Afghanistan - Third Highway Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. 2360a-AF AFGHANISTAN STAFF APPRAISAL REPORT OF A THIRD HIGHWAY PROJECT May 16, 1979 Projects Department Europe, Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Currency Equivalents Currency unit = Afghani (Af) US$1.00 = Af 40 US$0.025 - Af 1.00 Systems of Weights and Measures: Metric Metric System British/US System 1 meter (m) = 3.28 feet (ft) 1 kilometer (kmi) = 0.62 miles (mi) 2 1 sq. kilometer (ki2) = 0.386 sq. miles (mi ) 1 metric ton (m. ton) = 0.984 long ton (lg ton) Abbreviations ADT - Averap Daily Traffic CIF - Cost, Insurance and Freight included EEC i European Economic Community ER - Economic Return FIC - Flight Information Center FYR - First-Year Return GTD - General Transport Department ICB - International Competitive Bidding MPW - Ministry of Public Works RCMD - Road Construction and Maintenance Department RDD - Rural Development Department RMFD - Road Maintenance First Directorate RMGD - Road Maintenance General Directorate USA - United States of America USAID - United States Agency for International Development USSR - Union of Soviet Socialist Republics Democratic Republic of Afghanistan Fiscal Year March 22 to March 21  STAFF APPRAISAL REPORT OF FOR OFFICIAL USE ONLY A THIRD HIGHWAY PROJECT AFGHANISTAN Table of Contents Page No. I. THE TRANSPORT SECTOR ................................ 1 A. Effects of Geography and Economic Growth on Transport ...................................... 1 B. The Transport System ........................... 2 C. Transport Policy, Planning and Coordination .... 4 D. Previous Projects in the Transport Sector ...... 6 II. HIGHWAYS ............................................ 7 A. The Network .................................... 7 B. Traffic and Road Transport Industry ............ 8 C. Administration ................................. 10 D. Planning ....................................... 11 E. Financing ...................................... 11 F. Engineering .................................... 12 G. Construction ................................... 12 H. Highway Maintenance and Improvement ............ 12 I. Training ................... 13 III. THE PROJECT ......................................... 13 A. Objectives ..................................... 13 B. Description .................................... 13 C. Engineering .................................... 16 D. Cost Estimates ........... ...................... 16 E. Financing ...................................... 18 F. Implementation ................................. 20 G. Procurement .................................... 22 H. Disbursements .................................. 22 I. Environmental Impact ........................... 24 IV. ECONOMIC EVALUATION ................................. 24 A. Benefits and Beneficiaries ..................... 24 B. Economic Evaluation ............................ 25 C. Projects Risks ................................. 27 V. AGREEMENTS REACHED AND RECOMMENDATIONS ........ ...... 27 This report was prepared by Messrs. Raul M. Auzmendi (Economist) and R. Herman Snel (Engineer). 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.  Table of Contents (Continued) ANNEXES Annex 1 - Map IBRD 14049 1977 Average Daily Traffic Annex 2 - Road Standards Annex 3 - Project Implementation Schedule Annex 4 - Methodology for the Economic Evaluation of Strengthening the Pavement of the Kabul-Kandahar-Spin Boldak and Kabul-Torkham Roads Annex 5 - Documents and data available in the Project File SUPPORTING CHART AND TABLE C-i - RCMD Organization Chart T-1 - Highway Expenditures for MPW and RCMD MAPS IBRD 14048 Main Transport Infrastructure  STAFF APPRAISAL REPORT OF A THIRD HIGHWAY PROJECT AFGHANISTAN I. THE TRANSPORT SECTOR A. Effects of Geography and Economic Growth on Transport 1.01 Afghanistan, a landlocked country located in Central Asia, borders with the Union of Soviet Socialist Republics (USSR) to the north, Iran to the west, Pakistan to the south and east, and the People's Republic of China to the extreme northeast (see Map IBRD 14048). It covers an area of about 655,000 km2, somewhat less than the size of Turkey, of which 12% is arable, 60% is pasture land and the remainder is either desert or mountainous. Nearly half of the total area is more than 1,800 m above sea level with some areas exceeding 5,000 m. The 725 km Hindu Kush mountain range separates the fertile northern agricultural plain from the arid deserts in the south, making all overland communications between the north and the south difficult to establish and maintain. Due to the topographic conditions of the country, rivers are difficult to navigate which precludes using this low-cost means of transporta- tion, except for a stretch of about 200 km of the Amu Darya river at the border with USSR. The climate is sunny and dry, with precipitation varying between 50 and 400 mm per year, but with extreme daily and seasonal tempera- ture variation, especially in the northern part. The combination of rough topography and wide climatic variations make road construction and maintenance rather costly. 1.02 No population census has been held in the country, and available population estimates are subject to a wide margin of error. An official esti- mate of the country's population is about 17 million in September 1978 and growing at about 2% per annum. Approximately 70% of the population is rural and widely dispersed, with about half of the total population living in the Eastern Region, one quarter in the Northern, and the rest evenly distributed between the Southern and Western Regions. The density of the population varies considerably, from a few inhabitants per km2 in the most arid regions to more than 100 inhabitants per km2 in the most fertile ones. The wide dispersion of the population calls for a rather extensive transport network, mainly of low volume roads. 1.03 The predominantly agricultural nature of economic activity (agricul- ture contributes about half the GNP) determines the principal transport needs. It is estimated that two-thirds of agricultural output is for farm consump- tion, thereby greatly reducing total transport needs. However, this situation is probably partly a consequence of the very poor transport facilities in several areas of the country, that impair production for the market and more efficient exploitation of the land. About 2.0 million of the total population are nomads, predominantly engaged in cattle breeding on mountain pastures  -2- where annual precipitation is adequate to make this way of life possible. They are scattered all over the country and are largely self-sufficient. Therefore, their demands on the modern transport system are minimal. The rest of agricultural production is subject to long distance hauls between the farms and the main consumption centers in the country as well as those in the surrounding countries either to be consumed, or for export to farther markets. The areas suitable for agricultural exploitation are scattered all over the country into rather small areas, which increases the length of the low volume roads required. 1.04 The location of the country in the world affects international transport to and from Afghanistan. Some of the main reasons are: (i) the country's remoteness from the principal markets; (ii) frequent cargo transshipments required to arrive at the final destination, with long and unpredictable transit times, excessive loss and breakage and, therefore, high credit costs and insurance premiums; (iii) the dependence of its international routes on political, transport, and other conditions in neighboring countries; and (iv) the absence of unrestricted access to the sea which causes long clearing times, because Afghan cargo in neighboring countries' ports normally receives lower priority than national cargo. B. The Transport System 1.05 Roads provide the principal means of transportation for both internal and international traffic. Details of the highway sub-sector are given in Chapter II. 1.06 Domestic civil aviation serves an administrative and social func- tion, by providing access to areas with poor or non-existent road connections. Internationally, because of Afghanistan's remoteness, aviation is the most appropriate means for international business and tourism travel. The coun- try's civil air transport system has largely been developed over the last 20 years with USA and Russian aid. It now contains 20 airports and airstrips of which Kabul, with more than two-thirds of all international and domestic passenger movements, is by far the most important. In the period 1969-76 the L international and domestic passenger movements in Kabul increased from 76,000 in 1969 to 118,000 in 1976, or an annual growth rate of about 6.5%. 1.07 No railways exist, except for 600 m of railway line between Torghundi and the USSR border, because the mountainous terrain makes construction too difficult and expensive, while the volume of bulk products for long-distance hauls is at present not significant. In the past, the Government has con- sidered the possibility of building some 1,800 km of railways with financial assistance from Iran, but it seems the idea has been discarded.  - 3 - 1.08 The remaining two modes are river transport and pipelines. River transport takes place only on the Amu Darya River for international traffic between Afghanistan and the USSR, with all commercial vessels owned and operated by the latter. The main river ports are Sherkhan and Hairatan. The ports are administered by the Port Department under the Ministry of Commerce. Approximately 100 miles of pipelines link the gas fields around Shebergan with the Russian border at Kleft. A considerable amount of traffic is carried by animals, mostly camels and donkeys, even over long distances and on routes not yet served by the road network. 1.09 As a landlocked country, international transport routes are of vital significance. The following are the main routes presently used: (i) Via the USSR: This country prohibits commercial road traffic across the border. However, the USSR, through its agency Sojuzneshtrans, offers Afghanistan extensive land transport linkages to the Pacific (via Vladivostok), to northern Europe and USA (via Leningrad) and to southern Europe (via Black Sea ports) based upon a combination of railroad and ship services. (ii) Via Pakistan: With very rare exceptions, all the cargo to the port of Karachi must be transshipped to Pakistan railway lines (gauge 1.67 m) mainly at Peshawar which is 1,450 km from Karachi and sometimes at Chacman, a dis- tance of 938 km. The port of Karachi has considerable congestion problems and Afghani commerce is often given low priority. The operation of through trucks between Afghanistan and India is discouraged by Pakistan, and the cargo, mainly fruits, must be transferred first to Pakistan vehicles and then to Indian ones. (iii) Via Iran: Access to the sea is by way of the ports of Khorramshahar and Bandar-e-Shahpur, both heavily congested and with time consuming clearing procedures. The ports are located about 2,300 km from Herat. The cargo is normally expected to be moved by Iran Railways (gauge 1.435 m) from Meshed (240 km west of the border), although Iranian trucks can be used in case of necessity. The transit treaty between Iran and Afghanistan does not permit the through movement of commercial vehicles from a city in one country to a city in the other. However, Afghan vehicles are permitted to operate up to the rail terminal in Meshed and Iranian vehicles up to Herat. Afghan vehicles transiting Iran have so far been permitted to operate without difficulties. 1.10 In 1976 the country's export, import and transit amounted to about 1,000,000 tons; 70% was moved through the USSR, 20% through Pakistan and only 10% through Iran. Main exports in 1976 and their percentage in weight were: fresh fruits (49%), dry fruits (21%), cotton (11%) and oil seeds (5%). Similar information for main imports were: petroleum products (59%), sugar  -4- (19%) and tea (5%). More than half of the total international cargo of the country was moved through the river port of Hairatan located at the border with the USSR. The two countries have agreed to construct a combined road and railway bridge across the Amu Darya River at Hairatan with technical and financial assistance from the USSR. When completed, the bridge is expected to carry most of the traffic between Afghanistan and the USSR. C. Transport Policy, Planning and Coordination 1.11 The new Government that took power at the end of April 1978, has not yet announced its transport policy and national objectives in the sector. The general impression is that the new Government is aware of the policy- related problems in the sector and is considering how best to solve them, particularly with respect to: traffic and vehicle regulations (paras. 2.09 and 2.10), import duties (para. 2.06), truck rates (para. 2.08), etc. These matters have been discussed during negotiations and the team leader of the technical assistance team under the project will be available to help the Government in studying these matters (para. 3.09). 1.12 Table 1.1 shows the country's capital and recurrent expenditures in 1957-1976. During the First and Second Five-Year Plan periods, 1957-1966, the construction of a suitable primary road infrastructure received top priority, and transport sector expenditures amounted to 33% of the First Five-Year Plan expenditures, 1957-1961, and 43% of the Second Five-Year Plan, 1962-1966. During the Third and Fourth Five-Year Plans, 1967-1976, the emphasis in the sector shifted from construction of new roads to maintenance and improvement of the existing network. Transport sector expenditures amounted to 8-9% of the Third and Fourth Five-Year Plan expenditures. This shift reflects increased Government emphasis on protecting the considerable investments made earlier in the highway system and seems to be a change in the right direction.  Table 1.1: EXPENDITURES IN NATIONAL DEVELOPMENT PLANS 1957-1976 (in million Afghanis) 1st Plan 2nd Plan 3rd Plan 7 Years /1 4th Plan /1 1957-1961 1962-1966 1967-1971 1969-1976 1972-1976 (Actual) (Actual) (Actual) (Actual) (Proportional) Total Plan 14,676 21,660 33,620 73,680 52,629 Capital 8,371 8,540 9,580 29,175 20,839 Recurrent 6,305 13,120 24,040 44,505 31,790 Transport Sector 4,790 9,370 3,117 5,596 3,997 Highways 4,600 9,240 2,867 4,850 3,464 Civil aviation 155 130 250 746 533 River ports 35 n.a. n.a. n.a. n.a. Transport Sector in % of Total Plan 33 43 9 8 8 /1 The information is available for the 7-year period 1969-1976 which over- laps with the data for 3rd Plan, 1967-1971. A proportional value for 1972-1976 was computed by mission. Sources: 1957-1961: Second Five-Year Plan 1962-1966, Ministry of Planning, Kabul, 1963 1962-1971: Fourth Five-Year Plan 1972-1976 Draft, Ministry of Planning, Kabul, 1972 1969-1976: First Seven-Year Economic and Social Development Plan 1976-1983, Ministry of Planning, Kabul 1976 1.13 The Ministry of Planning is responsible for overall economic plan- ning and for coordinating planning by the various agencies in the transport sector. In the absence of rail-road competition, transport coordination amongst modes is not one of the principal issues. The agencies responsible for planning in the transport sector are: The Ministry of Public Works (MPW) for the main highway network; the Rural Development Department (RDD) for the rural roads carrying very low traffic volumes; the Afghan Air Authority for civil aviation; and the Ministry of Commerce for ports. In general, planning in all transport agencies is still in an early stage of development, often carried out on a'ad hoc basis. 1.14 As to the MPW, in particular its Road Construction and Maintenance Department (RCMD), planning was introduced under the First Highway Project, through a study by consultants, which provided the general principles and methodology for the preparation and planning of highway projects. Since then, RCMD has started systematic traffic surveys and the updating of road inventory. The Government is aware that the data are not always complete  and reliable, and that it does not yet have the necessary expertise for com- prehensive project preparation. For example, correlation between traffic counts taken at the same location, but at different points in time over the year, has not yet been well established. To further improve the situation, the proposed project provides technical assistance to assist the Government in this area (para. 3.09). D. Previous Projects in the Transport Sector 1.15 In the transport sector, Afghanistan has received three loans from the International Development Association (IDA) for a total amount of $19 million, two for road improvements and maintenance and a third one for an aviation project. 1.16 The First Highway Maintenance Project of June 1969 (Credit 158-AF), for a total amount of $5.0 million, did not become effective until mid-1970 after a long ratification process by the parliament. The project comprised the first stage of a two-stage highway maintenance program and included: (i) the organization of the Road Maintenance First Directorate (RMFD) in the Eastern Region; and (ii) the introduction of more efficient maintenance opera- tions and the improvement of selected paved highways and of high priority un- paved roads in the Eastern Region. The project provided also for the purchase of highway maintenance and workshop equipment, spare parts, and materials. Until about mid-1971, execution of the project was in general satisfactory although somewhat delayed mainly because of the long interval before the loan became effective. The delays were much aggravated, thereafter, mainly due to management problems; the situation improved early in 1973, after some staff changes were made and necessary funds were released. The project has been completed and the Credit was closed on December 31, 1977. 1.17 The Second Road Improvement and Maintenance project of December 1973 (Credit 449-AF), for a total amount of $11.5 million, became effective in mid- 1974. The project is an extension of the previous project by including the Southern and Western Regions, and consists of: (i) maintenance of about 4,000 km of roads of which 1,800 km to be improved, including purchases of equip- ment, spare parts and materials; (ii) construction of a highway maintenance center in Kabul: (iii) technical assistance by consultants to the Road Main- tenance General Directorate (RMGD), at that time the agency responsible for the project area; and (iv) training of its staff. The project is being imple- mented with a delay of about one and a half years due to delays in procurement and delivery of equipment and in the construction of the highway maintenance center in Kabul. An amount of US$2.7 million remains undisbursed of which US$2.2 million has been committed. To enable the Government to complete the equipment deliveries and construction of the highway maintenance center, the Closing Date has been postponed from mid-1978 to the end of 1979. A further extension may be necessary to take care of the vehicle load and dimension regulation included in the Credit Agreement. 1.18 The First Aviation Project of May 1973 (Credit 374-AF), of US$2.5 million, became effective in November 1973. The project consists of: (i) substitution by a new Flight Information Center (FIC) in Kabul of an obsolete facility in Kandahar; (ii) technical assistance by consultants to strengthen  the civil aviation administration; and (iii) a feasibility study by consul- tants of an airport at Logar to replace the existing airport at Kabul, which has limited capacity, with subsequent final engineering if justified. The FIC has been satisfactorily completed and only spare parts procurement remains to be finalized. Based on the study, the Government decided, and the Association agreed, not to proceed with the development of a new airport. An accounting system for the Air Navigation Service was prepared by a consultant. So far the Government has failed to implement the system or to undertake the institu- tional reorganization covenant under Credit Agreement. The Association has indicated to the Government that utilization of the uncommitted Credit funds (about 30%) would be related to the Government's satisfactory compliance with the covenants. 1.19 The role of IDA since its first involvement in the transport sector in Afghanistan has been beneficial in the area of institution building and has permitted a greater exposure of the country to the whole process of project preparation and implementation. However, progress has been slow mainly because of: (i) Government resistance to accept consultant services; (ii) cumbersome procurement methods; (iii) Government failure to ensure timely release of local funds; (iv) slow decision-making processes; and (v) frequent changes of key personnel. The Government seems to be aware of this situation. During negotiations, the Association was informed that legislation with respect to access to highways and the use of adjacent land had recently been adopted and that a draft proposal for axle load and vehicle dimension is being reviewed by an inter departmental committee. II. HIGHWAYS A. The Network 2.01 The total length of the road network is about 21,500 km, of which 13% are paved, 20% are gravel and the remaining 67% are earth roads (Table 2.1). The present length of the road network is about 3.5 times that in 1957, when the network was composed of only gravel and earth roads. Over the last 5 years the total length increased 3%, but the increase in asphalt roads was a significant 15%. 2.02 The backbone of the primary network is the Kabul-Kandahar-Herat- Mazar-i-Sharif-Kabul road, which encircles the mountainous inner part of the country and gives access to the agricultural plains in the north and the desert areas of the south and the west (Map IBRD 14048). After completion of the Shebargan-Maimana-Herat section in this circular road, the primary network would be largely in place. However, most of the asphalt paved roads constructed in the mid-sixties, are gradually reaching the end of their pave- ment lives. In view of the rapid increase in traffic in recent years, espe- cially of heavy vehicles, they need strengthening to protect the considerable investments made in the past. Also, a substantial part of the unpaved roads need to be upgraded to provide better access to the rural areas. The proposed project would help to alleviate the above mentioned deficiencies by providing assistance for highway maintenance and a pavement strengthening program.  -8- Table 2.1: ROAD NETWORK IN KM (1977) Maintained by /1 Army Laby Type of Road Length in Km RCMD-- MPW Corps- Concrete 680 - - 680 Asphalt 2,046 1,100 - 946 Gravel 4,200 2,000 1,000 1,200 Improved Earth 9,100 1,000 5,000 3,100 Earth 5,500 - 5,500 _ Total 21,526 4,100 11,500 5,926 /1 Under overall responsibility of MPW. Source: Ministry of Public Works, September 1978. B. Traffic and Road Transport Industry 2.03 The statistical information on transport demand is weak and some- times contradictory. The main sources of information are annual road traffic counts carried out by the MPW, toll station data, and special traffic studies conducted by consultants for specific projects. On a national basis, road freight was estimated by the Government at about 800 million ton-km in 1968 and at 1,300 million ton-km in 1975, representing an annual growth of around 7%. There is no reliable information on road passenger transport. 2.04 Traffic counts on the primary network (see Annex 1, IBRD Map 14049) during 1973-77 indicate that the average annual increase in average daily traffic (ADT) was 12.8%, substantially higher than the estimated annual growth rate of GNP of 3%. The higher growth rate of traffic is partly due to the fact that motorized vehicles are gradually replacing the more traditional means of transport such as carts and transport by camel. 2.05 In 1975, the road vehicle fleet comprised 51,000 vehicles, including 11,000 trucks, 6,000 buses, 14,000 private cars and 13,000 non-private cars and taxis. The rest of the fleet consists of motorcycles and auto-rickshas. Table 2.2 illustrates the distribution of the vehicle fleet.  - 9 - Table 2.2: MOTOR VEHICLE FLEET IN 1975 Rest of In % of Type Kabul Country Total Total Cars and motorcycles 24,800 8,800 33,600 66 Buses 3,200 3,000 6,200 12 Trucks 5,200 5,800 11,000 22 Total 33,200 17,600 50,800 100 Source: Traffic Department, Ministry of Interior, August 1977. The total road vehicle fleet increased during 1973-75 at an annual growth rate of approximately 15%, with the highest increase in buses (26%), taxis (25%), and trucks (13%). Unfortunately, information on the fleet is available only for 3 years and, therefore, no firm trends can be established. The regional distribution of vehicles in 1975 was as follows: Eastern region 75%; Northern 10%; Southern 10%; and Western 5%. Despite the concentration of vehicles in the Kabul area, the four regions have a fair share of the vehicle fleet, in line with their economic development and population. 2.06 Because used and smaller trucks are subject to more favorable import duties than new and larger trucks, the trucking fleet is markedly skewed to- ward small and old trucks. The same applies to buses and cars. However, not- withstanding the current structure of import tariffs for transport vehicles, the use of larger trucks is increasing because of their lower transport costs per ton-km. The Government should review its import tariffs to ensure the most economical age composition of the fleet. This was discussed during nego- tiations. 2.07 Entry into the road transport market is free and, in general terms, there are enough trucks on the primary roads and on the better roads of the secondary road network. The situation is different for the remaining second- ary, tertiary and feeder roads where it is more difficult to find adequate transport. On these roads, there is not enough competition among truckers, and therefore the truck rates are high. The improvements of the secondary and tertiary roads under the proposed project should promote increased competition on these roads. The predominant type of transporter is a small one, owning only one or two trucks. Some of the individual transporters are organized in transport associations which procure and allocate shipments among their members. Government goods, which account for about 40% of the total haulage, are handled by the big associations. The main government goods are: con- struction materials, cement, petroleum products, sugar, wheat, fertilizers, wood and minerals. 2.08 Tariffs for road freight distinguish between government goods and private goods. Official tariffs govern the transport of government goods, whereas for private goods, tariffs are agreed after a bargaining process  - 10 - between the shipper or middleman and the transporter. The present official tariffs of Afg. 1.8 (4.5 US cents) per ton-km on flat roads and Afg. 2.0 (5 US cents) per ton-km on rolling and/or mountainous roads, without any distinction in type of cargo or conditions of the road, seem to be below operating costs. To ensure balanced development of the trucking industry, the Government should review its freight tariffs. This was discussed during negotiations. During harvest peaks in summer, tariffs for private goods are generally higher than the official rate, but in times of low demand, tariffs may decline even below the official rates. While there is free entry in the road transport market, all commercial inter-urban goods transport require an operating permit for each trip, issued by the General Transport Department (GTD) under the Ministry of Commerce. The system enables GTD to establish priorities if demand exceeds supply momentarily; in general this system works satisfactorily. 2.09 At the present time, there are no regulations on weights and dimen- sions of vehicles, and especially trucks and buses are often overloaded. A study by consultants on this subject, financed under the First Highway Project and updated under the Second Highway Project, recommended a maximum permis- sible axle load of 8 tons for single axles and 14 tons for tandem axles. Under the Credit Agreement for the Second Highway Project, the Government undertook to adopt dimensions and axle load regulations before September 30, 1974, and thereafter to implement them. Although the above date was overly optimistic, the adoption of these regulations is overdue. The RCMD has recently submitted draft regulations for review by an inter ministerial committee. To allow sufficient time for review by the Committee and for the subsequent legislative steps that have to be taken, the date for adoption of the regulations has been extended to December 31, 1979. 2.10 On November 15, 1972, a Road Traffic Law was enacted establishing general principles for the regulation of road traffic behavior. Better enforcement of traffic regulations and vehicle inspection would help to improve the situation, but only a long-term process of driver education will be most effective. C. Administration 2.11 MWP has overall responsibility for the construction and maintenance of roads outside the boundaries of the major cities. Within the MPW the orga- nization specifically in charge of roads in the project area (the Eastern, Southern and Western Regions) is the Road Construction and Maintenance Depart- ment (RCMD). Responsibility for the planning and construction of rural roads, not under the responsibility of MPW, lies with RDD, which is directly respon- sible to the Prime Minister. 2.12 The RCMD was established in 1967 and has since been reorganized many times to better represent its growing specialization. The present organiza- tion is shown on Chart C-1. Whereas the RCMD deals, through its improvement units, with the improvement of existing roads, the construction of new roads is carried out by the Army Labor Corps, a military organization, under tech- nical supervision of the RCMD.  - 11 - 2.13 Administrative procedures within the RCMD are generally cumbersome, in particular for procurement matters. This often leads to unnecessary delays in equipment repairs, even if spares are available locally. Although the Gov- ernment has already taken some measures to simplify procedures, additional measures need to be taken, Procedures for procurement of IDA-financed goods have now been well established and do not cause major difficulties. 2.14 In the course of time there have been frequent changes in the man- agement of RCMD, as well as in lower staff positions. RCMD generally lacks qualified and experienced medium and lower level staff, resulting in an over- worked high level staff, which is involved in solving daily problems and cannot devote enough time to longer-term issues. The recruitment of new, qualified staff and training of present RCMD personnel and adequate Technical Assistance is therefore of high priority. 2.15 Technical Assistance under the two previous projects has been designed to strengthen RCMD capabilities in project identification, prepara- tion and implementation. The country has thus been exposed to the methodolo- gies of evaluating highway investments, which represents an important step towards establishing an adequate highway planning system in the country. Significant improvements in some areas, such as road inventory, budgetary allocation, systematic traffic surveys, etc, were made by RCMD as a con- sequence of Technical Assistance, but in general terms much has still to be done to fully implement the system. The absorptive capacity of RCMD is limited, and therefore the progress in the system implementation is slow. D. Planning 2.16 Longer term planning, taking into account economic considerations, was initiated by consultants under the First Highway Project. Under the Second Highway Project, the concept of the economic evaluation of highway projects was further widened by the feasibility studies of two road projects, carried out by consultants. The planning mechanism will be further strength- ened under the proposed project as explained in para. 1.14. At present the remaining part of the highway plan for 1976-83 is being modified to reflect the priorities set by the new Government. The new plan is to cover the period 1979-83. E. Financing 2.17 Road construction and maintenance is financed from the general bud- get. Total expenditures for roads, excluding the RDD roads, amounted to US$31.9 million in 1976 (Table T-1), including about US$8.0 million for main- tenance, improvement and pavement strengthening. There is no consistent trend in the annual expenditures for highways, but they increased markedly in 1975 and 1976. 2.18 The RCMD has started recently to estimate budget allocations on the basis of a detailed cost breakdown of field operations. The expenditures projected for maintenance, road improvements and the strengthening program in the project area for the period mid-1980 to mid-1983 (the execution period of the proposed project) are estimated at about US$39 million, or about US$13 million annually.  - 12 - F. Engineering 2.19 The Engineering Department in RCMD is responsible for the design of new roads and bridges and also acts as an advisor to provincial and local authorities. The design standards for new roads, developed under the First Highway Project (Annex 2), are satisfactory. Because of the difficult terrain the roads do not always adhere to the chosen standards, but are adapted to the local situation. The main highways, financed with assistance from the USA and USSR, were built before uniform design standards were established. Their standards differ therefore somewhat from the present Afghan standards. G. Construction 2.20 There are no Afghan construction firms capable of constructing major roads. The Government does not encourage private contracting firms and only one of the domestic publicly owned firms is capable of carrying out earthworks of some magnitude; at best, if the opportunity were to arise, this firm might be able to operate under a joint-venture arrangement with a foreign firm. 2.21 In the mid-sixties, the main roads financed by the USA were built by USA contractors. Since then, because of the absence of any domestic con- tracting capabilities and the reluctance of Government to engage foreign contractors, new roads have normally been built by the Army Labor Corps, under supervision of the MPW. Only recently has the Government been considering the construction of a road in the Helmand Valley with financing by the Asian Development Bank, by a contractor from the Philippines. In exceptional cases, the RCMD has built some minor roads, but it usually handles road improvements only. The RDD builds only rural roads carrying very low traffic volumes. H. Highway Maintenance and Improvement 2.22 The MPW has overall responsibility for highway maintenance. The Road Maintenance General Directorate of RCMD is responsible for the main- tenance of the highways in the Eastern, Southern and Western Regions, and the MPW for maintenance in the Northern Region, with some assistance from the USSR. Except for some 300 km of track which are being upgraded by the Army Labor Corps, the RCMD is responsible for the maintenance of the roads, as shown in Table 2.1. 2.23 Road maintenance operations are planned and directed from Kabul and executed by the nine district branch offices (see Chart C-1). With the completion by the end of 1979 of a highway maintenance center in Kabul (para. 1.17), the Works Division, which carries the direct responsibility for high- way maintenance, will be in a better position to organize and supervise its operations. The center will comprise the RCMD's administrative office, central workshops, warehouses for spare parts, a soils and materials labora- tory, and a training center. Besides the main mechanical workshop in Kabul, there is a lesser-equipped workshop in Kandahar while the other districts have only facilities for minor repairs and regular equipment maintenance. 2.24 Road maintenance has improved under the two previous IDA-financed projects (paras. 1.16 and 1.17). At present the main paved roads under the  - 13 - RCMD's responsibility are reasonably well maintained. The secondary and tertiary roads are, in general, maintained according to the traffic they carry, which is acceptable. Tracks are rarely maintained, but a reasonable effort to improve them gradually is under way. In sum, the current main- tenance effort should be continued, with the expectation that as the RCMD gains more experience, the efficiency and the quantity of maintenance opera- tions should improve. The proposed project is designed to support these objectives. I. Training 2.25 A beginning was made by consultants under the First Highway Project with the training of the RCMD's staff and personnel. Consultants under the Second Highway Project have continued with some training courses, but without much active support by higher authorities. However, in early 1978, the Plan- ning Division in RCMD has been made responsible for training under a newly appointed Training Director. In view of the continuing need for better- skilled personnel the RCMD wishes to reactivate the training with the help of local instructors and with possible assistance under bilateral agreement. During negotiations, views were exchanged on RCMD's proposed training program, the arrangements for its execution and the coordination with the on-the-job training through the proposed project. III. THE PROJECT A. Objectives 3.01 The proposed project will support the Government's aims and policy to maintain and gradually improve the highway network. It places emphasis on protecting present investments rather than on new construction. To this end, the proposed project will: (i) consolidate the improvements made in the maintenance of the highway network under the two previous highway projects; (ii) help to further stimulate the development of rural areas by upgrading access roads to these areas; and (iii) help the highway organization to improve its capability to plan and to carry out highway maintenance and improvement works. B. Description 3.02 The project consists of: (i) a three-year time slice of a pavement strengthening and preservation program;  - 14 - (ii) a three-year time slice of a road maintenance and improve- ment program; and (iii) technical assistance for RCMD. Pavement Strengthening and Preservation 3.03 Some 670 km of asphalt paved highway comprising about 420 km of the 492 km Kabul-Kandahar road, about 150 km of the 224 km Kabul-Torkham (Pakistan border) road and about 100 km of the 105 km Kandahar-Spin Boldak (Pakistan border) road are in various stages of pavement deterioration, ranging from first signs of failures to near disintegration. These primary routes, which carry some of the highest traffic volumes in the country, were constructed or improved to paved standard in the first half of the sixties with assistance from USAID. Their design was based on the principle of stage construction, involving timely pavement strengthening. 3.04 Notwithstanding routine maintenance, some periodic maintenance and strengthening of some 110 km of the worst sections under the First and Second Highway Projects, strengthening and preservation of the pavements of these highways has now become a high priority need. The proposed project would therefore include a program of strengthening by means of asphaltic concrete overlays of about 450 km out of the estimated total of 670 km over a three-year period. Of the remaining 220 km about 160 km will receive a surface treatment (double surface dressing) to prevent the intrusion of water, thus preserving the road surface. 3.05 The road sections to be treated will be selected on the basis of technical and economic considerations which take into account the present condition of the pavement and the expected future traffic loads. Depending on the thicknesses that are ultimately required for the overlays, the total length of the sections to be strengthened may differ from the presently esti- mated length of 450 km, whereas the road length to be surface dressed may also vary from the presently estimated 160 km after all tests on soils and materials have been completed. 3.06 Part of the equipment for the pavement strengthening program, in- cluding a 60 ton/hr asphalt mixing plant, has been provided under the First and Second Highway Projects. On the basis of the available engineering data a total of about 450,000 tons of asphaltic concrete will be required for the projected 450 km of overlays. Since this amount is beyond the capacity of the present unit within the given time frame, additional equipment for a second asphalt production and laying unit is included under the proposed project. Road Maintenance and Improvements 3.07 Under the First Highway Project and the ongoing Second Highway Project, the Association has financed mechanical equipment and spare parts for road maintenance and for road improvements in the Eastern, Southern and Western regions. Technical assistance under these projects helped RCMD to develop related maintenance and improvement plans and programs to improve its organizational and operational ability to undertake maintenance works.  - 15 - Under the proposed project, RCMD would continue to maintain its road network and upgrade some 300 km of tracks to improved earth roads. To help RCMD to continue its maintenance and improvement program after the Second Highway Project is completed at the end of 1979, the proposed project would finance US$2.4 million (including price increases) for new mechanical equipment and US$3.3 million (including price increases) for spare parts for existing equip- ment, financed under the two previous highway projects. The new equipment will replace equipment which is beyond repair. Technical assistance will be provided under the proposed project to continue the institutional improvements initiated and developed under the First Highway Project and the ongoing Second Highway Project (para. 3.09). Technical Assistance to RCMD 3.08 The proposed technical assistance would be a vital input to the pavement strengthening and to the road maintenance and improvement programs. For this reason the effectiveness of a contract between the Government and the Consultants will be a condition to the effectiveness of the Credit Agreement. The technical assistance consists of: Man-months 1 highway engineering and transportation expert (team leader) 36 1 cost accountant 18 1 hot-mix plant specialist 24 1 asphalt laboratory technician 12 90 3.09 The technical assistance team's function is to help RCMD in the planning and execution of the pavement strengthening program and in the devel- opment of the necessary skills of its staff through on-the-job training. The team leader would coordinate the work of the technical assistance team and be ultimately responsible for the quality and quantity control of the production and laying of asphaltic concrete (para. 3.35). He would also be available to assist RCMD in its highway planning (para. 1.14) and advise the Government in matters of road transport policies (para. 1.11). 3.10 The cost accountant's function will be to design and help implement a cost accounting system for the production and laying of asphaltic concrete for overlays. Since the production and laying of asphaltic concrete can be relatively easily monitored, it is also a suitable item to introduce the con- cept of cost accounting in general and to serve as a pilot project for the setting up of a more comprehensive system for all of RCMD's activities. 3.11 The hot-mix plant specialist and the asphalt laboratory technician would assist RCMD in the daily operation of the two mixing plants. During negotiations RCMD indicated that it expected to be able to provide the consul- tants with the services of two Afghan laboratory technicians. It was agreed that the consultants would examine their qualifications and experience before submitting a proposal.  - 16 - 3.12 RCMD has also indicated that it intends to assign to the Consultants a cost accountant and a hot-mix plant, foreman from its own staff with the purpose to take over the functions of the respective consultants' staff as soon as possible. The assignment of the accountant and hot-mix plant spe- cialist, employed by the Consultants, may therefore be shortened to 12 months, respectively 16 months, if the Afghan staff will have gained sufficient expe- rience after these periods. C. Engineering 3.13 The overlay program will be based on an adequate pavement overlay design. To enable the Association to determine the ability of RCMD to engineer pavement overlays, it has submitted the detailed pavement overlay design for a 50 km section ofthe Kabul-Kandahar road and a preliminary design for the Kabul-Torkham road and the remaining part of the Kabul-Kandahar road. RCMD's methodology for the overlay design is acceptable and it is proceeding with the detailed design of the remaining 400 km. 3.14 Out of the 670 km of roads in various shapes of pavement deteriora- tion about 450 km have been identified for an asphaltic concrete overlay and about 160 km for a surface treatment. The final selection for the three-year time slice will be based on completed detailed pavement overlay design and also on economic considerations. The methodology for the overlay design has been established (para. 3.13). An understanding was reached during negotia- tions on the methodology to be used for the economic evaluation of the pave- ment overlays. It was further agreed that, before commencing any pavement works, the RCMD shall provide the Association with a technical and economic justification for the overlay or surface treatment of each road section satisfactory to the Association. 3.15 The engineering and economic studies of the pavement overlays will be submitted far enough ahead of the actual pavement works to avoid delays in their execution. Because the rate at which the roads deteriorate with time gives valuable information, the engineering should also not be too far ahead of the actual pavement works. The proposed method of submitting the justifica- tion gradually will therefore make it possible to adapt the overlays to the latest available information. 3.16 Except for the Kandahar - Spin Boldak road the alignment, cross section and grade of the roads are adequate. No engineering is therefore required other than completion of the pavement overlay design. Presently the only work anticipated for the Kandahar - Spin Boldak road is a surface treatment of a 35 km section leading out of Kandahar for which no engineering is required. Any asphaltic concrete overlay that may be proposed by RCMD for the remaining part of this road should be considered in the light of frequent flooding of the road in low lying areas. More elaborate engineering by RCMD would therefore be required if any works are proposed for the sections subject to flooding. D. Cost Estimates 3.17 The overall project cost estimates are in Table 3.1 (see page 17) which also shows the proposed financing arrangements. Table 3.2 shows the re- current costs of the three-year time slice for the road maintenance and improvement program.  - 17 - TABLE 3.1: PROJECT COST ESTIMATES AND FINANCING PLAN Project Cost Estimates Financing Plan (US$ Million) (Base cost at early 1979 prices;(US$i.00. Afs4O) EEC 1 IDA Action Fund Foreign In 7 of In % of Afs Million US$ Million Exchange Foreign Foreign Govt. Local Foreign Total Local Poreign Total Cost Exch.Cost Amount Exch.Cost Amount Amount Capital Costs I. Pavement Strengthening and Preservation Program/i (3-year time slice) a. Pavement Strengthening Equipment Fr secon asphalt mixing and laying plant - 136 136 - 3.4 3.4 100 100 3.4_ /2 - Fuel 4 96 100 0.1 2.4 2.5 36 - _ _ - 2.5 W.gec 36 - 36 0.9 - 0.9 - - - - - 0.9 Maint. of equip. & vehicles 24 68 92 0.6 1.7 2.3 74 71 1.2/3 - - 1.1 Asphalt 12 244 256 0.3 6.1 6.4 95 34 2.1!3 44 2.7 1.6 Materials 48 116 164 1.2 2.9 4.1 71 79 2.343 - - 1.8 Site overheads 16 32 48 0.4 0.8 1.2 67 88 0.7 - - - 0.5 140 692 832 3,5 17.3 20,8 83 56 9.7 16 2.7 8.4 b. Pavement Preservation Asphalt for surface dressing - 32 32 - 0.8 0.8 1 10 0.8- - Subtotal 140 724 864 3.5 18.1 21.6 84 58 10.5 15 2.7 8.4 II. Hwy. Maint. & Improvement (3-year time slice) Capital Costs a. New Equipment - 84 84 - 2,1 2.1 100 52 1.1 48 1.0 b. Spare parts - 108 108 - 2.7 2.7 100 100 2.7 - - Subtotal - 192 192 - 4.8 4.8 100 79 3.8 21 1.0 III. Technical Assistance Consultants' services/4 4 24 28 0.1 0.6 0.7 86 100 0.6 - - 0.1 Total Base Cost Estimate 144 940 1,084 3.6 23.5 27.1 87 63 14.9 16 3.7 8.5 Expected Price Increases/5 44 200 244 1.1 5.0 6.1 82 54 2.7 14 0.7 2.7 Total Capital Costs 188 1,140 1,328 4.7 28.5 33.2 86 62 17.6 15 4.4 11.2 TABLE 3.2: RECURRENT COSTS Recurrent Costs Maintenance Works 212 120 332 5.3 3.0 8.3 36 - - - - 8.3 Improvement Works 100 92 192 2.5 2.3 4.8 48 - - - - 4.8 Estimated Price Increases/5 100 68 168 2.5 1,7 4.2 40 - - - - 4.2 Total Recurrent Costs 412 280 692 10.3 7.0 17.3 40 - - - - 17.3 for 3-year time slice (1981 through 1983) 1/ Based on information from RCMD and modifications by appraisal mission. 21/ To be disbursed on basis of actual cost of equipment. 3/ Total IDA contribution for these items (including price increases of US$1.6 million) is US$7.9 million. To be disbursed on basis of US$17.50 per ton asphaltic concrete for a total quantity of approx. 450,000 ton asphaltic concrete (paras. 3.42 and 3.43). 4/ Mission's estimates. 5/ Based on annual price increases of 6% for foreign goods and services and of 10% for domestic goods and services. Source: RCMD and mission estimates  - 18 - 3.18 The cost of pavement strengthening is based on a total production of 450,000-ton asphaltic concrete for overlays, to be produced by 2 asphalt mixing plants, with a total nominal capacity of 140 ton/hour and working with an efficiency of 85% for 7 hours/day. It is assumed that the operations will last 3 years with a working season of 180 days per year. Depending on the ultimate thickness of the overlays the final length to be strengthened may vary from the assumed 450 km (para. 3.05). Highway maintenance represents a three-year time slice of RCMD's program and highway improvement refers to the upgrading of about 300 km of tracks to improved earth roads (para. 3.07). E. Financing 3.19 The proposed overall external financing arrangements are shown in Table 3.1. As indicated in the table, IDA financing would amount to US$17.6 million, whereas US$4.4 million would be financed by the EEC Action Fund. The details for the parallel financing were discussed during negotiations. Details of the specific items proposed for IDA and EEC financing are: Pavement Strengthening and Preservation 3.20 Mechanical equipment for the second asphalt mixing and laying unit (para. 3.06) would be financed by IDA and consists of: Table 3.3: EQUIPMENT FOR SECOND ASPHALT MIXING AND LAYING UNIT In US$ 1 Hot mix Plant (80 tons/hr) with 300 KW Diesel Generator 500,000 2 Impact Crushers (60/70 ton/hr) 660,000 3 Screening Plants (100 tons/hr) 240,000 4 Conveyor Belts 40,000 3 Generators (200 KW) 200,000 1 Bulldozer 70,000 3 Loaders 200,000 6 Flat Bed Trucks 120,000 40 Dump Trucks (6 tons) 480,000 1 Asphalt Distributor (6 tons) 40,000 1 Water Tanker (6 cu. m.) 20,000 1 Pneumatic Tire Roller (25 tons) 60,000 2 Tandem Rollers (12 tons) 60,000 1 3-Wheel Roller (18 tons) 40,000 1 Finisher (100 tons/hr) 80,000 1 Mobile Laboratory 40,000 1 Mobile Repair Shop 40,000 2 4-Wheel Drive Vehicles 16,000 1 Welding Machine (350 amps) 8,000 1 Water Pump 5,000 2,919,000 Spares, 15% of Equipment Value 441,000 Base Cost 3,360,000 Price increases 440,000 Total 3,800,000  - 19 - 3.21 External financing of the pavement strengthening will be effected through disbursements for equipment for the second asphalt unit (IDA), for the purchase of an initial quantity of asphaltic bitumen for pavement strength- ening (EEC) and for IDA's contribution (US$17.50 per ton asphaltic concrete, paras. 3.42 and 3.43) to the remaining cost of asphaltic bitumen required for the pavement strengthening, and to the cost of equipment maintenance, mate- rials and site overheads. The initial quantity of asphaltic bitumen, valued at US$2.7 million (excluding price increases) and to be financed through the EEC Action Fund, will be sufficient to cover the first year of production of asphaltic concrete. During that period RCMD will receive US$17.50 per ton asphaltic concrete mixed and placed and thus collect the funds for the pur- chase of additional asphaltic bitumen to continue the operations after the first year. Asphalt for surface dressing will be entirely financed by IDA as a separate item. 3.22 Fuels are excluded from the IDA financing because they are imported from the USSR under a Government monopoly. Highway Maintenance and Improvements Program 3.23 IDA and EEC financing for new equipment will be for the following items: Table 3.4: NEW EQUIPMENT FOR HIGHWAY MAINTENANCE AND IMPROVEMENT In US$ 13 bulldozers 1,170,000 4 motor graders 240,000 3 loaders 210,000 3 road rollers (14 ton) 70,000 3 snow clearance trucks 60,000 4 water tankers 80,000 1,830,000 Spares, 15% of equipment value 270,000 Base Cost 2,100,000 Price increases 300,000 Total 2,400,000 Of this amount IDA would finance US$1.1 million (base cost) and the EEC Action Fund US$1.0 million (base cost). 3.24 IDA would finance the cost of spare parts for existing equipment, amounting to US$3.3 million (including price increases), of which US$1.6 mil- lion for spares for equipment purchased under the First Highway Project and about US$1.7 million for spares purchased under the Second Highway Project. Technical Assistance 3.25 IDA would finance the foreign costs of technical assistance, as specified in Table 3.5.  - 20 - Table 3.5: BREAKDOWN OF THE FOREIGN COST FOR TECHNICAL ASSISTANCE US$ 1 Highway engineering and transportation expert (team leader): 36 man-months at US$7,000/month 252,000 1 cost accountant: 18 man-months at US$6,000/month 108,000 1 hot-mix plant specialist: 24 man-months at US$5,000/month 120,000 1 asphalt laboratory technician: 12 man-months at US$4,500/month 54,000 534,000 Cost of transportation (personal and freight) 17,000 Base Foreign Cost 551,000 Price increases 119,000 Total Foreign Cost 670,000 3.26 The average base foreign cost per man-month amounts to about US$6,100 (including cost of transportation) and reflects the price level of early 1979 for recruitment on a worldwide basis. 3.27 The proposed IDA Credit of US$17.6 million would cover 62% of the total foreign cost. Since US$2.9 million (including price contingencies, Table 3.1) of the foreign cost represents fuel, which is excluded from IDA financing (para. 3.22), the Association would finance 69% of that part of the foreign cost which is eligible for IDA financing. 3.28 The EEC Action Fund would contribute US$4.4 million (15% of the foreign cost). The Government's contribution of US$11.2 million consists of US$6.5 million foreign cost and US$4.7 million local cost. The tax component of the local cost is negligible because the import of equipment and materials for foreign financed projects is exempt from taxes and fuel is not taxed in Afghanistan. 3.29 During Credit negotiations, the project cost estimates were dis- cussed and confirmed with the Government. Assurances were obtained from the Government that it will provide all of the financing, both foreign and local, not covered by the Association and the EEC, and all other resources needed to complete the project on a timely basis. F. Implementation 3.30 There has been little recent history of highway construction work in Afghanistan by international contractors. The landlocked and remote location, lack of assured long-term construction programs and the role seen for the state in the economy are the main reasons for this situation. Past experience with IDA financed irrigation and water supply projects has also demonstrated the lack of interest from international contractors for civil engineering work  - 21 - in Afghanistan. Similarly, lack of demand combined with Government's urge to use its own resources has mitigated against the development of local contractors who could undertake asphalt paving works. 3.31 Under the on-going Second Highway Project, RCMD has gained valuable experience of asphaltic concrete production and laying. Whilst inefficiencies and deficiencies exist in the RCMD operation in this area, an adequate base of experience does exist which could and should be built upon to provide an in-country ability to carry out this essential maintenance operation. 3.32 In light of this situation, the Government has proposed to carry out the pavement strengthening through RCMD's own forces. A vital aspect of this procedure is the technical assistance to assure a smooth running-in period of the pavement operations. Whilst the use of ICB procedures to attempt to induce a foreign contractor to undertake the paving works may seem a reasonable alter- native, experience indicates otherwise. For a road in the Helmand Valley, West of Kandahar, bids through ICB procedures were received in 1975. The Govern- ment and the financing agency (Asian Development Bank) rejected all the bids because of high prices. Three contractors participated in January 1977 in the rebidding, but the bids were again considered to be too high. Negotiations with the lowest bidder, a firm from the Philippines, resulted in a lower offer but at the time of appraisal, (September 1978) a contract was still not awarded. Attempted use of ICB procedures for the pavement strengthening works in the proposed project would most likely lead to a similar long protracted and abortive bidding procedure during which time the vital paved roads will further deteriorate. 3.33 The implementation of the paving works and the related part of the implementation schedule (Annex 3) are therefore based on the paving works being carried out by RCMD forces. Since 50 km of overlay design has been completed, sufficient of the first year's program has been engineered to enable an early start to be made with the overlay works, utilizing the pre- sently available asphaltic concrete mixing plant. The award of a contract for technical assistance to assist the RCMD in setting up and operating the unit will be a condition to the effectiveness of the Credit Agreement (para. 3.08). The importance of having the technical assistance team available as soon as possible after Credit signing for an early beginning of the overlay works was specifically raised with the Government during negotiations. 3.34 In addition to the paving works, the implementation schedule shows the detailed timing of the other project items which will be necessary for satisfactory project implementation, all of which were discussed and confirmed at negotiations. Detailed Implementation Schedule 3.35 RCMD will be responsible for the efficient use of the Technical Assistance team. In respect of quality control of the production and laying of asphaltic concrete for the road strengthening program, the team leader of the technical assistance team will have to be satisfied and certify accord- ingly, for the purpose of disbursement, that the works have been executed in  - 22 - accordance with the design and specifications and to generally acceptable engineering standards. Since the team leader's function as advisor to RCMD and at the same time as supervisor of work executed by the same agency could lead to conflicts between the technical assistance team and RMCD, the tech- nical assistance team will be employed under a contract administered by the MPW. 3.36 The establishment of quality control is considered vital to the satisfactorily carrying out of the paving works. During Credit negotiations assurances were obtained that the paving works will be certified both as to quality and quantity by the team leader as a condition of disbursement of the Credit funds directly applied to the asphaltic concrete. G. Procurement 3.37 As indicated in para. 3.33, the pavement strengthening works will be carried out by the RCMD forces. The procurement of IDA-financed equipment will be through ICB procedures according to the Bank's "Guidelines for Pro- curement." Procurement of equipment financed by the EEC Action Fund will be in accordance with the Action Fund's guidelines and were discussed with Gov- ernment during negotiations. Spare parts for existing equipment will be purchased from the original manufacturer or through international shopping. 3.38 To assist the RCMD in the financing of asphaltic bitumen for the overlay works, an initial quantity, valued at US$2.7 million (excluding price increases), will be financed by the EEC Special Action Fund (para. 3.21) and procured in accordance with its guidelines. The remaining quantity of asphaltic bitumen will not be financed as a separate item, but will be financed through IDA's contribution of US$17.50 per ton asphaltic concrete mixed and placed. 3.39 Because asphaltic bitumen represents 30% of the total cost of the pavement strengthening works, procurement through international competitive bidding (ICB) according to the Bank's "Guidelines for Procurement" will be required in order to minimize costs. Asphalt for surface dressing will also be procured through ICB according to the Bank's "Guidelines for Procurement". Assurances to this effect were obtained during negotiations. 3.40 The technical assistance will be provided by qualified and expe- rienced specialists on terms and conditions all acceptable to the Association. During negotiations assurances were given by the Government to this effect. In addition, the numbers and types of experts were discussed and confirmed during negotiations. H. Disbursements 3.41 Disbursements from the Credit account and EEC Special Action Fund account will be made on the basis of: - 100% of the foreign cost (CIF Kabul) of equipment and spare parts;  - 23 - - 100% of the foreign cost of an initial quantity of asphaltic bitumen for pavement strengthening to a value of US$2.7 mil- lion (excluding price increases); - 100% of the foreign cost of consultants' services; and - US$17.50 per ton of asphaltic concrete, mixed and placed according to standards acceptable and certified as such by the consultants in charge of quality and quantity control. 3.42 Disbursement for pavement strengthening would be made on the basis of a fixed amount (US$17.50) per ton asphaltic concrete, mixed and placed, since this would be an incentive for RCMD to efficiently carry out the work. Any cost increase because of inefficient operations would have to be borne by RCMD and any substandard execution could lead to rejection by the supervising consultant. Also, there would be an incentive to produce and place asphaltic concrete as soon as the mixing plants are operational, the crushers installed and the initial quantity of asphalt has arrived on site. The proposed arrange- ment will make project supervision by IDA more complex. However, the advantage of providing an incentive to RCMD to efficiently produce and deliver a qualita- tively acceptable end product will outweigh the disadvantage of a more inten- sive supervision on the part of the Association. 3.43 The amount of US$17.50 per ton for asphaltic concrete is derived from IDA's contribution of US$7.9 million (US$6.3 million base cost plus US$1.6 million for price increase) for the production and laying of 450,000 tons of asphaltic concrete. 3.44 The following estimated schedule of disbursements was discussed and confirmed with Government during negotiations. Any funds expected to remain in the IDA Credit account after project completion would be cancelled. Any balance remaining in the account of the EEC Action Fund would be used for the purchase of equipment for road maintenance and improvement in accordance with the Action Fund's guidelines for procurement.  - 24 - Table 3.6: ESTIMATED SCHEDULE OF DISBURSEMENTS Cumulative Disbursements at End of Quarter IBRD Fiscal Year (US$'000 Equivalent) and End of Quarter IDA EEC Action Fund 1980/81 December 31, 1980 300 600 March 31, 1981 500 1,000 June 30, 1981 1,500 2,000 1981/82 September 30, 1981 2,000 4,400 December 31, 1981 3,500 March 31, 1982 5,000 June 30, 1982 7,000 1982/83 September 30, 1982 8,100 December 31, 1982 10,000 March 31, 1983 11,600 June 30, 1983 13,700 1983/84 September 30, 1983 15,400 December 31, 1983 17,200 March 31, 1984 17,600 I. Environmental Impact 3.45 The pavement strengthening will not detrimentally affect the envi- ronment. The maintenance and upgrading of rural roads will improve the rural environment by providing better access to markets, schools and medical facil- ities. IV. ECONOMIC EVALUATION A. Benefits and Beneficiaries 4.01 The pavement strengthening program, which is the main item under the proposed project, is designed to prevent deterioration of vital sections of primary roads which are part of the backbone of Afghanistan's domestic and international transport system. These roads carry significant traffic volumes since they serve important centers of economic activity in the country. They were mostly built in the sixties and their pavement structures are now too weak for the traffic they carry. Unless remedial action is taken to upgrade this vital means of transportation to meet present and future transport requirements, the roads would break up even with intensive maintenance, transport costs would rise, traffic would be interrupted, the economy would  - 25 - suffer, and the Government would ultimately have to face costly reconstruction works. The proposed strengthening program would prevent these adverse effects and would benefit the economy by keeping these roads open to traffic, reducing the cost of transport and maintenance, and avoiding costly reconstruction works. The preservation program will also be applied to sections of primary roads and will make it possible to preserve the existing pavements and to postpone the strengthening of those sections. 4.02 The Government is carrying out satisfactorily a greatly needed main- tenance program and a well justified program of road improvements under two previous IDA Credits (paras. 1.16 and 1.17). In support of these programs, IDA financed about US$12 million of highway equipment. At present, spare parts are needed to keep this equipment functioning, estimated at a cost of about US$3.3 million and included for financing under the proposed Credit. The benefits of these purchases, although difficult to quantify, would be the value of production foregone from the loss in output of equipment standing idle for lack of spare parts. 4.03 The present condition of some secondary and tertiary roads does not economically satisfy the transport demand; many roads have substandard charac- teristics and lack the capacity to handle the traffic they carry at reasonable overall transport cost. The proposed purchases of mechanical equipment would enable the Government to improve these roads. This would benefit the economy by providing better access and reducing the cost of transport. 4.04 The technical assistance component of the proposed project is con- sidered to be essential to ensure an adequate and timely execution of the project pavement strengthening program and has been considered as part of the cost of that program. At the same time it will continue the process of insti- tution building and on-the-job training of RCMD staff, started in the two previous projects. 4.05 Beneficiaries. The principal direct beneficiaries will be th2 road users, by avoiding the higher costs of transport as Lhe roads deteriorate. However, because of keen competition in the transport industry, especially on the primary network, it is expected that these savings in transport costs accruing to truckers and other transport intermediaries will be passed on gradually to producers, consumers and the Government. As an average, a high 75% of the traffic volumes on paved roads are buses and trucks, whose operat- i-ig costs are about two or three times the corresponding values for passenger cars. Therefore, about 90% of the benefits will accrue to work and business- related traffic. The Government will also directly benefit from the proposed project in sa-ings in maintenance and reconstruction costs, which are espe- cially hign frr asphalt paved roads, and indirectly from the continuation of institution building through technical assistance. B. Economi Eva&.uation (i) Strengtnening and Preservation of Primary Asphalt-Paved Roads 4.06 To ascertain the feasibility of the full 670 km of pavement strength- ening from which the 450 km in the three-year time slice of the proposed proj- ect have been selected, it was assumed that each of the sections in the program  - 26 - will require an overlay of 7.5 cm thickness, which is the most costly solution; certain sections will probably require a thinner overlay. On this concept and based on the present and projected traffic, the economic returns on individual sections range from a minimum of 19% to a maximum of 59%, with an overall return of 34%, as shown below. All sections also show an acceptable first- year return. Details of the analysis are in the Project File. Table 4.1: PRELIMINARY ECONOMIC EVALUATION Economic Length 1977 ADT Cost /1 ER /1 FYR /1 Section/Link (km) (Average) (US$'O00) (7%) (%) Kabul-Kandahar Kabul-Ghazni 135 821 6,725 41 38 Ghazni-Kandahar 285 468 14,195 22 23 Kandahar-Spin Boldak Kandahar-Spin Boldak 100 417 4,981 19 20 Kabul-Torkham Kabul-Jalalabad 100 1,182 4,980 59 54 Jalalabad-Torkham 50 700 2,490 35 33 Overall 670 34 32 /1 Assumed thickness of 7.5 cm. 4.07 As indicated in para. 3.14 the Government will submit a technical/ economic study for each section in the three-year time slice for approval by the Association, prior to the start of any works. These studies are to be prepared on the basis of detailed pavement design and according to an agreed methodology and criteria (Annex 4). Each section will have a rate of return of at least 12%, which is considered to be an acceptable estimat'e of the minimum attractive rate of return in Afghanistan. Assurances oln this point were obtained during negotiations. 4.08 The agreed methodology calls for an evaluation of alternative strengthening options, including stage construction such as for example, a comparison of overlays at five-year intervals with overlays at ren-year intervals. However, the former option does not seem to be practical under conditions prevailing in Afghanistan, principally because of the additional cost of moving plant, equipment and labor force to another site and because of the extra burdens it would impose on the administration in pLanning and implementing the program. 4.09 The preservation program will preserve the existing pavement and will permit the strengthening to be delayed. Assuming the delay is 3 years, the benefit/cost ratio instead of doing the overlay now is 1.2.  - 27 - (ii) Road Maintenance and Improvement Program 4.10 The proposed project would include a three-year slice of a road maintenance and improvement program, as explained in para. 3.02. This program would continue and consolidate the improvements in planning, organization, and execution of maintenance and improvements started under the previous high- way projects. Although the Government is likely to continue this program, even if no IDA financing were available, for purposes of determining the basis for evaluating the economic benefits of this program, it has been assumed that, without the program, the maintenance effort would be reduced to a minimum. Traffic has been estimated to grow at an annual rate of 10% during the six- year period covered by the analysis from mid-1980 to mid-1986. This growth rate is in line with the increase of traffic in recent years and has also been adopted in several feasibility studies. Benefits from the program are reduced transport costs and savings in avoided rehabilitation, which would become necessary ultimately if the maintenance effort were reduced. Details of the economic evaluation are in the Project File. On this basis, the ER was esti- mated at 70% and the benefit/cost ratio at 2.3. (iii) Technical Assistance 4.11 As indicated in para. 4.04, technical assistance is a critical element for the appropriate execution of the project and its economic justi- fication is dependent on that of the pavement strengthening anld maintenance programs. (iv) Overall Economic Return 4.12 Under the conservative assumption that all the road links in the pavement strengthening program would require a thickness of 7.5 cm, the over- all ER of the pavement strengthening and preservation program and of the road maintenance and improvement program together would be 42%. Since at least some of the links will require a lesser thickness, the overall ER will be higher. C. Projects Risks 4.13 There is a risk that delays may occur in the execution of the pave- ment strengthening program, because of delays in the procurement of the second asphaltic concrete production unit, the procurement of asphalt bitumen, or the employment of the technical assistance consultants. Although these delays should not affect the economic returns materially, the country would forego the benefits to be derived from the program during the period of delay. V. AGREEMENTS REACHED AND RECOMMENDATIONS 5.01 During Credit negotiations agreement was reached on the following principal matters:  - 28 - (i) the effectiveness of a contract between the Government and the Consultants will be an additional condition to the effectiveness of the Credit Agreement (para. 3.08); and (ii) before commencing any pavement works the RCMD will provide the Association with a satisfactory technical and economic justification for the overlay or surface treatment of each road section (para. 3.14). 5.02 The project is suitable for an IDA Credit of US$17.6 million equiva- lent and for an EEC Action Fund Credit of US$4.4 million equivalent to the Government of the Democratic Republic of Afghanistan on the usual terms.  lBRD 14049 < U sAN N5 -1 1 SAA 2A u R.~~~~~~~~~~~~~~~~~~~~~~~~ No,> /~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ! \s r , > 4 )s 22 I, , t \> (~~~~~~~~~~~~~~~~~~~~ /r ., . Z X , | , S o- 4 z , h ffi ffi ^ ) ~~~~~~~~~~~~~~~~~~DEMOCRATIC REPU1BLIC OF AFGHAN STAN lIl A . - -A-Y 'I A N A , - r o o.t- . . G A < I/ [ - $ ~ ~ f ~ R A H I G H W A Y P R O J E C T _ _ _, \ _ F vi / 2 2 4 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~AVERAGE DAILY TRA FFIC ( ADT ) A's lIss '.1 I $oj A n2 A I 000 ._ AC1 )/ ~~~~~~~~ ,' g nLv .J 1S3 ~~~~~~~~~~~~~~~~~~~~~~~~~~~ADT 401 - 1000 V.h le- / ; ^ r / __A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~JI" ADT 201 -400 V2h,ce- / X ;,/ 2 z * J