Loan Application for Water Desalination Plant

Loan Application for Water Desalination Plant Kelly Crossen Committee: The World Bank Country: Japan on behalf of Yemen Total Amount: US$50,000,000 Type of Loan: IBRD 1. Total Amount of Loan: US$50,000,000 2. Proposed Project- The purpose of this loan is for the constructing of a water desalination plant in the coastal city of Mokha, 54 miles west of the water scarce city of Taiz. At full capacity the plant would be able to pump a total of 100,000 cubic meters of water per day, more than enough to meet the daily needs of Taiz city, which they estimated to be 55,000 meter. Located along the Mokha coastline, the plant would be connected to a pipeline running from Mokha to Taiz and then later to Ibb and Sanaa cities, serving all small towns and villages located along the way. The Japanese government is presenting this loan to the World Bank to strengthen the economy through increase production of Yemen nature resources, such as the coffee, corn, and wheat coming from the Haraz Mountain, which would reduce the dependency on the yearly humanitarian aid received from the UN and other foreign countries. Today, Yemen receives nearly 200 million in foreign aid per year. In addition, the lack of clean water had increase the spread of water-borne disease on a scale not seen in decades. Cholera, diarrhea and dengue fever have spread at shocking rates in rural areas where access to clean water is limited. 3. Background According to Yemen Water and Environment Minister, Abdulsalam Razzaz Yemen suffers with the most water shortages in the Arab region. He pointed to Yemens increasing population growth rates and limited rainfall for the exacerbation of the country water crisis, noting that at its current state Yemen would soon be unable to sustain its supplies. Today about 25 million Yemenis which is around 70% of the population, struggle daily to find or buy enough clean water to drink or grow food. As a result 14.7 million Yemenis currently depend on humanitarian aid. A senior expert at Yemens water and environment ministry states ordinary Yemenis now pay more than 30 % of their income just to get water in their houses. Prices have more than tripled since March, reaching 10,000 Yemen rials ($47) for a four cubic meter tank of water. According to a report by the U.N. Development Programme (UNDP), Yemen is withdrawing almost 169 % of its renewable water resources, meaning that it is using water far faster than it can replenish its supplies. According to the reports conducted by the UNDP the gap between the countrys demand for and supply of water has widened to 1.4 billion cubic meter per year as a result of one of the highest population growth rates in the world and peoples extensive use of water. Only a tiny proportion of Yemeni household are connected to the municipal supply. The state run municipal company only supplies some household in the city while 70% of Yemeni lives in rural area. In the capital of Sanaa only 40% of houses are connected. The pipe network is old and an estimated 60% of water is lost through leaks. 4. Rationale- Without this loan, the water crisis in Yemen has the potential to cause great destruction to the nation. Access to clean water and sanitation is one of the most cost-effective development interventions and critical for reducing poverty which is one of the World Bank decisive goal. With clean water readily available, women no longer have to spend hours every day collecting water, agricultural production can increase, the cost of services and goods could go down and the reduction of water-borne diseases. Studies have shown with proper management, not only would construction of the plant help fill the ever widening gap in the citys dwindling water supply, but that it would also be able to provide consumers with high purity water at cheaper rates than consumers were currently spending. The project will be managed by the Ministry of Planning and the International Cooperation Secretariat. The timeline for the project will be 5 years from planning to implementation. There will be quarterly report made to the World Bank on all phases of the project. The project will be broken down in four phases. The first phase will be the project planning in which a project scope will be put in writing. Next will be project execution where resources are tasks and teams are formed with responsible. Next will be project performance and control where project managers will compare project status and progress to actual plan. Finally, project close after all tasks are completed and the project is up and running. 5. Allocation- US$100 million for construction of the pipeline leading from Mokhta to Sanaa US$150 million for construction of the desalination plant. US$50 million for construction of pipe network to the rural communities. US$25 million each will come from Japan and EU; UNDP will provide US $200 million and IDA will provide US$50 million.   6. Environmental Impact This project will have a positive impact to the environment by helping to reduce climate change in the region. The increase water supply will aid in the increase of the natural resources and the reduction of humanitarian aid to the country. 7. Credibility Japan became a member of the World Bank in 1952; the World Bank has provided more than 30 loans totaling US$850 million to the country, which all were paid back on time. The last loan taken by Japan was issued in 1966 by the 1970s they transition from borrower to now a source of finance. Japan became the second-largest shareholder of the World Bank in 1984, gaining a greater voice as one of the most important partners. Over the last forty years, approximately US$150 billion of World Bank bonds have been sold to Japanese institutional and individual investors. Japan holds an 8.90% voting shares in the International Bank for Reconstruction and Development. 8. Co-Financing Government of Japan.US$25 mil EU.. US$25 mil UNDP. US$200 mil IDA.. US$50 mil 9. Maturity The terms are as follows:Amount: $50,000.00 from IDAGrace Period : 3-5 years Fixed RateInterest Rate: 1.15% Maturity : 5 years