Uganda - Fourth Highway Project

DoLam.t of The World Bank FOR OFFICIAL USE ONLY C f? L Report No. P-4541-UG MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 14.1 MILLION TO THE REPUBLIC OF UGANDA FOR A FOURTH HIGHWAY PROJECT April 30, 1987 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Ugandan Shilling US$ 1.00 = U Sh. 1400 (June 1986) U Sh. 1.00 US$0.0007 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 sq. kilometer (km2) = 0.386 square miles (sq mi) 1 hectare (ha) = 2.47 acres (ac) 1 metric ton (m ton) = 2,204 pounds (lbs) ABBREVIATIONS AfDB - African Development Bank EEC = European Economic Community MLG = Ministry of Local Government MOT = Ministry of Transport MOW = Ministry of Works FISCAL YEAR July 1 - June 30  FOR OMCIL USE ONLY UGANDA FOURTH HIGHWAY PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Uganda Amount: SDR 14.1 Million (US$ 18 million equivalent) Terms: Standard Financidng Plan: Local Foreign Total ---------US$ million------- Proposed IDA Credit - 18.0 18.0 Government of Uganda 3.8 - _3.8 Total Financing 3.8 18.0 21.8 Economic Rate of return of the Proiect: 47 percent Staff Appraisal Report: No. 5938-UG dated April 27, 1987 Ths document has a strkted distributon nd may be ued by recipients only in the perfonmnce of their offcial dutes Its contents may not otherwe be disclosod without WoTM Bank authoriation.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF UGANDA FOR A FOURTH HIGHWAY PROJECT 1. The following report on a proposed development credit to the Republic of Uganda for SDR 14.1 million (US$ 18.0 million equivalent) is submitted for approval. The proposed credit would be on staniard IDA terms and would help finance highway rehabilitation and strengthening. 2. Background. At independence in 1962, Uganda inherited a very good transport system. The system was further improved during the decade 1962- 72 to become one of the best in sub-saharan Africa. However, after years of neglect and ultimate destruction during the war in 1978/79 and its aftermath, the transport system was left in disarray. Deterioration has been particularly severe for trunk roads serving transit traffic (to Kenya, Rwanda, Burundi, Zaire and Sudan), where high volumes and heavy loads have caused structural damage and made roads difficult and dangerous for traffic. The transport infrastructure comprises about 26,200 km of roads, of which about 2,000 are paved; a railway system totalling 1,350 km; a port in Jinja on Lake Victoria providing a rail-ferry link to Tanzania and Kenya; an international airport at Entebbe, and eleven domestic airfields. Two ministries share responsibility for the transport sector, the Ministry of Transport (MOT) and Ministry of Works (MOW). MOW is responsible for the planning, construction and maintenance of the classified road network (7,819 km), while local Governments are responsible for the rest (about 18,400 km). The MHW's organization, though understaffed, is structurally sound. Revenues from road user charges are well in excess of highway maintenance costs. 3. The rehabilitation of Uganda's road transport is crucial to the country's economic recovery. Road transport has an important role in the import of essential commodities, particularly petroleum, and in exporting goods, mostly coffee, tea, cotton and tobacco. The priority aim of Government's 1982-84 initial Recovery Program and the 1985/86-1988189 Investment Plan in the transport sector is to limit further deterioration of the main transport network, and in particular, the essential trunk routes serving local and transit traffic to other land-locked countries. Engineering investigations for: (i) the Kampala-Jinja Road; (ii) the Mbarara-Ishaka-Katunguru Road; and (iii) the Mbarara-Rubarare Road (a total of 279 km) were carried out in 1983 with financing under a Technical Assistance Credit (1077-UG) and these roads comprise the highway rehabilitation program, which forms part of the Government's Investment Plan. IDA will finance part of the program under the proposed project (84 km), while other parts (totalling 195 km) will be financed or are being considered for financing by AfDBIEEC, separately.  -2- 4. Procit Oble1tivs. Tho objecttves of the proposed project are tot (i) protect capital investment *nd to increase the service life of essential trunk roads serving local and trnsit traffic to other land- locked countries; (it) help Improve maintenance planning and operations of rural/feeder roads serving agricultural areas; and (iii) strengthen institutions responsible for project implementation. 5. Lroject Descripti_n. The projoct would consist oft (i) rehabilitationistrengthening of the Kampala-Jinja Road (km 0-24) and the Mbarara-Ishaka Road for which bids have been received, and related supervision; (ii) pilot rural road maintenance program; (iWi) technical assistance; and (iv) feasibility study and, if feasible, detailed engineering of the Soroti-Lira Road. The road passes through a major cotton growing area and connects the two Important towns of Soroti and Lira, where a spinning mill is situated. This road is the only unpaved section of the Tororo-Mbale-Soroti-Lira-Gulu Road and the traffic between Tororo and Gulu at present follows a circuitous route via Kampala. The pilot rural road maintenance program included in the project will assist in determining how maintenance planning and operations of the rural/feeder road system can be improved. The technical assistance will comprise a highway engineer (project coordinator) and two road design engineers for a period of 30 months each to assist with project coordination and to help train freshly graduated engineers in the MOW's design and materials laboratory sections. It also includes a rural road maintenance engineer to assist HLG with the preparation and implemeatation of the pilot rural maintenance program. 6. The total cost of the project including contingencies is estimated at US$ 21.8 million, with a foreign exchange component of US$18 million or 82%. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursement, as well as the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Uganda are given in Schedules C and D, respectively. A map of Uganda (IBRD No. 19263) showing project locations is also attached. The Staff Appraisal Report, No. 5938-UG dated April 27, 1987 is being distributed separately. 7. Rationale for IDA Involvement. The project forms an integral part of the Association's lending strategy to support Government efforts to rehabilitate and maintain essential infrastructure needed for resumed growth of the productive sectors. This entails high priority for the transport sector tot (i) arrest further deterioration of the road network by strengthening road maintenance capacity. The ongoing Third Highway Project, which is off to a good start after initial delays, supports a program to improve maintenance of the classified road network; ($i) rehabilitate roads of key economic importance (proposed project) and assist Government in mobilizing donor support for the highway rehabilitation program; and (iii) rehabilitate the railways and assist with sector-wide training (a proposed transport project is tentatively planned for FY90).  -3- 8. A&reed Actina. The Government has agreed on the following actions: (a) to review with the Association, not later than four months before the beginning of each fiscal year, its highway investment Plan, as well as the budgetary requirements and the proposed budgetary allocation for road maintenance over the period FY1988-93. In the event of any shortfall in the maintenance allocation, the Government would make it up in the subsequent year; (b) submission f^r the Association's review of the pilot rural road maintenance program prior to its implementation; and (c) filling of vacant positions of Chief Planning Engineer and Chief Road Maintenance Engineer in the MOW not later than October 31, 1987. Condition of credit effectiveness is that the Government has opened a special account with a commercial bank to serve as a revolving fund for IDA eligible expenditures. 9. Justification. The project includes the rehabilitation/ strengthening of 84 km of the most seriously deteriorated sections of the highest priority roads in the country which connect some of the more populated areas of Uganda, with some 20% of the total Ugandan population. This includes not only the most industrialized area but also some of the best agricultural districts. The main benefit of the highway rehabilitationlstrengthening will be its impact on reducing vehicle operating costs, and transport users and consumers alike would benefit from the resulting reduced costs. Improved road conditions will allow better access to productive areas, provide cheaper and more reliable transport, arrest deterioration of the roads and improve the capacity for future maintenance by MOW. The o-erall economic return for the project is 47% for all quantitatively analyzed components, representing 83% of total project cost. For the Kampala-Jinja Road (km 0-24), the best estimate rate of return is 63% and for the Mbarara-Ishaka Road 30%. 10. Risk. The main risk facing project implementation is related to the economic conditions in the country which may lead to a decline in the availability of local funds for the project. Also, the possibility exists that implementation is delayed due to MOW's lack of administrative capacity, but this risk has been minimized because the road rehabilitation/ strengthening works included in the project will be carried out by contractors. 11. Recoumendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber B. Conable President Attachments Washington, D. C. April 30, 1987  -4 - Sch*dgle A Ent - lt