Cameroon - Transport Sector Strategy (Vol. 1 of 2) : The Summary and Recommendations

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY FILE COPY CONFIDENTIAL: CONFIDENTIAL Report No.:11430-CM Type: (SEC) ReportNo.11430-CM Title: TRANSPORT SECTOR STRATEGY MEMO, Author: GUILLOSSOU, JEAN-NOEL Ext.:34943 Room:J 8161 Dept.:AF1IN TWO VOLUMES REPUBLIC OF CAMEROON TRANSPORT SECTOR STRATEGY Volume I Summary and Recommendations June 30, 1993 Infrastructure Operations Division Occidental and Central Africa Department Africa Region 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. ABBREVIATIONS ASECNA Agence pour la Sécurité Aérienne en Afrique et à Madagascar CAMAIR Cameroon Airlines CAMSHIP Cameroon Shipping Lines CAMTAINER Cameroon Container Transport/Société Nationale de Transport et de Transit du Cameroun CAR Central African Republic CFD Caisse Française de Développement CIDA Canadian International Development Agency CNCC Conseil National des Chargeurs du Cameroun CNCRR Commission Nationale de Coordination des Routes Rurales CNIC Chantier Naval et Industriel du Cameroun DAC Direction de l'Aviation Civile DER Direction de l'Entretien Routier/Department of Highway Maintenance DGTC General Directorate for Large Works of Cameroon FAC Fonds d'Aide et de Coopération LABOGENIE Laboratoire National de Génie Civil/National Laboratory for Civil Works MATGENIE Parc National de Matériel de Génie Civil MINPAT Ministère du Plan et de l'Aménagement du Territoire MINT Ministère des Transports/Ministry of Transport MINTP Ministère des Travaux Publics/Ministry of Publics Work MINUH Ministère de l'Urbanisme et de l'Habitat/Ministry of Urbanism and Housing OECF Overseas Economic Cooperation Fund ONPC Office National des Ports du Cameroun PIP Public Investment Plan REGIFERCAM Régie Nationale des Chemins de Fer du Cameroun SOTUC Société des Transports Urbains du Cameroun TSP Transport Sector Project UDEAC Union Douanière et Economique des Pays de l'Afrique Centrale Currency Equivalents US$1 = CFAF 270 Republic of Cameroon TRANSPORT SECTOR STRATEGY VOLUME I SUMMARY AND RECOMMENDATIONS Contents Page EXECUTIVE SUMMARY ................................... i I. NEW TRANSPORT SECTOR STRATEGY ........................ A . Rationale ......................................... 1 B. New Transport SectorStrategy ............................ 3 II. SUMMARY OF SECTOR ANALYSIS AND RECOMMENDATIONS ....... 5 A. Institutional Issues.................................... 5 B. Fiscal and Financiallssues .............................. 7 C. Subsector Issues and Reconnendations ...................... 9 Annex: MATRIX OF POLICY MEASURES AND ACTIONS ............ 33 Maps: IBRD No. 24837 IBRD No. 24838 This report is based on data gathered during missions carried out in June 1991 and in April/November 1992, in preparation of the proposed Transport Sector Project. The mission team included Mr. John Schwartz, Mission Leader; Mr. Amadou Cissd, Principal Civil Engineer; Mr. Jean-No6l Guillossou, Transport Economist; Mr. Jean-Claude Vichet, Urban Transport Specialist; Mr. Sture Karlsson, Port Specialist; Mr. Karim-Jacques Budin, Railway Specialist; Mr. Peter Lanjouw, Economist; Mr. Jacques Bret, Civil Engineer (Consultant); Mr. Luc Cosyn, Civil Engineer (Consultant); Mr. Andr6 Garaud, Civil Engineer (Consultant); and Mr. Paul Levy, Sr. Financial Analyst (Consultant). Mr. Jacques Halluin, Miss Marcelle Houle, and Ms. Denise Martin were responsible for layout, wordprocessing and secretarial support. REPUBLIC OF CAMEROON TRANSPORT SECTOR STRATEGY EXECUTIVE SUMMARY i. This memorandum proposes a new strategy for Cameroon's transport sector development for the remainder of the decade. It covers roads, urban and interurban transport, railways, civil aviation, the maritime subsector, and transit transport facilitation. It assesses the capability of the institutions that oversee transport, evaluates the overall fiscal and financial performance of the sector, and provides a detailed financial analysis of the sector's ten public enterprises. It includes recommendations and policy measures to support the strategy outlined below. ii. PRIORITY SHOULD BE GIVEN TO THE ROAD SECTOR. Although road transport is the most important transport mode in Cameroon, insufficient priority was given to the road sector by the Government, resulting in deterioration of the road network, decapitalization of assets, and increasing need for rehabilitation. Only about CFAF 7.5 billion (US$27 M) are allocated for road maintenance although the subsector generates CFAF 54 billion (US$196 M) of fiscal resources, and road transport accounts for about 90% of passenger and freight transport. The shortfall of road maintenance amounts to CFAF 39.5 billion (US$144 M). The impact analysis of a maintenance program on priority paved roads demonstrated that it would save CFAF 22 billion (US$80 M) in vehicle operating costs against road maintenance costs of about CFAF 4 billion (US$15 M). iii. TRANSPORT ENTERPRISES SHOULD BE MORE COMMERCIALLY OPERATED OR FULLY PRIVATIZED. Almost all of the transport companies are bankrupt. Collectively, they generated a CFAF 100 billion (US$364 M) deficit during the 1986-91 period, coming mainly from railways, airlines, and urban transport. Their operation and management are characterized by inefficiency and lack of accountability. Considerable resources have been invested in these enterprises by the Government without benefitting the economy. In 1991, net assets amounted to CFAF 290 billion (US$1,055 M) in historic value, but return on assets was negative (-22%) iv. ACTIONS SHOULD BE TAKEN RAPIDLY TO RESTRUCTURE THE TRANSPORT SECTOR. A matrix of policy measures (Annex) to address sector issues has been prepared and discussed with Government with the following objectives: (a) strengthen road maintenance capacity through development of a new, sustainable road maintenance policy; (b) improve road transport fiscal policy and cost recovery; (c) restructure public enterprises; (d) improve institutional capacity and strengthen transport sector management; and (e) further improve transit transport facilitation and the corridor's competitiveness. v. Volume I summarizes strategy and recommendations for the sector and presents a matrix of policy measures. It should be read in conjunction with Volume II, which contains an analytical underpinning of the proposed strategy. vi. Chapter I of Volume H summarizes the country's macroeconomic framework, while Chapter II presents transport sector priorities. Chapter III gives the rationale and elements for a new road maintenance strategy, and Chapter IV analyzes the situation of the two public enterprises in the public works subsector. Chapters V through VIII evaluate and provide recommendations for operational subsectors (road, railway, civil aviation, and maritime). Chapter IX discusses the strategy for improving transit transport facilitation. Chapter X examines fiscal issues, and Chapter XI provides a detailed analysis of the ten transport sector public enterprises. REPUBLIC OF CAMEROON TRANSPORT SECTOR STRATEGY SUMMARY AND RECOMMENDATIONS 1. This memorandum recommends and describes a strategy to restructure the transport sector in Cameroon. Poor results achieved in the past support the rationale for a new strategy: (a) insufficient priority is given to road maintenance resulting in decapitalization of assets; and (b) public enterprises are poorly managed, and lack efficiency and accountability. The huge annual deficit suffered by these enterprises results in bankruptcy. 2. Volume I discusses the rationale and the priorities of the new strategy. It provides recommendations addressing institutional, fiscal, operational and managerial issues in the Ministries of Public Works and Transport (MINTP and MINT) and in the ten transport sector public enterprises: Road sector - Parc National de Mat9riel de Ginie Civil (MATGENIE), Laboratoire National de G6nie Civil (Labog6nie); Urban Transport - Socit6 des Transports Urbains du Cameroun (SOTUC); Railways - Rggie Nationale des Chemins de Fer (REGIFERCAM); Aviation - Cameroon Airlines (CAMAIR); Maritime - Office National des Ports du Cameroun (ONPC); Cameroon Shipping Lines (CAMSHIP); Socidtd Nationale de Transport et de Transit du Cameroun (CAMTAINER); Chantier Naval et Industriel du Cameroun (CNIC); and Conseil National des Chargeurs du Cameroun (CNCC). Volume II provides a detailed technical analysis to support these recommendations. 1. NEW TRANSPORT SECTOR STRATEGY A. Rationale 3. A new transport strategy is required to take into account Cameroon's severely weakened economy, lack of competitiveness, and the need to drastically reform sector policy, investment planning and resource allocation. Cameroon has been suffering from economic recession since 1985/86 and prospects until the year 2000 remain modest (Vol.II, Chap. I). During the 1975-86 period, sector strategy was driven by increasing transport needs and large investments in all sectors, supported by generous donor funding. This is no longer the case. Local and external resources have become scarce. The Government has adopted a structural adjustment program (SAP) including comprehensive measures covering all sectors of the economy and accompanied by substantial cuts in expenditures. 4. Consistent Bank efforts to persuade the Government to adopt a more rational approach to investment planning, to strengthen institutional capabilities, 2 Republic of Cameroon and to improve public sector performance (see Transport Sector Memoranda of 1980, 1981, and 1984) have had little success, while only physical objectives were generally met. The 1984 Transport Sector Memorandum recommended strengthening and broadening sector policy dialogue to better plan sector investments. Institutional and sector policy weaknesses were observed in planning and policy formulation, in maintenance operations and in equipment handling and management. Lack of sectoral development in civil aviation and limited efficiency and cost recovery in the sector's parastatal enterprises were also highlighted. Development projects were being proposed without appropriate economic analysis, priority setting, inter-sectoral balance, and without taking into account limits to financial resources or implementation capacity. Lessons from recent Project Completion Reports (Third Douala Port Project/Loan 2259-CM, Fifth Highway Project/Loan 2180-CM) confirm, through the positive role of the Bank in convincing the Government of Cameroon to limit the investments to their economically justified design, the validity of the above recommendations. 5. The road sector is the most important transport mode but has not been given priority by the Government. Road transport activities are spread all over the country and account for 90% of both overall passenger and freight transport; whereas railway and air transport concentrate on a limited number of routes. Even when transport modes compete on the same routes, road transport attracts more than 70% of the transport demand through lower tariffs and greater efficiency (Vol. II, Chap. II). 6. As a consequence of the above weaknesses, sector performance has deteriorated. (a) Declining Government revenues caused basic road maintenance expenditures to be cut to less than a third: from CFAF 25 billion (US$91 M) in 1986 to CFAF 7.5 billion (US$27 M) in 1991, resulting in an annual CFAF 39.5 billion (US$144) shortfall for road maintenance. This road maintenance underfunding has led to a severe deterioration of the earth road network. If perpetuated in the future, this policy would result in assets decapitalization and increasing need for road rehabilitation (Vol. II, Chap. III). (b) Inefficiency of public transport enterprises has resulted in a huge drain on Government resources. The accumulated deficit of the ten public enterprises amounted to CFAF 100 billion (US$364 M) during the 1986-91 period. It amounted to CFAF 25 billion (US$91 M) in FY91, coming mainly from railways, airlines, and urban transport, and representing 5% of total Government revenues and 11 % of budget deficit. In 1991, net assets amounted to CFAF 290 billion (US$1,055 M) , most of which were financed 7Ransport Sector Strategy 3 by the Government, with a negative return of -22% (Vol. II, Chap. XI). B. New Transport Sector Strategy 7. The proposed new transport sector strategy gives priority to: (a) Road Maintenance: Such priority will prevent the loss of assets and future costly rehabilitation works. It is justified by having the most significant share of road transport in the overall transport demand. Moreover, the sector generates enough resources (CFAF 54 billion (US$196) in 1990/91) to cover the shortfall estimated at CFAF 39.5 billion (US$144 M), in addition to resources already allocated to road maintenance (CFAF 7.5 billion-US$27 M). Improvement of road conditions will have a significant impact on the country's economy through the reduction of transport costs. The impact analysis of a maintenance program on priority paved roads demonstrated that it would save CFAF 22 billion (US$80 M) in vehicle operating costs against road maintenance costs of about CFAF 4 billion (US$15 M). (b) Restructuring of Public Enterprises: These enterprises should be restructured and more commercially operated to improve staff incentives and operational performance by widening ownership, encouraging management-staff buy-outs, and, when all else fails, considering sale of shares or outright sale. A special interest should be given during restructuring actions to improving the quality of the management and increasing transparency and accountability. (c) Increase of Competition: Reduction of transport costs by increasing competition between transport modes and within a mode, between operators, will improve the competitiveness of local products and eventually the overall economy. 8. The matrix of policy measures presented in the Annex summarizes the sector's issues and the proposed development strategy. The five strategy objectives are: (a) to strengthen road maintenance capacity through development of a new road maintenance policy; (b) to improve road transport fiscal policy and cost recovery; (c) to restructure public enterprises; (d) to improve institutional capacity and strengthen transport sector management; and (e) to improve transit transport facilitation and the corridor's competitiveness. 4 Republic of Cameroon 9. In order to create the enabling environment and as a foundation to further donor involvement, even in a low case macroeconomic scenario (Vol. II, Chap. I), the following actions are recommended: (a) Strengthen internalization of the strategy in Cameroon. Discussions should be broadened in Cameroon to draw up a Declaration of Transport Sector Policy, the elements of which are summarized in the matrix of recommendations, which will serve as the framework for future transport sector development. (b) Mobilize donors to support this sector development strategy and to adopt a solid, common approach to encourage Cameroonian compliance with changes needed for coherent transport sector management. Such compliance should be obtained before considering further Bank lending to the transport sector. 10. Had previous Bank recommendations on improved budgeting, investment planning, cost recovery, public enterprise management and restructuring been implemented, Cameroon's transport sector would have been in a better position to overcome the current crisis. The missing link may have been lack of solid donor coordination, anchored in an agreed transport sector development plan supported by implementation of appropriate policy measures. Also, the need for sector policy changes may have been insufficiently internalized in Cameroon, while the project-by-project approach followed by the Bank and other donors may not have been conducive to establishing a coherent sectorwide strategy that could be enforced through consistent conditionality. The objective of this memorandum is to reconfirm, reinvigorate and strengthen past recommendations, to place them in a sectorwide framework supported by donors and Government as a foundation for further development assistance to the sector, and to marshall the necessary understanding and political will to achieve full commitment and implementation by involving a broad spectrum of key Government institutions and staff. Transport Secor Strategy 5 2. SUMMARY OF SECTOR ANALYSIS AND RECOMMENDATIONS 11. This chapter presents, in Section A, the institutions that oversee the transport sector and the major reasons that explain its generally poor management. Section B summarizes the fiscal and financial issues and provides recommendations for improving the sector's performance in this respect, and Section C analyzes subsector issues and provides recommendations underpinning the new proposed sector strategy. A. Institutional Issues 12. MANAGEMENT OF THE TRANSPORT SECTOR. The Ministries of Public Works and Transport (MINTP and MINT) are overstaffed and their staff would be unable to implement complex responsibilities efficiently, should these be bestowed on them in future investment operations. MINTP and MINT total about 10,000 employees, of which about 6,500 are assigned to Public Works, including staff in the Provinces and Sub-divisions. Neither ministry has personnel management or training functions. Previous Bank reviews pointed to lack of efficiency of the Road Maintenance Department, lack of competence in the Shipping Merchant Division, and overall lack of accountability in the Ministry's departments. Although past donor financing included substantial financing for improving planning and technical assistance in road maintenance, the results have remained marginal. 13. Responsibilities for road sector management are not clearly spelled out between the MINT? and the General Directorate for Large Works of Cameroon (DGTC). DGTC is responsible to the Prime Minister and is the leading institution for specific project development and procurement over and above the technical ministries. DGTC also participates in loan negotiations and is a member of the National Procurement Committee, creating at least the perception of being judge and party at the same time. A subsequent draft decree, prepared in 1990, would strengthen this role even further to the detriment of the technical Ministries. The concept of DGTC is close to the concept of DCGTx in C6te d'Ivoire, although with a much smaller expatriate staff. Based on the Ivoirien experience, the enforcement of DGTC's responsibilities could lead to continuing tension in inter- institutional relationships. In addition, DGTC is not responsible to MINTP for road matters, which leads to parallel channels of decision making and frequent frictions of competence. Moreover, more favorable pay scales at DGTC create inequities with staff in the technical ministries and has attracted better staff to DGTC. 6 Republic of Cameroon 14. RECOMMENDATIONS. (a) DGTC and MINTP should conclude a convention which would make DGTC responsible to MINTP for project preparation, engineering studies -- including preparation of bids -- and supervision of works execution. Such an agreement would permit MINTP to benefit from the competence available in DGTC and would eliminate the causes of the present rivalry. In addition, DGTC's responsibilities for procurement would be turned over to a separate procurement agency to avoid the temptation of being judge and party at the same time. (b) MINTP and MINT should be strengthened to enable their Departments to fulfill their responsibilities. A Division of Human Resources needs to be established to start adequate personnel management and career planning based on needs and competence, accompanied by appropriate training programs. Diagnostic studies are underway to analyze the staffing structure and individual responsibilities in order to obtain a clearer view of the needs for reorganization, redeployment and training. Studies of job assignments should lead to re-deployment of redundant staff to reduce the wage bill and to increase the efficiency of a leaner Ministry. 15. PLANNING OF INVESTMENT. Past sector reviews have pointed to the weakness of transport sector investment planning. However, despite provision of technical assistance, no such planning mechanism has yet been established. In view of the transport sector's size, which covers about 35% of the proposed 1992-94 public investment program, appropriate management of its future development has become of critical importance to Cameroon's economy. Although under the Structural Adjustment Program (SAP), a beginning was made with the establishment of a Public Investment Program (PIP), the transport sector is still an amalgamation of Government and donor-proposed operations without a consistent analysis of economic viability, relative priority, and availability of local funds for counterpart funding and recurrent cost financing. Investment costs are often not related to an economic return, nor are they compared for intra- sectoral balance and choice between new investment or preservation of invested capital (e.g., a premature investment in US$25 M gantry cranes at Douala Port versus using the same amount for rehabilitation of a seriously deteriorated rural roads network which hampers evacuation of agricultural produce and affects Cameroon's competitiveness). 16. In principle, the Planning Divisions of MINTP and MINT are responsible for transport sector planning, but their activities are dormant. The list of projects is not regularly subject to economic and financial criteria and is passed on to the 7ransport Sector Strategy 7 Ministry of Plan and Territorial Development (MINPAT), and following interministerial discussion, included in the PIP. Past donor projects have provided for technical assistance in planning, but this assistance remained consultant-oriented and was insufficiently internalized. Since 1991, DGTC has assumed the de facto planning role for the road sector. Some investment proposals considered marginal in the Transport Survey of 1986 are still being pursued by MINPAT despite Cameroon's worsening economic circumstances. MINPAT is not fulfilling its role, which should be one of arbitrating and analyzing investment proposals for inclusion in the PIP on economic merits. B. Fiscal and Financial Issues 17. OVERALL nSCAL AND HNANCIAL PEMORMANCE. The fiscal and financial performance of the transport sector has gradually turned into chronic paucity of budget funds to finance preservation of basic infrastructure assets, and virtual bankruptcy of the ten transport sector public enterprises. Although in FY91 total tax revenues accruing from the road transport sector amounted to CFAF 54 billion (US$196 M), only CFAF 7.5 billion (US$27 M) was allocated to road maintenance, because of: (a) the financial burden imposed by inefficient public sector enterprises on the Government -- the total deficit of these enterprises amounted to CFAF 25 billion (US$91 M) or 5.4% of total FY90 Government revenues; (b) the dramatic budget reduction due to the economic crisis: budget for road maintenance decreased from more than CFAF 20 billion (US$73 M) in 85-86 to CFAF 7.5 billion (US$27 M) in FY91; and (c) the lack of Government interest in maintaining the infrastructure, and priority given to investment. 18. As a consequence of this underfunding of maintenance, road infrastructure is continuously decapitalizing, in particular earth roads critical for agriculture. The rehabilitation of the entire 47,000 km earth road network would require CFAF 235 billion (US$855 M) by 1994, nearly 50% of total Government revenues in FY90. This compares to an annual maintenance program of CFAF 39.5 billion (US$144 M) or a total of CFAF 158 billion (US$575 M) accumulated over four years, that should be spent in addition and above its actual maintenance expenditures to maintain road infrastructure at the required level of service. 19. ROAD TRANSPORT TAXES. Road transport taxes are manifold and complex, making it difficult to optimize the collection rate. A total of 15 taxes are applied, of which the fuel tax and the "patente" are the most important 8 Republic of Cameroon specific road taxes. In mid-1991, a quarterly axle-load tax was introduced, but the competitive advantage of overloading still exceeds by far the payment of the tax. In addition to the existing taxes, the Administration intends to create road tolls. Tax collection lags behind potential revenue because only 65% of road transport taxes are collected. Increasing consumption of smuggled gasoline from Nigeria is mainly responsible for the deterioration of the tax collection rate. 20. PUBLic ENTERPRISE PERFORMANCE. Favorable economic conditions before 1986 led to high sales revenues and concealed poor management and lack of productivity, efficiency, and accountability. However, once the deterioration of the economy set in and revenues sharply decreased, the weakness of the public enterprises was quickly revealed. The rationale behind transport sector public enterprises is invalid. Most enterprises were established to make up for the lack of availability or interest of private enterprises, and their dissolution or privatization was planned as soon as these gaps could be filled. 21. Financial statements clearly indicate the lack of sustainability of the transport sector public enterprises. As of June 30, 1991, the financial analysis showed an accumulated full operating loss of CFAF 98 billion (US$356 M) between FY87-91 (after depreciation and interest charges) amounting to 24% of the CFAF 403 billion (US$1,465 M) sales revenue. The sectorwide net operating loss (after depreciation) amounted to CFAF 59 billion (US$215 M). The sectorwide cash generation (sales revenue less working cost), i.e., its contribution to the financing of assets renewal and debt service, reached CFAF 40 billion (US$145 M), i.e., only 10% of sales, 40% of depreciation and 100% of the interest charges. The sector's debt amounted to CFAF 134 billion (US$487 M) of which 27% in short-term (less than 1 year) and 73% in long-term debt. In addition, a substantial part of the CFAF 14 billion (US$51 M) provision for risks is likely to be applied, raising the sector's debt burden to CFAF 148 billion (US$538 M), CFAF 7 billion (US$25 M) above the overall equity, reflecting bankruptcy. Debts accumulated by SOTUC and CAMAIR amounted to CFAF 30 billion (US$109 M) and 38 billion (US$138 M), respectively, while their respective equity was already negative by CFAF 23 billion (US$84 M) and CFAF 20 billion (US$73). CAMTAINER's, and CAMSHIP's debts amounted, respectively, to 6.5 and 2.1 times their equity, while a 1.5 factor is the minimum considered acceptable for the region. 22. RECOMMENDATIONS. To ameliorate the fiscal and financial performance of the transport sector, the following actions are recommended: (a) Government should allocate sufficient resources to road maintenance to stop decapitalizing road infrastructure and avoid the considerable cost involved in deferring maintenance. The road sector should be considered a service which provides substantial Transport Sector Strategy 9 revenues to the State, and which should be preserved in good state of repair so as to remain an important source of resources. (b) To increase these resources, tax collection should be improved and the road transport tax system be simplified to make this possible. Concession agreements with private companies to operate weighing bridges and with garages to carry out vehicle inspection should be considered. Measures envisaged under the UDEAC (Union Douanire et Economique des Pays de l'Aftique Centrale) customs tariff and fiscal harmonization agreements should also improve the collection rate of customs duties. Measures need also to be taken to reduce consumption of smuggled gasoline from Nigeria, but the main measure in this respect needs to be taken by Nigeria itself, that is to increase the price of gasoline in Nigeria. (c) To sanitize the financial situation of the public enterprises, they should be gradually privatized (CNIC, CAMTAINER), restructured or liquidated (CAMSHIP, SOTUC). Management of the few enterprises where public ownership by the Government is justified should be given full autonomy (REGIFERCAM, ONPC, CAMAIR) with private sector participation, or reorganized under management contracts with private companies with the private sector holding a majority stake (MATGENIE, LABOGENIE). CNCC, which consumes a large amount of tax money (CFAF 1.5 billion per year-US$5 M increasing export transport costs by about 5%), should be substantially downsized, reorganized into an effective service to local shippers, and be self-financing by selling its services. If this does not succeed, it should be liquidated or turned into an observatory of the transport chain. The creation of such an observatory was recommended during the Cotonou Maritime Workshop, sponsored by the Bank and the EEC, in June 1992. C. Subsector Issues and Recommendations 23. The sections which follow summarize the issues and recommendations for the road, railway, civil aviation, maritime, and transit subsectors. Road Subsector 24. ROAD MAWTENANCE. (Vol. II, Chap. III). No new road construction should be undertaken, and the emphasis should be on preserving and, where economically justified, upgrading existing assets. Past road maintenance concentrated on the paved road network (3,665 km), which is relatively new with 10 Republic of Cameroon about 40% having been constructed after 1981. About 74% is still in good to fair condition. The inverse is true for the maintenance of the earth road network under MINTP's responsibility which has been neglected, with 71% in fair to poor condition in 1990, and 96% in 1991. The unclassified rural road network under the responsibility of local authorities has generally not been maintained. For FY91, the shortfall of routine and periodic maintenance (i.e., the portion of the 51,000 km road network that was not maintained) is estimated at CFAF 39.5 billion (US$144 M) against a budgeted amount of CFAF 7.5 billion (US$27 M), demonstrating the extent to which Cameroon is running down its road infrastructure assets. 25. In the present economic and budgetary context, local and external resources are insufficient to cover the needs for the maintenance of the entire network. Therefore, alternative maintenance scenarios were prepared, which could be implemented in the future depending on the evolution of the fiscal and economic outlook of the country. Criteria for the establishment of alternatives were: (a) Prioritize the network: Four priority sub-networks were determined according to the economic importance (traffic volume); the coherence of road links between urban centers and regions of agricultural production, and between administrative centers (State, Provinces, Districts and Subdivisions); and regional balance. (b) Consider two types of maintenance operations: The first one assumes that maintenance is continuously carried out according to regular technical standards. The second one assumes that maintenance is only carried out to improve hot spots and ensure sufficient passability. 26. The reference scenario would cost CFAF 89 billion (US$324 M) and represent about half of the PIP in the low case macroeconomic scenario, the middle-case scenario CFAF 139 billion (US$505 M), and the upper-case scenario CFAF 175 billion (US$636 M) or 29% of the PIP in the high case macroeconomic scenario. Maintenance will be carried out on a network consisting of: (a) the entire paved network; (b) earth roads with more than 100 vpd; and (c) link roads between the previous network and administrative or economic centers. The network defined according to these criteria would be 24,050 km long, and would represent about half of the entire road network. Other roads will not be maintained during the 1994-1997 period. In the reference scenario, the road maintenance program consists of: (a) routine maintenance: 12 billion (US$44 M); (b) repair of bridges, signalling, and maintenance and operation of rain barriers: CFAF 4 billion (US$15 M); (c) periodic maintenance: CFAF 30 billion (US$109 M) of which 33% would be spent in 1994; (d) rehabilitation works of paved roads: CFAF 21 billion (US$76 M); and (e) hot Transport Sector Strategy 11 spots improvement: CFAF 22 billion (US$80 M). In view of the country's present financial constraint, it is proposed that the road maintenance budget be supplemented with external financing during this period. 27. When used for maintenance, force account resulted in low productivity due to: (a) inefficient planning and management of maintenance operations due to a cumbersome "bottom-up" planning process and slow decision making; (b) lack of sufficient budget funds allocated to maintenance and lengthy budget and payment procedures; (c) low productivity of force account maintenance teams, including increasing deficiencies in equipment availability; and (d) insufficient knowledge of the road situation and the actual cost of maintenance. 28. The planning process is an ad hoc process based on a mixture of political and technical justification. The Planning Division of the Road Maintenance Department (DER) is weak and lacks the experience to sustain a planning mechanism based on economic justification. Planning of maintenance is carried out through a procedure that collects and transmits information on annual maintenance requirements from the departmental and provincial levels upward to the central level. German technical assistance for the paved road network and Bank-financed technical assistance for the earth road network helped plan the annual maintenance program. The bottom-up approach has not worked. No data bank exists to carry out forward planning and distinguish seasonal bottlenecks. 29. RECOMMENDATIONS FOR A NEW ROAD MAINTENANCE STRATEGY. (Vol. II, Chap. III) The new road maintenance strategy should aim at efficiency and optimum use of limited available resources. First, in view of the present difficult budget situation, Cameroon cannot maintain its entire road network. It needs to make a choice between maintaining the entire network occasionally and inefficiently, without getting a satisfactory return on money spent, or maintaining a partial but economic network efficiently and regularly, thereby preserving its most valuable road infrastructure. Second, the persisting low productivity of force account, despite continuous technical assistance over the last decades, effectively discredits this method. 30. A planning mechanism for road sector investments should be established in order to optimize the allocation of resources. The Planning and Study Division of MINTP should be revamped and made more dynamic by selecting a competent manager and giving him an appropriate rank to ensure respectability of the Division. Intra-sectoral balance should be pursued so as to avoid over-investment in one and under-investment in another subsector. Investment proposals should be accompanied by recurrent cost assessments so as to plan future outlays of the operating budget in time. Clear linkages should be established with MINPAT to ensure an economic approach towards reviewing the composition of the transport sector component against priorities of the national development plan. 12 Republic of Cameroon 31. A mechanism for managing funds allocated to road maintenance should be implemented to ensure transparency and efficiency. The creation of a Road Fund is proposed with one of the following alternative configurations: (a) allocation of resources: resources can be: * earmarked through a tax collected from road users, currently on petroleum products; or * directly allocated from the State's budget; (b) technical role of the Road Fund: * the Road Fund is only used for paying road maintenance works; or * the role of the Road Fund is extended to that of a donor involved in the financial management of contracts, supervision, and control of objectives. 32. The road maintenance strategy proposes to: (a) define maintenance programs taking into account budgetary constraints, and based on sub-network priorities and alternative maintenance standards; (b) apply a new maintenance management system to ensure appropriate standards and durable results, taking into account the present level of service of the priority road network, traffic volume, climatological, geographical and geotechnical differences; (c) define a spot maintenance and improvement program to be carried out on the non-priority network and on rural roads, using small contractors, village workers and communities; (d) use labor-intensive methods and local materials, where possible; (e) disengage the State from maintenance execution by contracting out maintenance of all paved roads, and the majority of earth roads to private enterprises, thereby promoting the local construction industry and small contractors; (f) reorganize provincial and sub-divisional maintenance units through redeployment of redundant personnel and retraining for functions of planning, contracting and supervising maintenance works; Transport Sector Strategy 13 (g) clarify and coordinate responsibilities for road maintenance between the Ministry of Public Works, the Ministry of Urban Development and Housing, and the local authorities to improve allocation of resources, and consistency between development of interurban, urban and rural road networks; (h) redefine role and responsibilities for road maintenance management within MINTP: (i) centralize the management of paved road maintenance and contract all maintenance works on these roads; (ii) decentralize the management of earth road maintenance execution (tender, control of works and payments) at the provincial level for periodic maintenance and at the sub-division level for routine maintenance; and (iii) keep planning, programming and budgeting activities at the central level, based on data collected by decentralized services; (i) streamline maintenance management by creating: (i) a Road Maintenance Management and Coordination Group consisting of DER, MATGENIE, and Budget/Finance departments; (ii) a Control Division in DER to verify and to evaluate maintenance productivity with budgeted targets, in order to increase accountability; and (iii) a Procurement Unit in DER to prepare bids and contracts for maintenance operations; (j) carry out annual external audits of technical and financial performance and procurement procedures; and (k) ensure the protection of the environment in areas along roads to be maintained. 33. The strategy aims at alleviating poverty by reducing transport costs and generating employment. Road maintenance activities should favor non-mechanized methods when possible, and encourage participation of small and medium enterprises. Incorporating environmental safeguards and the use of local materials and techniques will also support the development of these enterprises and the use of labor-intensive methods. The Bank's experience in Cameroon and other countries suggests that assistance in creating these enterprises would be more efficient through the involvement of NGOs as intermediators between the individual groups and the administration financing road works. Public Works Enterprises 34. To replace inefficient administrative services, the Government created two public enterprises: MATGENIE for public works equipment management and LABOGENIE for road laboratory works. The objective was to improve the 14 Republic of Cameroon quality of the management and the operational performance through a greater autonomy. This approach has proved unsatisfactory: (a) Because of the liquidity crisis which arose in 1987, MATGENIE's financial situation has been deteriorating. Arrears from the Government, which is the main client of MATGENIE, reached CFAF 11 billion (US$40 M) in 1990. In spite of these negative results, MATGENIE's management took no action to improve the situation. (b) LABOGENIE's management made efforts to improve its performance, but its financial situation remains weak. In 1991, the number of staff was 526 reduced from 861 in 1986. Government arrears amount to CFAF 5.4 billion (US$20 M) against CFAF 1.3 billion (US$5 M) of revenue. 35. RECOMMENDATIONS. A new approach should be taken for the future of the two companies: (a) MATGENIE, as an equipment rental enterprise, should become a commercially viable company and compete with private operators established in Cameroon. A commercial orientation will allow MATGENIE to strengthen its management, to implement restructuring measures, and to be more financially sustainable by a better capacity of adaptation to the market. (b) Several activities carried out by LABOGENIE can be carried out by the private sector, such as geotechnical studies and supervision of road works, and control of materials. If LABOGENIE were exposed to competition, it would be forced to increase efficiency and cut costs. The participation of private operators in the capital of LABOGENIE should be encouraged, including possible widening of ownership to staff, thus strengthening incentives, and/or management-staff buy-out. However, LABOGENIE would remain responsible for those activities that are difficult to privatize. These activities should be carried out on the basis of technical and financial specifications, and not be subsidized. Urban and Inter-urban Transport 36. URBAN TRANSPORT. (Vol. II, Chap. V) Lack of a coherent urban transport policy and the increasing demand for transport have led to anarchy, with overcrowding of taxis (both registered and clandestine), congestion, pollution, lack of road safety, and bankruptcy of the public transport company. Urbanization has increased substantially (about 6% per annum) causing demand Transport Sector Strategy IS for transport to grow considerably, especially in Douala (about 1,5 M inhabitants) and Yaound6 (about 1 M inhabitants). SOTUC, a public-owned company, holds the monopoly for public transport in Douala and Yaound6. This monopoly is regulated by limiting private transport to seven persons per vehicle, thus eliminating mini-buses. However, as a result of poor management, SOTUC carries only about 5% of total urban transport. Its virtual bankruptcy (over US$100 M debt, US$48 M negative equity) caused the Government and city management to concentrate on keeping the bus company alive, while overlooking the need for an appropriate urban transport policy and institutional capacity to back it up. The National Council for Transport, created by Presidential Decree in 1989, groups most agencies involved in traffic and transport, but has not been effective. Much effort went into drafting and executing -- unsuccessfully -- a Performance Contract between SOTUC and the Government in the context of the SAP. Intensive donor support by the Caisse Frangaise de D6veloppement (CFD), including financing of new buses and technical assistance, has been unable to stem this tide, with SOTUC barely covering 50% of its operating cost. The more likely alternative is to liquidate the company. Although several studies regarding urban transport have been carried out, and a traffic circulation plan is being prepared under the Second Urban Project (US$146 M, Loan 2229-CM of Jan. 25 1989), statistics on transport demand date from the early 1980s. 37. RECOMMENDATIONS. The following strategy and actions are recommended: (a) to create a Ministerial Coordination Committee, possibly linked with the above National Council for Transport, with an executive unit, to prepare an urban transport policy and monitor its implementation; (b) to develop the institutional structure to coordinate urban transport policy in Cameroon; (c) to determine the requirements for strengthening local authorities and municipal institutions involved in decision-making, implementation, and management of urban transport plans and policies; and (d) to prepare an urban transport policy which focusses on key problems such as institutional and regulatory constraints, and -- where necessary -- infrastructure. The policy should also make proposals regarding the issue of State-supported public transport, traffic regulation for private transportation and competition (including removal of the seven person per vehicle limit for urban passenger transport), technical requirements, and the type of vehicles that should be permitted to operate. The role of non- 16 Republic of Cameroon motorized transport, including bicycle use, should also be enhanced. 38. INTERURBAN ROAD TRANSPORT. (Vol. II, Chap. V) Present operating conditions are deteriorating, and this trend will have a negative impact on road safety. The access to the profession has been liberalized almost entirely, but the Government still intervenes through CAMTAINER (see below), public company for freight transport and transit, which tries to retain activities from the public sector, or through the creation of a "Bureau Commun" in Douala, managed by one of the transport companies' syndicate, which delivers a transport license for international traffic, and collects fees as an intermediary between shippers and transporters. Official tariffs for passenger transport remain but are not applied. Road transport is subject to severe competition due to overcapacity and reduced economic activity. The analysis of the transport activity profitability shows that the revenues do not cover operating costs calculated in a legal operating context. A "profit" is only possible through fraudulent practices and tax evasion, and through reduced maintenance and overloading leading to vehicle deterioration. Only passenger transport by large buses between Yaounde and Douala has satisfactory operating conditions due to high passenger-occupancy rate and high annual mileage. 39. Freight transport costs per km are still high ranging from CFAF 24 to 36 per ton-kilometer (US$0.09-0.13) for a trailer and from CFAF 33 to 53 per ton- kilometer (US$0.12-.19) for a truck, about twice as high as in France, and four times as high as in Pakistan. Due to the poor state of rural roads, transport costs in rural areas are three to four times as high as interurban and transit transport. Elements of the higher cost are high variable costs (fuel, tires, spare parts, and road controls), the high cost of imported vehicles, and limited freight and roundtrips that do not permit a low depreciation cost. Compared to costs, only long distance transport tariffs are relatively cheap because of competition and low demand. 40. The competitive advantage of overloading a truck with 10 tons has been estimated at 40%. A very high additional tax would be required to eliminate this overloading and to recover accelerated maintenance costs. However, such an additional tax is unlikely to be applied, as is the case currently where axle load taxes are not enforced (four weighing bridges on the Douala-Yaounde expressway are not operated), although their amount is relatively low. 41. RECOMMENDATIONS. Little can be done with respect to the trucking industry but to improve productivity (limited by the present weak demand and its characteristics: imbalance between import and export traffic and high proportion of trucks returning empty; significant proportion of specialized freight [petroleum products, log]; seasonal peak for the transport of agricultural products and insufficient freight during the off-peak season), or to decrease cost per ton- ransport Sector Strategy 17 kilometer (limited by the high variable cost). The main problem is that the market is saturated, and, in the present constrained economy of Cameroon, can only become more rational following a general reduction in the trucking fleet. Actions recommended at this stage are: (a) ensure full liberalization of the transport industry through privatization or liquidation of CAMTAINER, and removal of the "Bureau Commun" in Douala; (b) liberalize the domestic insurance, and eliminate the compulsory domestic insurance, which is redundant with foreign insurance for transit traffic; (c) make more transparent the invoices for transit operations and provide the tariffs for each operation in the chain of transport; (d) simplify the road taxation system; (e) reduce the number of official road controls and eliminate illegal controls; (f) use existing weighing bridges and install additional bridges at strategic locations to collect data on axle loads; this information should be used to gradually increase the axle load tax in the context of a general harmonization of the road tax system; (g) improve vehicle inspection to ensure better transport conditions for shippers and reduce the number of accidents; (h) encourage the development of small and medium or larger transport enterprises to balance the influence of syndicates; (i) implement a mechanism to provide accounting assistance to small transport entrepreneurs; and (j) improve knowledge of the functioning of the road freight transport industry. 42. ROAD SAFETY. Although the 1986 Road Act and subsequent legislation provide an adequate legal base for road safety and several studies have been made with practical proposals for improving safety since 1983, road safety conditions are poor and no effective actions have been taken. The annual accident rate is over 1,000 dead, and 10,000 injured, i.e., about 10 accidents per 100,000 inhabitants per annum. This accident rate with only about 9 vehicles per 1,000 inhabitants is the same as for Europe with 400 to 500 vehicles per 1,000 18 Republic of Cameroon inhabitants, and thus more than 50 times as serious. Inaction is attributed to the weakness and to the lack of coordination and authority of the institutions that are involved in decision making. In addition, the police are underequipped and inadequately trained to enforce responsible driving habits. The population is poorly educated on safe driving, and traffic regulations and vehicle inspection requirements are not respected. Rescue squads are practically nonexistent, badly equipped, and lack training and communication equipment, making it almost impossible to reach an accident site out of town in time. 43. RECOMMENDATIONS. Several actions can be taken rapidly: (a) A durable institutional framework should be established to ensure sustainability of the implementation of an action plan, including appropriate continuing education in traffic safety, good driving habits, consistent training of police and rescue squads. (b) The Department of Land Transport in MINT should be strengthened to enable it to coordinate the needed actions of the many responsible authorities, including Health, Education and Interior Ministries, and municipalities, in order to draw up and implement an action plan. (c) Road maintenance and construction programs, as well as urban infrastructure rehabilitation, should include appropriate measures to improve road safety. (d) Road maintenance agencies should be made responsible under civil law for accidents caused by their negligence (e.g., poor signing, bad design, and poor maintenance). Railway Transport 44. Although the combined effects of economic recession, competition with the trucking industry and a weak financial situation inherited from the past have weakened the railway company, REGIFERCAM's management has responded well to the challenge of keeping the railway on track (Vol. II, Chap. VI). A performance contract, signed with the Government in November 1989, as part of the SAP, has helped REGIFERCAM to adjust to a more competitive environment and to clarify the institutional relationships between the State and REGIFERCAM. 45. The main causes for the railway's poor performance in the past are overinvestment, an increase in staff, from 3,450 employees in 1971 to 6,350 in 1989, and inadequate maintenance, resulting in high accident and low availability rates. Considerable resources (about CFAF 90 billion-US$327 M in current terms) were invested to modernize the railway between FY81-88. While these Transport Sector Strategy 19 investments have increased the quality of passenger and freight traffic, REGIFERCAM continues to incur heavy losses and survives only thanks to substantial Government subsidies and donor support. The financial situation of REGIFERCAM further deteriorated in 1985 with the opening of the Douala- Yaound6 expressway and the shift from quasi-monopoly to competition with road transport. Both the railway and donors were indifferent to this development and continued to invest in rail passenger transport between Douala and Yaound6, although this service rapidly became unprofitable due to competition from road transport. Large buses provide transport between the two cities for CFAF 1,800/1,900 (US$6.5/6.9) per person ("clandestine" buses offer seats as low as CFAF 1,000-US$3.6) and make a marginal profit, while REGIFERCAM offers a train ticket at the same price and loses about CFAF 1,000 per passenger (US$3.6). Between FY87-91, REGIFERCAM incurred a cumulative operating loss of CFAF 41 billion (US$149 M). 46. The main objectives of the Performance Contract were: (a) adoption of a new set of obligations and responsibilities ("cahier des charges") between the State and REGIFERCAM, stipulating the details of greater commercial autonomy; (b) increased management autonomy for REGIFERCAM; (c) progressive removal of regulatory obstacles to foster intermodal competition; (d) financial restructuring and improvement of cost recovery; (e) provision of Government compensation for unprofitable passenger traffic, which REGIFERCAM is required to continue as a public service; (f) staff reduction from 6,350 to 4,600 employees, with budget support for severance pay; (g) harmonization of the transport tax structure which favored road transport; (h) change of REGIFERCAM's legal status from a "r6gie" to a genuine commercial enterprise, confirming its greater autonomy in personnel policy, procurement, and investment; and (i) simplification of customs procedures to facilitate transit transport. 47. Several commitments under the performance contract have been fulfilled. First, the number of employees was reduced to 4,300. Second, the State has signed Public Service Obligations (PSO) contracts to compensate REGIFERCAM for losses on local commuter traffic. However, this compensation took the form of book transfers, and REGIFERCAM had to finance employee severance pay from its own resources, thus restricting outlays for other purposes. Third, REGIFERCAM's long-term debt has been restructured, and infrastructure debt has been taken over by the Government. Fourth, the new "cahier des charges" was approved by the presidential decree of December 1991. Finally, some auxiliary activities (maintenance of tracks and transport of parcels) were relinquished to the private sector. The express passenger service between Yaounde and Douala has also been integrated into a Douala-Yaounde-Ngaoundere service in order to reduce financial losses. 2 Republic of Cameroon 8. RECOMMENDATIONS. Despite its genuine efforts to improve its erformance, REGIFERCAM remains weak. Major issues remain and should be ddressed as follows: hort Term (a) The "Cahier des Charges" adopted by the Government in December 1991 should be implemented to support the restructuring initiated under the performance contract and to transform REGIFERCAM into a viable commercial enterprise. (b) REGIFERCAM should concentrate on bulk freight traffic, including transit freight, and long-distance traffic where it has a comparative advantage. (c) A separate affiliate should be created to handle passenger traffic to bring transparency into costing and productivity of this portion of the railway's business. (d) Donors should liaise to ensure that REGIFERCAM's investment program is in line with priorities and within its financing capacities. (e) Transport taxes should be coordinated to ensure increased cost recovery for road maintenance and to achieve fair intermodal competition between road and railway transport by: (i) increasing the axle load tax on trucks; (ii) operating weighing bridges on main transport axes to equalize cost recovery between rail and road transport; and (iii) reforming transport pricing for petroleum products to eastern and northern Cameroon to allow fair rail/road competition for this traffic, which at present includes a road transport subsidy on fuel transport. (f) A Business Plan should be prepared for FY93-95 on the basis of which a revised Performance Contract (covering FY95-98) would be negotiated during FY94. ledium Term (g) REGIFERCAM's legal status should be revised to strengthen its autonomy as a commercial enterprise and to reduce Government involvement in management, investment and procurement matters. This legal status should preferably take the form of an enterprise with significant private sector participation and should provide Transport Sector Strategy 21 REGIFERCAM with the full autonomy it needs to make decisions on staff and financial management, and procurement. (h) A ratio of staff costs over traffic revenue of 35% (44% at present) should be reached by 1997 to achieve financial viability. This would translate into a level of about 3,800 employees. (i) A complementary financial restructuring program should be implemented to consolidate CFAF 18 billion (US$65 M) of short- term debt to suppliers and the State's Social Security into long- term loans, and long-term debt to the Caisse Autonome d'Amortissement on account of investment loans. (j) Simplified customs procedures and a transit framework (TIF - Transit International Ferroviaire) should be defined and implemented within the transit facilitation component of the UDEAC Reform Program. Civil Aviation 49. CAMEROON AIRLINES. (Vol. II, Chap. VII) The national airline, which operates one Boeing 747 and three Boeing 737, is virtually bankrupt with a CFAF 53 billion debt (US $193 M), after a major capital infusion of about the same amount by the Government in FY91. This debt cannot be covered by the CFAF 35 billion (US$127 M) of historic assets. Moreover, the fleet will need to be renewed in five years. The small number of passengers generated by Cameroon is not sufficient to make the activities profitable and passengers cannot afford continuous tariff increases to recover increased cost. Under these circumstances, only continued massive financial assistance will keep the airline alive, at a prohibitive cost to the State. 50. The restructuring of the airline through a Performance Contract under the SAP was only partially successful. The agreed sale/lease-back of the Boeing 747 was rescinded in 1991. Positive achievements were the appointment, in 1990, of an expatriate General Manager -- lent by the airline's minority partner Air France --, the closing of unprofitable routes, and a 22% reduction in staff (from 2,248 to 1,758 employees). Also, commercial arrangements were made with Air Gabon and Air Afrique for sharing flights and some routes. ICAO will provide operational and financial expertise on a possible merge with other airlines and on financial management and accounting. 51. RECOMMENDATION. If liquidation is not an option, CAMAIR should merge with another airline company or with a newly formed regional company grouping other national airlines in financial difficulty. The latter option is being 22 Republic of Cameroon studied under the Regional Integration Initiative jointly launched by France (Minist6re de la Coop6ration) and the Bank. 52. AmPoRTS. (Vol. II, Chap. VII) Cameroon has achieved a considerable airport over-capacity, whose management, maintenance and staffing constitute a substantial cost that cannot be recovered. Cameroon has fourteen airports, of which Douala, Garoua, and the recently-opened Nsimalen (Yaound6) are of international standard. Nsimalen airport was designed in 1984 at the peak of Cameroon's boom period and opened to traffic in 1992. Both Garoua and Nsimalen are overdesigned. Nsimalen has a 1.5 M passenger capacity, although traffic in Douala, Cameroon's main international airport, was only 340,000 passengers in 1991 and peaked at 500,000 in 1987. Moreover, the debt service of the new airport will be a heavy burden on the economy because the airport was financed through a CFAF 82 billion (about US$298 M) German commercial bank loan. During the construction of Nsimalen, the Maroua airport was rehabilitated at a cost of CFAF 12 billion (US$44 M), while Douala airport, the only airport that recovers its costs, is deteriorating and needs rehabilitation works estimated at CFAF 5 billion (US$18 M). 53. Even before the opening of the Nsimalen airport, airport taxes were insufficient to maintain infrastructure and cover depreciation. Total revenues from airport charges amounted to CFAF 2.2 billion (US$8 M) in FY91, the bulk of which came from international traffic at Douala, while total expenditure amounted to CFAF 2.1 billion (US$8 M), 72% of which was for personnel costs. The small surplus does not include provisions for depreciation or postponed maintenance. If needed maintenance had been carried out, the estimated cost of CFAF 1.6 billion (US$6 M) would have resulted in a deficit of CFAF 1.5 billion (US$5 M). Overall airport finances are difficult to assess due to the involvement of many agencies, each having poor inter-communication and record-keeping. Airport taxes were raised recently, and revenues could potentially increase by 35%. However, with the continuing decline in airline traffic, airport management is likely to show a deficit with the operation of the new airport at Nsimalen. 54. Airport management is unsatisfactory. ASECNA is responsible for operations defined under Article 10 of its framework charter with the African member countries. The Department of Civil Aviation (DAC) of MINT oversees the subsector. In 1990, DAC prepared an action plan, which, however commendable, lacked estimates on maintenance requirements and economic priority of proposed investments, while at the same time maintaining State responsibility for execution. Airport management is characterized by large outstanding debts between CAMAIR and ASECNA (CFAF 4 billion or US$15 M outstanding in March 1992), and by CFAF 1.8 billion (US$7 M) due from the Government, demonstrating a clear need for a more commercial approach. A6roport de Paris (ADP) and ASECNA studied the feasibility of the creation of a commercial airport management company, with ADP proposing that the Transport Sector Strategy 23 company operate refueling, baggage handling and buildings, and ASECNA proposing a new tariff increase in order to make profitable the management of the five main Cameroonian airports. Operation of other airports could not be made profitable. CAMAIR handles assistance to other airlines which is a steady source of revenue for CAMAIR. Transferring this activity to the airport management company would hurt CAMAIR financially. While ASECNA has a good record in navigational tasks, its limited capacity to enforce sanctions due to Government intervention, makes it a less attractive candidate for commercial airport management. 55. RECOMMENDATIONS. The State should refrain from being involved in civil aviation operations. The following actions are recommended: (a) An airport management company should be created to deal with the three international airports. This company, which should be commercially oriented and profitable, should have a majority private shareholder participation, and its management should be confided to a private operator. Cameroon is currently negotiating a sole source contract with A6roport de Paris, but it would have been preferable to select the operator on the basis of international bidding. The company's responsibility should pertain only to the commercial aspects of airport management, the management of technical/navigational aspects remaining with ASECNA. (b) A solution should be found to minimize the financial burden due to other airports. They should either be given minimal attendance to maintain essential equipment or be closed. ASECNA or local communities should be requested to continue to manage these airports. (c) The investment program should be designed on the basis of projects economically and financially justified. More emphasis should be given to maintenance to ensure the sustainability of investments. (d) Proposed investments and equipment should be based on the estimated level of service in accordance with actual requirements, that the system will have to handle, and less on an optimum service. (e) Responsibilities should be reviewed and specified for all entities involved in the civil aviation subsector in order to improve their efficiency. Civil aviation entities should be responsible for operations. DAC should not be involved, for example, in CAMAIR's management and operations, and should not try to 24 Republic of Cameroon force CAMAIR to operate on unprofitable routes for political reasons. Maritime Sector 56. Cameroon's maritime sector is a mixture of public and private enterprises. Sector policy making and regulation reside with MINT and with the Merchant Shipping Division. The Shippers Council (CNCC) is responsible for applying the UNCTAD 40/40/20 rule, and negotiating/controlling tariff levels. It also carries out studies. Four public enterprises ONPC (port management), CAMSHIP (national shipping line), CNIC (dry-dock), and CAMTAINER (container transport), a port handling company SOCAMAC (privatized in 1990), and several private forwarding companies with local and European management, share an active business in domestic and transit transport to CAR and Chad. Douala has long enjoyed the reputation of being the main port of the Central African subregion and received several loans from the Bank and other donors to support its expansion. International technological and commercial developments in maritime sector activities have made the Port vulnerable to changes that are beyond its control. 57. The current strategy in the maritime sector has not created an autonomous, dynamic, and efficient sector (Vol. II, Chap. VIII.) It has promoted local capacity through the development of public enterprises and protection of their activities through ad hoc regulation, but its implementation has had several shortcomings: (a) Public enterprises are poorly managed resulting in mounting deficits and dependence on subsidies. (b) ONPC is unable to maintain the access channel to Douala Port at the minimum required depth. Moreover, it uses a high share of its resources for salaries while deferring infrastructure maintenance and therefore decapitalizing its assets. (c) The national shipping line is unable to carry its share of the "eligible" maritime transport market; nor can it profit from technological changes which would improve its efficiency. (d) The original mandate of the Shippers' Council to protect the national shipping line is superseded by the trend toward privatization of shipping activities, while the Council remains obstructive of private sector interests. 58. PORTS OF CAMEROON. (Vol. II, Chap. VIII.) The management of Cameroonian ports has been unsatisfactory because of ONPC's lack of autonomy Transport Sector Strategy 25 and lack of accountability. Although ONPC's articles of agreement grant the office full autonomy, the MINT Minister is chairman of the Board, thus subjecting ONPC to considerable political pressure. This is reflected particularly in the blocking of tariff increases and the composition of the investment program. In compensation of blocked tariffs, public services carried out by ONPC, and staff redundancy, ONPC expects the Government to finance infrastructure investment regardless of economic justification. 59. ONPC's management has been unable to meet its operational and financial requirements. Since 1990, less than 50% of the channel dredging needs have been met, resulting in an insufficient current depth of -5.4 m. Consequently, the 1989 rehabilitation to deepen the channel to -7.2 m has been lost. Since 1985, port productivity ratios have declined for mineral carriers, oil tankers and container ships. Since 1988, this declining trend has extended to general cargo ships. Due to the poor condition of infrastructure caused by a lack of maintenance, the productivity remains far too low compared to usual ratios. The financial management lacks transparency and does not permit analytical and cost accounting. As a consequence, the port is unable to justify tariff increases other than on the basis of a general increase in costs. The financial statements show a small profit but do not include depreciation of all investments. 60. Due to its natural limitations, it is unlikely that shipping lines will select Douala Port as a transfer port for regional traffic in the Central African region. Most likely, Douala's role will be confined to that of a secondary regional port receiving smaller vessels coming from a deep-sea transfer port along the western coast. These circumstances and Cameroon's modest economic growth mean that Douala port is unlikely to face any capacity problems before the year 2005. Nevertheless, to keep a high profile in port operations, the Government considers the construction of two new deep-sea ports, one in the south (Grand Batanga) and another in the southwest (Tiko-Limbe) while continuing to carry out costly investments in Douala. This development strategy is unrealistic and would draw a disproportionate amount of scarce resources to port operations. 61. RECOMMENDATIONS. The following measures are recommended to improve ONPC's autonomy and accountability: (a) ONPC should be turned into a commercial company with State and private financial participation, and an independent Board of Directors selected from the above, but not chaired by MINT. (b) Operation and maintenance of port services should be privatized. ONPC should divest itself of activities that can be done more efficiently by the private sector (dredging; tugboat services; piloting; container handling; operation of the fishing port and ice factory). 26 Republic of Cameroon (c) Douala Port should be disassociated from the smaller ports to improve transparency and accountability: ONPC could be a holding company with one company for Douala Port and a second company for other ports. (d) In conformity with commercial management, a modem accounting system should be adopted and applied. (e) Financial responsibilities and cost sharing between ONPC and the State should be clearly spelled out. 62. SHIPPING LINE. (Vol. II, Chap. VIII.) Cameroon's national shipping line, CAMSHIP, has been unable to carry its share of the domestic transport market because the protection once provided to the shipping lines of developed countries by the Code of Conduct of Maritime Conferences has progressively eroded. The Code of Conduct was designed to promote the development of shipping lines in developed countries. This objective has not been achieved due to poor management and lack of efficiency of these companies, and relatively high tariffs due to the absence of competition. Moreover, CAMSHIP's lack of autonomy has resulted in redundant staff and inadequate investments in costly vessels. 63. CAMSHIP is a semipublic company, with 66% participation by the State and 34% by foreign shareholders. The company operates under the protective Code of Conduct established by UNCTAD in 1974, which guarantees shipping lines of developing countries a 40% share of maritime transport and leaves 20% to independent shipping companies. It transports merchandise with its own ships (about 355,000 tons in 1989) and sells shipping rights to other liners within its conference for remaining freight to and from Cameroon (about 145,000 tons in 1989). Until FY89, CAMSHIP's profits averaged CFAF 1.5 billion (US$5 M) on sales of about CFAF 20/22 billion (US$73/80 M). With the economic crisis and the gradual discomfiture of the 40/40/20 rule due to worldwide competition and overcapacity, this profitability began to decline rapidly thereafter. In FY91, CAMSHIP's operating loss was CFAF 1.2 billion (US$4 M), and as a result the company depleted its working capital (CFAF 600 M or US$2 M negative in FY91). As of FY87, CAMSHIP was forced to disinvest itself and gradually sold four ships. It still plies its remaining two ships, which are costly to operate (about CFAF 3.8 M or US$14,000 daily, against CFAF 2.7 M or US$10,000 for more modem ships, i.e., an annual loss of about CFAF 330 M or US$1.2 M). 64. Issues regarding the application of the Code of Conduct are being dealt with in UNCTAD (United Nations Conference for Trade and Development). A first step has been taken to help countries in the Western and Central Africa Region to adjust to future development in international shipping. In June 1992, a conference held in Cotonou, Benin, under the auspices of the World Bank and the EEC, issued recommendations to: Transport Sector Strategy 27 (a) prepare a new policy to facilitate technological and structural changes in the maritime sector. The study will include an analysis of constraints on investment in the transport chain and propose a framework to promote investment and joint ventures in the region; (b) evaluate the impact of transport costs on the competitiveness of major export products; (c) develop observatories of maritime transport; (d) identify obstacles to transit and transport facilitation and prepare an action plan in coordination with ongoing programs; (e) strengthen human resources and execute a training plan; (f) evaluate the performance of existing maritime and port regional organizations; (g) evaluate the performance of shippers' councils in order to strengthen assistance to shippers; and (h) evaluate the performance of regional shipping lines and plan alternatives for the future. 65. RECOMMENDATIONS. It is difficult to justify the existence of CAMSHIP under its current form given the changed circumstances in maritime transport, the lack of economies of scale for a company operating six ships, and the cost it would entail for the State budget to back up the company, once its capital resources are dwindling. The following options are recommended: (a) CAMSHIP sells its remaining fleet and becomes a freight service, seeking the optimal transport means for Cameroonian shippers, importers and exporters, through chartering ships. (b) CAMSHIP extends its foreign participation or merges with foreign shipping interests. The State may initially keep some of its shares. The purchase price would not necessarily be the residual value of the ships, but the traffic rights for transporting Cameroonian merchandise. 66. In any of the above options, CAMSHIP should operate in a fully competitive environment without the protection of the 40-40-20 Code of Conduct. Therefore, CAMSHIP should compete with other carriers for all national import or export maritime freight, or should concentrate on market niches for which it has or might develop a comparative advantage. CAMSHIP should essentially 28 Republic of Cameroon become a commercial enterprise attracting business with its reliability and effectiveness. 67. SHIPPERS CoUNCIL (CNCC). (Vol. 11, Chap. VIII.) The Conseil National des Chargeurs du Cameroun, CNCC, has been unable to carry out its mandates, i.e., control the application of the Code of Conduct of Maritime Conferences, negotiate freight rates with Maritime Conferences, and represent the interests of Cameroonian shippers. Due to unclear national regulations, the first two mandates have been handled by CAMSHIP. The third one, i.e., minimizing transport costs, conflicted with the interest of the shipping line to obtain the highest possible tariff. CNCC carries out studies and training, and contributes to the formulation of MINT's maritime sector policy, and to the administrative matters handled by the Merchant Shipping Division, mainly because of the weakness of these institutions. 68. Because of the scarcity of Government resources and CNCC's low productivity, the Council's existence is hard to justify. CNCC's operations have been too costly and represent a misallocation of taxpayers' money. It is financed from a 0.30% tax (93% of CNCC's revenue) on CIF and FOB value of imports and exports, collected through customs and transferred from the Ministry of Finance. This tax increases transport costs of exports by about 5%. In addition, all professional importers and exporters operating in Cameroon must pay an annual fee of CFAF 10,000 (US$36) to CNCC. The Council also receives fees from penalties imposed on shippers who do not comply with the 40/40/20 regulation. Although cumulative revenues during FY89-91 amounted to CFAF 3 billion (US$11 M), CNCC's cumulated operating deficit reached CFAF 500 M (US$1.8 M). Its staff comprises 167 employees, of which 42 are professionals; it has an office in Paris and is represented in 12 European ports. 69. RECOMMENDATIONS. CNCC's role should be redefined following recommendations of a diagnostic study, keeping in mind that the redefined CNCC should not be a burden to the State. It is recommended that: (a) if CNCC intends to play the role of a consulting firm for studies and training, it sell its services on a competitive basis, as would a private consulting firm; (b) if it also intends to provide services to Cameroonian shippers, it sell these services on a commercial basis; or (c) CNCC play the role of observatory of the transport chain as a separate agency liaised with MINT, under a separate and much smaller budget; and Transport Seaor Strategy 29 (d) if the above is not possible, CNCC be liquidated and its staff transferred to MINT, but only following a diagnostic study of staffing needs and skill mix, and on the basis of appropriate redeployment provisions for redundant staff. 70. DRY DOCK REPAIR. (Vol. II, Chap. VIII.) The Chantier Naval et Industriel du Cameroun, CNIC, is reasonably well managed but tends to seek support from the State, which may have a comfort impact in the long term, therefore reducing its efficiency. The recently created company operates a 10,000 ton dry-dock, which exceeds by far the required capacity in Cameroon. CNIC does not include dry-dock depreciation in its financial accounts and could not do so without creating a deficit. Nevertheless, CNIC expects the Government to finance additional equipment and the relocation of the dry-dock to its final location, which is the site of CNIC's mechanical workshop. 71. RECOMMENDATIONS. CNIC should seek majority participation of private shareholders to increase its autonomy vis-a-vis the Government, revise its development plan according to the demand for ship repair, and improve its financial viability. It should seek cancellation of debt service for the dry-dock, or pay a lease to the Government for using the dock. 72. CONTAINER TRANSPORT. (Vol. II, Chap. VII.) CAMTAINER, the container transport company, has been struggling to survive due to its initial over- design. It competes with several private companies both domestic and foreign. Although it has tried to retain activities from the public sector, it has not succeeded because of strong competition. CAMTAINER wants to widen its field of activity and to become a full fledged transit and multimodal transport company. This would require larger stock. 73. RECOMMENDATION. The company should be fully privatized or liquidated because of the existence of active private competitors and the lack of rationale for state involvement in the sector. 74. MERCHANT SHIPPING DmSIIoN. (Vol. II, Chap. VIII.) The Merchant Shipping Division is unable to oversee the maritime sector because of poorly qualified staff and a limited budget. The staff lacks the competence to carry out the Division's mandate for port and shipping inspection, enforcement of maritime regulations and international conventions, and marine environmental protection. It carries out ship inspection. The other activities have been taken over in part by ONPC and CNCC. 75. RECOMMENDATION. The Merchant Shipping Division should be strengthened to ensure that it carries out its mandate and takes over public service activities from ONPC and CNCC. 30 Republic of Cameroon Transit Transport (Vol. II, Chap. IX) 76. Transit through Cameroon to access the sea is critical to landlocked CAR (1,850 km from Bangui to Douala) and Chad (about 1,500 km from Ndjamena to Douala). Although transit trade from and to these countries accounts for only a little over 10% of Cameroon's total external trade, the Cameroon corridor is of vital economic interest to both countries. Transit transport problems concern mainly imported merchandise. Exports, in particular cotton (Chad/CAR), coffee and wood (CAR), do not face major difficulties. This vital interest is not given priority by the Cameroonian Government, whose primary concern is to stem the tide of fraudulent imports. While import duties are sometimes evaded in Cameroon by diverting transit merchandise to the domestic market, there is no evidence that customs fraud is more prevalent in import transit through Douala Port than in contraband trade along Cameroon's 1,000 km border with Nigeria, a much more difficult area to oversee. 77. Transit transport in Cameroon is subject to many obstacles, such as complex and lengthy customs procedures, multiple road controls adding significantly to transport cost, and insufficient maintenance of international arteries. Although bilateral discussions and agreements on transit transport between CAR, Chad and Cameroon are held regularly, and conventions have been concluded in the UDEAC, policies remain inconsistent, and transit transport through Cameroon becomes more difficult with time. This situation led to the joint EEC-World Bank initiative of 1989 to formulate a transit transport facilitation program in the Central African subregion, in the context of the UDEAC Regional Reform Program. Because most of the obstacles to transit transport occur in Cameroon, the success of this program depends to a large extent on the willingness of the Cameroonian Government to take the necessary measures. 78. Most obstacles to transit stem from customs declaration procedures, including: (a) delays in customs declaration and the drawing up of transit document D15, once goods have arrived at the port; and (b) requirement to pay all import duties on transit merchandise to Cameroon customs. Importers must maintain custom bonds in a commercial bank, at high interest rates, until delivery is confirmed by the customs of the importing country and the customs document is returned to Cameroon. Due to slow processing by national customs services, this procedure often takes more than 90 days, which increases financial charges, and in turn, overall transport cost; (c) requirement to submit an import license and proforma invoice, domiciled in Bangui or Ndjamena, proving that the goods are destined for those countries; (d) compulsory signature of the D15 by the Minister of Finance for transit of "sensitive" goods (such as textiles, alcoholic beverages, and goods produced in Cameroon at higher than world market prices); and (e) compulsory customs escorts for transit transport to the border, at the cost of the importer, to ensure that merchandise exits Cameroon. Transport Sector Strategy 31 79. In November 1991, the UDEAC countries agreed on a Program of Regional Reforms to improve transit conditions. National transport committees have been created in the six UDEAC countries to draw up plans for: (a) simplifying customs documents and devising a regional guarantee system of customs duties along the lines of the EEC TIR and TIF systems; (b) reviewing the criteria for establishing bonded customs centers; (c) redefining transit requirements for intermodal transport (rail/road, rail/river) and containers; and (d) improving road transport conditions and regulations (maintenance of international highways, trucking liabilities, vehicle inspection, mechanisms for cost recovery). 80. RECOMMENDATION. Because of Cameroon's importance to the successful conclusion and implementation of the UDEAC transit facilitation component, it is recommended that the agreed measures (both national and regional) on the above points become central policy elements of the transport sector strategy for Cameroon. REPUBLIC OF CAMEROON TRANSPORT SECTOR STRATEGY MATRIX OF POLICY MEASURES AND ACTIONS POLICY AREA/ISSUES ORJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Road Transport/Fiscal Policy and Cost Recovery Improvement Inefficient recovery of road Establish realistic targets and Analysis carried out by a Extension of computerization to Annual review of collection performance. related taxes. incentives for appropriate consultant during TSP other cities if feasible. collection. preparation. Computerized vehicle certification MIS implemented in four cities. Road tax structure is Harmonization of road tax system. TOR prepared for study to be Simplification of road taxes and To be included in Loi de finances complex and some taxes are carried out under PPF 152- regrouping of vehicle taxes. 1993/94. redundant. CM. Total taxes collected from Improve adequacy between road Studies carried out by Walter Study of the feasibility and Idem road users cover the needs user charges per type of vehicle and Partners in 1987 on road comparative advantages of different Annual revision of tax structure; for road maintenance but and cost of road deterioration. maintenance and by Lavalin options (increase fuel tax; Regional agreements on harmonizing discrepancies are found per in 1990 on road user taxes. application and increase of axle load road tax structure (fuel taxes; axle load type of vehicle. The Government has prepared tax; higher import taxes; road tolls). taxes). a Law to establish axle load tax (loi des finances 1991/92), but proposed tax is insufficient. Road Controls are costly to Elimination of illegal road controls Presidential decree required. Principle of measure to be incorporated local and transit traffic. and reduction in number of in the Declaration of Transport Sector institutions in charge of formal Policy, before negotiations. controls. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Vehicle Technical Pursuit of axle load control to Consultants studies (GAUFF) Institutional improvements needed to Updating of study to be launched before Regulations are not being protect the road network against have been carried out to pursue axle load control. Devising TSP appraisal, resources permitting. enforced (overloading, lack damage by aggressive trucks. define a system to organize incentives for personnel to follow Agreed measures to be carried out during of technical inspection, non- and manage formal checking through. Studies should be updated TSP and Transit Transport Component of respect of "rain barriers"). points on the road network taking into account possible UDEAC Regional Reform Program. for overloading (weighing concession of certain paved roads to bridges). private management, including responsibility for maintenance. Regional agreements (UDEAC) on harmonizing and applying same measures (introduction and utilization of weighing bridges). Road accidents are Improve traffic safety. Studies on road security Establishment of a durable Principles of Action Plan to be dramatically high. Accident carried out by DHV (1983); institutional framework. incorporated in Declaration of Sector level is 50:1 compared to Code de Ia Route prepared in Strengthening of the Department of Policy, before negotiations. Europe, with 9 vehicles per 1986; LAVALIN studies on Land Transport in MINT. Reviewing Implementation to start before 1,000 inhabitants compared vehicle inspection and road legal responsibility for accidents of effectiveness. to 400-500 vehicles in security (1987) with road maintenance agencies. Europe. Law enforcement recommendations for action Preparation of a 5-year and rescue facilities are plan. Terms of reference implementation program to be almost non-existent. prepared in October 1991 carried out with PPF financing, to Government has not (World Bank mission) for be implemented during TSP and to implemented recommended definition of a 5-year Action include: a coherent road security actions by several consultant Plan. plan; changes in administrative rules studies. to facilitate security measures; initial provision of road security equipment; and technical assistance. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Urban transport policy is not Definition and application of an Studies carried out by LBI Following the study of the Principles of urban transport policy to be coherent, lacks institutional urban transport policy, in particular (Etude de diagnostic et de institutional structure, and incorporated in Declaration of Sector support and coordination, for Douala and Yaounde. restructuration de la Soci6t6 organization of the seminar- Urban Policy, before negotiations. and does not provide for des transports urbains du transport policy study to be launched Implementation to start before equal access to transport. Cameroun); TRANSURB to (i) establish a sound data base for effectiveness. Regulatory framework is (comparative study of 12 urban transport; (ii) improve outdated and has led to taxi cities in Sub-Saharan Africa); regulatory framework and overcrowding in the main and of a traffic plan (Second application; and (iii) prepare an cities of Douala and Urban Project). TORs action plan to be financed with Yaounde. prepared for a study of the donor assistance. institutional structure, and organization of a seminar to prepare an urban transport policy. Improvement of Competitiveness: Transit Transport Facilitation and Liberalization of Road Transport Trucking industry is Increase competition. Improvement Trucking Study carried out by Reduction in the cost of road Measures to be incorporated in inefficient due to high costs of trucking through better training INRETS/LET in 1989. transport through: (i) reduction in Declaration of Sector Policy (before and lack of professionalism. and devising incentive systems for Report on the reorganization unit costs and lowering cost through negotiations). Program to be safe and responsible driving. of the freight transport lower customs duties for vehicles implemented during TSP. industry in Cameroon and spare parts; (ii) improved (CNCC-AFr-CNUCED) in maintenance of international 1989. itineraries; (iii) improved responsibility and accountability of drivers; (iv) improved vehicle inspection; and (v) provision of assistance in accounting to small transport entrepreneurs. Increase of competition through: (i) encouraging the development of small and medium or larger transport enterprises; (ii) removing the "Bureau Commun" in Douala; and (iii) reducing the role of intermediaries between shippers and transporters. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Deterioration of transport Strateag: (a) develop an approach Launching of the UDEAC Measures common to UDEAC Elements for Cameroon to be included in and transit performance in to the role of the State in transport Regional Reform Program countries: (a) modify the existing Declaration of Transport Sector Policy UDEAC countries due to: (a) more focussed on economics by including a transit transport procedures for transit under customs (before negotiations). Implementation inconsistent transport policies minimizing public sector facilitation component bond; (b) revise conditions of during TSP. (unrealistic objectives, involvement, maximizing use of (November 1991). accreditation for transit and land inappropriate instruments of existing resources, and limiting the Diagnostic study and transport operators; (c) update the implementation, and lack of cost of procedures; (b) improve preparation of legal documents defining civil regional scope); (b) weakness cost-effectiveness of official logistic recommendations and an responsibilities and commercial of the legal system which channels; and (c) enhance the Action Plan, by the Bank in liabilities of transport and transit lacks instruments of responsibility of private and public 1992. UDEAC Regional operators; (d) liberalize domestic application, and has been agents involved in road transport Agreement on measures insurance for transit; (e) harmonize unable to prevent fraud; and and transit activities. Objectives: proposed by national action road user taxes; (f) define the role (c) high aggregated costs of improve: (a) customs practices and committees by April 1993. and status of international transit transport. procedures; (b) regulations for itineraries; (g) identify required transport operators and investments to facilitate transit. intermediaries; and (c) road Measures specific to Cameroon: (a) transport regulations. discontinue the obligation of producing invoices domiciliated in Chad and CAR for clearance of transit goods; (b) discontinue Minister of Finance's authorization for landlocked country imports; (c) limit road controls; (d) discontinue police escorts; and (e) overhaul of the computerized system for processing shipment documents in Douala. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING I PREPARATION Public Enterprises CAMAIR: US$300 M debts Rationalization of airline industry, Performance Contract Plan (a) complete measures defined in the Annual performance indicators defined in and operating on the brink of both national and regional. concluded under the SAL Performance Contract; and (b) the Performance contract. Satisfactory bankruptcy. updated in July 1992 for devise a viable strategy on the Performance Contract is condition of FY91-95: (a) concentration longer term (merging, regional third tranche release of the SAL. on profitable commercial integration with other carriers). Satisfactory implementation of ICAO activities; (b) improvement of experts' recommendations: condition of operational and financial TSP negotiations. management; (c) improvement of human resources management; and (d) financial restructuring. Expatriate Assistance to manage CAMAIR (since October 1990). ICAO to provide operational and financial assistance. REGIFERCAM: structural Upgrading REGIFERCAM to a Performance contract being Implementation of new cahier des Implementation of new Cahier des problems due to tariff commercial enterprise with implemented under SAL. charges. Adoption of a new legal Charges: Implementation of new fuel constraints, intermodal efficient performance and little New railway statute ("cahier status and new procurement transport price equalization system competition (road transport) support recourse from the State des charges") approved by procedures. Revision of price before TSP negotiations. and lack of autonomy in budget. Presidential Decree (Dec. structure for fuel transport to Business Plan prepared before decision making. 1991) providing greater Garoua, and road and railway negotiations. Draft Performance autonomy to REGIFERCAM. taxation, to permit equal competition Contract before effectiveness. Loi des Finances 1991/92 between rail/road. Creation of provides for levying of axle separated affiliates for passenger load taxes on road transport traffic. Preparation of a Business to, among others, eliminate Plan and a new Performance distortions in competitive Contract. Continuation of staff edge between rail and road reduction, analysis of unprofitable transport. activities. Financial restructuring through cancellation of cross-debts and rescheduling of debts. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION SOTUC Bus Transport. Rationalization of urban transport. Performance contract Decision to be made on whether or Action to be launched before negotiations US$40 M eq in debt, Elimination of unnecessary claims concluded under SAL, but not not to liquidate SOTUC. Definition through adoption of the Declaration of revenues do not cover on the national budget by an auto- being implemented. of an adequate urban transport Sector Policy. operating cost. Carries only financing transport system. policy and appropriate institutional 5% of urban transport framework. passenger traffic in Douala and Yaounde, due to heavy competition from unregulated taxi transport. MATGENIE (Equipment Upgrading MATGENIE to a Rehabilitation study carried New study to be carried out before First agreed action (e.g., management Pool). Road maintenance commercially operated company. out under Sixth Highway pre-appraisal to provide optimal contract) to be taken before TSP Direction of Ministry of Project. Provides for solution on company management. negotiations through adoption of the Public Works has continuation of MATGENIE Strengthen MATGENIE's Declaration of Sector Policy. accumulated CFAF 12 billion as a public enterprise, while management. Contract equipment's in arrears to MATGENIE for creating a private enterprise maintenance to the private sector. equipment rental. As a result "culture." TOR prepared Adjust staff to new structure and MATGENIE is unable to during TSP preparation role. maintain satisfactory mission for a study to equipment utilization rate. establish a commercially MATGENIE's management operated company under is weak. Staff/equipment private management. ratio (0.8 per unit) is too high. LABOGENIE (Road Streamlining services and staffing Restructuring Plan prepared New study to be carried out before Action on agreed solution to be launched Laboratory): Holds monopoly of LABOGENIE so that it can by LABOGENIE in 1990, pre-appraisal of TSP. Open before negotiations through adoption of on laboratory testing in road operate commercially in a proposing strengthening of competition for activities that can be the Declaration of Sector Policy. and building construction. competitive environment. operations through carried out by the private sector. Over staffed, and with commercial management Contract LABOGENIE for other services not being paid from while striving for market activities. the DER budget, dominance. During TSP LABOGENIE lacks preparation mission, TOR efficiency. prepared for study of potential for LABOGENIE to operate commercially. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION ONPC - Douala Port: Improve efficiency and financial Diagnostic Study by Port Achieve efficient port operation Action to be launched before negotiations Management and operational management and adapt port Autonome du Havre (March through: (i) managerial restructuring through adoption of the Declaration of problems causing: operations and investment program 1991), Container terminal - commercial management (semi- Sector Policy, starting with (1) substantial delays in port to changed maritime requirements. Modernization Study public company); (ii) divesting of implementation of proposed measures. handling; (2) cash flow [feasibility (1990), activities that can be done more shortages requiring expensive management and operations efficiently by private operators; (iii) commercial borrowing; (1992)), traffic forecasts financial restructuring - introduction (3) inadequate management study (1992) carried out. of analytical accounting system, of dredging operations Study for restructuring of adjustment of tariffs based on costs; resulting in severe siltation of ONPC and rehabilitation of (iv) adjustment of investment port area; (4) substantial the old port, detailed strategy to realistic traffic pilferage and lack of engineering of channel projections - review justification of security; (5) over- ambitious calibration works and investment in channel calibration investment program; (6) lack preparation of an Action Plan works; (v) execution of dredging by of competitiveness because of are being launched. a private operator; and (vi) inefficient tariff and port tax Agreements reached in March improving security measurements to structure impacting especially 1992 (OECF/IBRD/ONPC/ prevent pilferage. on export products. MINTPT) on port modernization project and dredging requirements. CAMSHIP: national shipping Reorganization of maritime Diagnostic Study by Port du CAMSHIP operation to be reviewed, Decisions to be incorporated in the semi-public company - shipping industry to eliminate Havre (March 1991). including possible sale of ships, Declaration of Sector Policy. operating 2 ships, losing claims on national budget. Conference in Cotonou (June turning company into a freight Implementation to start before about US$1.5 M per ship 1992) to help developing company with majority private negotiations. p.a.; large debt (USS34 M countries to adjust to future participation; possible conclusion of eq.) faced with increasing development in international commercial agreements with operational deficit financed shipping. international shipping companies; by expensive short-term seeking vertical integration with borrowing. Company is not SOCAMAC (port handling company viable in today's maritime privatized in 1991). Regional sector operations (too small studies to be carried out following for economies of scale, recommendations of the conference cannot meet competition in Cotonou. from international vertically integrated shipping conglomerates; 40-40-20 freight rule does not guarantee sufficient protection due to generally applied tariff discounts). POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION CNIC - workshop and Optimization of Workshop and dry Diagnostic Study by Port du Seek cancellation of the debt service Decision to be incorporated in the dockyard company, operating dock operations. Havre (March 1991). for the dry dock, or pay a lease to Declaration of Sector Policy. a 10,000 T dry dock. The the Government closer to the Implementation to start before dry dock is not located at its depreciation value than the present negotiations. final location and is operated lease. Fully privatize CNIC's well below its capacity. The management. Revise the dry dock, financed by KfW, development plan in line with the is not on CNIC's balance demand for ships repair. sheet. CNIC pays a CFAF 25 M annual lease to ONPC. MERCHANT SHIPPING Strengthen the Division to enable it Evaluation of the activities of Preparation of a decree redefining Decree before negotiations. DIVISION - Department of to fulfill its responsibilities, the Division (Lavalin, 1989). the role of the Merchant Shipping MINT. Unable to oversee Division. Implementation of a the maritime sector because training program. of poorly qualified staff and limited budget. CAMTAINER - the Stop the drain on State budget. The Company should be fully Decision before negotiations. container transport company privatized or liquidated. is not financially viable because of an initial over- design and competition with more efficient private operators. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING ___PREPARATION CNCC - Conseil National Shippers Council to become Diagnostic Study by Port du CNCC should emphasize its service Decision to be reached as part of the des Chargeurs du Cameroun effective service organization to Havre (March 1991). role to local shippers (assistance in Declaration of Sector Policy. (national shippers council): Cameroonian shippers. If shippers Conference in Cotonou (June documentation and information). Its Implementation to start before negotiates freight tariffs and are not interested, CNCC could 1992) to help Sub-Saharan status should be changed to a not- negotiations. cargo shares with become an observatory of the African developing countries for-profit advisory service, which international shipping lines international chain of transport. to adjust to future would be paid for its services at (4040-20 rule) for development in international cost, allowing substantial reduction CAMSHIP. Represents a shipping. Seminar in Douala of the surcharge. Regional studies costly budget item (financed is being prepared to discuss to be carried out following by 0.3% surcharge on the role of CNCC with recommendations of the conference import/export by sea, and shippers. in Cotonou. fees paid by importerslexporters and shipping lines). Overlaps with other State organizations (among others Merchant Shipping Division) in maritime sector management. Does not carry its real mission, i.e., defending the rights of national shippers and advising them on least cost transport means. O POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Improvement of Institutional Capacity through Reorganization and Strengthening of Transport Sector Management Ministries of Public Works Ministries to be strengthened to Reorganization study to be MINTP and MINT organization to Decision to be reached as part of the and Transport (MINTP and focus on sector policy, management undertaken for MINTP and be critically reviewed; department of Declaration of Sector Policy. MINT), related provincial and financial equilibrium; and to MINT. Diagnostic study of human resources management to be Implementation to start before and sub-divisional units: over disengage from day-to-day MINTP personnel to be established; program of post negotiations. staffed (about 10,000 people) management of public sector carried out under road description and staff evaluation to be and inefficient. enterprises, maintenance strategy study launched, in order to devise (public works staff), and PPF appropriate training program. for MINT. General Directorate for Draft decree to be amended for Letters sent by Bank, dated 8 Separation of activities of DGTC Decision to be reached as part of the Large Works (DGTC): DGTC to become an operational August 1991, commenting on with respect to procurement and Declaration of Sector Policy. created in 1988 to accelerate element of MINTP for the transport new role of DGTC as defined management of large works. Implementation to start before procurement and works sector and to transfer controlling in draft Decree of 1990 and Establishment of a separate agency negotiations. implementation but function in procurement to separate the new procurement code, responsible for procurement and constitutes duplication of procurement agency. awaiting discussion with strengthening of its competence. responsibilities with MINTP Government. MINTP to be made solely and institutional conflict in responsible for sector management, sector management. Role of and its executive role for large road DGTC is ambiguous in that a works to be delegated to DGTC 1990 draft decree would under contractual arrangement with enlarge its role in public MINTP. works. DGTC functions as judge and party at the same time, reviewing procurement proposals and being Secretary to the National Procurement Commission. Investment Planning is weak National planning system for public Since June 1991, first efforts Sector development strategy to be Revision of the transport sector portion and not based on quantified investment to be strengthened, made under TSP preparation agreed during sector work and of PIP before negotiations. approach to economic through better planning at sectoral to harmonize transport sector project preparation. Government and priorities in line with level, with appropriate arbitrage by investment planning with donors to agree on strategy and objectives of national Ministry of Plan. Investment plan National Public Investment priority transport sector investment development plan. Transport to be comprised of viable projects Program. program. sector lacks appropriate data using economic rate of return MINTP and MINT study and base due to inadequate methodology generally applied to planning units to be strengthened to statistical services. investment projects, such rate to be provide adequate information on at least 12%. needed expenditure and investment I I projects. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Expenditure Planning and To finance all routine road TSP Preparation Mission of Analysis of financial performance of Action to be defined before TSP pre- appropriation of budget maintenance by national budget; to March 1992 found that while the transport sector to be prepared appraisal. Decisions to be reached as part resources is executed on ad cut budget expenditures for public about CFAF 54 billion p.a. is and translated into concrete action to of the Declaration of Sector Policy. hoc basis and lacks sector enterprises through collected from road transport optimize fiscal support of the Implementation to start before transparent public restructuring, privatization and related taxes, only CFAF 7.5 transport sector. negotiations. expenditure analysis. liquidation; and to achieve full cost billion (18%) is allocated to recovery, road maintenance, thereby contributing to the decapitalization of the road network. Airport Management is Three national airports to be placed Study by ADP (Aroport de Implementation of the Airport Implementation to start before inefficient and does not under private commercial Paris) and ASECNA Management Company for major negotiations. recover costs from the three management to handle all recommending creation of airports. Management of other international airports commercial aspects. Expenditure Airport Management airports by ASECNA or local (Douala, Garoua and for non-operational airports to be Company; ICAO has been authorities. ASECNA would Nsimalen/Yaounde) or from reduced to minimum. requested to provide continue to handle matters regarding the 6 national airports. assistance to carry out a air navigation and meteorology. Government and Cameroon diagnostic study on airport Airlines owe about CFAF 7 navigation aids. Government billion to ASECNA for is negotiating with ADP the services rendered while creation of Airport airport revenues center Management Company. around CFAF 2 billion per Consultant to help negotiate year. the contract. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Strengthening of Road Maintenance Capacity through Development of a new Road Maintenance Strategy Maintenance is carried out Definition and implementation of a Monitoring system of Road (1) Establishment of a priority road Decisions to be reached as part of the mainly by force account, but new road maintenance strategy. maintenance activity network that will be maintained Declaration of Sector Policy. only part of road network is established during Sixth annually with appropriate budget for Implementation to start before covered due to inefficient Highway Project. New routine maintenance and donor negotiations. management and limited strategy prepared by financing for periodic maintenance. Annual review of maintenance budget allocation (CFAF 7.5 consultants as part of (2) Preparation of multi-annual performance of preceding year before billion instead of CFAF 20 preparation of TSP under maintenance programs; privatization November; preparation of next year's billion requested for periodic Sixth Highway Project. of paved road maintenance from the maintenance program before December maintenance, and CFAF 10 start of the TSP; gradual transfer in 1, for review with interested donors. billion needed for routine four years to maintenance by maintenance including rural contract of earth roads in accordance roads). Institutional weakness with annual targets. (DER, SRC, CNCNR) (3) DER, SRC, Sub-divisional requires drastic change for authorities to put emphasis on road adequate maintenance and maintenance management and arresting decapitalization of supervision of works carried out by road network. private contractors, including small enterprises and villagers/labor intensive methods as part of a poverty alleviation program. (4) Preparation of a priority rural road maintenance program. (5) Creation of a maintenance management group (MMG) at working level (paved roads, earth roads, MATGENIE, LABOGENIE, budget representative) and a "contr6le des objectifs" to verify budget expenditure compared to objectives. MMG to decide on annual budget and work program, and to meet quarterly to review funds spent and objectives met in accordance with agreed program. POLICY AREA/ISSUES OBJECTIVES ACTIONS ALREADY ACTIONS TO BE TAKEN MONITORABLE ACTIONS TAKEN AND UNDER AND TIMING PREPARATION Need to Protect the Environment Inadequate road maintenance Establishment of environmental Terms of reference prepared Environmental impact study to be Decisions to be reached as part of the programs cause erosion, protection criteria and for An Environmental Action carried out on road maintenance and Declaration of Sector Policy. Preparation drainage problems and brush implementation as part of Plan in the Maritime Sector. construction. Creation of a small of Environmental Action Plan to be fires along roads. application of transport strategy. Study being launched. environmental protection unit to completed before start of TSP mad Construction and prepare an environmental action plan maintenance program. maintenance of roads near or for road maintenance, protect areas Annual review of implementation of through forest areas require of the tropical rain forest, and environmental action plan before protective measures to coordinate with other environmental November each year. preserve ecology. protection agencies to prepare and Close coordination with other implement measures; establishment environmental action programs. Absence of protection of of appropriate anti-erosion measures maritime environment. and maintenance of drainage systems. 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