Madagascar - Seventh Highway Project

Document of O . N - The World Bank ~~~~~~~~~~( N ' OR OFFICiAL USE ONLY I > .i \ ~ - Repwt No. 7135-MAG STAFF APPRAISAL REPORT I - DEMOQRATI0. REPUBLIC OF MDAGA SCAR SEVENTH-HIGHWY PROJECT April 18, 1988 -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- 'J~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~N Infrastructure Operations Division South-Central and Indian Ocean Department Africa Region N This document has a retricted distrbution and may be used by redipients only in the performance of I~~~~hi . oia d-ls It otnswyntohrieb icoe ihu .rdBn uhrni  CurreacX Eauivalent Currency Unit * Malagasy Franc (FMG) USS FMG 1,200 (as of December 1987) WeiJhts and Measures 1 meter (m) . 3.28 feet 1 kilometer - 0.62 mile 1 square kilometer (km2) X 0.386 sq. mile 1 square meter (m2) . 10.76 square feet AcronVms and Abbreviations AfDB African Development Bank AfDF African Development Fund BADEA Arab Bank for Economic Development in Africa CATP MTP Training School (Centre d'Application des Travaux Publics) CCCE Caisse Centrale de Cooperation Economique (France) CMN Shipping line (Compagnie Malgache de Navigation) DGE Directorate of Works (Direction Generale de l'Equipement) DGP Directorate General of Planning (Direction Generale du Plan) DMAT Equipment Division (Direction du Ma,teriel) DR Division of Roads (Direction des Routes) EDF European Development Fund (EEC) EESP National Technical College (l'Etablissement d'Enseignement Superieur Polytechnique) FAC Fonds d'Aide et de Cooperation (France) KfW Kreditanstalt fuer Wiederaufbau (FRG) LNTPB National Soils Laboratory (Laboratoire des Travaux Publics et du Batlment) MC Ministry of Commerce (Ministere de l'Industrie et du Commerce) MOD Ministry of Defense MPARA Ministry of Agricultural Production and Agrarian Reform (Ministare de la Production Agricole et de la Reforme Agraire) MTP Ministry of Public Works (Ministare des Travaux Publics) MTMT Ministry of Transport, Meteorology and Tourism (Ministare des Transports, de la Meteorologie et du Tourisme) ODR Office of Rice Development (Office du Development Rizicole) PSAC Public Sector Adjustment Credit RN National Road (Route Nationale) RNCFM Reseau National,des Chemins de Fer Malagasy. SDC Swiss Development Cooperation SG Permanent Secretary (Secretaire General) SMTM Shipping Line (Societe Malgache des Transports Maritimes) Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY DEMOCRATIC REPUBLIC OF MADAGASCAR SEVENTH HfLTfAY PROJECT STAFF APPRAISAL REPORT TABLE OF CONTiSiTS Parte No. I. THE TRANSPORT SECTOR .................... .......... 1- A. Geographic and Economic Setting ................. B. Transport Sector . .. ............................ . 2 C. The Transport Network ....... . ......... ....... . 4 - Mi) Road Transport ...... ........................... 4 (ii) Rail Transport . ................................. 5- (iii) Air Transport .. ..................... . . ........ . 5 (iv) Ports and Coaital Shipping ...................... 6 D. Road Administration ....................... ............ 7 (i) Organization ....................... .......... 7 (ii) staffing and Training .................... 2 'iii) Maintenance .... ................................ 0...... 9 (iv) Financing ......................... .............. 10 (v) Engineering and Construction ........... ...... 11 (vi) Traffic Regulation and Safety .......... 12 E. Bank Group Role in Transport .......... ............. ... 12 F. Rationale for Bank Involvement ........................... 13 _:. THE PROGRAM AND THE PROJECT ........ ...... .............. .... 13 A. Objectives .................. . ......... 13 B. Program Description .................................. 14 Mi) Rehabilitation and Resurfacing of Paved Roads 15 (ii) Rehabilitation and Regravelling of Engineered Earth Roads ...........................15.......... 15 (iii) Rehabilitation of Feeder Roads ............. .... 15 (iv) Routine Maintenance .................. .... 16 (v) Development of Domestic Contractors ... 16 (vi) Training and Maipower Development ............. 17 (vii) Consulting Services ...... . ... 18 (viii) Traffic Regulation and Safety ....... .. 18 This report is based on the findings of an appraisal mission which visited Madagascar in-November/December 1987; members of the mission were P. Sooh (Sr. Engineer), B. Bostrom (Sr. Economist), J.M. Lantran (Sr. Engineer), and A. Benouahi (Financial Analyst). Secretarial assistance for this report was provided by Ms. Mary Y. Jackson. 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 authoriastion.  (ii) Page No. C. Program Cost and Financing ......................... 19 D. Project Cost and Financing . .......................... . 21 E. Implementation and Procurement . ...... 24 F. Disbursement ........... .. . .4 ...4 ................. .. 25 G. Accounting, Auditing and Reporting Requirements ...... 27 H. Environmental Aspects .. ................. 28 I. Poverty Alleviation Aspects . .................. 28 III. ECONOMIC EVALUATION .................. ................. 29 A. General ................ .. ....... 29 B. Benefits and Beneficiaires ..........** .............. 29 C. Economic Analysis .................... ................. 30 D. Overall Evaluation and Sensitivity Test ..' ........... . 32 E. Risks ..... ... ....... 32 IV. AGREEMENTS TO BE REACHED AND RECOMMENDATION ................. 32 Annexes: 1. Transport Sector PIP (1986-1990) 2. Vehicle Fleet 3. Petroleum Product consumption (1J3-1986) 4. Road Design Standards 5. Bank Group Projects in Transport 6. Road Program and Economic Tables 7. Equipment, Materials and Supplies in Road Maintenance and Traffic Regulation 8. Outline Terms of Reference for Technical Assistance in Road Maintenance, Training and Transport Planning 9. Project Financing Plan 10. Accounting, Auditing and Reporting Requirements 11. Related Documents and Data Available in Project File Charts: 1. Organization of MTP 2. Project Implementation Schedule Dap IBPJD 20566R  (iii) MADAGASCAR SIEENT HIGHWAY PROJECT Credit and Prolect Summary Borrowers Democratic Republic of Madagascar Beneficiairess Ministry of Public Works (MTP) and Ministry of Transport, Meteorology and Tourism (MTMT) Amounts SDR 28.9 million (US$40.0 million) Termes Standard IDA, terms. Projects Obiectives: The project aims ats (i) strengthening MTP's capacity, especially ir. policy formulation, planning, budgeting, and supervision; (ii) facilitating agricultural development, thus promoting food security and exports of agricultural products; (iii) gradually shifting most maintenance operations from force account to private contractors who are already active in the sector; (iv) developing local human'resources and the domestic construction industry; (v) improving public expenditure practices in the road sub-sector through a three-year rolling Public Expenditure Program (PEP) prepared yearly and based on a current updated National Transport Plan; (vi) improving road safety and enforcing traffic regulations; and (vii) ensuring optimal use of donors' assistance through financing of high priority works. Description: At appraisal a four-year program (1988-1991) for road rehabilitation and maintenance, and institution building was designed to meet the high priority transport needs of the country. The cost of the program was estimated at US$197.0 million equivalent 11. With pledges made by donors during a meeting held in the Bank offices in Paris on January 27, 1988, a project consisting of critical elements of the program has been designed; it is estimated to cost US$144.1 million. The project presented in para. 2.21 is self-contained; it is designed so that as additional financing becomes available, the elements can be easily expanded. 1/ Costs are net of taxes which are estimated at US$29.5 million and US$21.6 million equivalent respectively for the program and the project.  (iv) The proposed Seventh Highway Project is within the scope of Government's National Transport Plan and conforms to Government's macro-economic development strategy. The proiect's objectives will be optimally achieved bys (i) rehabilitating and maintaining during a four-year period (1988-1991) the main roads and priority feeder roads; (ii) restructuring and strengthening the role of MTP by (a) entrusting it with planning, coordination and monitoring of works including those carried out by other entities; (b) decentralizing MTP's functions by shifting the management of road operations to MTP's regional heads; (c) gradually contracting out most maintenance works by LCB to local (antractors; (d) developing the domestic construction industry by upgrading contractors' skills through training at MTP's Centre d'Applications des Travaux Publics (CATP) and providing timely payments through contractual arrangements; (e) strengthening the professional caliber of civil works personnel by upgrading CATP to the rank of institut so that its diplomas and certificates are valid for promotion of its graduates in the public and private sectors; (iii) providing the Ministry of Defense (MOD), charged with enforcing traffic regulations and road safety requirements to minimize road deterioration and accident fatalities, with the legal instruments to do so; and (iv) providing consultants' services to assist in program implementation. Benefits: The project would support the country's policy reform aimed at economic development by rehabilitating and maintaining an economic road network which carries about 90 percent of the traffic, traverses the most populous regions of the country and links all the major centers of economic activity, and by rehabilitating the vital feeder road network, which would facilitate and increase exports of agricultural products and promote food security thus alleviating poverty in the rural areas. The promotion of small- and medium-scale domestic contractors who will carry out labor intensive road maintenance operations will provide employment to the rural poor. Risks: The main risks associated with the project arise from the possible shortage of local counterpart funds for the maintenance component and from MTP's capability to manage and and execute force account works. These risks should be mitigated by the use of the Road Fund which ensures adequate, timely and easily accessible funds for road maintenance, by using contractors to carry out most of the civil works and through the technical assistance provided. Project Cost: The total cost of the project is estimated at US$144.1 million equivalent, with foreign cost of about US$105.6 million and local costs of US$38.5 million. The detailed costs and financing plan are in the following table.  (v) Seventh Iioh'Fo I (1963-1991) PrOl et CoGt ERtI' tes Mnd Flnncl, F Pl,n (m5l MII son) Foreign as Loal Forelon Total X of Total I) ProWect Cost Estiteson (1) Reh16blltation/Resurt.ecna of PLved Road. (1.472 km) 16.6 30.2 46.2 76 (Ii) Robabilitotlon/R.gravelllna of Enoineered Earth Road. (519 ki) 6.6 1.6 2.1 76 (iii) Rehabilltation of Feeder Roads (1.790 ki) 3.5 26J 28.9 70 (iv) Routine mlnt n ol (1' aOperating ond-Cntracting Cost ( a Paved Roads 2.3 5.2 8.0 6e Engineered Earth Roads 1.6 2.4 4.0 66 (c) Feder Roads 1.0 2.4 4.0 66 (2) Equipml t, Materials and Supplies 0.4 4.6 4.4 90 (8) Infrastructur 0.1 0.6 6.7 of Sub-Total 1i i4T 21-I3 69 (v) Truin II Inftrestructure/Equipent 0.1 0.6 6.7 96 2) Fellowships 0.4 0.6 1.6 Ob Sub-Total EK ri !T 71 (vi) Road Satf* C1) Fqui p nt/Infrestructure 6.1 6.9 1.6 90 (vii) Conrulting Services (1 Supervision 1.4 8.6 7.0 as (2) TA Malntenance 0.4 1.8 2.2 80 (a) TA Transport 6.1 0.8 0.4 B6 e4) TA Training 6.4 1.6 2.2 80 Sub-Total i 4 11.8 8I s Total Base Cost 28.6 76.2 186.8 78 Continencies -hysITS4r 2.9 7?8 10.7 73 Prico 7.0 19.6 a 78 Sub-Total 11 U7i 87; 74 Grand Total 38.6 195.6 144.1 78 I1) Financing Plan US million Foreign As Local For*lsn Total S of Total IDA EFr 1I0U 406.6 1F2 AfOB 4.6 20.6 2.60 17 ,EDF 8.7 28.9 82.6 22 SDC 0.6 15.6 15.6 11 V/ NORAD 0.8 1.9 2.7 2 Covernment Road Fund (Recurrent) 7.2 12.6 20 6 14 FNDE (Development Budget) 6.2 60.0 62 / 6 Total I lO ifli 144 t Estimated Disbursemnt IDA Credit (US1 *13illon) FY89 FY FY91 FY92 FY98 Annual 2.I 9-I 8 19 --6 Cumulative 2.3 1241 28.7 88.6 40.0 Economic Rate of Return: 34X over 651 of total project cost Staff Appraisal Report: Madagascar Seventh Highway Project Report No. 73S-MAG Map- IBRD 265666 V/ Coats are net of taxes which are estimated at US821.6 million equivalent. V Equivalent to SOC grant of SFR. 156 0 illion ce'lnancing with IDA and about SF. 10.0 mIIIIon bilateral 1fnancing. Of which US6.5 IIlion could be covered by Swiss Government counterpart funds of Its balance of payments oupport.  r )~~~~~~~~~~~~~~~ MADAGASCAR SEVENTH HIGHWAY PROJECT I. ;HE TRANSPORT SECTOR A. Geographic and Economic Setting 1.01 Madagascar is a large and diverse island with a good natural base for agriculture. Ecological zones are varied and the agricultural sector is equally diverse. Rice and cassava are the main food crops, while cattle raising is common in most areas. Agricultural products, primarily coffee, cloves and vanilla, comprise the bulk of exports; however, some minerals, mainly graphite, chromite and mica, are also exported. The country's mineral resources are limited, but recent exploration indicates good possibilities that petroleum may be found in economically exploitable quantities. Manufacturing consists almost entirely of consumer goods industries catering to local demand and agro-industries. 1.02 The fourth largest island in the world, Madagascar covers an area of about 590,000 sq. km. Its topography is generally rugged and a central mountain range traverses the country from north to south. The climate is marine tropical with cyclones and heavy rainfall particularly frequent on the east coast. The country is sparsely populated (about 17 inhabitants per sq. km.) and its population is unevenly distributed, with about one half of all inhabitants occupying the central one quarter of the island. The total population is estimated at about ten million and growing at about 3.0Z p.a. Ninety percent of the population works in the agricultural sector; its output accounts for 40X of the Gross Domestic Product (GDP). Industry accounts for 14? of GDP and annual per capita income was about US$230 in 1986. Madagascar is thus at an early stage of development. 1.03 Prompted by economic stagnation and a resultant 122 decline in per capita income in the late 1960s and early 1970s, significant investments were made in all sectors of the economy in the late 1970s. Financed largely by foreign borrowing, the spending boom left the country with a debt servicing burden that is straining its economy. Economic development over recent years reflects the need to correct serious imbalances in external accounts and in the government budget.',' With generally declining exports, the imbalance in external accounts had to be corrected by cutting back imports. Imports declined steadily from 1981 through 1984; the volume of imports in 1984 was approximately 23? lower than in 1979. Imports of raw materials and spare parts have been particularly affected causing disruptions in production. GDP declined by about 9? in 1981 and 2? in 1982. Estimates for 1983-1987 suggest a growth of about 1.5? per year. Industrial output has also declined and shortages of new equipment and spare parts have affected the transport system and diminished its capacity.  - 2 - 1.04 The stabilization measures which began in 1981, with IMF assistance, had led to a significant improvement of fiscal balance by 1984. These measures were followed by two IDA sector adjustment credits in 1985 and 1986, and a broader-based Industry and Trade Policy Adjustment Credit in 1987. The proposed Public Sector Adjustment Credit (PSAC) would complete the process of external trade liberalization, and reform measures in the parastal and financial sectors, and would extend the reforms to the public expenditure and social areas. In the transport sector development programs focusing on rehabilitation and policy reforms have considerably improved overall infrastructure and restored financial viability to the railways, the port of Toamasina and the national air carrier. Road freight transport has been liberalized. Institution building and policy formulation have also been strengthened through new institutions such as tne new Planning Directorate in the Ministry of Transport, Meteorology and Tourism (Ministare des Transports, de la Meteorologie et du Tourisme, MTMT) B. The Transport Sector 1.05 Development of the tt: .tsport sector has been influenced by: (i) rugged topography and a tropical climate with heavy rains and frequent cyclones; (ii) an unevenly distributed population concentrated in a few isolated regional centers; and (iii) the lack of suitable construction materials in some parts of the island. As a result, road construction and maintenance are costly and less populated regions remain relatively isolated. Transport needs are relatively well served on the central plateau where half of the population is concentrated. Nevertheless, the transportation infrastructure fails to provide access to all productive areas of the country. 1.06 Government policy towards transport development is to: (i) connect regional capitals by all-weather roads; (ii) improve communications between the centrally located capital and the main seaports (Antananarivo, Moramanga, and Toamasina); (iii) improve road maintenance; and (iv) improve transport organizations and their services. An overriding objective is to satisfy the country's quantitative and qualitative transport requirements at reasonable cost. IDA is in general agreement with these objectives. An action program to better coordinate measures relating to infrastructure and means of transport has been agreed. It seeks to: (i) coordinate and plan transport with regard to services, complementarity, infrastructure, and pricing; (ii) improve the quality of services by introducing competition between the different types of transport and, where possible, between different operators of a given mode; (iii) reorganize training of infrastructure specialists and transport company personnel; and (iv) rehabilitate transport companies by importing sufficient quantities of spares and tires to ensure regular maintenance of the equipment. Other objectives relate to the general development of Madagascar's economy. The overall policy goals aim at providing transport at lower cost, reducing regional isolation through rehabilitation of the secondary road network, and promoting food security and increasing exports of agricultural products.  -3- Sector Management 1.07 Several ministries and government organizations share reoponsibilities for the transport sectors MTMT and the Ministry of Public Works (Minist8re des Travaux Publics, MTP) play the most important role. MTMT has overall responsibilities for road, rail, air and water transport and oversees several autonomous government agencies, including the Madagascar Railvay, Air Madagascar, the Port of Toamasina, and the shipping companies. MTP is responsible for planning, building and maintaining roads, and other civil works. 1.08 Other government agencies whose responsibilities affect transport policy icludes the Ministry of Commerce (Ministere du Commerce, MC), the Ministry of Agriculture (Minist6re de la Production Agricole et de la Reforme Agraire, MPARA), the Directorate General of Planning (Direction Gdndrale du Plan, DGP), and regional administra- tions. MC's responsibility to collect atad market crops significantly affects road transport capacity, and its price control of basic commodities influences transport tariffs. The supply of transport services is also affected by MC's role in setting policies on the importation and assembly of motor vehi-Aes, as well as in determining, together with the Central Bank, foreign exchange allocations for imports. 1.09 Although there are several state-owned road transport enterprises, the majority of transport services are provided by cooperatives and private operators. Also, each regional administration owns a small trucking company and has recently begun limited pass?rnger services. Passenger transpert is regulated by MTMT and provincial authorities. Freight tariffs are determined by the operators, with some guidance provided by indicative costs published regularly by MTMl. As one of the conditions under the Sixth Highway Project, the liberaliza- tion of freight transport was largely undertaken during 1986. As part of the proposed Credit, MTMT will be required to review legislation and regulations of passenger transport and further liberalize the system if necessary. This was discussed and agreed during negotiations and is part of the covenants of the Credit Agreement. The Government will also be undertaking a rationalization of public enterprises, including those in the transport sector, in the context of the proposed PSAC. 1.10 As of early 1984, MTRT's Directorate-of Planning has been charged with transport sector planning. The Directorate's main task is to coordinate transport investment plans with other agencies, and also prepare investment programs of the sector. Pending the completion of a National Transport Plan (NTP), (now virtually finalized), DGP has prepared a Public Investment Program (PIP) for 1986-1990 (see Annex 1) with assistance primarily from MTMT and MTP for the transport sector. IDA and other bilateral and multilateral aid agencies have helped improve sector planning, but more assistance is still needed. Under the Sixth Highway Project, planning improved through the establishment of the planning department in the MTMT with rechnical assistance financed by French aid and IDA. Given the importance of planning in resource management, MTMT will update the NTP for IDA review by 1990 and 1993.  -4- MTP and MTMT will be requested to prepare yearly, for IDA approval, a three-year rolling Public Expenditure Program (PEP) for the sector beginning with tvo years in 1989 and three years in 1q90. This was discussed and agreed upon during negotiations, and is part of the covenants of the Credit Agreement. C. The TransDort Network 1.11 Madagascar, as an island, is dependent upon mainline shipping for its transport links with the outside world. There are four main ports, 18 lighterage ports and a navigable canal along the east coast. The country's internal transportation infrastructure includes an extensive road network, two rail sections of considerable length and a well-developed air network. Nevertheless Madagascar's transportation infrastructure is inadequate in that it fails to provide access to all productive areas of the, country. The country's lifeline, between the port of Toamasina and the central plateau area where most of the population lives, consists of a railway line and of a paved road. Madagascar has also developed an extensive system of ports and coastal shipping as well as an air transport network denser than in most comparable countries. Mi) Road Transport 1.12 The road network comprises about 50,000 km of roads, of which about 5,200 km are paved, 5,300 km are engineered earth and gravel and 39,500 km are feeder roads and tracks. The paved road network, the most important element of the surface transport system, consists of a main north-south artery (1,700 km) -- RN4 and RN7 -- stretzhing from the regional center of Mahajanga in the north to Antananarivo in the center and continuing to Fianarantsoa in the souwb-central region and Toliara in the southwest (Map IBRD 20566R). Other paved roads branch off from this central axis or are found around the major coastal towns. The paved and engineered earth road network is adequate in length and meets the country's objective of connecting all regional capitals by all-weather roads, a goal essentially achieved under the Fifth and Sixth Highway Projects with the construction of bridges and improvement to engineered earth standards of the Antsohihy-Ambanja road. However, some productive and potentially productive areas on the east and west coasts are still not connected to the rest of the country by all-weather roads. Road links to the southern region are mainly earth roeds or tracks, most of which are in poor condition although, with the drg climate prevailing, they are passable year round. Following rehabilitation and mai-ttenance works under the Fifth and Sixth Highway Projects, the con. ition of most of the paved and engineered earth roads ranges from good to fair, while the condition of rural and feeder roads is deteriorating. In view of limited resources (organization, manpower and finances), the Government has selected, with IDA assistance, a limited economic network on which the proposed rehabilitation and maintenance program will concentrate exclusively. This network (Map IBRD 20566R) consists of 14,700 km of roads including 5,000 km of paved roads, 3,700 km of engineered earth roads, and 6,000 km of feeder and rural roads. This network includes the most trafficked roads in the country, carries  - 5 902 of the traffic, covers all major administrative centers and all major agricultural and industrial zones. It aims at pronoting food security and increasing exports of agricultural products. 1.13 Total vehicle fleet in 1984 and 1985 numbered about 46,700 vehicles of which 42,000 were in working order. They include 17,200 commercial vehicles of which 12,000 are pickup trucks for passengers and freight, and 5,200 trucks and semitrailers (Annex 2). By contrast, in 1976 there were 104,000 vehicles, 472 of which were commercial. The decline in traffic is also reflected in the lower demand for petroleum products, particularly gasoline (see Annex 1). Since 1985, traffic has begun to increase again as a result of i;roved road conditions and rehabilitation of the transport fleet. (iL) Rail Transport 1.14 The railways are operated by the Raseau National des Chemins de Fer Malagasy (RNCFM), a parastatal agoncy under the authority of MTMT. The railways consist of two separate and unconnected single track systems. The northern system (about 700 km) connects the capital (Antananarivo) with industrial areas in the high plateau region, the main port of Toamasina and the rice and chrome producing area of-Lac Alaotra. The southern system (163 km) connects the regional center of Fianarantsoa with the main coffee-producing area in the south and the port of Manakara. The Antananarivo-Toamasina line is the most important line and the main mode of transport between the most populated and developed parts of the country. Almost half of the population of Madagascar llves in the areas directly served by the railway. 1.15 RNCFM is expected to remain the main means of transport for bulk commodities such as petroleum products, grain, chemicals and construction materials from Toamasina to the central highlands. Long-term projections indicate that rail traffic is unlikely to increase significantly even if the economy continues to grow, due to increased road competition for non-bulk comioditLes. Freight traffic is thus expected to stabilize at the current level of 224 million ton-km. In the short-to-medium term, desplte some 302 decline in passenger traffic since 1979, the peak year, the railways will still continue to carry a substantial number of passengers as many existing vehicles for road traffic need to be replaced, a process which may take some time given the current scarcity of foreign exchange. (iii) Air Transport 1.16 By regional standArds, Madagascar has developed a dense domestic air transport network in response to the-distance between population centers, the rugged terrain, costly construction and maintenance of surface transport. There are 56 airports, of which 17 are built to all-weather standards, including five suitable for international flights. The remainder are gravel or grass strips. The international airport at Antananarivo handles 50X of all traffic; 15 small airports carry 302 of the traffic; and 40 very small airports  - 6 - share the remaining 202. Service to many small airports is not financially profitable but ensures access to otherwise isolated areas. 1.17 Air Madagascar, of which the Government owns 80Z, Air France 182, and private shareholders 2Z, provides international service to Paris, Marseilles, Zurich and several countries in East Africa and all domestic service. Its aircraft fleet includes a B-747 (combination cargo/passengers) for European service. two B-737s for domestic and regional service, two HS-748s and four Twin Otters for domestic service. A subsidiary operates several smaller aircraft for air-taxi and charter services. In 1984, Air Madagascar's successfully renegotiated maturities on its long-term debt obligations to foreign banks, and in 1985 began a financial improvement program, which in 1986 resulted in a profitable operation. (iv) Ports and Coastal Shippinx 1.18 Although Madagascar relies on maritime shipping for the bulk of its foreign trade, coastal shipping is important. The country also owns a navigable canal along the east coast. Indeed, shipping by water is the only means of transporting freight between many areas of the country with no access to all-weather roads. There are four main portst Toamasina, the main international port serving the populated central highlands via the railway, handles 55Z of the total traffic; Mahajanga handles 11; Antsiranana in the north, 52; and Toliara in the south, about 4Z. The remaining 25Z of traffic is handled by 18 smaller coastal shipping ports. The port of Toamasina has adequate capacity to handle present traffic; its operations have improved but are still hampered by lack of spare parts. The increasing constraints on the railway's transport capacity in the early 1980s have led to the diversion of some international traffic to the port of Mahajanga. Capacity there is limited however, as the port requires lightering and the subsequent long distance surface transport to Antananarivo via RN4. 1.19 The Societe Malgache des Transports Maritimes (SMTM), the state controlled international shipping line, operates two carge vessels for the country's externally traded merchandise. Coastal shipping is handled primarily by the Compagnie Malgache de Navigation 'CMN), 922 state-owned, operating nine vessels of which eight are leased from the Government. The government-owned oil company, SOLIHA, operates three tankers, and a number of lighters and barges. Several private operators continue operating one or a few vessels each in coastal or inter-island shipping to nearby islands in the Indian Ocean. Parts of the intracoastal waterway on the East Coast are now being rehabilitated with African Development Bank (AfDB) financing but traffic is expected to be light. Government's objectives toward coastal shipping and ports are to improve their efficiency. A survey of shipping services was performed in 1983 with French aid in order to work out a policy to rehabilitate and develop the country's ports. This and further studies of institutional improvements for the sub-sector formed the basis for the recently approved IDA second port project.  D. Road Administration (i) orsanization 1.20 In Madagascar, MTP is only one agency among other public and private entities, such as Faritany (provinces) and Office du D4veloppement Rizicole (ODR), entrusted with management responsibilities of the about 50,000 km road network. This arrangement causes inefficient operations and ambiguous accountability. In principle, MTP is responsible only for the administration of main roads (paved and engineered earth roads). In practice, however, since '-P is the only organism equipped and with technical know-how, it is c led upon continually to intervene in the other parts of the network to perform 'emergency' road repair works, interrupting its own programs, diverting its resources and overtaxing its management. To alleviate these problems, the Government with IDA assistance: (a) has selected a limited 14,700 km of economic network (para. 1.12) on which the proposed rehabilitation and maintenance program will exclusively concentrate; (b) 1Fas decided to gradually shift to private contractors and consultants almost all of the road works and to concentrate MTP efforts in policy formulation, planning and supervision of the implementation. MTP's new decentralized organization (para. 1.21) will allow this initiative and ensure that basic, simple and routine maintenance operations are carried out while emergencies are properly addressed; and (c) has prepared an "Agreement on Road Network Management" ('Charte de Gestion du Reseau Routier") which would delineate the responsibility of each agency and would make MTP the executing agency for others. Works would thus be designed and supervised under MTP, carried out by contractors and disbursements made through the Road Fund (para. 1.26) for MTP and through other agencies with their own separate funds and accounts. MTP would thus carry out strjctly emergency works as those needed, for instance, after cyclones. Under the 'Charte', an initiation will be made to charge local users the cost of maintaining feeder roads. The decree on the "Agreement" was discussed and agreed upon at negotiations. The publication of the decree is a condition of IDA Credit effectiveness. 1.21 The organization of MTP has also impeded road maintenance; a centralized system with headquarters in Antananarivo designing road maintenance operations, dispatching brigades and giving instructions to the regions had resulted in inefficient road maintenance operations with a lack of adaptability and continuity. Improvement is being made in this area since MTP has decided to delegate road maintenance responsibilities to the regions. In November 1986, a decree was issued setting up a new organization (Chart 1); its main features are discussed below: (a) road maintenance operations are to be decentralized to the six regions of Antananarivo, Antsiranana, Fianarantsoa, Mahajanga; Toamasina and Toliara, the special division of Toalanaro and 33 subdivisions. Brigades, personnel, equipment, workshops, and financial resources will be placed directly under the  responsibility of these units to carry out routine road maintenance operations and emergencies, and execute, through contractors and consultants, regional road rehabilitation and maintenance programs; and (b) a central administration is to be charged with policy formulation, planning, financing and supervision of the implementation. It will monitor regional programs through a performance accounting system and provide prompt logistical support to the reSions if needed. The central administration will comprise the General Secretariat (Secr6tariat General, SG) charged with administrative, planning and training functions and a General Directorate (Direction G4ndrale de l'Equipement, DGE) which includes a Road Division (Direction des Routes, DR) and an equipment division (Direction du Hateriel, DMAT). The legal instruments (Arr@tOs d'Application) implementing this decree have been published. They satisfied one of the conditions of negotiations. (ii) Staffing and Training 1.22 A shortage of qualified and experienced staff at all levels is hampering maintenance operations. For the administration of roads, MTP employs about 50 engineers, 700 technicians and 2,000 skilled and semi-skilled laborers. This staffing strength is numerically adequate for MTP's current operations and will require only minor increases to cope with future workloads. However, MTP's engineers and technicians are inadequately trained and generally inexperienced. Hadagascar's education system is not equipped to train civil works technicians, and instructions given to engineering students at the Government University Technical School (Etablissement d'Enseignement Superieur Polytechnique, EESP) is too theoretical. 1.23 To provide the Public Works and private sector personnel with the required qualifications, the proposed program aims at improving (i) training capacities and status of MTP's Centre d'Application des Travaux Publics (CATP) and (ii) conditions of employment of professionals and technicians in the sector. CATP, created under the Fourth Highway Project, has provided road maintenance programs with key personnel under the Fifth and Sixth Highway Projects. But as the only in-ititution filling the gap in the education system for the training of technicians in this sector, it must be able to cater to the needs of the whole civil works market. Under the proposed program, CATP will be equipped to fulfill these needs. However, training at CATP is not recognized as a qualification for the recruitment and promotion of technicians. To solve this problem, the Government intends to upgrade CATP's status to an Institutw specializing in vocational training. The new institute will award diplomas and training certificates which will be valid for promotion in the public and private sectors. CATP will remain under the jurisdiction of MTP which will liaise with the two Ministries of Education and with the "Institut National de Formation-  -9- Promotion' (INPF). The legal instruments creating the new Institute have been prepared; they also contain a scheme by which firms sending participants to courses at CATP would be required to pay fees adequate to cover at least the average cost per trainee for salaries of local teachers and consumable goods. They were discussed and agreed upon during negotiations and specified as covenants in the Credit Agreement. The publication of these instruments is a condition of effectiveness of the IDA Credit. (iii) Maintenance 1.24 During the 1970s, the Government concentrated on building access roads to regional economic centers and paid little attention to maintenance. Consequently, inadequate road maintenance has become a serioua problem and its effects are being felt throughout the economy, especially in the agricultural sector where farmers find it increasingly difficult to get their crops to the markets. In 1984, the main constraints preventing proper maintenance were: (i) inadequate financial allocations to the Road Fund, established under IDA's Sixth Highway Project (Cr. 1391/SF4-MAG), from central government's budget and not as stipulated by fuel tax receipts through the national oil company, SOLIMA; (ii) sporadic maintenance operations directed centrally by MTP which lacked adequate management capacity; (iii) multiple management responsibilities of the road network by other public and private agencies, such as Faritany (provinces) and ODR with resulting inefficiencies and ambiguity of accountability; (iv) delayed progress in rehabilitation works under the Sixth Highway Project caused by arrears in payments to contractors, consultants and suppliers; (v) lack of X enforcement of traffic regulations and safety which has resulted in accelerated deterioration and high accident fatalities; (iii) cumbersome administrative and procurement procedures; (iv) shortage of qualified road maintenance technicians; and (v) poor management, budgeting and implementation of maintenance operations. 1.25 Major steps have been taken since then to remedy some of these problems under the ongoing Sixth Highway Project: (i) the November 1986 Decree decentralizing road maintenance operations and entrusting MTP with policy formulation and supervisory functions; (ii) funds provided through Caisses d'Avanceu, established under the Sixth Highway Project (para, 1.26), and the completion of the rehabilitation of workshops (in Antananarivo, Mahajanga, Toliara, Fianarantsoa, Toamasina and Taolanaro), financed under the Fifth and Sixth Highway Projects, have accelerated rehabilitation and maintenance of roads and equipment; (iLi) seven brigades have been organized in the regions with equipment procured under the Fifth and Sixth Highway Projects; (iv) MTP has shifted the execution of about 30? to 402 of the road maintenance works to private contractors; and (v) a permanent training center, CATP, has been established and a training program for road maintenance personnel is in operation. These actions will be expanded under the proposed program, where further clarification of responsibilities and accountability for road works will be settled, MTP will concentrate its efforts on management and most of the werks will be executed by private contractors (para. 1.20); financing of road maintenance operations will be secured directly from fuel taxes (para. 1.26 and 1.28); training  - 10 - activities will be expanded to iccommodate the private sector needs (para. 1.23) and a program of traffic regulation and safety will be implemented (para. 1.31). (iv) Financingt 1.26 Road maintenance is financed from the recurrent budget while new construction is financed from the investment budget which comes mainly from external sources. Thus, funds for new construction do not compete with other sectors for scarce local fupds. In 1982 when the Sixth Highway Project was being prepared, an average of FMG 4.0 billion p.a. was allocated to overall road maintenance (rehabilitation, periodic and routine maintenance). This was insufficient to adequately maintain the economic network. Moreover, the disbursement of these funds was alw4ys late, thereby interrupting and delaying the works. At that time, to solve the dual problem of over-investment in new construction and under-financing of maintenance and ensure reliable, timely and adequate funds for road maintenance operations, a covenant was introduced under the Sixth Highway Project requiring that the Government creates a Road Fund financed by fuel taxes with simplified disbursement procedures. As stipulated in the Credit Agreement, SOLIMA, the Government Oil Company, was to deposit FMG 5.0 billion directly into the Road Fund from the proceeds of fuel taxes. The Road Fund was legally established by decree on December 14, 1984. It was however untimely and inadequately financed through the budget with cumbersome disbursement procedures. But a revolving fund, aCaisses d'Avancel, opened under the Road Fund, is providing about FMG 600 million quarterly for routine road maintenance operations, or about half the basic routine maintenance needs of the network. In response to IDA's request, the Government has issued a decree *n September 11, 1987 which (i) authorizes SOLIMA to supply directly the Road Fund, (ii) makes MTP managing entity of the Road Fund, and (iii) authorizes MTP to designate responsible individuals in the region to manage regional accounts credited from the Road Fund, and to expedite the execution of road maintenance operations. This decree has been published thus satisfying one of the conditions of negotiations of the proposed IDA Credit. 1.27 As of mid-October 1987, the Government had accumulated about FMG 4.6 billion arrears of payments during the execution of the ongoing Sixth Highway Project. This issue, as a condition of negotiations, has been resolved by Government paying these arrears. If these arrears were not paid, they would have jeopardized the execution of the proposed program, as contractors, consultants and suppliers would have increased the base costs to recover their dues. 1.28 Revenues from road user charges are estimated to have been about FMG 16.0 billion in 1986. This exceeds the amount spert on roads for both construction and maintenance and is far above what normally should have been allocated for road maintenance. Import duties and sales taxes from transport equipment and spare parts totalled FMG 7.2 billion in 1985 and annual license fees, vehicle inspection fees, etc., added another FMG 0.4 billion. Taxes on gasoline and diesel fuel produced revenues of about FMG 8.5 billion in 1985, and at present level  - 11 - of fuel prices (November 1987), they are expected to yield about FMG 9.7 billion per year. Thus, the general level of road user charges is adequate to cover road maintenance needs. To etnsure reliable funding under the program, the Government agreed to (i) allocate SDR 3.6 million equivalent yearly to routine road maintenance operations through the Road Fund, (ii) maintain a sub-account to the Road Fund 'Caisse d'Avance replenished quarterly to the equivalent of at least SDR 360,000, and (iii) keep the prices of fuel at competitive levels to generate resources to cover road maintenance needs, taking into consideration inflation and expansion in the network. Since a timely revision of fuel prices is needed to sustain the tax revenue, a provision for an annual review of the fuel tax revenue was included as a covenant in the Credit Agreement. (v) Engineering and Construction 1.29 The DGE through its DR and regional offices is responsible for engineering studies and execution of construction works. Engineering and construction standards follow those developed by the French Ministry of Equipment but have been adapted to conditions in Madagascar (Annex 4). The DG carries out project identification and some preliminary design. But most studies and construction supervision are executed by foreign firms and their affiliates, the Government-owned firm DINIKA, and the National Soil laboratory (Laboratoire National des Travaux Publics et du Batiment, LNTPB). 1.30 Up to now almost all major road construction and maintenance works have been carried out by foreign contractors and their affiliates and by force account. Domestic private construction sector has started to play a small but increasing role. The government-owned construction firm, Soci6t6 d'Interet National de Travaux Publics (SINTP), has recently opened its equity to the China Road (China), and a domestic construction firm, SARA, has captured a sizeable share of the building construction market. In addition, there are about fifty small domestic contractors which are involved mostly in building construction but have occasionally executed small subcontracts for road works.. A survey carried out under the Sixth Highway Project has shown that many of these existing or aspiring small and medium domestic contractors have some basic skills in civil works (as former employees of MTP, contractors or consultants) but need managerial skills to execute substantial civil works contracts. The role of the domestic construction industry will expand under the proposed program as most of the maintenance works will be executed by contractors. To assist these firms in executing these small and scattered road maintenance operations for which they have comparative advantage over foreign firms, a training/work program will be established (para. 2.12). The applicant-firms will carry out road maintenance works under close supervision, and if successful, they will be prequalified for similar operations under the program. There is no specific financial assistance designed in the proposed program, but to solve these contractors' liquidity problem contractual arrangements will be made to provide quick up front payments, and ensure regular payments through the Road Fund. In addition, under the proposed Small Scale Enterprise (SME) Project, a financial assistance to SME, including  - 12 - small- and medium-scale domestic civil works contractors will be provided on a cross sectoral basis. More specifically, equipment leasing and renting will be considered, which will result in addressing one of the main constraints which hamper the development of domestic construction industry. (vi) Traffic Reaulations and Safety 1.31 Regulations governing truck weight and dimensions are adequate. Weight regulations allow loads up to 10 tons/axle; weighbridges were bought under the Fourth Highway Project to help enforce these regulations but enforcement remains poor. Spot surveys have revealed that more than 60S of trucks are overloaded and many exceed legal dimensions. The laws governing road safety are adequate but enforcement is lacking; and driver education, licensing and vehicle registration are hardly more than formalities. Vehicle inspection is carried out sporadically and superficially. Although statistics on traffic accidents are scattered and inconclusive, the large number of demolished vehicles along major roads point to a high toll of accidents. Under the Sixth Highway Project, the Government has prepared enforcement measures which would reduce the rate of road deterioration and ensure sufficient road safety. These measures will be implemented under the proposed program (para. 2.17). E. Bank Group Role in Transport 1.32 Bank involvement in the transport sector in Madagascar has been substantial. Between 1966 and 1987 the Bank supported eleven transport projects with IDA Credits totalling over US$200 million, six in roads, two in ports, and three in railways. The Bank has and should continue to play a critical role in improving the institutional capacity and policy framework for the sector. No other donor is prepared to, or seems capable of, playing this role. Further details on previously financed transport projects are given in Annex 5. Through its highway projects the Bank has assisted Madagascar in meeting its objective of connecting all regional capitals by all-weather roads, and improving the maintenance of the network; however, further improvement is still needed in institution building and financing (paras. 1.24 through 1.28). The most recent (1986) railway credit (Credit 1694-MAG, US$13.0 million, 1986) is financing priority items of the RNCFM's investment plan for 1987-1989. This consists of the following main componentst telecommunications and track rehabilitation, reconstruction of a bridge, provision of a road/rail link to a cement plant, provision of spare parts for locomotives and wagons, purchase of trolleys for track maintenance, workshop machinery, tools and other equipment, staff training, technical assistance and studies. Cofinancing is provided by Caisse Centrale de Cooperation Economique (CCCE) of Prance. 1.33 The most recent Ports Rehabilitation Project (Credit 1752-MAG, US$16.0 million, 1987) will provide for the rehabilitation of ports infrastructure in all the most important ports for coastal shipping, modifications and improvements to cargo handling in those ports, strengthening navigation and other services to shipping and  - 13 - institutional development and reform, particularly for the main port of Toamasina. The project is expected to reduce the cost of shipping through improved cargo handling, improved ship utilization and to improve safety of navigation. The project is supported by cofinancing from several donors such as CCCE and Kreditanstalt fuer Wiederaufbau (KfW). F. Rationale for Bank Involvement 1.34 Transport is a key sector in the Bank's lending strategy in Madagascar because inadequate transport constrains economic development in other sectors as indicated in the 1983 Transport Sector Memorandum. The Bank's heavy investment in the sector has resulted in: (i) a gradually increasing emphasis on rehabilitation versus new investments; (ii) progress towards the creation of a highway maintenance institution; and (iii) increased management and financial autonomy for the railways enabling them to carry out significant tariff reforms. The Bank has been promoting an integrated approach to transport to help Madagascar's economy, to maintain an ongoing dialogue with the Government with a view toward furthering policy reform, and to balance the Bank's lending among sub-sectors. This rationale has been the basis for both the most recent railway and ports rehabilitation projects. The transport modes also support each other so that both highways and railways must remain operative to ensure an efficient flow of goods to and from the ports. 1.35 IDA's support of Government's proposed Seventh Highway Program is therefore justified on the following grounds: (i) assistance to Government to achieve food security through the development ,of priority feeder roads; (ii) consolidation and continuation of transport sector improvements initiated under previously financed IDA projects; Ciii) support to Government's policy reforms aimed at restoring vital infrastructure and mobilizing more effectively domestic and external resources; and (iv) leadership in the coordination of support to a program which many donors, including AfDP, CCCE, European Development Fund (EDP), Fonds d'Aide et de Cooperation (FAC), Italy, Japan, KfW, Norwegian Aid (NORAD), Swiss Cooperation and USAID, are willing to finance. II. THE PROGRAM AND THE PROJECT A. Obiectives 2.01 The road network of Madagascar is adequate in size. However, a sustained effort in its maintenance is necessary to meet the country's economic and social development goals. The Government has prepared a comprehensive four-year (1988-1991) rehabilitation and maintenance program of this national asset. This program expands efforts begun under previous projects and aims at: (i) strengthening MTP's capacity, especially in policy formulation, planning, budgeting, and supervision; (ii) promoting food security and increasing exports of agricultural products; (iii) gradually shifting most maintenance operations from  - 14 - force account to private contractors who are already active in the sector; (iv) 4eveloping local human resources and the domestic construction industry; (v) improving public expenditure practices in the road sub-sector through a three-year rolling PEP prepared yearly and based on a current National Transport Plan; (vi) improving road safety and enforcing traffic regulations; and (vii) ensuring optimal use of donors' assistance through financing of high priority works.. B. Proaram Description 2.02 To achieve the above objectives the four-year (1988-1991) program comprises: (i) rehabilitation and resurfacing of 2,231 km of paved roads; (ii) rehabilitation and regravelling of 1,250 km of engineered earth roads; (iii) rehabilitation of 2,783 km of feeder roads; (iv) routine maintenance of the total economic network including about 5,000 km of paved roads, 3,700 km of engineered earth roads, and 6,000 km of feeder roads; (v) development of small- and medium-scale domestic contractors; (vi) training and development of HTP and private sector personnel; (vii) use of consulting ser"ices; and (viii) improvement of traffic regulation and safety. 2.03 The program has been designed to meet the road.transport needs of the country. As such it is flexible and could be executed progressively as financing is acquired, ensuring optimal use of donors' assistance through financing of high priority components. The design of the works in the program has been the subject of two comprehensive studies carried out under the Sixth Highway' Project by consultants. The first, carried out by Gendron Lefebvre Inz. has produced a sound rehabilitation and maintenance program for the main paved and earth roads. The second, executed by Renardet Engineering (France) and SAUTI (Italy), has identified a prioriA.y feeder road network and proposed rehabilitation and maintenance itorks to sustain agricultural and industrial development, and to achieve the country's goal of food security in the 19909. All rehabilitation and periodic maintenance works and most of the routine maintenance works will be carried out by private domestic and foreign contractors. Bidding documents have been prepared to award such works. As a result, MTP's role will be altered with most of its efforts directed to policy formulation, planning and monitoring of the program. An annual review of this program was agreed  - 15 - upon during negotiations a-id is part of the covenants of the Credit Agreement. (M) Rehabilitation and Resurfacing of Paved Roads 2.04 The program continues the rehabilitation of the paved road network begun under the Fifth and Sixth Highway Projects. Under these projects, the rehabilitation of the country's major road axis Mahajanga-Antananarivo-Fianarantsoa-Toliara (1,700 km) has almost been completed. The proposed program completes this process; it includes 2,231 km (Arnex 6.1) of paved roads. These roads were built 10 to 20 years ago, they carry about 100 to 500 vpd, with trucks amounting to about 502 of vehicles on low trafficked roads and 202 on those heavily trafficked. During the past decade maintenance has been spotty and carried out on an emergency basis, some pavements have deteriorated to the extent that reconstruction is necessary while others need protection to avoid premature breakdown. Pavement widths built within a range of 6.0 m to 5.5 m have eroded to about 4 m to 3.5 m. The works consist of: (i) improving drainage systems; (ii) repairing structures; (iii) regravelling of shoulders ranging from 0.5 m to 1.0 m .n width; (iv) rebuilding of some subgrades; (iv) patching, resealing and execution of a single surface treatment on some sections; (v) constructing new base courses of crushed rocks or treated local soil materials; and (vi) executing double surface treatments or asphalt concrete wearing courses on others. The design is based on a realistic maximum single axle load of 13 tons for an economic life of 15 years. It is expected that resurfacing will be required after 7 to 8 years. (ii) Rehabilitation and Rearavellint of Engineered Earth Roads 2.05 The proposed rehabilitation and regravelling of engineered earth roads includes 1,250 km (Annex 6.1) of roads, ensuring critical links between the main paved road network and the feeder road network. These roads, carrying about 50 vpd were built at the same geometric standards as those of the paved roads. Some have deteriorated causing traffic disruption and constitute serious bottlenecks in the entire road system while some need regravelling to bring them up to standard. The works proposed are the same as those for the paved roads (para. 2.04) except that base and vearing courses will be built of gravelly soil materials. (iii) Rehabilitation of Feeder Roads 2.06 The proposed program of rehabilitation of the feeder roads includes clusters of feeder roads totalling 2,783 km (Annex 6.1), providing access to the most agriculturally productive regions in the country. Some of these roads have not been maintained during the past decade and )thers are only tracks on which traffic is impeded during the rainy season due to, inter alia, lack of adequate drainage, steep grades and sharp curves. Works proposed includet (i) widening of widths to about 4.5 m with shoulders of 0.5 to 1.0 m when economically feasible; (ii) improving drainage; (iii) partially realigning and improving grades; and (iv) selective regravelling. These works, in conjunction  - 16- with the rehabilitation of the main road networks, would allow a year- round circulation system to sustain agricultural and industrial development in the regions. (iv) Routine Maintenance 2.07 The proposed routine maintenance program will cover the entire 14,700 km of economic road network. Since rehabilitation and periodic maintenance works will be carried out on pars of this network at the same time, as described above (paras 2.04 to 2.06), routine maintenance operations will be executed yearly on average on about 3,600 km of paved roads, 3,000 km of engineered earth roads and 3,900 km of feeder roads. Routine maintenance operations will consist of (i) clearing of shoulders; (ii) cleaning of ditches and culverts; (iii) minor repairs of bridges; (iv) patching and resealing of paved roads, and (v) filling of potholes and regrading of engineered earth roads and feeder roads. 2.08 Patching and resealing will be carried out by force account as they cannot be packaged and contracted out economically. Operations on feeder roads will mostly be contracted out to 6mall- and medium-scale contractors in the region, under supervision of MTP. Patching and resealing will be carried out by seven brigades, one in each of the six regions and- in the special division of Toalanaro. It is estimated that each of these brigades will maintain about 400 km of roads a year. Each region will also have an additional brigade to handle minor urgent earth works and emergencies in the subdivisions where the capacity of domestic small and medium contractors is not sufficient. Force account operations consisting of cleaning of shoulders, clearing of ditches and culverts, minor repair of bridges and filling of potholes will be carried out by labor-intensive 'cantonnage' teams composed of about 15 *cantonniersu supervised by a headman. It is estimated that each of these teams vill maintain about 75 km of roads a year. Most of thb equipment and tools for the brigades and teams have been provided under previous projects. The proposed program will provide complementary equipment. The physical facilities and equipment of the 33 subdivisions (para. 1.21(a)) will also be improved. The list of equipment (Annex 7) was discussed and agreed upon during negotiations. Equipment will be maintained in the seven workshops which, along with the regional headquarters, were improved and equipped under previous projects. (v) Development of Domestic Contractors 2.09 The shift of road maintenance operations from MTP force account to private contractors entails an intense utilization of small- and medium-scale contractors. These contractors have a comparative advantage over major ones for the execution of small and scattered routine road maintenance. About 50 domestic small and medium-scale- contractors have been identified. They are qualified to varying degrees in the execution of small civil works, with the majority having extensive eperience in building construction with the capacity to diversify. To assist in this development, (a) a comprehensive training work scheme will be established under the proposed program, including training courses and seminars to CATP. Field works, as part of the road  - 17 _ rehabilitation and maintenance program, will be carried out in the regions with tutorial management assistance, and (b) contractual arrangements will be made to provide up-front payments to solve the contractors' liquidity problems (para. 1.30). To help small-scale domestic contractors develop their ability to carry out periodic and routine maintenance, training works will be organized by MTP and assisted by consultants. The training program (para. 2.12) will progress gradually, expanding into two new regions every year until it is in place in all six regions and the special division of Toalanaro. These contractors will compete for the training works and will receive technical and management training. Each training-work site will consist of about 7 km of engineered earth road or feeder road to be rehabilitated, or maintained, costing about US$50,000 to US$100,000. Five work sites will be selected in each region during the program. 2.10 Special care will be taken to monitor the progress made by contractors during implementation. Once training works have been completed, contractors showing satisfactory performance will be approved to compete on their own for similar works in the program. (vi) Training and Manpower Development 2.11 The proposed training program will expand training efforts begun under the Fifth and Sixth Highway Projects by offering training for the entire civil works market. For this purpose the training center, CATP, built, equipped and operated under previous project, will be transformed into an Institut (para. 1.23). This would fill the gap in the country's education system by providing necessary practical skills to civil works personnel. The targeted NTP personnel includes: 40 engineers, 140 road technicians, 120 equipment operators, 250 mechanics and electricians, 60 accountants, and 70 store clerks. The Institute has the physical capacity to accommodate the training of contractors and could expand its teaching core according to demand. The proposed program would provide the necessary additional equipment, tools and supplies and the basic corps of experts to implement the training program (para. 2.15). 2.12 The program will combine classroom and field training. The trainees will receive on-the-job training by joining MTP's brigades under the Institute's supervision, while domestic contractors (majority owned by Malagasy nationals) will gain field experience by executing training works (para. 2.09). The training program will include main subjects such as labor-based methods, quality control, contracting, administration, construction management, and equipment operation and maintenance. Successful trainees needing additional instruction will be granted fellowships for short courses abroad or organized locally. Malagasy instructors, counterparts to the expatriate experts, will receive on-the-job training in the Institut and additional training abroad on short-term scholarships. During their training in the Institute, trainees will receive daily allowances in addition to their salaries as an incentive to prospective trainees and a means to attract personnel from outside hntananarivo. The proposed program is designed to be the most cost-effective means of providing road construction and  - 18 - maintenance skill to civil works personnel. The design and execution of the training program will be reviewed every year by the Government and the Bank. (vii) Consulting Services 2.13 As the program envisages MTP in a role of policy tormulation, planning and monitoring of the implementation, consulting services will be needed for the execution of the operations. The needed consulting services are as follows: (1) Sugervision of Contracted Works 2.14 Consultante will supervise rehabilitation, resurfacing and regrav.elling works carried out by contractors. (2) Technical Assistance to MTP and MTMT 2.15 MTP regional units will need 3 road construction and maintenance experts, 2 mechanical experts and one administrative and a financial expert to assist in the implementation of the force account and tutoring of small contractors for a total of 272 man-months. MTHT will need 2 transport experts for about 45 man-months to carry out transport planning and coordination. The experts will assist in 1i) planning works and supervising the brigades: (ii) carrying out repair and maintenance of equipment; (iii) procuring equipment and spare parts, materials and supplies; (iv) procuring and supervising routine maintenance works carried out by domestic contractors; tv) carrying out cost-accounting to determine equipment and brigades outpuit, unit costs, and indices for monitoring equipment utilization and progress of works; and (vi) transport planning and coordination. The outline terms of reference of the experts and monitoring procedures (Annex 8) were discussed and agreed upon during negotiations. (3) Technical Assistance for Training 2.16 A core of 9 experts will be needed for a total of 400 man- months to implement the training program. Additionally, 111 man-months services of various specialists will be needed to carry out short seminars during the program. The experts will aspist in (i) developing appropriate curricula; (ii) selecting trainees and-conducting classroom and field instruction; (iii) selecting institutions and trainees for short-term fellowships for studies locally or abroad; and (iv) monitoring the progress of trainees and helping them to be recruited in MTP, other public services, or private businesses. The outline terms of reference of the experts (Annex 8) were discussed and agreed upon during negotiations. (viii) Traffic Regulation and Safety 2.17 As required under the Sixth Highway Project (par&. 1.31), the Government has undertaken field experiments in order to design and implement an appropriate program for enforcement. From these  - 19 - experiments the Government has designated the Ministry of Defense (MOD) as the sole authority to approve the technic41 aspects of imported trucks, and operators' licenses. MOD will also carry out vehicle inspections, operate weigh-stations, and carry out road patrols from three centers located in Maevatanana - (RN4y'