World Bank, DC
July 31 2007

More Funds for Rehabilitation of Armenia’s Tertiary Canals
World Bank Approves Additional Financing for the Irrigation
Development Project

Press Release No:2008/038/ECA

Contacts:

In Yerevan: Vigen Sargsyan, (+374 10) 524-884

vsargsyan@worldbank.org

In Washington: Miriam van Dyck, (+1-202) 473-4215

mvandyck@worldbank.org

WASHINGTON, July 31, 2007 – The World Bank’s Board of Directors today
approved a US$5.0 million credit for additional financing for the
Irrigation Development Project (IDP) for Armenia. The additional
financing will support the government’s efforts in scaling up
activities implemented under the on-going IDP through rehabilitation
of tertiary irrigation systems, and through providing training and
technical assistance to Water Users’ Associations (WUAs).

Armenia has achieved substantial progress in preventing deterioration
of its irrigation and drainage system and in establishing the basis
for the sustainable management of irrigation and drainage
infrastructure. A long-term national program was conceived in the
mid-1990s with the support of the World Bank to support the
rehabilitation and restructuring of the irrigation and drainage
system. The first phase of the program consisted of emergency
interventions to secure the system’s continued operation.
Implementation of this phase was initiated under the Bank-funded
Irrigation Rehabilitation Project, followed by the Dam Safety
Project, and subsequently by the Irrigation Dam Safety Project II,
which is expected to conclude the emergency intervention phase. The
second phase of the program is focused on restructuring and
development and building a solid basis for irrigation system
sustainability initiated by the Irrigation Development Project Stage
I (IDP)

`Institutional reform is the most challenging aspect of the Project,’
said Giuseppe Fantozzi, Head of the World Bank team designing the
project. `The Water Supply Agency has been restructured and 52 Water
Users Associations were established throughout the country during the
period 2003-2004. Continued support to Water Users Associations is
crucial, since they represent the core of a more effective
institutional set-up that has notably improved, in recent years, the
sector’s financial sustainability and efficiency. That’s why capacity
building and training activities for the staff of Water Users
Associations will continue.’

The existing IDP project does not have sufficient funds to ensure
continued capacity building and training activities. In this context,
the Bank agreed to provide additional financing to assist in the
rehabilitation of tertiary-level infrastructure with 15% co-financing
from water users. To-date, the grant scheme under the IDP financed
about US$7.2 million for the rehabilitation of tertiary canals.
Eighty-five percent of this amount was financed with the credit
proceeds while 15 percent was financed by the WUAs as counterpart
funding. Proposals worth an additional US$9.0 million could not be
funded due to a lack of resources. The additional financing would
partially cover this surplus demand.

By the time the project is completed, 37 proposals for the
rehabilitation of some 110 km of tertiary level canals for Water
Users Associations in 37 communities in Ararat, Yerevan, Armavir,
Gegharkounik, Aragatsotn and Kotaik marzes will be implemented. The
expansion of irrigated areas will also allow for an increase in the
amount of water that is available per hectare in these areas. The
percentage of irrigated hectares cultivated with high value-added
crops is expected to increase from 71 to 78 percent. Similarly, cost
recovery will be strengthened, and will rise from 42 to 60 percent.
The percentage of farmers satisfied by irrigation water supply
services will be measured by an annual sociological survey.

The credit is provided on `hardened’ IDA terms with a maturity of 20
years, and a grace period of 10 years included. Armenia has been in
the process of graduating from IDA since July 1, 2006.

joined the World Bank in 1992 and IDA in 1993. Commitments to date
total approximately US $1.030 billion for 48 operations.