Burundi - Transport Sector Project

Docunent of The World Bank FOR OFFICIAL USE ONLY Report No. P-5091-BU MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 32.7 MILLION TO THE REPUBLIC OF BURUNDI FOR A TRANSPORT SECTOR PROJECT FEBRUARY 28, 1990 This document has a restricted distribution and may be used by recipients only in the performane of their offcial duties Its cootents may not otherwise be disclosed without World Bank authorization.  Curenvc Eouivalent Currency Unit Burundi Franc (FBu) US$ 1 FBu 155 Glossarv of Abbreviations and Acronyms AfDB African Development Bank AGCD Administration Generale de la Coop;ration aU Developpement (telgian Aid Agency) BEI Budget Extraordinaire et d'Investissement (Investment Budget) BO Budget Ordinaire (Recurrent Budget) DGR Direction Generale des Routes (General Directorate for Roads) DGT Direction Generale des Transports, Postes et Telecommunications (General Directorate for Transport, Posts and Telecommunications) FAC Fonds d'Aide et de Coopiration (French Aid Fund) GTZ Aid Agency of the Federal Republic of Germany MAE Ministere de l'Agriculture et de l'Elevage (Ministry of Agriculture and Livestock) MTPDU Ministere des Travaux Publics et du Developpement Urbain (Ministry of Public Works and Urban Development) MTPT Ministere des Transports, Postes et Telecommunications (Ministry of Transport, Posts and Telecommunications) OTRABU Office des Transports du Burundi (Freight Transport Company) OTRACO Office des Transports en Commun (Passenger Transport Company) PIP Public Investment Program PEP Public Expenditure Program Fiscal Year January 1 - December 31  FOR OMCLAL USE ONLY BURUNDI TRANSPORT SECTOR PROJECT Credit and Proiect Summary Borrower: Republic of Burundi Beneficiaries: Ministry of Public Works and Urban Development (MTPDU) Ministry of Transport, Posts and Telecommunications (MTPT) Amount: SDR 32.7 million (US$ 43.2 million equivalent) Terms: Standard IDA terms, with 40 years maturity. Financing Plan: (US$ million) Total % of Total IDA 43.2 48% AfDB 6.8 8% AGCD 5.0 6% GTZ 1.8 2% FAC 1.4 2% OPEC, Japan, Italy 7.0 8% Government 25.6 28Z Total 90.8 100% Economic Rate of Return: 32 percent over 75 percent of total project costs Staff Appraisal Report: Burundi Transport Sector Project Report No. 7848-BU * M.aps: IBRD 21189 & 21660 R This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents niay not otherwise be disclosed without World llank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF BURUNDI FOR A TRANSPORT SECTOR PROJGCT 1. The following memorandum and recommendation on a proposed development credit to the Republic of Burundi for SDR 32.7 million (US$ 43.2 million) is submitted for approval. The proposed credit would be on standard IDA terms and 40 years maturity and would help finance transport development in Burundi. The project would be cofinanced with AfDB (US$ 6.8 million equivalent), AGCD (US$ 5.0 million equivalent), GTZ (1.8 million equivalent), FAC (US$ 1.4 million equivalent), and OPEC, Japan and Italy (US$ 7.0 million equivalent). Background 2. Transport within Burundi is totally dependent on the road network. The country has no navigable river, traffic is too small to support a railway, and internal air transport is and will remain very limited owing to the small size of the country. The size of the network is fairly adequate. Main roads are passable all year long and have been reasonably well maintained in recent years. However, secondary roads have received little maintenance and are generally not in good condition. Moreover, the main network has been considerably extended over the last decade and the oldest part of it is deteriorating, which requires substantial increases in maintenance and rehabilitation funding. In this context, planning road operations has become an increasingly critical function of the highway authority - the General Directorate for Roads (DGR) of MTPDU. Lastly, rural roads which play a vital role in coffee production and marketing have been insufficiently maintained in the past, which is now jeopardizing the efforts to increase production of the highest grade of coffee (fully-washed) processed through the coffee-washing stations. Hence, there is an obvious need to set up an organization and funding mechanisms for their maintenance under an agreement between the Ministry of Agriculture and Livestock (MAE) and MTPDU. 3. As a landlocked country far from Indian Ocean ports, Burundi is highly dependent on external transport links for its economic development. The operational and policy constraints on the international routes facing the landlocked countries of the region have been recently identified under the Great Lakes Corridor Study. Fcr Burundi, it is essential to improve the reliability and efficiency of international transport, in particular through lower transport costs for imports and exports (mostly coffee). To address sectoral issues and keep up appropriate sectoral policies, the Government has decided to amend the sectoral policy framework and develop planning and monitoring capacities within the General Directorate for Transport (DGT) of MTPT. These objectives have been presented by the Government in a sectoral policy statement. The major principles guiding the statement include adopting a sectoral framework to facilitate priv We initiative in transport and road works, increasing cost recovery, giving . :iority to maintenance over  - 2 - new investments, and consulting with neighboring countries to improve transportation in the Great Lakes region. 4. Specifically, to sustain at the sectoral level the macroeconomic objectives set for the structural adjustment program, the Government aims at (i) improving efficiency of the transport parastatals (OTRABU and OTRACO); (ii) improving cost recovery mechanisms for transport infrastructure in order to substantially increase maintenance funding without increasing the budget deficit; (iii) increasing competition between public and private operators; and (iv) developing the role of the domestic private sector in road maintenance operations. Rationale for IDA Involvement 5. The Transport Sector Project is an integral part of the structural adjustment and economic an! social development process led by the Government with the support of IDA ard other donors. The transport sector has an essential role to play in sustaining the Government's macroeconomic policy as exposed in the latest Policy Framework Paper dated June 14, 1989. The proposed project will contribute to deepen economic liberalization in the sector, lower overall internal and external transport costs, improve mobilization of local resources, reduce the budget deficit and improve the efficiency of transport parastatals, increase export revenues and reinforce the sector's planning capacity especially in preparing appropriate sectoral PIPs and PEPs. Proiect Objectives 6. The project's objectives are to: (i) reform transport sector policies to promote greater competition and price liberalization; (ii) develop planning and monitoring capabilities within MTPDU and MTPT; (iII) consolidate, expand and improve maintenance practices, institutions and funding in the road sector including support for starting up the participation of the private sector in road maintenance activities; (iv) upgrade a selected road to paved standards; and (v) provide support to coffee production and marketing through rehabilitation and maintenance of access roads to coffee production areas. Proiect Description 7. The project will cover roads and transport, the responsibility of which is split between two ministries: MTPDU and MTPT. It covers a four- year program (1990-1993) to meet the country's priorities and received donor suppo:t during a Round Table held in Bujumbura in April 1989. In addition to policy measures aimed at liberalization and improved resource mobilization and allocation in the sector, the project would have two major components: (i) institutional support to DGT including (a) technical assistance to assist in creating a transport data base, monitoring international transport, preparing adequate sector policies and reforming transport parastatals; (b) training; and (c) subsector- related studies and a provision to finance priority transport investments to be identified during the abovementioned studies.  - 3 - (ii) a four-year road upgrading, rehabilitation and maintenance program including (a) periodic and routine maintenance of paved roads; (b) upgrading, rehabilitation and maintenance of unpaved roads of the main network, an increasing portion of which will be contracted out; (c) rehabilitation and maintenance of coffee roads; (d) subsector-related studies; and (e) institutional strengthening through the creation within DGR of two permanent Units for road planning and control of maintenance works, with technical assistance and training (including for the adoption of appraisal and execution methods taking environmental concerns into account). The proposed Transport Sector Project supports the Government's macroeconomic development strategy and structural adjustment program and conforms to its PIP and PEP defined in coordination with IDA. It is also consistent with and supportive to IDA's following operations: the Small Scale Enterpriseb!APEX Project (Cr. 1889-BU), the Agricultural Services Sector Project (Cr. 2024- BU) and the Coffee Sector Project under pre'aration. Prolect Costs 8. The total cost of the project is estimated at US$ 90.8 million equivalent with foreign costs of about US$ 57.5 million and local costs of US$ 33.3 million. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of B,nk Group operations in Burundi ore given in Schedules C and D, respectively. The Staff Appraisal Report, No.7848-BU dated February 28, 1990, is being distributed separately. Actions Azreed 9. The Government has presented to IDA a statement of sectoral policy and agreed to: (i) give priority to maintenance over new construction in allocating funds to the transport sector and especially to the road subsector; 'ii) set up appropriate cost recovery mechanisms including fuel pricing to provide funding for maintenance of the main road ne;work, and for rehabilitation and maintenance of the coffee roads; (iii) set up appropriate institutional arrangements for operations on the coffee roads; (iv) increasingly involve the private sector in road maintenance operations; and (v) amend the sectoral policy framework in order to liberalize transport operations and increase competition between private and public operators (including foreign exchange allocations, port operations, privatisation of the freight transport parastatal (OTRABU) and reforming the passenger transport parastatal (OTRACO) under a performance contract). Conditions of effectiveness will bet (a) implementation of appropriate road users taxation and fuel pricing policy agreed upon at negotiations; (b) appropriate budget allocation for road activities for DGR in 1990; (c) decision on operating the port of Bujumbura according to private management principles agreed at negotiations; and  (d) liberalization of the prices of transport by road and implementation of an appropriate performance contract between the Government and the passenger transport parastatal. An agreewent satisfactory to IDA betwee. MAE arnd MTPDU for management of coffee roads and the setting up of an adequate mechanism to finance their maintenance and rehabilitation would be a condition of disbursement for coffee roads. Benefits 10. Improvement in road maintenan-e would facilitate transport of goods and persons countrywide, reduce vehicle operating costs and the need for costly rehabilitation in the future. Improvement of coffee roads would support coffee production and marketing, and contribute to the increase in foreign exchange earnings and farmers' revenues. Improving the institutional framework would ensure better planning and management practices in the sector. Improving external transport conditions through better road access and trensport policies would lower overall transport costs for both imports and exports. The promotion of small- and medium-scale domestic contractors who will mostly carry out labor-based road maintenance operations would provide employment to the rural poor. Risks 11. The main risks associated with the project arise from the limited capabilities of the private sector for executing road maintenance works and possible shortage of local counterpart funds for the road maintenance components. These risks will be minimized by (i) the project providing for support to and gradual involvemert of the private sector and (ii) the sectoral PEP review mechanism which will help adjust yearly work programs to available financing. Recommendation 12. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, DC February 28,1990  -5 Schedule A B"URUNDI Transport Sactor Project PROJECT COSTS ESTIM&TES AND FINANCING PLAN (US$ million) Project Cost Estimates 11 Foreign as Local Foreign Total S of total A. TRANSPORT COMPONENT 0.4 4.5 4.9 92% I. Institutional Strengthening 0.4 2.4 2.8 87% II. Inivestments 0.0 2.1 2.1 100% B. ROAD COMPONENT 25.5 38.6 64.1 60% I. Road Upgrading to Paved Standards 1.9 4.3 6.2 70% II. Road Rehabilitation 4.0 3.7 7.7 48% III.Periodic Maintenance 4.6 9.3 13.9 67% IV. Routine Maintenance 8.4 10.9 19.3 57% V. Coffee Roads 4.4 0.2 4.6 5% VI. Institutional Stengthening 2.3 10.0 12.3 81% TOTAL BASE COSTS 25.9 43.1 69.0 62% 3_==3 -===~= =a=== Contingencies (32% base costs) Physical (10% base costs) 2.6 4.3 6.9 62% Price 4.8 10.1 14.9 68% GRAND TOTAL 33.3 57.5 90.8 63% Financina Plan IDA 7.7 35.5 43.2 48% AfDB 0.8 6.0 6.8 8Z AGCD 2.9 2.1 5.0 6% GTZ - 1.8 1.8 2% FAC - 1.4 1.4 2% OPEC, Japan, Italy 0.7 6.3 7.0 8% Government 21.3 4.3 25.6 28% Total 33.3 57.5 90.8 100% 1/ Costs are net of taxes which are estimated at FBu 473 million (US$ 3.05 million equivalent).  -6- Schedule B Page 1 of 2 BURUNDI Transoort Sector Prolect PROCUREMENT AND DISBURSEMENTS (US$ million) I. Procurement Method Non Total Prolect Element ICB LCB Other Aiplic. Costs Civil Works 22.7 15.1 18.3 11 56.1 (12.6) (9.1) (21.7) Vehicles, Equipment, 8.6 8.8 2/ 17.4 Materials & Supplies (8.6) (0.5) 3/ (9-1) Consultant Services 13.9 13.9 including Studies (9.3) 41 (9.3) Training/Fellowships 3.4 3.4 _______________________________________ 3.i) (3-1) Total 31.3 15.1 26.0 18.3 90.8 (21.2) (9.1) (12.9) (43.2) 1/ Force account works: includes DGR staff salaries and supplies financed from local sources and procured under local rule 2/ Procurement rules of other donors. 3/ International or local shopping on the basis of at least three quotations. 4/ IDA guidelines (August 1981) will be applied for USS 9.3 million. The remaining consultant services financed by the other donors will be procured under their respective guidelines for US$ 4.6 million.  -7- Schedule B Page 2 of 2 II. Disbursements (US$ million) Amount of Credit 2 of expenditures Catexory Allocated to be financed 1. Civil Works Under Contract 16.3 85% of total expenditures 2. Equipment, vehicles, spare parts, materials and supplies 6.9 100% of foreign and 80% of local expenditures 3. Technical Assistance/ Consultants' Servitees 7.0 100% of foreign and 80% of local expenditures 4. Training and Fellowships 2.4 1002 of foreign and 80% of local expenditures 5. Unallocated 10.6 Total IDA Credit 43.2 Estimated Disbursements IDA Credit (US$ million) FY91 FY92 FY93 FY94 FY95 FY96 Annual 4.2 8.1 10.2 9.2 8.5 3.0 Cumulative 4.2 12.3 22.5 31.7 40.2 43.2  -8- Schedule C BURUNDI Traassort Sector Prolect TIMETABLE OF KEY PROJECT PROCESSING EVENTS (a) Time to prepare s 2,5 years (b) Prepared by s Government of Burundi (c) First IDA Mission s July 1987 (d) Appraisal Mission Departure s January 1989 (e) Negotiations : January 1990 (f) Board Presentation : March 1990 (g) Planned Effectiveness : July 1990  -9- Schedule D Page 1 of 2 STATUS OF BANIK GROUP OPERATIONS IN BTJRUNDI A. STATEMENT OF BANK LOANS AND IDA CREDITS --------------------------------------- (December 31, 1989) Loan or Amount In USI MUtillon Credit Year --- --- ------- number Signed Borrower Bank IDA (1) Undiobursed ______ ------ -------- ---- ------ ________