Cameroon - Second Railway Project

FILE CorN DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Not For Public Use Report No. P-1454a-CM REPORT AND RECOMMENDATION OF THE PRES IDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO REGIE NATIONALE DES CHEMINS DE FER DU CAMEROUN WITH THE GUARANTEE OF THE UNITED REPUBLIC OF CAMEROON FOR A SECOND RAILWAY PROJECT June 13, 1974 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENTS Currency Unit CFA Franc (CFAF) US$ 1 C CFAF 250 CFAF 1,000 US$ 4 CFAF 1,000,000 = US$ 4000 FISCAL YEAR July 1 to June 30 j/ Floating exchange rate.  REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REGIE NATIONALE DES CHEMINS DE FER DU CAMEROtUN WITH THE GUARANTEE OF THE UNITED REPUBLIC OF CANEROON FOR A SECOND RAILWAY PROJECT 1. I submit the following report and recommendation on a proposed loan to R6gie Nationale des Chemins de Fer du Cameroun, with the guarantee of the United Republic of Cameroon, for the equivalent of US$ 16 million to help finance a Second Railway project. The loan would have a term of 25 years, including three years of grace, with interest at 7-1/4 percent per annum. Caisse Centrale de Cooperation Economique (CCCE) would provide a parallel loan of US$ 5.3 million equivalent to finance the motive power component of the project. PART I - THE ECONOMY 2. The report "The Recent Economic Development of Cameroon" (No. R72-247) was distributed to the Executive Directors on November 27, 1972. An updating mission visited the country in May/June 1973; its major findings are reflected in the following paragraphs and Annex I contains country data. A basic economic mission is planned for FY1975 to coincide with the preparation of Cameroon's Fourth Development Plan (FY77-81). Economic Potential 3. Cameroon's natural resources are varied, although not abundant. Its range of soils and climatic conditions permits cultivation of a wide range of crops and provides substantial agricultural potential. These crops include oil palm and rubber in the south, cocoa and coffee in the central region, and rice, groundnuts, cotton and other sahelian crops in the north. The forestry region of the southeast contains large untapped timber resources, and the north, good potential for livestock. 4. While the main opportunities for develooment lie in expansion and diversification of agricultural production, Cameroon also possesses valuable industrial potential. It consists not only of the production of import substitutes needed for a growing domestic market, but also of the processing of local raw materials, particularly agricultural and forestry products, for export. 5. Commerce, transport, and transit services are important economic activities. Cameroon is a large country with three main economic centers (West, South, and North) separated by large underpopulated areas. In addition, the country serves as one of the main export routes for landlocked Chad and, to a lesser extent, the Central African Republic.  - 2 - An active transport sector is therefore vital to the development of Cameroon, and considerable investments are needed to build or maintain adequate port, road, and railroad infrastructure - prerequisites to promoting agricultural and industrial development and to strengthening the role of Cameroon as a regional trade center. Past Performance 6. During the first decade of independence (1960-1970) the Govern- ment has made serious efforts to lay the groundwork for accelerated economic development and to step up the mobilization of financial resources for this purpose. In spite of internal political difficulties during the early 1960's and of administrative constraints arising from Cameroon's top-heavy federal structure, these efforts have been quite successful. During the 1960's GDP grew in real terms at an average rate of over six percent a year and owing to prudent financial policies the Government was able to finance a rising proportion of public investment from domestic savings. 7. The sectoral distribution of public investment corresponded fairly well to the country's development requirements. By far the largest part of public investment was devoted to lifting the most immediate deve- lopment constraint, namely the shortcomings of the transport network. Conscious of the lack of trained manpower at all levels, the Governrnent also emphasized the expansion and imprDvement of education. Numerous new schools were opened, school enrollment soared and a beginning was made with the reform of education. In agriculture, the Government promoted crop diversification through projects for rubber, oil palm, cotton and rice and made a beginning with the rehabilitation of existing coffee and cocoa acreage. In industry, the Government's efforts were limited to providing financial support for key projects and maintaining a liberal investment climate which led to an increase in private foreign investment and quick expansion of manufacturing caracity, particularly in the field of import substitution. 8. In the early 1970's economic growth slowed down because of declining world prices for cocoa and coffee and a decline in foreign private lnvestment. In spite of the recession, Government managed to increase budgetary savings through improved tax collection, better exPenditure control, and a modest rise in tax rates. Public investment however rose evJen faster and the result -was a drawdown of treasury reserves and an increase in external debt* With an estimated debt service ratio in 1973 of 8 percent, Cameroon's debt problems are still manageable. The increase in cocoa, coffee and timber prices in 1973 has improved government finance, balance of payments, and produced a slight recovery in the reserve position. Current indications suggest however that the rise in oil prites is likely to lead to gradually increasing external financing requirements.  - 3- Prospects and Development Strategy 9. Prospects for further economic growth remain favorable, provided the Government can come to grips with several structural oroblems which have come to the fore in recent years and of which the Government and aid donors are increasingly aware. (i) In spite of massive investments in recent years, the basic transport infrastructure is still inadequate to meet the country's requirements. The Douala port and the Douala-Yaounde section of the railroad require major improvements and the road system needs to be adapted to traffic growth and the development of new agricul- tural and forestry areas. (ii) In agriculture, which will remain the mainstay of the economy, more determined action should be taken to bring financial and technical assistance within the reach of the small farmers. Cameroon's favorable climate and soil would allow output increases in almost all crops as well as in livestock. The small farmers, who account for most of the country's agricultural production, however, are still largely unaware of improved cultivation techniques or not attracted by prospects of higher or better quality production. They mostly use tradi- tional, low-yielding production methods. An agricultural survey by the Bank during April/May 1973 recommended to the Government various specific measures including applied research, extension services, supplies of inputs and agricultural credit. On income distribution grounds, the survey recommends increased attention to development possibilities in "he backward northern plains and western highlands which have a large, poor population and reasonably good agricultural and livestock potential. (iii) Even if rural development efforts become more successful, rapid migration from the countryside to the cities is bound to continue. Cameroon's urban population is expected to rise from 20 percent in 1970 to 38 percent in 1985. The main problem in the cities will be to provide productive employ- ment, and to plan land use for housing, infrastructure, and social services. The Government intends to devote increased attention to migration and urban problems and has asked the Bank for advice. In the industrial sector, a revision of policies is necessary in order to restore foreign investors' confidence which in recent years had suffered from slow and cumbersome procedures. 10. To resolve these problems, action on two fronts is essential. First, a strengthening of project preparation and implementation machinery, and second, a mobilization of adequate domestic and external resources for a fairly large public investment program. 11. Considerable progress is being made on the first objective. In 1972, President Ahidjots policy of national integration culminated in a successful referendum which abolished the former federated states and replaced the cumbersome federal structure by a unitary government. Within the new structure, strong ministries are being established to replace the weak technical departments in each federated state; and within the new ministries, the Government is trying to establish planning units for project and policy formulation.  12. With respect to investment financing, and taking into account preliminary revisions necessitated by international Drice changes, an average yearly public investment spending of US$150 million would be required to catch up with the backlog of infrastructural investment and to support the 5 percent real annual GDP growth rate deemed feas-ble by our last mission.j External financing of about US$130 million a year will be required to allow for debt service and some rebuilding of reserves. Bilateral and other sources outside the Bank Group are expected to contribute about 70 percent of Cameroon's external aid requirements. Assuming that the Bank (excluding IDA) would finance.the remaining 30 percent, its share of Cameroon's disbursed external debt would rise to 18 percent by 1979 as against 13 percent at present. Service on Bank Group debt, however, now around 4 percent of total public debt service, would not exceed 14 percent by 1979 and total debt service at that date would amount to 15 percent of projected export earnings. 13. Cameroon's ability to make effective use of external resources and the Government's dedication to development are reasons for increased external support. Although debt service is still low, it is rising rapidly and will absorb an increasing share of gross public savings; the higher oil prices will also have a negative impact on savings. Therefore, Cameroon can make only a modest contribution to the financing of future public investment. To avoid further rapid buildup of debt service, lenders, including the Bank Group, should provide part of their assistance on concessionary terms and also be prepared to finance a high proporticn of project costs including when necessary a part of local costs. PART II - BANK GROUP OPERATIONS IN CAMEROON 14. Annex II contains a summary statement of Bank loans and IDA credits as of April 30, 1974 and includes notes on the execution of orgoing projects. The Bank Groupts commitments in Cameroon now amount to more than US$140 million and cover eleven projects: four in agriculture, four in transportation, two in education and one in public utilities. With the large loan/credit for the Second Highway project in 1973, trans- portation now renresents the largest share (52 percent) of our past commitments followed by agriculture (30 percent). Although delays and setbacks have been occasionally encountered in the execution of the projects, the Government has consistently shown willingness to collaborate with the Bank for the determination and application of satisfactory solutions. j The impact of the sharp recent changes in the international price structure has been estimated on a preliminary basis in these calculations. A full new set of internally consistent projections, taking into account the latest estimates of future commlodity prices and likely adjustments of the Cameroonian economy to these new price relationships is being undertaken in conjunction with our on-going economic work. Pending completion of this exercise, the balance of payments and debt projec- tions in Annex I have not been updated.  15. The Bank Group's strategy is to support the Government in its efforts to equip the country with infrastructure, to accelerate rural development, and to increase the efficiency of Cameroon's institutions. 16. In agriculture we have been able to help the Government to diversify production by financing its oil palm and rubber plantations in the east and west and rice irrigation in the north. The recently approved livestock project provides for cattle breeding ranches in the northwest, center and east, a tsetse fly extermination campaign, animal slaughtering and meat retailing facilities, and credit to private livestock holders. A cocoa rehabilitation and planting project, anpraised in October/November 1973, includes important institution building and training aspects that would benefit many small holders. An integrated rural development project in the very populated but underdeveloned north is under consideration for FY 76. Besides promoting much needed food- stuff production, increased Bank Group lending to agriculture will support the Governmentts efforts to organize itself and focus on rural develooment in order to correct geographical and economic imbalances in Cameroon's development. 17. Recognizing the crucial importance of transportation to economic growth in Cameroon and in neighboring countries, the Government has devoted the largest portion of public investments to this sector. The Bank Group, together with bilateral institutions, has substantially helped Government develop adequate transport facilities. The Second Highway project of 1973 will help complete the establishment of the basic trunk road system. Given sharp traffic increases and the backlog of required investments, massive injections of capital will still be necessary in the years ahead, particularly for the expansion of the port of Douala and further improvement of the transport corridor which links it with the capital, Yaounde. Road investments would mainly be for road maintenance and feeder roads to provide liaks to local markets and facilitate exploi- tation of Cameroon's forests, a major area for future development. In other sectors, we are actively considering a first power generation and distribution project, a first small-scale industries project, and a third education project with special emphasis on rural education and training. 18. Our lending to Cameroon has been closely coordinated with other donors; in six out of eleven projects financing arrangements have been either joint or parallel. French assistance would join us in financing the forthcoming cocoa project and make a parallel loan for the proposed second railway project. 19. In all our projects, we will as in the past pay particular attention to training, technical assistance and other provisions to strengthen government institutions and improve sector policies. Besides, through our economic work we will continue to advise the authorities, at their request, on development questions in general, and subjects suchI as economic management, problems of urban migration and manpower development in particular.  - 6 - PART III - THE TRANSFORT SECTOR Infrastructure 20. Despite the requirements imposed by the country's geography at indeoendence, Cameroon's transport infrastructure was appreciably less developed than in most other Wiest African countries. The country's location on the Gulf of Guinea, at the junction of West and Equatorial Africa, makes it an important gateway for its landlocked neighbors, Chad, and to a lesser extent, the Central African Republic (C.A.R.). The distances between Cameroon's principal agricultural areas and the sea are great. Given these distances and the country's dependence on exports and imports, low-cost transoortation i.s a prerequisite to economic growth. During the last ten years the Government invested largely in transoortation, to reduce transport costs, open up new areas for development (esoecially in the remote North), improve transit services for its landlocked neighbors, and unify the once divided country. 21. At present the system comprises one major port, about 1,200 km of railways,23,000 km of roads (of which 1,500 km paved), one navigable water- way, and five airports (two of which international). The trunk land transport system radiates from Douala, the main port, industrial and commercial center, and is being developed along two main axes. The 300-km Douala-Bafoussam-Foumban route serves the Western Region which is densely populated and produces cocoa, coffee and bananas. The 1,700-km Trans- cameroon route, which combines rail and road links, heads east from Douala to the cocoa producing region around Yaounde, the capital, then north to the cotton, meat and rice producing northern Cameroon and the Chad border. This route also carries timber traffic and part of Chad's imports and exports. 22. Thus, the network provides access to the vital areas of economic activity. However, many sections, built decades ago, could no longer cone with increasing traffic. The first highway project of 1970 included the improvement of about 300 kms of roads, between Ngaoundere and Garoua and between Tiko and Victoria. The second highway project (Loan 935, Cr 42Q of 1973) includes reconstruction of about 500 km of roads in north and west Cameroon. Together with other investments from bilateral and multilateral sources (including the Bank Group's First Highway Project), they are designed to bring the trunk road sections of the Transcameroon route to the capacity required by domestic and transit traffic.  -7- 23. The current capacity constraints on the Transcameroon route are the railway and the port of Douala. 24. Considerable additional investments are required on the railway system. Until recently, the railway in Cameroon was quite small, andS the furthest penetration from the port of Douala was to Yaounde, a distance of about 300 km; however, construction has recently been com- pleted of a 628 km extension to Ngaoundere which is expected to accelerate development of the northern region of the country. This extension has been built to high standards of design and engineering, and its cost of about US$100 million has been financed primarily by bilateral lending agencies either in the form of grants or of loans on concessionary terms. While this new construction was advancing, however, the old lines -- in particular the critical Douala-Yaounde link which was originally constructed to much lower design standards -- were deteriorating under the impact of growing traffic volumes. At the same time, additional motive power and rolling stock were required to meet traffic demands. 25. The Bank's involvement with the railway system has focussed on improvements to the Douala-Yaound6 section, and the equipment needed to maintain and augment the railway's overall carrying capacity. The First Railway Project (Loan 687-CM, US$5.2 million, 1970) resulted from a Government request for Bank support of the Third Railway Development Plan covering the period 1970/71 - 1975/76. This Third Plan also contained provision for major extensions of the railway system and a complete realignment of the Douala-Yaounde section. The Bank reserved its eosition on these proposals, most of which were not adequately supported by engineering and economic studies, and in fact stipulated in the ensbu><ngc Loan Agreement certain restrictions on investments and debt obligat 'ms which effectively prevented implementation of these plans until furth9' study and review had been undertaken. The Bank did, however, agree to assist with items relating to improvement of existing facilities and services during the first three years of the Plan period. As a result, the Bank provided financing for rolling stock, reconstruction of the Japoma bridge near Douala, track renewal on the Douala-Yaound6 section, and consulting services to review the proposed project to completely re-align that section. Other project items not financed by the Bank included reconstruction of the Douala railway station and shunting yard. and extension of the Training Center, which have been delayed. 26. Pending preparation of a new Plan, the Government and the rail- way have requested further Bank assistance to finance urgent needs -through 1976, and these are the subject of the proposed loan.  - 8 - 27. At the same time, the Government and the National Ports Authority are preparing with the help of French and German consultants the expansion of Cameroon's principal port, Douala. In the past Credit 229-CM helped improve log handling and build a berth for industrial raw materials. Nevertheless, this port is rapidly reaching the limits of its capacity and with the anticipated increase in traffic, especially of timber, port expansion becomes urgent. Several bilateral and rmultilateral donors (including the World Bank Group) have been approached to finance this expansion and we hope to appraise a project during the current year. Organization, Planning and Coordination 28. The Government's present transport policy aims at: (i) deve- loping and improving the Douala port, the Transcameroon route, and the Douala-Foumban axis, all of which serve export-import traffic; and (ii) improving road links that specifically contribute to socio-economic integration of the two former states which now form Cameroon. The transport investments in the Third Five-Year Plan (1971/72-1975/76) are designed to achieve these goals, and if completed as olanned (by around 1981), these two major policy objectives would be achieved. The importance of improving and developing feeder roads, as well as of strengthening road maintenance, is recognized, and will in future be the principal focus of attention. 29. The Ministry of Transport created in 1970 has overall responsi- bility for the determination of policy, planning, and coordination in the sector, though the Ministries of Planning and of Piblic Works have subsidiary planning roles. This responsibility covers transDort agencies such as Regifercam, the National Ports and Waterways Authority, and Cameroon Airlines, including review of their investment proposals and approval of tariffs. In the past, the planning function was relatively simple since transport needs were readily identifiable; in the future, more careful planning will be required to evaluate projects and establish priorities. ZSee paragraph 33 on the pending coordination problem with respect to the Douala-Yaounde transport corridor.j Cameroon's caoacity to achieve such planning needs strengthening, and the Second Highway Project provides assistance to the Ministry of Transport in setting up a pe&manent organization.  -9- PART IV - THE PROJECT Background and Purpose 30. The project is designed to meet the most urgent equioment and track needs of Regie Nationale des Chemins de Fer du Cameroun (Regifercam) through 1976. Regifercam and the Bank identified and preoared the pro- posed interim railroad project. The project is based on data supplied by consultants OCCR j and Sofrerail (France) and the findings of the Bank Mission which appraised the project in February/March 1973, as updated in the light of new information provided by Regifercam and Government in February 1974. The Appraisal Report, Appraisal of a Second Railway Project No. 423a-CM dated June 13, 1974 , is being circulated separately to the Executive Directors. A Loan and Project Summary is in Annex III of this report. Negotiations for a loan were held in Washington in May 19714, with a Cameroonian delegation headed by Mr. Tchoungui, Cameroon's Ambassador to the United States. Description 31. The project, to be executed during 1974-1977, consists of: (i) construction of a new Japoma bridge; (ii) completion of track renewal (42 km) on the Douala-Yaounde line; (iii) installation of 50 new turn-outs; (iv) installation of a radio link on the Douala-Yaounde- Ngaoundere lines; (v) purchase of 100 flat-cars, 25 box-cars, 100 freight-car bogies, a breakdown crane, and spare narts for locomotives and rolling stock; (vi) purchase of 4 main-line and 3 shunting locomoti:ves; (vii) provision of consulting services in the fields of railway operations, costing, commercial activities and management, and for a detailed review of the solution to fore- seeable capacity constraints on the Douala-Yaounde transnort corridor (road construction vs. railway realignment). 32. Concurrently with the proposed Second Project, the railway is planning construction of the new Douala Station and extension of the Training Center. / OCCR: Organization, Control, Conception, Realisation.  - 10 - 33. The project will provide Regifercam's rolling stock and motive power requirements to meet freight traffic demand until 1977, particularly with respect to the movement of expected timber traffic originating east and north of Yaound6. It will also enhance the line capacity on the critical Douala-Yaounde section, through track renewal, extended sidings, and better radiocommunications. These improvements will remove constraints which are inhibiting traffic growth and causing costly delays in the train operations. These line improvements will suffice to meet requirements until at least the end of the decade. In the early 1980ts, however, overall traffic growth may reintroduce a capacity constraint which could necessitate a major realignment of the Douala-Yaound6 section at a cost in excess of US$100 million. However, this railway section is paralleled by a road which, because of its present condition, is restricted to light (largely short-haul passenger) traffic. The Government is considering upgrading the road at considerable cost. Should both the railway and the road be improved, there is likely to be excess capacity and there is, therefore, a need to examine, in depth, the least-cost solution to future traffic requirements on the Douala-Yaound6 corridor. The project provides funds for appropriate studies to supplement those already undertaken for the railway realignment under the First Railway Project. 34. The proposed financing of the Japoma bridge is additional to the provision in the First Railway Project (Loan 687 of 1970). The existing bridge spans the Dibamba River and carries all rail traffic between Douala and Yaound6. Its stability is imperiled by damage to its piers and the sinking and tilting of one of them. Hence there is a risk that it may collapse and block the'Cameroon's main transport artery. It was envisaged under the First Project to reconstruct the existing bridge or to construct a new bridge upstream. Unforeseen subsoil conditions at the upstream site necessitated lengthy studies. After reviewing a wide range of technical solutions the Bank and Regifercam concluded that it would be better to construct a bridge downstream despite higher cost. Bids were received and confirmed that funds in Loan 687 (about $900,000) would be grossly insuffi- cient to cover the foreign exchange cost of the new construction, estimated at $2.2 million; consequently, Regifercam did not commission the work peniding a second Bank loan. The new bridge would be financed partly out of the proposed loan and partly out of funds allocated for this purpose in the previous loan. Project Execution 35. The project will be carried out by the railway, which is competent to do so. Execution is expected to start in 1974 and to take three years to complete. 36. The railway enjoys sufficient autonomy in its day-to-day operations to permit effective management. The quality of top management, strongly supported by French technical assistance, is generally satisfactory. However, there is considerable scope for improvement in administrative and technical practices. The proposed project provides for consulting services for operational planning and control, costing, marketing, administrative organization, management training, corporate planning. Regifercam has agreed to consult with the Government and the Bank regarding the decisions it proposes to take in the light of consultants' recommendations (section 4.03 of the Loan Agreement).  - 11 - 37. The railway's physical assets are generally well maintained. About 628 km of track, constructed to high technical standards, have been opened to traffic in recent years. Older track is maintained in good repair but at high costs, due to excessive wear of rails and the extremely difficult terrain crossed. Training of staff is given continuous attention in antici- pation of a continuing rapid growth in traffic. Efficiency of operations has been somewhat low, but should improve following completion of the tr'a`k renewal program and the delivery of new rolling stock and locomotives. the consulting services outlined in paragraoh 31(vii) above are, of course, allso designed to help improve efficiency. Project Cost and Financing 38. Total project cost net of duties and taxes amounts to about US$23 million, with a foreign exchange component of US$20.7 million or 90 percent (for a breakdown see Annex III). The Bank would make a loan to Regifercarn, of US$16 million, repayable in 25 years (including a 3 year grace period)5, of which US$14.6 million, together with US$0.9 million from the first Bank loan, would meet the foreign exchange requirements of all items except the locomotives. Caisse Centrale de Cooperation Economique (CCCE) has aDproved a loan of US$5-3 million equivalent to cover the costs of locomotive purchase. Regifercam would provide the remaining local costs of the project, estimated at US$2.3 million equivalent. The Bank loan would include US$1.4 million for interest during the first two years of the project to ease the debt service burden on the railway prior to receipt of additional revenues generated by project items. Regifercam's Financial Position 39. During the period 1965-68, the railway's financial situation was satisfactory, with rates of return on net fixed assets in use ranging from 5 percent to 7.3 percent. Subsequently, the position deteriorated, until in 1972 and 1973 the rate of return declined to zero, and the Government was forced to subsidize the railway. The essential reasons for the deterioration were: (i) a sharp increase in operating costs (including depreciation) arising from the opening of the first section (Yaounde-Belabo) of the Trans- cameroon extension and from inflationary pressures with no compensating increases in rates and fares; and (ii) a fall-off in the growth of traffic due to capacity constraints and a deterioration of service quality. 4O. It is now proposed that the railway will regain a sound financia? position, mainly by several substantial tariff increases which are designed to recover lost ground and cope with inflationary pressures. This is in line with the Government's policy not to subsidize railway traffic on a regular basis. In execution of this policy, tariff increases were introduced rn January and April 1974, and tariffs will continue to be raised annua-l>y so that the railwayts position will gradually improve to a point ie-rel, no later than 1979/80, the railway will be able to meet all its cash recuirements including debt service and a reasonable contribution to its investment nrogram (exclusive of major realignments or extensions). Regifercan has agreed to take measures necessary to attain a rate of return of 1 percent in fiscal year 1975, slowly rising to 4 percent by fiscal year 1979. These rates .Xeould be reviewed after June 1974 when Reg-fercamts assets have been revalluerd (Loan Agreement, sections 5.10 and 5.0a).  - 12 - 41. Regifercam's cash position, although now being eased by Govern- ment subsidies and bank overdrafts, will remain tight until 1976. The debt/ equity ratio is satisfactory because construction of the Transcameroon extension, which accounts for about 60 percent of the railw-ay's assets, was financed mainly by grants. The Loan Agreement for the proposed rroject makes adequate provision for limitation of the railway's indebtedness (Section 5.06). 42. It is recognized that, in spite of appropriate assurances and safeguards, the railway's financial situation throughout the project period is dependent upon the development of foreseen traffic volumes and the ability of the railway to match rising costs, particularly those resulting from inflationary pressures, with timely and adequate tariff increases. To protect the railway's position against the risks involved in traffic shortfalls or possible time-lags in the implementation of tariff increases, the Government has agreed to provide subsidies to the railways or to take other appropriate measures in the event that a cash shortfall sniould materialize. (Guarantee Agreement, Section 2.03). Procurement and Disbursement 43. All Bank financed items under the project, except the spare diesel generator to be manufactured by the locomotive supplier, will be orocured uhrouigh international competitive bidding in accordance with the Bank Group's Guideliries for Procurement. Domestic or regional preferences in bid evalu- ation are not applicable as no local tender has been received for the bridge construction, and other items are not produced locally. Disbursements from the Loan account will be made on the basis of: the C.I.F. costs of rails, sleeoers, fastenings, mechanical track maintenance equipment, turn-outs, freight cars, bogies, snare parts and equipment for a radio-telecommunication system; the foreign exchange costs of technical assistance to the Borrower; and, 75 percent of the total cost of the Japoma Bridge (reoresenting the estimated foreign expenditure component). Disbursement on freight cars will be subject to completion of satisfactory arrangements for the financing and delivery of locomotives. (Loan Agreement, Schedule 1.) Economic Justification 144. The proposed railway investments represent the least-cost solution to meeting transport requirements in the Douala-Yaounde corridor during the remainder of this decade. The economic case for the several elements of the project is well justified. For the Japoma Bridge, it was determined since appraisal of the first project that the economic 1osses that would result from rupture of the existing bridge would be so great that construction of a new facility was justified immediately. Although cost estimates have increased since then, that conclusion remains firm in view of continuing traffic increases and the railway's vital role in the economty. Completion of the track renewal program is now imperative,  - 13 - with the m,ain benefits being reduced operating and maintenance costs by avoidance of operating accidents, and increased line capacity of the critical Douala-Yaounde section. The economic return on this project item amounts to 12 percent. The purchase of additional freight cars and traction power is necessary to meet anticipated traffic requirements; the return on this investmant amounts to about 16 percent. The cost of purchasing bogies for existing freight cars would be 50 percent less than that of new cars, and this item is justified on the basis of this least- cost solution. The investment in purchase of a new crane is expected to yield an economic return of 24 percent derived from savings in time lost by frequent operating accidents. The overall economic return on the project, excluding the Japoma Bridge and the bogies, is 13 percent. PART V - LEGAL INSTRUMENTS AND AUTHORTTY 45. The draft Loan Agreement between Regie Nationale des Chemins de Fer du Cameroun and the Bank, the draft Guarantee Agreement between United Republic of Cameroon and the Bank, the Report of the Committee provided for in Article III, Section h (iii), of the Articles of Agreement and the text of a draft resolution approving the proposed loan are being distributed to the Executive Directors separately. 46. Features of the Loan and the Guarantee Agreements of special interest are referred to in paragraphs 36, 40, 41 and 42 of this report. 47. I am satisfied that the propos,3d loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 48. I recommend that the Executive Directors approve the proposed Loan. Robert S. McNamara President Attachments June 13, 1974   A~NNExI Page lof 3 pages COllNTRY DATA - CASFROON AREA POPUL.TION DEN317Y 475,450 knz 5.836 stflhon (etd-1972) 88 /a P.r kesSe arab.. l nd SOCIAL INDICATOhS Peferenoe OCountrles Osteeroon Ihdde Philpckine lery beast a 1960 1970 !~~17_0 1970 i~7 SNP PER CAFITA US$ (ATLAS 8ASTS) L * 200 Ib 110 210 /I 330 Id DEMO; RAPHOC Crade birth rate (per thousand) 4o 38 Is 42 46 Grads death rate (per thoua-d) 19 16 7ei 11 22 Inf-nt =ortelity rate (per thi-aaad live birth.) 120-140 7; 80 140 Life expectancy at birth (y.r.) 41 I 49 - 56 If 42 Seoes reprod-ution rate ,i. 2.7 If 2.9 2.9 3.0 Population gro-th rate .. 2.J 2.3 3.0 3.3 Popolatlee growth rate - urb. a 7 Sg.h 3.5 5Ai 9 If, Age et-ut- (re-perc.nt) 42 13 L 65 -ad - 55 53 55 De-nedency ratio /4 3 / 3 1.2/Ib.Ie 1.3 Ib.i 1.0 II Urbo- populattnn as percent of total 22 Ia 20 35 10i 2y8 Fanily .onning: N. or -ce ptoro ourculaito_ (thu_) 3 409 No. of t er- ( oa earried vteen) 8 EPLOYlENT Totel labor force (thoua-nde) 221,OOC /b,n 13,200 /b 2,300 Percentage veployed in agriculture 71 /e 56 71 76 Percentage uoenpoyed . 7 7 9 INCOME DATtRI3UFTIO Poranat or oathaua1 inose r.. ecnad by tighost 5$ . 25 lb o Percnt of national Lncoe received by b:Sgbet 21% 54 7b o Percet of national ixcors rIce e-d by loweet 20% 4 Per exact eratioxol tncoxm raxeSnod by loseeet% 12 k.. OISTRIWtTION OF LAND OMEERSEIP 8 owned by top lOS of xoeer % aenod bj anollest 10% of ennere HEALTN AND NOTP.ITION PxpolaIho. 1per pbysioiao. 25,960 4,000 /n 9,100 I 12,140 Pohllr erserteg perso 481 Ior 2,390 Ic 4,150 7 3,840I3, 2,240I Population per hoepitol bed 390 7Fse 43 0 7;4,s 1,630 7; 830 , 920 F. Per apito colosie opply as 9 of requirennnts SS 93 lao 81 In 87 I 100 Sa Per aepita protetu eopply, total (grae- per doyT .. 5s 7jj 48 7;- 53 y 59 /a. Of ohic, x-o!1 end pulss 20 78 15T7; 22 7; 5 7s Death rate 1-4 yearn L .. .. -. 2 7 / E2UCATION A fl76t S3 prtmary ncbool enroll cttratS 66 108 7Y lAb ll9lab 77 Adjuated 72 seondary eche e.allfeaent ratio 2 9 28 711 49 11 Yeses of schooling pr-xided, first and eexond 1o1re 13iac-IL lad 13Sao-14 lad 12 1G 13 Yoatianal ei,oll lnt ax % of soc. schuxl enrellment 23 - 22 6 lac 10 la 7 Adalt literay rote 5 , 36 71ag 72 20 Anaroge No. of peeron per r.x. (-rbo-) Peront of oco-pild units vithbat piped wales ., .. 77 Ia! A.cces to. esctriaity (as S of total pepulatien) 20 . . P-rcit of kea.l popsletino ooxn cted tn eleotrioity 210 I -ad ic r oxojorr per 1 0D 0 popuiat xon 3 3 2 /y .an 21 iS /v 127 Pes-enger ac-e pea 100l poplisteim 68 giePtrio peas oontnerpt.on (bkg p.c .) 198 206 100 f 229 102 Necaprint aosunSwpthau p.a. c g kSpe Year 0. 0.02 0.3 1.8 lai 0.2 ira, Fitguaren refer either to the latest period or to accact of norironental tapratucre, body weights, and the latret years Letsat periode rcrer in principle to distribotine by age aed ca of nationi1 pepulatlona. ihe years 1956-60 ar 1966-70; the leoteat Yar- ln prin- /6 Prcterl ahndarde (reaq.res-ts) for il ......riec as ecteb- xiple to 1960 and 1970. liabed by IOSDA E-oomio Rseerah S.r-lee pr-ridc far A ntiniuw /4 The Per Cpita GNhP rtiatne in at nstn prioxe for alloovace nf 60 grene of total prateLn per day, and 20 gra-e of ynrar ottrr thne 1960,oalculated by the aae coaneralen nolnai and pule protein, of bhich 10 greec ehoald be aninal. t-choique as the 1972 Word 3ank Atls. protein. Thene tandard. ore ea-ehat lea-r thnn thnee oa 75 ? Anerage nabehr of daughters per ancan of reprodocti-e grewa of total preteio and 23 gre oa -nio l prateit as no age. -nraga for the vorld, prpy...d by FAO it the Third World Food / Pcpulatuon aroart ratee ore far the d-od-a cnding n S-rey. 19660 sd 1970. L Scen tudie hae auggeeted that crude death rater af children t haito of under 15 cad 65 and over age brockot to agee I through a esoy be ceed ae a first apprpaIstio iodr of those it lbor fcrae bro-ket of oges 15 through 61, wlntrition. 4 FAC referefxo ot-ndards repre-ent phy.iolngia r-_ P -rceulog enrolled of onrreep-oding population of ehool ag qairerents for cr-aul activity cud hnalth, tasking c defined for anh wuntry. /4 DLfinitiac of ar.ble nknowon; /b 1971; In 1971 aetineted par c-pita GNP at S240 caned on reaised ati .n.l aoc_nta and inaladee 1US ioflation; /d 1972 ftlgree b.a.d no 1965-70 average anchange rates; /a 1971 atteote; If 1965-70; D4 aiflnitian cnklnoen; An 196370; /i Pbr the defiaetian of urban seaemographic rearbnelk 1971, p. 156; 7 Over 4,000 population; /k Ratio of pcpulatio- cnder 15 nod 65 and ever to labor tone in age group 15-59p /1 Ratio of popoletien under 15 nd 7 and orer to total lhbor force; h Over 5,000 population, n ACD 0etiate at iahb;r torcne i ag grop 15-59. IBh9 report givee a figure a! 180.4 eeliflc beacd on the 1971 population centua. The dittaenrnce is dUe to changee in the defaition of a -rorke. In the 1971 ceanee pereona e.r clanaified only on the treel of their _eain activities; thie led to the exeluceon of several categories, auch as hoceel0see; / H0oeeeholds; /P Poreonnel in govre- esnt oenrece only; Ic Lcluding ccidddree, aeeietont eidcvl_ *od asirteot caree Irl1962,/Taladee nidurvee It 1966; lu Gonernoent only; iv Including local or rural holpitals end Meduoal oentars; /w 1968,T/l 1968-69; 1969;