Document of The World Bank Report No: 20395-MAG PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 48.4 MILLION (US $65.0 MILLION EQUIVALENT) TO THE REPUBLIC OF MADAGASCAR FORA Transport Sector Reform and Rehabilitation Project (APL-Phase 1) 05102/00 Division: AFTT1 Country Department: AFC08 Africa Regional Office CURRENCY EQUIVALENTS Currency Unit = Malagasy Franc 1 MF = US$ 0.0002 US$1 = ME 6,300 FISCAL YEAR 00 ABBREVIATIONS AND ACRONYMS ADEMA - A6roports de Madagascar ACM - Aviation Civile de Madagascar CAS - Country Assistance Strategy CFM - Chemins de Fer Malgaches CMN - Compagnie Malgache de Navigation CNATP - Comite National d'Appui Technique a l'Autonomie des Provinces CNRE - Centre National de Recherches sur l'Environnement EIRR - Economic Internal Rate of Return ENEAM - Ecole Nationale d'Enseignement de l'Acronautique et de la Meteorologie GTIT - Groupe de Travail Interministeriel de Transports HDM - Highway Design and Maintenance Model LACI - Loan Administration Change Initiative LNTPB - Laboratoire National des Travaux Publiques et des Batiments MD - Air Madagascar MIS - Management Information System MOTM - Ministry of Transport and Meteorology MOPW - Ministrv of Public Works PMR - Project Management Report NPV - Net Present Value SATCC - Southern Africa Transport and Communications Commission SMTM - Societe Malgache de Transport Maritime MARPOL - International Convention for the Prevention of Pollution from Ships OPRC - International Convention on Oil Pollution Preparedness ONE - Office National de l'Environnement PES - Program Executive Secretariat RMI - Road Management Initiative RTTP - Rural Travel and Transport Program SEPT - Societe d'Exploitation du Port de Toamasina Vice President: Calisto Madavo Country Director: Hafez Ghanem Sector Manager: Yusupha Crookes Team Leader: Pedro Geraldes Madagascar Transport Sector Reform and Rehabilitation Project (APL Phase 1) CONTENTS A. Program Goals and Project Development Objectives ................... ........................2 1. Program goals and phasing ...............................................................2 2. Project development objectives ...............................................................4 3. Key performance indicators ................... ............................................4 B. Strategic Context ...............................................................5 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project . 5 2. Main sector issues and govemment strategy ...........................................................5 3. Sector issues to be addressed by the project and strategic choices ........... ............6 4. Performance triggers for subsequent credits ...........................................................8 C. Project Description Summary ...................... ........................................8 1. Project components ..............................................................8 2. Key policy and institutional reforms supported by the project ..................................8 3. Benefits and target population ...............................................................9 4. Institutional and implementation arrangements ..................................................... 10 D. Project Rationale .............................................................. 13 1. Project altematives considered and reasons for rejection ..................................... 13 2. Major related projects financed by IDA and/or other development agencies ........ 14 3. Lessons leamed and reflected in the project design .............................................. 14 4. Indications of borrower commitment and ownership .......................... .................... 15 5. Value added of IDA support in this project ............................................................. 16 E. Summary Project Analysis .............................................................. 17 1. Economic .............................................................. 17 2. Financial .............................................................. 20 3. Technical ............................. . 21 4. Institutional ............................. 22 5. Social ............................. 22 6. Environmental assessment ............................. 23 7. Participatory approach ............................. 23 F. Sustainability and Risks ............................. 24 1. Sustainability ............................. 24 2. Critical Risks ............................. 25 3. Possible Controversial Aspects ............................. 25 G. Main Credit Conditions ........................ 26 1. Conditions for negotiations ............................ 26 2. Conditions for effectiveness ............................ 26 3. Legal Covenants ........................... 26 H. Readiness for Implementation ........................ 27 1. Compliance with Bank Policies ....................... 27 Annexes Annex 1. Project Design Summary ........................... 28 Attachment 1 Summary Cost Estimates forthe APL-1, APL-2, APL-3, and APL-4 ............. 31 Attachment 2 Trigger Indicators under the APL Instrument ................................................ 32 Annex 2. Detailed Project Description ............................................................... 36 Annex 3. Estimated Project Costs ....................... 43 Annex 4.Cost-Benefit Analysis Summary ........................................ 45 Annex 5.Financial Summary ........................................ 55 Annex 6.Procurement and Disbursement Arrangements ................ ........................ 57 Table A. Project Costs by Procurement Arrangements ...................................................... 60 Table B. Thresholds for Procurement Methods and Prior Review ........................................ 60 Table C. AUlocation of Credit Proceeds ....................................................... 61 Annex 7. Summary Sector Environmental Assessment ........................................ 62 Attachment 1.Matrix of Interventions for Environmental Protection ................... ................... 66 Annex 8. Action Plan for Financial Management .................................. ........................ 71 Annex 9. Letters of Transport Sector Policy and of Road Management Strategy ........... ............ 74 Annex 10. Project Processing Schedule .......................................................... 91 Annex 11. Documents in the Project File .......................................................... 93 Annex 12. Statement of Loans and Credits ...................... ..................................... 94 Annex 13. Country at a Glance .......................................................... 96 Map - IBRD 30878 Madagascar Transport Sector Reform and Rehabilitation Project APL-Phase I Project Appraisal Document Afrca Regional Office AFC8 Date: 05/02/00 Team Leader: Pedro Geraldes Country Director: Hafez Ghanem Sector Manager: Yusupha Crookes Project ID: Sector TY - Other Transportation Lending Instrument: Theme(s): Regulatory Reform and Private Participation APL Credit Roads, Ports, Inland Waterways and CMI Aviation Financing Poverty Targeted Intervention: (I Yes [Xl No Project Financing Data [ ] Loan [X] Credit [] Grant [] Guarantee [ Other [Specify] For Loans/Credits/Others: Amount (US$M): 65.0 Proposed terms: [ To be defined [ Multicurrency [ Single currency I Standard Variable Fixed [ LIBOR-based Grace period (years): 10 Years to maturity: 40 Cornmitment fee: 0.5% Service charge: 0.75% Front-end fee on Bank loan: __~~~~~~4_ Government 2.5 2.5 IBRD IDA 65.0 65.0 Other (specify) Total: 2.5 65.0 67.5 Borrower. Govemment of Madagascar Guarantor: Responsible agencies: Ministry of Transport and Meteorology (MOTM) and Ministry of Public Works (MOPW) Estimated disbursements (Bank FY/US$M): .7". _lm Annual 9.1 16.9 19.5 13.0 6.5 Cumulative 9.1 26.0 45.5 58.5 65.0 Project implementation period: 54 months Expected effectiveness date: 08/01/00 Expected closing date: 01/31/05 Implementing agencies: Ministry of Transport and Meteorology (MOTM) and Ministry of Public Works (MOPW) Contact persons: Mr. RANDRIANARISON, Elie Aimable (MOTM) Mrs. RASOAVAHINY, Justine (MOPW) Address: Tel: MOTM: 2225420 Fax: MOTM: 222 4001 E-mail: MOTM: Minsfrans()Dts.MA MOPW: 2232033 MOPW: 226 4323 MOPW: Dpp.Mt dDts.Mg 2 A: Program Goals and Project Development Objectives 1. Program goals and phasing: (see Annex 1) (i) Goals The program has three main goals. First, increase efficiency by helping the Government of Madagascar (GOM) to divest itself of functions that the private sector can better discharge. Second, contribute to economic growth, by removing infrastructure bottlenecks in the progressively more open and diversified economy of Madagascar-ensuring that the benefits of growth would be evenly perceived on a spatial basis. Last, ensure the sustainability of existing infrastructure and environmental assets by emphasizing funding for preservation and maintenance, and by factoring environmental and social concems into the preparation and evaluation of sector programs. The efficiency goal would be gained through measures that develop a modem regulatory framework for a liberal business environment- one which contains privately provided transport services and infrastructure operations. For monopolistic subsectors, the program would pursue a strategy of corporatization and outsourcing of services with private providers; autonomous authorities will handle regulatory functions. Economic growth would be achieved through investments in the rehabilitation of main infrastructure facilities for the spatial integration of the economy, and the growth and diversification of foreign exchange eamings. Madagascar's transport infrastructure is undeveloped or in a state of advanced decay, which imposes a considerable barrier to production-to-market access. Potential agricultural production surpluses are lost as ever larger areas remain isolated. Tourism is not growing as would be expected in a country with such rich natural endowments, and mining resources remain untapped. And large segments of the population are becoming more excluded from economic and social opportunities as accessibility levels decline. Sustainability requires a regular flow of funds to infrastructure operations and maintenance. The deterioration of infrastructure assets must be arrested, and no new investments should be undertaken without ensuring their efficient use. To this extent, and beyond privatization, the project would seek the direct involvement of beneficiaries in financing and management of infrastructure at the national and regional levels. And, because of Madagascar's fragile ecosystem, the project will work to preserve the country's unique natural endowment through enforcement of national policies and regulations at the sector level. The three program goals -efficiency, growth, and sustainability - are interdependent. Reduced domestic and international transport costs, achieved by gains in efficiency, are key to bringing available resources into the market place, thus fostering growth through diversification of exports. Sustainability, through the preservation of natural and infrastructure assets, is a prerequisite to maintaining comparative advantage. And ensuring that the benefits of growth are perceived by Madagascar's population-especially the rural poor-through improved accessibility is essential for the sustainability of the policy reform process. (ii) Phasing After a prolonged dialogue with IDA, the GOM has committed to a comprehensive eight-year program of reform and development of the country's transport sector. The government has also demonstrated its commitment by initiating a comprehensive divestment program, including the flag air carrier (Air Madagascar) and its subsidiaries, the shipping line CMTM, and the Northern Railways. The government will also liquidate CMN, another shipping line, unbundle and corporatize MOPW's force account organization, and create autonomous Port Authorities to 3 manage the countries secondary ports. Moreover, an ambitious regulatory reform program has been initiated, including the progressive liberalization of the air transport and shipping markets. Key institutional reforms will lead to the spin-off of regulatory functions from the line ministries, and create autonomous regulatory bodies for both civil aviation and ports. In this context, the IDA- financed program includes four phases, the content and timing of which are dictated by: (i) the pace of the privatization process, especially in regard to uncertainties about when the expected sell-offs and signing of concession agreements will happen, and when the financial closure to back theses agreements will be effective; (ii) the requirements for public financing thereof to meet residual investment and/or labor and any other government liabilities; (iii) the time needed to move the decentralization process to the point that regional governments and local communities can manage their transport infrastructure; and (iv) the shoring up of institutional and project preparation capabilities, as well as sustainability requirements, before committing funds to particular subprograms. Phase I of the proposed Program (APL-1), which is the object of detailed appraisal in this report, would focus on: (i) strengthening the recently created Civil Aviation Regulatory Agency (Aviation Civile de Madagascar, ACM); (ii) institutional reforms to implement Autonomous Port Agencies for secondary and tertiary ports and an autonomous Ports and Shipping Regulatory Agency; (iii) concessioning of airport and railway facilities, as well as of cargo handling facilities at the main Port of Toamasina; (iv) spin-off of the public works force account activities and commercialization of production units; (v) preparing social mitigation plans for sector agencies; (vi) developing the domestic private sector; (vii) facilitating foreign trade, through transport-related measures; (viii) making the road maintenance fund operational; and (ix) implementing a sector environmental assessment and follow-up framework. APL-1 would also provide financing for physical investments in the periodic maintenance and rehabilitation of 527 km of main roads of key economic importance; rehabilitation of port and maritime facilities in secondary ports; pilot program for river navigation; shipwrecking removal; and emergency coastal protection works. Moreover, APL-1 would be an instrument for capacity- building in MOTM and MOPW and preparing subprograms to be financed under subsequent APLs. These would include rural roads, secondary airports, railways, remaining rehabilitation requirements for the primary road network, port improvements, and intermodal transport facilities. APL-2 will focus on strengthening sector agencies to be effective in conceding authority functions, particularly in supervising concession contracts for airports, ports, and railways. APL-2 will also finance social protection and mitigation program prepared under APL-1. Physical investments under APL-2 would cover residual public investment requirements identified during the concessioning of secondary airports, railways, and intermodal transport facilities. APL-3 will concentrate on financing the rehabilitation of some 1,000 km of rural roads and on implementing a program to decentralize, finance, and manage the rural network. This program would be prepared under APL-1. Finally, APL-4 would cover a second stage of the rehabilitation of the primary road network and of the port and river investment program to be also prepared under APL-1. The design of the APL process was done in such a way that the APLs' triggering mechanisms are as independent as possible from each other. APL-1 focuses on the regulatory framework required by privatization, on key sector investment and sustainability requirements, and on subprogram preparation for financing under subsequent APLs. APL-2 centers on financing public investments and social liabilities required because of organizational restructuring and concession contracts closed during APL- 1, as well as on strengthening conceding authority functions in the sector agencies. APL-3 focuses on a rural roads program prepared under APL-1, in support of the government's decentralization policy and 4 poverty alleviation efforts. APL-4 will follow on APL-1 by supporting a second stage of primary infrastructure rehabilitation. To the extent possible, only measures required for the implementation of each APL are set as the associated triggers. This allows the APL process to progress, at the same pace as the government reform process in each of the selected areas. It would therefore be feasible that, say, APL-3 would be triggered before APL-2, and that different APLs overlap in time. However, no APL would be triggered before an assessment of the implementation of government's sector policy is carried out. Whenever the specific triggering indicators for each APL are met at any time, there would be a policy review of key milestones that should have been achieved by that time. These milestones are part of the time-bound action plan attached to the government's Letters of Transport Sector Policy and of Road Strategy. Therefore, the triggering of any APL would first require the satisfactory completion of that policy review. 2. Project development objectives (see Annex 1) The project would help strengthen transport sector policy and management by supporting: (i) further liberalization of air, maritime, shipping, and road transport services; (ii) reactivation of the trade and transport facilitation process; (iii) promotion of public/private partnerships in investment and management of primary transport facilities, and otherwise of users and beneficiaries in operations and maintenance; (iv) restructuring of MOTM and its affiliated agencies, including staff training for the discharge of regulatory functions; (v) skill enhancement of small private transport operators; and (vi) development of a strategy for road transport policy. The project would also strengthen road management through: (i) spin-off and commercialization of productive activities and divestiture of the public equipment fleet; (ii) restructuring of MOPW and affiliated institutions to increase managerial delegation and outsourcing of activities with private suppliers; (iii) enhancement of planning and programming capabilities, and capacity-building at all levels of the road administration ; (iv) increased resource mobilization and allocation to maintenance and operations by strengthening the governance, autonomy and accountability of the Road Fund Board; and (v) development of small domestic private contractors. The project would further support the implementation of an environmental and social mitigation strategy for the sector through: (i) capacity-building and training for environmental assessment; (ii) monitoring of environmental performance in the sector; (iii) development of a national catastrophe prevention and mitigation strategy; and (iv) preparation of a comprehensive social protection and mitigation program for the workers displaced as a result of sector restructuring. Through the investmenits financed under the Credit, the project would also restore infrastructure facilities in trade corridors and zones with good agricultural potential, and help in environmental protection. 3. Key performance indicators: (see Annex 1) The progress of the project will be assessed through the: (i) increase in private participation in aviation, shipping, airport, and railway operations and infrastructure; (ii) reduction of the average port through- time for key tradables; (iii) reduction in vehicle operating costs and in transport tariffs for freight and passengers in selected routes; (iv) increase in traffic volume in selected transport modes/corridors; (v) increase in the percentage of road infrastructure in good condition; (vi) all weather use for a greater percentage of the road network; (vii) increased number of road works contracted out to the private sector; (viii) real increase in resources allocated to and used in road maintenance, and regularity in the availability of such funds; (ix) percentage of infrastructure works going through a satisfactory environmental assessment; (x) quality and coverage of the social protection and mitigation studies done as part of the restructuring effort; (xi) success of training and capacity-building initiatives through participants' assessments at activity completion and through ex-post surveys; (xii) regular assessment of users and beneficiaries' satisfaction; and (xiii) cost-effective and timely implementation of investments financed under the Credit. 5 B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 16249-MAG Date of latest CAS discussion: 02/18/97 The last CAS for Madagascar intended to reduce poverty by alleviating the wide-ranging constraints that stand between Madagascar and its growth potential. This strategy had four objectives: (i) broad- based growth led by foreign investment; (ii) human capital development, focused on basic education, health care and rural infrastructure; (iii) strengthening the public sector's ability to deliver quality services and create an enabling business environment; and (iv) natural resource management to reduce degradation and develop the potential for eco-tourism. Within the project, CAS-related goals include: support to private sector-led growth through quality transport services; accessibility to areas of the country whose remoteness prevents improved living standards for the poor; an enabling business environment through regulatory reform and financing to meet government obligations under private/public partnerships; and mitigating the environmental impacts of improved transport infrastructure and services. The project would address these goals through a four-pronged strategy: (i) support regulatory and institutional reforms to accommodate (and sustain) private participation, while enabling the public sector to fulfill its new regulatory and supervisory (rather then executing) role; (ii) involve the private sector by granting last-resort finance within public/private partnerships, and by promoting the outsourcing of activities with the domestic private sector (which will be strengthened in the process); (iii) remove key infrastructure bottlenecks and support more road investments in rural areas; and (iv) contribute to investment and environmental sustainability by helping to mobilize and allocate resources for infrastructure maintenance, and by systematically incorporating environmental protection into sector activities. 2. Main sector issues and government strategy: T'he transport sector plays a key role in Madagascar's growth and poverty alleviation strategy. Increased foreign investment, development of the country's eco-tourism potential, and growth in agricultural output all depend on the competitiveness of transport services and the availability of basic infrastructure. Unfortunately, transport services and infrastructure are in short supply both in quality and geographical coverage. The considerable extension of the country and the formidable topographical barriers, compounded by a long-lasting deterioration of existing infrastructure, have exacerbated the situation. But the sector is also hindered by inappropriate policies, a flawed institutional framework and lack of managerial incentives, unbalanced funding, and the absence of an appropriate regulatory framework. Madagascar's transport sector has been dominated by direct state intervention and heavy reliance on parastatals and/or government agencies to provide services. With the exception of road freight transport, government has, directly or indirectly, managed and financed railways, aviation, airports, shipping, and ports. As a result, service is poor, operating efficiency is low, safety standards are inappropriate, maintenance has been neglected, and funding for capital investments has been difficult to mobilize. As railways and the shipping lines compete for transport services, the parastatals have seen decreasing market share and declining operating revenues. Other parastatals and/or government agencies providing monopolistic or quasi-monopolistic services, such as aviation, ports and airports, have muddled through but at the cost of declining quantity and quality of services and infrastructure. Apart from Antananarivo airport and the port of Toamasina, transport facilities have often become technologically obsolete. This is also true of road infrastructure, which has traditionally been managed centrally and vertically, including planning, programming, funding, and execution of works. In a framework dominated by state 6 intervention, it is not surprising that the domestic private construction industry is underdeveloped and that a more efficient, safe and environmental-friendly operation of transport services by small operators still need to be developed. To address these issues, the GOM has deployed, in cooperation with IDA, the European Union, and other bilateral Donors, including the French Cooperation, the Swiss Cooperation and USAID, major efforts to install a sector strategy. This strategy rests on the following four building-blocks: (i) Promotion of private sector involvement, through the government's withdrawal from productive activities and instead focussing on core functions of economic and technical regulation; discharging of conceding authority functions; first instance of appeal for the settlement of disputes under concession agreements; development of a level-playing field for the private provision of services; planning and programming of the investments to remain under the public sector; environmental protection including the provision of meteorological services; natural disaster mitigation and safety enhancements; and overall monitoring functions. (ii) Organizational restructuring of the two key line Ministries (MOTM and MOPW), including the unbundling of regulatory functions for civil aviation and ports through the creation of two new autonomous agencies; the creation of autonomous port authorities for each secondary port and for groups of tertiary ports; the clarification of the role of the various levels of government in a decentralized framework for the provision and management of road infrastructure; the unbundling of road infrastructure production services that can succeed commercially and liquidation of those which cannot. Staff rationalization programs have also been prepared, based on anticipated skill-mix requirements and redeployment possibilities. (iii) Improve resource mobilization in the transport sector through privatization and equitable user charges policies, particularly in the road subsector, and ensure sustainability through dedicated user- funded mechanisms in the ports, airports, and road sub-sectors, as well as for the new regulatory agencies. Whenever collection of dedicated funds would be done more effectively at the central level, put appropriate allocation mechanisms in place for the decentralized-managed infrastructure. Rural roads, and tertiary airports and ports, for instance, would thus benefit from transfers from the center, although in a way that provides incentives for local resource mobilization through matching arrangements, and subject to accountability mechanisms; (iv) Involve users and beneficiaries in decisions related to funding and operation of public-managed infrastructure. To this extent, the Boards of the Autonomous Port Agencies and the Board of the recently-created Road Fund would have representation from sector stakeholders, including associations of port and road transport users, local government and communities, chambers of commerce and industry, associations of agricultural producers, and other social partners. 3. Sector issues to be addressed by the project and strategic choices: In order to assist in the implementation of the government's sector strategy, the project will address the following sector issues: (i) Private Participation The project will foster private participation in the sector by developing an enabling environment for public/private partnerships in operating and managing ports and railways, as well as for secondary and tertiary airport rehabilitation, whose management will be contracted out to private operators. In addition, the outsourcing of road works to the private sector would be a key element under the project, with a special emphasis on creating a market for domestic private contractors. Training and skill enhancement programs for the small scale construction and road transport industries financed under the project would also contribute to develop the incipient domestic private sector. 7 (ii) Regulatory Reform The project will work for liberalization of aviation and shipping services, and of port and airport operations, whereas the Credit would finance actions to strengthen the recently created ACM and to implement a Shipping and Ports Regulatory Agency. (iii) Organizational Restructuring and Social Protection The project would support a major reorganization effort in MOTM and MOPW, as they move away from direct executing functions. For MOTM, this would involve capacity-building to discharge conceding authority functions; to prepare and enforce technical regulations; to develop and implement road transport policy; to adopt an intermodal approach for sector development based on the economic role of different transport modes, focussed on the management of the logistic chain; and to lead transport and trade facilitation efforts. As to MOPW, the project would support the GOM strategy of commercialization of productive activities, through the creation of commercialized production units, and divestment of the equipment fleet. The project would also strengthen MOTM's and MOPW's capabilities in planning, programming and financial control; in procurement, supervision and control of works; and in delegated management of works, particularly roads, during the transition period preceding the decentralization of road management to subnational levels of government. The Credit would also finance the preparation of a social mitigation program for workers displaced under the restructuring of MOTM and MOPW. (iv) Road Sector Planning and Financing The project would pursue a balanced allocation of resources between primary and rural roads, and between maintenance and rehabilitation of existing infrastructure. It would also promote and progressively implement a cost-recovery and funding policy, through the recently created Road Fund. Specific actions under the project would cover the development and regular updating of a balanced pluriannual expenditure program, and the progressive reliance on domestic resources to meet road maintenance requirements for primary, rural, and urban roads. The project would also support independent performance audits for the various categories of road infrastructure. (v) Environmental Protection These actions would try to institute a systematic environmental assessment in the transport sector, covering operations and infrastructure. Under the project MOTM would implement a strategy for natural catastrophe mitigation, mainly for cyclone damages. The main strategic choice was related to the selection of IDA's lending strategy to assist the GOM's transport restructuring and development program. The alternatives under consideration narrowed down to a series of investment credits vs. a broader APL approach. The latter was selected in view of: (i) the government's ownership and commitment to its reform program, leading to key pieces of legislation covering economic regulation, organizational reform of MOTM and MOPW, and sector financing during project preparation ; (ii) the start-up of the government's divestment program during project preparation; (iii) the time required for implementation of the government's far-reaching reforms and the need for flexibility in their sequence and timing made it difficult to set up "ex-ante" a time-bound program, and calling instead for a trigger-activated mechanism; (iv) private participation in the sector required a long-term commitment from IDA to private investors and social stakeholders-as an honest- broker, an anchor for the regulatory reform process, a promoter of appropriate market structure in public procurement, and a financier of last-resort; (v) the need for a balanced road expenditure program and improved sector funding called for IDA's continuous involvement over the medium term as a financier and as a catalyst for donor coordination; and (vi) the time-horizon associated with managing the transition to a decentralized administrative and fiscal framework for public works, also called for a long-term commitment by IDA. 8 4. Performance triggers for subsequent credits (see Annex 1, Attachment 2) The performance triggers for subsequent credits, as agreed with the government during negotiations, are indicated in Attachment 2 to Annex 1. C: Project Description Summary 1. Project components: (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown) Regulatory refsrm at ing dte Goods and 1729 12 17.9 12 sector development consultant services for technical assistance and training Organizational restructuing and Goods and 12.6 19 12.6 19 sector policy |consultant services for technical lllll Iassistance and IIIII |traininglllll Environmertal protection |Goods, works and | 15.2 |23 | 14.5 |22 l consultant serviceslllll Improvement of economic Works and 30.3 46 28.5 44 infrastructure consultant services I I_I _ I_I TOTAL PROJECT COST 66.0 100 63.5 98 Refinancing of PPFs 1.5 1.5 2 TOTAL FINANCING REQUIRED 67.5 65.0 100 2. Key policy and institutional reforms supported by the project: The institutional and policy reforms supported by the project aim to improve sector competitiveness. This will be achieved through a business environment that increases private sector participation as investor, manager, and promoter. Complementary policy and institutional reforms supported by the project will create a sustainable framework for sector development, both from a financial and environmental perspectives. Specific reforms and policies supported by the project during preparation, and to be followed during implementation of the APL process, are under various stages of implementation as follows: (i) Air transport. Progressive removal of entry restrictions in aviation services; development of a technical and economic regulatory framework that ensures consumer protection; setting up of ACM, an autonomous regulatory agency, in charge of technical and economic regulations; privatizing the flag carrier, Air Madagascar; and promoting private financing and management of airport infrastructure and operations; (ii) Shipping, river transport and ports. Liberalization of handling operations in the main Port of Toamasina; creation of autonomous entities to manage the secondary and tertiary ports; development of a legal framework that allows the concession of port operations and facilities to the private sector; setting-up of an autonomous regulatory agency in charge of ports and shipping regulation; divestment process for CMN (liquidation) and SMTM (privatization); preparation of a pilot framework to involve 9 users and beneficiaries in river transport management; and ratification of the MARPOL and OPRC conventions; (iii) Railway. Privatization of the Northern Railway, for which a single bid has been received and is now being evaluated by the government; structuring a public/private partnership for the Southern Railway capable of gaining the interest of private operators, possibly through a joint railway/port operating concession; (iv) Road transport and infrastructure. Enactment of the revised Road Fund Decree, establishing a sustainable funding mechanism for maintenance and an appropriate organizational structure; enhancement of user and beneficiary representation in the Road Fund Board; formulation of a road user charges policy; defining the initial road fee and of its collection and transfer mechanisms; setting up the framework for the periodic adjustments in the road fee; enacting the revised Road Act; regulatory framework for delegated public works management; and road strategy; (v) Environmental protection. Implementation of a comprehensive environmental strategy for the transport sector, and monitoring of its impact thereof, and (vi) Social protection. Preparation of a social mitigation program for the implementation of the organizational restructuring programs for MOTM and MOPW, while seeking the smooth reintegration of any displaced workers into the labor market and social fabric of the country. 3. Benefits and target population: The impacts of project investments under APL-1 on users and beneficiaries of the transport system will be wide, given the comprehensive nature of the project. Regarding the roads to be improved under APL- 1, the areas in which investments will take place cover a broad cross-section of production conditions. The works done on RN 35, 25 and 45 will upgrade road conditions in an agriculturally productive area. For instance, local farmers in the hinterland of RN 25 produce lichee nuts, among other lucrative cash crops, which are a valuable export crop, and which depend on rapid access to markets and production facilities. RN 25 also provides the only year-round connection to the main east coast road linking the area to Tomasina, the leading port of Madagascar. The improvement of RN 44 and RN 3a will help in the lower cost evacuation of rice from one of the most important production areas in the country. In general, the road transport markets of Madagascar are competitive. Discussions with transporters indicate that rates do indeed vary significantly with road condition. Over time, there will be pressure on truckers to reduce their rates following road improvements. This reduction will lead to an increase in rural incomes. The bus fleet is growing rapidly and will receive a significant proportion of road project benefits. Rural dwellers and interurban travelers-who rely on the bus because of the low rate of motorization in the country-will ultimately benefit from lower fares. Buses also play an important role in marketing the produce of rural populations. The restructuring of MOTM and MOPW, and of its agencies, offers employment opportunities to a group of workers whose status was until recently unclear. Employment in the private construction firms will likely increase significantly-the sustainable funding of road maintenance under the project should ensure a growing and steady stream of work for domestic private contractors. The project will generate other employment opportunities as well-such as jobs to accommodate the increasing traffic in the rehabilitated ports. The port rehabilitation works in Toliary and Mahajanga will guarantee the future of these important economic facilities and of the businesses and individuals that rely on the ports for their commerce. The Province of Toliary was ranked by IDA and the GOM in 1996 as the most impoverished in Madagascar in terms of the incidence and degree of poverty. Toliary and Mahajanga have important fish processing operations that will export a product made from locally caught shrimp and groundfish. The analysis indicates that these important employers and purchasers of locally caught fish will expand operations as a result of the proposed rehabilitation works, thus increasing local employment. 10 The works proposed for the Sofia and Tsiribihina Rivers will create the conditions for change in the production patterns of thousands of rural families. Until now, the lack of regular river transport services at crucial times of the year has held back investments for farmers to produce potentially lucrative cash crops, such as haricot beans or cotton. Local farmers have been denied access to major rural credit schemes because of a reluctance on the part of credit agencies to lend to producers in remote areas. The procurement of inputs will become less problematic, and the improved access offered by the river will help in the distribution of social services. On the Tsiribihina River, employment opportunities will increase in the so-far embryonic tourism industry. Other activities supported under subsequent APLs were also subject to a prefeasibility screening. The concessioning of the Northern Railway will help preserve some 1,500-1,600 employment positions, which are otherwise at risk were the railway to continue to lose traffic. A number of important rural mining operations will benefit from the more reliable and frequent operation of the least-cost mode for their transport. The prospects for two proposed mining operations, potentially offering significant rural employment opportunities, will also be enhanced if railway service is restored to reasonable levels of efficiency. Regarding the Southern Railways, ongoing USAID work suggests that, despite their very low traffic, discontinuance of the services would bring an accelerate environmental deterioration in the network's servicing area. Upon completion of the USAID work, an analysis of the economic role of the Southern Railway, including externalities, will be carried out as a basis to assess the rationale for public investment in the context of a public/private partnership. The rehabilitation of secondary and tertiary airports and the establishment of private/public partnerships will help expand air services using appropriate equipment. Business development and government administrative efforts in the remote areas served by the secondary and tertiary airports will benefit. The future development of tourism, and the employment opportunities it affords, depends on regular and reliable air access. The secondary and tertiary airports also play a crucial role in the distribution of emergency assistance following the extreme climatic events that occur often in Madagascar. The rural road component envisaged for APL-3 will reduce transport costs and provide year-round access to rural dwellers through the upgrading of existing roads. The rehabilitation of rural roads will help extend social services to people in enclave areas and could lead, if rural credit schemes are extended to unserved areas, to the production of cash crops, thus increasing rural incomes. 4. Institutional and implementation arrangements: The institutional and implementation arrangements for the project are part of the restructuring process initiated by MOTM and MOPW. Therefore, technical assistance and support to strengthen program and project management capabilities will take place within the broader framework of strengthening the capacity for programming, procurement, financial management, and disbursements of both ministries. Implementation period The implementation period for APL-1 would be four-and-half years-i.e., from 08/01/00 to 01/31/05, and about eight-and-half years for all the APL phases (completion date 01/31/09). Executing Agencies The project will have two executing agencies: MOTM and MOPW. Each executing agency will be responsible for project activities under its tutelage. To this extent, MOTM will be the executing agency for the: (i) Regulatory Reform and Private Sector Development Component, except the technical assistance for the commercialization/liquidation of MOPW's Production Units and the technical assistance and training for the domestic construction industry; (ii) Organizational Restructuring and Sector Policy Component, except the activities related to the restructuring of MOPW and to the preparation of the social protection program; (iii) Environmental Protection Component, except the works and studies for coastal protection, and the procurement of emergency metallic structures; and (iv) 11 Rehabilitation of Economic Infrastructure, except the works for periodic maintenance of national roads, the feasibility studies for the rehabilitation of national roads and for the improvement of rural roads, and the consultant services for supervising road works. All activities not executed by MOTM will be executed by MOPW. The physical components, depending on their complexity, will be carried out by foreign or domestic contractors, on the basis of their expertise and geographical distribution, and will be supervised by consultants. Project coordination and implementation A Program Executive Secretariat (PES) will be established to coordinate project implementation. The PES will be headed by one Executive Secretary jointly nominated by the Ministers of MOTM and of MOPW, to whom she/he will be accountable. PES will also be entrusted with the coordination of other major donor-assisted programs, including the EU's and the ADB's. The PES will ensure the interfacing of the staff of both executing ministries, through the respective Secretaries General. The PES will be further responsible for ensuring that stakeholders are involved with program implementation. These stakeholders would include the Road Fund Board, Associations of Transporters and of Transport Users, Chambers of Agriculture, Commerce and Industry, and other interested parties, including NGOs. The PES will, among other things, be responsible for: (i) selecting consultants for technical assistance, training, and studies; (ii) issue tender documents for civil works, goods and services, evaluate tenders and make proposals for awards; (iii) ensure compliance with government and IDA's environmental and social safeguard policies, including any required mitigation measures thereof; (iv) ensure the implementation of the financial management action plan; (v) manage disbursements, and replenishment applications for the Special Account; (vi) contract out project financial and procurement audits; (vii) monitor the execution of works; (viii) prepare quarterly progress reports for IDA; (ix) promote regular consultations with relevant stakeholders as well as the dissemination of information to the press; (x) monitor the Project Implementation Plan (PIP) and prepare semi-annual progress reports; (xi) prepare the annual reviews of project implementation; and (xii) ensure coordination with GOM's rolling pluriannual expenditure program. PES staff will include specialists in transport policy, roads management, financial management, procurement management, environmental and social protection, and information and public affairs. Two project units, one in MOTM and the other in MOPW will assist PES. Each unit will keep an accounting system satisfactory to IDA standards; prepare tender documents; manage contracts; and prepare all basic information on project management as required by PES. Each of these units will include a Chief Account, a Procurement Officer, and two Accountants. Accounting, Financial Reporting, and Auditing (i) Accounting system Since the project's financial management system has to be created, an assessment was carried out at pre-appraisal stage to define the characteristics of the system and to determine an action plan to ensure compliance with the financial management capacity required by IDA standards. The MOTM and MOPW will maintain separate accounts for all transactions related to each component for which they have implementation responsibility, and will produce their individual annual financial statements in accordance with internationally accepted accounting principles. PES will consolidate the project financial statements at the end of each fiscal year. To strengthen both MOTM and MOPW financial management systems and to build their capacity to produce Project Management Reports (PMRs), an agreed action plan by the borrower has been proposed afler the assessment (see Annex 8). The main measures to be completed before the date of credit effectiveness include the recruitment of key accounting staff (Chief Accountant and two qualified and experienced accountants for each 12 executing agency) to deal with accounting and financial management; the implementation of the accounting procedures manual to provide information for record keeping and control over assets; the appointment of an accounting.firm to audit the project's financial statements. The recruitment of a consulting firm (specialized both in accounting and Management Information Systems) to provide appropriate computer software for financial management and accounting will start immediately after project effectiveness date. The recruitment will be conducted through a competitive process in accordance with terms of reference approved by IDA. (ii) Project Management Reports In accordance with Bank policy and procedures, the project needs to adopt a financial management and reporting system in compliance with the Loan Administration Change Initiative (LACI). Since the MOTM and MOPW financial management systems will be new, and the capacity of the accounting staff has to be developed, the project cannot yet produce a Project Management Report. During the first two years the project will use the traditional disbursement procedures and will submit, in addition to its basic financial statements, the following quarterly reports: a Summary of Sources and Uses of Funds, a Contract Expenditure Report-Goods and Works, a Contract Expenditure Report-Consultants, a Procurement Management Report-Goods and Works, a Procurement Management Report-Consultants. IDA would do an assessment before the end of this interim period to determine whether the MOTM and MOPW meet the eligibility criteria established under LACI. (iii) Auditing An independent auditor, acceptable to IDA, will audit the project's financial statements. The auditor will carry out this audit in accordance with international auditing standards and will provide a separate opinion on the financial statements, use of the special accounts, and statement of expenditures. The auditor will communicate in the audit report, especially in the section Management Letter, significant deficiencies in the design or operation of internal control and propose relevant recommendations for its improvement. The audit report will be sent to IDA within six months after the closing date of the fiscal year. The terms of reference for the audit were found acceptable to IDA standards. Disbursements Disbursements from IDA will be made on the basis of incurred eligible expenditures. IDA will make advance disbursements from the proceeds of the Credit by depositing into two Borrower-operated special accounts to expedite project implementation. One special account, in the amount of US$1.9 million will be opened in the name of MOTM, whereas the second one in the amount of US$2.6 million will be open in the name of MOPW. The advance to the special accounts will be used by the Borrower to finance IDA's share of project expenditures under the Credit. Another acceptable method of withdrawing funds from the Credit is the direct payment method, involving direct payments from the Credit to a third party for works, goods, and services upon the Borrower's request. Payments may also be made to a commercial bank for expenditures against IDA special commitments covering a commercial bank's Letter of Credit. IDA's Disbursement Letter will stipulate a minimum application value for direct payment and special commitment procedures. These disbursement methods will be used during the two first years of project implementation. After this period, it will be determined whether the Borrower is ready to implement the new LACI disbursement system. Upon Credit effectiveness, the two executing agencies will submit a withdrawal application for an initial deposit to the Special Accounts, drawn from the IDA credit, in the amounts agreed during negotiations. Replenishment of funds from IDA to the Special Accounts will be made upon evidence of satisfactory use of the advance, reflected in the SOE's and/or on full documentation for payments above the SOE thresholds. Replenishment applications should be submitted regularly. If ineligible expenditures have been made from the Special Account, the Borrower will be obliged to refund the same. If the Special Accounts remain inactive for more than six months, the Borrower may be requested to refund to IDA the amounts advanced to the Special Accounts. 13 Monitoring and evaluation (i) PES will develop a monitoring and evaluation system, based on the findings of a project launching workshop to be held in July 2000; (ii) semi-annual progress reports will be prepared on the basis of the project implementation plan; and (iii) a completion report will be submitted by the government to IDA within six months of Credit closing. Annual reviews of project implementation will be carried out before the beginning of each Borrower's fiscal year to facilitate annual program budgeting. A mid-term review will be carried out 18 months after Credit effectiveness. D: Project Rationale 1. Project altematives considered and reasons for rejection: Two main project alternatives were considered and rejected in favor of the selected one. The first alternative involved the cross-sectoral approach followed in project design, and the other the project scope. As to the project design, an alternative approach would have involved the consideration of parallel projects, each one supporting one sub-sector and having a single executing agency. This alternative could well be more focussed in scope and easier to implement. The institutional interlocutor would also be sharply defined, and the beneficiaries and stakeholders more homogeneous. In the end, this alternative was rejected in favor of a cross-sectoral approach since: (i) there have to be complementary investments, such as interfaces among various transport modes, in the context of the privatization of modal companies such as the railways; (ii) the prospects for increasing gains in market share from the privatized railways, should be taken into account into the planning of road investments; (iii) the provision of infrastructure to facilitate agricultural-based exports should reflect the full logistic chain, ranging from shipping and port services to feeder, rural, and main roads; and (iv) the advantages of addressing concessioning, regulatory reform, and organizational restructuring issues on a cross-sectoral basis, involving both the transport industry and infrastructure provision. Regarding project scope, and in order to facilitate restructuring and private participation in the sector, consideration was given to the inclusion under APL-1 of a staff redundancy program for sector agencies, as well as to the pros and cons of making specific provision for the financing of public/private partnerships under the Credit. As to the financing of staff redundancies, it was decided to include provision for them only under APL-2, since: (i) a compensation system for the various categories of public employees should first be defined, in order to avoid the establishment of precedents which may not be affordable for the civil service as a whole; (ii) detailed social mitigation plans satisfactory to IDA standards remain to be prepared and will be so under APL-1; and (iii) the privatization transactions should first be closed, so that a minimum number of redundancies can be established. Regarding the explicit provision of financing for public/private partnerships, one alternative considered was its complete exclusion in view of the risk that it would end-up inhibiting private willingness to invest. In the end, the alternative selected involved an allocation of IDA funds to private/public partnerships, whenever available evidence indicates that the deals will not reach closure without the provision of some public financing. This is the case of secondazy and tertiary airports, transport terminals, and railways considered under APL-2. As to secondary and tertiary airports, the Privatization Commission has identified them as being unlikely to attract private investment, although private initiative may be secured for its operation after the state undertakes some minimum investment. In the case of transport terminals, the business plan by the potential concessionaire for the Northern Railways specifically considers public investment in the terminal as a prerequisite for taking the concession. The potential concessionaire for the Northern Railways has also indicated his willingness to mobilize finance for its proposed minimum investment program, but at closure the concessionaire may not want to undertake some remaining key safety investments. As to the Southern Railways, it is most unlikely that any private operator is attracted without a minimum front-end investment undertaken by the public 14 sector. In any case, no IDA funds for public/private partnerships would be allocated without an assessment of the need for public investment through a bidding process. Even so, cost-recovery mechanisms would be put in place so that the state can recover any up-front investment through concession fees. 2. Major related projects financed by IDA and/or other development agencies: (conipted and ongoing) Implementation Developmerit Progress (IP) Objective (DO) More recentlycompleted The last of the weplve IDA projects in the Roads Infrastructure - Seventh Highway Project transport sector was completed in 1996 -sPoets Infratnucture - Port rehabilitaton Project exEmergency rehabilitation -Hurricane Emergency rehabilmtation Project moRaieay Infrastructure . Third Railtay Project asoivatin withothee rt snd Capacfty Building Project. IP/DA Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons leamed and reflected in the proaect design IDA has been extensively involved in the transport sector of the Republic of Madagascar, by supporting noelve transport projects between 1966 and 1996 totaling over US$200 million. Seven were in the roads sub-sector, two in the ports sub-sector and three in the railway sub-sector. These initiaeives doifered substantially in scope, magnitude and the objectives they aimed to achieve. In addition some were executed in times marked by polivical unrest, economic stagnalion, and farndamental changes in overall gaonomic potcies, which impacted project implementation. Many lessons leaased are thus project or mode specific. However, the following general trends can be regarded as lessons leaned from IDA's association with the transport sector of Madagascar. A strong commitment to project objectives is crucial to successful project implementation, while the scope for political interference in technical decisions needs to be limited. In the past, the Malagasy Govenment had shown varying commitments to project objectives. In some cases, the government did not honor project implementation programs agreed upon during preparation and confirmed during negotiafions, as was frequently evidenced by changes in project scope. The postponement of project implementation deadlines increased costs, which had a considerable impact on the attaning original objectives. Every effort must be given to ensuring that initial schedules are observed. ID:A also needs to guarantee timely project execufion through adequate supervision. The Malagasy Government needs to ensure counterpart financing and observe the covenants and other measures contained in the credit agTeements. The insoitutional capacity of the executing agency needs to be carefully assessed. In many of the past iniciatives, project implementation was negatively impacted by the limited resources (both human and financial) of the Malagasy Govertment Weak administrative performance resulted in delays in equipment procurement; the evaluafion of bids; preparafion of contracts; and approval of amendments to contracts. Delays in contracting and payments to contractors were partly due to insufficient counterpart funding. Weak administrative performance could be attributed to shortages in qualified personnel, discontinuity in mid-level staff assignments, and cumbersome administrafive procedures. Technical assistance and solutions like the use of procurement agents have helped to address these conceems, but it seems crucial that all administrative and disburscment procedures are simplified. 15 Past projects have been very amnbitious with unduly high operating targets. Future efforts should design projects that are focused and limited in scope. Open dialogue between IDA and the Malagasy Government is essential for a clear understanding of the context in which operating targets and recommendations are made. This will prevent unrealistic project objectives, the setting of unduly high operating targets, and executing agencies implementing World Bank recommendations out of context. Past experience has shown that project outcome could be enhanced by improving information sharing inside and outside of the executing agency. The wide circulation of a regularly updated progress report on all operations was particularly useful because it constituted an aggregated and reliable source of information. An effective system for managing the information required for supervision and implementation completion reporting has also been useful. Frequent donor coordination meetings are essential to the success of some initiatives. Organized donor meetings prevented divergent courses of action among donors, which are sometimes exacerbated by conflicting personalities among donor representatives or the excessive influence of in-house long-term consultants. The road projects have resulted in a shared view about the importance of road maintenance. Delays in implementing effective maintenance programs have been attributed to a lack of resources (equipment, limited funds, management skills, etc.). Autonomous contracting agency(ies) should manage the maintenance programs, and private contractors should undertake maintenance works as opposed to force account. Fostering the effective development of the local construction industry to undertake maintenance works was also highlighted as a key priority. 4. Indications of borrower commitment and ownership: In 1993, Madagascar presented the donor community a national transport plan prepared with IDA financing. Thereafter, the government's commitment to install a comprehensive transport sector strategy is documented by the following milestones: (i) A Transport Task Force (GTIT) involving all interested sector ministries prepared a major transport program for 2000. As part of this exercise, the GTIT has already prepared a policy and strategy document, a master plan, an action plan which defines the legal framework for the sector, a document detailing the pipeline of physical projects considered for the sector, and a final document synthesizing the four previous documents. All these documents have been discussed with IDA; (ii) In close consultation with IDA, MOTM has prepared a transport policy letter indicating the government's strategy for the years ahead. MOPW has also prepared a strategy for the road sector detailing the implementation of its reform program; (iii) GOM has also produced an economic policy document, which clearly spells out priorities for Government action, in particular the new orientation for the transport sector, focusing on state divestment from transport services and operations and on the corporatization and/or privatization of productive activities in infrastructure provision; (iv) GOM has moved ahead with the privatization and/or concessioning of sector parastatals and other transport facilities with the support of the IDA-financed Private Sector Development and Capacity Building Project (Credit 2956MAG). During project preparation, MOTM has also prepared the legal and regulatory framework for the progressive liberalization of air transport services, the concessioning of airport facilities, the setting up of an autonomous Regulatory Agency for Civil Aviation (ACM), as well as initiating legislation for creating autonomous port agencies and an autonomous regulatory agency for ports and shipping; and (v) A Road Fund was recently created, with its Board dominated by private sector representatives, a 16 road fee established, and mechanisms for the collection and channeling of revenues to the fund account are already in place. 5. Value added of IDA support in this project Through its long-lasting association with Madagascar, IDA has developed a deep knowledge of the country's transport sector. Recently, IDA has assisted the government in formulating its transport strategy and in liberalizing the sector. IDA is therefore well prepared to assist in the implementation of the government transport reform program. IDA has also been strongly associated with the reform process in road management and financing- directly and through the Road Management Initiative (RMI) and the Rural Travel and Transport Program (RTTP). This reform program has produced synergies with the French Cooperation and the European Union. As to the operations of the recently created Road Fund, IDA's cross-country experience also gives it a unique advantage in combining international best-practices with the specifics of Madagascar. In the shipping and port sub-sector, IDA has also played an important role in the restructuring process being implemented at the main port of Toamasina, and in the liberalization of shipping and port services. IDA is therefore well positioned to help move the process further ahead, in particular in the concessioning of commercial activities in Toamasina, and in the creation of autonomous port authorities for secondary and tertiary ports. IDA's involvement in the other Indian Ocean ports-and with shipping conferences serving the region, in particular in Mauritius, Mozambique, and Tanzania-gives it another advantage in addressing issues related to the maritime sector. As to the aviation sub-sector, IDA has important advantages to offer. The experience gained with the recent liberalization of air transport in Latin America, and IDA's ongoing dialogue with the Southern Africa Transport and Communications Commission (SATCC) and neighboring countries about the harmonization of more liberalized policies are unique. As to the railways, IDA has by now accumulated a substantial experience in designing successful concession arrangements, ranging from the high-trafficked Latin America railways to the relatively lower-trafficked African-ones. IDA is therefore in a position to add value in matters related to the independent financial advisory services; social protection of displaced workers; risk allocation between the conceding authority and the concessionaire; internalizing regulatory issues into the concession contracts, including environment and safety; minimizing emerging post-privatization issues through appropriate contract design; and dispute settlement. The important involvement of IDA in Madagascar and the strategic focus provided by the Country Team are also instrumental in impact of the assistance to the transport sector, through articulation with the civil service reform program; privatization program; and decentralization strategy, as well as through several linkages, particularly in terms of growth and poverty alleviation; fiscal policy; agricultural development; public expenditure programming; and environmental mitigation. IDA's comparative advantage in contributing to the reform and development of the transport sector are well recognized by the stakeholders active in Madagascar, including the donor community, the private sector, and theNGO's. 17 E: Summary Project Analysis: (detailed assessments are in the project file, see Annex 8) 1. Economic: (supported by Annex 4) [xj Cost-Benefit Analysis: APL-1 NPV (@12%) =USS 23.1 million; EIRR (weighted by Investment) = 24.0 % (i) APL-1 The investments under the organizational restructuring and the improvement of economic infrastructure components were subject to cost-benefit analysis. Investments in the development of the regulatory framework, which are mostly complementary to the privatization of parastatals undertaken under the IDA-financed Private Sector Development and Capacity Building Project (Credit 2956MAG), were assessed on a cost-effectiveness basis. Physical investments on emergency coastal protection and other investments on environmental mitigation were also assessed on a cost-effectiveness basis. The cost-benefit analysis has been carried out at several levels in accordance with the project's comprehensive nature, involving investments across a number of sub-sectors. Individual sub-projects have been appraised, and the consolidated investment package of APL-1 has alsG been assessed. In the case of the road sub-sector, an appraisal of the restructuring of the MOPW has also been done. A discount rate of 12 percent has been used; it represents fairly the opportunity cost of capital in Madagascar. The program of physical works proposed for the road sub-sector addresses the project objective of infrastructure renewal. Benefits from the investments in periodic maintenance are expected to flow predominantly from the reduction in vehicle operating costs and from time savings that arise as a result of improvement in the condition of the roads selected for treatment. IDA consultants undertook an initial strategic appraisal of investment alternatives for some 8,500 km of Madagascar's primary road network. Various mutually exclusive expenditure strategies were simulated for the primary road network and subject to cost-benefit analysis using the Bank developed Highway Design and Maintenance Model (HDM-Release III). This assessment was based on physical measurements of road condition made available by MOPW, and based on a sound methodology developed with the assistance of the French Cooperation. The rehabilitation and periodic maintenance costs were estimated for 1999 by MOPW and reviewed by IDA staff. Vehicle operating costs were similarly updated to 1999, based on past consultant studies. The initial traffic estimates for the road sections examined were obtained from traffic counts undertaken between 1994 and 1998 and updated to 1999. A detailed analysis of fuel sales and vehicle fleet data showed that growth in road transport activity has exceeded the growth in the economy. Traffic forecasts were prepared for the period through to 2022, and traffic growth is expected to exceed economic growth over the project horizon. The difference in growth rates between the economy and traffic should narrow in later years as the economy matures. As a result of the strategic analysis at the network level, and taking into account the roads already being financed by the EU and the ADB, four primary roads totaling 527 km have been selected for periodic maintenance under APL-1. The EIRR of these individual road sub-projects lies between 14.0 percent for RN 25-45 and 25.6 percent for RN 44-3A, with the overall package having a consolidated EIRR of 19.5 percent (weighted by investment), and an NPV of US$ 9.6 million. Sensitivity tests indicate that all the sub-projects, except RN 25-45, remain viable under assumptions of an increase in construction costs of 20 percent and a decrease in net benefits of 20 percent. The proposed investments in RN 25-45, and the foreseen evolution of traffic levels, should be carefully monitored during project implementation. The restructuring of the MOPW is designed to help the government divest productive activities that can be more efficiently executed by the private sector. The project will finance a comprehensive program of technical assistance and training designed to equip the new organization for the planning, contracting, 18 management, and supervision of maintenance works that will increasingly be carried out by the private sector. Provision is also made under the project to corporatize the production units of the MOPW with a view to enable their later privatization, as well as for training private sector construction companies to further develop their management skills. The benefits of MOPW's restructuring will consist primarily of increased productivity in the execution of road rehabilitation and maintenance works by the newly- corporatized units and the small domestic contractors. The NPV of this component is estimated at US$4.4 million and the EIRR at 25.6 percent. Even under assumptions of a 20 percent increase in costs and a reduction of 20 percent in the estimated productivity gains, investments in this component would still yield an EIRR above 18.4 percent. The port sub-projects are designed to arrest productivity declines in the western ports of Mahajanga and Toliary, which have been caused by the deterioration of physical infrastructure in the ports. Recently, the private sector has become involved in both ports and has made investments in cargo handling equipment The full benefits of these private-public partnerships cannot be realized without significant rehabilitation works to quays, land-side approaches, and backup areas. The proposed investments in both ports will reduce the number of ship days per unit of cargo because of increased productivity in shore-based cargo handling and in ship turnaround. The estimated EIRR for the investments at Mahajanga is 29.8 percent, and at Toliary is 27.5 percent. The economic feasibility of both projects is robust with sensitivity tests showing that the EIRR remains at above 21.0 percent in the case of a 20 percent increase in construction costs and a 20 percent decrease in benefits The project will finance a program of navigation works and landing stage improvement to assist the further development of river transport in Western Madagascar. The hinterlands of the Sofia and Tsiribihina Rivers offer significant agricultural potential. Currently, a considerable area of land suitable for cash crop production is not being cultivated because of a lack of river transport at critical times of the year. The works proposed under APL- I will lead to an extension of the navigation system through channel improvement. Landing stages will facilitate the movement of goods and passengers. Studies carried out for the MOTM show that the benefits accruing to the Sofia River sub-project will arise largely from the expansion of the area under cash crop cultivation. A substantial increase in the export trade in rice is expected to materialize following the proposed investment. There will also be cotton production, something for which the Sofia River hinterland is ideally suited. The benefits of the Tsiribihina River sub-project following the extension of the navigation season and the deepening of navigation channels will arise from savings to medium-distance passenger travel and goods trade, savings to local passenger traffic, growth in the emerging tourism industry, and from the net value added of induced agricultural production. The EIRR of the investments in the Tsiribihina River, including a complementary investment of rural roads to provide access to riverside landing stages for surplus cash crop production, is estimated at 15.2 percent while the EIRR for the investments at the Sofia River is estimated at 24.5 percent. The EIRR remains above 12 percent for the sensitivity tests carried out on the basis of a construction cost increase of 20 percent and of a benefit reduction of 20 percent. (ii) Subsequent APLs A number of investment proposals considered for implementation later in the project have been submitted to pre-feasibility screening at the time of appraisal. These investment proposals cover physical investments under private/public partnerships in the railways and airport sub-sectors; a rural road program; a primary road rehabilitation program; and a staff redeployment program. The pre- feasibility screening reflects the data available at the time of appraisal, and in no way is intended to replace a full beneftt/cost analysis prepared prior to the triggering of each APL. The RN CFM has suffered a significant loss of traffic because of a lack of investment funds for the renewal of track and equipment. At present, the GOM is negotiating with a potential concessionaire to operate the RN of the CFM over a 20-year period. The investment costs include an initial tranche of 19 US$ 20.7 million over the first five years of operation. For the most part the concessionaire will bear this cost, although the government has been asked to help provide a complementary multimodal terminal in Antananarivo. The concessionaire further proposes to provide a severance package to 460 workers whose services will not be required under concession operation. The benefits of the concessioning of the RN CFM arise from the recapture of traffic that has largely transferred to the more reliable road mode. Whilst the RN CFM carried 211,000 mt of traffic in 1998, the potential concessionaire's business plan indicates that traffic will be recaptured quickly, growing to 580,000 mt in the fifth year of concession operation. The avoided costs of road transport make up the majority of benefits, but the multimodal terminal and the redeployment of surplus RN CFM staff elsewhere in the economy also enhance the viability of the proposal. The pre-feasibility analysis indicates that the total investment in the concessioning of the RN CFM would yield an EIRR of 29 percent. The sensitivity tests show that the economic robustness of the proposed concessioning, with the estimated EIRR remaining at over 20 percent in the case of increases in either investment costs or operating costs. The viability of the sub-project is sensitive to assumptions about avoided costs of road transport in that a 20 percent reduction in recaptured traffic considerably lowers the EIRR yet to a still attractive 13.6 percent. As to the concessioning of the Southern Railway, it is unlikely that investments can be justified on a diverted-traffic basis only. The economic rationale for a minimum investment program will have to be built upon the substantial positive externalities in terms of environmental preservation as anticipated by the USAID team working in the railways area of influence. As part of the restructuring of the civil aviation sub-sector, a program of renewal and rehabilitation of secondary and tertiary airports is proposed under APL-2. An indicative switch-off analysis has been carried out and indicates that the viability of investments in specific airports will have be confirmed in the course of a detailed examination which will be undertaken under a study financed under APL-1. The rural road component proposed for implementation under APL-3 will involve the rehabilitation and upgrading of some 1,000 km of rural roads in various parts of the country. An indicative switch-off analysis indicates that the breakeven level of traffic for rural roads is of the order of 100 vehicles per day. For lesser trafficked roads, a separate analysis indicates that only a very small percentage of road hinterlands need be brought into production of mixed food and cash crops to render the upgrading of these roads viable. Under APL-4, it is proposed to upgrade about 900 km of the primary road network to be implemented between 2002 and 2007. A preliminary economic scrutiny based on the network-wide analysis carried out for APL-1, and based upon the same assumptions, indicates that that the program identified has a positive NPV above US$50 million, at a 12 percent discount rate, and an EIRR over 20 percent. During APL-2, a social protection program will be prepared to mitigate the impact of privatization and restructuring on surplus staff of the MOPW and the MOTM, as well of associated agencies. The MOPW and the Civil Service Reform Committee have drawn up an organization plan for the restructured central establishment of the MOTP. Based on this plan, there will be estimated 800 surplus staff members for the new organization, as a result of restructuring the two ministries and associated agencies. The costs of the social program include redundancy packages and training for surplus staff. The benefits arise from the redeployment of surplus staff elsewhere in the economy and from the unpaid salaries, as valued at their opportunity costs. Results of this preliminary analysis indicate an NPV, at a 12 percent discount rate, in excess of US$ 2.2 million and an EIRR of about 42 percent. In view of the uncertainty of this component, stochastic risk analysis was also used to test the results of the assumed base case scenario. As a result, and when risk is factored into the analysis, the most likely value for the EIRR for this component is about 31 percent, thus considerably lower the value estimated for the base deterministic scenario. Even so, there is a 100 percent certainty level that the EIRR for this component will be 20 percent or more, thus well above the 12 percent value assumed for the opportunity cost of capital in Madagascar. 20 2. Financial (supported by Annex 5) [x] FinancialAnalysis (in constantprices): APL-1 NPV(@,6.5%)=US$ 0.0 million; EIRR (weighted by Investment) = 6.5 % Under the project, the financial base of infrastructure provision and maintenance will be considerably strengthened. Road maintenance activities will be supported by a more equitable system of specifically targeted road user charges channeled through the Road Fund which, in turn, will progressively reduce the demands on the general revenue account. The RNCFM will experience significant asset renewal, and enhanced operations will contribute to government finances through payment of concession fees to the government. The autonomous regulatory agencies for aviation and for shipping and ports will also have their dedicated financing arrangements through user fees. The financial analysis shows that cost- recovery of the proposed port and river transport investments through specific user fees can be achieved without unduly affecting sub-project viability through a loss of trafftc. The switch-off analysis carried out for the rehabilitation of secondary airports, although preliminary, shows that a user fee on freight and passenger traffic struck at rates pertaining in the region and designed to recover proposed investments would be feasible. (i) Financial Analysis: APL-1 In the ports sub-sector, the imposition of a user charge averaging about $3 per tone of cargo would be sufficient to recover the proposed investments. An ad-valorem basis for the user fee would be feasible given the extremely high value-to-weight ratios of the growing exports of fish products helped by the investments. A final decision on a port user fee structure, including the funding of the Shipping and Ports Regulatory Agency, will be undertaken in the context of the technical assistance to the port sub- sector undertaken during APL-1. The proposed river transport works under APL- 1 would also require user fees. The level of such fees, were they levied on the basis of river transport tariffs, cause an increase in tariffs of 33 percent on the Tsiribihina River and 54 percent on tariffs charged by operators on the Sofia River. Even if a traffic loss of about 10 percent could be expected in Tsiribihina traffic as a result of the user charges, the EIRR would still be above 12 percent, the value assumed for the opportunity cost of capital in Madagascar. Most of the benefits from the Sofia River improvements result from the induced production of rice and cotton. Even if the imposition of the user fee required to ensure financial viability would reduce the net value added accruing to new producers by about 12 percent, the proposed investment would still yield an EIRR above the opportunity cost of capital. Road investments also received a financial analysis. A revenue stream was identified as a function of the level of road fee levied through automotive fuel consumption in the project roads. Overall, short-run variable costs of road use are covered by the fee revenue stream by a wide margin, with a NPV of US$4.8 million estimated in constant terms at a discount rate of 6.5 percent. However, and given the uniform level of the road fee, there are some cross-subsidies between various categories of roads and different types of vehicles. Even so, only one road, the RN 25-45, fails to meet short-run cost recovery scrutiny. The road policy study financed under APL-1 will access the impact of these distortions and propose corrective measures, taking also into account other taxes levied on vehicle ownership and use. (ii) Financial Analysis: Subsequent APLs The financial viability of the railway and civil aviation projects subjected to pre-feasibility analyses will be assessed in detail in the course of APL 1. Negotiations between the government and a potential concessionaire for the operation of the RN CFM began during the Appraisal Mission. A preliminary analysis carried out using elements of the potential concessionaire's business plan indicates that implementation of the concession would likely have a positive impact on the government's financial account. Most important, the value of railway assets will increase substantially through the significant investment program envisaged. In addition, annual concession fees still under negotiation would accrue to the General Revenue account redressing the drain on government finances that took place over the 21 last decade. A concession fee that enables the concessionaire to earn a return on investment significantly above the cost of borrowing on international capital markets seems consistent with the traffic assumptions of the business plan. The switch-off analysis carried out for the component establishing private-public partnerships for the rehabilitation and operation of secondary and tertiary airports shows that a user fee of about US$ 7 per passenger, probably levied as a departure tax, combined with a freight charge, would allow for the recovery of the needed investments in rehabilitation. Such a fee is in the range of departure taxes levied in Eastern and Southern Africa. The level of the required user fee would have to be determined in concert with other typical civil aviation charges, such as air navigation fees and landing fees. All user fee issues will be addressed in an airport study undertaken under APL-1. (iii) Fiscal Impact The project will have a positive impact on government finances through the shifting of a significant amount of financial responsibility from the government to transport operators and users and through increased general revenues through taxes. Road maintenance funding requirements will be met by additional revenues raised through a new road user fee, thus reducing dependence on general revenue funding. Additional tax revenue will also be generated through other taxes on fuel. Regarding the other sub-sectors, in addition to user fees, which will finance capital works and maintenance expenditures, the government will also receive tax revenues associated with component implementation. During APL-1, the Bank and other donors will help the government address the maintenance backlog. Currently, revenues from the road fee accruing to the Road Fund account to less than 30 percent of maintenance expenditure of about US$9.0 million equivalent. As revenues from the road fee progressively become the dominant source of funding for the Road Fund, so will general government revenue funding decline. Starting in 2004, revenues from the road fee are projected to reach an equivalent US$15.9 million, thus fully matching the estimated recurrent road expenditure requirements on primary and rural roads from that year onwards. The NPV, at a 6.5 percent discount rate, of the incremental fiscal revenues resulting from general taxes levied on the road fee is estimated at about US$31 million in constant terms. As to the Ports of Tuleara and Mahajanga, an NPV of US$6 million in constant terms, at a 6.5 percent discount rate, is estimated from the tax revenue levied on port charges and shipping bills for incremental traffic arising from project implementation. Regarding the improvements on the Tsiribihina and Sofia Rivers, the NPV of the tax revenues levied on user fees and induced agricultural production and arising from the incremental traffic and tourism flows on the rivers is estimated at US$1.8 million, in constant terms and also at a discount rate of 6.5 percent. Preliminary analysis indicates that the concessioning of the railways will have a positive impact on the govermment's general revenue account. The private-public partnerships proposed for the civil aviation sub-sector will also contribute to government coffers with no direct subsidization required. In general, the user fee revenue accruing to transport operators and the incremental tax flows on benefits and costs of the various sub-sector components make up the easing of what was previously a considerable burden caused by the government's substantial presence in the transport sector. 3. Technical Main physical project components under APL-1 include civil works and consultant services for periodic maintenance and rehabilitation of national roads, and for port rehabilitation and the improvement of river navigation. GOM, with the assistance of consultants, has already prepared detailed designs, economic feasibility studies, and Environmental Impact Assessments (EIA) for each sub-project, following Terms of Reference agreed upon with IDA. The EIAs were validated by the National Environmental Office (Office National de l'Environnement, ONE), and found compliant with the 22 recommendations of the Environmental Study for the Transport Sector undertaken during project preparation (see 6 below). The final road designs are based on Madagascar standards, and they reflect existing road condition and the foreseeable traffic levels. The final designs for the port and river rehabilitation works also reflect the findings of available hydrological and maritime studies and conform to international standards. The final design for the emergency coastal protection works will be prepared upon effectiveness of the Credit. Contract documents, incorporating the environmental mitigation provisions recommended by EIA and the ONE, have also been prepared for all civil works and goods under APL-1, and were reviewed and agreed upon during negotiations. The specifications for the passenger traffic control system at international airports would be prepared under a study financed under APL-1. All terms of reference for technical assistance, training, and studies have also been prepared in a way acceptable to IDA. 4. Institutional: a. EXECUTING AGENCIES: As discussed in C4, the project will have two executing agencies: MOTM and MPW. MOTM will have overall responsibility for the ports and shipping, rivers, civil aviation and environmental components whereas MOPW will be responsible for the road components. Responsibility for the implementation of the transport terminal, as well as the airport and railway components under subsequent APLs, will rest with MOTM. b. PROJECT MANAGEMENT: As also discussed in C4, project management will be entrusted to a Program Executive Secretariat, the PES. The PES will be jointly accountable to the Minister of MOTM and to the Minister of MOPW. The PES will ensure that all relevant stakeholders, including the private sector, NGOs and local levels of Government are associated with project implementation. The PES will also have overall responsibility for project accounting and financial management, procurement, disbursements, financial and technical auditing, and project monitoring. The PES will also be used as the focal point for strengthening the capabilities of both ministries in sector policy, financial management, and project analysis and management, including environmental and social assessment and mitigation. To this extent, the project will provide for required individual consultant services to be used by PES on a need basis during project implementation. PES will also become responsible for the implementation of donor programs, including the EU's and the ADB's. 5. Social: A social impact assessment was carried out as part of a comprehensive environmental study for the transport sector conducted prior to project appraisal. This was reviewed by IDA and found compliant with IDA's guidelines on involuntary resettlement, indigenous people, and cultural property. Although no involuntary resettlement has been identified as part of the investments financed under APL-1, a comprehensive framework would be developed during APL-1. This framework will build upon existing national legislation and will focus on relevant provisions to ensure that if land acquisition is required under the project, compensation takes place at replacement value. As to indigenous people and cultural property, no adverse impacts were identified as part of the environmental assessment process. Nevertheless, an assessment of institutional capabilities in both ministries was carried out during appraisal, towards ensuring that, if so required during subsequent APLs, the necessary mitigation measures can be identified and implemented. To this extent, both MOTM and MOPW -have entered into agreements with the ONE, which were found acceptable to IDA standards. And as pert of the APL process, no investment would be declared eligible for IDA financing unless it is complianzt with all safeguard policies in a way satisfactory to IDA. 23 6. Environmental assessment: Environmental Category X A [ B C c During project preparation, a comprehensive sectoral environmental assessment for the transport sector was canied out by Malagasy consultants at the National Center for Research on the Environment (Centre National de Recherches sur l'Environnement, CNRE) under the PPF. This study provides a systematic analysis of all potential biophysical and social impacts associated with the government's transport program. The study recommends a strategy to address the adverse impacts, taking into account the local/regional specificities of Madagascar and the different kinds of investments undertaken. The study also provided the basis for the specific environmental impact analyses and related mitigation measures for the sub-projects financed under APL-1. These specific analyses were approved by the Malagasy National Environmental Office (Office National de l'Environnement, ONE), in accordance with the country's own national legislation. As APL-1 sub-projects are concerned mainly with maintenance and rehabilitation of existing facilities, no major negative impacts were identified. Appropriate mitigation measures to ensure environmentally sound civil works execution are reflected in tender/contract documentation, as agreed during Negotiations. The sectoral EA's findings and recommendations will be applied, implemented and monitored throughout the APL process. This will be ensured through several institutional and technical arrangements and measures. Specific measures include: (i) formalization of the agreements entered into, prior to negotiations, between the Ministry of Environment and the two executing ministries (through their environmental units) to ensure that provisions under the national legislation are followed in transport and public works programs; (ii) development of a strategy to prevent and mitigate natural catastrophes, in particular cyclones, with technical assistance to MOTM's Meteorology Directorate; (iii) development of a road user charge policy, taking into account incentives for drivers to save in fuel use; (iv) development of training programs for the domestic trucking and construction industries , taking into account environmental and social/health implications; (v) coastal protection works to strengthen critical segments of the seashore; and (vi) technical assistance and training on environmental issues to relevant target groups. For subsequent APLs, all sub-projects will be subject to environmental impact assessment in accordance with the country's environmental legislation and IDA's safeguard policies. 7. Participatory approach: a. Primary beneficiaries and other affected groups: During project preparation, an extensive participatory approach has been conducted and targeted at the primary beneficiaries. Key actions have included: (i) Stakeholders Workshop for the presentation of the methodology and findings of the sector environmental study; (ii) consultation with the NGO "Sauvons Toamasina" in the design and phasing of the coastal protection works financed under the project (iii) presentation by MOPW of its organizational restructuring strategy at a Civil Service Reform Workshop, where the MOTM has also participated; (iv) regular consultations with road users representatives who are members of the Road Fund Board; (v) ad-hoc meetings with several domestic and foreign private investors interested in the transport sector conducted through MOTM and the Privatization Commission; (vi) regular contacts between MOTM and MOPW and trade union representatives; and (vii) a bottom-up participatory process undertaken through the RTTP to formulate a rural roads strategy. A comprehensive process of information sharing and consultation will also take place during project implementation. To this extent, the PES will have an Information and Public Affairs Officer who will interact directly with law-makers and beneficiaries, as well as the public opinion through the media. Moreover, participatory processes will continue to be fostered under the project through the systematic involvement of users and beneficiaries in road financing, of local communities in decentralized infrastructure operation and co-financing, and of users and local governments in the autonomous port authorities, and in the Boards of the regulatory agencies for the transport sector. 24 b. Other key stakeholders: During preparation of the project, a regular process of information sharing and consultation also took place with the donor community. The IDA-financed government's transport program was formally presented to the donor community; IDA mission Aide-Memoires were systematically circulated to donor representatives; and coordinating meetings took place with EC's DGVIUI, the EU Delegation in Madagascar, the French Cooperation, as well as with representatives from donor embassies in Antananarivo. Regular contacts have also been maintained with the AfDB and USAID staff. Tangible results include: (i) deep understanding and support among donors of the government reform program; (ii) good coordination among the donors in the parallel co-financing of components of the government's sector expenditure program; (iii) agreement in principle to have the PES as the focal point for the implementation of all donor-financed projects, and, whenever possible, basic procurement documents and external financial and technical audits acceptable to all major players. F: Sustainability and Risks 1. Sustainability: Since lack of investment sustainability has been a key lesson learned from IDA's past involvement in Madagascar, the project has front-ended a series of key policy measures to address this issue, including, the following: (i) stable, timely, and reliable financing of road maintenance; (ii) an autonomous Road Fund Board, including user and other beneficiary representatives; (iii) establishment of cost-recovery mechanisms and of more autonomous and accountable managerial structures for all transport agencies to remain under public operation; (iv) support to a more decentralized rural infrastructure management (roads and rivers) involving local communities, with resource-transfer from the central government reflecting their commitment and performance at the margin; (v) privatization of main transport operations; and (vi) development and strengthening of an autonomous regulatory framework to handle post-privatization issues. 25 2. Critical Risks: (reflecting assumptions in the fourth column of Annex 1) From Outputs to Objective_ Difficult negotiations with foreign investors introduce S IDA will be involved, not only as considerable delays in closing prvatization deals financier, but also as an honest broker providing comfort to Govemment and investors Peace of the restructuring and privatization processes is affected by social concerns M Provision under the Project for a social mitigation program will provide for labor protection Organizational reform in the two concerned Ministries faces internal opposition M A continuous participatory process will be followed in implementing the reforms Implementation of decentralization process is more The rural infrastructure program will be difficult than expected H managed by MOPW Adherence to appropriate environmental protection Social stakeholders would be standards at the sector level is neglected N systematically involved in the environmental mitigation process From Components to Outputs Impact of training and technical assistance in M Training programs and technical strengthening regulatory capabilities is below assistance efforts will be continuously expectations evaluated and follow-up assessments conducted Road fund revenues are not sufficient to cover S Road user/beneficiary involvement in minimum maintenance requirements the Road Fund Board will put pressure for improved road funding Budgetary provisions for counterpart funds are below M Budgetary provisions will be regularly requirements monitored under the rolling pluriannual expenditure process Overall Risk Rating M expenditure_process Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) 3. Possible Controversial Aspects: A possible controversial aspect would be the handling of any staff redundancies associated with the privatization and organizational restructuring efforts. Although no specific provision is made under APL-1 for financing staff redundancies, this aspect has been followed during project preparation. Overall, both MOTM and MOPW have prepared comprehensive assessments (quantity- and quality- wise) of the ministries' new staff requirements, as well as of their afFiliated agencies and/or of the public enterprises under their tutelage. These assessments have taken into account new requirements arising from the ongoing decentralization effort as well as age profile and contractual status. As highlighted in E-7, results of these assessments have already been presented to stakeholders. For staff employed by public enterprises, relevant provisions of the labor law would apply, whereas civil servants are covered by the applicable statutory regime. Still uncertainties prevail as to the applicable regime, particularly concerning the conditions applicable for employees under short-term contracts with the administration, and this may be creating undue anxiety among government workers. In order to mitigate 26 this aspect, clarification will be sought from the government under the project as to the application of an equitable and fair treatment for workers under short-term contracts. Furthermore, the project would provide financing for the preparation of social mitigation plans for all affected workers. G: Main Credit Conditions 1. Conditions for negotiations: The following conditions for negotiations have been met in a way satisfactory to IDA: (a) Approval by the GOM of the final Letters of Transport Sector Policy and of Road Strategy (b) Project Implementation Plan prepared (c) Terms of Reference for the PES approved by MOTM and MOPW (d) Plan of action to increase the revenues accruing to the Road Fund during project implementation, and for the clarification of the status of the Road Fund Board as an autonomous entity (e) Domestic counterparts funds for 2000 budgeted (f) Satisfactory progress in the implementation of the financial management action plan 2. Condition for effectiveness: The following are conditions for effectiveness: (a) Joint appointment by the Minister of MOTM and the Minister of MOPW of the Executive Secretary for the PES on terms of reference already approved by IDA (b) Appointment of the Financial Management and Procurement Advisors for the PES on tefms of reference already approved by IDA (c) Appointment of the Chief Accountants, Accountants, and Procurement Specialists for the units in MOTM and MOPW, on ternms of reference already approved by IDA (d) Two Project Accounts established, one for MOTM and another for MOPW, and agreed amounts for required counterpart funds deposited (e) Two Special Accounts for advanced disbursements under the Credit, one for MOTM and the other for MOPW, established (f) Satisfactory accounting system for project accounts established (g) Satisfactory financial, management, and accounting system adopted by MOTM and MOPW (h) Appointment of external auditors on terms of reference already approved by IDA 3. Legal Covenants: (a) New legislation on autonomous ports approved fifteen months after the date of effectiveness (b) Mid-termn review carried out 18 months after effectiveness 27 H: Readiness for Implementation The engineering design documents for all civil works under the project have been completed in a way satisfactory to IDA, except for the emergency coastal protection works, which will be carried out immediately after Credit effectiveness. All specifications for equipment procured under the project have been prepared to IDA standards, except for the system for the control of passenger traffic in international airports, which will be defined under a study initiated immediately after Credit effectiveness. Terms of reference for all technical assistance, training and studies under the project have been prepared in a way satisfactory to IDA. All the procurement documents for goods, works, and consultant services financed under the project have been prepared to IDA standards. The Project Implementation Plan has been prepared and agreed upon with IDA during negotiations. 1: Compliance with Bank Policies This project complies with all applicable Bank policies. Team Leader: Pedro Geraldes Sector Manager: Yusupha Crookes Country Director: Hafez Ghanem 28 Annex 1: Project Design Summary (Phase-1) Narrative Summary Performance Indicators Monitoring & Assumptions/Risks Supervision CAS Objective: [CAS Objective to Bank Mission) * Strengthening the public * Privatization of Air Madagascar * Follow-up with the * Private investors and operators sector's ability to deliver Privatization will perform in accordance with quality services and * Privatization of MOPWs Commission concession contracts create an enabling construction units business environment * Signing of concessions for the Northern Railways, and primary airports * Private provision of operations at * Follow-up with the the main Port of Toamasina Taomasina Port Authority * Autonomous regulatory * Enactment of * Government will allow an arms- framework for aviation and for regulations for length relationship with new shipping and ports operational existing Legislation regulatory authorities * Natural resource * Implementation of * Environmental awareness of management to reduce agreement sector Ministries degradation and develop between the ONE eco-tourism potential. and the MOTM/MOPW Project Development ImpacVOutcomes: fDevelopment Objective to CAS Objectives: Objective] * Reduce transport costs and * Greater competition in * Number of airlines * The Project Development sustainably improve international air transport services serving Objectives are closely related accessibility especially in Madagascar to the CAS Objectives rural areas * Reduction of average transit cost * Port statistics and and time in main trade corridors results of trade facilitation audit * Improved accessibility from * Reduction in road remote areas of the country to the travel time and main production and consumption costs, and all- centers weather passability * Increase in the percentage of * Regular condition national road infrastructure in surveys by MOPW good condition * Recommendations of * Environmental environmental impact monitoring system assessments systematically taken into account by MOTM and MOPW 29 Environmental and social * Social mitigation plans for * Acceptability by protection workers displaced by interested restructuring and privatization stakeholders, approved including trade unions Project Outputs: [Output to Development Objective] * Operationalization of the * Enactment of regulations * Supervision * Success of technical Civil Aviation Regulatory missions assistance Agency Implementation of management * Project monitoring system by PES * Creation of the Ports and * Approval of Legislation by * Supervision * Financial independence for the Shipping Regulatory Agency Congress missions Agency established * Creation of Autonomous * Appropriate articulation with Port Authorities for decentralization policy secondary and tertiary ports * Restructuring of MOTM and * Acceptability by existing staff MOPW * Development of the * Increase in the percentage of * Program monitoring * Sustainability in road domestic private sector road contracts awarded to small by PES maintenance funding domestic contractors * Improvement in the levels of * Success of technical service provided by transport assistance operators * Trade facilitation * Action plan for implementation of * Supervision * Good cooperation by Customs the recommendations of the missions and Defense Authorities facilitation audit * Sustained funding for road * Increased percentage of * Program monitoring * Approval by Government of the maintenance maintenance funding by PES recommendations of the Road requirements raised through the Fund Board Road Fund * Formulation of a road * Action plan for implementation * Supervision * Government approval of price transport policy mission adjustments * Formulation of a rural roads * Financing mechanism for * Difficulties in implementing strategy recurrent maintenance at decentralization policy subnational level, and an allocative process which provides * Willingness to pay, even in incentives for the mobilization of kind, by local communities local resources * Preparation of an economically- * Mobilization of domestic prioritized program for the counterpart funds rehabilitation of 1,500 km of rural roads 30 * Protection of the maritime * Ratification of the MARPOL and * Mobilization of resources for and port environment OPRC Conventions implementation * Preparation of a strategy for * Action plan for implementation of * Appropriate definition of natural catastrophe strategy priorities prevention and mitigation * Arrest of coastal erosion at * Coastal protection works * Project monitoring * Agreement between MOPW Toamasina and Morondava by PES and local NGOs, namely 'Sauvons Toamasina' * Improvement of economic * Improvement of the Ports of * Project * Cost-effective and timely infrastructure Toliary and Mahajanga monitoring by completion of works PES * Improvements in the Rivers Tsiribihina and Sofia * Periodic maintenance of 527 km of national roads 31 ANNEX 1 Attachment I Summary Program Cost Estimates for the APL-1, APL-2, APL-3, and APL-4 (costs in nominal USS million) Program Activities Estimated Costs Financing APL-1 APL-2 APL-3 APL-4 Total IDA GOM Phase-I 1. Regulatory reform and private sector development 7.9 7.9 7.9 0.0 2. Organizational restructuring and sector policy 12.6 12.6 12.6 0.0 3. Environmental protection 15.2 15.2 14.5 0.7 4. Improvement of economic infrastructure 30.3 30.3 28.5 1.8 Subtotal Phase-I 66.0 66.0 63.5 2.5 Phase-2 1. Strengthening of conceding authority functions 2.1 2.1 2.1 0.0 2. Financing of prvate/public partnerships in secondary 19.8 19.8 15.7 4.1 and tertiary airports, railways, and transport terminals 3. Social protection 2.2 2.2 1.5 0.7 Subtotal Phase-2 24.2 24.2 19.3 4.9 Phase-3 1. Support to decentralization 3.2 3.2 3.2 0.0 2. Rehabilitation and improvement of 1,000 km of rural 36.7 36.7 30.7 6.0 roads Subtotal Phase-3 39.9 39.9 33.9 6.0 Phase-4 1. Organizational restructuring and sector policy 3.2 3.2 3.2 0.0 2. Environmental protection 7.7 7.7 6.0 1.7 3. Improvement of economic infrastructure 110.2 110.2 85.7 24.5 Subtotal Phase-4 121.1 121.1 94.9 26.2 TOTAL ALL PHASES 66.0 24.2 39.9 121.1 251.2 211.6 39.6 32 ANNEX I Attachment 2 Trigger Indicators under the Adaptable Program Loan (APL) Instrument The transport sector reform and development program will be implemented in four phases, each phase having well defined objectives and scope. IDA will support each phase distinctly through a new Credit. The project described in this PAD refers to Phase-I of the program, as in the logical framework matrix in Annex 1. Each subsequent phase would be appraised in order to evaluate its technical, economic, financial, environmental and social feasibility, following criteria satisfactory to IDA, and factoring in the experience gained in the implementation of previous phase(s). This approach of learnig by doing will allow for continuous adjustment as GOM's reform progress advances, thus factoring in a risk management strategy based on the early identification of risks and the timely implementation of corrective measures. In order to help incorporate adjustments in project design, facilitate the appraisal process of each new phase, and determine its readiness for integration into the program, triggering indicators have been identified as indicated in the following table. They would be assessed and measured as part of the monitoring and evaluation system in place and reviewed during appraisal of each Phase to confirm its objectives and scope. Whenever the specific triggering indicators for each phase are met at any time, there would be a policy review of key milestones that should have been achieved by that time. These milestones are part of the time-bound action plan attached to the government's Letters of Transport Sector Policy and of Road Strategy (Annex 9). Therefore, the triggering of any phase would first require the satisfactory completion of that policy review. 33 Trigger Indicators Assessing Sector Reform and Development Means of Verification APL-2 APL-3 APL-4 Regulatory Agencies for civil aviation and Technical Satisfactory results of the ports autonomously discharging technical assistance and activity completion and follow-up and economic regulatory functions training surveys programs successfully completed Progress in privatizing the railways, Concession Residual public financing secondary and tertiary airports, and agreements requirements identified, and transport terminals signed technical, economic, financial, and environmental and social assessment of the proposed investments completed Revenue from concession fees to ensure, at least, cost recovery of public investment Social mitigation packages for each transport enterprise and agency to be privatized agreed with trade unions Environmental protection measures appropriately incorporated into concession agreements and in public investments Social protection measures for redundant Social Social mitigation packages for staff under MOTM mitigation staff under MOTM and agencies plans prepared under its tutelage agreed with to IDA trade unions standards Environmental process fully internalized into Satisfactory Favorable opinion by ONE and the operating practices of MOTM environmental social stakeholders assessments regularly conducted Financial management improved in MOTM Success in Compliance with requirements implementing for implementation of the LACI the action plan initiative for financial management 34 Development of the rural transport strategy Participatory Strategy agreed by Central and preparation of local Governments and the strategy interested communities completed Preparation of rural and village road program Program Pipeline of 1000 km of rural and completed and village roads prepared, in approved accordance with technical, economic, financial, and environmental and social criteria acceptable to IDA Appropriate funding mechanisms for rural CentraVlocal Level of finance required to infrastructure financing ensure maintenance of project framework in rural and village roads secured place on a sustainable way Progress in involving beneficiaries in rural Involvement of Bilateral agreements between road management beneficiary MOPW and beneficiary communities in communities signed road maintenance secured Environmental mitigation measures in place Rural Participatory environmental environmental auditing mechanisms adopted protection manual approved Preparation of the river navigation program Program Pipeline of investments completed and prepared, in accordance with approved technical, economic, financial, and environmental and social criteria acceptable to IDA Involvement of Progress in invoMng beneficiaries in river beneficiary Bilateral agreements between management communities in MOTM and beneficiary river operations communities signed and maintenance secured Environmental Environmental process fully internalized into protection Favorable opinion by ONE and the operafing practices of MOPW measures social stakeholders followed for 100% of road subprojects Road Fund revenues to meet Appropriate 100% of routine maintenance Performance of the Road Fund allocations expenditures under the road fund for various Rural road to benefit, at least, categories of from 15% of total allocations roads from the Road Fund Required Equipment force account legislation establishment liquidated and Progress in the commercialization of approved assets disposed thereof productive functions within MOPW . 35 UPAs privatized Required 80% of maintenance works in legislation value terms contracted out to Progress by MOPW in outsourcing works approved the private construction and and services with private suppliers consulting industry Social Social mitigation packages for mitigation plans MOPW and for each public Social protection measures for redundant prepared to IDA enterprise and agencyunder its staff under MOPW standards tutelage agreed with trade unions Success in Compliance with requirements implementing for implementation of the LACI Financial management improved in MOPW the action plan initiative for financial management 36 Annex 2: Detailed Project Description Detailed description ofAPL-1 (costs indicated are base costs, without physical andprice contingencies) Regulatory Reform and Private Sector Development Component - US$ 7.6 million This component will be targeted at strengthening the regulatory framework created during project preparation and at developing the domestic small private sector active in the transport sector. As detailed below, this component comprises a number of sub-components. (i) Regulatory Frameworkfor Civil Aviation - US$3. 5 million As part of the modernization and restructuring process the MOTM is going through, as well as the transfer of the air transport related public companies to the private sector, the GOM has decided to create ACM, a new technically and financially autonomous civil aviation authority. As part of this process, the GOM has also decided to develop and implement a new regulatory and legal framework for civil aviation. Technical assistance services, training and equipment would be provided under this sub- component to strengthen the capacity of ACM. The technical assistance would be aimed at implementing the regulations of the Civil Aviation Law, approved by Congress during project preparation, and at the development of the agency's management information system. At the moment of the creation of ACM, and following the recommendation of IDA-financed consultant studies, job descriptions were prepared and key positions filled in by competitive recruitment. Staff was also picked-up from the existing Directorate within MOTM to fill-in remaining positions. In order to enable this staff to acquire modem technical and economic regulatory skills, a training program will be financed under this component. Moreover, and in order to allow the new Regulatory Agency to benefit from quickly evolving regional'and international experience in the discharge of independent regulatory functions, their active participation in international networks would also be pursued under this component. This training effort would be complemented by a training of trainers program targeted at strengthening the capacity of ENEAM to train qualified staff for airport operations. The strengthening of this capacity in Madagascar's public sector is a key element to facilitate the privatization of secondary airports, which necessarily will generate a demand for qualified local staff. Financing under the Credit will be provided for training, technical assistance, and network management services for civil aviation. Furthermore, consultant services will be provided for the assessment of the most cost-effective way to install a computerized system for real time control of the flow of passengers using Madagascar's international airports. The implementation of this system, also to be financed under this component, will enable long-term tourist and business visas to be issued at arrival. This sub-component will be executed by MOTM. (ii) Port Subsector Reform - US$0.8 million The draft law, and related regulations, instituting the new autonomous authorities for secondary and tertiary ports prepared during project preparation needs to be adjusted for consistency with the new legislation creating the Autonomous Provinces, a key element of GOM's decentralization policy. And as part of its regulatory reform process, MOTM has decided to spin-off its shipping and ports regulatory functions along the lines of the civil aviation reform. To this extent, the creation of an autonomous shipping and ports regulatory agency is envisaged under the project. Support will be provided under the project to GOM's port sub-sector reform through the provision of consultant services for technical assistance and training. These services would support the precise definition of the new institutional set up for the subsector, including the framework for discharging regulatory functions and the allocation of operational responsibilities between the central and provincial levels; the functional relationships between the new agencies; the preparation of needed laws and regulations; the identification of the transitional measures to ensure an effective setting up of the new administrative structures; the 37 definition of agency functions and staff qualification requirements; the process for recruitment/reallocation of staff; and the corresponding training requirements. The scope of the services will focus on the setting up of an administrative and financially autonomous regulatory framework-as well as on the preparation of model concession contracts-the framework for their award, and the requirements for the effective supervision thereof. Following on the recommendations of the environmental study for the transport sector, explicit emphasis will be put on the protection and safeguarding of the environment. Furthermore, the setting up of the new institutional framework for the subsector should provide the opportunity to systematically establish, within the port communities, participatory arrangements to ensure compliance with environmental protection. This component will be executed by MOTM. (iii) Commercialization/iquidation ofMOPW's Construction Units - US$1.0 A key element in MOPW's organizational restructuring is the spin-off of productive activities. These activities range from construction, to ancillary services, such as laboratories for materials testing. Once these activities are separated from MOPW's organizational structure they will be commercialized. For those capable of meeting the market test, the ones operating in competitive segments will be corporatized, with a view for their subsequent privatization. Activities not capable of meeting market needs will be liquidated. Technical assistance will be provided under the project to assist MOPW in identifying the relevant activities and functions capable of being spinned-off; assessing the market prospects for these activities; evaluating assets and liabilities; preparing the corresponding articles of incorporation; determining the needs for capitalization; and initiating liquidation processes, including asset re-allocation and disposal, whenever required. This sub-component will be executed by MOPW. (iv) Domestic road transport industry- US$0.5 million Under the GOM's transport reform program, the domestic private sector will be called upon to play a more proactive role. Simultaneously, it would have to become more competitive if the benefits of improved infrastructure under the project are to be passed over to producers and consumers. This is particularly true for the road freight transport and passenger industries, the backbone of Madagascar's transport system. The strengthening of the largely small transport operators to enhance their entrepreneurial and managerial capacity, while increasing their safety and environmental awareness, would be pursued under this sub-component, through one comprehensive training program to be implemented in close cooperation with the beneficiaries. The program will also cover MOTM staff to enable them to discharge its regulatory functions in a framework of greater market- and administrative- decentralization. This program, including its regular evaluation and follow-up impact assessment, would be prepared and delivered under this component. Financing under the Credit would be provided for consultant services to prepare and deliver the training program. This sub-component will be executed by MOTM. (v) Domestic construction industry - US$1.7 million Another key element of GOM's reform program is the outsourcing of road maintenance works with private contractors. In view of the small dimension of these contracts, and of their scattered nature, large companies are unlikely to show interest in executing these works. However, the small domestic private contracting industry in Madagascar is underdeveloped, since this market has traditionally been dominated by MOPW's force account establishment. Now that the decision to create a market for small private contracts has been taken, it is important to enhance the supply-side response through a training program for the industry. This training program, implemented in close cooperation with the beneficiaries, will be financed under the project through consulting services. The program will focus on the development of entrepreneurial, managerial, and technical skills, including preparation of proposals under public procurement, financing and financial management, and environmentally-friendly construction techniques. The impact of the training program will be regularly assessed during project implementation. This sub-component will be executed by MOPW. 38 (vi) Trade and transportfacilitation - US$0.1 million To help remove key cost and time bottlenecks in the logistic chain, the project will finance a focussed technical assistance program, centered around the elaboration of a Facilitation Audit. This Audit will follow the methodology established by the Bank and its partners under the Global Partnership for the Facilitation of Transport and Trade. This process will also help MOTM reassert its role as the lead player in the national trade and transport facilitation agenda. This sub-component will be executed by MOTM. Organizational Restructuring and Sector Policy Component - US$12.1 million This component will be aimed at strengthening the capabilities of the MOTM and MOPW in regard to policy formulation, planning, programming, budgeting, auditing, financial management, procurement, quality control, and works monitoring. (i) Restructuring ofMOPW - US$S5.6 million The implementation of MOPW's restructuring would be supported under this component. Consultant services for technical assistance and training as well as equipment for the newly decentralized units would be provided under the project to assist in the establishment of the transitional arrangements for the new organizational set-up; development and implementation of new management systems and operational procedures; restructuring and commercialization of MOPW's affiliated agencies, includihg the LNTPB and ININFRA; and training of MOPW's staff. This sub-component will be executed by MOPW. (ii) Preparation of social mitigation program - US$1.0 million During project preparation, consultants prepared organizational restructuring programs for the MOPW and MOTP. These studies recommended the new organizational set-up for both ministries and associated agencies, consistently with the objectives for sector reform, as well as, with the strategy being formulated under GOM's public sector reform program. As a result, new staff requirements, quantity- and quality- wise, were estimated for both ministries. After taking into account staff upgrading, re-conversion, and redeployment possibilities, a potential surplus of staff was identified. A preliminary assessment of the feasibility of a redundancy program was also assessed, taking into account staff age and years of service, as well as the type of staff contractual relationship with the state. What is still missing is a specific identification of staff to be retrenched and the quantification of the redundancy and other statutory entitlements, as well as a strategy and program for their reinsertion into the labor market and for the mitigation of any social costs. The preparation of this program will be financed under this component. Although falling under the responsibility of both ministries, this slb- component will be executed by MOPW, in view of the following: first, most redundancies are expected to follow under this ministry; and second, the ministry has been selected as a pilot agency under the civil service reform program. 39 (iii) Capacity-building through Program Executive Secretariat - US$4.4 million This component will also support the establishment of a Program Executive Secretariat (PES) under the tutelage of the Ministers of MOTM and of MOPW, as the focal point to spearhead the reform and capacity building efforts in both ministries. Finance under the Credit will be provided for 54 man-years of high-quality individual consultant services covering the following fields of expertise: transport sector policy, highway management, financial management, program and contract management, environmental/social mitigation, information and public affairs, and accounting. Additional finance would be provided for an accounting firm to assist in developing the accounting and control systems of both ministries and in preparing operating manuals. Computers, vehicles, communications and reproduction equipment, software, and operating resources, would also be provided under this component to assist the PES in discharging its functions during project implementation. Since PES will also be responsible for managing the project's external auditing functions, finance would also be provided under the component for the services of external financial and procurement auditors. This sub- component will be executed by MOTM, in view of its comparative advantage in program management and monitoring. (iv) Road Sector Policy - US$1.1 million The comprehensive formulation of a -road sector policy framework will be supported under this component. This effort would cover the preparation of equitable road user charges, regulations and pricing issues for the trucking and passenger transport industries, inter-modal transport coordination, the preparation of model concession agreements for land transport terminals, and the development of data base for sector monitoring: Emphasis will also be put on the formulation of a more environmental- friendly transport policy framework. A training program for MOTM's staff will be prepared, delivered, evaluated, and monitored under this component. Finance would be provided under the Credit for consultant services for the delivery of technical assistance for these study and training program. This sub-component will be executed by MOTM. Environmental Protection Component - US$13.6 million From an environmental point of view, this component aim at implementing the recommendations of the study for the environmental assessment in the transport sector and at financing urgent shipwrecking removal and coastal protection measures which pose serious ecological and erosion treats. In addition, financing would be provided for mitigating the impacts of national catastrophes, including, the provision of emergency structures. (i) Monitoring of sector environmentalperformance - US$0.2 million As to the implementation of follow-up measures recommended by the environmental sector study, completed during project preparation, a training program on environmental assessment will be conducted for staff of MOTM and MOPW and from other important stakeholders, namely from the construction industry. Technical assistance services will be provided to ensure a better interface between national environmental regulations and the preparation and implementation of sector expenditure programs under both ministries. Technical assistance efforts will emphasize the development of a regular follow-up and monitoring system for environmental performance. Although falling under boith ministries, this sub-component will be executed by MOTM in view of its broader mandate in environmental matters, including meteorology and catastrophe prevention and mitigation. (ii) National catastrophe prevention and mifigation - US$0.3 million Consultant services will be provided to do a study and develop a strategy on natural catastrophe prevention and mitigation. Madagascar is frequently afflicted by natural disasters, particularly tropical cyclones, but also heavy rains and, in the case of coastal areas, extreme wave movement. The social and 40 economic daniage arising from such catastrophes is considerable. Particularly at risk are transport facilities, such as roads, ports, railways and airports. A program of damage minimization is necessary to assure the sustainable development of the transport sector. The goals of the study are to assemble and maintain a data base on natural disasters, including remote sensing data and measures relating to areas at risk throughout Madagascar, and to provide a functioning early warning system with national coverage. Specifically, the study aims to identify zones at risk and propose appropriate anticipatory action; upgrade and expand data collection coverage; improve data analysis methods with a view to increasing warning intervals; and extend and enhance the dissemination of warnings and alerts. This sub-component will be executed by MOTM. (iii) Emergency works and studies for coastal protection - US$5.3 million and US$1.3 million, respectively Financing for construction works and associated consultant services will be provided under this component for coastal protection activities at Toamasina and Morondava. The progression of the erosion of the coasdine on these two sites has reached proportions that seriously threaten the local social infrastructure. This is the case of housing and business activities at Morondava, and of the high-school and hospital at Toamasina. The project will finance the protective works that will assure the conservation of the sites and the maintenance of the threatened activities. With regard to Toamasina, MOPW will enter into an agreement with the NGO "Sauvons Toamasina," which has shown a deep grass route interest in the environmental protection of the city during project preparation. This sub- component will be executed by MOPW. (iv) Rafification of theMA4RPOL and OPRC Conventions- US$0.5 million As part of the ratification process of the international conventions MARPOL and OPRC foreseen by the GOM, MOTM is preparing a plan of action for conforming the main Malagasy ports to the requirements of these Conventions. Among other things, this plan will cover the definition of the facilities required for the collection and treatment of disposals, the cleaning of ships, as well as preventive measures concerning accidental pollution. Technical assistance and training services will be provided under this component to assist in the preparation of this action plan. This sub-component will be executed by MOTM. (v) Shipwrecking removal - US$3.6 million Wreckage, close to Madagascar's coast line, namely its eastern sea-shore, create major hazards to shipping and often constrains the development of the country's tourism potential. Given the complexity and the resource envelope required to fully address this problem, a pilot sub-project will be financed under this component. This is the case of the port of Taolagnaro, where the wreckage of the ship Well Born has become a major obstacle to the ships approaching the port. Financing under this component will assist in the pilot operation of removal of the wreckage of the Well Born, and in the disposal of the materials recovered following environmental guidelines acceptable to IDA. This sub-component will be executed by MOTM. (vi) EmergencyMetallic structures - US$2.4 million Madagascar has recently been affected by a series of hurricanes that have required emergency measures by MOPW, including the rapid deployment and installation of metallic structures. As a result, the existing stock of emergency metallic bridges has been severely depleted, and needs to be reestablished as a preventive measure against future natural catastrophe mitigation. To this extent, and in a complementary effort to other donors', the amount of US$2.4 million has been allocated under the Credit for the procurement of emergency metallic structures, including bridges. This sub-component will be executed by MOPW. 41 Improvement of Economic Infrastructure - US$27.3 million This component would address the periodic maintenance and rehabilitation of key secondary ports, as well as of river and road infrastructure facilities. Consultant services will also be provided under this component for infrastructure related studies and supervision of works. (i) Ports and rivers - US$ 7.7 million Financing under this sub-component is aimed at enabling the efficient operation of existing port facilities to meet increases of specialized traffic, namely containers. Moreover, the component will also address a pilot improvement of navigation and cargo transfer facilities in selected rivers. Specific sub- projects under this sub-component are indicated in the following. PORT OF TOLIARY - US$3.6 MILLION. Rehabilitation/improvement of existing facilities, including embankment defense, roadbed for container storage, and pavement and pier of access. This sub-project will be executed by MOTM. PORT OF MAHAJANGA - US$3.2 MILLION. Construction of a roadbed for container storage, modernization of 172 m of embankment, provision of an embankment protection, displacement of the jetty for the ferry to Katepsy. This sub-project will be executed by MOTM. RIVERS TSIRIBIHINA AND SOFIA - US$0.9 MILLION. Construction of peers, small dredging works, and provision of storage facilities in five selected sites on the Tsiribihina River, and on two sites on the Sofia stream. This sub-project will be executed by MOTM. (ii) National roads - US$9.4 million Financing under this sub-component is targeted at the periodic maintenance of 527 km of paved national roads of key economic importance. Specific sub-projects, to be executed by MOPW, include: RN 25/45 (VOHIPARARA-IRONDRO AND VOHIPARARA-ALAKMISIN'AMBOHIMAHA)- 62 KM - US$2.2 MILLION. Sections 025 to 64 and 000-023, with average baseline traffic levels ranging from 120 to 200 vehicles per day. RN 6 (AmBILOBE-AMBANJA)- 112 KM - US$1.5 MILLION. Sections 476 to 588, with average baseline traffic levels ranging from 150 to 380 vehicles per day. RN 35 (ANTISRABE-MIANDRIVAZO) - 222 KM - US$3.5 MILLION. Sections 000 to 222, with average baseline traffic levels ranging from 430 to 3200 vehicles a day. RN 44/3A (VOHIDIALA-AMBATONDRAZAKA AND VOHIDIALA-VOHITRAIVO)- 131 KM, US$2.2 MILLION. Sections 133 to 159 and 020 to 105, with average baseline traffic levels ranging from 400 to 540 vehicles a day. (iii) Feasibility studies - US$8.6 million Financing for consultant services for infrastructure feasibility studies will be provided under this component. As indicated below, these studies will allow for the preparation of sub-projects to IDA's technical, economic, environmental and social standards, in order to generate the pipeline for financing under subsequent APLs. TOURISTIC PORTS - US$0.4 MILLION. This study will be executed by MOTM. PORT OF TOAMASINA -US$0.5 MILLION. This study will be executed by MOTM. 42 MARITiME SIGNALING - US$0.4 MILLION. This study will be executed by MOTM. UPGRADING OF SOME 900 KM NATIONAL PAVED ROADS - US$4.0 MILLION. This study will be executed by MOPW. IMPROVEMENT OF SOME 1,500 KM OF RURAL ROADS - US$1.8 MILLION. This study will be executed by MOPW. IMPROVEMENT OF SECONDARY AND TERTIARY AIRPORTS - US$1.5 MILLION. This study will be executed by MOTM. (iv) Supervision of the civil works - US$1.6 million Under this sub-component, financing will be provided for consultant services for the supervision of the civil works under the project, as indicated below. To BE EXECUTED BY MOTM -US$0.3 MILLION To BE EXECUTED BY MOPW -US$1.3 MILLION 43 Annex 3: Estimated Project Costs Regulatory reform and private sector development 0.8 6.8 7.6 Regulatory framework for civil aviation 0.4 3.2 3.5 Port subsector reform 0.1 0.7 0.8 Commercialization/liquidation of MOPWs Production Units 0.1 0.9 1.0 Development of the domestic road transport industry 0.1 0.5 0.5 Development of the domestic construction industry 0.2 1.5 1.7 Trade and Transport Facilitation 0.0 0.1 0.1 Organizational restructuring and sector policy 1.2 10.9 12.1 Restructuring of MOPW 0.6 5.0 5.6 Preparation of social protection program 0.1 0.9 1.0 Capacity-building through PES 0.5 3.9 4.4 Road sector policy 0.1 1.0 1.1 Environmental Protection 2.4 11.2 13.6 Monitoring of sector environmental performance 0.0 0.2 0.2 National catastrophe prevention and mitigation study 0.0 0.3 0.3 Emergency Coastal Protection 1.3 5.3 6.6 Ratification of the MARPOUOPRC Conventions 0.1 0.5 0.5 Shipwrecking removal 0.7 2.9 3.6 Emergency metallic bridges 0.2 2.2 2.4 Improvement of Economic Infrastructure 5.1 22.2 27.3 Port and river improvement 1.5 6.2 7.7 Periodic maintenance of national roads 1.9 7.5 9.4 Preparation of feasibility studies 1.4 7.2 8.6 Supervision of civil works 0.3 1.3 1.6 Total Baseline Cost 9.5 51.1 60.6 Physical Contingencies (10% of civil works and 0.4 2.4 2.8 supervision) Price Contingencies (4% of baseline cost and phys. cont.) 0.4 2.1 2.5 Total Project Costs 10.4 55.6 66.0 Refinancing of PPFs 1.5 1.5 Total Financing Required, of which 10.4 57.1 67.5 Government 2.5 2.5 IDA 7.9 57.1 65.0 44 Goods 0.6 5.8 6.4 Works -5.9 23.6 29.5 Services 2.5 22.7 25.2 Training 0.1 0.1 0.2 Other 1.3 3.4 4.7 Total Project Costs 10.4 55.6 66.0 Refinancing of PPFS 1.5 1.5 Total Financing Required, of 10.4 57.1 67.5 which Govemment 2.5 2.5 IDA 7.9 57.1 65.0 45 Annex 4: Cost Benefit Analysis Summary A. Overview and Basic Assumptions A variety of economic appraisals has been executed in keeping with the sectoral focus of the project. Investments in the road/highway subsector have been assessed utilizing the Bank-developed Highway Design and Maintenance model (HDM, Release II). The restructuring of the Ministry of Public Works (MTP), involving the progressive transfer of road maintenance and construction functions to the private sector, has been appraised. The benefits arising from restructuring consist primarily of enhanced productivity in the rehabilitation and maintenance of roads. The benefits of port investments consist of savings from reduced cargo handling times and reduced ship delays and times in port. These have been calculated following industry practice and assessed in relation to the construction and maintenance costs of proposed investments. Inland river transport in the western part of the country offers tremendous potential in the development of several fertile areas. The development of such areas will lead to increased production, which will in turn increase the incomes of rural agricultural producers. Benefits from increased agricultural production depend upon a program of navigation channel works and the construction or upgrading of landing stages at several points along the Sofia and Tsiribihina Rivers. In the latter case, works to be carried out will also provide benefits to a nascent tourism trade and to existing users of river transport. Four pre-feasibility analyses have been carried out for investments to be considered in subsequent phases of the Project. The Northern Railway is to be let out to concession operation, negotiations with a prospective concessionaire having commenced in November, 1999 following an international tendering process. The benefits of concession operation arise from the reinstatement of an efficient rail service following a severe decline in rail capacity during the 1990's. The recapture of traffic suited for rail transport avoids more costly road transport operations, particularly in relatively heavily trafficked corridors such as that linking the capital of Antananarivo with the important deep sea port of Toamasina. The second pre-feasibility analysis concerns the restructuring of the civil aviation sub-sector, which will see the privafization of the national airline company and the strengthening of management at the major airports of Madagascar. The rehabilitation of secondary and tertiary airports is envisaged for APL-2 and will enhance the efficiency of government and of the private sector, including the further development of tourism. The secondary and tertiary airports constitute a vital lifeline in times of natural catastrophe. A program of rehabilitation and selected upgrading of 1,000 km of rural roads has been proposed for APL 3. A switch-off analysis of the rural road program has been carried out as the third pre-feasibility analysis. Under APL-4, a second set of improvements to the primary road network is proposed. To this point, the MOPW has identified a program of periodic maintenance and rehabilitation works of $ 34 million which has been subjected to a pre-feasibility analysis. The full program will be appraised in detail during the course of APL- 1. The reform program for the MOPT includes the preparation of a social plan, which will be considered under APL-2. The reform program for the MOTM includes a reorganization of the ports and maritime sub-sector culminating in the establishment of a national ports agency. Preliminary economic analyses have been carried out of outline plans for the compensation and retraining of surplus MOTM and MOPW staff. The following basic assumptions have been considered throughout the analysis: 46 All sub-projects are defined in with- and without- project cases. Works on the infrastructure components of APL-1 are assumed to commence in 2001. All costs are expressed net of taxes, and capital costs have been calculated inclusive of 10 percent physical contingencies and of 5 percent supervision costs. No shadow price has been used in the valuation of labor or foreign exchange. The analysis period is generally 20 years-i.e., in the case of infrastructure rehabilitation or of staff rationalization, benefits are assumed to flow for a period of 20 years. The discount rate has been set at 12 percent, the value assumed to reflect the opportunity cost of capital in Madagascar. The analysis is based on various consultant reports, which are available in the project file (see Annex 8). B. Road Periodic Maintenance Works (APL-1) (i) Background This component relates to the facilitation of growth in the economy of Madagascar through the removal of infrastructure bottlenecks. In order to appraise the project's rehabilitation and periodic maintenance, the consultant firm Ramboll was commissioned to evaluate road works required to restore the primary road network to a serviceable condition (after years of inadequate maintenance). The Terms of Reference for the consultancy were jointly drawn up by IDA in consultation with MOPW. The works required to restore some 8,570 km of the main roads and a majority of secondary roads to an acceptable level of service were appraised utilizing HDM I1I. HDM models the interaction between traffic, road condition and vehicle operating costs (VOCs) over time in the appraisal of a set of mutually exclusive treatment options. Only sub-projects with an EIRR of greater than 12 percent were considered for project -financing. The economic analyses of road sub-projects and of the consolidated road program for APLI were subjected to sensitivity tests and stochastic risk analysis. (ii) Traffic Projecfions The available data suggests that both the vehicle fleet and the consumption of automotive fuels, expressed in volume terms, have grown well in advance of the rate of growth characterizing the economy of Madagascar. Between 1994 and 1999, the GDP of Madagascar grew at a rate of 3.2 percent pa. Over the same period, sales of automotive gasoline grew at an annual rate of 9.1 percent, while sales of automotive diesel grew at a rate of 6.7 percent. The vehicle fleet has similarly grown at a faster rate than GDP, with the bus fleet growing by about 14.5 percent pa and road tractors being characterized by a growth rate of 16 percent pa between 1994 and 1997. Overall, the vehicle fleet grew by 6.4 percent over the period 1994-97 with provisional figures for 1998 indicating a further growth well in excess of 7 percent in that year. Traffic can be expected to grow at a faster rate than GDP over the project horizon. The low rate of motorization in Madagascar-nine vehicles of four or more wheels per 1000 inhabitants-is typical of lower income countries. Research carried out by the Bank and others confirms that road traffic tends to grow at a faster rate than GDP in lower income countries. Average growth in traffic flows over the primary and secondary network has been assumed to take place at an average rate of 5.1 percent pa between 1998 and 2010 and at a rate of 4.5 percent pa thereafter. Given the scarcity of traffic count data, the MOPW carried traffic counts in 1994 and in 1998. Network growth factors derived from the analysis referred to in the previous paragraph were applied in the course of the HDM II1 runs. The APL-1 program includes periodic maintenance works on some 527 km of primary roads. Current traffic flows on the roads selected for treatment range for the most part between 140 and 500 vehicles per day although several sections on RN 34 carry significantly more traffic. 47 (iii) Costs The consultants prepared engineering costs in close consultation with the MOPW. The IDA Appraisal Mission then reviewed these cost, and the various parties agreed upon a final set of unit costs. Generally, economic costs of rehabilitation and maintenance have been derived by the application of a factor of 0.80 to the calculated financial costs. The various elements of the vehicle operating costs were updated during the Appraisal Mission. Vehicle acquisition costs were confirmed against regional vehicle costs, and world prices of automotive fuels were also calculated. Alternatives The analysis considered a variety of alternative treatment types, including overlays, slurry seals, and two rehabilitation/reconstruction alternatives. Initial data on current road condition was obtained from surveys carried out by the MOPW in the last two years. The consultants confirmed the validity of road condition assessment through a sample program of ground inspections. Road links were divided into sections which were homogenous from condition and traffic flow perspectives for purposes of the analysis. (v) Results and SensitivityAnalyses The NPV at a 12 percent discount rate of the consolidated road program to be undertaken in APL-1 is US$ 9.6 million and the EIRR is 19.5 percent. Individual EIRRs are 18.6 percent for the RN6; 14 percent for the RN25-45; 19.5 percent for the RN35; and 25.6 percent for the RN44-3A. The sensitivity of the investment efficiency indicators was tested by examining the impact of a 20 percent increase in construction costs and of a 20 percent decrease in net benefits, the latter test being consistent with a lower than assumed rate of growth in traffic. Results of the sensitivity tests show that the EIRR of the decreased net benefit test were slightly lower than those calculated in the increased construction cost test. In the sensitivity analysis for cost increases, individual EIRR were above 12 percent, whereas in the case of the decreased net benefits only the investment in one road (RN25-45) would yield an EIRR below 12 percent. C. Restructuring of the Ministry of Public Works (APL-1) (i) Background Another component that will be implemented in the road subsector under APL-1 is the restructuring of the MOPW. The component has been formulated in accord with the principle that the government will, for the most part, abandon productive activities in the transport sector. The component supports a key project objective, which is to assist the GOM in the divestment of activities that the private sector can accomplish more efficiently. (ii) Costs The restructuring exercise will involve the delivery of technical assistance, consultancy services, and training to various elements of the MOPW in order to convert the new central agency of the MOPW into a management unit which plans, contracts, and oversees works carried out -by commercialized production -units and by private sector construction companies. The production units will initially be based upon the regional installations of the MOPW and will be prepared for privatization during APL-1. In addition to the human resources development activities delivered under the component, certain office, communications and transport equipment will be supplied to the fledgling production units in order to help manage and supervise works. An ongoing training program for the production units is assumed in order to replace retirees from the original cadre of ex-MOPW short term staff who have been transferred to the units. During APL-1 the private construction industry also receives training. 48 (iii) Benefits The short-term workers, known as effectifs a court duree (ECD), are in fact temporary staff who have gradually assumed a semi-permanent status over time. Earlier in 1999, the MOPW removed some 3,120 ECDs from the ministry's establishment and offered this category employment at the production units which are to be established under APL-1. Some of the recently released ECDs will find immediate employment elsewhere and it is assumed that about 93 percent of ECDs will present themselves for the training that will be offered. It is also assumed that about 2,800 of the ECDs will complete the training course and find ultimate employment with the production units. The training delivered should provide a significant increase in productivity, given the low level of activity that has characterized the under- funded MOPW road maintenance efforts in recent years. The productivity increase attributable to the restructuring activities of APL-1 should approximate 100 percent of the current weighted average wage of the ECDs. The output of the regional installations has been severely constrained over the past decade, and the assumption of a doubling of productivity is realistic, given that material and spare parts constraints will no longer hinder road maintenance. It is also assumed that the productivity enhancement of the private sector construction firms, which will likely employ about 3,000 workers will equate to about 90 percent of the net productivity benefit attributable to the ECDs. Allowance is made for the ongoing training of future entrants to the production units as the existing ECDs reach retirement age. (iv) Results and Sensitivity Analysis The restructuring program yields an NPV at 12 percent of US$4.4 million and an EIRR of 25.6 percent. The sensitivity of the economic criteria was tested against the assumptions of a 20 percent increase in restructuring costs and a reduction of 20 percent in the expected productivity increase achieved by the trained and redeployed workers. The results indicate that the EIRR is as sensitive to an increase in restructuring costs as to a decrease in productivity. In both cases, the EIRR remain well above 12 percent. D. Port Improvement (APL-1) (i) Background The ports of Mahajanga and Toliary are key economic facilities on the west coast of Madagascar. The private sector is now well established in these ports, and the proposed rehabilitation works will support the further development of these important actors in the formal economies of the respective provinces. The operations in both ports have relatively low cargo handling productivity, to the detriment of further port-oriented economic development, and could be expected to deteriorate further without project cases, thus leading to a situation in which traffic would be turned away. Both ports will ship significant tonnage of relatively high value fish products over the project horizon if the works are implemented. The physical works proposed will enable private sector shippers and cargo handling companies to achieve higher cargo throughput at a lower unit cost with their recently purchased cargo handling equipment. The improvements to the port of Toliary will allow traffic to grow from an estimated total of 151,000 mt in 1999 to the maximum throughput possible of 250,000 mt by 2007. The current traffic at Mahajanga of 166,000 mt will grow to 222,500 mt by 2010 ,and 271,000 mt by 2020. (ii) Costs The costs of works required to rehabilitate and upgrade the ports were originally prepared by consultants between 1996 and 1998. These costs were revised during the Appraisal Mission jointly by IDA and MOTM. The annual costs of operation and maintenance have been assumed to be 5 percent of the capital costs. 49 (iii) Benefits The works proposed for Toliary, combined with investments already made by the private sector in cargo handling equipment, will lead to significant savings in ship days spent in port. Unit cargo handling rates for break-bulk general cargo will halve while container handling rates will undergo a 40 percent improvement. At Mahajanga, ship days spent in port will decline as a result of the proposed works. Cargo handling productivity benefits will also arise, thereby significantly reducing unit cost of cargo movements. (iv) Results and Sensitivity Analysis The NPV at 12 percent of the investments proposed for Mahajanga is estimated to be US$ 4.5 million, and the EIRR is calculated at 29.8 percent. For Toliary, the proposed investment yields an NPV at 12 percent of US$ 3.6 million and an EIRR of 27.5 percent. The estimated investment efficiency criteria of the port sub-projects have been tested in relationship to an increase in construction costs and a decrease in port traffic flows. As regards Toliary, the EIRR reduces to 25.6 percent in the case of an increase in capital costs and to 21.0 percent in the case that traffic growth was under 20 percent below forecast. The Mahajanga sensitivity tests show that the EIRRs remain well above 20 percent under both the cost and traffic sensitivity scenarios. E. River Transport Program (APL-1) (i) Background The hinterlands of the Sofia and Tsiribihina Rivers in the west of Madagascar are have significant agricultural potential. The Sofia River is located in Mahajanga Province, and the Tsiribihina River flows predominantly through the Province of Toliary. The works program proposed will lengthen the navigation seasons on both rivers by providing properly formed, navigable channels. In addition, the provision of landing stages at selected points in the river hinterlands will facilitate the transfer of goods and people. (ii) Costs The costs of the works have been prepared by MOTM consultants and reviewed by IDA. Works are projected to take place over two years. Subsequent annual operations and maintenance costs have been estimated at 5 percent of the capital cost of works. The costs of vessel operation have been estimated following conventional marine practice. (iii) Benefits In the case of the Sofia River, benefits will come from the stimulus effect on agricultural production following the provision of less expensive and more frequent access to markets. The valleys surrounding the Sofia River offer a considerable amount of untilled land which could be quickly brought into production once access is enhanced. The analysis carried out by MOTM consultants indicated that about 4100 ha out of a total available 6000 ha of cultivable land could be brought into production within ten years of project opening. The net value added arising from the cultivation of a ha of rice is calculated at about US$98 per ha while the value added of induced cotton production would be around US$107 per ha. A small level of unspecified benefits would also accrue to travelers making local trips to market. The traffic flows on the Tsiribihina River are considerably more complex than those on the Sofia River. These flows include a significant medium-distance passenger trade in excess of 200,000 passengers a year and an embryonic luxury tourist trade geared at European travelers. In addition, over 40,000 Mt of cargo is carried each year. The benefits to existing medium-distance passenger and tourist traffic arise from the extension of navigation seasons, allowing a more effective use of canoes and river vessels. Additional land will be also be brought into production as transport prices fall with further development 50 of transport markets. The area of influence of the Tsiribihina River has a cultivable area of some 200,000 ha, of which only 29,000 ha are now cultivated. The combination of induced agricultural production and natural growth in the demand for inbound shipments of basic commodities has been forecast to increase goods traffic from 41,000 mt to 97,400 mt in 2010. Thereafter, the initial stimulus could be expected to abate and goods traffic will grow at a rate of 2.5 percent pa. (iv) Results and Sensitivity Analysis The economic analysis indicates that the investments programmed for the Sofia River would yield a NPV at 12 percent of US$ 0.6 million and an EIRR of 24.5 percent. An increase in the capital costs of 20 percent still results in an EIRR of 22.6 percent while a similar reduction in benefits arising from induced agricultural production still yields an EIRR of 22.2 percent. In the case of the improvements to navigation on the Tsiribihina River, including the consideration of complementary road investments and transport costs, the NPV at 12 percent is estimated at US$ 0.2 million and the EIRR calculated to be 15.2 percent. The provision of access routes to the river would likely be necessary in order to ensure that benefits from induced traffic would indeed, occur. As such, a modest program of some 20 km of rural roads at a cost of US$ 25,000 per km and an annual maintenance cost of US$ 1,000 per year was included in the analysis. An increase of 20 percent in the capital costs of the Tsiribihina sub-project or a reduction of 20 percent in the induced production attributable to the project, would still yield an EIRR which above 12 percent. F. Concessioning of the Northern Railways RN CFM (APL-2, pre-feasibility analysis) (i) Background The GOM is now discussing operation of the Northern railway network with a potential operator. The railway has steadily lost traffic over the past decade because of a lack of investment. This has brought a relative neglect of track and equipment maintenance, which has in turn sharply reduced the frequency and efficiency of operations. In response, the traffic on offer has declined as shippers have switched to the more reliable road mode. The consultants SOGELERG-ICEA have recently assisted the GOM by carrying out a study of investment requirements and likely returns in terms of recaptured traffic. The potential concessionaire, which has been selected on the basis of an internationally solicited invitation, has proposed a staged and considerably more modest program of investment. The Northern Railway carried about 211,400 mt of goods traffic in 1998 following several years of decline. The potential concessionaire estimates that an efficiently run rail operation would carry 248,000 mt of goods traffic in the first year of concession operation rising to 580,000 mt by the fifth year of operation. The provision of limited rail passenger services is being discussed with the GOM, but benefits arising from a recapture of passenger traffic have not been calculated in the present analysis. (ii) Costs The potential concessionaire's recommended investment program and forecasts of operating costs have been used in assessing the likely costs of operation and investment. The costs have been converted to economic costs through the netting out of taxes and subsidies and the assumption of world prices for traded goods, such as fuel. The investment program of the concessionaire, including concessioning and management costs will total US$ 20.7 million over the first five years of concession operation with more moderate amounts proposed for subsequent track and equipment renewal over the remaining 15 years of the concession. The concessionaire proposes to initially engage the services of about 1,690 of the 2,150 current employees of the Northern Railways. The concessionaire has included a redundancy package for surplus employees in its cost estimates. The concessionaire has requested GOM assistance in the construction of a modern multi-modal interchange in Antananarivo, which, if agreed to, will constitute the only investment the government is requested to undertake. 51 (iii) Benefits The benefits of the proposed concessioning agreement include savings in the amount of traffic carried on the road network, savings arising from the operation of an efficient rail-road interchange and the marginal pro.duction of surplus staff redeployed elsewhere in the economy. Currently, road freight rates range between US 4.0 cents and US 9.0 cents per tkm. The actual economic vehicle operating costs at replacement cost is considerably higher, taking into account the composition of the heavy vehicle fleet. Economic. vehicle operating costs, excluding vehicle depreciation, also lie at the higher end of the rate band. The assumed value of avoided costs of road transport used in the analysis is US 7.5 cents per tkm. The surplus workers given redundancy packages also have an alternative value if engaged elsewhere in the economy. Given the wide range of industrial skills found in railway companies, the majority of railway workers should find alternative employment elsewhere, and the benefit can be valued at a rate similar to that characterizing the current wage of the ECDs of the MOPW-i.e., at about US $570 per year. The benefits of the multimodal interchange are uncertain at this time but have been assumed to equate to about 5 percent of the total investment on an annual basis. There are additional benefits arising from the reduction in road traffic on the routes paralleling the rail lines of the RN CFM, including delayed periodic maintenance costs and a postponement in road capacity expansion requirements. At this time it has not been possible to calculate these additional benefits with any certainty. (iv) Results and Sensitivity Analysis The restoration of an efficient and reliable rail service on the northern railway network yields an NPV at 12 percent of US$16 million and an EIRR of 29 percent. The estimates of the investments efficiency indicators for the railway concessioning are relatively sensitive to decreased demand assumptions and less so to increased cost assumptions. A 20 percent decrease in the amount of traffic recaptured from road transport results in an EIRR of 13.6 percent. The impact of a 20 percent increase in investment costs is to reduce the EIRR to 21.7 percent. An increase in rail operating costs reduces the EIRR to 21.7 percent. Private-Public Partnerships for the Rehabilitation and Operation of Secondary Airports (APL-2, pre-feasibility analysis) (i) Background The GOM has established the Civil Aviation Authority (CAA), and the Privatization Committee has initiated the process of privatizing Madagascar's airports. Main airports under CAA and under ADEMA will likely be put up for privatization and/or concession operation. The remaining 40 airports currently administered by the MOTM fall into two categories: secondary airport designates an airport with business, administrative and possible tourism functions; tertiary airport includes those airports which play a social role in isolated areas of the country. IDA has been requested to assist under APL-2, through investments in airport renewal and rehabilitation, the development of public/private partnerships for the future operation of secondary and tertiary airports. (ii) Traffic A consultant's study carried out for the Privatization Committee in 1998 provided 1996 traffic data for some 26 out of the 40 airports which will fall into the secondary and tertiary categories. For this analysis, a 4 percent pa growth rate has been assumed between 1996 and 2000 for traffic at the 26 airports for which data is available. In regard to the airports for which traffic data was not available, it has been assumed that each airport handles, on average, one third of the traffic using the 26 airports. Following renewal and rehabilitation, a rate of growth of 5.5 percent has been assumed for traffic through all secondary and tertiary airports. Passenger traffic would grow from 88,400 in 1996 to 169,000 in 2010 with continued growth thereafter. Similarly, freight traffic in the secondary and tertiary airport system would total 900 mt by 2010 while postal traffic would be around 650 mt in the same year. 52 (iii) Costs The envisaged investment envelope for renewal and rehabilitation of secondary and tertiary airports is approximately US$ 10.4 million which would be implemented between 2003 and 2005 under APL 2. Annual maintenance costs of the works to be undertaken are assumed to be around 5 percent of the capital costs of works. (iv) Required Benefits The actual benefits of secondary and tertiary airport renewal will be the facilitation of commerce and government administration, the future development of tourism, and the maintenance of an emergency lifeline to remote. Madagascar is periodically prone to severe climate, and remote air fields can assist greatly in providing emergency assistance. Given the uncertainty surrounding the detailed investment program, to be prepared under APL-1, a switch-off analysis has been undertaken. Given prevailing load factors, it has been assumed that the investment costs will be recovered through airport fees levied directly on passenger departures (70 percent of revenue); on freight (25 percent of revenue) and on postal waybills (5 percent of revenue). As to passenger traffic, an airport fee of US$ 7 per would be required to meet this traffic contribution to cost recovery, at a 12 percent discount rate. This average passenger fee would represent a small proportion of the ticket price for average domestic flights in Madagascar. Indeed, the direct operating costs of a modem aircraft type suitable for the terrain and runway capacity of Madagascar, and for the average 300 km length of passenger trips, are in the order of US$ 0.14 per pkm. Assuming four passengers occupancy-and once landing fees and air navigation system fees have been incorporated into ticket price-the departure fee would amount to less than 10 percent of final ticket costs. Assuming similar assumptions, the unit (kg) departure user fee required of freight and post is US$ 0.35 and US$ 0.02, respectively. As air freight is characterized by a fairly high value to weight ratio, the required user fee would not be onerous. The user fee requirement on airmail might require a small public service obligation subsidy from the GOM. H. National and Rural Road Rehabilitation (APL-3 and APL-4, pre-feasibility analysis) (i) RuralRoads-APL-3 A rural road improvements program consisting of the upgrading and rehabilitation of some 1500 km of rural roads will be considered under APL-3. On the basis of a preliminary cost analysis, the package will amount to an indicative $ 30.0 million. On existing rural roads the proposed works could reduce vehicle operating costs and ultimately, goods tariffs and passenger fares. The provision of all year access could in certain. circumstances lead to changes in crop production patterns with agricultural producers able to substitute cash crop production for food crop production. The analysis of the river transport projects has indicated that farmers in enclave areas such as those served by seasonal roads can experience difficulties in accessing credit. The provision of year round access would act to ease such constraints. The provision of year round access also increases the access of the rural poor to social services. 53 Two provisional switch-off analyses have been carried out of the proposed rural road program. The first analysis consists of an examination of breakeven traffic flows likely to guarantee project* viability- given the roughness reductions that would result on the improved roads. Rural roads carrying around 100 vehicles per day would appear to meet viability criteria. For lesser trafficked roads, characterized by flows of 50 vehicles, a preliminary analysis indicates that only a modest two ha per linear kim of improved rural road would have to be brought under mixed subsistence and cash crop production to guarantee project viability. As the hinterlands of rural roads extend up to 7.5 km either side of the road, the required increase in production is relatively modest. A detailed analysis of the viability of the proposed rural road program will be undertaken during APL- 1. (i) National Road Upgrading - APL 4 The program of upgrading of sections of the primary road network will further reduce the maintenance backlog that has accumulated in recent years. The works to be undertaken cover a variety of periodic maintenance activities such as slurry surfacing, resurfacing and overlays, and the rehabilitation of a limited number of sections. The cost of the program covering about 900 km of national roads is estimated at about US$80 million. The program has been subject to economic scrutiny by Consultants Ramboll on a section by section basis, as part of the network-wide analysis conducted for the appraisal of APL-1 roads. Utilizing the same growth assumptions as previously described in Section B of this Annex, the consolidated road program to be undertaken between 2003 and 2007 is economically attractive, with an NPV over US$50 million, at a 12 percent discount rate, and an EIRR of about 20 percent. The final feasibility of this program will be further established in the course of implementation of APL-1. 1. Social Protection and Mitigation Program (APL-2, pre-feasibility analysis) Under APL-2, a social mitigation program will be implemented as part of the reorganization of the MOPW and the MOTM, and associated agencies. At this stage up to 800 staff members are estimated to be surplus to the requirements of the restructured ministries and agencies. An associated redundancy package for surplus workers has been assumed based on ongoing work of the MOPW and the Civil Service Reform Committee. In addition, a training and counseling program will be provided to the surplus staff, and about 60 percent of this staff could be expected to participate in such training. The benefits of restructuring lie partly in wage savings of retiring surplus staff who will not be required in the new organization or whose qualifications do not meet requirements. Wage savings are assumed as benefits in the economic sense since they are valued at their opportunity cost, in view of the highly constrained budgetary situation in Madagascar. Based on MOPW data, the age profile of surplus staff has been taken into account in calculating the avoided payroll costs for the concerned agencies. Despite the fairly low rate of unemployment in the formal economy of Madagascar (5 percent in urban areas in 1998 according to GOM surveys), only 50 percent of retrained surplus staff will find employment. The redeployment of surplus labor creates marginal productivity benefits elsewhere in the economy. As in the case of avoided wages, the productivity benefit is assumed to decrease over time following the demographic profile of surplus staff-i.e., benefits decrease as surplus staff reach retirement age. A preliminary analysis of the social mitigation program suggests an NPV at 12 percent of US$2.2 million and an EIRR of 42 percent. In view of the uncertainty for this component, stochastic risk analysis was also used to further test the results of the base case scenario assumed. For the variables assumed to be more representative of the underlying risks, triangular probability distributions were assumed. These variables are the: (i) redundancy package per displaced worker; (ii) cost of retraining for each displaced worker seeking retraining; (iii) percentage of retrained workers finding a job; and (iv) range of alternative wage for displaced workers.. The variables, alternative jobs and the corresponding wages, were further assumed to be positively correlated. A summary of the basic inputs for and of the results of the stochastic risk analysis, carried out with the Crystal Ball model, are presented below. 54 (i) Redundancy package per displaced worker (ii) Cost of retraining for each displaced worker seeking retraining (iii) Percentage of retrained workers finding a job (iv) Range of alternative wage for displaced workers .,, (v) Resulting probability distribution for the EIRR Forecast EIRR 1,000TrIals FrequencyChart OOutiers Ax ~~~~~~~~~~~~~~~~so ."O ----a 1010 20% 31% 30% 45% As a result, and when risk is factored into the analysis, the most likely value for the EIRR for t%Ws component is about 31 percent, thus considerably lower that the 42 percent estimated for the base deterministic scenario. Even so, there is a 100 percent certainty level that the EIRR for this componaa will be 20 percent or more, thus well above the 12 percent value assumed for the opportunity cost : capital in Madagascar. 55 Annex 5: Financial Summary Overview and Key Assumptions The various sub-projects have been assessed as to financial viability. The key assumption is that the reform of the transport sector and its further development will operate increasingly on the "user-pays" principle. Part of the rationalization exercise underlying the reform process is that operational activities in the transport sector will be undertaken wholly in or in part by the private sector. Accordingly, prices wull by and large be set by the market. The financial appraisals carried out assess the financial returns of improvements to be implemented under the project. In the cases of all sub-sectors, except for the road and rails sub-sectors, a specific user fee is proposed to cover the costs of provision and operation of transport infrastructure provided. Cost recovery in the road and rail subsectors are also assessed, taking into account the already established user fee systems. Road Subsector The govenment's proposed expenditure plans for the road network have been discussed at length between the donor community and government during project preparation. The govermnent has recognized the importance of putting the funding of the maintenance of the road network on a sustainable basis. In 1998, the government established a Road Fund to oversee the allocation of funds for road maintenance. A tax of 1.7 percent on the price of fuel is currently being collected. These funds are directly channeled to road maintenance activities. The GOM has experienced increasing difficulty in providing an adequate level of road maintenance over the past decade. Donors have assisted in the reduction of the maintenance backlog in recent years, primarily through rehabilitation and periodic maintenance projects. However, there remains a significant proportion of the network which the MOPW classifies as being in poor condition. Given the government's commitment to the reform process, a significant effort towards the rehabilitation of the 9,000 km primary network is to be mounted by the government and donors over the period 2000-2004. During APL-1, the Bank and other donors will assist the govermment to address the maintenance backlog. Currently, revenues from the road fee accruing to the Road Fund account to less than 30 percent of maintenance expenditure of about US$9.0 million equivalent. As revenues from the road fee progressively become the dominant source of funding for the Road Fund, so will general government revenue funding decline. Starting on 2004, revenues from the road fee are projected to reach an equivalent US$15.9 million, thus fully matching the estimated recurrent road expenditure requirements on primary and rural roads from that year onwards. The NPV, at 6.5 percent discount rate, of the incremental fiscal revenues resulting from general taxes levied on the road fee is estimated at about US$3 1 million in constant terms. PortslMaritime Subsector The user fees required to fund the improvements in the Ports of Toliary and Mahajanga would amount to about $ 3 per ton. The average value per ton of commodities passing through the two ports will increase significantly over the sub-projects' horizon because of the relatively high value of fish product exports. The user fee required would amount to a relatively small proportion of the transport charges of the most basic commodities that currently transit the port, such as sugar and building materials (Mahajanga) and corn and manioc (Toliary). Thus, little traffic loss would be expected by the imposition of a port improvement user fee or the augmentation of existing port cargo handling charges by US$3 per metric ton. A sensitivity test shows that the reduction of the economic benefits by the amount of the proposed user fee would have little impact on the EIRRs of each sub-project, which would remain above 20 percent in each case. The financial rate of return in both cases is 8 percent. 56 River Subsector The river subprojects are more sensitive to the imposition of a user fee. The fees required to assure financial rates of return of 8 percent on the proposed investments would amount to 33 percent of the current transport and tourism charges on the Tsiribihina River and 54 percent of current charges on the Sofia River. Current traffic flows will likely be relatively unbending to increases in transport charges on the two rivers because of the significant impact that the extended navigation season will have on the consumption and production functions of area residents and producers. Regarding consumption, hinterland merchants will be able to significantly reduce their carnying costs, and, hence, retail prices, since inventories of basic commodities can be replenished more frequently. The average size of commercial inventories can also be reduced because of the increased reliability of shipment that will characterize services on the improved waterways. From the production standpoint, analysis indicates that the required increase in transport charges constituted by the proposed user fee would have little impact on the size of the exportable surpluses assumed to arise. A 33 percent increase in river transport passenger and commodity tariffs on the Tsiribihina River would translate to a loss of traffic of about 10 percent. The associated loss of economic benefits reduces the EIRR of the sub-project from 23.5 percent to 21.5 percent. On the Sofia River, benefits are assumed to arise wholly from increased production of rice and cotton. Both surpluses would be exported to other parts of Madagascar. The increase of 54 percent in likely river transport charges would reduce the net value added accruing to the rural producer by about 12 percent. Such a decrease in induced production entails an EIRR of 24.0 percent as opposed to 26.2 percent in the base case. The river transport sub- projects are thus both financially and economically viable. Sub-projects Submitted to Pre-feasibility Analysis The concessioning of the RN CFM is currently under negotiation. An analysis based on the business plan of the potential concessionaire indicates that the concession operation will be characterized by a rate of return sufficient to allow the potential concessionaire to access international loan capital. In addition, the inclusion of the TA proposed to strengthen the GOM's capabilities in concession monitoring and supervision has no impact on sub-project financial viability. The NPV of fixed asset creation over the life of the concession is of the order of US$20 million on a gross basis and US$13.6 on a net basis. As well as providing the government with annual concession fee revenue, the proposed concession entails that the railway assets of the GOM held on the Northern network will be in a considerably better state at the end of the concession period than is currently the case. As to the Southern Railway, evidence made available by USAID indicates that operating revenues only cover about 80 period of working costs. It is, therefore, unlikely that a concessioning arrangement would be viable, unless in the context of a joint port/railway concession. The switch-off analysis carried out in relation to the proposed investment in the secondary airport system indicates that the user fee required to guarantee economic and financial viability will lead to little traffic loss. Private airline companies using modern and appropriate equipment should be able to operate profitably. It is assumed that there is a considerable latent demand for domestic air transport and that the potential growth of the tourism industry will occur with air transport tariffs and user fees close to world levels. This is certainly the case in the nearby Eastern (Kenya) and Southern African (Zimbabwe) tourism markets against which Madagascar's tourism product will be competing. 57 Annex 6: Procurement and Disbursement Arrangements Procurement methods (Table A) No special exceptions, permits or licenses need to be specified in the Credit documents for International Competitive Bidding (ICB), since Madagascar's procurement practices allow IDA procedures to take precedence over any contrary provisions and local regulations. Procurement of works, goods, and consultant services financed by the IDA credit will be carried out in accordance with the guidelines: Procurement for IBRD Loans and IDA Credits (January 1995, revised in January and August 1996, September 1997 and January 1999) and Guidelines for the Selection of Consultants by the World Bank Borrowers published in January 1997 and revised in September 1997 and January 1999. National Competitive Bidding (NCB) advertised locally would be carried out in accordance with Madagascar' s procurement laws and regulations which are acceptable to IDA. Procedures include local advertising, public bid opening, clarity in evaluation criteria, award to the evaluated bidder, non-exclusion of foreign bidders, and with preference in bid evaluation for domestic contractors. A General Procurement Notice is in the process of being published in the Development Business and will be updated annually. The project implementation plan comprises a procurement and disbursement plan which has been reviewed and agreed with IDA during negotiations. The procurement plan will be reviewed and updated at least one month prior to the start of each project year. Civil Works estimated to cost US$ 29.5 million dollars (IDA financing US$27.7 million) will be procured through pre-qualification and ICB procedures. No civil works will be procured through NCB. The bidding documents include a detailed description of the works, including basic specifications, the required completion date, basic form of agreement acceptable to IDA and relevant drawings where applicable. The awards would be made to the contractors whose tender is assessed on the basis of the lowest evaluated bid, provided they demonstrate they have the experience and resources to complete the contract successfully. Goods financed by IDA and estimated to cost US$6.4 million, include equipment, vehicles, and other supplies. Goods will be grouped, where feasible, into packages valued at least at US$100,000 and will be procured through ICB. Procurement of office furniture and supplies estimated to cost less than US$100,000, will be procured through NCB. The project will also require the purchase of relatively small, mainly consumable items such as vehicle spare parts, and office equipment which would be difficult and impractical to package and procure following NCB procedures. These goods are estimated to cost less than US$30,000 equivalent per contract and, up to an aggregate of US$250,000, may be procured through national shopping on the basis of quotations obtained from at least three qualified and authorized local suppliers. Consultant Services, training and studies financed by IDA would be for: (i) preparation of documents, feasibility studies, supervision of works, data collection, accounting and financial management, audits and impact analysis; (ii) short-term consultancies on specific technical matters, such as procurement, financial management, economics and statistics, and the design of training courses; (iii) training abroad and locally of MOPW and MOTM staff. Consultants financed by IDA, totaling US$25.2 million would be hired in accordance with the Bank's Guidelines for the Selection and Employment of Consultants by World Bank Borrowers dated January 1997 and revised in September 1997 and January 1999. Selection of consultants will be done through competition among qualified short-listed firms in which the selection will be based on Quality and Cost Based Selection (QCBS). by evaluating the quality of the proposal before comparing the cost of the services to be provided; Quality Based Selection (QBS), by evaluating first the quality and then negotiating the price with the most qualified firm; Least Cost Selection (LCS), by selecting on the basis of the lowest price proposal satisfying a specified threshold of quality; and Consultant Qualifications (CQ), by evaluating individual resumes against job description requirements. For training abroad and in-country, the program, containing names of candidates, cost estimates, content of the courses, periods of training, institution selection would be reviewed annually. 58 The Standard Request for Proposal (SRFP) forms as developed by the Bank will be used for the appointment of consultants. Simplified contracts will be used for short-term assignments, simple missions of standard nature (and not exceeding 6 months) carried out by individual consultants or firms. The government has been briefed during negotiations about the special features of the new guidelines, in particular with regards to advertisement and public bid opening. PES will handle procurement for the project Its tasks will comprise: (a) maintaining a register of all. interested bidders; (b) maintaining a detailed list of technical specifications of goods and services financed by the project; (c) updating the procurement plan and calendar; (d) preparation and/or finalization of pre-qualification /bidding documents and requests for proposals; (e) bid evaluation and preparation of evaluation reports; (f) contract approval process; (g) receipt of goods and services and dispatching; and (h) processing international and local price quotations. Prior review thresholds (Table B) IDA Review. All contracts for construction of civil works and purchase of goods above the threshold value of US$ 100,000 will be subject to IDA's prior review procedures. The use of IDA's standard bidding documents would considerably expedite the prior review process as IDA review would primarily focus on invitations to bid, bid data sheets, contract data, technical specifications, bill of quantities/schedule of requirement, and other contract specific items. The review process would cover the total value of the amount contracted for civil works and about 95 percent of the amount contracted for goods. Selective post review of contracts awarded below the threshold levels will apply to one in three contracts. Draft standard bidding documents for NCB have been agreed upon with the government. For consultant services, prior review will include the review of budgets, short-lists, selections procedures, terms of reference, letters of invitation, proposals, evaluation reports, and draft contracts. Prior IDA review will not apply to contracts for the recruitment of consulting firms and individuals estimated to cost less than US$100,000 and US$30,000 equivalent respectively. However, IDA prior review will apply to the Terms of Reference of such contracts, regardless of value, to single-source hiring, to assignments of a critical nature as determined by IDA (Project Unit staff, financial and procurement audits, etc.) or to amendments of contracts raising the contract value above the prior review threshold. For consultant contracts estimated above the US$100,000 threshold, opening the financial envelopes will not take place prior to receiving the Banks no-objection to the technical evaluation. For contracts estimated to cost less than US$100,000 and more than US$ 50,000 the borrower will notify IDA of the results of the technical evaluation prior to opening the financial proposals. Documents related to procurement below the prior review thresholds will be maintained by the borrower for ex-post review by auditors and by IDA supervision missions. The Project Unit will be required to maintain all relevant procurement documentation for subsequent review by IDA. The Project Unit will submit to IDA periodic procurement schedules detailing each procurement package in progress and completed as part of the normal project reporting exercise. Procurement Capacity Assessment A procurement capacity assessment was carried out by IDA for both the MOTM and MOPW, and discussed with the govemnment during negotiations. The summary of the results of this agency assessment and a series of recommendations to address the identified issues under the Project, is available in the Project File (Annex 11). Overall, the risk assessment is rated average. In order to manage this risk, the procurement Advisor to be appointed under the PES, prior to effectiveness, will lead a major effort towards greater transparency and effectiveness of the procurement process. Furthermore, it has been agreed upon during negotiations that provision will be made under the Credit for the financing of an independent procurement and quality audit on a regular basis. The recommendations of this audit, to be prepared from time to time based on an analysis carried out on a sampling basis, will be implemented also under the overview of the Procurement Advisor. 59 Disbursements (Table C) Disbursements will be in accordance with guidelines set out in the Disbursement Handbook. The project is expected to be completed over a four and a half-year period, by January 31, 2005, and the Credit is expected to be closed by July 31, 2005. The proposed allocation of the IDA Credit is shown in Table C below. All applications to withdraw proceeds from the Credit will be fully documented, except for expenditures for goods, works, and consultants' services (firms) under contracts not exceeding US$100,000 equivalent, consultants' services (individuals) under contracts not exceeding US$35,000 equivalent. For operating costs and training, reimbursement may be made against certified statements of expenditures (SOEs). The MOTM and the MOPW will be responsible for preparing withdrawal applications and SOEs to be submitted to IDA, and will indicate on the SOEs the nature and origin of any goods and the payment date. These will be retained along with all other supporting documentation for review by IDA supervision missions and independent auditors. Table C indicates the disbursement schedule, the amounts for each expenditure category and the disbursement percentage applicable to each. The disbursement percentages have been calculated on a tax-inclusive basis such .that, when applied to invoices denominated in local currency, the percentage not financed by the Bank be sufficient to cover government counterpart contributions and eliminate any Bank financing of local taxes and duties. Use of statements of expenses (SOEs) The Project (MOTM and MOPW) will use SOE procedures in which expenditures are summarized by category. The documentation for withdrawals of SOEs would be retained by MOTM and MOPW for review by IDA staff during supervision missions and for annual audits. SOEs will be used for payments of contracts of less than US$100,000 for goods and works and consultant contracts of less than US$100,000 and US$30,000 for firms and individuals respectively. SOEs will likewise be utilized for all operating costs and local training programs under contracts costing less than US$50,000 equivalent each. Special accounts: To ensure that funds will be available when needed, two Special Accounts in US$ will be established in local commercial banks under conditions satisfactory to IDA. One, in the amount of US$1.9 million, will be opened in the name of MOTM, and the other, in the amount of US$2.6 million, will be in the name of MOPW. Fifty percent (50%) of these amounts will be withdrawn on the Credit account after effectiveness; the remainder will be withdrawn as and when dictated by project activities. The amounts have been estimated to covef about four months of expenditures, and would be withdrawn from the Credit account after effectiveness. The MOTM and MOPW would have the right to draw directly on these accounts for project expenditures without prior approval by the Ministry of Finance. The Special Accounts would be replenished on the basis of documentary evidence, provided to IDA by MOTM and MOPW, of payments made from. the accounts for goods and services required for the project that are eligible for financing under the Credit. All supporting documents will be retained by MOTM and MOPW, and made available for review by IDA supervision missions and external auditors. 60 Annex 6, Table A: Project Costs by Procurement Arrangements (in US $million equivalent) 1. Works } ~~~~~~29.5 29.5 (27.7) (27.7) 2. Goods 1 ~~~~~~~6.0 0.1 0.3 6.4 I (6.0) I (0. 1) I (0.3) II (6.4)I 3. Services 1 25.2 1 25.2 ____________________________ ______ _ }(25.2) _ (25.2) 4. Training 0.2 0.2 ____________________________ ______ _ | (0.2) _ (0.2) 5. Other 4.7 4.7 _______________________________ ~~~~(4.0) _ ____ (4.0) 6. Front-end Fee Total 35.5 0.1 30.4 66.0 | (33.7) (0 1) (29.7) | | (63.5) (Figures in parenthesis are the amounts to be financed by the IDA credit) Annex 6, Table B: Thresholds for Procurement Methods and Prior Review ____________________ l US $ thousands US S millions 1. Works >100 ICB YES <100 ICB POST-REVIEW 2. Goods >100 ICB YES 100< NCB, up to an aggregate POST-REVIEW amount of US$100,000 30< National Shopping, up to POST-REVIEW an aggregate amount of US$250,000 3. Services Consultant firms >100 QCBS AND QBS YES Consulting firms 50< AND <100 QCBS AND QBS POST-REVIEW Consulting firms 50< QCBS AND QBS POST-REVIEW Individual >30 CQ YES consultants Individual 30< CQ POST-REVIEW consultants Total value of contracts subject to prior review: 60.1 61 Annex 6, Table C: Allocation of Credit Proceeds Works 23.0 100% of foreign expenditures _________________________ ______________________and 75% of local expenditures Goods 6.2 100% of foreign expenditures and 80% of local expenditures Consultants' services, training, 28.7 100% of foreign expenditures and audits _ and 80% of local expenditures Operating costs 0.3 80% of local expenditures Refunding of project 1.5 100% preparation advances . Unallocated 5.3 ___=______ _____ Total Credit Amount 65.0 62 Annex 7: Summary Environmental Assessment Overview of the Environmental Assessment of the Transport Sector The report on the Environmental Assessment of the Transport Sector, comprising three volumes, provides an overview of the context in which the sector currently operates. The EA report a) defines and analyzes the general environmental impacts related to each sub-sector; b) identifies the potential environmental impacts of activities planned under APLI; and c) recommends a plan for environmental management. The EA report provides project managers in the transport sector with a permanent working document enabling them to develop a clearer understanding of the situation at each project site, taking social, biological, and physical factors into account. The EA report is intended to be a tool for developing environmentally sound projects, monitoring investments, and above all decision-making. In addition to the Ministries of Transport and Public Works, other entities are involved with transport and environmental protection. As a result, the government will need to take appropriate decisions on institutional and legal matters. The EA report was prepared in accordance World Bank guidelines and national environmental policies concerning infrastructure and environmental protection. The environmental, political, socioeconomic, legal, and institutional context of the transport sector Madagascar, which occupies 594,000 kM2, has very diverse climates ranging from equatorial to semi- arid. It consists of highly varied topography and is rich in endemic and fragile species. It has all the characteristics of a continent and is a true nature sanctuary that should be preserved. All development activities must be carefully examined in order to avoid any irreversible impacts on natural habitats and the enviromnent. The political and legal strategies currently in place derive not only from the Constitution itself, but also from the Enviromnental Charter, the National Environmental Action Plan, the Economic Policy Framework Paper, the Transport Master Plan, texts implementing the national environmental impact assessment decree (MECIE), and various decrees, particularly those delimiting sensitive areas or establishing procedures for implementing environmental impact statements (EIS). The strategies also reflect the international agreements on transport and the environment ratified by Madagascar. Institutionally, the Government of Madagascar has established two types of environmental structures: (1) entities that focus on strategy, which include the Ministry of Environment, the National Council on the Environment (CNE), and the Inter-ministerial Committee for the Environment (CIME); and (2) operational bodies, which include the National Environment Office (ONE), executing agencies (AGEX), non-governmental organizations (NGOs), environmental units (CE), and national environmental research centers and/or institutes. Many other organizations deal directly or indirectly with environmental issues at the national, regional, and local levels. At times this current situation hampers the coordination of environmental activities. The analysis of the current status of Madagascar's transport sector shows that transport infrastructure may adversely affect the environment. Environmental degradation often destroys transport infrastructure and undermines the quality of sector services. The analysis also shows that the procedures followed to manage sector activities have not taken environmental factors fully into account thus far. 63 Finally, analyses of each sub-sector suggest the need to prepare standard and simple environmental impact statements (EIS) reflecting the challenges presented by each sub-sector activity. Generic environmental impact assessments Environmental impact assessments were undertaken for activities or works deemed likely to have negative environmental impacts. The assessments took two sets of factors into account: biophysical factors and social factors. Infrastructure works and operational activities in the four sub-sectors (road, ocean and river, air, and rail transport) were identified as the main sources of negative environmental impacts. INFRASTRUCTURE WORKS: Works related to construction and rehabilitation pose potential impacts. Activities include: route selection, establishment of work sites, excavation, quarry works, re-paving, restoration of work sites and rehabilitation and expansion works (airports and ports only). Potential impacts may be greater in the case of new sites or routes. OPERATIONAL ACTIVITIES: These activities include ongoing annual maintenance such as: leveling, grass cutting, ditch cleaning and more extensive periodic maintenance scheduled on a multiyear basis, as well as activities pertaining to port, airport, and rail services (loading, unloading and handing of cargo, temporary storage of goods, and transport of passengers and goods). Potential impacts of activities on the biophysical environment: * Soil: erosion (lavaka phenomenon), silting, and compaction; * Surface water and groundwater: various types of pollution, changes in the soil water balance, level of available groundwater, and extent of surface water infiltration; * Air: pollution from dust, noxious gas emissions, and/or odors; * Animals and plants: loss of habitat resulting from work site construction, deforestation, required siting of routes, and/or infrastructure construction; and * The landscape: total or partial alteration. Potential impacts on social environment: G Changes in daily living patterns (economic and cultural practices) among inhabitants living near works; * Land tenure conflicts and lawsuits resulting from expropriation; * Various illnesses caused by air and water pollution (including acute respiratory infections and diarrhea); and * Injury accidents and/or accidenfs causing damage to equipment and structures. Recommended mitigation measures: * Stabilize slopes and banks and size drainage ditches properly to address soil erosion (lavaka phenomenon), and pollution in general; * Protect the surface water system (streams, rivers, lakes, marshes) from all forms of pollution and from silting; * Construct and upgrade sanitation systems, ensure routine treatment of solid and/or liquid waste, and install infiltration devices for runoff to protect ground water from all forms of pollution and from decreases in the level of available water; * Restore all land occupied and/or polluted by sector-related works; * Reimburse persons adversely affected by pollution and expropriation as a result of sector works and activities; * Take appropriate measures to minimize noise and atmospheric pollution; and * Enhance quarry byproducts and optimize work-site infrastructure. Recommended mitigation measures should be the subject of awareness campaigns and should be agreed to by the entities involved in the works. Given the varying nature, scope and impacts of each sub-sector activity, a mechanism should be put in place to ensure the dissemination of information and/or public 64 consultation related to proposed transport works. Ecologically sensitive areas in particular may be affected directly or indirectly by general transport- related activities. Experienced professionals should conduct specialized studies in such areas, which should also contribute to the appropriate policy and strategy decisions that address both the protection of natural resources and economic issues. Environmental considerations specific to APLI activities The activities funded byAPLI loans focus on: * Periodic maintenance of priority sections (about 527 km) of national roads (RN25/45, RN 6, RN 34, and RN 44/3a); * Rehabilitation of Mahajanga and Toliary Ports; * Pilot program for the Tsiribihina and Sofia Rivers, including provision of light berthing facilities, warehouses, and cleaning up of the waterway; and i Shipwreck removal at Taolagnaro The measures to be implemented must be tailored specifically based on the natural setting, socioeconomic context, and type of works executed for each activity. Participatory efforts are recommended at all levels. Before implementation, population groups affected by the projects should be consulted. Prior consultation with the entities directly involved in each type of activity will facilitate a level of ownership leading to the sustainability of the works and/or compliance with any formal or informal regulations adopted in connection with the works. Integration of the environment into the transport sector management Environmental factors have not been adequately addressed during the design and implementation of transport sector projects, even though resulting investments have always had a direct or indirect minor or major impact on the environment. The EA report defines the role of the existing environmental units in the two ministries concerned to ensure that environmental assessments are incorporated throughout the project cycle for every sector project. These units will therefore be entrusted with legal, technical, and communications-related responsibilities. In particular, they will be expected to evaluate environmental impact statements for new projects or retrofits, monitor and supervise environmental requirements, provide legal surveillance, and conduct communication programs. The existing structures within the two ministries directly involved in the program are still relatively new. The role of these environmental units has not yet been clearly defined. Nevertheless, these units within the MOPW and the MOTM have already taken the initiative and are managing the environmental components of investments the ministries have made in respect of ongoing operations. Because their status within the ministerial structure is ambiguous, they do not have the financial wherewithal or skill base required in order to discharge their responsibilities fully. In the course of establishing the Environmental Management Plan for the Transport Sector the role of the environmental units should be defined clearly, and should include responsibilities for technical, legal, and communications issues. Finally, pursuant to national regulations, environmental factors should be incorporated during the preparation of the preliminary design and detailed design documents for transport sector projects. Environmental management plan for the transport sector The EA report proposes the following Environmental Management Plan: General and specific principles: * Mitigation measures should be introduced before the project begins, in consultation with the population; 65 * Mitigation measures for impacts of existing infrastructure for which investments are planned, should be identified; * Mitigation measures to prevent potential impacts at the national and regional levels should be identified; and * A guide of monitoring indicators (status indicators, pressure, and response indicators, and monitoring and evaluation methods). These principles and tools would allow any environmental damage to be identified and mitigated in a timely manner. Implementation strategy: The strategy will focus on measures to strengthen existing structures and enhance their capacity. It must be applicable at both the central and local levels. Implementation plan: The plan will outline mitigation measures, monitoring and supervision activities, and the entity responsible at each stage. The plan will also incorporate a capacity-building schedule, including training programs adapted to each target group. Standard clauses in works contracts: These will also serve as reference points for the drafting of environmental standards. Some of these are generic and are applicable to all types of works: * Measures to assist people forced to resettle, * Compensatory reforestation, * Installation of garbage bins and sanitation systems, and * Procedures for closing down work sites. Other clauses are applicable to particular sub-sectors: * Route selection, excavations, engineering structures, rest areas, and parking areas, * Preliminary hydrographic studies, protection of coral reefs and mangroves, regulations governing easements for aircraft emissions, and a lubricant treatment and recycling system. Communications strategy. The strategy, which comprises three components (environment and sustainable development; environment, population, and poverty; and environment from a regional perspective), and provides details regarding the needs assessment, the introduction of training programs, monitoring and assessment activities, and the relevant budget. The objective of the awareness program is to facilitate dialogue among the various actors and generate momentum for incorporating a sound communications strategy for the transport sector. ANNEX 7 Attachment 1: Matrix of Interventions for Environmental Protection MATRICE REFERENTIELLE DES MESURES DE SAUVEGARDE DE L'ENVIRONNEMENT PAR REGION ECOLOGIQUE ET TYPE D'INTERVENTION Interventions AVANT TRAVAUX PENDANT TRAVAUX POST TRAVAUX Etude et Installation Preparation Travaux de Terrasse- Revetement Drainage et Amenage- Ouvrages Travaux en Fin de Exploitation choix du du chantier du site carriere et ment de chauss6e assainisse- ment des d'art milieu marin chantier Zones trac6 ou du emprunt ment accotements et aquatique ecologiques site L Si, S2, S3, Si, S4, S5, S5;S6,P4 S8, S10, P7;P8;P9 P7;P14, P39 S31, P15 P16, P17 P17;P18, P3;P19; P22;S14; 11 ;12;13; I Littoral Est S4, P1, P2, S6, S7, S25, P7; . P48,P62 P20;P21; S15 Si6; 110;519; T S13, SB, P8;P11, P10;P11; S12,S13 S17;S18 S20;S31 T S27, P4, P61 P12 ;P13; 0 P5 P14 R . A S1, S2, S3, Si, S4, S5;S6,P4 S8, S10, P7;P8;Pg P7;P14, P39 S31, P15 P16, P17 P17 ;P18, P3;P19; P22;S14; i1 ;12;13; L E S4, P1, P2, S5, S6, S7, S25, P7; ; P48, P62 P20 ;P21; S15 ;S16; S19 ;S20; Littoral P19,.P70, S8, S13, P8;P11, P10 P11; S12 ;S13 S17 ;S18 S31 Ouest S27, P4, P61 P12 ;P13; P5 P14 H Zones P68; S1; S13; S25; P4; P3; S8, S10, P7;P8;P9 P72;P12, S31, P18, P16, P17; P17; P18, P22,S14; 11 ;12;13; A montagneus S2; S3; S27, P69 S7 S25, P7; ; P39, S29 P73 P37, P74 P48, P62 S15;S16; S19 ;S20; U es S4 .P8;P11, P10;P1I; S17;S18 S31 T 0 P31, P32, P12, P14, E P33, P34, SIO S P61, P71 T Tanety Si, S2, S3, S1, S4, S5, S5, S6, P4, S26, P7, P8, P7, P8, P9, S9, S10, S29, S31, P18, P16, P17 P17; P18, P22;S14; i1 ;12;13; E o S4 S6, S7, S8, P6 S25, P11, PIO, P11, P39 P43, P44, P48, P62 S15 ;S16; S19;S20; R S13, S27, P14, P31, P12, P14, P45, P46, S17 ;S18 S31 R P4, P5 P32, P33, S10 P60, P73, E P34, P71 P74 S Basfonds S1, S2, S3, SI, S4, S5, S6, P4, P6 Slo, P9, S9, S10, S29, S31, P18, P16 P17; P18, P22;S14; i1 ;12;13; S4, P1, S6, S7, S8, x P11, P12, P39 P44, P45, P48,P62 S15;S16; S19;S20; P75 S13, S27, P14 P46, P60, S17 ;S18 S31 P4, P5 . P73, P74 Interventions AVANT TRAVAUX PENDANT TRAVAUX POST TRAVAUX Etude et Installation Pr6paration Travaux de Terrasse- RevOtement Drainage et Am6nage- Ouvrages Travaux en Fin de Exploftation choix du du chantier du site carriere et ment assainisse- ment des d'art milieu chantier Zones trac6 ou emprunt ment accotements marin et 6colo. igues du site aquatique V Corridor SI, S 2, SI, S4, SS, S6,P4,PS S9, Sb, S31, P18, P43, P16,P17 P17; P18, P22;S14; 11 ;12;13; E forestier S3, S4, S6, S7, S8, x X S29, P39 P44, P45, P46, P48, P62 S15 ;S16; S19 ;S20; R P1, P75 S13, S27, P60, P73, P74 - S17 ;S18 S31 S P4,P5 N Plaines SI, S2, SI, S4, S5, S6, P4, P6 S8, S10, S6, S10, S9, S10, S31, P18, P44, P16, P17 P17; P18, P22 ;S14; 11 ;12;13; T cotieres S3, S4, S6, S7, $8, S25, P7, P9, PIO, S29, P39 P45, P46, P60, P48, P62 - S15 ;S16; S19 ;S20; P1,P75 S13, S27, P8, P11, P11 P73,P74 S17;S18 S31 E P4, P5 P61 $ T V Corridor S1, S2, A proscrire S6, P4, P6 S9, S10, S31, P18, P43, P16, P17 P17; P18, P22 ;S14; 11 ;12;13; E forestier S3, S4, S29, P39 P44, P45, P46, P48,P62 S15;S16; S19;S20; R P1,P75 x X P60,P73,P74 S17;S18 S31 A Si, S2, SI, S4, S5, S6, P4, P6 S8, S10, S6, S10, S9, S10, S31, P18, P44, P16 P17; P18, P22 ;S14; 11 ;12;13; N S3, S4, S6, S7, S8, S25, P7, P9, PIO, S29,1P39 P45, P46, P60, P48, P62 SI5;S16; S19;S20; T Plaines P1,P75 S13, S27, P8, P11, P11, P13 P73,P74 S17;S18 S31 OUEST cotUeres P4, P5 P61 et delta S, S2, S8, S10, S9, Sb, S31, P18, P43, P16,P17 P17; P18, 11 ;12;13; Zones S3, S4, X S25, P7, X S29, P39 P44, P45, P46, P48, P62 S19 ;S20; S dunaires P1, P75 P8, Pll, P60, P73, P74 S31 P61 U D Interventions AVANT TRAVAUX PENDANT TRAVAUX POST TRAVAUX Etude et Installation Pr6para Travaux de Terrasse- Revitement Drainage et Am6nage. Ouvrages Travaux en Fin de Exploitatio choix du du chantier tion du carriere et ment assainisse-ment ment des d'art milieu chantler n Zones icologiques trac6 ou du site emprunt accotements marn et site . aguatique Zones Si, 82, S3, S6, P4, S8, S0, S25, S9, S10, S29, S31, P18, P43, P16, P17 P17; P18, 11 ;12;13; foresti6res S4, P1, P75 X P6 P7, P8, P11, X P39 P44, P45, P46, P48, P62 S19-S20- (bush, foret P61 P60, P73, P74 S31 x6rophile) I SI, S2, S3, SI, S4, S5, S6, P4, S8, S10, S25, S9, S10, S29, S31, P18, P43, P16 P17; P18, 11 ;12;13; Zones 4, P1, P75 S6, S7, S8, P6 P7, Pa, P11, X P39 P44, P45, P46, P48, P62 S19;S20; sablonneuses S13, S27, P61 P60, P73, P74 S31 P4, P5 R6cits coralliens . 0 SI, S2, S3, S6, P4, P6, S6, P4, 88, S10, S25, S6, S10, S9, S10, S29, S31, P18, P43, P16,P17 P17; P18, P22;S14; 11 ;12;13; N Zones sujettes i S4, P1, P75 P27 P6 P7, P8, P11, P9, PIO, P39 P44, P45, P46, P48, P62 S15 ;S16; S19 ;S20; E 6rosion P61 P11 P60, P73, P74 S17;S18 S31 S .__ _ __ _ _ ._ _ __ S Zoneshumides S1, S2, S3, X S6, P4, X X S9, S10, S29, S31, P18, P43, P16, P17 P17; P18, 11 ;12;13; E S4, P1, P75 P6 P39 P44, P45, P46, P48, P62 S19,S20; N P60, P73, P74 S31 B L E S Interventions AVANT TRAVAUX | PENDANT TRAVAUX | POST TRAVAUX Etude et choix Installation Priparation Travaux de Terrasse Revitement Drainage et Amenage- Ouvrages Travaux en Fin de Exploitation du trace ou du du chantier du site carriere et -ment assainise- ment des d'art milieu chantier site emprunt ment accotements marn et Zconoles s_____________ quatique 6coloabques Zones S1, S2, S3, S6, P4, P6 S8, S10, 525, S9, 810, S29, S31, P18, P16, P17 P17; P18, 11 ;12;i3; forestiAres S4, P1, P75 X P7, P8, P11, X P39 P43, P44, P48, P62 S 819 ;S20; (bush, forAt P61 P45, P46, S31 xerophile) P60, P73, _________ ~~~~~~ ~~~P74_ _ _ _ _ Si, S2, S3, SI, S4, S5, S6,P4,P6 S8, S10, S25, S9, 810, S29, S31, P18, P16 P17; P18, 11 ;i2;13; Zones S4, P1, P75 S6, S7, S8, P7, P8, P11, X P39 P43, P44, P48, P62 S19 ;S20; sablonneus S13, S27, P61 P45, P46, S31 es P4, PS P60, P73, P74 Rdcifs - coralliens 0 S1, S2, S3, S6, P4, P6, S6, P4, P6 S8, S10, S25, S6, S10, S9, S10, S29, S31, P18, P16, P17 P17; P18, P22;S14; 11 ;12;13; N Zones S4, PI, P75 P27 P7, P8, P11, P9, P10, P39 P43, P44, P48, P62 S15;S16; S19;S20; E sujettes A P61 P11 P45, P46, S17;S18 S31 S 6rosion P60, P73, E Zones S1, S2, S3, X S6, P4, P6 X X S9, $10, S29, $31, P18, P16, P17 P17; P18, 11 ;12;13; N humides S4, P1, P75 P39 P43, P44, P48, P62 S19;S20; $ P45, P46, $31 I ~~~~~~~~~~~~~~~~~~~~~P60, P73, B P74 L E $ 70 LEGENDES 1. Littoral Est 2. Littoral Ouest 3. Hautes Terres Voh6mar Ambanja Befandriana Sambava Antalaha Bealanana Antalaha Mahajanga Tsaratanana Mananara Soalala Ambatondrazaka Fenerive Maintirano Anjozorobe Toamasina Tambohorano Antananarivo Vatomandry Belo sur Tsiribihina Antsirabe Nosy Varika Morondava Faratsiho Mananjary Morombe Ambositra Manakara Toliary Fianarantsoa Farafangana Androka Ambalavao Vangaindrano Miarinarivp Taolagnaro Tsiroanomandidy 4. Versant Est 5. Versant Ouest 6. Sud Vavatenina Antsohihy Sakaraha Ampasimanohitra Mampikony Bezaha Anosibe an'Ala Ambato Boeny Betroka Ikongo Maevatanana Bekily Midongy du Sud Kandreho Betioky Ivondro Miandrivazo Ampanihy Vohipeno Manja Tsihombe Ranomafana Ankazoabo Ambovombe Ifanadiana Beroroho Amboasary Ambohimanga du Sud 71 Annex 8: Action Plan for Financial Management The present action plan which has already started describes main actions to strengthen the MOTM and MOPW financial management systems and to build their capacity to produce PMR- based disbursement. This action plan divides the actions into two categories: (i) activities precedent to effectiveness assumed to be August 2000; and those activities expected to be completed during the second phase culminating in the adoption of PMR-based disbursements. 72 Acn Date due bv Resbonsible Conditions of effectiveness 1 Agreement on terms of reference for key staff (accountants) December 31, 1999 MOTM, MOPW, external auditor and consultant in charge of the (COMPLETED) IDA Implementation of the accounting manual of procedures. 2 Recuitment process of Consultant in charge of the MOTM, MOPW Implementaton of the accounting manual of procedures: * Finalization of bidding documents; * Reception of bids, evaluation, selection). June 1, 2000 3 Appointment of Consultant in charge of the implementation MOTM, MOPW of the accounting manual of procedures (with IDA no IDA objection) June 15, 2000 4 Consultant starts preparation of accounting and financial MOTM, MOPW manual of procedures describing accounting systems and procedures, internal controls and fund flow processes: * First draft for IDA comments June 30, 2000 * Final draft incorporating IDA comments July 15, 2000 * Appointment of key accounting staff July 31, 2000 5 Implementation of the manual of procedures and users June 30, 2000 Consultant, training. MOTM, MOPW 6 Recruitment process of external auditors: MOTM, MOPW * Finalization of bidding documents; * Reception of bids, evaluation, selection). July 15, 2000 7 Appointment of External Auditors July 31, 2000 MOTM MOPW 8 Project Effectiveness August, 2000 GOM/IDA Interim period (two years) 9 Agreement on terms of reference of Consulting firm in August 31, 2000 MOTM, MOPW, charge of the design and implementation of the MIS IDA 10 Users training on LACI September 1, 2000 MOTM, MOPW 11 Recruitment process of Consuling firm in charge of the MOTM,MOPW design and implementation of the MIS: * Finalization of bidding documents; September 15, 2000 * Reception of bids, evaluation, selection. October 31, 2000 12 Appointment of Consulting firm in charge of the design and November 30, 2000 MOTM, MOPW, Implementation of the MIS IDA 13 Installation of a computerized accounting system (MIS).. April 30, 2001 Consulting firm, MOTM, MOPW 14 System testing to ensure compliance with management's MOTM, MOPW, expectations and IDA specificabtons: IDA, Auditors * Prepare test data and expected results; * Perform tests and analyze results; * Correct problems and retest. _______ _______________________________________June 30, 2001 15 Conversion and final testing: * Complete systems documentation and training Consukant manuals; * Convert, verify files and data in the database and Consultarit, perform final testing; MOTM, MOPW * Complete user training and start operating the system; * Obtain user acceptance and approval. July 31, 2001 MOTM/MOPW 16 Production of draft PMRs from the MIS December 31, 2001 MOTM, MOPW, 73 l_______ Action Date due by Resnonsible 17 Review of PMRs and make corrective actions if February, 2002 MOTM, MOPW, necessary. Consultant, Auditors IDA IDA IDA FMS assessment to determine whether the MOTM March, 2002 and MOPW meet the eligibiliy crieria established under LACI. MOTM, MOPW, Determination of funds needed for PMR disbursement April, 2002 for the first six months 18 Production of the first PMR and submit them to the September 2002 MOTM, Bank MOPW 74 Annex 9: Letters of Transport Sector Policy and Road Management Strategy REPOBLIKAN'I MADAGASIKARA Tanindrazana - Fahafahana - Fandrosoana MINISTERE DES TRANSPORTS ET DE LA METEOROLOGIE MINISTERE DES TRAVAUX PUBLICS DECLARATION DE POLITIQUE NATIONALE DE TRANSPORTS 1.- CONTEXTE 1.1 L'ajustement structurel dans sa premiere phase a abouti A une stabilisation financibre effective. La croissance economique est pass6e de 2% en 1996 a environ 4 % en ftn 1998. Le Gouvernement compte desormais conforter cette stabilisation financiere et inverser la baisse tendancielle du niveau de vie en vue d'une croissance durable. 1.2 Dans cette perspective, le Document Cadre de Politique Economique (DCPE 1999-2001) definit les principaux defis a relever par le Gouvernement pour permettre de "creer " les conditions propices A une croissance rapide et durable en vue de relever le niveau de vie de la population et de reduire la pauvrete". Ainsi, pour la periode 1999 - 2001, les objectifs sont d'atteindre des taux de croissance du PIB reel sup6rieurs A 4% et d'assurer les conditions pour des taux de 6 - 7 % a moyen terme. Le programme macro-economique veut notamment porter les investissements bruts de 12,1% du PIB en 1997 a 16% en 2001 afin d'accel6rer le d6veloppement des infrastructures propices a l'investissement priv6. 1.3 Face A la situation inqui6tante de l'etat de l'environnement , le Gouvernement a adopte des politiques et actions visant une meilleure protection et voire une amelioration de l'etat de 1'environnement pour un developpement durable. En 1990, le Plan National d'Actions environnementales a acquis une dimension legale par l'adoption de la Charte de 1'environnement par la publication de la Loi n
Группа Всемирного банка · Project Appraisal Document
Madagascar - Transport Sector Reform and Rehabilitation Project
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