Somalia - Fourth Highway Project

Document of I The World Bank F L FOR OFFICIAL USE ONLY Report No. 3604-SO STAFF APPRAISAL REPORT SOMALI DEMOCRATIC REPUBLIC FOURTH HIGHWAY PROJECT January 6, 1983 Transportation Divisions I and II Eastern Africa Regional Office 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.  CURRENCY EQUIVALENT Currency Unit = Somali Shilling (So Sh) US $ 1.00 = So Sh 15.2 (from July 1, 1982) WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.62 miles 1 square kilometer (km2) = 0.386 sq. miles 1 hectare (ha) = 2.47 acres 1 metric ton (ton) = 2,204 pounds ACRONYMS AND ABBREVIATIONS AfDF - African Development Fund AF - Arab Fund for Economic and Social Development CED - Civil Engineering Department GNP - Gross National Product IDB - Islamic Development Bank MF - Ministry of Finance MMTP - Ministry of Marine Transport and Ports MNP - Ministry of National Planning MPW - Ministry of Public Works MT - Ministry of Transport NPA - National Petroleum Agency NTA - National Transport Agency SA - Somali Airlines SPA - Somali Ports Authority SSAL - Somali Shipping Agency and Line UNDP - United Nations Development Programme FED - European Development Fund VOC - Vehicle Operating Costs vpd - Vehicles per Day -Q GOVERNMENT OF SOMALIA FISCAL YEAR January 1 - December 31  SOMALI DEMOCRATIC REPUBLIC FOR OFFICIAL USE ONLY FOURTH RIGHWAY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE TRANSPORT SECTOR ................................... A. Geographic and Economic Setting ...................... I B. The Transport System .. 2 C. Transport Planning, Policy and Coordination . . 4 D. Previous Bank Group Involvement in the Sector .. 6 II. THE HIGHWAY SUBSECTOR .................................. A. The Network ................................... 9 B. Road Use ... ......................................... 10 C. Administration ...................................... 13 D. Training . . . ................... 15 E. Planning ...................... 15 F. Financing ...................... 15 G. Engineering ...................... 17 H. Construction .... .................. 17 I. Maintenance ...................... 18 III. THE PROJECT ............................................ A. Objectives ....................................... 19 B. Project Description ................................. 19 C. Cost Estimates ...................... 22 D. Financing ........................................... 23 E. Implementation and Procurement .......... ............ 24 F. Disbursements .......... ............................. 25 G. Accounting, Auditing and Reporting Requirements .25 H. Environmental Aspects ................................ 26 IV. ECONOMIC EVALUATION .................................... A. General . ............................................. 27 B. Benefits and Beneficiaries .......................... 27 C. Economic Analysis ................................... 28 D. Other Project Elements ......... ..................... 29 E. Sensitivity and Risks . .............................. 30 V. AGREEMENTS REACHED AND RECOMMENDATION ..... ............. 31 The original report was prepared by S. Kathuria (Sr. Engineer), D. Jovanovic (Sr. Economist), and A. Khanna (Young Professional) who appraised the project in May 1981; it was revised in December 1982 by S. Sigfusson (Sr.Engineer) and K. Clare (Sr. Economist). The report was edited by C. Applegate (Technical Editor). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Cont'd.) ANNEXES 1. Draft Terms of Reference for Road Maintenance Study 33 2. Draft Terms of Reference for Technical Assistance to 37 the Civil Engineering Department 3. Progress Reporting Requirements 43 4. Economic Evaluation of Strengthening/Improvement of 45 the Afgoi-Baidoa Road 5. Related Documents and Data Available in the Project 47 File CHARTS I. Organization of the Ministry of Public Works and of 48 the Civil Engineering Department 2. Project Implementation Schedule 49 MAP Somalia, Highway System (IBRD 15924R) 50  SOMALI DEMOCRATIC REPUBLIC FOURTH HIGHWAY PROJECT I. THE TRANSPORT SECTOR A. Geographic and Economic Setting 1.01 Somalia with a land area of 637,000 km2 lies in the northeastern corner of Africa bordered by Ethiopia on the west, Kenya on the south, the Indian Ocean to the East and the Gulf of Aden to the North (Map IBRD 15924R). The terrain is mostly plateau and steppes gradually sloping from the Ethiopian highlands toward the coastlines. In the northern part, the relief is broken by some steep escarpments; in the south, there is a relatively broad coastal plain. Apart from the escarpments, the terrain does not pose serious difficulties for land transport. Most of the country is arid to semi-arid. The areas more favored with rainfall and, therefore, of greatest agricultural potential are the northwest and the south. 1.02 The population of Somalia is estimated to be 4.6 million (1982) with a high average annual growth rate of 2.4%. In addition, there is a large number of refugees, now estimated to be over 0.5 million. The population is unevenly distributed; the highest concentration is in the southern part around the capital, Mogadishu, and in the basins of the Juba and the Shabele rivers. In the northern part, the main population concentration is around Hargeisa, the second largest city. About 80% of the population lives in rural areas and most of them are nomads. 1.03 Somalia's economy is based on livestock and agriculture. In 1978, livestock, agriculture and forestry accounted for more than 60% of the gross national product (GNP), industry about 7%, transport 5%, and trade and services accounted for the balance. Livestock and associated products are the main exports accounting for more than 75% of export earnings. The only other impor- tant export is bananas, grown near the southern coast; in recent years, bananas have contributed about 10% of the annual export earnings. Livestock and agri- culture will continue to dominate the economy. Areas of most potential for agricultural development are the Bay region and the basins of the Juba and Shabele rivers in the south and the West Galbeed region in the north. 1.04 In the period 1972-1980, GNP is estimated to have grown at a rate of about 2.8% per year in constant prices. Per capita GNP was estimated at US$280 in 1981 making Somalia one of the poorest countries in the world. The country is presently in the midst of a deep economic and financial crisis. The productive sectors of the economy have grown considerably slower than the service sectors, causing a stagnation in production and exports. Increasing budget deficits and a steeply rising rate of inflation have been coupled with a sharply worsening balance of payments position. The economic situation has been reflected in inadequate funding of road maintenance operations (para. 2.19); it has also caused a strain on new capital investments, calling for priorities to be accorded to those projects which preserve past investments.  2- B. The Transport System 1.05 Transport infrastructure of Somalia is composed of about 21,600 km of roads, consisting mainly of dry-weather roads with only 2,460 km of bituminous paved roads; three principal ports; and fifteen airfields, four of which have paved runways. There are no railways, pipelines or inland waterways. 1.06 Road transport is by far the principal means of internal transport. However, animal transport--camels and donkeys--is also an important means of transport, the former over long distances (carrying an average load of 100 kg over an average distance of 30 km per day) and the latter for small loads within urban areas and their environs. Despite a coastline of about 3,000 km, one of the longest on the continent, coastal shipping has had a very limited signifi- cance so far, although it has some potential. Internal air transport is provided by Somali Airlines (SA) operating with five aircraft. Highways 1.07 Details of the highway sub-sector are given in Chapter II. Ports and Shipping 1.08 Somalia has three major ports: Berbera in the north on the Gulf of Aden and Mogadishu and Kismayo in the south on the Indian Ocean. The Somali Ports Authority (SPA), created in 1962 as an autonomous Government agency under the authority of the Ministry of Marine Transport and Ports (MMTP), is responsi- ble for the operation and maintenance of these ports as well as a small port at Merca. All of them, except Merca, have sheltered deepwater facilities. The ports rely on ships' gear for general cargo loading and unloading. Mogadishu is the main port, handling most of Somalia's export/import traffic (58% in 1981). The ports of Berbera and Kismayo are mainly for the export of livestock and bananas, respectively. Merca, a lighterage port, exported bananas in the past but has been virtually inactive since 1978 as a result of the diversion of banana traffic to Mogadishu port after the latter's extension and improvement in 1977. 1.09 Traffic in Mogadishu port exceeds its present capacity (600,000 tons of general cargo). In the period 1975-80, traffic in the port increased by 14.6% annually due to rapid increases in imports of dry cargo and of petroleum, while Berbera port had only a moderate annual growth of 4%; Kismayo, the third largest port, experienced an annual traffic decline of about 4%. In 1981, total traffic (in tons) in the three ports was as follows: Mogadishu, 577,000; Berbera, 271,000; Kismayo 119,000. As a result of increases in traffic, the ports of Mogadishu and Berbera require expansion. Accordingly, at Mogadishu, a general cargo berth is under construction and at Berbera two new berths are expected to be built beginning in 1981 or 1982. Berthing facilities in Kismayo are sufficient but in urgent need of rehabilitation which is included in the 1982-86 development plan (para. 1.18). 1.10 SPA seems to be better organized than other agencies in the sector. Currently, about 20 Somalis are being trained abroad (with Arab Fund and ECC assistance) to become naval/shipping engineers, navigators, etc. Financial  - 3 - operations of the SPA (including all ports) have been successful and total net income increased from So Sh 11.25 million in 1977 to So Sh 64.20 million in 1981. 1.11 While foreign vessels handle most of Somalia's international trade, about 8% is carried by the Somali Shipping Agency and Line (SSAL), established in 1978 as an autonomous parastatal agency under the authority of MMTP. SSAL operates two refrigerated ships (about 5,000 dwt) primarily for banana exports, one livestock ship (about 4,000 dwt) and two small general cargo vessels (1,500 and 2,000 dwt). SSAL plans to purchase two new ships with assistance (US$7 million) expected from the Islamic Development Bank (IDB). In 1980, total freight transported by SSAL was about 105,000 tons, mostly exports of livestock and bananas to the Near East and Italy, respectively. After incurring deficits for the first two years of operations, SSAL recorded a profit of about So Sh 14 million (US$2.23 million) in 1980. 1.12 Coastal shipping is limited despite the 3,000 km coastline mainly because there is little inter-regional trade suitable for such shipping. However, individual operators with small boats of up to 300 dwt carry some passenger and freight traffic along the northern coast between Seyla and Bereda. The development of commercial fishing (a fishing project has been proposed for financing by the Bank Group) is expected to stimulate coastal shipping. Civil Aviation 1.13 In view of long distances and inadequate land transport, civil aviation has good potential for development in Somalia as evidenced by a strong growth pattern. Between 1975 and 1979, internal passenger transport increased by 21% per year and freight by 28% per year. Somalia has fifteen airfields; SA serves eight of them with scheduled domestic flights. Mogadishu and Hargeisa have international airports and two other airports, Kismayo and Berbera, have paved runways. Between 1975 and 1980, international passenger traffic at Mogadishu airport increased 24% annually; the volume of passengers in 1980 was 70,000. The Government has requested Bank Group assistance in the construction of a new airport at Mogadishu. The Bank Group recommended and is willing to finance a study of Somalia's civil aviation system, including a complete review of the airfields, communications and navigational aids system. The Government's decision is still awaited. 1.14 SA, established in 1964, operates one Fokker (F27) and two Cessnas on its domestic routes. Its two Boeing 707 jet aircraft connect Mogadishu with Rome, Frankfurt, Cairo, Nairobi, Djibouti and Seychelles and several places on the Arab peninsula. A few foreign airlines link Somalia with cities in Africa, the Near East and Europe. SA is an autonomous parastatal company under the Department of Civil Aviation of the Ministry of Transport (MT). Technical and management assistance to SA is provided by Lufthansa (Germany). UNDP is also providing fellowships for overseas training and technical assistance experts for training Somali personnel. SA's financial situation has deteriorated; in 1980, it had a deficit of So Sh 25 million (US$3.97 million). The deficit could partly be explained by substantial increases in the price of jet fuel and  - 4 - inefficient operations (on international flights, SA has an occupancy rate of only about 53%). The civil aviation study (para. 1.13) would also address SA's financial, management and staffing problems. C. Transport Planning, Policy and Coordination Planning 1.15 Planning in the transport sector is not a major problem. Planning units exist in MT and MMTP but are understaffed, and the planning process has been basically oriented to preparing lists of proposed projects. The Ministry of National Planning (MNP) has a section for infrastructure and prepares a development plan on the basis of inputs from other ministries and Government agencies. In that regard, MNP, in finalizing the list of projects and in shaping the plan itself, has a decisive role. UNDP and Germany are furnishing MNP with technical assistance which is helping to bring about improvements in transport planning. Policy 1.16 Although the Government has not prepared a long-term strategy for the development of the transport sector, investments realized or planned (para. 1.17) indicate that it has assigned transport infrastructure an important place. Given the still undeveloped state of the transport infrastructure, such a policy appears to be sound in principle. The Goverment's broad objectives in the transport sector as enunciated in the most recent development plans are to (i) open new areas for development in order to increase the productive capacity of the economy; (ii) foster economic integration of relatively isolated areas; and (iii) facilitate movement of goods within the country at low cost. Somalia's specific objectives for the road sub-sector include upgrading primary and secondary roads, which still are mainly (75%) earth and gravel, in order to prevent serious traffic interruptions during rains and to reduce vehicle operating costs. Sector Investments 1.17 Under the 1974-1978 development plan, transport investments accounted for about 20% of total planned public investment, or So Sh 1,104.7 million (US$175.6 million). The actual funds expended exceeded the amount planned by about US$18 million which includes US$13.5 million for a parastatal road transport company (para. 2.07) that had not been planned for. However, due to cost overruns caused by implementation delays and inflation, a number of projects were carried over to the 1979-81 plan. Investments in roads accounted for 63% (So Sh 695 million) of transport sector investments and an additional 8% was spent for the parastatal road transport company; 26% was invested in ports and marine transport; and only 3% in civil aviation. The Government financed about 27% of the projects' costs in the sector; external aid or loans contributed the remaining 73%. The plan generally followed investment recommen- dations made by consultants (Grimble, Canada) in their 1966 Transport Survey and was basically well conceived; however, certain projects such as relocation of the Mogadishu airport and the Gelib-Dinsor road construction had questionable economic viability and have not been carried out yet. Overall, the plan was  only partially successful in meeting the targets in the sector. During the 1979-81 plan period, 25% of total public investments were directed to the sector which is in line with the needs of a poorly developed transport infrastructure. The roads and road transport sub-sector still had a major share, 80%, followed by civil aviation, 8%, and ports, 5%. About 76% of planned investments actually materialized during these years; the shortfall in the planned targets occurred due to the overall economic crisis and was particularly pronounced in the ports and civil aviation sub-sectors. Investments made in the transport sector during the period 1974-1981 are shown in Table 1.1. Table 1.1 - Investments in the Transport Sector 1974-81 (So Sh '000) Five-Year Plan Three-Year Plan Sub-sectors 1974-1978 1979 - 1981 A. Highways (i) Planned Investments 757,660 485,300 (ii) Actual Investments 694,74i 738,566 B. Ports and Marine Transport (i) Planned Investments 188,576 389,996 (ii) Actual Investments 289,074 44,604 1/ C. Civil Aviation (i) Planned Investments 44,507 136,822 (ii) Actual Investments 35,901 69,750 D. Government Transport 2/ (i) Planned Investments --- 199,546 (ii) Actual Investments 85,000 69,640 Total Investments: Planned 990,743 1,211,664 Actual 1,104,722 922,560 1/ Government Investments only. 2/ Investments for a Government-controlled road transport company. Source: Ministry of National Planning: "Evaluation of the Three-Year- Development Programme 1979-81", Mogadishu, August 1982. 1.18 In 1982, the Government of Somalia completed a 1982-86 Development Plan. According to the plan, out of So Sh 16,299 million (US$1,072 million) of investments planned for the whole economy, only 8.3% or So Sh 1,349 million is envisaged for the transport sector. This represents a substantial reduction of the sector's share from the previous plans and appears to be low for the sector's needs. For the transport sector, the document notes that about 50% of the financing of the planned investments has already been secured (some projects started under the 1979-1981 Plan). The roads subsector's share (So Sh 867 million) amounts to 65% of the total investments in the sector which is justifiable given the predominance of the subsector and its poor state. Ports'  -6- share is 25% and that of civil aviation 10%. The plan is basically designed to cover priority projects in each transport mode. Included in the plan is the construction of the Dinsor-Gelib road (So Sh 360 million), which does not appear to be economically justified (para. 1.22). In addition to planned total investments of So Sh 16,299 million, the plan includes a group of projects which are still at the conceptual stage; among them are a number of transport projects totalling So Sh 2,360 million. Three major projects in this group, construction of Garoe-Bosaso and Erigavo-Las Koreh roads and a new international airport at Mogadishu (total estimated cost, So Sh 2,030 million), do not appear to be economically justified. In light of the current financial and economic situation, it is unlikely that this additional program will be carried out. Coordination 1.19 Four ministries are involved in the transport sector: (i) Ministry of Public Works (MPW), through its Civil Engineering Department (CED), is respon- sible for planning, constructing, and maintaining roads and constructing ports and airports; (ii) MT is responsible for road transport including vehicle registration and for civil aviation through its Civil Aviation Department; (iii) MMTP is responsible for port operations and, through SSAL, for marine transport; and (iv) MNP, through its Infrastructure Section, for general planning of the sector and for monitoring project implementation. Despite the dispersion of transport responsibilities among four ministries, intermodal coordination is not a major issue. There is no railway nor are there any plans for one; the limited coastal shipping is unlikely to increase significantly to compete with road transport in the foreseeable future. D. Previous Bank Group Involvement in Sector Highway Projects 1.20 The World Bank Group has been extensively involved with the develop- ment of the transport sector in Somalia through seven IDA credits -- three for highway and four for port projects. IDA support for the road subsector has had two major goals, namely, the completion of a basic system of trunk roads and building up of an effective institution for highway planning, design, construc- tion and maintenance. The First Highway Project (Credit 74-SO, US$6.2 million, March 1965), co-financed by the European Development Fund (FED), UNDP and the Government, comprised construction of the Afgoi-Baidoa Road (216 km), purchase of road maintenance and workshop equipment, construction of an office building and technical assistance to CED. In order to keep costs within available funds, Government, FED, and IDA decided that the pavement be designed for a service life of seven years using staged construction. Bids received for road construc- tion were US$2.8 million more than the appraisal estimate of US$8 million which led to a supplementary Credit (Credit 123-SO) of US$2.3 million in June 1968. Road construction was completed in March 1971, about two and a half months later than the 36-month contract period. Claims for the construction work arbitrated in favor of the contractor were initially contested by Government but were even- tually settled. Traffic on the road has been greater than what was estimated at appraisal resulting in a re-evaluated economic rate of return of 13-15%, compared to 7-8% at appraisal. The Project Performance Audit report (No. 2391, March 1, 1979) concluded that the project's objectives were largely achieved, namely that the road had facilitated agricultural development and social and economic cohesion. Purchases of road maintenance and workshop equipment and  construction of an office building for the CED provided essential infrastruc- ture; technical assistance helped to reorganize the road agency and initiate effective road operations. The road has, however, reached the end of its economic life and now needs strengthening and improvement (para. 3.03). 1.21 The Second Highway Project (Credit 295-SO, US$9.6 million, March 1972), co-financed by the African Development Bank, comprised construction of the Hargeisa-Berbera Road (158 km), a feasibility study and detailed engineering for the Hargeisa-Borama road with a link to Tug Wajale and technical assistance to update the 1966 Transport Survey. In view of the uncertainties involved in contracting in Somalia, the Association decided to call bids for road construc- tion prior to board presentation. Road construction was completed in May 1975, about six months behind schedule. As traffic on the road developed much more rapidly than had been expected, the economic rate of return was re-evaluated at 36% compared to 19% at appraisal (1971). The Project Performance Audit Report (No. 2391, March 1, 1979) concluded that the objectives of the project were achieved; the road has allowed trucking of livestock, the major export commodity, from market to the port. The 1978 Transport Survey carried out by consultants served as a general guide in preparing the road program under the on-going 1979-1981 development plan (para. 1.17). 1.22 The Third Highway Project (Credit 699-SO, US$7.0 million, June 1977), co-financed by Arab Fund for Economic and Social Development (AF), Islamic Development Bank (IDB) and African Development Fund (AfDF) and the Government, comprises construction of the Hargeisa-Borama Road with a link to Tug Wajale, (132 km), an extension of the paved road westward from Hargeisa to Berbera, a feasibility study and detailed engineering of the Dinsor-Bardere-Gelib Road, and strengthening of the CED through provision of technical assistance, training and workshop equipment. Construction works on the road started in November 1978, but came to a standstill after an air raid in the project area in August 1980. Only 56 km of road from Hargeisa had been completed. At the contractor's request, the Government terminated his contract as of December 27, 1980. The supervisory consultants' proposals, supported by the Government, to build the remaining 76 km of the road by force account under the management of a consulting firm were found to be inadequate and technically unsound. As an alternative, the Government has proposed inviting bids from other contractors (local or foreign) operating in Somalia to complete the road. Since the road has been completed to a point 13 km short of a large town, Nabadid, the Association has decided to continue participation in completing the road up to the town using the balance of uncommitted funds (about US$2 million) for civil works. It has, however, decided not to participate in completing the remaining sections, Nabadid-Borama (44 km) and Nabadid-Tug Wajale (19 km), in view of the very low rate of return estimated (about 6%) due to the sharp decline in traffic and economic activity and large increase in construction costs resulting from the difficult situation in the area. The feasibility study of the Dinsor-Bardere- Gelib road has been completed and the final report, submitted by the consultants, indicates the economic rate of return is too low to justify construction of the road at this time. The technical assistance to CED, financed by the AF, is continuing (para. 2.14). 1.23 Although the technical assistance included in the First Highway Project and ongoing Third Highway Project helped initiate effective road maintenance operations, there has been limited success in institution building. The principal reasons for this have been the transfer of trained personnel to other agencies and departure of staff for neighboring oil-rich countries (para.  - 8 - 2.14). Continued attention to manpower availability and training of staff is, therefore, necessary. The proposed project will provide technical assistance and training using local institutions. In the short term, apart from providing some technical assistance to aid CED in improving road maintenance operations and in drawing and implementing training programs for staff, the Government has agreed to assign to CED, from 1983 until the completion of the project, at least one newly graduated civil engineer from the Somali National University every year (para. 2.15). For the longer term, the country-wide road maintenance study included in the project (para. 3.08) will review the present road maintenance organization and make recommendations for its improvement including staffing required, overall training needs, design of incentives for efficient performance of staff at various levels and any technical assistance that might be requiredi for implementing the findings of the study. Port Projects 1.24 Port project financing began in 1964 with a technical assistance grant of US$311,000 followed in 1969 by a Credit (Credit 55-SO) of US$550,000 for engineering and accounting consultancy services for the SPA. Although the Mogadishu port project was first identified in 1964, it took nine years to put the project together because sufficient IDA funds were not available, lengthy negotiations with FED on co-financing arrangements were required, and a political revolution broke out in the country. In 1973, a US$12.9 million IDA Credit (Credit 359-SO) and an FED grant of US$12.5 million financed construction of a sheltered deep-water harbor at Mogadishu, including sheds and other facilities. In 1975, a third IDA Credit (Credit 586-SO, US$5.2 million) was approved for an additional general cargo berth and corresponding extension of the breakwater. Both projects were completed in 1977, about six months behind schedule. The physical execution of the project was plagued by disputes with the contractor which were eventually settled without resort to arbitration. A Bank staff economic re-evaluation in 1979 indicated an economic return of 17% which is slightly higher than that derived during appraisal. During execution of the project, it became evident that there were some fundamental weaknesses in SPA, such as the scarcity of skilled staff, and that to overcome these defi- ciencies, additional institution building would be required in future projects. The Project Performance Audit Report (No. 3052) for the Second and Third Projects (combined), issued on June 27, 1980, found that the project has resu:Lt- ed in much more efficient port operations. 1.25 The Fourth Port Project (Credit 838-SO, US$5.5 million, 1978) consisted originally of the construction of a tanker pier and related facilities for handling crude oil tankers and small products tankers. Bids were received on November 21, 1979, and the lowest bid was substantially higher than the appraisal estimate. As a result, the project was modified to exclude construc- tion of the tanker terminal and to include the building of a new general cargo berth as well as alteration of the present facility for better handling of oil products. Construction of the new berth began early in 1981 and is expected to be completed in February 1983. 1.26 The Bank Group has had a major impact on the development of transport facilities in Somalia and is also helping to establish and improve transport institutions. Benefits from the construction and subsequent expansion of Mogadishu port include augmented capacity to handle growing levels of traffic, reduction in ship-waiting time and reduced cost of transport, less loss and damage to cargo, and reduced handling time for cargo moving through port.  - 9 - II. THE HIGHWAY SUBSECTOR A. The Network 2.01 The road network totals about 21,600 km (Tables 2.1 and 2.2) of which 2,460 km are paved, 570 km are gravelled and the rest are earth roads and tracks. In terms of administrative classification, the lengths of primary, secondary, and rural/feeder roads are about 4,300 km, 5,300 km and 12,000 km, respectively. Table 2.1 Road Network by Administrative Classification and Surface Type - 1981 Primary Secondary Rural/Feeder All Roads Roads Roads Roads Percent Paved 2,425 35 -- 2,460 11 Gravel 350 215 -- 565 3 Earth 1,521 5,098 12,000 18,619 86 Total 4,296 5,348 12,000 21,644 100 Table 2.2 Development of the Road Network 1976-1981 (km) 1976 1977 1978 1979 1980 1981 Paved 1,460 1,660 1,910 2,160 2,310 2,460 Gravel 333 408 438 478 528 565 Earth 16,610 16,735 17,052 18,562 18,406 18,619 Total 18,403 18,803 19,400 21,200 21,244 21,644 Source: Civil Engineering Department, Ministry of Public Works, November 1982. 2.02 The coverage of the network is adequate for the country's present needs, but the standards and condition of the roads are not satisfactory. Low standard roads prevail, although there has been considerable road upgrading; the paved roads increased from about 900 km in 1971 to 2,460 km in 1981. In the past, earth roads were upgraded to paved standards in order to provide a basic road network linking major commercial centers. In the future, the normal development from earth/gravel to paved standards should be followed. The backbone of the country's road system is the north-south link between Mogadishu and Berbera via Galkayo, Garoe and Burao (about 1,900 km). The other most important roads are the coastal road from Mogadishu to Kismayo leading on to Liboi on the Kenyan border (about 700 km) and the road from Mogadishu to Dolo on the Ethiopian border via Afgoi and Baidoa (about 600 km).  - 10 - B. Road Use Vehicle Fleet 2.03 Available data on fleet composition, age and condition, indicate that there were about 15,600 privately owned vehicles in 1980 when the first systematic data collection was made. In addition, the Government has a fleet of 2,900 vehicles (excluding the military) yielding a national total of about 18,500 motor vehicles (Table 2.3). Statistics do not distinguish between trucks and buses, as both are classified as trucks. The composition of the vehicle fleet by size shows that pickups and vans constitute the largest category, 3L%; passenger cars, 28%; and medium and heavy trucks, 26%. Most of the truck 3iiet consists of trucks of 6-8 ton capacity. No systematic records of the vehicie fleet size and composition have been kept which makes it difficult to estimate the growth rate of the fleet. There are no vehicle manufacturers in Somalia; Italy is the principal source of supply. Table 2.3 Vehicle Fleet in 1980 Percent Private Total Vehicle Type Sector Government Total Fleet Passenger Cars 4,245 955 5,200 28 Taxis 1,260 - 1,260 7 Pick-ups and Vans 4,670 1,505 6,175 34 Trucks (3-5 tons) 997 - 997 5 Trucks (6-8 tons) 1/ 3,564 _ 3,564 19 Trucks (10-20 tonsT 1/ 854 440 1,294 7 Total 15,590 2,900 18,490 1CIO 84% 16% 100% 1/ Includes small and large buses. Source: Ministry of Transport, May 1981. Traffic 2.04 The collection of traffic data is the responsibility of CED which has done little work in this field. CED has made only random counts on primary roads rendering the reliability of its data questionable. The technical assistance included in the project will assist with improving the traffic count system (para. 3.09). Although road traffic statistics are not available, some indications of traffic growth could be obtained from the data on fuel consump- tion provided by the National Petroleum Agency, NPA (Table 2.4). Nearly all- gasoline and a significant portion of the diesel fuel are consumed by motor vehicles. The significantly high growth rate of gasoline consumption (12% per year) implies a correspondingly high growth rate in traffic by passenger and other light vehicles. The average annual growth rate of fuel consumption in the period 1974-79 is estimated at over 5%. On the basis of this past trend in fuel consumption as well as production of and demad for goods in Somalia and informa- tion available from occasional traffic counts, the average annual traffic growth rate is estimated at about 5%.  - 11 - Table 2.4 Fuel Consumption 1974-1979 (Millions of liters) Year Gasoline Diesel Fuel Kerosene Lubricants 1974 33.28 99.87 10.27 3.26 1975 41.03 112.33 10.38 4.01 1976 43.61 113.53 10.59 3.95 1977 1! 69.45 164.21 13.88 4.96 1978 n. a. n.a. n. a. n. a. 1979 58.52 115.04 12.76 5.39 Average Annual Growth Rate (1974-79) 12.0% 2.9% 4.4% 10.6% 1/ Sharp increase due to the war in Ogaden. Source: National Petroleum Agency, May 1981. Road Transport Industry 2.05 There is a shortage of information available on the road transport industry. Freight transport is carried out by private truckers (who are not yet organized into an association) and by a parastatal company (para. 2.07). There are no specific regulatory barriers to entry into the freight transport industry; the Government seems to encourage the growth of the industry. Although there are official tariffs, they are not always enforced (para. 2.08) and most of transport services between transporters and customers are settled by mutual agreement. The market appears to be reasonably competitive. However, modest economic activity of the private sector, poor road conditions, shortage of spare parts and fuel (temporary fuel rationing started in late 1980) and seasonal demand for freight transport services render profitability low, thereby inhibiting growth of the industry. 2.06 The private sector has about 4,000 trucks (light and heavy) and handles most of the internal demand. However, commercial operations are small- scale comprising mainly single owner/operators with very few having more than five trucks. They provide almost all the transport services demanded by the private sector and cater to a part of the needs of the public sector especially for services off the main trunk routes and those for which the larger, heavier vehicles are not needed. 2.07 The National Transport Agency (NTA) is a parastatal company established in 1978 to provide freight transport services. NTA operates under the authority of MT and primarily serves the Government's needs. NTA handles about 25% of the country's freight transport demand, while the private sector handles the balance. The current NTA fleet is about 290 trucks (mostly new) of which 87% are heavy trucks, 10 tons and above. NTA plans to expand its fleet, train additional drivers and mechanics and expand maintenance facilities both at headquarters in Mogadishu and at its regional offices. In the first two years of operations, NTA incurred losses making the agency dependent on Government subsidies for fleet expansion and replacement.  - 12 - 2.08 Freight and passenger rates are set by the MT in consultation with NTA and cooperatives representing private sector interests. The freight rates effective December 1982 are shown in Table 2.5. These rates reflect an increase but do not provide an adequate margin for the truckers to cover depreciation costs in addition to other operating expenses. The rates are observed only when a public sector agency or Government department is one of the parties involved; transactions between private individuals are usually settled at higher rates. Table 2.5 Freight Rates for Paved Roads Effective December 1982 (So Sh/ton-km) Trucks under 10 tons 1.40 Trucks over 20 tons 1.20 Fuel Tankers (average) 1.90 Source: Ministry of Transport, December 1982. 2.09 Passenger transport, provided only by the private sector, appears to be a relatively thriving business in Somalia, especially in and around the larger towns. Passenger transport facilities are also used to transport goods and commodities by individuals between towns and rural areas. Inter-urban transport is provided by buses and converted pickups, of which there are more than 1,000 in the Mogadishu area alone. In addition, by mid-1980, there were about 680 taxis in Mogadishu and 350 in the southern part of the country., Rates are established by the MT. In inter-urban transport, the average official rate is fixed at about So Sh 1.05 per passenger/km, though the actual prevailing rate is about So Sh 1.15; there are some variations depending on the route. Given the relatively high demand for passenger transport, these rates make the opera- tions commercially viable. 2.10 There is a growing demand for passenger services. Entry into the intra-urban transport industry in the Mogadishu area is regulated by local authorities to avoid over-capacity and undue demand on scarce foreign exchange resources; less than 50% of applications were approved in 1980. There are no limitations on inter-urban and rural transport, and they are exhibiting signi- ficant growth. So far, only a few routes have scheduled services. The industry faces the familiar problems of lack of spare parts and of adequately trained maintenance personnel. Poor road quality in the rural areas has also been cited as a barrier to expanding operations there. Road Transport Regulations 2.11 As explained in para. 2.05, there are no specific regulations (for entry, route allocations, etc.) which would limit operators in the freight transport industry. Vehicle weight and dimension regulations were introduced in September 1972. The maximum gross vehicle weight permitted is 32 tons; the maximum load for a single axle is 10 tons and for tandem axle, 16 tons. Overloading is not a problem since the regulations are enforced. Commercial vehicle operators engaged in public transport are required to register with the Public Registration Agency of MT. MT is also in charge of vehicle inspections which are performed twice a year for commercial vehicles.  - 13 - Automotive Fuel Prices 2.12 The NPA is the sole importer and distributor of petroleum products in Somalia. The refinery in Mogadishu, which started production in 1979, ceased operations in 1980 due to the curtailment of supply of crude oil from Iraq as a consequence of the Iran-Iraq war. Saudi Arabia is now the primary source of refined fuel imports as well as for crude oil for the refinery which has recently started operations again. Table 2.6 provides the retail price deve- lopment, tax and duty component for gasoline and diesel fuel, together with import prices of fuel (C.I.F. Mogadishu). The C.I.F. import prices are in line with those in the Region. Retail prices rose sharply in July 1981 reflecting a substantial devaluation of the Somali Shilling; no price increase, however, followed the 20% devaluation in July 1982. The tax component in the gasoline price (over 40%) is one of the highest in the region, and there are no subsidies of the retail prices. Table 2.6 Fuel: Retail Prices; Taxes and Duties; Import Prices A. Price per liter (US$) 1975 1977 1979 1981 1982 1/ Gasoline 0.29 0.32 0.48 0.79 0.66 Diesel Fuel 0.17 0.25 0.34 0.58 0.43 B. Taxes and duties per liter (US$) 1975 1977 1979 1981 1982 1/ Gasoline 0.15 0.15 0.19 0.36 0.30 Diesel Fuel 0.10 0.10 0.10 0.13 0.13 C. Import prices C.I.F. Mogadishu (US$ per metric ton) December 1982 Gasoline 404.04 Diesel Fuel 317.67 1/ December 1982. Source: National Petroleum Agency, May and October 1981, and December 1982. C. Administration 2.13 The CED, under the MPW, is responsible for planning, building and maintaining all roads. CED also constructs ports and airports which, however, are maintained by other Government organizations. It has six divisions (Planning and Design, Construction, Maintenance, Materials Laboratory, Equipment and Administration) and sixteen regional road maintenance sections. The regional road maintenance sections, while receiving technical support from CED, operate under administrative control of regional directors who report to MPW. CED has three main workshops at Hargeisa, Mogadishu and Kismayo, set up under the First Highway Project, which handle major repairs for vehicles and equipment; regional workshops take care of minor repairs and routine servicing. MPW's Workshop and Equipment Department exercises overall control over workshops and equipment. The present organization of the MPW and the CED is shown in Chart 1.  - 14 - 2.14 Under the UNDP-financed Technical Assistance Program included in the First Highway Project, CED's activities were reorganized and expanded during 1965-1974. Based on recommendations made by management consultants employed under the program, a large number of new positions were added both in CED's headquarters office and in the regional sections. The consultants assisted CED in organizing, staffing and operating the highway administration, and provided on-the-job training to professional and lower level staff in various areas of highway operations; some eighteen Somali engineers and technicians received training abroad. However, with the departure of the management consultants int 1974, the full burden of the operations rested on CED which had, by then, fa'_1. n short of its authorized strength due partly to staff transfers to other agenMies and departure of staff for neighboring oil-rich countries offering higher salaries. An increase in the number of regions from eight to sixteen in 1973 caused weakening of the organization, adversely affecting CED operations, particularly road maintenance. Currently, several senior and middle management positions as well as lower level posts at CED headquarters and in the regional sections are vacant. Under the ongoing Third Highway Project a technical assistance team, provided by consultants Dorsch Consult (Germany) and financed by the Arab Fund, is assisting CED to alleviate staffing shortages and to improve highway operations. The team comprises a senior highway engineer (team leader), a highway design/construction engineer, a highway maintenance engineer, two workshop superintendents and a financial/administrative officer. The technical assistance contract, originally for a period of two years and later extended, will expire in July 1983. While the team has provided assistance to CED, more work is needed especially in the field of road maintenance. The technical assistance included in the proposed project (para. 3.09) will continue the aid in building CED's strength with the main focus on road maintenance operations. 2.15 At CED headquarters, three key posts in the Planning and Design, Soils and Materials Laboratory and Administration Divisions have been vacant for several years. The first two were filled in mid 1982 with recently graduated engineers who are being supervised and trained by the technical assistance team; the post in the Administration Division is effectively filled by a technical assistance expert while training a local counterpart. The present set-up will continue under the proposed project until the local staff is deemed to have acquired the necessary qualifications to head the Divisions on their own. Further, to fill other vacant positions, the Government agreed during negotiations to assign to CED, from 1983 until the completion of the project, at least one newly graduated engineer (civil) from the Somali National University (SNU) every year with the total number of additional engineers reaching at least 10 at the completion of the project. SNU has sufficient potential to meet CEDI's needs. Of the 27 engineers graduated from SNU in 1980, 13 were in civil engineering; the yearly intake of students in engineering courses currently is around 60. As for the vacant posts in sub-professional grades, CED plans to recruit high school graduates from the country's technical schools including the Mogadishu Polytechnic (para. 2.17) which turns out 150-200 technical graduates every year. 2.16 CED submits all invoices to MPW for payment; MPW maintains accounts of all capital and recurrent expenditures for works under the direct supervision of a representative of the Ministry of Finance (MF) who is administratively responsible to the Minister of Public Works. The accounts are audited by Government auditors under the Magistrate of Accounts. The audit and accounting  - 15 -- procedures followed are generally satisfactory. The administrative/financial officer included in the technical assistance team (para. 3.09) will help improve the accounting system. D. Training 2.17 The technical assistance team, employed under the ongoing Third Highway Project (para. 2.14), is providing on-the-job and classroom training to Somali sub-professional staff (mechanics and equipment operators). However, training classes are not held regularly, and no records are maintained c the individuals trained or courses taught. The training generally is hind i by the low level of skills and lack of adequate Somali staff. The maintenance study included in the project will assess manpower needs for maintenance operations and formulate appropriate training programs (para 3.08), while the technical assistance included in the project will help assess other manpower needs of the CED, identify possible sources for recruiting additional staff, and draw up, coordinate and implement the overall training program. CED already has most of the required facilities (classrooms, equipment and training aids) for training its staff. In addition, it can use facilities at the Mogadishu Polytechnic, a four-year technical secondary school for general mechanics, auto mechanics, electrical and building technicians. E. Planning 2.18 CED, under MPW, is responsible for road planning but has limited capacity for this function; the key position in the Planning and Design Division has just been filled (para. 2.15). CED has used consultants for long-term transport planning and for project feasibility and design studies. In preparing the ongoing 1979-1981 road development program, the 1978 Transport Survey carried out by consultants Renardet-Sauti (Italy) served as a general guide. The German technical assistance team in MNP is currently assisting CED in road planning. A summary of current and planned road projects is presented in Table 2.7 (page 16). F. Financing 2.19 The outlay for road construction in the period 1974-78 was So Sh 695 million (US$110.5 million) of which external sources financed 73%. In the 1979-81 period, the outlay was So Sh 739 million (about US$103.0 million) with about 91% financed by external sources. The investment planned for road development for the period 1982-86 is So Sh 867 million (para. 1.18). The Government expects a large portion of the investment to be financed by external sources. There has been a decline in funds allocated to road maintenance and present allocations are far below requirements (para. 2.24). Table 2.8 shows the allocations for road maintenance during the period 1976-83. Table 2.8 Allocations for Road Maintenance 1976-1983 (So Sh million) 1976 1977 1978 1979 1980 1981 1982 1983 7.96 7.96 10.25 8.59 8.20 7.3 1 Y5.I3Y/ 20.0 1/ In addition, some So Sh 9.0 million were used for road rehabilitation. 2/ In addition, some So Sh 7.0 million were used for road rehabilitation and some So Sh 3.7 million for bridge reconstruction. Source: Civil Engineering Department, May 1981 and December 1982.  - 16 - Tahls 2.7 QOn(bIx and PIaxe tmjpnrt Projects Estimated Cor4pleted Type of Total Cost I. ROADS AND bRIlGES Length To End 1982 Work in So. Sh. FRnarks (km) (Iam) A. On-Coing Projects 1. Hargeisa-Borama Road 134 56 N 235 Under construction by contract to 2-lane paved standard with assistance from IDA, AF, IDF, AfDF. 2. Galuen-Gelib Road 257 230 N 320 Under construction by contract to 2-lair paved standard with assistance from AF, EEC. 3. Baidoa-Lugh Ganane Road 170 55 R 150 Under rehabilitation by force account to 2-lane paved (120 km) and 2-laie gravel (50 kon) stan- dards with Goveronent finance. 4. Lugh Ganane-Dolo Road 110 35 R 48 Under rehabilitation by foroe account to 2-lane gravel stan- dard with Goveroment finance. 5. Baidoa-Bardere Road 165 20 N 190 Under construction by force account to 2-lane gravel stan- dard with Government finance. 6. Bulo Burti-Fer Fer Road 160 70 R 120 Under rehabiliation by force - - account to 2-lane paved stan- Total 996 466 dard with Governmnt finance. B. Planned Projects 7. Afgoi-baidoa Road 216 - R 470 2-lane paved standard; proposed for IDA, AF finance under IV Highway Project. 8. Gelib-Kismyo Road 114 - R 340 2-lare paved standard; awaits financing arrangerents. 9. Balad-Jobiar Road 54 - R 162 2-lane paved standard; awaiLs financing arrangeTents. 10. Buraon-ergeisa Road 175 - N 525 proposed for feasibility study with funds from AF. 11. Gelib-Bardera Road 232 - N 700 Feasibility study under Third Highway Project found construc- tion not justified. 12. Kisnayo-Liboi (Kenyan Border) Road 260 - N 780 Feasibility study proposed for EEC financing. 13. Berbera-Loyado (Djibouti Border) Road 289 - N 1,085 Feasibility study underway with EEC financing. 14. Ainabo-Erigavo-Laskoreh Road 447 - N 1,340 Project at conceptual stage. 15. Garsale-Afgoi-Jarnale Road 118 - N 355 Project at conceptual stage. 16. Garoe-Bosaso Road 410 - N 1,230 Project at conceptual stage. 17. Audegle Bridge -0- - N 8 Project at conceptual stage. 18. Najabto Bridge -0- - N 8 Project at conceptual stage. 19. Corioley Bridge -0- - N 8 Project at conceptual stage. 20. Marerei Bridge -} - N 45 Project at conceptual stage. 21. Barei Bridge - N 8 Project at conceptual stage. Total 2,315 7,064 II. OTHE PROJECrS 22. Strengthening of CED 85Z N/A 15 Financed by AF under Highway III Project and will be ormbined under the Fourth Project. 23. Country-Wide Maintenance Study - N/A 6 Proposed for financing under the Fourth Highway project. 24. Erergency Road Maintenance Program - N/A N/A Will be defined under mointe- nance study; soae finance likely from Fourth Highway Project. 25. Setting Up of ttaintenance Centers - N/A N/A Will be defined under mainte- nance study; some finance likely from FouLrth Highway Project. 26. Mogadishu Port Extenaion 90% N 66 Underway with assistance from ID& under the Fourth Port Pro- ject. 27. Berbera Port Extension - N N/A Project at conceptual stage. 28. Kismayo Port Rehabilitation - R N/A Project at conceptual stage. 29. Construction of 10 Small Ports - N N/A Project at conoeptual stage. 30. Hargeisa Airport - N,R N/A Project at conceptual stage. 31. Erigavo Airport - N,R N/A Project at conceptual stage. 32. MDgadishu Airport - N N/A Project at conceptual stage. NOrES: N - New Construction R - Rehabilitation Source: Civil Engineering Department, Deoember 1982.  - 17 - 2.20 Road users contribute to Government revenues through taxes and duties levied on fuel, lubricants, imported vehicles and spare parts, vehicle registra- tion and inspection fees and licence fees. Data on total annual revenues from road user charges are not available. However, taxes and duties on fuel -- the major source of Goverment revenues from road users -- could be estimated on the basis of actual fuel consumption and the corresponding tax and duty component of retail prices. The revenues from fuel taxes and duties (Table 2.9) have been rapidly increasing, over 7% on an average per year, and exceed the Government's contribution to road construction and road maintenance. In the period 1975- 1979, average annual Government contribution toward road maintenance and construction combined was estimated at about So Sh 48 million while the corres- ponding average annual revenue from fuel taxes and duties alone was about So Sh 130 million. Table 2.9 Revenues from Fuel Taxes and Duties (in millions) 1975 1979 So Sh US$ So Sh US $ Gasoline 39.79 6.32 71.39 11.35 Diesel Fuel 70.76 11.25 74.77 11.89 Total 110.55 17.57 146.16 23.24 G. Engineering 2.21 CED's Planning and Design Division carries out minor road and bridge design using its own staff, but all economic feasibility studies and detailed engineering for major projects are done by foreign consultants. The Somali Consulting Agency, a parastatal organization under the MPW, occasionally undertakes some minor design work for highways but is generally involved with building design. There are no local private consultants in the country. CED has a well-equipped materials and soils laboratory, set up under the First Highway Project, which assists in investigations and design for major road projects. The design standards adapted by CED are appropriate for local conditions. H. Construction 2.22 Major road and bridge construction works are generally undertaken by foreign contractors and supervised by consultants. Contracts are let out on unit-price basis, following suitable prequalification and tendering procedures. Apart from a few small contractors capable of carrying out minor road or culvert works, no local highway construction industry exists in Somalia. The National Construction Agency, a parastatal organization under the MPW which generally undertakes building construction, however, is currently building by force account a 200 km approach road to the proposed dam at Bardere in south-central Somalia. CED itself carries out some rehabilitation/reconstruction works on roads.  - 18 - I. Maintenance 2.23 Although CED is responsible for the maintenance of the road network, actual field operations are carried out under the administrative control of the regional directors (para. 2.13). The road maintenance organization in the regional sections is unsound due to the lack of adequate, trained manpower (road superintendents, foremen, equipment operators). Apart from a few speciaL crews set up for rehabilitation/reconstruction of roads, there are no organized crews to carry out road maintenance. The regional workshops lack facilities for servicing and day-to-day repair of road maintenance equipment. CED's main workshops, too, lack adequate equipment, tools and spare parts and are short of properly qualified and trained mechanics. Equipment repair and control procedures established by the management consultants employed under the First Highway Project have fallen into disuse. Much of the road maintenance equipment is in need of repair; consequently, equipment availability is very low, and road maintenance is carried out only sporadically. Staff shortages prevent CED headquarters from overseeing maintenance operations, and the quantity and quality of road maintenance is poor. There are no regular programs for routine and periodic maintenance. Paved roads which have not been resealed for several years have developed potholes and surface cracks; maintenance of gravel/earth roads has been completely neglected and most gravel roads have reverted to earth roads. The project will help finance a country-wide road maintenance study to review the current situation and to determine how maintenance planning, organi- zation and operations should be improved (para. 3.08). The study will, among other things, make recommendations for establishing road maintenance procedures using an appropriate mix of equipment and labor. 2.24 There has also been a decline in the funds allocated for road maintenance (para. 2.19). Present allocations are far below what is required. Based on data from CED, the 1981 expenditure was So Sh 8.2 million, and the amount allocated for 1982, So Sh 5.3 million, is far short of the So Sh 20 million requested by CED on the basis of recommendations made by the Arab Fund technical assistance team. CED's budget requests, however, do not present a clear picture of the amounts needed for road maintenance because maintenance and upgrading/reconstruction funds are not clearly differentiated. The technical assistance included in the project will assist in preparing and monitorirLg the road maintenance budget (para. 3.09). The Government has recently confirmed that the 1983 budget allocation for road maintenance is So.Sh 20 million. During negotiations, agreement was reached with the Government that pending recommendations of the road maintenance study on the recurrent funds required, the budgetary allocation for road maintenance for 1984 will be at least So Sh 20 million in 1983 prices and that by September 1 of each year up to and including 1987, the Government shall review and agree with the Association on the budgetary requirements and the budgetary allocation for road maintenance 2.25 Another serious problem is that road maintenance equipment and staff are frequently diverted to other public works projects such as rehabilitation/ reconstruction of roads, airfield improvement, etc. Certain road maintenance equipment purchased by MPW with the German Commodity Aid is currently deployed on the construction of the approach road to the Bardere dam. During negotia- tions, the Government agreed not to divert road maintenance staff and equipment to other uses.  - 19 - III. THE PROJECT A. Objectives 3.01 The objectives of the proposed project are to: ii) protect the capital investment in and increase the service li-e of a primary road in south-central Somalia; ii) help improve road maintenance planning, organization and operations; and iii) help alleviate the staffing shortage of the CED. B. Project Description 3.02 The project comprises: i) strengthening and improvement of the Afgoi-Baidoa Road (216 km); ii) consultants' services for: a) supervision of (i); b) a country-wide road maintenance study; c) technical assistance to CED; and iii) assistance for urgent road maintenance needs. 1) Strengthening and Improvement of the Afgoi-Baidoa Road 3.03 The Afgoi-Baidoa Road (216 km) forms part of a main artery connecting Baidoa -- administrative capital of Bay region in south-central Somalia -- with Mogadishu, the principal port and capital of the country (see map), and serves areas of good agricultural potential (para. 4.05). Apart from a slightly rolling terrain near Baidoa, the road traverses flat terrain. Baidoa itself is located on a plateau, and the road climbs a gentle escarpement for the last few kilometers into town (Chart 2). The road was constructed in 1971 with the assistance of the FED and IDA under the First Highway Project (para. 1.20). The pavement was originally designed for a service life of seven years using staged construction. Although traffic has developed more than what the road was designed to carry, it has held up well and retained its camber and profile except in sections where it crosses poor soils. On the first 30 km from Afgoi where lime stabilized soil was used as sub-base, it has developed sinkholes (a kind of pothole caused by burrowing mole rats), and the road is in poor condition; the sub-base has also become weakened. A section of the road from Km 173 to 181 (O at Afgoi) where the underlying soil is expansive and moisture susceptible, the road has poor riding quality and the surface is badly rutted  - 20 - and cracked. The road has not been resealed since its construction and shows signs of distress. Due to the lack of maintenance, road shoulders have eroded and have encroached on the road making it narrower. The road has reached the end of its economic life and is in need of strengthening and improvement. 3.04 Consultants Halcrow International Partnership undertook a technical and economic evaluation study including detailed engineering for strengthening and improvement of the road. The study, financed under Technical Assistance Credit 821-SO, started in September 1980 and was completed in June 1981. The road was divided into six sections on the basis of traffic volumes and into seventeen sub-sections of similar physical characteristics on the basis of surface condition, pavement deflection, road drainage and construction details. In considering pavement strengthening and improvement alternatives, the consultants identified two possible solutions, one for a service life of 10 years and the other for a service life of 20 years. Based on their technicaL and economic evaluation, the consultants concluded, and the Government and IDA agreed, that the preferred solution was for a service life of 20 years. 3.05 The proposed road strengthening and improvement works consist of crushed stone overlay of varying thickness (160 mm to 200 mm) on 111.7 km, bituminous macadam (50 mm) overlay on 61 km, pavement reconstruction on 27.5 km and resealing of surface on the remaining 16.2 km. In addition, the road shoulders will be widened and reconstructed and drainage improved along the whole road. Pavement reconstruction will be done in sections (Km 1.5 to 21 and Km 173 to 181) where the road has developed extensive sink-holes and/or the pavement is badly rutted and cracked (para. 3.03); the existing material in the pavement will be salvaged as far as possible. Suitable construction materials are available within reasonable distance from the road. No land acquisition is involved since the road will follow the existing alignment. 3.06 The design standards adopted for the road are in accordance with the national primary road standards and are shown below (Table 3.1): Table 3.1 Design Standards of the Afgoi-Baidoa Road Design speed 80-100 km/hr Roadway width 9.5 meters Carriageway width 6.5 meters Shoulder width 1.5 meters (on either side) Minimum horizontal curve radius 300 meters Maximum vertical gradient 6% Minimum vertical curve radius 20,000 meters (convex) 10,000 meters (concave) Road crossfall: (a) Carriageway 3% (b) Shoulders 5%  - 21 - ii) Consultants' Services a) Construction Supervision 3.07 Consultants will be engaged for construction supervision. The Association has agreed with the Government's proposal to engage the same consultants who carried out the economic evaluation and detailed engineering study for the road (para. 3.04). b) Countrywide Road Maintenance Study 3.08 The quantity and quality of road maintenance is unsatisfactory (para. 2.23). The project will help finance a country-wide road maintenance study to make recommendations for improving road maintenance planning, organization and operations. The study will define a five-year comprehensive road rehabilitation and maintenance program including a time schedule for its implementation and requirements for staff, funds, materials, equipment, workshop facilities, road camps, etc., which could form the basis for future assistance to the country. It will also formulate a training program to help CED meet staff requirements for maintenance on a continuous basis; the training would be both in-house and through local technical institutions. The study will be undertaken by consultants; draft terms of reference for the study are given in Annex 1. During negotiations, agreement was reached with Government that the findings and recommendations of the study will be reviewed with the Association, and an action plan satisfactory to the Association will be drawn up within six months of completion of the study to implement its recommendations. c) Technical Assistance to CED 3.09 The project will provide technical assistance to strengthen CED's administration but mainly to improve its road maintenance operations, prepare and monitor the road maintenance budget, improve traffic count system; and to draw up and implement suitable training programs for Somali staff. The technical assistance team will comprise a road maintenance engineer (team leader), a design/construction engineer, a road maintenance superintendent, two workshop superintendents (master mechanics) and an administrative/financial officer for a period of 30 months each. The technical assistance staff will be provided by a consulting firm; the draft terms of reference are given in Annex 2. The Government agreed during negotiations that it will, (i) by October 31, 1983, assign counterpart staff with qualifications and experience satisfactory to the Association to the technical assistance personnel and (ii) by June 30, 1984, submit to the Association, for its review and approval, a suitable training program including any agreements and arrangements with the local technical institutions for training of CED's staff. iii) Assistance for Urgent Road Maintenance Needs 3.10 Due to the lack of adequate maintenance, the country's road network is deteriorating rapidly (para. 2.23). The road maintenance study, while providing CED with a five-year road rehabilitation and maintenance program, will also recommend any urgent action necessary to save the roads from disintegration. The project includes a notional amount to cover the foreign exchange cost of materials (cement, steel, bitumen), basic equipment, spare parts and tools  - 22 - required for any immediate road maintenance needs recommended by the consul- tants. Specific items of equipment, spare parts and tools to be financed will be decided when the needs are determined. During negotiations, agreement was reached with the Government that lists of goods to be purchased shall be submitted to the Association for its review and approval. C. Cost Estimates 3.11 The total project cost including contingencies is estimated at US$43.8 million, with a foreign exchange component of US$35.17 million or 80%. Excluding taxes and duties (US$0.26 million, see further in para. 3.12 [a]), the total cost is US$43.54 million. A breakdown of costs is shown below (Table 3.2): Table 3.2 Estbmted Project (ets Local Foreign Total lxcal Foreign Total % Foreign Item -(So Sh Vallion)- -(US$ million)- Cxmponent i) Strengthening and Improvement 76.62 374.43 451.05 5.04 24.63 29.67 83 of the Afgoi-Baidoa Road ii) Supervision of i) 1.82 16.42 18.24 0.12 1.08 1.20 90 iii) Road Maintenance Study 0.61 5.47 6.08 0.04 0.36 0.40 90 iv) Technical Assistance to CED 2.10 18.88 20.98 0.14 1.24 1.38 90 v) Assistance for Urgent Road 0.76 6.84 7.60 0.05 0.45 0.50 90 Maintenance Needs - - - Base Cost 81.91 422.04 503.95 5.39 27.76 33.15 84 vi) Contingencies: a) Physical (10%) on items i)-iv) 8.12 41.52 49.64 0.53 2.73 3.26 - b) Price 1/ on iters i)-iv) 41.19 71.08 112.27 2.71 4.68 7.39 - Subtotal vi) 49.31 112.60 161.91 3.24 7.41 10.65 - Total Project Cost 131.22 534.64 665.86 8.63 35.17 43.80 80 Total Project Cost Excluding Taxes 127.27 534.64 661.91 8.37 35.17 43.54 81 1/ Expected price increases (%): 1983 1984 1985 1986 Ixcal 25.0 20.0 20.0 20.0 Foreign 8.0 7.5 7.0 7.0 3.12 The base costs are estimated as of December 1982 and have been derived as follows: a) Strengthening and Improvement of the Afgoi-Baidoa Road: In view of the generally difficult and uncertain economic situation in Somalia, it was decided that bids for civil works would be  - 23 - received and evaluated prior to Board presentation. The cost for the strengthening and improvement of the Afgoi-Baidoa road, there- fore, reflects the price of the lowest evaluated bid of the seven bids received on October 30, 1982; the lowest bid is about 2% below the consultants' estimate. Costs for road strengthening and improvement average between US$45,000 and US$215,000 per km depending upon the amount of work involved in different sections; these appear reasonable. The foreign exchange component of cons- truction costs is estimated at 83% which includes depreciation of equipment, imported materials, spare parts, fuel, foreign expense of expatriate personnel, contractors' overheads and profits. The local component (17%) mainly comprises labor, local expense of expatriate personnel and taxes; the tax component, however, is very small (US$260,000, see para. 3.11) and comprised mostly of the local wage tax as the contract documents permit the contractor to procure all fuels and materials free of duty and taxes. b) Consultants' Services: The supervision of strengthening and improvement of the road will require about 135 man-months of consultants' services over a 35-month period; the country-wide road maintenance study, about 36 man-months over a 12-month period; and the technical assistance to CED, about 180 man-months over a 30-month period. The average man-month costs including salary, social costs, international travel, subsistance allowance, the firm's overhead and profit, are estimated at US$8,800 for the construction supervision and technical assistance to CED and US$10,000 for the road maintenance study. In addition to these personnel costs, the contract costs include the cost of accommoda- tion, local transportation and other minor expenses. The compara- tively lower man-month costs for the supervision of civil works and the technical assistance to CED is because some experts will be of technician level. These costs are in line with recent experience in Somalia. c) Assistance for Urgent Road Maintenance Needs: A notional amount has been included to cover the foreign exchange cost of materials (cement, steel, bitumen), basic equipment, spare parts and tools as may be required for any immediate road maintenance needs recommended by the consultants in the course of the road maintenance study. D. Financing 3.13 The project will be financed by IDA (US$23.0 million or 53% of total project cost), the Arab Fund (about US$16.3 million or 37%) and the Government (about US$4.2 million or 10% net of taxes and duties). The IDA credit would finance about 65% of all foreign costs, the Arab Fund the remaining 35% of foreign costs and about 50% of local costs while the Government will finance the remaining 50% of local costs. The detailed financing plan 1/ is as follows (expressed in US $ Million): 1/ Including contingencies, excluding taxes and duties.  - 24 - IDA ARAB FUND GOVERItM TOTAL Local Foreign Total lcal Foreign Total local Foreign Total Incal Foreign botal 1. Road Strengthening - 19.73 19.73 4.09 11.59 15.68 3.78 - 3.78 7.87 31.32 39.19 2. Supervision of (1) - 0.80 0.80 0.04 0.58 0.62 0.14 - 0.14 0.18 1.38 1.56 3. Maintenance Study - 0.44 0.44 - - - 0.05 - 0.05 0.05 0.44 0.49 4. Technical Assistance - 1.58 1.58 - - - 0.22 - 0.22 0.22 1.58 1.80 5. Urgent Maintenance Needs - 0.45 0.45 - - - 0.05 - 0.05 0.05 0.45 0.50 - 23.00 23.00 4.13 12.17 16.30 4.24 - 4.24 8.37 35.17 43.54 E. Implementation and Procurement 3.14 Project implementation will be the responsibility of the CED of the MPW. Consultants will be engaged for supervision of the strengthening and improvement of the Afgoi-Baidoa Road, the countrywide road maintenance study and the technical assistance. The draft terms of reference for the consultants wore agreed upon with the Government at negotiations. 3.15 The road strengthening and improvement will take about 32 months beginning mid 1983 with an estimated 15%, 30%, 35% and 20% of works to be carried out in 1983, 1984, 1985 and 1986, respectively; the road maintenance study will take about 12 months and should be completed in the latter half of 1984; the technical assistance will be spread over a period of 2j- years starting in mid-1983. An implementation schedule shown in Chart 2 was agreed with Government during negotiations. 3.16 The civil works will be procured under unit-price contract(s) through international competitive bidding in accordance with the Bank Group "Guidelines for Procurement". This was agreed with Government during negotiations. The Government will engage the same consultants for construction supervision who carried out the study for the road (para. 3.07). For the road maintenance study and technical assistance to CED (paras. 3.08 and 3.09), consultants will be employed in accordance with the Bank Group "Guidelines for the Use of Consultants" and will be selected solely on an evaluation of technical competence of the firm, the personnel undertaking the assignment, and the suitability of its proposal; this was agreed with the Government during negotiations. Materials, equipment, spare parts and tools required for urgent road maintenance needs (para. 3.10) will involve a number of relatively minor individual purchases that would not attract international competitive bidding and will be procured on the basis of at least four responsive quotations from suppliers eligible under the Bank Group "Guidelines for Procurement"; this was agreed with Government during negotiations.  - 25 - F. Disbursements 3.17 The IDA Credit funds will be disbursed on the following basis: a) 50% of the total costs of the strengthening and improvement of the Afgoi-Baidoa road; b) 50% of the total cost of consultants services for supervision of the road strengthening; c) 90% of the total cost of the consultants services for the road maintenance study and the technical assistance to CED; and d) 100% of foreign cost of materials, equipment, spare parts and tools (for urgent road maintenance) if procured internationally; 90% of local cost if procured locally. All disbursements will be fully documented. The Arab Fund will disburse its loan on the following basis: a) 40% of the total costs of the strengthening and improvement of the Afgoi-Baidoa road; and b) 40% of the total cost of consultants services for supervision of the road strengthening. 3.18 An estimated disbursement schedule is set out in Table 3.3 (page 26). The disbursement estimates are based on the project implementation schedule as well as on the typical disbursement profile for the highway sub-sector in Somalia. G. Accounting, Auditing and Reporting Requirements 3.19 Project accounts will be maintained by the CED of the MPW with separate accounts for each component and will be available for inspection by the Association during project supervision missions. MPW's accounts are audited annually by the Magistrate of Accounts, an independent Government agency, which submits its report to the Presidency. In previous IDA projects, accounts have been audited by the Magistrate of Accounts; as this arrangement has proved satisfactory, it would also be followed for the proposed project. During nego- tiations, the Government agreed that all project accounts will be audited by the Magistrate of Accounts who will prepare a report on the audit for submission to the Association not later than six months after the end of the fiscal year. 3.20 During negotiations, the Government agreed to progress reporting requirements (Annex 3), which include indices for measuring implementation progress, and submission of a project completion report in a form satisfactory to the Association not later than six months after the closing date of the Credit.  -26- Table 3.3 Estimated Schedule of Disbursements IDA Fiscal Year and Cumulative Disbursements End of Quarter at End of Quarter (US$ '000) 1983 June 30, 1983 2,300 1984 September 30, 1983 2,400 December 31, 1983 2,500 March 31, 1984 4,000 June 30, 1984 5,500 1985 September 30, 1984 7,500 December 31, 1984 9,500 March 31, 1985 11,500 June 30, 1985 13,500 1986 September 30, 1985 15,500 December 31, 1985 17,500 March 31, 1986 19,500 June 30, 1986 21,500 1987 September 30, 1986 22,000 December 31, 1986 22,500 March 31, 1987 22,700 June 30, 1987 23,000 Closing Date: September 30, 1987 Mission Estimates H. Environmental Aspects 3.21 The project is not likely to have any adverse effect on the environment. The project road would follow the existing alignment, and no disburbance to land use should occur. In fact, improved drainage facilities along the road will benefit adjacent areas and soil erosion would be less than at present.  - 27 - IV. ECONOMIC EVALUATION A. General 4.01 One of the main objectives of the Somali Government in the transport sector is to facilitate low-cost movement of goods within the country (para. 1.16). The proposed project will reduce transport costs on a major artery, the Afgoi-Baidoa road (216 km), which is one of the busiest roads in Somalia and connects Mogadishu, the capital city, with the Bay region. It will also protect past capital investment by extending the road's service life. The project would also help improve road maintenance planning, organization and operations in Somalia. 4.02 The economic analysis of the strengthening and improvement of the Afgoi-Baidoa road takes into account the fact that larger investments will be needed later for reconstruction of the road if the proposed works are not carried out now at comparatively much lower costs; the proposed civil works are expected to yield an economic rate of return (ERR) of 17%. No ERR has been calculated for the assistance for the urgent road maintenance needs and technical assistance to CED. However, it is expected that substantial benefits will occur through the much needed improvement of the Government's capability to maintain the road network. B. Benefits and Beneficiaries Afgoi-Baidoa Road 4.03 The main benefits expected from the proposed civil works are reduced vehicle operating and road maintenance costs; there will also be savings in deferred major reconstruction works which would be necessary if the road were allowed to deteriorate further. Benefits from improved road safety and accident reduction could not be quantified and have not been included in the computation of the ERR. Since a paved road has existed for a decade, it is estimated that traffic generated due to the strengthening and improvement works will be negligible; consequently, vehicle operating costs savings have been limited to the normal traffic on the road. Savings in transport costs of some additional traffic expected to develop on the road (para. 4.06) have also been included as benefits from the project. There would also be various non-quantifiable benefits in terms of improving access to social and administative services as well as facilitating regional development. 4.04 The major direct beneficiaries of the reduced transport costs would be local truck and bus operators. Since the private market is essentially competi- tive and the tariffs set by Government are based on operating costs, it is expected that the benefits will be passed on to the rural population and to consumers of goods originating in the road zone. The Government will also benefit directly through a significant reduction in transport cost of materials for a planned cement plant in the project area. Finally, the refugee relief operation, which has placed heavy demands on this road, would greatly benefit as well.  - 28 - C. Economic Analysis Area of Influence of the Afgoi-Baidoa Road 4.05 The Afgoi-Baidoa road is part of one of the main arteries in south- central Somalia, linking the capital with the Lower Shebele and Bay regions. The road traverses a relatively heavily populated area; an estimated one million people live in its zone of influence. It crosses the largest cereal producing area in the country and the region has good potential for expanding dry-land farming and increasing agricultural output. About 700,000 hectares are now cultivated in the road zone, but could possibly be expanded. The road is essential to the Bay Region Agricultural Development Project (financed by IDA) which is an important part of the Government's rural development strategy for the southern part of the country. According to 1978179 data, sorghum has been the principal crop in the road zone (annual production was about 140,000 tons), while the livestock was estimated at 800,000 head. Finally, the road provides the vital link for supplies to a large number of refugees in the country. Traffic 4.06 Some traffic counts have been taken on the road in recent years. A comparison of the most recent counts (December 1980) and those of the 1970s indicates that traffic on the road has been growing at more than 5% per annum. For economic analysis, the road has been divided into six sections on the basis of current traffic volumes (para. 3.04). At the end of 1980, the actual traffic on the road varied from 115 to 530 vehicles per day (vpd) with heavy vehicles ranging between 60% and 70% (Annex 4). Table 4.1 below shows the estimated traffic levels by vehicle type for each section at the completion of works in late 1984/early 1985. It is expected that normal traffic will continue to grow at 5% annually; the additional traffic forecast is based on the estimated requirements for the proposed development projects in the region and for supplies to refugee camps. Due to gradual resettlement of refugees in the country, the refugee traffic is assumed to taper off from an estimated 32 trucks in 1985 to 8 trucks in 1990; some additional transport demand is anticipated by 1989/90 by two projects in the region (Bay Region Agricultural Development Project and a planned cement plant). Table 4.1 Estimated Traffic Levels on the Afgoi-Baidoa Road in 1985 (vpd) Normal Traffic Add'l Traffic 1/ Passenger Freight 7t & Trucks Total Sections Cars Pickups Buses less lOt 20t (20 t) (vpd) I 101 157 70 238 82 20 32 700 II 41 63 43 110 46 16 32 351 III 20 43 43 49 37 16 32 240 IV 13 41 22 17 31 14 32 170 V 25 41 26 28 57 14 32 223 VI 25 46 28 28 85 14 32 258 1/ This will comprise trucks needed for refugee traffic. Source: Consultants Halcrow Intl., Study for Improvement and Strengthening of the Afe -~aidoa P-d 1981.  - 29 - Economic Return 4.07 The economic analysis was carried out by comparing "with" and "without" project cases. VOC unit savings were treated as a function of deteriorating road surfaces in the "without" project case; consequently, unit savings of VOC's were gradually increased in the course of the project's economic life. Savings in transport costs are based on operations of typical vehicles under four different surface conditions, ranging from good to very poor (Annex 4). Currently, the road is assessed to be in fair to poor condition but deteriorating. In the "without" project case, it is assumed that the condition of some sections of the road would rapidly worsen within the next few years to very poor requiring costly repairs to keep the road passable. 4.08 The economic analysis was done in November 1982 prices net of taxes and duties; cost of local labor was shadow-priced at 50% of the market rate. The cost/benefit analysis, including the detailed assumptions underlying the calculations, is presented in Annex 4. The costs included in the economic evaluation comprise: (i) cost of civil works (strengthening and improvement) in 1983-85; (ii) 10% physical contingencies; (iii) cost of work supervision; and (iv) cost of routine and periodic maintenance on the road. 4.09 The benefits considered in the economic analysis include: (i) savings in vehicle operating costs of the normal traffic (until 1989) growing at 5% per annum; (ii) savings in VOC of added traffic (related to refugee traffic, the Bay Region Project, etc.); (iii) savings in avoiding costly restoration works and other road maintenance costs; and (iv) savings in avoiding full reconstruction costs which were assessed to become imminent for five sections of the road by 1989/90 and by 2000 for the sixth section in the "without" project case. The proposed strengthening and improvement will extend the economic life of the road by 20 years. 4.10 The cost/benefit analysis based upon the assumption explained in paras. 4.07 - 4.09 shows that the proposed civil works are economically justi- fied. ERR for the whole road is estimated at 17%; six different road sections will have ERRs ranging from 12% to 23% (Table 4.2) exceeding the estimated opportunity cost of capital in Somalia of about 10%. Table 4.2 Economic Rates of Return of Afgoi-Baidoa Road Strengthening and Improvement Road Sections I II III IV V VI All Sections Length (km) 12.0 18.0 30.0 94.0 40.5 21.9 216.4 ERR (%) 23 15 21 12 20 17 17 D. Other Project Elements 4.11 The other project components include a country-wide road maintenance study, assistance for emergent road maintenance needs, and technical assistance to CED of the MPW. These components are clearly justified although the benefits could not be quantified. Together, they are designed to provide CED with much needed assistance in improving road maintenance planning and operations.  - 30 - E. Sensitivity and Risks 4.12 A sensitivity analysis was carried out for a 15% rise in construction costs or a 15% decrease in benefits and in either case, the ERR of about 13% was above the estimated opportunity cost of capital. 4.13 As regards institution building, there is a high risk in Somalia o:E a delay in improving CED's road maintenance capability in the event planned local staff leave for lucrative jobs outside the Government or leave the country altogether. This is a risk which needs to be taken given the vital importance of improving CED's capability.  - 31 - V. AGREEMENTS REACHED AND RECOMMENDATION 5.01 During negotiations, agreement was reached with Government on the following items: i) at least one newly graduated engineer (civil) will be assigned to CED from SNU annually, during the period commencing in 1983 until the completion of the project while the total number of additional engineers will reach at least 10 at the end of the period (para 2.15); ii) pending recommendations of the road maintenance study on the requirement of recurrent funds, the budgetary allocation for road maintenance for 1984 will be at least So Sh 20 million in 1983 prices, and by September 1 of each year up to an including 1987, Government shall review with the Association the budgetary requirements and the proposed budgetary allocation for road maintenance (para. 2.24); iii) road maintenance staff and equipment will not be diverted to other uses (para. 2.25); iv) the findings and recommendations of the road maintenance study will be reviewed with the Association, and an action plan satisfactory to the Association will be drawn up within six months of completion of the study to implement the recommenda- tions of the study (para. 3.08); v) (a) by October 31, 1983, counterpart staff with qualifications and experience satisfactory to the Association will be provided to techncial assistance personnel, and (b) by June 30, 1984, a suitable training program including any agreements and arrange- ments with the local techncal institutions for training of CED's staff will be submitted to the Association for its review and approval (para. 3.09); vi) during project implementation, lists of materials, equipment, spare parts and tools to be purchased for urgent road maintenance needs will be submitted to the Association for its review and approval (para. 3.10); vii) draft terms of reference for consultants for carrying out the maintenance study and technical assistance to CED (para. 3.14); viii) a project implementation schedule (para. 3.15); ix.) civil works will be procured under unit price contract(s) through international competitive bidding in accordance with the Bank Group "Guidelines for Procurement" (para. 3.16);  - 32 - x) consultants will be employed in accordance with the Bank Group "Guidelines for the Use of Consultants" and will be selected solely on an evaluation of technical competence of the firm, the personnel undertaking the assignment, and the suitability of its proposal (para. 3.16); xi) materials, equipment, spare parts and tools required for urgent road maintenance needs will be procured on the basis of at least four responsible quotations from suppliers eligible under Bank Group "Guidelines on Procurement" (para. 3.16); xii) an audited statement of project accounts will be submitted to the Association not later than six months after the end of the fiscal year during project implementation (para. 3.19); and xiii) progress reporting requirements and the submission of a project completion report (para. 3.20). 5.02 A condition of effectiveness for the IDA Credit is the fulfillment of all conditions to initial disbursements under the Arab Fund loan. 5.03 Agreement having been reached on the items listed above, the project is suitable for a credit of SDR 21.4 million (US$23 million) to the Somali Democratic Republic on standard IDA terms.  - 33 - Annex 1 SOMALI DEMOCRATIC REPUBLIC FOURTH HIGHWAY PROJECT ROAD MAINTENANCE STUDY Draft Terms of Reference I. Background and Objectives 1. Although the Civil Engineering Department (CED) of the Ministry of Public Works (MPW) is responsible for the upkeep and maintenance of the country's road network, actual field operations are carried out by sixteen regional road maintenance sections under administrative control of the Regional Directors. Because of the lack of proper organization and shortage of resources -- funds, equipment, workshop facilities, trained manpower, etc. -- the quantity and quality of road maintenance is unsatisfactory. The Government intends to employ consultants to carry out a country-wide study to review the present situation and to make recommendations for improving road maintenance planning, organization and operations and to provide CED with a 5-year comprehensive road maintenance program including recommendations for urgent action as necessary. II. Scope Of Consulting Services A. General 2. The consultants shall carry out all field investigations, organiza- tional, economic and financial studies and related work required to achieve the objectives in Section I. In the conduct of their work, the consultants shall cooperate fully with the Government ministries and departments responsible for highway planning, construction and development; the Government will provide the consultants with the data, services and facilities outlined in Section III. The consultants shall have sole responsibility for the analysis and interpretation of all data received and for the conclusions and recommendations in their reports. 3. The consultants shall base their recommendations for achieving the above objectives on considerations of economic feasibility with due regard to financial and other conditions prevailing in Somalia and shall present their findings and recommendations in the reports listed in Section IV. B. Review of Present Situation 4. The consultants shall: i) review and evaluate records and other data and carry out additional surveys and investigations for preparing inventories of the existing road network; ii) review present road maintenance operations, volume of maintenance work carried out on different types of roads and maintenance methods used; and  - 34 - iii) review the present maintenance organization, including: a) the personnel structure, lines of authority, staffing, employment policies, training facilities and training programs employed; b) the planning, budgetary, accountancy and management information systems employed; c) the system of equipment procurement, its management and control; d) the manpower and workshop facilities available for repair and servicing of road maintenance equipment; and e) the road maintenance equipment fleet and related spare parts stocks, and the availability and utilization of equipment. C. Road Maintenance Program 5. On the basis of the analysis of findings of Section B and other considerations described in this section, the consultants shall draw up a road maintenance program to be carried out by the CED over a five-year period. The program, which shall identify major rehabilitation efforts needed before normal routine and periodic maintennce can be carried out, shall be based on technical and economic criteria and shall take into account Government's plans for the improvement and expansion of the road system, as well as growth of traffic during the program period. The consultants shall also identify all investment, operational, organizational, budgetary and other requirements necessary to implement the program. The consultants' report shall include recommendations on: a) the proposed road rehabilitiation and maintenance program, including a detailed time schedule for its implementation and associated requirements for labor, material, equipment, spare parts, workshop facilities, road camps, etc.; b) the proposed methods of execution of works (contract, force acount or combination thereof); c) estimates of financial and economic costs of the recom- mended program broken down into local and foreign components; d) estimates of the annual budget allocations (capital and recurrent) required to implement the program; e) possible improvements in road maintenance planning, organization and operations, including: i) the organization and administration of road mainte- nance at the headquarters and in the regions;  - 35 - ii) the staffing required for the maintenance organiza- tion, including job descriptions, qualifications and educational requirements, and possible sources for the recruitment of required additional staff in various categories; iii) the setting up of a system of cost accounting and budgetary control; iv) the establishment of an efficient system of equipment procurement, management, and of stocking, distribution and control of spare parts; v) the measures necessary to improve equipment maintenance and repair operations; vi) the setting up of an equipment replacement program based on the need for scrapping existing units that are beyond economic repairs; vii) the setting up of road maintenance training units along primary roads including the Afgoi-Baidoa Road; and viii) the overall training needs of the maintenance organization and the establishment of associated facilities, including design of incentives for efficient performance of staff at various levels. f) suitable levels of maintenance for different road types and traffic levels, incorporating an assessment of the effect of different levels of maintenance on vehicle operating costs; g) establishment of performance standards and procedures for routine and periodic maintenance involving an appropriate mix of labor and equipment; h) regulation of traffic (axle loads and dimensions of vehicles) in accordance with established road design standards, and administrative arrangements for their imple- mentation; and i) establishment of a comprehensive and continuous training program including the use of local technical institutions to the extent possible to help CED meet staffing requirements; and j) any technical assistance that might be required for implementing the recommended maintenance program, training program and other findings of the study. III. Data, Local Services and Facilities to be Provided by the Government A. Data 6. The Government shall provide the consultants with:  - 36 - i) any available information and studies required for the services; ii) appropriate highway traffic count data; and iii) assistance in undertaking additional highway traffic counts. B. Cooperation of Government Agencies and Counterparts 7. The Government will provide for the cooperation of Government ministries, departments and other agencies as required for carrying out the work and will allow the consultants full access to all information required for the completion of the work. 8. The Government will assign suitable counterparts to work with the key personnel of the consultants. C. Facilities 9. The consultants will make their own arrangements for all necessary office and living accommodation, local transportation, supplies, etc., in connection with the services to be provided. IV. Time Schedule for Consulting Services and Reports 10. The consultants shall prepare and submit the following reports (all in English) within the time limits specified below: i) Inception Report: (5 copies within 2 months of starting date of study) summarizing initial findings of the consultants and giving proposals for the conduct of the study; ii) Progress Reports: (3 copies at bi-monthly intervals) summarizing progress made during the reporting period and total progress since the start of the work and tentati- vely summarizing their findings and recommendations and identifying any major delays or problems encountered in the work with recommendations for corrective action; iii) Draft Final Report: (5 copies within 10 months of starting date of the study) summarizing all work performed and their findings and recommendations. This report shall include all material to be presented in the Final Report for comments by the Government; and iv) Final Report: (number of copies to be decided by Government within 30 days of receipt of the Government's comments on the draft Final Report) incorporating all revisions deemed appropriate by the consultants and the Government. 11. The consultants shall submit 3 copies each of the reports outlined in (i) - (iv) above to the International Development Association.  - 37 - Annex 2 SOMALI DEMOCRATIC REPUBLIC FOURTH HIGHWAY PRWECT TECHNICAL ASSISTANCE TO THE CIVIL ENGINEERING DEPARTKENT Draft Terms of Reference I. Objectives 1. The purpose of the Technical Assistance is to assist the Civil Engineering Department (CED) with improving road maintenance planning and operations, personnel management, budgetary and accounting systems and to train local staff in these fields. T. Scope of Consulting Services 2. The consultants will provide a technical assistance team consisting of a road maintenance engineer (team leader), a road design/construction engineer, a road maintenance superintendent, two workshop superintendents and an adminis- trative/financial officer for a period of 30 months each. The individuals will assist and advise the CED in their respective fields in addition to carrying out on-the-job and classroom training of local staff. They will be stationed in either Mogadishu or one of the regional headquarters. III. Individual Job Descriptions A. Road Maintenance Engineer Qualifications: 3. The road maintenance engineer should be a qualified professional civil engineer with 10-15 years of experience in highway planning, design, construction and maintenance of bituminous-surfaced, gravel and earth roads, including the design and use of bituminous mixes and the testing of soils and materials; he should have experience in operational and administrative aspects of highway maintenance in a government road organization and should be conversant with unit costing and similar management systems and controls and have suitable experience in equipment usage and control. The person selected must be fluent in written and spoken English and/or Italian and should have previous experience in organizing and conducting training programs for staff. Duties: 4. He will report to the Director of CED and will assist and advise him on all aspects of highway maintenance, planning and implementation, including but not limited to:  - 38 - i) identifying for each road section the type and amount of work required for adequate maintenance and translating such works into specific tasks in terms of routine and periodic maintenance; ii) establishing performance standards and procedures for routine and periodic maintenance involving an appropriate mix of labor and equipment; iii) installing a system of cost accounting procedures to facilitaLte determining the cost of individual road rehabilitation and maintenance operations and the total cost of maintaining individual road sections, relating costs to physical environments and traffic; iv) operating a highway maintenance organization, including equipment management and control, work scheduling and budgeting; v) assessing manpower requirements, establishing and carrying out a training program; and vi) coordinating the work of technical assistance team and of personnel employed in highway maintenance. B. Road Design/Construction Engineer Qualifications: 5. The Design/Construction Engineer should be a qualified, professional. civil engineer with 10-15 years experience in highway planning, design, cons- truction (by contract and force account), construction supervision and maintenance of bituminous-surfaced, gravel and earth roads, including the design and use of bituminous mixes and the testing of soils and materials; should have experience in operational and administrative aspects of highway planning, design, construction and construction control in a government highway/roads organization and should be conversant with unit costing and similar management systems and controls and have suitable experience in equipment usage and control. Fluency in written and spoken English/Italian and the ability to communicate ideas easily are also required. Duties: 6. The Design/Construction Engineer will report to the Director of CED and will assist and advise him on all aspects of highway planning, design and implementation, including but not limited to: i) assisting and advising the head of CED's Division for Planning and Design in: a) reviewing and evaluating existing road inventories, records and other data and carrying out additional surveys and investigations for preparing detailed and updated inventories for the road network;  - 39 - b) collecting and compiling data such as highway traffic counts, freight movements, axle loads, origin and destination data and traffic forecasts; c) using above and other data for planning highway develop- ment; d) selecting and using adequate standards for geometric design and construction; e) carrying out field surveys for highway design (alignment location, soils and materials, hydrology); and f) assembling and completing design and tender documentation such as invitation to tenderers, conditions of contract, specifications and drawings; ii) assisting and advising the head of CED's Soils and Materials Laboratory in: a) organizing and operating the laboratory efficiently; b) establishing routines for carrying out the most common tests for soils and materials; c) training laboratory technician to carry out the less common and more complicated tests for soils and materials; and d) interpreting, using and reporting on test results. iii) evaluating pre-qualification applications, bids and quotations for procurement and proposals for consultancy services; iv) awarding of contracts for construction and consultancy services; v) carrying on a dialogue with consultants superving road construction and with contractors as required; vi) checking and evaluating contractor payment certificates and claims; and vii) assessing man-power requirements for the Planning and Design and the Laboratory Divisions, establishing and carrying out a training program for those divisions. C. Road Maintenance Superintendent Qualifications: 7. The road maintenance superintendent should be a technician with 15-20 years experience in the construction and maintenance of bituminous-surfaced, gravel and earth roads, including the design and use of bituminous mixes and the  - 40 - testing of soils and materials; he should also be conversant with unit costing and similar management systems and controls and have suitable experience in equipment usage and control and in labor intensive methods of road construction and maintenance. He should also have sufficient experience at supervisory level in a government road organization. In addition, he should have previous experience in organizing and conducting on-the-job and classroom training of staff within the area of his responsibility. He must be fluent in written and spoken English and/or Italian. Duties: 8. He will report to the head of the Maintenance Division in the CED and will assist and advise him on all aspects of road maintenance, including but not limited to: i) planning and implementing rehabilitation, routine and periodic maintenance work; ii) developing maintenance costs and budgets; iii) establishing performance standards and procedures for routine and periodic maintenance; iv) instructing road maintenance personnel in proper work execution and demonstrating how required standards of maintenance can be obtained; v) directing and controlling the deployment of equipment assigned to areas of operation; and vi) in cooperation with the workshop superintendents, training local personnel in the operation of road maintenance equipment. C. Workshop Superintendents (Master Mechanics) Qualifications: 9. The workshop superintendents should be technicians qualified in the mechanical field with 15-20 years experience in the operation and management of equipment fleets, including road construction/maintenance plant and vehicles, scaling, stocking and distribution of spares; they should have sufficient experience in workshop management in a government road organization and should have previous experience in organizing and conducting on-the-job and classroom training of staff within the area of their responsibility. They must be fluent in written and spoken English and/or Italian. Duties: 10. They will report to the head of the Mechanical Workshop and will assist and advise him on all matters concerning workshop management and control, including but not limited to: i) routine administrative matters concerning workshop management;  - 41 - ii) reviewing and updating equipment and spare parts inventories and establishing a continuous stock verificaiton system; iii) establishing preventive maintenance parts and components requirements (maximum-minimum stock levels); iv) establishing an efficient system for spare parts distribution and control; v) setting up a preventive maintenance schedule for all types of eqipment and instituting standard equipment repair and overhaul procedures; vi) establishing standards for machineshop production; and vii) carrying out on-the-job training of mechanics, plant and vehicle operators. D. Administrative/Financial Officer Qualifications: 11. The administrative/financial officer should be a qualified cost accountant or a graduate in business administration, or have equivalent training and experience. He should have extensive experience in administration, costing and financial control of civil engineering works preferably with not less than five years experience in a government road organization. He must be fluent in written and spoken English and/or Italian and should have previous experience in teaching costing and accounting methods on-the-job or in the classroom. Duties: 12. He will report to the director of the CED and will assist and advise him on all aspects of personnel administration and accounts including but not limited to: i) determining staffing requirements of CED headquarters and field organization and identifying possible sources for the recruitment of additional staff in various categories; ii) assessing training needs and selecting staff for on-the-job and classroom training; iii) designing and implementing costing and accounting systems including data and progress reporting requirements, timing and formats of reports; iv) preparing, monitoring and revising annual and forward budgets; v) receiving, checking and analysing costing and accounting data and information;  - 42 - vi) preparing periodic reports on job costing, finance and budgeting and project financial status; and vii) carrying out training of Somali staff. IV. Data, Local Services and Facilities to be Provided by Government 13. The Government shall provide the technical assistance team with all available information, studies and reports required for their services, and will assign suitable counterparts to work with them. It shall also provide them necessary office space, furniture, equipment and office supplies, as well as secretarial and clerical services. They shall, however, make their own arrangements for living accommodation and local transportation. V. Reports 14. The consultants shall submit quarterly progress reports (3 copies each to Government and the International Development Association) summarizing accomplishments during the reporting period and total progress since the start of the work and identifying any problems encountered in the work with recommendations for corrective action.  -43 - Annex 3 SOMALI DEMOCRATIC REPUBLIC FOURTH HIGHWAY PROJECT PROGRESS REPORTING REQUIREMENTS 1. Progress Reports shall be submitted to the Association quarterly in triplicate, no later than one calendar month after the end of the quarter. The first report should cover the period ending December 31, 1982. 2. The Report should contain the following information: i. General Information: (This should refer to Project Monitoring Indices shown in the Attachment) a) the physical progress accomplished during the reporting period; b) actual or expected deviations from the project implementation schedule; c) actual or expected difficulties or delays and their effect on the implementation schedule and the steps planned or taken to overcome the difficulties and avoid delays; d) expected changes in the completion dates of the project; e) key personnel changes in the staffs of the CED, consultants or contractors; f) matters which may affect the project cost; and g) any development activity likely to affect the economic viability of the project components. ii. A bar-type progress chart, based on the project implementation schedule, showing the progress in each project component. iii. A financial statement set out in tabular form which shows for each of the project components: a) original estimated cost; b) revised cost, if appropriate; c) actual expenditure; d) projected expenditure; and e) actual withdrawals and projected withdrawals from the Credit Account. iv. The status of action on each of the covenants of the Credit Agreement.  - 44 - Ahxi 3 Atac R:n]Wfr aMUXsM IMIQLS as of (date) Corrective Actual Action as % of Reasons for Planned Estimated Actual Estimated Divergence or Taken I. Road Strengthening and Improvement 1. Preliminaries to mnbilization (onths) 2. Clearance of shoulders (km) 3. Earthworks 4. Sub-base (km) 5. Wit-inx macadam road base (km) 6. Bituminous nmacdam waring corse (km) 7. Surface dressing (km) 8. Shoulders (km) 9. Ancillary works (km) 10. Payments to Contractors lI. Road Maintenance Study 1. Preliminaries to Start (months) 2. Inception Report (date) 3. Draft final report (date) 4. Final report (date) 5. Payments to consultants III. Technical Assistance to CED 1. Preliminaries to start (nnths) 2. Technical assistance (man-months) 3. Paynents to consultants  Amsiex 4 SIW.M 1DATIC REOIEC ECAxxt lamti(Xk of MrengdrWTxqovt Of Agoi-aaidoa &1d I/ 1. Road Section Section I Section II Section III Section IV Section V Section VI Total 2. LIngth (kn) 12.0 18.0 30.0 94.0 40.5 21.9 3. Traffic (AADT) 2/ 1980: Total (vpd) 530 257 170 115 160 185 Light 40% 33% 30% 40% 34% 33% Heavy 60% 67% 70% 60% 66% 67% 1985: Total (vpd) 700 351 240 170 223 258 Light 37% 30% 26% 32% 30% 27% Heavy 63% 70% 74% 68% 70% 73% 4. Traffic Growth (per year) 3/ 5% 5% 5% 5% 5% 5% 5. Cost/Benefit Analysis 4/ Costs Benefits Costs Benefits Costs Benefits Costs Benefits Costs Benefits Costs Benefits Costs Benefits Years (in SoSh millions) 1983 6.58 0.17 9.24 0.34 10.42 0.52 31.88 0.52 15.35 5.62 5/ 4.87 0.17 78.34 7.34 1983 1984 13.16 3.17 18.49 3.34 20.84 3.52 63.77 6.71 30.71 16.75 Y/ 9.71 1.34 156.68 34.83 1984 1985 15.62 12.92 5/ 21.79 14.37 5/ 24.66 7.11 75.45 15.99 36.35 8.97 11.57 3.15 185.44 62.51 1985 1986 8.91 7.32 12.55 5.86 14.24 7.14 43.57 16.16 20.99 9.06 6.72 3.19 106.98 48.73 1986 1987 0.17 7.53 0.27 5.95 0.52 21.20 5/ 1.23 22.33 5/ 0.71 10.16 0.34 4.99 3.24 72.16 1987 1988 0.24 8.12 0.40 6.32 0.52 6.48 1.23 13.61 0.88 9.05 0.34 2.99 3.61 46.57 1988 1989 6/ 0.34 26.76 0.52 33.92 0.71 49.77 1.57 148.98 1.23 69.93 0.45 3.09 4.82 332.45 1989 1990 6/ 2.26 7/ 27.25 3.31 7/ 34.34 3.51 7/ 50.33 16.43 7/ 150.28 7.53 7/ 70.64 0.45 3.28 33.49 336.12 1990 0.62 6.30 0.62 6.30 1991 4.137/ q.81 5/ 4.13 8.81 1992 6. Ecooreic Rates of Return Section I Section II Section III Section IV Section V Section VI Whole Road 0.24 7.80 0.24 7.80 1993 0.24 8.17 0.24 8.17 1994 Base Case 22.5% 14.5% 21.0%f 12.4% 20.0% 16.9% 17.1% 0.34 8.56 0.34 8.56 1995 Sensitivity 0.34 11.78 5/ 0.34 11.78 1996 * Construction Costs + 15% 17.1% 10.2% t6.5% 8.8% 15.0% 14.6% 13.2% 0.45 10.52 0.45 10.52 1997 * VOC Benefits - 15% 16.4% 9.5% 15.6% 8.3% 14.2% 14.3% 12.5% 0.45 10.97 0.45 10.97 1998 * Both Assunptions 11.6% 5.5% 11.5% 4.8% 9.8% 12.2% 8.9% 0.62 11.40 0.62 11.40 1999 4.137/ 42.16 6/ 4.13 42.16 2000 (The ERR for the whole road would fall below 10% only if costs increased by 46% over the base case or if benefits decreased by 32%; that is, tupever, considered unlikely.) 7. Vehicle Operating Costs 8/ Passenger Vehicles Trucks (in So Sh/kn) Paved Road Condition Passenger Car Pidoip Bus Light (5-7t) Medium (10-12t) Heavy (20t) Level 1 (Good) 2.75 3.70 5.74 5.91 7.95 9.83 Level 2 (Fair) 3.23 4.34 6.77 7.31 9.52 12.21 Level 3 (Poor) 3.92 5.01 7.84 8.27 10.87 14.18 level 4 (Very Poor) 4.22 5.18 8.14 8.61 11.19 14.67  -46 - Annex 4 FOOTNOTES 1/ Economic analysis was done net of taxes and duties in November 1982 prices; due to different traffic volumes, the road was divided into six sections. 2/ Includes normal traffic plus additional traffic (trucks only); up to 1990, the additional traffic is mostly composed of the refugee traffic in the function of assumed declining number of refugees, from 460,000 in 1985 to 120,000 by 1990; Bay Region Agricultural Project and cement plant project make only minor contribution to the traffic. The total additional traffic declines gradually - 1986:28; 1987:24; 1988:20; 1989:16; and 1990:14. 3/ For normal traffic only. 4/ Costs include 10% physical contingencies and 5% for works super- vision. Due to high unemployment in the country, the cost of local unskilled and semi-skilled labor was shadow-priced at factor 0.5 in both costs and bene- fits stream. Furthermore, in view of the exchange rate effective July 1, 1982, the exchange rate used for economic calculations was US$1.00 = So Sh 15.227 to reflect the true economic value. 5/ Includes also provision for urgent restoration works which were assessed to be unavoidable in *without project case" to keep the road passable. 6/ The benefits in years 1989 and 1990 also include avoided reconstruc-- tion costs, which would be required without the project. 7/ Includes provision for periodic maintenance - resurfacing. 8/ In 1981, road sections are found to be in levels 2 and 3: assuming "without project case", by 1985, it is estimated that three sections will be iLn level 3, two in level 4 and one in level 2. Emergency repairs would only postpone disintegration of the road. Source: Consultants Halcrow Int., Study on Improvement and Strengthening of the Afgoi-Baidoa Road, 1981, and mission estimates.  - 47 - Annex 5 SOMALI DEMOCRATIC REPUBLIC FOURTH HIGHWAY PROJECT Related Documcnts and Data Available in the Project File Reports Relatiug to Transportation (1) Somali Democratic Republic, Three-Year Plan, 1979-1981 (2) Somali Democratic Republic, Draft Five-Year Plan, 1982-1986 (3) Somali Democratic Republic, Statistical Abstract, 1978 (4) Somali Democratic Republic, Statistical Abstract, 1979 (5) Evaluation of the three-year development programme 1979-1981, August 1982. II. Studies, Tender Documents and Drawings Relating to the Project (1) Study for improvement and strengthening of the Afgoi-Baidoa Road, June 1981, Volumes 1-3, Halcrow International Partner~ship. (2) Tender Documents for improvement and strengthening of the Afgoi-Baidoa Road, June 1981 and revision of June 1982, Volumes 1-3, Halcrow International Partnership. (3) Tender Documents (Drawings) for improvement and strengthening of the Afgoi-Baidoa Road, July 1981, Halcrow International Partnership.  - 48 - . E I_ __ _ _- i'll AL  Ilhart 2 9aMU IDf4XRATIC RF2'JNI 1982 06~~~~~~193 198 1985 1986 Miain Activties Rpnsb 71. .2 *. I.3 1 7 ----