Ghana - Second Transport Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 18413 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA SECOND TRANSPORT REHABILITATION PROJECT (CREDIT 2192-GH) September 18, 1998 Transport Group 2 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - cedi (C) US$ 1 1990 326 cedis (SAR) 1991 = 367 cedis 1992 437 cedis 1993 651 cedis 1994 = 964 cedis 1995 = 1,200 cedis 1996 = 1,500 cedis 1997 = 2,200 cedis 199' = 2,300 cedis WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) I hectare (ha) 2.47 acres 1 kilometer (kin) = 0.62 mile (mi) 1 metric ton (t) = 2,205 pounds (lb) FISCAL YEAR January 01 - December 31 ABBREVIATIONS AND ACRONYMS ADF - African Development Fund ADRP -- Accra District Rehabilitation Project BADEA -- Banque Arabe pour le Developpement Economique en Afrique (Arab Bank for Economic Development in Africa) CFD -- Caisse Francaise de D6veloppement (French Development Fund) DFR -- Department of Feeder Roads ERP -- Economic Recovery Program ERR -- Economic Rate of Return GHA -- Ghana Highway Authority GOG -- Goverm-nent of Ghana GRC -- Ghana Railway Corporation IMT Intermediate Means of Transport KfW -- Kreditanstalt fuir Wiederaufbatu (German bilateral aid agency) MRHA -- Ministry of Roads and Highways MTC -- Ministry of Transport and Conmuunications NGO - Non Govemrment Organization NIO -- Netherlands Investment Organization NRPIS -- Northern Region Pilot Infrastructure Sclheme ODA -- Overseas Development Agency (U.K.) OECF -- Overseas Economic Cooperation Fund (Japan) RTPU -- Road Training and Production Unit SAR -- Staff Appraisal Report Vice President: Jean-Louis Sarbib, AFR Country Director: Peter Harrold, AFC JI Sector Manager: Maryvonne Plessis-Fraissard, AFVT2 Task Team Leader: Snorri Hallgrimsson, AFTT2  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA SECOND TRANSPORT REHABILITATION PROJECT (CREDIT 2192-GH) TABLE OF CONTENTS Page Nos. PREFACE EVALUATION SUMMARY i - iii PART I - PROJECT IMPLEMENTATION ASSESSMENT A. Project Objectives and Components I B. Achievement of Project Components 2 C. Achievement of Project Objectives 4 D. Major Factors affecting the Project 7 E. Project Sustainability 7 F. Bank Performance 8 G. Borrower Performance 8 H. Assessment of Outcome 8 I. Future Operation 8 J. Key Lessons Learned 9 PART I - STATISTICAL ANNEXES Table 1: Summary of Assessments 10 Table 2: Related Bank Loans and IDA Credits 11 Table 3: Project Timetable 12 Table 4: Credit Disbursements: Cumulative Estimated and Actual 12 Table 5: Key Indicators for Project Implementation 13 Table 6: Key Indicators for Project Operation 14 Table 7: Studies Included in Project 15 Table 8A: Project Costs 16 Table 8B: Project Financing 16 Table 9A: Economic Evaluation -- Ghana Highway Authority 17 Table 9B Economic Evaluation -- Northern Region Pilot Infra. Scheme 18 Table 10: Status of Legal Covenants in the Credit Agreement 19 Table 1 1: Compliance with Operational Manual Statements 21 Table 12: Bank Resources: Staff Inputs 21 Table 13: Bank Resources: Missions 22 APPENDIX A. Borrower contribution to the ICR B. Cofinanciers contribution to the ICR Maps: IBRD 29529 and IBRD 29530 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.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA SECOND TRANSPORT REHABILITATION PROJECT (CREDIT 2192-GH) Preface This is the Implementation Completion Report (ICR) for the Second Transport Rehabilitation Project (TRP-2) in Ghana, for which Credit 2192-GH in the amount of SDR 69.0 M (US$96.0 million equivalent) was approved on December 13, 1990, and made effective on June 18, 1991. The original closing date was September 30, 1996. The credit was extended for 15 months and closed on December 31, 1997. Final disbursement took place on May 14, 1998. Undisbursed funds in the amount of approximately SDR 1.2 million will be canceled. Cofinancing for the project was provided by the Caisse Francaise de Developpement (CFD, France); the Arab Bank for Economic Development in Africa (BADEA); Kreditanstalt fir Wiederaufbau (KfW, Germany); and the Overseas Economic Cooperation Fund (OECF, Japan). This ICR was prepared by Farida Khan of the Transport Group 2, Central-Western Africa Department, Africa Region, and reviewed by Snorri Hallgrimsson, Cluster Leader, Transport (AFTT2) and Jer6me Chevallier, Manager, AFTS3. The Cofinanciers were invited to provide comments; those received are included as an appendix to this report. Preparation of this ICR is based on materials in the project files and on interviews with Government officials and project staff. A final supervision/completion mission was conducted in December, 1997 and supplemented by a separate mission in April, 1998 to obtain complete project data. The Borrower contributed to the ICR by preparing its own evaluation of the implementation of the project (Appendix A) and by commenting on the draft ICR. Comments were requested of the Task Managers, who had appraised or supervised the project, and these were incorporated in this ICR.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA SECOND TRANSPORT REHABILITATION PROJECT (CREDIT 2192-GH) EVALUATION SUMMARY Introduction i. When Ghana launched its Economic Recovery Program (ERP) in 1983, with a series of sweeping economic reforms, it was recognized that removing transport bottlenecks and improving transport efficiency were crucial to the success of the program. Under the ERP, Ghana undertook, with support from IDA and other donors, a program of emergency repairs and phased rehabilitation of its transport sector, and initiated generally sound and pragmatic institutional reforms. While considerable progress was made by the mid- 1980s, more still remained to be done to restore the transport system. ii. The Government of Ghana (GOG) sought IDA's support in designing and implementing the restoration of adequate transport capacity, particularly for the road system, and the rebuilding of efficient sector institutions. The First Transport Rehabilitation Project (TRP-1), which started in 1988 marked the beginning of a phased program for sector-wide rehabilitation and strengthening. The Second Transport Rehabilitation Project (TRP-2) was the next phase of this program. Project Objectives iii. The aim of the project was to continue to sustain and accelerate Ghana's ongoing economic recovery by: (a) removing physical bottlenecks to the expansion of exports, farm production and labor mobility; and facilitating private sector development through improved maintenance and rehabilitation of the road and railway infrastructure; (b) improving the efficiency of both the public and private sector transport management through promotion of market-oriented policies, institutional development and manpower training; (c) promoting appropriate technology, local resource mobilization and community participation for infrastructure rehabilitation and maintenance; (d) alleviating poverty, and improving the lot of women, in rural areas; and (e) reducing transport costs for both goods and passengers. To achieve the above objectives, the project aimed at four major areas: (a) road rehabilitation, which included (i) a three-year (1991-1993) time slice of the trunk road stabilization program aimed at clearing periodic road maintenance backlogs over 1988-1997; (ii) rehabilitation of six priority bridges as part of Ghana Highway Authority's (GHA's) ongoing bridge rehabilitation program; (iii) design and supervision consultancies for road and bridge works, including studies for rehabilitation of three major trunk roads and six bridges; and (iv) technical assistance and training for management strengthening at GHA; (b) railway rehabilitation, which included: (i) sleeper renewal and other improvements on the Western Line; (ii) provision of essential locomotives and rolling stock mainly for replacement; (iii) strengthening management and training; and (iv) studies on line-capacity constraints;  - 11 - (c) support to transport sector institutions, which included: (i) strengthening of the Ministry of Roads and Highways (MRH), and the Ministry of Transport and Communications (MTC); (ii) sector policy and other studies to assist MTC in policy formulation and transport planning, and improvements in road safety; and (iii) training programs for road transport operators and mechanics in the private sector; and (d) a pilot operation in low-cost rural infrastructure, comprising low-cost road rehabilitation in about 50 villages, training for NGOs/villagers in road maintenance, and support for non-motorized transport, construction of hand-dug wells and environmental improvements, with NGO and community involvement, using appropriate labor-intensive technology. Assessment of the Project's Success in Achieving its Objectives and Sustainability iv. Globally, the project achieved its objectives. There are, however, wide differences in the success and impact of different components, as described in the following sections of this ICR. The project did alleviate physical bottlenecks to transport in the roads sector, and placed a brake on the physical deterioration of the western railway line; it contributed significantly to sector policy reform; it provided a convincing demonstration that low-cost rural infrastructure provision based on local decision-making is possible, has significant poverty alleviation impact, and has good chances of being replicable; and it certainly did reduce or contain the cost of transport on the road and rail links that it touched. Finally, it provided impetus to the development of the local contracting industry and consulting profession. Economic Evaluation v. The overall economic rate of return (ERR) on the roads, bridges, railways and the Northern Region Pilot Infrastructure Scheme (NRPIS) at appraisal was about 38 percent. The re-evaluation of the ERR was done for the roads, railways and NRPIS parts of the project (the separate bridge component is delayed until 2002 due to delays in raising financing). For the roads component, the final ERR is estimated at 18 percent; that for the NRPIS at 22 percent, and that for the rail component at zero. The overall re-evaluation of the completed components yields an ERR of 16 percent. Major Factors Affecting the Project vi. There were few problems directly associated with the project. However, the road sub-sector has suffered from a lack of financial discipline, which for several years has translated into large arrears to contractors carrying out road works. The availability of counterpart funds was an issue, although less acute for this project than for some others in the sector. Ghana suffered severe economic inflation and currency devaluations during the project period, with resulting difficulties in project planning and management. vii. Assessment of Performance of the Bank and the Borrower. Overall, the Bank's performance in preparing and supervising this broad-based project was good. The Borrower's performance was satisfactory. viii. Assessment of Outcome of the Project. Even with the disappointing outcome of the rail component, and the deferment of some bridge works, the project's overall outcome has been satisfactory. The project played a major role in institutional strengthening and capacity building, both in the public and the private sectors.  Future Operation ix. Future operation of the project is supported by the institutional reforms undertaken under the project. In the roads sub-sector, it is strongly assisted by the successful implantation of a road fund financed by user tariffs; the fund now raises, on time, the revenues necessary for all routine and some periodic maintenance of the road system. The local contracting industry and local consultants have both the skills and the capacities to carry out road works at the volumes needed. Future operation of the railway component will depend on whether structural reforms in the sub-sector are introduced and take hold. The Government has officially adopted concessioning of the railway as its strategy for this sub- sector. x. The Project was complemented by IDA -flnanced sub-sector projects in Feeder Roads and Urban Transport. A Credit of US$100 million for the Highway Sector Investment Project (Cr. 2858) was approved by the Board on May 14, 1996 and became effective January 31, 1997. Cr. 2858 is part of the financing package of a five-year GOG investment program in the road sub-sector, the formulation of which relied on agreements and institutional reforms that were parts of the TRP2 Project. Key Lessons Learned xi. A key lesson learned from the road components of the project is that improvements in sector management, and additional physical investments, are insufficient to improve the road infrastructure in the absence of financial discipline at the National Government level. The need to serve the persistent accumulation of debts to contractors diverted the use of resources that should have gone to infrastructure maintenance. xii. Establishment of an autonomous road fund with a well designed structure can insure a stable flow of funds to road maintenance, and provide one of the prerequisites for preservation of assets. However, proper planning and disciplined implementation of the maintenance program is equally important. xiii. The railway components of TRP2 and also of the previous TRP 1 provide a lesson similar to the one experienced in other countries during the project period, namely that physical investments into a railway which is still under an antiquated management structure, are doomed to failure. xiv. The rural infrastructure pilot scheme would have benefited from having a project management team drawn from concerned institutions, which were to remain responsible for the various sub- components in the future, rather than an ad-hoc project management unit. Also, being a pilot scheme, the supervision inputs needed from both the Bank and the implementing agency were substantially higher than the average for IDA operations in the sector.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GHANA SECOND TRANSPORT REHABILITATION PROJECT (CREDIT 2192-GH) PART I - PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES AND COMPONENTS I. The project complemented and reinforced IDA's ongoing assistance to Ghana in support of its Economic Recovery Program (ERP) and continued the efforts started under TRP-1. The aim of the project was to sustain and accelerate Ghana's ongoing economic recovery by: (a) removing physical bottlenecks to the expansion of exports, farm production and labor mobility and facilitating private sector development through improved maintenance and rehabilitation of the road and railway infrastructure; (b) improving the efficiency of both the public and private sector transport management through promotion of market-oriented policies, institutional development, and manpower training; (c) encouraging new methods of infrastructure rehabilitation and maintenance practices, using appropriate technology, local resources, and community participation; (d) reducing transport costs; (e) alleviating poverty in rural areas, and improving the self-development of rural women through a pilot program focused on: women's employment and earning under a specially-designed, labor-intensive road program; related savings schemes to channel wage-earning into income-generating activities; support of community-sponsored activities to improve rural transport, well-water supply and environment, through involvement of local NGOs. 2. The objectives of the project were to be achieved through five components: (a) Road and Bridge Maintenance and Rehabilitation (mainly through GHA) i. a three-year (1991-93) time-slice of the road stabilization program for clearing part of the accumulated road maintenance backlog by carrying out periodic maintenance and rehabilitation on about 2,600 km of paved and gravel-surfaced trunk roads; ii. rehabilitation of six bridges; iii. consultancy services for (i) and (ii) above and for the engineering design for periodic maintenance/rehabilitation of about 3,000 km of trunk roads, including major rehabilitation of three primary trunk roads (344 km) and six bridges; iv. technical assistance to support GHA in planning, quality control, and contract management; v. local and foreign training programs; vi. providing road maintenance equipment and spare parts, laboratory equipment and tools, training equipment and training aids; and vii. construction of about 40 housing units for GHA's engineers. (b) Support to Ministry of Roads and Highways (MRH) i. training for MRH staff locally and abroad, office improvements and office equipment; and ii. technical assistance for the Project Management Unit (PMU) and support to the local contracting industry. (c) Railway Rehabilitation (GRC)  - 2 - i. improving rail capacity, mainly on the Western Line, through rebuilding and purchasing of locomotives, wagons, and other equipment and spare parts, sleeper renewal on some sections, and axle-load strengthening of some bridges; ii. workshop and service management; and iii. consultancy services for the Western Line Development Study (WLDS) and Railway Policy Reform and Restructuring Study (RPRRS) and technical assistance and training to strengthen GRC. (d) Support to Transport Sector Institutions (through MTC) i. strengthening of MTC's organization including policy studies, planning and statistics training, and office equipment; ii. training programs for private sector vehicle-servicing industry, including driver training; and iii. road safety program consisting of data collection and analysis, vehicle inspection and training. (e) Northern Region Pilot Infrastructure Scheme (NRPIS) (mainly through the Department: of Feeder Roads) i. labor-intensive rehabilitation/construction of about 150 km of low-cost rural access roads and about 50 hand-dug wells, covering about 50 villages in the poorer areas of Northern Ghana, with community involvement, particularly of women, in building and maintaining roads and hand-dug wells; ii. promotion of the use of appropriate non-motorized transport vehicles in rural areas, to reduce head-porterage by women; and iii. technical assistance for project management, impact studies, and support to non- governmental organizations (NGOs) involving women to improve environment, nutrition levels and other self-development activities. B. ACHIEVEMENTS OF PROJECT COMPONENTS 3. There were substantial differences in the degree of achievement between different components: The components supporting the roads sector, providing investment financing and technical assistance, were on the whole successful. Those providing support for the railway sub-sector were not. (a) Road and Bridge Maintenance and Rehabilitation (mainly through Ghana Highway Authority) The execution of road works under the project has been competent by the agencies involved, and continues smoothly into the Highway Sector Investment Project, for which Credit 2858-GH became effective earlier this year. However, the total length of road maintained and rehabilitated through the project was only about 84 percent of that envisaged at appraisal. This is mainly caused by the effect of the time elapsed (in some cases up to seven years) between appraisal and works execution, combined with less than optimal maintenance, resulting in works being heavier than planned, and ultimately permitting less of the network than foreseen to be treated. Despite these short comings, the component has been satisfactory, and yields an acceptable, albeit reduced, economic rate of return of about 18 percent. (b) Support to the Ministry of Roads and Highways (MRH) The support to the MRH blended into the support to Transport sector institutions with the merger of the two Ministries concerned in early 1997. The results have been satisfactory and has provided the sector with a number of tools to manage the road sector in an efficient manner, such as a contract management  - 3 - system for the GHA and an accounting and management information system for the project management unit, which is now in use for an increasing number of road works under the new Ministry of Road and Transport (MRT). (c) Railway Rehabilitation (Ghana Railway Corporation) The results of the Railway component are as a whole not satisfactory. The underlying reasons go beyond the TRP-2 project as such. In general terms, GRC has received more than US$ 250 million of donor- financed funds during the past 15 years, mainly through IDA, OECF, KfW, CFD and others. It also received substantial Government subsidies. However, GRC is not any closer than it was 15 years ago to becoming an efficient and financially sustainable operation. There is a wide gap between the targets which were set at the beginning of TRP-2 for passenger and freight traffic to be carried by GRC, and the actual traffic figures. Throughout the project period, the volume of cargo carried by rail has remained fairly constant at around 750,000 tons and 125 million ton-km, which is approximately 50 percent of the target volume of freight projected during the TRP-2 appraisal. The number of passengers carried increased initially from 1.5 million in 1983 to 3.5 million in 1988, but declined thereafter to around 2.0 million, far short of the TRP-2 appraisal target of 7.0 million for 1995. Revenues from freight and passenger traffic are not sufficient to fully pay for GRC's operating costs, let alone to cover the depreciation of rolling stock and fixed installations. Yet it is important to say that it would be incorrect and unfair to attribute this situation to GRC management alone. The GRC management team has been subject to political demands for services which are not profitable, especially passenger services, without receiving a specific compensation for those services from the Government. This has gravely affected the financial situation of the company. Another important factor was the timing of individual investments which were financed by different donors. There was a long period during which GRC had many new wagons for passengers and freight, but a serious shortage of locomotives in good condition to pull them. The shortage of locomotives also affected the rehabilitation of the track, as ballast could not be hauled as planned. Once new locomotives arrived, the condition of the track had deteriorated and frequent derailments impeded an increase in traffic. At times, the bauxite mine reduced shipments because of world market conditions. Also, GRC did not really penetrate the cocoa freight market, because it could not apply certain marketing techniques used by private truckers. In summary, there always seems to be at least one plausible reason why the agreed targets for GRC cannot be achieved. There is also the recognition that in practice, multi-donor financing of investments which are part of a system (such as a railway) is almost impossible to coordinate in terms of timing. The above situation has led the government to recognize the need for substantial change in Ghana's rail sub-sector. It has become impossible for the Government to ensure for the future the survival of rail transport in Ghana, without a major institutional change. This follows the trend which is clearly visible in many developing and developed countries alike. The concept is to allow the private sector to take responsibility for, and the commercial risk of, the main core operation of rail transport services, probably through some form of concessioning. Among the objectives of the reform is to separate between those services which are commercially viable and others which would need a Government subvention. Today, GRC still has very substantial assets, many of them financed by foreign donors. Among them are more than 30 locomotives in excellent condition, many freight and passenger wagons, a track in reasonable condition (especially on the Western Line) and, above all, a captive market for the transport of certain mining products. It is now believed, by the Government and some donors, that some form of concessioning of rail transport services may be best suited to make sure that the existing assets are put to good and efficient use, and rail transport may take play its legitimate role in Ghana's transport sector.  -4 - The Economic Rate of Return (ERR) for the combined railway investment of TRP-1 and TRP-2 had been projected at around 29 percent during appraisal in 1990. However, due to the non-achievement of traffic volume targets, the ERR is around zero. (d) Support to Transport Sector Institutions (through MRT) This institutional support has progressed very well and is being continued under the Highway Sector Investment Project. Staff training was quite successful, but the disparity in salary levels between the public and the private sector caused many trained staff to leave their institutions, a problem which persists and will persist as long as the compensation package in the public sector is markedly less attractive than that in the private sector. Institutional reform, such as the granting of autonomous status to the GHA, is expected to lead to some redressment of this situation. (e) Northern Region Pilot Infrastructure Scheme (N]RPIS), mainly through Department of Feeder Roads (DFR) The Northern Region Infrastructure Pilot Scheme (NRPIS) has produced valuable experience for future efforts both within and without Ghana in working with rural communities through NGOs (Amasachina and 31st December Movement.) The project also has rendered experience in the application of labor- based work methods for road construction and maintenance, sinking of wells and tree planting. Efforts at expanding the load capacity of bicycles through the introduction of bicycle trailers met with a number of financial and technical challenges. While the Intermediate Means of Transport (IMT) promotional effort encountered numerous issues related to affordability and technical design, it clearly demonstrated the significant latent demand rural people have for low cost vehicles, in this case bicycles. C. ACHIEVEMENT OF OBJECTIVES Overall assessment 4. In overall terms, the project outcome was only partially satisfactory, although nearly all individual components were, with some modifications, successfully completed. A tendency - conscious or not - to increase the design standards for periodic maintenance works reduced the mileage of roads dealt with through this and other projects, and left the remainder of the stretches originally included as project roads vulnerable to deterioration. This effect is probably one main cause of a slight deterioration of the overall condition of the network which has been observed and documented through two comprehensive road condition surveys in 1995 and 1997. The other main reason for the deterioration was inadequate funding by the Government of routine road maintenance. On the other hand, the managemnent of the maintenance that was being done improved markedly, and on those segments where funding permitted regular routine maintenance to be carried out, road conditions stabilized. The outline results were: (a) most of the physical rehabilitation targets of the project have been met; (b) sector management has improved significantly in the highway sub-sector: a system of cost recovery for the road network through road user charges with an autonomous road fund has been established and has in the last year of the project contributed significantly towards the future sustainability of road maintenance; rail sub-sector management did not make marked progress during the project period, but in mid-1998 the Government adopted a strategy of concessioning the GHR to the private sector. (c) efforts at expanding the load capacity of bicycles through the introduction of bicycle trailers met with a number of financial and technical challenges. It took much longer than anticipated for the manufacturers to produce the trailers and for the NGOs to sell them. The  -5 - project lacked an explicit marketing strategy. Nonetheless, while the IMT promotional effort encountered numerous issues related to affordability and technical design, it clearly demonstrated the significant latent demand rural people have for low cost vehicles, in this case bicycles; the labor-based construction and maintenance methods, has been successful and shown to be obtainable in the Northern pilot area, and could be spread over an expanded territory in whatever follow-up project is designed; (d) Poverty alleviation follows (c) above when pilots can go to scale; also, the GRC component financed protective clothing for a large number of railway workers, most of which can be considered poor; the clothing clearly improved working conditions of those workers, and (e) Transport infrastructure rehabilitation has had measurable effects in reducing or at least stabilizing transport unit costs on those road and rail links where the project was active; this is true for transport costs both in terms of cash outlay and time consumption. The road rehabilitation components have substantially improved the condition of those parts of Ghana's trunk road network where the project was active, and are contributing to keeping down transport costs for both goods and passenger movements. 5. Overall the project was a mixed success. Its development impacts and their sustainability vary between project components: (a) in the roads sub-sector, sustainability is good, due to institutional reforms (establishment of an autonomous Road Fund, granting autonomous status to GHA, etc.) having been identified, decided upon and being implemented; (b) in the rail sub-sector, any sustainability of the project impact will depend on profound reforms in the sub-sector, which have now been decided upon by the Government; (c) the NRPIS has attracted considerable attention from Government in the context of its drive for decentralization, and sustainability appears good. Sector Policies. 6. Besides physical road improvements, a system of cost recovery through road user charges has been established, thus contributing to the sustainability of road maintenance. Concerning the rail sub- sector, the less-than-satisfactory outcome during the past 15 years, and in particular the TRP2 project period, has confirmed the conclusion reached elsewhere in Africa and worldwide, in the sense that even heavy investmnents in an antiquated institutional setup cannot bring about good results. In recognition of this, Cabinet has approved a policy paper on railway restructuring, in which it is stated that the private sector will be invited to participate in the core operations and management of the railway, in the context of concession agreements. Financial Objectives. 7. Financial objectives of the project are relevant to GRC only. GRC's financial performance did not improve during the project. The working ratio recorded in 1997 was 147 as compared to 78 which was forecast, and set as a target, at appraisal. The financial position of GRC remained critical throughout the project period, and the corporation continued to need substantial Government subsidies. It has become clear that there is the need to introduce profound changes in the rail transport sub-sector, especially when considering that massive investment in GRC during the past years has not brought about any significant improvement in performance. Institutional Development Objectives. 8. The MTC and MRH (now MRT) and their agencies (DFR, GHA, and GRC) greatly benefited from large scale comprehensive training of staff.  -6 - Environmental Objectives. 9. The project had no significant adverse effects on the environment, as it primarily involved periodic maintenance operations for road and rail infrastructure operations. No new construction of infrastructure facilities was undertaken. Positive environmental impacts of a long-term nature were achieved due to improved traffic safety on the project roads and improved accessibility to adjacent lands. The Northern Region Pilot Scheme improved the rural environment through tree planting along side of roads and village wood-lots. The railway component included drainage improvements, which improved environmental conditions by avoiding erosion and siltation. Physical Objectives. 10. Most of the project's physical objectives, with the exception of rehabilitation of six bridges, were achieved: (a) Road rehabilitation and Maintenance: Periodic maintenance and rehabilitation was done for about 2,175 km of roads, consisting of: regravelling of 1,622 km (3 percent more than estimate); resurfacing of 200 km and resealing of 353 km; Engineering design was done of three primary trunk roads (346 lkn): Accra - Yamoransa; Tema - Aflao and Takoradi - Axim; Egineering design work was done for periodic maintenance/rehabilitation of 4,000 km (25 percent more than estimate); and 14 housing units for GHA's engineers were built and 16 purchased. (b) Railway Rehabilitation: Drainage works and the strengthening of two railway bridges was completed. In addition, 264,417 sleepers (37.6 percent more than forecast) and more than 70.000 cubic meter of ballast (gravel) were purchased under the project and are in the process of being used for routine and periodic maintenance of the Western Line. However, in spite of the work carried out on the track during the project period, the Western Line and its branch cannot be considered as fully rehabilitated. This is due to various factors: (i) the works advanced slowly and were sometimes interrupted, (ii) delivery of ballast by the private quarry to GRC was slow at times, (iii) there was a shortage of rolling stock used for track works (either hopper wagons, or locomotives, or both simultaneously), (iv) works responded mainly to the need to repair bad sections of track where derailments occurred, and (v) there was no clear distinction of normal maintenance work and track rehabilitation; both were mixed together. Much of the ballast and also a significant part of the sleepers purchased under TRP-2 are not yet installed on the track, but serve as a necessary stock for normal track maintenance work to be carried out during the next two years. (c) Northern Region Pilot Infrastructure Scheme: the feeder roads component was successful. The project's initial planned target of 150 km 3-meter wide feeder roads was exceeded by 62 percent (total approx. 244 km) with 45 km 3-meter wide, 163 km 5-6 meter wide and spot improvement of 45 km of roads. The objective of engaging 70 percent women labor force on each road corridor had to be reduced to 50 percent due to labor intensive work activities that could not be effectively handled by women. The nutrition component obtained a short term objective of providing a balanced diet to workers on site to enable them to do the hard work as well as increased the knowledge of the female workers on nutrition issues. 71 hand dug wells were completed as compared to 50 envisioned at appraisal (30 percent increase); community wood-lots have been more successful than the roadside plantings. On account of the popularity of village wood-lots, the NGOs are now selling seedlings from their nurseries at a nominal price to offset their overhead costs. The Non Motorized Transport sub-component of NRPIS was less successful since the beneficiaries needed to buy both the bicycles and the cycle trailers, which many of them could ill afford. 11. Economic Evaluation. The Economic Rate of Return (ERR) was calculated during appraisal for the roads, bridges, railways and the NRPIS components. This yielded a weighted average ERR of  -7- 38 percent. It should be noted that for the railway component, only the Western Line Rehabilitation sub-component was evaluated at that time. The evaluation of the overall ERR for this ICR was done for the same components (with the exception of the bridge component which is delayed until 2002 due to difficulties in raising cofinancing), and when weighted in the same fashion yields an ERR of 16 percent. For specific components of TRP2, the review of economic rates of return shows the following results: The Periodic Maintenance Program for trunk roads was in the SAR estimated to yield an ERR of about 45 percent, based on traffic and road condition data on the selected road sections. After completion of the project, ERR for this component is rated at 18 percent. In the case of NRPIS, the SAR estimate was based on the road component, which indicated an ERR of 25 percent. The re-evaluation of this component yields an ERR of 22 percent. The Bridge Rehabilitation Program ERR was estimated at 70 percent. No ERR could be done as the bridges have not yet been rehabilitated. The bridge component is delayed until 2002 due to delays in raising financing For the Rehabilitation of the Western Rail Line, the ERR was calculated at 29 percent at the time of project appraisal. That rate of return was calculated for all rail-related investments of TRP2 and also TRP1 which could be attributed to the Western Line, including for rolling stock, training and technical assistance. An evaluation period of 15 years was selected. The ERR calculation was based on the following assumptions: (i) only freight traffic was taken into account, (ii) the project would allow to increase the freight traffic carried on the Western Line from 700.000 tons in 1989 to 1.265.000 tons in 1996, remaining at that level afterwards, (iii) without project, the freight traffic volume would drop from 700.000 in 1990 tons to 500.000 in 1992 and stay stable afterwards, (iv) in the case without project, the freight which could not be transported by rail would have to be carried by road at a higher unit cost and over longer distances. However, reality has shown that in spite of the investments made through TRPI and TRP2, plus some other important investments which have in fact been made but were not taken into consideration in the ERR calculation, freight traffic levels on the Western Line have not increased, but have remained fairly stable at 750.000 tons per year until today. Compared to the "without project" scenario of 500.000 tons per year carried by rail on the Western Line, the incremental traffic has been in the order of 250.000 tons every year; which is roughly one third of the projected increment of 765.000 tons over the "without project" case. The SAR did indicate correctly that variations in traffic would be critical to the economic feasibility of the planned investmnents. As a "worst case" scenario, it was assumed that rail traffic volumes would be 20 percent lower that projected; the ERR for that case calculated at 12 percent instead of 29 percent. Unfortunately, actual freight traffic carried was around 40 percent lower than projected, and it is estimated now that the ERR of the investments is about zero. Evaluation of the project as a whole is reflected in Table 1 of Part II. D. MAJOR FACTORS AFFECTING THE PROJECT Factors not generally subject to Government Control. 12. High turnover of Bank staff concerned with the project. Factors generally subject to Government Control.  - 8 - 13. Long delays on decisions from relevant government authorities and delays in timely release of counterpart funds to meet the local costs of the project. High inflation resulting from high budget deficits was partly responsible for counterpart funds shortages. Factors generally subject to Implementing Agency Control. 14. Lack of timely intervention and inadequate supervision initially by DFR on the pilot project considering its complexity and the fact that it was a pilot project. 15. Timely clearance of the delivered project inputs from the port of destination. E. PROJECT SUSTAINABILITY 16. The sustainability of some of the project components appears solid while others are still uncertain. The sustainability of the road rehabilitation and maintenance of its infrastructure is well established through the road user charges and the establishment of a road fund. The MTC and MRH and their agencies greatly benefited from large scale comprehensive training, both in and outside the country, resulting in increased institutional capacity. Under the NRPIS, the sustainability of the feeder road component is ensured since DFR will continue to use the labor-based construction technology to improve roads in the area and thereby provide employment for the rural women. Even though the hand dug wells component has been very successful, its sustainability cannot be guaranteed due to the issue of future funding of maintenance. While the NGOs and some community members have acquired the necessary skills for well construction and can provide some form of technology transfer to interested communities, the cost of construction is beyond the means of most of the communities. Although currently the NGOs are nursing seedlings for the tree planting component and selling to interested communities, the sustainability of the project cannot be guaranteed since the overhead cost of nursing exceeds what the seedlings are being sold for. The sustainability of the nutrition education of the NRPIS cannot be ascertained. F. BANK PERFORMANCE 17. The Bank's performance is on the whole judged satisfactory. The intensity of supervision was adequate and provided the opportunity for continued dialogue with the Borrower on the subjects of road and port sector strategies, reforms and management. The advances in managerial tools available to the sector, notably the establishment of contract management systems and the establishment of the autonomous road fund, grew in part out of this process. 18. However, in hindsight it appears that in the rail sub-sector the Bank could have done better in the area of policy dialogue with the Government. At least since 1994 and possibly earlier, it had become clear to the Bank that investing large sums of money into old-style railway operations, without introducing major institutional changes, rarely improves the performance of rail transport. There was ample evidence in Africa and elsewhere to support this recognition. The Bank has probably not done enough to show this conclusion to the Government and to promote the type of change which is needed. Only relatively recently (since mid-1996) has such a rail sub-sector policy dialog has developed, and results are only now starting to show. 19. Tumover of Bank staff assigned to the project was at times higher than desirable.  - 9 - G. BORROWER PERFORMANCE 20. Officials heading up the various transport agencies of the Borrower were cooperative with the Bank, and ably performed their duties. There was little in the way of procurement problems, other than the protracted clearance times by Government, and those that arose were promptly handled to the satisfaction of the Bank. Government officials kept the Bank closely informed on progress, and delivered satisfactory audit reports on the various accounts opened under the project, and on GRC. Government's failure to promptly make counterpart funds and foreign exchange available, as it was committed to do under the Credit Agreement, caused delays. H. ASSESSMENT OF OUTCOME 21. The project's major objectives were achieved and the outcome is judged satisfactory, except for the railway component. I. FUTURE OPERATION 22. Future operation of the project is supported by the institutional reforms undertaken under the project. In the roads sub-sector, it is strongly assisted by the successful implantation of a road fund financed by user tariffs; the fund now raises, on time, the revenues necessary for all routine and some periodic maintenance of the road system. The local contracting industry and local consultants have both the skills and the capacities to carry out road works at the volumes needed in the future. Future operation of the railway component will depend on whether structural reforms in the railway are introduced and take hold. The Government has officially adopted concessioning of the railway as its strategy for this sub- sector. 23. The Project was complemented by IDA -financed sub-sector projects in Feeder Roads and Urban Transport. A Credit of US$100 million for the Highway Sector Investment Project (Cr. 2858) was approved by the Board on May 14, 1996 and became effective January 31, 1997. Cr. 2858 is part of the financing package of a five-year GOG investment program in the road sub-sector, the formulation of which relied on agreements and institutional reforms that were parts of the TRP2 Project. J. KEY LESSONS LEARNED 24. A key lesson learned from the road components of the project is that improvements in sector management, and additional physical investments, are insufficient to improve the road infrastructure in the absence of financial discipline at the National Government level. The need to serve the persistent accumulation of debts to contractors diverted the use of resources that should have gone to infrastructure maintenance. 25. Establishment of an autonomous road fund with a well designed structure can insure a stable flow of funds to road maintenance, and provide one of the prerequisites for preservation of assets. However, proper planning and disciplined implementation of the maintenance program is equally important. 26. The railway components of TRP2 and also of the previous TRP1 provide a lesson similar to the one experienced in other countries during the project period, namely that physical investments into a railway which is still under an antiquated management structure, are doomed to failure.  - 10- 27. The rural infrastructure pilot scheme would have benefited from having a project management team drawn from concerned institutions which will remain responsible for the various sub-components in the future, rather than an ad-hoc project management unit. Also, being a pilot scheme, the supervision inputs needed from both the Bank and the implementing agency were substantially higher than the average for IDA operations in the sector.  - 11 - PART II - STATISTICAL ANNEXES Table 1: Summary of Assessments Substantial Partial Negligible Not applicable A. Achievement of Objectives Macro Policies Q Q Q Sector Policies Financial Objectives Q Q 0 E Institutional Development Q Q Q Physical Objectives Q 0 0 0 Poverty Reduction 03 0 0 0 Gender Issues E 01 0 Other Social Objectives Q Q 0 Environmental Objectives 03 0 a o Public Sector Management Q Q3 Private Sector Development Q Q El B. Project Sustainability Likely UnlikeU ncertain O O 0 Highly C. Bank Performance Satisfactory Satisfactory Deficient Identification Q 21 El Preparation Assistance 0E 0 Appraisal E