Zambia - Financial performance of the government-owned transport sector

Report No. 10667-ZA Zambia Financial Performance of the Government-Owned Transport Sector November 1992 Infrastructure Division MIC P CFICHE COPY Southern Africa Department F N. Type: (f Africa Region r i t i e: F INANCIAL FPF'RFOPMANCTE (F' THF CT FOR OFFICIAL USE ONLY Axt.': 3 B(: or2 IJ11125 Dept. :AFtN Ext. t Docunent of the World Bank This document has a restricted distribution and may be used by recipients -onily in the performance of their official duties. Its contents mnay not otherwise b!etisclosed without World Bank authorization.  ZAMBIA CU ECEYOIVALENTS Currency Unit - Zambian Kwacha Exchange Rates YM ~~~~~~~~~~~~~~~K per US Do: lar 1987 8.9 1988 8.2 1989 12.9 1990 29.0 1991 50.0 1992 (assumed average) 120.0 FISCAJ. YEARS Government: January 1 - December 31 Transport Enterprises: April 1 - March 31 ABBREVIATIONS AJAS - African Joint Air Services BAU - Business-As-Usual BP - British Petroleum Ltd. CHL - Contract H-aulage Ltd CSO - Central Statistical Office DC - District Councils DCA - Department of Civil Aviation EEC - European Economic Community ESCO - Engineering Services Corporation Ltd IATA - International Air Transport Association km - Kilometer MC&T - Ministry of Communications and Transport MH - Mpulungu Harbor Corporation Ltd M-Roads - Main Roads MSD - Mechanical Services Department MT - Mulungushi Traveller Ltd NACL - National Airports Corporation Ltd PSO - PuDlic Service Obligation PTA - Preferential Trade Area RD - Roads Department SADCC - South African Development Coordination Conference SATCC - Southern Africa Transport & Communications Commission sq km - Square Kilometer TC - Traffic Comm!ssioners T-Roads - International Trunk Roads TYDP - Ten Year Development Plan UBZ - United Bus Company of Zambia Ltd. UNCTAD - U. N. Commission on Trade and Development ZA - Zambia Airways Corporation Ltd. ZIMCO - Zambia Industrial and Mining Corporation ZIMOIL - Zambian National Oil Company ZNSL - Zambia National Shipping Company Ltd. ZR - Zambia Railways Ltd.  FOR OFCML USE ONLY EtNANCILPPEQRFORMANCE F THE GOVBERNMEU-OWNED TRANSPQRTSEC Table of Conents EXECUTIVE SUMMARY ....... .............. i I. INIRODUCTION .............................. 1 II. PUBLIC EXPENDrlrURE REVIEV . ........ .. 3 IH. REVIEW OF AGENCIES WITH MAJOR PROBLEMS...... 4 A. The Roads Sector.... 4 A.1 Current Financing Arrangements . . ............ 5 A.2 Options for Reform . . . 10 A.2.1 Revenue Mobilization ..10 A.2.2 Management Arrangements . . . 13 A.2.3 Maintenance of DC Roads ....14 A.2.4 Road Maintenance Capacity . . . 16 A.2.5 Road Rehabilitation . . . 17 A.3 Conclusions . . .19 B. Zambia Railways ....20 B.1 Current Financial Performance . . .20 B.2 Options for Reform . . .21 B.3 Conclusions . . .23 C. Zambia Airways ....24 C.1 Current Financial Performance . . . 26 C.2 Options for Reform . . .31 C.3 Conclusions ...32 IV. ROAD TRANSPORT INDUSTRIES ......... 34 A. Contract Haulage Ltd . . .34 A.1 Current Financial Performance ..34 A.2 Options for Reform . .35 A.3 Conclusions ..36 This report is based on the findings of a mission consisting of Ian G. Heggie and Ms. A. Fantaye which visited Zambia in November/December 1991 and presented an initial draft of the report to the government in February, 1992. The text was finalized and formatted by Nellie Sew Kwan Kan and Mary Jackson. The mission would like to thank officials from the Ministry of Finance, Ministry of Communications and Transport, Ministry of Works and Supply, and the individual transport enterprises for their generous help during preparation of the report. IThis document has a restricted distribution and may be used by recipients only in the performance |or their official duties. Its contents may not otherwLse be disclosed without World Bank authorization.  pagn No B. United Bw Company of Zambia Ltd. ...................... 36 B.1 CurreotFinancial Per; nance ...................... 36 B.2 Options for Reform ...................... ... 37 B.3 Conclusions ......................... i8 C. Urban Bus Services ........................... ; ...... 38 V. AIRPORTS AND OTHER CIVIL AVIATION ..... . ... 40 A. National Airports Corporation Ltd .. 40 A.1 Current Financl Performance .42 A.2 Options for Reform .43 A.3 Conclusions .45 B. Department of Civil Aviation ..46 B.1 Present Financial Perfbrmance .48 B.2 Options for Reform .50 B.3 Conclusons.. 51 VL OTHER TRANSPORT AGENCIES . .52 A. Engineering Services Corporation .52 B. Mpulungu Harbor Corporation Ltd .53 C. Zambia National Shipping Company Ltd. 54 VIM. OVERALL SECTOR PERFORMANCE . .56 A. Overall Fiscal Balance .56 B. External Indebtednes .58 C. Diversifying Ownership and Increasing Private Sector Involvement .... 60 D. Postscript .......... i .... 61 -TABLES 1. Length and Costs of Maintaining Trunk, Main and District Roads 2. Central and Provincial Roads Departments: Revenues and Expenditures 3. Revenues and Selected Expenditures: Kabwe Urban DC 4. Build up of Retail Prices of Fuel in Lusaka S. Prices of Gasoline and Diesel Fuel in selected countries 6. Indicative Finahcing Plan for Trunk, Main and District Roads 7. Overall Development Budget, Ongoing and New Projects 1991-1994 8. Passengers on Intercontinental, Regional and Domestic Services 9. Estimated Operating Results, FY91 First Two Quarters 10. Zambia Airways, Cash Flow From Intemational Sales Office 11. Amount of Traffic Handled at the Four Airports Managed by NACL 12. Charges at Selected Regional Airports in Africa 13. Amount of Traffic Handled at Category H Airports Managed by DCA 14. Civil Aviation Departnent: Revenues and Expenditures 15. Consolidated Public Expenditure Program for Transport 16. Transport Sector Outstanding and Disbursed Govermment and Government Guaranteed Debt ANNEXES 1. Estimated Number of Vehicles and Income from License Fees 2. Accounts: Zambia Railways 3. Accounts: Zambia Airways Corporation 4. Acounts: Contract Haulage S. Accounts: United Bus Company of Zambia 6. Accounts: National Airports Corporation  EXECtIIQOVERVIEW 1. The overriding Issue arising from the present Transport Sector Public Expenditure Review is the need to reduce the sector's drain on the government's overall fiscal revenues. In FY91 the drain amounted to almost K 5 billion (nearly $100 million), or 12 percent of the government's total current revenues. The drain took the form of injections of cash and/or equity, overdrafts and short-term loans from government-owned banks, or short-term loans from commercial banks with government guarantees. The financial situation is even worse when the decapitalization of roads, due to shortfalls in regular road maintenance, is included. 2. Since the financial drain is largely attributable to Zambia Airways Corporation Ltd. (ZA), Zambia Railways Ltd. (ZR) and the roads sub-sector, these are the areas targeted by the review for immediate reform. First and foremost, ZA needs to revise its route structure (probably by giving up routes to Bombay and Mauritius), consider terminating its air freight business or continue operating it using cheaper aircraft, and extending pooling arrargements with other airlines with a view to disposing of one or both of its two B-737 aircraft. Second, ZR needs to cancel its Ten Year Development Plan and replace it with a smaller and more realistic commercially-oriented one which focusses on its core business as a freight railway. It also needs to Improve its accounting system to ensure it provides a true picture of the corporation's financial health. Third, priority actions for roads include increasing road user charges over a period of five years to finance road maintenance (higher vehicle license fees and an additional fuel tax), agreeing on cost-sharing arrangements for maintenance of district roads, sub-contracting most road maintenance to the private sector with maximum involvement of local consultaits and contractors, and developing a road rehabilitation program consistent with the availability of government local currency contributions. 3. The report further outlines an agenda for improving the overall financial performance of the aector over the next five years. Although it is difficult to be precise about the impact of the proposed reforms and the speed at which they might be implemented, the program of reforms could reduce the sector's overall cash shortfall to 6 percent of total current revenues by the end of FY92, 4 percent by the end of FY93 and 1 percent by the end of FY94. The program would also ensure that current shortfalls in road maintenance spending were brought into balance within five years. The proposed reforms are listed in a policy matrix attached to this overview. For convenience, the reforms have been given an order of priority and a time-scale. A final column of the matrix also lists actions taken by the government since the mission's first visit to Zambia in November/December 1991.  3 c !ifl E|SE j E s EN E CA 4 eV E E I tI c I t Is c It I & I, 1 ~~ i i .1 | i |t ti  Pae, 2 of 3 Polinv MawCotinud Polcy Isuo Pr fiequlrd Actionsm Timing Status IV. Contract Haulage Ltd Set CommOrI ObjcIes I Mak6 it clew tht thOe corpoation Immediate Agreed In principle Is pctbd to operast. on a wholly commemcW basi wihout the need for govnmnt support Set Guidelines for Bilaral Aid I Ensure bilateral aid Is mad. Immediate cavlabls Uas of crdit which do nct discriminate In favor of th publo sedor. Deslfy Owneship 11 Invib a stslf buy-out and. If thd Late FY02 To be studIed Is unsuccessful. consider outright esb. V. Unitd Bus Co. of Zembia Ltd: se CommrciW Objectis I Make i clew that the ccpor n Immediate Agreed In prInciple Is expcted to operate on a wholly ccvnmwroW basis without th need for government support. Set Guidelines for Bilateral id I Ensure biltea aid is mode Immediate waaiab an lines of credit which do not diorikninab In favor of the public sector. Resrucure Loans I Govenment to aist Ms IY92 guarantues) wih converion of short-term loans Into long-term one. Improv Peformance if Increase fleet utlizmtlon, hold FY02 to FY93 down coms, reduce sa, Incr vshbol utilidzlan and reduce aounts payable. Reform Workshops Ill Dispose of workshops and hae FY92 to FY04 maintenanoe done byathird party;, considr leaing. Dergublt Fae Ill Remove all fae regudaons and FY92 to FY04 To be studied concentrate on regublting safety, qualIty and reWiabUity. Diesify Owehip Ill When peformanc has Impronvd. FY03 to FY04 To be studied invit a *s buy-out and. if that does not succeed, consider outright "sb. VI. Urban Bus Onerons: Revis Reguatoy Framework 11 Revise regulaions to emphasiz FY*3to FY34 To be studied safety, regularity and relibiliy of sevic. Inboduce PSO Grant Ill In conjunction with urban didrict FY03 to FY04 counils, introduce grants to cover th costs of publio sevie obilga0ons (e.g.. concslonry fs, network xtensins, tc.). VII Ndional Airnoft Qo oration Ltd: Transfer Fixed Assts I Formalize trarsfe offixed assets FY02 to FY03 and agree on procedures for deaing with rehabilittion of aiport. Diwvrr Revnue Bas I Seek othr source at rewvnue from FY92 to FY93 concssion, property rentls. cr prking. de.  Polov M*tix Conthu d POlcy Issue Prority Required Actions liming 8talu Airport Polie Ill Charge te cotd of polko at NACL FY93 o4port agina tth corporation. Meteorological Chrgee III Charge z'p to 10% of the cosb of FY93 the meetoolglal departent aginst NACL to be recoved m wis through alr navigaion Divsfy Ownenhip iII ODrlfloalon of ownership Is only FY03 To be studied fsblb n unways and navald are tr red to DCA; ell 10 % of shaes to staff to strengthen incentv lil. Deoartnent d Civil Aviton: Rabe 'isr Charges I Rse ' ng fee to an averag of R ed FY02 Budget $40 pek awr and exprm K In Ielgn xchange; rase the passenger service departure foe to K200. Comm reize AIrport 11 Turn alrportb Into a separate unit FY03 Decision deferred within MC&T accounting for its activie ag regulr commercial lines. Denlopmt Plan III Continue with present deelopment FY93 to FYU Agreed plan and reviso Itonce the AIDS study is complebt. Diversify Ownrhip Ill Conalder whether some airfields FY93 to FY94 could be traisferred to ditrict councis and whethe some (e.g., Southdowns) should be transfrred to NACL, or prva opwerato. Ot Enelne g Servic Cornoraton Ltd: R esture Operdaons I Re--organize the corporation Into FY92 Agreed In princle sd9ate busInss centers, build up those whkh are proftble and clo thoee which mak losses. Diesfy Ownerhip 11 Invit a st buy-out of FY02 to FY03 To be studied indMdual buslne centrs, or of the busin as whole; failing that, sl th enire busines, or iquldate IL X. Mukunau Harbor Corforation Ltd: 8tralghtsn OLt Accounts 11 Agre on the value of the aees, FY92 pravide for depreciation and reduce accounts receiable. Dirsify Ownersp 11 Opeate the port under a managenent FY92 to FY3 Offer from th privae contrat, under a conceuIon sectr being . agreement, or sell th entire port considered to a private sectr opator. l. Zambia Naional Shloolno Company Ltd: Finali Uquldation I Wind up corporation and only settle FY02 Agreed guaanteed de.  EXECUT ,SUMMARY 1. Zambia is land-locked and depends significantly on road and rail transit routes through Tanzania, South Africa, Zaire, Mozambique and Angola. The Ministry of Communications and Transport is responsible for overall transport policy and for supervision of transport enterprises. The road sector suffers from a number of systemic weaknesses which hamper effective performance. It suffers from lack of clear lines of responsibility, weak institutional structures and under-funding. Some transport enterprises are operated as joint ventures with the gcvernments of Tanzania and (in 1La case of air services) Uganda. Joint ownership adds to the complexity of management. The remaining transport enterprises are operated under the jurisdiction of Zambia Industrial and Mining Corporation (Zimco), which acts as a holding company on behalf of the government. Zimco has not provided effective leadership and many of the enterprises under its jurisdiction are in a critical financial condition. Apart from the trucking industry, these enterprises are also affected by an unfriendly regulatory environment and by well-intentioned donor sLpport which has inadvertently weakened competitive pressures. Once existing and proposed studies of the transport sector have been completed, it would be desirable to prepare a transport sec.or strategy document to guide long-term development of the sector. 2. The public expenditure review takes it for granted that government-owned transport agencies should be able to operate commercially without the need for financial support from government, other than to meet a clearly agreed public service obligation (PSO). A quick review of the financial health of the transport sector in Zambia shows this to be far from the case. In FY91 the sector imposed a financial burden of about K 4,875 million (nearly $100 million) on the government in the form of grants and overdrafts and short-term loans at g -,rnment-owned banks or commercial banks with government guarantees. This report examines the reasons for this poor financial performance and suggests ways of improving it. 3. Three agencies account for most of the sector's financial problems: roads, railways and the airline. Road expenditures are well below the levels needed to maintain the road network in a stable long-term condition. Current spending levels on roads under the jurisdiction of the Roads Department (RD) cover 20 to 40 percent of requirements for trunk and main roads (7,087 kn), and a mere 10 to 20 percent for district roads (13,696 km). The condition of roads under the jurisdiction of District Councils (15,980 km) is no better. Inadequate allocations for road maintenance means that routine maintenana has effectively ceased, vehicle operating costs have risen, rural roads become impassable during the rainy season, road rehabilitation has become a substitute for regular road maintenance and low maintenance expenditures have destroyed RD's capacity to undertake road maintenance. One of the main reasons for the shortage of finance, is that road users are paying negligible snms for use of the road network. License fees have not kept up with inflation and fuel only bears a standard excise tax (i.e., no explicit user fee is added to the price of fuel). 4. There is a clear need to put the financing of roads on a sustainable long-term basis. The task is to increase revenue mobilization, put in place management arrangements to ensure the additional funds are used effectively, revise arrangements for financing maintenance of district roads, rebuild the country's road maintenance capacity, and develop an affordable program to rehabilitate high priority roads. Improved revenue mobilization should focus on raising vehicle license fees and adding a supplementary fuel charge to the tax on transport fuels. These charges could be r.ised gradually over a period of five years. By FY96, the proposed increases would have raised average license fees to K 9,000 for cars ($75), K 36,000 for buses ($300) and K 60,000 for trucks ($500), all at FY92 prices. The fuel charge would likewise have raised the  - Ii - ii - price of premium gasoline from K 86 per liter to K 99 ($0.83) and that of diesel from K 49 per liter to K 59 ($0.49). 5. Roads are important national assets with an estimated replacement .ost, less the backlog of deferred maintenance, of $1.95 billion. Of this, $1.46 billion are managed by RD, while the remaining $0.49 billion are managed by the 57 urban and niral DCs. Since these assets need to be well-managed to ensure they produce value-for-money, and required road maintenance expenditures are three to five times current levels, there is a need to introduce better management arrangements to ensure the large sums of money which need to be spent on road maintenance are properly accounted for. It is suggested this be done by commercializing RD and turning it into an autonomous Roads Board. The Board's executive committee would include representative of the road transport industry, and the Board would be expected to keep commercial accouvts, introduce program budgeting systems and charge a clear price for roads implemented via international transit fees, vehicle license fees and a specific fuel charge. The road tariff would either be collected by RD or collected by British Petroleum (BP) and Zimoil on an agency basis. These arrangements need to be complemented by revised arrangements for financing maintenance of district roads. District Councils have a narrow tax base and it is suggested that block grants be introduced to support maintenance of district roads. The block grants would be financed from the overall fuel charge and allocated in a way which encouraged local tax effort and compensated for variations in the DCs ability to pay. 6. Road maintenance capacity also needs to be rebuilt and it is suggested this be done by involving the private sector. Local consultants could be used for design and supervision of work, with local contractors undertaking most road maintenance. In rural areas, it is furthermore suggested that maintenance of gravel and earth oads be undertaken using lengthmen sub- contractors to help increase rural employment. AD's role would also change and it would become a more specialized agency with a smaller and better paid staff. They would primarily become planners, facilitators and paymasters. They may also need to retain the capacity to undertake emergency road maintenance and some routine maintenance of paved roads. Finally, a road rehabilitation program needs to be prepared to handle the large bacldog of road maintenance which now needs to be made good. The size of the program should be determined to suit the availability of government local currency contributions. Under the above financing program a rehabilitation program of between K 2,000 million and K 2,500 million per year would be affordable. 7. The financial performance of Zambia Railways Ltd. (ZR) has deteriorated in recent years and reported losses in 1990/91 reached K 440 million ($15 million). The actual bottom line is much worse, since the corporation has not been servicing its debt, assets have not been revalued and depreciation provisions are too small. In spite of creafive accounting, ZR required government grants and equity contributions of K 2,347 mi-'n ($81 million) in 1990/91 to rebuild working capital. To address these problems ZR prepared a Ten Year Development Plan (rYDP), involving expenditures of over $200 million. The plan is unrealistic and does not face up to the difficult issues which need to be overcome if the corporation is to survive. F. The performance of ZR is only likely to improve if it is radically restructured. One of the first tasks should be to straighten out the corporation's accounts to ensure they present a true picture of its overall financial health. ZR also needs to focus on its core business as a freight railway and should stop operating pre-ast concrete factories, attempting to open quarries and should only develop the parcels business in conjunction with private sector interests. Passenger services, which account for a mere 2.5 percent of total income, should also be restructured,  terminated (including closure of the Mulobezi lina), or operated with explicit suppoAc from a PSO grant. The operation off workshops is another area in need of reform. The report recommends that ZR get out of the business of operating workshops. Instead, It should arrange to have overhaul and maintenance of locomotives and rolling stock .rried cat by a third party Mased either on privatization of existing workshops or leasing equipment directly Irom a third party). 9. The above reforms need to be complemented by strenuous efforts to improve utilization of equipment. Better utilization of locomotives would avoid the need for costly hires from Spoornet and purchase of Canadian locomotives. The contract for purchase of these loc,..motives should be scaled down, or canceled. Priority sectons of track also need tco be rehabilitated and should concentrate on relieving restrictions on sections of track carnying the highest volumes of traffic. Construction of the new Chipata-Mchinji line to Malawi shou!d be cancelled or postponed. Finally, the TYDP should be dropped and r-^Iaced by a m'ore modest and commercially-oriented development program. It is recommcnded that the government's development budget for FY92 only include a provision of K 300 million for ZR, followed by provisions of K 2,440 million in FY93 and FY94. 10. Zambia Airways Corporation Ltd. (ZA) is in a critical financial condition. It incurred a loss of K 2,112 million ($73 million) in 1990/91 and has only managed to keep afloat by running up overdrafts and short-term debts. Overdrafts and short-term debts reached a total of K 1,384 million ($48 million) in 1990/91. ZA's poor performance furthermore has a direct effect on the country's foreign exchange position, since ZA uses the IATA Clearing House (effectively underwritten by government) as a means of settling payments for miscellaneous services. The payment for miscellaneous services amounted to $45 million in 1990/91, out of a total net payment ef $53.2 million. The main reasons for poor performance are an unsuitable route strucre, lack of a cost-effective sales organization, an unprofitable air freight business and low aircraft utilization (the two B-737s only flying for 2.5 hrs per day). 11. Some attempts have already been made to improve performance and have focussed on liquidating Africa Bound Ltd. (a tour company), terminating flights to New York, reducing the scope of the air freight business, closing foreign sales offices and promoting pooling arrangements with otler regional airlines. To survive, ZA must nevertheless do more. The corporation needs to concentrate on five main cost-cutting measures. First, it needs to take a hard look at the present route structure and may need to cut its inter-continental services to Bombay and Mauritius. Regional services to Gaborone, Windhoek and Entebbe also need to be reviewed. Second, ZA's international sales offices (which absorb about 30 percent of sales revenues) cost far too much and some offices need to be down-sized, or closed. In 1990/91 the London sales office lost over $7 million and it may ba desirable to market ZA s-rvices under an agency agreement with another airline. Third, ZA's air freight services have been affected by structural changes in the international freight market and may have to be terminated, or continued using a cheaper aircraft. 12. Fourth, poolinl arrangements should be promoted but, since all SADCC airlines are suffering from excess capacity, one or both of ZA's two B-737s should be sold. Finally, ZA needs to explore every opportunity for improving crew utUlization, cutting staffing and victualling costs, and generally impro 'ing operational performance. The serious financial state of the airline also raises questions about the timing of the Africa Joint Air Services (AJAS) agreement. Such ventures are normally only attempted by airlines in sound financial health. Implementation of the AJAS agreement should therefore be deferred. In spite of current problems, it should be possible to turn the airline around. In the medium term, the emphasis should be on encouraging  - iv - the airline to operate iWx a more commercial way and, once that had been achieved, to conslder privatization, provided a suit&ble buyer can be found. The only qualification is that no corporate investor is likely to be willing to invest in LA for less than 51 percent of the voting shares. 13. Contract Haulage Ltd. (CHL) is in reasonable financial health sknd is the most consistently good performer. ;n 1989/90 it earned net profits of K 72 million ($5.6 million) and earned a rate of return on total assets of 41 percent. As a top performer, CHL is not in need of restructuring. Whatever steps are needed to improve performance are under the control of management and they should be encouraged to address these problems without government involvement. Road haulage does not have to be in the public domain and government should start considering the long-term future of CHL. There is no case for infusions of public iunds and offers of dedicated bilateral aid should be resisted in favor of general support to the road haulage industry (preferably in the form of lines of credit). CHL should be a key target for diversification of ownership. Government should set clear commercial targets and announce its intention to diversify ownership of the corporation. Within six months the government should ;nvite bids from existing management and staff and, if that does not succeed, should explore other wa "s of diversifying ownership through outright sale, or sale of shores. 14. The United Bus Company of Zambia Ltd. (IM.tZ) operates inter-urban and peri-urban bus services. The corporation was restructured in 1988 and performance thereafter improved. However, in 1989/90 performance started to decline and, in spite of substantial fare increases, it incurred a net loss in 1991/92. The corporation is now in an illiquid position and has been financing fixed assets through a combination of accounts payab!e and short-termn oans. UBZ management needs to make strenuous efforts to improve financial performance to ensure it does not repeat the crisis which affected it in 1987. It needs to increase fleet utilization, hold down operating costs, reduce staffing levels from 12 per vehicle in service to less than 10, increase vehicle utilization, reduce accounts payable and should convert its short-term loans into long-term debt (perhaps with government guarantees). These actions need to be supported by provision of clear commercial objectives and womplete deregulation of fares. Offers of bilateral assistance should likewise be made to both public and private bus companies on the same basis. Finally, government needs to give serious consideration to diversifying ownership through a management or staff buy-out, or outright sale. 15. Urban bus services are provided almost entirely by the private sector and government is mindful of the need to ensure they are operated reliably. Most current problems are caused by the rigid and outdated regulatory framework. These need to be relaxed to encourage provision of a wider and more diverse range of urban bus services. It would be unwise for government to become involved in the provision and operation of urban services and it should confine itself to being the regulator and facilitator of such services. The regulatory role should be corfined to ensuring safety and reliability of service, while the facilitating role should be confined to financing (in conjunction with urban District Councils) incremental improvements to existing private bus services. These improvements should be financed through provision of explicit PSO grants provided to support services provided on a contractual basis. 16. In September 1989, the four category I airports (Lusaka, Ndola, Livingstone and Mfuwe) were transferred from the Department of Civil Aviation (DCA) to a newly created National Airports Corporation Ltd. (NACL). Many of the airport facilities taken over were in a deteriorated condition and neither the value of the assets, nor the terms of their transfer, have yet been agreed. NACL keeps good accounts and is reasonably well managed. In 1990/91 it produced net profits of K 21 million ($1 million) and earned 5 percent return on total assets.  v - Revenues consisted almost entirely of aircraft and passenger fees. The NACL tariff is relatively high, although they are broadly in line with charges in neighboring countries like Zaire, Angola and Mozambique. 17. NACL is a relatively well run corporation and there is no need for any major structural reforms. However, it may be worth considering some minor restructuring to transfer ownership of runways and air traffic control equipment back to DCA. DCA could then negotiate a contract with NACL for managemen. of these assets. This would make NACL a much smaller corporation operating more like a property development company. In this form, ownership of the corporation could probably be diversified. The corporation would then focus on management and development of airport land and termmals, and would also manage runways anct navigational aids on behalf of DCA. Several other steps could also be taken to improve performance, since a 5 percent return on total assets is too low to generate sufficient revenues to operate on a sustainable basis. There are six issues which need to be addressed. First, the value of the fixed assets need to be agreed and so do their terms of transfer. Second, arrangements need to be agreed for rehabilitating these assets. It would be unreasonable to saddle the corporation with the costs of making good past neglect by DCA and it is suggested that government act as broker in trying to arrange grants and soft loans to finance the required rehabilitation. Third, NACL needs to diversify its revenue base by increasing earnings from concessions, rentals and parking charges. Fourth, the costs of the airport police (currently carried on the Police Department vote) should be charged to NACL. Fifth, operating costs need to be reduced and staff incentives improved (possibly by selling 10 percent of the equity to staff, or issuing it in the form of bonuses). Finally, goverment should consider charging 10 percent of the meteorological department costs against NACL. The corporation could then recover these costs from users by adding them to the air navigation charges. 18. DCA regulates all civil aviation services and is responsible for operating the country's 40 category II and III airports. DCA levies landing charges at category II airports and collects passenger service departure fees. Airfield revenues during FY90 were K 1.7 million, while expenditures were K 46.7 million leaving a shcrtfall of K 45 million. Curren3t landing fees are negligible. During FY90 the average landing fee was K 55 (about $1.90) for a 10 tonne aircraft. These fees need to be raised by a factor of st least 12 to reinstate their 1987 values. The passenger service departure fee is K 80 compared to a domestic departure fee of iC 200 at NACL airports. There is no systematic method of accounting for invoices issued, bills paid and delinquent accounts. A quick check suggests that revenue evasion and leakage are not a problem. 19. To improve financial performance and reduce the burden on the government's recurrent budget, it would be desirable to commercialize all category H airports and account for them as a separate commercial entity within the Ministry of Communications and Transport. Commercialization should be accompanied by an increase in fees. The average landing fee should be raised to $40 (and expressed on foreign exchange) and the passenger service departure fee should be raised to K 200. This would increase revenues to K 19.5 million in FY92. Other refbrms should concentrate on examining the feasibility of transferring management of selected airports (e.g., Southdowns) to District Councils, or transferring them to NACL or private sector operators. With revised charges and improved management, Southdowns airport could probably be managed profitably. Allocations in the development budget appear reasonable, but should be reviewed once the ongoing airport study being finarced by the African Development Bank has been completed.  - vI v 20. The remaining transport agencies covered in this report include Engineering Services Corporation Ltd. (ESCO), Mpulungu Harbor Corporation Ltd. (MH) and Zambia National Shipping Company Ltd. (ZNSL). ESCOs fincial position is precarious and there are no signs of things getting better. It is suggested that the corporation be restructured into separate business cent-rs, that management concentrate on those which are profitable (or could be made so) and closes those which continue to make losses, and that government then privatizes the corporation as a whole or as separate business centers. The time-table for privatization should be no longer than two years. MH is a small harbor and there seems to be no case for spending large sums of public money rehabilitating quays and providing more equipment. It is suggested that the government consider partial or complete privatization of the port. Finally, ZNSL is currently being liquidated and it appears that government has made a wise decision. The company is likely to end up with lazge debts and it is recommended that government only meets losses covered by government guarantee. 21. In FY91 the transport sector's cash shortfall amounted to K 4,875 million (nearly $100 million), or 12 percent of the government's total current revenues. When decapitalization of roads due to inadequate maintenance are included (to reflect the sector's long-term expenditure requirements) the overall shortfall amounted to K 6,304 million ($126 million), or 15 percent of the government's total current revenues. The shortfall was mainly attributable to ZA and ZR. These figures emphasize the urgent need to restructure selected transport agencies. The transport sector is now one of the country's main macro-economic problems and the government's stabilization program will only succeed if it includes actions to reduce !he above financial losses. The impact of the reforms proposed in this report suggest that the sector's overall cash shortfall could be reduced to 6 percent of total current revenues in FY92, through 4 percent in FY93 to I percent in FY94. When road maintenance shortfalls are included, the percentages amount to 11, 7 and 3 percent respectively. In other words, within three to five years, the transport sector could again be brought into balance with all road maintenance expenditures fully funded. 22. The government-owned transport sector accounts fbr 9.3 percent of the government's long-term external indebtedness and for 11.1 percent of project-related long-term debt. For a revenue-earning sector this is probably too high and more effort should be made to strengthen internal financing and domestic borrowing. External debts are mainly attnbutable to railways (the Tanzam railway being a large borrower), roads and air transport. The road sector has also benefitted from a large number of donor grants. Since these three agencies account for most of the sector's financial problems, the loans (and the covenants usually attached to them) have not been effective. Roads face a two-fold problem. First, donor-financed rehabilitation has become a substitute for regular road maintenance and, since much of the rehabilitation is being financed on a grant basis, there has been little need to raise road user charges. It might have been better to use the leverage of grant-financing to promote improved performance of railways and air transport, and to require roads to mobilize more of their own revenues by raising road user charges.  I. INfRQUDlCQON 1 Zambia is land-locked with a surface area of about 750,000 sq km and a population of just under 8 million. The economy is dominated by the mining industry which is heavily dependent on external trade. The transport network comprises five distinct modes of transport: rail, road, civil aviation, inland water transport and pipeline. Rail and road are the most important modes, while air transport is significant for passenger traffic. The main transit routes rely on shipments through ports in Tanzania, South Africa, Zaire, Mozambique and Angola. Most external traffic is carried by rail, although road transport is becoming increasingly important. The railways concentrate on bulk traffic (coal, minerals and agricultural products), while road transport handles most intermediate and consumer goods. 2 The Ministry of Communications and Transport (MC&T) is responsible for overall transport policy and for supervision of transport enterprises. There is a small Planning Unit within MC&T which helps with this task. Operation and maintenance of main roads is under the jurisdiction of the Roads Department (RD) in the Ministry of Works and Supply (MWS), while other roads are under the jurisdiction of 9 urban and 48 rural District Councils (DCs), presendy under the Ministry of Local Government and Housing. Two transport enterprises are operated as joint ventures between the governments of Zambia and Tanzania. They include the Tanzania Zambia Railways Authority (Tazara) and Tazama Pipelines Ltd. (67 percent of which is owned by Zambia). A third joint venture, Africa Joint Air Services Ltd (AJAS), was also established to operate joint air services on behalf of Zambia, Tanzania and Uganda, although financing for this activity has been drastically reduced. Most other transport enterprises are operated under the jurisdiction of Zambia Industrial and Mining Corporation (Zimco), which acts as a holding company on behalf of the government. Traditionally, Zimco has chaired the Boards of these enterprises, set overall management policies and guided their long-term development. However, Zimco's role will soon diminish, since it is in the process of being restructured into an investment holding company providing a non-executive chairman and financial controls. 3 The road sector suffers from a number of systemic weaknesses which hamper effectivc performance. Uncertain lines of responsibility, weak institutional structures and under-funding are perennial problems. DCs are unsure which roads are their responsibility and !he legislative arrangements for financing maintenance of DC roads (which empower the Transport Minister to make grants and require owners of adjoining property to contribute to maintenance) are not being used. DCs are furthermore imostly too small to support an effective road maintenance organization. It would be better to group DCs into larger units and designate highway authorities responsible for a larger and more viable road network. Under-funding is also pervasive and affects both main and DC roads. There is now a substantial backlog of deferred maintenance. 4 It has proved difficult to operate the joint ventures on a commercial basis (Tazara, Tazama and AJAS). Joint ownership makes co-ordination and management difficult, and turns simple managerial decisions into elaborate exercises in international relations. Tazara is the largestjoint venture. It mainly serves Zambian transit traffic, although it is increasingly carrying local traffic in the southern part of Tanzania. The performance of Tazara, in terms of freight transported, improved significantly in 1987 and 1988 in spite of serious constraints on the availability of its locomotive fleet. However, a serious deterioration was noted in 1989 due to numerous accidents caused by relaxed operational practices. Cost recovery is poor and Tazara has been unable to meet its debt-service obligations and this has led to a restructuring of its capital. The government is currently exploring options for creating a separate management company to deal with Tazara's operations within Zambia.  -2- S The enterprises under the jurisdiction of Zimco suffer from a number of problems. Zimco has not provided effective leadership and many of the transport enterprises are in a critical financial condition. Asset utilization is low, financial oversight is weak and. little attempt has been made to instil a sound commercial outlook, or to restructure the enterprises to improve performance. These disadvantages have been exacerbated by an unfriendly regulatory environment and by well-intentioned donor support which has inadvertently weakened competitive pressures. Public transport has been particularly affected. The regulatory framework imposes entry restrictions on urban bus operations, requires standardization of fares (hence preventing any form of service differentiation, including operation of scheduled services) and even requires all private vehicles to be painted green and white. Donor assistance - which has provided privileged access to foreign exchange for purchase of vehicles and spare parts, and has provided generous technical assistance - has helped public transport operators, but has done so at the expense of the private sector which has to survive without such assistance. The trucking industry is one of the few areas which does not suffer serious regulatory constraints. Entry and tariffs are effectively deregulated and there are nearly 1,000 trucks offering domestic haulage services (only 206 being government owned), supplemented by an estimated 1,600 foreign trucks offering intemational services to, from and through Zambia. 6 The unfriendly regulatory framework and the lack of clear policy directions emphasize the need to prepare a consistent sector strategy to guide future development of the sector. The proposed Infrastructure Engineering Credit, being prepared for possible inclusion in the Bank's FY93 operational program, would finance a series of detailed studies covering national transport policies, operation and maintenance of roads, management of government plant and equipment, and the potential for developing the local construction industry. Once these studies have been completed, they could be used as the basis for preparing a clear sector strategy to guide future development of the transport sector.  -3 - II. PUBLIC EXPENDITURE REVIEW 7 This review examines the financial performance of the government-owned transport sector in Zambia and was undertaken as part of a national Public Expenditure Review (PER). The objective was to: (i) review the financial performance of each government-owned transport agency; (ii) identify the net impact of the sector on the government's overall fiscal balance; (iii) examine the scope for improving financial performance by increasing private sector involvement; (iv) review methods of financing roads and examine ways of placing such financing on a sound long-term basis; and (v) consider all other ways of strengthening financial performance. 8 The review took. for granted that: (i) government-owned transport agencies should be able to operate commercially without the need for net financial transfers from government; (ii) in principle, these agencies should make a net contribution to overall government revenues in the form of corporate taxes, profits (on government equity) and surpluses of government departments; (iii) government regulation should focus on safety, quality and reliability of service leaving the remaining service characteristics to be determined by the market place; and (iv) when government wishes transport agencies to undertake social service obligations, it should do so under transparent arrangements which compensate transport agencies for the financial costs of meeting these obligations. 9 A quick review reveals a sector in poor financial health. In FY91 it imposed a financial burden of about K 4,875 million ($9S million) on government in the form of direct grant requirements, overdrafts in government-owned banks, or government guaranteed short-term debts held by commercial banks. This is equivalent to 12 percent of the government's total current revenues (excluding grants). When shortfalls of regular road maintenance are included (i.e., when the figures include erosion of capital), the financial burden rises to K 6,565 million ($131 million). This is equivalent to 17 percent of the government's total current revenues. The estimates for FY92 are equally large. The financial burden is K 6,243 million ($52 million) without the maintenance shortfall and K 10,330 million ($86 million) when erosion of capital is included. Far from contributing to government revenues, these transport agencies are imposing a major drain on such revenues. This report examines the reasons for this poor performance and outlines an agenda for improving it. 10 For purposes of analysis, the government-owned transport agencies have been divided into four main groups. The first group includes the agencies accounting for the largest and most important financial problems (the Roads Department, Zambia Railways Ltd. and Zambia Airways Corporation Ltd.). The second group focuses on the road transport industry (Contract Haulage Ltd., United Bus Company of Zambia Ltd. and support for urban bus operations). The third group focuses on airports and other civil aviation activities (National Airports Corporation Ltd. and the Department of Civil Aviation). The final group includes the remaining miscellaneous transport agencies (Engineering Services Corporation Ltd., Mpulungu Harbor Corporation Ltd. and Zambia National Shipping Company Ltd.). Chapter m examines the agencies facing the most serious financial problems, chapter IV examines the road transport industry, chapter V examines airports and other civil aviation while chapter VI deals with miscellaneous transport enterprises. Chapter VII finally discusses the overall financial performance of the government- owned transport sector, emphasizes the need for radical te form and summarizes the implications of adopting the financial reforms recommended in chapters III through VI of this report.  m. REVIEW OF AGENCIES WITH MAJOR PROBLEMS 11 Three agencies account for most of the deficits incurred by transport sector agencies and have the largest impact on the government's overall fiscal balance. They include the Roads Department (RD), Zambia Railways Ltd. (ZR) and Zambia Airways Corporation Ltd.(ZA). In FY91 and FY92 their losses amounted to K 4,268 million ($85 million) and K 4,911 million ($41 million) respectively (the losses consist of RD's revenue shortfall, ZR's government equity contributions and ZA's overdrafts and short-term loans) . The following sections examine each of the above agencies, identify th- causes of weak financial performance and outline ways to improve it. A. 'Mpg PRoads Sector 12 Zambia has a fairly extensive road network, although the density is low compared to other African countries. The spatial density is about 4 km per 100 sq. km (which is slightly below the average for Africa as a whole), while the population density is about 4 km per 1,000 population (which is about twice the average for Africa as a whole). The network includes 3,119 km of international trunk roads (T-roads), 4,048 km of main roads (M-roads), 23,882 km of district roads and 5,714 km of rural roads. Of this, about 2,979 km of T-roads, 2,008 km of M- roads and 1,489 km of district roads are paved. About 20,783 km fall under the jurisdiction of the central and provincial Roads Departments, while the zemaining 15,980 km are under the jurisdiction of 9 urban and 48 rural District Councils (see Table 1). It is estimated that the replacement costs of the road network are about $1.95 billion (i.e., the capital value of past investments, valued at current prices, less the backlog of deferred maintenance).  Table 1s Lenath and Costs of Maintalnina Trunk. MaLn and District Roads (kas and $, million at FY92 prices) Trunk "T" Roads Main "MW Roads District Roads Rural Roads iwos of Road tab RD .DCQ . RD DC RD DC DC Road Lengtls: Paved 2,916 63 1,991 17 1,489 - Gravel - - 1,211 - 1,049 _ Earth - _ 612 - 5,487 - _ Unclassifled 140 _ 216 - .6.L70 10.186 5.714 Total Length 3.0S6 9 , 4031 13- 8696 10.186 5.1 Maintesance Costs$ lbb Paved 11.66 0.25 7.96 0.07 5.96 0.00 0.00 Gravel 0.00 0.00 1.21 0.00 1.05 0.00 0.00 Earth 0.00 0.00. 2.19 0.00 2.19 0.00 0.00 0.00 Unclassified 0.06 0.0Q 0.09 0Q.0 2.27 4.07 2.29 Total Costs 11.72 Q 9.51 07 11.47 4.07 2.29 Notes: (a) RD - roads under the jurisdiction of the Roads Department; DC Roads under the jurisdiction of District Councils. (b) Maintenance costs have been estimated as follows (average cost p.a.): Paved: routine $1,500; periodic $2,500. Gravel: hand work $150; grading $400; regraveling $450. Earth: hand work $100; grading $150; spot patch $150. Unclassified: same as earth. A. 1 Cufent Fnincn Arrangements 13 Expenditures on RD roads were unbalanced during the entire 1980s (see Table 2). Maintenance expenditures (essentially recurrent expenditures on "Purchase of Goods", together with maintenance by Provincial Roads Departnents) in FY86 were only K 19 million ($2.7 million), compared to project expenditures of K 224 million ($30.7 million). RD was thus spending nearly twelve times as much constructing new roads as it was maiaining tL. existing network. Maintenance expenditures thereafter increased until they reached K 305 million in FY91 ($6.1 million) compared to project expenditures of K 429 million ($8.6 million). Much- of the project expenditures were furthermore for rehabilitation, so that nearly all road spending now concentrates on maintaining and rehabilitatng the existing network. Budgeted allocations for maintenance in FY92 increased to K 587 million, but devaluation has reduced its real value to $4.9 million. Project expenditures for FY92, again almost entirely for rehabilitation, are budgeted at K 791 million ($6.6 million).  -6 - Table 2. Central and Provlnda Roads Denartment: Revenues and Exesnditumr (Kwacba, miln) Revised Busins Estmatw Esmat as Usual Revised Item 1986 1987 1988 1989 1990 1991 1992 (a) 1992 Rovenue: Internadonal Trnsit Feo - - * 7.005 47.560 82.000 82.000 216.000 Fuel Charge (b) Gasoline - - - - - - 346.140 Diesel . - - - - - 320.320 M.V. Licensa 3.339 4.821 4.556 2.017 6.000 8.000 10.000 123.600 Road Toil Zaire Pedicle 0.358 0.106 0.027 0.678 0.255 0.300 0.350 0.3S0 Other - 6.495 0.026 0.048 - - Road Taffic Collections 0.845 .7_42 4.412 9.450 15.000 1S.000 .lS000 lS.000 Total Revenue 4.542 12.169 9.021 19.198 68.81S 10S.300 107.3S0 1021,410 Expenditutes: Personal Emoluments 13.685 1S.100 17.213 20.318 S.374 13.482 21.673 21.673 Recurent Expenses Allowances 0.180 0.520 0.640 0.840 1.657 8.000 13.510 13.510 Purchase of Goods 19.442 23.215 30.490 64.675 34.19S 224.001 479.264 479.264 Purchae of Sevices 0.28S 0.470 1.062 1.138 1.513 5.260 18.09S 18.095 Training 0.100 0.090 0.100 0.400 - - - CApita Expenditure Movable Asst - - - - - 2.000 90.000 2.000 Projects 222.543 175.06S 199.093 311.000 498.404 419.500 791.000 791.000 (c) Mechanical Services (30%) 13.046 7.485 ? ?- - - Road & Road Traffic Board 0.241 0.389 0.418 1.732 3.791 8.728 17.774 * 17.774 * Road Trtf Commissioners (d) 1.042 1.047 1.479 2.693 1S.898 23.110 39.983 * 39.983 Provincia Roads Dept. Admin & Overhead - - - - S3.796 171.995 229.298 * 229.298 * Maintenance (e) S4.730 81.293 108.377 * 108.377 * Projects (f) 1S49 1834 2 595 2.944 4.939 9.340 ? 0.0 Sub-Total 272.113 225.215 253.090 40S.740 674.297 966.709 1.808.974 120. Surplust(Deficit) (267.571) (213.046) (244.069) (386.542) (605.482) (861.409) (1,701.624) (699.564) Notes: (a) Busineu as Usual means 1992 Estimate without policy shif. Figures include actual project capital expenditure. (b) Excludes geneal revenue taxes. (c) Excludes capital expenditure on plant and equipment. (d) Includes expenditure of provincial traffic commissioner. (e) Maintnance of Provincl roads funded thrugh the Prime Ministers Office. Includes expenditures on fuel, spae past, maintenance matrials and cycle maintenancoe. (I) Ptoject expenditure on feeder roads and road maintenance camps funded under the Provincial HQ vote. * = Estimate.  -7- 14 Mainienance expendicures are well below the levels needed to keep the road network in a stable long-term condition. This Is reflected in recent road condition surveys. In 1984 the proportion of the paved road network in good, fair and poor condition was 40, 30 and 30 percent respectively which was close to the average for East and Southern Africa as a whole. However, by 1990 these proportions had worsened to 20, 40 and 40 percent respectively. A rough calculation suggests that an optimal maintenance regime (i.e., one which minimizes the sum of vehicle operating costs and road maintenance costs) would involve annual expenditures on RD roads of about $33 million ($21 million for T & M roads and $12 million for district roads). Although these figures are not strictly comparable with RD expenditure estimates (which exclude the costs of administration and equipment), the differences between the two sets of figures are starding. Expenditures on T & M roads were K 224 million ($4.5 million) in FY91 and a mere K 479 million ($4.0 million) has been budgeted for FY92. Even if these figures were doubled to allow for the costs of administration and equipment, they would still be less than 40 percent of optimal requirements. The comparable figures for district roads are K 81 million ($1.6 million) and K 108 million ($0.9 million) respectively, which is only 10 #', 20 percent of optimal requirements. 15 The condition of DC roads is no better. Indeed, roads under the jurisdiction of rural DCs are often impassable during the rainy season and this has a serious effect on agricultural output. The urban DCs have a broader tax base and this is reflected in their spending patterns. As an example, selected financial data for Kabwe Urban DC are presented in Table 3. The table shows that urban DCs have a narrow tax base and rely heavily on transfers from central government. The only effective local taxes are rates levied on property and these are notoriously difficult to collect. Furthermore, although the new local government act proposes to give DCs additional taxation powers, they do not go beyond residential and commercial rates, and local sales taxes. Revenue mobilization at the DC level will therefore remain weak. The table also shows that Kabwe Urban DC spends about 13 to 14 percent of its income on maintenance of roads and drainage, but that this only covered about 20 percent of optimal requirements in FY90. Although budgeted allocations for FY91 would cover nearly 50 percent of requirements, the increased spending is almost entirely dependant on estimated increases in the claw-back on local sales taxes and increased profits from shops and liquor undertakings.  -8 - Table 3. Revenues and Selected 3 ditur: Kabwe Urban DC (Kwachi, at 1991 prices) FY90 FY91 Approved Estimate Source gf Revenues: Local Taxes Rates 6,000,000 13,283,360 Personal Levy (head tax) 20000 5000 Sub-Total 14.233.360 Transfers From National Taxes Grant in lieu of Rates 389,890 358,400 Share of Local Sales Tax 8,94.760 42.941.450 Sub-Total 926A8.650 43.299.850 Other Net Revenue Interest 70,000 75,000 Low-Cost Housing (1,797,840) (3,596,087) Water & Sanitation Services (184,810) 2,335,789 Shops & Liquor Undertakings 340,430 8,864,346 Factories, Motels, etc. 4,21L,160 6.101.132 Sub-Total 2.645.940, 137280.180 Total District Revenues 18.83Z.U0I 71.313.390 Population 166,619 166,619 Local Taxes/Head 41 85 District Revenue/Head 1 ' 3 428 National Taxes/Head 2,626 4,730 District Revenue/National Taxes (%) 4.I 9.0 Selected Expenditures: Road Maintenance & Drainage Actual and Budgeted 2,395,286 9,765,758 As % of Total District Revenue 12.7 13.7 Desirable Level of Expenditure 11,600,000 20,000,000 Actual and Budgeted/Desirable (%) 20.6 48.8  -9 - 16 Inadequate allocations for maintenance have had three important effects. First, routine maintenance has effectively ceased and, even when funds are available, there is a chronic shortage of vehicles to transport laborers to where they are needed (vehicles are sometimes available, but get commandeered for other purposes). Most of the available funds are being used to carry out periodic maintenance on paved roads. As a result, the road network has deteriorated, vehicle operating costs have risen substantially (by two to three times the shortfall in maintenance allocations) and some rural roads have become impassable, particularly during the rainy season. It is estimated that about $250 million now needs to be spent rehabilitating paved roads and a further $150 million probably needs to be spent rehabilitating unpaved roads. In other words, about $400 million of public capital has been eroded through lack of maintenance (i.e., nearly 20 percent of the total capital invested in roads). These roads either need to be rehabilitated, or abandoned. 17 Second, road rehabilitation has become a substitute for regular road maintenance. Donor willingness to finance rehabilitation of roads (and in some cases even routine maintenance of these roads for a period of five years after rehabilitation) has avoided the need to put road maintenance on a sustainable financial basis. Roads are rehabilitated, receive little or no maintenance and after ten years again require rehabilitation. Third, lack of maintenance has eroded the physical capacity to plan, mobilize and undertake road maintenance. It has also destroyed the financial controls needed to ensure that allocations fcr maintenance are not diverted to other uses. The country's road maintenance capacity has withered away through disuse and now needs to be rebuilt. 18 One of the reasons for the acute shortage of finance, is that road users are paying negligible sums for use of the road network (see Table 2). License fees have not kept up with inflation and, more important, fuel taxes have been confined to a standard excise tax without any additional road user charge (gasoline is taxed at 30 percent and diesel at 28 percent).1/ The only significant source of revenues are the international transit fees introduced in FY89. The fees are payable in foreign exchange and started off at $60 per goods vehicle, but were increased in November 1989 to $120. The fees are collected on behalf of the government by British Petroleum Ltd. (BP) at centers in Lusaka, Kitwe, Livingstone and Chipata and are credited to the Ministry of Finance account at the Bank of Zambia. The arrangements for collecting these fees are vague. The funds are treated as miscellaneous revenue by the Ministry of Finance (instead of as road toll revenue) and there appears to be no arrangement for dealing with interest payments while funds await transfer to the Bank of Zambia (they sometimes wait 9 months before being transferred). 19 The international transit fee was replaced in June 1992 by the new Preferential Trade Area (PTA) harmonized road transit charge. The proposed charge is $8.00 per 100 km for heavy goods vehicles with more than 3 axles and $3.00 per 100 km for rigid goods vehicles without trailers. A typical international transit vehicle in Zambia has 6 axles and travels 800 km across Zambian territory and 900 km in adjoining countries. The new PTA charge for such vehicles would thus be $64, compared to the existing fee of $120. A Zambian vehicle, which has to pay to travel 900 km in the adjoining country, would pay a fee of $72. This represents a significant reduction over the existing fee level of .120 and PTA members are planning to meet in Maputo 1/ Officials at the Ministry of Finance confirmed that tax rates on transport fuels were designed as general taxes and did not include any element to reflect road user charges.  - 10- to discuss ways of revising the fees. The current suggestion is that each country should be free to set its own fee level. A.2 Options for Reform 20 There is a clear need to put the financing of roads on a sustainable long-term basis. Routine maintenance has virtually ceased, periodic maintenance is well below the levels needed to keep the road network in a stable long-term condition, the capacity to undertake road maintenance has been seriously damaged and about 20 percent of the capital invested in roads has been eroded through lack of maintenance. These problems apply at both central and district government levels. At the same time, road users are paying next to nothing for use of the road network. User charges cover a mere 6 percent of annual expenditures on roads, with the balance of the revenues, over K 1,700 million ($14 millio)n) in FY92, coming from the government's scarce general revenues. 21 The task for the road sector is thus to: (i) mobilize sufficient revenues to ensure that the road network can be operated ana maintained on a sustainable basis; (ii) devise managemen; arrangements to ensure the funds allocated for maintenance are not confused with the government's general revenues and diverted to other purposes; (iii) revise arrangements for financing maintenance of DC roads; (iv) ensure that the capacity to undertake road maintenance is rebuilt and that effective procedures are put in place to control increased road maintenance expenditures; and (v) after resolving items (i) to (iii), develop a program to rehabilitate a core road network which the country can afford to maintain on a sustainable basis (there is no point rehabilitating roads which can not be maintained). A.2.1 Revenue MobilizatiQn 22 The government is seriously short of fiscal revenues and it is unrealistic to imagine that additional revenues for road maintenance could be allocated from the government's recurrent budget. Of necessity, the road sector needs to become more self-sufficient and will have to generate additional resources by raising road user charges. There are three charging instruments which could be used to mobilize these revenues: (i) international transit fees; (ii) vehicle license fees; and (iii) fuel charges. 23 The original international transit fee was $120 per goods vehicle and the new PTA agreement has lowered this to an average of $64 per vehicle. This is a large reduction and, for purposes of revenue mobilization, it is assumed that the proposed meeting in Maputo, which will discuss the suggestion that each country should set its own fee level, will enable Zambia to reinstate the original $120 fee. In FY90, transit fee revenue amounted to $1.64 million (all paid in foreign exchange) and this is expected to rise to $1.80 million in FY92 and $1.98 million in FY93. Since the fees are collected on an agency basis, BP needs to be paid a commission for collecting these fees. However, any interest earned on fee payments awaitirn transfer to the Bank of Zambia, should be treated as part of the fee income. The Ministry of Finrance should keep accurate records and not treat these fees as miscellaneous revenues. 24 Vehicle license fees have not been consistent'y adjusted for inflation and are low by regional standards. A large part of the vehicle fleet also appears to be unlicensed and uninsured (see Annex 1). It is therefore suggested that these fees be raised over a period of five years to levels similar to those in countries like Kenya and Uganda. This would raise average annual license fees for passenger cars from $21.00 to $75.00, for buses from an average of $37.50 to  - 11 - $300.00 and for trucks from an average of $45.80 to $500.00. Provided all non-govrnment vehicles are licensed (i.e., the Administration and enforcoment of the license system i8 substandally improved), this would mobilizo about $1.03 mUUilon duri PY92 and $5.45 million In FY96 when the fllI fees were payable (see Table A.2). 25 In the case of fuel, the suggestion Is to add a supplementary road user charge to the price of gasoline and diesel fuel and agaia to introduce the increases over a period of five years. The charge for gasoline would rse from K 3 per liter in FY92 to K 13 per liter ln FY96 and this would raise the pump price r-r liter of premium gasoline from the present level of K 86 ($0.72) to K 89 ($0.74) in FY92 and to K 99 ($0.83) in FY96. iibe charge for diesel fuel would likewise rLse from K 2 per lter ln FY92 to K 10 per liter in FY96. This would raise the pump price per liter of diesel from the present level of K 49 ($0.41) to K 51 ($0.43) in FY92 and to K 59 ($0.49) in FY96. The build-up of these prices is sbown in Table 4. The new charges would generate K 666 million in FY92 and K 3,628 in FY96 ($S.6 million and $30.2 million respectively). Table 4. Build Up of Retal PUaO Prim of Fuel In LUka (Kwacba nd $ at Jan. 1992 prims) Premium Gasolin Rcguar Gasoline Diesel Kerosene K/cu m S/iter K/ou m S/iter K/lcum S/liter K/cum S/L;tcr Border Pice 37,320 0.31 37,320 0.31 34,668 0.29 34,740 0.29 implcit TaxI(Subuidy) 16,480 0.14 7,780 0.06 (5.36b) (0.04) (5,640) (0.05) Wholuale Prce 53,800 0.45 45,100 0.38 29,300 0.24 29,100 0.24 Excise Duty @30 % 16,140 0.13 13,530 0.11 @28% 8,204 0.07 i1s % - 4,365 0.04 Tenninal oFC 200 0.00 200 0.00 200 0.00 200 0.00 Transpot Coat a K1S.0 per km/cu m 4,665 0.04 4,665 0.04 4,665 0.04 4,665 0.04 Company Margin 0 7.5 % 5,610 0.05 4,762 0.04 3,178 0.03 2,875 0.02 Dealer's Marsin @ 7.5 % 6,031 0.05 5,119 0.04 3,416 0.03 3,090 0.03 Total 86,447 0.72 73,376 0.61 48,963 0.41 44,295 0.37 Pump Ptbc per lItr 86 0.72 73 0.61 49 0.41 44 0.37 PRice incing New Tax FY92 89 0.72 76 0.64 51 0.42 0.37 FYS6 99 0.83 86 0.72 59 0.49 0.37 Note: Exobahge rae used is K120 - $1.00.  - 12 - 26 The above price increases would make Zambia a relatively high-price country for gasoline (which, as a land-locked country, it should be), while the price of diesel fuel would still be average by regional standards (see Table 5). In FY96, the price of gasoline would be similar to that in Rwanda and Zaire, while the price of diesel fuel would be lower than Malawi, but higher than Zimbabwe. Fuel prices would remain low in relation to West African countries like Ivory Coast, Chadl, Senegal and Niger. It would also be low compared to industrialized countries (where premium gasoline usually costs between $0.90 and $1.00 per liter, and diesel between $0.60 and $0.90 per liter). The proposed fuel charges would affect relative prices and create a large differential between the price of kerosene and gasoline/diesel. This would encourage vehicle operators to substitute kerosene for diesel fuel (there is always a temptation to do this when the price differential exceeds about $0.08 per liter) and encourage garage owners to mix kerosene with gasoline. Zambia fortunately colors its kerosene with blue dye and this should prevent mixing with gasoline. It is more difficult to discourage substitution of kerosene for diesel fuel and It is recommended that introduction of the new fuel charges be accompanied by increased enforcement (i.e., inspection of fuel tanks for blue coloration) to discourage substitution. Table 5. Prices of Gasoline and Diesel Fuel In Selected Countries (U.S. Cents at end 1991 prices) Fuel Price Fuel Price Country Gasoline Diesel Country Gasoline Diesel Tanzania 42 25 Zambia, FY92 72 41 Namibia 46 41 Zambia, FY96 80 47 Swaziland 46 41 Ghana 53 43 Zaire 81 73 Kenya 53 37 Rwarta 81 79 Burundi 63 61 Niger 94 81 Malawi 64 56 Ivory Coast 124 115 Cameroon 68 58 Zimbabwe 68 37 Germany 93 68 Botswana 68 61 U.K. 94 82 Uganda 69 55 France 99 64 Mozambique 74 26 Italv 124 95 27 The present tax rates applied to gasoline and diesel fuel result in gross tax rates of 19 and 18 percent respectively (the gross tax rate is the amount of tax divided by the final selling price). The above fuel charges would raise these gross tax rates to 30 and 32 percent respectively. The net customs and excise taxes applicable in Zambia are generally 15, 30 and 50 percent, depending on the type of commodity. If these were replaced by a broad-based commodity tax with a minimurm of exemptions (as recommended in the World Bank policy paper, Lessons of Tax Reform), the gross tax rate would probably be in the vicinity of 20 percent. In such a system, tax rate differentiation would be kept to a minimum and applied only to those items which justified higher rates on grounds of equity, or efficiency (i.e., where the item was known to have a low price elasticity of demand and Ramsey pricing suggested a higher rate in the interests of  - 13 - minimizing overall welfare losses). Gasoline and diesel fuel fall Into this category and tax rates of 2 and even 3 times the standard rate are usually justified (because of the low price elasticity of demand for gasoline and diesel fuel). An optimal fuel tax would thus be in the vicinity of 40 to 50 percent, suggesting two things: (i) the proposed fuel charges would result in overall fuel taxes which were economically efficient; and (ii) the overall welfare losses due to taxation would be reduced if the taxes on gasoline and diesel fuel were raised even fiuther (from 30 and 32 percent to nearer 40 percent) and other tax rates were lowered accordingly. 28 Timely implementation of the above arrangements would have a significant impact on the road sector's financial balance. It would reduce she sector's overall FY92 Business As Usual (BAU) deficit from K 1,700 million ($14 million) to about K 700 million ($5.8 million), although there would still be a shortfall of regular road maintenance of about K 3,300 million ($28 million). However, the shortfall could be completely eliminated by FY96 (see Tables 2 and 6). Indeed, by FY96, the road account (excluding the Roads and Road Traffic Board and the Traffic Commissioners, but including expenditures on traffic police) could cover all maintenance requirements and run a current account surplus of nearly K 400 million ($3.2 million). This surplus represents the internal financing available to support rehabilitation of roads and would provide most of the local currency required to support a realistic road rehabilitation program. A.2.2 Management Arranyements 29 Roads are important national assets. Their replacement value (assuming about 25 percent of their value has already been eroded through lack of maintenance) is about $1.95 billion, of which $1.46 billion is managed by RD and $0.49 billion by the various DCs. Few other enterprises in Zambia manage assets of comparable size. The net asset value of the National Airports Corporation is $50 million, while the estimated replacement costs of Zambia Airways and Zambia Railways are $120 million and $400 million respectively. Roads are clearly big business in Zambia. RD is nevertheless still managed as a government department. It offers terms and conditions of employment which are unattractive to managers and technical staff, keeps accounts on a cash basis, has no balance sheet and simply writes off new investments as soon as they are made.. Expenditures are firthermore financed from general revenues allocated as part of the annual budgetary process. In other words, RD's financial accounts lack transparency. There is limited managerial accountability and no market discipline. Revenues and expenditures are de-linked, road user charges are not separated from other taxes and the government does not know how much road users are paying for use of the national road network. Such arrangements may be suitable for agencies managing few assets and handling small sums of money (e.g., like minor regional airports), but are not suitable for an agency with assets worth billions and managing (with road maintenance fully funded) an annual recurrent budget of $33 million and a capital budget of $15 million. Roads need to be managed in a more business-like way. 30 The suggestion is that RD should be commercialized and required to account for its activities along regular commercial lines subject to a hard budget constraint. Under such arrangements, RD might eventually become an autonomous Roads Board, owned by the government but managed by a Board made up of er offlio representatives of government (e.g., ministries of Works & Supply, Communications & Transport, Agriculture, Industry, etc.) and representatives of the road transport industry. The Roads Board would be expected to collect its own revenues through the international transit fees, license fees and fuel charges outlined in section A.2.1 above, or to cause them to be collected by others under a clear agency arrngement. International transit fees could continue to be collected by BP and fuel charges could be collected by Zinoil and credited to the Roads Board. Current arrangements for  - 14 - collecting license fees also require revision. There is a great deal of evasion and the existing procedures administered by the Road Traffic Commission either need to be substantially Improved, or fees need to be collected by the proposed new Roads Board, which would have an incentive to minimize evasion. 31 The RoaAs Board would also be expected to prepare an income statement, a sources and application of ' jnds statement and to keep a balance sheet. The balance sheet should furthermore show the capital value of the national road network, the accumulated shortfalls of regular road maintenance (i.e., aggregate erosion of capital) and should write off road rehabilitation against this erosion. Cost accounting, in the form of performance budgeting, should be introduced to complement the commercial accounting systems to improve planning, execution and monitoring of road maintenance. An effective financial control system, supported by independent external auditing, should also be introduced to ensure that the substantial increase in funding envisaged under the above proposals are adequately accounted for. Finally, to further strengthen market discipline and promote more public involvement, fuel charges should be prominently displayed on all fuel pumps. The public needs to know what they are paying for roads to ensure they demand value for money and hold the Roads Board accountable for the efficiency of road spending. A.2.3 Maintenance of DC Roads 32 The above user charges would all be collected by (or on behalf of) the Roads Board. Some of the revenue would therefore represent charges for use of urban and rural DC roads and some mechanism would be needed to ensure these revenues reached the district level agencies responsible for maintaining DC roads. That does not mean all DC road expenditures should be financed from user charges. DC roads are mainly access roads (i.e., they include a lot of municipal streets and rural access roads), carrying low volumes of traffic and these roads are usually financed through a combination of central government grants, user charges and local property taxes. Part of the revenues collected at the national level nevertheless need to be remitted to DCs in the form of a block grant to support district road expenditures. 33 The example of Kabwe Urban DC showed that DCs have a narrow and relatively weak tax base (see Table 3). The urban DCs rely on property taxes and head taxes and, under the new local government act, may also start collecting local sales taxes. Rural DCs generally have a weaker property tax base (e.g., fewer commercial undertakings and less formal housing) and tax instruments which are more difficult to administer (e.g., taxes on movement of fish and agricultural produce). Kabwe Urban DC is allocating reasonable sums of district revenue to support spending on maintenance of roads and drainage. In spite of that, it is only meeting about 25 to 50 percent of requirements (the figure of 50 percent being an estimate which may not be realized in practice). Their tax base makes it unrealistic to imagine they could mobilize sufficient local revenues to meet all requirements or, if they did, that the funds would eventually be spent on maintenance of roads and drainage (rather than on other local expenditure programs). The local tax effbrt - at least in relation to DC roads - appears to be close to its limit. 34 The block grants made to support DC roads, may therefore bave to cover up to 50 percent of local maintenance requirements. This issue nevertheless needs to be examined in more detail, since some DCs are more solvent than others and introduction of a block grant system offers an ideal opportunity to encourage greater local tax effort. Table 6 has therefore assumed, for illustrative purposes, that the average grant amounts to about 30 percent of aggregate DC road maintenance requirements. Administrative arrangements for making such block grants would also have to cover: (i) preparation of a credible road maintenance program; (ii) assurances that funds would be spent on road maintenance (supported by appropriate technical and financial auditing procedures); and (iii) an agreed formula for estimating block grant entitlements (based on length and type of road, population and income levels).  - 15 - Table, . Indicative Fnanuina Plan for Trunk. Main and Disrit Roads (a) (Kwacha, million, at FY92 prices) PY 92 FY93 FY94 FY95 FY96 Revenues: Internationa Tansit Fos (b) 216.00 237.60 261.36 287.50 316.25 Annual Licpnse Fees (c) 123.60 266.45 420.53 586.50 765.09 Fuel Carges (d) GasoHne 346.14 659.97 998.36 1,362.76 1,754.72 Diesel 320.32 666.27 1,039.37 1,441.27 1,873.65 Other 15.35 15.96 16.60 17.27 1.96 Total Revenues 1,021.41 1.846.25 2,736.22 3.695.29 4.727.65 Admnitradion (f) 55.28 57.49 59.79 62.18 64.67 Maintenance of T & M Roads Paved (g) ) 517.97 988.85 1,600.99 2,354.40 Gravel ) 479.26 58.08 87.12 116.16 145.20 Eabth ) 11.52 17.28 23.04 28.80 Unclasified ) 7.20 10.80 14.40 18.00 Maintenance of District Roads Paved ) 286.08 429.12 572.16 715.20 Gravel ) 108.38 50.40 75.60 100.80 126.00 Earth ) 105.12 157.68 210.24 262.80 Unclassified ) 108.96 163.44 217.92 272.40 Contib to Distict Roads (h) 96.19 144.29 192.38 240.48 Traffic Police (i) - 10037 104.39 108.56 112.91 Total Expenditures 642.92 1399.38 2.238.35 3.218.84 4.340.85 Profit/(LOss) 378.49 446.87 497.87 476.4S 386.80 Percntgo of Maintenance - 0.40 0.60 0.80 1.00 Financed Notes: (a) Tmffic is assumed to grow at 4 percent p.a. Maintenance requibments are assumed to remain constant. (b) Based on cuurent toi revenue increasing at 10 pect p.a. (c) Fes rise from $1.7 to $S for motorcycles, from $21 to $75 for cam, from an average of $37.5 to $300 for buses, fiom $16.7 to $125 for vans and from $45.8 to $500 for tucks over the five year period. (d) The gasolin charge rises from to K 2 to K 13 per liter and diesel from K 2 to K 10 over the period. The revenue estimates are based on 1989 fuel sales. (e) Ie maintenance requiments based on $4,000 per hn for paved roads, $1,000 for gravel roads and $400 for earth and unclassified roads. (f) Based on esdmated 1991 budgeted expenditures an Personal Emoluments. Allowances, Purcas of Servicoes and Moveable Assets. (g) Length of road under maintenance increases from 3,500 to 6,396 km during the period; the romainder of the paved rads are being rebabilitated. (h) This asumes that centl goverment meets 30 percent of the ideal mainteance costs of District Council roads by FY96. (i) Based on 15 percent of Police HQ budgeted costs.  - 16- A.2.4 RoaVMaintenance Capacity 35 The technical capacity to undertake road maintenance also needs to be rebuilt. The process nevertheless needs to bear in mind the following factors. First, RD has had difficulty managing and maintaining road maintenance equipment. Maintenance arrangements with the former Mechanical Services Department (MSD) were not satisfactory and RD does not employ ESCO to maintain its mechanical equipment. As a result, repair and maintenance of equipment is problematic and RD also has difficulty recruiting and retaining qualified heavy equipment operators. The difficulties experienced with the Bank's previous highway project were largely due to problems with mechanical equipment. The equipment and spare parts were procured, but the re-equipped resealing and re-graveling units remained idle for much of the time, due to inadequate budget allocations, and little road maintenance was undertaken. Second, RD finds it almost impossible to recruit and retain qualified engineering and technical staff and has to rely on technical staff financed by foreign donors (about half the authorized technical staff positions are vacant and many are under-filled). Third, world-wide experience has demonstrated that most road maintenance activities can be sub-contracted, that this improves quality and can reduce costs by as much as 10 to 20 percent (when force account work is fully costed). Fourth, Zambia appears to have a number of competent local consulting engineers (who are continually losing qualified local engineers to firms in Botswana) and there are a number of local civil works contractors capable of undertaking road maintenance work. 36 One way to rebuild road maintenance capacity is thus by involving the private sector. Local consultants (strengthened, as necessary, through existing associations with foreigT. partners) could be used to prepare bid documents, issue and evaluate tenders and supervise the ensuing maintenance work. Local contractors are likewise capable of undertaking most types of maintenance, provided it is appropriately packaged to suit their physical and financial capacity. It is therefore suggested that sub-contracting work to the private sector should become the main instrument for rebuilding road maintenance capacity. 37 In rural areas, it is suggested that maintenance of gravel and earth roads under the jurisdiction of RD be undertaken by way of individual labor sub-contracts (i.e., through the lengthman system). These are labor contracts under which rural residents are given short sections of road (usually about 5 km) to maintain by hand with a minimum of hand toels. The work includes vegetation control, clearing drains and filling potholes and can usually be planned to avoid conflict with the demands for agricultural labor. The role of RD would be confined to supervision, providing hand tools (usually leased to laborers) and paying for work completed. The lengthman system has many advantages. The main ones are that it provides a welcome form of income support to rural areas (particularly for female household heads), the labor does not have to rely on motorized transport to site (the lengthmen either live near the road, or can get there by bicycle) and, since the lengthmen are maintaining roads they themselves use, they have a strong incentive to keep them in good condition. 38 Sub-ontracting would also change the role of RD. Under this scenario, RD would become a more specialized agency, with a smaller and better paid staff. They would primarily be planners, facilitators and paymasters. They would plan all road expenditures, recruit private sector consultants, select contractors based on the consultants' bid evaluations and disburse fimds after work had been satisfactorily completed. They may also need to undertake emergency maintenance and some routine maintenance on paved roads. RD would need to retain the capacity to undertake such work. Any labor made redundant through the proposed reorganization of RD would furthermore have to be voluntarily transferred to private contractors undertaking  - 17 - road maintenance, or otherwise compensated through introduction of a formal labor redundancy scheme. A.2.5 Roaneabltd 39 There is currently a large backiog of road maintenance which needs to be made good. Total requirements are in the vicinity of $500 million, of which $243 million relates to rehabilitadon of 3,054 km of paved :3ads. RD has prepared a program for rehabilitating these roads (and constructing some new ones). It envisages development expenditures rising from K 1,432 million in FY91 ($29 million with a 73 percent foreign exchange content), through K 6,727 million in FY92 ($56 million) and K 7,576 million in FY93 ($63 million), to K 5,700 million in FY94 ($48 million with a 90 percent foreign exchange content). These proposals are unrealistic and the revised FY91 and FY92 estimates instead budget for K 420 million and K 1,098 million respectively, excluding projects financed through provincial roads departments (see Table 7). The final program, as amended by the FY91 and FY92 budget discussions, furfther reduced the FY93 approved budget allocation to K 791 million.  Fm-~~~~~~~-8 __AL AL 2h2. L _& _& 221 Q1 ML A L DcAiaa 8so-Wyatc ow .0 0.0 8.0 40.0 0.0 40.0 40.0 0.0 40.0 40.0 0.0 40.0 Soiwa.CdMWWBMua 83.0 0.3 100.0 80.0 0.8 176.0 220.0 0.0 220.0 250.0 0.0 250.0 4UWMadw Didge 3.0 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Lusaka-Kaomas (CHI) 20.0 1.2 80.0 350.0 0.0 350.0 300.0 0.0 300.0 300.0 0.0 300.0 Mm- *wo ea kuomp(ITA) 10.0 0.0 10.0 50.0 0.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0 KCaUe4MisUmdiU (ULAID) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 tdeZobc (KM) 2 T.0 2.7 157.5 54.0 0.6 130.8 60.0 1.5 240.0 60.0 1.0 180.0 BtidgoWogka 9.0 0.0 9.0 10.0 0.0 10.0 0.0 5.0 600.0 0.0 5.0 600.0 Qu"(ROM110) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cbo.a.Naawaa 10.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 XafOeMOaa (Pb. 1) o(ORAD) 0.0 0.0 0.0 10.0 0.4 56.0 20.0 6.0 740.0 20.0 6.0 740.0 Eapiri..aiol(DANJDA) 0.0 0.0 0.0 10.0 0.4 53.2 15.0 10.0 1,215.0 20.0 6.0 740.0 Luaak.Ktw 0.0 0.0 0.0 10.0 0.4 53.2 66.0 10.0 1,26.0 66.0 10.0 1,26.0 PI"e. & Eis 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 LuaasKbwo (u C 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 eaiwLuuks (UMAD) 0.0 0.0 0.0 40.0 0.2 68. 20.0 12.0 1Q460.0 20.0 6.0 740.0 LCw BMa. (JAPAN) 0.0 0.0 0.0 10.0 0.2 38.8 20.0 4.0 500.0 20.0 0.5 80.0 Livinguow.smboeb 30.0 0.2 40.0 40.0 0.0 40.0 50.0 0.0 50.0 60.0 0.0 60.0 LuRkd(Up S 0.0 0.0 0.0 10.0 0.2 29.2 20.0 8.5 1,040.0 20.0 8.0 980.0 (DANIDA+ADD) Road-Mainnance audy(ADD) 0.0 0.0 0.0 0.0 0.0 0.0 6 0 7 7 I O cbd Awio (ADD) .0 0.0 . 0.0 0.0 0.0 QO 7 --I --o s SubTtda Roash 00 00 Q 0 0 .0 0L. 07.0 70671.0 06.0 EL S.0.0 aCtchtgaao Mirs 0.0 0.0 0.0 3.0 0.4 45.0 3.Q 0.4 45.5 3.5 0.4 40.5 X . Railway 4l D) 0.0 ~ 0.0* g. 1. 0.4 88.0 20,0 60 320.0 20.0 LO 170 0 Sub-Total Od0 E.0 0, 0.0. 10. 0.4 2 66.0 10.0 1,. 66L 10.0 1,26. TOTAL ONGOING ML .. g~ ZtL 52 59.7- MI 929.5 43.9 6.91. B.Railways Railway P. Radio 0.0 0.0 0.0 0.0 0.0 0.0 2.5 0.5 62. 0.0 0.0 0.0 Loo Rebabiittio 0.0 0.0 0.0 0.0 0.0 0.0 18.8 49.0 5,898.8 0.0 0.0 0.0 Track2.pair& Uppadla 0.0 0.0 0.0 0.0 0.0 0.0 140.6 3.7 584.6 140.6 3.7 584.6 siwan-VLuhTck Ro( waS 0.0 0.0 0.0 0.0 0.0 0.0 532.5 12.3 2,008.5 0.0 0.0 0.0 Raiway Wodahop oqoipmooa 0.0 0.0 0.0 0.0 0.0 0.0 1.3 1.0 121.3 2.5 2.0 242.5 allat Qiuavia 0.0 0.0 0.0 0.0 0.0 0.0 3.0 3.9 49.0 30.0 3.9 40.0 jaLe Railway ipdM 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0. 60.0 37.S 5.4 680. 1iisdMd &GCutTt1aD 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.2 24.5 2.0 1.1 134.0 rtck Maint po 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 42.0 7.5 1.6 19.5 UaiRiflo 1ML gL L 40 i 8S.0 8. 24. 320.0 a 10 -1.0 TOR gL OMA 2Al 1.. 31. ZL nL 4.21-7 1233L. 95.7 2439 19 NAi.m AiPsa 10.0 1.0 60.0 48.0 2.4 336.0 48.0 2.4 336.0 48.0 2.4 336.0 Dept of Civil Aviation 3L AL AL 22&. AL lL 22& AL ILL- 1290 ELo .1 Sub-ToialAvistion Ia& LA. .. fZ