Uganda - Third Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY FIECPY Report No. 4722-UG STAFF APPRAISAL REPORT UGANDA THIRD HIGHWAY PROJECT February 14, 1984 Transportation Division I Eastern Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Ugandan Shilling US$ 1.00 = U Sh 250 U Sh 1.00 US$0.004 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) 0.62 mile (mi) 1 sq. kilometer (km2) 0.386 square miles (sq mi) 1 hectare (ha) 2.47 acres (ac) 1 metric ton (m ton) = 2,204 pounds (lbs) ABBREVIATIONS EAC = East African Community EARC = East African Railways Corporation HMOS = Highway Maintenance and Organization Study MOT - Ministry of Transport MOW = Ministry of Works MPED = Ministry of Planning and Economic Development PTC - People's Transport Company UA = Uganda Airlines URC = Uganda Railways Corporation UTC = Uganda Transport Company UTCU = Uganda Transport Cooperative Union FISCAL YEAR July 1 - June 30  FOR OFFICIAL USE ONLY UGANDA THIRD HIGHAY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No I THE TRANSPORT SECTOR .......................................... 1 A. Geographic and Economic Setting ............................ 1 B. The Transport System..... ... . .. . ............. .... ...... . 2 C. Transport Sector Management... 6 D. Planning and Coordination ...... , ................. ... .. 6 E. Transport Sector Ivestment............... 7 F. Transport Policy and Isesps 10 G. Previous Bank Group Assistance in the Sector 12 II. THE RIGHWAY SUBSECTOR .......................... o.... .... . ... 14 A . Tne Network* ................................ 14 B. Road Use . . ................................. 15 C. The Road Transport Industry . .................... 16 D. Traffic Regulations and Safety........... t......... .... 19 E. Administration...* .......... o........ o ...................e*v 19 F. Staffing and Training. ...................... . ............. 20 G. Maintenance .... .. ..................................... ... 23 H. Planning and Financing of Investments.................... 24 I. Engineering and Construction .............................. 26 III. THE PROJECT ............... ......... ....... 27 A. Objectives ............0........... ........ 27 B. Description i.......0.......... ...... 27 C. Project Cost and Financing ............ ......32 D. Implementation and Procurement...........S................ 35 E. Disbursements ................ .. .... 37 F. Accounting, Auditing and Reporting Requirements............ 39 G. Environmental Aspects...... 40 IV. ECONOMIC EVALUATION ...............o.......41 A. Genrl.........e................... 41 B. Area of Influence of the Project, Benefits and Beneficiaries .......... ...... . ....... 41 C. Economic Analysis. . . . . . . .......... ........... ..... 43 D. Riss..is......k...........s....... 45 V. AGREEKENTS REACRED AND RECOMMENDATION .................. ....... 46 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.  (Contents Cont'd) ANNEXES 1. Annual Estimated Road Motor Vehicles by Type 2. Roads Included in the Project for Periodic Maintenance 3. Road Maintenance Equipment to be Purchased 4. Draft Terms of Reference for Technical Assistance to the Ministry of Transport 5. Draft Terms of Reference for Technical Assistance to the Ministry of Works 6. Draft Terms of Reference for Road Maintenance Study 7. Outline Program for Development of Local Construction Industry 8. Progress Reporting Requirements 9. Economic Analysis 10. Related Documents and Data Available in Project File CHARTS I. Organization of the Ministry of Works II. Organization of Road Maintenance Section of Technical Division under Ministry of Works III. Project Implementation Schedule MAP Uganda, Highway Network (IBRD 17320) This report was prepared by S.L.Kathuria (Sr. Highway Engineer) and M. Le Blanc (Economist) who appraised the project in April 1983. B. Bostrom (Sr. Economist) and C. Applegate (Technical Editor) also participated in the preparation of this report.  I TE TRANSPORT SECTOR Ab ~ A en LCO.;L s. e.sic Settin 1.01 Uganda is a landlocked country In the upper basin of the N1ile, astride the Equator botu-nded by the Sudan to the north, Kenya to the east, Tanzania, Lake Victoria and .Rwanda to the south and Zaire to the west. The total area of the country is 236000 km2, about the size of the United Kingdom, of which about one seventh is swamps and lakes, and most of the remainder is a plateau about 1700 m above sea level, Rainfall averages 1,270 mm in the central and eastern parts of the country while the somewhat drier northern parts receive about 760 mm annually. Neither its temperate climate nor its topography pose major Impediments to transiport. 1.02 The population, est imaiced at 13.5 million and growing at 2.6% per annum, is predominantly rural with roughly 93% living in the countryside. Popult-ion density averages 57 persons per kin2, which is about twice that of neigghbouring Kenya. Uganda is essentially an agricultural economy with that sector contributing 75% of GDP and 95% of the country's exports. The share of coffee, the most important export crop, in export receipts increased from 53% in 1971 to over 90% in 1982 despite a decline to 174,000 tOnS in 1982 from 191,000 tons In 1970. Other export cash crops including cotton, tea, tobacco and sugar, which in the past provided up to 42% of eXPort earnings currently account for less than 10% of agricultural exports. 1.03 The production of foodcrops for domestic consumption, the most important activity of the agricultural sector, amounted to about 10.3 million tons in 1980 growing to 13.5 million tons in 1982. The main function of the transport system is the distribution of this produiction throughout the country. When food production, which currently is about half of that of the peak years, revert to their past levels, the deteriorated transportation system will constitute a bottleneck. 1.04 During the last decade the economy of Uganda has seen a reversal from growth to decline followed bv rapid deterioration during 1972-1979 and the subsequent liberation war. Rea1l G-DP in 1982 was consequently only two-thirds of the 1971 level- and per capita income fell by 48% in real terms, to a level of US$240 over the same period. This has and continues to have an adverse impact on the transport sector and its operations - foreign exchange to renew equipment- and vehicles and to provide spare parts is scarce; staff morale is low due to the harsh economic situation and low salaries and the efficiency of road ma-ntenance works has suffered due to  -2- this. The decline in the share of transport sector from about 12% of GDP in 1970 to about 7% in 1982 is explained by the very deteriorated state of infrastructure and vehicles. B. The Transport System 1.05 Uganda's transport infrastructure comprises about 27,540 km of roads of which about 2,000 km are paved; a railway system totalling 1,350 km; a port on Lake Victoria providing a rail-ferry link to Tanzania; one international airport at Entebbe and eleven domestic airfields. The density of the transport system is adequate, however, due to severe neglect over the past 10 years, the infrastructure has deteriorated and requires rehabilitation and maintenance. The proposed project is primarily aimed at stopping further deterioration of the road system. Highways 1.06 The highway subsector is described in detail in Chapter II. Railways 1.07 The railway network consists of a 1,350 km metre-gauge system of two main lines branching off at Tororo on the eastern border with Kenya (Map IBRD 17320). Until 1974, the railways in Kenya, Tanzania and Uganda were organized as a single operating system within the East African Railways Corporation, although each country collected revenues for goods originating within its boundaries. Train and traffic control in all countries was centered at the Nairobi headquarters, which was also the heavy locomotive and wagon repair center for the system and the main training centre. In 1977, when the Eastern African Community (EAC) broke up, the Uganda Railways Corporation (URC), a parastatal under the Ministry of Transport, was formed. 1.08 In general, the railway's infrastructure and its rolling stock would be adequate for it to play its role in the economy if they were rehabilitated and efficiently utilized; much of these have deteriorated due to failure to perform adequate maintenance and replace capital. The URC's efficiency has been further constrained by the lack of adequate operating operating relations with neighbouring countries, through which the bulk of Uganda's external trade transits.  1.09 The railway's condition needs to be improved urgently. Although the track was not seriously damaged during the liberation war, it is estimated that over 70% is now sub-standard. Moreover stations, offices, sheds, communication equipment and service vehicles need urgent repair of damage caused during the war. The lack of communications, an operating necessity, has resulted in further straining the already limited administrative and operational capacity of URC. The situation regarding rolling stock and locomotives has improved somewhat in recent years and Uganda will have sufficient rolling stock capacity now that Kenya has agreed to release Uganda's share of EAC wagons. The locomotive fleet is more than adequate for present traffic, although approximately one half of it is currently out of service due to the need for repairs or lack of spare parts. Repair facilities remain inadequate; a new workshop being built at Nalukolongo, near Kampala, with local financing is proceeding only slowly as funds become available. 1.10 Uganda remains virtually dependent on Kenya for its import/export traffic. Thus co-operation with Kenya is a key element in Uganda's overall transport strategy. Considerable progress in this area has been made recently and there is an informal agreement between Kenya Railways and URC which forms the basis for the exchange of rolling stock between the two countries. At negotiations, it was agreed that the Government will take all measures necessary on its part by September 1, 1984 to formalize appropriate arrangements with Kenya concerning the interchange of rolling stock (Para. 5.01(a)). A similar agreement will be reached with the Government of Kenya under the proposed Second Highway Sector Loan. 1.11 With the breakup of the EAC, the number of passengers handled by the Ugandan railway system fell sharply. Freight traffic had begun to decline much earlier, and by 1982, the volume of goods had fallen to some 300,000 tons or 30% of peak levels reached in the early 1970s. Although there has been some recovery, especially in passenger service during the past two years (3.3 million passengers in 1982), the railway is still underutilized. While this reflects in part the general decline in economic activity, it is also due to a diversion of traffic to road transport caused by the low efficiency of the railways; the low level of security of traffic, particularly for high value products such as coffee and fuel; and coordination problems with Kenya Railways. In 1982 the major export commodity was coffee of which the railways carried about 53% or some 92,000 tons. The railway is also now carrying maize exports to Tanzania using the rail ferry on Lake Victoria. For imports the railway carries only a small portion (6,000 tons or 4%) of fuel. This should increase when URC gets EAC-owned tank wagons under their own direct control. Another area of potential expansion is the movement of import goods in containers.  -4- 1.12 The breakup of the EAC also imposed completely new institutional requirements on Uganda. As all general services such as administration, procurement, finance, accounting, train control and heavy maintenance had been centralized in Nairobi, both Tanzania and Uganda were left without them. Thus URC has weak commercial and technical management and little experience in railway operations. Therefore in addition to rehabilitation of infrastructure, URC needs a major staff training effort, a complete review of personnel policies, and technical assistance to help the railway in management and operational tasks. Government is currently discussing with the UNDP possible assistance in reviewing its management and operations and in providing limited management support to URC. The Association would act as executing agency for that project. 1.13 The railway's rise from its humble beginnings has been a slow one, interrupted by the severe economic downturn experienced in Uganda, the liberation war and the period of uncertainty which followed. URC received French aid (120 million FF) from 1980 to 1982 to purchase locomotives, telecommunications, track maintenance equipment and technical assistance in the operations, accounting and commercial fields. A second part of this aid will provide technical assistance, track welding, two additional locomotives, spare parts and coffee wagons. The share of URC in the transport of imported fuel will increase when 25 tank wagons financed by European Development Fund are delivered. Air Transport 1.14 The air transport infrastructure consists of an international airport at Entebbe capable of handling long-range jet aircraft and eleven domestic airfields, of which eight were operated until June 1981 when all domestic services were suspended due to unsafe operating conditions. Limited operations were resumed in mid-1982 but flights are still often cancelled because of lack of equipment and navigational aids. The 1983-85 recovery program includes some funds for renewal of this equipment. Uganda Airlines, a wholly owned parastatal, was formed in 1976 and became the sole national carrier following the collapse of East African Airlines in 1977. During the liberation war many of its aircraft and much of its equipment were destroyed or damaged, including two B-707s. Since the war, the airline has replaced aircraft and resumed international service to points in Europe, the Gulf (Dubai) and regional centers in East Africa. The airline's fleet now comprises two B-707--320C's, two F-27, one Beechcraft King Air. The B-707s and the F-27 are used on scheduled services if and when spare parts and fuel are available.  - 5 - 1.15 Traffic levels on Uganda Airlines are relatively low with air cargo the most important revenue-earner. Both B-707 aircraft are combi-versions carrying main-deck cargo. In 1982 in international services 47,496 passengers were carried (1981: 43,572) and 5,818 tons of cargo (1981: 5,569 tons). Domestic flights are less important. The first six months of 1983 only 14,469 domestic passengers were carried compared to 21,841 on international services. A main problem for the airline is that low international passenger fares are reduced further through conversion at official exchange rates, whereas a large proportion of costs are in foreign currency only obtainable at less preferential exchange rates. Furthermore, the airline lacks a suitable aircraft for regional routes within Africa gd the B 707 aircraft will not meet noise limits in Europe after 1985. Because UA is a large consumer of foreign exchange, the Government has begun to look at it more critically and to identify possible improvements in efficiency and cost reductions. The possibility of restructuring UA into a more efficient, regionally oriented carrier has already been discussed with the Government in the course of preparing a Transport Sector Memorandum. These discussions will be continued as part of an overall sector dialogue between the Bank and the Government. Water Transport 1.16 Until recently, water transport was virtually non-existent in Uganda. However, in the past, as part of the East African Railway system, a rail-car ferry was operated on Lake Victoria linking Jinja in Uganda, Kisumu in Kenya and Mwanza in Tanzania. Since the breakup of the EAC, a Tanzanian ferry has operated intermittently as and when spare parts are available providing Uganda with an alternate, albeit not fully reliable, route to the Indian Ocean. To reduce its dependence on a single route for international trade, Uganda placed orders in 1978 with a Belgian shipyard to purchase three rail-car ferries to be operated on Lake Victoria between Uganda and Tanzania with financing through a barter of Ugandan coffee. The ships are being assembled at Port Bell near Kampala. The first ferry is now operating with two others to follow in 1984 and 1985. This route is economically inferior to the Kenyan route for most cargo, especially now that proper interchange arrangements between Uganda and Kenya railways are imminent. Nevertheless it does give a supplementary trade link which under certain conditions can be useful. Government will be encouraged through ongoing sector dialogue with the Bank to consider the best use of the two ferries scheduled for 1984 and 1985 delivery.  - 6 - C. Transport Sector Management 1.17 Two ministries share the main responsibility for the transport sector, the Ministry of Transport (MOT) and the Ministry of Works (MOW). Other ministries involved indirectly include: the Ministry of Commerce for transit traffic; the Ministry of Co-operatives and Marketing through its control over the Uganda Transport Cooperative Union (UTCU), the Ministry of Planning and Economic Development (MPED) for overall investment planning; and the Ministry of Finance for project financing and external aid. The Ministry of Transport has a policy role in matters of road, rail, air and water transport and is responsible for transport regulation, coordination, control, tariffs, and road transport safety. It also oversees the operations of Uganda Railways, Uganda Airlines, the Uganda Transport Company (UTC) and People's Transport Company (PTC), the latter two being road passenger transport parastatals. In addition, its transportation department operates a fleet of 30 for-hire trucks as a public service for customers not able to avail themselves of transport at competitive tariffs. Although the ministry's organisational structure is adequate, it seriously lacks qualified staff to perform its functions and is in serious need of technical assistance in the short-term and recruitment and training in the long term. The MOW is responsible for planning, constructing, and maintaining highways and for airport operations. Its operations are described in detail in Chapter II. D. Planning and Coordination 1D18 Transport planning is supposed to be carried out by MOT in cooperation with the MPED. Because of the lack of clearly defined objectives and manpower shortages, little has been done and most transport agencies and parastatals have, by default, taken on a high degree of autonomy without due regard to economic or intermodal considerations. While the MPED should have the role of overall economic planning, sectoral responsibilities are the responsibiity of the MOT. To adequately perform its role, tne MOT should: (i) strengthen its staffing, and (ii) systematize and intensify its sector knowledge through better data collection and analysis. Eventually MOT should assess Uganda's medium and longer term transport needs; prepare a comprehensive transport investment program; and develop a transport strategy and policy framework. Some effort is being made to achieve these objectives under the ongoing International Labor Organ-zation (ILO)/United Nations Development Programme (UNDP) project which is providing technical assistance. Further assistance and training support will 'be necessary to accomplish the above. The proposed project includes two Transport Planners/Statisticians who will assist MOT to continue establishing the required data base to carry out its functions.  - 7 - Training c local staff is being considered under a possible transport sector training sub-project under the proposed Second Technical Assistance Project. 1.19 To assist the MPED in its role of overall investment co-ordinator, a UNDP-financed project with the Association as executing agency is providing, among others, a transport specialist to advise Government on transport matters, particularly with respect to the rehabilitation of the sector. The terms of reference of the transport specialist call for inter alia: (i) preparing a document on transport policy reflecting the needs and priorities between modes; (ii) reviewing, appraising and monitoring implementation of transport sector projects; (iii) examining pricing and tariff policies for transport; and (iv) training counterparts in the techniques and methods of transport planning and project preparation. It is being considered by the Government that this transport specialist later be transferred from MPED to MOT where his involvement could be more direct. 1.20 Until the breakup of the East African Community, intermodal coordination was centrally handled from the Community's headquarters and operated relatively efficiently. However, following the EAC breakup and consequent collapse of transport interchange agreements, Uganda embarked on a series of investments designed to fill the void left in its transport system without adequate consideration for intermodal coordination. The only coordination occurs during the preparation of annual budgets but even then the exchange of information and discussion of projects is inadequate. An efficient coordination mechanism is clearly needed. This is being addressed in part by the ILO/UNDP policy study and will be expanded by the above mentioned restructuring of the UNDP-financed transport planning technical assistance project. Further technical assistance to the MOT is included in this project (Para. 1.18). E. Transport Sector Investment 1.21 At independence in 1962, Uganda inherited a very good transport system. The system was further improved during the decade 1962-1972 to become one of the best in sub-saharan Africa. However, after a decade of neglect and ultimate destruction during the liberation war in 1979, the transport system was left in disarray. The Government reacted quickly to the reduced transport capacity by investing simultaneously in all modes.The Government purchased trucks, ferries, airplanes, railway locomotives and rolling stock. In the transport sector, the two highest priority areas are the rehabilitation of Uganda Railways so that it can move a greater share of the import/export traffic and the maintenance of the national road  - 8 - network. The Government has since concentrated on the rehabilitation of the economy and identified priorities for each sector based on the most critical needs. 1.22 Government has since then, with the assistance of a Commonwealth team of experts, prepared a recovery program which concentrates on the rehabilitation of the economy and identifies priorities for each sector. In the transport sector the two highest priority areas are the rehabilitation of URC and the maintenance of the national road network. The overall cost of the recently revised recovery program is US$789.6 million, of which transport's share is US$78.6 million (10%). Other sectors' shares are: 27% for agriculture, 35% for industry and tourism (including commodity aid), 20% for social infrastructure and the remainder for communications, minerals and energy. Given the short-term needs and condition of the transport system, its share of the recovery program is reasonable. The program includes US$48.6 million for roads (see Table 1.1), US$26.0 million for railways and Lake Victoria ports and US$4.0 million for airports. Except for the funds allocated to the Lake Victoria ports (US$1.5 million), for which the economic justification is questionable, the projects in the recovery program are sound and reflect the priorities in the sector. The road transport program includes twelve sub-programs of which seven have sources of external financing; funding for the rest has been delayed pending the completion of the necessary pre-investment studies. Two of the programs are being financed by the European Economic Community (EEC) at a cost of US$7.2 million and the second IDA reconstruction project US$2.2 million. Two of the road sub-programs are aimed at improving road maintenance, one for the national network and the other for rural and feeder roads which are maintained by the local authorities; the former would be financed under the proposed project.  -9 - Table 1.1 Recovery Program 1983-85 US$ million Railway 1982/83 1983/84 1984/85 Rolling Stock - 3.9 4.4 Permanent way - 1.1 8.0 Telecom - - 1.0 Diesel workshops 1.2 0.4 2.0 Wagon workshop - 0.5 Sheds - - 1.0 Mechanical handling equipment - _ 1.0 Subtotal 1.2 5.4 17.9 Roads Kampala-Masaka 1.7 2.5 1.7 Kampala-Jinja - - 5.6 Lake Katwe road 0.8 0.5 0.7 Malaba-Jinja 0.8 1.4 1.7 Mbarara-Katunguru - 2.1 Mbarara-Masaka - 5.0 Mbarara-Rubaare - 5.0 Road maintenance units - 1.2 5.1 Feeder road maintenance units 1.0 1.0 1.0 Other roads - - 4.5 Subtotal 4.3 6.6 32.4 Air Transport Entebbe and Navaids 0.5 1.2 2.3 Water Transport Ferries - 0.6 0.6 Lake ports - - 0.3 Subtotal - 0.6 0.9 Road Studies - - 1.0 Kampala Streets - 1.3 3.0 Total Transport 6.0 15.1 57.5  - 10 - 1.23 The railway recovery program includes the renewal and improvement of permanent way, procurement of rolling stock, signalling and telecommunications, workshop for carriage and wagon repairs, and procurement of handling equipment. So far, the railway has received some external assistance for permanent way improvement, telecommunications and procurement of locomotives and rolling stock from France, the Federal Republic of Germany and the German Democratic Republic. The EEC plans to finance a study to examine the feasibility of realigning the line between Jinja and Kampala, and discussions have been initiated with the UNDP on a small technical assistance project to help the railway improve its management and accounting procedures and to prepare a longer term investment program. 1.24 The program for air transport involves the repair of essential navigational and communications equipment at Entebbe airport which were damaged during the liberation war. These are intended to improve safety of flight operations and are reasonable. The proposed investments for the improvement of Lake Victoria ports are questionable since they involve the construction of a ferry terminal at Port Bell outside Kampala when one already exists at Jinja. 1.25 In summary, although some of the individual transport components of the recovery program require more careful scrutiny the program is realistic as a framework for the rehabilitation of the transport sector. F. Transport Policy and Issues 1.26 In addition to its role of planning and coordination for the sector, the MOT is also responsible for setting transport policy. Although no clear transport policy has been enunciated, a set of objectives can be derived from the Government actions in the sector. Thus, for international transport, the Government sees rail transport as the principal mode for long distance freight movements. Moreover, given the current difficulties experienced with Kenya in operating the corridor to Mombasa, it is seeking to strengthen an existing alternative route, namely the Lake Victoria - Tanzania (rail) corridor to Dar Es Salaam. Additionally, it has assigned an active role to Uganda Airlines in international transport. On the domestic front, policy objectives are considerably less articulate. For example, the role of the parastatals vis-a-vis the private sector is not clearly defined. Although the Goverment's general strategy is to bring the transport system up to its previous level, it has been working concurrently at improving competing modes road and rail services without a clear set of priorities.  - 1i - 1.27 To help it formulate a comprehensive transport policy, the Government requested the ILO to (i) review the current situation and prepare an overall transport policy; and (ii) prepare a feasibility report on needed surface transport investments. The ILO has agreed to exchange views with the Association on its findings. This assignment will be followed by a second phase which will involve the recruitment of a transport development advisor for a period of eighteen months to assist the Gc7ernment in the initial phase of the implementation of the policy adopted and provide advice to the MOT on transport matters. In addition, the ILO project includes 20 man-months for specialized consultancies such as maintenance management, management information ystems design and installation, supply and stores management and railways management training. Concurrent with this assistance a statistical division should be established in the MOT to coordinate the data gathering and analysis needed to monitor the performance of the transport system. This will be addressed under the proposed project (Para. 1.18). 1.28 Following the Commonwealth team of Experts (1979) the Association carried out a transport sector review in 1982-83. A Transport Sector Memorandum was prepared and sent to Government for comments and follow-up in revising its transport sector policy. The major shortcomings and problems whici, were identified in the TSM are: (a) the need for extensive transport sector manpower development; (b) the need to improve the data base in the MOT sector to permit policy formulation and decision-making; (c) the need to improve transport &dministration and policy making including the definition of clearer relationships between '1PED, MOW and the MOT; and (d) the need to improve transport sector cooperation between Uganda and Kenya, particularly as it applies to rail movements. 1.29 Need for a transport sector manpower training program: Under the East African Community, management of all transport entities was headquartered in Kenya with only divisional or operating staff in Uganda. After the EAC breakup, Uganda launched a number of transport operations, including Uganda Railways and Uganda Airlines with very few experienced management staff. The shortage was compounded by the exodus of most of the experienced staff during the 1972-79 period. A comprehensive manpower survey for the transport sector should be carried out with the view of preparing a possible future technical assistance project. Discussions are being undertaken on the possibility of carrying out this survey under the proposed Second Technical Assistance Project. The project includes technical asslstance for manpower planning for highways (Para. 2.23).  - 12 - 1.30 Need to set up transport data gathering system: The weak transport data base is one of the inhibiting factors in transport policy formulation and sector performance analysis. The proposed project will include 48 man-months of technical assistance to help the MOT establish a transport data unit to supplement to the technical assistance being provided by the ILO (Para. 1.18). 1.31 Need to clarify and improve transport management: As mentioned earlier, one of the major problems of the Uganda transport sector is the lack of planning and coordination within the sector and between transport and other productive sectors. The transport sector specialist in MPED should help alleviate the problem (Para. 1.19). 1.32 Need to improve transport coordination between Kenya and Uganda: Being a landlocked country, Uganda suffers from having to transit through other countries for its access to the sea. Coordination between Uganda and Kenya is particularly critical to the functionning of Uganda's external transport system, especially rail. In addition, Uganda serves as a transit route for Rwanda, Burundi, parts of Zaire and southern Sudan. The effective utilization of the rail system between Kenya and Uganda has so far been hampered by lengthly customs procedures, discriminatory charges and the strong trucking lobby in Kenya. In addition, the heavy trucks used in the international road operations are seriously damaging roads in both countries. Discussions on possible solutions have progressed very well recently and there appears a better chance than ever to resolve this problem. G. Previous Bank Group Assistance in the Sector 1.33 The Association has helped finance two highway projects in Uganda. The first (Credit 108-UG, US$5.0 million, 1967) provided for construction to paved standard of the Mbarara-Katunguru road (113 km), construction of several small agricutural and feeder roads, and detailed engineering of 740 km of main and feeder roads. According to a Bank audit on this project (No. 1623), the main road construction was of poor quality as a result of the contractor's inefficient organization and workmanship, and the actual rate of return on this investment was estimated at 8% to 11%, although because of lack of adequate maintenance, the returns may even be lower. 1.34 The second Highway Project (Credit 164-UG, US$11.6 million, 1969), helped finance: (a) construction or reconstruction of 665 km of primary, secondary and feeder roads engineered under the previous project; (b) a highway investment, maintenance and organization study; (c) feasibility studies and detailed engineering of about 400 km of roads selected from among those identified in (b) above, and (d) technical  - 13 - assistance to the MOW. The project was completed in 1980. Project implementation was hampered, especially after 1975, by a lack of qualified staff, and high prices for all purchased goods due to shortages and parallel market operations. An audit has not been carried out due to the limited data; a limited completion note has been prepared. 1.35 The 1972 highway study financed under Credit 164-UG was redone in 1982-83 through a Highway Maintenance and Organization Study (HMOS) carried out with funds under the First Technical Assistance Project (Credit 1077-UG). In addition, the transport sector has been assisted by other credits for rehabilitation such as in particular the Second Reconstruction Project (Credit 1252-UG) which provided funds to MOT and MOW as well as some of the parastatals in the transport sector. 1.36 The Bank has also made three loans totalling US$104.4 million to the now defunct East African Railways Corporation to modernize and develop railways in the community (Kenya, Tanzania and Uganda). All have been disbursed and a mediation exercise is still ongoing to allocate assets and liabilities of EARC among member states.  - 14 - II. THE HIGHWAY SUBSECTOR A. The Network 2.01 The highway system of Uganda is in the form of a semi-circle with Kampala as its center and the circumference broadly following the international boundaries of the country (Map IBRD 17320). The system is supported by a network of radials emanating from Kampala towards the circumference. Secondary and tertiary roads connect these radials with one another. The network totals 27,540 km of roads of which 7,540 km forming the classified road network are maintained by the MOW. The roads maintained by the MOW are classified into three categories: primary, secondary and tertiary. In general, primary roads are important national and international roads which connect administrative centers with one another and with neighboring countries. Secondary roads are either inter-district roads or roads linking the primary road network with other centers of economic activity. Tertiary roads serve local population centers and agricultural areas, and connect them with other roads in the network. The classified road network comprises 1,940 km of bituminized roads and 5,600 km of gravel roads. A breakdown for the 7,540 km network is shown below. Table 2.1 Road Network Primary Secondary Tertiary All Roads Roads Roads Roads Percentage Bitumen 1,630 90 220 1,940 26 Gravel 2,220 1,745 1,635 5,600 74 Total 3,850 1,835 1,855 7,540 100 The remaining about 20,000 km of the road system constitutes the feeder network, consisting mostly of un-engineered earth/gravel roads, and is the responsibility of local Governments. No reliable inventory exists for the feeder road network.  - 15 - 2.02 The coverage of the road network is adequate for the country's needs, however, the -~ondition of the roads has deteriorated for want of proper maintenance during the past decade (Para. 2.28). B. Road Use 2.03 The country's total vehicle fleet is estimated at about 20,000 four-wheel vehicles, of which 12,500 are light vehicles and 7,500 are commercial vehicles (3,400 utility, 600 buses and 3,500 heavy trucks). The composition of the vehicle fleet is shown in Annex 1. The heavy trucks are the most important as they carry about 75% of the freight traffic. The vehicle fleet has been severely depleted due to lack of maintenance and to destruction and looting during the liberation of the country. The reduction numbers was most severe for cars and heavy commercial vehicles: from 1971 to 1982, the number of cars fell from 23,771 to 9,821 and heavy trucks from 6,795 to 3,529. Foreign exchange shortages have further exacerbated the problem by severely restricting the supply of spare parts. 2.04 Up to 1972 the Ministry of Works maintained reliable traffic counts for all sections of the classified road network. Annual records were kept for over 240 road sections, including primary, secondary and tertiary roads. However, from 1973 until 1982 only a few scattered traffic counts were undertaken and the records of these were lost during the liberation war. At negotiations agreement was reached with Government that the annual traffic counts will be resumed starting not later than January 1, 1985 (Para. 5.01(b)). 2.05 In 1982 the MOW undertook a traffic counting program as a basis for the HMOS (para. 1.35) carried out by consultants. Average daily recorded traffic ranges from a high of about 2,000 vehicles on the paved roads leading into Kampala to as low as 30 vehicles on tertiary roads. Consultants estimate that traffic levels throughout the country in 1982 were only 50% of the levels of the 1972 study reflecting the substantial decline in the vehicle fleet, the frequent shortages of gasoline and diesel fuel and the economic collapse during the 1970s. 2.06 The consumption of motor vehicle fuel in 1981 stood at 84,000 tons, representing only 43% of the 1972 consumption level. Retail prices for motor fuels are set by Government and are adjusted periodically to reflect any changes in the border prices of the various products. The breakdown of the retail price of gasoline and diesel fuel are shown below:  - 16 - Table 2.2 Fuel Prices (April 1983) U.Sh./litre Super Auto Gasoline Diesel CIF Malaba 50.99 41.76 Local Transport 1.81 1.37 Landed Cost 52.80 43.13 Customs Duty 25.82 11.88 Company Margin 14.89 12.17 Sub-total 93.51 67.18 Sales Tax 51.49 17.82 Exdepot price 145.00 85.00 Dealer Margin 5.00 5.00 Retail Price 150.00 90.00 As shown in the above table, the tax differential between diesel and gasoline fuels is large and reflects the Government's desire to use gasoline taxation as a source of general government revenue. The fuel prices are adjusted with changes in exchange rates. The pump price for gasoline has well exceeded the international price at all relevant exchange rates, whereas the prices of diesel has been slightly below the import parity prices using a shadow exchange rate (i.e. the relevant opportunity cost). In a recent development this policy has now changed so that diesel prices are also now clearly above the import parity prices. C. The Road Transport Industry Freight Transport 2.07 There are very few large freight transport operators in Uganda; the industry is dominated by small owner/operators with less than three trucks each. These carriers supply the bulk of the freight transport capacity but face the same problems as the rest of the sector such as lack of spare parts or repair facilities. The IDA Second Reconstruction Credit is providing some of the resources to remedy the situation and the opening  - 17 - up of the foreign exchange market also will provide adequate support for the most urgent needs. 2.08 While there once existed a flourishing road transport industry in Uganda, the substantially reduced economic activity, and the vehicle fleet decimation which followed the liberation war have severely reduced the number and size of carriers. After the liberation war, the Government purchased about 600 trucks to primarily transport coffee. Most of these vehicles were sold to transport co-operatives involved in coffee transport from the farms to the central processing plant in Kampala. While coffee is transported as a priority by these co-ops, the vehicles are also used on a for-hire basis for other types of cargo as well. 2.09 The major freight transporter in the country is the Uganda Transport Cooperative Union (UTCU), a fully autonomous cooperative under the umbrella of the Ministry of Cooperatives. UTCU operates about 150 vehicles ranging in size from 8 to 18 tons in carrying capacity. Availability rate is acceptably high at about 70%. The UTCU is owned by 30 regional co-op unions which are its shareholders. The regional co-ops in turn are owned by individual farmers set up as district unions. The UTCU was set up mainly to provide transport for its members but it also acts as a for-hire carrier to others. Its members are provided transport at cost while others are provided at profit. UTCU's main role is to move coffee from the farms to the Coffee Marketing Board's central processing plant in Kampala but lately it has moved some coffee from Kampala to Mombasa. UTCU is building a new centralized maintenance workshop in Kampala and also has three repair workshops up-country for minor work. 2.10 Part of the truck fleet originally purchased by Government was distributed to various marketing boards including the Coffee Marketing Board, the Cotton Marketing Board and the Produce Marketing Board. Most of the vehicles were ordered without due consideration to appropriate type or size and intended use. The trucks are for example often too large to be operated on secondary or feeder roads resulting in high ton/km costs and the operation of these vehicles is not well-coordinated resulting in a high ratio of empty trips. Since these vehicles are now some years old and mostly used on main roads gradual vehicle replacement will improve the operation. Passenger Transport 2.11 Public passenger services are provided by two parastatal organizations, the Uganda Transport Company (UTC) and People's Transport Company (PTC), under the jurisdiction of the Ministry of Transport. UTC, which provides bus service in Kampala and also on some routes in Western  - 18 - and Southern Uganda has a fleet of about 145 buses with an availability rate of only about 30%, partly due to lack of spare parts. PTC headquartered in Jinja, operates on routes in Eastern and Northern regions with a fleet of about 50 buses. 2.12 In addition to the two major parastatals, there are a number of private bus companies licensed to operate on specific routes. Many of these carriers compete directly with the two parastatals, but the private carriers tariffs charge two to three times the fares charged by UTC and PTC. Essentially these are either operators of regular buses or of small minibuses, the latter charging the highest fares. There is a serious shortage of public passenger transport in Uganda, and in Kampala passengers often have to wait more than one hour for a bus. Thus the majority of workers in the Central Business District walk to work. The IDA Second Reconstruction Credit will provide some resources also for spare parts of buses and some of the vehicle shortages can be alleviated. Transport Regulation 2.13 The Road Traffic and Safety Act of 1970 empowered the Government to regulate the road transport industry as necessary from an operational, economic and safety point of view. This power has so far not been exercised in any adverse manner for freight transport. The MOT publishes a tariff but it is only intended as a guideline for carriers. The transport of passengers is more strictly regulated both in terms of routes and tariffs. Carriers must apply to the Transport Licensing Board for permission to operate on a specific route. The applications are publicly announced and hearings are held. Carriers already providing service on the route in question can oppose the application and the Board decides whether or not public convenience and necessity dictates that a new carrier should be allowed to operate. The tariffs charged by UTC and PTC are regulated by the Ministry of Transport. The current permissible fare is USh 2.50 per passenger/km (minimum USh 30) irrespective of terrain and road surface. Private carriers are only provided with an indicative rate. 2.14 Regulated rates charged by UTC and PTC are non-remunerative and barely cover out of pocket expenses. No allocation is made for equipment replacement. As a result, the service levels have deteriorated substantially and the public suffers from reduced transport availability. If the Government wishes to provide a subsidized public passenger service, the parastatal companies should be encouraged to restructure their operations on a commercial basis with Government providing a direct operating subsidy. These points were discussed with Government at the time of the Transport Sector Review. The IDA-financed parastatal accounting study and ILO technical assistance are also going to suggest measures for improvement. Agreements were reached at negotiations that the accounting  - 19 - study for parastatal corporations will begin not later than December 31, 1984 and, that based on the study recommendations the Government shall submit to the Association by June 30, 1985, its proposals concerning tariff levels for passenger transport. After review of its proposals by the Association, the Government shall establish passenger tariffs having due regard to any comments made by the Association (Para. 5.01(c)). D. Traffic ations and et 2.15 Despite its power to do so the MOT had not had to regulate vehicle weight, dimensions, inspections, licensing and safety because until the breakup of the East African Community in 1977, the control of road vehicles was not a problem since most heavy traffic moved by rail. However, with the inefficiency of Uganda -ailways and the diversion of traffic to the roads, the situation has changed drastically and the size and axle loadings of heavy vehicles is having a detrimental effect on the roads. The Government is in the process of drafting new traffic and safety legislation and expects to have it submitted to the National Assembly shortly. This legislation would, among others, enact into law governing vehicle size, weight (10 tons axle-load) dimensions and road safety. Agreement was reached at negotiations that Government will take all measures necessary to ensure that such regulations will be enforced not later than December 31, 1984 (Para. 5001(d)). E. Administration 2.16 MOW is responsfible for planning, construction and maintenance of classified road network while the local Governments are responsible for the rest. The MOW is divided into four divisions: Technical Division, Finance and Administration Division, Highway Division and Stores Division (See Chart I). The Technical Division (TD) is composed of four sections: Road Maintenance, Training, Materials Laboratory and Mechanical; the Highway Division comprises three sections: Planning, Design, and Construction. The MOW organization though understaffed (Para. 2.21) is structurally sound. 2.17 The Road Maintenance Section of the TD is responsible for upkeep and maintenance of roads. Responsibility for maintenance of the road network is divided into four geographical areas, each headed by an Area Engineer. Each area in turn is divided into a number of maintenance districts; there are currently 21 districts performing road maintenance tasks. Routine maintenance is done by work gangs (about 5 men), each covering an average of 8 km of road, under the supervision of headmen who  - 20 - report to the road overseer; periodic maintenance (resealing/regravelling) is done with the help of special crews under inspectors of work/district engineers. At the headquarters level, the Chief Road Maintenance Engineer (CRME) who heads the Road Maintenance Section is assisted by three senior executive engineers, one for the Eastern and Central Areas, one for the Northern and Western Areas, and one for special projects. The flow of responsibility for road maintenance from the CRME to the work gang is shown in Chart II. 2.18 The Mechanical Section is responsible for the repair and maintenance of vehicles and plant of all Government ministries/departments, and is headed by a Chief Mechanical Engineer located at the central Workshop in Kampala. Under the central workshop there are four Area workshops (at Kampala, Mbale, Gulu and Fort Portal) and twelve district workshops. While the central and area workshops handle major overhauls/repairs for vehicles and plant, the district workshops take care of light repairs and routine servicing. The central workshop, in addition, undertakes rebuilding of engines, transmissions and other equipment components. About 70% of overall workload in MOW workshops relates to road maintenance vehicles and plant. However, as a result of damage to workshop structures, and the looting caused during the 1979 war, the workshops do not currently have facilities to adequately repair and maintain MOW's equipment. About 60% of the workshop equipment was damaged beyond repair and over 75% of the mechanic's hand tools and bench mounted equipment were completely or partially looted. The project will help in replacing the damaged or looted equipment and tools and provide additional items to upgrade the maintenance and repair capability of MOW workshops. Besides, it will assist in reconstruction/repair of workshop structures (Paras. 3.07 & 3.09). 2.19 The MOW has a well equipped material testing laboratory located outside of Kampala. The Laboratory not only provides testing services for the MOW, but also provides such services to other Government agencies and private firms on a charge basis. The testing is divided into sections for chemistry, soils, bitumen, concrete, and field investigations and quality control. The laboratory received equipment and supplies estimated at over US$0.2 million after the war with assistance from the EEC. F. Staffing & Training 2.20 MOW staff are divided into two categories, civil servants and group employees (casual workers). The cutoff between the two categories is at the level of road overseer; Road Overseer Grade I and above are civil service employees, while Road Overseer Grade II and below are group employees.  - 21 - 2.21 The MOW organization is understaffed; average Ministry-wide vacancy rate for civil servant positions is around 50%. The vacancy rate is particularly high in the Design, Training and Road Maintenance Sections. Based on the results of the Highway Maintenance and Organization Study (HMOS) carried out by Consultants Louis Berger International Inc. (USA), the vacancy rate is the highest for the upper mid-range positions where core experience is crucial; of the 226 such positions, some 145 (64%) are currently vacant. This has resulted in the designation of individuals to serve in acting positions or covering two positions; the majority of personnel lack the qualifications and experience necessary for efficient task performance. The vacancy rate for group employees, however, is low, around 12%. 2.22 In view of the budgetary constraints under which Government is currently functioning, there is a general embargo on filling vacant posts, however, they can be filled with prior Government approval if properly qualified individuals are available. But, the low salary scales often make it difficult to recruit qualified personnel. Given the budget limitations the issue of low level of salaries of staff in Uganda can only be addressed over the medium term within the overall government administrative policy. In the meantime, the impact of the staffing problem in road maintenance will be alleviated by carrying out all periodic maintenance included in the project by contract (Para. 2.30) and by providing technical assistance to assist with road maintenance planning and operations (Para. 3.14). 2.23 The Training Section of the TD is responsible for training activities of the MOW. In the past the MOW's Road Maintenance Training Center (RMTC) at Kyambogo, just outside Kampala, provided class-room and on-the-job training to road maintenance personnel (road inspectors, overseers and headmen); active curricula were available to train road maintenance personnel. Separate facilities within the central workshop were used for classroom instruction, coordinated with on-the-job training, of machanical staff (foremen, plant operators, mechanics, etc.). However, training facilities and training aids both at the RMTC and the central workshop were either damaged or looted during the war, and have not been restored. The RMTC is largely inactive currently; the last course given at the Center was in March 1982. The skeleton staff, comprising an acting principal and three instructors, assigned to the RMTC hold infrequent seminars for MOW staff. The project will help in re-establishing the training facilities at the RMTC as well as central workshop and will include technical assistance to assist in reviewing staff inventories assessing manpower requirements and their training needs and organizing and carrying out a comprehensive training program for staff (Paras. 3.10 & 3.15).  - 22 - 2.24 The MOW has also drawn on the resources of external facilities such as the Makerere University (MU) and Uganda Technical College (UTC) for training its staff. MU offers courses leading to Bachelor's degree in civil, electrical and mechanical engineering; the yearly intake of students varies from 60 to 65. In 1982-83, out of the 175 candidates (upper secondary school leavers) who applied, 65 were selected for admission to the program. The UTC offers courses leading to Ordinary Diploma/Higher Diploma in civil, electrical and mechanical engineering; in 1982-83, some 469 students were receiving technician/higher technician level training at the institution. The UTC also offers a technical teacher training course, and has residential facilities for about 600 students. During 1976-80, MOW sponsored 12 staff for Ordinary/Higher Diploma Course in civil engineering at the UTC; 7 staff are currently receiving training. 2.25 Vocational training is provided by the four vocational training institutes/centers run by the Directorate of Industrial Training under Ministry of Labor. The Vocational Training Institute, Nakawa and the Vocational Training Center, Lugogo are located just outside Kampala, while the other two namely (i) the YMCA vocational Training Center; and (ii) the Jinja Vocational Training Center are located at Jinja, which has the largest concentration of manufacturing industry in the country. The Vocational Training Institute, Nakawa and the Vocational Training center, Lugogo are offering, with the assistance of ILO, accelerated training program of 40-week duration to Secondary school leavers; the yearly in take of students is around 60. Besides, MU students receive their practical training at these institutes. The courses offered are automobile repairing, machine fitting and assembly, welding and fabrication, carpentry, brick laying, electrical installation, etc. The Jinja Vocational Training Center built under the Second Education Project (Credit 258-UG) has a planned capacity of 680 students, and is expected to open shortly. Also, there are 5 technical secondary schools (Kisubi, near Entebbe; Kichwamba, near Fort Portal; Masaka; Mbale; and Lira) providing craftsman/master craftsman training to secondary school leavers of which one at Masaka is inactive currently. The yearly intake of students at Kisubi Technical Secondary School is 250, and there are residential facilities for 450 students. 2.26 In summary, the training facilities in the country are adequate in size for foreseeable needs of MOW but needs improvement in the quality of training in some cases. The engineer and technician level training is provided by the MU and UTC respectively while there are a number of vocational training institutes/centers and technical secondary schools in the country offering craftsman training in various fields.  - 23 - 2.27 The Chief Training Engineer is currently performing the functions of one of the Deputy Engineers-in-Chief in addition to his own duties, assised by a recently recruited training assistant. Agreement was reached at negotiations that the Government shall, by not later than December 31, 1984, fill the position of Deputy Engineer-in-Chief within MOW with a qualified and experienced person and keep such position and the position of Chief Training Engineer filled at all times with suitably qualified and experienced persons. (Para. 5.01(e)). G. Maintenance 2.28 MOW's road maintenance organization is basically sound, but due to severe staff shortages and lack of adequate equipment, coupled with paucity of funds, planning and coordination are virtually non-existent; the quantity and quality of road maintenance is far from satisfactory. Routine maintenance is carried out irregularly. Because of the low salaries, the road gangs put in two or three hours of work a day and then engage in other activities to supplement their income the remainder of the day; their output varies between 20-40% of the expected output. Periodic maintenance too has not been undertaken on a meaningful basis since 1973; only about 165 km out of the 1,940 km (8.5%) of paved road were resealed and 1,180 km out of the 5,600 km (21%) of gravel roads were regravelled in the last ten years. Due to the lack of proper maintenance varying degrees of deterioration of riding surfaces, shoulders and roadside drainage are evident throughout the paved and unpaved road network. The more heavily trafficked roads show pronounced deterioration; paved roads have developed deep potholes and surface cracks, besides extensive edge ravelling and skin failures, and in the worst cases they require major rehabilitation. Most gravel roads have completely lost their gravel and have reverted to earth roads. 2X29 MOW's ability to maintain roads is severely constrained by lack of equipment, trained manpower and funds. Much of the existing MOW's equipment and plant are old and unserviceable; of the 229 items, 131 (57%) are unserviceable. The MOW's workshops suffer from lack of proper equipment and tools, and shortage of properly qualified staff and trained mechanics, and spare parts. As a consequence, equipment availability for road maintenance is very low. Furthermore, due to the shortage of foreign exchange, fuel and bitumen required for road maintenance operations are not easily obtainable. 2.30 Because of the above, road maintenance has been virtually neglected resulting in the build-up of a huge backlog of work. The project includes part of a seven-year program identified by Consultants based on  - 24 - the HMOS (Para. 1.35), to improve maintenance of the classified road network. Because of the lack of adequate staff and physical resources in MOW, the periodic maintenance included in the project will be carried out by contract while routine road maintenance operations will be carried out by force account with the assistance of technical assistance staff. 2.31 As a basis for the HMOS, the MOW undertook a traffic counting program and an inventory of the road network. The consultants verified Government's inventory data and drew up a road maintenance program accounting for the different traffic levels served and existing road conditions. The program drawn by the consultants has been found to be generally satisfactory. 2.32 The results of the HMOS showed that about 73% of the road network is in a condition requiring minor rehabilitation/maintenance; the rest is in need of major rehabilitation and pavement strengthening. Engineering investigations for four of the primary road sections namely: (i) Kampala-Jinja; (ii) Mbarara-Katunguru; (iii) Masaka-Mbarara; and (iv) Mbarara-Rubaare requiring pavement rehabilitation and strengthening are underway with funds under the First Technical Assistance Project (Credit 1077-UG). A follow-up project could include these works. The four road sections are included in the Government's Recovery Programme 1983-85 (Para. 1.22). R. Planning and Financing of Investbents 2.33 In principle, short and long-term planning in the road sub-sector is carried out by the MOW's Highway Planning Section in cooperation with the MOT and the MPED. In practice, however, the MOW has dealt directly with the MPED which has taken on the task of sectoral coordination in the preparation and execution of the Government's recoveryprogram as well as identifying and arranging the necessary financing. The initial recovery program for the period 1982-1984 has now become a "rolling plan" to be reviewed annually. Until the recovery is clearly in hand, no other medium or long- term plans are anticipated and the Highway Planning Section is performing adequately. 2.34 Road maintenance is financed from the recurrent budget while capital investments are financed from a separate budget which comes mainly from external sources. Therefore, funds for new construction do not directly compete with other sectors for scarce local funds. The  - 25 - expenditure on road maintenance increased from U Sh. 318.4 million (US$3.7 million equivalent)l! in FY 1982 to U Sh. 455.1 million (US$4.4 million equivalent)2/ in FY 1983. The amount allocated for FY 1984 is U Sh. 1,356 million (UST5.4 million equivalent). A major portion of the amount allocated is spent on the wages of staff who are not fully utilized for lack of road maintenance equipment and the difficulty in obtaining spare parts, fuel and bitumen. Under the project the estimated recurrent expenditure for routine maintenance of the classified road network amounts to U Sh 1,500 million (US$ 6.0 million equivalent) in 1983 prices. At negotiations, agreement was reached with Government that such funds will be provided for FY 1985-1987 and that not later than four months before the beginning of each fiscal year the Government shall review with the Association the Budgetary requirements and the proposed budgetary allocation for road maintenance (Para. 5.01(f)). Further, in order that provision be made for financing road maintenance after project implementation, the Government and the Association will exchange views by June 30, 1987 on the estimated funds required for the next three years; the Government will take measures necessary to ensure that such funds will be available to MOW as and when needed (Para. 5.01(g)). 2.35 Revenues from road user charges are estimated to have been USh 7.65 billion (about US$90.0 million) in 1981. This far exceeds what was spent on both construction and maintenance of roads and is substantially more than would be required to properly maintain the road network. Import duties and sales taxes from transport equipment and spare parts totalled USh 232 million in 1981 and annual license fees, tolls and freight taxes amounted to USh 318 million. Taxes on gasoline and diesel fuel of US$0.89 and US$0.30 per litre, respectively, produced revenues of USh 7.10 billion in 1981, or approximately 93% of all road user revenues. The general level of road user charges is much higher than the road maintenance and rehabilitation needs due to the government's need for general budgetary support. 1/ US$1.0 = U Sh. 85.15 (December 1981) 2/ US$1.0 = U Sh 104.30 (December 1982)  - 26 - I. Engineering and Construction 2.36 The Design Section of the MOW carries out minor road and bridge design including field investigations, while all economic feasibility and detailed engineering studies for major projects are done by foreign consultants. There are some local private consultants in the country, but they are generally involved with structural design. The established general standards and specifications for roads are acceptable. 2.37 Major construction works financed by outside agencies are awarded following prequalification and international competitive bidding, and are supervised by foreign consultants. In the past there had been local firms who had the capability to execute road works; the MOW maintained a roster of contracting firms with a classification based on the value of works for which they were eligible to bid, but this system is no longer in force. At present, works awarded to local firms are mostly based on unit rates approved by Central Tender Board on the basis of quotations obtained from contractors each year. Much like other sectors, the road construction industry in Uganda is suffering the consequences of a decade of disruptions in economic activity, and is currently at 10-20% of the pre-1974 capacity. There are some 10 medium-sized and a number of small local contractors who have been engaged in minor road upgrading and periodic maintenance works; but they lack proper equipment, management expertise and trained manpower to perform effectively and profitably. Government, therefore, has to rely on the services of foreign contractors even for resealing/regravelling operations requiring the use of a combination of labor and equipment. The project therefore includes a Pilot Program for the development of local construction industry (Para. 3.18).  - 27 - III. THE PROJECT A. Objectives 3.01 The objectives of the proposed project are to: (i) improve the maintenance of the country's rapidly deteriorating classified road network; (ii) help train MOW's road maintenance personnel and to re-establish MOW's capability for road maintenance; (iii) help develop local construction industry; (vi) improve country's transport sector management; and (v) help enforce vehicle weight and traffic safety reguLations. B. Description 3.02 The project comprises: (i) a program to improve maintenance of the country's classified road network; (ii) technical assistance to MOW and MOT; (iii) a pilot program for the development of local constluction industry; and (iv) preparation of future road maintenance program. Road Maintenance Program 3.03 The program to be implemented over a 4-year period (1984-87) will help improve routine maintenance of the classified road network (7,540 km) as well as periodic maintenance of about 600 km of bitumen-surfaced roads and about 1,000 km of gravel roads that are in urgent need o.E resealing/ regravelling; the roads were identified by the consultants and MOW with the assistance of the Association staff, based on the results of the HMOS. The resealing/regravelling of roads will be carried out in two pnases, the  - 28 - first phase during 1985-86 and the second phase during 1986-87. The list of roads to be resealed/regravelled is shown in Annex 2. The consultants to be employed for preparing bidding documents will review the selected roads and establish priorities. The road resealing work would include repairs to pavement edges, potholes and surface cracks, besides repairs to base/sub-base at failed locations. In addition, the road shoulders will be repaired/reconstructed and drainage improved. 3.04 To assist in carrying out the program, the project provides for: engagement of contractors for periodic maintenance of roads; (b) procurement of road maintenance equipment, including a supply of spare parts for routine road maintenance; (c) procurement of spare parts for rehabilitation of existing equipment; (d) procurement of workshop equipment and tools; (e) improvement to Road Maintenance Training Center and MOW workshops; (f) procurement of training equipment; (g) supply of fuel and bitumen; and (h) consultant services. Road Maintenance Equipment and Spare Parts 3.05 The maintenance of the classified road network in Uganda suffers from lack of adequate equipment and poor facilities for their repair and maintenance; much of the MOW's existing equipment is old and unserviceable (Para. 2.29). The project provides for the procurement of new equipment and an initial stock of spare parts to help improve MOW's capability for routine road maintenance. It also provides for the procurement of spare parts for rehabilitation of existing equipment. The list of new equipment to be purchased (Annex 3) was defined by the consultants and MOW with the assistance of Association staff based on the results of the HMOS. 3.06 Routine maintenance crews to be established under the project will be of six types: Pavement Repair, Heavy Grading, Light Grading, General Labor, Traffic Service and Major Maintenance. Pavement repair crews (18) will be responsible for patching potholes and repairing edge ravelling and skin failures; the heavy grading crews (8) and light grading crews (10) will carry out grading operations on gravel roads as well as on shoulders of paved roads; general labor crews (35) will be responsible for maintaining culverts and roadside ditches, and the cutting of grass, etc; traffic service crews (21) will carry out minor repairs to road furniture, structures, etc.; and major maintenance crews (4) will be responsible for the repair of base, sub-base, subgrade or shoulders where the extent of needed repairs exceeds the capacity of the general labor crews. The above, with the exception of heavy and light grading crews, will utilize labor- intensive or intermediate technology, depending on the nature of work.  - 29 - Workshop Equipment and Tools 3.07 MOW workshops lack adequate equipment and tools to rapair and maintain MOW's equipment (Paras. 2.18). The project provides for the procurement of supplementary workshop equipment and tools to upgrade the maintenance and repair capability of MOW's Central, area and district workshops; it includes, inter alia, lubrication units for each of these workshops. Itemized lists of equipment and tools are shown in the HMOS, Final Report (June 1983). These were agreed between MOW and the Association staff. Improvement to Road Maintenance Training Center (RNTC) 3.08 The existing facilities at the RMTC campus (two classroom buildings for a total of 90 students, but only residential facilities for 36 students and mess facilities for 60 students) need to be enlarged in order to meet the training needs of road maintenance staff foi a projected program demand of 80-85 students. The project provides for the construction of additional facilities namely, a lecture hall, 2 dormitories, a dining hall, a kitchen, and 4 staff houses. At negotiations agreement was reached with the Government that, by August 31, 1984, it will submit to the Association for its review plans and construction details of additional facilities to be provided at the RMTC campus (Para, 5.01 (h)). Improvement to MOW Workshops 3.09 MOW workshops suffered extensive damage during the 1979 war; the damages incurred range from minor to major repairs; in some cases complete reconstruction of the structures is needed. The project provides for the needed repair/reconstruction of the central workshop, area workshops (Fort Portal, Gulu, Mbale) and district workshops (Masaka, Jinja, E-atebbe, Soroti, Moroto, Lira, Arua, Masindi, Kasese, Kabale, Mbarara). It also includes construction of two classroom structures at the central workshop. At negotiations agreement was reached with the Government that, by August 31, 1984, it will submit to the Association for its review plans and construction details of these workshops and the classroom structures at the central workshop (Para. 5.01 (i)).  - 30 - Training Equipment 3.10 The training equipment at both the RMTC and central workshop were either damaged or looted during the war and have not been restored (Para. 2.23). The project will assist in replacing the damaged or looted equipment and provide supplementary items to upgrade training facilities for staff. Itemized lists of training equipment are shown in HMOS, Final Report (June 1983). These were agreed between MOW and the Association staff. Fuel and Bitumen 3.11 Because of the severe shortage of foreign exchange in the country, the fuel and bitumen required for road maintenance operations are not easily obtainable (Para. 2.29). The project therefore includes supply of diesel fuel, gasoline and 4,100 tons of bitumen for routine road maintenance for about three years. Consultant Services 3.12 Consultants will be engaged to assist Government in: (i) preparation of bidding documents for resealing/regravelling of roads; (ii) supervision of road resealing/regravelling; (iii) preparation of bidding documents for road maintenance and workshop equipment, and tools; (iv) technical assistance (Paras 3.14 - 3.16); and (v) preparation of future road maintenance program (Para. 3.17). 3.13 In order not to delay the project the preparation of bidding documents for (i) and (iii) above will commence before Credit effectiveness (See Project Implementation Schedule, Chart III). Employment of Consultants for the purpose will be a condition of Credit effectiveness (Para. 5.02(a)).  - 31 - Technical Assistance 3.14 MOW's road maintenance organization suffers from severe shortage of staff; the majority of personnel lack the qualifications and experience necessary for efficient task performance. To help alleviate staffing shortage and to improve MOW's road maintenance planning, organization and operations the project provides for 186 man-months of technical assistance comprising: No. Man-months Senior Highway Engineer (Team Leader) 1 ,O Road Maintenance Engineer I ;o Road Maintenance Superintendent 1 iO Equipment Maintenance Engineer 1 24 Mechanical Superintendent 1 24 Training Instructor (Civil) 1 24 Training Instructor (Mech) 1 ,24 Total 186 The project also includes 2 Transport Planners/Statisticians for 24 months each to assist MOT in establishing its transport data base (Para. 1.18). 3.15 As for the technical assistance to MOW, the road maintenance engineer will assist and advise the Chief Road Maintenance Engineer on all aspects of highway maintenance planning, organization and operations; the equipment maintenance engineer will assist and advise the Chief Mechanical Engineer on matters concerning fleet management, workshop management and control; the road maintenance superintendent and mechanical superintendent will assist in establishing training production units and carrying out on-the-job training of staff; the two training instructors will develop specific courses of instruction, prepare curricula and impart on-the-job and classroom instruction to staff. The senior highway engineer (team leader) will, among other things, coordinate the work of the technical assistance team and will assist in reviewing staff inventories, assessing manpower requirements and their training needs anc. establishing suitable training programs for staff. 3.16 The technical assistance staff will be provided by a consulting firm; the draft terms of reference are given in Annexes 4 & 5. These were discussed and agreed with Government at negotiations (Para. 5.01(j)) and an agreement was reached that by March 31, 1985, Government wi:Ll submit to  - 32 - the Association, for its review and approval, a suitable training program for MOW's staff (Para. 5.01(k)). Preparation of Future Road Maintenance Program 3.17 The project covers a part of a seven-year road maintenance program identified by the consultants, and includes periodic maintenance of only 1,600 km, out of total of 7,540 km, of the classified road network in Uganda. The project therefore includes funding for consultants to carry out a study for drawing up a future three-year road maintenance program (1988-1990), which could be included in a subsequent project. The draft terms of reference for the study are shown in Annex 6. These were discussed and agreed upon with Government during negotiations (Para. 5.01(1)). Pilot Program for Development of Local Construction Industry 3.18 The road construction industry in Uganda is suffering the consequences of a decade of disruptions in economic activity; the local firms lack resources to perform competitively and profitably in road construction (Para. 2.37). Government is anxious to develop the local construction industry in order to reduce its reliance on foreign contractors. The project therefore includes a Pilot Program for development of local construction industry. A notional provision has been made in the project for technical assistance and procurement of equipment for providing on-the-job training to a few selected local firms on different phases of construction (tender preparation, site organization and management, personnel management, cost control, etc.); the roads to be used as training media will be from among those included for resealing/regravelling under the project. Annex 7 provides an outline of the program which was discussed with Government at negotiations. It was agreed that the Government will prepare and submit to the Association for its approval the details of implementation of the program (Para. 5.01 (m)). C. Project Cost and Financing 3.19 The total project cost including contingencies is estimated at US$ 80.9 million. Excluding taxes and duties, the total cost is US$ 74.0 million, with a foreign exchange component of about US$ 58.0 million or 78% of project costs excluding taxes. A breakdown of costs (in December 1983 prices) is shown below (Tables 3.1 and 3.2).  - 33 - Taele 3.1 Estimated Project Costs Item Local Foreigi Total Local Foreign Total % Foreign U=4 Sh MilEion~ U