Cameroon - Highway Engineering Project

RESTRICTED g i t023! Report No. P-580 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE FEDERAL REPUBLIC OF CAMEROON FOR A HIGHWAY ENGINEERING PROJECT January 15, 1968  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOTiMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPI{ENT CREDIT TO THE FEDERAL REPUBLIC OF CAMEROON FOR A HIGHWAY ENGINTERIING PROJECT 1. I submit the following report and recommendation on a proposed development credit in an amount in various currencies equivalent to $550,000 to the Federal Republic of Cameroon to finance a highway engineering project. PART I - HISTORICAL 2. The Federal Government of Cameroon has applied for an IDA credit to assist in financing the services of consultants to undertake de- tailed engineering and associated studies for two roads: the Ngaoun- dere-Garoua road in East Cameroon and the Tiko-Victoria road in West Car.eroon. In July 196b the Bank made a technical assistance grant of $200,000 to the Federal Government of Cameroon to help finance a fea- sibility study of the Ngaoundere-Garoua road. The study considered two alternative designs, a gravel and an asphalt road, estimated to cost about $7.5 million and $15 million, respectively. The estimated rates of return on the two designs are very close to each other, with a slight advantage in favor of the asphalt road. However, before a decision can be taken and a construction project appraised, the econo- mic analysis should be refined on the basis of more exact cost estimates resulting from detailed engineering. For the Tiko-Victoria road, the Directorate of Public lWorks in West Cameroon has already carried out preliminary engineering. On this basis, the rate of return for an asphalt road is provisionally estimated at about 12%. However, detailed engineering as well as the determination of the ecoromic benefits is necessary before the road can be appraised for construction. 3. In view of the small amount of the credit, no fornal negotia- tions were held. The proposed credit was discussed with the Govern- ment on various occasions in Washington and in Cameroon. Agreement between the Association and the Government on the draft credit docu- ments has been reached by correspondence. 4. In July 1964, the Bank made a technical assistance grant of $100,000, later increased to $120,500, to the Federal Republic of Cameroon to help finance an agricultural feasibility study. In March 1967, a $7 million Bank loan and an $11 rillion IDA credit were made to the Cameroons Development Corporation and the Federal Republic of Cameroon, respectively, to assist in financing the Corporation's plan- tation program.  - 2 - PART II - DESCRIPTION OF THE PROPOSED CREDIT 5. The main characteristics of the proposed credit are as follows: Borrower: The Federal Republic of Cameroon Amount: $550,000 in various currencies Purpose: To finance the foreign exchange cost of the detailed engineering and associated ser- vices for the Ngaoundere-Garoua and Tiko- Victoria roads. Amortization: The development credit imuld be for a period of 10 years, including a grace period of 2 years. Repayment is provided for in equal semi-annual instalments beginning March 1, 1970 and ending September 1, 1977; however, the credit would be subsequently refunded from the proceeds of any future credit which IDA may make for the construction of the roads. Service Charge: 3/1 of 1% per annum. PART III - PURPOSE 6. An Appraisal Report entitled "Proposal for a Highway Engin- eering Credit - Federal Republic of Caroeroon" (TO-579a, dated January 1, 1968) is attached. 7. The purpose of the project is to prepare two major improve- ments in the Cameroon transport system: (a) the Ngaoundere-Garoua road (285 km.) is part of the "Cameroon Route" which will link the Douala/Yaounde regions with the northern part of East Cameroon and the southern part of Chad. Its northern road and southern railroad connections are presently being improved with assistance from other external sources. The existing ITgaoundere-Garoua road is a low-standard gravel road and wouuld be inadequate for the traffic to be expected in the future.  - 3 - (b) The Tiko-Victoria road (24 km.) which is the extension of the Douala-Tiko road, is narrow and dangerous, and therefore no longer adequate to carry the increasing traffic between Douala and Victoria, the two main ports and business centers of East and Il^est Cameroon. 8. The consultants' services for the Ngaoundere-Garoua road would include the preparation of detailed engineering and cost esti- mates for a gravel and an asphalt road, a more refined determination of the economic benefits to be expected from the two alternative designs, and the preparation of tender documents for the road design which will be selected. As for the Tiko-Victoria road, the proposed project would provide for a review of the preliminary engineering and the preparation of the detailed engineering, and, on this basis, the confirmation of the economic justification for a road investment. The preparation of tender documents is also included in the project. 9. Subject to the approval of this credit, the Carneroon Govern- ment has already selected, with IDA approval, consulting engineers to carry out the project. 10. The total cost of the engineering project is estimated at $770,000 equivalent. The foreign exchange component is estimated at 72% or $550,o0o. The local currency cost of the project will be fin- anced by the Cameroon Government. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 11. The draft Development Credit Agreement between the Federal Republic of Cameroon and the Association, and the Recommendation of the Corrmmittec provided for in Airticle V, Section l(d) of tho Arxticles of Agreement of the A^ssociation are being distributed to the Executive Directors separately. 12. The draft Development Credit Agreement is in the usual form except that the term of the credit would be ten years, including a two-year period of grace, as reflected in Schedule I to the Agreement. Attention is drawn to: (a) the preamble of the draft Development Cre- dit Agreement where it is stated that the Association would be prepared to refund this credit out of the proceeds of any credit which may later be made for the construction of the project roads; and (b) Section 5.01 which specifies as an additional condition of the effectiveness of the Agreement that the consultants selected for the project shall have been employed on terms and conditions satisfactory to the Association.  PART V - COMPLIANCE INITH ARTICLES OF AGRER ENT 13. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI - RECO1'fIENDATION 1i. I recommend that the Executive Directors adopt the following resolution: DRAFT RESOLUTION NO. Approval of Development Credit to the Federal Republic of Cameroon in an amount equivalent to Us$ 550,000 RESOLVED: THAT the Association shall grant a development credit to the Federal Republic of Cameroon in an amount in various currencies equivalent to five hundred and fifty thousand United States dollars (U.S. $550,ooo) to mature on and prior to September 1, 1977, to bear a service charge at the rate of three-fourths of one per cent (3/1 of 1%) per annum, and to be upon such other terms and conditions as shall be substantially in accordance with the terms and conditions set forth in the form of Development Credit Agreement (I-ighway Engineering Project) between the Federal Republic of Cameroon and the Association, which has been presented to this meeting. George D. Woods President Attachment Washington, D.C. January 15, 1968.