Guinea - Highway Project

Report No. 882a-GUI` FILE COPY Appraisal of a First Highway Project Guinea December 5, 1975 Western Africa Projects Department Highways Division Not for Public Use Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization  Currency Equivalents Currency Unit - Syli US$1 - 20.46 Syli Syli 1 million= US$48,878. System of Weights and Measures: Metric 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km2)= 0.386 square mile (sq mi) 1 metric ton (m ton) = 2,204 pounds (lb) Fiscal Year October 1 - September 30 Abbreviations and Acronyms DPC - Direction des Ponts et Chaussees NEF - Ministry of Fconomy and Finance MNW - Ministry of Pablic WTorks, Mining and Geology MT - Ministry of Transport ONRR - Office National Rail-Route UNDP - United Nations Development Programme vpd - vehicles per day  GUINE-A FIRST HIGHWAY PROJECT Table of Contents Page No. SU'4ARYY ................................................. i -iii 1. INTRODUCTION ................................ 1 2. THE TRANSPORT SECTOR ..................... I A. Economic Setting .............................. I B. The Transport System ...... .................... 2 C. Sector Management ............................. 4 3. HIGHWAYS ............................... 6 A. The Network ................................... 6 B. Characteristics and Growth of Road Traffic 7 C. Administration ...........7........ 7 D. Engineering and Construction. 8 E. Maintenance. 9 4. THE PROJECT .10 A. Description .10 - Rehabilitation and Maintenance .11 - Technical Assistance and Training .12 B. Cost Estimates .12 C. Execution ..14 D. Procurement .15 E. Financing and Disbursements..... 15 5. ECONOMIC EVALUATION .16 A. General .16 B. Justification .16 6. AGREEMENTS REACHED AND RECOMMENDATION . .18 This report has been prepared by Messrs. P. Gyamfi (Engineer/Economist), D. Jovanovic (Economist), and E. Schaefer (Consultant) following an appraisal mission in May/June 1975.  TABTE OF CONTENTS (Cont'd) TABLES 1. Development of Transport Demand, 1965/66-1973/74 2. Transport Investments Envisaged in 1973/74 - 1977/78 Plan 3. Development of the Highway Network, 1967-75 4. Growth of the Vehicle Fleet, 1968-73 5. Personnel of the Directorate of Roads and Bridges 6. Design Standards for First Category Roads 7. Project Roads for Rehabilitation and Maintenance 8. Technical Assistance Requirements 9. Rehabilitation and Maintenance Crews and their Equipment 10. Cost Estimate of Imported Materials and Supplies 11. Work Schedule for Rehabilitation and Maintenance 12. Estimated Schedule of Disbursements 13. Estimate of Vehicle Operating Costs 14. Sensitivity Analysis ANNEXES 1. Draft Terms of Reference for Technical Assistance to DPC for the Highway Rehabilitation and Maintenance Program 2. Summary of Economic Analysis CHART New Organization of the Ministry of Public Works, Mining, and Geology - World Bank 9967 MAP Guinea - First Highway Project - IBRD 11698R  GUINEA FIRST HIGHWAY PROJECT SUMMARY i. Guinea's excellent natural resources in the rural sector, mining, and hydro-electric power, make it potentially one of the richest countries in West Africa; for agriculture particularly, the predominant sector in the country's production structure, the broad range of eco-climatic zones provides the possibility for great diversification. Despite this potential, however, the economy has stagnated over the past decade, and per capita Gross National Product (GNP) has declined to a level estimated in 1972 at about US$90. This situation has resulted partly because the Government placed heavy emphasis on developing infrastructure, mining, and manufacturing at the expense of agri- culture. Moreover, poor performance of the modern sector, combined with a decline in agricultural production, has led to severe balance of payments difficulties with resulting import restrictions and shortages. Some improve- ment in the economic situation is expected over the longer term mainly as a result of developments in the mining sector. However, any lasting solution would have to include better exploitation of the country's rich agricultural potential, and an efficient and reliable transport system would be vital to ensure the success of these efforts. ii. The transport system consists of about 13,300 km of roads, about 1,100 km of railroads, two deep-water ports, an international airport and ten airfields. While the extent of the road and railroad network is generally adequate for the country's needs, the general condition of infrastructure and vehicles is poor due to old age and lack of proper maintenance. Government in its current Five-Year Plan (1973/74-1977/78) has assigned high priority to maintenance and rehabilitation of the road network, and has asked the Associa- tion to finance the first phase of this long-term effort. iii. The proposed First Highway Project is based on a consultants' Road Maintenance Study in 1969 financed by the United Nations Development Programme (UNDP) and updated in February 1975 by two Bank-employed consultants. It would consist of (a) rehabilitation as needed on 2,491 km of high priority roads, and initiation of proper maintenance on these roads; (b) repair of existing equipment and plant, and rehabilitation of workshops; (c) purchase of highway equipment and spare parts, workshop equipment and tools, parts for repair of existing equipment and plant, engineering and laboratory equip- ment, and training material and radio equipment; (d) purchase of materials and supplies for project operations; and (e) technical assistance to the Department of Roads and Bridges (Direction des Ponts et Chaussees, DPC) of the Ministry of Public Works, Mining, and Geology, for implementation of the rehabilitation and maintenance program as well as preparation of a second phase of that program, and for training of mechanics and equipment operators.  - ii - iv. Total project costs, excluding taxes, are estimated at US$18.6 million, of which US$14 million (76%) in foreign costs. These costs include estimated price contingencies of 20% for equipment and 30% for materials and supplies; quantity contingencies are deemed unnecessary because of the program nature of the project. The proposed Credit will finance all the foreign costs, and the Government will meet all the local costs of the project, mostly wages. v. DPC will be responsible for execution of the project, which will be carried out by force account with technical assistance provided by consultants to be selected in agreement with and on terms and conditions acceptable to the Association. The project is expected to start at the beginning of 1976 with the engagement of consultants; contracts for the purchase of equipment should be essentially completed by April 1976, and rehabilitation works by fully- equipped crews are expected to commence during the third quarter of 1976. In addition to advising and assisting DPC in execution of the project, the con- sultants for technical assistance are expected to train a total of 90 mechanics and 45 operators, and to assist DPC in developing appropriate design standards for different road categories and in establishing a method of systematic col- lection of data on the road network, including road inventory, traffic, the road vehicle fleet, and motor fuel consumption. The project is expected to be completed within three years. vi. Procurement of project goods will be on the basis of international competitive bidding in accordance with Bank Group guidelines; however, fuel, spare parts for existing equipment amounting to some US$600,000, and equip- ment items not exceeding US$20,000 individually or US$100,000 in aggregate, will be procured on the basis of quotations from local suppliers. DPC will prepare bid documents assisted by consultants. Bid evaluation for purchase of equipment will take into consideration not only the bid price, but also the desirability of standardizing equipment and the availability of after- sales service and spare parts. Credit proceeds will be disbursed on the following basis: (i) 100% of the c.i.f. costs of equipment and other imported supplies and material, and 85% of the cost of imported items purchased locally; and (ii) 100% of foreign costs for technical assistance. vii. The proposed project will help provide the reliable and efficient road transport necessary to support the Government's program to revitalize and expand its economy. The rehabilitation and subsequent proper maintenance of roads will result in cheaper, safer, and more reliable transport to the productive regions of the country, as well as defer the need for road recon- struction. The project has a benefit/cost ratio of 4.6 discounted at 12%; this corresponds to an economic return which exceeds 100%. A major portion of the project benefits, in the form of training for mechanics and operators, delay in reconstruction investments, and savings in vehicle operating costs to the state- owned transport agencies, will accrue to the Government. Most of the remaining benefits are expected to be eventually passed on to consumers and producers, after initial accrual to private transporters.  - iii - viii. The economic analysis assumes that all the project objectives will be attained; otherwise, a reduction in benefits could be expected. A crucial issue therefore, is whether, in spite of Government's awareness of the im- portance of these objectives and its acceptance of them, the project can be implemented successfully. The determining element in this connection is the use that will be made of equipment, material, and personnel. Should these project inputs be diverted to purposes not included in the project description, there would be a substantial risk that project objectives could not be met. This issue has therefore been thoroughly discussed with the Government, and it has provided assurances that the program of works will be carried out as agreed. ix. The proposed project is suitable for a Credit in the amount of US$14 million to the Government of Guinea on standard IDA terms.   GUINEA APPRAISAL OF FIRST HIGHWAY PROJECT 1. INTRODUCTION 1.01 In its efforts to rebound from the steady decline in Guinea's economy over the past fifteen years, the Government is placing emphasis on revitalizing the agricultural sector and expanding the exploitation of forestry and mineral resources. The Association has already initiated assistance in this respect with a recently approved project for pineapple development (Credit 569-GUI, US$7 million, 1975), and preparation of live- stock and rice projects. The success of Government's efforts will depend partly on rehabilitation and maintenance of the country's badly deteriorated road network. 1.02 The proposed project will be the Bank Group's first operation in the transport sector since the Boke Mining Project (Loan 557-GUI, US$64.5 million, 1968) which included financing for a railway line and a port integ- rated with the mining operations. Preparation of the proposed project commenced with a 1969 UNDP-financed consultant study on highway maintenance and on the feasibility of constructing the Kissidougou-N'Zerekore-Liberian border road. The conclusion was reached that there was an urgent need for a program to strengthen the maintenance organization. The Government, how- ever, declined the Bank's offer to assist in financing a maintenance project, since it accorded higher priority to construction of the Kissidougou-N'Zerekore road. 1.03 The rapid detoriation of the road network during recent years has now made the Government aware of the extreme importance of road maintenance. Its current Five-Year Plan (1973/74-1977/78) includes about US$29 million for road maintenance and rehabilitation, and in December 1974, the Government asked the Association to help finance the proposed maintenance project. 1.04 This report is based on a consultants' updating study carried out in February 1975, and on the findings of an appraisal mission consisting of Messrs. P. Gyamfi (Engineer/Economist), D. Jovanovic (Economist), and E. Schaefer (Consultant) which visited Guinea in May/June 1975. 2. THE TRANSPORT SECTOR A. Economic Setting 2.01 Guinea has an area of about 246,000 km2 and a population of about 5 million growing at 2.8% p.a. Bordered by Guinea-Bissau, Senegal and Mali to the north, Ivory Coast to the east, and Liberia and Sierra Leone to the south, the country has about 300 km of coastline on the Atlantic Ocean to  -2- its west (see IBRD Map 11698). The narrow coastal plain rises to mountainous highlands to the east and southeast, making road and railway construction there costly. 2.02 Guinea's excellent natural resources in the rural sector, mining, and hydroelectric power, make it potentially one of the richest countries in West Africa. The broad range of eco-climatic zones makes it possible to produce a variety of agricultural commodities, including food crops such as rice, cassava, and maize, and export crops such as coffee, pineapple, and bananas. Mineral deposits include bauxite, of which the country is estimated to possess nearly half the world's known reserves, or about 4-5 billion tons, and a high grade of iron ore, est.mated to be over one billion tons. 2.03 Despite this potential, however, economic growth has been slow. Since Independence in 1958, the Government has placed heavy emphasis on developing infrastructure, mining, and manufacturing, at the expense of agriculture, the predominant sector in the country's production structure. Also, in pursuit of its socialist objectives, the Government has sharply curtailed the role of the private sector, and increased correspondingly the share of public agencies and state enterprises. Except for mining in which foreign companies still own shares, Government has nationalized all activities in the modern sector including commerce, trade, and transport. Poor perfor- mance of the modern sector, combined with a decline in the agricultural sector which is moving rapidly from the market economy to localized subsistence, has led to severe balance of payments difficulties with resulting import restric- tions and shortages. These and other adverse developments have been responsible for the country's economic stagnation; during the period 1967-72, GNP increased by about 2.5% p.a., but because of the slightly higher increase in population, per capita GNP decreased slightly reaching about US$90 in 1972. 2.04 No significant change in the current economic stagnation is fore- seen in the short run, and although mining projects now reaching gestation and others now being prepared should improve the situation somewhat over the long term, any lasting solution to the economic problems should include better exploitation of the country's rich agricultural potential. Restora- tion and proper maintenance of the road network must be an integral part of this strategy. B. The Transport System General 2.05 The system consists of about 13,300 km of roads, about 1,100 km of railroads, two deep-water ports, an international airport, and ten airfields served by regularly scheduled domestic flights. The extent of the road and rail network is generally adequate for the country's needs. However, the general condition of both infrastructure and vehicles is poor; the road network has deteriorated badly due to poor maintenance, and the major railway  -3- line, Conakry to Kankan, built about 70 years ago is in poor condition. More- over, the shortage of foreign exchange has made impossible adequate repair and replacement of road vehicles and railway rolling stock. 2.06 Statistics on road and rail traffic indicate that the decline in the economy, especially in the agricultural sector, has been reflected in stagnating transport demand (Table 1). State-operated road and rail trans- port, amounting to more than half of total traffic, declined steadily toward the end of the 60's, and was about 46,000 tons in 1973/74. Although current transport demand is low, it is expected to pick up with some revitalization of economic activity now beginning to appear. For domestic transport, roads are the predominant mode, carrying over 70% of inter-urban freight and passen- ger traffic; preservation of the road network is therefore of great importance. Highways 2.07 Details of the highway system and its administration, as well as the characteristics of road traffic, are given in Chapter 3. Railways 2.08 The railway system comprises four lines; the main line Conakry- Kankan (660 km) which runs parallel to the road, and three enclave lines connected with mining operations: the Conakry-Kindia (135 km), the Kamsar- Sangaredi (136 km), and the Fria railway (145 km). Both freight and passen- ger traffic on the main line have declined since 1965 at an average annual rate of 10% and 4% respectively, due mostly to the drop in agricultural exports and the progressive shift of the agricultural sector from the market economy to localized subsistence. Traffic in 1973/74 was only about 27,000 tons of freight and about 472,000 passengers, far from sufficient to make the railways viable. This slow decline is expected to continue. The Government agency Office National Rail-Route (ONRR), established in 1971 under the authority of the Ministry of Transport, manages the Conakry-Kankan railway as well as the road transport of all imported, manufactured, and exported goods. ONRR is reasonably efficient in its management considering the poor facilities it has to operate with; since its establishment it has managed to reduce personnel by some 15% through attrition, and has attempted to establish a rational tariff system for road and rail transport. 2.09 The railways have operated at a deficit of about US$1 million p.a. (about 25% of total revenues) for the past five years, despite the reduction in ONRR's personnel. The poor financial performance stems mostly from the traffic decline and increasing operating expenditures. The Government has covered the deficit from the general budget, but its future plans are still unclear; on the one hand, Government has taken no positive action for phasing out the railway, but on the other, it has invested little in the system over the past decade. Under present circumstances, it is unlikely that funds will be available to improve the parallel road to handle  -4- all traffic on the Conakry-Kankan corridor, and the railway will therefore continue to play a useful role. Ports 2.10 There are two deep-water ports, one at Conakry and the other at Kamsar. The port of Conakry handles most of the country's export/import traffic, while Kamsar is basically a mineral port (bauxite) isolated from the main population and production centers. Traffic at Conakry has been declining over the past decade at the rate of 4% p.a., amounting in 1973/74 to some 1.4 million tons, about half the port's capacity. As in the case of the railway, the loss of port traffic is mostly due to the continuing decline of agricultural exports, but also partly to poor handling facilities which has driven off some foreign ships. An ongoing UNDP project (US$1.3 million) is aimed at improving cargo-handling facilities. The new port at Kamsar, integrated with the Boke mining operations, is functioning efficiently; about 700,000 tons of bauxite were shipped in 1973/74. Air Transport 2.11 The air transport network includes an international airport at Conakry and ten domestic airfields capable of handling DC-3 and DC-4 type aircraft. The Civil Aviation Agency is in charge of airport construction and management. Passenger traffic has increased over the past five years reaching 74,000 in 1973/74; internal air transport plays only a minor role in freight movement. Most domestic flights operate close to capacity, and despite delays in take-off times, Air Guinea's domestic operations appear satisfactory. The company's international service has been temporarily suspended to permit internal reorganization. C. Sector Management 2.12 Overall responsibility for sector management rests with the Ministry of Economy and Finance (MEF) which discharges its transport sector functions through the Ministry of Transport for planning, coordination, and regulation, and through the Ministry of Public Works, Mining and Geology (MFW) for planning and execution of road construction and maintenance. For large projects, usually involving foreign financing, MEF's Division of Infrastructure plays a dominant role in both the review of project scope and in project preparation. In such situations, there is an overlap of responsi- bility between the Infrastructure Division and MPW which results in some duplication; in general, however, the set-up appears to operate well. Transport Planning and Investments 2.13 Investment plans for railways, ports, and airports are initiated by the Ministry of Transport, and those for roads by MPW in the form of  -5- investment proposals. On the basis of these proposals, the Ministry of Planning, through its Transport Commission, puts together a draft plan which is submitted for further review by the Central Committee of the Party, and finally by the President. The procedure results in a Five-Year Plan which is at best an intended investment budget. The planned expenditures are often unrealistically high and can be regarded only as Government's indication of investment priorities; the actual course of implementation is determined by the availability of foreign aid for specific items. 2.14 Information on actual investments going on in the transport sector is not available; however, a rough indication of the Government's intentions can be inferred from the transport plan. The current plan (1973/74-1977/78) proposes a total investment in the transport sector of GS 7,907 million (about US$386 million). It places major emphasis on (i) construction of selected primary roads and bridges (about 69% of total transport investments); (ii) improvement of road maintenance through equipment purchases (about 7%) and the purchase of equipment and improvement of facilities for ports, airports, and the ONRR (Table 2). 2.15 The amount of proposed investments is high in view of the country's shortage of foreign exchange and the difficulties it has in securing external aid. Regarding the plan content itself, the priority given to new con- struction of primary roads is unjustified. Much higher returns would be derived from minor improvement, rehabilitation and maintenance of the network as contained in the present project; the Government is in agreement with these proposals. Feeder road maintenance and construction appear to have been left out of the plan, since presently the Government gives higher priority to the rehabilitation and maintenance of main roads. Feeder roads should be planned as integral parts of agricultural or forestry projects. Scarcity of data does not permit an evaluation of investments in the other modes, but their individual levels are not high enough to warrant much con- cern. The Government also has a major project under study, not indicated in the Plan, to construct the Trans-Guinean railway (about 1,200 km long and estimated to cost about US$1.2 billion) to transport iron-ore and timber from the Forestry Region, and bauxite from the Tougue-Dabola area to Conakry. A more economic way of achieving the iron-ore transport from Mount Nimba, how- ever, might be through neighboring Liberia via the existing iron-ore railway tprivately owned by the Liberian American Mining Company (LAMCO), for a distance of about 400 km; the Government is exploring this possibility. Modal Coordination 2.16 Although no explicit policy of transport coordination exists, the Ministry of Transport is clearly aware of the relative roles of road and rail transport, and endeavors to make the best use of existing facilities. The bulk of goods and passenger transport, including all imports and exports not tied to the enclave mining operations, is by statute handled by the ONRR which allocates it between road and rail depending on available capacity, and subcontracts to the few private transporters during peak periods. Con-  -7- sidering the poor condition of road and rail infrastructure, ONRR charges appear reasonable: a uniform rate of about 9d per ton-km, and 44 and 3i per pass-km for first- and second-class passengers respectively. Transport Industry 2.17 "For hire" transport is shared between the state-owned enterprises -- the ONRR and Regional Commercial enterprises (60%) -- and numerous private transporters, mostly with single or at most two vehicles (40%). The share of the state-owned agencies is increasing rapidly. Government's policy is clearly to discourage private sector participation, an objective strictly in line with its overall socio-economic strategy. Because it does not yet have the capacity to handle all transport, however, the Government still permits some private participation in the industry, but regulates entry through vehicle import restrictions. No change in the present situation is foreseen in the given Government socio-economic development strategy, and Bank assistance to improve the industry in the short term could therefore be most beneficial if provided within the framework of the existing system. This may consist of assistance in instituting a proper pricing policy and in improving ONRR's management capacity. Dialogue through project supervision and sector visits will be used to provide this help. 3. HIGHWAYS A. The Network 3.01 There are about 13,260 km of classified roads, of which about 1,060 km (or 8%) are asphalt paved. The network is divided into First Category (national and inter-regional) and Second Category roads. First Category roads amount to abuot 6,000 km, or 45% of the network, and include all the paved roads in the country (Table 3). While paved roads are generally constructed to design standards established by the Department of Roads and Bridges (Direction des Ponts et Chaussees - DPC), gravel and earth roads have varying characteristics, usually below DPC standards. The road system is in bad condition, and is continuing to deteriorate as a result of years of little or no maintenance. In fact, many roads have deteriorated to such a degree that it is no longer possible to upkeep them with normal maintenance forces, and their rehabilitation has become a matter of first priority. 3.02 During the past nine years, the length of the national network has increased by only 5%. The increase was not uniform in the four geographic regions of the country -- it was 12.7% in the Zone Forestiere, 9.3% in Moyenne Guinee, and 2.8% in Guinee Maritime, and there was an actual decrease of 1.3% in Haute Guinee. Since 1967 emphasis has been on paving, and the total paved network has increased nearly five-fold, from about 190 km to 1,060 km in 1975.  -7- B. Characteristics and Growth of Road Traffic 3.03 The composition and growth of the vehicle fleet is shown in Table 4. The fleet size has fluctuated around 8,500 units over 1968-73, declining at the overall rate of about 1.5% p.a. during the period. The truck fleet has however decreased at about 9% p.a., in spite of the increase in ONRR's state- owned fleet. This trent reflects both the decrease in transport demand and the import restrictions on vehicles and spare parts. 3.04 No regular systematic traffic counting program exists yet in Guinea. Consultants' counts carried out in 1969 (updated early 1975) show that most road sections carry low traffic, below 100 vehicles per day (vpd), except the Conakry-Labe and Conakry-Kissidougou roads which on average carry respectively 400 and 300 vpd. Lack of data, particularly of the development of fuel consumption, make it difficult to estimate the average growth of road traffic. However, in light of current Government efforts to expand economic activity and indications of a start towards this revival, it would not be unreasonable to forecast a modest traffic growth in the vicinity of 3% p.a. Under the proposed project, systematic traffic counting and collection of fuel consump- tion data will be gradually introduced within DPC (para. 3.11). C. Administration 3.05 The Ministry of Public Works, Mining and Geology (MPW) was re- organized in May 1975. Until then, the country was divided into four geo- graphic regions with a total of 29 subdivisions. It is now divided into seven zones with 33 subdivisions (See Chart). Each zone has an Inspector who supervises the activities of the subdivisions within that zone. All inspectors report to an Inspector General who in turn reports directly to the Minister. The main task of the subdivision is the maintenance of roads, and the construction and maintenance of buildings. Each subdivision is headed by an engineer who has an average of 60 people under him. 3.06 DPC has overall responsibility for the administration, engineering, construction, and maintenance of the national road system. Instructions regarding maintenance and rehabilitation are given by the Director of DPC either to the inspectors of the zones, or directly to the subdivision chiefs. Although there is some overlapping of responsibility between the Director and the Inspector General, there are no apparent difficulties of hierarchy within the Ministry. 3.07 Each subdivision has its own equipment and workshop, or rather what is left of them. Decay is evident everywhere (paras. 3.15 - 3.16). In addition to the subdivision crews and their equipment, there are mobile crews with their own equipment which is usually heavier and geared more for rehabilitation and improvement works than for maintenance. The mobile crews operate under the Inspectors' orders, but here again, the Director of DPC oversees all operations. Their equipment is in the same poor condition as that of the subdivisions.  3.08 DPC has 2,215 employees, of whom 159 work in the head office in Conakry; the bulk of the personnel (82%) is distributed among the subdivisions (Table 5). DPC has 287 mechanics, 190 equipment operators, and 213 drivers, most of whom have little to do owing to the lack of equipment and tools. 3.09 The Government seems to be much interested in quality education for young professionals, and the mission met a number of young engineers educated in different parts of the world. Much less attention is paid to the training of skilled labor. Although there are quite a few talented mechanics in the country, they are mainly self-taught, and their training in proper equipment maintenance and repair is only sporadic. The almost total lack of tools and spare parts have caused resignations, even among the best, and the most rudimentary maintenance procedures are frequently neglected. A similar situation can be observed with regard to equipment operators. A training program for mechanics and equipment operators must be considered just as vital for DPC as the procurement of equipment and tools. The proposed project includes a provision for training of DPC staff required to implement the planned road rehabilitation and maintenance program (paras. 4.07-4.08). D. Engineering and Construction 3.10 The design standards used for engineering of First Category roads are shown in Table 6. With the exception of the maximum axle load, standards are modest and satisfactory considering the low traffic on most of the roads (para. 3.18). However, the time has come for DPC to establish a policy on design standards, and to develop, in addition to acceptable standards for rehabilitation of existing roads, design standards for different categories of new roads. One of the taks of the technical assistance to be provided under the proposed project would be to help DPC in the development of such standards (see Annex 1). 3.11 The engineering group of DPC has sufficient capacity for the relatively simple preparatory engineering work required for rehabilitation and minor improvement works. However, with increasing works of improvement and construction, demands for more extensive engineering will increase, and DPC should prepare for that time to avoid excessive dependence on foreign technical assistance. An appropriate starting point would be the collection of information required to prepare for planning and design such as road inventories, periodic traffic counts, deflection surveys, and testing of soils and construction materials. The proposed project provides the necessary equipment and technical assistance for this purpose. The Government has provided assurances that such work will be started not later than June 1977, and will be carried out systematically. 3.12 There is at present little encouragement for the formation of road construction firms in Guinea. Improvement and construction works are carried out either by Government forces with the help of foreign technical advisors, or by foreign contractors, usually under contractor-financing arrangements. At present three major road projects (totalling 445 km) are under construction, namely: (i) Labe-Mali-Lebekere (165 km), by STFG  -9- (Societe Technico-Financiere de Guinee), a Spanish-Guinean company; (ii) Kissidougou-Guekedou (90 km), by EJL (Enterprise Jean Lefebvre), a French company, (iii) Kissidougou-Kankan (190 km), by the Guinean Army with the assistance of Cuban technical personnel. Considering present Government policy, as well as the difficulty of importing equipment and materials, there is little opportunity for development of private domestic construction firms. The trend most likely will be towards State-controlled organizations with sufficient autonomy to demonstrate their competence. E. Maintenance 3.13 Improvement of the maintenance organization and introduction of efficient maintenance operations must be considered a matter of high priority for the Ministry of Public Works. Inadequate funding has led to lack of equipment and tools, which in turn has hindered personnel in their pro- ductiveness. DPC expenditures, excluding personnel, were Sylis 60 million in 1973/74, and the budget for 1974/75 calls for Sylis 40 million. Based on this budget and on estimated personnel expenditures for the head office and installations in Conakry and for the subdivisions, the mission estimates that an average of only US$170/km year is being spent on maintenance. The inadequacy of these funds becomes even more serious when one considers that the productivity of personnel is far below normal due to the lack of equipment and tools. With the proposed project, Government's financial contribution to maintenance will be limited to personnel expenditures and supply of local materials which the Government has met in the past, and will continue to in the future. 3.14 There are only a few pieces of equipment left which are worthwhile repairing. Subdivision yards are graveyards of cannibalized equipment, and shops show little or no activity due to the lack of tools and spare parts. The plants are more often out of work than producing; these include the aspahalt batch plant, the screening and washing station for lateritic gravel, and the crushing plant, all within 20-35 km from Conakry.. 3.15 The effects of neglected maintenance are visible everywhere. Roadways and structures have not been preserved as originally constructed or as subsequently improved. They have deteriorated to a point where many roads are no longer at an adequate level of traffic serviceability, or in suitable condition for normal maintenance operations. It is urgent that extensive rehabilitation works be carried out. 3.16 The Government should start a program for: (a) rehabilitation and improvement of high-priority roads; (b) strengthening of the maintenance organization; (c) introduction of efficient maintenance operations; and (d) active training of mechanics and equipment operators. Such a program will have to be long-range, not only because a great amount of work and funds are needed to put the entire network in suitable condition for routine and periodic maintenance by departmental forces, but also because it will be a complicated and difficult task to gradually improved maintenance operations  - 10a - and procedures to the point where optimum utilization of equipment, facilities, manpower, and materials is achieved, and efficient control of costs, accounting, and records is established. It is estimated that such a program will take from 8 to 10 years. The first phase should concentrate on the most urgent matters such as rehabilitation of high-priority roads, repair of workshops and of existing plant and equipment, purchase of most-needed equipment and materials, and training of mechanics and equipment operators. The proposed project deals with this first phase of the program which will require execu- tion over a three-year period. The Association should assist in financing it with a view to continued participation in future phases of the program if performance proves satisfactory. Preparation of subsequent phases of the program, which should concentrate on strengthening DPC's maintenance organi- zation and improving its operations, will be carried out by the technical assistance consultants under the proposed project. 3.17 The regulatory provisions for maximum vehicle weight and dimensions call for a maximum axle load of 10 tons for single axles. Since over 90% of the network consists of laterite roads, and since there is considerable rainfall in Guinea (minimum is 2 m in Guinee Forestiere and maximum 4.3 mm in Guinee Maritime), the axle load for such roads appears excessive. In addition, enforcement of weight regulations is non-existent for all practical purposes, and highly overloaded trucks can be seen everywhere. The Government has recently issued a Decree restricting the use of heavy vehicles on unpaved roads during rainy periods and reducing the maximum axle load on such roads during the rainy season to 5 tons, and has agreed to take the necessary measures to enforce these regulations. 4. THE PROJECT A. Description 4.01 The proposed project consists of the implementation of a three-year program of road rehabilitation and maintenance, including the following: (a) rehabilitation as needed on 2,491 km of high priority roads, and initiation of proper maintenance operations on these roads; (b) repair of existing equipment and plant, and rehabilitation of workshops; (c) purchase of (1) highway equipment and spare parts, (2) workshop equipment and tools, (3) parts for repair of existing equipment and plant, (4) engineering and laboratory equipment and training material, and (5) radio equipment;  (d) purchase of materials and supplies for the operations included in the project; and (e) technical assistance to DPC for (1) implementation of the proposed rehabilitation and maintenance program, (2) training of mechanics and equipment operators, and (3) prepara- tion of a second phase of the rehabilitation and maintenance program to be executed over 1978/79 - 1980/81. Rehabilitation and Maintenance 4.02 The 2,491 km of high priority roads selected for immediate re- habilitation include 1,046 km of asphalt roads (nearly the country's entire paved network). The balance of 1,445 km are gravel and earth roads, of which about 1,100 km are located in the east of the country (see Table 7 and Map). The rehabilitation works included in the program are essentially those required to reconstruct the selected roads to standards as originally designed or as subsequently improved. The program specifically excludes improvements involving heavy earthworks, and the Government provided assurances that such works will not be undertaken, and that in general, equipment and materials will not be used for any work outside the range of understanding for the project unless specifically agreed with the Association (para. 5.07). 4.03 Of the 1,046 km of asphalt paved roads included in the program, 571 km have surface treatment, and the remainder bituminous concrete. Dis- integration in varying degrees can be observed everywhere, and asphalt patching, ranging from simple seals to deep patches, will be required for all the paved roads. Out of the 571 km with asphalt surface treatment, about 300 km, or 53%, show serious defects and will need rehabilitation. The portion of bituminous concrete roads which need to be rehabilitated is less, since more attention has been paid to their maintenance -- 105 km out of 475 km, or 22%, show signs of distress and will require partial to complete reconstruction of the pave- ment structure. Some of the major causes of pavement damage include drains which are improperly located, incorrectly designed, or clogged, and shoulders which do not provide sufficient lateral support for the pavement structure. About 500 km of asphalt paved roads need rehabilitation and improvement of drainage and shoulders. 4.04 The 1,445 km of gravel and earth roads need reshaping, regravelling, and improvement of drainage. The amount of rehabilitation work to be done varies, but about 270 km will need heavy rehabilitation including some align- ment and grade corrections. The criteria for selection of gravel and earth roads were (1) traffic, (2) economic potential in road's influence area and its role in Government's development plan, and (3) the necessity for geo- graphic coordination to prevent long travel distances by road crews. 4.05 It will also be necessary to repair timber and concrete bridges, and also to reconstruct some short-span structures. A program for this purpose was developed in February 1975 as part of the consultants' updating  - 12 - study (para. 1.02 - 1.04). In cases where complete plans of bridges to be repaired are not available, technical assistance personnel under the proposed project will help DPC make field surveys and prepare the necessary plans. 4.06 Routine maintenance for the project roads will continue to be labor-intensive, and will be carried out by subdivision forces. Twenty-one subdivisions (out of a total of 33, see para. 3.05) will be involved. Technical Assistance and Training 4.07 The successful programming, engineering and execution of the re- habilitation works and maintenance operations, as well as of the training of mechanics and equipment operators, require technical assistance by foreign experts. The Government has therefore agreed to secure the services of an international consulting firm. It is estimated that nine experts will be required, for varying periods over the three-year program, to a total of 264 man-months (Table 8). 4.08 The main training center will be in the Conakry shop where facili- ties for training already exist. To avoid trainees going through prolonged absence from home, a second but smaller training center will be opened in N'Zerekore. The proposed project provides for a one-year training course for equipment operators, and for two one-year courses for mechanics in both training centers. It is estimated that in Conakry 40 mechanics can be trained the first year and 60 the second year, with a probable output of 60 men; in the same shop, 40 operators can be trained during one year, with an output of about 30 men. In the smaller training center at N'Zerekore, 20 mechanics can be trained the first year and 30 the second year, with a probable total output of 30 men; in the same shop, 20 operators can be trained during one year, with an output of about 15 men. The proposed train- ing courses will produce sufficient mechanics and equipment operators to cover DPC's most urgent needs. However, this can be considered only the beginning of personnel training. Skilled labor is in short supply in the country, and DPC will find it necessary to continue with the development of skilled mechanics and operators from partially trained personnel, or even from the ranks of unskilled laborers. One of the first tasks of the technical assistance experts will be to develop a detailed training program for these mechanics and operators. The plan and strategy for continuation of the training effort will be discussed with Government before the end of project execution; consultants' terms of reference (Annex 1) require them to submit recommendations on this matter. B. Cost Estimates 4.09 The total cost of the project, net of taxes, is estimated at US$18.6 million equivalent, with a foreign exchange cost of US$14.0 million (76%). Details of cost estimates are given in Tables 9 and 10, and summarized below:  (Million Sylis)-- ----- (US$'000) ------ Foreign as Local Foreign Total Local Foreign Total % of Total 1) Highway Equipment and Spare parts (10%) - 104.06 104.06 - 5,086 5,086 100 2) Shop equipment and miscellaneous tools - 16.04 16.04 - 784 784 100 3) Parts for repair of exist- ing equipment and plant - 11.46 11.46 - 560 560 100 4) Engineering & laboratory equipment and training. materials - 8.02 8.02 - 392 392 100 5) Radio Equipment - 4.58 4.58 - 224 224 100 6) Materials and Supplies 15.34 83.09 98.43 750 4,061 4,811 84 7) Labor (skilled and unskilled) 75.11 - 75.11 3,671 - 3,671 - 8) Technical Assistance - 37.81 37.81 100 1,848 1,948 100 Total Basic Cost 90.45 265.06 355.51 4,521 12,955 17,476 73 9) Contingencies (Prices) Equipment - 10.30 10.30 - 503 503 100 Materials & 2.01 10.83 12.84 98 529 627 84 Supplies Total Contingencies 2.01 21.13 23.14 98 1,032 1,130 92 TOTAL 92.46 286.19 378.65 4,619 13,987 18,606 76 (Rounded) (4,600) (14,000) (18,600)  14 4.10 Cost estimates are based on January 1975 prices and adjusted to January 1976. Considering the specific nature of the various procurement items and the program nature of the project, quantity contingencies are not deemed necessary. Price contingencies have been estimated at 20% for equip- ment and 30% for materials and supplies on the basis of the following expected price variations: 1975 1976 1977 Equipment 12% 12% - Materials and Supplies 15% 15% 12% 4.11 The Government indicated at project appraisal that all goods and services procured for the project will be exempt from all duties, taxes, fees, or levies. All project estimates have been based on this understanding which has now been confirmed by the Government. C. Execution 4.12 The most effective way to execute the work under the project is to enable the largely idle DPC crews to carry out the operations by pro- viding them with equipment, materials and supplies, as well as technical assistance to modernize procedures and to train personnel. Such operations will also be the first step in the build-up of competent Government mainte- nance forces. 4.13 Execution of the project will be the responsibility of DPC, assisted by consultants. The Government has agreed to employ foreign consultants selected in agreement with, and on terms and conditions satisfactory to the Association. The consultants will provide technical assistance for pro- gramming, engineering, and execution of the rehabilitation works, and for maintenance operations, and will be in charge of training mechanics and equipment operators. The consultants will also assist DPC in introducing and employing a proper accounting method for the project works. Draft terms of reference for consulting services (shown in Annex 1) have been agreed with the Government. 4.14 The project is expected to commence at the beginning of 1976, and to be completed in 36 months. Equipment requirements are consistent with the work schedule (Table 11). The key technical assistance personnel are expected to start work in the field in January 1976. Contracts for the purchase of equipment should be essentially completed by April 1976 (para. 4.19), and delivery schedules will be determined by the technical assistance team on the basis of a more detailed work plan and estimated delivery dates proposed by bidders. Operations of fully-equipped crews are expected to commence during the third quarter of 1976.  - 15 - 4.15 A basic requisite for the operations under the project is the rehabilitation and equipping of the workshops in Conakry, Labe, Kankan, Faranah, and N'Zerekore. Shop equipment and tools, as well as materials for repair and reconstruction of buildings, will be provided under the pro- ject, but the Government has agreed to immediately undertake this part of the project, including disposal of scrapped equipment, clean-up and levelling of yards, and plans for repair and reconstruction of buildings. D. Procurement 4.16 Equipment, spare parts for new equipment, supplies, and materials amounting to about US$8 million will be procured on the basis of international competitive bidding in accordance with Bank Group guidelines. As exceptions, the following items will be procured on the basis of quotations from local suppliers: (i) fuel about US$2.0 million; (ii) spare parts for existing equipment amounting to some US$600,000; and (iii) equipment or groups of the same items of equipment with a value less than US$20,000 but in the aggregate not exceed- ing US$100,000. In evaluating bids for equipment purchase, the availability of after-sales service and spare parts will be important considerations. The above procurement procedures have been agreed with the Government (para. 4.19). E. Financing and Disbursements 4.17 The proposed Credit of US$14 million, representing about 76% of total project costs excluding taxes, will finance all the foreign exchange costs of the project. The Government has confirmed that it will provide all the local costs, about US$4.6 million equivalent. 4.18 Credit proceeds will be disbursed on the following basis: (i) 100% of the c.i.f. costs of equipment and other imported supplies and materials, and 85% of the cost of imported items purchased locally; and (ii) 100% of foreign costs for technical assistance. Table 12 shows the estimated schedule of disbursements from the Credit Account based on the expected start and duration of the project as given in para. 4.14 and in Tables 8 and 11. Any funds remaining in the Credit Account on completion of the project will be used to finance items related to the project, or to the next phase of the rehabilitation and maintenance program as agreed between the Government and the Association. 4.19 The Government is planning to have the technical assistance con- sultants assist DPC with preparation of bidding and contracting documents for purchase of goods prior to Board consideration of the proposed project. Government has already compiled a shortlist of prospective consulting firms, and has requested the Association's assistance in drafting their terms of reference (Annex 1). Early engagement of technical assistance experts as  - 16 - planned will necessitate retroactive financing of about US$150,000; it is recommended that the Association approve this financing to enable procure- ment of urgently needed equipment and materials as required for a prompt start of project operations. 5. ECONOMIC EVALUATION A. General 5.01 As mentioned earlier (para. 1.01), the Government is placing emphasis on revitalizing the agricultural sector and expanding the exploita- tion of forestry and mineral resources. The success of these efforts will depend partly on the availability of efficient and reliable transport both among the widely dispersed population and productive areas, and between these centers and the Port of Conakry. Roads provide the predominant means for this transport. The network is however in very poor condition, due to the huge maintenance backlog built up over the last several years. The highest priority requirement of the transport sector is therefore the preservation, by rehabilitation and subsequent regular maintenance, of the road network; the proposed project is designed to meet this need. Details of the economic analysis are given in Annex 2. B. Justification 5.02 In defining the scope and content of the proposed three-year road rehabilitation program (Table 7), consideration has been given to the length of the roads which most urgently need rehabilitation and maintenance, their traffic, the economic potential in the road's influence area, the necessity for geographic coordination in execution of works, and the capacity of DPC to implement the works (paras. 4.02-4.06). The program which covers some 2,491 km of roads (1,046 km paved) will ensure greater transport reliability, expand the seasonal use of the most important unpaved roads, and reduce transport costs, all of which are expected to have a positive impact on the country's development. Other benefits include those associated with the training of DPC staff, especially mechanics and operators, as well as delaying the need for costly reconstruction of extensive sections of the network. 5.03 The estimates of traffic volumes on the roads included in the program are based on a consultants' updating study carried out in February 1975. Traffic levels on the roads range from 20 vpd to 1,000 vpd, with about 800 km or 35% of total length carrying over 100 vpd (Table 7). The proportion of heavy vehicles on the roads ranges from 50-90% of total traffic. Traffic is expected to grow at about 3% p.a. over the life of the project. 5.04 Out of the selected 2,500 km of primary roads, about 1,850 km are estimated to be in poor condition, and the remainder in fair condition (Annex 2). These roads are all expected to be back in good condition after  - 17 - the three-year rehabilitation program. The program is expected to produce a reduction in vehicle operating costs ranging from about 14 per veh-km for passenger cars on paved roads, to about 15i per veh-km for heavy vehicles on gravel roads (Table 13). For all road types and vehicle categories, the rehabilitation works are expected to result in a weighted average of 26% savings in vehicle operating costs. 5.05 For the purpose of analyzing the justification of the project, the cost of the proposed program has been taken to irclude the cost of equipment, spare parts, materials, technical assistance, and labor. To reflect the dif- ference between the official domestic prices and actual market prices, local cost components were shadow priced (Annex 2). The quantifiable benefits in- cluded in the analysis are (i) the reduction in vehicle operating costs and avoidance of future increases, and (ii) the savings in delaying the need for road reconstruction. The economic life of the project has been estimated to be 10 years, reflecting the estimated economic life of the rehabilitation works. The stream of costs and benefits is shown in Annex 2. On the basis of the above inputs, the project has a benefit/cost ratio of 4.6 discounted at 12%; this corresponds to an economic return which exceeds 100%. The inputs for estimating the project's returns have been estimated with varying degrees of accuracy. Because of the general paucity of data and the Association's lack of experience with road works in Guinea, a high degree of uncertainty exists in estimating the inputs for the above economic analysis. The sensi- tivity of the estimated return to variations in these inputs has therefore been tested. Table 14 shows that even under very pessimistic assumptions, the proposed project is still well justified, 5.06 A high proportion of the project's benefits, as savings both to the ONRR and MPW, will accrue to the Government. Private car and truck owners will also benefit directly from a decrease in vehicle operating costs. Although immediately following project execution a large part of private transporters' reduced operating costs is expected to go to them, part of these savings may be passed on to consumers and passengers as a result of possible adjustments to tariffs, since some competition exists in the private sector of the transport industry. Risks 5.07 The foregoing economic analysis assumes that all the project objectives defined in para. 4.01 will be attained; otherwise, a reduction in benefits could be expected. A crucial issue therefore, is whether, in spite of Government's awareness of the importance of these objectives and its acceptance of them, the project can be implemented successfully. The determining element in this connection is the use that will be made of equipment, material, and personnel. Should these project inputs be diverted to purposes not included in the project description, there would be a sub- stantial risk that project objectives could not be met. This issue has  therefore been thoroughlily discussed wl_h .he Government, and it has provided assurances that the program of works will be carried out as agreed. 6. AGREEMENTS REACHED AND REC0MMENDATION I 6.01 During negotiations on the proposed Credit, agreements were reached with the Government on the following principal items: (i) that not later than June 1977, it will start collecting on a systematic basis the information required for planning and design of future road improvements (para. 3.11); (ii) that it will take the necessary measures to enforce regulations restricting the use of heavy vehicles on unpaved roads during rainy periods, and reducing the maximum axle-load on such roads during the rainy season to 5 tons (paza. 3.17); (iii) that equipment and materials purchased under the project will not be used for heavy earthworks, or for any work outside the range of understanding of the project unless specifically agreed with the Association (paras. 4.02 and 5.07); (iv) that goods and services procured for the project will be exempt from all duties, taxes, fees, and levies (para. 4.11); (v) that consultants for technical assistance will be selected in agreement with and under terms and conditions acceptable to the Association (para. 4.13); (vi) that it will immediately undertake the necessary preparations for rehabilitation and equipping of workshops (para. 4.15); (vii) all arrangements for procurement of goods under the proposed project (para. 4.16); (viii) that it will provide all the local costs of the project, amounting to about US$4.6 million equivalent (para. 4.17). 6.02 The proposed project is suitable for a Credit in the amount of US$14 million to the Government of Guinea on standard IDA terms. December 5, 1975  Table 1 REPUBIIC OF GUINEA FIRST HIGHWAY PROJECT Development of Transport Demand, )365/66 - 1973/741Y 3/ 1965/66 1971/72 1972/73 1973/74 2/ 1 ONRR (total freight) 68.o 390