Uganda - Transport sector memorandum

Document of The Worlcl Bank FOR OFFICIAL USE ONLY Report No. 4429-UG UGANDA TRANSPORT SECTOR MEMORANDUM December 21. 1983 Eastern Africa Projects Department Transportation Division I This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  UGANDA TRANSPORT SECTOR MEMORANDUM CURRENCY EQUIVALENTS Currency Unit = Ugandan Shilling (USh) US$1.00 = USh 100.0 (First Window) US$1.00 = USh 250.0 (Second Window) On August 23, 1982, the Government introduced a dual exchange rate coupled with a 5% devaluation of the official (Window One) exchange rate. The exchange rate in the Second Window is market-determined through a weekly auction and subject to wide fluctuations; it has fluctuated from USh 300 to the Dollar in August 1982 to USh 240 to the Dollar in January 1983, and currently starts at USH280 to the (dollar. Conversions in the Transport Sector Memorandum have been made at: the First Window rate, which is applicable to all external assistance projects. ABBREVIATIONS EAA - East African Airline!s EAC - East African Community EAR - East African Railway Corporation KR - Kenya Railways TCAO - International Civil Aviation Organization MOW - Ministry of Works PED - Ministry of Planning and Economic Development PTC - People's Transport Company UAC - Uganda Airlines Corporation URC - Uganda Railway Corporation -TC - Uganda Transport Company UCTU - Uganda Cooperative Transport Union Fiscal Year July 1 - June 30  UGANDA TRANSPORT SECTOR MEMORANDUM Table of Contents Page No.: Summary and Conclusions (i) CEAPTER I Economic DeveloDment and the Transport Sector ............. ...... 1 - Introduction Setos................................... 1 - Productive Sectors ....... .............................. - Transport Flows ...................................... 2 - Transport and Energy . ............................... . 3 - Landlocked Position of Uganda ........ *............... 4 - Transit Traffic .................. ........................ 4 C-HAPTER II Transport Facilities .......... ...... . ....... ......... 5 A. The Road Subsector ................ . . .. . .o...o. . 5 - Road Transport Industry ...., ......... ..... ........ 7 - Transport Regulation .... ................o.. . . . . . e. .. . . . 8 - Freight Transport ...... ...... . ...... ...... .,. 8 - Passenger Transport ...... ...... .. .. .. ... . 9 - Railway Transport ..................... . ....... .. . 10 i) Organization .................... , ............... 10 ii) Facilities .......... ...0.0...... ..O 4 .............. ...... 11 iii) Traffic ............ .. , 12 iv) Future Needs and Assistance ... o.....*.......... 13 B. Water and Air Transport ....... .................. 14 i) Water Transport ......................... . . . 14 ii) Air Transport ...... .... .. ......... , . . 15 CHAPTER III A. Institutional Structure for the Sector ... ........ 17 B. Transport Policy and Planning ............ ....... 18 C. Investment Plan ....................... . 20 This report was written by Mr. Le Blanc, based on visits to Uganda during May/June and September 1982, and April 1983 and updated by Mr. B. Bostrom after a visit to Uganda in October 1983.  Table of contents (continued) - 2 - CHAPTER IV Page No.: Problems and Recommendations , ......... 21 A. Lack of Qualified Manpower ............. 21 B. Low Level of Salaries .................................e 21 C. Need to Improve the Transport Information System 22 D. Transport Sector Management ............................. 22 E. Need to Concentrate Future Investment in Rehabilitation and Maintenance of Infrastructure and Equipment: .23 F. Need for Foreign Exchange to Purchase Spare Parts. 23 G. Financial Management of the Sector .. ............I ........ 24 R. Coordination with Kenya ................................. 24 I. Summary of Recommendations ................... .......... 25 ANNEX I - International Transport Routes .............. ........ 27 ANNEX II - Traffic ................ . .............................. 28 ANNEX III - Administration and Staffing 29 (i) Administration .................... , .... . 29 (ii) Staffing ................... ...... ...... 29 ANNEX IV - Past Bank Group Assistance. 31 ANNEX V - Tables 1-11 ................................ 32-42 CHART: Organization of the Ministry of Works Maps: IBRD 16719 IBRD 16790 IBRD 16792 IBRD 17320  (i) Summary and Conclusions i) This memorandum is the first attempt at an overall review by the Bank Group of the transport sector in Uganda in over twelve years. Its main objective is to take stock of the current situation, to identify and recommend solutions to the main problems faced by the sector, and to propose short and long term strategies to facilitate the recuperation of transportation in Uganda. The report is based on the findings and discussions of four missions which visited the country in 1982 and early 1983. The analysis and content of the TSM is, however, limited by the paucity of the data available and as a result, the perspective has had to be more qualitative than quantitative. ii) Uganda's principal resource is agriculture, from which it derives more than 90% of its foreign exchange. The decline of this sector has had a significant impact on the overall economy, including transport, since agriculture contributes to over one half of the gross domestic product. Industrial production also shows a negative growth since 1972 and production levels were only a fraction of earlier (1966-74) levels. Industrial value added in 1980 represented only 40% of its peak 1972 level and accounted for less than 5% of total GDP. Those industries which are operating are doing so at very depressed capacity levels. iii) Coffee, the most important cash crop, is grown in the fertile crescent around Lake Victoria. A network of radial roads leading into Kampala has developed over the years and these are inter-connected with feeder roads such that the road coverage is good with no major gaps existing. The rail system also provides adequate internal service and is potentially the most economic and efficient system to handle import/export traffic. iv) The transport system is now in disarray following a decade of neglect and lack of proper maintenance. The Government has accorded the rehabilitation of the transport sector a very high priority along with agriculture and industry. Uganda also serves as a major transit country for goods destined to and from Burundi, Rwanda, eastern Zaire and southern Sudan and the disruptions which have occured during the 1970's and follow- ing the liberation war have had serious economic repercussions on these neighbouring countries as well. The speed at which this rehabilitation will take place is, however, greatly influenced by the Government's ability to mobilize resources. It also depends on rebuilding and staffing properly the institutional and administrative structures of Government in the sector and in formulating and implementing a strategy to reinstate at minimum cost in time and resources the once adequate transport system. v) Wnile Government has stated explicitly that its policy is to re- habilitate rail transport and maintain and rehabilitate its road network, it has not clearly defined how to achieve these goals. There is no official transport policy on which to base decision making. In addition, because of severe staff shortages, the Ministries of Transport and Planning and Economic Development have not been able to coordinate the investments required to rehabilitate the sector.  (ii) vi) The major problems and recommendations whicL are discussed in the paper are as follows: a) the lack of sufficient qualified transport staff; b) the low level of salaries which affect motivation of Govern- ment workers; c) the need to improve the transport information system; d) the deficiencies of teansport sector management; e) the need to concentrate future investments on rehabilitation and maintenance of infrastructure and equipment; f) the need for foreign exchange to purchase spare parts; g) the lack of proper financial discipline in transport para- statals; and h) the need to improve the level of transport coordination with Kenya. vii) The paper is divided into four chapters. The first chapter deals with economic development and the transport sector. I.t looks at the role of transportation in Uganda and the shortcomings of the sector.. The second chapter examines transport facilitie's by mode and gives some indica-tion of overall performance. The third chapter focusses on transport sec- tor management and coordination. It looks at the institutional structure of the sector and indentifies the probLems which affect both the short.and long-term outlook of the sector. It also deals with transport policy, planning and coordination . Chapter four is a summary of the problems and recommendations-and how, in the Bank-Group's opinion, they should be tackled.  UGANDA TRANSPORT SECTOR MEMORANDUM Chapter I Economic Development and the Transport Sector Introduction 1.1 Uganda is a landlocked country in the upper basin of the Nile astride the Equator, bounded by the Sudan on the north, Kenya on the east, Tanzania, Lake Victoria and Rwanda on the south and Zaire on the west. The total area of the country is 236,000 km2, about the size of the United Kingdom, of which about one seventh is swamps and lakes, and most of the remainder is a plateau about 1,700 Di above sea level. Neither its temper- ate climate nor its topography pose major impediment to transport. The population estimated at 12.6 million in 1980 is growing at a rate of about 2.6% per annum. Population density averages 54 persons per km2. 1.2 During the last decade the economy of the Republic of Uganda has seen a reversal from growth to decline with rapid deterioration under the Amin regime (1972-1979) and the subsequent liberation war. The result is that real GDP in 1982 was only two-thirds of the 1971 level and per capita income fell by 48% in real terms over the same period, to US$240. Only in the last two years has economic activity begun to gradually re-establish itself. An immense task of moral, institutional and physical reconstruction, however, still lies ahead. Productive Sectors 1.3 Uganda is essentially an agricultural economy and the agricul- tural sector contributes 75 percent of GDP, 95 percent of the country's ex- ports and provides a livelihood to about 93 percent of the population. The coffee is grown in an area radiating about 200 km around Kampala and along the fertile crescent bordering Lake Victoria (see map IBRD 16790). Cof- fee's share in export receipts increased from 53 percent in 1971 to over 95 percent in 1981, despite a decline in official coffee exports from 191,000 tons in 1970 to 174,000 tons in 1982. The coffee growing areas are adequately served by roads and the major flows are all towards the central processing plant in Kampala from where exports are shipped by rail or road to the port of Mombasa. Tea exports; from areas in the west (IBRD Map 16792) only amounted to 2400 tons in 1982. 1.4 Cotton, the other major export crop, experienced a dramatic de- cline in output from 413,000 bales of lint in 1969/70 to less than 22,500 bales in 1980/81. Cotton growing areas are shown on map IBRD 16719 and are well served by both road and rail systems.  -2- 1.5 The production of foodcrops for domestic consumption is the most important activity of the agricutural sector and in 1980 amounted to about 10.3 million tons increasing to 13.5 million tons in 1982. While in the past, food production in Uganda was primarily for subsistence and local market sales, there has been in recent years a development of inter-regional trade in foodcrops and unofficial exports to neighbouring countries as a result of the 1977 deregulation of producer prices for food. As Kampala and other major urban areas increase in size, the distance travelled to bring foodcrops to these markets is increasing. Since the above mentioned production figures represent an average of only about 50% of the peak production years, and in view of the increasing demand for transport to move these crops to markets, it is obvious that the present inadequate transport system will have to be improved if it is to accommodate future increasing demand. 1.6 Regarding the transport of mineral products, in the early 1970's copper exports from the mine at Kasese in western Uganda reached a peak of 17,000 tons. The mine is at present inactive but scheduled to open. again. The impact of resumption of its operations on the transport sector would in any case not be significant. Transport Flows 1.7 The transport system in Uganda is basically a hub and spoke with Kampala being the hub from which radiates a main road linking the Kenya border to the Rwanda border around Lake Victoria. The road network is well developed with adequate links between the routes leading into and out of Kampala at the centre (see map IBRD 17320). The railway network consists of two main lines from west to east, one in the southern part of the country linking the copper mine at Kasese to Tororo, via Kampala, and the other linking the northwestern part of the country from Pakwach, around Lake Kyoga and to Tororo. 1.8 The railway system was mainly geared to handle import-export traffic, which in 1981 amounted for about 234,000 tons. Coffee accounted for about 42% of this traffic. The line from Kasese to Kampala carries little traffic since the closure of the copper mine in 1975. Studies are being carried out on the future viability of the mine but even if it did resume production, the total output would not likely exceed the peak production level of 16,800 tons ach:ieved in 1971. The line from Pakwach to Tororo was built to serve the cottoln traffic but traffic has steadily declined since 1973. The potential for increasing traffic on this line is limited in the short term but as coc:ton production is rehabilitated, the line could eventually carry about 55,000 tons annually. 1.9 The road network, currentLy carries the vast majority (about 98%) of the total freight and passenger i:raffic in Uganda. There is a well-developed trunk road network with an extensive system of rural and feeder roads feeding into it. Cotton, coffee and tea growing areas are all well served by the road system. It is well known that in the late 1960's, Uganda had one of the best developed road systems in sub-saharan Africa.  -3- The main problem which exists today is the poor condition of the roads due to lack of maintenance over the past ten years which has greatly reduced the capacity of the system. This problem of lack of maintenance is also generalized throughout the whole transport system and will require a concerted effort by Government if its rehabilitation is to be coordinated with the rehabilitation of other secitors, particularly agriculture and industry. 1.10 While the road network itself is without major gaps, the vehicle fleet which was severely decimated following the liberation war is not able to cope with the transport demand particularly in the case of passenger transport. This is especially true of urban passenger transport where the lack of available buses and the high tariffs relative to salaries has forced people to turn to other means of transport, including bicycles and walking long distances to get to work. The same is true of inter-urban transport where the high operating costs and low number of buses operating are restricting those wishing to avail themselves of transport. 1.11 Finally, air transport plays an important if limited role in the economic development of Uganda. It is mainly for the transport of passengers and for certain high valu,e commodities or spare parts which can support the high transport costs. While Uganda was an important tourist attraction in the late 1960's, the events of the 1970's have virtually eliminated this factor. Until it is reestablished, air transport will continue playing an important but limnited role. Transport and Energy 1.12 Petroleum products account for about 18% of the value of imports in Uganda but consume 30% of the country's export earnings. While transport accounts for only 2.5% of total energy use in the country, it consumes about 22% of the commercial energy in the form of petroleum products1/. In 1982, the country imported 93,400 tons of petroleum products for highway use and about 4,000 tons of fuel oil for the railway. Current prices of gasoline and auto diesel are US$1.36 and US$0.82 per litre respectively. At these levels, the retail prices reflect the full cost of importation and marketing and also provide a significant contribution to Government revenues in the form of import and sales taxes. Any savings as a result of better maintained equipment, vehicles and rolling stock and roadways will help reduce the large foreign exchange expenditures for imported petroleum products. A 5% improvement in the efficiency of vehicles and railway locomotives would result in a saving of about US$1.9 million annually of foreign exchange. The improvement in the road network which provides the majority of the domestic transport need of both freight and passengers will result in additional savings to the economy. 1/ Uganda - Energy Assessment Report, IBRD April 12, 1983 (Yellow Cover).  -4- Landlocked Position of Uganda 1.13 Because of its position as a landlocked country and the difficulties with the rail route through Kenya, Uganda is attempting to improve an alternate rail-lake route through Tanzania to the Indian ocean via Lake Victoria. This is having the effect of diverting already limited resources in order to ensure that an alternate route is available for its exports. While it was possible, under the East Africain Community, to operate such a route as part of an integrated transport system, Uganda is now trying to put in place an operating system before the actual coordination mechanisms, such as customs procedures and operational agreements, have been established. This has proven very difficult but considerable progress has been made recently. (See Annex I "International Transit Routes"). Transit Traffic 1.14 Land transport also plays an important role for Uganda as a transit country. It is on the major route which links; the port of Mombasa in Kenya to Rwanda, Burundi, northeastern Zaire and southern Sudan (Map IBRD 17320). The length of the route within Uganda serving these other countries exceeds 800 km and the choice of mode has a very dramatic effect on the cost of transport to the neighbouring countries. Before the breakup of the East African Community, most of the transport from the Indian Ocean was by rail to either Kampala or Kasese for furtherance by road. Now, all this transit traffic, estimated at about 300,000 tons annually, moves almost entirely by road transport at a much higher cost both in terms of actual vehicular transport costs and damage inflicted on the road network of all countries involved including Uganda. A Bank study (A Report on the International Transportation Bottlenecks Affecting Rwanda and Burundi Vols. I & II) completed in 1980, assessed alternative routes for Rwanda and Burundi traffic but gaps existed at that time on the impact to Uganda of modal choice decisions because of lack of data. The-main recommendation of the report that improvement of existing routes rather than investment in new ones would have a higher priority is still valid. The costs to Uganda and its neighbours of restoring the railway system are much less than the cost of rehabilitation and operation of the road system. The problem is one of coordination of railway operations between Kenya and Uganda and will have to be addressed as a priority Lssue. (See Chapter IV, Section H).  -5- CHAPTER II Transport Facilities 2.1 Apart from the river Nile which cuts the country from South to North, and Lake Kyoga with its extensive papyrus swamps which prevents direct access between the populous fringes of Lake Victoria and the less developed northern part of the country, there are few physical barriers to communications within Uganda (see Map IBRD 17320). Kampala, the capital and major commercial city, is the hub of the transport system from which roads and railway lines radiate throughout the country. Since Uganda is a landlocked country, some 1,200 km from the nearest coast, and is heavily dependent on foreign trade, the road and rail links through Kenya to the port of Mombassa are vital components of its transport system. 2.2 In the late 1960's and early 1970's, Uganda had a broad-based and reasonably well developed transport system. The road network was commonly regarded as one of the best in Sub-Saharan Africa, and through the East African Community the country shared access to air, water and rail transport systems. Despite its position as a landlocked country, transport facilities were relatively good. However, during the 1970's, they deteriorated principally because of four reasons. Firstly, during the Amin regime (1972-1979), a large contingent of qualified personnel was either forced out or left the country voluntarily and as a result the transport sector and other productive sectors were left seriously understaffed. Secondly, with the ensuing economic decline, fewer and fewer resources were available for maintenance of infrastructure, particularly roads. Thirdly, the sudden breakup of the East African Community in 1977 had a drastic impact by significantly reducing availability to Uganda of jointly owned equipment and disrupting operations. Finally, the domestic transport system was badly damaged during the liberation war and the subsequent looting. Vehicle fleets were destroyed or removed from the country and facilities destroyed or looted. 2.3 Consequently, the transport sector is currently depleted in many ways. Its rehabilitation will be vital to the successful revitalization of other sectors and the economy as a whole. A. The Road Subsector 2.4 The road network in Uganda consists of about 2,000 km of paved roads and 25,500 km of unpaved roads. It can best be described as a semi-circle with Kampala as its centre and with the circtumference broadly following the international boundaries of the country. This system is supported by a network of main roads radiating from Kampala towards the circumference interconnected with secondary and tertiary roads. The Ministry of Works is responsible for maintaining about 7,500 km of both paved and unpaved roads; the remainder of the network (about 20,000 km) is the responsibility of the Ministry of Local Government or town councils.  -6- Those roads maintained by the. Minist:ry of Works (MOW's administration and staffing are described in Annex III) are classified as either primary, secondary or tertiary depending on their strategic importance or traffic volumes. For the purpose of road maintenance administration, the country is split into four areas: Kampala, Mbale, Gulu and Fort Portal. The major corridor is the strategic route which originates at the Kenya border and follows the outline of Lake Victoria, through Kampala and on to the Rwanda border. A breakdown of the lengths of paved and unpavied roads by areas is found in Annex VTable 1. The network is adequate insofar as coverage is concerned but has deteriorated due to poor maintenance over the past decade. 2.5 Poor road maintenance is one of the major problems in the road subsector. Since 1972 only about 120 km or 6% of the paved trunk roads have been resealed. On strategic routes, particularly those which serve transit traffic to and from neighboring countries, traffic has been high with heavy loads causing a sharp deterioration of the network. Because of a pronounced drop in traffic volumes in recent years, secondary roads have fared better and have not deteriorat:ed as much. However, the war and subsequent looting have severely restricted the Ministry of Works capabilities. Extensive infrastructural and institutional rebuilding is recuired to reinstate the largely acdequate system which Uganda once possessed. 2.6 Road maintenance is hampered by a number of factors of which the most critical are: (i) the insufficient number of properly trained staff; (ii) the lack of serviceable equipment, (iii) the low salary scale for Government employees; and (iv) shortages of foreign exchange for imports of fuel, bitumen, spare parts and equipment. The need for trained personnel is critically important to the maintenance function. During the 1970's many of Uganda's qualified people left the country or were forced to look for more remunerative activities outside the Government:. As a result, the Ministry of Works has many vacancies at all levels and will need to reorganize its training effort and depend on technical assistance in the short to medium term to improve its production levels. The MOW's training centre at Kyambogo has been neglected and needs rehabi:Litation and technical assistance to help it resume training of road maintenance personnel. This component will be included in the Association's proposed Third Highway Project. Because of the shortages of staff at all levels, management has suffered and the organization of the MOW lacks direction to carry out its mandate. Expatriates will be required in staff positions to assist the Ministry while Ugandans are recruited and trained. 2.7 The condition of the road network is also afi-ected by the lack of adequate traffic control regulations. While the Traff:ic and Road Safety Act of 1970 gives the Minister of Transport powers to make regulations governing vehicle weight, dimensions, inspections, licensing and safety, many of these regulations were never made. This is likely due to the fact that up until the breakup of the East African Community in 1977, the control of road vehicles and their size was not considered a problem since most heavy traffic moved by rail. However, the situatiLon has changed dramatically with the diversion of large volumes of traffic to road  -7- transport. Overloading of trucks has a detrimentral effect, especially on the major transit routes where traffic is heaviest. The Ministry of Transport in conjunction with the Ministry of Works is now preparing after consultation with neighbouring countries regulations governing vehicle size, weight (10 tons axle-loads) dimensions and road safety. 2.8 In the past, Uganda had a very well organized system of labor in- tensive road maintenance. Government would like to return to these proven methods to generate employment and help reconstruct the road network but the lack of tools, transport and, more critically, the low salaries, prevent an early resumption of this type of maintenance. As an example of the seriousness of the salary constraint the monthly wage rate for a labourer is 900 Uganda Shillings while matoke (large bananas, the local staple food) costs USh 1,000 and will only feed a family of four for three days. The issue of salaries will therefore have a major impact on any proposed maintenance program and will require financing of supplements either in cash or food rations to ensure a proper supply of manpower. This must be an element of any program aiming at a serious reestablishment of the once efficient maintenance organization. The overall salary issue, however, can only be tackled in the medium term within the overall government administrative policy given the overall budget limitations. 2.9 In addition to the question of vacancies and salaries, the short- age of funds is a serious impediment to the proper road maintenance. Dur- ing the 1981/82 fiscal year, the MOW's total budget amounted to about US$5.4 million equivalent of which 70% or US$3.7 million was spent on road maintenance. This represents only about US$525 per km of which a substan- tial part was taken up by salaries (about US$1,000 per km is generally considered sufficient on a networkwide basis). This situation is compounded by an acute shortage of foreign exchange. While the Ministry's budget included an amount of US$337,000 for the purchase of spare parts, only 20% of this was actually spent because of foreign exchange shortages. The foreign exchange situation is not expected to sufficiently improve in the next few years to allow the Ministry to purchase all the needed spare parts and supplies for its road maintenance effort. External assistance to Government for the road subsector should provide some of the foreign exchange requirements also for road maintenance as proposed in the revised recovery program. Road Transport Industry 2.10 While there once existed a flourishing road transport industry in Uganda, the substantially reduced economic activity, the decimation of the vehicle fleet following the liberation war and the high cost of transport have severely teduced the number and size of carriers. After the liberation war, the Government purchased about 600 trucks which were primarily intended to move coffee exports. Many of these vehicles were sold to transport co-operatives who are involved in the movement of coffee from the farms to the central processing plant in Kampala. While coffee is transported as a priority by these co-ops, the vehicles are also used on a for-hire basis for other types of cargo as well.  -8- 2.11 Because of a significant reduction in the number of road transport vehicles imported in the 1970's along with an exodus of vehicles during the liberation war, the fleet is very depleted (Annex V, Table 5) and its condition is significantly deteriorated. The reductions in vehicle numbers was most severe for cars and heavy commercial vehicles. From 1971 to 1982, the number of cars fell from 23,771 to 9,821, while heavy trucks dropped in numbers from 6,795 to 3,529 during the same period.This, combined with very high fuel costs, has had a dramatic effect on traffic levels in the country (see Annex II). The Commonwealth Report of June 1979 on the Rehabilitatibn of the Ugandan Economy estimated that about 2,500 new trucks would have to be imported to revitalize the road transport industry. Similarly, about 500 additional buses would be required to provide sufficient capacity for passenger transport. However, only one quarter of the number of trucks and very few buses have since been imported. The need has been tempered somewhat, though, by the slower than expected recovery of the economy. Transport Regulation 2.12 The Road Traffic and Safety Act of 1970 is a broad and all encompassing piece of legislation which was intended to provide the framework by which the Government could regulate the road transport industry from an operational, economic and safety point of view. The power to make regulations has rarely been exercised and freight transport remains essentially unregulated. The Ministry of Transport publishes a tariff but it is intended only as a guideline for carriers. The transport of passengers is more strictly regulated but not well enforced both in terms of routes and tariffs. Passenger carriers must apply for a route license and a hearing is held to determine if the new entrant should be permitted to provide service. The transport licensing board is the body which decides on the applications and the rates are set by the Ministry of Transport. Technical assistance from ILO has included an analysis of transport policy options which is now under review by the Government. Freight Transport 2.13 There are very few large freight transport operators in Uganda and the largest volume of transport is still carried by small owner operators with fewer than three trucks. These carriezs also supply the bulk of the freight transport capacity. 2.14 The major freight transporter in the country is the Uganda Cooperative TransDort Union (UCTU) a cooperative which comes under the umbrella of the Ministry of Cooperatives, but which operates with full autonomy. UCTU operates a fleet of 150 vehicles ranging from 8 to 18 tons carrying capacity with an availability rate of about 70%. The UCTU is owned by thirty regional co-op unions who are its shareholders. The regional co-ops in turn are owned by individual farmers set up as district unions. The UCTU was set up mainly to provide transport for its members but it also acts as a for hire carrier for any individual in need of transport. Its members are provided transport at cost while profits from other operations are rebated back to the membership at: the end of the  9- year. UCTU's main role is to move coffee from the farms to the Coffee Marketing Board's central processing plan in Kampala but lately it has also been involved as a sub-contractor to Kenatco (Kenya) for movement of coffee from Kampala to Mombassa. UCTU is building a new centralized maintenance workshop in Kampala and also has three repair workshops upcountry for minor work. However, repair works are often held up for lack of spare parts. 2.15 Part of the truck fleet originally purchased by Government was distributed to various marketing boards including the Coffee Marketing Board, the Cotton Marketing Board and the Produce Marketing Board. Most of the vehicles were ordered without due consideration of type or size and intended utilization. The trucks are often too large to be operated on secondary or feeder roads resulting in less than optimum conditions and high ton/km costs. Since these vehicles are now some years old and mostly used on main roads gradual vehicle replacement will improve the operation. 2.16 A major transporter of freight in the past was TRANSOCEAN, a parastatal reporting to the Ministry of Commerce. In addition to providing transport, TRANSOCEAN acted as a freight forwarder for goods moving between Uganda and the port of Mombasa. However, TRANSOCEAN has not been able to compete with UCTU and as such its rcle is being reduced to that of freight forwarder only. Before the liberation war, it had up to 300 heavy trucks but its fleet has mostly been destroyed or looted and only a few trucks remain mostly operating within Uganda. The firm should concentrate on its role as a freight forwarder since it has experience in the field and this type of service is required by Uganda to clear goods from the port of Mombasa. Passenger Transport 2.17 Public passenger services are provided by two parastatal organizations, the Uganda Transport Company (UTC) and People's Transport Company (PTC), under the jurisdicticn of the Ministry of Transport. UTC, which provides bus service in Kampala and also on some routes in Western and Southern Uganda has a fleet of about 145 buses with an availability rate of only about 30%. PTC, headquartered in Jinja, operates on routes in eastern and northern regions with a fleet of about 50 buses of which only about 35% were operational in mid-19182. 2.18 In addition to these two parastatals, there are a number of private bus companies (160 in 1979) licensed to operate specific routes. Many of these carriers compete directly with the two parastatals, but the private carriers tariffs are about two to three times the fares charged by UTC and PTC. However, due to the shortages of spare parts and high vehicle operating costs, many of the private carriers have gone out of business or ceased operations. There is a sericus shortage of public passenger transport in Uganda and in Kampala, passengers often have to wait more than one hour for a bus.  10 - 2.19 The transport of passengers by highway carriers is more closely regulated than the transport of freight but presently not well enforced. Carriers must apply to the Transport: Licensing Board for permission to operate on a specific route. The applications are publicly announced and hearings are held. Carriers already providing service on the route in question can oppose the application and the Board decides.whether or not public convenience and necessity dictate that a new carrier should be allowed to operate. The tariffs charged by UTC and PTC are regulated by the Ministry of Transport. The current permissible fare is UShs 2.50 per passenger km irrespective of terrain and road surface. For urban transport there is a minimum of U.Sh. 30 per trip for the first 5 km and 5 U.Sh. per km thereafter. Private carriers are only provided with an indicative rate which is set at UShs 286 per vehicle/km (minimum 100 km). 2.20 Regulated rates charged bly UTC and PTC are non-remunerative and barely cover out of pocket expenses.- No allocation is made for equipment replacement and the level of fares :Ls a disincentive to the management of these operations. As such service 'Levels have deteriorated substantially, the public suffers from reduced transport availability. If the Government wishes to provide a subsidized public passenger service-, the parastatal companies should be encouraged to restructure their operations on a commercial basis with Government providing a direct operating subsidy. Railway Transport 2.21 Historically, rail services were provided in Uganda, Kenya and Tanzania by the East African Railway Corporation (EAR). Following the collapse of the East African Community (EAC) in 1977, the Uganda Railway Corporation (URC) was formed to provide the service previously supplied by the Community. URC operates on the basis of a 1977 decree which gives it the responsibility to caretake the affairs of the East African Railways Corporation as an interim measure. A new railway act is in the process of being drafted and is expected to go before the National Assembly shortly. Because of a still unresolved dispute among the EAC partners over the distribution of assets, Uganda has been required to invest considerable sums of money to acquire rolling stock and provide the necessary operational facilities. Being a landlocked country, Uganda remains heavily dependent on the rail access route to the Indian Ocean, via Kenya and the port of.Mombasa. There is no discrimination in tariffs for Uganda traffic but costs are high partly as a result of separate rail tariffs for Kenya and Uganda. It has also been improving an alternative lake-rail route via Tanzania to Dar es Salaam. i) Organization 2.22 The Uganda Railway Corporation is a semi-autonomous corporation established to carry out the services within Uganda previously provided by the East African Railways. Its operations are governed by a Board of Directors appointed by the Minister of Transport. The URC is charged with carrying out its functions with due regard to sound financial principles including: (i) ensuring that its revenues are sufficient to meet all its  -, 11 - charges including interest on capital and loans; (ii) ensuring that sufficient provision is made to provide for depreciation of assets; and (iii) the offsetting of any losses or bad debts. In practice, however, these goals are rarely met. 2.23 The management of URC is very weak. Since the former headquarters of the dissolved EAR were located in Kenya, Uganda being only a division of the previous system, there was very little managerial capability upon which the URC could draw. Training facilities were also located in Kenya and Uganda has not yet set up its own training school. Attempts at using the Kenya training centers proved too expensive for Uganda. While URC has some engineers, they lack the confidence required to make decisions and the new Managing Director has limited railway experience. In all facets of the organization but especially at the managerial level, incumbents may be academically qualified but possess no railway experience. This is especially noticeable in the posts of the chief civil engineer, chief accountaLnt and the head of purchasing and stores. The railway lacks a planning department capable of preparing any long range investment programs. At lower staff levels, many of the trained Ugandans, who were previously employed by the East African Railways, are approaching retirement age and will have to be replaced. The need for technical assistance in the short to medium term and a massive program of training to fill the longer term gap is one of the most critical priorities to be addressed by the URC. The establishment of training facilities for the railway should be a top priority in any assistance program. One option available to the railway in the short term would be to seek a qualified firm to manage the operations of the railway and set up the necessary training program to build up URC's institutional capability. A severe problem among many staff is the level of salaries and wages. Present wage levels of the workers represent less than one fifth of their basic needs, therefore workers are obliged to devote a major share of their efforts to secure alternate sources of income and use their railway employment to ful- fill their needs for housing and social services. As mentioned earlier the salary/wage problem is economy-wide and requires a concerted solution. ii) Facilities 2.24 The history of railways in Uganda goes back to 1912 when a first section from Jinja to Namasagali was laid. The line from Malaba to Jinja via Mbulamuti was laid in 1928; from Jinja to Kampala in 1931; from Kampala to Kasese in 1953; from Tororo to Soroti in 1929; from Soroti to Lira in 1962 and from Lira to Packwach in 1964. All totalled the railway comprises 1,280 km of single track. The physical infrastructure of the railway is in fair condition for the current levels of traffic but is in need of maintenance and rehabilitation. While most of the track-was not seriously damaged during the liberation war, it is mostly sub-standard due to its long life (more than 50 years in some cases) and inadequate maintenance over the past decade.  -12- 2.25 Uganda is virtually dependent on Kenya for its import/export traffic, making co-operation with Kenya a key element in Uganda's overall transport strategy. There is an urgent need to exten,d and strengthen cooperative railway operations, including the rationalization of interchange of rolling stock and revenue agreements b,etween the two countries. URC's investment needs will depend to a great extent on the willingness of Uganda's neighbours, especially Kenya, to co-operate and run an integrated service. Only about 25% of the total distance between Kampala and Mombasa is within UgancLa. Furthermore, wlhile URC is critically dependent on Kenya railway's operations, transit traffic represents only a fraction of the latter's traffic, and thus receives relatively low priority, especially at peak traffic periods. Hence IJR and Kenya Railways do not feel the same urgency about cooperating. 2.26 The Railway's highest priority is therefore to seek assistance to help negotiate the necessary interchange agreements with Kenya Railways. Recent discussions dealing with the Northern Corridor (Rwanda, Burundi, Uganda and Kenya) leave room for optimism. Channels of communications at the highest levels have been opened and procedural det:ails have been decided upon, and agreements have been worked out to standardize regulations for the transit traffic between all the countries. A draft railway operating and interline agreement between URC and KRC is now being reviewed. Further developments will have to be closely followed and all possible assistance given to help the four cotntries in question to solve the transport issues affecting international transit traffic. 2.27 With respect to rolling stock, Uganda has had to purchase a considerable amount of new equipment because much of the rolling stock was located in Kenya when the East African Community broke up. While arbitration over the disposal of the Community's assets continues, Kenya forwards some wagons but not always those required by Uganda, particularly for the transport of petroleum products. An inventoryr of motive power and rolling stock of URC is presented in Annex V, Table 6.. Some passenger- coaches have been purchased and the railway intends to acquire more. Currently, URC has a fleet of 62 diesel locomotives, most of which are less than five years old. For a railway of its size and current and anticipated traffic levels, this fleet is more than adequate. However the availability rate at any given time is relatively low (about 60%) dlue to lack of maintenance and spare parts.. The mvotive power fleet was recently rehabilitated with assistance from the U.K. and Germany but problem of preventive maintenance will continue to hamper the railway because of shortages of foreign exchange required to buy spare parts and materials. iii) Traffic 2.28 Passenger traffic declined with the breakup of the East African Community (Annex V, Table 7). In 1975, the peak year, the railway handled 2 million passengers, but dropped to 867,000 in 1977 but increased to 3.3 million in 1982. This decline began to reverse itself in 1980 as the railway bought passenger cars for long distance travel and resumed its suburban services around Kampala using cattle wagons for lack of better equipment.  - 13 - The returns on rail passenger transport, however,- is low. Suburban passenger transport could more easily and cheaply be provided by a well organized and managed bus system. This should definitely be a short term priority area for study before a decision is taken by the Government to commit funds for more passenger coaches. 2.29 Freight traffic has steadily declined from 1970 levels and still shows little strength although export of coffee now averages 5 trains per week of about 300 tons each. While the reduction in economic activity has been the principal cause for the decline in rail traffic, diversion of traffic from rail to road has also contributed. This is the case both for principal coffee exports and fuel imports. The railway carries only a small portion (6,000 tons or 4%) of fuel imports. This should increase when URC can get tank wagons under their own direct control. Another area of potential expansion is the movement of import goods in containers. With five trains now running per week in both directions from Kampala to Mombasa and with the ability to further increase this capacity, the railway should be carrying the majority of import-export traffic. However, by being diverted to road, Uganda bound and international transit traffic is adding substantially to the deterioration of the road network in all countries, in addition to the comparatively high transport cost of the goods moved. This is particularly so on the main international Ugandan access routes to Rwanda, Zaire, Kenya and the Sudan. It is therefore critical that this issue be addressed by the Governments concerned (para. 4.16). 2.30 The major factor behind the diversion from rail to road is the pressure from truckers, mostly Kenyan who have managed to capture a large share of the transport between Kenya and its landlocked neighbours following the breakup of the EAC in 1977. Due to internal and political pressures in Kenya, it has been extremely difficult for Kenya and Uganda Railways to reach and implement a commercial operating agreement. iv) Future Needs and Assistance 2.31 In the short term, URC needs technical assistance to strengthen the institution and reorient the management to commercial practices. Also, URC needs assistance to identify training needs and design a program to ensure that its manpower needs can be met as technical assistance is phased out. 2.32 In terms of hardware, the priorities which have been identified at this stage are: (i) track rehabilitation; (ii) completion of works in supportive infrastructure, communications and workshops; (iii) provision of handling ecuipment and specialized freight wagons, particularly for containers; and (iv) a training facility. 2.33 The future of URC will depend on its ability to operate on a commercial basis, secure an operating agreement with neighbouring railways and provide an economic service which is attractive to shippers.  - 14 - 2.34 Import fuel traffic will increase when 25 tank wagons financed by European Development Fund are delivered. This will supplement such rolling stock previously owned by EAC and now operated by Kenya Railways. In addition to bilateral aid from the U.K. and the Federal Republic of Germany, for the purchase of locomotives, the URC has also received assistance from the French Government for the purchase of locomotives and track maintenance equipment, for improvement of operations along a section of the main line between Kampala and Tororo on the Kenyan border, and for the expansion and improvement of telecommunications. Regarding the latter, the French are providing the railway with a new microwave telecommunications system which includes centralized train dispatching and control. Further work in all these fields will be required as part of the overall rehabilitation of the railway in parallel with the need to improve the organization and management. The multiplicity of donors interested in the railway combined with the varying and urgent needs of URC make it imperative that external assistance be better coordinated to avoid duplication of investments or projects on a grander scale than necessary. B. Water and Air Transport i) Water Transport 2.35 Until the present time, water transportation in Uganda was virtually non-existent. In the past a wagon ferry was operated between Jinja and Mwanza in Tanzania by the East African Community as part of the international corridor through Tanzania to Dar Es Salaam. After the breakup in 1977 the ferry ceased to operate and diversion of traffic to the northern corridor through Kenya and 1:o road transport occured due to the unreliability of this route. The Tanzanian ferry operates intermitently and is often out of service due to lack of spare parts. In 1978 the Government of Uganda contracted with a Belgian shipyard for the purchase of three rail car ferries for the Lake Victoria service. The financing was arranged through a barter of Ugandan coffee. The ships were fabricated in Belgium and disassembled for transport and are being reassembled at Port Bell near Kampala. The first ferry began operating in October 1983 with two others to follow in 1984 and 198'i. With the advent of containers, transport using wagon ferries is not a least cost solution for containerizable cargo. Therefore, the system being put into place may soon be obsolete for such cargo. However the Government considers it necessary to have a lake service as an insurance option, and for certain commodities like oil products at the moment an alternate access to international markets could lead to reduced import costs despite a longer and more expensive transport distance. Recent:ly this route is also carrying exports of maize from Uganda to Tanzania. 2.36 Further, while the Lake Victoria service functioned relatively well under the East African Community, the three former member countries have set up independent, uncoordinated transport systems. It is questionable whether the new ferries contracted by Uganda can effectively fulfill all normal transport needs of the country given that a large part of the proposed transport route is in Tanzania and beyonid Uganda's  15 - effective control. Traffic levels in Uganda do not warrant further investments to modernize and update two separate and competing routes (see Annex I, International Transport Routes). While it is doubtful that traffic levels in Uganda alone woul,d justify additional investments in the Lake Victoria alternate route, such a route will provide Uganda with a stronger bargaining position vis-a-vis Kenya. In the case of petroleum products, this route has proven cheaper than the pipeline/road alternative through Kenya. It is, however, more expensive than the all rail route through Kenya. Therefore, rather than expanding the capacity of the Lake Victoria route beyond its current level, the Government should keep this option open but continue to make every effort to secure the necessary cooperation with Kenya to ensure the most efficient and least cost transport route to the Indian ocean. ii) Air Transport 2.37 The infrastructure for air transport consists of an international airport at Entebbe and eleven domestic airfields, of which eight were operated until June 1981 when all domestic services were suspended due to unsafe operating conditions. Operations resumed in mid 1982 but flights are often cancelled because of lack of equipment and navigational aids. 2.38 Entebbe airport is equipped to handle wide-body aircraft but its lighting and navigational equipment, which were damaged during the war, are now being repaired and therefore flights are operated under vi'sual flight rules until these works are complete. Only one major carrier, SABENA, operates a weekly DC-10 service from Brussels. Other international flights are operated by Ethiopian Airlines, once a week, and Kenya Airways, three times a week. Although the passenger terminal is relatively new, it suffered some structural damage during the liberation war and is in need of repairs. Other facilities damaged during the war in addition to the lighting, radar and navigational facilities include the fire-fighting equipment, the control tower, and the meterological equipment. Accordingly, the'airport was designated unsafe by ICAO and is one of the major reasons why most of the major carriers which had served Entebbe have left. A cargo terminal, whose construction was interrupted by the war, is being completed, as and when funds are available. Upcountry airports are mostly small grass or murram landing strips with small, poorly maintained buildings. The airfield at Soroti, the site of a regional air training school, has a control tower; most of the other airstrips have no grass cutting equipment, or serviceable navigational and safety aids. 2.39 Uganda Airlines was formed in 1976 and became the sole national carrier with the collapse of East African Airlines in 1977. During the war much of its aircraft and equipment were lost or damaged, including two B-707s. Since the war, the airline has replaced the B-707s and resumed its international service to points in Europe, the Gulf (Dubai) and regional centers in East Africa. The airlines' fleet comprises two B-707-320C's, one F-27 and one Beechcraft King Airs. The B-707s and the F-27 are used on scheduled services.  - 16 - 2.40 Traffic levels on Uganda Airlines are relatively low ( Annex V, Table 10) with air cargo the most important revenue-earner. Both B-707 aircraft are combi-versions carrying main-deck cargo. In 1982, in international services 47496 passerngers were carried (1981:43572) and 5818 tons of cargo (1981:5569 tons). Domestic flights are less important. The first six months of 1983 only 14469 domestic passengers were carried compared to 21841 on international services. A main problem for the airline is that low international passenger are reduced further through conversion at official (window one) exchange rates, whereas a large proportion of costs are in foreign currency only obtainable at less preferential exchange rates. Furthermore the airline lacks a suitable aircraft for regional routes within Africa and the B-707 aircraft will not meet noise limits in Europe after 1985. A low level of capitilization for the airline also limits its operations. 2.41 The first priority in the sub-sector is to restore Entebbe airport to ICAO standards and thus improve safety and induce international carriers to resume services so that Uganda Airlines can concentrate on regional routes. This would also require a concurrent: effort to rehabilitate tourism infrastructure to stimulate demand for air transport. While complete rehabilitation of Entebbe airport is estimated to cost US$25.0 million, the Government has included US$2.3 miLllion in its revised recovery program to make the minimum repairs to the aiLrport and provide the essential navigational aids, meterological services and runway lighting to restore safe operations. This is reasonable in the light of the needs to ensure adequate and safe air transport connections to and from Uganda.  - 17 - Chapter III A. Institutional Structure for the Sector 3.1 Two ministries share the main responsibility for the transport sector, the Ministry of Transport and the Ministry of Works. Also involved indirectly are: the Ministry of Commerce for transit traffic; the Ministry of Co-operatives and Marketing for UCTU and marketing parastatals; the Ministry of Planning and Economic Development for overall investment planning; and the Ministry of Finance for project financing and external aid. 3.2 The Ministry of Transport has a policy role in matters of road, rail, air and water transport. It also oversees the operations of Uganda Railways, Uganda Airlines, the Uganda Transport Company (UTC) and People's Transport Company (PTC), the latter two being involved in road passenger transport. The Ministry of Transport has a transportation department which operates a fleet of 30 for hire trucks at the official tariff as a public service for customers not able to avail themselves of transport at competitive rates. The Ministry of Transport is also responsible for transport regulation, control, tariffs, and road transport safety. 3.3 The Ministry of Works (MOW) is responsible for planning, constructing and maintaining highways and for airport operations including the international airport at Entebbe. A more detailed description of MOW's organization and staffing is presented in Annex III. 3.4 The transport planning function is in principle supposed to be carried out in-a collaborative way by the Ministries of Transport and of Planning and Economic Development (MPED). However, because of the lack of clearly defined objectives and of data and manpower shortages, little has been done and most transport agencies and parastatals have, default, taken on a high degree of autonomy in planning their investments. As expected these agencies give little regard to economic or intermodal considerations. While the MPED should have the role of overall economic planning, including coordinating the transport plan with relevant sectors of the economy, the sectoral responsibility should be left to the Ministry of Transport. The latter should: (i) systematize an intensive transport sector knowledge through better data collection and analysis; (ii) assess Uganda's medium and longer term transport needs; (iii) prepare a comprehensive transport investment program; and (iv) develop a transport strategy and policy framework. Some effort is being made in this direction with the ongoing ILO/UNDP project which is providing technical assistance. Further assistance and training support will be necessary to accomplish the above tasks and ensure local capacity to continue them. 3.5 To assist the MPED in its role as overall investment co-ordinator, a UNDP project, with the Association as executing agency, is providing, among others, a transport: specialist to advise Government on transport matters, particularly with respect to the rehabilitation of the sector. The transport advisor is part of a team in bIED which is to assist  - 18 - that Ministry in implementing Government's program of economic rehabilitation. Because of the weak links between the MPED and the Ministry of Transport and the criti.cal shortages of specialists for the latter to carry out its function, the transport advisor has not yet been able to have the impact on transport planning that was originally intended for him. The terms of reference of the transport specialist call for him to inter alia: (i) prepare a docunment on transport policy reflecting the needs and priorities between modes; (ii) review, appraise and monitor implementation of transport sector projects; (iii) examine pricing and tariff policies for transport; and (iv) train counterparts in the techniques and methods of transport planning and project preparation. B. Transport Policy and Planning 3.6 As was stated-above, the Ministry of Transport is responsible for transport policy in addition to its role of planning and coordination for the sector. Although no clear transport policy has been enunciated, a set of implicit or explicit objectives can be derived froma Government actions in the sector. Thus, for international transport, the Government sees rail transport as the principal mode for long distance freight movements. Moreover, given the difficulties experienced with Kenya in operating the corridor to Mombassa, it is seeking to strengthen previously used alternative routes, namely the Lake Victoria - Tanzania (rail) corridor to Dar Es Salaam. Additionally, it has assigned an active role to Uganda Airlines in international air transport. On the domestic front, policy objectives are considerably less articulate. For examiple the role of the parastatals vis-a-vis the private sector is not well defined. Although the Government's general strategy is to bring the transport system back to its former level of efficiency, it has been working concurrently at improving competing road and rail services without a clear set of priorities. 3.7 To help it formulate a comprehensive transport policy, the Government requested the International Labour Organization (ILO) to: (i) review the current situation and prepare an overall transport policy; and (ii) prepare a feasibility report on needed surface transport investments. The ILO has agreed to submit the report currently being prepared to the Association for comment. This assignment will be followed by a second phase which will involve the recruitment of a transport development advisor for a period of 18 months to assist the Government in the initial phase of the implementation of the policy and provide advice to the Ministry of Transport on transport matters. In addition the ILO project includes 20 man-months for specialized consultancies such as maintenance management, management information systems design and installation, supply and stores management, and railways management training. The 20 man-month duration of the transport development advisors' assignment under the ILO project may need to be extended to permit more meaningful work. Parallel to this assistance is the need to help establish a statistical division in the Ministry of Transport to coordinate the data gathering and analysis needed to monitor the performance of the transport system (para. 3.10). A transport planner/statistician and assistant expert in this field will be needed in the Ministry of Transport..  - 19 - 3.8 The Ministry of Transport is seriously understaffed, and therefore has not been effective in its role as transport planner and coordinator. The MPED, which has overall investment coordinating responsibility, is also weak and not iable to provide the much needed direction to other ministries. This was evidenced in the inordinately long delay required to get approval of a sub-project under the Technical Assistance Credit (1077-UG) to financie the updating of the Highway Maintenance and Organization Study in preparation for the proposed Third Highway Project. 3.9 The Government's first priority in overcoming problems in the transport sector is the manpower shortage issue which not only affects transport but all other sectors. Partly responsible for this is the low level of salaries which militates against the attainment of high producti- vity levels by workers (para. 2.8). Also, Government must strengthen MOT's authority for overall transport sector responsibilities and decisions.Government recognizes that this will be difficult without large inputs of technical assistance and training of local staff. 3.10 One of the major reasons why the Ministry of Transport and the MPED are unable to carry out their roles prdperly is the lack of data for analyses of sector performance. There are virtually no data on transport costs or they are so outdated and unreliable as to be of little value. Transport costs are important not only. for transport policy, but also for pricing policy in general. Traffic data are sketchy or out of date and regular traffic counts have not been carried out since 1974. This is in part due to the severe manpower shortages of both MOW and the Ministry of Transport but is also the result of a system unable to adjust to change following the collapse of the EAC. Under the East African Transport system, statistics were relatively well kept but the present situation in Uganda requires that a whole new information collecting system be set up. One of the first tasks in reorganizing the transport planning function will be for the Ministry of Transport to work closely with the Department of Statistics in MPED to set up a system of data gathering to monitor the transport sector. It will also require the close collaboration of the Customs Department to monitor international traffic which is very important to Uganda as a landlocked and transit country. This important problem will have to be addressed in the long and medium term on one hand but in the short-term will require technical assistance and training to organize procedures and train staff. 3.11 In summing up, the institutional and policy planning and coordination issues facing the transport sector in the short term are, in order of priority: (i) the severe manpower shortages at all levels, but particularly at managerial levels; (ii) the lack of a data base with which to analyze the sector needs and performance;  - 20 - (iii) the lack of a clearly defined overall transport policy; and (iv) the lack of a clearly defined relationship between the Ministry of Transport and the MPED. C. Investment Plan 3.12 The main priorities in the sector are to rehabilitate the transport system so that it can cope with the demands being placed on it now and in the coming years as the economy is revitalized. The two highest priority areas on which the Government is concentrating, and with which the Association agrees, are the rehabilit:ation of Uganda Railways so that it can move a greater share of the import/export traffic and the maintenance of the national road network. In order to tackle these priorities, the Government has prepared a recovery program (1982-84) which was recently revised, amounting to US$789.6 million of which transport's share is US$78.6 million (10%). The share of other sectors are: 27% for agriculture, 35% for industry and tourism, 20% for social infrastructure and the remainder for communications, mining and energy. Given the short term needs and condition of the transport system, the distribution of the recovery program is reasonable. The breakdown for transport is as follows: Roads - US$48.6 million (Annex V, Table 11); Railways - and Lake Victoria Ports - US$26.0 million; and airports - US$4.0 million. Except for the funds allocated to the Lake Victoria ports, the other projects are sound and reflect the priorities in the sector. The funds allocated to the Lake Victoria ports is to provide new ferry facilities at Port Bell (facilities already exist at Jinja); but the economic justification of all the proposed new ferries is questionable. 3.13 The recovery program as a whole is very ambitious, and it is clearly evident at this stage that only part of it may be completed by the end of 1984. The most obvious constraints to implementation of the proposed program are financial and maLnpower shortages. For transport the absence of a well communicated transport policy, and proper coordination are the greatest bottlenecks.  - 21 - Chapter IV Problems and Recommendations 4.1 The transport sector in Uganda is of vital importance to the rehabilitation of the economy. As Uganda is also a landlocked and transit country, the importance of having an efficient transport system is further hightened. However, the country is still weakened from a decade of economic mismanagement culminating in a devastating liberation war. It was anticipated that the economy would rebound quickly once these constraints were removed but the damage was so pervasive that righting it has and will take time. As already stated, the transport system also suffered greatly from the economic deterioration and the collapse of the East African Community. It is widely recognized that one of the key elements in restoring the economy is the need to restore the transport system. The preceding discussion has outlined problems which must be solved if the performance of the sector is to be reinstated so that it can adequately fulfill its role. The problems are summarized below with recommendations on how to solve them. A. Lack of Qualified Manpower 4.2 Under the East African Community, management of all transport entities was headquartered in Kenya with only divisional or operating staff in Uganda. After the EAC breakup, Uganda launched itself in a number of transport operations, including Uganda Railways and Uganda Airlines, with very few experienced management staff. The shortage was compounded by the exodus of most of the experienced staff during the Amin regime. This has contributed to the major operational and financial difficulties and the resulting loss of efficiency and the high transport costs which these corporations face.. 4.3 It is recommended that a comprehensive manpower survey be undertaken for the transport sector and that a program of technical assistance and training be established in which potential donors could participate through modal specific projects. The manpower survey could be a possible sub-project to be financed under the proposed Second Technical Assistance Project. B. Low Level of Salaries 4.4 The level of salaries in Ulganda has not been sufficiently adjusted following the devaluation of 1981, and as such Government personnel, in particular, receive saLlaries which only cover about one fifth of the cost of living. Most employees are forced to seek other forms of remuneration and many have undertaken gardening on the side to supply necessary foodstuffs. Because of these other activities, productivity levels are low and absenteeism from work is high.  - 22 - 4.5 While this issue must be addressed at the miacro-economic level, it has serious implications in the transport sector, particularly road maintenance. The Ministry of Works is having difficulty attracting qualified personnel as a result of the low salary structure, and the same applies to other Government transport parastatals. A complete review of the Government salary structure will have to be undertaken before proper levels can be established. In the meantime the impact of the problem in the transport sector could be alleviated by the use of private contractors- both foreign and local. Also possible support from the IWorld Food Program to supplement wages for workers involved in such works as routine road maintenance could be considered. C. Need to Improve the Transport Information System 4.6 One of the highest priorities in the transplort sector is-to establish a data base upon which the analysis of the performance of the transport sector and decision-makiag should be based. Information on transport costs, supply and demand, financial control, and pricing are very difficult to obtain since the Department of Statistics in the MPED has all but ceased to function. 4.7 To address the problem of the poor data base in transport, it is recommended that as a supplement to the ILO Project (Para. 3.7) a transport statistician and a transport management information specialist be recruited to work with the Ministry of Transport. The experts should be responsible for collection, coordination and analysis of all the necessary data and information pertaining to the railway, the airline, and the road transport industry in order to provide the necessary policy recommendations as well as help rationalise the day to day operations of the transport system. D. Transport Sector Management 4.8 One of the major needs in the Uganda transport sector is planning and coordination within the sector and between transport and other productive sectors. The proliferat:ion of agencies involved in transport and the need to coordinate domestic transport needs as well as Uganda's role as a major transit route can nio longer be handled on an ad-hoc basis. This is compounded by the totally uncoordinated aid being provided to the sector by external agencies both bilateral and multinational. 4.9 As mentioned earlier the Ministries of Transport and Planning which should have planning and coordination responsibility are unable to fulfill this role, due chiefly to a shortage of trained manpower. The training programs proposed in para. 4.3 will have a beneficial impact on these Ministries, and the reinforcement of transport planning through the setting up of an adequate data gathering and analysis system will be a major step in improving transport planning and coordination. Further technical assistance in the medium to long term will, moreover, be required.  - 23 - E. Need to Concentrate Future Investment in Rehabilitation and Maintenance of Infrastructure and Equipment 4.10 It is clear that in the short term Uganda must concentrate its efforts in rehabilitation and maintenance of its existing transport system. Many years of neglect have resulted in serious deterioration in all sub-sectors. In highways, assistance is needed for MOW to rehabilitate its road maintenance capability and train staff to carry out the works. This will be addressed under the proposed Third Highway Project appraised in April 1983. The road transport fleet is also in need of rehabilitation and expansion. The quickest method to make funds available to purchase spare parts and equipment is to use the Association's Second Reconstruction Credit, and Government should be encouraged to carefully select sub-projects which will help it increase transport capacity at the lowest possible cost. - 4.11 For rail transport, the most pressing problem is to increase its capacity to carry more import/export traffic. This will require serious negotiations with Kenya and support from the Association. The railway has sufficient locomotives and while it could use more rolling stock, it is in even greater need of management assistance and track renewal. Expansion of the Lake Victoria ferry service also needs to be reviewed seriously in the light of containerization. It is too late to advise Government against the introduction of the ferry boats since they have been practically paid for. Government should, however, take any opportunity to sell or lease the last one and be open for their use not only by wagons but also by lift-on-lift-off containers. 4.12 The most pressing problem facing air transport is in the short term the restoration of Entebbe airport to ICAO standards to ensure safety of operations. Assistance to Uganda Airlines is also needed to determine its possible reorganization into a more cost effective operation and its best options for fleet replacement. F. Need for Foreign Exchange to Purchase Spare Parts 4.13 To date the effort to rehabilitate the transport sector has been limited, in part, by the shortage of spare parts resulting from Government's foreign exchange crisis. Transport equipment is severely underutilized because of the lack of spare parts and the slow bureaucratic procedures for allocating funds from the available credits. In addition, the lack of a clear-cut set of objectives and policies for the transport sector has made it more difficult for Government to mobilize resources from other agencies. As the economy improves, it will be imperative that transport maintenance equipment and vehicles be rehabilitated as a first step to improving productivity and utilizing existing assets in all modes. The reconstruction credits will likely require supplemental assistance which could be met through projects in each sub-sector. As the road sub-sector is one of the most critical, further assistance in the provision of spare parts purchases for maintenance equipment is a part of the Association's proposed Third Highway Project. Assistance to other modes, namely railways and the road transport industry, are be provided as a short term measure from the IDA Reconstruction Credits.  - 24 - G. Financial Management of the Sector 4.14 In its haste to build its own transport system after the collapse of the East African ComTminity, Uganda embarked on a series of investments in transportation equipment including aircraft, railwray rolling stock, ferrys, trucks and buses without much consideration f'or their financial viability. In addition, the capitalization of most of the parastatals is such that it could not even cover the cost of spare parts needed to run the various operations. As such, deprieciation accounts are meaningless and the agencies, including Uganda Railways and Uganda Airlines, are unable to accurately reflect costs in their tariffs. There is very little financial discipline other than what is imposed by budget restrictions. 4.15 It is recommended that before any further investments are committed, studies of Uganda Railways, Uganda airlines, UTC and PTC be undertaken to determine their cost structures and review tariffs so that they may be brought in line with operating costs for each mode. This is one of the objectives of the IDA-financed parastatal cost accounting study. R. Coordination with Kenya 4.16 Being a landlocked country, Uganda suffers from having to transit through another country for its access to the sea, a route which is 90% outside its .territory and control. Coordination between Uganda and Kenya is critical to the functioning of UJganda's transport system, particularly rail. In addition, Uganda serves aLs a transit route for goods travelling to and from Rwanda, Bur'undi, parts of Zaire and the Sudan. The effective utilization of the rail system between Kenya and Uganda is being hampered by lengthy procedures imposed by Kenya, including discriminatory charges, and by the strong trucking lobby in Kenya which has successfully captured and retained a large share of bulk traffic to Uganda which economics dictate should be moved by rail. T'he heavy trucks used for road transport are seriously damaging roads in both countries. The absence of a working agreement between the countries has also imposed much higher costs on the Ugandan rail system than would otherwise be the case. Considerable progress in this area has been made recently but needs to be followed up. 4.17 It is recommended that the northern corridor (Kenya, Uganda, Rwanda, Burundi and Eastern Zaire) be considered in a regional context so that assistance could be linked to regional cooperation in matters of common interest such as transport. Even in the case of Kenya which appears to benefit from the status quo, the absence of a cooperative agreement between the two countries and the overloading on the Mombasa-Uganda border road are causing severe damage to the road. It is rec:ommended that external aid agencies assisting the northern corridor countries put their weight behind forging a cooperative agreement between the transit and landlocked countries in the matter of external transport.  - 25 - I. Summary of Recommendations 4.18 The principal recommendations arising from the foregoing are summarized as follows: (i) carry out a transport sector manpower survey and propose a training program to meet longer term needs for qualified staff to manage and operate the sector's entities; (ii) set up, for the Ministry of Transport, a system of data gathering and analysis to permit policy formulation and decision-making in the transport sector; (iii) improve transport admi.nistration and policy making; (iv) organize and define more clearly the relationships between MPED, MOW and the Ministry of Transport to improve transport planning and coordination; (v) establish a mechanism to ensure better aid coordination among donors to avoid duplication and concentrate efforts where it is most urgently needed; (vi) provide the necessary foreign exchange and improve foreign exchange allocations to the transport sector for spare parts for essential rehabilitation of road maintenance equipment, vehicles and railway locomotives and rolling stock; (vii) improve coordination between Uganda and Kenya, particularly as it applies to rail transport; (viii) review government salaries and make the necessary adjustments to motivate staff; (ix) bring the Entebbe Airport and aeronautical aids and communications up to ICAO standards for safety of flight operations as soon as possible; (x) monitor closely the financial feasibility of expanding the rail-car ferry system for Lake Victoria services linking Uganda and Tanzania, and review the least cost alternatives for use of the ferry-boats; (xi) assist the Uganda Airline with a view to rationalizing the airline as an efficient regional carrier and review its best options for fleet replacement; (xii) embark on an intensive program to train URC staff; as a short term expedient to recruit technical assistance to help run the railway;  - 26 - (xiii) carry out a study oi- possible bus alternatives to UR's suburban passenger services; (xiv) establish Uganda Rai.lways as a financially autonomous agency with the necessary increase in capitalization.  - 27 - ANNEX I International Transport Routes Uganda, a landlocked country, is dependent on its neighbours, particularly Kenya, for overland transport to East African ports. A rail system capable of handling all of the import and export traffic of bulk goods, i.e. fuel and coffee, already exists. In 1982, the Uganda rail system managed, with the assistance of ILO experts, to raise the level of coffee exported by rail to 60% of total coffee exports. This represents five pairs of trains per week interchanged with Kenya Railways compared to two per week in 1980. Several factors prevent this level from being increased further. Firstly, there was a shortage of wagons available to Uganda Railways and, secondly, the lack of an interchange agreement with Kenya Railways prevented a better utilization of equipment and rolling stock in both systems. Thirdly, the inefficiency of both countries customs at border crossings causes inordinate delays. There is little doubt that Kenya Railways and Uganda Railways have sufficient wagons between them to shift of all Ugandan traffic to rail, over and above current traffic levels on the two railways. However, the breakup of the East African Community and the deterioration in Uganda Railways performance between 1976 and 1980 have resulted in mutual distrust between the two railways. This has led to parts of the old EAR wagon fleet, including tank wagons, being underutilized in Kenya. Inequitable interchange practices have developped, such as Kenya Railways charging full tariff for Ugandan freight moving in Uganda Railways wagons, without paying an interline wagon hire charge. Because of the difficulties of reaching an optimum operating system with Kenya, the Government of Uganda has begun to invest heavily in an alternate "insurance" route via Lake Victoria through Tanzania to the port of Dar es Salaam. The investment decisions made to date are not supported by economic analysis and the Government is not fully aware of the cost implications of its decisions. Three rail-car ferries capable of carrying up to 800,000 tons a year have already been contracted in Belgium and the first one in operation (para. 2.35). Every indicator suggests that the Tanzanian transportation system could not absorb such traffic levels. In addition, with current turn around times for wagons to and from Tanzania at about six weeks, this would require the purchase of about 1,000 additional wagons to operate the route at that traffic level. The cost in wagons alone would be about US$75 million. Even assuming that traffic levels reach or surpass the early 19,70 levels of 1.6 to 1.8 million tons, this investment cannot be justified. The most viable option available is to improve and better utilize the Northern Corridor route which also serves and benefits Rwanda, Burundi and Zaire. This will require that considerable pressure be brought to bear on Kenya. The benefits to Kenya itself would be substantial. A possible strategy to induce the Kenyan Government to favour this approach might include tying future lending to that country for the transport sector to improved co-operation between the two countries.  - 28 - ANNEX II Traffic Up to 1972 the Ministry of Works maintained reliable traffic counts for all sections of the classified road network for which it had responsibility for maintenance. Annual records were kept for over 240 road sections, including primary, secondary and tertiary roads. However from 1973 until 1982 only a few scattered traffic counts were undertaken but these records were lost. In 1982 the Ministry undertook a traffic counting program between April and June to serve as a basis for updating the Highway Maintenance and Organization study carried out by consultants. Traffic counts were undertaken at 39 points (Annex V, Table 2) which were selected as being critical road sections of primary, secondary and tertiary roads. The coverage of the program was restricted due to security, problems. The 1982 figures were compared to the 1972 traffic counts and percentage changes were computed for the stations which could be compared. The figures obtained (Annex V, Table 3) show that the traffic levels decreased by about 50% over the 10-year period. This correlates well with the number of vehicles registered and the volume of petrol and diesel fuel imported which have also declined by about 50% over the same period (Annex V, Table 4). For the 1982 traffic counts, the figures varied form a low of 30 vpd on tertiary roads to slightly more than 3000 vpd on paved primary roads. Traffic composition is mostly light vehicles which represent about 60% of the traffic levels; medium vehicles and heavy vehicles represent about 30% and 10% respectively.  - 29 - ANNEX III Administration and Staffing (i) Administration The Ministry of Works has undergone many changes during the past decade. In 1972, the Ministry of Works, Communications and Housing as it was then called, had the following functions: Communications and Administration; Civil and Highway Engineering; General Engineering; and Housing and Public Buildings. In 1973, a Ministry of Communications was established and in 1976 Housing was separated and the Ministry of Works as a separate entity was abolished and its functions were brought under the Ministry of Transport. This later transfer was accomplished by moving the accounting and administrative offices to Kampala, but the technical and road services of the MOW remained inL Entebbe. These and other modifications were accomplished primLarily by executive directives and were accompanied by confusion and jurisdictional debates, some of which continue to the present. The situation was further compounded by the looting of the MOW during the liberation war. In 1980 the functions of the MOW were reconstituted under the Ministry of Rehabilitation, and then in 1981 the Ministry of Works reappeared as a se!parate entity. The fact that the existing organizational structure of the MOW is- the product of a rather fragmented process of development - one which is still going on - is reflected in the! absence of a comprehensive, current organizational chart for the Ministry. Direction of the MOW is tbe responsibility of the Minister assisted by the permanent secretary. The services of the MOW are provided through four divisions: (i) the Technical Division, (ii) the Finance and Administration Division; (iii) the Highway Division; (iv) the Stores Division (see organization chart). Road Maintenance, Training, the Materials Laboratory and the Mechanical Section all come under the Technical Division. The Highway Division is responsible for planning, design and construction supervision while the Finance and Administration and Stores Divisions are responsible for accounts, financial control and supplies to support other divisions., (ii) Staffing The MOW separates its; employees into two classes: civil servants and group employees (casual workers). Each group has separate designations as well as different salary scales. Currently, the Ministry has an overall vacancy rate of about 50%. It is higher for engineers and management level positions. Out of a total of 39 engineering posts, only 15 are filled. This creates severe strains on the overall administration of the Ministry and the result has been that the level of works carried out is very low. Too many of the persornel are concentrated at headquarters and not enough are assigned to the regions outside the Kampala-Entebbe area. The high vacancy rate has also resulted in distortions of work responsibility, creating uneven workloads and uncertainty over procedures.  30 - The high vacancy rates are in part due to the unrealistically low government salary scales and the security problems which continue to plague the country. Most of the engineers positions which are not filled were left vacant as these people fled the country or were killed during the reign of Amin. Many are still feariful of returning because of the continued political uncertainty. The proposed Third Highway Project will partly address this problem through technical assistance and training but the question of salaries will have to be addressed in a broader macro-economic context.  - 31 - ANNEX IV Past Bank Group Assistance The Association has already helped finance two highway projects in Uganda. The first (Credit 108-UG, US$5.0 million, 1967) provided for construction to paved standard of the Mbarara-Katunguru road (113 km), construction of several small agricutural and feeder roads, and detailed engineering of 740 km of main and feeder roads. According to a Bank audit on this project (No. 1623), the main road construction was of poor quality as -a result of the contrator's inefficient organization and workmanship, and the actual rate of return on this investment was roughly estimated at 8% to 11%, although because of lack of adequate maintenance the returns may even be lower. The Second Highway Project (Credit 164-UG US$11.6 million, 1969) helped finance: (a) construction of 665 km of primary, secondary and feeder roads engineered under the previous project; (b) a highway investment, maintenance and organization study; (c) feasibility studies and detailed engineering of about 400 km of roads selected from among those identified in (b) above, and (d) technical assistance to MOWH. The project was completed in 1981. Project implementation was hampered, especially since 1975, by the lack of local funcds due to the poor performance of the economy, lack of qualified staff, and high prices for all purchased goods due to shortages and parallel market operations.  I  UGANDA TRNSPORT SECTOR IEt4ORANDUH Table I - UGANDA - llICIIWAY NETWORK (LEIIGTII IN KM) Primary Roads Secondary Roads Tertiary Roads Total Bit. Gravel bit. Gravel lit. Gravel blit. Gravel TOTAL Rea ostble Agency 1llatary of Uorks 1,630.0 2,233.0 85.0 1,704.0 219.0 1,146.0 1,934.0 5,083.0 7,017.0 - Kampala 632.0 236.0 77.0 179.0 80.0 155.0 789.0 570aQ 1.359.0 - Hbale 316.0 549.0 553.0 125.0 2'8.0 441.0 1,350.0 1,791.0 - Fott Portal 536.0 5S5.0 2.0 679.0 5,0 443.0 543.0 1,707.0 2,250.0 - Cu,lts 146.0 863.0 6 0 293.0 5.0 300.0 161.0 1,456.0 1,617.0 Rural Local AuthoritIes 20,020.0 20,020.0 20,020.0 Total 1,630.0 2,233.0 85.0 1,704.0 219.0 21,146.0 1,934.0 25,103.0 27,037.0 Source: Hileistry of Works. [ate: Juae 1983. F-  33 - ANN,Ex 5 Table 2 UGANDA TRAUNSPORT SECTOR !E!ORANDUM Table 2 - TRUFFIC COUNT LOCATIOIYS mOW Primary 1982 Count Location Secondary Paved Esti3ace4 Centre or or AADT Nu1ber. Tertiary Gravel 1. Kampala Before Mukono P Paved 1101 2. Mukono-Kayunga After Makif -,a S Paved 260 3. Kayunga-Jinja Near Kagulumira T Paved 312 4. KaRpala-Entebbe Before Kajansi P Paved 2068 5. Kampala-Hoima After: Busunju ' P Gravel 196 .6. Kampala-Hityana Paved 289 7. Ka=pala-Jinja Near Bulamagi P Paved 1870 8. Kampala-Masaka After Buddo P Paved 1404 9. Pakwach-Arua Near Nebbi . P Gravel 64 *0. Pakwach-Arua Near Arua P Gravel 112 11. Gulu-Karnma After Panwo P Paved 128 12. Gulu-Pakwach Afte:r Olwiyo P Gravel 437 !3. Gulu-Lira . Near Aboke T Gravel 63 14. Gulu-Atiak-Nimule Before Atiak P Gravel 44 15. Mbarara-Kikagati Near Gayaza S Gravel 37 16. Mbara-Ntungamo-iKabale Before Ntungamo p Paved 213 17. Ntungamo-Ishaka Before Kagamba- S Gravel 54 18. Ntungamo-Rukungiri After Kebisoni T Gravel 72. 19. Kasese-Kilembe T Gravel 416 20. Masindi-Kafu-Bridge Befoore Wobulenzi P Gravel 56 Kazpala Afte'r Rafu Bridge 21. Port ?ortal-Kasese-Katungure Before Equator Road P Paved 214 22. Katunguru-Ishasha S Gravel 19 23. Kafu Bridge-Karuma igumba - P Paved 115 24. Fort Portal-Kyenjojo P Gravel 69 25. Fort Portal-Bundibugyo S Gravel to 26. Kabale-Kisoro P Gravel 111 27. Iganga-Terinyi-Mbale Before Pallisa Road P Gravel 32' 28. Jinja-Kamuli Before Bulangala T Paved 357 29. Mbale-Tororo 8 kns from Mbale P Paved 853 * 30. Tororo-Iganga-Jinja Before Iganga P Paved 1078 31. Tororo-Iganga-Jinja Before Buwayo P Paved 553 32. Mbale-Kumi Befere Kumi P Paved 379 33. Soroti-Moroto After Akisim S Gravel 33 34. Mbale-Kapchorwa-Suam After Sipi S Gravel 42 * 35. Soroti-L.ira Before Otuboi P Gravel 65 36. Ishaka-Rukungiri Befoire Fuhind T Gravel 67 37. Katunguru-Ishaka After Kikakora P Paved 162 38. i!asaka-Kyotara-Mutukulu Before Kyotara P Paved 859 39. Masaka-Mbarara Before Lyantonde P Paved 366 Source: MOW and Consultants Louis Berger. Date: December 1982.  - -.34- ANNEX 5 Table 3 UGA2IDA TRANSPORT SECTOR 1EMORANDUM Table 3 - REDUCTION in 1972 TRAFFIC LEVELS BY AREA Traffic Count 1982 1972 centre number traffic traffic Kampala Area 2 260 265 3 312. 195 Average 45% 5 196 2541 reduction 6 289 547 in traffic - 8 1404 1980 Gulu Area 9 88 142 11 128 258 Average 43: 13 63 259 reduction 14 44 96 in traffic Mbale Area 22 325 103 28 357 694 29 853 1466 30 815 1866 Average 58: 32 379 392 reduction 33 33 184 in traffic 35 65 143 Fort Portal Area 15 37 201 16 213 332 17 54 127 19 416 589 20 56 252 Average 52%- 21 214 432 reduction 22 19 52 in traffic 23 115 229 24 69 281 25 10 126 26 111 97 37 162 432 39 366 421 Averag,e 50% total reduction in traffic Source: Louis Berger - Highway ?Maintenance and Organization Study - December 1982.  11WEIKIIT ~ ~ .Si[lll llllil O Table 4 - rlsmD: lium(ns oW mEimm* 1WIIV is 1905 .1906 1%7 196a 1969. 1970 1971 1972 1913 1974 1915 1976 1977 1978 1979 1960 1961 1982 34 M2h1