Upper Volta - Third Highway Project

E- r Qpy Document of r\L u The World Bank FOR OFFICIAL USE ONLY Report No.P-1873-UV REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UPPER VOLTA FOR A THIRD HIGHWAY PROJECT June 18, 1976 This document ba a restricted disribution and may be ued by recipients only in the performance of their offiea duties. Its contents may not otherwise be dislased without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit CFAF franc (CFAF) US$1.00 CFAF 225 CFAF 1 million US$4,444 WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) 1 cubic meter (i3) 35.29 cubic feet (cu ft) 1 kilometer (km) 0.62 mile (mi) 1 square kilometer (km2) 0.386 square mile (sq mi) 1 hectare (ha) 2.47 acres (ac) 1 metric ton (m ton) 2,204 pounds (lb) ABBREVIATIONS AND ACRONYMS BPP - Bureau of Planning and Programming CFPPTP - Centre de Formation Professionnelle et de Perfectionnement des Travaux Publics DOT - Directorate of Transport DPW - Directorate of Public Works FAC - Fonds d'Aide et de Cooperation FED - Fonds Europeen de Developpement LBTP - Laboratoire du Bfitiment et des Travaux Publics MOP - Ministry of Planning, Rural Development, Environment and Tourism MPWUT - Ministry of Public Works, Transport, Urban Development and Architecture OPEV - Office de Promotion de l'Entreprise Voltaique RAN - Regie du Chemin de Fer Abidjan-Niger SEPTN - Service des Etudes, Programmes et Travaux Neufs SERN - Service Entretien Routes Nationales SERS - Service Entretien Routes Secondaires SVTR - Societ6 Voltaique de Transport Routier UNDP - United Nations Development Programme vpd - vehicles per day FISCAL YEAR January 1 - December 31 PROJECT YEAR July 1 - June 30  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UPPER VOLTA FOR A THIRD HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Upper Volta for the equivalent of US$20.0 million on standard IDA terms to help finance a Third Highway Project. PART I: THE ECONOMY Background 2. The latest economic report entitled "Current Economic Position and Development Prospects of Upper Volta" was distributed to the Executive Directors on July 7, 1975 (RN 564a-UV). Annex I contains country data. 3. With a per capita GDP of about US$80 in 1974, Upper Volta is classified by the United Nations as one of the 25 "least developed coun- tries." The country's economy faces serious growth constraints due to a combination of harsh natural conditions and a very modest resource base. These disadvantages also explain Upper Volta's relatively poor economic performance. For the period 1964-73, annual growth of GDP was estimated at 2.2%, about the same rate as annual population increase in the same period, and per capita income has thus stagnated. 4. The economic structure has undergone little change over the past decade: agriculture and livestock provide a living for over 90% of the population but account for less than half of GDP. The modern manufacturing sector accounts for about 10% of GDP. Savings capacity and actual savings performance of the economy are low, and consumption usually absorbs 95% to 100% of GDP. Investment has therefore been mostly financed by foreign capital. The country's external trade deficit has been widening in recent years and reached a record level of about 15% of GDP in 1975. 5. The basic problem facing the country's rural sector, apart from low and irregular rainfall and distance from the sea, is an uneven population distribution with respect to available resources. About 61% of the total population (3.5 million people) live in the central region (Mossi Plateau), which comprises only 34% of the total area and which is much less favorably endowed than the southern and southwestern regions from the viewpoint of both rainfall and soil quality. The occurrence of riverblindness in the country's river valleys explains in part the concentration of population on the Mossi plateau. An important component of the country's long-term development strategy is to redistribute population, and the riverblindness control program, which aims to destroy the vector which transmits the disease, is an important aspect of this strategy. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - 2 - Meanwhile, the improvement of living and production conditions on the Mossi plateau, through the financing of small projects, remains a matter of high priority. Recent Economic Developments 6. The intensified drought of 1972/73 caused a severe setback in agriculture and livestock. Production of food grains (sorghum and millet) dropped by more than 20%, calling for emergency food imports of about 100,000 tons. Output of cotton, the most important cash and export crop, fell by one-third. Drought-related herd losses were estimated at 10%. With near-normal rainfall in 1974, crop production rebounded, but recovery in the livestock sector is much slower. Preliminary assessment of the 1975 harvest of food and cash crops indicates that the favorable levels achieved in 1969/70 will again be met. 7. In spite of a growing external trade deficit, the overall balance of payments was in surplus until 1974 due to increasing inflows of foreign capital and workers' remittances from the Ivory Coast. Over the past seven years, the latter has represented on average between one-third and one-half of the aggregate of private and public net transfers. In 1975, the overall balance of payments showed a deficit for the first time since 1968. 8. Over the period 1968-74, Government's financial position has been relatively strong as a result of a conservative spending policy, French budget subsidies, and surpluses generated by autonomous public institutions, in particular the Price Stabilization Fund for Agricultural Products. At the end of 1974, public sector deposits with the banking system stood at CFAF 9.3 billion (US$38.7 million), equivalent to about three-fourths of the correspond- ing year's current revenue. 9. To some extent this financial performance by Government had a negative impact on economic progress. Recurrent expenditures for a number of essential economic services, such as, for example, agricultural extension and road maintenance, have been kept very low, and the capacity of various govern- ment agencies to participate in the financing of externally-aided development projects has been restricted. The need for a more aggressive, development- oriented expenditure policy is recognized by the Government. An important manifestation of this new orientation was the establishment in January 1975 of the Caisse Nationale des Depots et des Investissements (CNDI) which is de- signed to mobilize savings from both public and private bodies and to channel them into public infrastructure projects and other economically and financially profitable undertakings. During the first six months of its existence, this new institution committed CFAF 2.5 billion (US$11.8 million) for various development projects. It aims at annual commitments of around CFAF 3.2 billion (US$15.1 million) for the next five years. Meanwhile, public sector deposits with the banking system dropped dramatically in the course of 1975, mainly because of special defense expenditures for the border conflict between Mali and Upper Volta. It is too early yet to assess if this decline in public sector deposits will be temporary and how it will affect CNDI.  -3- Foreign Aid 10. During the period 1968-1973, Upper Volta received annual average aid inflows of about US$36.0 million from its major donors: France, FED, Canada, Germany, USA, IDA and the UNDP. About 85% of all aid has been in the form of grants, and, of the remaining 15%, 90% has been loans on concessionary terms. Investment aid accounted for about two-thirds of the total, followed by technical assistance (20%). In 1974 and 1975, annual average aid inflows were double the annual average for the period 1968-73, the sharp increase being due to drought-related relief operations and inflation. 11. Public investment, which represents the bulk of all investment in the economy, has been financed mainly by foreign aid. Donors accounted for more than two-thirds of total public sector investment under the first Devel- opment Plan (1967-70), and are expected to finance about four-fifths of total investment under the current Development Plan (1972-76). IDA is gradually becoming one of the main sources of aid: its total commitments presently stand at US$56.6 million. 12. External public debt at the end of 1974 stood at US$138.0 million, including an undisbursed amount of US$92.0 million. The ratio of debt service payments to exports of goods and non-factor services was about 6% in 1973 and 1974. This ratio is expected to increase somewhat in the near future, but debt service will remain manageable. The Associatioh's share in Upper Volta's public external debt at the end of 1974 (including undisbursed amounts) was about 23%, but the Association's share in debt service is still relatively insignificant. Development Policies and Prospects 13. Like the first Plan, the current Plan (1972-76) is well conceived and essentially project-oriented; its targets are moderate but realistic (GDP was expected to grow only 3.5% p.a.). The Plan assigns top priority to the development of the rural sector. However, external factors such as the drought and worldwide inflation have adversely affected the economy during the plan period, and actual growth (2%) has been less than expected. Lack of operating funds, limited administrative capacity, and shortfalls in proj- ect preparation have also impeded achievement of plan targets. 14. The Government has recently drawn up guidelines for the next Devel- opment Plan (1977-81) conceived in a longer-term "perspective" for tackling the country's structural problems. Rural development in the broadest sense, including the resettlement of people in the riverblindness-freed zones, will continue to occupy center stage. Education and employment will be given higher priority than in the past, and close linkage between the two will be actively sought in the form of a production-oriented education system, the content and form of which have yet to be determined. Increased mineral development is also one of Government's objectives. It has been decided in principle to go ahead with the Tambao manganese mining project, but financing of the railway linking the proposed mine with the existing railway  network has not yet been secured. Following a recent reshuffle of the Cabinet (February 9, 1976), a separate Ministry of Planning has been established, which confirms the Government's intention to use the Plan as the principal guide for the preparation and implementation of projects and policies. 15. Foreign capital and technical assistance will continue to play a vital role in the development of Upper Volta. In view of the country's poverty and limited growth potential, it will be appropriate for external lending agencies to finance an exceptionally high proportion of project costs, including a substantial amount of local costs. PART II: BANK GROUP OPERATIONS 16. To date, the Bank Group's contribution to Upper Volta's develop- ment has consisted of eleven IDA projects totalling US$56.6 million of which US$14.5 million has been disbursed as at April 30, 1976. Annex II contains a summary statement of these credits as at April 30, 1976, as well as notes on the execution of ongoing projects. 17. Experience with ongoing projects has been good, apart from the rural education project, where there was considerable initial delay. The Bank Group's strategy in Upper Volta is dictated by the extreme poverty of the country and the need to raise productivity in agriculture and livestock, on which the bulk of the population depends for a livelihood. Some basic infra- structure is required for the operation of the economy, and the IDA projects for telecommunications and road construction and improvement are designed to help in providing this. For the rest, IDA lending in line with govern- ment policy is directed primarily to projects in agriculture, education and rural area improvements, with special emphasis given to operations which will favor movements of people away from the over-populated and ecologically disadvantaged central plateau to the Southwestern region where conditions are much better. The Banfora, Bobo-Dioulasso, Hounde road proposed for improvement under the present project is the most important transport link in this region. 18. In addition to the proposed project, a number of other operations are under consideration for IDA financing. A follow-up to the West Volta Cotton project has just been appraised. The appraisal of a joint Urban/ DFC project, which will enable Government to demonstrate the validity of its low-cost approach to urban development and combine this approach with employment creation in urban centers, is planned for late fall 1976. 19. The campaign for the control of riverblindness in the Volta River Basin is opening up new opportunities for investment in land settlement and agricultural development. The RDF II project approved by the Executive Directors on June 8, 1976 provides for studies for the economic development of areas freed from onchocerciasis.  - 5 - PART III: TRANSPORTATION IN UPPER VOLTA The Transport System 20. While Upper Volta's transport infrastructure is generally adequate in extent to match the country's level of development, and there are suffi- cient alternative access routes to the sea, road standards are often low and maintenance needs increased attention. Many sections of the national road system are closed to heavy vehicles for short periods after heavy rains. Most of the rural road network is impassable during the rainy season. The major issues facing the transport sector at this time include: (i) the need to upgrade roads serving newly developed agricultural production areas; (ii) the priority need to adequately maintain the existing road network before investing in new construction; and (iii) the need to strengthen the institu- tions involved in transport planning and coordination, including establishing road investment priorities. The various elements of the proposed project are directed toward these government objectives and sector issues. 21. During the period 1967-74, the Government invested about CFAF 11.6 billion (US$51.6 million) in roads and CFAF 2.7 billion (US$12 million) in railways, amounting to about 19 percent of total investments, or 1.5 percent of Gross National Product (GNP). Investments in roads and railways during 1972-76 are expected to total CFAF 12.8 billion (US$56.9 million), amount- ing to about 20 percent of total investments. 22. Domestic transport is almost exclusively via the country's 17,000 km road network. Internal air and river transport are not significant modes. For administrative purposes, the road system is divided into two categories: classified roads (about 8,700 km) which are grouped into national, departmen- tal and regional roads; and unclassified (about 7,800 km) which consist only of tracks. Functionally, the system is divided into trunk roads and rural roads. 23. The network of trunk roads (about 4,450 km, of which only 575 km are paved) in most instances radiates from the capital, Ouagadougou, and the main commercial center, Bobo-Dioulasso. The majority of the unpaved roads are gravel-surface; the rural roads are earth surface and are essen- tially dry-weather facilities. 24. Upper Volta is linked from Ouagadougou to the coast at Abidjan (Ivory Coast) by the 1,150 km railway, Regie du Chemin de Fer Abidjan- Niger (RAN), which carries about 80-90 percent of the country's import/ export traffic. Other international access routes include a paved road from Ouagadougou to the coast through Ghana; and roads through the Ivory Coast, Togo, and Benin which are only partly paved. 25. International air service is provided by Air Afrique and other carriers from Ouagadougou and Bobo-Dioulasso, while domestic services are  -6- primarily provided, at a loss, by Air Volta, a mixed public/private company created in 1967. The international airports are efficiently managed by the International Aviation Safety Agency for Africa and Madagascar (ASECNA). Transport Planning and Coordination 26. The primary responsibility for transport planning and coordination rests with MPWT. The Directorate of Public Works is responsible for plan- ning as well as construction and maintenance of roads, while the Directorate of Transport (DOT) is responsible for supervision of the road transport in- dustry, railways, shipping, river transport and aviation. In addition, the Ministry of the Plan (MOP) assembles the investment proposals of the MPW and other operating ministries into five-year development plans. The Ministry of Finance (MOF) establishes road user taxes, and together with MOP speci- fies financial envelopes governing the level of investment in each sector. 27. The output of the transport planning process has not been satisfac- tory, due primarily to a lack of qualified planning personnel, resulting in uneven project preparation and a development strategy which does not appear to give sufficient weight to economic criteria. The Government is beginning to address this issue through preparation of a Comprehensive Transport Survey (with assistance from consultants BCEOM and financed by the French Fonds D'Aide at de Cooperation, FAC), due to be completed in the first half of 1977. The survey deals with a wide range of problem areas including future road investments, alternative routes to the sea, rail investment, regula- rion of the road transport industry, international transport agreements, and the development of air transport. Since the study covers a broad range of topics, some of the above issues may require additional attention before specific proposals can be considered for implementation. 28. The Government has agreed under the Rural Roads Project to establish a Bureau for Planning and Programming (BPP) as a new division within DPW. The Bureau is intended to serve as a liaison between MPWT and the Ministry of the Plan and will be responsible for the entire road network, including: (i) collecting and evaluating traffic and road inventory data; (ii) formulating and coordinating with the various government agencies the priorities for road improvement; and (iii) analyzing sector issues and developing transport policy recommendations for future road investment plans. Under a United Nations Development Programme (UNDP) project for which the Bank is executing agency, a transport engineer and a transport economist will be provided for three years to assist BPP. 29. The next important step in developing Upper Volta's capacity for planning and coordination of transport is to strengthen DOT, where a short- age of trained staff hampers execution of its responsibilities. At present only the Director and the Assistant Director are professionally trained, and the former is now on extended study leave. DOT therefore lacks the manpower to supervise all the transport modes, or to follow up on recommendations of the Comprehensive Transport Survey. The proposed project provides the technical assistance required for this task (paras. 31 & 50).  -7- Road Transport Industry 30. The road transport industry is highly fragmented and consists of one large mixed public/private firm (Societe Voltaique de Transport Routier, SVTR) operating in competition with a large number of small firms or owner operators. SVTR carries about one fifth of total goods traffic at a profitable tariff of CFAF 17-20/ton-km over all types of roads and handles most of the traffic which requires specialized vehicles. The re- mainder of the industry carries most of the passengers, agricultural pro- duce and small loads, generally in small vehicles. Competition is fierce, particularly during the period of the year when there is little agricul- tural traffic and rates may be forced as low as CFAF 10/ton-km. The in- dustry operates essentially in a free market environment. Regulations are primarily in the area of vehicle safety and are administered by the DOT through its Department of Land Transport. Access to the industry is relatively easy; for example, an operating permit costs CFAF 4,000 (approxi- mately US$18.00). 31. The major questions which need to be addressed at this time are (i) whether it would be possible to improve information available to truck- ers on transport demand, particularly for international shipments; (ii) whether there is excess capacity in the traditional sector; and (iii) whether complex border-crossing procedures could be simplified. These issues are currently being investigated under the Comprehensive Transport Survey. Some follow-up investigation may be required, and Government confirmed at negotia- tions that DOT, with technical assistance provided under the project, will develop recommendations as appropriate for implementing or further investi- gating: (i) whether there is long-term excess capacity in the industry, and appropriate measures to remedy this; (ii) the feasibility of establishing a dispatching system; and (iii) ways of simplifying transit procedures. Highway Administration 32. Within the Ministry of Public Works, Transport and Urban Develop- ment (MPWT), the Directorate of Public Works (DPW) is responsible for the planning, design, construction and maintenance of classified roads and bridges. Local authorities are in charge of the remainder of the network. DPW is divided into four divisions for planning and design of new works; maintenance of national roads; maintenance of rural roads; workshops and equipment. DPW also operates a technical training school in Ouagadougou (Centre de Formation des Techniciens des Travaux Publics) and a soil lab- oratory (Laboratoire du Batiment et des Travaux Publics). 33. DPW relies heavily on foreign technical assistance, and most of its head office functions are carried out by expatriates provided principaLly by the French Fonds d'Aide et de Cooperation (FAC). There are at present 31 FAC experts at various levels, including three division chiefs, some accountants, and several highway technicians supplementing the 80 local staff. There is a severe shortage of experienced local staff at upper and middle levels, and only 11 DPW engineers are Upper Voltan. Government is making a major effort to improve its staffing situation. Seven Upper Voltans are now enrolled  - 8 - at foreign universities and will eventually take over upper level positions now held by foreign staff; even though there appears to be no shortage of funds (principally from FAC, FED, and bilateral assistance) for provision of fellowship for overseas training, DPW, for the near future, will have to continue to depend heavily on foreign technical assistance to help it run its affairs. Financing 34. Government highway expenditures exclusive of foreign financing averaged CFAF 504 million (US$2.2 million) during the four-year period, FY 1971-1974. About 90 percent of this amount was spent on road mainte- nance, the remainder being allocated for minor construction works and ad- ministrative expenditures. FAC also provided an average of CFAF 143 mil- lion (US$0.6 million) during FY1971-1974 for renewal of road maintenance equipment. Foreign financing of new road construction averaged CFAF 2.1 billion (US$9.3 million) over this same period and total expenditure on roads (including foreign financing) was CFAF 2.7 billion (US$12 million). 35. Road user taxes averaged CFAF 1.4 billion (US$6.2 million) per year in FY 1971-74, accounting for about 12 percent of government revenues. Road user taxes are high enough to provide the approximately CFAF 1 billion (US$4.4 million) required annually to assure adequate maintenance of the entire road network (para. 39) and at the same time cover about 20 percent of the costs of new road construction. However, by law, maintenance is allocated only about 35 percent of road user revenues, and in accordance with a general policy of fiscal austerity brought on primarily as a result of the drought, the actual allocation has been even less, averaging CFAF 415 million (US$1.8 million) p.a. during the FY1971-1974 period. 36. The Government has agreed that DOT, with technical assistance provided under the proposed project, will carry out a survey of the structure, effi- ciency and level of road user taxes, including import duties on vehicles, and make recommendations with a view to improving efficiency, determining an appropriate level and ensuring an appropriate distribution of the burden of such taxes. The Government has agreed to consult with the Association on the recommendations and on their implementation not later than June 30, 1978. (Section 3.06 of the draft Development Credit Agreement.) Maintenance 37. Maintenance of national roads has decreased during recent years due primarily to an insufficient allocation of funds as discussed above. As a result, the regravelling of roads declined from 270 km in 1971 to 113 km in 1974 and day-to-day maintenance operations were reduced by about 30 percent. 38. It is tentatively estimated that, in order to maintain the national roads in their present condition and prevent further deterioration of the  network, a minimum of CFAF 600 million (US$2.7 million) in operating expend- itures including personnel costs, and another CFAF 300 million (US$1.3 mil- lion) for equipment renewal, would be required in 1977. In addition, main- tenance of the feeder road network is estimated to require about CFAF 50 million (US$200,000) in FY 1976, and up to about CFAF 200 million (US$888,000) by FY 1980. These are high figures and the program needs to be reviewed to ensure that planned expenditures are in line with traffic levels and that the various levels of maintenance are appropriate to the country's circumstances. These issues will be addressed under the proposed project which makes provi- sion for implementation of a comprehensive maintenance study directed towards helping Government formulate a policy to ensure the most effective level of maintenance operations and allocations of expenditures. Recommendations of the study could form the basis for further Bank Group assistance in implement- ing a highway maintenance program. 39. In order to assure an acceptable level of maintenance operations while the above study is completed and recommendations reviewed, the Govern- ment has agreed to make available in its 1977 budget the minimum amount of CFAF 900 million (in constant 1977 CFAF) estimated for maintenance of the national road networks and that each year during the execution of the project (1977-1979) (i) the amount allocated will be augmented in line with cost increases; and (ii) the Association will be provided an opportunity to comment on DPW's proposed maintenance budget by July 31 of the year prior to its approval by Government. (Section 4.02(b) of draft Development Credit Agreement). The Construction Industry 40. Public and private investment in civil works and housing averaged about CFAF 6.7 billion (US$29.7 million) per annum during 1971-74 of which CFAF 2.3 billion (US$10.3 million) per annum was for civil works. At pres- ent about 70 per cent of all construction works are executed by foreign firms, most of which operate throughout West Africa; four of them have es- tablished permanent offices locally. Domestic contractors are engaged pri- marily in the building sector which accounts for about 80 per cent of their contracts. The industry is concentrated, with only seven domestic contractors having an annual turnover in 1974 greater than CFAF 25 million (US$110,000). Only in the last four years have domestic firms participated in civil works, and to date only four of them have been involved in minor operations limited to supply of materials, concrete and irrigation works. 41. Major difficulties which have so far hampered the development of domestic civil works contractors are as follows: (i) Skills of Personnel: lack of qualified personnel at all levels in construction techniques, cost accounting, bid preparation, and management.  - 10 - (ii) Financial: lack of short- and medium-term credit funds for equipment procurement and working capital; (iii) Institutional: cumbersome government procedure for contract payments; tax disincentive to domestic con- tractors for imports of equipment and materials as they are required to pay a 43 percent tax which does not apply to foreign contractors if their equipment is imported on a temporary basis and shipped out of the country on the completion of works; and lack of sufficient contracts of a size consistant with the capacity of domestic contrac- tors. 42. Civil works investments are expected to amount to about CFAF 3 billion (US$13.3 million) annually over 1977-81, of which the major share will be for road construction. If domestic contractors are to increase their participation in this sector, they will require training and financial assis- tance, as well as the support of a government policy geared to promoting such participation and overcoming the deficiencies listed above. 43. To encourage the development of domestic industry the Government, in 1971, created the Office de Promotion de l'Entreprise Voltaique (OPEV) and gave it responsibility for training and assisting the management of small and medium-size domestic entreprises. OPEV operates a training center in Ouaga- dougou which is staffed by 16 expatriates and 25 Upper Voltans, and provides courses in accounting, management and elementary technology for the various trades, including building construction. The training does not yet cover the civil works sector. OPEV has adequate training facilities in Ouagadougou which could be used by civil works contractors and their personnel, but it does not have the qualified training staff. The proposed project will pro- vide technical assistance to OPEV to assist in this effort (para. 51). With the help of this technical assistance the Government will also study the elimination of existing tax discrimination in equipment procurement by domestic contractors and will outline an action program to facilitate in- creased participation of domestic firms in the civil works sector. 44. In order for domestic contractors to increase their equipment fleets to a size required to undertake major works, financial assistance of about US$1-2 million in credit would be needed over the next two to three years. The Bank Group is now planning to appraise a DFC operation in late fall 1976 (para. 18) to include provision of financial assistance to domestic contractors to procure road construction equipment.  - 11 - PART IV: THE PROJECT 45. A report entitled "Appraisal of a Third Highway Project-Upper Volta" (no. 1135b UV of June 8, 1976) is being circulated separately. A credit and project summary, including a breakdown of costs, is contained in Annex III, and the project area is shown on the attached map (IBRD 12189R). The project is based on studies by consultants BCEOM undertaken in 1974, and information provided by DPW. Field appraisal took place in December 1975. Negotiations were held in Washington from May 19 to May 21. The delegation was led by M. Mahamoudou Ouedraogo, Minister of Public Works, Transportation and Urban Development and included M. Malick Ouedraogo, Director of Public Works. Project Description 46. The proposed project consists of: (a) reconstruction to paved standard of the Banfora-Bobo Dioulasso-Hounde road (183 km), including supervision of construction (this consti- tutes the bulk of the project); (b) procurement of (i) equipment for vehicle weight control including provision of fixed facilities for installation and (ii) traffic counting equipment; (c) consulting services for: (i) a study of road maintenance and (ii) preinvestment studies for about 150 km of roads to be defined; and (d) technical assistance for: (i) strengthening DOT; and (ii) assisting OPEV in the promotion of the domestic civil works industry. Project Execution 47. MPWT will be responsible for execution of the project assisted by consultants who will be selected in agreement with, and on terms and con- ditions satisfactory to, the Association. Construction works are expected to start in September 1976, and to take about two years to complete. Bid- ding documents for the construction items have been prepared by DPW assisted by consultants BCEOM. Reconstruction of the Banfora-Bobo-Dioulasso-Hounde Road 48. This road is the most important transport link in the Southwest region. This area, because of its relatively high agriculture potential and low population density, is the object of an intense regional development effort, including programs for population resettlement and integrated rural development and irrigation projects. The present condition of this road is not adequate to support the planned development of the region.  - 12 - Maintenance Study 49. The proposed project provides for about 35 man-months of consult- ing services to investigate the present structure of road maintenance, de- fine its deficiencies and make recommendations on how to improve planning, budgeting, and the execution of maintenance operations. Consultants will also be expected to formulate a long-range maintenance strategy. Recom- mendations of the study will from the basis of a maintenance program which could result in a future highway maintenance project for Upper Volta. It was agreed at negotiations that consultants for the study would be appointed not later than June 30, 1977 and that Government, in consultation with the Assoc- iation, would take the recommendations of the study into account in carrying out maintenance, repairs and renewals. Technical Assistance to DOT 50. The proposed project provides for the services of a transport economist for three years to help DOT review all proposed investments in the transport sector, with a view to minimizing the total cost of transport, and follow up on recommendations of the Comprehensive Transport Survey. The expert will train and be assisted by a counterpart, to be provided by Government. It was agreed at negotiations that the expert would be appointed by March 31, 1977. Technical Assistance to OPEV for Promotion of the Domestic Civil Works Industry 51. The proposed project includes technical assistance which will strengthen the capacity of domestic civil works contractors to participate in road works. The assistance will be provided in two stages. Under the first phase, an expert will spend two or three months evaluating the existing capacity, organization, and technical competence of domestic civil works and building contrators, and the proficiency of their staff. Based on his find- ings the expert will outline training requirements for improving the pro- ficiency of Upper Voltan personnel in civil construction works. This will include a detailed program of courses and on the job training. Under the second phase of about two years, the expert will help implement recommenda- tions proposed under phase one. The expert will be attached to OPEV and will work in close collaboration with MPWT. It was agreed at negotiations that the expert would be appointed by March 31, 1977. Cost Estimates 52. The total cost of the project net of taxes, but including contin- gencies, is US$22.1 million. The proposed credit of US$20.0 million will finance about 90 per cent of total project costs net of taxes, i.e. all the foreign costs (US$16.8 million) and US$3.2 million equivalent of local costs. US$2.1 million equivalent plus about US$7.1 in taxes will be provided by the Government. Estimates were arrived at on the basis of bid results received in mid-May. The details of project cost estimates are presented in Annex III.  - 1 3 - 53. Costs for about 270 man-monthis of consulting services and about h0 man-months of technical assistance by individual experts were estimated following a review of current unit prices in West African countries. For experts recruited individually, costs, including expatriate allowances and other expenses, would average about US$3,000 per man month, and reimbursable expenses, including housing and internal and external travel, would average about US$2,000. For experts recruited from consulting firms, costs would overage about US$6,000 per man month and reimbursable expenses about US$2,500. Procurement 54. Bidding procedures and contract awards for the Banfora-Bobo- N)ioulasso-Hounde road are on the basis of international competitive bid- ding and in accordance with Bank Group guidelines. Weighing scales to help Government control and enforce existing axle load regulations and traffic counting equipment to help BPP establish a data collection system, would be procured on the basis of international competitive bidding in accord- ance with Bank Group guidelines. Specifications would be prepared by DPW and reviewed with the Association. Suppliers would be required to train local personnel in the use of the equipment, and the Government has agreed to supply staff to be trained for the operation of said equipment. The facilities for the weighing scales will be procured in accordance with local competitive bidding procedures acceptable to IDA. The services of expatriate staff and consultants (US$2.2 million) would be obtained according to pro- cedures acceptable to IDA. Disbursement 55. IDA Credit proceeds will be disbursed on the following basis: (i) 67 percent of total expenditures for construction contracts; (ii) 100 percent of foreign costs or 80 per cent of total expenditures for consulting services and technical assistance; and (iii) 100 percent of foreign expenditures for equipment procurement. Benefits and Risks 56. The Government's development strategy is based to a significant degree upon developing the southwest of Upper Volta. The Banfora-Bobo Dioulasso-Hounde road will support this regional development effort. Its contribution to the economic development of the southwest region is complex, since it will carry traffic related to virtually every aspect of economic activity. In addition, the road section forms part of the coun- try's major transport axis connecting Bobo-Dioulasso, the commercial cen- ter of the region, with the capital, Ouagadougou, and is part of a major international route to the coast at Abidjan and through Upper Volta to eastern Mali. 57. The economic rate of return calculations relate only to the road component of the project. The maintenance study and technical assistance provided under the project represent major benefits which cannot be quanti- fied. The economic return from paving the road was estimated on the basis of benefits from vehicle operating cost savings and maintenance cost savings.  - 14 - The net benefits from diverting short-distance traffic from the RAN are not significant and have been omitted from the calculation. Benefits from time savings, accident reduction, and flood control in the vicinity of the road embankment have also been omitted from the calculation. The economic return from the recommended level of improvement is about 18 percent (14-28 percent on individual sections), with a first-year return of about 13 percent (10-26 percent on individual sections). The return from reconstructing to the planned paved standard ranges from one to three percent higher than con- structing to engineered gravel standard. Under sensitivity tests, the rate of return on individual sections of the project road remains greater than 13 percent, and it drops below 10 percent only if project costs were increased 45 percent or if benefits decrease 30 percent or more relative to costs. The rates of return are considered sufficiently high, based on vehicle operating costs and maintenance cost savings, to absorb any reasonably probable combina- tion of adverse circumstances. There are no special risks associated with the project. 58. Agricultural freight transport accounts for the bulk of the proj- ect benefits. The majority of passenger transport is for business purposes. There is evidence of competition within the trucking industry during the non-agricultural season in Upper Volta, and it is therefore expected that most of the benefits from reduced transport costs will be passed on to other sectors of the economy. PART V: LEGAL INSTRUMENTS AND AUTHORITY 59. The draft Development Credit Agreement between the Republic of Upper Volta and the Association, the recommendation of the Committee provided for in Article V, section 1(d) of the Articles of Agreement of the Associa- tion and the text of a Resolution approving the proposed Development Credit, are being distributed to the Executive Directors separately. 60. The draft Development Credit Agreement conforms to the normal pat- tern for credits for highway projects. Features of special interest include (i) those referred to in paragraphs 36 and 39 of this report and (ii) an additional condition of effectiveness, namely that the consultants required for the supervision of the road construction works have been employed (see Section 5.01 of the draft Development Credit Agreement). 61. 1 am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association.  - 15 - PART VI: RECOMMENDATION 62. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments June 18, 1976   AKU I Page I of 4 page TABLE SA UPPER VOLTA - SOCIAL lIRICATONS DATA SWEET LAUD ARtA (TNOU RN!) - ------- _ UPPER VOLTA mcvcuXcE COU.TznIE (1970) TOTAL 274.2 most RECENT ARABLE ..1960 1970 ESTIMATE mAtLI NAURITANtA SENEGaL ZNP PER CALPITA (USA)5. 00 7. 6. 6. 9. POPULATILON AND VITAL STATISIICS POPULATION AMIDTR. MILLION) ~~~~ ~~~~4.3 5.4. 5.? 3.1 1.2 4.4 POPULATION DENSITY PEA S QUAR E M.16.0 20. 210 4. 1.0 27.0 PER SQUaRE MM. A.leLE LAND. 51.0: .. 4.3. VITAL STATISTICS CRUDE BIR,TH RATE PER THODUSAND 49.0 49.0 49.0 50.0 414.0 12.1 CRUDE OEATH RATE PER THOUSAND 31.0 29.0 23.0 27.0 23.0 16.3 INFATNT ORT,ALITY RATE (ITMOII) 182.0 ...... 156.0 LIFE EXPEC TANCY AT BIRTH (IR3) 32.0 35.0 37.0 1r:0 41.0 41.0, GROSS REPRtODUCTION RATE ..1 5.2 3. .3 2.9 5.0 POPULA,TION GROWTH RATE (Xi TOTA 2 .6 2.2 2.1 2.2 1.9 2.1 URBAN .. 4.0 ... 5.0 4..0 UR9AN POPULATION El Or TOTAL) 5.0 11.0 ... 14.0 29.0 AGE SFRUCFURL (PERCENT) 0 tI 14 YEARS 42. 43.0..40 4.0 42 1TO64 TEARS 550 3.0 ":9.0 54. 54 65 TEARS AND OVER 3.0 3.0 . 2.0 3.0 3.9 AGE DEPENDENCT RATIO 0.8 0.9 ..1.0 o.V 0.0 ECONOMIC OEPENOENCY RATIO 0.6 / o .6a5 . 0.9/ 3.0 LA 1.2 FAMILY PLANNING- ACCEPTORS (CUMULATIVE. THOU) . .. USERS (I of MARRIED WOMEN) . .. EMPLOY MENT ..;O -------~~* TTAL LABOR r6R ;E (THOUSAND) 2500.0 0000.0 . 2800.0 500.0 1600.0 LABOR FORCE IN AGRICULTURE (Z) 92.0 89.0 ~ .9. 50 13. UNEMPLOYED CZ Or ILABOR FORCE) .. 00 ?:,O. . . INCOME DISTRIAUTIOH Ijr PAIVTE Ic NCOM MEC-D AVT HIGHES SI Or POPU LATION . .. HIGHST 20 FPOPULAT ION.. .. LOWEST 201 OF POPULATION . .. LOWEST 401 OF POPULA,TION . .. OISTRISIUYIGN OF LAND OWNERSHIP 1 OWiNED AT SMALLEST lOZ OWMFRS . .. HEALTH AN) NUTRITION POPULATION PEA PHYSICIAN .. 92160.0 75220.0 41490.0 25510.0 14940.0 POPULATION PER NURSING PERSON 4110.00/b c 4230.0 369 I1:0.0 La360.:0 3420. A 2410. POPLATON ENHOSPITAL BED 1610.0t 161D.0/g 1110. ISaQ.0L Teo0 i 13. PER CAPITA SUPP.I OJF- CA LO MIES ( OF REQUIREMENTS) 85.0 82.0 12.0 92.0 69.0 91.0 PROTEIN (GRAMS PtER DAV) 66.0 66.0 59.0 19.0 75.0 64.0 -OF WHICH ANIRAkL AND PULSE . 22.04 . 23.0Lt 44.0 /d 26.0 Li DEATH RATE C/THOU) AGES 1-4 . .. EDU CATfION AD;JUSE ENROLLMENT RATIO PRIMARY SCMOaL 6.0 11.0 ..20.0 15.0 360/ SECOADARY SCHOOL 1.0 10. . 20 1. o TEARs IF SCHOOLING PROVIDED (FIRST AND SECONID LEVEL) 13.0 12.0 12.0 12.0 14.0 10.0 VOCAl IONAL ENRO.LMENT (I OF SECOHOART) 21.0 13.0 11.0 40.0 5.0 ?.0 ADULT LITERACY RAtTES0) .. . . 0 . 10.0 10.0 HOUSING PERSONS 7C OM(AVERAGE) . .. OCCUPIEG OWELLINGS WITHOUT PIPEG WATER (I) . .. ACCESS TO ELECTRtICITY (1 Or ALL DWEL-INGS) . .. RURAkL DWELLINGS CONNECTED TI ELECTRICITY (l) . .. CONSUMPTION RADIO;1 AECI VIERS (PER THOU POP) 1.0 16.0 14.0 12.0 47.0 b9.0 PASSENGER CARS (PENt THOU POP) 0.4 1.0 1.0 1.0 4.0 9.0 ELECTRICITY CRWHIYR PER CAPi 2.0 5.0 7.0 6.0 62.0 F. NEWSPRINT (KGITR PIER CAP)...... 1.3 0.1