Senegal - Feeder Roads Project

Report No. 941a-SE Appraisal of a Feeder Roads Project FILE COPY Senegal March 4, 1976 Western Africa Projects Department Highways Division FOR OFFICIAL USE ONLY International Bank for Reconstruction and Development International Development Association 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 = CFA Franc (CFAF) US$ 1 = CFAF 225 CFAF 1 million = US$4,444 WEIGHTS AND MEASURES Metric British/US Equivalents 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km2) = 0.386 square miles (sq mi) 1 metric ton (ton) = 2,204 pounds (lb) ABBREVIATIONS AND ACRONYMS BCEOM = Bureau Central d'Etudes pour l'Equipement d'Outre Mer BPP = Subdivision for Feeder Roads CCCE Caisse Centrale de Cooperation Economique DER = Division de l'Entretien Routier in DPW DPW = Directorate of Public Works in MPWUT DSP = Directorate of Studies and Programming in MPWUT FAC Fonds d'Aide et de Cooperation FED = Fonds Europeen de Developpement ICC Interministerial Consultative Committee MPWUT = Ministry of Public Works, Urban Development and Transport ONCAD = Office National de Cooperation et d'Assistance au Developpement SAED = Societe d'Am'enagement et d'Exploitation des Terres du Delta SODEVA = Soci'ete de Developpement et de Vulgarisation Agricole SODEFITEX = Societ6 de D6veloppement des Fibres Textiles STN = Societe de Terres Neuves FISCAL YEAR July 1 - June 30  FOR OFfICIAL USE ONLI SENEGAL APPRAISAL OF A FEEDER ROADS PROJECT TABLE OF CONTENTS Page No. SUMMARY 1. INTRODUCTION.1 2. BACKGROUND 2 A. The Economy. 2 B. The Rural Sector .. 2 - Roads and Agricultural Development 3 - The Marketing System and Impact of Road Improvements. 4 C. Roads. . 4 - The Network .... 4 - Traffic on Feeder Roads. 5 - The Road Transport Industry. 6 - Highway Administration. 7 D. Financing of Feeder Roads. 8 3. THE PROJECT .10 A. Description ..10 - Improvement and Maintenance of Feeder Roads . 10 - Technical Assistance to MPWUT .11 - Purchase of Equipment .12 B. Cost Estimates ..12 C. Execution ..14 D. Project Monitoring ..15 S. Procurement..... ... 16 F. Financing and Disbursements . .16 4. ECONOMIC EVALUATION ................................ 17 5. RECOMIEND A i' )I" ........................ 19 Th-is report i , -_ cd by Messrs. C. Delapierre (Engineer/Economist, RMIVA) R. C-.s n (i,conomist, RMWA) and J. Brown (Loan Officer) following an apprai:.al LUm ;on in May 1975. This documner.l i3 a restricted distribution and may be used by recipients only in the performance of their offici -:. . ieis. Its c;ntentF may not otherwise be disclosed without World Bank authorization.  Table of Contents (continued) TABLES 1. Development of the Highway Network 2. Highway Maintenance Expenditures 3. Design Standards 4. Road Improvement Program 1976/77 5. Road Improvement Program 1977/78 (provisional) 6. Road Improvement Program 1978/79 (provisional) 7. Road Maintenance Program 8. Equipment to be Purchased under the Project 9. Project Costs 10. Initial Schedule of Implementation 11. Estimated Schedule of Disbursements ANNEXES 1. Agriculture Table 1 - Agricultural Regions of Senegal Table 2 - Agricultural Production by Region 2. The Road Transport Industry Table 1 - The Privately Owned Trucking Industry in Senegal, 1975 Table 2a _A Vehicles with 12.5 T Payload and more in 1975 Table 2b - Vehicles with less than 12.5 T Payload Table 3a - Road Transport Costs Table 3b - Road Transport Rates 3. Technical Assistance to M5PWUT - Job Descriptions 4. The Rural Communities 5. Details of the Feeder Roads Improvement and Maintenance Program 6. Guidelines for the Selection of Feeder Roads to be Improved in the Second and Third Years of the Project 7. Details of the Economic Evaluation Table 1 - First-year Benefits and Economic Costs of the Improvement Program by Region and Type of Road Table 2 - Summary Evaluation of the Benefits of two Road Projects in the Niayes Area Table 3 - Economic Rate of Return CHART Organization of the Ministry of Public Works, Urban Development, and Transport (World Bank 15278) MAP Senegal - Fie xx'- Rn^- Project (IBRD 11868)  SENEGAL APPRAISAL OF A FEEDER ROADS PROJECT SUMARY i. Agriculture plays a central role in Senegal's economy, employing over 70% of the total labor force. Although contributing only about 35% of GDP, the sector's leverage on the economy is considerable through its impact on exports and on the purchasing power for locally produced goods and services. Groundnuts account for 60% of agricultural value added, and for 35 - 55% of commodity exports. The majority of the rural population is concentrated with- in 200 km of the capital, Dakar, in the Cap Vert Peninsula, and the Ground- nut Basin (Sine Saloum, Thies and Diourbel) where population density varies from 15 - 100 per km2. Small-scale rain-fed farming accounts for 95% of agricultural production. In the Groundnut Basin, a central feature of Gov- ernment's rural development strategy has been a national Agricultural Credit and Extension Program (Programme Agricole) which has been supported by Credits 140-SE and 404-SE. Starting in the early 1960s, Programme Agricole was the basis for moving farmers from subsistence agriculture to minimum package technology. The recently approved Sine Saloum Agricultural Develop- ment Project (Credit 549-SE/Loan 1113-SE) would assist the diversification and intensification of agriculture in the southern Groundnut Basin. ii. The potential for future agricultural development is highest in the south and southeast of Senegal where population density is low, annual rainfall is above 1000 mm, and soils are generally more fertile than in the Groundnut Basin. Development programs emphasize cotton, maize and upland rice in the Casamance and Eastern Senegal regions, irrigated rice production in the valleys of the Casamance and the Senegal River, and vegetable produc- tion on the basis of underground water resources in the coastal region north of the Cap Vert peninsula. The Bank Group has actively supported these efforts, in particular through the financing of a rice-growing project in the Casamance (Credit 252-SE), two settlement projects in Eastern Senegal (Credits 254-SE and 578-SE), a River Polders Project in the Senegal River Delta (Credit 350-SE), the Debi Lampsar Project (Credit S-18-SE), and the proposed Casamance II project. iii. The Office National de Cooperation et d'Assistance au Developpement (ONCAD) has the monopoly for groundnut marketing and is becoming increasingly active in cereals marketing. ONCAD buys produce at fixed prices and organizes their transport by trucks to the storage centers, and from there to the oil mills. Truck owners are paid transport rates which vary according to the state of feeder roads. Savings resulting from the improvement of feeder roads will accrue to ONCAD in the first instance, since ONCAD will be able to reduce transport rates accordingly. Unit savings are not sufficiently important to warrant a significant increase in groundnut producer prices. But feeder road  - Ai - improvements will have stimulating effects at the farm level, e.g. through better and cheaper supply of consumer goods, more timely and regular supply of agricultural inputs, and better opportunity for selling surpluses of cereals. Development of feeder roads in the south and southeast is expected to contribute to a more balanced geographical distribution of the rural popu- lation in relation to the agricultural potential of individual regions. iv. The proposed Feeder Roads Project is designed to support agric'tl- tural development, and to strengthen the institutional framework for the con- tinuous expansion and proper maintenance of the feeder road network. Feeder road improvements under the proposed project will be directed towards ongoing and planned agricultural development projects, including projects financed by the Bank Group, with a regional bias initially towards the Groundnut Basin and Casamance. The project consists of the implementation of a three- year program for the improvement and subsequent maintenance of about 1000 km of feeder roads and the maintenance of about 250 km of existing feeder roads, including procurement of highway equipment, spare parts, materials and sup- plies and a building for the Subdivision for Feeder Roads (BPP), and technical assistance to implement and monitor the proposed road improvement and mainte- nance program. v. In order to maintain a desirable degree of flexibility in the feeder road rimprovement program, the work programs for the second and third years of the project will be reviewed, and if warranted, revised, taking into account new agricultural projects or delays in the implementation of scheduled pro- jects. An Interministerial Consultative Committee (ICC) will be created which will make annual assessments of feeder road requirements in different parts of the country, and have proposals analysed by the Directorate of Studies and Programming (DSP) recently established within the Ministry of Public Works, Urban Development and Transport (MPWUT). Criteria for the selection of new feeder road proposals would be agreed upon by the Government and the Bank. The list of roads to be improved each year will be submitted to the Bank for approval. vi. Project costs are estimated at US$8.5 million equivalent (net of taxes), with foreign exchange costs of US$6.6 million (77%); taxes and duties are estimated at US$1.6 million equivalent. The proposed Third Window Loan of US$6.6 million would finance the entire foreign exchange cost of the pro- ject. The Government's contribution would be US$1.9 equivalent, or about 23% of total project costs net of taxes. vii. Physical execution of the project is scheduled to start in late- 1976 and to last three years. Improvement and maintenance works will be carried out by BPP's own forces with the support of domestic contractors and possibly rural community self-help. Equipment will be purchased, operated, and maintained by the Central Equipment Division in MPWUT. Equipment, mate- rials, spare parts and supplies amounting to US$5.0 million will be procured on the basis of international competitive bidding in accordance with Bank Group guidelines. Contracts for equipment, materials and supplies costing less than US$20,000 and for spare parts can be awarded on the basis of competitive bidding following local procedures acceptable to the Bank; the  - iii - total amount of such purchases would not exceed US$400,000. Contracts for the construction of works amounting to US$0.5 million will be awarded on the basis of competitive bidding advertised locally following procedures accept- able to the Bank. The proposed project includes contingencies amounting to US$1.2 million. viii. Senegal is in the process of creating Rural Communities, groups of villages with about 10,000 inhabitants, as part of its policy of government decentralization. These communities have autonomous budgets financed from a Rural Tax. Although modest in size, the budgets could make a useful con- tribution to the cost of maintaining the feeder roads to be improved under the proposed project. Contributions could also be made in the form of labor for routine maintenance operations. The Government has agreed to explore the possibilities of obtaining voluntary contributions in cash and/or labor from the Rural Communities, thus potentially reducing the burden on the national highway maintenance budget. ix. Loan funds will be disbursed as follows: (a) 100% of c.i.f. costs (Dakar) of equipment, spare parts and other imported supplies and materials and 91% of the cost net of tax, of imported items purchased locally; (b) 100% of foreign expenditure for technical assistance; and (c) 64% of total costs, with taxes, of works by contractors. X. Improvements and maintenance of feeder roads have been justified on the basis of savings in vehicle operating costs, except for the betterment of two proposed roads which has been justified on the basis of their contri- bution to increased production in conjunction with planned agricultural pro- jects. Institution-building is of primary importance, and this component of the project is expected to have benefits well beyond the scope of this project. xi. All sub-projects included in three annual improvement programs have a first-year benefit of at least 10%; the rate of return of the entire project is about 14%. The project is only moderately sensitive to variations in project cost and in the level and rate of growth of benefits; however, the assumptions used for benefits are rather conservative. xii. Agreement having been reached with the Government on the issues listed in para. 5.01, the proposed project is suitable for a Third Window Loan of US$6.6 million to the Government of Senegal on standard terms.   SENEGAL APPRAISAL OF A FEEDER ROADS PROJECT 1. INTRODUCTION 1.01 The Government of Senegal has over the last four years given increased priority to the rehabilitation and maintenance of its highway network. How- ever, most of the feeder roads on which close to one million tons of agri- cultural commodities are transported annually, have so far received only limited attention. Recognizing the need for a supplementary effort in this field, the Government asked the Association in 1973 to finance a study of feeder road improvement needs under the Second Highway Project (Credit 366-SE). For the implementation of the proposed project, which is based on the results of that study, the Government has created within the Directorate of Public Works (DPW) of the Ministry of Public Works, Urban Development and Transport (MPWIJT) a Subdivision for Feeder Roads (Bureau des Pistes de Production, BPP). 1.02 The proposed Feeder Roads Project is designed to support agricul- tural development, and to strengthen the institutional framework for the expansion and adequate maintenance of the feeder road network. Feeder road improvements under the proposed project will be directed to ongoing and planned agricultural development projects, including those of the Bank Group, with emphasis towards the Sine Saloum, Thies/Diourbel, and the Casamance regions. The project consists of a three-year program for improvement and subsequent maintenance of about 1,000 km of feeder roads, and maintenance of about 250 km of existing feeder roads. 1.03 Project costs are estimated at US$8.5 million equivalent (net of taxes) with foreign costs of US$6.6 million (77%); taxes and duties are esti- mated at US$1.6 million equivalent. The proposed Third Window Loan of US$6.6 million would finance the entire foreign exchange cost of the project. The Government's contribution would be US$1.9 million equivalent, or about 23% of total project costs net of taxes. 1.04 The project would be the fourth financed by the Bank Group in the highway sector of Senegal. The First Highway Project (Credit 198-SE, US$2.1 million, 1970) provided for construction of four feeder roads totalling 78 km, and for execution of a comprehensive highway maintenance study. The project has been completed satisfactorily. The Second Highway Project (Credit 366-SE, US$8.0 million, 1973) consists of the strengthening of 109 km of paved roads, a four-year road maintenance program based on the study financed under the first project, and a study of feeder road requirements. There have been substantial cost overruns in the road strengthening program which are partly due to inflation and changes in the exchange rate of the US$, but also to slow Amplementation of the whole project during the first two years. The strengthening  -2- program has been reduced to 35 km in agreement with Government and some funds for this component were switched to maintenance operations with higher priority. The highway maintenance program is now making satisfactory progress. A Third Highway Project, appraised simultaneously with the proposed Feeder Roads Project, includes the strengthening of additional sections of the highway network, and sections of the Second Highway Project that could not be completed due to the cost overruns mentioned above. In addition to these road projects, three agricultural development projects financed by the Association over the last four years have contained programs for rural road improvement kpar&. 2.10). 1.05 The proposed project is based on the study financed under the Second Highway Project and carried out by consultants BCEOM (France) in 1974, with the support of the Bank's Regional Mission in Western Africa (RMWA). This report is based on the findings of an appraisal mission consisting of Messrs. C. Delapierre (Engineer/Economist, RMWA), R. Gusten (Economist, RMWA) J. Biderman (Economist), and J. Brown (Loan Officer) which visited Senegal in May 1975. 2. BACKGROUND A. The Economy 2.01 Senegal is located mostly within the Sudano-Sihelian zone of the coast of West Africa, and has a land area of 196,700 km . Population is about'5.0 million, growing annually at about 2.2%. Urban areas account for about 25% of total population, the largest being around the capital, Dakar (pop. 0.6 million). Per capita GNP in 1975 was estimated at US$320, while rural per capita incomes average about one-fifth that amount. 2.02 In 1972, the economy came under severe strain as a result of the worst series of droughts in this century. In 1973 there was another though less severe drought, and by the end of the year total reserves had reached an all time low of minus US$31 million, the real standard of living in rural areas had declined to early 1960 levels, and Government's financial situation had become very precarious. Faced with this situation, Government resorted to heavier external borrowing and assistance to avoid a slowdown in its investment program. During 1974 and 1975, the economic situation improved markedly as a result of sharp price increases, until recently, for groundnuts and rock phosphate. In addition, satisfactory rainfall in both years improved crop production, and Government took steps to improve its financial situation by substantially reducing the level of subsidies on food for consumers. B. The Rural Sector 2.03 Despite relatively poor soils and erratic rainfall, the agricultural sector is central to Senegal's economy; it accounts for about 35% of GDP, up to 55% of exports, and about 70% of all employment. Moreover, as Senegal  - 3- has few known alternatives, agriculture will continue to be the largest source of employment for the forseeable future. Details on the agricultural sector are given in Annex 1. 2.04 There are several important sectoral characteristics: small-scale farms account for 95% of all production; groundnuts account for almost 70% of agricultural exports; 60% of the rural population is concentrated within about 200 km of Dakar in the Groundnut Basin which is composed of the regions of Thies, Diourbel and Sine Saloum; and large areas in the northern and east- ern parts of the country are suitable only for livestock production under extensive grazing. Thus, there are significant variations in the distribu- tion of population, but with smaller differences in cropping patterns. 2.05 Government's efforts to develop agriculture have been directed to: (a) increasing groundnut and millet production, especially in the Groundnut Basin; (b) diversifying production by promoting rice and cotton in regions of higher rainfall such as Eastern Senegal and Casamance; (c) promoting live- stock development in Eastern Senegal and resettling farmers in this region from the more populated Groundnut Basin; and (d) developing the irrigation potential of the Senegal River Basin. Central to implementing Government's rural development strategy are Programme Agricole (PA) which supplies farmers with a minimum package of agricultural inputs, and the semi-autonomous develop- ment agencies, organized on either regional or product lines and reporting to the Ministry of Rural Development, which provide extension services. The 2,000 cooperatives throughout the country, of which 1,700 are based on ground- nut production, are important intermediaries for the distribution of agricul- tural inputs and credit, and for the collection of produce. These cooperatives, which are supervised and supplied with agricultural inputs by the Office National de Cooperation et d'Assistance au Developpement (ONCAD), have 200,000 members, but are used for narketing purposes by members and non-members and serve a total of about 1.2 million farmers. Roads and Agricultural Development 2.06 In addition to constraints imposed by nature, important factors limiting increases in agricultural production are the lack of roads in rural areas where they are needed, and the poor maintenance of those which do exist. The absence or poor quality of these roads has contributed to high costs and inefficiencies in agricultural marketing. Transport costs are as high as CFAF 50 (US$0.22) per t. km in sandy areas of the Groundnut Basin, and given the low prices for cereals which prevailed until recently, collection of cereals from remote areas was unprofitable. Inadequate feeder roads have also slowed agricultural modernization by hindering the regular and timely supply of inputs and extension services by ONCAD and regional development agencies. Lack of roads in regions where good soils and rainfall and low population densities make agricultural development attractive, is one reason people have been reluctant to emigrate and thus relieve population pressure in the Groundnut Basin. At present, the feeder roads which are constructed and maintained are often chosen on an ad hoc basis. The proposed project  - 4 - would include an Interministerial Consultative Committee to review feeder road requests from various government agencies and have them screened accord- ing to technical and economic criteria established with assistance from the Bank. The Marketing SX!Itm and ents 2.07 Agricultural production falls into two main categories, crops grown for export, mainly groundnuts, and those grown for domestic coa.sumption, pri- marily cereals; the mechanism for marketing varies according to these ca egories. Office National de Cooperation et d'Assistance au Developpement (ONCAD) has the monopoly for the marketing of groundnuts 1/ which it buys at a uniform producer price from about 1,700 cooperatives throughout the country. Transport rates are fixed in five categories by ONCAD according to road conditions. Benefits result- ing from the project will accrue to ONCAD where road improvements result in a road being shifted from a lover to higher category or to transporters if they result in improvements of a road through better maintenance within a given cate- gory. These transport cost savings will allow ONCAD to improve and extend its services to farmers. Competition among the private groundnut transporters is strong enough to ensure that transport savings accruing to transporters would be passed on to the farmers in the form of lower rates on the transport of consumer goods, agricultural inputs and commodities other than groundnuts. Specifically with respect to cereals, marketing is less well organized than with groundnuts and road improvement would have a more direct impact. While Govern- ment has decided to expand ONCAD's role in cereal marketing, cereals are presently bought both by ONCAD (20-30,000 tons annually) and by private traders (about 50,000 tons). Producer prices for cereals are set by Government, but except for ONCAD purchases, products are sold freely, often below Government prices. Cereal marketing suffers particularly from a lack of storage capacity 2/ and transport. In regions where poor road conditions allow limited access, the unreliability and high costs of transport and the lack of competition among those traders willing to collect produce result in lower producer prices. Farmers are therefore less inclined to generate marketable surpluses. In these circumstances, access to feeder roads and the resulting reduction of transport costs, and the increased competition this would permit, should help stabilize producer prices at levels attractive to farmers and consequently stimulate production increases. C. Roads The Network 2.08 Senegal's road network is largely concentrated in the third of the country stretching out from the Cap Vert peninsula to the northern, central and southern Groundnut Basin, and from the latter to Casamance and Eastern 1/ The average volume of groundnuts marketed in recent years has been about 750,000 tons, although in years of good rainfall the groundnut harvest can amount to 1 million tons. 2/ A study of cereals production, marketing, and storage has recently begun, financed under the Sine Saloum Agricultural Development Project (Credit 549-SE/Loan 1113-SE).  - 5 - Senegal. The northern Groundnut Basin is linked to St. Louis as part of the main network. A further road runs parallel to the Senegal River from St. Louis to Matam. The network of feeder roads is fairly dense in the area west of the line Louga-MBacke-Kaffrine, but poor in other areas, especially in Eastern Senegal and Upper Casamance. 2.09 Of the total network of about 13,300 km (Table 1), about 9,100 km are classified, which means that their maintenance and improvement is the responsibility of DPW. However, only about 5,840 km are presently maintained by the DPW within the framework of the Second Highway Project; of the remaining 7,460 km of roads, 4,200 km are not classified, and are under the competence of local authorities whose limited financial means do not permit them to carry out any significant improvement or maintenance work. Less than half of the 7,460 km of feeder roads has been partly improved, the remainder of the system consisting of rather ill-defined tracks which are often impassable. The proposed project addresses itself to the economically most important roads of the partly improved or unimproved feeder road network. 2.10 Development of the rural roads system has been an important element in many IDA-financed transport and agricultural projects: - the First Highway Project (Credit 198-SE) provided for the construction of four feeder roads totalling 78 km in the Sine Saloum Region; - the Second Highway Project (Credit 366-SE) contained the comprehensive survey of feeder road requirements on which the proposed project is based; - the Casamance Rice Project (Credit 252-SE) called for the construction of about 250 km of feeder roads in the project area (Sedhiou); and - the First and Second Terres Neuves Settlement Projects (Credit 254-SE and Credit 578-SE) provided for construction of 166 ktm of secondary and feeder roads in the project area located in Eastern Senegal. The other major effort in feeder road development is the network of cotton roads built by Societe pour le Developpement des Fibres Textiles (SODEFITEX) with financing provided by the European Development Fund (FED). This network is located in Upper Casamance and adjoining areas of Eastern Senegal. Traffic on Feeder Roads 2.11 Traffic on feeder roads consists mainly of groundnuts and other agricultural products, and agricultural inputs. Traffic amounts to nearly one million tons in years of good harvests. Traffic growth over the last  - 6 - decade has reflected the slow increase in agricultural production as well as large fluctuations due to a series of drought years. ONCAD's traffic repre- sents about 80% of the total traffic on the feeder road network considered in the proposed project. Traffic growth in rural areas is projected to be 4% annually on average, but may be higher in areas in which agricultural develop- ment programs will focus. 2.12 Traffic on tracks leading from individual cooperatives to miajor feeder roads is typically 500 - 1,500 tons per annum or 2-5 vehicles per day (vpd). The volume of traffic increases towards the main collecting cente.s (seccos), and, as on some of the project roads, may reach 20-25,000 tons per annum or 20-30 vpd in the vicinity of these seccos. For the collection of produce on remote and sandy tracks, light trucks of about 5 t pay-load are widely used, while on the better roads the share of medium-sized trucks of 7--11 t payload increases. From the seccos, groundnuts are forwarded to the oil mills by heavy trucks of 20-25 t payload. 2.13 Traffic on rural roads is highly seasonal. Evacuation of ground- nuts takes place between mid-December and mid-May, and the marketing of millet and sorghum starts one month before the groundnut campaign. During this period, traffic is nearly double the annual average, while during the other half of the year traffic levels are very low. A significant feature of transport conditions in the Groundnut Basin is that the sandy tracks are easier to negotiate during the rainy season when the sands have a higher bearing capacity, than during the dry season when traffic is at its peak. The Road Transport Industry 2.14 The road transport industry in Senegal specializing in rural trans- portation including agricultural commodities and inputs comprises about 250 firms (Annex 2). There are 19 large firms owning between 16 and 60 vehicles each (of which two are cooperatives of small owners), while one firm out of two owns only 1-2 trucks, mostly of lighter build. Much of the freight generated by commerce and industry is transported by the large modern firms, while the small firms rely on the groundnut campaign and the general market (foodstuffs, cattle, building material, miscellaneous), and suffer from the effects of the sharp seasonal variations in traffic. In this sector, com- petition is fierce, and rates on the unregulated market are frequently barely sufficient to cover direct operating costs. 2.15 ONCAD's produce-marketing and input-distribution operations are by far the most important road transport activity in Senegal. The improvement of the feeder road network proposed under the project concerns ONCAD's collection of produce which uses: - 92 trucks owned by ONCAD; - 325 trucks bought by ONCAD and sold on hire-purchase terms to small transporters who are to pay off the outstanding portion of the price by hauling groundnuts at the ONCAD- determined rates, the so-called "trucks under control";  - 7 - - in addition, ONCAD draws on the large number of private transporters who supply approximately three-quarters of the carrying capacity required. 2.16 Remuneration of transporters is calculated on the basis of a detailed mapping and grading of all the roads and tracks used for hauling of each cooperative's crop to the nearest secco. Roads are classified in five cate- gories with rates per t. km graded according to the quality of roads: no track CFAF 60 per t. km bad track " 50 per t. km ordinary track " 28-31 per t. km improved gravel road " 22 per t. km paved road " 17 per t. km Transporters are consulted, but their degree of organization is low and the overall level of rates is largely determined by ONCAD. However, the classi- fication of individual tracks is governed by a kind of market mechanism: if the condition of a track is worse than indicated by its classification, ONCAD receives complaints and finds it increasingly difficult to find transporters for hauls on such roads. This assures that rates reflect the relative quality of tracks rather faithfully. The spread of rates is large, but it must be taken into account that the bad tracks can be negotiated only by small trucks which have much higher costs per t. km than medium-sized trucks used on better roads. Also, speed on bad tracks is very low, and the long time spent on these hauls must be adequately remunerated because in the short groundnut campaign, time is literally money for transporters, earning oppor- tunities in other seasons being very poor. 2.17 Regarding the transport of passengers and of non-regulated commodi- ties, largely consumer goods for the rural markets, competition is sufficiently strong to ensure that savings in vehicle operating costs will in general be passed on to the rural population. Highway Administration 2.18 Within MPIUT, DPW is responsible for construction and maintenance of the highway system. ?4PWUT comprises six Directorates (see organization chart). DPW has five Divisions in Dakar and seven Regional Divisions. The maintenance of the highway network falls under the responsibility of the Road Maintenance Division (DER). The equipment is managed and repaired by the Central Equipment Division (PCM) and maintenance works are carried out by the Regional Divisions. A Subdivision for Feeder Roads, Bureau des Pistes de Production (BPP), which has been created within the DER, will be in charge of improvement and subsequent maintenance of the feeder road network. 2.19 DPW has over past years experienced a shortage of experienced staff at the upper and middle levels. The Director and most of the Regional Engi- neers, technicians, foremen, and operators are Senegalese, but DPW's head office functions are carried out primarily by 14 French engineers provided  - 8 - under the French technical assistance program. Four fellowships for DPW engi- neers, to be provided under the proposed Third Highway project, will help alleviate the staffing situation at the upper levels. MPITJUT will also require additional personnel to staff BPP, and to fill key positions in the Directorate of Studies and Programming (DSP). The Government has had difficulty in hiring qualified personnel for engineering positions, primarily due to the relatively low scale of Government salaries compared with those offered by private industry. Efforts have been made to relieve the staffing situation by raising the salaries of Government employees in 1974, but little progress has been achieved so far in recruiting qualified local personnel. Middle- and lower-level personnel required for the reorganization of highway maintenance operations are recruited primarily through transfer and training of existing DPW staff. The Government has long realized that its staffing needs can be met only through extensive efforts in technical education. Several training programs are now being implemented at two technical colleges (St. Louis and Dakar), a technical university at Dakar, and a polytechnic school at Thies, which together will provide an annual output of about 60 engineers and technical personnel from 1976 on. In addition, training of middle-level staff required for maintenance operations has started at the Center for Permanent Technical Training as part of the four-year maintenance program financed under the Second Highway Project. Therefore, prospects are good that MPTUT can in the near future fill its positions with qualified local personnel, and that positions now held by foreigners can progressively be taken over by Senegalese staff over the coming years. D. Financing of Feeder Roads 2.20 Until FY74, no funds were allocated for feeder roads, except those included in Bank/IDA-financed projects. Since then, about CFAF 40 million have been budgeted annually for these roads. These funds represent only a small portion of Government's total expenditures for roads and its revenues from road-user charges; less than 1% and 0.5% respectively. However, with the proposed project alone, additional average annual expenditures of about CFAF 170 million will be made on feeder roads over the next three years. If Government continues the program at its present rate and extends it to the next hierarchy of feeder roads--the extensive farm-to-market network--which is highly likely in view of Government's growing emphasis on rural development, the financial requirements for these roads will grow very rapidly. In fact, present estimates are that over CFAF 700 million will be required annually for feeder road construction, improvement and maintenance by 1985. Given Government's other commitments in the highway sector, it is unlikely that sufficient funds would be allocated to the DPW budget for feeder roads. A two-pronged strategy to stem this shortage of funds consists of (i) reducing the costs of feeder road works and (ii) finding extra-budgetary funds to supplement DPW's funds. 2.21 Consultants BCEOM, as part of their feeder road study in Senegal, examined various ways of reducing feeder road costs and concluded, inter alia, that the following operations could be performed with considerable cost savings by labor-intensive methods:  - 9 - (i) excavation and truck loading of laterite for regravelling; and (ii) routine maintenance, including patching and cleaning of ditches and culverts. The proposed project envisages the use of these methods. Although a step in the right direction, consultants' analysis concentrated on equipment- intensive and labor-intensive methods and did not explore the other and often more promising alternatives of intermediate technologies. Government has agreed to look into these alternatives during project execution with the help of the technical assistance experts under the project. Government has agreed to discuss its findings, and a program for follow-up action with the Bank at the same time as the program for the second year of the project is submitted to the Bank for approval. 2.22 Regarding alternative sources of funds, consideration has been given to the possibility of increased participation from the ultimate beneficiaries of feeder road improvements, the Rural Communities they serve. This partici- pation could be in the form of cash contribution, self-help labor, or a mixture of both. Two factors fortuitously enhance the success of this approach. First, as a result of a Government's administrative decentralization, the Rural Communities are fast becoming the basic administrative units with their own autonomous budgets (Annex 4). Experience with the more established communities, particularly in the Thies region, has shown that roads run second to wells on their list of priorities. The communities can therefore be expected to contri- bute financially and with self-help labor for roads in their areas. Secondly, as explained in para. 2.21 above, considerable scope exists in feeder road improvement and, particularly, maintenance for the use of labor - a resource relatively abundant in these communities. The Government has agreed to explore the possibilities of obtaining voluntary contributions in cash or commitments of labor from the Rural Communities for maintenance of feeder roads, after consultation with these communities and in accordance with the Law of Rural Communities (Law 72-75, 19 April 1972, specifically Article 82). In addition, to encourage the communities, the Government agrees that, when selecting roads to be included in the program of the second and third years of the Project and subsequent programs concerning feeder roads, priority will be given to pledges of voluntary contributions from the Rural Communities, and Government will examine with the Bank a formula by which this factor can be taken into account. Before the above mentioned contributions become available, DPW will have to spend about CFAF 125 million annually, after termination of the project, for maintenance of the feeder roads to be improved under the project. The Govern- ment agreed that it will allocate this amount for maintenance of the project roads, and that these annual allocations will be increased in line with cost increases and maintenance requirements of the feeder road network.  - 10 - 3. THE PROJECT A. Description 3.01 The proposed project consists of the implementation of a three-year program for the improvement and subsequent maintenance of about 1,000 km of feeder roads and maintenance of about 250 km of existing feeder resds, including the following: (a) purchase of highway equipment and spare parts; (b) purchase of materials and supplies for the operations included under the project; (c) technical assistance to (i) the Subdivision for Feeder Roads (BPP) for implementation of the proposed road improvement and maintenance program and (ii) monitoring of the project; and (d) construction of BPP's headquarters. Improvement and Maintenance of Feeder Roads 3.02 The project provides for improvement of about 1,000 km of rural roads in key areas of ongoing and planned agricultural development, and for the maintenance of this network. The project covers: the Groundnut Basin which comprises the administrative regions of Thies/Diourbel and Sine Saloum, the Casamance region, and the west part of Eastern Senegal. The project would not cover the Senegal River region and the Cap Vert peninsula; the latter already has a fairly well-developed secondary network which is mostly paved, while the road requirements of the former will be determined within the frame- work of plans to develop the Senegal River Basin through major irrigation works. 3.03 The proposed improvements consist of: (i) reshaping of roadway; (ii) regravelling of selected sections; and (iii) building or reinforcing of drainage and crossing structures. Three road design standards are planned as follows: TYPE POA - track designed to carry up to 6-7,000 t annually or about 10 vpd will have a 6 m reshaped roadway and will be gravelled over sandy sections only; TYPE PAl - one-lane road designed to carry up to 20,000 t annually or less than 20 vpd will have a 7 m roadway and will be gravelled, where necessary, over 4 m width to a thickness of 12-20 cm depending on soil quality and traffic levels;  - 11 - Type PA2 - two-lane road designed to carry at least 20,000 t annually or 20-30 vpd will have a 8 m roadway and will be gravelled over 6 m width and the entire length to a thickness of 15-20 cm depending on soil quality. Details of road design standards are shown in Table 3. 3.04 A work program for the first year of the project has been established on the basis of the survey carried out by consultants BCEOM and the findings of the appraisal mission (Table 4). Provisional programs based on the same sources and on a review of agricultural development programs scheduled to be implemented over the next 3-4 years have been added for the second and third years of the project (Tables 5 and 6), but these are subject to changes if new agricultural projects are launched or scheduled projects are delayed (para. 3.13). The entire three-year program is expected to comprise about 400 km of POA roads, about 500 km of PAl roads, and about 100 km of PA2 roads. The last category concerns mainly the rehabilitation of PA2 roads that have disintegrated due to insufficient maintenance (for details of the program see Annex 5). 3.05 The proposed project also provides for maintenance of about 250 km of existing gravel feeder roads which had not been included in the Second Highway Project, because in 1972 traffic was considered too low to justify maintenance operations (Table 7). BPP will also undertake maintenance of the 1,000 km of roads to be improved under the proposed project as the improvements are completed. Apart from annual routine maintenance, periodic maintenance will take place after six years, on the average. Technical Assistance to MPWUT 3.06 To implement the road program BPP will need two engineers and two administrative assistants at headquarters in Dakar. The latter can be re- cruited in the country. In the absence of experienced Senegalese engineers, the two posts of engineers will be filled from abroad. This technical assist- ance will be required for about two years until Senegalese engineers have been trained. The experts' duties would include on-the-job training of these Senegalese engineers, expected to graduate in 1976 (para. 2.19), who will take over responsibility during the third year of the project. The proposed project provides financing for the two experts over two years. The experts' job descriptions and required qualifications, given in Annex 3, have been discussed and agreed with the Government. In the field, BPP will require about 85 foremen, operators and mechanics. Staff requirements for these positions will primarily be filled through local recruitment. Training of newly recruited staff will be carried out with the assistance of consultants Lotuis Berger under the four-year maintenance program as part of the Second and Third Highway Projects. The Government has taken appropriate budgetary measures with respect to the training and employment of the personnel and to undertake the recruitment of the personnel prior to September 30, 1976.  - 12 - Purchase of Equipment 3.07 Except for front loaders available at the Central Equipment Division (PCM), no highway equipment can be taken ovet from the existing stock. The equipment purchased under the First, Second and the proposed Third Highway projects, and a loan from Denmark, is being or will be used by the several maintenance brigades which are now working on the main highwav network. The rest of the PCM fleet consists of old equipment, of which only a small portion can be reconditioned. A brigade for road improvement has also been set up under the Casamance Rice Project (Credit 252-SE), but is used to a considerable extent for bottomland development and similar kinds of rural works, and will therefore not be available for the improvement of feeder roads. 3.08 The proposed road improvement program will require equipment for three regravelling brigades and three additional motorgraders for maintenance operations which will be purchased and maintained by the PCM. BPP will also need some vehicles and office equipment in Dakar. The workload of the brigades has been calculated on the basis of actual performance by DER during implemen- tation of the Second Highway Project. Productivity is low compared to that observed in other countries of West Africa. Consultants Louis Berger are investigating this matter (under the Second Highway Project), and are expected to propose measures for improvement. Although it is expected that productivity will increase during implementation of the highway maintenance program, no increase was projected in calculating the output for the feeder road program because most of the BPP personnel will be newly recruited and will go through a learning period. 3.09 The proposed project provides funds for procurement of all necessary equipment as listed in Table 8. Bidding documents have been prepared by DPW and approved by the Bank. The project also provides funds for purchasing materials such as cement, steel, lumber, and for spare parts and supplies such as fuel, lubricants, and tires. B. Cost Estimates 3.10 The project is estimated to cost US$8.5 million equivalent net of taxes and customs duties, with foreign exchange costs of US$6.6 million (77Z). Taxes and duties are estimated at US$1.6 million equivalent. Details of cost estimates are given in Table 9 and summarized below:-  - 13 - (in CFAF million) (in US$'000) Local Foreign Total Local Foreign Total A. Equipment and Materials Equipment 54.4 511.6 566.0 242 2,274 2,516 Materials 19.8 9.9 29.7 88 44 132 74.2 521.5 595.7 330 2,318 2,648 B. Spare parts and Supplies 61.9 582.6 644.5 275 2,590 2,865 C. Staff - Technical assistance 11.3 87.8 99.1 50 390 440 - Head Office 27.9 - 27.9 124 - 124 - Field Staff 136.8 - 136.8 608 - 608 176.0 87.8 263.8 782 390 1,172 D. Works contracted - Head Office 34.0 25.0 59.0 151 111 262 -Other works contracted 17.1 68.4 85.5 76 304 380 51.1 93.4 144.5 227 415 642 Totals A - D 363.2 1,285.3 1,648.5 1,614 5,713 7,327 E. Contingencies 63.1 199.8 262.9 280 888 1,168 GRAND TOTAL 426.3 1,485.1 1,911.4 1,894 6,601 8,495 (rounded) (1,900) (6,600) (8,500) 23% 77% 100% 3.11 Estimates of equipment costs are based on the consultants' report using quotations from suppliers given in March 1975 and bids received for similar equipment in November 1975. A 5% allowance has been included in equipment costs to permit some flexibility in the selection of plant specifications. Running costs of equipment for 180 working days per year are based on actual cost figures registered by the highway maintenance program financed under the Second Hlighway Project. Costs of construction of the BPP building were calcu- lated by DPW. Estimated costs of technical assistance are based on the actual cost of highway engineers now employed for the Second Highway Project. Price contingencies amounting to about 14% of total project cost have been calculated as shown in Table 9. This low price contingency is due to the fact that all equipment is expected to be delivered during the first year of project imple- mentation.  - 14 - C. Execution 3.12 Physical execution of the project is scheduled to start in late 1976, and to take three years to complete. MPWUT Wrill be responsible for execution of the proposed project. Road improvement and maintenance works will be carried out primarily on force account by BPP. 3.13 BPP's brigades will at the beginning of the project be located in the regions of Thies/Diourbel, Sine Saloum and Casamance. The location of these three brigades will be reviewed as the project progresses. The survey carried out by consultants BCEOM indicated that, in the longer run, there are limits to road improvement in the northern and central Groundnut Basin where road construction is expensive, the existing network relatively dense, and the expected impact on agriculture rather modest (with the exception of new lines of production such as irrigated vegetable cultivation). On the other hand, prospective returns on road improvements in the Eastern Sine Saloum, Eastern Senegal, and the Casamance will be considerably higher. Therefore, after a first phase of high priority road improvements in all principal regions, the program may be expected to turn more decisively to the new development areas. The organizational implication is that road improvement brigades should not be tied to the administrative region to which they are initially assigned. It is recommended that the brigade operating initially in the Thies/Diourbel region be transferred to Eastern Senegal in the third year of the program. The Government has given assurances that, within the framework of the project's objectives, feeder road brigades can be transferred from one region to another according to the changing priorities of agricultural development. 3.14 To stimulate the development of small- and medium-scale enterprises, construction of the BPP headquarters, drainage structures and hauling of some laterite will be carried out by domestic contractors. About 110 small- and medium-size contractors exist in Senegal, of which 80 are prohibited by law from responding to bids of more than CFAF 15 million because of their limited access to finance. They are generally oriented toward house-building; however, they also participate in water supply and drainage projects, and in construction of city streets. In the project area, 12 enterprises are located at Thies, 3 at Kaolack and 3 at Ziguinchor. Contracts would be awarded to enterprises by the Regional District Engineer after local bidding. The proposed project provides funds for these works to be contracted. However, present administrative procedures for contract approval and payment of invoices are exceedingly slow for contracts exceeding CFAF 3,000,000 and tend to discourage small enter- prises from bidding even where legally possible, because delays in payment cause serious liquidity problems for these firms. For contracts below CFAF 3,000,000 procedures are simple and payment fairly prompt. 1/ The Government is exploring possibilities of simplifying and expediting procedures in general. In addition, the proposed Third Highway Project provides technical I/ This represents, however, a significant improvement as the limit until January 1976 was CFAF 1,000,000.  - 15 - assistance to DPW to determine the action required to promote the domestic construction industry. Also, the proposed project envisages using rural community self-help for the undertaking of tasks amenable to the use of labor-intensive techniques (para. 2.22). 3.15 The feeder roads to be included in the first year's improvement and maintenance program are shown in Table 4. In order to maintain a desirable degree of flexibility in the program, an Interministerial Consultative Committee will be created no later than June 30, 1976 which reviews annually and if necessary revises the provisional programs prepared for the second and third years (Tables 5 and 6) in the light of new developments. This Committee will be chaired by the Minister of Public Works, and will consist of repre- sentatives of the Ministries of Rural Development, Planning and Cooperation, Finance, and the Interior as well as of ONCAD. These Ministries and this agency will review and submit annually their particular feeder road require- ments. The proposals will be coordinated and screened from technical and economic viewpoints by the Directorate of Studies and Programming of MPWUT, which will also prepare feeder road programs following the proposed project. The DSP was set up by the Decree which reorganized MPWLUT, but it is not yet staffed. To make the Directorate fully operational, the proposed Third Highway Project includes the services of four technical assistance experts over three years to fill the key positions of senior planner, two transport economists and a highway planning engineer, and to train local counterpart staff in their respective duties. The criteria to be applied for selection of new roads to be included in the annual work program are given in Annex 6. The annual programs for the second and third years will be submitted for approval to the Bank four months before the beginning of each working year. 3.16 A Presidential Decree is being drafted in MPWNT for the establish- ment of the Interministerial Consultative Committee. The Government agreed that the Decree will be issued no later than June 30, 1976. 3.17 The proposed schedule of implementation of the project is shown in Table 10. D. Project Monitoring 3.18 Several concepts and assumptions included in the design and justif- ication of the project require careful monitoring and regular evaluation to determine the extent to which they can be replicated or should be modified for use in subsequent projects. The particular items proposed for monitoring and evaluation are: (a) costs, productivity and quality of work performed (i) by force account and (ii) by local contractors. In this connection works performed by (i) labor intensive methods, (ii) inter- mediate techniques, and (iii) equipment intensive methods, should be treated separately and compared where applicable;  - 16 - (b) price of alternative uses of unskilled labor used in the project works; (c) response of Rural Communities towards contributing funds and/or labor for feeder road rehabilitation and maintenance and any factors explaining such response; (d) future development of passenger and goods traffic on project roads; (e) incidence of road works on transport charges for passengers and important goods on the project roads; (f) changes in land use; consumption and marketing patterns due to road improvement; (g) development of per capita income of the population in the project area. The technical assistance consultants being provided to the BPP will assist the MPWUT to establish and implement the proposed monitoring system and will provide the data for items (a) through (e) on a routine basis as part of their work. To monitor items (f) and (g), a consulting firm, either local or a locally established foreign firm, or qualified staff from the local University, will be used. Thereafter, the results obtained will be reported to and discussed with the Bank at regular intervals. These arrangements have been discussed and agreed with the Government. E. Procurement 3.19 Equipment, materials and supplies amounting to about US$5.0 million will be procured on the basis of international competitive bidding in accordance with Bank Group guidelines. Contracts for equipment, materials and supplies costing under US$20,000, and for spare parts, can be awarded on the basis of competitive bidding following local pro- cedures acceptable to the Bank; the total amount of such purchases would not exceed US$400,000. Contracts for the construction of selected civil works (drainage and crossing structures, excavation/haulage of materials for base courses, and BPP office building) amounting to about US$0.5 million, will be awarded on the basis of competitive bidding advertised locally following procedures acceptable to the Bank. Construction supervision will be carried out by BPP with the assistance of the Regional District Engineers. All the above arrangements have been discussed and agreed with the Government. F. Financing and Disbursements 3.20 The proposed Loan of US$6.6 million will finance all the foreign costs of the project, or 77% of total costs net of taxes. The Government will finance the local costs amounting to US$1.9 million equivalent, and about US$1.6 million equivalent in taxes, of which US$1.2 million are import duties. The availability of this proposed Government contribution has been confirmed.  - 17 - 3.21 Third Window Loan funds will be disbursed as follows: (a) 100% of c.i.f. costs of equipment, spare parts, and other imported supplies and materials, and 91% of the cost of these items if purchased locally; (b) 100% of foreign expenditures for technical assistance services; and (c) 64% of total costs (with taxes) of works by contractors. A schedule of cumulative quarterly disbursements from the proposed Third Window Loan is shown in Table 11. 4. ECONOMIC EVALUATION _ 4.01 The economic justification of the project rests on two types of benefits from road improvement and subsequent maintexiance, namely (i) savings in total transport costs, and (ii) increased transport reliability, and in some cases, pro- vision of access to possible markets. Because of the prevailing marketing syseem, transport savings would have only a limited direct impact for the farmer on the main agricultural product, groundnuts. The per kilo savings in transportation costs due to the project (about 0.30 CFAF) would be insufficient to warrant an increase in the national price ONCAD pays farmers for grounduuts (41.5 CFAF). However, the total savings for ONCAD alone in transportation costs as a result of the project would be substantial--on the basis of the tentative program about US$900,000 annually by year four, representing 17% of ONCAD's present transporta- tion costs. These savings will either be used by ONCAD to expand and improve its services to farmers, or will be passed on to the Government's Price Stabilization Fund. In addition, road improvements will increase ONCAD's ability to provide essential agricultural inputs, particularly improved seed varieties, fertilizer, pesticide and equipment, in sufficient quantity and on a timely basis to assist farmers in increasing their output. Transport savings will have a more direct impact on cereal production. With easier and more regular access of trucks to farming areas reducing the risk that surpluses will not find a buyer, farmers can take advantage of modern agricultural methods to increase their cereal production. 4.02 Institution-building is of primary importance, and the component in- cluded in the project represents a major benefit which cannot be quantified. It consists of: (i) establishing within DPW a Subdivision for Feeder Roads with separate budgetary appropriations and its own equipment financed under the project; (ii) setting up an Interministerial Consultative Committee with MPTIJT's Directorate of Studies and Programming acting as its secretariat; and (iii) trying to develop a system of partly financing feeder road maintenance on a self-supporting basis through the involvement of Rural Communities. These institutions will ensure that development of agriculture and of feeder roads is effectively coordinated, so that the urgency of requests for feeder road improvement from different regions of the country will be assessed according to uniform and objective criteria. In addition, the possible participation of Rural Communities in maintaining feeder roads may help reduce the burden of these recurrent costs on the national budget.  - 18 - 4.03 The economic justification presented in the succeeding paragraphs provides only an approximate indication of project feasibility, since the exact roads to be included in the second and third-year program will be determined only during the course of project execution. Future revision of this provisional program is, however, expected to further improve the project's justification. For purposes of justification for the road improvement component, roads have been grouped into two categories: Category I: This category includes roads in areas where ongoing agricultural activity is already sub- stantial. The economic return will be based on road-user savings. Category II: This comprises roads with little or no existing traffic, but which form part of an agricultural development project. In this case, the economic analysis will be based on the incremental value added resulting from the combined road/agricul- tural investment. 4.04 Road user savings 1/ have been estimated on the basis of costs cal- culated by consultants BCEOM in September 1974 based on analysis done by consultants Louis Berger under the Second Highway Project, and on data gathered by the appraisal mission. Traffic estimates, essentially agricultural commo- dities on feeder roads, were made by BCE(OM for the present and medium-term future on the basis of ONCAD's records, and on a survey of ongoing and planned agricultural development projects. Traffic estimates are summarized in Table 4 for the first year improvement program, and in Tables 5 and 6 for the pro- visional second and third year programs. These estimates assume annual traffic growth of 4%. The actual growth rate may be higher on roads associated with agricultural development projects. To these benefits, 25% have been added for passenger vehicles according to estimates made by the appraisal mission. Costs for the Case II roads were obtained from consultants Louis Berger under the Second Highway Project, with agricultural data supplied by the Ministry of Rural Development. 4.05 Of the roads selected for improvement during the first-year of the project (Table 4), all of which are Case I, the 194.5 km in the Casamance region are associated with the Casamance Rice Project (Credit 252-SE) for which a second stage project was appraised in October 1975. The 104.2 km of roads in the Sine Saloum region cover an area in which the Government's Programme Agricole is active, as well as the Sine Saloum Agricultural Development Project financed by the Caisse Centrale de Cooperation Economique and the Bank Group (Credit 549-SE/Loan 1113-SE). In the Thies/Diourbel region, the proposed roads serve both Programme Agricole and an agricultural development project financed by USAID. 1/ Details of the economic evaluation are given in Annex 7.  - 1 4.06 All feeder roads included in the improvement program have a first-year and an economic return of at least 10%. The average economic return is expected to be 12%. For the estimates of benefits from the maintenance of previously improved feeder roads (Table 7), only savings in vehicle operating costs, i.e. cost increases that would occur in the absence of maintenance operations, have been taken into account. On this basis, the maintenance component has a cost benefit ratio of 1.5 discounted at 10% which is assumed to be the opportunity cost of capital in Senegal, corresponding to an economic return of more than 20%. The economic rate of return of the whole project would be about 14%. This re- turn underestimates the real benefits, since it does not include the benefits associated with increased transport reliability. 4.07 The rate of return is not very sensitive to cost overruns. With a cost increase of 20Z, the rate of return is about 11%. Moreover, such overruns are not likely since equipment purchased is already being arranged for delivery during the first year of the project; performance of the road brigades has been estimated on the basis of results achieved by the ongoing highway maintenance program and does not take into account productivity gains which may be expected from greater experience. Finally, the estimate of traffic growth (4% p.a.) is probably too low since most feeder roads to be improved are located in areas with agricultural development programs aiming at a much higher rate of production increases. However, this estimate allows for the eventuality of future drought years. 5. RECOMMENDATIONS 5.01 During negotiations with the Government, the following items were discussed and agreed: (i) Government will look into alternate intermediate technologies for feeder roads construction, and discuss with the Bank its findings and a program of follow-up action (para. 2.21); (ii) the Government will allocate the equivalent of CFAF 125 million for feeder road maintenance in the first year after termination of the project, and the allocation will be augmented in line with cost increases and maintenance requirements of the feeder road network (para. 2.22); (iii) the Government will explore the possibilities given by the law on Rural Communities to obtain voluntary contributions in cash and/or in labor from the Rural Communities, and to give preference to those communities willing to make these contributions in the selection of roads for the second and third-year programs (para. 2.22); (iv) the job descriptions and required qualifications of two experts for the Subdivision of Feeder Roads (para. 3.06);  - 20 - (v) the Government will take appropriate budgetary measures allowing recruitment and training for middle and lower positions in BPP before September 30, 1976 (para. 3.06); (vi) the feeder road brigades can be transferred within the framework of the project's objectives, from one region to another according to the changing priorities of agricultural development (para. 3.13); (vii) the annual work programs for the second and third years of the project will be submitted for approval to the Bank four months before the beginning of each working year (para. 3.15); (viii) the Decree establishing the Interministerial Consultative Committee will be issued not later than June 30, 1976 (para. 3.16); (ix) arrangements for monitoring of the project (para. 3.18); and (x) all arrangements for procurement of equipment, materials, supplies, and awarding of contracts for civil works (para. 3.19). 5.02 The proposed project is suitable for a Third Window Loan to the Government of the Republic of Senegal in the amount of US$6.6 million on standard terms.  Table 1 SENEGAL FEEDER ROADS PROJECT Develo3pmetanf the Higa._ Network, _1964-74 (km) 1964 1968 1972 19741/ 1. Trunk road network Pavjed roads, 1,658 2,035 2,256 2,586 Engineered gravel roads 409 642 645 456 Other all-weather gravel roads 1,526 1,840 1,640 2,794 2. Feeder road network Partly improved earth roads 4,926 4,474 4,480 3,285 Other earth roads and tracks (mostly unclassified) 4,150 TOTAL 8,519 8,991 9,021 13,271 1/ Breadkdown according to the new classification approved in June 1974: Law NO 74-20 dated June 24, 1974 and Presidential Decree NO 74-718 dated July 19, 1974. Source: DPW  SENEGAL FEEDER ROADS PROJECT Annual Highway Expenditures.!/ 1970/71-1975/76 (CFAF million)