Rwanda - Fifth Highway Project

Document of The World Banlk . hS '..67}2'';' FOR OFFICIAL USE ONLY Report No. 3680a-RW STAFF APPRAISAL REPORT RWANDA FIFTH HIGHWAY PROJECT May 11, 1982 Highways Projects Division Eastern Africa Regional Office L This document has a restricted distribution and may be used by recipients only in the performance of Ltheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT Currency Unit = Rwandese Franc (F Rw) US$1.00 = RF 92 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.62 miles 1 square kilometer(km2)= 0.386 sq. mile 1 hectare (ha) = 2.47 acres 1 metric ton (ton) = 2,204 pounds ACRONYMS AND ABBREVIATIONS AfDB - African Development Bank BADEA - The Arab Bank for Economic Development in Africa FED - European Development Fund KFAED - Kuwait Fund for Arab Economic Development MC - Ministry of Communications MPW - Ministry of Public Works PED - Planning and Engineering Department RB - Roads Branch STIR - Societe des Transports Internationaux du Rwanda TRAFIPRO - Travail, Fidelite, Progres UNDP - United Nations Development Programme VOC - Vehicle Operating Costs vpd - Vehicles per day WD - Works Department GOVERNMENT OF RWANDA FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY RWANDA FIFTH HIGHWAY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE TRANSPORT SECTOR ................................... 1 A. Geographic and Economic Setting ............ 1 B. The Transport System .. 3 C. Transport Planning and Coordinati3n . . 4 D. Previous Bank Group Involvement in the Sector . . 5 II. THE HIGHWAY SUBSECTOR .................................. 9 A. The Road Network ...................... 9 B. Road Use ............................... 9 C. Administration and Training .......... .. ............. 14 D. Engineering .................... ..................... 15 E. Construction ........................................ 16 F. Planning ...................... ...................... 16 G. Financing ..18 H. Maintenance .................... ..................... 20 [II. THE PROJECT ....................-.....-.-...... 22 A. Objectives .......................................... 22 B. Project Description .............. .. ................. 22 CL Cost Estimates ................... ................... 25 D. Financing ..................... ...................... 27 E. Implementation ................... ................... 28 F. Procurement .................... ..................... 29 G. Disbursements ................... .................... 30 H. Accounting and Reporting Requirements ............... 30 I. Environmental Aspects .................. 31 IV. ECONOMIC EVALUATION .................. .................. 32 A. General ...................... ....................... 32 B. Main Benefits and Beneficiaries .,.. . 32 C. Economic Analysis ................. .................. 33 D. Sensitivity and Risks .................. 35 V. AGREEMENTS REACHED AND RECOMMENDATION ............. ..... 37 This report was prepared by E. Fellinghauer (Engineer) and J. Van der Ven (Economist) who appraised the project in August 1981. The report was edited by C. Applegate (Technical Editor). 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 disclcsed without World Bank authorization.  Table of Contents (Cont'd.) ANNEXES I. Draft Terms of Reference for Road Maintenance Engineers in the Ministry of Public Works II. Draft Terms of Reference for a Transport Planning Expert at the Ministry of Public Works III. Progress Reporting Requirements IV. Economic Evaluation of Paving the Butare-Kitabi Road V. Related Documents and Data Available in the Project File CHARTS 1. Organization of the Roads Branch 2. Project Implementation Schedule MAP Rwanda, Fifth Highway Project (IBRD 16034)  I. THE TRANSPOR" SECTOR A. Geographic and Economic Setting 1.01 Rwanda is a small landlocked country in central Africa with Uganda to the north, Zaire to the west, Burundi to the south and Tanzania to the east. The country's area is only about 26,000 km2 and it is separa- ted from the Indian Ocean by a distance of 1,400 km. The topography ranges from mountainous in the west to a rolling plateau with scattered, swampy valleys in the east. The climate is equatorial with heavy rainfall in the western highlands. 1.02 With a population of almost 5 million people growing at about 3% per annum and a per capita income of aboul: US$230 (in 1980), Rwanda is one of the most densely populated and poorest: countries in the world. More than 90% of the population lives in rural areas, engaged mainly in subsis- tence agriculture. Foodcrop production, however, has barely kept pace with the rapid population growth; increases itl food production have generally been due to extensions in cultivated area at the expense of pasture and forestry uses. More than half of all fartners also grow coffee; other cash crops are tea and quinine bark grown mainly in the southwest. 1.03 During the 1970s GDP grew on average at about 6% p.a. The fast- est growth was registered in commerce (11% p.a.) and manufacturing (10% p.a.), but at 18% and 15%, respectively, these sectors' share of GDP remains relatively small compared with agrLculture which still accounts for just over 40% of GDP. The estimated share of transport is small (less than 2%), but this estimate does not take into consideration that an important part of the transport activity is counted as trade (para. 2.09). 1.04 Rwanda's export earnings are heavily dependent on coffee, which has provided about 60% of the value of exports in recent years. Production (about 25,000 tons p.a.), however, is growing slowly and export earnings are vulnerable to changes in the world market price for coffee. Mineral exports, providing some 20% of export earnings, have shown virtually no growth in volume over recent years while tea, the second agricultural ex- port crop, has increased moderately to about 6,000 tons p.a. For the short and medium term, the general shortage of land, diminishing soil fertility and the scattered settlement pattern preclude any significant change in agricultural production; export earnings, therefore, are expected to remain insufficient to cover the fast growing foreign exchange requirements of the economy and will have to be supplemented by substantial capital inflows.  - 2 - 1.05 Rwanda's external economic position is precarious not only because its major exports are subject to significant price fluctuations, but its landlocked position substantially increases the cost of imports and exports and makes the vital foreign trade vulnerable to events in neighboring countries. Moreover, imports are of the order of 150,000 tons p.a. and exports (mainly coffee) average 35,000 tons p.a. and are very seasonal in nature. This relatively small volume of international trade and the imbalances between imports and exports with wide seasonal fluctuations in the latter further add to the cost of international transport. External Transport Connections 1.06 Traditionally, two main transport corridors have provided Rwanda with access to the Indian Ocean ports: the northern all road or road/rail route via Kampala to Mombasa (1,740 km by road or 1,924 km by road/rail); and the southern road/lake/rail connection via Bujumbura and Kigoma to Dar es Salaam (1,715 km). Even though the southern route is marginally cheaper (in direct costs), the northern surface route is faster and more reliable and now carries more than 70% of total external trade. Air transport has increased to handle about 20% of this trade. But even on the northern sur- face route, efficient operations are constrained by cumabersome interna- tional transit procedures; in addition, general political instability in the region over the past decade has led to frequent interruptions in traf- fic flow severely harming Rwanda's economy. As an alternative to the existing routes, another road/rail route connecting Kigali (via Rusumo at the Tanzania border and the railhead at Isaka in Tanzania) to the port of Dar es Salaam is being developed. The road has been paved in Rwanda and paving of the three remaining sections in Tanzania is either underway or planned. 1.07 In order to assist Rwanda as well as Burundi in assessing the re- lative advantages of existing and potential external transport routes and in identifying actions and investments required to improve the efficiency of these routes, the Bank Group prepared a study on the external transport connections of the two landlocked countries.l/ The conclusions of the study were that: (i) the two existing surface routes now serving Rwanda and Burundi will continue to offer these countries the least-cost access to Indian Ocean ports, at least in the medium term; and (ii) their external transport situation could be markedly improved by a number of measures (e.g. simplified customs and border regulations) and by projects which either have recently begun or are about to begin. The report has been fa- vorably received by the countries concerned and has provided the first framework for discussions and negotiations between the landlocked and tran- sit countries. A more comprehensive and detailed study has also been car- ried out by the United Nations Conference on Trade and Development (UNCTAD) on the international transport connections of Rwanda, Burundi, Uganda and eastern Zaire. The findings and recommendations of these studies are assisting the countries concerned and the donor agencies to agree on ac- tions and priority investments for the medium and longer term; since the publication of these reports fruitful, bilateral as well as multilateral meetings (sponsored by the EEC) have been held. 1/ "A Report on the International Transportation Bottlenecks Affecting Rwanda and Burundi," December 1980, No. 3224-EAF.  B. The Transport System 1.08 Rwanda's transport infrastructure consists of a network of 6,000 km of roads and tracks, Lake Kivu on its western border, and an interna- tional airport at the capital of Kigali and five smaller airports. There are no railways or navigable rivers. Dome3tic transport is therefore de- pendent predominantly on the highway networlk which is discussed in more de- tail in Chapter II. Lake Transport 1.09 Commercial navigation takes place on a small scale between the towns of Gysenyi, Kibuye and Cyangugu on Lake Kivu. The main transport flows consist of beer from Gysenyi to Cyangugu and Kibuye with coffee being carried on the return journey when in season. Total volume of lake traffic (estimated at some 25,000 tons per annum) has remained stationary for sev- eral years but lack of demand rather than limited capacity seems to be the principal cause. The lake fleet, owned by traders/operators, consists of 15 units, mostly self-propelled barges withl a carrying capacity of 30-120 tons. TRAFIPR02/, a cooperative engaged principally in the distribution of consumer goods, is the largest trader/operator with 4 barges and 2 tugs. The fleet is old and in a state of disrepair as maintenance and repair facilities are no longer available cn the lake. The berthing faci- lities are generally rudimentary and in poor- condition but could be renova- ted at relatively low cost. Since lake transport is the most economical method of transportation between communities along the lake, there will be scope for its expansion if and when trade in agricultural and consumer pro- ducts increases. In the meantime, the traders/operators would most likely only replace worn-out equipment. Air Transport 1.10 In view of the small size of the country, air transport primarily serves Rwanda's external transport needs; in times of severe bottlenecks on the surface routes, it offers the only means to evacuate exports to and transport essential imports from Indian Ocean ports. There is an interna- tional airport near Kigali, which was upgraded in 1981 to handle wide- bodied aircraft. The airport's storage and handling facilities are being expanded to handle increased traffic. An airport at Cyangugu can handle medium range aircraft while four grass airstrips in the interior handle small aircraft. Kigali airport provides connections to Europe and to the capitals of neighboring African countries. Passenger traffic amounts to some 20,000 arrivals and departures per year. Freight traffic achieved significance in the late 1970's when, due to difficulties with the surface transport, chartered cargo flights were started between Kigali and Mombasa. Traffic increased sharply from about 2,500 tons per annum in 1974 to 38,000 tons per annum in 1980 (exports and imports combined). Although it is clear that this rate of growth cannot be sustained, particularly if service on the surface routes were to improve, air transport is expected to continue to play an important role in Rwanda's external transport. 2/ TRAFIPRO (Travail, Fidelite, Progres); created in 1965 with Swiss assistance.  1.11 Air Rwanda, the national airline, was established in 1975 but only became a carrier in 1979 when it purchased a Boeing 707 cargo air- craft. It operates an average of 10 flights per week to Mombasa and two per month to Europe and handles the largest share of the country's air cargo. Although the Boeing 707 is not particularly well adapted to Rwanda's import and export traffic, the cargo carried has increased faster than anticipated. It is too early to determine whether the current rates can cover the aircraft's operating costs including depreciation, since operating results have not been finalized for the only complete year (1980) of operation. C. Transport Planning and Coordination 1.12 The Government has assigned an important role to transport in the development of the economy. Its policies and investments are aimed at the following objectives: (a) to improve external transport connections; (b) to upgrade the main road network to facilitate the country's economic develop- ment and social and administrative integration; and (c) to improve the road network in general through better maintenance. These objectives correspond to the priority needs of the country. 1.13 Three ministries are involved in achieving the above objectives: (a) the Ministry of Public Works (MPW) for roads; (b) the Ministry of Com- munications (MC) for other modes and for transport operations; and (c) the Ministry of Planning (MP), for determining priorities and coordinating all public investments. Even with the limited complexity of the sector, trans- port planning has received too little attention in Rwanda. The technical assistance provided to MPW by the Federal Republic of Germany (Germany) has concentrated on engineering and construction supervision. At the MP an ex- pert responsible for infrastructure was only recently added to the techni- cal assistance staff financed by the United Nations Development Programme (UNDP) and the United Nations Industrial Development Organization (UNIDO). This should help MP to better assume its responsibilities regarding the overall coordination of transport investments. However, neither MPW nor MC employs a transport planner, and both are insufficiently equipped to pro- vide the necessary inputs toward preparation of the national development plans. The planning capability, therefore, still needs to be strengthened (paras. 1.18 and 3.10). 1.14 Under Rwanda's second five year plan covering the period 1977-81 a strong emphasis was placed on the transport sector which accounted for 26% of all planned investments with roads alone taking 22%. Since roads provide the principal means of domestic transport and considering the poor state of the road network, this heavy concentration on roads was justi- fied. When the plan was published, however, priorities for transport had not been clearly specified, and financing, all practically in the form of external pledges, had been received for less than 50% of the projects. Moreover the estimated implementation period was generally unrealistic. Fortunately, the road projects that were started were those with the high- est priority. However, the annual investment budgets bore only slight re-  - 5 - lation to the plan's contents and implementation was slow, particularly in road construction where only about a third of the plan was achieved. Out- side the road subsector two major investmen:s took place: the extension and strengthening of Kigali airport and the purchase of an aircraft by Air Rwanda in 1979. 1.15 The third plan (1982-86) has not yet been published. However, the objectives under the second plan will most likely be pursued. Given the vital importance of Rwanda's transport sector, a clear definition of sector policy and of investment priorities is imperative. Two areas of planning--the strategy for the improvement of external transport and the relative weight to be given to main roads and feeder roads--will require particular attention. 1.16 With regard to external transport, Rwanda alone cannot apprecia- bly improve the situation since, with the Exception of air transport, only a small portion of the transport facilities are within Rwanda's control. In addition, the volume of Rwanda's traffic is quite low both in absolute terms and relative to the total traffic so that Rwanda has limited leverage over transport decisions made by the transit countries. In Rwanda's situa- tion, achieving a high degree of security of external access is prohibi- tively costly, and planning for development and utilization of external routes should be directed at obtaining relatively secure access at minimum cost. Rwanda must therefore have a clear understanding of all aspects re- lating to its external transport in order to effectively negotiate and coordinate actions and investments with the transit countries. 1.17 The road improvement projects currently underway or about to be started (see para. 2.24, Table 2.5) will provide the country with a basic network of national and interregional roads. In preparing future road in- vestments, particular attention should be paid to making optimal use of the existing network and to working out the r-ight balance between main roads and district and feeder roads. The latter category of roads will require increased attention, first in terms of the identification of priorities and the design of institutional arrangements for their development and mainte- nance and later in terms of actual construction. 1.18 In order to address these issues and needs, the Government has requested technical assistance under the proposed project to establish a planning capability for the transport sector in MPW. Terms of reference for the technical assistance to be provided under the proposed project (para. 3.10) are given in Annex 2. The project also provides for prein- vestment studies to assist the Government in planning road sector invest- ments (para. 3.09). D. Previous Bank Group Involvement in the Sector 1.19 The Bank Group has been involved in Rwanda's transport sector since 1970 when the First Highway Project (Credit 196-RW, US$9.3 million) was approved to help finance the purchase of maintenance equipment and the paving of the Kigali-Gatuna road, the firial link of an all-weather road  - 6 - joining Kigali (via Kampala) to the port of Mombasa. Difficulties were en- countered d&-ring construction of the road attributable mainly to inadequate engineering which led to a considerable increase in construction quanti- ties. The slow mobilization of the contractor, shortages of materials and fuel, and difficult soil conditions further hampered project execution. As a result of these problems, the road was not completed until late 1977, three years behind schedule. Torrential rains during the 1978/79 rainy season caused severe hillslides and earthslides requiring costly road repairs. Increased quantities, repair works, severe inflation in 1973/74 and currency realignment gave rise to a substantial cost overrun: total project costs increased from the appraisal estimate of US$10.9 million to US$28.1 million. 1.20 To finance the cost overrun, the Credit Agreement was amended in 1975 to increase the credit by US$9.5 million (Credit 196-1-RW) to US$18.8 million. The Saudi Fund also provided US$5.0 million toward financing of the road. The Project Performance Audit Report estimated the economic return at 13%, the same as estimated at appraisal, the increased project costs having been compensated by higher than expected traffic development. The Credit closed on September 30, 1979. 1.21 Sections of the Kigali-Gatuna road are now in a badly deteriora- ted state, particularly on the first 50 km, which will require extensive reconstruction of the base and surface courses. While the exact causes of the deterioration have yet to be determined, it appears that the problem lies in inadequate design for the difficult soil conditions, poor execution of the drainage works and overloading of trucks using the road. In view of the importance of the road, the proposed project includes a study to inves- tigate in more detail the causes for its failure and to identify the type, scope and cost of restoration works and interim maintenance pending comple- tion of the studies (para. 3.08). 1.22 The Second Highway Project (Credit 299-RW, US$4.2 million, 1972) provided for reorganizing and strengthening MPW to enable it to carry out road improvement and maintenance more efficiently. Project implementation suffered from a delay in credit effectiveness, the slow mobilization of technical assistance, delayed delivery of equipment, fuel shortages result- ing from frequent border closures between Uganda and Kenya, and periodic shortages of Government funds. Project completion was postponed from mid- 1976 to the end of 1977. These difficulties also resulted in the project's falling short of its objectives. At project completion, about 65 km out of the planned 243 km of roads had been rehabilitated and about 1,100 km out of the planned 1,600 km of routine maintenance had been carried out and to lower standards. The Credit Agreement was amended in 1977 to provide an additional US$1.2 million to help finance an increase in project cost from an estimated US$5.1 million to US$7.2 million; the increase was due to the delays in project implementation and higher than anticipated price escala- tions. Credit funds were fully disbursed and the project was closed on December 31, 1978. The Project Performance Audit Review (PPAR) concluded that the targets for improving maintenance of the network set at appraisal were overly optimistic. The re-evaluated rate of return of the project  - 7 - given in the PPAR was 27% compared with the appraisal estimate of 28% because the increase in construction costs arid the shortfall in kilometers maintained were offset by higher than anticipated traffic growth and the consequent greater VOC savings. Despite the failure to meet the mainte- nance targets, the project succeeded in setting up a basic road maintenance administration and improving the skills of lozal staff. 1.23 The Third Highway Project (Credit 475-RW, US$6.3 million, 1974) provided for the paving of the Ruhengeri-Gisenyi road (60 km), feasibility and detailed engineering studies of the Kigali-Ruhengeri and Ruhengeri- Cyanika roads (financed by Belgium), and technical assistance to the MPW to train maintenance staff. The paving of the Ruhengeri-Gisenyi road was de- layed by about one year by slow contractor mobilization, work stoppages due to disagreement over construction materials and price escalation. The fea- sibility and detailed engineering study of the Kigali-Ruhengeri road was satisfactorily completed as scheduled, but the feasibility and detailed en- gineering of the Ruhengeri-Cyanika road were deleted due to cost overruns and were financed later by another donor. The technical assistance and training components were also deleted from the project due to cost overruns for the construction of the Ruhengeri-Gisenyi road and were included in the Fourth Highway Project. The project was completed by mid-1977, about one year behind the appraisal estimate. The actual cost was US$8.9 million compared to US$7.7 million estimated at appraisal due to the cost increases already mentioned. Part (US$0.4 million) of this increase was financed by IDA under the supplementary financing credit for the First Highway Project and the remainder by the Government. The rate of return upon project com- pletion was calculated at 18%, the same rate estimated at appraisal, since the increase in construction costs was offset by an increase in vehicle operating cost savings. The PPAR of June 18, 1979 attributed the cost overruns and delays to inadequate preparation, namely only about a third of the Ruhengeri-Gisenyi road had been engineered at appraisal, necessitating major changes in the horizontal and vertical alignment and a subsequent in- crease in the amount of construction works. 1.24 The Fourth Highway Project (Credit 769-RW, US$15 million, 1977) provides for the second phase of strengthening the MPW's road maintenance operations. It comprises a four-year betternent program covering 1,500 km of roads, routine maintenance of 3,850 km of roads, improvement of equip- ment repair facilities, and training of maintenance personnel at all levels. Although the project is about one year behind schedule due to de- lays in procurement of equipment and in the start of the training program, implementation has now achieved its anticipated progress rate and the pro- ject is proceeding satisfactorily. Project completion is expected by the end of 1982 compared to the appraisal estimate of end 1981. 1.25 Experience with previous highway projects has shown that cons- truction works have frequently been interrupted due to periodic shortages of materials and fuel caused by border closures in Uganda and Kenya through which these commodities must pass on their way from Mombasa to Rwanda.  - 8 - Furthermore, difficult soil conditions in certain parts of the country have resulted in unforeseen additional construction works and have caused exten- sive damage to roads requiring comprehensive repair and rehabilitation. As a result, road construction works have frequently required more time to complete than foreseen and costs have been substantially above those origi- nally estimated. To minimize the effects of possible interruptions in the supply of materials for construction of the Butare-Kigeme-Kitabi road, ten- der documents for this project component will provide for a larger than usual stock of materials. A risk allowance of 10% has also been added to the project cost to safeguard against possible cost increases due to work interruptions; extra care will be taken during project supervision to take into account any difficult soil conditions. 1.26 The institution-building efforts begun by IDA under the Second Highway Project and continued under the Fourth Highway Project as well as those undertaken by other donors have been successful; good progress has been made in in establishing the highway organization and in training staff (para. 2.18). It is expected that by 1983 the organization will be predo- minantly manned by local staff with only pockets of specialized expatriate assistance including technical assistance and training being provided by the Federal Republic of Germany for engineering and the mechanical work- shops.  - 9 - II. THE HIGHWAY SECTOR A. The Road Network 2.01 The classified network totals about 2,280 km of which 490 km (22%) are paved and 265 km are under construction to paved standards, 800 km (35%) are mostly unengineered gravel road:3, and 980 km (43%) are earth roads and tracks. In addition, there are about 4,000 km of unclassified district and rural roads. Road density is about 240 m per kM2, which is one of the highest in Africa. 2.02 Although the coverage of the network is nearly adequate, a consi- derable part of it is of low standard. I4any of the gravel and earth roads are in poor condition, characterized by frecuent and narrow curves, steep gradients and uneven surfaces; potholes and rutting are common and many of these roads are impassable during the rainy season. As a result, the average driving speed is low on most of the non-paved network and transport costs are high. The mountainous terrain, heavy rainfalls and poor soil conditions call for construction of paved roads in most of the country due to high costs for maintenance of gravel and earth roads. During the past decade, Government has been concentrating its efforts on paving the major international road connections between Kigali and neighboring Uganda, Burundi and Tanzania and between its major regional centers. The Govern- ment is also giving considerable attention to improving conditions of the non-paved network through strengthening of il:s road maintenance operations (paras. 2.28 - 2.31). B. Road Use Vehicle Fleet 2.03 Despite rapid growth in recent years Rwanda's vehicle fleet is small when compared to the road network or the population. In 1980 the fleet totalled about 11,800 (of which 1,800 were in the public sector) or 2 vehicles per 1,000 inhabitants which is b'elow the average for Eastern Africa and only about a fifth of Kenya's vehicle ownership rate. The vehicle fleet is composed of about 4,400 passenger cars, registered mainly in Kigali, 5,700 pick-ups and minibuses, 1,300 trucks and 400 other vehicles (Table 2.1). Heavy trucks are powered with diesel engines but most of the light trucks run on gasoline; the pick-ups almost all have gasoline engines. The fleet of pick-ups more than doubled in four years (1976-1980), registering an average growth of some 23% per annum and overtaking passenger cars in importance. This latter development is the result of small scale trade rapidly gaining in importance. Though it may suggest less efficient use of energy, it is well adapted to the country's trade and distribution requirements characterized by small loads.  - 10 - Table 2.1 Motor Vehicle Fleet Increase 1976 1977 1978 1979 19801/ 1976-80 Passenger cars 2,713 3,036 3,488 3,901 4,400 62 Pick-ups, minibuses, jeeps 2,432 3,265 3,925 4,653 5,700 134 Trucks 858 937 1,051 1,064 1,300 51 Other 299 334 388 351 400 34 Total 6,302 7,572 8,852 9,969 11,800 87 Motorcycles 538 853 1,243 1,636 2,150 1/ Mission estimates. 2.04 Imports of gasoline and diesel fuel increased by 26% from 1976 to 1980 (Table 2.2) compared to the 87% increase registered by the vehicle fleet. The growth occurred entirely in gasoline as diesel fuel imports de- clined. It is not possible to draw conclusions on the fuel economy of the vehicle fleet from the available data because: (a) the figures represent total imports and there is no breakdown between road vehicles and other uses (estimated at less than one third), (b) transport bottlenecks in the region have affected consumption, and (c) different prices in the countries of the region may have led to illegal trade of fuel products. Table 2.2 Imports of Petroleum Products 1975-79 (tons) Increase 1976 1977 1978 1979 1980 1976-80 Premium and Regular Gasoline 15,098 18,088 20,576 18,592 23,326 54 Diesel Fuel 14,639 12,004 12,679 13,530 14,286 - 2 Sub-total 29,737 30,092 33,255 32,122 37,612 26 Other 5,572 5,972 7,315 8,082 8,010 44 Total 35,309 36,064 40,570 40,204 45,622 29 Source: Ministry of Finance  - 11 - 2.05 There is little difference in the CIF/Kigali prices of gasoline (premium: RF55.24!liter) and diesel fuel (RF53.36/liter). As long as the cost differential remains marginal, there is no advantage of diesel-powered vehicles over gasoline-powered ones: the small saving in fuel consumption of the diesel engine is offset by a higher initial cost and the fact that there are fewer facilities for servicing diesel vehicles. The predominance of gasoline engines in the light commercial vehicles, owned largely by small traders/operators, is probably relat:ed to the greater availability of gasoline which results from the fact that the small pump stations generally can carry only one type of fuel. 2.06 The figures for fuel prices and taxes are shown below. Table 2.3 Fuel Prices and Taxes (US$ per lit:er) Pump Price Tax Premium gasoline 0.72 0.05 Regular gasoline 0.71 0.05 Diesel fuel 0.69 0.04 While fuel taxes are low by international standards, the Government is not subsidizing fuel products. The low taxes are a result of Government's po- licy of not adding to the rapid world prize escalation of fuel products by increasing taxes. Since it is expected that world prices will rise less rapidly, there is a strong case for the Government to review its fuel taxa- tion policies taking into consideratior energy conservation, road-user costs and resource mobilization. One of the tasks of the transport plan- ning unit in the Ministry of Public Works will be to recommend pricing and taxation policies for petroleum products. Traffic 2.07 Over the period 1970-80 MPW carried out five countrywide traffic counts on the classified network. The number of counting stations stands at 80. Three quarters of these counting stations are located well within the influence area of towns; the remaining one quarter give a good indica- tion of traffic levels and growth on the intercity trunk roads. The most trafficked road sections register about 500 vehicles per day (vpd). Ave- rage traffic growth in recent years is estimated at 7% per annum with slightly higher growth for light vehicles. Heavy vehicles represent about 50% of intercity traffic.  - 12 - Domestic Road Transport 2.08 The road transport industry is largely composed of traders/ truckers who own one or two vehicles and engage mainly in trading with trucking as a second activity. Vehicle owners normally use their vehicles for their own account but will offer spare capacity when there is demand. Few traders own more than two vehicles. Two major organizations, active in the distribution sector, own larger fleets: TRAFIPRO with 20 trucks and OPROVIA3/ with 30 trucks. Both organizations are involved in the distri- bution of basic foodstuffs and the collection of agricultural produce through a network of regional stores. 2.09 Entry in the road transport industry is subject to the same con- ditions as setting up a business which requires registration in the trade register. Transport routes are not regulated, and competition appears to be stronger on improved roads where transport flows are higher. It is ex- pected, therefore, that road upgrading will contribute to increased compe- tition in transport operations. Although uniform tariffs for freight are set by the Government, the regulations do not provide penalties for non- compliance, and actual prices agreed between operators and shippers can differ from the official rates according to supply and demand and road con- ditions on a particular route. The Government is beginning to recognize that the setting -of uniform tariffs, even if they could be enforced, will not achieve its principal objective -- to help the rural areas by lowering their transport costs -- and that road improvements combined with adequate allocations of foreign exchange for the importation of vehicles and spares are a much more effective instrument for that objective. It is likely that uniform tariff setting will be abandoned and replaced by a more appropriate system of maximum and minimum tariffs. The transport planning unit in the Ministry of Public Works will look into this question and make suitable recommendations. 2.10 The 1977-81 national plan called for the creation of a publicly owned domestic transport company which still has not been established. Since the demand for transport is scattered in small pockets over the country and is highly seasonal, for the time being the continued use of trader/truckers who normally have substantial spare transport capacity is probably the most- flexible and cost-effective arrangement for handling the country's transport needs. 2.11 Passenger transport is mainly undertaken by traders who carry both goods and passengers with their pick-ups and trucks. The public bus company ONATRACOM created in 1978 under the MC operates about 48 buses bet- ween Kigali and provincial centers and 8 minibuses in Kigali. ONATRACOM's 3/ OPROVIA (Office National pour le Developpement et la Commercialisation de Produits Vivriers et des Productions Animales) is a semi-public organization for the development and distribution of agricultural pro- ducts, created in 1975.  - 13 - tariffs require approval by the Government. Tariffs are insufficient to cover capital replacement. ONATRACOM's fleet is in poor condition and will have to be replaced in the near future which will require a fresh injection of Government capital. For the longer term, unless more realistic tariffs are adopted and operations improve, ONATRZACOM's survival will continue to depend on continued government financial assistance. To help avoid this, the transport planning unit in the Ministry of Public Works will prepare proposals for tariff adjustments. Whatever ONATRACOM's future, the mixed transport by traders, which offers considerable flexibility and helps to increase capacity utilization of the vehicle fleet, will continue to take the major share of passenger transport for some time to come. In Kigali private minibus transport has made its appearance and has potential for growth. International Road Transport 2.12 Owing to the cumbersome administrative and customs procedures go- verning transit traffic, importers and exporters have traditionally relied on the three major international clearing and forwarding agents established in Rwanda to handle transit formalities and transport. The agents them- selves do not engage in transport but contract out this work to truckers or pools of truckers. The trucking industry is dominated by carriers from the transit countries who account for about 75% of the total volume, while Rwandese carriers transport the remaining 25%. 2.13 The Societe des Transports Internationaux du Rwanda (STIR), a semi- public organization created in 1974, is the main Rwandese interna- tional carrier. It has a fleet of about 90 tractor-combinations of which about half are tank wagons. Even though STIR is well established, it is experiencing financial difficulties mainly due to the recurrent problems associated with transit transport in the region (cumbersome administrative procedures, border closures, bonding, theft, etc.) and competition from more efficient Kenyan carriers. In orc.er to be less dependent on the clearing and forwarding agents, STIR recently expanded its activities to include agent's services. It is too earl) to assess whether in the prevai- ling competitive environment the organiza:ion will be able to maintain its market share without protection and/or assistance from the Government. However, in view of Rwandese carriers' small share of international trans- port, there should be scope for increasing Rwanda's involvement subject to agreements with the transit countries. Road-User Revenues 2.14 Road users contribute to Government revenues through import duties and taxes on vehicles, spare parts and lubricants, registration and licensing fees, and a border toll on commiercial vehicles (see table 2.4). Import and other duties are 10% on commercial vehicles with payloads of less than 6 tons, 15% for vehicles with higher payloads and 20% for buses. These rates reflect a policy to make it easy for small businessmen to acquire commercial vehicles. For passenger cars the duties range from 20%  - 14 - to 120%. Revenues collected from road users in 1980 are estimated to have amounted to about US$9.3 million (see table 2.4). These revenues more than covered recurrent maintenance expenditures at US$3.1 million and also con- tributed to meet the costs of new road construction and of urban roads. The levels of road user taxes are adequate, but as maintenance expenditures increase with the growing maintenance needs and the expanding capacity of the Roads Branch (para. 2.15), they will have to be reviewed. Table 2.4 Road User Revenues (RF million) 1976 1977 1978 1979 1980 Road tax 27.2 30.9 33.8 76.0 88.0 Vehicle registration 5.7 5.6 7.9 6.9 7.2 Import duties - fuel 157.8 136.7 168.8 158.5 208.6 - spares 31.8 32.1 45.2 47.6 37.5 - vehicles 99.7 112.0 165.6 205.5 294.9 - tires 33.9 44.0 54.3 54.4 140.8 Border toll 25.1 27.3 41.0 46.2 65.1 Total 381.2 388.6 516.6 595.1 842.1 US$ equivalent (million) 4.2 4.3 5.7 6.5 9.3 C. Administration and Training 2.15 The MPW through its Roads Branch, RB (Direction Generale des Ponts et Chaussees) is responsible for design, construction and maintenance of the classified network. RB is functionally divided into two depart- ments: the Planning and Engineering Department, PED (Direction Etudes Techniques) which also supervises construction of works, and the Works De- partment, WD (Direction Travaux), which is in charge of road construction and maintenance and of the mechanical workshops. In addition, an Adminis- trative Division (Division Administration, Bureau Personnel) is responsible for personnel and for accounting (see Chart 1). 2.16 While its organization is adequate to administer the road sub- sector, RB is seriously short of experienced local staff at all levels. At present, it employs 9 local engineers, who among them fill all the posi- tions of department head and above, and about 30 technicians. However, some of these employees lack sufficient experience to carry out their assignments without expatriate assistance. There is also a severe shortage of middle and lower-level staff, such as works supervisors, mechanics and equipment operators. The lack of qualified staff is due not only to the  - 15 - nationwide shortage of engineers and technicians but also to low Government salaries which causes more qualified RB staff to seek higher paying jobs in the private sector. RB, therefore, depends heavily on foreign technical assistance to offset this shortage. 2.17 Currently, RB employs 24 expatriates financed by Germany and Belgium and by IDA under the Fourth Highway Project. The bilateral aid provides 11 positions ranging from advisor to mechanic: 5 positions are in the Planning and Engineering Department, 6 in the Works Department. IDA is providing 13 technical assistants: 10 to help implement the four-year main- tenance program (para. 2.30) and 3 to work exclusively at the training cen- ter in Kigali which was also set up under the project. 2.18 The technical assistance provides classroom and on-the-job train- ing to improve the skills of MPW's staff at all levels. Classroom instruc- tion is given at the Kigali training center and the expatriates in the field provide the on-the-job training. This training effort has already succeeded in improving the competency of 12 supervisors, 60 apprentice mechanics and about 80 drivers and equipment operators and has provided re- fresher training for about 200 mechanics and helpers. The program is also training eight local instructors to carry on the training at the Kigali center upon expiration of the consultants' assignment at the end of 1982. As a further measure to improve the skills of local personnel in the long term, bilateral assistance (mainly from Germany, France and Belgium) is providing overseas fellowships for Rwandese engineers and technicians. At present about 100 Rwandese are studying for engineering degrees abroad and an additional 14 at the local college in Butare; another 44 are receiving vocational training from consulting firms and highway administrations in France and Germany. With these training efforts, local staff is expected to gradually replace the expatriates but RB will continue to depend heavily on expatriate assistance, primarily for PED and the mechanical workshops, for quite some time. D. Engineering 2.19 PED is responsible for planning, engineering and supervising construction works. It is staffed by nine engineers, including five expa- triates, and seven technicians. PED also operates a soils laboratory which is adequately staffed and equipped to carry out soil tests required for MPW's operations. Although PED is headed by a Rwandese engineer, its daily operation and administration are supervised largely by the expatriate staff. Due to the limited number of experienced staff, PED can handle only minor engineering design and work supervision tasks. Engineering studies for major projects are entrusted to foreign consultants since the National Study Bureau (BUNEP) does not have the necessary expertise in this field. Design standards usually follow the recomLmendations of the consultants em- ployed for the particular road. A standard pavement width of 6 m with 1.5 m wide shoulders is generally adopted for major trunk roads; this is appro- priate for the country's topographic and traffic conditions.  - 16 - 2.20 Current vehicle weight regulations were introduced in 1958 and restrict single axle loads to 5.5 tons and tandem axle loads to 8 tons, even though construction standards for the paved roads built during the past eight years are based on a 13-ton axle load. The existing regula- tions, therefore, need updating to reflect actual design loads. Trucks carrying loads exceeding the 13-ton design axle load are frequently obser- ved on paved roads and with the increase in international transport, the problem of overloading will become even more pronounced. Overloaded trucks travel with impunity since the Government does not control vehicle loads. The Government has prepared draft vehicle weight regulations to bring them up to date with the country's needs and conditions as well as the regula- tions in force in neighboring countries, primarily Kenya and Uganda, the major transit countries. The Government will establish appropriate vehicle weight regulations and an enforcement mechanism and will put the new regu- lations into effect by December 31, 1982. In order to assist Government in controlling vehicle overloading and to avoid damage to the road network, weighing scales will be provided under the project to enforce these regula- tions (para. 3.11). E. Construction 2.21 WD's mechanized and labor-intensive brigades carry out some 380 km of road improvement, regravelling and resurfacing operations annually. For major construction projects, PED employs contractors, following suit- able pre-qualification and tendering procedures. Contracts are generally let out on a unit-price basis following international competitive bidding. Road construction is expensive because the terrain is rugged and because materials have to be transported long distances from seaports. There are two local road construction firms established in the country, both subsi- diaries of foreign companies. Rwanda has no domestic road construction firms due to lack of skilled and experienced staff and the linted financial capacity of the domestic contractors, who work only in the building sector and have not yet ventured into major civil works. 2.22 Supervision of major road construction is carried out by consul- tants since PED does not have the necessary experienced staff. Supervision of recent construction works has been satisfactory. F. Planning 2.23 PED is also responsible for planning highway investments but is unable to devote much of its staff resources to this task due to other com- mitments. However, a large volume of preinvestment work has been financed by external sources and carried out by consultants. As follow-up to a long-term highway investment plan prepared by consultants in the 1960s, studies were carried out for improvement of the major national roads. Most of these projects were included in the highway component of the 1977-81 na- tional investment plan but priorities for the progressive development of the network had not been specified and the implementation periods were un- realistic. Out of the 725 km of road construction included in the plan, work will have started during the plan period on only 225 km which are among the country's most important road links.  - 17 - 2.24 The road construction projects currently being implemented and under preparation are shown in Table 2.5. Seven of the projects were in- cluded in the original 1977-81 National Plan while four are new projects which were added later Three projects have a regional character. Among the road projects under preparation, two, which owe their justification largely to interregional traffic, would provide competing links to existing roads. The Kayonza-Kagitumba road would serve as an alternative to the existing Kigali-Gatuna road for international traffic, while the Gitarama- Ruhengeri road would provide an alternative to the Kigali-Ruhengeri road under construction. Although reconstruction of these two roads will be justified as and when traffic increases, for the near future, neither of these alternative connections should be upgraded. Therefore, clear priori- ties for the gradual implementation of the road reconstruction program and for the development of regional and feeder roads still need to be set. The new transport planning unit to be strenthened (para. 1.18) will help deter- mine the priorities.  - 18 - Table 2.5: Road Construction Projects Item Length Comments (km) A. Under Construction Kigali-Butare-Burundi Border 153 Works started Aug. 1979 Completion expected Nov. 1982 Kigali-Ruhengeri 89 Contract awarded July 1981 Completion expected April 1984 Ruhengeri-Cyanika 23 Contract awarded July 1981 B. Under Preparation Ntendezi-Cyangugu 33 AfDF financing Butare-Ntendezi 123 IDA, FED financing Gitarama-Kibuye 91 Feasibility completed Kayonza-Kagitumba 123 Design underway Gitarama-Ruhengeri 108 Feasibility underway C. Under Consideration Kibuye-Cyangugu 130 Regional Project; design completed Byumba-Gabiro 60 Regional Project; design completed Nyabisindu-Kibungo 157 Regional Project. Bugarama-Burundi Border 7 Source: MPW, July 1981 Note: Projects under preparation and consideration are not listed in order of priority and their implementation schedule has not been defined. G. Financing 2.25 Rwanda's fiscal year corresponds to the calendar year. The MPW prepares its recurrent budget proposals during the third quarter and they are submitted to the Ministry of Finance at the beginning of the last quar- ter. During discussions with the Ministry of Finance these budget propo- sals can be revised. For the investment budget, the proposals are submit- ted first to the Ministry of Planning which jointly with the Ministry of Finance decides on the budget to be presented to the Cabinet for final  - 19 - approval. Final budgets are normally approved by the full Cabinet in January. 2.26 All funds under both the recurrent and investment budgets are disbursed by the Ministry of Finance upon presentation of approved invoices by the MPW. In addition disbursements from the recurrent budget are sub- ject to general government procedures which require a lengthy chain of au- thorizations. While this introduces a nmeasure of financial control, in practice it suffers from the drawback that the processing of payments is unnecessarily slow. The Government agreed under the Fourth Highway Project to simplify RB's payment procedures under the recurrent budget but no exact timing for accomplishing this was indicat:ed. While significant progress has been made in reducing delays, the procedures themselves have not been simplified. By September 30, 1982 the MPW will prepare and submit to the Association for its review proposals for simplified procedures for process- ing payments under the recurrent budget through the Ministry of Finance. The proposed changes will not necessarily deviate significantly from the Government's general accounting and payment principles. 2.27 Expenditures for highways during 1975-80 are shown in Table 2.6. Both road maintenance and road improvement are financed by the Government from its recurrent budget and by IDA, UNDP, Germany and Belgium. The latter finance equipment, tools, parts and technical assistance. The Government's recurrent budgets have been adequate in recent years. They increased from RF105.6 million (US$1.14 million) in 1975 to RF 283.9 million (US$3.14 million) in 1980. The start and completion of major cons- truction works, financed largely by external sources, have caused expendi- tures for highway construction to fluctuate widely over the years. Table 2.6: Highway Expenditures 1975-1980 (RF '000 in current prices) 1975 1976 1977 1978 1979 1980 Highway Maintenance and Improvement n.a. n.a. n.a. 291,573 631,577 726,976 - Government's recurrent budget 105,610 91,350 131,300 178,203 192,297 287,925 - External financing 809,406 1/ 113,370 439,280 443,051 Highway Construction 92,570 1,134,542 817,762 311,349 455,855 878,035 - Government's investment budget 32,989 63,299 61,572 89,388 80,200 72,707 - External financing 959,581 1,071,243 756,190 221,961 375,655 805,326 1/ Total for period 1973-77. Source: MPW, July 1981  - 20 - H. Maintenance 2.28 WD is responsible for planning and executing the maintenance of the classified network (2,280 km), while district authorities are respon- sible for the approximately 4,000 km of unclassified district and rural roads. Since the latter serve an important function in the transport of agricultural produce, and since local authorities lack the funds, equipment and skilled staff to maintain them, WD undertakes this task for about 1,600 km of the most vital links. The Government is drafting the legal documents to include these additional 1,600 km of roads in the classified network. The remaining 2,400 km receive only sporadic spot improvements by villages and users on a voluntary basis, with RB providing some assistance for the most critical repair works needed. 2.29 Road maintenance operations have greatly improved over the past years and are now nearly adequate. This is due in part to the Government's recognition of the importance of road maintenance and the assistance provi- ded by the Association and other foreign donors, principally Germany. In 1972, the First Highway Project provided for procurement of equipment for one mechanized unit to reshape one of Rwanda's most heavily trafficked roads. The Second Highway Project financed a four-year maintenance pro- gram, including technical assistance to build up an effective maintenance administration, ptocure equipment and improve workshop facilities. The on- going Fourth Highway Project continues Bank Group assistance through a second four-year maintenance program (1978-1983), which provides for im- provement and regravelling of about 1,500 km of roads; resealing of 100 km of paved roads; routine maintenance for 3,500 km of earth and gravel road and 350 km of paved roads; improvement of mechanical workshops; and techni- cal assistance for training of RB's staff in maintenance operations at all levels. 2.30 This assistance provided by the Association has succeeded in setting up an adequate administrative structure and procedures for main- taining the country's major network and in improving the skills of local staff. WD's operations are now largely mechanized, but extensive use is made of labor for routine maintenance, and labor-intensive techniques are now being introduced for major regravelling and improvement works. Six brigades were established in mid-1980 for periodic maintenance operations and include four equipment-intensive and two labor-intensive units. They carry out about 350 km of road improvement and regravelling and about 30 km of resurfacing operations annually. Recurrent maintenance is performed by one mechanized reshaping brigade and 165 road gangs, each of the latter composed of a foreman and 12 roadmen with responsibility for 12-15 km of roads. Due to the shortage of qualified local staff and the low motivation of some of WD's personnel (partly a result of low Government salaries and wages), programming, execution and monitoring of maintenance operations are still dependent on the technical assistance team (para. 2.17), composed of 10 expatriates (2 maintenance engineers, 1 cost accountant, 6 brigade su- pervisors, and 1 procurement/storage specialist). On-the-job training by the above technical assistance team and in-class training by three addi- tional training instructors has already improved the skills of local staff  - 21 - to such an extent (para. 2.18) that WD should be able to carry out road maintenance operations on its own not too long after completion of the Fourth dighway Project by the end of 19E2. However, planning, budgeting and overall supervision of the annual operations will still require techni- cal assistance for the near future. The proposed project will therefore provide three road maintenance engineers to assist MPW in these functions (para. 3.10). 2.31 Equipment maintenance and repair is the responsibility of WD's Workshop and Warehouse section (WW). WW operates a central mechanical workshop and a spare parts store in Kigali and three regional workshops in Ruhengeri, Gisenyi, and Butare. Major repairs are carried out at the cen- tral workshop which is managed by five expatriate mechanics provided by Germany and staffed by about 50 local mechanics and helpers. The ongoing Fourth Highway Project is helping to finance an expansion of the central workshop in Kigali and the regional workshop in Butare as well as the pro- curement of a mobile workshop for the mechanized brigades. The project also provides for procurement of an adequate stock of spare parts and the service of a procurement/storage specialist for the operation of the spare parts store in Kigali. As a result of the assistance provided by Germany and the Association, WW is now operating satisfactorily. However, it will continue to depend on the assistance of t:he expatriate mechanics provided by Germany for its operations for several. years given the shortage of ex- perienced local mechanics. The proposed project will also assist in strengthening WW operations by providing one expatriate mechanic for 36 months to assist in maintaining and repairing equipment financed by UN agencies (para. 3.10).  - 22 - III. THE PROJECT A. Objectives 3.01 Development of Rwanda's southwestern region is dependant on im- proved road communications. The poor condition of the roads linking this region to the rest of the country inhibits economic activity in the area. The proposed project supports Government's objectives of (a) promoting agricultural development in the country's southwestern region, (b) foster- ing economic integration of this region with the rest of the country through more reliable transport, and (c) reducing transport costs. The project will also assist in strengthening road maintenance administration and transport planning. Finally, the project will help to reduce damage to the road network by providing assistance for enforcing vehicle weight regu- lations. B. Project Description 3.02 The proposed project consists of: (a) construction to paved standard of the Butare-Kigeme-Kitabi section (53.5 km) of the Butare-Cyangugu road (156 km); (b) consulting services for (i) completion of preparation under a PPF and supervision of construction works under (a), (ii) engineering studies for restoration works needed on the Kigali-Gatuna road (80 km), (iii) preinvestment studies, and (iv) technical assistance to MPW; (c) procurement of materials and supplies for two-year routine maintenance of the Kigali-Gatuna road; and (d) procurement of weighing scales for control and enforcement of vehicle weight regulations. (a) Road Construction 3.03 The Butare-Ntendezi road (123 kn) is one of Rwanda's most impor- tant roads. It connects with the Ntendezi-Cyangugu road (33 km) and links the country's second largest city, Butare (population 35,000), to the southwestern region of Cyangugu which is an agricultural surplus area. The present road link is an unengineered earth road with poor driving condi- tions; during the eight-month rainy season (September-May), it is often im- passable for all but 4-wheel drive vehicles. The road crosses rolling to mountainous terrain and has poor drainage particularly in its middle sec- tion; the horizontal and vertical alignment is characterized by frequent and narrow curves and steep gradients. The road surface is uneven with deep ruts and potholes. As a consequence, the average driving speed is re- duced to only about 20 km/h for most of its length and transport costs are high. The road is also costly to maintain and improvements made are only  - 23 - of short duration, given the heavy rains, steep gradients and inadequate construction materials in the area. The poor condition of the existing road, therefore, inhibits the growth of economic activities of the area. In addition, the construction of a cement plant near Cyangugu is underway; this plant would make Rwanda self-sufficient in cement. In its present state, the road would not be able to carry cement traffic, except perhaps by using very small pickups which during parts of the rainy season pass with extreme difficulty. 3.04 The project will help finance construction to paved standards of the Butare-Kigeme-Kitabi section of the Bul:are-Cyangugu road. The European Economic Community (EEC), AfDB, BADEA and KFAED will finance construction of the section from Kitabi to Cyangugu (102.5 km). 3.05 The project will be carried out according to a detailed engineer- ing study done by consultants DHV (Netherlands) for the Butare-Ntendezi road in 1980/81 which was financed by the Government and the EEC. The road will be constructed to two-lane paved standards. The geometric and struc- tural design standards (Table 3.1) are consistent with established stan- dards in Rwanda and are appropriate for t:he terrain and for present and anticipated traffic. They are generally based on a design speed of 50 km/h (33 mph) and a maximum gradient of 8%, bul: in the most difficult mountain section, the design speed is reduced to 30 km/h (19 mph) and maximum gra- dients are up to 10%. The pavement structure will be a 15 cm crushed stone base-course with a 6.0 m wide bituminous double surface treatment and 1.5 m wide shoulders (1.0 m wide in certain sections). Only minor land acquisi- tion is involved since the new alignment will closely follow the existing road. Table 3.1 Design Standards for Project Road Section Km 0 - Km 42 Km 42 - Km 53.5 Design speed 50 kn/h (30 km/h)l/ 50 km/h (30 km/h)l/ Road width 9 m 9 m Pavement width 6 m 6 m Shoulder width 1.5 ri 1.5 m Minimum horizontal curve radius 60 m (30 m) 1/ 60 m (30 m) 1/ Maximum vertical gradient 8% (]0%) 1/ - 8% (10%) 1/ - Minimum vertical curve radius 2,501) m (convex) 2,000 m (convex) 2,000 m (concave) 1,500 m (concave) Minimum crossfall (pavement) 2.5% 2.5% (shoulders) 6% 6% Maximum permissible axle load 13 tons 13 tons 1/ In exceptional cases.  - 24 - (b) Consulting Services Supervision of road construction 3.06 In view of staff constraints in PED, consultants will be engaged to supervise construction of the Butare-Kitabi road under terms of refer- ence and conditions of employment acceptable to the Association (para. 3.19). In addition to the supervisory consultants the proposed project also provides for the services of an independent soils engineer with wide experience in soils and geological conditions similar to Rwanda's. This expert will carry out perodic reviews of project implementation (about two man-months per year) with regard to utilization of appropriate construction materials and proper work techniques to allow the Government and the Asso- ciation to more closely monitor construction works. Preliminary engineering and feasibility study update for Butare-Kigeme- Kitabi road 3.07 With financing under the Project Preparation Facility (PPF) con- sultants DHV (Netherlands) carried out a preliminary engineering study and an update of the feasibility study of the Butare-Kigeme-Kitabi road. These studies were necessary since an economic analysis of the road, which was completed in December 1979 with financing from the EEC, did not permit ade- quate assessment of the level of improvement that would be economically justifiable and the related costs. The DHV studies demonstrated that re- construction of the road to two-lane paved standards is the most feasible all-weather link between Butare and Ntendezi. The PPF will be refunded from the proposed credit. Study for the Restoration of Kigali-Gatuna road and Interim Maintenance 3.08 Construction of this road was completed in 1977 with financing under the First Highway Project. The road already shows considerable sur- face damage. The pavement has broken up on many sections, particularly on the first 50 km, and requires extensive reconstruction of the base and sur- face courses. The project provides for consultants' services (including a soils expert) for a study, at an estimated cost of US$100,000, to determine the causes for the failure and the scope, type and cost of restoration works needed. The Government will have the study carried out, prepare an action plan and identify financing sources by June 30, 1983 for the resto- ration works. However, given the importance of the road and the rapid rate of deterioration, immediate steps are required to keep the road passable. Therefore, as an interim measure pending completion of the study, the pro- ject will provide materials and supplies for routine maintenance of the road. This maintenance will be carried out by the patching brigade set up and equipped under the Fourth Highway Project.  - 25 - Preinvestment Studies 3.09 The project provides US$250,000 for preinvestment studies. The type and scope of the studies will be agreed by the Government and the Association on the basis of the priorities set with the aid of the trans- port planning capacity to be created in MPW. UNDP has agreed to finance the studies, which could include a feeder road study, and would request the Association to act as executing agency. Technical Assistance 3.10 The project will also provide technical assistance to (a) assist MPW's staff in planning, budgeting, execating and monitoring road mainte- nance operations; one senior road maintenance engineer will be assigned to this task for a three-year period and two road engineers for a two-year period each; (b) strengthen the Government:'s transport planning capability; one transport economist will serve for about three years in MPW; and (c) strengthen MPW's equipment maintenance and repair capability; one mechani- cal engineer will work with MPW for a three-year period. Terms of refer- ence for the engineers and economist are given in Annexes 1 and 2. An important part of their activities will be the training of counterparts. UNDP has agreed to finance the positions of senior road engineer, transport economist and mechanical engineer and would request the Association to act as executing agency for this project component. (c) Vehicle Weight Control 3.11 To enable the Government to control and enforce vehicle load regulations, the project provides for the procurement and installation of two fixed weighing scales and procurement of three mobile ones. The two fixed scales would be installed at the border posts of Gatuna and Kagi- tumba, through which nearly all Rwanda's imports by road must pass. The mobile scales would be used for spot ccntrols of vehicle loads over the country's entire network. The Government has agreed to install a fixed scale at Gatuna and another at Kagitumba by December 31, 1983. C. Cost Estimates 3.12 The total project cost including contingencies is estimated at US$30.7 million with a foreign exchange c3mponent of US$22.9 million or 75% of total project costs. Excluding taxes and duties, the total cost is about US$30.1 million. A physical contingency allowance of 10% has been included to cover increases in quantities; a 10% risk allowance has been included for possible interruption of supplies for construction works and an additional 10% risk allowance has been provided to cover possible risks associated with wide variations in bids experienced in the country (para. 3.13). Price contingencies are based on the following estimates of inflation rates worldwide for the foreign cost of civil works and in Rwanda for the local cost of civil works: 1981 - 9% foreign, 15% local; 1982 - 8.5% foreign, 15% local; 1983 - 7.5% foreign, 15% local; 1984 - 7.5% foreign, 15% local; 1985 - 7.5% foreign, 15% local. A breakdown of costs of the various project components is given in Table 3.2.  - 26 - Table 3.2 Estimated Project Costs RF million US$ million % Foreign Item Local Foreign Total Local Foreign Total Component (a) Construction of Butare- 412 1,115 1,527 4.48 12.12 16.60 73 Kitabi Road (53.5 km) (b) Consulting Services: (i) Supervision of (a) 18 74 92 0.20 0.80 1.00 80 (ii) Project preparation for (a) 2 21 23 0.02 0.23 0.25 90 (iii) Engineering study for restor - 1 8 9 0.01 0.09 0.10 90 ation of Kigali-Gatuna road (iv) Preinvestment studies 2 21 23 0.02 0.23 0.25 90 (v) Technical assistance 25 99 124 0.27 1.08 1.35 80 Subtotal (b) 48 223 271 0.52 2.43 2.95 83 (c) Maintenance of Kigali-Gatuna road 3 52 55 0.03 0.57 0.60 95 (d) Weighing Scales 1 13 14 0.01 0.14 0.15 95 Subtotal (a) - (d) 464 1,403 1,867 5.04 15.26 20.30 (e) Contingencies (a) Physical (107) on items (a), 47 137 184 0.51 1.49 2.00 (b-i, iii, iv, v), (c) and (d) (b) Price 1/ on items (a), (b-i, 120 349 469 1.30 3.80 5.10 ii, iv, v), (c) and (d) (c) Risk Allowance (107 of (a)) 42 110 152 0.46 1.20 1.66 (d) Risk allowance associated with 39 108 147 0.43 1.17 1.60 bids (10o of (a)) Subtotal (e) 248 704 952 2.70 7.66 10.36 Total Project Cost 712 2,107 2,819 7.74 22.92 30.66 75 Total Project Cost Excluding Taxes 659 2,107 2,766 7.18 22.92 30.10 76 1/ Expected price increases (%) 1981 1982 1983 1984 1985 Local 15 15 15 15 15 Foreign 9.0 8.5 7.5 7.5 7.5  - 27 - 3.13 The base costs are estimated alS of end of 1981 and have been derived as follows: (a) Road Construction. The cost estimates of US$16.6 million for con- struction of the Butare-Kigeme-Kitabi road were derived from consultants' estimates based on final design quantities. In view of the past experience with difficulties in the transport of essential supplies such as cement, bitumen and fuel and in the location of adequate road building materials, a 10% risk allowance has been added to the cost. When road construction has becn completed, any funds remaining including the risk allowance will be cancelled. An additional 10% risk allowance has been provided to cover variations in bids; these funds will be cancelled if bids are within appraisal estimates. (b) Consulting Services. (i) the supervision of construction at an estimated cost of US$1.0 million is based on about 100 man-months of con- sultants' services over a three-year period at an average man-month rate of US$ 10,000; (ii) preliminary engineering and an update of the feasibility study under a PPF for the Butare-Kigeme-Kitabi road at a cost of US$250,000 is based on actual charges by consultants; (iii) the engineering study for the restoration of the Kigali-Gatuna road is based on about 10 man-months over a 6-month period at a total cost of about US$100,000. The average man-month costs for consultants services including salaries, overheads (home office expenses, expatriate allowance, social costs and other in- direct expenditures), international travel, subsistence and other miscella- neous items is estimated at about US$10,000; this is in line with recent experience in Rwanda; (iv) a lump sum of US$250,000 for preinvestment stu- dies yet to be determined; and (v) the technical assistance will require about 156 man-months of consultants' services, at a total cost estimated at US$1.35 million. The average man-month costs, including salary, overheads (home office expenses, expatriate allowances, social costs and other in- direct expenditures), international travel, subsistence and other miscella- neous items is estimated at about US$9,000 in line with current experience in Rwanda. (c) Procurement of materials and supplies for maintenance of Kigali- Gatuna road and procurement and installation of weighing scales are based on recent costs for similar items procured under other Bank Group projects. D. Financing 3.14 The total project cost of US$30.10 million net of taxes and du- ties will be financed by: (i) an IDA Credit of US$25.90 million covering 95% (US$21.72 million) of the US$22.92 million foreign cost and 58% (US$4.18 million) of the US$7.18 million local cost; (ii) a UNDP contribu- tion of US$1.5 million covering the remaining 5% of the foreign cost and 4% of the local cost, and (iii) Government's contribution of US$2.7 million amounting to 9% of total project cost net of taxes and duties or 38% of the local cost (Table 3.3). A condition of Credit effectiveness will be that financing agreements betweeen the Government and AfDB, EEC, BADEA and the Kuwait Fund for construction and works supervision of the Kitabi-Cyangugu road have been signed. Included in the p^-oposed IDA credit is provision for refinancing an advance of US$250,000 from the PPF.  - 28 - Table 3.3 FINANCING PLAN (US$ million) Government UND1P IDA TOTAL Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total a. Construction of Butare- 2.70 - 2.70 - - - 3.74 19.09 22.83 6.44 19.09 25.53 Kigeme-Kitabi Road b. Supervision of (a) - - - - - - 0.27 1.08 1.35 0.27 1.08 1.35 c. Preparation of (a) - - - - - - 0.02 0.23 0.25 0.02 0.23 0.25 d. Technical Assistance - - - 0.30 1.20 1.50 0.10 0.40 0.50 0.40 1.60 2.00 and Studies e. Maintenance of Kigali- - - - - - 0.05 0.75 0.80 0.05 0.75 0.80 Gatuna road f. Weighing Scales - _ _ - _ _ - 0.17 0.17 - 0.17 0.17 Total 2.70 _ 2.70 0.30 1.20 1.50 4.18 21.72 25.90 7.18 22.92 30.10 E. Implementation 3.15 MPW will be responsible for the implementation of all project components. Within the MPW, PED will be responsible for (i) the road con- struction works to be carried out by contractor and supervised by consul- tants, (ii) the procurement and installation of weighing scales, and (iii) the execution of the study to determine the reasons for the failure and the scope, type and cost of restoration of the Kigali-Gatuna road as well as the preinvestment studies. WD will be responsible for technical assistance for road maintenance, equipment maintenance and repair and for the procure- ment of materials and supplies and carrying out by force account the rou- tine maintenance of the Kigali-Gatuna road. 3.16 The road construction and related supervision will start in the first quarter of 1983; it will take about three years to complete the entire road from Butare to Cyangugu. Procurement of weighing scales is expected to take about six months; the equipment is expected to arrive mid-1983. The senior road maintenance engineer and mechanic (financed by UNDP) will start in January 1983 and work for three years; the two maintenance engineers (financed by IDA) will start in January 1984 at the end of the Fourth Highway Project and work for two years. The type, scope and schedule of execution of the preinvestment studies will be agreed upon by the Government and the Association following the elaboration of the country's transport investment priorities by the transport planning capability to be strengthened under the project; this is expected to be available by mid-1983. The engineering study for restoration of the Kigali-Gatuna road is expected to start in January 1983 and to be completed within six months. The project is expected to be completed by the end of 1985. The project implementation schedule is shown in Chart 2.  - 29 - F. Procuremeant 3.17 Award of the contract for the construction component (US$16.6 million, excluding contingencies) will be subject to ICB in accordance with Bank Group guidelines. The bidding procedures will provide for prequalifi- cation of contractors. Particular attention will be given to contractors with experience in areas with similar conditions since the road crosses re- latively difficult terrain. To minimize the risk of construction delays, tender documents will include provision fcr a considerable stock of mater- ial and fuel. The Butare-Cyangugu road ha:3 been divided into four sections to match the financing available from the various donors, one section being Butare-Kigeme-Kitabi financed by IDA. Contractors will be invited to quote bids for one or more sections or for the entire road, according to their qualifications. 3.18 Procurement and installation of the weighing scales (US$0.15 million, excluding contingencies) will be through international shopping after receiving quotations from specialized suppliers. This procedure has been found to be satisfactory given the specialized nature of this equip- ment. Materials and supplies for maintenance of the Kigali-Gatuna road will be procured from suppliers from whom such items have been previously purchased on the basis of reasonable, negotiated prices. 3.19 Consultants' services (US$3.60 million, including contingencies) will be needed for supervision of construction works, technical assistance, a study to identify the type and cost of restoration works on the Kigali- Gatuna road as well as for preinvestment studies. The Government intends to recruit an individual consultant for t:he position of transport econo- mist. The three road maintenance engineers and mechanic will be recruited from consultants Rhein-Ruhr, who are already employed by the Government with financing under the Second and Four:h Highway Projects. Consulting firms will be selected for supervision of construction works, a study to identify the type and costs of the restoration works on the Kigali-Gatuna road and for preinvestment studies. The tarms and conditions of employment of consultants will be satisfactory to the Association; consultants will be selected in accordance with 1981 Bank Guidelines for Use of Consultants; and, because of the specialized nature of their services, price will not be a factor in the selection of the consultants for technical assistance and, given the difficult terrain in the project area, for the soils engineer and supervision of construction works.  - 30 - G. Disbursements 3.20 Credit funds will be disbursed on the following basis: (a) 90% of total expenditures for road construction; (b) 100% of c.i.f. cost or 90% of cost if locally purchased for equipment (weighing scales) and materials and supplies for maintenance of Kigali-Gatuna road; and (c) 100% of consulting services for supervision of construction and two road maintenance engineers. All disbursement will be fully documented. A disbursement schedule follows in Table 3.4. It is based on the project implementation schedule and the profile from past highway projects. Table 3.4 Estimated Schedule of Disbursements IDA Fiscal Year and Cumulative Disbursements End of Quarter at End of Quarter (US$ '000) 1983 March 31, 1983 100 June 30, 1983 600 1984 September 30, 1983 2,300 December 31, 1983 4,600 March 31, 1984 6,900 June 30, 1984 9,200 1985 September 30, 1984 11,500 December 31, 1984 13,800 March 31, 1985 17,100 June 30, 1985 19,400 1986 September 30, 1985 21,700 December 31, 1985 23,000 March 31, 1986 24,300 June 30, 1986 25,100 1987 September 30, 1986 25,900 Closing Date: December 31, 1986 Source: Mission Estimates  - 31 - H. Accounting and Reporting Requirements 3.21 All payments under the investment and recurrent budgets are made by the Ministry of Finance upon presentation of invoices approved by MPW (para. 2.25). Since MPW had not been keeping any accounts, the Credit Agreement for the Fourth Highway Project required that (i) cost accounting be introduced for the activities of the Works Department paid for out of the recurrent budget and (ii) accounts be. kept for the project and the Government departments or agencies responsible for carrying out the proj- ect. The cost accounting being implemented is adequate. MPW still does not keep accounts for payments made under ithe investment budget. The Gov- ernment has agreed that RB will introduce accounts registering all payments under its investment budget and separate accounts for payments under the proposed project. It was also agreed that the project accounts will be au- dited by independent auditors acceptable to the Association and the audited accounts will be submitted to the Association not later than six months after the end of each fiscal year during project implementation. 3.22 The Government and the Association have agreed on progress re- porting requirements (Annex 3) which will include indices for measurirg im- plementation progress and submission of a project completion report in a form satisfactory to the Association not Later than six months after the closing date of the Credit. I. Environmental Aspects 3.23 The project is not likely to have any adverse effect on the en- vironment. The project road would follow the existing alignment, and no disturbance to land use should occur. Furthermore, the new or improved drainage facilities will benefit adjacent areas and the new improved geome- tric standards will contribute to road safety.  - 32 - IV. ECONOMIC EVALUATION A. General 4.01 The major goal underlying Rwanda's transport sector plan (1977- 81) is to foster economic, social and administrative integration of the different regions of the country which have remained isolated because of poor roads. At present the only major region which does not have all- weather communications with the rest of the country is the southwest; as a result its economic development has been severely hampered. The area along southern Lake Kivu and the Ruzizi Valley in particular are fertile and have a high agricultural potential. They produce coffee and almost half of the country's tea and provide agricultural staples to the more densely popula- ted area around Butare. The Butare-Cyangugu road also provides access to the Nyungwe tropical rain forest, which holds economic potential. A number of forest exploitation and reforestation projects for this area are under consideration or preparation. Furthermore, after the completion of a ce- ment plant near Cyangugu, improved communications will become critically important for supplying this plant with raw materials and evacuating its output. Finally, an improved road link between Butare and Cyangugu will also have international significance in that it will provide a shorter and less costly connection to the Indian Ocean ports for Zaire's eastern re- gion, particularly the Bukavu area. 4.02 The proposed construction to paved standards of the Butare-Kitabi section of the Butare-Ntendezi road is expected to yield an economic return (ER) of 16%. This E.R. is dependent on the entire road being paved. No economic return has been calculated for the technical assistance component but, like smaller inputs in previous projects, it is clearly justified as it is expected to result in an improved maintenance capability and better use of scarce investment funds. B. Main Benefits and Beneficiaries 4.03 The main benefits to be derived from the investment are reduced vehicle operating costs (VOC) for the normal traffic and reduced total transport costs for the cement traffic diverted to the project road from the lake/road route via Kibuye. The road connection from Butare to the ce- ment plant at Cyangugu is based on two links--the Butare-Ntendezi link (123 km) considered under this project and the Ntendezi-Cyangugu link (33 km) which is being financed by the AfDB. The reduction in total transport costs will result from the combined effect of a better road surface and from the use of larger and hence more economical vehicles. The expected impact of the reduction in VOC on the economic activity in the influence area of the road (e.g. increased foodcrop production which is highly sensi- tive to transport costs and perishability) is taken into account through the benefits assigned to generated traffic which have been included in the analysis.  - 33 - 4.04 In the short term, the major diiect beneficiaries of VOC savings will be the traders/truckers. Later, as it is expected that the road imr- provement will increase competition on the transport route (para. 2.09) most of the benefits are likely to be passed on to producers and con- sumers. Because marketing and distribution are dominated by traders/ truckers whose trading and trucking activities are not easily separable, the savings in VOC will be passed on in the form of higher farm-gate prices for agricultural products and/or lower prices for products sold by the traders/truckers. As regards the cement traffic, since the distribution arrangements for the plant's output have not been decided, the direct bene- ficiaries may be the cement company or the trading/trucking sector. In ei- ther case, a significant portion of the savings are expected to be passed on to the construction industry. C. Economic Analysis Traffic 4.05 Periodic traffic counts have beea carried out on the project road by the Roads Department since 1970, but ia order to supplement the avail- able data additional counts were carried oat in 1980. For the traffic ana- lysis two sec-tions were used, the ButarE-Kigeme section (35 km) and the Kigeme-Kitabi section (18.5 kn). Normal t:raffic on the Butare-Kigeme sec- tion was estimated at about 144 vehicles per day (vpd) and 12 motorcycles in 1980. Assuming a 7% growth rate, the ,raffic in 1985 would be 202 vpd, of which 23% would be cars, 67% pick-ups and 10% would be trucks and buses. For the Kigeme-Kitabi section, the 1980 normal traffic was estima- ted at 33 vpd and 7 motorcycles and at 46 vpd in 1985 (22% cars, 60% pick- ups, 18% trucks and buses). 4.06 The reduction in vehicle operating costs will be of the order of 60% on the Kitabi-Ntendezi section and will generate a significant amount of new traffic between the southwestern region and the rest of the coun- try. Based on traffic data on other roads similarly situated (Ruhengeri- Gisenyi and Kibungo-Rusumo roads), the inter-regional generated traffic was estimated at 64 vehicles in 1988 of which 26% would be cars, 64% pick-ups and 10% trucks. Local generated traffic by 1988 was estimated as a percen- tage of normal traffic as follows: for Butare-Kigeme, 20% for cars and 15% for pick-ups and trucks; for Kigeme-Kitab-i, 30% for cars and 20% for pick- ups and trucks. 4.07 The heavy cement traffic, which will be able to use the project road only if the entire Cyangugu-Butare road is of all-weather standard, has been evaluated independently on the basis of the following main assump- tions: (i) national cement consumption supplied by the Cyangugu plant, some 30,000 tons in 1980, grows at 8% per annum until 1995 and thereafter growth slows down to 4%; (ii) without the project road, the requirements of the Butare region, estimated at some 16% of national consumption are shipped over the project road using vehicles with an average load of 8 tons; (iii) with the project some 80% of national consumption is shipped on the road using vehicles with an average load of 20 tons.  - 34 - Vehicle Operating Costs 4.08 VOC were estimated by consultants DHV in 1980 as part of the fea- sibility study of the Butare-Kitabi section of the road. The appraisal mission reviewed the consultants' assumptions, particularly those on life- time mileage of vehicles, and made some adjustments which resulted in lower VOC savings. Table 4.1 indicates the VOC for representative vehicles in Rwanda. For the without the project case, the condition of the road has been assessed as an earth road, while a gravel and a paved road have been examined as project alternatives. Table 4.1. Vehicle Operation Costs (RF/veh/km, net of taxes) Earth Road Gravel Paved Car 46.6 35.1 27.0 Pick-ups 51.8 39.6 31.1 Medium Truck 144.3 93.2 73.2 Heavy Truck 206.3 132.1 100.8 Trailer 272.7 172.6 129.5 Bus 183.2 116.5 91.0 Source: Derived from Consultants DHV's Feasibility Study of the Butare-Kitabi section of the Butare-Ntendezi-Cyangugu road, January 1981. Construction and Maintenance Costs 4.09 Construction costs in January 1981 prices, excluding taxes but including 10% physical contingencies and a 10% risk allowance, are estima- ted at RF 981 million for the Butare-Kigeme section and at RF 518 million for the Kigeme-Kitabi section. Construction supervision is estimated at RF 55 million for the Butare-Kigeme section and at RF 29 million for the Kigeme-Kitabi section. The cost of resurfacing the road every seven years is estimated at RF 1.4 million/km. Maintenance cost estimates for the existing and the proposed paved road are based on data provided by the Roads Department for roads with similar soils and climatic conditions. In view of the difficult terrain, the heavy rains and the soil conditions, maintenance costs on the existing earth road are higher than those for a paved road and the resultant savings are estimated at RF 227,500/km (US$2,500).  - 35 - Economic Return 4.10 In view of the very poor condition of the existing Butare- Ntendezi road, particularly the Kitabi-Ntendezi section, the heavy traffic induced by the cement plant will only be able to use the road if it is up- graded to all-weather standard in its entirety. Therefore, in the economic analysis, in addition to paving, two other alternatives have been consider- ed: (i) constructing the road to an enginEered gravel standard, and (ii) improvement to a low standard gravel road bv force account with the view to making it passable to heavy traffic on a year round basis. 4.11 Assuming a 20-year economic life for the project, a comparison of the costs and benefits of the paving alternative indicates that paving of the two sections is well justified, yielding an ER of 18% for the Butare- Kigeme section and 13% for Kigeme-Kitabi. Improvement to gravel standard was not found to yield a higher return than the paved alternative (15% and 11% respectively) because : (i) the long-term function of the road will require construction to the same geometric standards as the paved alterna- tive and hence construction cost savings u-ider the gravel alternative are limited to the surface course; and (ii) the hilly terrain, the types of soils and the heavy rains in the region make maintenance of such a gravel road very costly especially with heavy traflic. 4.12 The alternative of improvement to a low standard gravel road by force account, although technically possible, was found to be unfeasible in practice owing to RB's limited capability to engage in the relatively large scale works required in terms of haulage of suitable materials over long distances. Such works could only be accomplished by diverting substantial manpower and equipment resources from priority upgrading and maintenance activities in other parts of the country. Moreover, once completed, the road would still require considerable roatine and periodic maintenance which would continue to divert scarce maintenance resources. D. Sensitivity and Risks 4.13 Some variables determining the outcome of the economic analysis could vary significantly due to unforeseen developments, e.g. construction costs could escalate due to interruptions Ln supplies of essential mater- ials or benefits from cement traffic could be lower due to a slower increase in the output of the cement plan-. A sensitivity analysis was therefore carried out on these critical faztors. With a cost increase of 20%, the ER would be 16% for the Butare-Kigeme section and 11% for the Kigeme-Kitabi section. A stagnation of cement-related benefits after 1988 would yield an ER of 17% for the Butare-Kigeme section and 11% for the Kigeme-Kitabi section. If there were both a 20% increase in costs and a stagnation of cement-related traffic, the ER would be 14% for the Butare- Kigeme section and 9% for the Kigeme-Kitabi section. The ER is not very sensitive to changes in generated traffic. A 50% reduction in benefits assigned to generated traffic reduces total benefits by 5% in the case of the Butare-Kigeme section and by 9% in the case of the Kigeme-Kitabi sec- tion. In addition, for the latter section a cost increase of 20% and a re- duction of benefits by 13% would still yield an ER of 10%. The opportunity cost of capital is estimated not to exceed 10%.  - 36 - 4.14 Experience with IDA's previous projects in Rwanda has shown fre- quent interruption of construction works and consequent cost overruns due to periodic shortages of construction materials and fuel caused by border closures in neighboring transit countries (Uganda, Kenya) through which these commodities must be transported. To minimize the risk of delays from interruptions, provision will be made for a larger than usual stock of material and fuel in the contract documents for the construction of the Butare-Kitabi road. 4.15 Difficult soil conditions and unexpected shortages of construc- tion materials in certain regions have also caused considerable increases in road construction quantities, construction time and in project costs. Even though consultants have been careful in their soils and geologic sur- veys and design, and a Bank-financed consultant has visited the road to re- view consultants work, this risk still remains significant. The proposed project therefore provides for the services of a soils engineer, in addi- tion to the supervising consultants, with wide experienced in soils and geological conditions in this or similar regions and preferably with work experience with contractors under similar road conditions. This expert will allow the Government, the Association and consultants for construction supervision to review periodically the geological and soil conditions, uti- lization of appropriate construction materials and application of proper work methods. 4.16 To guard against unforeseen increases in construction costs due to the possible interruption of supplies and variations in bids, the proj- ect cost estimate includes a 20% risk allowance for this project component. 4.17 The risk of the institution-building component not attaining its intended benefits is low. Experience from the past road projects demons- trates relatively good success in establishing the road organization and in training staff. Trained staff retention could be a problem given the low salaries received in the civil service. This is, however, a risk well worth taking given the vital importance of training staff. 4.18 Even though the fixed weighing scales will be located at the two most important border posts, which will facilitate enforcement of the vehi- cle weight regulations, there remains a risk that enforcement will be weak as is the case in some other countries. In order to reduce the likelihood of this, the Government has agreed to establish appropriate vehicle weight regulations and an effective enforcement mechanism.  - 37 - V. AGREEMENTS REACHED AND RECOMMENDATION 5.01 The following items were discussad and agreed upon during nego- tiations: (a) the Government will establish appropriate vehicle weight regula- tions and an enforcement mechanism, and put the new regulations into effect by December 31, 1982 (para. 2.20); (b) by September 30, 1982 the MPW will prepare and submit to the Association for its approval proposals for simplified procedures for processing payments under the recurrent budget through the Ministry of Finance (para. 2.26); (c) the study and preparation of an action plan and identification of sources of financing for restoration of the Kigali-Gatuna road by June 30, 1983 (para. 3.08); (d) the Government will install a weighing scale at Gatuna and ano- ther at Kagitumba by December 31, 1983 (para. 3.11); (e) the award of the contract for construction of the Butare-Kitabi road will be subject to ICB in accordance with Bank Group Guide- lines (para. 3.17); (f) the terms and conditions of employment of consultants will be sa- tisfactory to the Association; the consultants will be selected in accordance with 1981 Bank Guidelines for Use of Consultants; and price will not be a factor in the selection of consultants for technical assistance, the soils and geology expert and supervision of construction works (para. 3.19). (g) RB will introduce accounts registering all payments under its in- vestment budget and separate accoints for payments under the pro- posed project; project accounts will be audited by independent auditors acceptable to the Assoc-iation and the audited accounts will be submitted to the Association not later than six months after the end of each fiscal year during project implementation (para. 3.21); and (h) the Government will submit progress reports, including indices for measuring implementation progress, and a project completion report, in a form satisfactory to the Association, not later than six months after the closing date of the credit (para. 3.22).  - 38 - 5.02 A condition of Credit effectiveness will be that financing agree- ments between the Government and the AfDB, EEC, BADEA and KFAED for cons- truction and works supervision of the Kitabi-Cyangugu road have been signed (para. 3.14). 5.03 Agreement having been reached on the items listed in para. 5.01, the proposed project is suitable for a credit of US$25.9 million on stan- dard IDA terms. May 1982  - 39 - Annex I RWANDA FIFTH HIGHWAY PROJECT Draft Terms of Reference of Road Maintenance Engineers in the Ministry of Public Works To sustain maintenance operatioas, MPW will need a senior road maintenance engineer for about three years and two maintenance engineers for about two years. The road maintenance engineers will be civil engi- neers with at least 10 years of experience in planning, executing and moni- toring road maintenance operations, of which at least 5 years will have been in developing countries. They will work in close cooperation with the Director of Public Works and will also advise the MPW officials on road maintenance matters and assist in road maintenance operations. Their func- tions will include, in particular, advising and assisting in: (i) preparation of the annual maintenance program; (ii) establishment of annual budget. requirements for recurrent and periodic maintenance operations; (iii) execution of the annual maintenance program and the allocation of equipment, materials, and funds as well as assignment of staff to the various maintenance brigades and work gangs; (iv) identification of equipment and spare parts needs and the prepa- ration of bidding documents, bid evaluation and contract award; (v) monitoring of maintenance work3, such as establishment of unit costs for different types of cperations and work output by the various maintenance units; (vi) establishment of training requirements and program for the exe- cution of training of local staff at MPW's training school; (vii) organization and operations of the mechanical workshops and spare parts store to effectively carry out the maintenance and repair of MPW's equipment. In addition to the above functions, the maintenance engineers will provide on-the-job training for local engineers and works supervisors in the above functions along the lines employed successfully under the Fourth Highway Project.  - 40 - Annex II Page 1 of 3 RWANDA FIFTH HIGHWAY PROJECT Draft Terms of Reference for a Transport Planning Expert at the Ministry of Public Works 1. The Government intends to strengthen its transport analysis and planning capability by recruiting a transportation expert who will (i) re- commend policies for the development and utilization of external transport routes, and (ii) help prepare a domestic road investment program. An im- portant aspect of the expert's work will be to train counterparts. He may be required, inter alia, to carry out the following principal tasks. Principal Tasks 2. Elaboration of policies for the development and utilization of exter- nal transportation routes (i) forecast export and import volumes; (ii) secure information on the transportation costs by different routes and different modes, and prepare of a system of valuation for the other elements of transportation service such as speed, safety and regularity with a view to forecasting transportation demand by route and mode; (iii) assess transport capacity of the different modes and routes, and in particular the capacity of the facilities within Rwanda; (iv) forecast transportation flows by route and mode and prepare re- commendations on policies for the development and utilization of routes and modes; and (v) help prepare the Government's position for negotiating with tran- sit countries on the development and utilization of international transport routes.  - 41 - Annex II Page 2 of 3 3. Facilitation of international transportation (i) obtain information on the measures and regulations in the transit countries that are hindering inl:ernational transportation; (ii) prepare recommendations in the Light of experience and procedures existing in other parts of the world, designed to eliminate or reduce the problems affecting transit traffic; and (iii) help prepare Government's position for negotiating with transit countries regarding facilitation. 4. Project Appraisal (i) prepare terms of reference for studies and monitor studies in progress; and (ii) particularly for the roads subsector, assure comparability of the feasibility studies under preparation. 5. Programming and coordination for the entire transportation sector (i) in cooperation with the minisl:ries of Planning, Communications and Public Works, define select:ion criteria for the preparation of investment programs; (ii) work closely with these ministrLes in the preparation of a trans- port sector plan; (iii) evaluate the financial and budgetary effects of programs under preparation and assess their compatibility with the objectives and the financial constraints of the plan in general; and (iv) prepare recommendations for transport tariff policies and assist in the preparation of tariff proposals. 6. Road user taxation and aspects of the transport sector (i) analyze the level and structure of prices and taxation of petroleum products used in transportation, to determine whether the prices are in line with the opportunity cost of petroleum products; (ii) recommend pricing and taxation policies for petroleum products used in transportation and a mechanism for periodic adjustment of prices and taxes; and (iii) assess the overall adequacy of road user taxes.  - 42 - Annex II Page 3 of 3 7. Duration of mission The duration of the expert's mission shall be three years. 8. Work Program Following a three-month familiarization period, the expert, under the guidance of a steering committee composed of representatives of the three ministries concerned, shall draw up his work program for the next six months. This program will specifically include proposals for the training of counterparts. Thereafter, at the end of each six-month period, he shall prepare a short report on the work he has accomplished and prepare a new work program for the coming six-month period. 9. Training The transport planner will work closely on the above tasks with two suitable local counterparts. Training of these counterparts will be an important part of his services.  - 43 - Annex III RWANDA FIFTH HIGHWAY PROJECT Progress Reporting Requirements 1. Progress reports shall be submitted to the Association quarterly in triplicate, no later than one calendar month after the end of the quar- ter. The first report should cover the period ending December 31, 1982. 2. The Report should contain the following information: I. General Information: (a) the physical progress during the reporting period; (b) actual or expected deviations from the project implementation schedule; (c) actual or expected difficulties or delays and their effect on the implementation schedule and the steps planned or taken to overcome the difficulties and avoid delays; (d) expected changes in the completion dates of the project; (e) key personnel changes in the administrative staff, consul- tants or contractors; (f) matters which may affect the project cost; and (g) any development activity likely to affect the economic viabi- lity of the project components. II. A bar-type progress chart, based on the project implementation schedule, showing the progress in each project component. III. A financial schedule set out in tabular form which shows for each of the project components: (a) original estimated cost; (b) revised cost, if appropriate; (c) actual expenditure; (d) project expenditure; and (e) actual withdrawals and projected withdrawals from the Credit Account. IV. The status of action on each of the covenants of the Credit Agreement.  - 44 - Annex IV RWANDA FIFTH HIGHWAY PROJECT Economic Evaluation of Paving the Butare-Kitabi Road Economic Cost of Construction (RF'OOO/km) 29,598 Cost of Resurfacing every 7 years (RF'OOO/km) 1,365 Annual Maintenance Cost (RF'OOO/km): with 91 without 318 Residual Value (RF'OOO/km) 17,759 Cement Traffic 1985: Normal (t/day) 20 Diverted (t/day) 79 Cement Benefits: RF/t-km - Normal 38 Diverted 50 Motor- Car Pickup Truck Bus Cycle Normal Traffic 1985 (vpd) Butare-Kigeme 46 135 20 1 20 Kigeme-Kitabi 10 27 8 1 10 Generated Traffic 1988 (% of normal) Butare-Kigeme 50 40 40 40 50 Kigeme-Kitabi 180 170 160 160 180 Traffic Growth (% p.a.) 7% 7%1/ 7%1/ 7% 7% VOC Savings (RF/vehicle) 20 21 82 92 5 1/ Due to a shift to vehicles with higher payloads, benefits are assumed to increase at the rate of 8%.  - 45 - Annex V RWANDA FIFTH HIGHWAY ?ROJECT Related Documents and Data Avai:Lable in the Project File A. Etude Economique de la route Butare-Cyangugu; Consultants SEDES, (France), November, 1979. B. Etude de rentabilite du trongon Butare-Kitabi de la route Butare- -Ntendezi-Cyangugu; Consultants DHV (Netherlands), January 1981. C. Etude Technique d'Execution dui troncon Butare-Ntendezi de la route Butare-Ntendezi-Cyangugu; Consultants DHV (Netherlands), August 1981.  -46 - ORGANIZATION OF THE ROAD BRANCH Ministry of Public Works Generai Secretary r Urans an 0 = o 5 Buildings | Works n n g .. a, aint n| M-aied parntmentn |ie.lm S|o VVoartment l.. Op.rations | MehnzdSene.reOeairn tio 10 sub-sections E E s = 'i165worrkagangs) E E -23X05 E Ix I rX :: rx Cc mz =V_i7_Vorld 8ank -23105  - 47 - RWANDA FIFTH HIGHWAY PROJECT PROJECT IMPLEMENTATION SCHEDULE Authority 1982 1983 1984 1985 Maini Activity ResponsibleR-pnsbe ___ 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 I. Road Construction - Bidding Contractors - Bid Evaluation, Review atnd Approval Government/IDA - Award of Contract Government - Construction r Contractor _ _ - _ II. Equipment (Weighing Scales) - Call for Quotation Government - Evaluation of Offers Review and Approval Government/IDA - Award of Contract Government - Delivery Suppliers III. Technical Assistance - Selectioni of Consultants Government/IDA - Review and Approval Government/IDA - Execution (i) Maintenance Engineers and Mechanics Consultants _ - - (ii) Transport Planner Consultants _ - - -- - - IV. Studies (i) Preinvestment Studies - Definition and Agreement of Transport Investment Priorities Government/IDA - Selection of Consultants Government/IDA - Execution of Study Consultants (ii) Restoration of Kigali- Gatuna Road - Agreement on Scope of Study, Consultants TOR Government/IDA - Selection of Consultants and Signature of Contract Government/IDA - Execution of Study Consultants - Maintenance 1/ Government 1/ Following completion of present financing under Cr. 769-RW.   ici L0P;Ee; sEiSiW;RE E i!i iDiiN E 11 A ,. W tC xLa SX ' j C; :g: 0 ' (: ] rn ' i ' * v 'j, ,'' - 3 , x 't :, ' 4t9E ': t"EA:'St),~~~~~~~~~~~~~~~~~~~~~a N\F - X i 't aX '''"S ;- ~~~~~~~~~~~~~~~jo o__l _ .