Gabon - Road Project

RESTR ICTED Report No. TO-427a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A ROAD PROJECT GABON June 16, 1964 Department of Technical Operations CURRENCY EQUIVALENTS U.S. $1 - = CFA Francs 247 CFA Francs 1 Million = U.S. $4, 046 PUMLIC OF GABON APPRAISAL OF A ROAD PROJECT TABLE OF CONTENTS Page SU-MMARY i I. INTRODUCTION 1 II. BACKGROUND INFORMATION 1 III. THE HIGHWAY SYSTEN 2 A. General 2 B. Road Transport 2 C. Road Administration 3 D. Maintenance Operations 4 E. Planning and Design of Roads 5 IV. THE PROJECT 6 A. Description of the Project 6 B. Cost Estimate 8 C. Design Standards 9 D. Execution of the Project; Procurement 9 E. Financing of the Project 10 V. ECONOMIC JUSTIFICATION A. General 11 B. Service Areas ol the Planned Roads 11 C. Market Ofttlook of the Gabohese Timber 12 D. Profitability of Producing Export Timber 13 E. Economic Benefits 14 VI. CONCLUSIONS 15 ANUEXES Tables 1. Road Network 2. Budget for the Directorate of Public Works 3. Design Standards 4. Annual Breakdowm of Estimated Expenditures AdNEX7S (continued) 5.- Road Fund 6. Government Collection on Timber Operations Chart - Organization Chart of the Directorate of Public Liorks - Main Highway Network Showing the Roads Included in the Project, the Forest Zones and the Limit of the Okume Forest - 1 - REPUBLIC OF GABON APPRAISAL OF A ROAD PROJECT SUIJARY i. The Government of Gabon has requested the Bank to finance part of its highway development program; the present project consists of: a. The construction and improvement of 185 km. of roads in- cluding final engineering and supervision of construction by consultants. b. The employment by the Directorate of Public Works (DPI) of a few experts to assist in carrying out the project. c. The employment of consultants to carry out feasibility studies and preliminary engineering of about 280 km. of additional roads and of the river loading facilities in NrDjole. d. The procurement of maintenance equipment, spare parts and shop facilities. ii. The total cost of the project is estimated at about US$13.7 million equivalent of which the foreign exchange cost would be US$12 million; the local currency cost amounting to US$1.7 million equivalent will be financed by the Government. The cost estimate is considered sound and includes a sizeable allowance for contingencies due to the difficulty of estimating the cost of works in forest-covered rough terrain. iii. Within the Ministry of Public Works the DPW is in charge of all public roads in Gabon. It is operated by a group of French engineers on loan from the French Ministry of Public Works. Its organization and staff- ing is adequate for the present volume of road works, but should be strength.- ened with additional experts for carrying out the administrative, techni- cal and financial aspects of the project. iv. Contracts will be awarded through international competitive bid- ding on the basis of final design prepared by consultants. Works will also be supervised by the consultants. v. The project is economically justified; the proposed roads will open up the interior region of the country designated as the "Second Forest Zone" for timber exploitation. The economy of Gabon relies very heavily on its timber exports, which account for about 60% of its export earnings, coming presently from the "First Forest Zone" in the coastal area. In this region, where exploitation began about 60 years ago, the exploitable resources are being depleted and must gradually be replaced by new production in the Second Zone. The market demand is strong and growing; the price trend has been stable in the past few years and is expected to remain so. - ii - vi. The project providesa suitable basis for a loan of US$12 million equivalent to the Gabonese Government. The term of the Loan would be 20 years including a period of grace of 4 years. - 1 - REPUBLIC OF GABON APPRAISAL OF A ROAD PROJECT I. INTRODUCTION 1. In December 1963, the Government of Gabon asked the Bank to help finance the construction and improvement of about 990 km. of roads ained at opening the interior part of the country designated as the "Second Forest Zone", for exploitation of forest reserves. The total cost of this program, which also includes the construction of river loading facilities and the nrocurement of road maintenance equipment amounted to about US$50 million equivalent. 2. A Bank mission which visited Gabon in February 1964 found that this program was too large judging by the present needs of the coun- try and that only a part of it could be eligible for immediate Bank financing. The mission recommends financing a smaller and n,ore realistic project limited to the construction of three roads totaling 185 km., the additional engineer- ing studies, and the procurement of road maintenance equipment. The total cost of the project recommended is estimated at US$13.7 million equivalent of which the foreign cost component is US$12 million equivalent. 3. This report is based on information prepared by several Ministries of the Government and on the findings of the Bank mission. II. BACKGROUND INFORMATION 4. Gabon is located on the west coast of Africa at the Eauator. Its population is estimated at 450,000 and its total area is 267,000 square km. (about half the area of France), of which 200,000 square km. is core.ed by a heavy jungle. It is bordered on the north by the Republic cf Comproon, on the south and east by the Republic of the Congo (Brazzavillc). T1he coast- line on the Atlantic Ocean extends some 800 km. 5. The climate is typically tropical -- warm, humid and without large temperature variations throughout the year. The rainy season extends from October to April, but the heavy rains occur in March/April and October/ Fovember. In Libreville, the capital of the country, the average auiaal rainfall is 2.50 m. 6. The topography is of three main types: a) the coastal plains, varying from 30-200 km. in width; b) the plateau sections formed by relatively high and rough lands (between 300 and 600 m. above sea level) located in the northwest and the south; and c) the mountains scattered throughout the country with altitudes ranging between 900 m. and 1,57D m. - 2 - 7. Gabon enjoys a favorable balance of trade with exports exceeding imports by some 35%. The timber industry is the principal source of both ex- port earnings and government revenues. The exploitation of timber started at the beginning of the present century, and exports totaled about 800,000 tons of tropical hardwood (mainly ohume) in 1963. In re;ent years the traditional exports have been reinforced by petroleum, manganese and uranium. It is quite possible that by the end of the next decade Gabon will be a major producer of iron ore as well. III. THE HIGhWAY SYSTEM A. General 8. The development of a national road system is of relatively re- cent origin, for the most part dating from the end of the Second World War. Road construction was financed mainly by the French Government through its special agency, FIDES, now superseded by FAC (Fond d'Aide et Cooeration); yet the road development is still at an early stage and nany areas of the country are not connected by all-weather roads. 9. The main surface transportation route is the Ugooue River which origi- nates in the Congo and crosses the country from southeast to west for a total length of about 1,200 km. This river is an important transport media for the country's timber industry, the logs being floated down this river to Port Gentil for export shipment. 20. The domestic air transport is fairly well developed with some 100 landing fields throughout the territory. Since there are still many places in the country without adequate road connections, air transport plays on iiportantu role in passenger and goods transport. 11. A feasibility study of the "Hekambo" project is presently under way, for a railroad connection (700 km.) bet'.een Belinga,where rich iron deposits have been found recently, and Owendo (15 km. south of Libreville) where a r.ew port will be built for ore shipment. The feasibility r study and related econnmir studies are being carried out by United States and French consulting firms, with partial financing by the United Nations Special Fund and are expected to be -om-- pleted by the middle of 1965; the Bank is the Executing Agency for this stidy B. Road Transport 12. The road system comprises 4,440 am. of roads divided into National Roads (1,570 km.) and Regional Roads (2,870 km.); only 29 kn. are asphalt paved, 2,793 km. are laterite surfaced and 1,618 are earth roads. The design stardard6 of the present roads are generally low. 13. The growth of the road network has been slow; from 1959 to 1963 there was only a 15 increase in length (see Table 1). Efforts were concentrated on improving existing roads rather than extending the network. The main artery of this network is a north-south road extending over 870 k1M. from Dolisie in the Republic of the Congo to Kribi and Douala in the Republic of Cameroon, passing through liouila, Lambarene, N'Djole and Oyem (see map). A branch road between Lambarene and N'Djole runs to Libreville. - 3 - 14. Substantial construction and improvement works are planned to be undertaken shortly, mainly with financial assistance from the European Development Fund (FED). The major items are as follows: a) Kougouleu-Medouneu Road, Mala-Akoga Section, 65 km. new construction Financed by FED b) Ebel-N'Djole Road, 47 km. asphalt paving " " c) Libreville-Oyam Road, 130 km. asphalt paving " " d) Ayem Bridge, construction " " " e) Ayem-Mikongo Road, 94 km. new construction Financed 50/50 by the German Govern- nent and Gabon. 15. The vehicle fleet has been growing at an annual rate of about 105 during the past decade. The latest Government statistics indicate the follow- ing categories at the beginning of 1962: otorcycles 539 Passenger Cars 2,075 Buses 59 Trucks 2,678 Total 5,351 16. The consumption of motor fuel has been increasing by about 150 per annuri during the past 5 years, but it covers other uses than transport vehicle operations, such as operations of Jogging equipment. The annuql consumption of motor fuel reached 51,000 m in 1963 (gasoline 14,000 iu- and diesel oil 37,000 m3). C. Road Administration 17. The Directorate of Public Works (DPW), one of the three Directorates in the Ministry of Public Works, is responsible for the planning, construction and maintenance of roads. The Directorate is also in charge of the construe;- tion of public buildings, electricity supply, sewer and water supply, river and sea ports, and water and sea transport. Its organization is shown in the attached chart. 18. The operations of the DEW are at present carried out by a group of French engineers on loan from the French Government. The Director of Public Works, a French Chief Engineer of "Ponts et Chaussees", is assisted by 15 French engineers and technicians. The French Government assured the Gabon that an additional 15 engineers and technicians from "Ponts et Chaussees" will be made available during 1964. The local staff consists of two engineers, three technicians and 65 office clerks. 19. A Road Fund (Fonds Routier Gabonais) was established in 1960, to which receipts of the following earmarked taxes are assigned: 3l ad valorem tax on all import merchandise and 2% (of f.a.s. value) tax on timber exports. The annual revenue to the Fund grew from CFA Francs 271 million in 1960 to 350 million (about US$1.4 million equivalent) in 1963. 20. The immediate purpose for establishing the Road Fund at that time was to secure the repayment of a revolving credit made to the Central Bank for roads construction and imp:ovement. The total resources of the Fund seem committed to the Central Bank until 1966. D. Maintenance Operations 21. Maintenance operations are difficult because of the adverse natural conditions: dense forrst, rugged ter-ain with soft clay soil, and heavy rain. In addition, most of the roads were built without adequate grade or drainage and this makes the maintenance expensive. 22. Road maintenance is carried out by the DPW's own forces working from eight divisional offices located in various parts of the country. Cer- tain roads presently maintained by local communities are expected to be taken over gradually by the DPJ as its maintenance organization expands and it ac- quires more equipment. 23. Each division is responsible for the maintenance of about 300 km. of roads but, due to shortage of equipment and lack of trained personnel, the current status of road maintenance is far from satisfactory. Moreover, the insufficient repair facilities in the division shops make it necessary to send a large part of the renair work to the Central Shop in Libreville. The efficiency of the Central Shop itself needs improvements. As a part of its program, the Government has obtained a financing from FAC to build and equip a new Central Shop, the work to be carried out during 1964-196$. 24. Due to the lack of skilled labor in Gabon, only relatively simple jobs such as mechanic helpers, greasers, drivers, etc., are filled by local personnel; mechanics, foremen, technicians, etc. are mostly expatriate per- sonnel. The Government has been requested 4nd it agreed to establish a training program that would improve the skill of local laborers. The -re- sent maintenance force is about 800 persons. 25. The total amount allocated for maintenance operations for the year 1964 was CFA Francs 360 million or US$1.5 million equivalent (see I'able 2). The annual maintenance expenditure per km. varies from US$210 ta US$610, excluding the depreciation cost of the equipment used. Such amount is still inadequate to meet the heavy maintenance requirements, and maintenance in parts of the country is neglected. On the basis of the experience of countries with similar natural conditions, DPi estimates, and the mission agrees, that US$800 equivalent would be the appropriate average cost per km. including the cost of replacement of worn-out equipment units. In addition to the difficull natural conditions of the country, the high level of cost is also the result of the high cost of imported materials and skilled local labor. The mainte- nance expenditures on the proposed rew roads are likely to be high because of the traffic of -eavy vehicles used for timber transport. The Government assured the Bank that it will allocate sufficient funds for the maintenance of the proposed Bank financed roads. E. Planning and Design of Rcads 26. The DPW does not have an adequate organization for planning and designing roads. Consequently, all such works are performed at present by a private French firm of consulting engineers in Gabon. Prior to the establish- ment of this firm, construction contractors used to perform the final survey and design of the roads as part of their contracts; this practice has now been abolished. 27. It has been the practice to call for tenders and award construction contracts on the basis of only preliminary engineering (avant projet). Cost estimates are not based on final quantities and, therefore, the cost of the work frequently exceeds the original estimates by a considerable margin. Moreover, because of the difficulties presented by the heavy forest, only superficial soil investigations are carried out before awarding contracts. -6 - IV. THE PROJECT A, Description of the Project 28. The project consists of: a, The construction and improvement of 18r' km. of roads, including final engineering and supervision of construction by consultants. b. The employment by DPW of 3 engineers and some additional personnel to assist in the administrative, technical and financial operation of the proj- ect, including the setting up of a pilot maintenance division. c. The employment of consultants to carry out feasibility studies and preliminary engineering of (i) about 280 km. of additional roads and (ii) river loading facilities in NiDjole, d. The procurement of maintenance equipment, spare parts and shoO facilities. 29. The three roads to be built or improved would open up a part of the interior region of the country designated as the "Second Forest Zone" in order to make exploitation of the region's forest resources possible. The sections of the oresent roads, or tracks, abound ITith sharp curves, steep grades and narrow stretches. The heavy and long tractor-semi-trailer units used for log transport cannot negotiate these sections and therefore, except in the limited area along the river, the forest exploitation cannot be carried out until adequate road facilities are provided. The logs will be urarisported along the new roads to the river sites where they can be floated down the Ogooue river to export ports. 30. The Government has already built, startingin 1962,some sections of the roads involved and the Bank Project would only include the sections still to be constructed from June 1964. The-following table shous the-brea-down: Constructed Before Bank June 1964 Project Total (Length in K. N'Djole - Alembe - 40 40 Alembe - Lalara 20 80 100 Alembe - Ayem 18 65 83 Totals 38 185 223 31. The project roads cross rough.country in which big cuts and fills will be required; only a small portion of the jilembe-Ayem road is located on a plateau. Laterite and granitic materials for base and sub-base courses are available in the vicinity of the project roads. 32, According to the preliminary study of the Belinga-0wendo railroad (cf. para. 11), it appears that a stretch of about 50 km of this railroad will be located along the Okano river paralleling one section of the Alembe- Lalara road now under consideration. The final alignment of this road will be determined in coordination with the results of the railway study as the latter is gradually completed, 33. The Gabonese Government has indicated that several sites exist along the Ogooue river for possible power dams; the water basin to be created by one of these dams, if ever built, could affect part of the Alembe-Lalara and Alembe. Ayem roads. However, the possibilities of actual execution of such an invest- ment are very remobe; the needs for such amount of power do not exist, the engineering and construction costs of such scheme of dams would reqaire huge investments and probably several decades before completion. As the present location of these roads is the most appropriate for the forest operations, it is not recommended to modify the alignment of the roads for the possible con- struction of the dams. 34., The final engineering, preparation of bidding documents and supervisior of works on the new roads will be carried out by consultants. In addition, the administrative control of these works and the setting up of a pilot maintenance division to take care of the project roads (cf. para. 37) will substantially increase the workload of DFW; this would require an increase of the present staff by 3 expatriate engineers and some additional personnel, 35. Out of the original program of 990 km of roads submitted to the Bank by the Government, some other roads appear to present an economic interest, although their immediate construction is not contemplated in the present project Five of these roads totalling about 280 In would be required to further devel- op the Second Forest Zone exploitation, and the financing of the feasibility studies and preliminary engineering has been included in the project. 36. In addition, river loading facilities should be improved to complement the use of roads for timber operations, The Ogooue river is navigable all y3ar round up to N'Djole and during the high waters period (about 4 months) to Alembe. located 40 km upstream. At these points the logs are assembled and pul?ed doinstream by tug boats. However, heavy logs cannot be floated and have to be transported by barges, for which a special pier and loading facilities are required. For this reason, the Government is now considering the construction of river loading facilities in N'Djole; this would also facilitate movement of commercial goods traffic to and from the area. Financing of the feasibility study and preliminary engineering for these facilities has been included in the project. 37. The project also includes, as a pilot scheme, the procurement of maintenance equipment, spare parts, and repair shop facilities to equip one of the eight existing divisional offices that will be in charge of the maintenance of the project roads. A preliminary list of maintenance equipment and repair shop facilities, including 10, for spare parts,has been prepared by DIPW, - 8 B. Cost Estimate 38. The total cost of the project is estimated by the DPW at about USl3.7 million equivalent as follows: Foreign Cost Estimates Component Partial Total Cost CFA USC CFA USS Frcs. equiv. Prcs. equiv. equiv, millio a. Construction & Improvement of Roads 2470 10.0 8-5 i) I'djole-Alembe '0 km) 698 2.83 ii) Alembe-Lalara (80 kcm) 998 4,04 iii) Alembe-Ayem (65 km.) 774 3.13 b. E-igineering Services 420 1.7 1.5 i) final engineering, pre- paration of bidding docu- ments of project roads aid supervision of construc- 247 1.00 tion. ii) strengthening of D7,jj staff 50 0.20 iii) feasibility studies and preliminary engineering of river loading faci- lities in N'Djole and of about 280 km. of addi- tional roads 123 0.50 c. Procurement of 1aintenance Equipr-ent, Parts and Repair Shop racilities 27 1.0 1.0 d. Unallocated 247 1.0 L0 33 13.7 12.0 39. The estimated construction costs are based on the preliminary engi- neering (avant-project) prepared by the French Consulting Firm SEGA, on the basis of both an original analysis of costs prepared by BCEOM, another French consultant, and the actual cost data obtained from the construction racently performed on sections of the Alembe-Lalara and Alembe-Ayean roads; these cost estimates appear realistic, The estimate includes a built-in contingency al-- lowance of 15% for the three years period of construction (June 196h-June 19k7) -9- 40. The final engineering,'pmparation of contract docluents, analysis of bids and smer2ision of coztruction of the neu roads would be carried out by consu2tant The cost of these works has been estimated on the basis of present contracts in force on road works already underway. It would represent about 10% of the construction cost which seems reasonable in view of the very difficult con- ditions of the topography and access in the areas involved. The cost for strengthening the DPV was estimated on the basis of salaries and other re- settlement expenses, for three engineers and some additional personnel to be hired from abroad for a period of about three years. The cost of the feasibili- ty studies is based on costs presently paid by D?W to consulting firms for similar studies. 41. The cost of maintenance equipment, parts and repair shop facilities, which would be wholy in foreign exchange, is based on a preliminary list, acceptable to the Bank, prepared by DPrI (cf. para. 37). 42. An unallocated amount of US$1.0 million equivalent (about 8, of the project cost) has been included to cover additional contingancies and possible price increases during the construction period. 43. The foreign component cost for the construction works is estimated at 85%; this high percentage results from the little local contribution ex- pected either in supplies of equipment and materials or in skilled labor, Calculation of this percentage was made by DPW and confirmed by the information supplied by two of the principal contracting firms in Gabon. 'The same per- centage (85%) has been estimated for the engineering services, Salaries of the present DP,T staff on loan from the French Government (cf. para. 18) is not included in the calculation of the foreign cost. C. Design Standards 44. The design standards of the project roads have been determined specifically in view of the topography and the nature of the expected traffic, rough terrain encountered in many sections, 20 m. long tractor-semi-trailer units used for log transport, relatively low traffic volume (about 60 vehicles a day), low design speed (30 km/hour) etc. The design standards are shown in table 3. All project roads will be laterite and gravel surfaced. 45, The adopted design load for bridges is satisfactory. Bridges up to 5 m. span will be constructed to the full width of the embanlkment; for larger spans, only one lane bridges will be built and may be widened later on when the traffic volume justifies it. D. Execution of the Prolject; Procurement of Equipment. 46. The DPW will be the executing agency of the project. The organiza- tion and personnel of the DPW is satisfactory for the present needs, but ad- ditional foreign personnel will be hired for the scaff of DPI (cf. para. 34) in order to carry out the additional workload resulting from tho project execution. - 10 - 47. New contracts have been recently negotiated and will be awarded shortly for the continuation of the Alembe-Lalara and Aleiabe-Ayen roads, for which international tenders were called among several prequalified firms already working in Gabon or in the neighboring countries, The procedures followed are acceptable to the Bank and it is recommended that works be eligible for reimburse- ment from June 196h as assumed in the cost estimate3. Contracts for works to be performed during 1965 - 1967 would be awarded through a bcoad internaticnal competitive bidding. Final engineering and tender documents for such works, prepared by consultants, are expected to be completed by late 1964 and the call for tenders made immediately thereafter. It is expected that the construction of all sections of the three roads would start early in 1965 and should be com- pleted by the middle of 1967. 48. There are a number of highly mechanized contrpcL.ng firms in Gabon owned and operated by French nationals. There are also a number of *branch offices of European contracting firms established in the neighboring countries and ready to operate in Gabon if contracts are awarded. 49. The purchase of maintenance equipment would also be made through international comnetitive bidding. DP4 is planning to establish a depreciation fund for periodical renewal of worn-out units. The construction of the shop, procurement of equipment and maintenance operations would be supervised by the experts engaged for the strengthening of DPW. E, Financing of the Project 5O. On the assumption that the loan would become effective by October 1964, a tentative annual breakdown between the estiirated local currency and the foreign exchange expenditures is shown in Table 4 and summarized as follows:- Total Local Currency Foreign Exchange Years Expend. Expenditures ExpeiZTtures CFA Frs. CFA Frs. CFA Frs. JT Tquiv. --- i i l s ---------------------- 1964 (June) 607 87 520 2.10 1965 1264 150 1114 6,5-2 1966 940 134 806 3.26 1967 (June) 326 49 277 1.12 TOTALS 3137 120 2717 11.00 Unallocated US$ 1.00 Total US$ 12.00 '1. The local currency costs of the project amounting to CFA Francs 120 million (US$1.7 equivalent) will be financed by the Government. The resources of the Road Fund, however, appear insufficient to meet the local expenditure up to 1965. (see Table 5). During Loan negotiations assurance was obtained that the Government will allocate sufficient funds to pay the local coct out of its Development Budget in which the Road Fund is only a pa-t. - 11 - V. ECONOMIC JUSTIFICATION A. General 52. The Gabonese economy is heavily dependent on timber exports. They bring in 60 percent of the total earnings of foreign exchange, and yield, directly and indirectly, 60 percent of the tax revenue for the Government's current and developmental budgets. 53. Prbsent timber exports amount to 800,000 tons a year and bring in $40 million equivalent a year at present f.a.s. (free alongside ship) prices. All the exoort timber is tropical hardwood. About 85 percent of volume and value is the export of a single species - okume - a highly prized naterial for the manufacture of plywood. The remaining exports are other exZotic woods such as ozigo and agba. 54. The entire present production comes from the so-called First Zone of the equatorial rain forests which cover most of the land area (see Hap). Generally, the First Zone is the rain forest of the coastal areas. It has been logged intensively and continuously for more than 60 years. As a result, the stands of timber in the readily accessible areas have been progressively depleted, production has begun to level off and is soon due to decrease. Re- forestation is now being carried out on a scale calculated to assure a future constant yield of 600,000 tons annually. The program started experimentally in 1943 and began to operate full-scale in 1958. About 10,000 liectares have been replanted to date. During loan negotiations, the Government lies confirmed that is present reforestation program of reolanting 2000-3000 hectares per year Till be maintained. 55. The three roads for which a loan has been requested are penetrntion roads intended to r-each and bring out export timber from the forests of the so-called Second Zone (see Map). 56. In short, the project aims to replace a diminishing output of tropical hardwood from heavily-cut regions of the forests of the coastal areas by new production from densely-wooded regions of the virgin foreits of the interior. B. Service Areas of the Planned Roads 57. Commercial logging has already starthd on a sma1 scale in the Second Zone areas which the planned roads traverse. Because of the lack of roads, logging is confined at present to the vicinity of the upper streams of the Ogooue River, dowm which, for a part of the year, timber can be moved to Port Gentile. Although present production is about 50,000 tons a year, the access- ible areas are being rapidly over-cut and all logging would have to cease ,jithin a few years if no new roads were built. - 12 - 58. According to surveys carried out by the Department of Forestry, an experienced and qualified governmental entity, (a) production from the regions which the planned roads traverse could readily reach 200,000 tons annually within 5 years from completion of the project, and (b) the stands of timber to which the roads would give ready access are sufficient to permit logging at the rate of 200,000 tons annually for about 24 years. These estimates are realistic considering: (a) the richness of the Second Zone forest in okume and other commercial timber; (b) the existence in Gabon of many experienced logging companies which are ready to expand their operations in the Second Zone as soon as penetration roa0s are built; (c) a world market which fa7ors increasing exports of exotic hardwoods at firm or rising prices; and (d) cost/price relationships which are an incentive to comm rcial logging in all the forest regions that can be reached economically from convenient points on the river. 59. Only trees with a diameter exceeding 70 centimeters are permitted to be cut by the forest laws. The average hectare yields only 1 to 2 trees annually weighing about 7 tons each. With present logging practices and controls, very few trees besides those to be cut are felled or damaged during the cutting operation, and the protective forest cover remains vir- tually untouched. Dangers of soil erosion or soil leaching are therefore held to a minimum. 60. The Government has already negotiated with and awarded franchises for cutting timber in the Second Zone to eight private logging companies. The franchises cover about 720,000 hectares, most of the area of forest, which the planned roads would make accessible. All eight companies are established, competent enterprises with long experience in Gabon. Each will build its own access roads from the logging sites to the project roado. C. Market Outlook of the Gabonese Timber 61. The mrket prospects and price trends for Gabonese timber are favorable. Export demand for tropical hardwoods, mainly demand in the markets of Western Europe, has been growing for some time at about 13 per cent annually. In contrast, Gabonese production of timber was increasing only 4.5 percent annually until it recently began to level off. Gabonts timber exports have lagged far behind the growth of European demand primarily because of the difficulty of enlarging, or even maintaining, output from the overcut areas of the First Zone. According to conservative estirmtes, the demand for tropical hardwood in Western Europe is likely to increase 61 per cent annually from an average 5 million cubic meters a year in 1951/61 to some 15 million cubic meters a year by 1975. 62. Gabonese timber now sells at f.a.s. prices which average about CFA francs 12,500 (US$50 equivalent) a ton. The present prices have been main- tained for the past three years. In view of the expected rapid growth of demand for tropical hardwood and Gabon's strong status as virtually the sole producer of okume, it is reasonable to sun ose that present prices will be maintained, if not increased, in the foreseeable future.A Gabonseg-ny "Office des Bois de l'Afrique Equatoriale", is in charge of handling timber exports and maintaining stable prices designed to stimulate exports. This Office is composed of five representatives of various Government Ministries and five representatives elected by the logging companies. D. Profitability of Producing Export Timber 63. Timber operations in the Gabon are carried out by private companies which have to pay working costs, meet depreciation and amortization expenses, earn interest charges, and yield a profit on the equity. Production is therefore sensitive to price/cost ratios and responsive to profit incentives. 64. If proper penetration roads are built, lurber can be produced in the Second Zone and carried to Port Gentil at not much more total cost than timber from the First Zone. According to estimates which the Bank considers to be reliable, the average costs of cutting timber in the service area of the planned roads, hauling the logs by trucks to the river bank, and towing them downstream to ocean port would approximate CFA francs 6,500 a ton as follows:- CFA fr. per ton Wages, Fuel, Supplies and Other Working Costs Survey and exploration 115 Clearing, grubbing and felling 1,950 Logging proper 2 099 Truck haulage from logging site to river bank 2,065 15% allowance for river transport and handling expense 310 Maintenance of private access and service roads 235 Working costs h,705 Amortization of investment in access and service roads 1,180 Depreciation of operating plant and equipment 570 Amortization of logging franchise 65 Total 6,500 Q5 0 Subtracting costs of CFA fr.6,00 a ton from an average f,a.s. price of CFA fr. 12,500 leaves a remainder of CPA fr. 6,000 a ton. From this remainder must be deducted (a) stumpage- tax, reforestation tax, road user tax, exoort duties, sales taxes and stamp charges (see Talle 6) amount- ing to 25 percent of the export value, or CFA fr. 3,100 a ton plus (b) other levies and imports amounting to CFA 800 a ton. The balance of earnirgs out of - 14 - which to pay interest on loan caita. and dividends on equity capital would therefore approximate CFA fr. 2,100 a ton - a 33 percent mark-up on costs of production and an equity return of approximately 10% to 15% after taxes. 66. The above analysis indicates thab logging in the newly opened tracts of the Second Zone ought to be sufficiently profitable to ensure prompt realization of the Governmnnt's production target - 200,000 tons of timber annually. E. Economic Benefits 67. The costs of logging and moving timber in the Gabon are predomin- antly foreign exchange expenditure for imported eouipment, fuel, materials and sup,lies and for the salaries and allowances of expatriate staff. Furthermore, the logging companies are foreign enterprises which wish to bring home most of their earnings. Under the existing foreign exchange regime, there are no controls or limitations on the payments for imports of equipment, materials and sapnlies, on remittances of coroorate earnings or on remittances of personal income. 68. Furthermore, the construction of the project roads will require substantial payments of foreign exchange for debt service and road mainten- ance. The requested loan - $12 million equivalent - represents about 85% of the total construction cost. Proner maintenance of the new roads will cost about $150,000 a year, mainly foreign exchange. 69. Under these circumstances, it is meaningful to measure the economic benefits of the project by estimating the net earning of foreign exchange which would accx-ue to Gdbon from the timber exports made possible by the roads. For a period of 20 years or more. this earning would approxi- mate $3.25 million equivalent annually (about a quarter of the total cost of the project), as shown below, after meeting debt service on the Loan: $ million equivalent Export value of 200,000 tons of timber @ CFA fr. 12,500 a ton, f.a.s. 10.00 Subtract: Foreign exchange component (80%) of production and transport costs (CFA fr. 6,50o a ton) 4020 : Debt service of $12 million loan 51% - 20 yrs. 1.00 : Depreciation of 38 km. previously built (8% of US$1.9 x 80%) 0.12 ' Road maintenance co4sts (80% of $800/ku for 225 km.) 0.13 : Remitted earnings of ?.ogging companies (80% of CFA fr. 2,100 a ton) 1.30 Net foreign exchange earnings of Gabonese ecmomy 3.25 - 15 - 70. At the same time, the Government, would be amply reimbursed for tbe debt service of the proposed loan plus the maintenance cost of the new roads. As estimated above, the direct and indirect fiscal revenue would approxi- mate CFA fr. 3,900 ($16 equivalent) a ton. The Government's financial resources would therefore be strengthened in the amount of $2 million a year for 20 years. This strengthening would result from receipts of $3.2 million equivalent a year in direct and indirect taxes on timber exports minus ann-ual debt service of $1.0 million equivalent and annual road maintenance of $150,000. 71. The project is economically justified by the foreign exchange earn- ings and the fiscal revenue it would help to induce. In addition, the project will enable to maintain the current level of employment of 13,000 wage earners in the timber industry, nearly a third of the total labor force in the country. VI, CONCLUSION 72. The project is techniclly sound and cost estimates are reliable. The project is economically justified for its contribution toward maintaining the country's export earnings, assuring adequate public revenue and facilitat- ing useful employment in the production of export timber to a large fraction of Gabonts labor force. 73. The Directorate of Public Works, with the assistance of consultants and strengthening of its staff, wo41d be able to carry out satisfactorily the execution of the project. 74. Satisfactory assurances have been obtained during loan negotiations that the Government vill:- a) Establish a training progran that would improve the skill of the local laborers; b) Allocate adequate funds for maintenance of the project roads after completion of construction; and c) Provide sufficient funds to meet the local currency cost of the project, out of its Development Budget. 75. The Government has also confirmed that itspresent reforestation program will continue. 76. The proDosed project provides a suitable basis for a Loan of US$ 12 million equivalent. An appropriate term would be 20 years including a 4 year period of grace. June 16, 1964. TABLE 1 REPUBLIC OF GABON ROAD PROJECT Road Network NATIONAL RCADS REGIONAL EOADS_____ GRAND Asphalt Laterite Earth Total Asphalt LateUte 3arth Total TOTAL - - - - - - - - - - - - k i1 omleters - - - - - - - - - - - - - - - - - - 1959 10 988 108 1,106 11 1,200 1,536 2,747 3,853 1960 18 1,39 1/ 108 1,565 11 720 1,567 2,298 3,863 1?61 18 1,h2 108 1,568 11 727 1,567 2,305 3,873 1962 18 1,98 52 1,568 11 792 1,567 2,370 3,935 1963 18 1,500 52 1,570 11 1,293 2/ 1,566 2,870 4,440 1/ In 1960, 451 km. of Regional Roads were transferred to the National network 2/ In 1963, 501 km. of additional roads built since 1960 were added to the Regional network Source: 1Hinistry of ?ublic Works TABLE 2 REPUBLIC OF GABON ROAD PROJECT Budget of the Directorate of Fablic Works (In million CFA Francs) Administration Maintenance Construction I/ Total 1959 60.0 185.o 514.0 759.0 1960 64.5 222.5 Vi1o 828.0 1961 70.5 257.5 649.0 977.0 1962 75,o 291,0 1,053.0 1,419.0 1963 75.0 321.0 1,280.0 1,676.0 1964 80.0 360.0 1,513.0 1,953.0 1/ Including works financed with external assistance. Source: Ministry of Public Works TABLE 3 REPUBLIC OF GABON ROAD PROJECT Desing Standards for Froject Roads TYPE OF ROAD: A - FOR H]AVY FOREST TRAFFIC Design Speed 30 In per hour Clearing and grubbing 40 m. clearing, 20 n. grubbing along the center line Width of embannent 9.00 mi Width of surfacing (gravel-laterite) 7.00 m. Width of shoulders 1.00 m. each side Ditches 1,50 m, widta, 060 m. depth Minimum radius of curvature ;0 m; exceptional: 30 m. Maximum grade K Maximum load design for bridges 11-20 S-16 (AASHO) TBT L GAB3ON ROA PROJECT Annual Breakdown of Estimated Expenditures 7964 1965 1966 1967 Total (June-De,t.) -j(Ja7Jue) Local Foreign Local Foreign Local Foreign Local Foreign Local Foreign A. CONSTRUCTION AND IMPROVE- MENT WORKS 68 382 122 738 122 738 45 255 357 2,13 B. ENGINEERING SERVICES i) Final engineering, tender documents and supervision of construction 12 70 13 71 9 51 3 18 37 210 ii) Strengthening of DPW staff 1 4 3 17 3 17 1 4 8 42 iii) Feasibility studies 6 34 12 71 - - 18 105 C. PROCUREMENT OF MAINTENANCE EQUIPNENT SPARE PARTS AND SHOP FACILITIES - 30 - 217 - - - -- 217 87 520 150 1,114 134 806 49 277 420 2,717 Table 5 REPUBLIC OF GABON ROAD PROJECT Road Fund (In Million CFA Francs) Receipts Expenditure Balance Road Repayment Works of Debts Actual 1960 271 271 - 0 1961 330 - 330 0 1962 336 - 336 0 1963 350 - 350 0 Projected 2964 350 - 350 0 1965 350 - 350 0 1966 350 125a) 125 100 a) For works other than project worxs. Source: Ministry of National Economy. TABLE 6 REPUBLIC OF GABON ROAD PROJECT Governrent Collection on Timber Operation a. Stumpage tax 7% of f.a.s value of timber produced b. Reforestation Fund tax 3.5% " c. Road Fund Tax 2% " d. Export Tax 5.5% - 7.50o a/ of f.a.s. value of.timber exported e. Sales Tax 2% of f.a.e. value + amount of taxes under a, b, and d f. Stamps 3% of the combined value of taxes under a, b, d, e, and g g. Other Fixed Charges CFA Franc 780 per ton of (for Chamber of Commerce, National timber produced Reconstruction Fund, etc.) h. Vranchise Fee CFA Franc 20 per hectare per annum a' 7.5% on first quality timber and 5.5% on all others Source: Ministry of National Economy GABON: ROAD PROJECT ORGANIZATION OF THE DIRECTORATE OF PUBLIC WORKS DIRECTOR OF PUBLIC WORKS ARCHITECT AND ADVISER ASSISTANT DIRECTOR ON TOWN PLANNING MARITIME AND CHIEF ENGINEER FOR ENGINEERING CHIEF ENGINEER CHIEF ENGINEER FLUVIAL SERVICE A URBAN WORKS OFFICE ROADS - Ist DISTRICT ROADS - 2nd DISTRICT WATERS AND ASSISTANT ASSISTANT ASSISTANT ENGINEER CHIEF ENGINEER CHIEF ENGINEER CHIEF ENGINEER DIVISIONAL OFFICES DIVISIONAL OFFICES DIVISIONAL OFFICES PORT GENTIL MEDOUNEU FRANCEVILLE PORT LIBREVILLE PORT GENTIL KOULA MOUTOU PORT SAFETY SERVICES FOR PORTS OF LIBREVILLE LIBREVILLE N'DJOLE AND PORT GENTIL FOUGAMOU OYEM IBRD-2334 Г������,L ���t�®LBC ®� САRЯ��ООР8 го юга оы �.,то ..._..� •в"�•�-..�..�......�л..�.� .�..�.......л•�•�' ми�оиi в��оп = G� �GГ�AЛI��U� ®Г� GGa[�®1п� � Г ROAD PROIECT �� � д � ASSakNqoum � ' ОУЕМ ! � О 5о ЮОКМ � � jЭ�OgSsP � � ^в��.��_ .� �v � � О � �ег/в�• � � { меиепео I � . в � • • о # � еосоееосе �� � ываоими 5 п --' �i Р^е ^�Чада 7r � Мп2�е ^ � /- Etote� Qa' Мп10 � 1�оаи•т✓о � 3 мnкоко х .�в � �'у° . й, у .-'"- � L18REИLLE У' Lc.ro � -'r И\ в � -ьИювт� � о о.еп л( гв про � оwсн ^ Р,+°г � � кы,попвУопд ,,.'" п , v копgо г -�" Ваья�и.о q�� . ,� � А =� � � вооиЕ ��f� теоеQ t " 1 � r"" аегюв `\ %^ U�E FO q Е г� ` � � и'a�oië о;апаlрпп-в�ио `гТ еИ •в`. в�гоип � И ��` �W о�' ор �ы'„o,�vo i е _ _ ` R1 `ч у, ' 1` ' 1 GENTIL сА 6авЕиЕ � \"' ы5,,.�Ив _ �Оиопоiа �pS oemei \__ вое'�� � I а0 � --р-_�� оьм� У pOUË Г) ` � о с s�птго Ч 11 �� �� Р 1 коиlАмоитои � ' г е а и Feugomou , �„евди � _ E�eka $ 2' Мооюо Lexoпi / � `4 р �."° �_PPOVo iИтдо rero � ЕЧсисЕиl�Е "-�_ % л о Уепо ��' : MOUILA В�1lепqиа г р,впда О ` I Mbgou �• 0 ` Kari `� •` " � �и �/ О `. � 2�, � ИоАус В�е«апди� � о,пае �. / `� о i ` у а � �\ U 2 �воппт л а � . в"�в ' �,9 1 мопы иавпео �.��� ��.е.� ��� �`.� в. 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