis for waste management activities 5.20 There has also been success stories o f excellent S W M practices involving the rural communities NGOs. Qena Governorate has succeeded to provide S W M services usinglocal resources and contractors mainly as a result o f the local leadership and the public-private partnership that was successful in this governorate. NGOshave created community development centers for solid waste sorting and recycling in Cairo. Menia and Fayoum govemorates, in cooperation with local NGOs and private sector firms, have organized several awareness initiatives including holding workshops, do-and-do-not campaigns, and competition among neighborhoods and schools. In the Menoufia governorate, two villages, Kafr Abdo and Kafr Wahba are implementing a self-financing project for waste collection, and have covered polluted, rat infested waterway with soil, and turned it into a garden. 5.21 The Govemment has yet to decide on how best it should dispose o f agricultural residues for which it allocated to Ministry o f Agriculture an annual operating cost for LE 30 million. The Government has considered a large number o f policy measures, such as using these residues as a: (i) source o f energy conversion; (ii)agricultural products; or (iii)building materials. Many trials demonstration have been financed by M S E A and the Ministry o f Agnculture, such as shredding, bailing and animal feeds; but none were nationally adopted due to lack o f market information and cost-benefit analysis on the investments proposed. The most cost effective solution proposed by the Energy- Environment Review (EER) Study conducted by the World Bank2*showed that the present free collection of residues and the transport to a centralized land fill site or just disposed o f in a desert area, i s financially expensive as the costs are unlikely to be borne by the farmer. The only immediate solution is 28 Egypt: Energy-EnvironmentReview, ConsultantReport, April 2003. -68- rationalizing the burning; and the use o f residues o f agricultural products appears to be the most cost effective use in the medium term. Collection and disposal o f agncultural waste required a totally different approach and system from the one adopted for municipal waste. 5.22 The collection and disposal o f waste inrural areas (in which 57% o f the population lives) should be carefully analyzed, and an action plan prepared in the form of a Figure 5.2 Strategic Environment Assessment (SEA), especially that 2 7 solid waste i s considered a number one priority in a survey in 19 governorates2' which was conducted by the Environment $ 4 Department Unit o f the Social Fund for Development. In a "2 21 8 0 - scale o f 1-8, Solid waste, hospital waste and industrial waste are the three largest priorities as shown inFigure 5.2. Inview .g3 gs m 8 ?g E ; z + $ E o f the importance given by the rural inhabitants, and given z33.-z%s 3 0 -f 3 i 3 + the severity o f pollution, it will not be inappropriate that a m 3 d crisis emerges so that rapid curative measures are put in 29 Social Fund for Development,Annual report 2000. -69- 5.23 On the other hand, there are important lessons learned as a result of insufficient planningand preparatorywork that should have occurredprior to the rapid implementationo f the strategy. These are summarized on Table 5.3 as follows: Table 5.3: Lessons Learned LESSONS LEARNED COMPONENT Adoption o f a broad national S W M strategy at the most senior decision-making level has been an Legislative, effective catalyst to enhanced S W M and has led to enhanced collaboration between government Institutional agencies insupport o f ISWM. Such collaboration should be continued for developing the institutional and legal framework. Risk guarantees for private sector contracts are still lacking, and therefore, the private sector has been showing little interest and insome cases withdrawing from involving inEgyptian market, waiting to evaluate performance o f current SW contracts. Planning Local authorities that were involved inprivatization o f S W M services should take the time necessary to adequately prepare for the privatization initiative by carrying the necessary feasibility and sensitive analysis to determine the most efficient contractual arrangement. A lack o f preparation inprevious contracts has resulted indelays, unmet expectations, cancellation o f bids, andhightransaction costs. There are significant opportunities for local authorities to enhance waste management services cost-effectively, through commercializing existing public services ifthey have the proper knowledge base as well as the analytical and financing skills, which are,still lackmg. An Environment and Social Impact assessment shouldbe conducted at the planning stage o fthe privatizationprocess so as to avoid the environment and especially social problems that are being encounterednow. Among the social issues are the change inthe livelihood o f the Zabbaleen community and the social resistance o f the low and middle class to pay for S W M services in Cairo. An environmental issue that was created inthe aftermath o f privatization inCairo is waste sorting and scavenging that sometimes take place inthe operators' bins on the streets. Collection o f a S W M service fee on top o f the electricity bill i s an effective cost recovery Cost Recovery mechanism. However, its success depends mainly on: public participation, acceptance and willingness to pay, and detailed financial analysis o f the different segments o fthe S W M process should be undertaken to determine the tipping fee, expected revenues and the level o f implicit government subsidies. IPrivate Sector Privatization o f S W M can result inrapid improvement in S W M services at affordable cost. At Participation present, the operators have offered a moderate price per ton for S W M inorder to penetrate the market. With the devaluation o f the Egyptian pound and the fact that implementation barriers are encounteredby operators, such prices will increase as part o f contractual re-adjustment, as operators intend to increase their profits after settling into the market. The integration o f the informal sector inthe privatization o f the solid waste sector from the planning phase, i s essential for the success o f the new integrated approach, as well as prevention o f serious social problems. A participatory approachto builda consensus inthe communities, municipalities, andthe Awareness & government is necessary prior to the start up o f the privatizationprocess. It is equally important Public to take into account the social and cultural specifics o f the Egyptians and influence their behavior Participation through well designed and professionaI media campaigns. EEAAmust maintain its credibility byensuring that EIAs are prepared and are publicly disseminated duringthe preparation phase o f any S W M project. -70- Conclusion 5.24 Egypt i s experiencing a rapid change as a result o f the improvement o f integrated solid waste management services. By taking into consideration the lessons learned from the early experience, the following actions will be required: 0 The establishment o f a comprehensive legal framework that set up basic principles, legally binding, and requirements to specify achievable and phased objectives and timing for integrated solid waste management enhancement. Regulatory guidelines and standards for implementation should be flexible and adaptable to local conditions with community participation. Incentive systems, cost recovery and risk guarantees should be clearly defined; 0 The strengthening o f the institutional framework with clear roles and responsibilities for action at the local level, taking into account the formal sector. A regulatory function for compliance with the EIA provisions and environmental standards should be reinforced at M S E N E E A A to protect public health, and environmentalresource quality; and 0 Preparation o f an action plan for the collection and disposal o f municipal solid waste inthe peri- urban and rural areas to deliver effective and affordable management services to the local community usingsimple and efficient technologies. 0 Developing a cost recovery mechanism that i s sufficient to cover the financial costs o f the existing and upcoming S W M contracts, as well as acceptable by the public i s essential. This will assist the GOE to successfully progress inthe Integrated S W M approach it overtook since 1998, and solve gradually the persistent problem o f S W M throughout the country -71- CHAPTER6 INTEGRATEDCOASTALZONE MANAGEMENT (ICZM) I N EGYPT Introduction 6.1 The economic activity in Egypt's coastal areas i s vital for the national economy. Together with the oil industryand income from the Suez Canal, tourism i s one o f the top three foreign exchange earners in Egypt amounting to US$4.5 billion in 2000 and projected to reach US$10 billion in 2005.30From 1992-1997, the tourism industry was booming, with foreign exchange receipts averaging 4.1% o f GDP and tourism growing by more than 11% per year.31 After the Luxor incident o f 1997 which caused tourism to plunge for two years, it revived again. Tourism in 2001 reached 4.6 million visitors with a decline from the 5.5 million in the year 2000, spending US$4.5 billion. The number o f tourists visiting Egypt is almost similar to Tunisia though the latter does not have the rich cultural and historical antiquities that Egypt has. Notwithstanding the impact o f oil, industryand agriculture inthe costal zones, this chapter essentially deals withthe cause and effect of coastalzone management relatedto tourism. 6.2 Table 6.1 provides information on the number o f hotels, tourist villages (including the number o f rooms), the number o f tourists and tourist nights inEgypt for the years 2000 and 2001 as provided by the MinistryofTourism. A comparisonwiththe 1981/1982 is also given. Table 6.1: Tourism data inEgypt r - - - -- - - - __I _" I - --- - - - --__^ I ____I _I_xI^__I Item I j 81/82 2001/2002 Indicator lll. - - - I I ore than 4 fold increase compared to 1 I_-I 111111 I -I- I /Numberofhotels, tourist villages and 243 lfloating hotels (hotel & village r l_ll I " I ~-~ I - , ---_1I -----_I -_I-- Numberofrooms inhotels t 18.1 t 7 fold increase compared to I1 /villages and floating hotels (thousand) - - --I- ----_-- - ~- _- 181182 lll_I 1- I"^ - 1 Numberoftourists (million) 1.4 5.3 1 --_ - - -- --I - 1 I--- ~~ ~ _I I I_llllllll-lil Numberoftourist mghts (mllion) ~-~ % 32.7 iMore than 3 fold increase comparedto I I I i I - - 181182 - ! ~ -- _II-_II I I _ _ _ _ I x _ _ " - II II I-- l_l- 6.3 The coastal areas have an economic effect. Tourism brings growth especially inthe construction sector, services and agriculture. The socio-economic importance o f the coastal areas i s further illustrated by the City o f Alexandria, one o f the most important industrial areas in Egypt and home to 40% of Egypt's total industrialproduction and 57% o f the country's port capacity, as well as an important tourist city with incredible cultural heritage, both above and below the water. Tourism also has a socio- economic effect as it absorbs now about 12% o f the workforce and could also cause further employment ~pportunities.~~ 6.4 Until the early eighties, internal tourism has been traditionally along the Mediterranean Coast between Alexandria in the West Delta to Port Said in the East Delta, where Egyptians used to send their 30 www.uktradeinvest.gov.uk 31 Arab Republicof Egypt,Povertyreduction in Egypt:Diagnosisand Strategy, IBRDreport No. 24234-EGT 32 www.euromonitor.com -72- vacation in summer. As a result o f the Peace Process, new regions have undergone strong tourism growth: along the Mediterranean Coast from Marsa Matrouh to West o f Alexandria where tourism compounds and villages, belonging to Egyptian private sectors and professional syndicates mushroomed for internal tourism; and the Red Sea Coast which provided to intemational tourists diverse and spectacular natural and marine resources attractions. Such growth created a tremendous pressure on Egypt's coastal resources with numerous ecological threats. Major ICZRIssuesinEgypt 6.5 The 1,200 kilometers long Mediterranean coast o f Egypt contains a spectacular mixture o f economic, cultural and environmental assets. While the westem part o f the Mediterranean coastline i s relatively sparsely populated with rain-fed agriculture and grazing as major land-use as well as tourism, the coast around the Nile delta has population densities which are among the highest inthe Mediterranean region. The low-lying coastal areas, around the Nile delta also have important agricultural areas. The high population density and economic development has created serious environmental impact such as pollution hot spots, indiscriminate construction incoastal areas, coastal erosion, etc. The eastem coastline i s again sparsely populated with small scale agriculture, fishing and tourism. 6.6 The Red Sea coast o f Egypt i s about 1,800 kilometers long with relatively few traditional communities scattered along the coast. Preservation o f these assets i s key for economic growth in this competitive sector where environmentally sound tourism i s becoming a strong selling argument demanded by an increasing number o f visitors. Negative perception, due to environmental degradation, can rapidly erode the base for economic growth and fortunately, the highest political level inthe Red Sea realize that ifnot for the spectacular marine life, many tourists would choose other destinations. 6.7 Marine and coastal biodiversity in Egypt i s very rich, but under constant threat from development. Today, Egypt has 24 declared protectedareas, and i s planning to increase this number to 40 by the year 2017. Ten of these protected areas are on the coast, five on the Red Sea coast and five on the Mediterranean. The entire coastal line from Taba to Ras Mohammed along the Gulf o f Aqaba has been declared as a natural protectorate. Causes,Effects and ChallengesinICZM 6.8 Coastal management problems in Egypt can be divided in three fundamental categories. Each of these categories and the specific driving forces involved, need to be addressed. 6.9 The first category of I C Z M issues i s basically related to the development o f new land in areas with little or no traditional land-use, butwith highmarine/coastal values, such as inthe 1,800 kms of Red Sea coast. The extraordinary beauty and biodiversity resources o f beaches, coral reefs, mangroves, salt marshes and intertidal zones in the Red Sea provide world class diving opportunities and have created a rapidly developing tourism industrywhich has become a comerstone for the vital tourism sector in Egypt. The conflict here i s mainly with nature conservation interests as development i s often based on strong pressure by a single or a few demographic and tourist policies or the exploration o f oil. Although driven by strong economic interests (tourism, land speculation, oil exploitation, etc.), sufficient political will, adequate land-use planning and enforcement can still produce efficient I C Z M activities at the local level. 6.10 The second category o f I C Z M issues i s common on the 1,200 Kms o f the Mediterranean coast, and contains extremely complex and inter-linked issues with intensive user conflicts between thousands o f years o f traditional use of coastal space and resources and new development pressure. While the westem part o f the Mediterranean coastline i s relatively sparsely populated with rain-fed agriculture and -73- grazing as major land-use as well as tourism, the coast around the Nile delta has population densities which are among the highest in the Mediterranean region. The low-lying coastal areas, around the Nile delta also have important agricultural areas and have been affected by the lack o f siltation and sea water intrusion as a result o f the construction o f the High Dam which was beneficial for regulating the water resources of the N i l e and for generating electricity. . 6.1 1 The high population density and economic development have created serious environmental impacts such as pollution hot spots, indiscriminate construction in coastal areas, coastal erosion, etc. The eastern coastline i s again sparsely populated with small scale agriculture, fishing and tourism. Driving forces for these problems in coastal areas are related to wide-ranging macro-economic policies, at least partly external, and often located far from the affected coastal strip itself but with serious downstream impacts. Examples are water resource management in the up-stream Nile, pollution from urban conglomerations such as Cairo, and agricultural practices (irrigation, use o f agro-chemicals, soil erosion) inthe watershed. Remedialmeasures would needto consist of far-reaching policy reforms, enforcement o f existing regulations, and investments to improve water quality. However, lag time between putting these measures inplace and positive impacts on the coast may be extensive. 6.12 The third category includes issues related to global warming and climate changes. A major factor defining the situation on the Mediterranean coast i s the Nile. Duringthe last 7,000 years, the Nile delta has been building up in a construction phase and provided great potential for socio-economic development, agriculture, fishing and other human activities, in a surroundinghostile desert environment. However, the delta i s geologically unstable and during the last 150 years water regulation, erosion and subsidence have basically converted the delta to an eroding coastal plain vulnerable to climatic changes and associated sea-level rise. Most o f the land within 50 lulometers from the coast i s less than 2 meters above sea-level, protectedonly by a 1- 10 kilometers wide coastal sand belt. Significant socio-economic values and about 15% o f Egypt's GDP i s generated in these low-lying coastal areas and the implications on economic growth and societies o fthe 50 c m sea level rise are catastrophic.33 6.13 A preview o f the implications o f sea-level rise can already be observed by the present coastal erosion and retreat o f the delta, which are further maximized by human interventions such as reduced sediment input, groundwater extraction and hard civil engineering work inthe coastal strip. The difficult situation because o f the demand for water inEgyptmust be addressed by linkingwater policy with long- term strategic policy for restricting future development in low lying coastal areas, use o f coastal protection measures or retreat. Duringthe last decade, the Government has allocated LE 1.2 billion (see Chapter 8) on coastal protection, such as sand replenishment o f the beaches in Alexandria and halting coastal erosion. Inthe last 5 years, the city o f El Arish has seen national tourism decline. This town was known for its three colors: yellow (desert), blue (sea) and green (palm trees forming a wall on the beach and giving it a superb scenery). Nowadays all the palm trees are decaying, because o f the erosion o f the coastline that has been regressing to the extent that the roots o f the palm trees are now exposed to the wave action. These trees were at least 10 meters away from the shoreline. Protective measures to stabilize the coastline may be part of a short-term solution to protect specific coastal assets and infrastructure, but must be part of careful land-use planning and set-back construction zoning. 33 UNEP.GRID. -74- Environmentalissues 6.14 The major environmental and costal issues are summarized inTable 5.2 below showing the sharp contrast between the northern and southern coast o f Egypt. Among the major issues are: 6.15 Degradation o f water quality due to land-based pollution i s a major problem in the Mediterranean coastal areas. The Environmental Monitoring and Information Program (EMIP) conducts periodic water quality monitoring for the marine water along the entire Mediterranean coast. The latest report o f 2003 showed that marine water in specific sites between Alexandria inthe west delta to Damietta in the east delta and not to exceed 5 percent o f the coast line, i s highly contaminated with coliform bacteria with a mean probable number (MPN)/100 ml, ranging from 500 to 100,000 (permissible i s 100-500 MPNA00ml). Similarly, concentrations o f ammonia and nitrate, which are indications o f discharge o f wastewater exceeded their permissible concentrations along the Alexandria coastal line and inthe coastal cities o f Damietta and Port Said. Part o f the Alexandria coastal line also has high levels o f phosphate Already degraded water quality at the northern coast has impacted on tourism which led to the intensive development o f beach resorts to extend along 300 Kms west o f Alexandria where the water quality parameters are within permissible concentrations. However, popular beaches in Alexandria continue to be used for bathing for the working class which cannot afford to spend its vacation in the recreational facilities west o f Alexandria. Industrial and urban wastewaters are being discharged into the major lakes o f Burullus Marriout and Manzala. Eutrophication phenomena in the lakes and open sea have been reported and the lakes are losing their attraction as recreational resorts which negatively affect the livelihood o f the local p ~ p u l a t i o n . ~ ~ 6.16 Ship-generated operational pollution and maritime accidents are a major threat to the marine and coastal environment due to the traffic through the Suez Canal, which in FY 2002-03 was transited by in 14,610 vessels, totaling 499 million tons. In addition, the oil pipeline connecting the Red Sea with the Mediterranean inAin Sukhna (inwhich one o f the most prestigious resorts are located) with a capacity o f about 3 million barrels per day generated a lot o f oil tanker traffic, mainly from Saudi Arabia in the Red Sea and to Europe in the Mediterranean. Ship-generated pollution occurs from operational (intentional) discharges from commercial vessels o f oily bilges and ballast water, sewage and solid waste as well as accidental oil spills. Garbage and oil pollution by recreational boating can be a problem locally in addition to coral damages by anchoring. 34 National Environmental Action Plan, 2002. -75- Table 6.2: M a j o r ICZM issues in the Mediterranean and Red Sea ICZMissues Mediterranean coastline Red Sea coastline Economic Important commercial, industrial and petrochemical The Gulfo f Suez produce about 60% o f development development and extensive agriculture inthe Nile Egypt'soil and i s also one o fthe world's busiest delta.Extensive government-promoted tourism by shipping areas. The beautifid and pristine development o f new coastal land. The area o f coastlines are targeted for international tourism Alexandria, initially planned to attract international attracting enormous private sector investments tourism has instead become a very popular area for inhotel infrastructure. About 165,000 rooms national mass tourism. Economic growth limited by an already exist and 25,000 are under construction "over- development" o f tourism infrastructure, while hotel occupancy inCairo, Alexandria and secondary homes used only for short periods, extensive Luxor i s stagnant. Tourism inHurgada has land speculation and user conflicts. Reduced multiplied20 times ina few years and Sharmel attractiveness due to pollution o f coastal waters have Sheikh developed from only two hotels in1987 spread development o f highclass secondary homes to to a world class resort area today. About 120km new pristine areas west o f Alexandna and the Gulf o f o f coastline between El Quseir and Mersa Alam Suez. i s earmarked for considerable tourism investment with most plots already sold and about 7, 000 rooms built. Coastal land-use Highest population density inthe Mediterraneanwith Tourism development is requiring extensive extensive land demand for urban and tourism coastal space. Major natural assets and development. attractions, such as panoramic coastlines, Agricultural productivity inthe northern delta i s beaches and coral reefs, are being encroached declining due to soil erosion and salinization. Land and replaced by mile after mile o f resort reclamation is common for agricultural extension in constructions and degradedby numerous natural wetland and for aquaculture production. visitors. Biodiversity The largest wetlands inthe Mediterranean and very CoastaVmarine habitats among the richest inthe important for migratory birds. world with about 200 coral and several endemic species. Pollution from Severe pollutioninthe lakes inthe delta and around Pollution hot spots exist in the Gulf o f Suez land-based sources Alexandria. The cumulative volume o f wastewater and local sewage discharges occurs from discharged from the Alexandria area i s 9 million cubic municipalities and tourism development meterdday - equal to the Nile outflow from the Rosetta along the coast. outlet. Bacterial contamination freauentlv exceeds (in about 50% o f the sample^)^' EUa n i natibnal standards. Coastal erosion/ Nile delta i s an eroding coastal plain with accelerated Land filling, dredging, buildingwithin the 200 I modification o f coastal erosion (exceeding 100meters per year insome meters set-back zone are preventing public coastline locations), reduction o f wetland size, and landward access to the shoreline. Sixty percent o f tourism incursiono f saline groundwater. The Town o f infrastructure along a 30 kilometer coastal strip Alexandria, which has grown from about 370,000 inHurgadawas builton filled land, directly on inhabitants in 1905 to more than 4 milliontoday, the shoreline or even o n flat reefs extends along 100 kmo f coastline saturated with civil - engineering work. Sea level rise The threat o f sea level rise on the coastal Nile delta is o f global ~ i g n i f i c a n c e .In~the Alexandria ~ Governorate, a 50 c m rise in sea-level would flood 51% o f the area, affect 50% o f the population, and cause the loss o f 93% o f the agriculture and 65% o f the ind~stry.~' 35 Environmental Monitoring and Information Program (EMIP). 36 UNEP, GRID. 37 El Raey, et al, 1995 Potential impacts of accelerated sea level rise on Alexandria Governorate, Egypt. -76- ExistingGOE ICZMPolicies,Achievementsand Challenges 6.17 Achievements towards sustainable I C Z M in Egypt give a mixed picture. Until the early 1990s, the Government adopted a very aggressive development strategy aimed at promoting mass tourism both inthe Mediterranean and the Red Sea Coasts. The Ministryof Housing and New Communities financed a multi-million development o f full-fledged tourist villages and resorts along the western Mediterranean coastal line (such as Marakia and Marina) aimed primarily at international tourism which did not materialize. As a result, large villas and apartments were sold to the upper middle and high class o f the Egyptian society at modest prices which further escalated as a result o f land speculation. The establishment o f the government sponsored resorts led to the construction o f multiple villages managed by the different professional syndicates and private sector developers. There was no land use planning and no environment impact assessment was undertaken. 6.18 A similar situation o f a different caliber was undertaken in development o f the Red Sea resorts centered in and around the town o f Hurghada. Development was made with private sector participation which was provided in 1993 with incentive o f a 1O-year tax exemption, low cost land and ownership right for foreigners. This has subsequently encouraged the private sector to invest inmore that 700 projects. In the 1980s, the Tourism Development Authority under the Ministryo f Tourism was providing investment opportunities at the Red Sea and Aqaba Bay. The construction o f the first hotels built in Hurghada did not have any setbacks, and have destroyed the coastal coral reefs. They were not subjected to any EIA. Subsequently, the TDA adopted EIA guidelines for the establishment o f tourist resorts which were followed by operators. As o f today, no follow up i s made on the mitigating measures after construction o f large scale hotels and resorts were completed. 6.19 By the midnineties, the Government adopted a different policy for sustainable tourism supported primarily by USAID under its Red Sea Sustainable Tourism Initiative (RSSTI).38 This policy calls for the conservation and sustainable use o f the Red Sea land and marine resources. Sustainable Tourism would promote environmental conservation and promote the sustainable use o f natural resources and be also a catalyst for economic and local community development. As a result, TDA prepared land use plans for 100 k m s new pristine areas and environmental management system being implemented in selected Red Sea tourism properties leading to environmental improvements. Under the GEF-financed Red Sea Project, traffic marine and warning systems in order to protect the coral reefs, were put in place by the International Marine Organization to control traffic inthe Red Sea. 6.20 Today, the importance o f coastal areas for the economy o f Egypt is also recognized by local governorates, NGOs, local communities, the hotel industry and tour operators. Everybody realizes now that without the conservation o f the living tapestry o f corals and exotic fish, intemational tourism will not grow. On the other hand, the rapid development of coastal land still persists, resulting in a continuous degradation o f coastal areas and an ever increasing threat to pristine areas. Concrete and sustained management actions have not been implemented at a speed required by present development. To be successful, an ICZM initiative needs to become operational and sustainable over a long period o f time, and provide a mechanism to encourage participation and attract resources from stakeholders. The political will to implement the protection o f Egypt's precious coastal resources and implement ICZM mustbe translated and reflectedby actions andresource allocation. 38 Egyptian Environmental Policy Program, USAID -77- 6.21 There is a general recognition that ICZM should address environmental and Box 1: Frameworkfor EvaluatingProgressin ICZM IOlsen,2003) developmental challenges in the coastal area in a holistic way. The fundamental purpose a) First Order - Enabling Conditions: i s to maintain, restore or improve specific 1. Constituenciesthat actively support ICZM qualities o f coastal ecosystems and initiative associated human societies on local, 2. Formal governmental mandate with necessary regional or national scales. A simple four authority order framework has been described by 3. Resource allocation O l ~ e n(see~B o x 5.1) which i s being used ~ 4. A plan o f action to describe the ICZM process in Egypt.The 5. Institutionalcapacity b) Second Order -Changes inbehavior major goal i s to reach the fourth order level, 1. Changes inbehavior o f institutions and interest but the discussion below shows that Egypt groups still remains in the first order phase, trying 2. Changes inbehavior affecting resourceuse to establish the enabling conditions for a 3. Investment ininfrastructure supportive o f national ICZM program. This is quite ICZMpolicies and plans common, and. according to Sorensen, the c) ThirdOrder - result harvest or actual improvements majority o f nations lie primarily in the first 1. Improvement incoastal ecosystem qualities order outcomes. It is not surprising that 2. Improvements incoastal societal qualities Egypt still remain in this category, the d) Fourth Order sustainable coastal development - important challenge i s for Egypt to complete 1. A desired and dynamic balance between social and environmental conditions i s achieved these first order measures in an incremental and orderly manner, and trying to balance now the tremendous development in coastal areas with environmental conservation through voluntary compliance with the developers and the hotel industry. Incase o f non compliance, MSEA should make public the name o f violators, and apply subsequent terms o f law actions. EnablingConditions 6.22 Constituency: The Egyptian Environmental Affairs Agency (EEAA) is responsible for Egypt's Sea and Coastal Zone policies, while different authorities are responsible for their implementation. The MinistryofDefense and EEAAare the main controlling andmonitoring agencies. The MinistryofWater Resources and Irrigation with its Shore Protection Authority i s responsible for shoreline management. The Ministry o f Transport i s responsible for maritime transport and international shipping. The Tourism Development Authority, Fisheries Development Authority and Egyptian General Petroleum Corporation are among the main users o f coastal zones. The Governorates have an important role in managing coastal areas at the local level. There i s serious fragmentation within all institutions, and it i s not clear which agency i s responsible for what. Recently there has been increased coordination between the Ministries of Petroleum, Tourism, and the Governorate o f South Sinaii concerningoil exploraiton. These has been also cooperation between the Coastal Protection Authority and EEAA for the protection o f the Mediterranean coastline against erosion and infi-action by developers. 6.23 Formal povernmental mandate with necessarv authoritv: The Environmental Law No.411994 provides important provisions for I C Z M as well as provisions for Environmental Impact Assessments (EIA). Halfo fthe articles o f this law deal with protection o fmarine resources. The law is quite detailed on certain coastal aspects, such as pollution from ships which i s covered by more than 20 articles; it i s rather unspecific on others. Pollution from land-based sources and near-shore land use, for example, i s 39 Stephen. B. Olsen, Frameworks and indicators for assessingprogressin integrated coastalmanagement initiatives, Ocean & Coastal Management 46 (2003), p 347-361. -78- covered in only six articles. Passing the Environmental Law sends important signals about the government policy regarding coastal development, but so does the implementation and enforcement o f the law. Discrepancy between the objectives o f the law and the actual impact in the areas regulated i s wide which highlights the need for strengthened enforcement capabilities. Law 102/1983 related to the natural protectorates and to the management o f natural resources i s being stalled as it only applies to the coastal protection o f the Mediterraneansea 6.24 Resource allocation: Most coastal zone projects inEgypthave been financed by the intemational community with minor, often "in-kind," governmental contributions. This i s a common phenomenon in the region as a whole and a general major weaknesses o f any ICZM initiatives for two reasons. First, it i s probable that coastal zone management has not yet gained sufficient political acceptance and status, failing to generate sufficient government resources for effective implementation. Second, as international financing i s something that i s almost expected in coastal zone management, countries tend to divert their funds to other uses. For example, regular funding for all protectedareas inEgypt4'consist o f the modest amount o f LE 2.7 million Egyptian pounds per year. For the establishment o f three protectorates in the Gulfo fAqaba a total ofLE 18million and 12million from the EuropeanCommission (1986-2001) was assigned. In 1986, the Government established the Tourism and Environment Services Fund(see Chapter 8) to finance inter-alia, the Ministry o f Tourism plan from a 6.25% imposed tax on the sale o f the airline tickets sold locally. Additional fimd could be raised for ICZM activities, for example through an increase inentrance fees inprotected areas. Unfortunately, Egypt's marineprotectoratesare only capturinga small portion o f their potential, desperately needed revenue^.^' 6.25 Plan of Action: The "Integrated Coastal Zone Management in Egypt - Towards an Egyptian Framework ICZMProgramme" was developed in 1996. Within the framework ICZM Plan, four national strategies would be developed on shore protection, coastal land-use, coastal and marine water quality, and coastal and marine resource preservation. Although priority issues inICZMare scientifically well known and documented, the National ICZMPlan has not been finalized and management actions are lacking. 6.26 At least three local ICZM plans have been developed. Under the GEF-funded Red Sea Coastal and Marine Resource Management project a Coastal Zone Management Action Plan for the coastline from Hurgada to the Sudanese border was finalized in 1998. A Coastal Area Management Program (CAMP) project inFuka-Matrouh was done between 1992-1999 which included an I C Z Mplan for a 70 - 100 km long area o f the Westem Mediterranean coast. The Gulf o f Aqaba Environmental Action Plan was prepared by the Government of Egypt, the EgyptPrivate Sector, the EUand the World Bank between 1997 and 2000. The others are being initiated by EEAA for Suez and Alexandria. USAID has been supporting the Tourism Development Authority within the Red Sea Sustainable Tourism Initiative (RSSTI) to strengthen their environmental capacity to manage tourism development. Recently a US$ 1.7 million contract has been signed between Delft Holland and the Ministry o f Water Resources and Irrigation MWRIand Coastal Protection Authority for the coastal zone management o f the north coast of Egypt in order to conduct research on coastal erosion, pollution prevention, and resorts (tourism) development management. EEAA i s also preparing an integratedmanagement plan for controlling land - based sources (LBS) o f pollution. 6.27 Institutional capacitv; The Environmental Law assigns the Egyptian Environmental Affairs Agency (EEAA) as the lead agency for I C Z M in Egypt. A National ICZM Committee was set up by a Ministerial decree in 1994 amended by the Ministerial Decree number 200/96 to include sixteen top rank representatives o f all concerned ministries, e.g. EEAA, Ministries o f Public Works and Water Resources, Housing, Development and New Communities, Agriculture, Maritime Transportation, Tourism, 40 FirstNational Report o fEgyptto the Convention on Biological Diversity. 4' Egyptian EnvironmentalPolicy Program Support Unit, Red Sea Marine Protectorates Revenue Generation Options, 2003 -79- Planning, Scientific Research and Technology, Defense, Local Government, Electricity and Energy and NGO representative. The ICZM committee i s a coordinating body without major regulatory/administrative power or funding to actively promote I C Z M issues. With its 14 mandates, it was, inter-alia, expected to coordinate all coastal activities between the competent authorities towards ICZM, drafting guidelines, preparing an ICZM plan, studying and evaluating all major projects to be executed in the coastal zone, and resolving conflicts between ministries or other governmental bodies while reaching a final decision. The I C Z M committee has reportedly met about ten times in eight years, and i s presently inactive. The inactivity o f this inter-agency committee means that the policy dialogue and consistency analysis between governmental stakeholders with different visions o f the use o f coastal areas is reduced, with apparent risk for continuous single sector and fragmented approaches to coastal management. The Committee's responsibility to carry out EIA review o f development projects in coastal areas i s not implemented. Behavioralchanges 6.28 Changes in behavior of institutions and interest aroups: The goal o f I C Z M i s to achieve sustainable use o f coastal resources. Economic sectors may have other goals, but at least for the tourism sector, a well-balanced development protecting the basic foundation assets such as beaches, attractive coastline, clean water and coral reefs should be conceived as a win-win strategy. As a consequence, mainstreaming o f I C Z M objectives into the tourism sector has shown some success in awareness building.Inthe Red Sea, at the highest political level, tour operators and many developers are aware that without the natural marine and coastal resource, a large fraction o f the visitors would go elsewhere. The Governor o f South Sinai has imposeda zero tolerance policy for collecting and/or destroyingcoral reefs. 6.29 Changes in behavior affecting resource use: A concrete example on mainstreaming environmental considerations into the tourism sector i s the different construction pattern consisting o f low-rise, bungalow type resorts in Sharm el Sheikh. Extensive use o f floating docks instead o f fixed constructions avoids alteration o f the coastline, and protects near-shore corals. The new tourist village o f El Gouna, (north of Hurghada) balances both development and environment protection, and is hlly managedby the private sector. 6.30 Investment in infrastructure supportive of ICZM uolicies and plans: Actions to combat land- based industrial pollution have advanced and, according to EEAA a total o f approximately LE 360 million Egyptian pounds have been invested in pollution abatement `at 34 industrial establishments polluting the Nile in2000/2001. GEF is fundingthe constructiono f an artificial wetland at Lake Manzala as a demonstration project for sewage treatment. The Tourism Development Authority (TDA) is financing infrastructure development for tourism, and has the authority to acquire and sell tourism development lands and retain the income as well as charge fees for assessing and monitoring environmental impacts o f tourism development projects. The agency has established an environmental unit to encourage developer compliance, and promote investments in a more environmentally-sound infrastructure. GEF i s also considering financing an integrated water and land management for Lake Marioutt as part o fthe World Bank financed Egyptian Pollution Abatement Project 11. Improved coastalconditions 6.3 1 There are still few signs o f general improvement o f environmental conditions in Egypt's coastal areas, Undeveloped coastal areas, agricultural land and natural habitats are rapidly urbanized or converted through tourism development, water quality degradation i s becoming critical, in particular in coastal lakes and nearshore waters, serious coastal erosion i s affecting the Mediterranean coastline, and biodiversity protection remains an issue where improvement i s needed. The significantly increased -80- marine fisheries production on the northern coast, from about 10,000 tons per year in the late 1960s to about 80,000 tons in the early 2000s, should not be interpreted as a sign o f environmental improvement. On the contrary, it i s probably due to highdischarge o f nutrients from urban wastewater and agricultural drainage. Conclusions 6.32 Based on the analysis o f the present state o f ICZM, it i s concluded that Egypti s still inthe early stages o f sustainable development for its coastal areas. There has been some achievements in trying to balance development with environmental protection in Gouna and Sahl el Hassheesh (north and south o f Hurghada). Egypt still remains inthe first order stage o f puttinginplace enabling conditions, with certain success in changing behaviors, such as mainstreaming environment into the tourism sectors, particularly in the Gulf of Aqaba (Sham El Sheikh and Ras Muhammed). These enabling conditions should be completed first and followed by an incremental approach towards achieving the higher measures. The focus should be on pristine areas that have not been touched by development. These areas are the coastline between Salloum on the Libyan borders and going eastward to the city o f Marsah Matrouh. In the RedSea, still some pristine areas are from Abou Souma to the Sudanese Border, and along the Gulf of Aqaba. A summary of challenges regarding enabling conditions and behavioral changes i s provided in Table 6.3 6.33 The recommendations o f achieving higher measures, are explained in Chapter 9, and will include the preparation o f strategic action plans at the policy and program levels for any new pristine coastal area, the consolidation of the institutional and legal framework, and the initiation o f a cost recoverymechanism capable of ensuring the conservation o f Egypt's natural resources. -81- Table 6.3: Issues and Actions on ICZMinEgypt ISSU S ~~ Actions Constituencies Increase awareness buildingamong ICZM stakeholders to that actively encourage their active participation, support and contribution to .-2.. support ICZM local ICZM initiatives initiative 0 3 U Formal Enforcement o f existing regulations complemented with non- governmental regulatory policy instruments (economic incentives and awareness u mandate with building)andvoluntary agreements M necessary 2 E .I authority Resource Establish local funding mechanisms to reduce the dependence on WI E allocation extemal donor support which does not allow a sustainable 30 L implementation of national ICZM goals Plan o f action Conclude the national ICZMplan and start implementation. Institutional Strengthen existing institutional setup and concentrate ICZM U v) E L capacity responsibilities under one agency. The National ICZM committee should be reactivated and its mandate refocused. Changes in Improved land-use planning o f development incoastal areas with behavior of valuable biodiversity resources or vulnerable to erosion and sea- institutions level rise and interest groups Changes in Far-reaching policy reforms required to reduce land-based behavior pollution from point and non-point sources (eg. use o f fertilizers in affecting agriculture) resource use Infrastructure Major investments inwater pollution abatement and coastal investment erosion protectionrequired supporting ICZMpolicies -82- CHAPTER 7 Environment Policiesand Institutions The Evolutionof the Environment Policy Process 7.1 Environmental policy formulation in Egypt has been an evolving process which has been fluctuating with time, modified with major unexpected environmental events and often influenced by the leadership o f senior decision makers. Environmental policies in Egypt have always been embedded as part o f sector policies by a number o f line ministries including the Ministries o f Health and Population, Agricultural and Land Reclamation, Water Resources and Irrigation, and others. There i s no effective mechanism, other than the Council o f Ministries, for coordinating the policy(ies) formulation processes. Insome cases, environmental policy decisions are made at the highest levels ofthe government. This is the exception, however, rather than the rule, for there are only a few examples where environmental policy decisions were taken at the highest levels o f the government and usually to address an environmental crisis such as the air pollution episodes over Greater Cairo. 7.2 Four milestones could be distinguished in the evolution o f the environmental policy process in Egypt: NEAPof 1992; M S E A Policy directives in 1998; NEAP update o f 2002; and President Mubarak's statement o f M a y 28,2002. The NationalEnvironmentAction Planof 1992 7.3 The NEAP of 1992 i s the first public document that provided the tools for ensuring that "If Egypt'seconomic growth becomes a sustainable one ... protectingthe environment, among other aspects, i s one o f the key imperatives imbedded in the concept o f sustainable development." The main trust of NEAPo f 1992 was to improve the incentives for environmentalmanagement through appropriate pricing o f inputs to encourage conservation, recovery and recycling. A number o f actions, policy and institutional as well as investment programs in water and land, air quality, solid waste management, protecting Egypt'sheritage, and strengthening environmental institutions were envisaged. 7.4 A rapid assessment o f the results o f the actions proposed in NEAP o f 1992 shown in Table 7.1 demonstrated a strong emphasis on investments and institutional strengthening with a neglect o f implementing the policy actions particularly those related to pricing o f water and energy and development o f market-based instruments for environmental compliance. The only policy actions that were completed were the reduction o f lead in gasoline (which has in fact been eliminated), establishment o f full coverage system on cost recovery for solid waste in the cities o f Cairo and Alexandria and establishment of licensedcompanies insolid waste management. 7.5 In the water and land sectors, prices o f fertilizers and pesticides were increased; however, no progress was achieved in imposingwater charges in the agriculture and industrial sectors. As recently as M a y 2004, a Presidential decree was issued to establish the Holding Company for Drinking Water and -83- Sanitation with the objective of purification, desalination, transport, and distribution of potable water and collection, treatment and safe disposal of wastewater as well as setting up a clear water pricing strategy based on levels of water consumption. 7.6 Substantial progress was achieved inthe solid waste sector as anticipated inNEAP. This was due to a concrete policy development implementation consisting o f a combination o f policy, institutional, information and investments. Using an improved "solid waste management formula" that could be owned by all stakeholders, many inter-sectoral issues could be resolved. -84- Table 7.1: Review of the Progress of NEAPof 1992 commercialbasis. Informationsystem Developingto improveplanning Solid Waste management I SolidWaste management Fullcoverage for management ofmunicipalwaste. Specific to each type of urban,pen-urban, andrural. Earmarkedsurchargeson environmentally hazardousproducts. Industrialhazardouswaste managementsystemdevelopment. Full coverage of industrial hazardous waste treatment and hospital wastes. Establishmentoflicensedcompanies for waste management. Completed Partially Completed Not Completed -85- The Policy Directives ofMinistry of State for EnvironmentalAffairs 7.7 In 1998, the newly-appointed Minister of State for Environmental Affairs issued a seven-point policy directives framework. These policy directives were at a relatively high level o f generality and included: 0 Fostering partnerships, coordination and collaborative work between different segments o f society at the national level; 0 Fosteringpartnerships at bilateral, regional and global levels; 0 Implementation o f Law 4/1994 for the protection o f the environment; 0 Development and upgrading o fnaturalprotectorates and protection o fbiodiversity; 0 Support to institutional capacity building in EEAA, its regional branch offices and environmentalmanagement units; Support to sustainable environmental management systems; and 0 Operationalizationo f market based instrumentsinthe field o f environmentalprotection. 7.8 These directives represented a very good start towards establishing an environment management system based on specifics programs and outputs that would enable the Ministryo f State o f Environmental Affairs (MSEA) and Egyptian Environment Affairs Agency (EEAA) to set specific targets and report the achievements o f these targets. Reporting on progress o f each o f these directives was described in two annual reports for 1999/2000 and 2000/2001. N o additional reporting was subsequently published. Given the interest o f the Minister in developing policies, USAID-financed in 1999 the first environment structural adjustment program, the Egyptian Environment Policy Program (EEPP) that provided a US$170 million cash transfer to the Egyptian Government for developing specific policies by the Ministries o f Petroleum, Tourism and Environment. These policies include inter-alia the promotion of economic instruments for environmental management; support the decentralization o f environmental responsibilities, inspection and voluntary compliance and strategic environmental planning. With such assistance as well with the DANIDA-funded organization Support Program, M S E N E E E A have now a number o f studies and guidelines that will enable them to take the necessary actions, provided they have the humanresources and the right skill mix which are still a drawback that needto be addressed. The NEAPUpdate of 2002 7.9 Parallel to the policy directives, M S E A initiated in 1999 an update o f NEAP o f 1992, by EEAA's Capacity 21 Unit, with sponsorship from UNDP. Both the Prime Minister and Minister o f State for Environmental Affairs note in their forewords that the goal o f sustainable development linking development with environmental protection i s key to Egypt's future. NEAP process employed "a participatory, consultative, gender anchored, holistic planning modality to create an enabling environment" and received the approval o f all affected line Ministries; its status as an `Action Plan' confirms this view. 7.10 The updated version i s designed to represent Egypt's agenda for environmental actions over the next 15 years. It i s also designed to complement and integrate with existing sectoral plans for economic growth and social development. It can be viewed as an impressive diagnostic document with qualitative analysis o f the environmental issues but with little quantitative analysis for setting priorities. NEAP consists o f a plan o f strategic actions as stated in Annex 7.1, covering the period to 2017 and, in some cases, beyond. Strategic actions in NEAP o f 1992 are also reflected for comparison but have not been -86- followed up or commented upon in NEAP update so as to make use of the lessons leamed before proposing new strategic statements. In contrast to NEAP o f 1992, its update did not provide any cost estimate o f the strategic actions proposed, which could make its implementation difficult. Rather, NEAP cites a large number o f financing sources both external and internal, but defers the preparation o f concrete targets and detailed plans to "a near future" along with appropriate legal instruments to support implementation. 7.11 Inapproving NEAPupdate of 2002, EEAA Board of directors reiterated that "The integration of the environmental dimension in all national policies, plans and programs'd2 i s Egypt's strategic environmental objective. Infulfilling NEAPrecommendation, the Board approved a five-year action plan (2002-2007) that specifies in table 7.2 the policy measures to be implemented through 14 programs as well as the projects to be implemented together with the necessary legislative developments and in collaboration of the sector ministries and institutions both public and private. Eleven programs are under implementation. This action plan intends to institutionalize the strategic planning within the Ministry and the Agency. Recently EEEA has been focusing on new policy directives, emphasizing more the implementation o f environmental projects that a have sound impact on population health and foster new foreign investments inthe environment through Egyptianprivate sector participation. Table 7.2: EEAA Five-Year Action Plan 2002-07 Programs Policy Measures 1. IntegratedSolid Waste Management Achieve soundmanagementof solid waste andhealthcare waste inall governorates ofEgypt. 2. Protectingthe River Nile andWater Resources Improvequality of water resourcesby controlling industrialwaste. 3. ImproveAir Quality of Greater Cairo Reduceconcentrationsofdust and leadinCairo air. 4. EnvironmentalEducation, Training andAwareness Increasepublic awarenessof environmentalproblems and develophumanresourceswithin the field of environment. 5. EnvironmentallyFriendly Industrial Cities Identify environmentallyfriendly cities in order to 42 EEAA Web-site (www.eeaa.gov.eg) -87- 7.12 One challenge for institutionalizing strategic planning will be to analyze the cost and benefit o f the above actions proposed to justify the priorities for intervention before putting them in operation through specific programs and projects. The conclusions and the recommendations o f the CEA were designed to provide details required for concrete policy development and implementation for the first three major EEAApolicy measures related to air quality, water quality, and solid waste management. PresidentMubarak's Statement on SustainableDevelopment 7.13 A promising step towards the realization o f a stronger GOE commitment at the highest levels materialized in M a y 28, 2002 when President Mubarak called a top level ministerial meeting to discuss the Environmental Strategy for Egypt for the coming twenty years, (up to 2017). The meeting was attended by the Egyptian Prime Minister, in addition to 11 ministers and 4 governors. The President indicated that the "Environment i s not a luxury business, but it i s the protection o f our natural resources for our generations and other generations to come." H e also reaffirmed the integration o f national efforts to modemize the agriculture, industry,and service sectors, and that the "environmental dimension should be integrated into the modernization process." Clear Presidential directives ensued as a result o f the meeting. The most important o f those were: Strong commitment towards the finalization o f the fresh water improvement Program through controlling industrial discharges according to the set phased plan presented to the President, and stricter monitoring o f all what may influence the quality o f drinkingwater; Development o f a plan for air pollution abatement and consistent monitoring o f air pollution levels inbig cities; Stress on the importance o f environmental impact assessment studies for all projects, and prohibiting the establishment o f any project that may negatively impact the environment, especially near tourism development areas and coastal zones; and Developing the monitoring and follow-up bodies and units to ensure the rapid implementation o f programs, environmental laws, regulations and intemational environmentalprotection protocols and conventions. 7.14 The President's statement was unequivocal about sustainable development and the need to integrate the environment into the development policies, projects and programs. It also sets the priorities o f intervention to which the Government should be committed. Although the President's Statement was followed up by ministerial meetings and establishment o f inter-sectoral'committees, a holistic planneeded to be prepared to put inaction the President's directives. The EnvironmentalLegalFramework 7.15 Over the past four decades, Egypt has adopted a substantial body o f environmental and environment related laws, decrees and regulations addressing various aspects o f environmental protection and natural resources management. .Environment protection was included in several sectoral laws which authorized the ministries to monitor their own polluting industries, renderingtherefore their application o f these laws to be dysfunctional as each sector ministry (Petroleum, Electricity, industry and Water Resources and Drainage) became judge and party at the same time The Table in Annex 7.2 presents principal environmental laws, decrees and regulationsh 1983, and just after the establishment o f EEAA in 1982, Law No.102 for Protected Areas and Natural Resources Management was enacted. However, it -88- wasn't until 1994 that a unified law dealing with all the media o f the environment (Air, Land and Marine Water) and with the various sources o f pollution was promulgated. 7.16 The enactment o f the Environment Protection Law No. 4 o f 1994, which was prepared in 1989, addressed several significant legislative gaps in the legal framework for environmental protection neglected by the earlier sector laws such as water pollution, hazardous substances and waste, and waste management laws. It also introduced for the first time the notion o f development. It has, however, acted a compromise to satisfy all the parties concerned without giving the real authority to M S E A and EEAA to enforce the terms o f the law. For example, the Ministry of Water Resources and h g a t i o n i s still responsible for implementing Law No. 48 o f 1992 on the protection o f the Nile and its waterways which was not cancelled as originally envisaged in the earlier versions o f the draft law, and as such, M S E N E E A A has little control, if any, on land pollution and on water quality. In addition to that, some standards such as the pollution control standards o f Law 48/1982 are too stringent to be attainable, and thus maybe unenforceable. 7.17 The law restructured EEAA, and provided it with broad authority, among other things to regulate air pollution, control hazardous substance and waste management, and control discharges to marine waters. Furthermore, the Law gives EEAA an array o f tools for implementing and enforcing these provisions, including traditional regulatory controls based on command and control (e.g., emissions' standards for air pollutants), inspection and punitive enforcement (e.g. penalties, closures, and imprisonment authorities); and other voluntary tools providing incentives such as economic and financial instruments, establishment o f an Environment Protection Fund, an Environmental Impact Assessment system (EIA), and compliance monitoring system (e.g., record keeping requirements),. One positive unprecedented aspect o f this law i s that it allows any citizen, organization and/or any moral person to report and challenge at court any violator o fthis law including sector ministries and governorates. 7.18 The record in Egypt for implementing and enforcing environmentallaws was not very successful. With limited exceptions, violations o f environment-relatedlaws went undetected and requirements went often unendorsed especially with the public sector polluting. The main impediments to effective and meaningful implementation and enforcement o f environmental and environment-related laws are due to the fragmentation among regulatory institutions, licensing agencies, police authorities, etc, at both the national and Governorate levels o f government, to the effect that no single institution can take enforcement actions effectively. This fragmentation o f responsibilities necessitates a highdegree o f inter- agency coordination for effective management; yet, few formal mechanisms for such coordination exist, 7.19 Inaddition, LawNo.4/1994 requeststhe inspectors ofEEAAand other administrative concemed authorities to report to the authority to which they belong any violations of the provisions o f the law, which inits tum shall instruct the establishment owner to rectify such violations Ifhe fails to do so within 60 days, EEAA in in co-ordination with the concerned authority shall then take the necessary legal procedures ,i.e., reports the violation to the police, presents it to the district attorney, and, where the case warrants further action, brings a legal action to court. Inorder to improve its performance, the Ministry o f Interior has introduced changes in the organizational structure o f its Environment and Surface Water Police, as well as in the responsibilities o f their general departments to become a specialized authority responsible for the protection o f the environment, inits broader sense. The Egyptian legal system doesn't however, with its tremendous backlog o f cases and lack o f experience with complex environmental issues, support timely and effectively the enforcement o f the law. 7.20 The MSEA i s considering amendment to the existing law in order to mitigate some of its weaknesses. EEAAhas already prepared, with the participation o f and in full consultation with concerned authorities involved inthe inspection and enforcement o f environmental regulations, and after 5 years o f practical enforcement o f Law 4/94 (after the completion of the grace period of 3 years granted by the law -89- to existing establishments), a detailed study on the weaknesses, gaps, procedural impediments, overlapping aspects with other enforcement mechanisms and priority sections to be amended in the executive regulations. For example, pollutants concentrations will be substituted for pollution loads in order to overcome dilution by many polluting enterprises. Compliance monitoring will be decentralized at EEAA regional branches and the environment management units that were established in the Governorates will also have a monitoring and reporting role. Burningo f wastes will be prohibited, and a penalty for lack o f submission o f an environment impact assessment and failure to keep yearly environmentalrecords ineach establishment, will be imposed. 7.21 Despite its weaknesses, the enactment o f this law had many positive impacts. It allowed civil society to have a voice heard in the press, in the media and inpublic hearings concerning environmental issues. It also enabled NGOs to monitor compliance and even win court cases against the State. It provides intemational donors with legal assurance for financing environmental investments. It also created a market for local and international consultants that specialized in environmental impact assessment and in the preparation o f compliance action plans for polluting industries that requested a grace period for originally complying with the terms o f the law. It introduced the provision o f environmental services in the private sector particularly in water, wastewater, solid waste management and industrial pollution control. EnvironmentalImpactAssessment(EIA) SysteminEgypt 7.22 The legal basis for EIA i s established by Law No. 4 o f 1994. It i s implemented through its Executive Regulations, issued by Prime Ministerial Decree No. 338 o f 1995. These came into full force in 1998, at the end of the grace period granted by the law to existing establishments at the time of enactment o f the executive regulations. 7.23 The Law No. 4 and its executive regulations require that an EL4 be prepared for all new projects as well as the expansions and renovations o f existingones. Provisions within the law also cover pollution control o f existing activities, including monitoring o f environmental impacts by owners o f activities who have to keep environmental registers as specified by the Egyptian Environmental Affairs Agency. EEAA i s responsible for checking the accuracy o f these in coordination with the Competent Administrative Authorities. Sectoral ministries and Governorates are the Competent Administrative Authorities for EIA in Egypt, as they possess the executive powers in relation to development authorization. Additionally, they are required by Law No. 4 and its executive regulations to conduct the screening o f projects. The Central EIA Department o f EEAA i s responsible for supervising the screening process, managing the review o f EIA reports (either by undertaking reviews itself or by assigning independent bodies or individuals to do so), tahng decisions on the acceptability o f EIA reports, and giving an opinion on the development and proposals for mitigation measures. EEAA also has the responsibility for issuingEIA guidelines. 7.24 General guidelines for EL4were issued by EEAA in 1995 with assistance from DANIDA. These describe in detail the procedures for EIA as identified in L a w No. 4 and its executive regulations. They describe the screeningmethod which is based on three lists o fproject types: white list projects with minor environmental impacts; gray list projects which may result in substantial environmental impacts, and black list projects for which complete EIA i s mandatory due to the magnitude and nature o f their potential impacts. The guidelines include two screening forms, form A for white list projects and form B for gray list projects. For gray list projects, EEAA may require a "scoped EIA," whose scope i s specified by EEAA on the basis o f the information presented by the developer in form B. These general guidelines also include a general outline o f the content o f a full EIA report, and brief sectoral guidelines which define the content o f EIA reports for establishments that need full EIA. Both the Support for Environmental Assessment and Management (SEAM) project funded by the UK Department for -90- International Development (DFID) and the Organization Support Program (OSP) funded by DANIDA assisted EEAA in the development o f sectoral guidelines in the forms o f terms o f references to be provided to consultants and operators. 7.25 Although the EIA process has been anchored as part o f the issuance o f permit system by the competent authority, the EIA system revolves around a project and does not include the preparation o f regional/sectoral environment assessment as inthe case o f establishment o f new industrial zones or cities, 7.26 Several ad-hoc regional/strategic environmental assessments have been conducted to address key environmental issues (e.g. coastal zone development, industrial development in Helwan, relocation o f industry from Gamaleya Islamic quarter, the El-Kawthar industrial city in Sohag and part o f the Gulf o f Suez development). These have been funded by international various sources, and some have been influential in changing development policies and plans. The coastal zone assessment for example resulted inEEAAdevelopment guidelines which are being usedeffectively. 7.27 The EIA system suffered at the early stages o f its implementation from some administrative and management shortcomings such as the centralization o f the decision malung in EEAA central organization and the lack o f specialized trained human resources. As o f 2002, the regional branch offices o f EEAA (RBOs) have been delegated the responsibility o f reviewing o f Category A projects (white list projects), and it i s planned to delegate Category B projects (gray list projects) to fully established and staffed RBOs. The system continues however to suffer fiom other shortcomings :(a) lack o fpenalties for violations o f the EIA requirements for an operator that did not prepare an EIA, (b); (b) poor technical capacities o f the relevant licensing authorities for screening and approving the EA reports; (d) perceived lengthy life cycle for EIA approval which could be extended to two years instead o f 60 days, mostly in case the applicant does not provide adequate documentation or respond to EEAA comments and observations in a timely manner ; (e) emphasis in reporting on the performance o f the EIA system on quantity rather than quality o f the EA reports; (f) disconnect between the EIA system and the monitoring and follow up on the environment mitigating measures after the EIA report i s approved, and (g) absence o fEIA report for National and/or Megaprojects unless they are co-financed by international donors or by foreign investors. 7.28 In1999, the Mediterranean Environmental Technical Assistance Program(METAP) conducted a thorough assessment o f the EIA system to assess its compatibility with international norms, and develop an action plan for further improving the quality and effectiveness o f the state system so as to achieve standards o f best international practices.43 Annex 7.3 provides a comparison between the Egyptian EIA system and that o f the World Bank environmental assessment as described in its operation policy OP 4.01. 7.29 Many o f the features o f the Egyptian EIA system are generally compatible with the corresponding features o f World Bank operational policy (OP 4.01). However, there are differences in certain features, which are proposed inTable 7.3. The most fundamental one is related to the absence o f consultation and public participation inthe EA preparation and review process. 7.30 Public participation i s not mandatory inthe Egyptian EIA system, and as a result is often ignored. Public hearings are held mainly only for overseas funded projects. Ingeneral, EIAreports are regarded as confidential documents. There i s a widespread view among those involved in EIA inEgypt that it i s a technical process, to be entrusted entirely to professionals. 43 METAPEIA Institutional Strengthening Project, www.metap.org -91- 7.31 There was some evidence o f movement towards greater openness. The Governorate o f Cairo has scheduled public hearing on environmental issues in Helwan and in Cairo. These have served a useful purpose in identifying public concerns. Governorates are permitted to retain copies o f EL4 reports, to enable them to discharge their responsibilities for compliance monitoring. Some developers have voluntarily involvedNGOs inEL4 studies. Such cases appear to be the exception, however. 7.32 Irrespective o f the limitations which it places on decision-malung processes, the lack o f openness inthe Egyptian EIA system limits its own effectiveness by restricting coordination between government departments, the awareness o f public concerns, the use o f public knowledge, and actions to improve EL4 quality. Despite the training workshops organized for the different actors involved in the EL4 system, including NGOs and consultancy firms, additional support i s still needed for promoting awareness o f the potential benefits o f consultation and public participation. Table7.3: ProposedActions for Harmonizingthe NationalEIA Systemwith OP 4.01 Handbook. Use o f relevant measures should apply to those grey list and white list projects to which they are applicable, as well as to black list ones. 9 Guidelines Further guidelines are needed to give developers and consultants fuller guidance on potential impacts and appropriate impact prediction techniques. 10 Trans-boundary and global Regulations or enforceable procedures should specify the study o f trans- imuacts boundarv and global imnacts. The EnvironmentalInstitutionalFrameworkinEgypt 7.33 There are 17 environment-related institutions in Egypt. They could be classified inthe following three categories: (a) the national environmental organization represented by the Minister o f State for Environmental Affairs, the Egyptian Environmental Affairs Agency (EEAA) and its eight Regional Branch Offices (RBOs) which are charged with overall monitoring and regulatory coordination; (b) institutions with specific operational functions on environment which are performed by environment units in line ministries, and by environment management units (EMUS)in the governorates; and (c) institutionswith environment support role. These are the universities and research institutes. The Ministerof Statefor EnvironmentalAffairs andthe EgyptianEnvironmentalAffairs Agency 7.34 The Environmental Protection L a w provided new mandates for the Egyptian Environmental Affairs Agency. Given its coordinating and horizontal role among all ministries, EEAA was put under the responsibility o f the Council o f Ministers, and a Minister was assigned to oversee the work o f the -92- agency and chair EAAA Board o f directors. The Chief Executive Officer (CEO) o f the Agency i s nominated by the Council o f Ministers and has a First Undersecretary rank. The CEO oversees the day- to-day management o f the agency and ensures that the policies and guidelines provided by the Board are implemented. The detailed functions o f EEAA are attached in Annex 7.4. Its main responsibilities were merely o f a coordinating role and development o f legislation, standards, studies, and projects. EEAA was not responsible for developing environmental policies in accordance with the terms o f the law. Beingpart o f the Council o f Ministers structure, EEAAdidnot have a separate state budget until 1998. 7.35 Untilthe early nineties the EEAA was weak and seriously understaffed. This was due to new EEAA mandates for which the required skills were not readily available in the Egyptian market as a whole, such as skills required for reviewing environmental impact assessment studies, hazardous waste management, industrial inspection, etc., and the GOE has put a freeze on the employment o f its civil servants, forcing EEAA to appoint temporary staff and local consultants on the basis o f annual contracts. At present, o fthe total humanresources available temporary staff constitutes 70% o fthe total staff. 7.36 Soon after NEAP, several measures were undertaken to enhance the institutional and human resource capacities o f the Agency, among which were: 0 the implementation o f a number o f donor supported projects aiming at enhancing the institutional capacity o f the Agency, most significant among these being the DANIDA-fundedOrganization Support Program (Phases I& II); 0 the appointment o f junior employees to the various departments to fill in the shortage in human resources; 0 the establishment of the Technical Cooperation Office for the Environment (TCOE), a separate entity outside EEAA approved-organigram and reporting to EEAA CEO. TCOE was staffed with young and dedicated professionals that carried the responsibility of following up with the donors on NEAP programming, preparing projects for donor funding and be the main liaison office between the donors, EEAA, sector ministries and governorates. Until 1999, TCOE was supported and funded by intemational donors. In addition, TCOE was also requested to provide technical assistance to the main agency; and ' the appointment o f representatives o f donors which established offices with local staff inside EEAA. 7.37 In 1997,as result ofthe formation ofthe new cabinet, a new position o f the Minister of State for Environmental Affairs was created. By virtue o f the Presidential Decree No. 275 o f 1997,the Minister o f State for Environmental Affairs (MSEA) took charge o f day-to-day management o f EEAA, with the CEO acting under hisher delegation o f authority. The Minister o f State also appointed advisors with duties that mirrored many o f those to be implemented by the different offices o f EEAA. This may have contributedto redundancies and lack o f clarity inthe chain o f command. 7.38 EEAA is currently a much better established organization than it used to be ten years ago. Departments are better performing their functions, staff are more experienced and confident with their responsibilities, needed departments have been established and staffed (such as the Inspection Unit and the newly-established industrial unit) and Regional Branch Offices have been established, staffed, equipped and are operational. EEAA succeeded also to incorporate the TCOE as part o f its organigram into a department o f international affairs & technical cooperation and a department o f planning and follow up, established a "Public Services Office" whose function i s to handle public complaints, and lately established a Sustainable Development Unit. -93- 7.39 One major weakness lies in the lack o f enforcement and compliance with the terms of the law. The establishment by the Minister of Environment Decree No. 132/2003 of the General Department for Inspection within EEAA and directly reporting to the Head o f the Environmental Management Sector, has been supported in terms o f capacity buildingby several projects, such as the EEIS, EEPP, and EPAP. In the same context, general industrial inspection manuals and provision o f on-the-job training were developed. The General Department for Inspection sets inspection policies, carries out several inspections in emergency situations where complaints are blatant and is responsible for inspection planning, coordination, and reporting to the executive management o f EEAA. The General Department for Inspection at EEAA commenced operations as an InspectionUnit with no official administrative status, as per the official organigram o f EEAA approved by the Central Authority for Organization and Management. It also started with a mandate that all inspection tasks be compiled within the authorized Inspection Unit. At present, EEAA faces a serious shortage in the number o f inspectors; the overall number of inspectors at EEAA (centrally) i s limited to 14 inspectors hired by virtue o f temporary contracts. Staff o f the existing Regional Branch Offices (RBOs) conducts inspections as well. However, the total number of inspectors both centrally and regionally do not exceed 50 inspectors covering all activities (industry-tourism- waste, etc.) and inall governorates. 7.40 From the establishment o f the Inspection Unit in the year 2000, up to June 2002, 500 law- violating establishments were taken to court, 25 o f which reconciled with the Agency, 150 cases are still being investigated, and nearly 150 cases received a verdict. However, in 90% o f the cases ruled, the fine imposed did not exceed L.E. 1000, that is the lowest minimum fine mandated by virtue o f the Environmental Protection Law. The personnel o f the Inspection Unit attributed this to the judges that are not fully aware o f the extent o f the environmental damage caused as a result o f these violations. Relatively weak penalties led to the exacerbation o f the violations. Establishments' owners found it much easier and cheaper to pay the fine than to rectify or control the polluting activity. 7.41 At the local level, each of the 26 Governorates has an Environmental Management Unit (EMU). The organization and operations o f the EMUs vary across these Govemorates. Under the existing institutional framework, the EMUSrepresent the primary local authority on environmental issues and, in many cases, operate as the executing agencies for EEAA's environmental policies and programs. Most EMUs have received training from capacity building projects supported by a number o f donors. To be able to perform their functions effectively and promote decentralization, all EMUs would need to be raised to a higher institutional level, a General Directorate level, which would then increase their effectiveness and guarantee a separate budget for their operations. These units would retain their administrative affiliation to the Govemorates and would be technically affiliated to EEAA. The EMUs also still need additional staff, training, office and technical equipment. Successful piloting, supported by donor funded projects, has taken place in several governorates including Sohag, Damietta, Quena and the Red Sea. LineMinistries 7.42 At the sector level, many line ministries andor national institutions have a department or unit mandated with environmental management issues, these are shown in Table 7.4 below. These environmental departmentshnits vary in terms o f their capacities and experiences. However, except for the environmental units o f MOHP, MOMP, and MOI, they all share two common features: they are relatively newly-established or mandated with environmental concerns, and accordingly have limited environmental management capacity and experience. Some ministries, by virtue o f their mandate, have a mainstreamed approach towards environmental issues, such as MOWRI, MOLD, and MOH. The mechanisms for coordination with EEAA and those applied within various ministries are however -94- unclear. It i s also interesting to note that the Ministry o f Foreign Affairs by virtue o f its international and diplomatic responsibilities follows very closely all matters related to sustainable development. 7.43 Table 7.4 provides a brief overview on the responsibilities o f the different line ministries in the field of the environment, the environmental institutions andor divisions within these ministries,and their affiliated concerned departments. -95- Table 7.4 LinesMinistries/National Institutions -Mandated with EnvironmentalIssues Ministries Affiliated National Environmental Environmental National Institution Institution or Division Department o r Unit Management Responsibility Ministryof Health and Central Department for . General Department for .Setting environmental Population (MOP) EnvironmentalAffairs Environmental Health, health policy and regulation . General Department for Environmental . Preventionandcontrolof Monitoring environment-related health problems and - General Department for diseases through food inspection environmental health officers. - General Department for occupational and industrial medicine . OperatingtheNational Air Pollutionandthe RiverNile Water Quality Networks - Monitoring water quality for drinking and domestic purposes. - Monitoring the municipal and industrial effluents through sampling Ministryof Water NationalWater Climate Change and Protecting all public ~~ Resources and Irrigation Research Center Environmental Institute water resources in Egypt Regulatingand controlling sources o f water pollution Operation o f the national surface and groundwater monitoring networks Issue regulations setting water quality standards and discharge limits Facility inspection and reporting violations to the police Coastal Protection Protection o f coastal line Authority against erosion and seawater intrusion Water Quality Policy development, Management Unit decision support system and monitoring Ministryof Local Solid Waste Overview the orivatization Development Management Unit process o f solid waste management services inthe Govemorates MinistryofTourism Tourism Development Environmental Unit Authority Ministry o f Industry General Organization (MOI) for Industrialization Ministryof Housing General Organization General Department for -96- 1 Utilities and Urban for Sanitary Drainage Zontrol of Industrial supply, sewage collection Communities Discharge and treatment and solid waste management Planning and construction o f new industrial cities. Preparing land use/physical plans. MinistryofInterior Environment and . Special policeforce for Surface Water Police enforcement o f law 4811982 and law 411994 Traffic Departments - Implementation o f the Vehicles Emissions [nspection, according to Law 4194, General Department for General Department for (MOMP) Occupational Health and Occupational Healthand Safety MinistryofAgriculture & Agriculture Research -Safety Management and Land Reclamation Center conservation o f (MALR) agricultural land, wildlife, and biological resources. - Preventing soil stripping and protecting land from degradation. - Regulating the purchase, importation and handling o f pesticides. Ministry o f Electricity and Egypt Electricity General Department for - EIAs o f electricity projects Energy Holding Company Environmental Studies - Periodic environmental audits and reviews Environmental Affairs Departments within the - Management o f monitoring affiliated companies and and inspectionprogrammes stations - Implement environmental compliance plans - Collaboration with environment-related I organizations Ministry o f Petroleum Egyptian General Deputy Chairman for Deputy Chairman for Petroleum Cooperation Environment Eniironment Ministry o f Foreign Department o f Sustainable Development Affairs Environment and Sustainable Development Affairs EgyptianUniversities and ResearchInstitutes 7.44 In addition to the environmental infrastructure at the sector and local levels, Egypt has a core of well-trained academics and researchers that are involved in the field of the environment. All major -97- universities have undergraduate and graduate programs in environmental engineering and/or public health. The major research centers such as the National Research Center o f the Egyptian Academy o f Scientific Research and Technology, the Agriculture Research Center o f the Ministry o f Agriculture and Land Reclamation and the National Water Research Center o f the Ministry o f Water Resources and Irrigation have a caliber of well-trained staff and excellent computer and laboratory facilities. 7.45 Many universities and research staff members are also providing consulting services either through their specialized research centers, or through the establishment o f private consulting firms which have flourished through contracting with international donors and with sector ministries. It i s also common practice inEgypt to call upon the academic and research staff to be part o f national commissions to assist inthe resolution o f emergency environmental issues and/or to find rapid solutions to mitigate the impacts o f these issues. The solutions proposed are always o f a high technical / engineering quality, though the socio economic dimension i s not often considered. Despite such talents, no universityior research center offer academic syllabi or training programs in the field o f policy analysis and environmental economics which are now required if EEEA i s to be involved in strategic planning as stated inits action plan. InformationDisseminationand Coordination 7.46 Egypt has established a system o f environmental information at the Council o f Ministers' level and at EEAA level. The Council o f Ministers has established the Information for Decision-Support Center, a specific entity that i s responsible for collecting and analyzing information that will support the decision-making process inall government entities. 7.47 The Environment Protection L a w No. 4 o f 1994 requires EEAA to publish on a yearly basis a State o f the Environment Report, and to collect and publishnational and international information related to the environment on a periodical basis in cooperation with information centers o f other agencies. Although the Law was issued ten years ago, and that private consulting offices have been contracted to develop the State of the Environment Report, no single report was published. 7.48 The Egyptian Environmental Information System (EEIS) was established at EEAA to assist GOE's decision-makers to formulate and implement timely and appropriate environmental policies, legislation and programs. The EEIS produces timely and accurate environmental status reports, used to inform the Cabinet, others in Government and the public. The EEIS i s also used to assist in developing environmental projects and policy options, and in monitoring and enforcing compliance with environmental regulations; however, the information generated i s not in the public domain. The EEIS produces these reports using the data generated by the Environmental Information and Monitoring Program (EIMP) which produces real time data on air pollution from 43 air quality monitoring stations connected on line in a network and covering the major Egyptian cities. EIMP also produces annual reports on the pollution o f marine water on the Mediterranean coast. These reports are for internal circulation only. 7.49 The annual and monthly reports on the status o f air pollution and marine water pollution are for internal circulation only. This information i s valuable given that EEAA generates real time data from 43 air quality monitoring stations distributed all over Egypt and i s also taking regular sampling of the marine water on the Mediterranean coastline. Inrecognition o f the importance of establishing an information and management system for the identification, registration, categorization and management o f hazardous chemicals, MSENEEAA developed a comprehensive system for hazardous substances. Efforts were directed towards the collection o f data from different sources, which included producers, users, importers, and distributors o f chemicals. -98- 7.50 M S E A and EEAA have made substantial efforts generating environmental information; however, their diffusion is only limitedto positive achievements. Furthermorethis information is not being usedto make sound decisions regarding environmental protectionand management. PublicParticipationandthe Role of Media 7.5 1 The general public inEgypt i s becoming increasingly active inthe environmental field, as a result o f its increased awareness about environmental issues. Over the last decade, the public's role has been switching from a passive one to a more pro-active role. The media has contributed largely to this increased awareness and to change in behavior. All the major newspapers cany out weekly reports on environmental activities, and do not hesitate to bringto the public the major violations undertaken by the State or by private violators. TV reporting i s also frequent especially incases o f environmental crises and serious environmental violations. The Government has sought to increase public awareness by establishing several media programs established during the past five years, developing an environmental journal and Green Message for journalist, and implementing an environmental awareness campaign to enforce Law No. 4/1994. Despite all these efforts, public opinion i s not yet significant to influence the policy formulation process and to create a significant responsible behavioral change towards the environment. 7.52 A stronger partnership with the media could be achieved if its role is further strengthened, as requestedby the media itself, through: 0 The development o f a communication strategy and campaign for M S E N E E A A to address the major environmental issues 0 The development o f the necessary communication materials in print, radio, TV, and other media as may be appropriate; 0 The provision o f training and technical support for developing an outreach and mobilization program for different targeted groups such as the public at large, the decision makers, the investors,... etc;and regularly update the communication and the information based on actual facts 0 Conducting periodic assessment and public opinion surveys on the programs and activities offered by the media The Role of civilsocietyinthe EnvironmentinEgypt 7.53 Egypthas anumber o fNGOs actively participating inthe environmental arena. Estimates are that more than 270 environmental NGOs are working on various aspects o f environmental management in Egypt, on issues ranging from public awareness and environmental education to waste collection and community self-help programs. However, very few environmental NGOs have grass root linkages to influence the public or the community they serve. NGOs have been increasingly involved in project implementation, in public debate and also in ensuring compliance with the environmental laws. Court rulingswere won by some o fthem. NGOscan be classifiedinto three main types: The first type are those concerned with the field o f the environment as a whole and cover various issues, such as the Arab Office for Youth and the Environment and the Friends o f the Environment Association inAlexandria; the second type are those who concentrate on particular environmental issues, such as the Association for the Development o f Services in Zamalek, and the Association for the Protection o f the Environment which specializes in community development for solid waste management services and in particular with the Zabbaleen community while the third type is the scientific societies and research institutes, such as the Egyptian Society for Marine Sciences and Technology and the Egyptian Association for Toxic Sciences. -99- 7.54 Most o f NGOs are prominent because o f the leadership who i s a recognized figure in the Egyptian society, rather than the nature o f the activities NGOs undertook. NGOs leaders are usually called upon to provide their views and advice but they have not influenced the policymakers, and are not yet agents o f change. 7.55 L a w No. 4/1994 recognizes the importance o f NGOs in environmental management, requiring three representatives from the NGO community on the Board o f EEAA and providing authority for NGOs to bring legal action to enforce its environmental requirements. MSEA and EEAA are encouraging NGOs to take a more active role at the grass root level, and serve their communities. A special unit was established at EEAA to enhance NGO collaboration. M S E N E E A A i s also co-financing with NGOs community type projects, and provided LE 3.5 million for 140 projects to be implemented by 140 organizations. Many international donors have also provided direct assistance to NGOs to design and implement community-driven projects. This has enabled many NGOsto develop their own technical and managerial capacities at the local level. However, NGOs continue to depend primarily on external donor assistance for funding including, and find it difficult to sustain their activities with the local resources. 7.56 In addition to environmental NGOs, three national councils are also playing a major role in promoting the environment. The National Council for Woman (NCW), the National Council for Motherhood and Child Care and the Supreme Council for Youth and Sports. 7.57 NCW i s entrusted to empower women to play an effective role as major contributors inthe social renaissance. The standing committee within the NCW on Health, Population and Environment follows up and evaluates the implementation o f public policies relating to environment and health on women issues. The N C W i s drafting a proposed five-year plan to be submitted to the relevant authorities. This plan will be taken into consideration when drafting the gender component within the Comprehensive National Development Plan. The plan includes all aspects o f society such as education, health, social security, environment, labor force and the media. The NCW i s establishing a documentation center to collect information, data, and studies on women as well as conduct its own studies and researches inthis area. The studies may include areas related to gender issues such as the impact o f structural adjustment programs on women, the impact o f environmental degradation on women, environmentally sounds technologies suitable for small industries, and a program to involve Egyptian women engineers and technologies in developing environmentally hendly technologies for rural areas. The World Bank i s also providing grants to strengthen the role o f women inmonitoring environmental activities (see Chapter 9). 7.58 The National Council for Motherhood and Child Care and the Supreme Council for Youth and Sports have been planning programs and projects to develop skills and raise environmental, cultural and social awareness o f the Egyptian Youth sector. MSEA i s also organizing summer jobs for youngsters in projects that will benefit the environment. The Role of the Private Sector in the Environment 7.59 The Five-Year Development Plan (1998-2002) calls for expanding the ownership base for companies previously operating under the public enterprise sector and allowing unrestricted opportunity for the private sector to maximize its role in enhancing socio-economic development. 7.60 The private sector is involved in the environment through: (a) providing consulting services for EIA, environmental studies, and environmental engineering principally in the field o f water, wastewater, irrigation, industry and energy sectors; (b) financing environmental- related investments in tourism, petroleum, agro-business, and industrial sectors; (c) operating environment-related activities, such as in -100- the solid waste sector and in the energy conservation and efficiency field (ESCOs); and (d) producing environmental equipment for wastewater, energy and cement sectors for example. 7.6 1 The private sector also receives concessionary financing from the different environmental-related funds (Chapter 8, Sections 8.13-8.26), established either by the Government or by International Donors. The Social Fund for Development, for example, through its Environment and Development Department (EDD provides soft loans for projects where environmental and social dimensions are considered. The EDDis active inproducing guidelines for pollutionprevention and control, and has a controlling role to guarantee that subprojects are not detrimental to the environment. 7.62 The private sector has been encouraged to participate in energy-related projects as part o f the national privatization program. Through the Build-Operate-Own-and-Transfer(BOOT) system, the first three power generation plants were established in Sidi Kreir, Suez and Port Said. Most activities in agriculture and tourism sectors are also financed by the private sector. The private sector has recently proposed to enter into a private-public partnership in the irrigation sector in the West Delta with a potential assistance fkom the World Bank and KfW. 7.63 The private sector i s starting to become environmentally responsible by complying with environmentalregulations, especially when it exports its products or i s injoint ventures with international firms. Many private companies are investing in new and cleaner technologies to increase their profitability while complying with environmental'regulations. Some companies have already acquired I S 0 14000 and I S 0 14001 certification. In order to assist the private sector in environmental due diligence, intemational donors and financing institutions, such as KfW, the World Bank, and EIB are also providing concessionary lending through local banks. OverseasDevelopmentAssistanceinthe Environment 7.64 Since the establishment o f NEAP of 1992 Egypt was assisted by 19 intemational organizations to move its environmentalagenda forward. Ofthese organizations, nine were bilateral and included: Canada (CIDA), Denmark (DANIDA), Finland (FINNIDA), Germany (GTZ and KfW), Italy, Japan (JICA), Switzerland, the United Kingdom (DFID) and the U S A (USAID). The eight multi-laterals included the Arab Fund for Economic and Social Development, the European Union, the European Investment Bank, the Center for Environment and Development o f the Arab Region and Europe (CEDARE), the Global Environmental Facility (GEF), the Mediterranean Action Plan (MAP), the Mediterranean Environmental Technical Assistance Program (METAP), The United Nations Development Program, the Ozone Multilateral Fundand the World Bank. -101- 7.65 The total amount o f donor funds allocated to the field o f Environment and coordinated through M S E N E E A A reached nearly the equivalent o f LE 2.4 billion.44 These amounts are distributed among 51 environmental programs and projects about half o f which are still ongoing. Figure 7.1 presents the distribution o f the official development assistance (ODA) by environmental donors, with USAID providing the largest assistance. Figure 7.1 Distribution of Environmental Official Development (199$200) Including Both A+-: D.. n ---_ Bilateral and Multilateral Donors @UnitedSates of (!SA1 ) MDenmar-Danid OThe Woild OOzone MultilateralFundin .. .German- KF - GT -FE . - - @GlobalEnvironment - GE .Canad - CID OThe European -E MUnited -DFI - Japam;lC OThe United Nations Development - OND olsal MFinlan-Finnid MSwitzerlan MMETAP Donod MThe Arab Fund for Economicand Devevopme 7.66 Figure 7.2 shows the volume of assistance allocated to each environmental fieldsector. As indicated, the highest percentage o f support 42.9% was channeled through the policy support and environmental management programs (sponsored by USAID4' and Denmark46) while industrial pollution abatement and air pollution together account for 26% of the total support. The least supported sectorkeld i s solid and hazardous waste management being 1.8%. Approximately 91% of the total assistance was in the form o f grants, while only 9% was inthe form of loans. 7.67 Inaddition to the grants and concessionary loans channeled through EEAA, international EnviranmttSeda donors provided an on going allocation o f US$2.3 44 OrganizationSupport Program: Reportreviewing donors projects implementedincooperationwith EEAA over the past ten years 1991-2001, August 2001. 45 USAID: EgyptianEnvironmentalPolicy Programand Sector Policy Reform111. 46 DANIDA: EnvironmentalSector ProgramSupport. -102- billion for three sectors that are considered environment-related investments. These are: water supply and sanitation, irrigation and drainage and solid and hazardous waste management. USAID i s the largest financier in the urban water supply and sanitation with no contributions from the World Bank in this sector . All donors have also invested in agriculture and/or irrigation for the amount o f US$ 840 million. Japan and Finland have also invested in solid waste management and hazardous waste management in Alexandria respectively. Figure 7.3: Donor Allocations in Specific Sectors Ongoing Donor Allocations for Major Sectors 1600 5 1400 1200 Water supply and Sanitation .I 1000 E 800 tff 3 600 Agriculture and 400 Irrigation 200 0 'M USolid and ~ Hazardous Waste 7.6E With such a level o f assistance, the donors succeedednot only inputtingthe issue o fenvironment on the GOE's policy agenda but in building the environmental infraskcture at the national level in major sector ministries as well as at the local level in the govemorates. They have stimulated the participation o f NGOs and local communities in addressing and solving their environmental issues. Without the injection o f technical assistance, capacity building, laboratory and monitoring equipment, the environmental related agencies would not be now in a position to carry out their present functions o f environmental management 7.69 Onthe Egyptian side, the Technical Cooperation Office for the Environment (TCOE), which was a separate entity outside EEAA,was established by UNDP and responsible for NEAP implementation and follow-up. In 1999 MSEA issued a policy directive for international cooperation in the field o f the environment delineating its functions and responsibilities as: 0 Coordinating the different donor agencies in order to achieve the maximum benefit and avoid duplication o f efforts; 0 Ensuring the presence o f the element o f sustainability in all projects and programs; 0 Steering cooperation with developed nations to areas where they possess comparative advantages; -103- Maximizing the utilization o f indigenous capabilities especially in areas where there are abundant highly qualified national experts; Emphasizing the importance o f experience and technology transfer particularly in areas where Egypt may still be considered a newcomer, such as Hazardous Waste Management and EnvironmentalImpact Assessment (EIA); Encouraging capacity building efforts as being an essential component in all cooperation programs; Developing partnerships and new cooperation patterns that would benefit all parties involved, such as the Gore-Mubarak Partnership between USAID and Egypt, and the Egypt Environmental Initiatives Fund (EEIF) established in cooperation with the Canadian International Development Agency (CIDA) whereby new innovative participatory relations are establishedbetween NGOs and the private sector; and Cooperating with other developing countries in order to benefit from shared experiences; including the initiation o f experts' exchange programs and training courses in the different areas o f specialization where the developing country may have a comparative advantage. 7.70 As a result o f this ambitious policy decision, the TCOE was replaced by a Department for Intemational Affairs and Technical Cooperationwithin EEAA, giving this agency a difficult and complex role o f facilitating coordinatingand/or implementing environmental activities amounting to LE2.4 billion with very limited staff. EEAA technical departments are now more involved the implementation o f donor-funded projects, and the staff from the International Affairs and the Technical Cooperation Department i s doing its best efforts to ensure the sustainability o f these projects. N o detailed business plan was prepared in order to support the implementationo f these directives which looked good on paper but could not be fully implemented with EEAAlimitedregular staff 7.71 Due to such lack o f human resources within EEAA, many projects and activities continued to be outsourced by the donors to international/ local staff to assist inthe management and supervision o f their projects outpacing therefore EEAA capacity to deliver. Nevertheless, institution-building projects helped strengthen the re-structured EEAAinimproving its slulls and inestablishing laboratories and information systems in order to perfom its environmental responsibilities at the national and local level. It also demonstrated the tangible benefits o f improved decentralized environmental management and provided tools to the governorates inenvironmentalplanning and monitoring. 7.72 There i s also an excellent cooperation and collaboration with Govemment agencies and among donors who kept each other informed through the establishment o f a subcommittee o n environment so as to maximize their contribution and avoid overlapping between the different programs. One major concern that will have to be faced by the GOE is the establishment by the donors o f large capital assets without ensuring that these assets could be maintained, inthe long term, usinglocal resources. It is not yet clear how these projects will be sustained once donor funding will cease. This could compromise the sustainability o f these projects if local resources were not made available for the operation and maintenance o f these assets. 7.73 Many donors have now changed their strategies so that environment i s no longer a priority per se but a cross-cutting theme which should be addressed as part o f development with action-oriented objectives consistent with the Millennium Development Goals. Many donors such as USAID have included the environment as a core o f economic growth, facilitating trade and partnership. Others such as DANIDAand FINIDAhave signaled a decrease intheir level o f grant assistance now that Egypt hasbeen classified as middle-income country. Japan and Germany are maintaininghncreasingtheir environmental assistance, and multilateral environmental agreements (CDM, PCF and GEF) could be viewed as additional financial resources for environment support. Recognizing the change in donor strategies, -104- Egypt needs to have its own strategy for mobilizing local resources to sustain these large capital assets, and finance ,its own environmental investments. The Roleof the World Bank 7.74 Since 1991, the Bank has played a major role inthe field o f environment and natural resources. It provided assistance with a team o f international donors, the GOE in preparing NEAP o f 1992 which led to substantial technical and financial assistance from the international donor community inthe field o f the environment. From 1992-1995, the Bank role in the environmental field was very modest. It was re- activated as a result o f the publication inDecember 1995 of the first MNA environmental strategy.47 As a result o f this strategy, the Bank approved inDecember 1997 the first stand alone environmental project, The Egypt-Pollution Abatement project,^ a US$35 million IBRDloan and IDA credit whose objective is to strengthen the enforcement capacities o f environment related institutions, and to establish technical and financial mechanisms for supporting pollution abatement investments. This project was co-financed by FINNIDAwith a grant o fUS$6.0 million equivalent. Since then, the Bank, through activities financedby the Mediterranean Environmental Technical Assistance Program (METAP), was able to be involved in the policy dialogue andprovide support to MSENEEAA. 7.75 The Country Assistance Strategy o f June 200149considers the environment as cross cutting among three types o f interventions that support higher and sustained growth (supportingmacroeconomic stability, phased restructuring o f the banlung and corporate sectors, and improved infrastructure for greater competitiveness). The Bank's lending, at least under the base case scenario, would be targeted for poverty reduction (basic education and health, social protection and safety net, and rural poverty), and also for having an indirect poverty reduction impact. These would include interventions that may have major indirect benefits for the poor in terms o f promoting broad-based growth, developing poor areas, initiating dialogue on governance and community development issues, and building effective institutions. 7.76 As a result o f CAS, the Bank re-oriented its environmental support to Egypt along the following four key areas which are intendedto enhance environmental mainstreamingefforts: Enhancing the quality and effectiveness of Egypt's environmental impact assessment through capacity building and technical support to EEAA; Demonstrating the economic importance o f a clean environment by undertaking: (i) studies to assess the cost o f environmental degradation at both macro and micro levels; and (ii) analytical work on identifying linkage between environment and trade, environment and energy; and environment and poverty reduction. All these studies. were financed by METAP and the Bank trust funds for environment and social sustainable development (TFESSD) for a total amount o f US$2.1 million; Integrating an environmental component into targeted sectoral projects in irrigation, agriculture, and rural development, and also integrating global environmental issues into Bank operations, including the protection o f biodiversity in the Red Sea Tourism Project and the MatrouhI1Natural Resources Management Project; and Developing an electronic environmentalprofile for Egypt. 47 MNA Environment Strategy - Towards Sustainable Development, IBRD- 48 EgyptPollutionAbatement Project, IBRDReport No. 17065-EGT. 49 Egypt -Country Assistance Strategy-IBRD document 22163-EGT. -105- The On-GoingWorld BankPortfolio 7.77 The World Bank has in its portfolio 21 active projects totaling the amount o f US$680.5 million. Irrigation and agriculture constitutes 40% o f the total portfolio, and environment and natural resources constitute 6.8% (US$47.35 million) o f the total portfolio. Figure 7.4: World Bank Portfolio =.-E 5 300 250 200 ; 150 100 50 = o 7.78 Figure 7.5 shows the environment and natural resources components in the on-going Bank portfolio which are very limited as a result o f the characteristics o f the portfolio itself. The irrigatiodagriculture projects have an environment component as part o f the environment management plan, and address primarily the monitoring o f water quality. Improvingwater quality inthese projects has not been a realistic objective since irrigated water i s often polluted by rural wastewater. The East Delta Agricultural Services Project and the Egypt-Pollution Abatement Project are the only projects that have addressed water quality improvement through the financing o f a wastewater treatment plants. With the exception o f EPAP and the Matrouh I1Projects, there were no environmental or NRMindicators included inthese projects -106- Figure 7.5: Lending for Environment and Natural Resources Management in Egypt, as compared to Total Bank Lending in Egypt, FY1994-2004,as of April 6,2004 (includes GEF Projects) -+- Environment and Natural Resources Management Total Bank Lending in EfJypB N 9 5 FY95 FY97 FY98 FY99 FY02 FY03 FYM Conclusion 7.79 Egypt has made significant progress in environmental planning and in shaping up its institutional and legal infrastructure with the assistance from the international community. However, NEAPSwere not usedprimarily to set up priorities and to move forward the policy reform agenda as originally contemplated. Although the Government i s committed to sustainable development, there are not sufficient elements in place to ensure such transition from environmental protection to environmental sustainability. This will require: - a modification in the present institutional and legal framework to create favorable conditions for a decentralized and outward looking economy for which Egypti s committed; - a resolution about the responsibilities and accountabilities within MSENEEAA; - an emphasis on policy measures that can bejustified interms o f cost and benefits; - a focus on few environmental priorities which are demand-driven and for which outputs can be measured; - a requirement that strategic or project specific environment impact assessment should precede major inter-sectoral policies and programs and all investment projects which have negative environmental impacts financed irrespectiveo f financing source; - an openness in the diffusion and dissemination o f positive and negative information o f environmental issues inEgypt; - development o f EEAA work plan to include human, financial and technical resource requirements, ensuring the long-term sustainability through the implementation o fprocedures for acquisition o f environmental information, quality standards and maintenance of environmental information; -107- - better coordination and association of line ministries, local government, civil society and the private sector in designing and implementing policies and programs; and - a national strategic approach to donor collaboration i s needed. Donor funding should be linked to financial and technical performance on the ground, and the provision of technical assistance, knowledge and experience sharing, targeted towards achieving the MDGs. Donor-funded projects should gradually be integrated inthe Egyptian system to ensure sustainability once these projects are completed. An exit strategy shouldbe defined at the onset of the support programs. -108- CHAPTER 8 Environmental Expenditures Introduction 8.1 This chapter reviews the expenditures made by the Government o fEgyptand internationaldonors and financial institutions since the publication o f the National Environmental Action Plan (NEAP) in 1992. The purpose o f the review i s threefold: (a) to estimate the investments made in the field o f environment protection; (b) to assess whether these investments were compatible with the development and environmental priorities during the period 1992/1993 to 2001/2002; and (c) to ascertain the sustainability o f financial resources. 8.2 The investments assessed are limited to Chapter 3 (Bab 3) of the State General Budget which i s composed of: (a) the Egyptian administrative authority's budget including cash contribution made by international donors and financing institutions. This budget i s managed by the National Investment Bank (NIB) which provides the appropriate budget in the form of local credits; (b) the service authorities' general budget which is funded through the State General Budget but offer free services to the citizens and are nonprofit oriented; and (c) the local administration budget (governorates, secondary cities and villages) representing investment projects financed by the state to improve the citizens' living standards. 8.3 The review o f environmental expenditures was made on the basis o f published records from the State General Budget (SGB). Many difficulties were found to separate what are environment-related investments from what i s non-environmental. A further difficulty was encountered in reconciling the grants provided by donors who may not have been posted in the State General Budget since, as shown below, the Ministry o f State for Environmental Affairs (MSEA) and the Environmental Affairs Agency (EEAA) did not have a separate budget before 1997. The estimates for the period 1992-2002, provided below, should be treated as orders o f magnitude. Trends in expenditures are more important than the accuracy o f the figures. 8.4 The expenditures which were included in our analysis are for environment-related investments made in the sectors o f water supply, wastewater, land improvement and reclamation, roads pavements, rural electrification and renewable energy, coastal protection against erosion, environmental research in ministries and institutes, and support to the Ministry of State o f EnvironmentalAffairs which received its first allocated budget in 1997. The expenditures were taken from the budget allocated to the following organizations and ministries (Table 8.1). -109- Table 8.1: Organizations and ministries included in the assessment of budget expenditures ~ Environmental Categories Sector Ministries and Authorities Water General Organization o f Potable Water, DrinkingWater Organizations in governorates Wastewater National Authority for Wastewater, General Authorities inAswan, Minia, Beni Souef, Fayoum, Dakahlia, Gharbiya and Sharkiya Land General Organization for Land Improvement, General Organization for Northern Sinai Region Energy Rural Electrification, and New and Renewable Energy Roads General Authority for Roads and Bridges Coastal Protection General Authority for Coastal Protection, Egyptian Harbor Authorities Research Funds EEAA,Desert ResearchInstitute, Agriculture ResearchInstitute, Water Research Institute, BuildingResearch institute, Development Research Miscellaneous Organization o f Physical Planning, Tourism Development, Cairo City Cleaning and BeautificationAuthority, Giza City Cleaning and BeautificationAuthority 8.5 Included in this assessment i s the support budget in the form o f subsidies. Subsidies are mainly for general transportation inCairo and Alexandria as well as for water supply in some governorates. The total amount o f these subsidies i s LE 300.0 milliodyear. Subsidies related to water and electricity are not explicitly stated in the State General Budget. These subsidies are o f the order o f LE 19-20 billiodyear. They consist o f subsidies in energy for the amount o f LE 14.5 billiodyear (1999/2000)50; in drinlung water for the amount o f LE 2.5 billiodyear; and in irrigated water for the amountof LE 2-3 billiodyear (Chapter 4). The total amount of implicit and explicit subsidies i s estimated to be 19.3-20.3 billiodyear corresponding to 5.2% o f GDP. 8.6 Other environment-related investments financed by the economic general authorities were excluded. These authorities are state-owned, non-profit-making and are not included in the State General Budget. These authorities are managed by a Board o f Directors, and their budget i s issued by a presidential decree. As these authorities are paid for the service they provide, their profits revert to the SGB, and in case of deficits, they are also supported by the SGB. The Ministry o f Investment had an overall portfolio o f L.E. 2 billion over the period 1994-2004 for environmental initiatives. Private sector, profit-making companies also invest in environmental projects, thus contributing to the overall improvement o f the environment in Egypt. Investments made by 55 companies amounted to L.E. 1.5 billi~n.~' 8.7 The SGB analysis shows that environment-related investments were estimated during 1992-2002, to be LE 31.9 billion, representing 5% o f the total investments o f LE 847 billion financed by the State. The environment-related budget increased threefold from LE 1.6 billion in 1992 to LE 5.1 billion in2002. This corresponds, as showninFigure 8.1, to 1.O-1.3% of GDPwhich has beenrelatively constant over ten years. Egypt: Energy-Environment Review, Consultant Report, April 2003 " Source: Ministry of Investement, Comments o n Draft CEA Report, January 2005.. -110- - Figure8.1: Percentage of Environment-Related Investment, 1992-2002 5 0% 4.5% +Percentage of Enviroment- 4 0% Related Investmentsto the State General Budget 3.5% Percentageof Enviroment- 3.0% Related Investmentsto the 2.5% 20% 1.5% 1.O% 0.5% 0.0% 92- 93- 94- 95- 96- 97- 98- 99- 2000- 2001. 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Years 8.8 Figure 8.2 shows the distribution o f investments made by Egypt during the last ten years in the different sectors. Of the total investment o f LE 31.9 billion, LE 13.1 billion was spent on water supply, LE 5.05 billion on land improvement, LE 4.62 billion on rural electrification and renewable energy, and LE 4.27 billion on wastewater, totaling 84.8% o f the budget. Investment in water supply clearly dominates compared with the budget o f other sectors. While the trend o f investments in water supply, land and energy increased by fivefold, fourfold and threefold respectively, reflecting the Government priority to invest in basic services in water and in agricultural/irrigation expansion, investments in wastewater were maintained at an average o f LE 0.4 billion a year. This indicates the low priority given by the Government for tackling one o f the major sources o f water pollution, particularly in rural areas. Furthermore, investments in coastal pollution were small in the first five years (LE 40-50 million), but increased by twofold (LE 160-200 million) in view o f the increased coastal erosion inthe northern coast (See Chapter 6) -111- Figure 8.2 Environment-RelatedInvestmentsby Sector L E 6.00 ...1.- ._-I- -.-^-.---_-_1111~ 5.00 0Others L 4.00 Funds&Research b" L 3.00 HCoastal protection 2.00 1.00 W Roads 0.00 0Energy 0Water 92-2002 Waste water SLand Years 8.9 InNEAP 1992,52environmental investments untilyear 2002 were estimated at a total of LE 8.2 billion for various sectors and themes as shown in Figure 3.4. Priorities were given to water and wastewater followed by air pollution and solid waste management. In comparison with the budget expenditures for the same period, the Government spent a total o f LE 31.9 billion, i.e. four times the total estimated expenditures in NEAP, with water and wastewater investments estimated at LE 17.4 billion in contrast with LE4.75 billion inNEAP. With the exception o f water and wastewater, there seems to be a disconnection between environmental priorities and development priorities, indicating that NEAPwas not used by the GOE for directing environmental-related investments. Also discrepancies between NEAP figures and budget figures are anticipated since it was difficult to reconcile both expenditures by sectors and by environmental categories. Figure 8.3: Distribution of investments in the NEAP of 5000 L.E4500 ( 4000 mil3500 3000 ti0 2500 n) 2000 1500 1000 500 0 8.10 The source of expenditures for these sectors comes primarily from the State Budget as shown in Figure 8.4 totaling LE 23.01 billion (72.4% o f total investments). Foreign loans and grants from international financial institutions and donors amount to LE 7.22 billion (22.6% o f total investments), 52 National Environment Action Plan o f Egypt-May 8, 1992. -112- showing the dominance o f the State in financing environment-related investments. However, foreign assistance i s dominant inthe case o f environmental management coordinated by M S E A which only had a separate budget o f LE 20.7 million as o f 1997/1998. Its investment budget slightly increased to LE 23.3 million and LE 25.5 million in budget years 2000 and 2001 respectively, but was decreased to LE 20.2 million in2002. 8.11 The environmental management "soft" investments were principally driven by international and bilateral contributions totaling LE 2.4 billion during the last ten years (see Chapter 7). Assuming an average o f LE 200 milliodyear, the ratio o f donors to Govemment contribution on environmental management projects i s 10:1, as opposed to 1:5 on environment-related projects in basic infrastructure. The continuous reliance on donor contribution in the form o f grants and soft loans for environmental management is a risky undertaking considering that Egypt i s now classified as a middle-income country which would limit its access to grants from some bilateral donors and that additional operations and ' Figure 8.4 Comparison of Damage Costs and Investments in 1999 P 3.5 E R 3 C 2.5 E N 2 Damage costs Benefits T 1.5 j~lnvestmentsCosts1 A I G 1 E 0.5 0 HealthlQuality of Life' Natural Resources' maintenance resources would be required to sustain the free capital assets provided by these grants at a time when Government revenues are indecline. Figure8.5 Financing of Environment-Related Investments =2-6.0 5.0 - 4.0 3.0 w 2.0 A 1.0 0Localcredits (NIB) 0.0 I Years -113- 8.12 Finally, considering that the cost o f environmental degradation in Egyptin 1999 was estimated at LE 14.5 billion or 4.8% o f GDP, the environmental expenditures seem to be o fthe order o fLE4.4 billion or 1.2% of GDP showing a ratio o f foregone benefits/costs o f 3.3: 1. This may indicate that without these large investments made by the Government, the damage costs could have been even higher. However, it seems as shown inFigure 8.4 above, that the allocation o f these budgets favors primarily the protection o f natural resources and i s not consistent with the distribution o f damage costs which reflect primarily the healthprotection. EnvironmentalFunds 8.13 Inaddition tothe State Government Budget(SGB) andthe internationaldonors contribution, the Government and the International donors have established 14 environmental protection and environmental-related funds in the estimated amount o f UStS0.5 billion and L.E 0.37 billion (1992-2002) totaling LE 3.0 billions3). Two funds for the amount o f LE 366 million, are anchored into Egyptian laws, andmanagedentirely by a public entity outside the SGB; its proceeds are generated from levies, taxes and other charges. These are: the Environment and Tourism Services Fund (ETSF) and the Environment Protection Fund(EPF). 8.14 Twelve others were established with the assistance and financing o f international financing institutions (such as the World Bank and ED) and bilateral donors (CIDA, DANIDA, FINNIDA, KfW, and USAID) and the Social Fund for Development (SFD) under its Public Work and Community Development Programs. The first eleven funds are managed by commercial banks and provide concessionary lending to private and public polluting enterprises, NGOs and SMEs. The Social Fundfor Development (SFD) i s a separate legal entity and provides a concessionary financing in water, wastewater, and solid and hospital waste management services as well as environmental activities for NGOs and for MSENEEAA. At least US $ 338.0 million s4were allocated by the major donors o f the SFD. USAID also provides under its commodity import program (CIP) soft credits for importing U S goods, which could be used for environmental purposes; however, n o reporting was provided on the use o f the environmental financing activities. The EnvironmentandTourism Services Fund(ETSF) 8.15 In 1986, the Government issued Law No. 1.1 for increasing the State resources. It was subsequently re-issued as L a w No. 5 o f 1986 related to an increase in state resources purchase o f international airline tickets in local currency by imposing a 25% tax. The ETSF was allocated 25% of this increase which amounted to 6.25%. The objective o f the ETSF is to finance the plan o fthe Ministry o f Tourism for the preservation and improvement of archaeological sites, as well as pollution control projects by MSEA. 8.16 The ETSF i s managed by a committee chaired by the Minister o f Finances5and composed o f the Ministers o f Culture, Rural Development, Tourism, Administrative Development, Council o f Ministers and MSEA. MSEA acts as the secretary o f this committee. There i s no management and organizational structure pertaining to this Fund. 8.17 ETSF generates its fund from the proceeds o f the 25% o f the increase in the resources tax, i.e., 6.25% o f the price o f an international ticket purchased in local currency. Since its establishment in j3 Using an average exchange rate of 1US$ =LE 5.0. 54 Egypt-Social Development Fund, Annual Report 1999. j5 Decree form the Council of Ministers no. 3214 o f 1997. -114- 1985/1986, the total ETSF revenues amounted to LE 379.5 million.56 Its initialrevenue in 198511986 was LE 14.5 million and increased to LE42.9 million in2001/2002. The net balance as o f 30 April 2003 is LE 7.5 million, indicating that up to date fund expenditures are LE 372 million. Since the establishment o f NEAP in 1992, the total revenues o f this fund amounted to LE 232.5 million. ETSF acts as support fund and does not have a balance sheet. Its revenues are kept in a special account and allocations are made on a project-by-project basis on demand from the Ministers, recommended by the Ministerial committee, and approved by the Prime Minister. There are general guidelines for the use o f this fund but no pre- allocations are made by sectors, or by ministries or governorates on the basis o f a pre-approved business plan. However, inaccordance with the publishedreport o f the Environment Protection Fund(EPF) for FY 2000-2001,57 EEAA share in ETSF i s "not less than one half' o f its proceeds. However, these revenues are not reflected inthe EPFbalance sheet. 8.18 Environment projects financed by ETSF include the establishment o f green parks, city cleansing and solid waste management, improvement and cleaning o f beaches, wastewater, and treatment o f renal diseases, pollution control and participation in conferences. The Ministry o f Tourism used ETSF to finance projects related to wastewater on tourist sites, waste from ships, wastewater, electrification of Luxor and Aswan airports and street sweeping and cleaning. 8.19 Despite its large revenues, ETSF operates as a slush fund to subsidize and/or support financial gaps o f projects that could not be financed by sector ministries and/or governorates. This will provide a wrong signal as it offers free public money to projects for which no financial or economic analysis was made. In the absence o f clear and transparent operating plans, management procedures and proper financial management, the ETSF cannot contribute to the sustainable management o f environmental resources. The EnvironmentProtectionFund?' 8.20 Established as a result o f the Environment Protection L a w No. 4 o f 1994 and its executive regulations, the Environmental Protection Fund (EPF) was established with an objective "to stimulate environmental investments and support the environmental, social and economic policies inthe pursuit o f sustainable development." NEAP o f 1992 provided the general framework under which EPF i s to pursue its objectives. 8.21 The proceeds o f the EPF are both in intemational and local currency and generated from the compensation for shipping accidents, fines levied for any harm caused to the environment and violations o f the environment, nature reserves and protected areas entrance fees and aid and donations. From its inception in 1995 to mid-2000, the EPF was only an account managedby EEAA. During fiscal year 2001 the fund was restructured with an established management and organizational structure, clear operation procedures and three major expenditure categories: Support to M S E N E E A A expenses and the Fund's own administrative costs, a reserve account for environmental disasters and pollution from unknown sources, and financing a limited number o f environmental projects in the form o f grants and interest rate subsidies, through the competitive project programs (CPP) and public tenders. The Fund publishes its balance sheet which i s reviewed by an independent chartered accountant 8.22 Since its inception in 1995 until 2000, the funds annual revenue was about LE10 million a year. reliable as the source of these revenues i s not stable and cannot be projected accurately. DuringFY 2001- These revenues increased to LE 11.81 million in 2001/2002. EPF annual revenues cannot be considered 56 InternalMSEAmemo. 5' MSEAIEEAA:EnvironmentProtectionFund,AnnualReport2000-2001, page3. 58 MSEAIEEAA:EnvironmentProtectionFund,AnnualReport2000-2001. -115- 2002 for instance, these exceeded LE 73 million o f which over LE 50 million were generated by "compensation for environmental damage" only. Other sources o f income that never appeared in EPF's income statement although stipulated in the executive regulations are "amounts allocated in the state budget to subsidize the fund" and "proceeds from tax on air tickets." EPF officials explained that these proceeds were collected by the Ministry o f Finance, and routed to the Environment and Tourism Services Fund. According to EEAA figures, this fund showed a balance as low as LE 1.2millionyear ending June 2003. 8.23 DANIDA was the only bilateral donor that channeled, inthe context o f its Environment Support Programme, its funds through the EPF, which in turn, forwards the equivalent o f these funds in LE upon the request o f the "Environmental Compliance Office (ECO)" at the Federation o f Egyptian Industries, and the Governorates o f Aswan and Beni-Suef. ECO provides concessionary lending to small and medium enterprises for adopting cleaner production in the textile, food, chemical and metallurgical sectors, while the Governorates provide fundingfor community demonstration projects. 8.24 Although the Fund prepares an annual operating plan which i s approved by EEAA Board o f Directors chaired by MSEA, the Fund's priorities, forms and level o f support vary from year to year. It i s too early to assess whether the Fundresponds to the purpose for which it was established, as its financing was mostly to support MSEA/EEAA activities. The EPF i s also challenged by the existing rules and regulation o f the commercial banks through which it operates. If the Fund i s to respond to its original objective o f "supporting environment, social and economic policies," it should be provided with more autonomy from EEAA, follow a clear and transparent implementation o f its operational procedures and enhance its resources to enable its effective role in supporting sustainable environmental investments. This will be addressed inChapter 9 on recommendations. Donor-SupportedFunds 8.25 Twelve separate environmental and environmental- related fundss96o for a total amount o f US$0.5 billion were established and have been operational since 1995. All these funds were allocated for different purpose, sectors and recipients and have different lending conditions and procedures as shown in Annex 8.1. The Social Fund for Development (SFD) is the largest financier o f environment-related investment projects. The general characteristics o f these fbnds with the exception o f the Social Fund for Development are: (a) they are non-revolving; (b) they are a mixture o f grants and loans (too often on a concessionary basis); and c) they are managed for the first time in Egypt by local commercial banks. The involvement o f the local banking sector in managing environmental investments, resulted in four positive outcomes: (i)it created a general awareness among the banking community about compliance with the environment protection law; (ii) it established a core o f expertise in the banking sector for understanding and assessing environmental and pollution control investments; (iii)it increased competition among the different banks for managing these funds; and (iv) it enabled the local banking sector with the technical assistance provided, to market the environmental investments with its individual clients in order to move toward compliance with existing environmental regulations. 8.26 These funds may have served their purpose by providing cheap financing for supporting investments in pollution control, water supply and sanitation which otherwise would have not occurred. Environmental awareness has increased as a result o f implementation o f various environmental financing packages. However, at present end users are still reluctant to make environmental investments which do not have a financial return. Furthermore, compliance with Law No. 4 o f 1994 i s weakened by the lack of 59 Egypt-PollutionAbatement Project: Study o f Sustainable Mechanisms for Financing of Industrial Environmental Investments inEgypt, ART Consulting report, 2003. 6o Social Fundfor Development-Annual report, 2000. -116- strict enforcement o f regulations. Inthe medium and long term ranges, the multiplicity and proliferation o f these funds are not sustainable nor are they the appropriate solution for addressing the environmental issues o f Egypt. These funds may infact delay the adoption by the government o f an environment policy based on a combination o f command-and-control approach and adoption o f economic instruments. If the Government finds it necessary to provide financial incentives to the market, it should consolidate all these funds into one national revolving fund which will reward environmental performance based on an approved benchmarking system to be set up and disclosed by MSEA. Intemational donors should in fact coordinate better their role and assist in the development and operation o f a sustainable fund which would focus on performance and outcomes rather than financial inputs and projects' outputs. EconomicInstruments 8.27 Under the environment Protection Law No. 4 o f 1994, product charges and positive tax incentives are allowed although the legislation does not allow for levying incentive charges to change the polluter's behavior. 8.28 The Government has infact levied product charges such as the 6.25% tax increase on the price o f airline tickets as the main source revenue for the ETSF. It also imposed a tax in 1995 o f LE 5 per metric tons o f cement inorder to pay for monitoring services, chemical analyses and control o f dust emissions in the public sector cement factories. It also introduced a charge for the collection and disposal o f solid waste and for wastewater treatment in the cities o f Cairo and Alexandria. Similarly, the Government has waived payment o f custom duties for solid waste equipment provided by international contractors for the cities o f Cairo and Alexandria and also gave their tax brake for 10% in accordance with Investment L a w No. 8. These products charges and incentives are made on an ad-hoc basis in order to respond to crisis situation or to fill ina financial gap that cannot be supported by the state budget. On many occasions, the SFD i s the source o f additional environment-related investments or bridging the financial gaps o f the investment budget o f the governorates. 8.29 Carefully designed economical instruments, coupled with appropriate environmental policy formulation and strong enforcement o f the regulation, could lead to reduction o f pollution levels and encourage the industry to move towards compliance with environmental standards. A number o f studies were made by the World Bank,61 USAID6* and DANIDA63in order to assist MSEA in establishing economic instruments. The major conclusions o f these studies showed the majority o f options considered for pollution charges were judged unsustainable, because of: (a) a lack o f competition within a polluting sector, as these sectors are dominated by very large public sector companies (fertilizers, iron and steel, chemicals) and there are too few actors for an economic instrument to be applied; (b) there i s a limited range o f marginal abatement costs in the polluting sectors which operate with very small but old technologies; (c) there is uncertainty in the future o f specific sectors as a result o f imports and external competition; and finally (d) there is a lack o f sufficient data to carry out the financial return from the application o f a specific economic instrument. Finally, the existing administrative structure for collecting and managingrevenues render the adoption o f market based instruments unworkable at present. 8.30 In order for an economic instrument to be implemented in Egypt, the following requirements should be met: (a) Law No. 4 o f 1994 should be amended to enable M S E A to levy incentive charges; (b) MSEA should present the charges as one tool o f its enforcement tools, i.e. that M S E A intends to enforce the law and levy fines on polluting establishments; (c) MSEA should also commit itself that any revenue 61 EPAP: Economic Instruments for Industrial PollutionControl in Egypt: Findings and Recommendations, ERMconsultantsreport- June 1998. 62 EgyptianEnvironment Policy Program. 63 Organization Support Project. -117- raised for industry will be used to achieve the environment objectives o f these industries and these revenues cannot be deviated for a different purpose; and (d) MSEA should raise public awareness about the importance o f health impacts. Even with the absence o f conventional economic instrument, the Government should pursue the gradual removal o f the energy subsidies (see Chapter 3) and continue to increase the user charges to cover the costs o f water, wastewater and solid waste services for industryand the domestic sector. Conclusion 8.3 1 The review o f environmental expenditures showed that Egypt has allocated a substantial amount o f LE 31.9 billion of its local resources for financing environment related projects (equivalent to 1% o f GDP). Egypt has benefited greatly from the Overseas Development Assistance o f donors which collectively provided about LE 2.4 billion to improve environmental management. However, it appears that from the expenditure point o f view, there i s a disconnection between environmental priorities in NEAP and development priorities o f the Government underminingtherefore the importance o f NEAP in ensuring that the environment i s mainstreamed inthe productive sector of the economy. 8.32 The situation is further aggravated by the large blanket subsidies in the water and energy sector amounting to LE 19.3 billion-20.3 billiodyear (US$3.1 billiodyear in 2004) which are putting pressure on the state budget, and have not resulted in changing consumer and producer behavior. The proliferation o f the environment related funds for the amount o f LE 0.9 billion i s likely to distort the market in the longer term, once they would have achieved the purpose for which they were established and which i s usually specific to a certain phase in the environment work (e.g. industrial pollution funds established to support industries duringthe grace period o f Law4/94). This would encourage the local banking sector to rely on cheap financing instead o f usingits own money to stimulate the market o f environmental services and on lend to the private sector for environmental investments. Such use o f fund will also delay the application o f the polluter-pay-principle. 8.33. Inthe short term these subsidies should bejustified on the basis of well defined objectives; they should be limited inmagnitude and time. Inthe long term, policies shouldbe inplace so that the subsidies reduction would result in increasing the Government budget to finance its social program and provide additional incentives for the private sector to be fully involved in environmental services. 8.34 The challenge i s not to increase government investments. The challenge i s to meet certain socioeconomic criteria by, first, prioritizing and reallocating this investment, and second, by devising a financial management system and implementing it on the basis o f clear priorities and well-defined outcome through the mobilization o f local resources instead o f depending primarily on grants from the international donor community. -118- CHAPTER 9 General Conclusionsand Recommendations The RoadAhead 9.1 Inorder for Egyptto embark into the pathof sustainable development, changes are needed inthe way it manages its socio-economic and environmental resources, and decides upon the related priorities. Inprevious chapters, it was shown that the cost of environmental inaction is a bindingconstraint for economic growth that Egypt cannot afford to neglect. The two key principles that are essential if Egypt would like to engage into sustainable development are: 0 The conservation and development o f its own natural resources (oil/gas, water and land); and 0 An agreement on a new share o f responsibilities between the State, the Producers (or Service Providers) and Beneficiaries in the conservation and development o f these resources. 9.2 Inthe past, the Government ofEgypt (GOE) was unilaterally responsible for managingEgypt's natural resources and directing its economy. This-top down approach has led to much inaction that increased the burden on the State revenues and affected the quality life o f the citizens. Inthe new era o f market-based economy, there i s a need for clear articulation between environmental policies with overall economic policy. Environmental benefits would flow from the deregulation o f the economy (initiated in the 1990s) which aimed at improving the administrative management o f the economy, including price and fiscal reforms, trade and foreign exchange liberalization, and aiming at creating an enabling environment for attracting local foreign investment. Such strategic approach towards sustainable development implies a new way o f thinkingand worlung in Egypt. As a private good, the environment is the responsibility o f the ordinary citizen through change in his behavior, and his involvement as part o f the decision-making process, as well through the private sector which should now act as the engine o f growth. As a public good, the responsibility lies with the Government though the adoption o f environmental policies and incentives as well as the financing o f environmental investments that are focused primarily to protect the poor. As a global good, the environment should be an incentive for the Government to take advantage o f the existing financing mechanisms such as GEF, CDM and PCF in order to improve local environmental benefits and build on overlaps with regional and global benefits. The recommendations provided in this chapter were designed to look at the environment not from a degradation perspective but from opportunities for economic growth. 9.3 Despite undeniable progress in implementing its National Environmental Action Plan (NEAP) for which a legal and institutional framework was established and important environmental and natural resource projects and programs were financed, Egypt is still at the early stage of its transition to sustainable development. An overview o f Egypt's performance towards sustainable development showed that: 0 Ownership of the sustainable development process is unclear. Despite strong political declarations, there i s presently an institutional gap in the development o f policies and strategies related to sustainable development as opposed to environmental protection which i s entrusted to MSEMEEAA. Apart from the conceptual commitment to sustainable development principles, there i s no clear vision how the country could embark onto the path -119- o f sustainable development especially amid Egypt's commitment to implement its MDGs. At present, there i s neither a legal nor an institutional framework capable o f establishing links at the outset between social and economic policy decisions and the quality of the country's environmental resources. A "horizontal" system should be developed for a global and integratedreflection on sustainable development and the environment. Such system requires the explicit commitment o f the entire government, and a participatory approach for setting priorities and making choices. The institutional and legal framework should thus be modified to rapidly adapt to the needs o f a new era characterized by: (i) a competitive economy for creatingjobs where the private sector plays a major role; (ii) the use o f incentive mechanisms; and (iii) a better integration o f economic growth objectives into environmental sustainable management and, inparallel, a better cross-sectoral coordination; and finally (iv) an increased role o f municipalities, local organizations, civil society and the private sector in the management o f environmentalproblems, each at its scale. 0 The NEAP process could not be used to set priorities at the national level. NEAPSo f 1992 and its 2002 Update have provided an extensive state o f the environment analysis, identified a number o f environmental issues confronting the country and proposed a very ambitious implementation program. However, NEAPSwere not used as an instrument for setting environmental priorities based on a comparison o f costs and benefits. Rather, they provide a qualitative and quantitative assessment o f impacts on the environment and natural resources in order to meet the technical requirements and interests o f particular sectors or agencies. 0 Mainstreaming environment into sector policies has not been fully introduced. The sector policies prepared by the ministries are independent o f one another. The preparation o f sectoral plans, such as the National Plan for Protection o f Water Resources, the Integrated Coastal Zone Management Plans, and the Integrated Solid Waste Management Plans are generally well documented on a technical level. However, the economic and financial evaluations are critically scant. Currently, there are more than 20 policies developed under the USAID-funded Egyptian Environment Policy Program (EEPP) waiting to be transformed to strategies and objectives and then to outputs and outcomes. They are so far unreachable goals. 0 The present legal framework is not conducive to facilitate environmental mainstreaming. Egypt is still using the command and control regulations in its legal framework requiring the establishment o f strong monitoring and enforcement systems which are still weak, and with stringent standards that cannot be met. EEAA has completed the revision o f these standards and will request the Government to amend the executive regulations o f the Environment Protection Law # 4. With its transition to a market economy and its opening to globalization, the legal framework should be reformulated to reward compliance through self monitoring and self control instead o f imposing non-collectable fines on polluters; to provide financial incentives for adoption o f clean technology; to revise the stringent standards that cannot be achieved into a adaptable guidelines that facilitate trade and direct foreign investments; to use the strategic environment assessment and the environment impacts assessment as decision tools in the formulation o f policies and improvement o f project design, and finally, to facilitate disclosure and dissemination o f environmental information to attract markets. A progress in amending the legal framework was made: L a w No. 8 related to the Investment Law has been amended to include environmental industries and more specifically solid waste management industry. -120- 0 Furthermore, the institutional framework needs to be streamlined, shared and decentralized. Inter-Ministerial Cooperation on environmental matters is quite in its form and quality. Coordination between the different ministries, decentralization to regional branches and governorates units, definitions o fnew functions and responsibilities between the national and local government and civil society are important topics that many ministries individually or collectively should come to terms with. Coordinated actions between economic, sectoral ministries and local government are irregular, but should be improved if inter-sectoral issues are to be resolved. A positive example i s inthe partial resolution o f solid waste management issue; it i s only when the whole Council o f Ministers was politically behind this issue and when the Ministries o f Local development, M S E N E E A A and the governorates worked together as a team that a solution could be found. Such a system o f inter-institutional synergies should not be short-lived, and only became active during crisis management. Rather, it should be sustained; as such exemplary cases exist already in the governorates o f Alexandria and Quena. Ifenvironmental conditions have largely improved in these governorates, it i s because there was strong leadership committed to change; an understanding between the local government and the citizens on the preservation o f local resources, and a voluntary agreement on a new definition o f responsibilities to be shared between the local government, the private sector and the ordinary citizen. Another positive example i s the pilot implementation o f a new institutional/organizational set-up through which the Environmental Management Units in the Governorates are administratively affiliated to the Governorates and technically affiliated to MSEMEEAA. That was only implemented because of a strong leadership and voluntary agreement between the Governorates and MSENEEAA. 0 Yet public investments are still considered to be solutions for improving the environment. There is still a strong emphasis on investments as a remediation for environmental problems with less impressive progress on policy reforms. Implicit and explicit subsidies on water, wastewater and energy sectors amount to 5.2% o f GDP (2002). Egypt's environmental problems have emerged as having a clear link, and inmany cases their origin, in past policy and institutional choices, including, fiscal and incentive systems faced by consumers, producers, and government agencies. At present, prices o f goods do not capture the true costs o f production. The policy o f direct and indirect subsidies for critical inputs stimulates pressure on Egypt's `s natural resources and encourages the development o f those sectors o f the economy that have no comparative advantage in international terms. Since the prices o f key inputs such as energy and water are low, the ,wrong signals are sent to the producers and policymakers as resources are allocated to increase the production o f subsidized inputs. On the other hand, whenever pricing and sectoral policies are inter-linked, they lead to long-term economic and environmental benefits. Examples o f such win-win solutions have been provided in Chapters 3 and 4 concerning the improvement o f water and air quality. 0 With large environmental expenditures but less impressive outcomes. Public expenditures in the field o f environment reveals a considerable attention granted by the Government in financing during the last ten years, an amount o f LE 31.9 billion, complemented by twelve environmental-related funds for LE 0.9 billion and supplemented by a yearly subsidy o f LE 20 billiodyear (at current LE). This amounts to a total expenditure in the last decade o f an order o f magnitude o f LE 231.8 billion with subsidies on energy and watedwastewater covering nearly 80 percent. This level o f financing can no longer be sustained with the decline in Government revenues which could not be used to finance additional basic environmental services such as water supply, sanitation and waste management in rural areas or in social sectors. Under such circumstances, Egypt has no -121- alternative but to proceed with public expenditure efficiency based on output performance, impose the recovery o f services and resource utilization costs, increase its revenues fi-om environmental investments and intemalize the environmental degradation costs. PROPOSED GOALS AND ACTIONS TOWARDS SUSTAINABLE DEVELOPMENT 9.4 Despite considerable efforts, the issue o f water and air quality, solid waste and coastal zone management remain the most pressing environmental inter-sectoral problems in Egypt as also identified inEEAA action plan of 2002 (see Chapter 8). This situation has been inthe past linkedto the economic and social development process o f the country. Therefore, solutions aimed at remedying constraints and limitations should be integrated in the economic, institutional, and social reforms proposed by Egypt within the scope o f its free market economy. These solutions must respond to the following two inter- related goals, namely: 0 Reduction in theprevalence of respiratory and water borne diseases due topPor air and water quality and inadequate collection and disposal of municipal waste and; 0 Improving the quality of growth of Egypt's coastal areas. 9.5 The appropriate objectives to respond to these goals are now anchored in a macro and micro- economic analysis performed as part o f the CEA. Damage costs were estimated and used as a tool to identify measures proposed below, and to bring to the discussion table stakeholders o f different persuasions, includingmembers o f civil society and agencies, like the Ministryo f Finance, and others. 9.6 The proposed approach to address the priority actions defined below i s essentially based on policy and institutional measures ranging fi-om: (i)rationalization to embody price-signals that induce a switch to environmentally-benign practices (renewable energy, for instance); (ii) cost for environmental services (sanitation and solid waste management, for instance); and (iii) development o f information systems and strategic environmental assessments (disclosing and disseminating data on inferior water quality, for instance). All such measures are summarized in the Matrix attached to this Chapter. This matrix describes the objectives, intermediate objectives for the next five years, the proposed policies, institutional and legal measures, the responsibility o f the different stakeholders as well as the anticipated outcomes as a result o f the implementation o f these measures. Very few investments are proposed, and they should not be a burden on the state budget but should generate revenues on the basis o f costs and benefits resulting from strategic environmental assessments. The priority actions summarized below, consider the environment as a public, private and global goods that could generate benefits. 9.7 The prevention and decrease of air pollution risks can be achieved by: 0 The Government adopting a pricing policy o f gradually increasing (the currently- subsidized) price o f fuel oil and gas oil, combined with sector policy after completing the necessary studies related to social impacts and commensurate with the income levels; 0 Reducing concentration o f pollutants o f PMlO and SO2 in the transport and agricultural residues sectors; 0 Increasing the share o f natural gas in the industrial sectors (with emphasis on small-and- medium industry) and inthe transport sector particularly for city buses and micro buses; 0 Using the Clean development Mechanisms (CDM) and the Prototype Carbon Fund to increase revenues fkom the trading o f certified emission credits in order to improve further -122- air quality in the urban and rural areas through the use of Clean Development Mechanism and the Prototype Carbon Fund; Providing and disseminating through M S E N E E A A factual information on air pollution and its health risks. 9.8 Applying these win-win policies would not only decrease the damage health costs by at least of LE 2.0 billiodyear in the year 2010, i.e., reduction o f 33% o f the damage costs, but will also generate revenues from the trading o f methane and carbon dioxide from solid waste landfills and from CDM projects on land use, land use change and forestry. 9.9 The improvement of water quality in the rural areas particularly in the Nile Delta will reduce the burden fkom water-borne diseases as well as improve crop and fishery production. This can be achieved by: The govemment reviewing gradually its pricing policy in water and wastewater and establishing a cost recovery for at least operation and maintenance; Improving sanitation inrural areas through the adoption o f l o w cost technologies and through establishing a cost recovery system (inkind and cash), thus fostering community participation in devising, financing, implementing, and overseeing such unconventional undertakings and empowering the water board and water users associations; Integrating the soil and water quality in development o f regional strategies, for optimization o f crop production; Decreasing salt accumulation through a decrease o f total dissolved solids (TDS) in the drainage and irrigation canals inorder to increase yield production; Increasing awareness campaigns through NGOs and the media on the impact o f diseases due to bad hygiene and poor water quality; and Enhancing local environmental benefits by protecting the global environment usingthe CDM for land use, land use change and forestry projects, the PCF for improving energy efficiency in the irrigation sector and GEF for combating desertification and land degradation. Improvement o f water quality due to rural sanitation and decrease in salinity will both have environmental and economic benefits. The poor water quality resulting in mixing surface and drainage water both contaminated by wastewater create both economic damage due to a decrease in yields and health damage. 9.11 Both air and water quality are also affectedby lack o f proper collection and disposal o f municipal solid waste. Burningo f municipal solid waste in urban areas and o f agncultural waste inrural areas i s a serious source o f air pollution. Improper solid waste disposal in the rural areas is a source o f surface and groundwater pollution especially in the Nile Delta. Adopting an integrated approach to municipal solid waste and agricultural waste managementsystemscan be.achieved through: Re-enforcing the effective and successful implementation o f the Integrated Solid Waste Management strategy in the urban areas with private sector participation, backed with the appropriate legal framework, with a cost recovery system based on a full cost accounting and with incentives for the local private sector and local communities; Extending solid waste management collection and disposal inrural areas on a priority basis, by involvingNGOs and local contractors to carry out community development projects for -123- the production o f recyclable products, feed, fodders and compost from municipal solid waste and agricultural waste; 0 Developing and raising awareness o f the public and farmers for the proper disposal o f municipal solid waste and agricultural waste, and implications o f unsound behavior; 0 The provision o f an incentive systemby the local government to enable the local market for the production o f recyclable and agricultural products (feed, fodders and compost) from municipal solid waste, and agricultural residues; and 0 Protecting the global commons by reducing the emission o f methane and carbon dioxide usingthe CDMPCF and GEF mechanisms. 9.12 The improvement o fthe quality o f growth inEgypt's coastal areas can be achieved through: 0 Ensuringequilibrium between the development o f mass tourism and the preservation of Egypt's unique natural and marine resources by applying region-specific integrated coastal zone management; 0 Improving tourism by targeting the clients in search o f quality environment and in ecology-based products as well as charging appropriate fees for the preservation and conservation o f these resources; 0 Increasing awareness campaigns for tourists and operators for protecting the unique marine and natural resources and public consultation on the coastal use; 0 Enforcing the existing regulations complemented with local funding mechanisms through the increase if entrance fees and tourist taxes; and Making use o f GEF for protecting the pristine areas in the Red Sea from further degradation. -124- TowardsanImprovedEnvironmentalManagement System 9.13 Achieving the proposed objectives described in the previous sections would require the establishment o f strong public institutions which could: (a) build on the positive links between the environment and development and ensuring equitable income growth; and (b) establish sound policies, regulations and economic incentives which would integrate environmental considerations in the decision- making process. Such objectives cannot be attained inthe long term unless a series o f measures are first implementedinthe near term to buildup these institutions inEgypt. 9.14 A realignment o f institutional responsibilities is necessary to achieve an efficient environment management system on the basis o f the recommendations stated above. However, the most important factor in managing the environment is a strong political will. This should be manifested not only by promulgated or documented statements but also by the performance record o f the entire government to engage in environmental sustainability. Egypt has demonstrated its political will by providing clear statements in NEAP and in EEAA action plans. Such statements should, however, be translated into policy, institutional and legal changes that would: (a) Increase inter-ministerial coordination on environmental sustainability through the High Committee on Policies of the Council o f Ministers; (b) Strengthen the environment-related institutions o f MSEA, EEAA and the he sector ministries; (c) Continue and reinforce the basic environmental functions o f regional coordination, monitoring and enforcement from EEAA to its Regional Branches Offices (-0s) and the Governorates' Environment ManagementUnits(EMUs); and (d) Support sustainable private sector development and harness the advocacy and participatory role o f civil society. 9.15 A four-tiered organization is proposed for Egypt. It would involve: (a) the HighCommittee on Policies as decision forum for environment sustainability at the policy level; (b) MSEA, EEAA and the sector ministries as a coherent core for strengthening environmental policies at the national level; (c) EEAA existing regional branch offices as a new decentralized structure at the regional level and the EMUsat the governorate level; and (d) The private sector, civil society andthe internationaldonors.. IncreasingInter-MinisterialCoordinationon SustainableDevelopment 9.16 Inorder to fill inthe institutional gap inthe development of sustainable development policies, it i s recommended that the High Committee for Policies o f the Council o f Ministers be the body responsible for articulating the sustainable development policy of Egypt after further studies are completed. This inter-ministerial committee i s presided by the Prime Minister and includes a number of line and sector ministries. When this committee would address sustainable development, it could be enlarged to include the Minister o f State for Environmental Affairs, key Governors o f Cairo, Qaliyoubiah, Guizeh, Alexandria, Red Sea, Aswan and Quenah, and South Sinai as well as the head o f the Federation o f Egyptian Industries, the Egyptian Chamber o f Commerce, and selected NGOs. The Minister o f State for Environmental Affairs could be the secretary o f this committee for all matters related to sustainable development. -125- The Committee will be responsible for: 0 Identifying or providing oversight o f sustainable development policies. Approving major changes in existing sustainable development policies and/or new policies, and establishing and approving environmental goals and priorities for sector ministries inrelation to national priorities of economic growth and poverty alleviation. 0 Providing the necessary oversight and coordination o f government activities in the implementation and follow up on Egypt's progress towards achievements in the Millennium Development Goals (MDG). 0 Reviewing and approving major economic activities affecting the development, conservation and exploitation o f natural resources. 0 Approving investment priorities in the field o f environmental and natural resources protection and preservation; reviewing and approving ministerial plans and programs and ensure that environment i s integrated in these plans; proposing financial allocations and determining the necessary economic instruments for environmental and natural resources protection. 0 Approving for enactment, new or revised legislation to be able to support Egypt in competing inthe global economy while protecting its environment. Revising environmental protection legislations that would enable Egyptto compete inthe global economy. 9.17 There are examples in Arab countries on the establishment o f high councils or inter-ministerial commission on sustainable development and environment protection. The establishment o f a National Commission on Sustainable Development i s operational in Tunisia. It i s presided by the Prime Minister and included line and sector ministries. The State Secretary in charge o f the Environment who i s o f a ministerial rank (equivalent to a Minister o f State in Egypt) acts as a secretary for the Commission with a special office within the Ministry, the Tunisian Observatory for Environment and Sustainable Development i s the secretariat for this Commission. A High Commission for Environment and Sustainable Development was established in Algeria but i s not fully functional as it does not have a proper technical or administrative secretariat. Instead, Sustainable Development Policies are discussed in subcommittees o f the Conseil National Economique et Social (CNES), which acts as a think-tank, and includes public and private figures. In Saudi Arabia, a Ministerial Committee for the Environment (MCE) was established by Royal Decree, and chaired by the Second Deputy Premier and Minister o f Defense and Aviation. The M C E i s the highest environmental authority in the Kingdom and has been designed to address the policy and sectoral issues at the national, regional, and international levels; it coordinates and follows up environmental activities within the Kingdom. The Ministryof State for EnvironmentalAffairs 9.18 As stated in Chapter 7, the Minister o f State for Environmental Affairs has responsibly undertaken the environmental functions and with limited staff and resources succeeded in placing the environment at the core o f the Government policy agenda. The ambiguity in the involvement o f the Ministerand EEAA ChiefExecutive Officer ina day-to-day management of the environmental activities, could infringe upon the exercise o f their policy and strategic functions which are different but complementary. The Minister's office would continue to be a "horizontal" outward structure responsible for formulating environmental strategies and policies that would result in economic growth, poverty alleviation and support Egyptincompeting inthe global economy while protecting its environment. -126- 9.19 The role of the Minister's office should be mostly strategic, frontward looking and going beyond the environmental issues (ie., the symptoms) to address the key underlying environmental and social causes o f economic growth and poverty alleviation. Inaddition to overseeing the applicationby EEAA of its national environmental policies, the Minister's office will concentrate on national and international interlinking topics related to poverty and environment, trade and environment, energy and environment, finance and environment, tourism and environment, climate change and environment. It will oversee, inter-alia, the implementation by the policy and institutional measures o f cross-sectoral issues o f air and water quality as well as waste and coastal zone management which are the major causes o f environmental degradation. MSEA's challenge will be to identify the economic instruments to enable the Govemment, and the private sector to rely on local resources to sustain environmental investments and activities, and to supplement there resources by revenues generated from the trading o f environmental commodities on the international market, and form the different international funds attached to international agreements and conventions. These functions cannot be undertaken by EEAAwhich i s essentially an inward coordinating and operating national environmental agency and has not yet had an inter-ministerial mandate to help move the sustainable development agenda o f the country. 9.20 A Sustainable Development Unit should be established in the office of the Minister o f State for Environmental Affairs. This unit will be supported by EEAA staff and will: (a) undertake the appropriate policy and economic analyses for the definition o f environmental goals and objectives as well as serve as a secretariat for the High Committee on policies whenever this committee will address sustainable development issues;(b) carry out strategic environmental assessment o f national priorities to determine their compatibility with environmental and sustainable development priorities; (c) evaluate the environmental implications o f major economic and sectoral policies and formulate environmental policies and strategies to respond to the MDGs targets; (d) evaluate policy options for pollution abatement and natural resources management; and (e) establish performance indicators and review the overall progress o fNEAP2002. The EgyptianEnvironmentalAffairsAgency (EEAA) 9.21 EEAA would remain the operating arm o f the Minister o f State for Environmental Affairs, It would continue its basic regular functions but would need to further coordinate among its sector departments such as the Environmental Management Sector, the Environmental Quality Sector, The Nature Protection Sector, the Planning and Follow-up Department, the Information and Computer Department, the Environment Protection Fund Department, and supervise the work o f the RBOs and EMUS. 9.22 The following functions are proposed to improve the performance and coordination o f the different EEAA departments: (a) The Environment Management Department should now adopt the principles of IntegratedPollution Control. This department should identify and prepare policies related to integrated pollution control, develop environmental quality objectives (EQO) commensurate with the state o f the local environment and based on data generated from the environment quality department, advise on best available technologies, provide regulations and guidelines for integrated solid waste management, propose recommendations for complying with international environmental regulations, and for removal o f environmental barriers to trade, besides making the EM system operational and mandatory with regular follow up on the implementation o f EM mitigating measures. The inspection general directorate should be further reinforced and strengthened. This directorate could -127- implement pilot projects to test new technologies andor clean technologies and/or remove the institutional and financial barriers for market penetration; (b) The Environment Quality Department should be responsible for environmental monitoring o f compliance at the national level using its central laboratories and the Nationwide Environment Information Program. This department could use such monitoring network to take decisions on preventive and curative measures, and advise the environment management department and sector ministries on industrial sitting, and tourism resorts levels o f pollution loads; (c) The Nature Protection Department should be able, among its responsibilities for protected areas, to develop natural resources trends, articulate strategies and policies for their management, support the application by governorates o f an integrated regional costal zone management plans, and follow trends and development o f coastal erosion in the Nile Delta. This department will ensure that land use plans would not adversely affect Egypt's natural and protected area resources and that the Integrated Coastal Zone Management i s implemented as proposed in Chapter 6 i s being implemented; (d) The Technical Support and Environmental Disasters Management Unit should prepare plans for natural and environmental disasters, such as oil spills and chemical accidents, and follow up on the implementation o f the mitigating measures; (e) The Environment Protection Fund Departmentwill continue to be a viable instrument to target resources to environmental programs and projects. This Fund should be able to raise and generate revenues from economic instruments to be established (pollution taxes, pollution fees, fines, and others) based on the "polluter pays principle" (PPP) with the objective o f influencing polluters' behavior. Funddisbursement should be output based to stimulate the market, and generate income as a result o f its use. New environmental finds established through EEAA (see Chapter 8) should be consolidated with the EPF which should be managed on a commercial basis by one or more local banks and based on sound banking discipline and strict technical and financial criteria; (f) The Information and Computer Center Department will manage the Egyptian Environment Information System and serve as a decision support system for ministries, agencies and clients. This unit will be the central source o f environmental data that should be in the public domain, and be a gateway for easy access to national and international database for a wide range o f users. This unit will be responsible for issuing the annual report on the state o f the environment; (g) The International Relations and Cooperation Unit would oversee international and inter-sectoral programs focusing on the development o f institutional and policy measures for their effective implementation by the ministries, governorates or the private sector. This unit will be responsible for following and implementing conventions, develop policies for international cooperation and partnership and maintain donors coordination; (h) The Planning and Follow Up Unit should be responsible for formulating EEAApolicies, preparing annual business plans based on NEAP o f 2002 and on the recommendations o f EEAA Board, conducting periodic evaluation and follow up on EEAA action plans, and providing feedback interms o f annual reports on EEAA achievements and challenges; -128- (i) The Climate Change Unit would be responsible for all energy environment activities. This unit will oversee the implementationo f the Energy-Environment Review Action Plan as well as the CDM, GEF and other mechanisms established by international conventions. This unitcould assist inbuildingaportfolio o fprojectswith local and global benefits; and (j) The EnvironmentalInformation and Public Awareness Department should carry out the collection, analysis and dissemination o ftechnical information, and ensure participation o f NGOs, civil society and affected groups in the decision-making process. The awareness program should be used for the dissemination o f information concerning the EIA process, promotion o f integrated pollution control, and strengthening ownership o f the implementation o f NEAP. 9.23 MSEA and EEAA should review its recruitmentpolicy so that its regular staff be maintained and the major part o f the contracted staff be regularized. Without additional human resources, training, and financial incentives, no substantial progress could be achieved to strengthen the environment management system in Egypt. EEAA should also supplement its staff with different slulls mix in policy, in financial and economic analysis, in environmental economics and in environmental law. It would also continue to call upon the expertise o f the universities and research centers to help in the implementation o f its functions and to transfer knowledge and expertise to its staff. Sector Ministries 9.24 The major role o f the sector ministries would be to implement with MOE and EEAA's assistance the sustainable development policies, as applicable to the operations o f the specific ministry. The sectoral ministries would have primary responsibility for environmental-related investments in their respective sector, but would delegate the implementation o f these investments to the local authorities, User Associations and Water Boards as could be the case for the Ministry o f Water Resources and Irrigation. Ministries would ensure that environmental-related investments are properly operated and maintained. In order to assume this role, sector ministries should have the flexibility o f either establishing an Environmental Management Unit (EMU) or designing an existing department`division to be the focal point for all environmental activities and provide inter-departmental links. The EMU or the assigned environment department should report directly to the Minister's office, the design o f the EMU should emphasize a structure and staffing pattems which are the most effective given the mandate o f the organization to effectively implement its environmental responsibilities. Of special importance i s the strengthening o f the trade and environment committee at the Ministry o f Foreign Trade in order to ensure that Egypt does not lose market competitiveness as a result o f applying stringent environmental regulations as described in Chapter 2. M S E A and the Ministry o f External trade should work in collaboration with the Federation of Egyptian Industries and Chambers o f Commerce, and provide them with information andtechnical support. The High Level Governorate Committee and the Regional Branch Offices and Environment ManagementUnits 9.25 A high level committee on environment was established in each Governorate. This high level committee should be the local body to support sustainable development at the local level. The RBOs and EMUswould continue to constitute the most cost-effective mechanismto carry out the decentralization o f environmental management functions. A number o f proposals supporting the role o f the RBOs and EMUswere prepared by DANIDA Organization Support Program (OSP), by USAID-financed Egyptian Environment Policy Program (EEPP), and by the F i n n i s W o r l d Bank-financed Egyptian Pollution Abatement Project. The main responsibilities are to monitor and enforce environmental laws and -129- regulations on the local level, conduct periodic surveys on the state o f the environment and advise the governors and local government on all environmental matters, review the yearly environmental record prepared by each establishment as part o f self monitoring, review and approve EIA reports for gray projects and follow up on their mitigating measures, coordinate environmental activities inthe region and inthe respective governorate in accordance with the governorate environment action plans (GEAP), and be responsible for local education awareness. 9.26 Decentralization o f environmental functions would require strengthening the staff through external training or local training by the local universities and research institutes, and increasing gradual responsibilities with the assistance o f local experts from the local universities. This would require establishing a process o f rigorous and regular review o f the performance o f the RBOs and EMUSby EEAA. The Role of the Private Sector 9.27 The private sector should be an engine o f growth for sustainable development. The Government could not continue to provide large scale environment related investments, and should depend on the private sector to play major role provided that the right policies and incentives are developed to create markets for environmental goods and services. This canbe accomplished by: the Government to introduce environmental regulations that allow flexible market mechanisms to achieve environmental objectives and introduce good govemance, increased transparency and access to environmental information; the private sector to promote through investments, environmental and social responsibility and good environmental management, and to make use o f existing incentive mechanisms such as the PCF, CDMand GEF; local banking sector to provide long term loans with flexible repayment facilities; international donors to assist in formulating market policies and incentives for private sector development; sector-ministries and the local government to empower the associations and the communities in managing their resources in accordance with local plans developed by the community. the private sector to introduce environmental accounting in the industrial sector in order to ensure sustainable consumptionand production. 9.28 With the right policies in place, the private sector should be able to invest or manage urban investments in the water, wastewater, irrigation, solid waste and transport sectors. The local community and water boards and association should take over the responsibility o f managing their local infrastructure. This will allow the Government to target its investments to serve the poor in the rural and peri-urban areas. -130- The Role of the Media 9.29 The role o f the media should be further strengthened. Changes can only occur if they are accompanied by public pressure which could be communicated through the newspapers, radios and TV stations by well informed and factual media reporting. Such strengthening will be further enhancedby: 0 Developing a communication strategy and campaign for M S E N E E A A to address the major environmental issues 0 Developing the necessary communications materials in print, radio, TV, and other media as may be appropriate; 0 Supporting t h e media and the press through traning and technical support for developing an outreach and mobilization program for different audiences such as the public at large, the decision makers and the investors, and update regularly the communication and the information based on actual facts 0 Conducting periodic assessment and public opinion surveys on the programs and activities offered by the media The Role of Local NGOs and Civil Society 9.30 Building bridges with NGOs and civil society will reinforce the bottom-up approach for environmental sustainability. So far many NGOs were vocal but were not influential in changing behavior and policies. Unless both the civil society and NGOs take initiative and reinforce their advocacy role, limited progress will be achieved towards the transition to sustainable development. 9.3 1 The NGOs could play a major role at all levels. At the policy level, NGOs could take the lead in organizing a forum for sustainable development. This forum will be in the form o f a think-tank o f Egyptian experts selected on the basis o f their managerial and technical expertise, substantial national and international experience and leadership. It will discuss the major inter-sectoral environmental issues confkonting Egypt, and propose practical recommendations on how to integrate environment into policies and programs. It will also draw on the lessons from other countries to identify the policies to be considered by the government for meeting the MDGs. It will track down progress towards the implementation o f NEAP, and publishgood practice and challenges. It will also act as a sounding board for the Council o f Ministers on environment sustainability. International donors could play a major role in supporting this forum. 9.32 At the operational level, NGOs should continue to organize and participateinpublic hearings and consultations on all environmental assessment for national and mega projects. This would require receiving training and technical support on reviewing EIAs and on public consultation and disclosure. They should be able to have access through the Government and other channels o f environmental information, analyzing and publishing environmental data and trends, and using the media to provide facts and solutions on the major environmental issues, and organizing national campaigns. 9.33 At the local level, NGOs should continue to assist the community they serve in designing and managing their own development plans. They will design and implement awareness campaigns particularly on water resources, air pollution and solid waste management, water pollution, and hygiene. They should continue to take the lead in participating in the design and implementation o f Community development projects inthe rural areas particularly insolid waste, sanitation and water resources sector. -131- The Role of the International Donors 9.34 The proposed restructuring o f the policy and institutional framework would require a change in the conventional system o f donor support in the environmental field. N o w that Environment, after the Johannesburg Summit has become a cross-sectoral theme, donor support will be needed to assist Egypt in meeting its MDGs. USAID has already refocused its support toward helping Egypt to reach its environmental objectives related to economic growth and/or poverty alleviation. Other donors are orienting their environmental programs to other key ministries such as Ministry o f Water Resources and Irrigation. Donor support should be based on: a) A National Environmentally Sustainable Strategy anchored inspecific social and economic benefits. The proposed strategic measures inthe document could constitute the elements o f such strategy; b) Quantitative targets to be identified at the outset of eachprogram with emphasis on meeting primarily specific policy and institutional measures in relation to the MDGs. Donors support should continue to be bundled with technical assistance, knowledge and experience sharing, and an exit strategy should be designed as part of the program definition and approval. A structured learning program on policy analysis and environmental economics shouldbe included inall environmental program support; and c) The Government should mobilize local resources and revenues to be the principal financiers o f programs and projects. Donors' financial support should be to bridge the gap between public expenditures and local resources generated from cost recovery or economical instruments. Donors would also be expected to support projects on the ground that would fulfill sustainable development policies. -132- The Role of the World Bank 9.35 The Bank's overall approach for supporting the implementation o f the CEA will focus on addressing critical constraints and providing the enabling conditions for truly mainstreaming the environment inboththe lending portfolio and the government's policies and programs, and will be guided by the key operating principles consistent with the MNA Regional Strategy, namely: a) Sharing knowledge. By focusing on three areas where the Bank has comparative advantage and global experience in mainstreaming the environment (including global environment, if and when applicable) with the aim o f encouraging policy and institutional reforms: (i)the use o f economic criteria and valuation o f externalities; (ii) the linkage between environment and poverty reduction, energy and environment, women and environment, and banking and environment; and (iii) the strengthening o f the decision- making process in water quality, solid waste management, and rural water and sanitation sectors. This work i s already ongoing through the following activities: A Socio-Economic Studyfor Water Quality Management in Egypt." The purpose o f this studyis to assist the MinistryofWater Resourcesand hgation (MWRI)and other water- and environmental-related institutions in applying the environmental economics tool o f benefit-cost analysis (BCA) to better incorporate the full socio-economic costs o f alternative optionshnvestments into decision-malung on water quality management; e Establishing and strengthening the capacity of an environment economic group in 1-2 selected m i n i ~ t r i e s . ~The purpose i s to strengthen the capacity in environmental ~ economics to enable sector ministries to take policy decisions based on cost and benefit analysis; e Water Resources - Implicationsfor Income and Health of the Poor.@ The objective o f this activity is threefold: (1) improve the understanding o f linkage betweenpoor small- scale farmers and water resources in Egypt; (2) identify measures available to mitigate impacts on the poor o f water resources issues; and (3) foster local, national and regional partnerships and awareness. The study was initiated by the Minister o f State for Environmental Affairs and will cover two Egyptian villages in the Delta and South o f Egypt where the project will be implemented; e Environmental Monitoring and Compliance in Rural Egypt6' The objective of the activity i s to promote development by strengthening environmental monitoring and compliance inEgypt at the local level with major emphasis on the role o f rural women inenvironmentalprotection. This activity is implementedby the World Bank institute (WBI) and the Association for the Protection o fthe Environment, an EgyptianNGO; e Energy and Environment.68 The objective o f this activity is to follow up on the Action Plan o f the Energy-Environment Review and the CDM study, and identify investment projects in the energy, irrigation and waste management sectors that could be financed by the Prototype Carbon Fund and GEF but blended with the forthcoming Bank operation on EPAP; 64 Activity financed under the World Bank Environment Mainstreaming Fund. 65 Activity to be partly financed by the World Bank's Development Grant Facility. 66 Activity Financed under the Norwegian Trust Fundfor Environment and Social Sustainable Development. " Activity Financed under the Norwegian Trust Fundfor Environment and Social Sustainable Development. Activity Financed under the Norwegian Trust Fundfor Environment and Social Sustainable Development. -133- Banking and E n ~ i r o n m e n t .The objective of this activity is to assist local banks in ~ ~ managing the new risks and exposures in relation to environmental regulations and management, and provide a regional perspective on reasonable and transparent environmental regulations that support environmental quality objectives and private sector development and growth. This activity i s implemented in cooperation with the InternationalFinance Corporation o fthe World Bank Group; Monitoring and Information Dissemination for Regional Water Quality Ma~tagement.'~The aim o f this activity i s to enable the National Water Research Center (NWRC) o f the MRI to assist eight countries o f the Mashreq and Maghreb countries to improve water quality monitoring and dissemination o f information through the provision o f relevant data and information to appropriate institutions and organizations for informed decision making and actions; Solid Waste Management Activity.71 Egypt i s one o f the eight beneficiaries of the regional capacity building initiative entitled "METAP Regional Solid Waste Management in Mashreq and Maghreb Countries" which i s financed by the European Union. This activity aims particularly at: (a) providing tools to national and sub- national (i.e. regional and/or municipal) institutions to plan, design, implement, operate, and manage Integrated Solid Waste Management systems through the preparation o f capacity development modules, development of operational guidelines, and organization o f national and sub-national training courses; and b) promoting exchange of information and experiences within the MNA region in the field o f solid waste. A national activity for developing a strategy for plastic recycling for which tender preparation i s underway. Rural Water Supply and Sanitation study." This sector study will review the status o f Rural Water and Sanitation in Egypt, identify the institutional, legal and financial constraints and propose recommendations for policy and institutional reforms and for investments. b) Using high impact strategic lending. By capitalizing on analytical and advisory activities planned for FY05-07, three priority sectors from the CEA with potential for significant contributionsto increase economic growth and poverty outcomes will be supported: Water Quality-Integrated Irrigation Improvement. The Bank intends to be involved in developing a portfolio o f environment-related projects in Egypt aimed particularly at improving watedwastewater quality. InFY05, the Integrated Irrigation Improvement Project will envisage integration and management o f water resources and improvement o f water quality on a pilot scale. The West Delta Irrigation Infrastructure (FY07) would support the implementation o f an innovative partnership with the private sector for the management o f water resources in the West Delta region, incorporating environmental objectives and components into the design o f both institutional reforms and investment operations. There will also be emphasis on water demand management especially on improving water conservation and economic retums. The Rural Water and Sanitation Project (potential for FY07) aims to improve the water supply and sanitation services inrural poor areas o f Southem Egypt. 69 Activity financedthroughMETAP by the Swiss Developmentand InternationalCooperation. 70 Activity financedthroughMETAP by the Swiss Developmentand InternationalCooperation. 7` Activity FinancedthroughMETAP by the EC-SMAP 11. 72 Activity financedby the World Bank. -134- e Air Quality and Waste Management. The Bank will also be designing a follow-on project, the EgyptianPollutionAbatement Project (EPAP 11) whose objective i s to reduce pollution generated by point-sourcehndustrial entities in the region o f Alexandria and other northern governorates, in order to limit impacts on public health as well as on ecological systems. The project will introduce for the first time in Egypt, environmentalbenchmarking at the plant, industrial sector, governorate and ministerial levels, and introduction o f environmental performance disclosure as an appropriate market-based instrument. EPAP I1 will provide three financial windows for investments in : (i) pollution control in the urban and industrial and petroleum sector and in small and medium enterprises in Alexandria; (ii) environment services aimed particularly at stimulating private sector enterprises in manufacturing pollution control equipment, and in managing and operating sanitary landfills for solid waste and hazardous waste; and (iii) projects with local and global benefits that can be supported by GEF, C D M and PCF. The Bank will also be co-financing with GEF, the Solar Thermal Hybrid Project whose objective is to contribute to improving the economic attractiveness o f solar thermal technology globally. The project will create global learning effects that will contribute to a reduction in costs for the solar thermal technology over the long-term. e Enhancing the World Bank's Operation Effectiveness in Egypt by relying gradually on the national environmental and social impact system. This enhancement will consist of: (a) adopting a more efficient safeguard system based on upstream considerations in the planning o f policies, programs and projects and on predictable environmental guidelines for private sector development. This will require: attaining complementarity o f the World Bank and Egypt's environmental review and resettlement procedures by identifying systemic issues as explained in Chapter 7 (EMP preparation and follow up, consultation and disclosure) and agreeing on short-and medium-term solutions for modifications to existing procedures, policies and legislations; (b) pilot testing o f the simplification procedures in Egypt by the harmonization of the national systems with the World Bank policies in EA and in involuntary resettlement in the irrigation and agriculture sector; and (c) establishing through METAP, a well structured learning program for the use o f strategic environmental assessment (SEA) as a decision-making tool. c) Respondingflexibly and quickly by building on the momentum and the "space" created by the CEA process, the Bank would stay the course o f its dialogue with GOE on issues related to overall environmental sustainability and implementation. Inthis regard, Egypt's Business Plan for FY05-07 has already provided a total amount of US$150,000 for supporting the policy dialogue on institutional development, mainstreaming tools and follow up on the CEA recommendations. d) Partnership by continuing and strengthening Bank collaboration with donors, local stakeholders and NGOs, particularly inthe following areas: With the five METAP Partners (EC, EIB, UNDP, Finland and Switzerland) and focusing on harmonizing approaches and providing technical assistance in environmental economics, environmental assessment, coastal zone management, and banking environmental management, solid waste, and water quality management; and -135- 0 With bilateral and other institutions and partners o f Egypt, through parallel financing operations with EIB, the Japanese Bank for International Cooperation (JBIC), GTZKFW, FINNIDA, GEF and PCF, and through support and collaboration with all the environmental donors in Egypt and particularly with the European Commission, CEDARE73,CIDA, DANIDA, DFID, USAID, UNDP and UNEP as well as local and international environmental NGOs. The WorldBankBusinessPlanfor FY05 9.36 The Bank's work programinthe environment for FY05 consists of: Mainstreamingthe environment into CAS by including major CEA recommendations; Conducting a wide consultation in Egypt with national and local government agencies, universities and academics, members o f civil society and NGOs, and the private and public sector representatives on the content and recommendations o f the CEA; Initiating 1-2 follow up activities from the CEA, on the full social cost accounting for water quality, and on the follow up o f the energy-environment review through building a portfolio o f GEF, C D M and PCF projects that can be blended with the World Bank's future operations; Continuing the simplification process o f the harmonization o f the safeguard policies with the national system; Continuing the implementation o f EPAP, focusing on the sustainability of financial mechanisms; Completing the preparation o f the Solar Thermal HybridProject; Preparingthe EPAP 11; and Continuing the major studies on poverty and environment, women and environment, and the METAP activities in the field o f environmental economics, environmental assessment, environment and finance, and water quality and solid waste management. General Conclusion 9.37 The success o f implementing the CEA will require more than the proposed Bank assistance, which i s quite modest compared to the magnitude and severity o f the four priority environmental problems. Eventually, the GOE needs to be in the driver's seat and maintain political commitment, a sustainable policy and institutional reforms without which environmental sustainability cannot be achieved in the medium future. This will require time, patience and perseverance. However, because environmental sustainability requires a long-term commitment and an integratedsystematic approach, its greatest benefits will be reaped throughout the longer term. It would be therefore shortsighted to try to justify the continuation o f Bank's assistance based only on its expected immediate tangible benefits, important as these may be. Bank assistance should therefore continue to be a long-term, forward-looking program that would help build Egypt's capacity in engaging into policy and institutional reforms to help achieve its environmental MDG. 9.38 Since the early 1990s the Bank has been an irregular environment policy interlocutor in Egypt. N o w that the Bank has agreed to assist its client countries in meeting their targets o f environmental 73 CEDARE - Center for Environment and Development for Arab Region and Europe. -136- sustainability, its catalytic presence i s needed for addressing the root causes o f inadequate environmental management in the four priority areas identified in the CEA, integrating environmental concems into decision making through strategic environmental assessments; and providing tools for environmental policy analysis and linkingproject preparation to investment. Through the Bank's association inthe CEA process, significant outcomes can be achieved, including: (a) an improved public sector efficiency and environmental governance, through better planning and priority setting o f environment-related institutions based on sound cost benefit analysis and participation o f civil society; (b) lower environmental health risks through the development o f health-related and poverty-related prevention and mitigating measures in Egypt's selected portfolio of projects; and (c) adopting a more efficient safeguard system based on upstream considerations in the planning o f policies, programs and projects and on predictable environmental guidelines for private sector development. 9.39 Implementing the CEA remains a challenge for both the GOE and the World Bank in order to improve the quality of life and the quality o f growth o f the Egyptianpeople. -137- Y VJ 0 m U E Bu Y 8 W B 0 Y m 0.E x I R.9 2 aY 8 v) P z a 0 8 0 8 13 $n e + 8 3 E * v1 u d 3 F Bu U a I - Tt Tt 3 U I I lIl m n o m n u .-m 3 C ._ C P mm 5 m L . .> W % W -0 T- Table 2.1: Comparisonof MDGof Egyptwith other countriesof the Mediterranean Gin SelectedMediterranean Countries 150 Annex 3.1 Summaryof PreviousEnergyWork in Egypt Nameof Report Date of Funding RelevantMain FindingdOutputs Completion Agency National Action Plan August 1999 - SNAP Description o f proposed mitigationactions and - on climate change. their piojected impacts. Procedures for Cross-Sectoral implementation and proposed out reach activities. Initial National July 1999 Global Description o f the National Circumstances. Communication to Environment Estimation o f Egypt GHG emissions and sink. the United Nation Facility Identification o f Possible mitigation options for Framework reducing GHG. Convention on Vulnerability assessment and adaptation Climate Change. measures to climate change negative effects. Identificationo f Policies and measures to mitigate climate change effects. Policies, Strateges January 2001 DANIDA Description o f the current institutional and Programmes for framework. the Electric Energy Overview o f the power sector and its Sub Sector restructuring. RenewableEnergy Identifyingthe role o fthe energy sector insocial and Energy development and poverty alleviation. Efficiency inEgypt. Identification o f the role o f the private sector in future investment plans. BaseLine Survey o f August 1999 Danish Overview o f the Energy Sector including both the the Energy Sector in Intemational supply and demand sub-sectors. Egypt. Development Identificationo f the assistance needs within the Assistance Energy Sector. (DANIDA) Analysis o f some cross cutting issues such as awareness, R & D, environmental impacts and decentralization. GHG Mitigationand May 1997 United States In-depth financial, environmental, social and Technology Country Study economic assessment o f seven proposed Energy Assessment. Programme Efficiency Technologies. (USCSP) The Status o f The August 1999 Global Environment and Environmental Energy Sector in Facility Egypt. Greenhouse Gases April 2001 Preparation o f Estimation o f GHG emissions from the Energy (GHG) Emissions the inventory and Waste Sectors for the year 1999/2000. from the Energy and was camed out Waste Sectors in by the national Egypt 199912000. efforts. Arab Republic o f September IBRD Description o f the financial situation o f EEHC Egypt: Infrastructure 2000 (International and the distribution companies. Subcommittee - Bank for Description o f the electricity sector organization BackgroundReport Reconstruction and structure. onElectric Power. and Identification o f the electric energy generation Development) BOOT projects. Study onthe . October 1993 Japan Reviewingand analysis o f existing data and Transportation Intemational information. System and the Cooperation Formulation o f socio-economic framework. National Road Agency (JICA) Transport demand forecast. Transportation Formulation o f a master plan for the national road Master Plan. network and road transportation system. UNEP Greenhouse 1995 Finland. GHG emissions inventory for Egyptfor the year Gas Abatement 1990. Costing Studies Case GHG abatement technologies. Study on Egypt. Abatement costs. Draft's Egypt 2002 Swiss Review o f existing Egyptianand international Strategy on CDM. Government studies. Current and projected GHG emissions and reduction / avoidance potential in Egypt. International GHG offset. 151 Name of Report Date of Funding Relevant Main FindingdOutputs Completion Agency EgyptPrerequisitesfor C D M participation. C D M options for Egypt. Electricity Pricing January 1992 Review o f load forecast. Strategy Study. Review o f least cost generationdevelopment programme. Economic cost o f gas inthe power sector. Energy Planning o f Sept. 1999 Transport sector structure and main the Transport Sector characteristics. inEgypt inthe Effect o f transport sector on the environment. Context o f Energy saving and economic effect o f energy Environmental conservation intransport sector. Concerns. (Doctor of Philosophy in Chemical Engineering By Eng. Hamed Korkor). The Energy 2000 Energy efficiency and its impacts on natural Efficiency Council. resources, economic development and environment protection A Framework for the March, 2001 USAID Enhance the competitiveness o f Egyptian Egyptian National industries and reduce greenhouse gases Energy Efficiency emissions. Strategy. Reduce o f national energy consumption per unit o f economic output. Law Number 4 for 1994 Enhancement and improvement o f the 1994 for the Environment on the national level Environment and its Executive Regulations. herating Plan for 2001/2002 Enhancement o f air quality, water quality, Waste -~ ~. t i e ~ear12001/2002 Management and nature conservation. Environmental Protection Fund Ministry o f State for 2000/ 2001 Environmental Affairs Summary Profile of Initiatives Annual Report 2000/ 2000 / 2001 This Annual Report reflects the trends in 2001, Ministry o f economic and social progress o f Egypt Electricity and Energy. Egyptian 2003 (planned) USAID Promotion o f energy efficiency, within the Environmental Policy Egyptian Energy Sector. Programme. Updating o f the 1998 DANIDA Oil spill contingency plan National Oil Spill Contingency Plan. Industrial Waste 2006 (planned) DANIDA Promotion o f energy efficiency, within the Management and Egyptian Industrial sector. Energy. Conservation for Aswan Fertilizer Company (KIMA). The Environmental 2002 GEF/ UNDP Energy Profile Profile o f Egypt. Effect o f energy uses on the air quality. Profile o f the transport sector The National 2002 GEF/ UNDP Energy Profile Environmental Effect o f enerw uses on the air aualitv. -< . < Action Plan o f Egypt Profile o f the transport sector 2002 - 2017. National Energy Efficiency Strategy. Climate Change and Egyptresponse to systematic problems. Cairo Air Dec. 2000 USAID Impact o f various sources such a, motor vehicles Imurovement Proiect: and oil combustion 152 Name of Report Dateof Funding Relevant Main FindingdOutputs Completion Agency Attribution Study. Implementation o f Sept. 2000 DANIDA Renewable energy technology applications Renewable Energy Barriers and removals Technologies Project. Opportunities and barriers, Egypt Country Study. Energy InEgypt Energy and national economy. 1999/2000 Primary energy resources. Energy production. Energy consumption. Energy balance. Annual Report Petroleum Conventions. 1999,"Ministry o f Exploration activities. Petroleum" Production activities. Training and human resources. Petroleum and Environment Business People for USAID Energy efficiency benefits. an Energy -Efficient Energy consumption figures. Economy Investment Potential within energy sector. Energy Conservation USAID Expansiono fthe private sector through cost and Environmental effective energy use. Project (ECEP) Decreasedrate o f growth for GHG emissions. Creation o f a more environmentally sound power sector. 153 Annex 4.1 (Table Al): Overview of water quality related laws and decrees Level of legislation NoNear Topic Law 93 1962 Liquid waste discharge into public sewers Presidential Decree 421 1962 Ratifying Marpol convention Ministerial Decree 649 1962 Implementation o f law 93/1962 MHUNC Presidential Decree 2703 Highcommittee for water (Ministry o fHealth) MPWWR 1966 Law 38 1967 Bathing and Washing in Streams Law 72 1968 Prevention o f oil pollution o f sea water Ministerial Decree 331 1970 Executive committee o f water MPWWR Law 74 1971 Clearance o f Weeds and Dead Animal Disposals in Streams Presidential Decree 961 1972 Permanent committee for control o f sea water pollution by oil Law 27 1978 Control o f potable water sources Law 57 1978 Treatment o f ponds, marshes and swamps Ministerial Decree MoHP 7/1 1979 Specifications o f potable water Law 27 1982 Public water resources for drinking water and domestic use Law 48 1982 Protection o f riverNile from pollution Ministerial Decree 170 1982 Establishing Highcommittee o fthe Nile MPWWR Ministerial Decree MOI 380 1982 Technology & pollution Presidential Decree 631 1982 Establishing an Environmental Affairs Authority under I the presidency ofthe Council o fMinisters Ministerial Decree 8 1983 Implementing Law 48/1982 MPWWR Law 12 1984 Irrigation and drainage and License of Groundwater Wells Ministerial Decree 43 1985 Regulation of drainage & waterways MPWWR Prime Minister Decree 1476 Executive committee for Industrial drainage to the river 1985 Nile Ministerial Decree 9 1988 Amendment o f provisions o f decree 8/1983 MPWWR Ministerial Decree 9 1989 Drainage o f wastewater (related to 93/1962) MHUNC Law 4 1994 EnvironmentalProtection including tasks EEAA Law 213 1994 (follow up o f law 121 1984) on Water Users' Organizations; Law 256 1994 Wastewater Oualitv Guidelines for Irrigation. 154 Annex 4.2: Spatial presentation for key water quality parameters in the Nile Delta irrigation system Fecal ColiformBacteria (FC) 4.19 FC standards from Law 48/1982 being 5000 MPN/100 ml. The average values show that most of the sites exceed the standards. The FC counts are within 20,000 MPN/lOOml. The highest values are found in middle Delta while the lowest inwestem Delta as shown in Figure (Al). Besides the abject impact on public health, biological contaminants especially F C would also impact badly on livestock health and production as they reach livestock dinking and/or washing water. In addition, the parasites may remain in the animal's intestines for a long time producing eggs and multiple-parasite generations exerted in the animal's feces. Fecal (MPN1100ml) 7 0 -5000 e 5000-20000 e 20000 100000 I00000 500000 - - Figure Al. Fecal Bacteria Counts in the irrigation system of the Nile Delta, Year 2002/2003 Total Dissolved Solids (TDS) 4.20 TDS concentration is a good indicator o f salt concentrations. TDS ranges from 0-500 in most o f the Delta irrigation system. Only in the northem Delta, it may exceed the limit and score above 1000 mgil due to repeated reuse of drainage water and to presence o f saline groundwater in the north. There is also significant discrepancy between eastern andwestern-Delta concentrations as shown inFigure (A2). 155 N Figure A2. TDS concentrationsinthe irrigation systemof the NileDelta, Year 2002/2003 DissolvedOxygen(DO) 4.21 Dissolved Oxygen (DO) is one o f the parameters that can infer fish healtWproduction. DO exceeding 5.0 mg/l guarantees healthy and abundant production. If DO falls between 5.0 and 2.0 mg/l, physiological impacts and strain buildup inthe fishbody causing laziness and thus poor productivity. IfDO falls below 2.0 mg/l, mortality occurs leadingto an ample loss of production. The average for the three Delta regions i s still around the standard (7.0 mg/l). However, a number o f locations along the Delta drains, inthe northern lakes, and at the downstream reaches o f the two Nile Delta branches are subject to remarkable oxygen deficit. Figure (A3) illustrates the spatial variability o f average DO (mg/l) concentrations in the irrigatioddrainage System of the Nile Delta, inthe year 2002 & 2003. 156 I N I e 0 - 2 1 9 e 2 - 5 s 5 - 1 8 Figure A3. DO Concentrationsin the irrigation system of the Nile Delta, Year2002/2003 157 Annex 5.1: Key characteristics and data for solid waste in Egypt SW Criteria Unit 1990sa 2000s data data MSW Generated Million tonslyear 10 15.3 Accumulated SW million tons 5.0 9.7 Material Composition o f Foodwaste (%) 46 60 MSW Paperpaperboard (%) 21 10 Plastic (%) 4 12 Glass (%) 2 3 Metal (%) 2 Other (%) 25 13 Waste Type MSW (urban) 6 9.1 MSW (rural)' 4 6.2 Agricultural I 16.5 ConstructiodDemolition I 4 (0.5 hazardous) 4.0 Industrial 6.2 (of which 0.3 hazardous) Healthcare 0.13 29.4 Per Capita MSW 0.6 - 1.0 0.5 - 0.7 Generation MSW Collection Rural (%) 0 (low income rural) to 30 - 95 0 - 25 Coverage' Urban (%) 90 (highincome urban) SWM % ComDosted I 8 %Recycled 2 %Landfilled 2 YOUncontrolleddumping 88 Public sector SWM (million U S Dollars) expenditure Estimated 1998 100 Estimated annual 2003/2008 Sanitary Landfills under No. of sites 1 danning I Composting plants No. ofplants 5 (foreign manufactured 11980s) MSW Generation percenuyear 2.8 Growth I * To be achievedby year 2010, accordingto National Strategy for ISWMdevelopedin2000. a Accordingto National EnvironmentalAction Plan(1992). Egypt CountryReport, GTZIERMIGKW, 2004. Figuresgiven are for Cairo only. Source: Project inDevelopment andthe Environment: ComparingEnvironmentalHealth Risks inCairo (1994), as quotedin "Social DevelopmentIssues, SolidWaste Management Strategy Dakahleya," a reportby Dr. Laila IskandarandDr. Inas Salama(Community Institutional Development), 1996. Source: ProjectinDevelopmentand GovernmentComparingEnvironmental HealthRisks (1994) as quotedin"Dakahleya Solid Waste Management Strategy" (SEAM Project), 1999. 158 I Annex 5.3: Solid Waste Management Stakeholders Stakeholder ionalLevel STAKEHOLDER IN S W M orates IIIGreater Municipalities Municipalities NGOs Contractors Private Sector contractors, NationalPrivate Solid waste management Projects (collection, transportation, Consulting firms Contractors International Donors Consulting Firms Solid waste management services (assisting Governorates in 160 Annex 7.1: StrategicActions of NEAP 1992 and NEAP2002 1hospitalwastes I Creation of guidelines and strategiesfor waste management I agricultural waste Protecting Egypt's Heritage I Managing Protecting Egypt's Heritage 161 Completed Partially Completed 162 Annex 7.2:PRINCIPAL ENVIRONMENTALLAWS, DECREESAND REGULATIONS Annex 7.3: Summary of the EgyptianEIA systemand comparisonwith the WorldBank EgyptianEIA system WorldBankDrocedures EIA LEGISLATIONAND :EDURES Enabling legislation for EIA Law N o 4 on OP 4.01 1999 EnvironmentalProtection EL4is the process that is specific 1994 to each specific operation, both category A and category B projects. Any reportresulting from the process i s an EA report. Detailed legislation for EIA Executive Regulations BP/GP 4.01 1999 1995 (Prime Minister's Decree 338) Formal provisions for SEA None Definitions o f sectoral and regional EIA are provided. Sectoral and/or regional EIA is requiredwhen the project "is likely to have cumulative or regional impacts." Local government EIA None legislation or procedures Sectoral authority EIA Tourist Development legislation or procedures Authority has issued review criteria for tourist projects General and specific guidelines Guidelines for EM EA sourcebook andupdates 1991-2000. drafted by EEAA in 1995, Pollution Prevention and Abatement include report content for Handbook 1999. each sector. Detailed guidance issued for several project types. [INISTRATION OF EIA Main administrative body for Egyptian Environmental Regional Environment Unit EIA Affairs Agency ~Competent authority for EEAA:makes Director, Regional Environment Unit environmental acceptability recommendations to sectoral and local competent authorities Review body for EL4 EEAA:uses independent WB regional environment unit consultants as reviewers (BP) Sectoral authority Initial screening N/A responsibilities according to lists. Final project approval Local government Govemorates act as CAA N/A responsibilities for certain types o f project 164 - EgyptianEIA system World Bank procedures Other bodies responsible for Competent NIA planning approval Administrative Authorities and Governorates Method o f co-ordination with Occasional meetings, - Internally with environment other planning approval bodies registered letters - department anchor Externally with national environmental agencies and - concerned ministrieslentities For riskyprojects Quality Assurance and controlunit (QACu) ofthe environment anchor o f WB Method of co-ordination with Pollution control is part Use o fPollution Prevention and pollution control approval and o f the EIA system. For Abatement Handbook regulation discharges to water it is Available as guidance. The EA may also regulatedby the recommend alternative emission levels Ministry ofIrrigationand and approaches to pollution prevention Water Resources. and abatement o f the project. Standards are defined in Exceptions shouldbe rare. Law 4. Three screening lists: 0 EA is the process that is specific to black list, full EIA: grey each specific operation, both category list, approval with A and category Bprojects. conditions or scoped EM: 0 Any report resulting fromthe process white list, approval with i s an EA report. conditions 0 Screening categories :A, B, C and IF 16 Screening method Lists, plus individual Individual screening for significance, screening based on with illustrative lists (BP, GP) and on screening forms. the basis o f sourcebooks Individual scoping by - Based on EA TOR for category A proponent for black list projects projects, based on Approval o fWB sectoral guidelines. -- EA TOR after scoping Reviewedby EEAA, including site visits. Scoping byEEAA for grey list projects. 165 - EgyptianEIA system World Bank procedures :Con nt of EIA studv - 18 Content o f EIA report As World Bank (sectoral guidance) -- executive summary policy, legal and administrative framework --- project description baseline data prediction and assessment of environmental impacts and mitigation ----- analysis o f alternatives environmental management plan list o f EIA report preparers record o f consultations references and supporting data (Annex B) - 19 Requirements for non-technical Non-technical and Executive summary (Annex B) - summary executive summary 20 Requirements for considering Study required (sectoral I s a policy requirement as "EA alternatives guidelines only) evaluates a project's potential environmental risks and impacts inits area o f influence, examines project - alternatives.. .. 21 Requirements for environmental Mitigationmanagement Specifically required inthe OP and also management plans plan and monitoring plan included as Annex C. OP strengthens require.d (guidelines) and clarifies the role of the EMP by specifically listing EMP as a component o f the category A project EAreport, and specifically citing EMP provisions related to the - implementation o f the EA. 22 Requirements for transboundary None Compliance with all international impacts treaties Specified. The Bank does not finance project activities that contravene country obligations under relevant international environmental treaties and - agreements. 23 Requirements for global impacts None Compliance with all international treaties Specified. The Bank does not finance project activities that contravene country obligations under relevant international environmental treaties and - agreements. Rei :w,publicparticipationand decision-making 24 Method for review o f content Comparison with content Comparison with TOR(BP) and substance o f EA reports specified inguidelines, submitted plus ad hoc review by Consistency with TOR as specified in independent reviewers. the guide for preparation and review o f Review criteria for tourist EA reports for MENAregion projects. 166 Cgyptian EIA system World Bank procedures Requirements for public hidelines request public 5 For all category A and Bproiects larticipation :onsultation during the the borrower consults project- ZIA study. affected groups and localNGOs. L For category A projects, - consultation occurs twice: shortly after screening andbefore - EA TORSare finalized (scoping) once a draft EA report i s prepared Arrangements for access to EIA Vo formal provisions. Disclosure : reports 4ccess is given to Mandatorv for A and B proiects. The scientific institutions for borrower provides relevant materials in researchpurposes a form and lanmane that are understandable.. ..: 1) For Category A projects: prior to proiect appraisal: 17 Same as OP. C EA available at the Bank's Infoshop. 2) For category B projects. EMP i s disclosedprior to appraisal: i5Borrower's permissionto release the EAreport is still required. Decision-making authority Opinion givenby EEAA integrated withappraisal o f project on environmental design and economic analysis (BP) acceptability, prior to project approval by CAA. Regional Environment Unit v Provisions for appeal Permanent appeal committee W-UD Requirementsfor follow-up and Developer maintains Reports submittedto WB by borrower, monitoring records, EEAA supervision visits by WB (120, BP) undertakes follow-up insuections YAPACITY Expertise for conducting EIA Internal EEAA guidance Independent EA experts retained by on the selection o f proponent, consultants independentinternational panel for major issues (14) for category A. EA is responsibility o fborrower. No. of EIAs conducted Approx. 200 full EIAsper annum, plus approx. 7000 grey and white list submissions Approx. no. o f EIA firms and Small number o f individuals consultancy firms, large number ofindividuals 167 - Egyptian EI.4 system M'orldBank procedures 33 Foreign consultants used? Insome \VB and - international Droiects 34 Universities/ Approx. 6 universities institutes with EA technical expertise - 35 Universities/ Being developed inthe - institutes with EIA systems American University at expertise Cairo and inSuez Canal University 36 Training provisions Numerous intemationally - fundedEIA courses, plus well-established training - programs inuniversities I 37 Other EIA capacity-building DANIDA,DFID, programs USAID, others 168 Annex 7.4 :EEAA Functions and Responsibilities ~~~~ ~ ~ ~ ~~ Preparation o f draft legislation and decrees relevant to fulfilling theobjectives o f the Agency and consideration o fproposed legislation that is related to the protection o f the environment. Preparation o f studies related to the state o f the environment o f the country, and formulation o f the national plan for the protection o f the environment. This would include environmental protection projects and their estimated budgets as well as the environmental maps o f urban areas and areas planned to be developed. In addition, it shall set the necessary norms that II need to be followed when planning and developing new areas as well as targeted norms for old areas. Establishment o f norms and conditions to be complied with by owners o f projects and establishments before the start o f construction and during the operation of these projects. Compilation o f a list of agencies and national institutes as well as qualified individuals who could contribute to the preparation and execution o f environmental protection programs, and the preparation and implementation ofthe projects and studies undertakenbythe Agency. Carrying out o f field follow-up o f compliance to norms and conditions to be followed by agencies and establishments. Also, it shall undertake the procedures stated inthe law against those who violate these norms and conditions. Establishment o f necessary norms and standards to assure compliance with the permissible limits o fpollutants and to ensure that these norms and standards are followed. Collection and publication o f national and international information related to the environment on a periodical basis in cooperation with information centres o f other agencies. IIIt shall evaluate and utilize this updated information in environmental management and planning. Setting o fprinciples and measures for environmental impact assessment o fprojects. Preparation o f the Environmental Contingency Plan in the manner stated in Article 25 of Law 4 and coordination with the competent agencies for the preparation o f programs for confronting environmental disasters. PreDaration o f a d a n for environmental training and suDervision o f its imdementation. 169 Annex 8.1: Environment Funds supportedby InternationalDonorsand FinancingInstitutions InUS$ equivalent (million)75 Purpose On- Technical Total Fund Allocated Disbursed lending Assistance Amount %mount amount Amount World Bank/FINNIDA To provide financing for 35.0 5.676 40.6 38.4 25.6 Egypt-Pollution pollution abatement Abatement Project projects inprivate and (EPAP) public sector enterprises To finance pollution 6.0 6.0 6.0 6.0 Pollution Abatement abatement projects o f Facility industrial and productive sector enterprises KfW a) Public Sector Improve environmental Program impact situation o f Egypt's public sector 30.6 3.6 34.2 26.13 12.27 b) Private Sector industriesand utilities Program I To promote profitable industrial companies with I acceptable environmental 38.5 1.2 39.7 39.7 35.1 clprivate Sector Program standards To promote environment related investments in 34.9 1.9 36.8 3.94 3.0 Egypt's private sector CIDA a) Environment Support environment 6.5 4.55 11.05 Management investments in SME Technologies b) Environment Support to NGOs and Initiative Fund community development 1.54 1.54 based projects 3.08 3.08 Support to new business c) Environment and expanding green EnterpriseFund projects 1.61 1.61 3.22 d) Climate Change Conversion o f Brick factories ofHelwan from Mazout to Natural Gas DANIDA Support to the To provide support for 11.1 4.96 16.06 Environment Protection cleaner productionin Fund SMEs I 75 All conversions were made inUS$ at the following rate: 1EURO=US$ 0.83, 1US$= 1.3 CAN$ 76 Grant from FINNIDA. 170 IUSAID 1Toprovidepartial I 10 I I 10 Development Credit guarantee to industrial ---A- Authority firms, and tourist development for gas conversion and energy efficiency Social Fundfor To provide on lending for 338 Development water supply, wastewater, municipal, medical and industrial waste I Total* 512.0 28.04 I 540.04 *Total amount may differ by or -15% due to exchangeratefluctuations. + 171