Guinea - Transport Sector Project

Document of The World Bank FOR OFFICIAL USE ONLY C '' / f ') - (Lt/7 Report No. 6787-GUI STAFF APPRAISAL REPORT REPUBLIC OF GUINEA TRANSPORT SECTOR PROJECT May 18, 1987 Western Africa Projects Department Transportatioa Division 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 = Guinean Franc (GF) US$1.0 = CF 400 US$1.28563 = SDR 1 FISCAL YEAR January 01 -- December 31 SYSTEM OF WEIGHTS AND MEASURES (METRIC) 1 meter (m) > 3.28 feet (ft) 1 square meter (m2) 10.76 square feet (sq ft) I cubic meter (m3) = 35.3 cubic feet (cu ft) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (kM2) = 0.39 square mile (sq mi) 1 metric ton (t) = 2,205 pounds (lb) ABBREVIATIONS AND ACRONYMS Item English French adt average .:aily traffic trafic journalier moyen AfDB African Development Bank Banque Africaine de Developpement AfDF African Development hFnd Fonds Africain de Developpement COTRA Public Road Transport Company Compagnie de Transports Routiers Autonomes ENTRAT National Freighthandling Company Entreprise Nationale de Transit et de Transport ERR Economic Rate of Return Taux de Rentabilite Economique FAC French Bilateral Aid Fund Fonds d'Aide et de Cooperation FRIGUTA Fria Mining Company Compagnie Miniere de Fria GTZ Society for Technical Cooperation, Societe pour la Cooperation Technique, Federal Republic of Germany Republique Feddrale d'Allemagne ICAO International Civil Aviation Organization Organisation de l'Aviation Civile Internationale (OACI) KfW German Bilateral Aid Agency Agence Allemande Bilaterale d'Aide au (Kreditanstalt fir Wiederaufbau) Developpement m million million MN Meteorological Agency Meteorologie Nationale NPV Net Present Value Valeur Nette Actualis6e OBK Kindia Bauxite Company Office des Bauxites de Kindia ONAH State Petrol Company Office National des Hydrocarbures ONCFG Guinean Railway Company Office National du Chemin de Fer de Guin6e OPR Road Project Office Office du Projet Routier PAC Port Authority of Conakry Port Autonome de Conakry PPF Project Preparation Facility Fonds pour la pr6paration des projets SET Ministry of Transport Secretariat d'Etat aux Transports SETP Ministry of Public Works Secretariat d'Etat aux Travaux Publics SJF Special Joint Financing Agreement Fonds Special pour l'Afrique, Finance- for the Special Africa Facility ment conjoint s-m staff-month personne-mois SNG National Consignment Company Societe Navale Guin6enne SOGEAC Conakry Airport Management Company Socift6 de Gestion de l'Aeroport de Conakry SOGETRAG Joint Venture Bus Company Societe General des Transports en Guin6e tpy tons per year tonnes par an TUC Conakry Urban Transport Company Transport Urbain de Conakry voc vehicle operating cost cogt d'operation des vehicules WAPTR, April 1987  FOR OFCML USE ONLY REPUBLIC OF GUINEA TRANSPORT SECTOR PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. DOCUJMENTS IN THE PROJECT FILE ....... ............................ i CREDIT AND PROJECT SUMKARY ........................... .. . . iv I. INTRODUCTION .. . . .................... 1 II. THE TRANSPORT SECTOR ............................. . . ....1 A. The Transport System .................... . .... . I B. Roads and Road Transport . ................. 2 C. Fuel Distribution and Pricing .......................... 3 D. Railways and Rail Transport ............................ 4 E. Ports and Shipping . ....... . ....... 4 F. Airports and Civil Aviation ........................... . 6 G. Transport Sector Administration . . . . 7 H. Transport Sector Investment .. . . 8 II. THE POLICY FRAMEWORK ....................................... 9 A. Resource Mobilization and Pricing Policy .......... *..... 9 B. Public Investment and Expenditure ...................... 10 C. Deregulation and Institutional Reform .................. 10 IV. THE PROJECT ........................... ... ....... 14 A. Project Objectives .................................... 14 B. Project Description . . . 14 C. Project Cost Estimate ............................... 19 D. Implementation .. ........ 20 E. Procurement... ...................................... .. 21 F. Financing and Disbursements .......................... . 22 G. Accounting and Auditing ............................. *.. 24 H. Reporting . ......... . ....... 25 I. Impact on Environment and Employment ................... 25 J. Technical Assistance .................................. . 25 V. ECONOMIC EVALUATION ........ 26 A. TI.e Road Component ............. . 26 B. The Port Component . ........................ . 27 C. The Aviation Component . . ............................... 29 VI. FINANCIAL EVALUATION OF PAC ................................ 29 A. Recent Financial Performance and Current Financial Position... ...... .----... .. 29 B. Tariffs .. .............................................. 30 C. Financial Objectives . . .*......... .. 30 D. Forecast Financial Performance ...................... ... 32 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ............ ........ 33 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (continued) ANNEXES 2-1 Camparative Road and Road Traffic Data for Selected West African Countries, 1983 2-2 Roads and Road Transport 2-3 Fuel Supply, Distribution and Pricing 2-4 Railways and Rail Transport 2-5 Conakry Port Facilities 2-6 Actual and Forecast General Cargo Traffic, 1981-2000, Other Port Statistics 2-7 Airports and Civil Aviation 2-8 Public Works Administration 2-9 Transport Sector Administration 2-10 Public Investment Program. (PIP) 1987-1989: The Transport Sector 2-11 Share of Transport Sector in Total Investment Expenditure by Plan Period, 1960/84, and for 1985/86 3-1 Policy Measures and Actions under the Transport Sector Credit -- Summary Matrix 4-1 Road Component: Pavement Strengthening and Resurfacing 4-2 Road Component: Vegetation Control and Labor Based Maintenance 4-3 Road Component: Office Rehabilitation 4-4 Road Component: Outline TORs for Project Management Unit 4-5 Port Component: Engineering Aspects 4-6 Port Component: Institutional Aspects 4-7 Aviation Component 4-8 Detailed Project Cost Estimates by Component 4-9 Port Component: Implementation Schedule 4-10 Project Disbursement Schedule 4-11 Road Component: Disbursement Schedule 4-12 Port Component: Disbursement Schedule 4-13 Aviation and Transport Sector Components: Disbursement Schedule 5-1 Parameters for the Economic Evaluation of Pavement Strengthening and Resurfacing 5-2 Economic Evaluation of the Rehabilitation of Three Road Sections 5-3 Economic Evaluation of the Port Component 6-1 PAC -- Financial Evaluation (Statements 1983-1986) 6-2 PAC -- Existing and Proposed Tariffs 6-3 PAC -- Forecast Financial Statements, 1987-1995 MAPS: IBRD 20074, 20075, 20131 The project as well as this report were prepared on the basis of an appraisal mission conducted in January 1987 by Mrs. B. Mitchell (Mission Chief) and Messrs. Y. Duvivier, A. Fateen, and J.-C. Sallier. Typing and secretarial work were done by Miss M. E. Houle and Mesdames L. Dorsey, S. Chase, and J. Vieira da Luz. WAPTR, April 1987  REPUBLIC OF GUINEA TRANSPORT SECTOR PROJECT DOCUMENTS AVAILABLE IN THE PROJECT PILE Reference Number Document WAIC Code Road Component 1-1 Auscultation des Chausseos Bitumindes pour la Definition 128 923 (A) du Troiei'me Projet Routier, Louis Berger International, Inc., January 1983 1-2 Recherche de Sites de Carri6res pour la Production de Granulats 128 923 (B) Routiers dans le Cadre du Trolsieme Projet Routier, Louis Berger International, Inc., January 1983 1-3 R4fection de la Route Conakry-Mamou -- Marche de Travaux, D 02739 SETEC International, Mai 1986, (3 volumes) 1-4 Entretien des Routas Revetues -- Appel d'Offre 3PR14 -- D 02743 Troisi6me Projet Routier, Tractebel-Louis Berger International, December 1986 (2 volumes) Port Component 2-1 Port de Conakry, Etude d'Amdnagement Portuaire, 124 979 (E) Parties I A XIII, le Bureau d'Etudes Lackner & Partners (L & P), 1980/81 2-2 Etude du Port de P6che de Conakry, le Bureau d'Etudes 129 994 Dravo Van Houten, mai 1983 2-3 Fermeture du bassin portuaire au nord-est, L & P, avril 1985 222 219 2-4 Deuxieme Projet Portuaire, Etude de Faisabilitd, L & P, novembre 1986: -- Volume I: Etude d'Exploitation et d'Organisation D 00323 -- Volume II: Etude Technique D 00324 -- Volume III: Etude Financiere D 00325 -- Volume IV: Etude Economique D 02729 -- Volume V: Plans D 00326 2-5 Donn6es statistiques du PAC, 1986: D 02824 (A) -- Service Contr8le, trafic et statistique -- Service d'exploitation -- Assistance Technique 2-6 Etude de Tarification, HPC, septembre 1986 D 02824 (B) 2-7 Etude sur les activites portuaires a Conakry, mai 1986 229 375 2-8 Budget de Fonctionnement exercice 1986, PAC, ddcembre 1985 D 02825 2-9 Etats financiers au 31 ddcembre 1984, Price Waterhouse, Africa, YAR juin 1985 2-10 Etats financiers au 31 decembre 1985, Price Waterhouse$ Africa YAR mai 1986  - ii - DOCUMENTS AVAILABLE IN THE PROJECT FILE (con't) Reference Number Document WAIC Code Port Component (con't) 2-11 Projet de R6evaluation des Actifs et Passifs, Price Waterhouse, D 02826 Africa, fdvrier 1987 2-12 Detailed Financial Projections and Supporting Documents, PAC; D 02827 FY87-95 2-13 Projet de Statuts et des Reglements du PAC, octobre 1986 D 02828 2-14 Projets d'Agrdment pour Manutentionnaires et Transitaires, D 02829 janvier 1987 Civil Aviation Component 3-1 Evaluation des Pistes, Republique de Guinde, Boeing Co., DOC229-466 octobre 1977 3-2 Etude Diagnostique d'Air Guin6e, Projet PNUD/DACI GUI/81/004, D 02830 decembre 1985 3-3 Rapport d'Activites exercice 1985, Air Guinee, avril 1986 D 0283L 3-4 Rapport de mission Aerotec, Mission ACDI, juin 1984 DOC229-468 3-5 Pour la Relance de la Compagnie Nationale Air Guinee, Air Guin6e, D 02832 septembre 1986 3-6 Etude de Restructuration d'AIR GUINEE -- Societd d'etudes et de D 02742 consultation du Canadien-Pacifique (Ltee) et GAGNAIR CONSULTANTS LTEE, en cour depuis avril 1987 3-7 Etude sur l'Organisation et la Gestion de l'Aeroport de Conakry D 02833 G'Bessia, ADP, fevrier 1985 3-8 Mission d'6valuation Aviation Civile, SOFREAVIA, Juin 1986 DOC321-812 3-9 Evaluation des Charges imputables aux services de la navigation D 02834 adrienne, ADP, 1986 3-10 Report on Technical Mission to Guinea, IATA, August 1986 D 02835 3-11 Mission OACI d'Etude de l'Organisation de l'Aviation Civile, D 02836 novembre 1986 3-12 Projet de Statuts, SOGEAC et Projet Cahier de Charges de la D 02837 Concession de gestion d'exploitation de l'Adroport de Conakry G'Bessia, juin 1986 3-13 Projet de Contrat d'Assistance Technique a la SOGEAC, D 02838 ADP, juillet 1986  - iii - DOCUMENTS AVAILABLE IN THE PROJECT FILE (con't) Reference Number Document WAIC Code Civil Aviation Component (con't) 3-14 Politique et Stratdgie de Developpement de la MWtdorologie D 02839 Nationale A moyen- et A long-terme, Secretariat d'Etat aux Eaux et Forets, juillet 1986 3-15 Previsions de la DGAC en Equipement Technique, janvier 1987 D 02840 3-16 Projet de requete pour le renforcement et la modernisation D 02841 des equipements m4t6orologiques en appui A la navigation aerienne, janvier 1987 Transport Sector Component 4-1 Troisi6me Projet Routier, Plan de Transport Phase 1 -- Cellule 224 857 de Planification Tractionnel/Louis Berger International, July 1985 4-2 Troisieme Projet Routier, Plan de Transport -- 320 188 Etude d'Organisation du Secteur des Transports Routiers, Tractionnel/Louis Berger International, Mars 1986, 2 volumes 4-3 Etude d'Organisation du Secretariat d'Etat aux Transports, 321 060 Tractebel/Louis Berger International, fevrier 1986 4-4 Troisieme Projet Routier, Plan de Transport -- 321 063 Etude d'Organisation .4 Secretariat d'Etat aux Travaux Publics, Tractebel/Louis Berger International, Juin 1986 4-5 Troisieme Projet Routier -- Rapport du Volet D 02740 Organisation-Formation, TractebellLouis Berger International, 7.ai 1986 4-6 Diagnostic du Secteur des Transports et Definition D 02744 d'une Stratdgie d'Action, Secrdtariat d'Etat aux Transports, Aol3t 1986 4-7 Identification des Problemes d'Organisation et de Formation D 02745 au Secr6tariat d'Etat aux Transports, RWpublique de Guinee, J. Curien, FPvrier 1987 4-8 Esquisse d'une Nouvelle Politique des Transports pour la Guin6e, D 02746 Projet de Rapport, G. P. Metschies, Mars 1987 WAPTR, April 1987  * iv - REPUBLIC OF GUINEA TRANSPORT SECTOR PROJECT CREDIT AND PROJECT SUMMARY Borrower: The Republic of Guinea Credit Amount: SDR 42.8 million (USS55 A equivalent) Terms: Standard Co-Lenders: African Development Bank (US$30.0 m equivalent); Kreditanstalt fUr Wiederaufbau (KfW/SJF) (US$13.0 m equivalent); Gesellschaft fUr Techiische Zusammenarbeit (GTZ) (US$1.0 m equivalent); Ponds d'Aide et de Cooperation (FAC) (US$1.0 m equivalent). Project Description: The project will assist Government in implementing a sectorwide policy program and in rehabilitating and upgrading essential trans- port infrastructure. It will provide financing for (a) the rehabil- itation of some 360 km of existing paved roads; (b) the construction of a container berth, a fuel jetty and a siltation prevention dike in Conakry port, and for dredging of the port area and access channel; and (c) essential navigational aids and infrastructure rehabilitation at Conakry International Airport and at selected domestic airfields to re-establish safe operating conditions. Additionally, the project will finance technical assistance to deregulate the road transport industry, including the establishment of a sound regulatory framework for privatized transport sector operations, and to strengthen and improve Government planning and investment selection, pricing policies, manpower development and training sectorwide. It will assist the development of private transport operators by preparing the privatization of periodic road maintenance activities; by privatizing ship and cargo handling and associated services at the Port of Conakry and improving the effici- ency of its container and bulk carrier operations; and by restruc- turing aviation sub-sector activities. Project Benefits and Risks: The project will begin to eliminate serious transport bettlenecks now threatening to block essentitl flows of imports and exports through the port and airport of Conakry, and to impede the exchange of goods and services between the markets of the capiEal and the regions. It thus benefits both the urban and rural populations; most directly private road transport operators and passengers, and the users of port and airport facilities and zervices. The main risks would be insufficient or delayed implementation of policy reforms. These risks are, however, tolerable since the more signif- icant steps will be adopted early on, and the perspective of follow-up operations in the sector would help strengthen Govern- ment's commitment. In addition, the project puts heavy emphasis on staff training, technical and financial assistance for the defini- tion and implementation of appropriate policies and procedures.  Summary Project Cost Estimate and Financing Plan (Net of Taxes and Duties) - --------- US$ million ----------- Local Foreign Total Road Component 3.4 23.7 27.1 Port Component 3.0 47.0 50.0 Aviation Component 0.5 9.5 10,0 Institution Strengthening 0.3 2.9 3.2 Tc.al Base Cost 7.2 83.1 90.3 Physical Contingencies 1.1 11.5 12.6 Price Contingencies 3.6 5.0 8.6 Total Project Cost 11.9 99.6 111.5 La /a Exempt from taxes and duties Financing Plan IDA 0.4 54.6 55.0 AfDB 30.0 30.0 KfW/SJF 13.0 13.0 GTZ 1.0 1.0 FAC 1.0 1.0 Conakry Port Authority (PAC) 5.0 - 5.0 Government 6.5 6.5 Total 11.9 99.6 111.5 Estimated Disbursements Bank Fiscal Year: 1988 1989 1990 1991 1992 Annual 10.8 16.2 23.3 4.1 0.6 Cumulative 10.8 27.0 50.3 54.4 55.0 Rates of 1Return Paved Road Rehabilitation: 21% overall, ranging fro. 18%-28% Port Rehabilitation: 24% overall, ranging from 12%-27% Maps: IBRD 20074, 20075, 20131 WAPTR April 1987  REPUBLIC OF GUINEA TRANSPORT SECTOP PROJECT I. INTRODUCTION 1.01 The Government of Guinea has embarked on a courageous and ambitious program of economic reform aimed at reversing the difficult situation it inherited from the First Republic. Under a structural adjustment program supported by IDA and bilateral, donors, it aims at decontrolling and liberalizing economic activity, encouraging private sector participation, reducing direct state involvement in productive and service sector activities, and improving macro-economic management through major institutional reforms. The Government, with technical assistance from IDA, has begun the process of public sector disengage- ment from industrial and commercial activities in order to reduce inflated civil service rolls and eliminate the substantial state subsi- dies hitherto required to keep mismanaged and loss-making public enter- prises afloat. The proposed project would help Government implement similar reforms in the transport sector. 1.02 After a quarter-century of neglect and mismanagement, most of the transport infrastructure in Guinea is barely operable, and the institutions for planning, running, and maintaining them need to be completely rebuilt. The Government has accorded the highest piiority to the creation of a sound policy framework and the re-establishment of essential transport services. In support of this strategy, the Govern- ment's investment program rightly focuses on the elimination of four major bottlenecks: (a) the heavily deteriorated basic trunk road system; (b) the serious congestion in the commercial port of Conakry; (e) the unreliable and unsafe air transport system; and (d) the diffi- culties of transforming a transport industry historically dominated by inefficient parastatals into a performing, private service industry. IDA, in collaboration with several co-financing agencies (AfDB, KfW, FAC), intends to support this strategy through a series of proiects in FY87, FY88, and FY90 that will finance priority investments and support basic policy reform measures in the transport sector, paralleling those being supported at the macro-level by IDA's ongoing structural adjust- ment program. Substantial mobilization of local resources and co-financing are required for these operations, since priority transport sector investment needs over the medium-term will account for over half of Guinea's total investment budget. II. THE TRANSPORT SECTOR A. The Transport System 2.01 Guinea has a land area of 246,000 km2 and a population esti- mated at about six million. Given the severe climatic conditions and high mountain ranges of Guinea, transport infrastructure is both diffi- cult to build and maintain, and costly to operate. Although the country is well endowed with agricultural, hydro-electric and mineral resources,  - 2 - its average per capita GNP in 1986 was estimated at only US$300, among the lowest in West Africa. 2.02 When the First Republic ended in April 1984, Guinea was left with some of the most rundown infrastructure and least efficient trans- port operations in Africa (Annex 2-1). A nominally adequate classified road system of about 14,000 km at independence had been reduced to a bare-bone network of less than 5,000 km of passable roads (1,200 km paved). Guinea's national railways with 660 km of main line had virtu- ally ceased operations, while the three mining railways -- Conakry-Fria (140 km), Conakry-Kindia (110 km) and Sangaredi-Kamsar (135 km) -- continued functioning normally under the control of alumina and bauxite mining companies. Of the country's two deep-water ports, that in Kamsar, built in the early seventies for bauxite handling, was operating satisfactorily, but Conakry, the country's main general cargo port which also handles bauxite and alumina exports, was completely run-down. A small secondary port at Benty, serving agricultural exports before independence, was no longer used. While the international airport at Conakry was partly rehabilitated in 1983, the nine secondary airports were in poor condition. Moreover, airport security and navigation equipment were dangerously substandard and among the worst in the African continent. The national carrier's (AIR GIfINEE) financial situation -- like that of all other transport parastatals -- was precar- ious and its efficiency low. 2.03 The present capacity of all transport modes in Guinea is insufficient to meet current levelb of demand, much less the increased demand expected as economic reform measures take hold and productive sector activities revive. Rehabilitation and maintenance of core infrastructure and restructuring of sector agencies form the center of Government's near- and medium-term strategy for all transport sub-sec- tors. The ongoing Third Highway Project (Cr. 1457-GUI) and the Port Project (Cr. 1382-GUI) have begun the reconstruction efforts, but much more is needed in infrastructure rehabilitation, in institution building and in appropriate policy design and implementation. B. Roads and Road Transport 2.04 The situation in the vital road sector is critical. The state of maintenance of the 4,200 km priority network which carries over 80% of all traffic is extremely poor. The US$73.2 m Third Highway Project includes the reconstruction of the country's main highway (Conakry-Mam- ou) and a rehabilitation and maintenance program of the priority road network. The project, which became effective in December 1984, was prepared during the previous regime and designed for a different insti- tutional and economic environment. To circumvent political interference and compensate for the ineffectiveness of the Public Works Administra- tion, the project created an autonomous Road Project Office (Office du Projet Routier, OPR). This institutional set-up has proved unnecessari- ly cumbersome and the pro4ect has been redesigned to reorient OPR's structure towards that of a commercially-based contracting enterprise. The road rehabilitation and maintenance program under the Third Highway Project will be expanded and reinforced under the proposed project and the subsequent Road Rehabilitation Project currently programmed for FY88. Details of the highways sub-sector are provided in Annex 2-2.  2.05 Although vehicle imports rose steeply during the past two years, traffic volumes on the inter-urban network have changed little from the levels in 1980/82. Traffic on the main axis from Conakry to Mamou varies from 3,000 vpd near the capital to 800 vpd near Kindia and 400 vpd near Mamou. On the remainder of the paved trunk roads, traffic varies between 150 and 250 vpd, while improved laterite trunk roads carry 80-100 vpd and other sections about 30-40 vpd (Annex 2-2). These low traffic levels are due mainly to the severe deterioration of the trunk network over the past two years when Guinea experienced exception- ally heavy rains, exacerbated by a continued shortage of spare parts, and an almost complete breakdown of the fuel distribution system up-country. Early 1986 traffic figures also reflect a temporary fall in transport demand following monetary reform and the subsequent fourfold increases in the priee of fuel as well as in transport tariffs. New traffic counts, to be carried out in 1987, are expected to reflect the sharply higher levels of imports through the port as well as increased agricultural activity. 2.06 The road transport industry has undergone significant changes since the advent of the Second Republic. The most important is the abQlition of two state companies' monopoly of long-distance freight transport (COTRA -- dissolved; ENTRAT -- being liquidated) in prepara- tion for the proposed project. Freight traffic is now being handled mostly by private operators; several of them have acquired truck fleets of 10-20 vehicles, but most are owner-operators of one or two vehicles. Access to the industry is free, and tariffs for freight transport have been unregulated as a result of the policy dialogue with Government in preparation for the project. Road passenger transport has always been handled by small private transporters and continues to be so. Some 7,000 vehicles are estimated to be licensed for public transport with over two-thirds operating in the capital; there is also considerable unlicensed transport for hire. A newly established joint-venture company (SOGETRAG) started to provide efficient bus services in Conakry in early 1986, while the surviving state company, TUC, operates poorly and irregularly. Regarding inter-urban passenger transport services, one private bus company (GUINEE EXPRESS) provides regular services. 2.07 It is difficult to determine the size of Guinea's overaged and extremely heterogeneous vehicle fleet. The Vehicle Licensing and Regis- tration Office, recently attached to SET, keeps track of new registra- tions only, without dropping scrapped vehicles from its rolls. The fleet is currently estimated at about 27,000 vehicles (less than a fifth of that in Cote d'Ivoire), of which about 4,000 are trucks and 1,000 buses. This is adequate to meet present transport demand, but as economic activity picks up, a considerable increase in transport capaci- ty will be required. C. Fuel Distribution and Pric(iB 2.08 Fuel supply and distribution have been serious impediments to normal development of the road transport sector. ONAH, a parastatal, is currently responsible for both fuel supply and retail distribution, while negotiations with foreign partners to form a joint venture succes- sor company to ONAH are underway. Once a new structure is in place, rehabilitation of the fuel distribution network becomes an urgent priority for re-establishing normal road transport conditions. Fuel  - 4 - prices in Guinea, while covering border prices, represent only one-half to one-third of those in neighboring Mali, Senegal or C8te d'Ivoire. There is, on the other hand, an urgent need to mobilize additional resources to finance the sizeable road maintenance and rehabilitation efforts. Accordingly, to generate revenues sufficient to finance essential road maintenance, fuel prices must be adjusted upwards until price differentials to neighboring countries disappear. Further, fuel taxes should be structured so as to favor essential transport services over personal vehicle use, and to ensure that their burden falls most heavily on those income groups with the highest ability to pay. A new fuel price structure acceptable to IDA will be developed in connection with the new project (para 3.02). Details on fuel supply, distribution and pricing are provided in Annex 2-3. D. Railways and Rail Transport 2.09 Office National du Chemin de Fer de Guinee (ONCFG) is the parastatal responsible for running the Conakry-Kankan public railroad. Services have been interrupted for several months on a number of occa- sions and ONCFG's financial situation is dismal, with revenues not even covering operating expenses. In connection with the project, it has been agreed with the Government to severely limit investments in the railways (para 3.04). Meanwhile, the upcoming Urban Transport Plan Study, to be financed under IDA's restructured Urban Project, will compare the relative economic interest of establishing an urban commuter rail entity (with a new management) in Conakry to complement urban bus services, with that of extending existing bus services. The possibility of using the FRIGUIA line for the transport of clinker from the port to the cement factory at Sonfonia (km 36) would also be examined under the proposed study. (See Annex 2-4 for details on rail traffic.) E. Ports and Shipping 2.10 Guinea has two major ports: Kamsar and Conakry. Kamsar, constructed as part of the Bank-financed Boke Bauxite Project, has been in operation since 1975. It has a total capacity of 9.2 million tpy; currently it handles about eight million tons of bauxite exports annual- ly and a small amount of imports for the account of the mine. Conakry is the main commercial port. It handles all general cargo imports and exports, fuel and clinker imports, as well as bauxite (three mil- lion tpy) and alumina (500,000 tpy) exports. Details of Conakry port facilities and of the port sub-sector are given in Annex 2-5 and map IBRD 20131. 2.11 The ongoing US$38 m Conakry Port Project is expected to be completed in 1987. Physical project objectives have been fully realized and institutional objectives substantially so. The Port Autonome de Conakry (PAC), established in 1982, has evolved into a credible port manager with foreign technical assistance financed by GTZ. However, it has not yet attained full financial autonomy as foreseen by its stat- utes. Moreover, transit functions were until recently handled by ENTRAT and consignments by the SOCIETE NAVALE GUINEENNE (SNG) -- both state monopolies. Their operations were inefficient and a source of frequent financial and operational problems. Under the proposed project these services will be provided bv the private sector (para 3.08). A problem that has proved quite intractable so far is port security. Although the  - 5 - situation has improved since fencing and lighting have been installed, losses through pilferage remain unacceptably high. PAC has recently been assigned the responsibility for ensuring port security, and has been examining arrangements in other ports in the region with a view to establishing its own security force to replace the existing ineffective ones. Further, the physical, institutional and operational improvements under the proposed project should have a positive effect on security. 2.12 Increases in traffic in response to the improvements in port installations and operations and the liberalization of the Guinean economy since mid-1984, have largely exceeded those foreseen at apprais- al of the Port Project. General merchandise imports increased from 215,000 tons in 1983 to 580,000 tons in 1986, an increase of about 170%. The containerized share of this traffic increased even more steeply from 26,000 tons in 1983 to 146,000 tons in 1986. Total general merchandise volume (imports plus exports) of 612,000 tons in 1986 exceeds the volume anticipated at appraisal by 290,000 tons. (Annex 2-6 gives details on traffic development for different categories of merchandise.) This explosive growth in traffic is producing severe congestion of the newly rehabilitated port facilities. When appraised, these were estimated to be sufficient for handling a volume of 470,000 tons annually, expected to be reached by 1995. Although increasing containerization and im- proved cargo handling following privatization of port-associated servic- es under the proposed project can alleviate some of the pressures of congestion, the port risks to remain a major bottleneck in handling the country's growing volume of imports and exports unless further improve- ments are introduced urgently. Increased storage and quay capacities are needed to handle increased container traffic and to allow second-generation container and Ro-Ro ships, that have begun operating along the West African coast, to serve Guinea regularly and at substan- tially lower costs than those of the vessels currently predominating in Conakry traffic. Further, dredging of the port basin and access channel is essential to permit fuel tankers and ore-carriers to arrive or depart fully loaded. The proposed project addresses the most urgent investment needs that will allow PAC to function adequately through the end of the century (para 4.09), 2.13 PAC's financial performance has been, on the whole, satisfac- tory: tariff increases were introduced as foreseen under the project, and revenues through December 1985 were sufficient to cover operating expenses and financial charges. Due in part to a confusion in the attributes of PAC and SNG, however, recovery of foreign exchange pay- ments from foreign clients has presented problems, and local currency payments by public sector clients have been consistently in arrears, although partially compensated by delayed tax payment. A new tariff structure has been elaborated and is being introduced in connection with the new project (para 3.03). Details on PAC's financial situation aTe given in Chapter VI. 2.14 Privatization of port associated services, replacing ineffi- cient state monopolies (SNG, ENTRAT and PAC's stevedoring activities), should result in significant productivity increases. Privatization of services will be accompanied by the creation of a Port Labor Office for stevedore cargo handlers to which PAC's "civil servant" dockers will be transferred. The new arrangements will facilitate the introduction of a two-shift system allowing for fuller utilization of port installations.  At the same time, increases in salaries of PAC's remaining personnel and provision of incentives will be implemented -- these are essential for improving port productivity, efficiency and security. The proposed project would support PAC in introducing the institutional changes required to make it more efficient and responsive to the country's changing economic environment while, at the same time, providing the essential additional infrastructure required to handle increasing traffic through the 1995-2000 period. 2.15 Guinea's involvement in shipping is currently limited to part ownership of a joint-venture company, GUINOMAR, set up with Norwegian partners (Torvald Klaveness) in 1979 to handle some four million tons of bauxite shipments annually from Kamsar. The company at present owns only one ore-carrier (65,000 tdw) and charters another eleven, at very favorable rates in the depressed shipping markets of today. In 1982/83, Guinea signed a loan agreement with Japan for the acquisition of a second ore carrier of 45,000 tdw, to be constructed at a Korean ship- yard. Since ships of that type can actually be bought at about a third of the price of new construction in the second-hand market, IDA has requested both the Guinean Government and Japan to reconsider the proposed investment that would result in substantial losses to the company. The Government of Guinea has now requested that Japan allocate the funds for other purposes. 2.16 Coastal shipping is limited to small scale barter trade of little importance, with annual volumes handled less than 4,000 tons. It may grow in importance as agricultural production revives. River transport is possible for about four months during and after the rainy season on the Milo (Kankan-Siguiri) and Niger (Kouroussa-Siguiri-Bamako) rivers; it is used mainly for agricultural products transported over short distances with traditional river barges. F. Airports and Civil Aviation 2.17 Guinea has ten airports: an international airport at Conakry, and nine domestic airfields of which three -- in Faranah, Labe and Kankan -- have paved runways. The existing secondary airfields provide good coverage of the country and could compensate for the absence of all-weather road connections to the outlying provinces. However, the main three airports are in such poor condition that, like the laterite airfields, they can accommodate only short take-off and landing (STOL) aircraft. Moreover, they lack basic navigational aids and security equipment and are often non-operational, especially during the harmattan period when dust from the Sahel affects visibility, and during part of the heavy rainy season when the roads also become impassable. A reha- bilitation program of the highest priority airfields will be prepared and carried out under the proposed project (para 4.14). 2.18 To achieve real improvements in the provision of air naviga- tion services, it is desirable that the Directorate General of Civil Aviation (DGAC), within SET, be responsible for planning and supervision of civil aviation activities. Air traffic control and delivery of other highly technical services should, however, be ensured by an autonomous agency, outside the civil service, and organized aiong the lines of the Agence pour la Securite de la Navigation Aerienne en Afrique et a Madagascar (ASECNA), a regional agency active in most of the francophone  countries. Specific agreements regarding this institutional reorganiza- tion are mentioned in para 3.12. The proposed project will include support for both the institutional and physical rehabilitation of the civil aviation sub-sector (paras 4.10 ff). 2.19 International air passenger traffic has increased from a modest level of around 10,000 passengers p.a. in the early 1980s to 118,000 in 1983 and 191,000 in 1985. In contrast, domestic air passen- ger traffic which had attained 90,000 passengers p.a. in the early 1980s (including about 40% Government officials flying free), dropped to about 28,000 in 1985, as a result of the deterioration of the airports and the precarious condition of the national carrier, AIR GUINEE. 2.20 Faced with mounting losses, the Government requested a study of AIR GUINEE in 1985 aimed at restructuring the company. The study recommended transforming AIR GUINEE into a new company limited to domestic services, at least for the initial years. To stem foreign exchange losses, the Government suspended all international operations in 1986 and sold two of its three jet planes. Domestic services are provided with a DASH-7 obtained as a grant from the Canadian Government. Under the PPF, IDA has financed a new study aimed at restructuring of the carrier, which is discussed in para 3.13. Annex 2-7 provides details of the civil aviation sub-se^tor. G. Transport Sector Administration 2.21 Administration of the transport sector is the responsibility of the Ministry of Equipment and more particularly of its two Secretari- ats of State: (a) the Secretariat of State for Transport (Secr6tariat d'Etat aux Transports, SET) which is responsible for the formulation and monitoring of sector policies, programs and regulations covering public and private sector organizations, and for overseeing public sector agencies in ports, shipping, air transport, road transport and railways; and (b) the Secretariat of State for Public Works (Se..ctariat d'Etat aux Travaux Publics, SETP), which deals with the planning, programming, construction and maintenance of highways, urban and feeder roads, as well as airfield infrastructure. SETP carries out these responsibili- ties through its central services and its seven regional directorates and 36 sub-divisions, and through the Road Project Office (Office du Projet Routier, OPR), an autonomous entity supervised by SETP. The Secretariat of State for Commerce (Secr6tariat d'Etat au Commerce, SEC) under the Ministry of Finance and Economy oversees the company responsi- ble for supply and distribution of fuel, while the Ministry of Plan and Intertrtional Cooperation (Ministere du Plan et de la Coop6ration Internationale, MPCI) deals with the allocation of investment resources to the sector. 2.22 SETP and SET have inherited large numbers of inadequately qualified staff, including a large number of locally-trained civil and mechanical engineers and technicians, as well as economists and accoun- tants. Streamlining of administrative structures is a high priority. To help this restructuring, organizational studies of both SET and SETP were completed under a Transport Plan Study being carried out as part of the Third Highway Project, but their recemmendations need to be refined. The approach to developing the basic operational structure of SET was agreed with Government during negotiations and a detailed program will  - 8 - be established with the assistance of consultants as required (pa- ra 3.15 ff). This approach will permit the definition of manpower and training needs so that financing can be provided under the project for a comprehensive staff development program designed to meet them (para 4.15 ff). Anrnexes 2-8 and 2-9 provide details of SET and SETP staffing and proposed reorganization. 2.23 Having been non-existent under the First Republic, transport planning is in an embryonic state. IDA's Third Highway Project included some financing of consultants for initiating a Transport Plan Study. Following completion of the first study phase (review of existing data for the different sub-sectors and proposals for an organizational set-up to begin to fill the important gaps in sector knowledge), a small transport planning unit was established in SET in late 1985 to build up the data base for the medium-term transport plan. To enable the Plan- ning Unit to improve collection and analysis of transport statistics and conduct studies of transport problems, additional funds have been made available under the PPF advance for the proposed project. These funds will provide for supplementary technical assistance as well as for some of the office equipment necessary for carrying out the work program. Further support will be provided under the proposed project, including a training program for Guinean staff to prepare them to evaluate projects and to establish three-year rolling investment programs for the sector (para 4.16). H. Transport Sector Investment 2.24 A three-year Public Investment Program (PIP) has been estab- lished for 1987-89 with technical assistance financed under IDA Cred- it 1559-GUI. It foresees total annual public investment expenditures (excluding grant financing) of US$150-180 m equivalent, of which about JO% would go to the Transport and Telecommunications sector. Given the massive and urgent needs for transport infrastructure rehabilitation, the 1987-89 PIP for the transport sector (Annex 2-10) currently shows annual average investments of US$65 m equivalent in the road and road transport sub-sectors, US$15 m equivalent in the ports sub-sector, and US$6 m equivalent in the aviation sub-sector. However, these amounts include only part of the substantial "emergency programs" being prepared for city street rehabilitation in the metropolitan area of Conakry, and of the rehabilitation of roads, bridges and ferries on the major north-south and east-west road axes of the country, which will consti- tute the bulk of a proposed Priority Road Rehabilitation Program expect- ed to be executed starting about September 1988, to be financed by IDA and other multilateral and bilateral aid agencies. Provided that financing is found on acceptable terms, and that adequate provisions are made by Government to ensure correct project implementation (mainly by contractors) and works supervision, transport sector investments in Guinea should be allowed to take a major share of public investments over the next five year period. Future investment and expenditure policy is further discussed in para 3.04. Data on earlier trends in transport investments are in Annex 2-11.  - 9 - Bank Group Involvement in the Transport Sector 2.25 The Bank Group has been among the principal sources of exter- nal financing for transport development in Guinea. Since 1966, it has made three loans and four credits in the sector. The former (Loans SI-GUI, 1966; 577-GUI 1968 and 766-GUI, 1971; US$75.2 m in all) financed the mining town site at Bok6 and related port and rail infrastructure for the export of bauxite from the mining development and were success- fully completed in 1975. The latter have funded the First (US$14 m, Cr. 596-GUI, 1976) and the Second (US$17 m, Cr. 953-GUI and EEC-33 GUI, 1979) Highway Projects, and a Port Project (US$38 m, Cr. 1382-GUI, 1983). The two highway projects financed extensive road rehabilitation and maintenance programs. The First Highway Project was satisfactorily completed in 1980 by a virtually autonomous project unit (PCR No. 4358, March 1983). The Second Highway Project was designed to incorporate the unit into the Ministry of Public Works organization and achieve a wider institution building impact. This objective proved premature and resulted in diversion of project resources and disappointing works outputs. Nevertheless, the project, completed in mid-1984 after strong remedial action, yielded a satisfactory rate of return (PCR May 1985). The ongoing Third Highway Project and Port Project have been described in para 2.04, and in para 2.11 and Annex 2-5, respectively. III. THE POLICY FRAMEWORK 3.01 The Transport Sector Project's central objectives are the implementation of a sectorwide policy program and the rehabilitation of Guinea's main transport systems. This chapter summarizes the policy program while Chapter IV deals with the project's physical elements and related technical assistance. The policy content covers three basic transportation sector areas described in more detail in the paragraphs below: (a) resource mobilization and pricing; (b) public investment and expenditure; and (c) deregulation and institutional reform. Govern- ment's development policy for the sector has been confirmed to the Association in a letter dated May 9, 1987; the letter and the summary table of policy measures Government has agreed to adopt are in An- nex 3-1. A. Resource Mobilization and Pricing Policy 3.02 Despite a doubling of the road maintenance budget between 1986 and 1987, lack of sufficient local financial resources and their timely availability to the road sub-sector has been one of the main obstacles to the road maintenance and rehabilitation efforts financed under the ongoing Third Highway Project. Moreover, as stated in para 2.08, fuel prices in Guinea, while covering border prices, are substantially below those of neighboring countries which use fuel taxation as an important source of fiscal revenues. In Guinea, there is a vast need to mobilize additional resources to finance the large and urgent road maintenance and rehabilitation effort. Therefore, as a first step, it was agreed that the Government will raise the tax on petroleum products by FG 15 per liter as a condition of credit effectiveness. Further, during negotiations, it was agreed that (a) a study will be carried out to (i) recommend the proper level and structure of fuel taxes, including a program of gradual increases; and (ii) examine alternative fiscal, financial and administrative mechanisms and recommend the one best  - 10 - suited to Guinea's conditions; and (b) the study will be started not later than July 1, 1987 and completed not later than November 15, 1987. After review of its findings and recommendations by the Government and the Association, the Government shall, as a condition of disbursement for the road component, make adequate 1988 budgetary provisions for the maintenance of the priority road network. The Government has also agreed that Credit disbursements after January 1, 1988 will be contingent on a further increase in fuel taxes, based on the results of the study under (b) above. 3.03 Regarding port pricing, a new tariff structure was elaborated during project preparation to reflect the impact of monetary reform and the new statutory attributions of the Conakry Port Authority (PAC). Implementation of the new tariff will be a condition of credit effec- tiveness. Moreover, at negotiations the Government and the Association agreed that PAC will be allowed to increase tariffs periodically between 1989 and 1993 in order to maintain a rate of return on net fixed assets of not less than 6% and achieve other specific financial targets de- tailed in Chapter VI. Further, the structure of port tariffs will be re-examined when the new container terminal to be built under the project is completed. B. Public Investment and Expenditure 3.04 To ensure that new transport investments and expenditures will be in accordance with strict priorities in the sector, the Government agreed during negotiations to an annual review with IDA by December 31 of each year, of (a) the three-year rolling investment and expenditure programs for the entire transport sector for the period 1988-1993; and (b) as part of such programs, the Borrower should submit to the Associa- tion annual maintenance budgets for the roads, ports, railways and aviation sub-sectors including an outline program of works, their financial requirements and the sources of funds for covering them. Only projects with an economic rate of return of at least 10% would be included in the program. Moreover, railway investments will be limited to those required for clear safety reasons, while budget transfers to cover operational expenditures will not exceed present low levels. C. Deregulation and Institutional Reform 3.05 In the highways sub-sector, a complete restructuring of highway maintenance begun under the ongoing Third Highway Project will be continued and consolidated under the proposed project. The Road Project Office (OPR), created under the previous Government to introduce some measure of accountability and discipline in the previously inade- quate road maintenance service, will be transformed into a private contractor. Therefore, during negotiations agreement was reached between the Government and the Association that OPR will be privatized by December 31, 1988. In the future, all periodic maintenance will be carried out by private contractors under modalities discussed in Chap- ter IV. Meanwhile, the SETP will re-assume full responsibility for the planning, programming and control of all road maintenance activities and for implementation of routine highway maintenance.  - 11 - 3.06 In road passenger transport, the operation of a state enter- prise, the Conakry Urban Transport Company (TUC), is plagued with difficulties and inefficiencies. More importantly, these services are no longer warranted since the newly established private-public sector joint venture company SOGETRAG is providing efficient urban transport services in Conakry. During negotiations, agreement was reached regard- ing the transformation, not later than June 30, 1988, of TUC into a joint venture company (SocietW d'Vconomie mixte) expected to provide urban and inter-urban services. 3.07 The monopoly on freight transport services which existed in past years has disappeared and the existing parastatals have been either dissolved (COTRA) or are to be restructured. As a result of the changes already introduced, the majority of passenger and freight interurban services are now provided by a strongly competitive emerging road transport industry. Entry and exit to the industry is free, but ade- quate legislation that ensures the sustainability of this situation and provides regulations to foster minimum safety conditions is required. To prepare this legislation, including the reorganization of the Vehicle Licensing and Registration Office in SET, technical assistance will be provided under the project. Further, during negotiations, the Govern- ment and the Association agreed that (a) SET will prepare and submit to the Association for comments, by March 1, 1988, a draft legislation proposal to regulate the road transport industry, both for passenger and freight transport services, so as to provide and consolidate an environ- ment conducive to competition, efficiency and safety of service, includ- ing, in particular, regulations on free entry and exit to the industry, on axle load limits and controls, and on safety considerations; and (b) after incorporating IDA's comments, the Government will enact the new legislation by June 30, 1988 at the latest. 3.08 During preparation of the proposed project, IDA and the other co-financiers (AfDB and KfW) have assisted the ports sub-sector in liberalizing its operations and in developing an institutional and regulatory framework aimed at fostering competition and efficiency through full-scale participation of the private sector in the supply of the main port-associated services. In the past, three state enterprises held a monopoly of main port-related services. The Po. t Authority of Conakry (PAC) was responsible for ship-handling, stevedoring and ware- housing, in addition to its normal functions of port administration and technical services such as pilotage, towage, allocation of ships to berths, infrastructure construction and maintenance, and the like. The National Freight Handling Company (ENTRAT) maintained an exclusive control on transit functions, while the national Consignment Company (SNG) was the sole shipping agency in Conakry responsible for all consignments. The operation of these parastatals, particularly the last two, has been a constant source of financial and operational inefficien- cies and difficulties. 3.09 Several improvements to this control of port operations by the public sector have already been introduced in preparation for the proposed project. In accordance with newly announced Government poli- cies, private operators were admitted in freight handling and customs clearance for the first time in 1985. Later on, they also participated, in an ad-hoc fashion and as "sub-contractors" to the three state monopo- lies in ship-handling and stevedoring services. Their presence enabled  - 12 - the port to handle the rapidly increasing traffic and resulted in greater port productivity. On February 12, 1987, the decree privatizing all port-associated services was signed; PAC's stevedoring services and SNG's shipping agent activities were officially privatized on Ap- ril 1, 1987. Importers and exporters also can now freely select freight forwarders and customs agents among private companies. Agreement was reached at negotiations, that Government would not provide any subsidies or monopoly rights for shipping activities to SNG or other companies. 3.10 In preparation for the project, IDA and the co-financiers also assisted PAC in developing a new regulatory framework aimed at institu- tionalizing and formalizing the privatization of all maln port-associa- ted services. Moreover, before transferring responsibility of several services to the private sector, a new tariff structure was prepared for the remaining services to be rendered by PAC. Draft new statutes for PAC, reflecting the new operating and regulatory framework, acceptable to the Association, have been prepared and were reviewed during negotia- tions. During negotiations, it was also agreed that the new statutes for PAC, together with the new orginization chart and salary structure, will be implemented as a condition of credit effectiveness. 3.11 Other areas where the private sector could play a more signif- icant role in the provision of port services are port maintenance and navigational aids. Currently, PAC is responsible for all maintenance work, and the Office Maritime within the Ministry of Transport (SET) has been maintaining navigational aids in Conakry Port under contract with PAC. In practice, the contractor carrying out the expansion and im- provement works under the ongoing Port Project has also handled all port maintenance. Navigational aids are in extremely poor condition nation- wide. Therefore, during negotiations, the Government and the Associa- tion agreed that (a) starting on January 1, 1988, PAC will sign a contract with an independent experienced contractor acceptable to the Association, under procedures acceptable to the Association, to carry out cleaning and maintenance works of all port facilities; and (b) starting on January 1, 1988, the responsibility for the maintenance of navigational aids in Conakry port and access channel will also be transferred to the private contractor mentioned in secticn (a) above. 3.12 Another important reorganization is proposed for the civil aviation sub-sector under the project. There exists at present an institutional vacuum regarding air navigation and meteorological ser- vices in the country. A new Franco-Guinean company, SOGEAC, was recent- ly established with the participation of Aeroports de Paris as technical partner, to manage Conakry's international airport. Given its restrict- ed scope, however, SOGEAC's operations will not be sufficient to ensure normal operations and safe flying conditions at Conakry, nor to address the existing lack of navigation and meteorological services nationwide. Based on studies by ICAO and other international consultants, the establishment of a new autonomous organization called the Air Navigation Agency (ANA) has, therefore, been proposed. Given the technical nature of its functions and of its staff, it has been felt that an autonomous body could best handle such services. ANA would complement SOGEAC at Conakry in a manner similar to other airports in the world, and would administer the country's secondary airports. The new agency would be financially autonomous, with revenues derived from airport fees at the secondary airports and part of the landing fees at Conakry, which it  - 13 - would share with SOGEAC. It was agreed during negotiations that one of the first tasks of the technical assistance to ANA, in coordination with SOGEAC, will be to propose by March 1, 1988 an adjustment of larding fees in Conakry, to levels comparable to those in neighboring countries. Meanwhile, meteorological services for civil aviation will remain the responsibility of M6t6orologie Nationale, which wilL detach teams at each airport to operate under the guidance of ANA. During negotiations, the Government and the Association agreed on (a) the draft plans for the creation of the new agency to be submitted for the Association's review and comments by March 31, 1988; and (b) the establishment of the new agency, after taking account of the Association's comments on the draft plans for its creation, by June 30, 1988. 3.13 Regarding air transport, the Government has been grappling with the reorganization of the state-owned Air Guin4e for a number of years, without much success. The Government recently undertook a study, financed under a PPF to the proposed project, under terms of reference and conditions acceptable to the Association, to seek an acceptable solution for the airline. The study, which is expected to be completed by end July 1987, will establish the company's current assets and liabilities, propose alternatives for restructuring the company or liquidating it and replacing it by a new domestic-oriented air carrier. It is expected that the study will provide a basis for the Government to call for specific proposals from foreign airlines interested in partici- pating as equity partners and co-managers of the new or restructured airline. At negotiations, the Government and the Association agreed that a detailed plan of action will be submitted to the Association for its review and comments on the restructuring of Air Guin6e by Octo- ber 31, 1987, and that the recommendations of the study will be imple- mented beginning June 30, 1988, in accordance with a detailed timetable of events to be decided based on the study's specific recommendations. 3.14 At the center of the efforts of the Association and other co-financiers in helping prepare, finance and implement the proposed project, is the objective of rebuilding the Government's institutional and administrative infrastructure. It is an essential task to ensure a proper implementation of the policies and investments included in the project, as well as the sustainability of the efforts undertaken with the project. This task involves institutional reform as well as manpow- er development. 3.15 On the institutional reform front, the proposed project supports transformation of both the Ministries of Public Works (SETP) and Transport (SET) into organizations capable of formulating and monitoring sector policy as well as planning, preparing and supervising investment and maintenance programs and projects. Organizational studies of both Ministries were carried out by consultants in prepara- tion for the project and discussed with the Government. Implementation of more appropriate structures will be gradually introduced under the project. Therefore, during negotiations agreement was reached between the Government and the Association regarding (a) the implementation, in collaboration with the General Commissariat for Administrative Reform, and supported by Consultants acceptable to the Association, as required, of a program to help SET and SETP in (i) establishing position descrip- tions and staffing profiles for the administrative units within each of the two organizations; (ii) evaluating the profiles of existing staff  - 14 - and comparing them with those required in each unit; and (iii) preparing a program for assigning suitable staff to the units and for handling the re-deployment of redundant staff; (b) preparation of proposals for reorganization of SET and SETP for review between the Government and the Association not later than June 30, 1988; and (c) the full implementa- tion of the reorganization by October 31, 1988. 3.16 On the important manpower development front, during negotia- tions the Government and the Association agreed that (a) consultants acceptable to the Association will be engaged by the Government by December 31, 1987, under terms and conditions acceptable to the Associa- tion, to (i) elaborate a medium-term manpower development program for the transportation sector, including a critical evaluation of relevant technical and managerial training institutions and their curricula; and (ii) prepare specific proposals for improving their programs to make them more responsive to foreseeable manpower needs within the next five years; (b) the Association will be given an opportunity to comment on the manpower plan by September 30, 1988; and (c) the plan will be implemented starting on January 1, 1989 (see also para 4.12). IV. THE PROJECT A. Project Objectives 4.01 The project is designed to support the Government's Public Investment Program in the transport sector. The main physical objec- tives of the proposed project are to halt the accelerated deterioration of the existing paved road network; to expand the capacity of Conakry Port and improve its operational efficiency; and to upgrade air naviga- tion and safety, and meteorological services nationwide. B. Project Description General 4.02 To realize these objectives, the project will provide finan- cial assistance for the following components over a three-and-a-half- -year period: (a) Roads -- rehabilitation of about 360 km of severely deterio- rated paved roads to provide basic access to major centers of agricultural production; the rehabilitation and equipping of the SET and SEPT buildings; technical assistance for the Public Works Administration, and the Secretariat of State for Transport, and consultants' services for privatization of OPR and studies; (b) Ports -- construction of the northern enclosure and dredging of the port basin and access channel to accommodate ore-carrier and oil tanker traffic; construction of a fuel jetty and of a modern container berth; rehabilitation of existing port facilities and navigational aids; and technical assistance for Improved port operations including privatiza- tion of port-associated services;  - 15 - (c) Aviation -- consultants' services to assist in reorganizing AIR GUINEE; technical assistance for establishing an autono- mous agency for Air Navigation and Secondary Airports; acqui- sition of navigation and safety equipment for Conakry airport; minor runway rehabilitation and essential navigation equipment for domestic traffic at selected secondary airports, and acquisition of meteorological equipment; and (d) Transport -- technical assistance for the Jevelopment of a 5-8 year manpower development plan for the transport sector and its partial implementation. Road Sub-sector 4.03 This component (Map IBRD 20074) includes the following items: (a) rehabilitation of paved roads, including about 206 km of pavement strengthening and 157 km of resealing; (b) associated consulting services for engineering and supervision of worksg (c) a pilot operation, including purchase of equipment and tools, to develop small contractors for vegetation control work on the paved road network; (d) rehabilitation of about 1,400 m 2 and 800 M2 of offices in the SETP and SET buildings respectively, including supply of furniture and equipment; (e) technical assistance to SETP for project administration and monitoring, and for organizational studies, manpower develop- ment and training; and (f) consulting services for examining the establishment of a funding mechanism for highway maintenance and for preparing and implementing the privatization of OPR. 4.04 The project roads require a single surface treatment on about 85 km, double surface treatment on about 73 km, and full pavement reconstruction on about 206 km (Annex 4-1). No improvement of the geometric characteristics of the roads will be carried out, but the drainage system will be fully rehabilitated. The proposed works would stop pavement deterioration, and they would postpone the need for periodic maintenance on the resealed sections by 6-10 years and increase the life of the reconstructed sections by some 15 years. In addition, routine maintenance, currently ineffective, would become possible again under normal conditions. 4.05 The routine maintenance of the classified highway network would remain the responsibility of SETP. It is essential that strict implementation of basic maintenance (vegetation control, clearing of drainage ditches and maintenance of shoulders) of the newly rehabilitat- ed roads be assured, since they would be quickly damaged without it. Because maintenance of paved roads has been very poor in Guinea, the project would finance a pilot operation for vegetation control to be  - 16 - carried out by small contractor(s) on the 190 km Kissidougout-Kankan paved road (Annex 4-2). 4.06 Two floors of the five-story building housing SETP, which is structurally sound but completely dilapidated, and the building housing SET, will be rehabilitated. Works will include repairs and repainting of rooms, repair of electrical and water systems, and provision of serviceable office furniture and basic office ."quipment and computer facilities (Annex 4-3). 4.07 To assist SETP in developing an adequate organizational structure and strengthening its capacity for programming and supervising works, for studies, and for training, a small technical assistance team will be required. This will consist of one Senior Highway Engineer/Man- ager with special experience in works supervision and highway mainte- nance organization; one Highway Engineer -- specialist in Highway Design; one specialist in training and one junior engineer-economist. This assistance should start no later than one month after project effectiveness and should be fully mobilized by the time the SETP offices have been rehabilitated. The technical assistance will initially (a) supervise and monitor implementation of the project civil works, and assist in the preparation of the Priority Program for Road Rehabilita- tion (which it would also ultimately monitor); and (b) carry out person- nel evaluations, develop a clear organizational framework, establish job descriptions for all technical and administrative positions and develop and start implementing a training program to upgrade the capacity of SETP's technical staff. In addition, technical assistance would pro- gressively assist SETP in addressing issues of highway planning, mainte- nance, and effective administration. It would also establish criteria and procedures, as well as related organizational arrangements for handling feasibility and engineering studies, tendering and disburse- ment. Annex 4-4 provides outline terms of reference which were agreed at negotiations. 4.08 Short-term consulting services will be provided to prepare proposals and an action plan for (a) transferring road maintenance planning and works supervision functions currently being carried out by OPR to SETP; and (b) privatizing OPR's Works Division and transforming it into a fully fledged contracting firm, probably in association with experienced partners. Another study urgently required concerns the establishment of a regular financing mechanism for highway maintenance operations that are currently seriously under-funded (para 3.02). Ports Sub-sector 4.09 This component (Maps IBRD 20075 and 20131) includes: (a) construction of a 1,500 m long siltation prevention dike to close the two openings located at the north side of the harbor, and extension of the Prudente breakwater by 200 m to reduce wave action at the location of the new container berth; (b) dredging of about 1.8 million ms to deepen the leading channel and port water area to -9.5 m;  - 17 - (c) construction of a container berth 250 -i long and 10 m deep with a 75,000 m2 storage area of which 45,000 m 2 will be paved under the proposed project; (d) construction of a fuel jetty capable of receiving vessels of up to 30,000 dwt and 190 m long; (e) rehabilitation of existing port facilities that were not rehabilitated under the Conakry Port Project (paved areas; quay aprons; water, drainage and electrical systems, etc.); (f) provision of navigation aids (light buoys and beacons); and (g) technical assistance to PAC for: (i) preparation of tender documents for the above works and dredging, and supervision; and (ii) improvement of port operation and financial manage- ment (including budgetary control, internal audit, cost accounting and pricing) through consultancy services and training. Annex 4-5 provides details on the engineering aspects of the port component. Annex 4-6 describes the institutional changes under way and planned to improve PAC's operational and managerial efficiency and assure its sound financial footing. Aviation Sub-sector 4.10 The aviation component will include the technical assistance reqtuired to introduce the agreed institutional changes in the civil aviation sub-sector (see para 3.12 and Annex 4-7 for details) and to prepare a number of priority investments necessary to ensure minimum acceptable safety of flight operations in Conakry and at selected domestic airports. A. conslultant's study financed by IDA in June 1986, identified about US$22 m of investments required over a period of six years. Among those, the following priority items have been selected for inclusion in the component: (a) technical assistance to provide initial management of the newly established ANA, and training of Guinean counterparts to take over its operation according to an agreed timetable; and (b) detailed studies to: (i) define the equipment for the Conakry Airport, secondary airports and the "Me'torologie Nationale" including preparation of bid documents and supervision of equipment installation; and (ii) establish plans for the development of secondary airports including service plans, and rehabilitation of runways and essential buildings at four selected airports. 4.11 The aviation component will provide essential nav-aid equip- ment and other critical facilities including: For Conakry Airport: (a) supply of service vehicles and an ambulance;  - 18 - (b) replacement of the rundown navigation aids (VOR, ILS and VASIS); (c) supply of critical telecommunication equipment for the AFTN and for the domestic network including HF sets, VHF sets and teleprinters; spares and basic electronic repair sets; and (d) construction of a firefighting station and miscellaneous building rehabilitatton; and full enclosure of the airport area to reduce secur risks due to vehicle, pedestrian, and animal traffic now regularly using the runway. For the secondary airports in Kankan, Lab6, N'z6r6kor6 and Siguiri: (a) runway maintenance including drainage works over a length necessary to accommodate the DASH-7; (b) repair of essential airport buildings, and equipment with simple watch-towers and associated equipment; (c) supply of telecommunication sets, with spares; (d) supply of NDB radio beacons and solar panels; small standby power generators; and rehabilitation of Conakry's old VOR for installation in a secondary airport; and (e) supply of small firefighting vehicles with spares. For the M4t4orologie Nationale (MN): (a) training of Guinean personnel and studies for detailed speci- fications of MN's equipment; (b) supply of telecommunication sets, including BLU sets and teleprinters; (c) rehabilitation and replacement of equipment at the Conakry Airport weather observation center, and supply of spares; and (d) supply of elementary weather observation equipment and small power generating sets including some solar panels, and some vehicles at secondary meteorological stations. Transport Sector 4.12 The project will finance the services of consultants who will, in close collaboration with the administration, elaborate a five-year manpower development program for the sector. This would include a critical evaluation of relevant training institutions and curricula currently available to both public and private sector personnel in Guinea, and proposals for making them more responsive to foreseeable manpower needs in the sector in the medium-term. More generally, the project will finance a project coordinator, in SET, who will monitor progress of the different components; he will also pay particular attention to developing the Transport Planning Unit into an effective data collection, investment planning and policy support unit for the  - 19 - SET. The immediate training needs of administration personnel will be identified and on-the-job and formal training programs will be proposed, either through local institutions, short-term study programs abroad on specific topics or problem areas, or one-to-two year practical or theoretical training courses at regional or international institutions for selected candidates. An amount of about US$1.5 m equivalent would be made available under the project to finance a three-year program of training (training materials, courses, scholarships) to Le proposed by the consultants and agreed upon by Government and IDA. In addition, the project will support the re-establishment of acceptable office accommo- dation for personnel responsible for administering the sector (An- nex 4-3). C. Project Cost Estimate 4.13 The estimated total cost of the project including contingen- cies is US$111.5 m equivalent; the project is exempt from taxes and duties. As shown in the table below, the foreign exchange component is about US$99.6 m or 89%. Costs have been estimated in January 1987 prices, and with the current exchange rate of US$1 - GF 400. Physical contingencies of 15% on average have been added. Price contingencies for foreign expenditures are 3% for 1987, 1% p.a. for 1988-90, and 3.5% for 1991; for local expenditures, annual price increases of 15% were used to reflect current inflation trends in Guinea. Annex 4-8 gives detailed cost estimates for each component. --- F million - ----- US$ million ------- Local Foreign Total Local Foreign Total Road Component 1,360 9,480 10,840 3.4 23.7 27.1 Port Component 1,200 18,800 20,000 3.0 47.0 50.0 Aviation Component 200 3,800 4,000 0.5 9.5 10.0 Transport Sector Component 120 1,160 1,280 0.3 2.9 3.2 Total Base Cost 2,880 33,240 36,120 7.2 83.1 90.3 Physical Contingencies 440 4,600 5,040 1.1 11.5 12.6 Price Contingencies 1,440 2,000 3,440 3.6 5.0 8.6 Total Project Cost 4.760 39,840 44,600 11.9 99.6 111.5 4.14 The foreign exchange costs of the project will be financed by IDA (US$55.0 m equivalent), by the AfDB (US$30.0 m equivalent), by the Federal Republic of Germany (KfW, US$13.0 m equivalent under the Special Joint Financing Agreement for the Special Africa Facility, and GTZ, US$1.0 m equivalent) and by France (FAC, US$1.0 m equivalent); local costs will be covered by the Government (US$6.5 m equivalent), by PAC (US$5.0 m equivalent) and by IDA (US$0.4 m equivalent). The Government will onlend US$11.0 m of the IDA credit to PAC for 20 years including four years of grace, at 8.0% p.a., and US$8.9 m to the new aviation navigation agency (ANA) to be created, at the same terms and conditions. PAC and ANA would assume the foreign exchange risk which is considered minor, since a significant part of their revenues is in foreign  - 20 - currency. The execution of a subsidiary loan agreement with PAC and ANA would be conditions of disbursement of the two sub-loans. Since the Government attaches the highest priority to the rehabilitation of the country's paved road network, and to re-establishing essential safe- guards in air transport, budgetary allocations for counterpart funds will be assured; in addition, this will be confirmed at the proposed annual revJews of the three-year rolling investment and expenditure program with IDA (para 3.04). D. Implementation 4.15 The road component will be implemented by SETP. The bulk of the final design data have been prepared under the Third Highway Project and are ready for bidding by already prequalified firms, Civil works construction will be carried out by contract. Works will be subdivided into three lots, supervised by consultants, and are expected to be carried out over a two-year period starting September 1988. 4.16 The port component was prepared by consultants accepted by the Association and the co-financiers under agreed terms of reference. Construction is expected to start in early 1988 and to be completed in mid-1991. The critical path program for implementation was discussed and agreed with PAC and the co-financiers during appraisal (Annex 4-9). 4.17 Agreement was reached with PAC during negotiations that it will: (a) assign by December 31, 1987, two qualified engineers to work as counterparts to the supervision consultants; (b) establish by Decem- ber 31, 1987, a Monitoring Unit headed by its Technical Director and consisting of qualified staff in adequate numbers agreed with the Association, to coordinate the implementation of the project, prepare progress reports and implement the training program; and (c) prepare and submit by June 30, 1988, to the Association for its approval, a training program, and, thereafter, carry out such program in accordance with a timetable satisfactory to the Association. 4.18 The aviation component will be implemented initially by the Directorate General of Civil Aviation (DGAC) in SET and by ANA after its establishment. ANA is expected to employ about 70 persons. Most of DGAC's existing trained personnel is expected to be transferred to SOGEAC and to ANA. The organization of the aviation sector, including the possible merger of SOGEAC and ANA will be reviewed between Govern- ment and IDA no later than by December 31, 1991. 4.19 Meteorological services for aviation remain the responsibility of the M4teorologie Nationale, which will, however, detach a team of about ten key personnel at Conakry, where they will operate under the guidance of the ANA. Similar arrangements would be made in those secondary airports where the local Meteorological Observation Centers are located. These arrangements and those for the maintenance of the meteorological equipment were agreed upon at negotiations. 4.20 The transport sector component will be implemented by SET. During negotiations, a schedule for carrying out the program of person- nel testing and for submitting proposals for SET and SETP was agreed upon (Annex 3-7).  - 21 - E. Procurement 4.21 Unless otherwise indicated below, procurement arrangements for the overall project are as follows: (a) all equipment and civil works contracts under the project will be awarded on the basis of internation- al competitive bidding in accordance with Bank Group Guidelines, and procurement decisions in excess of US$100,000 equivalent will be subject to prior approval by IDA; (b) all civil works construction will be supervised by consultants acceptable to the Association and the co-financiers, under agreed terms of reference; and (c) all consultants and experts for technical assistance will be recruited in accordance with the Bank Group and co-financiers' Guidelines under agreed terms of reference. Contracts for civil works which are unlikely to attract international competition will be awarded on the basis of LCB procedures which have been reviewed and are acceptable to IDA, as stated in pa- ras 4.21-4.23 oelow. These arrangements were confirmed during negotia- tions. 4.22 For the road component, all contracts for civil works in excess of US$2.5 m equivalent will be awarded on the basis of ICB. Contracts for civil works under US$2.5 m equivalent but not exceeding US$5.0 m in aggregate, may be awarded on the basis of LCB. The contract for the pilot vegetation control operation estimated to cost less than US$0.3 m would be awarded under LCB among selected domestic firms. Equipment and goods for this sub-component for a total amount not exceeding US$0.2 m will be procured through the procurement agent retained by OPR under the Third Highway Project. 4.23 For the port component, it is expected that all project items, except technical assistance, will be awarded to the same contractor under ICB. This is necessary to ensure efficient coordination of works that depend on intricate scheduling to progress as programmed and without impeding port operations. However, work has been divided into separate lots, so as to facilitate parallel financing by different co-financing agencies. PAC will be responsible for project implementa- tion. 4.24 For the aviation component, equipment will be procured under ICB, except that (a) purchases of telecommunication equipment and spares (approximately US$0.5 m), where standardization with existing sets is essential, may be procured, with prior IDA agreement, directly from authorized agents; and (b) packages belo-7 US$200,000 up to an aggregate of US$2.0 m may be procured through international shopping on the basis of price quotations from at least three qualified suppliers. Because contracts for civil works cover small and scattered works, they will be awarded after LCB.  - 22 - Amounts and Methods of Procurement La (US$ m equivalent) Category ICB LCB Other Total Road Component 28.8 2.4 4.1 35.3 (23.6) (2.1) (4.0) (29.8) Civil Works 28.8 2.4 0.1 31.3 (23.6) (2.1) (0.1) (25.8) Equipment and Materials 0.9 0.9 (0.9) (0.9) Cons. Services, Tech Assistance and Training 3.1 3.1 (3.1) (3.1) Port Component 55.1 4.9 60.0 (8.7) (2.3) (11.0) Civil Works 54.3 -- -- 54.3 (7.9) (7.9) Equipment and Materials 0.8 0.8 (0.8) (0.8) Cons. Services, Tech Assistance and Training 4.9 4.9 (2.3) (2.3) Aviation Component 3.5 4.5 5.0 13.0 (3.5) (4.1) (3.4) (11.0) Civil Works 4.5 4.5 (4.1) (4.1) Equipment and Materials 3.5 2.3 5.8 (3.5) -- (2.3) (5.8) Cons. Services, Tech Assistance and Training 2.7 2.7 (1.1) (1.1) Transport Sector Component 3.2 3.2 (3.2) (3.2) Cons. Services, Tech Assistance and Training 3.2 3.2 (3.2) (3.2) TOTAL PROJECT 87.4 6.9 17.2 111.5 (35.8) (6.2) (13.0) (55.0) Civil Works 83.1 6.9 0.1 90.1 (31.5) (6.2) (0.1) (37.8) Equipment and Materials 4.3 -- 3.2 7.5 (4.3) -- (3.2) (7.5) Cons. Services, Tech Assistance and Training -- -- 13.9 13.9 (9.7) (9.7) /a Amounts in ( ) indicate IDA credit shares in totals. F. Financing and Disbursements 4.25 The proposed IDA credit of US$55 m will be made to the Govern- ment of Guinea. The project is expected to be fully disbursed by mid-1992. The credit will be disbursed against the categories indicated  - 23 - for each component as shown below. Disbursements would be fully docu- mented except for some expenditures under Category (3) (d), for which statements of expenditure will be used. Documentation of the latter will be kept by the project coordination in SET and reviewed by super- vision missions. No special account will be required, because the project does not finance operating expenditures. Disbursement applica- tions against contracts will not be for less than US$10,000. % of Expenditure Category Amount (US$ m) to be Financed (1) Civil Works by Contract 33.0 (a) for road rehabilitation 19.2 100% of foreign expenditure (b) for pilot road maintenance 0.1 100% of total cost (c) for office rehabilitation 1.2 100% of foreign expenditure (d) for port infrastructure 8.9 100% of foreign expenditure (e) for airport rebab. - Conakry 1.3 100% of foreign expenditure (f) for secondary airport rehab. 2.3 100% of foreign expenditure (2) Equipment and Haterials 4.7 (a) for road component 0.9 100% of foreign expenditure (b) for port component 0.1 100% of foreign expenditure (c) for aviation component - ANA 3.1 100% of foreign expenditure (d) for aviation component - Meteorology 0.6 100% of foreign expenditure (3) Consulting Services, Technical Assistance and Training 7.5 (a) for road cbmponent 2.6 100% of total cost (b) for port component 0.5 100% of total cost (c) for aviation component 1.2 100% of total cost (d) for transport sector component 3.2 100% of total cost (4) Unallocated 9.8 TOTAL 55.0 4.26 The detailed disbursement schedule for the project is given in Annex 4-10. It differs from the standard West Africa Region profile for Transport Sector Projects of 6.5 years mainly because preparation of the road and port components is well advanced, so that rapid project start-up can be expected. 4.27 Road Component. The standard disbursement profile for trans- port projects in the West African Region indicates that a six-year period is required for full disbursement. But the profile reflects mainly the experience of complex highway maintenance projects and is not considered appropriate for the proposed project. About 94% of the proposed credit concern straightforward civil works, for which the bulk of final design data already exist and that are ready for bidding by already prequalified firms. Therefore, the proposed highway component is expected to be fully disbursed by end 1990. The detailed disburse- ment schedule is shown in Annex 4-11. The table above indicates credit categories and disbursement percentages. Disbursemnent for civil works  - 24 - and consulting services would be on the basis of contracts approved by IDA; it is estimated that a maximum of about 10 contracts would be signed. Disbursements for purchase of equipment and furniture would also be made on the basis of IDA-approved contracts, and equipment for the vegetation control operation would be acquired through the OPR purchasing agent. 4.28 Port Component. The IDA financing of US$11.0 m equivalent for this component will be onlent to PAC at commercial rates (8.00% for a period of twenty years, including a four-year grace period) to cover 20% of the foreign exchange cost of the component. The remaining 80% (US$44 m equivalent) is expected to be financed by an AfDB loan of US$30.0 m equivalent (8.64%, also for twentv years, including a four-year grace period), and by a KfW/SJF credit of DM 25 m (US$13.0 m equivalent, 8%, same repayment and grace periods) and a GTZ grant of US$1.0 m equivalent. PAC will provide US$5.0 m equivalent representing the local expenditures. 4.29 AfDB will finance the container berth, dredging and construc- tion supervision; KfW will finance the siltation prevention dike, extension of the Prudente dike and preparation of tender documents; GTZ will finance expatriate experts providing the technical assistance; and IDA will finance the fuel jetty, rehabilitation works and navigation aids, and training and studies. Effectiveness of the AfDB loan and of the KfW/SJF credit will be conditions of disbursement for the port component of the credit. The detailed disbursement schedule and the agreed financing plan are shown in Annex 4-12. 4.30 Aviation Component. The aviation component will finance 100% of foreign cost estimated at US$12.2 m. US$11 m will be financed by IDA and US$1.2 m equivalent from a grant provided by FAC (French bilateral assistance); the latter would cover technical assistance. Local costs will be financed by Government as a US$0.8 m equity contribution to the Air Navigation Agency in annual installments as required for the imple- mentation of the project. This was agreed at negotiations. The IDA credit would finance 100% of the foreign cost of studies, training, civil works, purchase and installation of equipment (plus possibly a minor portion of technical assistance if the FAC grant is not sufficienat to cover its full cost). Except for the part financing the equipment for METEOROLOGIE NATIONALE, the IDA credit will be onlent on commercial terms to the ANA; this was confirmed at negotiations. Disbursament for all equipment and works would only start after key members of the technical assistance team have taken up their duty and prepared the specifications and tender documents. 4.31 Transport Sector Component. The IDA credit will finance 100% of the technical assistance, consulting services and training costs under this component. Detailed disbursement schedules for the aviation and transport sector components are in Annex 4-13. G. Accounting and Auditing 4.32 Accounting, costing, and budgeting systems for the road and aviation components need to be established by the Project Management Unit in SETP and technical assistance to SET/ANA. They have already  - 25 - been established in PAC, and will be further improved through special financial assistance and introduction of computerized management sys- tems. External auditors acceptable to the Association have carried out annual audits of PAC and will continue to do so; similar arrangements will be made for SETP and SET/ANA, with audit reports to be submitted to IDA within four months of the end of each fiscal year. H. Reporting 4.33 SETP, SET/ANA and PAC, with the assistance of consultants, will submit quarterly progress reports on project implementation and expenditures to IDA and the co-financiers, as appropriate. I. Impact on Environment and Employment 4.34 The rehabilitation of existing paved roads will have no negative environmental impact. The pilot maintenance operation for vegetation control may have a positive impact by reducing the number of bush fires. The road component will generate employment for about 1,500 unskilled laborers during construction. If the pilot maintenance operation for vegetation control is successful, additional permanent jobs would be created through private small contractors doing routine maintenance by contract. 4.35 No significant environmental impact is expected in the city of Conakry or adjacent water areas as a result of the port component since all improvements are confined either to rehabilitation of existing facilities that have operated in the same location for many years or to construction of berths within the same port water area. Hydraulic model studies proved that closing the two openings located at the north side of the harbor will have no adverse scouring or siltation effect on the coast adjacent to Conakry. Dredged soil will be dumped in deep sea far from the port in a place which will have no adverse effect on either the navigation or the environment. 4.36 The port component will generate employment opportunities during the construction stage for some 400 skilled and unskilled labor. On completion of the project, about 100 permanent additional jobs wouild be created, ranging from port labor to skilled and semi-skilled workers in the operation and maintenance of the facilities to be provided under the project. Training will improve skills in port management, security and accounting of about 50 PAC staff. 4.37 While there will be inter-agency transfers under the aviation component, little or no changes are expected in employment levels. J. Technical Assistance 4.38 The staff-month requirements for technical assistance exclud- ing construction supervision total 553. They include 90 s-m for the road component, 223 s-m for the port component, 120 s-m for the aviation component and 120 s-m for the transport sector.  - 26 - V. ECONOMIC EVALUATION A. The Road Component General 5.01 The project complements and completes a program of paved road rehabilitation launched under the ongoing Third Highway Project and initiates the reorganization of the Public Works Administration. The economic evaluation of the civil works to be carried out under the project is based on the Highway Design and Maintenance Standards Model (HDMS). Vehicle operating costs (voc) have been computed based on roughness indices, using the vehicle operating cost module of the HDM III model, and reflecting the present composition of the vehicle fleet in Guinea described in Annex 5-1. All costs and benefits in the economic analysis are estimated at January 1987 prices, net of taxes and duties. Economic Rates of Return 5.02 In calculating the economic rates of return (ERR) for the three road sections, it was conservatively assumed that (a) maintenance costs would increase compared to the "without project" situation, where no maintenance is actually carried out; (b) roads would be resealed in year 10; (c) traffic would increase by only 4% annually, and there would be no generated traffic; and (d) passenger time savings were disregard- ed. Also, any residual value of the roads in year 15 was ignored. With these very conservative assumptions, the estimated ERRs are as shown below: A B C Mamou-Kissidougou Kissidougou-Gueck6dou Kamsar-Bok