Zambia - Third Highway Project

FILE COPY Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-2194a-ZA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION AND THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND CREDIT TO THE REPUBLIC OF ZAMBIA FOR A THIRD HIGHWAY PROJECT April 27, 1978 This documut bas a resticted dtrilbuon and may be used by recipients only in the perfornice of their offiial dudle. Its contests my no otherwibe be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Calendar 1977 November 1977 Currency Unit = Kwacha (K) K US$1.00 = K 0.79 K 0.80 1/ K 1.00 = US$1.27 US$1.25 WEIGHTS ANT) MEASURES 1 meter (m) 3.28 feet (ft) 1 kilometer (km) 2 0.62 miles (mi) 1 square kilometer (km ) 0.386 square miles (sq mi) 1 metric ton (m ton) 2,204 pounds (lb) GLOSSARY OF ABBREVIATIONS CIDA - Canadian International Development Agency CPO - Contingency Planning Office MLGH - Ministry of Local Government and Housing MPW - Ministry of Public Works MSB - Mechanical Services Branch MTPC - Ministry of Transport, Power and Communications NCDP - National Commission for Development Planning NTC - National Transport Corporation SNDP - Second National Development Plan TAZARA - Tanzania-Zambia Railway Authority TNDP - Third National Development Plan UBZ - United Bus Company of Zambia ZTRS - Zambia-Tanzania Road Services GOVERNMENT OF ZAMBIA FISCAL YEAR January 1 - December 31 1/ The currency equivalents used in this report are those that were in effect in November 1977. Since that time, exchange rate fluctuations have occurred and, on March 17, 1978, the Kwacha was devalued by 10 percent in terms of the SDR. The exchange rate as of the date of this report was approximately US$1.00 = K 0.83.  FOR OFFICIAL USE ONLY ZAMBIA THIRD HIGHWAY PROJECT Loan. Credit and Project Summary Borrower: Republic of Zambia Amount: US$22.5 million equivalent (US$11.25 million IDA and US$11.25 million IBRD) Terms: The IDA credit would be on standard IDA terms; the Bank loan would be repayable in 20 years including 5 years of grace, at 7.5 percent interest per annum. Project Description: The proposed project will assist the Borrower in improving the maintenance of the rapidly deteriorating primary and secondary road network by strengthening the responsible institutions through the provision of equip- ment and technical assistance. The project will also include a pilot rural road maintenance program, a feasibility study and, if justified, detailed en- gineering of either the Mansa-Kawambwa-Nchelenge road, or such other road or roads as may be agreed. The main beneficiaries will be the direct road users and the Borrower (through cost savings on restoration of bitumen roads). Two risks could affect the project's progress. The first is the possibility of delay in recruiting the requisite technical assistance for the institutions involved in road maintenance and the second is the possibility that the performance of the organization responsible for maintenance of plant and equipment may improve more slowly than expected. Estimated Costs: US$ Million Foreign as a X Item Local Foreign Total of Total A. Road Maintenance Equipment 1.01 10.87 11.88 92 B. Workshop Equipment and Too]>, and Training Aids 0.11 1.2 1.31 92 C. Consulting Services 0.21 0.82 1.03 D. Pilot Rural Road Maintenance Program 0.50 0.50 1.00 50 E. Technical Assistance 1.04 4.16 5.20 80 Sub-total 2.8/ 17.j5 20.42 86 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  US$ Million Foreign as a % Item Local Foreign Total of Total F. Contingencies: Physical 0.29 1.75 2.04 86 Price 1.04 3.20 4.24 75 Sub-total 1.33 4.95 6.28 79 Total Project Cost 1/ 4.20 22.50 26.70 84 Financing Plan: US$ Million Local Foreign Total Percent of Total Bank/IDA - 22.50 22.50 84 Republic of Zambia 4.20 __ 4.20 16 Total 4.20 22.50 26.70 100 Estimated Disbursements: US$ Million Bank FY 1979 1980 1981 1982 Total Annual: IDA 0.4 10.9 - - Bank - 0.7 7.0 3.5 Cumulative 0.4 12.0 19.0 22.5 22.5 Rate of Return: 44 percent Appraisal Report: Report No. 1729b-ZA, dated April 17, 1978 1/ There are no taxes and duties applicable to the project.  INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND CREDIT TO THE REPUBLIC OF ZAMBIA FOR A THIRD HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed loan and credit to the Republic of Zambia for the equivalent of US$22.5 million (US$11.25 million each) to help finance a third highway project. The loan would have a term of 20 years including 5 years of grace, with interest at 7.5 percent per annum, and the credit would be on standard IDA terms. The grant element of the proposed lending is about 49 percent. PART I - THE ECONOMY 2. A Basic Economic Report on Zambia (1586b-ZA) was issued in December 1977. Its main conclusions are reflected below. The most recent economic data are summarized in Annex I. 3. With its large mineral reserves and wide area of land suitable for crops and livestock, Zambia has the potential for rapid and sustained devel- opment. Over the past decade, however, real output grew at a rate of only 2.8 percent per annum owing to relative stagnation in mining, agriculture, construction, and transport and communications; the value added by the other sectors increased at a higher rate - services at 6.7 percent annually and manufacturing at 7.7 percent annually. While 1976 GNP per capita has been estimated at US$440, per capita income in urban areas is over three times that in rural areas, providing a powerful incentive for migration. Today more than one-third of the country's population lives in towns and there is substantial urban unemployment. Goals and Performance 4. The broad economic and social goals of Zambia's last two national development plans (1966-1970 and 1972-76) may be summarized as follows: (a) raising the general level of welfare; (b) diversifying the economy to make it less dependent on copper; (c) narrowing the gap between urban and rural incomes; and (d) raising the level of education and developing a wide range of technical and managerial skills. While progress toward the goals of more rapid growth, diversification and equity has been relatively slow, substantial progress has been made in education and training. 5. Despite stagnation in copper production since independence, Zambia's heavy dependence upon mining continues; in 1976 the mining sector still accounted for more than 90 percent of exports and about 21 percent of GDP. Such a heavy reliance has had unfortunate repercussions for the country. Wide fluctuations in world copper prices have caused serious instability in govern- ment revenues and the balance of payments. Periods of high prices resulted in  - 2 - the expansion of expenditure to levels which could not be sustained without serious stress in periods of low prices. As a result of the current slump in world demand for copper, Zambia is presently passing through its most serious economic crisis since independence (paras. 10-12). Because of the precipitous decline in copper prices since mid-1974, the mining companies' profits have been severely squeezed (at times, turning to losses), their tax contribution to the Government has declined to zero and their growing reliance on borrowing from the central bank and commercial banks has led to a faster growth of the domestic money supply and hence contributed to inflationary pressures. 6. Although Zambia has plentiful land for the development of crops and livestock, the contribution of the agricultural sector to increasing welfare, diversifying the economy and bridging the rural-urban gap has been below its potential. During the ten years following independence (1964-74), output expanded at a rate of only about two percent annually, failing to keep pace with population growth and resulting in a continuing reliance on imports of food and agricultural raw materials, most of which Zambia has the capacity to produce at home (e.g., wheat, rice, vegetable oils). The failure of the sector to perform up to its potential has been due largely to government pricing policies which discouraged production and reduced farm incomes while insufficient government reosurces were devoted to the planning and implementa- tion of projects. 7. It is against this background that, in the last three years, the Government has begun to devote greater attention to the rural areas, taking steps to increase price incentives and improve project implementation capacity in the rural sector. Agricultural producer prices for a wide range of crops have been substantially increased since 1973/74 which, together with generally favorable weather conditions, contributed to more rapid output growth; agricul- tural value added grew at 4.6 percent per annum during the 1975-77 period. Maize production hit record levels (in 1976 and 1977) and large increases were registered in the output of cotton, groundnuts, wheat, rice and sunflower seeds. The Government is committed to maintaining adequate incentives for farmers and, in August 1977, announced further producer price increases for the 1977/78 growing season ranging from 8 to 25 percent for maize, sunflower, groundnuts, soybean, cotton and coffee. In addition the Government has taken a number of steps to increase production directly and augment its capacity to implement projects - e.g., investments in sugar have created the capacity to export, experiments have begun in rainfed wheat production and a number of programs have been undertaken to train manpower (particularly youth) for rural employment. The Government has expressed its intention to strengthen the Ministry of Lands and Agriculture and provincial administrations and a working group has recently submitted a draft report. President Kaunda has charged the Ministry with the responsibility of identifying and preparing projects in eight or nine key areas of high growth potential on which the development effort would be focused; in some cases these projects may involve only small- holders, and, in others, estates with joint government and private ownership, with smallholders as outgrowers. The Bank is currently providing assistance to a special unit in the Ministry for the identification and preparation of projects in these areas.  8. Manufacturing, though expanding more slowly than in the 1960s, has contributed to growth and diversification while providing employment for a growing number of migrants from the rural areas. However, much of the investment in manufacturing has been for final stage assembly or processing industries, necessitating large inputs of imported raw materials and capital goods. Such a structure of development has made the sector more vulnerable to periodic foreign exchange shortages and meant that its contribution to import substitution and employment has been less than would have been the case with an investment policy more oriented towards agro-processing and resource based industries - e.g., fruits and vegetables processing, cooking oil, sugar, copperwire and cable, textiles and clothing, wood products, and furniture. 9. Zambia has made important strides in improving the economic and social infrastructure necessary for future development. Investments in power and transportation have laid the basis for a future expansion in copper production and the rest of the modern sector. At independence, Zambia was in a particularly difficult position regarding the availability of trained manpower. Since then the expansion of the educational system has been im- pressive. From 1964 to 1974, primary school enrollments doubled and secondary and technical school enrollments more than quadrupled; since its establishment in 1966, the University of Zambia has produced 860 graduates and enrollment has increased more than sevenfold. Despite these achievements, skilled manpower remains an important constraint on the development effort. The Current Economic Crisis 10. Because of Zambia's dependence upon copper, the fall in copper prices from US$0.93/lb in 1974 to an average of US$0.60/lb during the 1975-77 period has had serious consequences for the balance of payments, government budget and domestic production. The sharp decline in copper prices (combined with stagnating copper sales volumes) has led to large balance of payments deficits beginning in 1975. Despite government controls on imports (which, when combined with an average rate of increase of 20 percent annually in import prices, has sharply reduced import volumes), a 20 percent devaluation of the Kwacha in mid-1976 and stricter controls over service payments (e.g., expatriate remittances, foreign travel), current account deficits of US$611 million, US$58 million and US$228 million were incurred during the years 1975 to 1977 respectively. Because net capital inflows during the three years were far short of the amounts necessary to finance such current account deficits, the deficits were covered by an accumulation of arrears in payments for imports and for private foreign remittances and a decline in foreign exchange holdings. By the end of 1977, arrears had accumulated to US$470 million. Between the ends of 1974 and 1977 net foreign assets fell from US$119 million to minus US$227 million dollars; gross international reserves at the end of 1977 stood at US$74 million (the equivalent of just under one month's worth of imports). 11. Through its import licensing system, the Government has attempted to allocate foreign exchange to those products most essential for the opera- tion of the economy. While the real volume of imported consumption items  fell 65 percent between 1975 and 1977, imports of capital goods and of spare parts, raw materials and intermediatie goods fell 42 and 32 percent respectively. Shortages of spare parts and essential intermediate goods have created idle capacity and unemployment in m..-y productive sectors and contributed to a decline in real output. While real GDP fell 2 percent between 1975 and 1977, larger declines were suffered in manufacturing (11 percent), construction (13.8 percent), and transport, communications and storage (25.8 percent), sectors particularly affected by shortages of essential imports. 12. To counter the effects of falling mineral tax revenues, the Govern- ment has attempted to curb expenditures while increasing non-mineral tax revenues. Firstly, in contrast to the 1965-75 growth rate of 15 percent per annum, recurrent expenditures expanded at 4.2 percent annually during the 1975-77 period (far less than the rate of inflation). Government wages have been frozen while subsidies were cut by 20 percent through substantial increases in the prices of fertilizers and important basic foods such as maize meal, wheat flour and bread; nonetheLess other recurrent expenditures have continued to expand, mainly due to greater servicing charges on foreign and domestic debt and rising prices of goods purchased by Government. Secondly, capital expenditures have been cut by about 30 percent, severely reducing the Government's development effort; in real terms government capital expenditures during 1975 to 1977 were lower than in the late 1960s. Thirdly, non-mineral tax revenues have been expanded greatly through higher personal and company taxes and increases in the rates and coverage of sales, excise and customs taxes; during 1975 to 1977, income tax revenues increased 39 percent while revenues from sales and excise taxes and tariffs grew by 28 percent. Despite these expenditures and tax measures, which partially offset the effects of the precipitous decline in mineral revenues and brought a steady decline in the size of budgetary deficits over the three year period, the deficits remained unacceptably large and had to be financed mainly by borrowing from the central bank and commercial banks. Such monetary finance added to inflationary pressures at a time when falling domestic production and declining import volumes were reducing the available supply of goods. During the 1975-77 period the rate of inflation averaged 16 percent annually. The 1978 Budget and Economic Program 13. Through a reduction in expenditures and increased taxes, the Govern- ment plans to bring about a sharp decline in the size of the 1978 budgetary deficit, thus (together with an expansion in disbursements from foreign loans) reducing its reliance on borrowing from the central bank and commercial banks by over 60 percent as compared with the 1977 level; these measures should contribute to reducing inflationary pressures. Among the major budgetary measures are: a reduction in recurrent expenditures mainly due to a 33 percent cut in subsidies resulting from substantial price increases for maize meal and fertilizers; a freeze on the level of capital investment, which, taking into account inflation, will reduce the Government's investment program to the lowest level since independence (1964); and an eight percent increase in non-mineral revenues mainly through higher duties on imports of capital goods and luxuries and higher sales aLnd excise taxes on various luxury items.  -5 - In addition to these budgetary measures, the Government has taken other steps to strengthen its anti-inflation program, increase the diversification of the economy and ensure more appropriate relative factor prices. Among the most important measures are: (a) a 10 percent devaluation of the Kwacha (on March 17, 1978) designed to increase the international competitiveness of Zambian goods and, together with cost cutting measures, increase mining company profits, thus reducing their reliance on the domestic banking system for borrowed funds; (b) increased agricultural producer prices (see para. 7) and a 30 percent increase in government budgetary investment in agriculture (at a time when the capital budgets of most other ministries are being cut); (c) an Industrial Development Act designed to attract private domestic and foreign capital through assurances about nationalization and to promote such government goals as exports, use of local raw materials, use of labor-intensive techniques and the development of rural, small-scale industries through various types of tax incentives; and (d) a freeze on wages and an increase in interest rates in order to hold down private consumption and encourage savings as well as promote more labor-intensive production techniques. External Capital Requirements 14. Zambia has relied on external capital flows to an extent similar to other African nations with comparable per capita income (e.g., Ivory Coast and Congo). The terms of these flows range from the very concessionary terms given by the People's Republic of China to suppliers' credits and Euro-dollar loans. With a 24 percent share in debt outstanding and disbursed at the end of 1977, the Bank is the country's largest creditor, just ahead of the People's Republic of China (22 percent) and private banks (23 percent). Zambia's outstanding and disbursed external public debt amounted to US$1.3 billion at the end of 1977. Owing to greater reliance on external capital flows, a growing proportion of which has been from commercial lenders, and to a trend toward harder loan terms from all sources (except bilateral), Zambia's debt service ratio has increased since the late 1960s. These factors, in combina- tion with relatively low copper prices, led to a debt service ratio of 19.4 percent in 1977. 15. Given current copper price projections and the need to build-up foreign exchange holdings and pay off arrears, the 1978-80 period will see continued balance of payments stringency. Owing to the sluggish recovery of the world economy, current Bank projections show almost no improvement in real copper prices before 1981. Given such constraints, the Government will have to maintain tight import controls with consequent continued short- ages of spare parts and materials, unutilized productive capacity and unem- * ployment. Even under such restraints, net capital flows required to cover the current account deficits, pay off arrears and eliminate the negative net foreign assets balance by the end of 1980, would exceed US$1 billion between 1978 and 1980. Over US$380 million is being provided by IMF resources, in- cluding a standby agreement (approved by the Fund Board on April 26, 1978), the Compensatory Financing Facility and the Trust Fund. Zambia's terms of trade are expected to improve in the early 1980's (current Bank projections  -6- show an increase in real copper prices, as compared with 1977, of 40 percent by 1981 and 67 percent by 1985). Its capital requirements, therefore, should fall, averaging around US$300 million per annum during the 1981-85 period. In obtaining capital over the 1978-85 period, the past trend toward harder loan terms for Zambia's external borrowing should not continue. The Government has requested the Bank to form a Consultative Group for Zambia to facilitate aid coordination. The first meeting is tentatively scheduled for late June 1978. While Zambia, because of the longer-term prospects of copper prices, would be creditworthy for bor-rowing a portion of its requirements on commercial terms, bilateral donors ares increasingly interested in lending in the southern African region on comparatively soft terms. The Bank also con- siders Zambia to be eligible for a small amount of IDA lending in view of the country's large short- and medium--term capital requirements, its recent progress towards economic diversification and improved fiscal management (paras. 13 and 14), and its per capita income level. On these assumptions, Zambia's debt service ratio would remain about 19-20 percent through 1980, slowly declining thereafter as Zambia"s terms of trade improve, reaching about 15 percent in 1985. PART II - BANK GROUP OPERATIONS 16. Since 1956, the Bank has made 23 loans in Zambia totalling about $507 million. Ten loans, totalling $323 million (64 percent), financed physical infrastructure projects of which power, transportation and com- munications accounted for three-quarters of the total amount. Four loans for education helped to expand and develop Zambia's secondary school system, teacher training and higher education. In 1974 the Bank made a loan for urban development and a $30 million program loan. The program loan was slow to disburse due to dramatically improved copper prices which reduced the Gov- ernment's need for the funds, and partly because the disbursement mechanism proved more complicated than expected. At the Government's request, $12.5 million of the loan was cancelled in June 1975. The Bank also made a loan to the Development Bank of Zambia in 1976 to help finance manufacturing and commercial farming. A second program loan extended in late 1976 provided foreign exchange for importing essential capital and intermediate goods, raw materials and spare parts for agriculture, mining and manufacturing. A loan for industrial forestry in 1977 is assisting the Government's long-term plan- tation program, and an expansion of logging and sawmilling capacity. Twelve loans are now fully disbursed; one was cancelled and the disbursed portion prepaid (para. 18). In 1977, the Bank's shares of Zambia's total debt (dis- bursed and outstanding) and total debt: service payments were 24 percent and 13 percent respectively. On the basis of present projections, these percent- ages are expected to be less than 25 percent each in the mid-1980s.  - 7 - 17. IFC made its first investment in Zambia in 1972 by providing $1.1 million (including $227,500 in equity) for the expansion of the Zambia Bata Shoe Company, Ltd. and, in 1973, invested an additional $1.2 million in Bata for a tannery. IFC in May 1975 invested about $1.0 million in Century Packages, Ltd. for a packaging materials factory and invested a further $100,000 in the company in January 1978. An IFC investment of $550,000 equivalent in the share capital of the Development Bank of Zambia was made in February 1976 in conjunction with a $15.0 million Bank loan to that institution. A summary statement of Bank loans and IFC investments along with notes on the execution of ongoing projects is contained in Annex II. 18. Agricultural and rural sector development is essential to diversify the economy and improve rural living conditions. Until recently, progress in this sector has been difficult, primarily because of the Government's weak- nesses in making and carrying out suitable policies and in formulating and implementing effective programs. Nevertheless, the Bank made five loans during 1968-77 for industrial forest plantations, livestock, commercial crops and integrated family farming. The livestock loan was cancelled in 1973 at the Government's request. The project was having serious problems due mainly to adverse pricing policies and poor management. To help identify the sector's problems and possible solutions, the Bank, at the Government's request, undertook a rural sector survey in 1975. The report has stimulated wide discussions about agriculture and rural development at all levels of Government, and is playing a key role in increasing cooperation between Zambia and the Bank Group in the development of this sector. 19. During the past year, the Bank Group has been providing substantial assistance to the Government in the preparation of programs and projects for rural development. A coffee project has just been appraised and prepara- tion of a cotton project is near completion. Bank Group assistance in this sector, however, is not limited to agricultural projects as such. The Fourth Education project, approved in late 1976, includes a major component for training farmers and government agricultural technicians. A rural water supply project, now under preparation, will provide assistance to smaller towns in predominantly rural environs. 20. In addition to the agricultural and rural sector, the Bank Group has carried out sector surveys of urbanization and water supply and sewerage. A basic economic mission which visited Zambia in June/July 1975, and subse- quent follow-up missions, focused largely on the industrial and mining sectors as well as manpower planning in its broadest aspects. The reports of these missions have provided the basis for a more intensive dialogue between the Bank and Zambia. 21. While the Bank Group's program will continue to emphasize agricul- tural and rural development, it will also continue to support the development of industry, and of physical and social infrastructure. Further assistance is being considered for the Development Bank of Zambia to help it continue its efforts in industry and commercial agriculture, and for the next stage of the country's hydropower development. In all aspects of the Bank Group's program, institution building will continue to occupy a central position.  - 8 - PART III - TRANSPORT SECTOR 22. Zambia's transport system comprises approximately 35,000 km of roads (including about 19,000 km of primary and secondary roads), 2,000 km of railways, 150 airstrips, and a 1,700 km oil pipeline from Dar es Salaam in Tanzania to Ndola in the Copperbelt. Given its land-locked position, Zambia has attached high priority to the development of outlets to the sea. The internal transport system, including the main rail system, has developed mainly in accordance with settlement patterns along a narrow strip between Livingstone, in the southwest, Lusaka in the southeast, and northward through the Copperbelt. This strip contains many of the important mining and indus- trial concerns, and is one of the best agricultural areas in the country. In recent years, however, greater emphasis has been given to the development of roads to provincial centers outside the line-of-rail. 23. Zambia has two main railway systems. The Zambia Railway extends 827 km from the Victoria Falls Bridge on the Rhodesian border to the Copper- belt area in the north where it links up via Zaire to the Benguela Railway, and thence to the port of Lobito in Angola. Various spurs totalling about 250 km have also been built to serve mines, refineries and other industries in the Copperbelt area. Total freight traffic declined about 44 percent between 1972 and 1975 to about 1.0 billion ton-kilometers as a result of, inter alia, the closure of the border with Rhodesia in 1973 and the suspension of services on the Benguela Railway in 1975. This has been exacerbated by a shortage of locomotives, rolling stock and qualified staff, which Zambia Railways is attempting to rectify. The jointly-owned Tanzania-Zambia Railway (TAZARA) connects with the Zambia Railway at Kapiri Mposhi in the Copperbelt and extends for about 1,850 km (880 of which are inside Zambia) to the port of Dar es Salaam. Total Zambian freight over this line was about 1.2 billion ton - kilometers in 1976. Freight capacity is now estimated at two million tons per annum and may eventually be increased to five million tons per annum. Actual freight carried, however, has been much less because of long delays in loading operations in Zambia. 24. Air transport services have been developed to help integrate widely scattered settlements into the life of the country. Of the 150 airstrips in Zambia, 52 are Government-owned. In 1967, Zambia Airways Corporation was established as a parastatal corporation to provide domestic and international services. In 1976, Zambia Airways carried about 167,000 domestic passengers, 77,000 international passengers, and 21,000 tons of international air freight. Scheduled air services link Zambia with Europe and a number of African coun- tries. 25. The pipeline was completed in 1968 and is jointly owned and operated by Tanzania and Zambia. It carries almost all of Zambia's crude oil imports, about 850,000 tons in 1976, as well as about 50,000 tons destined for Zaire. 26. The Government seeks to maintain control of external trade through a Contingency Planning Office (CPO), which was set up under the President's  - 9 - Office following the border closure with Rhodesia in 1973 which necessitated a major rerouting of Zambia's trade. International haulage is provided by the two railways and two companies, the parastatal National Transport Corporation (NTC), and the multinational Zambia-Tanzania Road Services (ZTRS), an associate company of NTC. ZTRS operates on the Dar-es-Salaam route, and Contract Haulage, a subsidary of NTC, operates mainly on the Beira (Mozambique) route via Malawi. 27. Of the total number of vehicles engaged in road haulage (about 2,500 to 3,000), approximately 40 percent are operated by NTC and ZTRS and the rest by small independent private operators owning an average of 5 to 10 trucks each. Haulage rates vary for different routes and commodities, but the overall level is generally set by the parastatal transport companies which must also obtain government approval for rate increases. Internal road haulage is usually undertaken by private operators. The United Bus Company of Zambia (UBZ), a subsidiary of NTC, accounts for about half of total road passenger transport capacity. Private operators provide the remaining passenger transport. 28. In 1975, the vehicle fleet consisted of about 160,000 vehicles, of which 59 percent were automobiles, 18 percent light commercial vehicles, 11 percent trucks, and 12 percent other types of vehicles. Overall, the fleet has been growing at nine percent per annum since 1970, although annual registration of new vehicles has generally been decreasing, probably due to the down-turn in the economic situation and import license restrictions im- posed during the late 1960s and 70s. All vehicles must be registered and licensed. The road haulage licensing system, however, needs to be reviewed since present procedures are inefficient and somewhat arbitrary, and do not allow for flexibility of operations. The proposed project includes assistance for such a review (para. 39(d)). The Roads and Road Traffic Act governs vehicle weights and dimensions, and provides adequate legislation to protect the road network. Axle loads, however, are often grossly exceeded, and overweight vehicles are common on Zambia's roads. The Borrower, therefore, will take actions required to ensure that vehicle axle-loads, dimensions and weights do not exceed legal limits (Section 4.05, draft Development Credit Agreement). 29. General government revenues obtained through taxes and duties on vehicles, fuel, lubricants and spare parts, and through license and regis- tration fees, totalled about US$46 million equivalent in 1975. Road users contributed a substantial portion of these revenues which, in 1975, were sufficient to cover road maintenance expenditures and contribute to new road construction. Although road maintenance expenditures will increase under the proposed project, revenues from road users should still be suffi- cient to cover the increased costs. 30. The Ministry of Public Works (MPW), through its Roads Department, is responsible for the construction and maintenance of the primary and sec- ondary road network, comprising about 19,000 km of roads (including about 4,600 km of paved roads and 7,600 km of all-weather gravel roads). The organization of the Roads Department is basically satisfactory. It has three  - 10 - divisions at its headquarters in Lusaka, Planning and Design, Works, and Administration, and nine provincial divisions, each headed by a Provincial Road Engineer. The Planning Division is responsible for highway planning, and assists the Ministry of Transport, Power, and Communications (MTPC), which is responsible for overall transport planning. For road maintenance purposes, the road network is divided into 122 zones, each zone having an average of 150 km of roads. Four to five zones form a district (29 in all), with three or four districts in each of the nine provinces. Routine maintenance is carried out by zonal crews headed by a Road Ranger/Foreman, and each district is supervised by a Road Superintendent. In turn, the Superintendents are responsible to a Road Inspector stationed at provincial headquarters. Periodic maintenance, such as regravelling/resealing and heavy maintenance work, is carried out through special crews (18 in all) under the Road Inspectors. The activities of the Roads Department, however, have been limited by a shortage of qualified staff, both at headquarters and in the provinces. At present, only 17 of the 29 established posts for Engineers, and 11 of 17 posts for Road Inspectors, are filled. In addition, a number of subordinate posts (materials officers, engineering assistants) are vacant. The Government is making efforts to strengthen the Roads Department, and this will also be an important element of the proposed project (para. 43). 31. The 34 Rural Councils, under the Ministry of Local Government and Housing (MLGH), are responsible for development and maintenance of the estimated 16,000 km of rural district roads, comprising the tertiary road system. These are generally low standard earth roads for which no reliable inventory exists. The Councils presently have few or no facilities, nor skilled manpower, for road maintenance. The condition of these roads, which is poor, continues to deteriorate. In view of the present constraints of the Rural Councils, an important focus of the proposed project will be to assist the Government in determining how maintenance, planning, and operations of district roads can be improved (para. 39(b)). 32. The Mechanical Services Branch (MSB), under the Defense Division of the Office of the President, is responsible for the procurement, mainte- nance and repairs of all civilian government vehicles and plant; the majority of its staff are civilian. MSB has a central workshop in Lusaka and nine provincial, and 54 district, workshops. MSB's inadequate staff and workshop facilities and weak management, together with unsatisfactory maintenance and repair systems, have resulted in low vehicle and equipment availability rates (as low as 25-30 percent for the Roads Department) and consequent inefficient road maintenance operations. One-third of the 24 senior level management positions are vacant. A substantial number of posts in the lower grades (mechanical superintendents, engineering assistants and skilled mechanics) are also vacant, particularly those for mechanics. This situation is exacerbated by functional difficulties caused by MSB's position outside the normal civil service lines of communication. In light of these difficulties, the proposed project will include assistance for reorganizing MSB and strengthening it through the provision of technical assistasnce and training (para. 39(d) and 44). 33. The Ministry of Local Government and Housing, the Roads Department and MSB all have training facilities. The Ministry of Local Government and  - 11 - Housing operates a training institute, primarily for secretarial and adminis- trative personnel, which has facilities for about 100 students. The Roads Department has a well organized and equipped school in Lusaka for lower-level staff (plant operators, road gangers/foremen, and road superintendents) that can accommodate about 48 students at a time. The school's output has been sufficient to meet the Department's needs for this category of s.aff, and career progress of staff trained at the school has been adequate. Neverthe- less, there is a need for additional full-time instructors in order to assist in improving present curricula and to teach additional methods of road maintenance including those involving labor-intensive techniques. MSB also has the physical facilities for training but lacks qualified instructors and a regularly organized training program, particularly for mechanics. The proposed project, therefore, will include technical assistance for both the Roads Department and MSB to address these needs (para. 39(d) and 43). 34. The Second National Development Plan (SNDP) (1972-76, later extended to 1977), allocated US$389 million equivalent to the transport sector, or 28 percent of total public investment. These funds were used for (i) construc- tion of TAZARA (40 percent); Zambia Railways, the oil pipeline, and air and water transport (33 percent); and road construction (27 percent). Of the US$104 million equivalent allocated for roads, an estimated US$100 million has been disbursed and a further US$19 million equivalent has been allocated for ongoing projects, resulting in a US$15 million increase in the road con- struction program. This level of investment appears to have been reasonable in view of the already extensive length of Zambia's road network. An inte- grated long-term sectoral plan, which will form part of the Third National Development Plan (1979-83), is presently being drawn up by a Transport Coor- dinating Committee, formed by the National Commission for Development Plan- ning (NCDP). The Committee consists of representatives of the Ministry of Power, Transport and Communications, the Contingency Planning Office, the national transport companies and other concerned ministries. It is important that investment plans for external transport take into account the options open to Zambia and the many alternatives which may arise in the future once events permit the Benguela Railway and the border with Rhodesia to be reopened. 35. The Bank Group has helped finance two road projects in Zambia. First, US$17.5 million was made available in 1966 (Loan 469-ZA) for the engineering, reconstruction and paving of sections totalling about 600 km of the Great East Road (Lusaka to Malawi) and the Great North Road (Lusaka to Tanzania). The project was completed on time in 1969, well within cost estimates. While the audit report did not recalculate the economic benefits because of a lack of data on road user costs, the actual rate of return was probably higher than the 11 to 14 percent estimated at appraisal because of savings in construction costs and higher than forecast increases in traffic. The second project was financed by a US$10.7 million loan made in 1968 (Loan 563-ZA) and consisted of the engineering and reconstruction to two-lane bituminous paved standards of a 379 km section of the Great North Road, and the provision of three weighbridges for this road. This project was also completed on time with a minor cost overrun of US$300,000 over the appraisal estimate of US$17.5 million. A rate of return was not calculated in the audit  - 12 - report but since traffic levels were higher than expected, it was estimated in the report that the 12 to 15 percent rate of return forecast at appraisal was realized. While both projects achieved their main objectives of provid- ing Zambia with improved alternative routes to the sea, the audit report noted that the Government's road maintenance program was not as successful as had been expected, and consequently the condition of the road network had deteriorated. PART IV - THE PROJECT 36. A report entitled "Zambia - Appraisal of a Third Highway Project," No. 1729b-ZA, dated April 17, 1978, is being distributed separately. 37. The proposed project arose out of the Bank and Association's con- tinuing dialogue with the Government on the needs of the transport sector. In 1976, agreement was reached on the urgent need to improve road maintenance operations in order to arrest the rapid deterioration of the road network. The project was prepared by the Roads Department and the Mechanical Services Branch, with the assistance of Bank Group staff. A preparation mission visited Zambia in September 1976 and the project was appraised in the field in March 1977, with a follow-up mission in June 1977. Negotiations were held in Washington from January 9 to 13, 1978. The Delegation was led by Mr. N. Kalala, Permanent Secretary, Ministry of Public Works, and included Mr. T. Ngoma, Director of Roads, and Captain Diddee, Assistant Director, Mechanical Services Branch. Objectives and Description of the Project 38. The objective of the proposed project is to assist the Borrower in improving the maintenance of the rapidly deteriorating road network by strengthening the responsible institutions through the provision of equipment and technical assistance. 39. To meet this objective, the proposed project will consist of the following: (a) A program to improve maintenance of the primary and secondary road networks. The program will help improve routine maintenance of the entire 19,000 km of roads administered by the Roads Department (para. 30). Periodic maintenance will also be improved, but only for certain priority routes in view of the large backlog of work, and the limited availability of funds and manpower. These routes will include about 2,000 km of bituminous paved roads and 750 km of gravel roads that are in urgent need of resealing or regravel- ling. For the program, the project will provide for: (i) the purchase of new road maintenance equipment; (ii) the rehabilitation, where economical, of existing equipment; (iii) spare parts for new and existing equipment; (iv) nine mobile workshops for the Roads Department (one for each province) for equipment servicing and minor repairs; and (v) supplementary workshop equip- ment, tools and training aids for the Mechanical Services Branch (para. 32).  - 13 - (b) A pilot Rural Road Maintenance Program to determine how the mainten- ance planning and operations of the Rural Councils can be improved. The program will cover two Rural Councils, to be selected by the Ministry of Local Government and Housing, and will require the provision of a few small workshops/ offices, key staff housing, road camps, and basic equipment and tools. US$1.0 million, excluding contingencies, has been allocated for this purpose in the proposed project. (c) A feasibility study and, if justified (para. 45), detailed engineer- ing of the Mansa-Kawambwa-Nchelenge road (240 km), or such other road or roads of equally high priority as may be agreed between the Borrower, the Bank, and the Association. Proposals for the Third National Development Plan, which are being reviewed, include upgrading to bituminous standards the existing Mansa-Nchelenge road which is gravelled and poorly engineered. The road is important because it connects Mansa, the capital of Luapula Province, and the rest of the country with important fishing and agricultural areas. (d) Technical assistance to the Roads Department, Mechanical Services Branch, and Ministry of Local Government and Housing for operations and training. For the Roads Department, the project will provide (i) three road maintenance engineers to assist in planning, coordinating and implementing the road maintenance program, training of counterparts, and improving the traffic count system; (ii) one transport economist to assist with highway planning, project evaluation, maintenance programming, and reviewing the country's road haulage licensing system; and (iii) two training experts to help allevi- ate the shortage of instructors in the Department's training school. For the Mechanical Services Branch, the project will provide twenty mechanical superintendents (two for headquarters and two for each of the nine provincial workshops) and two training experts who will focus on the training needs of mechanics. The Ministry of Local Government and Housing will be provided with one expert to assist the preparation and implementation of the Pilot Rural Road Maintenance Program. The Borrower will employ these experts by September 30, 1978 (Section 3.03(b), draft Development Credit Agreement) and, in view of the current housing shortage, will take all reasonable action required to make available adequate living accommodations for them (Section 3.03(c), draft Development Credit Agreement). (e) Consultant services to assist the Borrower: (i) in preparing speci- fications and bidding documents for road maintenance and workshop equipment and in bid evaluation (about 6 man-months at US$6,000 per man-month); (ii) in drawing up a plan for the reorganization of MSB (about 20 man-months at US$6,000 per man-month); and (iii) in carrying out the study and engineering referred to in (c) above (about 105 man-months at US$6,000 per man-month, plus needed vehicles and equipment). Cost Estimates and Financing 40. The total cost of the project is estimated at US$26.7 million equivalent. There are no taxes and duties applicable to the project. The foreign exchange component is estimated at US$22.5 million, or 84 percent of  - 14 - the total project cost. A detailed breakdown of costs is given in the Loan, Credit and Project Summary. Costs have been estimated on the basis of prices and exchange rates at November 1977. The value of the US dollar in terms of the Zambian Kwacha has fluctuated since that time (partly as a result of the March 17, 1978 devaluation of the Kwacha by 10 percent in terms of the SDR) and it is currently valued at about 4 percent less than in November. Thus there is no material effect on the cost estimates, the financing plan or the rate of return. The cost estimate for the road maintenance and workshop equipment is based on estimates of MSB and quotations by Zambian suppliers. Estimates for consultant services and technical assistance are based on similar services provided in the recent past. 41. The proposed loan and credit of US$22.5 million would finance the full foreign exchange component and the Borrower would finance the balance of US$4.2 million equivalent. In addition, the Borrower would provide recurrent funds for road maintenance, which are primarily for salaries and wages of local staff, and materials such as bitumen and fuel. These are estimated at about US$12 million, US$19.5 million, US$21 million and US$18.5 million equivalent for the fiscal years 1979 through 1982, respectively (Section 4.04, draft Development Credit Agreement). Similarly, the Borrower would provide recurrent funds for MSB, which are estimated at US$1.7 million, US$2.7 million, US$3.8 million and US.$4.0 million equivalent for the fiscal years 1979 through 1982, respectively (Section 4.04, draft Development Credit Agreement). The Borrower and the Bank Group will review annually the adequacy of the funds allocated by the Borrower to the Roads Department and MSB (Section 4.04, draft Development Credit Agreement). Project Execution 42. The Roads Department will be responsible for executing the road maintenance program, improving its training program, and carrying out a feasi- bility study and detailed engineering of the Mansa-Kawambwa-Nchelenge road, or such other road or roads as may be agreed (para 39 (c)). The Ministry of Local Government and Housing, through the Rural Councils, will be responsible for executing the Pilot Rural Road Maintenance Program. The Mechanical Services Branch will be responsible for the procurement and maintenance of all vehicles, plant and equipment, and for improving its training program. Suitably qualified consultants will be employed to assist the carrying out of certain tasks (para 39(e)). 43. In order to help strengthen these institutions, substantial tech- nical assistance is included in the project (para. 39(d)). The Borrower also will employ an additional three Senior Executive Engineers and one Chief Materials Officer in the Roads Department to fill existing vacancies by September 30, 1978 (Section 3.02(b), d[raft Development Credit Agreement). Further, in order to help ensure the asvailability of qualified Zambian staff in the future, the Borrower will prepare, by September 30, 1978, a program satisfactory to the Bank and the Association for the career development of local staff in the Roads Department and subsequently implement the program (Section 4.07, draft Development Credit Agreement). In addition, the Borrower  - 15 - will prepare training programs that are satisfactory to the Bank and the Association (Section 3.01(c), draft Development Credit Agreement), and will train the road maintenance staff of the Rural Councils in the Roads Depart- ment's training school (Section 4.06, draft Development Credit Agreement). 44. The Mechanical Services Branch must also be reorganize.' to make it more responsive to the needs of the road maintenance program and to im- prove coordination between MSB and other government departments (para. 32). The Borrower, therefore, will (i) prepare, by December 31, 1978, a plan of action (including specific targets), satisfactory to the Bank and the Associa- tion, to improve MSB's efficiency; such plan to include, inter alia, limiting MSB's services to non-military vehicles, equipment and plant; and (ii) carry out such plan within nine months from the date of its preparation (Section 3.01(b), draft Development Credit Agreement). Employment of consultants for preparing the plan of action will be a condition of effectiveness (Section 5.01(b), draft Development Credit Agreement). 45. Implementation of the project is scheduled to begin in mid-1978 and be completed by late 1982. The preparation of specifications, bidding documents, and plans to reorganize MSB should begin in May 1978. The con- tract for road maintenance and workshop equipment, spare parts, tools and training aids is expected to be awarded by February 1979 with delivery com- mencing in July 1979. Correspondingly, the road maintenance program should also commence at this time. The feasibility study of either the Mansa- Kawambwa-Nchelenge road (or another road of equally high priority) is ex- pected to begin in January 1979, and the detailed engineering, if found justified by the Bank Group and the Borrower, in October 1979, with com- pletion in September 1980. The Pilot Rural Road Maintenance Program is expected to begin in January 1979 and be completed by December 1980. Procurement and Disbursement 46. Contracts for road maintenance and workshop equipment, including a supply of spare parts, estimated to cost about US$11.6 million equivalent (excluding contingencies) will be awarded after international competitive bidding in accordance with Bank Group guidelines with separate contracts for each type or group of similar types of equipment. The Borrower, however, will not enter into these contracts until the requisite technical experts for the Roads Department and MSB have been employed (Schedule 3(c), draft Development Credit Agreement). Suppliers of equipment not already repre- sented in Zambia will be required to provide training for mechanics and plant operators. In addition, they will be required to maintain an adequate organ- ization and a reasonable inventory of spare parts in Zambia. The spare parts required for rehabilitating and maintaining existing equipment, and training aids, estimated to cost about US$1.5 million equivalent (excluding contin- gencies), will involve a wide range of items of various makes and are unlikely to attract international competition. These will therefore be procured, after calling competitive quotations from established suppliers within the country and abroad, in accordance with government procurement procedures. These  - 1 6 - local procedures have been reviewed by the Bank Group and found to be satis- factory. Similarly, equipment, materials and other items, estimated to cost US$1.0 million equivalent (exclmllng contingenci.es), required for the Pilot Rural Road Maintenance Program are unlikely to attract international competi- tion and will also be procured in accordance with government procedures. 47. The Bank will disburse agairLst: (i) 100 percent of the foreign expenditures for road maintenance and workshop equipment, tools, training aids and spare parts that are directly, imported, and 70 percent of total expenditures for those that are imported and procured locally; (ii) 50 per- cent of total expenditures for the Pilot Rural Road Maintenance Program; and (iii) 80 percent of total expenditures for consultant services and tech- nical assistance. Retroactive financing of up to US$180,000 is proposed for expenditures incurred after January 1, 1978 on consultant services for re- organizing MSB and preparing bidding documents and evaluating bids (Schedule 1, draft Development Credit Agreement). Benefits and Risks 48. The road network in Zambia is rapidly deteriorating because of inadequate maintenance. Investment already made on the roads is being lost, particularly on bitumen roads which, if maintenance is not improved, will need costly remedial work in a few years. Many of the bitumen roads play vital roles as international transport routes, and service important mining and industrial areas. Many gravel roads are deteriorating into earth roads. If steps are not taken quickly to arrest this deterioration, there will be serious economic and social consequences, particularly for the 65 percent of Zambia's population who live in rural areas and depend on roads to market their produce, obtain agricultural inputs, and reach health, education and other government services. Traffic levels on the gravel roads selected for periodic maintenance are from 200 to 400 vehicles per day, and are projected to increase at seven percent annually over the next decade. 49. Benefits from both the routine and periodic maintenance programs have been calculated. The benefits from the periodic maintenance include savings arising from vehicle operating costs and from resealing the bitumen roads which, if not resealed during the project period, will need costlier treatment, such as bituminous overlays, much earlier than if resealing takes place. The benefits from the routine imaintenance program arise from vehicle operating cost savings only. The economic return for each program separately is estimated at 44 percent. The first year return is about 26 percent when a 12 percent discount rate is used. The main beneficiaries will be the direct road users, and the Borrower through ciDst savings on restoration of bitumen roads. 50. While the project is economically sound, two risks could affect its progress. The first is the possibility of delay in filling the essen- tial posts in the Roads Department and MSB which, in turn, would cause a delay in procurement and the implementation of the maintenance programs. Consequently, further deterioration of the road network could occur. The second is the possibility that MSB's performance may improve more slowly  - 17 - than expected, thereby hindering the road maintenance programs. The rate of return, however, would still be about 12 percent for both the routine and periodic maintenance programs if only 45 percent of the planned periodic maintenance and 40 percent of the routine maintenance is carried out during the project period. PART V - LEGAL INSTRUMENTS AND AUTHORITY 51. The draft Loan Agreement and draft Development Credit Agreement between the Republic of Zambia, and the Bank and the Association, respec- tively; the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement of the Bank and in Article V, Section 1(d) of the Articles of Agreement of the Association; are being distri- buted to the Executive Directors separately. 52. Special conditions of the project are listed in Section III of Annex III. An additional condition of effectiveness will be the employment of consultants to prepare a plan of action to improve the efficiency of the Mechanical Services Branch (Section 5.01(b), draft Development Credit Agreement). 53. I am satisfied that the proposed loan and credit would comply with the Articles of Agreement of the Bank and of the Association. PART VI - RECOMMENDATION 54. I recommend that the Executive Directors approve the proposed loan and credit. Robert S. McNamara President Attachments April 27, 1978 Washington, D.C.  -18 - ANNX I Page 1 of 4 pages TABLE 3A ZAMBIA - SOCIAL INDICATORS DATA SHEET LAND AREA (THOU KM2) ------------------------------------------------ ---------------- ZAMBIA REFERENCE COUNTRIES (1970) TOTAL 752.6 MOST RECENT AGRIC. 350.0 1960 1970 ESTIMATE IVORY COAST CHILE YUGOSLAVIA** GNP PER CAPITA (US$) 180.0* 300.0* 440.0*/a 350.0* 820.0* 830.0* POPULATION AND VITAL STATISTICS POPULATION (MID-YR. MILLION) 3.2 4.3 5.1/a 5.4 9.4 20.4 POPULATION DENSITY PER SQUARE KM. 4.0 6.0 7.0 /a 16.0 12.0 80.0 PER SQ. KM. AGRICULTURAL LAND 9.0 12.0 15.0/a. 32.0 58.0 139.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 49.5 49.7 51.5 46.1 32.9 21.0 CRUDE DEATH RATE (/THOU.AV) 23.1 20.9 20.3 23.3 11.0 9.1 INFANT MORTALITY RATE (/THOU) .. .. .. . 79.0 55.5 LIFE EXPECTANCY AT BIRTH (YRS) 38.5 43.5 44.5 41.0 60.6 67.7 GROSS REPRODUCTION RATE .. 3.3 3.3 3.1 2.2 1.3 POPULATION GROWTH RATE (%) TOTAL 2.8 2.9 2.9 3.4/a 2.4 1.0 URBAN 13.6/a 6.3 S.77E 3.5 4.6 URBAN POPULATION (X OF TOTAL) 20.0 30.0 36.3 2B.0 76.0 38.7 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 45.0 /a 45.8 46.5 42.5 39.0 28.3 15 TO 64 YEARS 51 .0rbC 51.9 60.9 54.8 56.3 64.3 65 YEARS AND OVER 4.0 tfaD 2.3 2.6 2.7 4.7 7.4 AGE DEPENDENCY RATIO 1.0 0.9 1.0 0.8 0.8 0.6 ECONOMIC DEPENDENCY RATIO .. .. 1.8/b 0.9/c 1.6 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) .. .. .. .. 403.5 USERS (x OF MARRIED WOMEN) .. .. .. .. EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) .. .. 1310.0 2600.0 2900.0 LABOR FORCE IN AGRICULTURE (%) .. .- 52.0 82.0 21.0 UNEMPLOYED (% OF LABOR FORCE) .. 10.0/b .- *- 4.1/a INCOME DISTRIBUTION X OF PRIVATE INCOME REC D BY- HIGHEST 5% OF HOUSEHOLDS 33.7 .. 23.0 .. 31.0 15.1 HIGHEST 20% OF HOUSEHOLDS 58.2 .. 63.0 ,. 55.8 41.4 LOWEST 20% OF HOUSEHOLDS 5.4 .. 3.8 .. 4.8 6.6 LOWEST 401 OF HOUSEHOLDS 13.0 ,, 10.1 .. 13.0 16.4 DISTRIBUTION OF LAND OWNERSHIP X OWNED BY TOP 10% OF OWNERS .- .. .. .. ., 151a X OWNED BY SMALLEST 10% OWNERS .. .. .. .. .. 84.9 7 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 12300.0/del3500.0 9110. /c 15320.0 2210.0 / 870.0 b POPULATION PER NURSING PERSON 9950.0 7U 2920.0/c 2430.07C 2830.0/d 5830.:0' 280.07C POPULATION PER HOSPITAL BED 350.07a-- 310.0 .. 1150.0 270.0 170.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 87.0 E8.0 112.0 /d 108.0 01o.0 124.0 PROTEIN (GRAMS PER DAY) 63.0 64.0 68.o 60.0 71.0 92.0 -OF WHICH ANIMAL AND PULSE .. 25.0 /d .. 1.O/e 32.0 29.0 DEATH RATE (/THOU) AGES 1-4 .. .. .. .. 3.9 2.6 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 48.0 /b t0.o 88.0 76.0 103.0 94.0 SECONDARY SCHOOL 1.0 13.0 15.0 11.0 36.0 45.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 12.0 12.0 12.0 13.0 12.0 12.0 VOCATIONAL ENROLLMEN't (X OF SECONDARY) 28.0 3.0 9.6 7.0 33.0 72.0 ADULT LITERACY RATE (X) 41.0 *- 43.0 20.0 90.0 85.0 HOUSING PERSONS PER ROOM (URBAN) ,, 2.6/e .- 1.3/C OCCUPIED DWELLINGS WITHOUT PIPED WATER (X) .. 88.0 /f .. .. 40.0/c,d ACCESS TO ELECTRICITY (X OF ALL DWELLINGS) 28.0 a .. .. ... RURAL DWELLINGS CONNECTED TO ELECTRICITY (X) .. .. .. .. .. CONSUMPTION RADIO RECEIVERS (PER THOU POP) 9.o /h 18.0 23.0 .. 143.0 165.0 PASSENGER CARS (PER THOU POP) 11.0 14.0 18.o 10.0 18.0 35.0 ELECTRICITY (KWH/YR PER CAP) 681.0 957.0 1056.0 95.0 806.0 1286.0 NEWSPRINT (KG/YR PER CAP) 0.9 /h 0.5 0.6 0.2 5.0 4.3 SEE NOTES AND DEFINITIONS ON REVERSE  - 19 - AE I Page 2 of 4 pagee NOTES Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970, and for Most Recent Estimate between 1973 aed 1975. NCNP per capita data are based on the World Bank Atlas methodology (1974-76 basis). * Yugoslavia has been seIected as an objective country because it has a higher degree of development with estenaive state participation in industry and comesrcs; also the dominant sector of omployment is developing frs * relatively low level of productivity. ZAMBLA 1960 I 1963; /b African populetion; /c 15-59 yaara and 60 and ove, respectively; /d 1962; /a Registered only; /f Personnel in government services, including nidwives /L Urban only; /h Dats for Rhodesel and Malawi included. 1970 /a 1965-69; /b Including assistant nurses; /c Persons seeking wrk: /d 1964-66; /e Total, urban and rural; /f Inaide only. MOST RECENT ESTIMATE; La 1976; /b Ratio of population under 15 and 65 and over to total labor force; /c -971; /d 1969-71 average. IVORY COAST 1970 /a Due to ioigration population growth rate is higher than the rate of natural increase; /b 1965-70, /c Ratio of population under 15 and 65 and over to total labor force; /d Govermnnt only, including midwives; I/ 1964-66. CHILE 1970 /a Gren Santiago; /b Personnel in governmnt services only; /c Data refer to households; /d Inside only. YUGOSLAVIA 1970 /a Agriculture land held by social sector "Ronxbinste" and agriculture land held by private mell-holders "10 hectarse mamimun" respectively; /b Including dentists; /c Including midwives, assistant midwives and assistant nurses. R9, October 31, 1977 UI 'ITONS OP SOCIA INDICATOMS Leed Area (than lon2) Population per nursing seronm - Population divided by nomber of practicing Totl - Total surface area ceaprisinS laud era nd inland waters. m and faale graduate nurss, "tratned" or "cartified" nureas, and Aeric. - Most recant estimate of agricultural ara -ea temporarily or p r_- elciliary personal with trainlag or emparteece nantly for crops, pastures, mrket & kitchen gardenu or to lh fell. Population PEr hbp ital bad - Population divided by nuber of hospital beds eilabl in public and priwvt general and *pecialised hoepital and GND D r cepitc (US$ - GN par capit. estinates at current merket prices, rhabilitation canterf; *ecludes usig hos and .tablib-net for celculated by smm conversion mthod Ca World Bank Atlas (1973-75 biae); custodial and preventive care. 1960; 1970 ed 1975 data. Per capita supply of calories (7 of requirmenta) - Computed from enrgy squival.nt of net food supplies avilble In country per cepita par diy; Popubtion and vital statistic, aveilable supplies comprise deastic prodution, Imports les esports, and Popwlation (oid-year til1ion) As of July first, if not wailabla, areage chages in stock; net supplies seclude animal feed, seeds, quantities used of two end-ar estimtes; 1460, 1970 and 1975 data, in food processing end losaes in distribution; requirmets "ere estimated by FAo ba..d an phyiologicl nueda for nornal activity ad health conaid- Population da. ity par square ko - Mid-year population per square kilometer acing enron_ntal tperture, body wights, *ge and .s. distribution of (100 hebtorse) of total area, population, and allowing 107 for wate at houehold lsvel. ptu.letion density - par sqare k. of seric land - Coumpted as abov for Par capita eas of protein (ar_ pr dcv - Protein content of per capita agricultural land only. net supply of fsod per da; nt aupply of food to defind as abov; requir- ments for a11 countries established by USDS Economic Rerch Servics Vital statistics ptovide for a niniss allotaxce of 60 gras of truel protein per day, and Crude birth rats per thousand. averase - Anual ltv birtbh per tbouan d of 20 gras of animal and pulse protein, of which 10 gre should be animal mid-year Population; ten-year arithetic averages endiDg in 1960 and 1970, protein; thae atedard amr lowrt them thoas of 75 gr_s of total protein and five-year verage ending in 1975 for met recent etimate, and 23 gras of amimel protein *e an average for the wnrld, proposed by FAO Crude deth rate par thousand, averae - Aessl d-tha per thousand of mid-yar in the Third World Food urvey. population; ten-year arithbatic *veregma ending in 1960 and 1970 and five- Per capita protein s*wDI fr animal end uls - Protein supply of food year average ding in 1975 for most recent etimat. derived from animl nd pulses in gr per day. Infant mLtrtality rate (/thou) - Annual deaths of ifaunts undr one Year of age Death rete (Ithou) gs" 1-4 - Auesal deaths per thousand iD *Sg rm-p 1-4 Per thouad live birtb year, to children in this sp group: suggested as an indicator of Life aspect-nc at birth (yrsl - Averege mumber of years of life raining at lnutrition. birth; suaully five-year averages ending in 1960, 1970 and 1975 for develop- Lsg countries . Education Grote reproduction rats - Averog number of live d.ught.rr a women will bear Adustd PrrolLIt ratio priry school - Enrollment of a11 Sg. as par- in her norm-l reproductive period if she apriences present age-speciftc cntage of prioury hao1-ag popula:tion, includs children egad 6-11 years fertility rates; usuly fie-year averages adins in 1960, 1970 and 1975 but adjusted for diffrnt langth of primary education; for countries with for devloping countri. unive"al education, enrollment my excwd 1007 since son pupils are below Population xrowth rate (70 - total - Compo,sd annual growth rate of *idyear or aboe the offiial school age. population for 1950-60, 1960-70 and 1970-75. Adlwted enrollesnt artio - secondar chool - Computed as sbove; econdcry Population growth rate (%) - urban - Computed like growth rate of total education require a t lst four years of approved primry io truction; population; different definitions of urban smes may affect coWrability of proyide general, vocatiomal or teacber training inetructions for pupils data wong comntries. of 12 to 17 years of age; cor pondence courses are generally eecludsd. Urban poplation (% of total) - Rtio of urban to tatal population; difforent Years of .choo pvd first andcnd levels) - Total y.ors of definitions nf urban are-a say affect comparbility of date swong countrie. echooling; at secondary lel, vocetionel esatruction my bh partially or Ama structure feerrent) - Children (0-14 yers), wockiseg-a (15-64 yrs), Vocational enrolent t% of aecndere - Vocational institutions include and retired (65 years nd o-er) as percentages of id-yar population. tchnicel, indstril or other progra_a which operate independeotly or as Age dependencY ratio - Ratio of population under 15 nd 65 and over to those deparnmnts of secondary inatitutionn. of ag.. 15 through 64b Adult literacy rate (15 - Literat dults (able to read and -ite) as pe- Economic d.epndeocy ratio - Ratio of population under 15 and 65 nd over to centage of torti adult population afad 15 pars and over. the labor force in ga group of 15-64 years. Fmilv planninx - acc-Ptorm (calative thoul - Cumulative number of acceptors Hou ing of birth-control devicee under .u-pi... of national faily planning progra Persons per room (urban) - Average ntber of persona per room in occupied since t ..ption. -cnventional dweilings in urban aresa; dwellings exclude non-permonent Fanily Planning - users Cl of morried women; - Pecrantagos of married .om*s of strcturco and unoccupied parts.. child-bearing g (15-44 years) vho u-s birth-control devices to al -rried n..Pied durlln without p_ead v ater in - Oro pid on-ention1 dwellings women in som age grap. In urban end rasra....s without iaid. or outside piped water facilities as percentage of all occupied dwellings. Employment Accesse to electriiyC fal wllel- Coevetional dw.l1i.ge cith Total Ilbor force (thousand) - Ecanoically active persona, including rad el ectricity In liv in quarter as percnt of total dweIling. 1n urban and forces and unesployad but anoluding housewives, students, etc.; definitions rural areas. in variow countrie s nOt comparable. Rural dwelling. connectad to electriity t%) - Computed as sbove for rural Labo foce i agiculture Cl) - Agricultural labor foros (in faning, forestry, fellng ol. hunting and fishing) as percentage of total labor force. U.mploved t% of labor forrcl - Unemployed are usually defined as persona who Concusetion are able nd willing to t.ke a job, at of a Job on a given dey, roind ant Radio receivars (er thou Pop) - All typ_ of recivr f radio broadcasts of a job, end s-king work for a specified minisum period not seceeding one to general public per thousand Of population; exclude unlicoed receivers week; my not be comparable boten countriea du to different dfinitions in countris and in yars whan rgietration of radio sets was in affect; of umployd and source of data, e.g., aploynmat office tatintics, saple data for recent years my not bh comparable since most co-ntrien aholihad surveys, compulsory unemployment inaurance. licening. P-assne cars (per thou Pop) - Pat-anger cars ronprise motor care seasting Inc e distribution - Percentage of private inca- (both in csh and kind) less an ight Persons; wecudea ombulancs, herses and militsry recaiwed by richest 5%, richest 201, poorest 20%, nd poorest 402 of hous- vehicles. hold.. Electricity (kwh/yr gar cap) - Annul coneumption of industrial, comercial, public and private lelstriit in kilowatt hours per capita, generally Distribution of lnd onership - Percentages of land owned by we-lthiest ID bse d en produotion dt, without *ilnc for los.se in grids but alloa- and poorst 101 of land owners. loig for Imports and weporta of electricity. Ne'print ft}/yr per cap) - Per capita annual consm ption in kilogras ea.lth and Nutrition estimated from, domestIc production ple set imports of sawprict. population per peysician - Population divided by nvber of practicing physician. qualified from a medical school at univeraity levl.  -20- ANNEX I Page 3 of 4 ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1977 ANNUAL RATE OF GROWTH (%, constant prices) US$ MCln. _ 1965 -70 1970 -76 GNP at Market Prices 2,335 100.0 2.6 2.9 Gross Domestic Investment 630 27.0 8.4 -5.7. Gross National Saving 402 17.2 9.4 0.3 Current Account Balance -228 9.8 Exports of Goods, NFS 963 41.2 2.3 2.4 Imports of Goods, NFS 1,008 43.2 9.1 -7.1- OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1974 Value Added Labor Force/ V. A. Per Worker US_XLMn. Mln. % U Agriculture 297 10.0 0.687 52.0 432 19.3 Industry 1,704 57.6 0.198 15.0 8,606 384.2 Services 958 32.4 0.337 25.5 2,843 126.9 Unallocated . . 0.099 7.5 _ Total/Average 2,959 100.0 1,321 100.0 2,240 100.0 GOVERNNENT FINANCE 2/ General Government;- Central Government ( jLn.M % of GDP (Kyacha _!n.) of GD 1977 1977 1LW1- 76 Current Receipts 499 26 27 Current Expenditure ) 599 32 27 Current Surplus ) -100 6 0 Capital Expenditures ) 131 7 10 External Assistance (net) ) 30 2 2 MONEY, CREDIT AND PRICES 1965 1970 1972 1974 1975 1976 1977 (Mi:Llion K outstanding end period) Money and Quasi Money 107.6 355.6 341,0 440.7 492.9 623.5 697.8 Bank credit to Public Sector -88.7 -163.8 147.2 78.1 517.8 571.1 790.4 Bank Credit to Private Sector 3/ 42.3 136.9 165.0 335.8 392.9 394.1 470.4 (E'ercentages or Index Numbers) Money and Quasi Money as % of GDP 15.1 27.8 25.5 23.1 31.6 34.8 36.8 General Price Index (1970 = 100) 74.2 100.0 111.7 128.8 141.7 168.2 201.8 Annual percentage changes in: General Price Index 8.2 2.6 5.4 8.4 10.0 18.7 20.0 Bank credit to Public Sector . . 691.4 -61.9 306.9 79.7 38.4 Bank credit to Private Sector 3/ . 21.9 -9.7 92.1 17.0 0.3 19.4 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocate" consists mainly of unemployed workers seeking their first job. 2/ Figures do not differ significantly from "Central Government". 31 Includes parastatal organizations. not available not applicable April 17, 1978 EACP I  - 21- ANNEX I Page 4 of 4 TRADE PAYMENTS AND CAPITAL FL0WS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1973-76) 1976 1977 US $ Mln % (Millions USS) Exports of Goods, NFS 1,141 963 Copper 1,019.6 93.0 Imports of Goods, NFS 980 1,007 Lead, Zinc, Cobalt 55.3 5.0 Resource Gap (deficit -) 161 -44 All other commodities 22.1 2.0 Total 1,097.0 100.0 Factor Payments (net) -111 -100 Net Transfers -108 -84 Balance on Current Account -58 -228 Direct Foreign Investment *. .. EXTERNAL DEBT. DECEMBER 31. 1977 Net MLT Borrowing 'Public) Disbursements 270 244 US $ Mln Amortization 45 120 Subtotal 225 124 Public Debt, incl. guaranteed 1,307.8 Capital Grants . Non-Guaranteed Private Debt .. Other Capital (net) 145 200 Total outstanding & Disbursed 1,307.8 Other items n.e.i -368 -169 Increase in Reserves (+) -56 -74 DEBT SERVICE RATIO (Z) 1/ 1977 Gross Reserves (end year) 100 74 Net Reserves (end year) -145 -227 Public Debt. incl. guaranteed 19.4 Non-Guaranteed Private Debt .. RATE OF EXCHANGE Total outstanding & Disbursed 19.4 Before February 1973 March 1978 US$1.00 = Kwacha 0.714 SDR1 = K1.0243 K1.00 = US$1.40 Kl = SDRO.9763 IBRD/IDA LENDING, (FEBRUARY 28, 1978) (Million US$) February 1973 to July 1976 Annual Averages IBRD IDA US$1.00 = Kwacha 0.643 1976 :K1 - US$1i4019 (1.00 = US$1.554 1977 :K1 = US$1,2675 Outstanding & Disbursed 291.3 Undisbursed 139.2 J-uly 1976 to March 1978 Outstanding incl. Undisbursed 430.5 SDR1 = KO.922 K(1 = SDR1.085 1/ Ratio of estimated Debt Service to Exports of Goods and Non-Factor Services in 1976. not available April 17, 1978 not applicable EACPI  - 22 - ANNEX II Page 1 of 6 STATUS OF BANK GROUP OPERATIONS IN ZAMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as at February 28, 1978) Amount (less cancellations) US$ million Loan No. Year Borrower Flurpose Bank Undisbursed 12 loans fully disbursed 185.2 592 1969 Zambia Education 17.4 1.4 645 1969 Zambia Education 5.3 0.7 701-2 1974 Kariba North Power Station 42.1 4.4 Bank Company 882 1973 Zambia Integrated Fam- 11.5 7.2 ily Farming 900 1973 Zambia Education 33.0 16.9 919 1973 Zambia Electricity Hydroelectric 115.0 22.7 Supply Corp. Power 1057 1974 Zambia Urban Develop- 20.0 11.2 ment 1131 1975 Posts & Tele. Telecommunica- 32.0 29.7 Corps. tions 1210 1976 Development Bank D,evelopment 15.0 15.0 of Zambia Finance Co. 1356 1977 Zambia Education 13.3 13.2 1424 1977 Zambia Industrial 16.8 16.8 Forestry Total 506.6 139.2 of which has been repaid 71.5 Total now outstanding 435.1 Amounts sold 38.6 of which has been repaid 34.0 4.6 Total now held by Bank 1/ of which is undisbursed 430.5 139.2 1/ Prior to exchange adjustments.  - 23 - ANNEX II Page 2 of 6 A. STATEMENT OF IFC INVESTMENTS (as at February 28, 1978) Investment US$ million No. Year Type of Business Loan Equity Total 216 ZA 1972 Zambia Bata Shoe Shoe manufacturing 0.85 0.23 1.08 Co. Ltd. 250 ZA 1973 Zambia Bata Shoe Shoe manufacturing 1.20 - 1.20 Co. Ltd. and tannery 307 ZA 1975 Century Packages Packaging materials 0.78 0.21 0.99 Ltd. 324 ZA 1976 Development Bank Development Finance - 0.54 0.54 of Zambia Co. 394 ZA 1978 Century Packages Packaging materials 0.10 - 0.10 Ltd. Total gross commitments 2.93 0.98 3.91 Less cancellations, terminations, repayment and sales 1.78 - 1.78 Total now held by IFC 1.15 0.98 2.13 Total undisbursed 0.10 - 0.10  - 24 - ANNEX II Page 3 of 6 B. PROJECTS IN EXECUTION 1/ Loan No. 592-ZA First Education Project: US$17.4 million loan of April 11, 1969; Effective Date: July 15, 1969; Closing Date: September 30, 1978 Due to prolonged negotiations with architectural consultants, bud- getary constraints in both 1972 and 1977 resulting from low copper prices, poor management in the early stages of project implementation, and more recently shortages of construction materials and financial difficulties of several major contractors, the project is about four and a half years behind schedule. The expected Closing Date is now March 31, 1979. Latest estimates indicate an increase in cost of about 17 percent which is manageable. Educational objectives in quantitative terms are being met, while qualitative changes of content of education have not yet been achieved. Some problems with respect to defects in materials used in construction of project secondary schools have recently emerged and are being closely monitored. Loan No. 645-ZA Second Education Project: US$5.3 million loan of November 20, 1969; Effective Date: May 5, 1970; Closing Date: March 31, 1978 The project as originally approved has been completed satisfac- torily with the exception of finalization of accounting. Due to contributions of instructional equipment by bilateral donor agencies, savings in the loan proceeds of about US$1.0 million were realized. As a result, the Government requested an amendment, which has been approved by the Bank, to the Loan Agreement for additional work at the University to utilize these savings and also enable the postponement of the Closing Date by two years to March 31, 1978. However, delays in the procurement of furniture and equipment for the project items included in the amendment and in the transfer of farm lands to the University are necessitating a further extension, which is presently under consideration, of the Closing Date to March 31, 1979. Loan No. 701-ZA Kariba North Project: US$82.1 million loan of July 29, 1970, as amended on August 16, 1974; Effective Date: December 16, 1974; Closing Date: December 31, 1978 The fourth and last 150-MW generating set was commissioned on May 5, 1977. Construction is virtually completed and the station is oper- ating satisfactorily. The Central African Power Corporation is now fully 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 25 - ANNEX II Page 4 of 6 responsible for operation of the power station. A project completion report is being prepared. Loan No. 882-ZA Integrated Family Farming Project: US$11.5 million loan of February 28, 1973; Effective Date: July 26, 1973; Closing Date: June 30, 1979 The project is experiencing difficulties. Management at headquar- ters and scheme level is unsatisfactory. Slower than expected recruitment of project farmers, together with inflation, have precipitated sharp in- creases in settlement cost per farmer. These developments are threatening the economic viability of the project. However, because of satisfactory yields (tobacco and maize) and government subsidies, financial returns to farmers are good. In addition to visiting consultants, the Tobacco Manage- ment Board of Zambia (TBZ) has recently selected a new Project Manager to replace the one who resigned in November 1976. However, two expatriate staff, the Extension/Training Officer and the Financial Controller, may soon leave Zambia if TBZ's efforts to gain government approval to increase their remuneration are not successful. It is hoped that ODM would agree to top up their salaries. The Bank is following this matter closely. Loan No. 900-ZA Third Education Project: US$33.0 million loan of June 6, 1973; Effective Date: August 9, 1973; Closing Date: September 30, 1979 Project implementation is generally proceeding satisfactorily. Difficulties experienced in obtaining contractors to construct numerous small facilities located in remote areas have been overcome but at higher than anticipated costs and some delay. The Borrower has decided to split the University into three separate campuses which may result in modifica- tion to the Loan Agreement. The project is expected to be completed by the original September 30, 1979 Closing Date. Loan No. 919-ZA Kafue Hydroelectric Project (Stage II): US$115.0 million loan of July 16, 1973; Effective Date: January 15, 1974; Closing Date: December 31, 1979 Construction of the main dam is ahead of schedule. Current expec- tations are that the project will be completed on schedule and within the appraisal cost estimate. However, there appeared to be a problem when the reservoir filling reached 1,013 m level in September 1976 after a warm spring had surfaced some 1,200 m downstream from the dam. Since then the consultant and the Board of Experts have been examining the performance of the dam site and surrounding area under the effect of the rising water pressure. There are indications that the foundation rock may be badly faulted and cracked. Various possible solutions are being investigated and the Board of Experts is meeting frequently to review progress. Over the past two years, the Zambia Electricity Supply Corporation has made considerable progress in improving its  - 26 - ANNEX II Page 5 of 6 financial management but its financial performance has not been satisfactory. However, performance is expected to improve considerably with the implemen- tation of a new financial framework for the sector that has been substan- tially agreed to by all parties, including the Central African Power Corpo- ration, and which is to be effective retroactively from July 1, 1977. Loan No. 1057-ZA Lusaka Squatter Upgrading and Site and Services Project: US$20.0 million loan of December 6, 1974; Effectiveness Date: April 1, 1975; Closing Date: December 31, 1979 Implementation of the project is slower than anticipated because of delays in land acquisition and difficulties in providing construction materials and spare parts due to Zambia's foreign exchange shortage. Up- grading of the first major squatter settlement in Chawama has been completed, and construction and improvement of houses is progressing satisfactorily. Provision of services in various new sites is in full swing and construction of houses in these sites should start by the middle of 1978. At present, arrears in building materials loans are very high but Government is taking appropriate measures to reduce these to a realistic level. Loan No. 1131-ZA Telecommunications Project: US$32.0 million loan of June 24, 1975; Effective Date: December 10, 1975; Closing Date: December 31, 1980 Project procurement and execution are approximately one year behind schedule but recently have been proceeding satisfactorily. Contracts for switching equipment and microwave and radio systems have been awarded. Implementation, however, may slowdown considerably as a result of government budgetary constraints. An increase in telecommunications tariffs has been approved by Government, and arrears and delays in billing have been reduced. Implementation of the financial/management consultants report is proceeding satisfactorily. Implementation of the initial capitalization of the recently formed Posts and Telecommunications Corporation, however, still remains to be completed. Loan No. 1210-ZA Development Bank of Zambia: US$15.0 million loan of February 18, 1976; Effective Date: April 23, 1976; Closing Date: March 31, 1980 The loan has been committed to the extent of about US$2.4 million equivalent for a number or projects in various industries such as chemicals, textiles, packaging, agriculture and food processing. The low level of com- mitments is mainly due to a slower pace of operations than anticipated at appraisal, due to the serious economic recession in the country.  - 27 - ANNEX II Page 6 of 6 Loan No. 1356-ZA Fourth Education Project: US$13.3 million loan of January 17, 1977; Effective Date: March 8, 1977; Closing Date: March 31, 1983 While the project has made an excellent start, progress has slowed recently because of government budgetary constraints. However, implementation of two major components - the Education Services Center and the Evelyn Hone College - is ahead of schedule. Loan No. 1424-ZA Second Industrial Forestry Project: US$16.8 million Loan of May 12, 1977; Effective Date: November 15. 1977; Closing Date: December 31, 1983 Project implementation is underway. Plantation targets are being met and no serious difficulties have been encountered. IFC PROJECTS IN EXECUTION IN ZAMBIA Zambia Bata Shoe Company Ltd. - 216 ZA and 250 ZA - Shoes and Tannery The company continues to perform well. Century Packages Ltd. - 307 ZA and 394 ZA - Packaging Materials Project construction is virtually completed. The revised project cost is estimated at K 2.2 million compared to K 1.7 million estimated in the 1975 Board Report. Disbursement of IFC overrun financing (US$100,000) is expected to be completed by June 1978. Development Bank of Zambia - 324 ZA - Development Finance Company The IFC investment, approved in February 1976, was disbursed in June 1976.  - 28 - ANNEX III Page 1 of 2 Supplementary Project Data Sheet I. Timetable of Key Events (a) Time taken to prepare project: Twelve months (b) Preparation by: Government of Zambia with the assistance of the Bank and the Association (c) Initial discussions with the Bank: September 1975 (d) First Bank mission to consider project: September 1976 (e) Appraisal mission: March 1977 (f) Follow-up appraisal mission: June 1977 (g) Negotiations: January 9 to 13, 1978 (h) Planned date of effectiveness: September 1, 1978 II. Special Bank Implementation Actions None. III. Special Conditions (a) The Borrower will take actions necessary to ensure that vehicle axle-loads, dimensions and weights do not exceed legal limits (para. 28); (b) The Borrower will employ, by September 30, 1978, the following technical experts: (i) three road maintenance engineers, one transport economist and two training experts in the Roads Department; (ii) twenty mechanical superintendents' and two training experts in the Mechanical Services Branch (MSB); and (iii) one rural road maintenance engineer in the Ministry of Local Government and Housing (para. 39(d)); (c) The Borrower will take all reasonable action required to make available adequate living accommodations for the experts referred to in (b) above (para. 39(d)); (d) The Borrower will provide the recurrent funds required for road maintenance and for MSB's operations, and the Borrower and the Bank Group will review annually the adequacy of the funds allocated by the Borrower to the Roads Department and MSB (para. 41);  - 29 - ANNEX III Page 2 of 2 (e) The Borrower will employ in the Roads Department, by September 30, 1978, an additional three senior executive engineers and one chief matp-ials officer (para. 43); (f) The Borrower will prepare, by September 30, 1978, a program satisfactory to the Bank and the Association for the career development of local staff in the Roads Department (para. 43); (g) The Borrower will prepare training programs that are satisfactory to the Bank and the Association and will train the road maintenance staff of the Rural Councils in the Roads Department's training school (para. 43); (h) The Borrower will (i) prepare, by December 31, 1978, a plan of action (including specific targets), satisfactory to the Bank and the Association, to improve MSB's efficiency; such plan to include, inter alia, limiting MSB's services to non-military vehicles, equipment and plant; and (ii) carry out such plan within nine months from the date of its preparation (para. 44); (i) Employment of consultants to prepare the plan of action referred to in (h) above will be a condition for effectiveness (para. 44); (j) The detailed engineering for the Mansa-Kawambwa-Nchelenge road (or another road or roads of equally high priority) will be carried out only if the Borrower and the Bank Group consider the proposed upgrading of the road to be justified (para. 45); (k) Contracts for road maintenance and workshop equipment, spare parts, tools and training aids will not be entered into until the requisite technical experts referred to in (b) above for the Roads Department and MSB have been employed (para. 46); and (1) US$180,000 will be provided for retroactive financing of expenditures expected to be incurred after January 1, 1978 on consultant services to assist in reorganizing MSB, preparing bidding.documents and evaluating bids (para. 47).   I BRD 12934 2'2' 2*' 26' 2r 3 REPUBLIC OF ZAMBIA THIRD HIGHWAY PROJECT '/ 7 ~ s ~ \Ns Highway Network E.or roadsf: -'-T.---Mbrlrrad I,,ter,atio,,l mom rods -::7- RiceA's ___ _Distrit roads * Airf Ields ----R,rol dislricl.cads 0 District headquarters Co-strutiol District boandon.sb pl0 ..0 ......Destailed e,,gI,,eerig -,IPrvnca .budarie Ieraialbc-ado,ies S A Third HigLiwy_fqj:A 0 52 100 ISOCHt A N 0 '0 L A ) p~~~~~~~~~~~~~~~~~0 5 10 IES10 0 <0 R E7 H Ias~ C alr I/ 0inaF~ ZAIRE 7CPPEBEA Muwk a Kr2 - osWloMposPtIMtK5A R T H~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 UKJLJf ~~~~~~~~~~~l) -~~~~~~~ "'b / / U~~~~~~~~~~~~~C 01~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~f % \ * Kooma~~~~~~~~~~~~~~~~~~~~O 'JKaoal r- DOLA R LJ R A L Maeaifl E N j E~~~~~~~~~~~~~~~~~~n' iiirvrirovi 'honic c L~~~~~~~JANSH .,g..~~~~~~~~~~~~~~~~~~~~~~~enirecriiv C~~~~~~~~~~~~~~~~~~~my... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ *6rvCrP jcr\nnci- To Daliseuro ' ~~~~~~~~~~~3~~C OFp OS -2frcrsl 4 '~c~y ~ K A 5 E M P A ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ - oo ly~ ~ ~ ~~~~~~~~[NOACi'p~{OOi I 10'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4