Haiti - Fourth Highway Project

FILE COPY DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1593a-HA REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR-A FOURTH HIGHWAY-PROJECT May 23, 1975 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  Currency Equivalents Currency Unit = Gourde (G) US$1 = G5.00 Gl = us$0.20 Gl million = US$200,000 Fiscal Year October 1 - September 30  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF HAITI FOR A FOURTH HIGHWAY PROJECT I submit the following report and recommendation on a proposed development credit to the Republic of Haiti for the equivalent of US$2000 million on standard IDA terms to help finance a project for the rehabili- tation of the Northern Road. PART I - THE ECONOMY 2. The most recent economic report on Haiti, Report No. 410-HA entitled "Current Economic Position and Prospects of Haiti" was issued on April 18, 1974. Updated social and economic data are presented in Annex I1 3. Haiti is one of the poorest nations in the world, and the only country in the Western Hemisphere included in the U.N. list of 25 least developed nations. GNP per capita in 1972 stood at about US$130. An infant mortality rate of about 200 per thousand live births, an average life expectancy of 45 years, low nutrition and sanitation standards (mal- nutrition and gastro-enteric diseases account for over half the deaths in the country) and an adult literacy rate of only 20 percent characterize the depressed living standards of the population. 4. The country's natural resources are limited. Of the country's total area, only about 15 percent is well suited to agriculture although twice as much is actually under cultivation. The remaining 70 percent is too arid and steep for cultivation. The average density of population is nearly 500 per square kilometer of arable land, one of the highest in the world. In addition, much of the country suffers from frequent hurricanes, floods and droughts. Known mineral resources are also modest, consisting of bauxite, copper and lignite. Haiti's natural conditions for tourism, in contrast, are more favorable. Some beaches offer good potential for development, the mountainous terrain is attractive and Haitits culture and art are distinctive. 5. Economic growth and social progress have been hampered by periods of political instability which did not permit the development of an adequate technical and physical infrastructure. Inadequate maintenance has reduced the efficiency of the limited irrigation network. The lack of transport infrastructure has hampered the development of commercial agriculture while deficient communications between the capital and the interior have led to the concentration of economic activity in Port-au-Prince. Power generation capacity is also well below the Latin American average  - 2 - despite recent investments in hydro-electrical generation facilities. 6. Nevertheless, in marked contrast to the previous decade when the economy stagnated, Haiti enjoyed some growth in 1968-73. Expansion of small-scale manufacturing and assembly operations, tourism and cons- truction led to average annual increases of GDP of about 4 percent uwhi,e population grew at an estimated annual rate of 1.7 percent. These acti- vities contributed noticeably to ixrnproving economic conditions in Port-au- Prince. Emfployment in assembly operations, for example, increased from 10,000 in 1971 to 25,000 in 1973. Agriculture, however, which employs hO percent of Haiti's population and accounts for nearly half of GDP and about 60 percent of merchandise exports has as yet shown little dynamism. Progress in agriculture will require the adoption of improved production techniqtles and provision of greater incentives to farmers, as well as the improvement of transport facilities. 7. Value added in agriculture stagnated in 1974. The Government adopted two important measures in 1974 to stimulate agricultural produlction (a program to modernize coffee production and a substantial increase in the price paid to farmers for sugar cane). Adverse economic conditions in the United States brought about declines in investment and growth in tourism and export-oriented manufacturing. Consequently, GDP growth in 1974 is estimated to have been only 1.9 percent. 8. The Government's strategy is to create the conditions for a fuller utilization of the country's physical and human resources by first con- structing or rebuilding the necessary infrastructure in transport, power, irrigation, water supply and telecommunications; second, taking measures to increase agricultural productivity and third, extending educational services to reach greater numbers of persons. This strategy will require much higher public development outlays than in the past. The five-year development plan 1977/81 that the authorities are currently preparing is expected to call for an increase of development expenditures from about US$15 million per year in 1970-72 (3 percent of GDP) to about US$50 million per year in 1977-81 (about 5 percent of GDP). 9. The successful execution of such a program presupposes a substan- tial increase in +tle flow of external assistance. In the period 1970-72 gross disbursements on external official loans financed 25 percent of de- velopment experditure. Technical assistance grants and private donations financed the equivalent of 35 percent. The remaining 40 percent was fi- nanced out of public savings. On the basis of disbursements of already committed loans and of likely annual commitment levels of US$30-US$35 million, it is expected that official lending agencies will finance about 54 percent Otf development expenditures in the period 1977-81. Capital investment grants from bilateral agencies are expected to finance about 10 percent of develop- ment expenditures. Technical assistance grants and private donations are expected to continue financing an important, albeit dec4ining, share of  development expenditures (about 14 percent) Public savings are expected to finance the remaining 22 percent. 100 Although public savings are expected to finance a smaller share of development expenditures in 1977-81 than in 1970-72, in absolute terms the level of public savings is expected to increase from about US$9 million per year in 1970-72 to about US$12 million per year in 1977-81l These savings will be utilized to provide counterpart funds for externally financed projects, to finance some investment projects that are not linked to foreign loans and to repay outstanding public debt. In addition to the need for increased external assistance and public savings, the Government's development plan will require the allocation of increased domestic resources for operating expenditures associated with the new development projects in agriculture, education, road maintenance and other sectors. 11. The Government has expressed its determination to make the necessary fiscal effort. It has recently adopted two tax measures which, although they may have the immediate effect of lowering some collections, should stimulate commodity exports and in the medium term generate higher revenues. In August 1973, the specific tax on coffee, which contributed to reducing producer incentives by absorbing a large share of export proceeds when international prices were low, was replaced by a progressive ad valorem levy. In early 1975, the export tax on sugar was lowered from its previous rate which was as high as 80 percent at the margin. In addition, the Government plans to improve income tax administration to nearly triple collections by the end of the decade. Customs administra- tion and the collection of import duties are also being tightened, with technical assistance from the OAS and the IMF. 12. Additional development funds are expected to originate from the taxation of bauxite exports of which the Government has allocated US$4.4 million for development expenditures in 1975. It is expected that at least similar amounts will be made available in future years. On balance all the measures contemplated are likely to increase the ratio of taxes to GNP from its current level of 12 percent to about 14 percent by 1980. 13. Even with the adoption of the increased tax measures discussed above (paras. 11 and 12), government revenues allocated to development may not be sufficient to finance the investment program and operating expenditures. It may, therefore, be necessary to channel increased resources into the development effort by allocating to it certain revenues that at present do not fall within the budgetary process, in particular part of the profits of public enterprises such as the Port Administration, the State Flour Mill and the Tobacco Monopoly.  4 - 14. Haiti's balance of payments has deteriorated in 1974. The current-account deficit doubled to US$41 million as merchandise imports increased from US$70 million to US$110 million, largely owing to higher import prices. (Higher costs of fuels accounted for one-fourth of the US$4o million increase in 1974 imports.) On the other hand, higher prices benefitted Haiti's exports, particularly coffee, sugar, essential oils and sisal, but these gains were partially offset by declines in the volume of coffee and sugar exports. Haiti's international reserves decreased by about US$20 million in 197h. As of December 31, 19743 net international reserves of the National Bank were equivalent to US$1009 million, less than one month's imports; for the consolidated banking system, net international reserves were negative, of the order of US$3.1 million. The 1974 balance of payments deficiL was partially financed by the drawdown of US$7.6 million on the IMF stand-by and special oil facility. An IMF mission visited Port-au-Prince in May to discuss with the authorities the possible extension of the current stand- by arrangement which will expire in July. 15. Haiti's resource gap is expected to continue to widen in the medium term, reflecting the import requirements associated with the Government's investment program. As there has been relatively little net foreign borrowing in the last decade, the debt-service ratio is relatively low (5,8 percent in 1974). But even with a low debt-service ratio, the balance of payments is likely to constitute a constraint to economic development in view of the limited growth prospects of Haiti's major exports (coffee and bauxite) and because export diversification through the development of other agricultural products, manufacturing and tourism, is still at an early stage. In view of the country's poverty, vulnerable balance of payments and the need to employ most of its limited import capacity to sustain growth, Haiti will require external assistance on highly concessionary terms for a long time if it is to achieve a significant improvement in the standard of living of its population. PART II - BANK GROUP OPERATIONS 16. Bank Group lending to Haiti prior to 1974 consisted of a US$2.6 million Bank loan (141-HA) in 1956 for highway rehabilitation and maintenance and a US$350,000 IDA credit (32-HA) in 1962 for highway maintenance. Much of the progress achieved under these projects was lost in the 1960's, a period during which Haiti's highway system deterio- rated badly for lack of adequate maintenance. 17. In 1974, responding to the Government's assignment of the highest priority to the reconstruction of the countryts major roads, IDA made a US$10 million credit (478-HA) to commence reconstruction of the Northern Road which connects the capital, Port-au-Prince, to Cap Haitien, Haiti's second city. The project (Third Highway Project), as approved by the Executive Directors in May 197h, included the replacement of the collapsed Estere Bridge, reconstruction of about 150 km of the 250 km Northern Road, comprising those  sections in most urgent need of reconstruction and technical assistance to undertake studies, train personnel in the Ministry of Public Works, Trans- portation and Communications (TPTC) and assist the domnestic civil works industry in management, administration and engineering. Because of much higher than expected bids reflecting worldwide inflation and probably the unfamiliarity of international contractors with conditlons in Haiti, the Executive Directors authorized on October 29, 1974 a reduction in the scope of the road reconstruction work to about 80 km. Similar bid overruns also affected other major road projects in Haiti. Annex IT contains a stumary statement of Bank loans and IDA credits as of April 30, 1975, and a state- ment of the execution of the ongoing Third Highway Project. 18. Other official lending agencies are also supporting the Government's road rehabilitation program. The IDB has made a loan for the reconstruction of the Southern Road from Port-au-Prince towards Les Cayes and the French Government is financing construction of a road connecting the Southern Roar to Jacmel. USAID is financing technical assistance equipment and shop ins- tallations for a road maintenance program. The UNDP is financing the tech- nical assistance component of the Third Highway Project (with the Bank as executing agency) including a study of Haiti'- transport sector which is expected to recommend future investment priorities. All agencies participa- ting in the roads program meet twice a year in Port-au-Prince with the Government to coordinate their efforts. 19. In addition to its lending for road reconstruction, the IDB has made loans in Haiti for agricultural and industrial credit, rural education and improvement of Port-au-Prince's water supply and port facilities. IDB is also providing assistance to the Government for the preparation of inte- grated rural development projects in the Cul-de-Sac Plain and in the Artibonite Valley. USAID has provided assistance for a malaria eradica- tion program, for community development and for agriculture with emphasis on rehabilitation of coffee production and improvement of feeder roads. Besides the recently approved Jacmel road project, France has given assis- tance to technical and secondary education and to improve airport facilities in several provincial towns. The Federal Republic of Germany is assisting rural development schemes, with current emphasis on drilling of wells for irrigation in the Gonaive Plain. Canada is financing a technical education project, a study of the water resources of Haiti for both irrigation and power potential, and the preparation of a rural development program in the southern peninsula. An important contribution to Haiti's development are the programs of the many voluntary agencies whose assistance, especially in health, education and agriculture, will continue to be a vital element in community development. Table 1: LOAN CCMMITMENTS TO HAITI, 1966-74 (US$ maillion) IBRD/IDA IDB AID Agriculture 0.7 5.7 Industrial Credit - 1.1 - Transport 10.0 32.2 3.4 Education - 1.3 - Water and Sewerage - 10.0 E 9.]  - 6 - 20. Future IDA assistance for the Government's road rehabilitation program would take into account the recommendations of the study of the transport sector for which the Bank is executing agency. It is likely that road projects (e.g. the Central Road, linking Port-au-Prince to Cap Haitien via the Central Plateau, and rural feeder roads) will rank high among investment priorities. 21. The recent rapid development of light assembly industries in the Port-au-Prince metropolitan area contributed positively to the balance of payments and in particular to the amelioration of Haiti's acute under- employment problem. This industrial development has increased the demand for power in the metropolitan area to a point where shortages are expected by 1977 unless urgent measures are taken to reinforce the capital's mainly hydro-electric power supply. The Bank is presently assisting the Government in preparing a small-scale thermal power project for Port-au- Prince. The consultants who are carrying out the feasibility study will also make recommendations on the improvement of the distribution system and on the strengthening of the State Power Company's accounting and management. The Bank also expects to assist the Government in carrying out a country-wide sector study which would make recommendations, inter alia on future high priority power investments, The results of an on- going hydraulic resources study which is being financed by Canada (CIDA) would be integrated into the sector study. IDA lending for power, other than for the Port-au-Prince thermal project, would take into account the findings of the study. 22. An 1DB/UNESCO mission visited Haiti in June 1974 to identify the country's educational needs. The Association is presently discussing with the Government and with iDB possible areas in which the two lending agencies could provide assistance in education. 23. Following an IDB/IBRD/FAO agriculture sector study in September 1973, which identified several high priority project possibi- lities in the agricultural sector, the Government and Bank/FAO staff began preparation of an integrated rural development project in the Northern part of Haiti (Plaine du Nord)0 This densely populated region has considerable agricultural potential which could be developed through a combination of public investment (feeder roads, drainage and irrigation) and strengthening of existing peasant organizations. 240 The Government has requested IDA assistance for a program to improve thewater supply system of provincial towns, Inadequate water supply contributes to Haiti's serious health problem including one of thl highest infant mortality rates in the Western Hemisphere. Further- more, Haiti's considerable but largely unrealized tourism potential can only be developed if improvements in water supply and other services in the country's provincial towns are made. 25. The Bank Group's share in Haiti's publicly-guaranteed external debt outstanding and disbursed amounted to about two percent at the end of 1974. The Bank Group's share of external public debt service during 1974 was about 0.2 percent. Its share of outstanding publicly-guaranteed external debt could rise to about 35 percent by the end of the 1970's;  - 7 - its share of external public debt service would be of the order of 10 percent. 26. There have been no IFC operations in Haiti and none are under active consideration at this time. PART III - THE TRANSPORT SECTOR 27. Haiti's transport network is still rudimentary. Mountainous terrain hampers communications between rural communities and the main distribution centers. Except for a short narrow-gauge railroad used for hauling cane to a sugar mill, all inland transportation is by road. The port of Port-au-Prince handles over 90 percent of the country's export and import trade although numerous small hairbors along the countryt s long coast line are used for coastal shipping, and a few other general cargo and specialized ports service international shipping. Port-au-Prince airport handles all international air traffic and over 90 percent of all tourist travel. A few provincial towns have small airports for domestic air traffic. Transport Planning 28. TPTC is responsible for implementing transportation projects, but has not been actively involved in transportation planning for lack of expe- rienced professional staff and transportation data. In order to strengthen transportation planning, the Third Highway Project includes technical assis- tarce for creation of a planning uni4 under TPTC, and for the preparation of a National Transport Study which will provide the sectoral input for tie next national development plan (1977-81). Consultants preparing the study will also train counterpart personnel in planning procedures. 29. The National Transport Study, to be completed in mid-1976, will identify priority transport projects. Assurances were obtained during nego- tiations for the proposed credit that the Government will consult with the Association on the recommendations of the Study with a view to formulating an investment plan for the transport sector, and that, until such a plan has been completed, the Government will consult with the Association prior to undertaking any major investment in the transport sector (Section 4.06 of the draft Credit Agreement). Maritime Transport 30. With 1500 km of coastline, Haiti has long used coastal shipping as a means of moving merchandise and people. The Government, with the assis- tance of IDB, is making major improvements to the Port-au-Prince harbor. The other main general cargo harbor is at Cap Haitien. There is a specialized harbor at Miragoane for handling bauxite, Coastal shipping will continue to serve an important role for isolated communities, but cannot provide an economic alternative to an improved road network.  Air Transportation 31. Though a few Caribbean cruise ships stop at Port-au-Prince and Cap Haitien with passengers coming ashore for a few hours, almost all international passengers arrive and leave by air. Haiti's international airport at Port-au-Prince can handle international flights adequately. Several provincial towns have small airports but domestic air traffic is low due to the small size of the country and the poverty of the popu- lation. Some tourist traffic flies from Port-au-Prince to Cap Haitien and to Jacmel on the north and south coasts, respectively. Roads 32. The basic road network of Haiti was built during the 1920's and from the mid-1940's to the mid-1950's. Of the 3000 km constructed during those periods, only 350 km were paved. From the mid-1950's through the 1960ts no new road construction was undertaken and existing roads deteriorated to such an extent that communities which formerly had year-round communication with the main trading centers, now find themselves isolated during the rainy seasons. Trucking costs became so high that costs of evacuation of agricultural products left little revenue for the producer. 33. In the late 1960's the Government began to recognize the need to redress this situation and requested OAS and UNDP assistance for transportation studies. These studies identified the priority of the reconstruction of the Northern and Southern Roads and underscored the need for systematic road maintenance. As a result, USAID made a US$3.1 million loan and a US$0.6 million grant in 1973 to support a newly created maintenance unit (SEPRRN) with technical assistance and equipment. The IDB made a US$22.2 million loan in 1974 for the partial reconstruction of the Southern Road and IDA lent US$10 million in 1974 to begin reconstruct- ion of the Northern Road (Third Highway Project). The French Government made a FF 35 million loan (about US$.3 million) in 1975 to build a road connecting the Southern Road to the south coast city of Jacmel. 34. The Government has taken several measures to improve road maintenance. SEPRRN is being strengthened under an AID-sponsored program designed to improve SEPRRIN's administration, modernize its equipment and train field maintenance personnel. The Government has organized special brigades to maintain sections of the Northern Road not being rebuilt under the Third Highway Project. With the help of technical assistance being supplied under the on-going project, regular traffic counts and origin- destination surveys will be undertaken not later than December 31, 1975 and load limit legislation will be drafted for enactment before the end of 1976. During negotiations for the proposed credit, an understanding was reached with the Government on the basic outline of SEPRRN's five- year maintenance and training plan and on the required budgetary alloca- tions. A detailed five-year plan, based on the above outline, and in- cluding specific measures for maintenance of the Northern Road, is being prepared by the Government. Agreement on this detailed plan between the Government and the Association is a condition of credit effectiveness (Sections 4002 and 5.01 of the draft Credit Agreement).  35. Counterpart funds for road construction and maintenance come from earmarked excise taxes on fuel, from export taxes on bauxite and from the general budget. Counterpart funds wil be needed over the next three years for the Southern Road (IDB), for road maintenance and feeder roads (USAID), as well as for the Northern Road. Revenue projections indicate that suffi- cient funds would be available as counterpart for the proposed project and assurances were received during negotiations that additional funds would be provided by the Government if required (Section 3.01 of the draft Credit Agreement). PART IV - THE PROJECT 36. The feasibility and detailed engineering studies for the project, financed by UNDP, were carried out in 1973 by a French consultant firm (Ingeroute) as part of the preparation of the Third Highway Project. These studies have since been updated by a Canadian consultant firm (Ewart, Lea and Tremblay) which was retained by the Government in October, 1974 to evaluate pavement standards and also to design the Sonde bridge. The project was appraised in the field in December 1974. Negotiations for the proposed credit were held in Washington from April 7 to 11, 1975. The Haitian delegation was headed by Mr. Emmanuel Bros, Minister of Finance. A Report entitled "Haiti - Appraisal of a Fourth Highway Project" (No. 673a-HA) dated May 21, 1975, is being distributed separately. The main features of the credit and project are summarized in Annex III. 37. The 250 km Northern Road is the most important highway in Haiti. Near Port-au-Prince it serves a sugar factory, the country's only steel processing mill, a cement factory and a flour mill. Seventy kilometers north of the capital, the road skirts beach resort areas before crossing the Artibonite Valley and the Gonaive Plain, both important agricultural areas with potential for major increases in production. Beyond Gonaive the road crosses two difficult mountain ranges before descending into the fertile Northern Plain and to Cap Haitien, Haiti's second city. On a mountain overlooking the Northern Plain, 30 km from Cap Haitien, is a fortress, the Citadel, and at the foot of the mountain are the ruins of Sans Souci Palace, both important historic sites which are expected to increasingly attract tourists as the Northern Road is rebuilt. Project Objective and Description 38. The main objective of the project is completion of reconstruction of the Northern Road. The project would consist of: (a) reconstruction of the remaining 170 km not included in the ongoing Third Highway Project; (b) construction of a new bridge over the Artibonite River (Sonde Bridge);  - 10 - (c) supervision of construction under (a) and (b); (d) evaluation of pavement standards, and design of Sonde Bridge; (e) technical assistance for (1) preparing specific priority transport projects and (2) further improving the capability of the domestic civil works industry. 39. The pavement standards recommended in the 1973 engineering studies have been reviewed by consultants (Ewart, Lea and Tremblay/Canada) to take in- to account recent behavior of the pavements and current traffic volume, as well as to update cost estimates. The existing Sonde Bridge on the Artibonite River is nearly a hundred years old and, though still in re- markably good condition, its replacement should not be too long delayed. Should the bridge collapse a very long and costly detour (about 180 km) would have to be used to evacuate agricultural products from the Artibonite Valley, the Gonaive Plain and the Northern Plain. 140. With the help of technical assistance financed under the ongoing Third Highway Project, a transport sector planning unit will be set up under TPTC by December 31, 1975. Under the proposed project, assistance would be given to prepare transport projects of the highest priority recommended by the ongoing Transport Sector Study, and selected by the Government in agree- ment with the Association. The ongoing project is also supplying technical assistance to strengthen the Haitian civil works industry with emphasis on evaluating physical execution capacity and on training industry personnel in administration, engineering and management (costing, budgeting, prepa- ration of bids). Under the proposed project, assistance to domestic con- tractors would continue the training begun under the ongoing project with emphasis on practical on-the-job training. Local firms, some of which are already participating in construction of the Northern Road as sub-contractors, would be assisted to upgrade their expertise in job management and equip- ment use and maintenance to enhance their capabilities to execute civil works contractsO Project Cost and Financing 41. Based on the 1973 detailed engineering, on the recent review of pavement standards and on bidding experience on the ongoing Third Highway Project, the cost of the proposed project is estimated at US$26.3 million equivalent net of duties and taxes (foreign contractors are exempted from taxation). The foreign exchange component of US$20 million would be financed by the proposed credit. Cost estimates for road reconstruction are based on bids received under the Third Highway Project and on bids already received for major civil works components of the proposed project. Cost estimates for construction of the Sonde Bridge are based on prices for construction of the recently completed Estere Bridge. The cost estimat. of consultant services for supervision and technical assistance has been based on experience under  the ongoing project. Allowances of 10 percent of civil works base line costs for physical contingencies and 24 percent of project base line costs for price contingencies have been included in project cost estimates. The price contingencies reflect the results of the bidding mentioned in para- graph 43 below and are considered adequate in the light of expected price trends. A summary of project costs is found in Annex III. Project Execution 42. TPTC would be responsible for execution of the project and would be assisted in supervision of construction by the sane consultant (Ingeroutet France) who is supervising the ongoing project. Major earthworks, rock ex- cavation and paving will require the use of mechanized methods. Other items, particularly small structures and drainage works, will be executed by labor- intensive methods. 43. Procurement: Although a 7-1/2 percent margin of preference is available for local contractors, none are expected to qualify as prime contractors. As indicated above (para. 40), continuing on-the-job training should enable then to participate in bidding for prime contracts in the future. Works on the ten road sections to be rebuilt and on construction of the Sonde Bridge were divided into four lots. Bids for two of the lots, equal to about 85 percent of the estimated cost of -ivil works, were received in March 1975 on the basis of international competitive bidding according to Bank Group guidelines. These bids were in line with project cost estimates. Awards would only be made after approval of the credit by the Executive Directors. Bids for the remaining two lots of civil works will be called for as soon as bidding documents are completed. 44. Disbursements of the credit would be for the foreign exchange component of the project, estimated at 75 percent of total project cost, on the basis of: (a) For civil works: 100 percent of foreign exchange costs of contractors, and 20 percent of local costs of contractors, representing the estimated foreign exchange corponent; (b) For consultant. services: 100 percent of the foreign exchange cost. Up to $100,000 retroactive financing fror, the proposed credit is recormended for consulting services undertaken after October 1, 1974 for the review of pavement standards and for the design of the Sonde Bridge. Economic Benefits 45. The unreconstructed sections of the road would continue to deterior- ate even if maintenance efforts were increased. Quantifiable benefits fron the proposed road reconstruction would consist of reduced road maintenance costs and of savings in vehicle operating costs. Since the transport industry is competitive, a large part of savings in vehicle operating costs are likely to  - 12 - be passed on to farmers, passengers and consumers. These savings, by increasing revenues received by farmers from marketing of their crops, should generate agricultural development, particularly in the Gonaive Plain and the Artibonite Valley. They should also generate development of tourism by providing an all weather road from Port-au-Prince to the tourist attrac- tions near Cap Haitien. Non-quantifiable but nevertheless important benefits would include the better integration of the northern part of the country with the capital. 46. Quantifiable benefits and costs were discounted over the period 1975 through 1997 (representing the construction period and the anticipated 20-year economic life of the project). Benefits are sensitive, of course, to the assumptions made regarding the number of years that the existing Sonde Bridge can still be used. The economic rate of return of the civil works overall and assuming collapse of the existing Sonde Bridge in 1997, would be about 26 percent. Assumptions of earlier collapse of the bridge increase the estimated rate of return, up to 35 percent if failure of the bridge is assumed as early as 1982. Sensitivity tests, assuning either (a) an increase of construction costs by 25 percent, (b) a decrease in benefits by 25 percent or (c) a reduction to zero for the amount of generated traffic, indicate that the overall economic rate of return would still be no less than 21 percent. PART V - LEGAL INSTRUMENTS AND AUTHORITY 47. The draft Development Credit Agreement between the Republic of Hailti and the Association, the Recommendation of the Committee provided for in Article V, Section l(d), of the Articles of Agreement and the text of a draft resolution approving the proposed credit are being distribuited to the Executive Directors separately. 48. Features of the draft Credit Agreement of special interest are referred to in paragraphs 29, 34 and 35 of this Report. Agreenent between the Government and the Association on a detailed five-year maintenance and training plan is a special condition of credit effectiveness. 49. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - REC%MDTENDATION 50. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamnara President Attachments May 23, 1975  ANNEX I Fa-gs 1 of 3 pages 00tINTRT DATA - HAITI AREA POPULATION _______ 750 r Ra2 5. illion (mid-1972) 593 /s Per k.Dsf areble land SOCIAL INDICATORS Haiti ~~~~Reference Countries Hal ii ~ ~ ~ ~~~~voyCoaet l9 ~f1970 1r( ORP PER CAPITA U3$ (ATLAS BASIS) aI 120 /b 130 I. 200 Io 320 /c 350 / DEMCGRAP11C r-derbIirh rain (Per thousand) .. S /d 03/d t9a 6 Crude death rtai (per thousand) ..020d 23 T l 97Ld 23 Id Infant mortality raei (per thousand lies births) 180-200 Ia *. . . it Life expectancy at birth (years) ..5 /d Si /d 52 5l La Gross reproduction rain /2 *2.0 Id 2.7 Id 3.3 Id 3.1 Ld Popolatian grcwth rateI 1.5 1.7 2.0C, 3.2j 3.5 Pcpulotion growth rain - urban hii/, 6tLi 5La 9 l4 Age aio.c- r (p.eret) 0- 15 12 i4 5 i2' 15-6 5ss si5 13 65~ and uce 3 3 34 2 3L f Age dendency ratio /t 0.8 0 690 1.0 0.8' cocncdopeodc.y cTioi A 0.9 1.01.18 Urban population as percent of total 12 IhOu 19Lh. 20Al 32 /c i 28 / Fanily planning: No. of accept.-orrusclatiue (ihouo.) ......1.6 No. of users (9 of married woen) . .. EMPLOYMENT TtIbor forcus (thousands) 2,300 /f 2,ioXo If 7,200 800 2,600 La Percentage employed is agriculture 83 7?f 50 7? 65 78 Percsniago unemployed ... .89 INCOME DSiTRIBUTION Percent of national Ancome r.onived by highest 5% ... .29 Ir- 30 Percent of nat1o0a1 Inr.on received by highest 20% 60 .r . 60 , Perce nt of natianal1 inome ceived by lowest 20% ... .3 4 Percent of natiovul in come received by lowest 40% ... .8L.a 1.5 DISIONIRUTION OF LARD DOJERSHIN 9 owned by t_o_p _10 of owners . .. 9 o0ood by snallest 10% of o-nrs .. HEALTH AND NUJTRITION Population' per, physician 10,6oo I 13c210 /v 25,9160 3,710 12,11.0 Population per nursing Person 9,220 ~ 7,i60 2,570 9,120 2,50 5 Population per hospital bed 1,790 ic370 580 /.a 570 680 T. Per capita calorie supply as % of requirements /5 81 /9 6 96 96 108 Per capita protein supply, total (grmws per dayT / 5o ' 3 59 58 60 Of wihich, senimal and pulse la1 23 IsA 25 18 /bA Death rate 1-4 years /7 27 33.. EIDUCATION A33Thfled /8 pricmsry school enrollmsent ratio 38 tO0R 108 lad 91 Lx. 77 AdjustedL9 secondary chbsl enrollment ratio 5 5 9 10 11 Tears of schooling provAded, first and second level 13 03 13Ian-15 1sf 12 13 Vocational enrollment as 9 of sac, school enrollment 21 19 22s? 18 7 Adul t literary rain 9 10I.c 1-20 ? 7 j.5 ~ 0I. ROUSING Average No. of persons per cons. (urban) . .. Percen.t of occupied units without piped water... Ac--ss in eleutricity (as 9 of total pupulation)........- Perce nt of Pu..al populationm cneted in electricity .... CONSUMPTfION Radio receivers per 1000 populatison 17 5 37 La 5 18 /p Pesseoger care per 1000 population 2 3 5 6 7L. Electri c pear consuptimn (kwh p.c. 17 26 /6200 i5 15 I Neasprint consumption p.c. kg per year 0.5-08 0.7l 1 Noten: Figure refer either to the latest periods or to acon f niomntal temper7--ature beY wigt, n thm 1lest ye.ar. Lat-ot periods refer in principlr to / distribution by age ans sex of national populatisons. the Y.ors 1956-60 or 1966-70; the latest yearn in peSo- 6Protein standards (requirements) for all coa..tries as stab- ciple to 1960 and 1970. lisied by USDA Emonoc, Re..e.rrb Service provide for a minina /J The Per Capita GOP entinste Ac et market pricca for alowance of 60 grac of ntotl protein per day, and 28 gree of yearn other tan t~60,.calculted by the ounr cooveroino anina1 and pulse protein, of chich 10 grans should be animal trchnique an the 1972 World Bs-k Atiso. protein. The,se stancdardis ar somewhat lower than~ those of 75 L2 Average vunber of daughters per onan of reproductive grrao total protein and 23 gram of animal prmtein as an ge.' a.veragefo.r the world, propoo..d by FAG in the Third World Food Zj Population gro-tb mien ure for the decodes coding is Survey. 1968 and 1970. /7 Some st.udiee have sggesied that crude death rains of children IS atio of population under 15 and 65 an~d over to popua- ages 1 through 5 nay he used asafiret approximation index of tioc of ages 15-65 for age dependency ratio and to labor melnutritl on. force of ages 15-65 for ecu..oomi dependenoy ratio. / Percentage enraled of -.rrenpo,ding population of school age Fi AO referenc standards represeni phyaiological re- as dsftod fur sorb onntry. quireo..ot. for nursedl actirity and health, taking Ia 1965, excluding forests and pastureo /b Com.puted by opplying to the 1970 figure the growth rate cf the GNPF/cap. in. real term frm. 1960 to 1970; Ic 19727 Id 1965-70, 8N estimate; La 1962; If Estimate; La 1960-72; Ih Definition not available; /i 1950-71; IT 1959-70; Lit Urba centers over 5,000 popolation; /I Localities of - 1,000 or c.ore inhabitants having essentially urban characteristice; La 1965-70; Io Over 5,000 populetion; Ic 1950; /P 1970; /. Official estimate; / ~ 1967-68; La Per capita; It Inc-ome recipient; I. 1961; Iy 1969; T. lumber on the register, cot all curbing io the coutry; Ix Iocludicg nidi-rs; It Inc luding esoitant aicives, urr ciduiven and a..niotani nurses; In uo-rr -et. only; las 1968; ~ .5 l965-66; la is; asEtcst ohico ni-lde overa.ge sutdents; Ise Nant Caneroo; 1sf Went Cxoeroun; 15 yearn and over 53 May 1, 1975  ANNEX I Pageof 3 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1974Y ANNUAL RATE OF GROWTH (a constant nrices) v US$ mi n. ^ 1960-65 1965-70 1970-71 GNP at Market Prices 711 100.0 1.2 1.9 L.8 Gross Domes!ic Investment 61 8.6 -5.9 -7.7 12;0 Gross National Saving 5 0.7 -1.2 1.3 -b.0 Current Account Balance -41 -5.8 E3nports of Goods, NFS 96 13.5 -1.4 2.5 10.7 .T.Mports of Goods, FYS 146 20.5 -1.2 1.6 12.0 OUTFUT, LABOR FORCE AND FRODUCTIVITY IN 1974 Value Added Labor Foue V.A. Per Worker A ln. % US S Agriculture 326 15.4 Industry 116 16.1 Services 276 38.5 Unallocated * * a GDP Total/Average 718 100.0 100.0 100.0 GOVERNMET FINANCE General Government Central Government C C.Hln) % of GDP (Gj4ln.) X of GDP, 1972 1972 1970-72 I 1970-72 Current Receipts 326 12.0 12.1 301 8.5 10.0 Current Expenditure 291 10.7 10 257.2 lQ Current Surplua w4J f7' -0.4 Cspital Expenditures 85k 3. y 3.O 103 3.3 i 3.0 i External AssistanceY 43 1.6 1.2 1 i 0.1 Y 0.1 Y HONET. CREDIT and PRICES 1969 1970 1971 1972 1973 1974 B (Million G. outstanding end period) Money and Quasi Money 178.6 193.4 246.4 311.3 391.5 479.9 Bank credit to Public Sector 193.1 189.2 202.5 215.3 211.7 307.3 Bank Credit to Private Sector 59.4 65.3 78.5 92.1 170.6 286.7 (Percentages or Index Numbers) Money and Quasi Morey as " of GDP 8.2 8.1 9.1 10.5 12.7 13.9 General Price Index (1963-100) 119.0 123.2 128.9 135.6 166.L i90.7 Annual percentage changes ins General Price Index 1.9 3.5 4.6 5.2 22.7 14.6 Bank Credit to Public Sector 13.6 -2.1 7.0 5.4 13.7 25.6 Bank credit to Private Sector 5.7 9.9 20.2 19.6 85.2 57.5 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. J Data refer to fiscal years ending September 30. M May include small amount of fixed investment. / Includes current expenditures associated with development projects. M Net lo e and tecinical aseistance granta. G General government. not available ' not applicable staff estimate P/ PreliiaY  ANNEX I Page 3 of 3 pages TRAIE PAYMENTS AND CAPITAL FLDWS FALANCE OF PAYMENTS MFRCHANDISE EXPRTS (AVERAGE 1972-74) 1972 1973 2E 1974/ US$ Mln % (millions of US4V Exports of Goods, NFS 61.4 71.5 95.8 Coffee 20.0 30-) Imports of Goods, NFS 8h.4 102.h 145.5 Handicrafts 4.4 8.5 Resource Gap (deficit = -) -23.0 -30.9 -79.7 Bauxite 6.6 12.7 Sugar 2.1 4.o Interest Payments (net) -0.3 -0.6 -o.6 Essential Oils 4.5 8.7 Other Factor Payments (net) -4.1 -4.8 -6.3 Sisal 1.6 3.1 Net Transfers 14.0 16.2 15.4 Beef 1.2 2.3 Balance on Current Account -13. -20.1 -412 All other commodities 11.5 22.2 Total 51.9 100.0 Direct Foreign Investment 4.2 7.9 7.1. Ne. 14LT Borrowing EXTERNAL DEBT, SEPTEMBER 30. 19742Y Disbursements 7.3, 4.7 8.1 US$ Mln Amortization 4.3 4.5 4.8 Subtotal 3.0 0.2 3.3 Public Debt, incl. guaranteed 54.5 Non-Guaranteed Private Debt Other items n.e.i. 16% J8 10.8 Total outstanding & Disbursed Increase in Reserves (+) +10.7 -3.1 -20.0 DEBT SERVICE RATIO for a974/ Net Reserves, National Bank 17.8 20.1 l0.9 / Gross Reserves, Banking System 20.6 20.1 3_01 % Public Debt, incl. guaranteed 5.8 -Fuel and Related Materials Non-Guaranteed Private Debt Imports 3.7 5.4 15.5 Profit Temittances 6.6 Exports - - - IBRD/IDA LENDING. (Feb. 20. 1974)Y Million US$): RATE OF EXCHANGE IBRD IDA US$ 1.00 = G 5.00 Outstanding & Disbursed - 3.0 G 1.00 = US$0.20 Undisbursed - 7.4 Outstanding incl. Undisbursed - 107 1/ Data refer to Fiscal Years Ending September 30 2/ Ratio of Debt Service to Exports of Goods and Non-Factor Services. / Including exchange adjustment. i December 31, 197T W Includes $10 million repayable in local curTancy LI Preliminary v Estimate Country Programs I Latin America and the Caribbean Regional Office May 13, 1975  ANNEX II Page 1 of 1 THE STATUS OF BhNK GROUP OPERATIONS IN HAITI A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of April 30, 1575) Loan or US$ million Credit Amount (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed One loan (1956) and one credit (1962), both fully disbursed 2.6 035 - 478-HA 197T Repoof Haiti Highway 10.0 6.9 Total 2.6 10.35 of which has been repaid -26 .01 Total now outstanding iJ 1034 Amount sold 04 of which has been repaid 004 Total now held by Bank & IDA - 10,34 Total undisbursed 6.5 B. STATEMENT OF IFC INVESTMENTS (as of April 30, 1975) No IFF investments have been made in Haiti. ; . PROJECTS IN EXECUTION The Third Highway Project, under Credit 478-HA signed June 6, 197h and amended by the Executive Directors on October 29, 197h, is at an early stage of execution. Progress under the amended project is good. Road works envisaged under the project were contracted in September 1974, and the Estere bridge reconstruction was completed in December 1974. Government's project executing capability has improved, as well as per- formance in highway maintenance. In this latter area, Government has complied substantially with terms of the detailed maintenance program agreed to during negotiations for Credit 478-HA. 1/ Prior to exchange adjustments  A!U_EX III HAITI: FOURTH HIGHWAY PROJECT CREDIT Page 1 of 2 AND PROJECT SUMMARY Borrower: The Republic of Haiti Amount: US$20.0 million equivalent Terms: Standard IDA terms ProJect 'Reconstruction of ten road sections of the Northern Road Description: totalling about 170 km., construction of a new bridge on the Artibonite River (Sonde Bridge), supervision of construction, evaluation of pavement standards and design of Sonde Bridge- and technical assistance for preparation of new projects in the transport sector and for fu&ther improving the capabilities of the domestic eivil works industry. Estimated Cost: The estimated total cost of the project is US$26.3 million equivalent, With a foreign exchange component of about US$20.0 million. US$-Million - % of Base % Foreign Cost Civil Works Local Foreign Total Exchange Estimate Reconstruction of 10 sections of Northern Rbad 4.2 12.8 17.0 75 86 Construction of new Sonde Bridge Oi3 0.9 1.2 75 6 Sub-Total 4.5 13.7 18.2 75 92 Consulting Services Construction Supervision 0.2 O.7 0.9 80 5 PEvaluation of pavement and design of Sonde Bridge 1/ 0.1 0.1 80 3 Technical Assistance 0.1 0.5 0.6 80 3 Sub-Total 0.3 1.3 1.6 80 8 Base Cost Estimate 4.8 15.0 19.8 100 Contingencies Physical 2/ O.4 14 1.8 Price Escalation j 1.1 3.6 4.7 Sub-total 1.5 5.0 6.5 TOTAL PROJECT 6.3 20.0 26.3 i/ Not significant within degree of precision of this table. v lCjo of civil works 3/ 2k % of batse cos1; estiiate  ANUEY III Page 2 of 2 Estimat,ed Disbursements Fiscal Year (US$ Million) 1975-76 197l-77 1577-78 Annual 6.o 10.0 l.C Ciunulative 6.0 16.0 20.0 Procureiilen't: Civil works contracts would be let on the basis of international competitive bidding in accordance with Association guidelines. WIorks would be divided into four lotsS Although a 7-1/2 percent margin of preference is availabie for local contractors, none are expected to qua-if, as prime contractors. Up to $100,000 retroactive financing is reconm,;e;.ded for consulti nlg services undertakeri after October 1, 1`74. Technical Assistance Consu]ta-t services have been retained, in agreement (Consultants): with the association, for supervision of civil works (Ingeroute/France), and for review of pavement standards and design of Sonde bridge (Ewart, Lea and Trenmblay/Canada). Other techAical assistance would be provided oni terms and conditions acceptable to the Association. A total of about 180 man/months of techaical assistance would be provided under the project. Rate of Return: The estimated.economic rate of return on the civil works items of the project is 26 percent. Appraisal Report: Report No. 673a-HA dated May 21, 1975.  I BR D-11482 A 025,O 730 73? 77030 02~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MARCH 1975~~~~~~~~~~~AC1 17 <._.t q 0, A F Z X N F / C O ., O7CE A N 70 0 A N A r A A/C O C F A ITOEP I~ ~ ~~~~~ AO37OIAAS E0W'E PROEPOSDFURTLH HIGHWAY MROLEST ICLS' d Al:;7R0C3-- it> - )<- tC9dAn < 0E1X IST00I NG0 CA T R tS A N S E Ag JI 5