Malawi - Transport sector review : selected issues (Vol. 1 of 2) : Main report

Report No. 9908-MAI Malawi Transport Sector Review Selected Issues (In Two Volumes) Volume 1: Main Report August 10 1992 MICROFICHE COPY lnfrastructure Operations Division Report No, Southern Africa Department Title: rt ANo SO9R8MAI Type ( SEC) Author: BURNS, J. Ext. :35550 Room:J11125 Dept.:AF61A FOR OFFICIAL USE ONLY G 2 V. Document Of the World Bank '. -. This document has a restricted distribution and may be used by recipients orMy in the performance of their official duties. Its contents may not otherwise fdisowd witho Woru d Bank authorization.  CURRENCY EQUIVALENT (as of November l, 1991) Currency Unit - Malavi Kwacha (MK) US$1.00 MK 2.86 MK 1.00 l US$0.38 MK 1.00 - 100 Tambala GOVERNMENT OF MALAWI FISCAL YEAR April 1 to March 31 WEIGHTS AND MEASURES 1 kilogram (kg) - 2.2 lb I metric too (mt) - 2,204.6 lb 1 liter (1) - 2.116 US pints 1 hectare (ha) - 2.471 acres 1 cubic meter (cm3) * 35.3 cubic feet 1 kilometer (km) - 0.621 miles GLOSSARY OF ABBREVIATIONS ABA - African Ruitineesmen's Association ADMARC - Agriculture Development Marketing Board AFRAA - African Airlines Association AfDB - African Development Bank APRAA - African Airlines Association BA - British Airways CFH-t! - Caminho de Perro-Norte. Hozambique DCA - Department of Civil Aviation DSS - Decision Support System DEMATT - Development of Malawi Traders Trust DTM - Directed Track Maintenance EPD - Economic Planning and Development Department GOM - Government of Halawi GSA - General Sales Agent IATA - International Air Transport Association INDEBANRK - Investment and Development Bank of Malawi INDEFUND - Investment and Development Fund of Malawi KRA K Ramazu International Airport KLM - Royal Dutch Airlines LAM - Mozambique Airlines LPC Leasing and Finance Company of Malawi LS - Lake Services MMS - Material Management Systems MOP - Ministry of Finance MOTC - Ministry of Transport and Communications MOU - Memorandum of Understanding MOW - Ministry of Works MPF - Monthly Payment Factor MR M Malawi Railways MTIT - Mlnistry of Trade, Industry and Tourism NTC - Northern Transport Corridor NRZ - National Railways of Zimbabwe OAS - Operations Audit System OPC - Office of the President and Cabinet PCC - Petroleum Control Commission PR - Passenger Kilometers PRP - Prime Route Policy pVHO - Plant and Vehicle Hire Organization QAS - Quality Assurance System QM - Air Malawi RAP - Restructuring Action Plan ROC - Return on Capital Employed RSP - Road Service Permit RTA - Road Traffic Act RTC - Road Traf.ic Conmission RTD - Road Traffic Department RTOA - Road Transport Operators Association SM - South African Airwkys TEU - Twenty Foot Equivalent Unit (containers) SM - Stagecoach Malawi. Ltd. TR - Tanzania Railways UNHCR - United Nations High Commissioner for Refugees ZR - Zambia Railways  FOR OFFICIAL USE ONLY MALAWl TRANSPORT SECTOR REVIEW - SELECTED ISSUES VOLUME I Table of Contents Page No. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . I. INTRODUCTION AND OVERVIEW . . . . . . . . . . . . . . . . . . . 1 A. Purpose and Scope of Study . . . . . . . . . . . . . . . 1 B. Geographic Setting and Transport System . . . . . . . . . 1 C. Economic Development and Transport Policy . . . . . . . . 3 II. STRUCTURE OF DEMAND FOR TRANSPORT ... . . . 6 A. International Plows .... . . . . . . . . . . . . . . . 6 B. Transport Cost Savings ... . . . . . . . . . . . . . . 11 C. Future Demand .... . . . . . . . . . . . . . . . . . . 12 D. Domestic Flows .... . . . . . . . . . . . . . . . . . 13 III. MALAWI RAILWAYS - STRATEGY FOR RECOVERY . . . . . . . . . . . 15 A. Background ....... . .. .. . .. .. . .. .. . 15 B. Corporate Objectives and Strategy . . . . . . . . . . . . 16 C. Framework for Financial Viability . . . . . . . . . . . . 17 D. Restructuring Plan .... . . . . . . . . . . . . . . . 18 E. Tariff Restructuring .... . . . . . . . . . . . . . . 22 F. Management Effectiveness .... . . . . . . . . . . . . 22 G. Railway-Goveroment Relationship . . . . . . . . . . . . . 23 H. Projections and Action Plan . . . . . . . . . . . . . . . 24 IV. LAKE SERVICES . . . . . . . . . . . . . . . . . . . . . . . . 30 A. Introduction .30 B. Objective and Strategy ..... . . . . . . . . . . . . 31 C. Restructuring . . . . . . . . . . . . . . . . . . . . . 31 D. Operations Improvement .34 E. Financial Projections ..... . . . . . . . . . . . . . 35 V. AIR MAIAWI ......................... . 36 A. Background ....... . .. .. . .. .. . .. .. . 36 B. QM's Current Operations and Competitive Position . . . . 36 C. QH's Financial Position . . . . . . . . . . . . . . . . . 40 D. Current 'issues ..... . . . . . . . . . . . . . . . . 44 VI. PRIORITY ISSUES FOR ROAD FREIGHT TRANSPORT . ...... . 51 A. Background ..... . . . . . . . . . . . . . . . . . . 51 B. Industry Structure .... . . . . . . . . . . . . . . . 52 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  C. Institutional Constraints . . . . . . . . .... . . . 57 D. Recommendations . . . . . . . . . . . . . . . . . . . . . 60 VII. PRIORITY ISSUES FOR PASSENGER TRANSPORT . . . . . . . . . . . 62 A. Overview . . . . . . . . . . . . . . . . . . . . . . . . 62 B. industry Structure . . . . . . . . . . . . . . . . . 62 C. Regulatory Issues . . . . . . . . . . . . . . . . . . . . 66 D. Other Constraints . . . . . . . . . . . . . . . . . . . . 69 S. Rural Passenger Transport . . . . . . . . . . . . . . . . 71 F. Recommended Actions . . . . . . . . . . . . . . . . . . . 72 VIII. STRATEGY AND ACTION PLAN . ......... . . . . . . . . 76 ANNEXES 1. Transport Costs (Land, Port and Sea) as Percentage of the Commodity Value in Two Scenarios 2. Forecast of Exports and Imports of Malawi, 1990-2010, in Four Scenarios 3. Malawi Railwayst Basic Data and Key Performance Indicators for the Malawi and Some Neighboring Railways 4. Malawi Railways: Current Estimates of MR Assets and Depreciation 5. Malawi Railways (Including Lake Services): Cost Structure and Trend (1985/86-1989/90) 6. Malawi Railways: Operational Performance Targets 7. Malawi Railways: Current Estimates of MR's Usable Assets and Depreciation 8. Air Malawi: Financial Projections of Jet Aircraft Purchase Scenarios MAPS IBRD No. 23293 IBRD No. 23294 This report is based on the findings of a mission that visited Malawi in October/November, 1990. Mission members were Imogene Burns (Mission Leader, AF6IN), Yash Pal Kedia (AFTIN), Mats Gustavsson (AF6IN), Maria Kiwanuka, Made Kofod, Erik Ostergaard, Edward Ramsdell, Gary Roberts, Harold Shenton and Vim Spit, Consultants. The mission was also joined by Steve Siwande, Ministry of Transport and Communications, during the course of the review. The report was discussed with the government in Malawi in March 1991. Ms. Sonia Ainsworth provided graphics and secretarial support in the preparation of the report.  MALAWI TRANSPORT SECTOR REVIEW - SELECTED ISSUES VOLUME 1 Executive Suvnary Purpose and Scope of Study 1. The Malawi transport sector review focuses on modes of transport under the auspices of the Ministry of Transport and Communications (MOTC). Accordingly, the review covers key issues pertaining to Malawi Railways (MR) and its subsidiary Lake Services (LS), Air Malawi (QM), the road freight transport industry, and road passenger transport services. Roads, which fall under the Ministry of Works, have been covered elsewhere and are not addressed in this review. 2. The aim of the review is to identify the most. pervasive and pressing issues facing these transport subsectors. To a large extent these issues pertain to the efficient and effective allocation of resources, with specific emphasis on creation of a policy environment that can facilitate the necessary supply response from the private sector. The Government of Malawi (GOM) also is approaching a number of investment decisions throughout the transport sector, and the transport sector review aims to establish a context and sound principles for making such decisions. Of particular concern is the effective use of existing assets, improved financial performance of +-4 sector, cost reduction and, to the extent possible given the unce tain environment, minimization of risk. Background 3. As a landlocked country that depends on neighboring countries' overland routes and seaports for regional and international traffic, Malawi faces a range of difficult transport problems that have adversely affected prospects for growth and development. Foremost among these has been the insurgent activity in Mozambique, which by 1985 had effectively severed Malawi's traditional access to rail routes for imports and exports through the ports of Nacala and Beira. This same external unrest caused an influx of Mozambican refugees totaling one million, more than 10 percent of Malawi's population. The refugees continue to place additional strain on Malawi's economy, and food aid and services for the refugees further aggravate the shortage of domestic transport supply. 4. The alternative routes available for handling Malawi's external trade to and from InO Ocean ports vary greatly in length and reliability. The major tra':I ersion, from the Mozambican routes to the port of Durban in South *t -1 has not only increased transport distances by 200 to 300 percenu, but also the number of countries transited. This has had important implications for reliability, loss and damage, time in transit, as well as out-of-pocket cost. Recent  - ii - disturbances in the Tete Province in Mozambique, through which trucks following the fastest and most direct route to Durban have to pass, have exacerbated the problem. During periods of closure, trucks must instead travel via Lusaka and Harare at significantly higher cost. An alternative route through Tanzania, the Northern Transport Corridor (NTC), is being developed to provide a less costly alternative to the various routes to Durban, and although behind schedule, is expected to become fully operational by late 1992. In addition, the route to Nacala reopened in December 1989 with one train a week, later increased to two. However, disruptions still occur along the line, which carried less than five percent of Malawi's external trade in 1990. 5. The cost savings anticipated from the NTC and unhampered operation of the Nacala line are critical, as the economic burden associated with the closure of the Mozambican routes has been great. Prior to 1983, nearly 95 percent of all import and export traffic, in value terms, went through the Mozambique ports of Beira and Nacala. The shift via road/rail to Durban caused the overall c.i.f. margin to increase from about 20 percent in the 1970s to 40 percent by 1987. Expansion of Y-lawian-licensed international road hauliers led to modest foreign excha&ne savings and a reduction in the c.i.f. margin to about 38 percent in 1989 and 1990, but the disruption of the Tete corridor in 1991 increased the margin to an estimated high of 41 percent. In 1992 the corridor has again reopened and is being used for grain imports. 6. The end result of the uncertainty and efforts to keep as many transport options open as possible has been a dramatic decline in the efficiency of the sector. For example, MR has been kept going at full capacity in anticipation of the reopening of the Nacala line, but at considerable cost. LS also has been operating with excess capacity in anticipation of NTC traffic. Conversely, the position of international truckers has improved, and these truckers are capturing a substantial portion of Malawi's external trade. These hauliers generally offer service that is reasonably efficient and reliable and have the advantage of being able to provide door-to-door service. As shippers typically make their transport decisions based on the minimum "generalized" cost, such factors as reliability, and low frequency of loss and damage, can overshadow out-of-pocket cost, especially for higher value commodities. There is a valid concern that it will be difficult for the alternative modes, e.g., the NTC or Nacala line, to provide service of sufficient quality to win back the full complement of traffic. 7. This underscores the importance of developing efficient and reliable transport options, which are properly scaled to the nature and level of demand and thereby direct resources to their most efficient use. Once achieved, the potential savings could be considerable. The total transport burden to the economy at present is in the order of US$120 million. It is estimated that savings of up to US$28 million, or 24 percent, could be realized if security were no longer a problem and all corridors were operating optimally. These estimates assume that all services are priced to reflect their economic cost, i.e., to lnclude the cost of road investment and maintenance in the trucking costs, and an increase in rail tariffs and decrease in lake services tariffs to  - iii - reflect long run marginal costs. Specific issues that pertain to each subsector are as follows. Malawi Railways 8. As indicated, the strategic role for MR lies in its ability to provide, through its link with the Mozambican railway network, the shortest and most economical routes for Malawi's international traffic. While the reopening of the route to Beira is a long way off, the resumption of full traffic on the Nacala line could occur as early as 1994. However, the shift of international traffic to Nacala could be less than expected, i.e., about 300,000 tonnes or one-third of the peak traffic level of 1975. Contributory factors include changes in Malawi's trading patterns, GOM's policy to keep all corridors active, and the expanded capacity and efficiency of the road sector. In addition, there is little economic or financial justification for MR to continue in the local transport sector alone, given the low volume and short hauls of the local freight traffic. lf present operations and investment trends continue, losses as high as MK 60-70 million per year, equal to six percent of the government budget, could be incurred. With the drought, these losses could be even more. This underscores the need for a major restructuring of MR to direct scarce resources to those areas where MR has the comparative advantage and thereby rationalize the allocation of resources overall. Lake Sarvices 9. For many years, LS was the dominant mode of transport between southern Malawi and much of the central and northern regions of the country. However, the development of the road network during the past 30 years has reduced LS' relative importance, regional trade among the three countries sharing the coastal line of the lake remains limited, and LS presently serves mostly local freight and passenger traffic. This limited role is about to change, as LS is a critical link in the multi-modal NTC. LS also continues to be an important and, in some cases, the only link for certain communities. However, LS' current overall operating and financial performance is not satisfactory and its future role as a provider of services, either on its own or as a part of the NTC, will depend upon the capacity of LS to restructure and operate at a substantially enhanced level of efficiency and productivity. Of particular concern is the passenger service, which continues to sustain heavy losses. The passenger service needs to be restructured to focus on the otherwise inaccessible areas at the least cost, mainly through use of vessels of appropriate design and optimizing frequency of service. Air Halawi 10. Air Halawi (QM) is one of the smallest airlines and one of the few that has avoided the heavy losses and fiscal subsidies of many carriers in the region. However, there are a number of reasons for concern. QH only breaks even after taking into account the revenues derived from ancillary activities, depreciation charges that are insufficient to cover capital replacement needs, and a range of hidden  - iv - subsidies that, while not a cost to the airline, represent a cost to the economy. Further, QM took delivery of a new Boeing 737-300 aircraft in May 1991, with a second aircraft due for delivery in 1992.1/ An analysis of this two-jet aircraft purchase indicates a substantial cash deficit and a return on capital employed in the year 2t0'n of less than two percent. QM also is in the difficult position of being instructed to operate on commercial principles, while its authority to make sajor investment or operational decisions is limited. Fundamental issues that must be addressed include clarification of the respective roles of the government and airline management, regulation and ov3rsight, operational autonomy, and the appropriate aircraft replacement plan based on sound economic and finarnial principles. Road Freight Transport 11. Road freight transport presently accounts for about 95 percent of Malawi's import and export traffic, and an estimated 70 percent of domestic traffic. The industry functions competitively and there is no trucking parastatal. The Road Traffic Act (RTA), which provides the legal framework for the road transport subsector, in principle accords GOM the right to regulate all aspects of freight and passenger transport. Although the Act as presently administered is less constraining than in most neighboring countries, there are a number of issues to be resolved. These include the setting of maximum rates for domestic cargo; restrictions on joint haulage of passengers and freight or of for-hire and own-account cargo, which segment the market and reduce the density of demand in any given area;2/ confusion over regulatory requirements and procedures, as changes in requirements are frequently not gazetted and updated copies of the Act are unavailable; and inadequate enforcement of safety requirements. Safety aspects of the RTA are, however, being addressed under a current program. In addition, poor access to credit, the unavailability of used vehicles due to many years of import restrictions, and the high cost of new vehicles continue to represent significant constraints. Road Passenger Transport 12. The bus industry is composed of an intercity bus sector dominated, but now exclusively operated, by one large-bus carrier, Stagecoach Malawi, Ltd., urban services in four cities dominated by that same carrier, and a small minibus industry. The rural areas of the country, where the majority of the population lives, receive only minimal transportation services, and there is evidence of a pervasive shortage of supply, even in the more densely populated areas. Along with road freight transport, the road passenger transport industry is directly regulated under the RTA, and vritten requirements and IJQM also recently procured an ATR-42 turbo-prop aircraft for domestic services. 2/GOM intends to implement a rural motorized transport project that would demonstrate the feasibility of operating combined goods/passenger vehicles in rural areas.  l - ~~~~~~~~~~~v - proceduves are largely unavailable. However, unlike road freight, GOM is exercising its authority to control entry. exit, routes and fares for passenger transport. Bus fares are regulated through a country-wide uniform fare system. Control over entry and exit is limited primarily to making the award of the so-called prime rcutes to operators of large buses contingent upon acceptance of non-prime routes, typically on unpaved surfaces in rural areas. GOM is considering changing the prime route system, as it has been difficult to enforce, and resulted in limited service coverage in rural areas and the proliferation of illegal, potentially unsafe alternatives. 14inibuses, which were tightly regulated until recently, are now free to enter and exit any market upon receipt of a certificate of fitness. 13. Passenger t_ansportation in the rural areas is beset with a number of special problems, as roads typically are unpaved and may be impassable in the rainy season, operating costs are high, demand is cyclical, and the shortage of cash income places a significant constraint on the ability of people to pay. In many areas, improved non-motorized translortation may be better suited to the demand patterns and cost structure of rural areas. What is required is an intermediate level of transport between head-loading, which is expensive in time and energy, and small trucks. Such non-motorized vehicles could include bicycles and bicycle-trailers that can be hooked to bicycles or pushed separately, or farm vehicles suitable for use on bush tracks that have a wheel at the center to support the weight of the load. Barriers to use of non-motorized vehicles include lack of finance, import duties, and absence of local manufacturing facilities for both the vehicles and spare parts, as well as social resistance. Lack of suitable tracks and roads can also present a barrier, but this generally is not the case in Malawi with its excellent system of earth and gravel roads. To determine what options are best for Malawi, the Ministry of Local Government, with the assistance of ILO, has a non-motorized transport project under way. Strategy and Action Plan 14. To a large extent the issues facing the Malawi transport sector are policy-related, and as such can be addressed effectively through regulatory reform and restructuring of transport enterprises. This will entail making effective use of existing capacity, encouraging the private sector to expand its level of operations in freight and passenger transport, and taking the necessary steps for all parastat;als to attain commercial viability within a reasonable period of time. A matrix that identifies the recommended actione types of reform and purpose, priority, and agency responsible follo%'s. Key recommendations are summarized below. 15. The restructuring plan proposed for MR is directed towards enabling the railway to become fully commercially viable, defined as an adequate return on capital employed after meeting all variable and fixed costs and providing for depreciation adequate to finance all future replacement of assets. A plan is proposed that provides initiallr for MR to break even and subsequently to generate an adequate return to the economy. Although there would be some latitude for increasing tariffs  - vi - once efficient and reliable operations were provided, much of the gain must come from enhanced productivity *nd * scaling down of MR's asset base. The strategic plan to do so would involve a reetructuring o! products and operations, organization and staff, physical resources, tariffs and capital in line with realistic traffic forecasts and organinational goalo. In so doing, difficult decisions will be required, including the phasing out of mized trains, gradual elimination of passenger services once appropriate alternatives are provided for, relegation of uneconomic sections of the network to siding status, and a substantial reduction in staff. MR recently reduced the frequency of mixed trains from daily to twice-weekly service. The Government is currently studying additional optlons and preparation of a restructuring plan is under way. 16. Some restructuring will also be required for LS to become commercially viable, in particular to provide for greater autonomy with respect to tariffs, routes, marketing and management now that the NTC is about to become operational. Immediate action is 'equired to stem the large losses accruing to the passenger services. As a first step, the Chauncy Maples should be retired for reasons of both cost and safety, and service eliminated along the north-south leg where passengers could be served at less cost by road transport. The Ilala and Htendere could then be used to service the islands and those villages without alternative transport in the north and south, re,spectively. This would yield considerable operating cost savings, particularly with respect to fuel. The Government expressed willingness to consider operational changes, but only after further study to work out operational details. As a second step, suitable replacement vessels, such as landing craft, should be acqusired. Such vessels, if sized and scheduled correctly, could potentiLlly provide more frequent and safer service than the present vesseLs which are no longer suitable for the type of service and areas served. 17. The overall objective for QM, as for all the other transport parastatale, is commercial viability. Although there are a range of important issues that pertain to management autonomy and the ability to operate according to commercial principles, the most immediate issue for QM is the equipment replacement plan. Given that delivery has already been taken of one new Boeing 737-300, it is recommended that QM maintain the jet fleet on a one-aircraft basis, with, as has been done, replacement of the BAe 748 with another turboprop aircraft. Although there would be some operational inconvenience associated with the one jet-aircraft fleet, the severe financial penalty associated with the second aircraft would far outweigh the benefits. The purchase of the second aircraft should be deferred until a sufficient volume of additional traffic is assured on existing or new routes to support en economically viable operation. However, the Government uoes not consider this recommendation feasible at this time, partly because substantial payments have been made on the second aircraft. 18. The key issues with respect to road transport are institutional and regulatory. Although road transport has generally been managed well and without excessive control, there is an urgent need to replace the increasingly outdated and cumbersome RTA with a clear,  - vii - transparent set of regulations that provide for a safe and efficient industry, without economic restraints. For road freight transport, key actions would be to replace the current domestic road service permit with a commercial operating permit granted to all owners of Malawi- registered goods vehicles, and eliminate all controls on domestic transport rates. The same actions would pertain to road passenger transport, although given the present lack of competition in the industry, the eliminatlon of non-safety related regulation would need to be in a phased manner. The Government concurs with these recommendations, subject to further analysis, again to address implementation aspects. Consistent with the redefinition of activities away from economic control, MOTC also would need to be reorgauized to strengthen its management, planning and monitoring capacity. 19. In view of the range of policy reforms required, IDA's future strategy for transport would be to provide the donor coordination and assistance needed to effect such reforms. As there are few pressing investment needs, the central policy '1ssues could appropriately be addressed under a possible new adjustment credit, with a parallel technical assistance effort to help formulate and implement the policy reforms and institutional changes. This technical assistance could also help to determine a multi-year program of investments and technical assistance needs for the transport sector. Such investments and technical assistance could then be aggregated in a future project for which IDA would assist GOM in mobilizing funds from the donor community.  MALAWI RAILWAYS ACTION PLAN Completion Area of Reform Recommended Actio, Content/Purpose Schedule Business Restructuring i. Discontinue passenger services To avoid losses as average FY 1992/93 from routes where parallel bus passenger journey is short and services are available in Phase I. cost/pk is much higher than of the road mode. ii. Take immediate action on FY 1993194 E providing altematives and discontinue passenger services from remaining routes in Phase 11. iii. Stops accepting small loads from . To avoid losses from the FY 1991J92 0tal other than main originating and uneconomic operation of snall sxa-1 destination stations. loads. g 5a iv. Discontinue regular services on . To eliminate sections with very FY 1992)93 Border-Limbe section and run poor traffic density. e trains only on demand. v. Discontinue services on Lilongwe- . To eliminate sections with very FY 1992/93 Mchinji section and run trains only poor traffic density. on demand. 0 t" vi. Discontinue wagon-load service To avoid high cost of servicing FY 1991/92 . t. from/to private sidings that are private sidings on a single wagon v ,l unprofitable to service. basis. ti '4 Business Development and i. Concentrate on: bulk traffic, . To improve average freight haul FY 1991/92 Marketing Strategy clients with private sidings, and and obtain more NTKs with block train operations. less/sane tonnage. ii. Offer incentives for faster . To improve wagon tumaround. FY 1991/92 loading/mloading of trains and loading of wagons to full capacity.  Completion Area of Reform Recommended Action Content/Purpose Schedule Operations Restructuring i. Gradually increase the share of To increase productivity of FY 1993/94 block, through and dedicated locomotives and other assets. trains. ii. Terminate trains in the users' . To avoid freight train delays. FY 1991/92 premises instead of railway yards as far as possible. iii. Switch over to Directed Track . To enable staff reduction and FY 1992/93 |4 Maintenance. improve track quality. iv. Maintenance of locomotives to be . To reduce maintenance cost and FY 1991/92 based on kms and not hours. improve locomotive reliability. l 0 Resource Rationalization i. Restrict the assets on MR to those . To reduce maintenance and FY 1992/93 0 required for efficient operation. operating cost and improve l0 utilization of assets. W o ii. Operate the fleet of locomotives Is." and wagons as required and sell/hire out/mothball. iii. Restrict investment to the . To reduce depreciation charges FY 1994/95 l minimum required. and improve return on capital Ol employed. 9 c iv. Close commercially inviable . To reduce operating costs. FY 1994/95 l stions. l e v. Consolidate maintenance . To attain advantages of increased FY 1994/95 l A workshops and facilities. scale of operat;ons and reduce l: H costs. Ca Organization Restructuring i. Conduct a detailed reorganization . To define the positions to be FY 1991/92 and redesign study. abolished/merged. ii. Implement reconunended . To reduce costs and improve FY 1992/93 .____________ organization design. management effectiveness. Staff Reduction i. Gradually reduce staff to 1 ,000. To reduce cost and improve FY 1994/95 l _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ productivity.  Completion Area of Reform Recommended Action Content/Purpose Schedule Financial Restructuring i. Tariff restructuring after internal . To improve revenues. FY 1992193 study. ii. Revaluation of assets employed on . To ensure adequacy of FY 1991/92 MR. depreciation for replacement of assets. iii. Improved costing system to enable . To improve profitability and FY 1991/92 1E better control of assets utilization operating ratio. |! and other important ratios. l Systems Improvement i. Design and implement the . To improve management and FY 1992193 M following: effectiveness in all aspects of - Decision Support System management. - Material Management System 0 - Operating Audit - Quality Assurance System. Operations Improvement i. Achieve Operation Improvement . To increase assets and manpower FY 1992/93 Targets as per Annex 6.1. productivity. _ O P-fA Staff Development and i. Conduct manpower study. . To improve staff productivity. FY 1992/93 o " Motivation ii. Implement an appropriate human t q resources developmnent package. e 4 iii. Implement incentive scheme. 0 N Railway-Government i. MR and GOM to sign a . To clarify long-term objectives of FY 1991/92 S Understanding Memorandum of Understanding MR and facilitate their i achievement. Implemientation Strategy i. Constitute a high-level committee . To avoid slippage in the FY 1991/92 for coordinating the implementation of the implementation of the Restructuring Action Plan. Restructuring Action Plan. ii. Constitute a cell for managing staff . To enable reduction of staff and FY 1994/95 and assets reduction program. assets in an efficient manner.  AIR MALAWI ACTION PLAN Nature of Implementing Reform Recommended Action Purpose Priority Agency o Regulatory i. Air Malawi to continue to be given Improve commercial orientation A MOTC, : complete autonomy with regard to and accountability. Treasury 1 r tariffs, routes and aircraft leasing. 6: Organizational ii. Postpone purchase of the second new . Avoid a near zero return on A MOTC Vs 737-300. capital employed. iii. Implement a revised system of . Effect better control on both A QM accounting to enable costs of airline & operations and improve rt~ agency operations to be segregated. profitability. F.. iv. Review the current system of . Reduce cash outflow due to A QM 0 scrutinizing billing by other airlines. erfors and difference in X t interpretation. n r v. Develop an improved marketing . Improve profitability from A QM "3 strategy. better utilization. ti N to to  LAKE SERVICES ACTION PLAN '6 Nature of Implementing r Reform Recommended Action Purpose Priority Agency S ______ al___ ". Regulatory i. Lake Services to be given complete . Improve commercial orientation A MOTC pi o autonomy with regard to tariffs, routes and accountability. 0 0 and management. , d Organizational ii. Passenger services to be restructured . Prevent heavy drain on the A LS n to service only those passengers and economy. X areas inaccessible by other modes. il iii. Evaluate feasibility Of low.c'zst . Provide essential services at the B LS I. alternatives, e.g., landing craft. least cost. 0C iv. Consider all ships and ports as . Improve control and profitability A LS N separate profit centers. and decision-making process. C v. Set norms of operational efficiency . Cost reduction and improved A LS I N and reduce staff accordingly. profitability. ' vi. Mothball Chauncy Maples . Cut losses by not operating an A LS immediately. inefficient vessel.  ROAD FREIGHT ACTION PLAN lature of Implenmting Reform Recommended Action Purpose Priority Agency ulatory i. Replace the current domestic RSP with a . Improve domestic freight A MOTC commercial operating permit granted to transport capacity with minimal all Malawian registered vehicles. investment. ii. Remove all controls on domestic . Enable rate setting in accordance A MOTC e transport rates after proper notification. with operating circumstances. 0 iii. Eliminate the differential in duty and . Encourage better and more A MOTC and MOF seo surtax between vehicles and spare parts. timely maintenance. 0 C iv. Regularize Matola operation with . Improve passenger service in A MOTC v minimum safety-related regulation. rural areas. n o -itutional v. Undertake organizational study of . Strengthen management, A MOTC MOTC and of organizational, functional planning and monitoring ability cr5i and legislative restructuring of RTD. of MOTC and RTD. rr .4I ^ vi. Implement rural transport pilot project . Improve passenger service in B MOTC (joint-use passenger/cargo vehicle). rural areas. " I vii. Reduce duty and surtax burden in a . Reduce transportation cost and B MOF u phased manner consistent with GOM's facilitate entry of trucks and program. tractors. C n viii. Support the continued direct importation . Reduce operating costs. A Reserve Bank t of vehicles, parts and tires. ti ix. Establish a development-oriented pilot . Provide access to credit for A MOF and CA revolving MK credit program. equipment and spare parts. Operators a -anizational x. Training and staff development of . Improve competitiveness of all A MOTC u operators in areas of fare setting, operators and improve Operators marketing and trip scheduling. utilization. xi. Investigate maintenance and operating . Reduce cost of transportation. A MOTC practices and generate guidelines for Operators efficiency improvement and cost reduction. xii. Plan and implement a procedure for data . Facilitate assessing the health of A MOTC collection and construction of a road transport sector and transport Operators transport data base. planning.  IpA $SSENGER ACFION PLAN Nature of Impleting Reform Recommended Action Purpose Priority Agency Regulatory i. Update and rewrite the RTA with Overall deregulation, clarity and A MOTC minimum of non-safety-related emphasis on safety and regulation. enforceability. ii. Implement a phased reduction of fare- . Remove distortions in fare-setting B MOTC making regulations except those and permit market to function. 0 deemed anti-competitive. ! iii. Abolish the Prime Route Policy. . Eliminate discrimination in fare A MOTC > 0. and service a!location. c iv. Regularize Matola operation with the . Improve passenger service in A MOTC e minimum required safety-related rural areas. s regulation. :: Institutional v. Implement rural transport pilot project . Improve passenger service in B MOTC