Cameroon - Transport Sector Technical Assistance Project

Public Disclosure Authorized Document of The World Bank Report No. T-6559-CM Public Disclosure Authorized TECHNICAL ANNEX TO THE MEMORANDUMAND RECOMMENDATION (REPORT NO. P-6559-CM) ON A PROPOSED CREDIT Public Disclosure Authorized IN THE AMOUNTEQUIVALENT TO SDR 6.9 MILLION TO THE REPUBLIC OF CAMEROON FOR A TRANSPORT SECTOR TECHNICAI. ASSISTANCE PROJECT Public Disclosure Authorized MARCH 23, 1995  CURRENCY EQUIVALENTS (as of March 2, 1995) Currency Unit CFA Franc (CFAF) US$1 CFAF 515 CFAF I million US$1,942 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ASECNA Agence pour la Securite Aerienne en Afrique et de Madagascar = (Air Safety Agency for Africa and Madagascar) BMZ = Bundesministerium fur Zusammenarbeit (German Ministry for Cooperation) CAMAIR = Cameroon Airlines CAMSHIP = Cameroon Shipping Lines CAMTAINER = Societe Nationale de Transport et de Transit du Cameroun (Cameroon Container Transport and Freight Forwarder Company) CAR = Republique Centrafricaine (Central African Republic) CAS = Country Assistance Strategy CFD = Caisse Francaise de Developpement (French Development Agency) CIF = Cost, Insurance, Freight CNCC = Conseil National des Chargeurs du Cameroun (Shippers' Council) CNIC = Chantier Naval et Industriel du Cameroun (Cameroon Dockyard) CNPS = Caisse Nationale de Prevoyance Sociale (National Social Security Fund) DMN = Developing Maritime Nations DGTC = Direction Generale des Grands Travaux du Cameroun (General Directorate for Large Works of Cameroon) DPO = Deferred Privatization Option ERC = Economic Recovery Credit ESOP = Employee Stock Ownership Program EU = European Union FAC = Fonds d'Aide et de Cooperation (French Cooperation Fund) FOB = Free on Board FY = Fiscal Year GDP = Gross Domestic Product GOC = Government of Cameroon IBRD = International Bank for Reconstruction and Development ICAO = International Civil Aviation Organization IDA = International Development Association IMF = International Monetary Fund IRU = International Road Union LABOGENIE = Laboratoire National de Genie Civil (National Road Laboratory) MATGENIE = Parc National de Materiel de Genie Civil (Equipment Pool) MC = Management Contract MINEFI = Ministere de l'Economie et des Finances (Ministry of Economy and Finance) MINT = Ministere des Transports (Ministry of Transport) MINTP = Ministere des Travaux Publics (Ministry of Public Works) OECF = Overseas Economic Cooperation Fund ONPC = Office National des Ports du Cameroun (Cameroon National Port Authority) PE = Public Enterprise PIP = Public Investment Program PPF = Project Preparation Facility PSO = Public Service Obligation REER = Real Effective Exchange Rate REGIFERCAM = Regie Nationale des Chemins de Fer du Cameroun (Cameroon Railways) SAC = Structural Adjustment Credit SAL = Structural Adjustment Loan SAP = Structural Adjustment Program SAR = Staff Appraisal Report SME = Small and Medium Enterprise SNH = Societe Nationale d'Hydrocarbures (National Oil Company) SNI = Societe Nationale d'Investissement (State Holding Company) SOCAMAC = Societe d'Amenagement et de Manutention du Cameroun (Port Handling Company of Cameroon) SOTUC = Societe de Transport Urbain du Cameroun (Urban Public Transport Company) SSATP = Sub-Saharan African Transport Policy Program TICU = Transport Interministerial Coordination Unit TIR = Transit International Routier (International Road Transit) TIPAC = Transit Inter-Etats des Pays de l'Afrique Centrale (Central African Countries Regional Transit) TSAC = Transport Sector Adjustment Credit TSP = Transport Sector Project UDEAC = Union Douaniere et Economique de l'Afrique Centrale (Central Africa Customs and Economic Union) UNCTAD = United Nations Conference on Trade and Development FISCAL YEAR July 1 - June 30  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT TECHNICAL ANNEX TABLE OF CONTENTS Section A. Detailed Project Description .. 1........................... I 1. Country Background. I II. Transport Sector Issues.......................... .. . 4 III. Transport Sector Reform Program .................................................... 13 IV. Lessons Learned and Strategy for IDA Assistance to the Transport Sector in Cameroon .22 V. Project Description .23 Section B. Project Costs and Administration .. 27 I. Project Costs .27 11. Procurement .27 lII. Disburseients .29 IV. Accounting and Auditig .29 Section C. Implementation and Monitoring .. 31 I. Organization and Management.31 lI. Implementation Schedule .31 III. Reporting and Monitoring .................. 31 IV. Supervision Plan .32 V. Mid-Term Review .32  Schedule 1: Central Government Operations and Other Macro-economic Data...................... 33 Schedule 2: Maritime Transport Regulation and Development in sub-Saharan African Countries 34 Schedule 3: Importance of Transport Sector Public Enterprises in the Overall Public Enterprise Sector........................................................... ,.,.,,,.,.37 Schedule 4: CAMAIR. A Company Profile..................................................... ,.,.,.,.38 Schedule 5: REGIFERCAM. A Company Profile . ................................................... 41 Schedule 6: SOTUC. A Company Profile.................................................... 43 Schedule 7: CAMSHIP. A Company Profile..................................... 45 Schedule 8: CAMTAINER. A Company Profile.................................... 46 Schedule 9: ONPC. A Company Profile................................... , , , . . 47 Schedule 10:CNIC. A Company Profile .................................. 49 Schedule 11l:MATGENIE. A Company Profile ................................... 52 Schedule 12:LABOGENIE. A Company Profile .................. ................ 53 Schedule 13:Road Maintenance Budget and Performance .............................. 54 Schedule 14:Strategy, Timetable, and Key Financial Data for the Privatization of Air Services .. 55 Schedule 15:Strategy, Timetable, and Key Financial Data for the Privatization of Rail Services..................................................... 64 Schedule 16:Key Financial Data and Timetable for the Privatization of CAMSHIP and CAMTAINER ..................................................... 75 Schiedule 17:Benefits Resulting from the Privatization of Transport Public Enterprises ............. 79 Schedule 18:Action Plan and Timetable for the Transit Component of the UDEAC Transport Reform Program .............................................................. 82 Schedule 19:lmplementation Schedule of Transport Sector Reform Program.......................... 83 Schedule 20. Expected Results and Timing for Key Project Activities ........... ....................... 85 Schedule 21.List of Project Activities and Procurement Procedures ..................................... 86 Schedule 22.Guidelines for Preparing Training Activities................................................. 88 Schedule 23.Detailed Project Costs ........................ ...................................... 89 Schedule 24.Implementation Schedule.9............................................................... 90 Schedule 25.Supervision Plan .............................................................. 91  REPUBLICOF CAMEROON SECTORTECHNICAL TRANSPORT ASSISTANCEPROJECT TECHNICAL ANNEX SECTIONA: DETAILEDPROJECTDESCRIPTION 1. Chapter I presents the country background to place the proposed project in the context of past and current economic adjustment. Chapter II presents the transport sector issues. Chapter III presents the reform program prepared by the Government, as of end-1994, to address these issues. Chapter IV proposes a strategy for IDA assistance to the transport sector in Cameroon based on lessons learned from Bank Group involvement in Cameroon. Chapter V provides the project description. I. Country Background EconomicBackground 2. Cameroon is among the countries with the greatest development potential in the region. Until 1985, its economic growth averaged 7 percent per year sustained by abundant natural resources (tropical forests, petroleum, bauxite, natural gas, fertile agricultural land, and a largely favorable climate). Agriculture was the main source of growth and foreign exchange earnings until 1978, when oil production began and became the corner stone of economic growth. 3. The favorable economic indicators, and the sudden flow of oil revenues concealed Cameroon's mounting structural problems. The traditional growth sectors, particularly agriculture, were neglected and their productivity declined. The multitude of public enterprises (PEs) created during this period were inefficient and eventually became bankrupt while draining huge resources from the State budget. The banking sector practiced imprudent lending by becoming overly dependent on oil revenues and large Government deposits. The investment in public infrastructure was not selected to respond to priority or social needs and was not followed by proper maintenance. The long-term debt increased from less than 20 percent of Gross Domestic Product (GDP) in 1976 to about 50 percent in 1992. 4. In addition to the structural problems, Cameroon suffered from two major shocks. Firstly, as a result of a sharp decline in export prices by petroleum in 1986, followed by cocoa and coffee, the external terms of trade fell by more than 55 percent from 1985 to 1989. Secondly, the real effective exchange rate (REER) started to appreciate following the US dollar and Nigerian Naira depreciation in 1985-1986, and continued as Cameroon's inflation rate consistently remained above those of its main trading partniers. It is estimated that the REER appreciated by more than 40 percent from 1985 to 1989. Real GDP fell by an average of 3.4 percent a year from 1986 to 1989, and real per capita income dropped by almost 40 percent during the same period. 5. In 1988, the Government launched an adjustment program with support of the IMF and the World Bank. However, the program was not implemented consistently and its main objectives were not attained. While some progress was made in diminishing government intervention in the economy, reducing price controls on domestically traded goods, lifting a number of quantitative restrictions on imports, and rationalizing the incentives framework, the fundamental structural problems of the economy remained unaddressed. As a result, external competitiveness continued to decline, external and internal imbalances worsened, and the economic and financial situation did not improve. Tax revenues deteriorated while total current expenditures remained unchanged, thus shifting the primary 1  fiscal situation from a surplus in 1989, to a deficit of 2 percent of GDP in 1992. Key macro-economic data are presented in Schedule 1. 6. Political uncertainties and weak social indicators aggravate the picture. Attempts to establish a national political consensus have thus far failed. The country is now facing major problems of poverty, unemployment, illiteracy and population growth. A fourth of the urban population lives below the poverty threshold. Unemployment is high among urban women and youth, and has worsened with the contraction of the economic activity. In rural areas, poverty and unemployment are rising due to the decline in agriculture. Malnutrition is recurrent among rural women and children, especially in the north. Adult female illiteracy is high. Health care delivery is poor. High fertility rates and population growth (3.3 percent per annum), and the scarcity of resources allocated to health and education have worsened conditions for the poor. Economic Prospects 7. A major change occurred on January 1994, when the Government of Cameroon, along with its partner countries in the CFA zone, decided to adjust the parity of the CFA Franc from CFAF 50 per French Franc (FF) to CFAF 100 per FF. To take advantage of the positive effects of the devaluation, the Government, with the assistance of the IMF and IDA, began implementing a program of economic measures and structural reforms. The program, supported by an IMF Standby Arrangement (approved on March 14, 1994) and an IDA Economic Recovery Credit (ERC, Cr. No. 2627-CM, approved on June 10, 1994), covers three key areas: (a) redimensioning of the public sector and improved public resource management; (b) an improved incentives framework for the productive sectors; and (c) targeted poverty alleviating measures. 8. In conjunction with the effects of the devaluation, the program is expected to end the recession and result in positive real growth, provided it is successful in achieving its objectives. Real GDP growth is projected to average about 5 percent per annum from 1995/96 onwards, primarily as a result of improved performance in the tradable sector, sustained by increased investment levels as confidence is reestablished. Public sector investments are projected to recover gradually from 2.2 percent of GDP in 1992/93 to about 4 percent in 1996/97. As a result of reforms of the trade regime, the financial system and the public enterprise (PE) sector, and as the public finance situation is brought under control, private investment is expected to rise from 8.7 percent of GDP in 1992/93, to about 12-13 percent in 1996/97. Due to a serious external debt overhang, most of the increase in investments will have to be financed by domestic savings, which will need to increase from 9.8 percent of GDP in 1992/93 to about 20 percent in 1996/97. Private savings will be stimulated by the recovery of economic growth and an improved external trade position. Public sector savings are projected to turn around substantially, as tax reform and expenditure control translate into improved fiscal balances. Country Assistance Strategy 9. The Country Assistance Strategy (CAS) for the medium term was formulated in conjunction with the preparation of the ERC. The CAS's objectives are: (a) to redimension, focus, and improve the public sector through: (i) a stronger mobilization and more efficient use of public resources, the downsizing and reorganization of the civil service, and the divestiture and restructuring of PEs; and (ii) improved macroeconomic management in such areas as institutional reforms of the public procurement system, environmental protection and the rational use and management of natural resources; (b) to increase productive capacity through: (i) reform of the legal and regulatory environment, aimed at deregulation and liberalization; (ii) maintenance and development of basic infrastructure; (iii) support 2 to human resources development; and (iv) strengthening the financial sector; and (c) to focus interventions on poverty alleviation, including improvements in the delivery of social services to low- income groups. To be consistent with the strategy, the lending portfolio, suffering from major implementation problems, was restructured in 1993 to focus implementation on immediate priorities and to reduce undisbursed IBRD balances. Following the devaluation of the CFA Franc, Bank Group financial support to help implement the CAS is on IDA terms. 10. The proposed project is consistent with the CAS, and will help achieve its objectives by preparing: (a) privatization/liquidation of transport PEs and restructuring sector ministries; (b) liberalization of air, urban and maritime transport, and through privatization of road maintenance and dredging execution; and (c) the use of labor-based methods in road maintenance. Public Enterprise Reform and Private Sector Development 11. Since 1989, the Government of Cameroon has implemented reforms to promote private sector development. These reforms include: (a) tax and tariff reforms to introduce a value added tax, simplify the tariff structure to only four rates, reduce rates, and eliminate exemptions benefiting certain goods and companies; (b) trade reform to abolish all remaining quantitative restrictions on merchandise imports; and (c) legal reform with the adoption of a new labor code which makes the employer- employee relationship more flexible, as well as a new investment code. 12. The current institutional framework for privatization proved inoperative during the previous PE reform initiated under the first Structural Adjustment Program (SAP). Laws related to privatization are too numerous, of varying authority, and often both overlapping and conflicting. An Interministerial Committee, consisting of about 13 Ministers, chooses the enterprise to be privatized, the method of privatization, the sale price, the buyer, and follows up on the privatization. The large number of ministers in the Committee makes it highly politicized and hardly efficient. A Technical Commission (the Commission) prepares the evaluation of companies, the issuance of tenders, and preliminary negotiations with potential buyers. The final decision is taken by the Head of State, who can be involved in the decision-making process at any step of the procedure. The Prime Minister is given the authority to define the procedures for privatization and liquidation, but needs approval by the Head of State. Moreover, outside the system is the state holding company SNI, which controls many state-owned enterprises. The procedures lack transparency. Bidding is more an exception than the regular procedure. Bidding outcomes can be modified or a procedure other than bidding can be chosen to give preference to civil servants, employees of the enterprise to be privatized or liquidated, or to farmers in the case of agricultural enterprises. 13. In addition to the unsatisfactory institutional framework, lack of political commitment has hindered the implementation of a coherent privatization/liquidation program. The Commission has not formulated a comprehensive strategy defining clearly the PEs to be privatized and the ones to remain in the State portfolio, and the policy measures necessary to monitor PEs and improve their management. Too much focus was placed on rehabilitation, which mainly consisted of financial restructuring, with the State taking care of PEs' operational losses and debt through performance contracts, rather than on addressing the causes of the losses -- e.g. overstaffing, inefficient management, political interference with management. No priority guidelines were established to determine the enterprises to be placed under performance contracts. The Commission has not been able to monitor the design and the implementation of all these contracts. 3  14. As of end-1993, of the first 15 PEs designated in 1990 for privatization, 5 had been privatized, 5 were in the process of being privatized, 3 had been liquidated, and 2 were on stand-by for privatization. Since 1990, the Interministerial Committee had designated 8 more enterprises for privatization, but only 4 operations were underway. Sixty-four PEs were in different stages of liquidation. Of these, 25 were administrative liquidations in which the Government had become responsible for the payment of the debt. Six were banks that had been liquidated under the program for reforming the banking sector. Thirty-three were in the SNI portfolio and the liquidation was dealt with directly by SNI. One hundred and twenty PEs remained in the State portfolio. Twenty-five performance contracts were signed, and 5 were being negotiated. The Commission had scheduled diagnostic studies for 27 PEs, but only three studies had already begun. Of the 120 PEs, only 27 were introduced in the Management Information System set up by the Mission to monitor the PE sector. 15. The Declaration of Policy adopted by the Government in June 1994, as a condition for Board presentation of the ERC, emphasizes the need for State retrenchment from commercial activities. The objective for public enterprise reform is to divest all the PEs currently engaged in production as well as in commercial activities. The Declaration specifies that the Government should list at least 10 PEs every year to be privatized or liquidated. Fifteen enterprises were listed in July 1994. They included the national airline, the railways, the urban bus company, the national shipping line, and the national freight forwarder. The Government also intends to gradually bring private equity participation into the State oil monopoly. To enhance the performance of enterprises not yet undergoing privatization, and improve efficiency and transparency, the Government intends to develop private equity participation and management contracts. 16. To ensure an expeditious, efficient and transparent State divestiture, the Government is currently revising the institutional framework for PE Reform as intended in the 1994 Declaration of Policy. The Ministry of Economy and Finance has been mandated to implement this reform. In this respect, a powerful, autonomous unit would be established within the Ministry. This unit would be staffed with a small team of professionals well known for their integrity and experience in business management. The revised institutional framework would be established under a proposed Structural Adjustment Credit (SAC), under preparation. 17. Domestic Debt. The settlement of Government domestic debt is a priority for the economy. A substantial amount of the debt service and arrears are simply not paid, causing economic decline through serious illiquidity of the banking system, as well as low returns on private investment. Based on the preliminary outcomes of an on-going analysis of the domestic debt, the Government domestic debt accounts for 75 percent of the total domestic public sector debt, which amounts to about US$4 billion and accounts for about 45 percent of the external debt, 50 percent of GDP and six times the 1993-1994 budgetary receipts. The Government and IDA are currently working on the definition of a strategy to settle the domestic debt. II. Transport Sector Issues 18. Sector Performance. Weak management of institutions, and an unsatisfactory regulatory framework have caused the transport sector to have a major negative impact on the overall economy. The Government gave priority to investment and to protection of PEs. As a result, transport infrastructure has lacked maintenance and PEs have drained scarce State resources. The consequences are a lack of competitiveness within the transport sector, the running down of existing assets, and a lack of resources for investment. 4 19. Weak Sector Management and Institutions. Sector ministries are overstaffed and have interfered negatively with PE management and decisions on staffing, operations and investments. Ministries' responsibilities overlap. The Government institutions involved are the Ministry of Public Works (MINTP), with about 6,700 employees, and the Ministry of Transport (MINT), with about 880 employees. MINTP runs an inefficient, unaccountable road maintenance system driven by force account. MINT's role is to oversee transport PEs, but instead, it has interfered with their management, hindering both their autonomy and performance. MINT initiates and supervises regulations for road, rail, air, and transit and maritime transport. It also oversees the Shippers' Council (CNCC), which controls the distribution of Cameroon's maritime traffic under the United Nations Conference on Trade and Development (UNCTAD)'s Code of Conduct (40-40-20), negotiates liner conference tariffs, and represents Cameroonian shippers' interests. 20. The functions of the Directorate of Large Works of Cameroon (DGTC), which has about 150 employees, overlap with those of the other sector institutions. DGTC reports to the Prime Ministry. It prepares and supervises large works, including roads. DGTC has given priority to investment to the detriment of maintenance. Road investment has not been coordinated between DGTC and MINTP. DGTC has not achieved its objective of reducing construction costs and making enterprises comply with contractual time stipulations. The Government has thus far rejected IDA's recommendation to give full management responsibility in the road subsector to MINTP, and to stop DGTC's involvement as executing agency for large road works. DGTC also procures contracts above about US$100,000 equivalent for ministries, and about US$365,000 for PEs. DGTC serves as a secretariat to the National Tender Board on procurement decisions. The country procurement review carried out by IDA in 1993, qualified the local procurement procedures as critically deficient because of little transparency in bid evaluation and award of contracts, resulting in long procurement processing and high costs. IDA and the Government of Cameroon agreed on a revised national procurement code in December 1994. Thresholds for DGTC's involvement would be above US$1 million for works, US$0.6 million for goods, and US$0.4 million for consultants. Implementation of the new code is part of the macro-economic reform supported by the proposed SAC. 21. Unsatisfactory Regulatory Framework. The current framework is an obstacle to effective competition in some transport subsectors and is dysfunctional overall: (a) Civil Aviation: Domestic fares on routes serviced by CAMAIR are regulated and subsidized. Other domestic companies were authorized in 1994 to operate regular or charter flights in Cameroon. Regional and international air cargo services are not developed, although the market does exist. High aviation fuel prices in Cameroon due to local taxes impede civil aviation development. (b) Railway: The transport component of the price structure for petroleum products does not promote competition and does not encourage petroleum companies to use the railway to transport these products within the country despite its comparative advantage, especially for transport towards the Northern regions. (c) Urban Transport: The Government has decided to liquidate SOTUC, the urban bus company, which held the monopoly on urban transport with more than seven-seat vehicles. The regulation needs to be revised accordingly. (d) Interurban Road Transport: A bureau of freight was created in 1994 to control the distribution of transit traffic to Chad and the Central African Republic between 5  Cameroonian, Chadian and Central African transporters. This is likely to reduce sector efficiency and increase transport costs. The road taxation system is complex and cumbersome, with about 15 taxes collected at different stages, by different institutions. (e) Maritime transport: The negotiations of tariffs between shipping lines and the shippers' council have kept tariffs at the same official level for several years, although they have decreased in the rest of the world on average by an annual 4 percent between 1980 and 1992, and by an annual 7 percent since 1989. These negotiations and unofficial rebates proposed by the shipping lines cause lack a of transparency in the transport market. The current regulation protects the national shipping lines, and its application causes delays and increases costs of international maritime transport, thereby impeding the country's competitiveness (see background note on maritime transport regulation in sub-Saharan countries in Schedule 2). 22. Non-Performing Transport Sector Public Enterprises. Seven PEs are under the jurisdiction of MINT: the national airline (CAMAIR), with about 1,600 employees; the railway company (REGIFERCAM) with about 4,000 employees, operating about 1,000 km of railways; the urban bus company (SOTUC) with about 1,050 employees, operating bus lines in Yaounde and Douala; the national shipping line (CAMSHIP) with about 280 employees, including 80 sailors; the national freight forwarder and road transport company (CAMTAINER) with about 200 employees; the National Port Authority (ONPC) with about 1,000 employees, managing Cameroon's main port at Douala and three secondary ports, and the national dockyard (CNIC) with about 130 employees, operating a maritime workshop and dry-dock. Two PEs fall under the jurisdiction of MINTP: the equipment pool for road maintenance (MATGENIE) with about 400 employees, and the road laboratory (LABOGENIE) with about 530 employees, which controls the norms and standards of road and building construction, and carries out research. 23. Seven out of nine transport sector PEs are bankrupt and drain huge resources from the State budget. The transport sector PEs' debts and arrears severely constrain the State Treasury. At the end of FY93, direct subsidies needed to cover transport PEs' deficit amounted to US$55 million, equivalent to 8 percent of the State revenues. About US$240 million of subsidies had been allocated to transport sector PEs between FY90 and FY92, of which 84 percent to CAMAIR. As of 1994, the total domestic debt for the nine sector PEs is estimated at CFAF 122 billion, US$236 million equivalent (Table 1). This accounts for about 24 percent of the total debt of the 34 major PEs in Cameroon, 6 percent of the total domestic debt and 3 percent of the gross domestic product. REGIFERCAM, CAMSHIP and SOTUC are the most important debtors to the State among transport PEs. Transport PEs owe US$74 million to the State, which amounts to 19 percent of the total PE debt due do the State. SOTUC, MATGENIE, ONPC and LABOGENIE are the most important creditors of the State among transport PEs. The State owes US$93 million to these enterprises which accounts to 22 percent of the total State's debt due to PEs. Schedule 3 presents the key data which measure the importance of the transport sector PEs among the PE sector. 6  Table 1: FY94 Short-termDebt of TransportPublicEnterprises(CFAFbillion) SOTUC CAMSHIP ONPC CAMAIR REGIFER- LABO- MAT- CAM- TOTAL 1994 1994 1994 1994 CAM GENIE GENIE TAINER 1994 1994 1994 1993 5.0 0.0 0.1 0.5 0.3 1.9 2.7 0.0 10.5 Arrears on salaries 4.7 0.2 0.0 5.1 4.0 1.3 1.0 0.0 16.3 Fiscal arrears 4.6 0.0 0.6 13.7 8.0 2.3 2.2 0.0 31.4 Arrears on Social Security 6.7 0.0 0.0 8.9 6.8 1.8 0.2 0.0 24.4 Bank overdrafts and arrears 3.6 1.1 2.7 3.6 2.0 1.2 0.8 1.9 16.9 Local suppliers 0.0 0.7 0.0 3.5 0.0 0.0 0.0 0.0 4.2 Extemal suppliers 0.3 0.0 11.5 6.3 0.0 0.0 0.5 0.0 18.6 Other debt and arrears 24.9 2.0 14.9 41.6 21.1 8.5 7.4 1.8 122.2 Total 24. In 1993/94, CAMAIR had an estimated debt of about US$78 million, with arrears of about US$55 million, and a negative net worth of US$20 million, against assets of US$50 million. On the basis of projected operating losses and debt service requirements, the company would need an annual US$10 million subsidy to continue, and still be unable to renew its equipment when it reaches the end of its economic life in five years. Financial and operational management is poor and lacks transparency. Fraud is widespread. The company is overstaffed by about 800 employees. CAMAIR operates one B-747, and three short haul carriers (B-737) for regional and domestic flights. A company profile of CAMAIR and key financial data are presented in Schedule 4. 25. Several attempts to restructure the company failed because the Government interfered with management, in particular with respect to staffing decision. The company maintains the presidential fleet without being paid for the service, and civil servants use CAMAIR without the Government paying for all tickets. The agreements under the performance contract concluded between the Government and CAMAIR as part of the Structural Adjustment Loan (SAL) conditionalities were largely unfulfilled. The agreement to prepare a sale and lease-back arrangement for CAMAIR's long haul carrier (B-747), signed by the Minister of Finance under the SAL, was rescinded by the President of Cameroon. Despite the appointment, in October 1992, of a Director-General from Air France, which is a minority shareholder (25 percent), the situation has not improved. Since 1992, when Air France purchased UTA, the former French airline which serviced Cameroon, Air France's participation and technical assistance entail a conflict of interest as the airline competes with CAMAIR on the Douala-Paris line. 26. REGIFERCAM's long-term debt (mostly in foreign currency) stood at about US$75 million equivalent on June 30, 1994. Arrears to various bilateral donors, suppliers, and local banks amount to about US$40 million equivalent. Arrears to the Social Security system amount to about US$15 million. During FY93, the enterprise incurred an operating loss, before subsidies, of about US$20 million (down from about US$52 million in 1988). Growth of log and timber traffic in 1994 has improved the cash-flow situation but the long-term situation remains the same because of the importance of the debt. The company plays an important role in domestic freight and transit transport. Logs, wheat and flour, petroleum products, cotton, and transit goods are the largest items using railway services. In addition, the company provides passenger services to and from Northern Cameroon (at 620 km from Yaounde and 880 km from Douala), which is linked to other regions by an earth road in poor condition. A company profile of REGIFERCAM and key financial data are presented in Schedule 5. 7  27. The company made substantial efforts within the framework of the performance contract signed with the Government under the SAL in 1989. The management has been more commercially oriented and has full autonomy to set tariffs and negotiate contracts. The number of employees was reduced from 6,350 to about 4,000. REGIFERCAM concluded agreements with the State on compensation for operating unprofitable passenger transport services under public service obligations. Some auxiliary activities were privatized. But Government still interferes with some management and procurement decisions, therefore limiting the potential for further efforts which would be required in view of the still weak financial situation of the company. 28. SOTUC, which owns 229 buses (107 in Yaounde and 122 in Douala), has been unprofitable since 1988. In 1994, only about half of its buses were operational, and this number was rapidly dwindling because of lack of maintenance. In FY93, SOTUC's net loss amounted to about US$7 million equivalent, with a turnover of US$4 million. By June 30, 1993, its negative net worth amounted to about US$56 million equivalent, against assets with a book value of US$12 million. Its arrears to banks, employees, suppliers, the Treasury, and the Social Security system amount to about US$45 million. The Government's policy of maintaining a high number of staff, insisting on operating uneconomic routes, and setting preferential tariffs for certain segments of the population has been the principal cause of SOTUC's failure. It would have cost the State about US$7 million annually to continue operating SOTUC over the next few years. A performance contract signed under the SAL was never implemented. In 1994, because salaries had not been paid for more than one year, the company had been defacto taken over by its employees who ran the buses for their own account. A company profile of SOTUC and key financial data are presented in Schedule 6. 29. Before devaluation, SOTUC's market share was less than 5 percent of total urban transport, which is very low compared, for example, to 22 percent in Conakry and 41 percent in Abidjan for similar public bus transport. The police and military accounted for 28 percent of SOTUC's passengers, but only 8 percent of its revenues. Students also paid reduced fares or no fare at all. The Government has never compensated SOTUC for the full deficit caused by public service. Between 1986 and 1991, passenger volume dropped from 152,000 per day to 44,000, a decline of 70 percent in five years. Most urban trips are done by private vehicles, by taxis or by foot. Until 1994, the taxi fleet was estimated at about 5,000 in Yaounde and 5,500 in Douala. It is now shrinking and the condition of vehicles is deteriorating quickly after the devaluation. Transport tariffs cannot be increased because the revenue per capita decreased significantly following salary reductions in 1993. The cost of spare parts and new vehicles is now too expensive for owners to maintain or renew the fleet. The share of the population walking is now estimated at around 40 percent. 30. CAMSIHP's principal problem is a lack of competitiveness. Accordingly, it has been unable to capture its full quota of Cameroon's merchandise trade under the UNCTAD's Code of Conduct, despite the 34% participation of German shareholders, and was technically bankrupt until 1993. Until FY89, CAMSHIP made profits of about US$6 million on sales of about US$80 million. In 1991, its operating loss reached US$4.4 million, which increased to US$6 million before taxes in 1992. Its working capital was negative by US$1 million in 1991. CAMSHIP owns two vessels and charters ships for petroleum and clinker. Its vessels generate an annual loss of about US$1.5 million as they are more costly to operate than modern ships (US$14,000 daily versus US$8,000). In June 1993, net equity stood at below 75 percent of the company's initial capital, thus implying bankruptcy. The company's liquidation value was estimated at US$20 million in 1993, below its cash-flow of US$32 million, calculated on a net present value basis of 20 years at the 20 percent annual interest rate prevailing in Cameroon. 8 31. CAMSHIP's debt was substantially restructured in an amount of US$21 million in a convention concluded with the State in September 1993. The Government agreed to: (a) transfer to the State the additional US$11 million debt incurred in the purchase, arranged by the Government, of two vessels at above market value; and (b) reschedule over eight years the remaining bilateral debt due by CAMSHIP, and assume that debt. As a result, the June 30, 1994, balance sheet shows a profit. However, this agreement was not signed by the private shareholders of CAMSHIP, who do not agree to participate in the capital increase as intended in the agreement. In addition, the company remains burdened by its lead share (27 percent, US$2.6 million) in a real estate holding (SIMAR) created by the Government to build a maritime office building, which has substantial arrears on its mortgage payments (US$13 million). The mortgage banks could call the entire loan balance. Besides being a financial burden on the State Treasury, the company impacts adversely on the maritime sector's efficiency and competitiveness and on the country's economy. This is because application of quotas to shippers under the UNCTAD's Code of Conduct results in high transport costs due to the absence of competition between shipping lines servicing Cameroon. In addition, delays in transport operations arise from cumbersome procedures created by the efforts of Cameroonian authorities to allocate its full quota of traffic to CAMSHIP. A company profile and key financial data are presented in Schedule 7. 32. CAMTAINER is heavily leveraged with an 87/13 debt/equity ratio, and has insufficient revenues to meet debt service obligations. As a result of competition with other companies and its overdesign at its creation, CAMTAINER has been unable to recover the cost of the initial investment and is unprofitable. In early-1995, its foreign partners (45% German and Danish institutional investors) agreed to debt-relief to improve the company's cash-flow. A company profile and key financial data are presented in Schedule 8. 33. ONPC breaks even, but at much too high costs and tariffs, and without providing efficient services. Expenditures are estimated at one third above the normal level for the services rendered, because of overstaffing and past over-investment. ONPC's management lacks both autonomy and accountability. ONPC has been unable to maintain the access channel, whose depth was reduced from 7.2 m after rehabilitation in 1989, to 5.4 m in 1992. Lack of maintenance has resulted in the need for more rehabilitation. The investment policy has not been based on financial return and capacity to service the debt. ONPC is considering an unrealistic five-year US$275 million investment program, the equivalent of 40% of overall Government investment, to finance a new dredger, a new container terminal, the rehabilitation of the channel and construction of calibration dikes, the rehabilitation of the Douala port infrastructure, the renovation of secondary ports, and the construction of two deep-sea ports. This plan is supported by the Government for political reasons, but the financing is not available for its most important components. In FY93, salaries increased by 12 percent, although port traffic remained the same than in FY92. Early 1995, the Government has contracted out the management of a secondary port to a private investor. 34. ONPC's tariffs are set arbitrarily and do not reflect costs. Analytical accounting is being implemented to provide the basis for a more accurate calculation of tariffs. ONPC increased its tariffs for ships by 100 percent to 300 percent after devaluation, and intends to increase its other tariffs on goods. ONPC revenues totaled US$33 million after devaluation, down from US$48 million before devaluation, and were obtained from ships (piloting, tug boat services, occupation of berth space) for about US$18 million, from goods for US$8 million, from renting-out warehouses and port space for about US$6 million, and from non-port activities, such as the production and sale of ice, utilities and other items. The operating results ranged between positive and negative during FY89-94. However, until 1993, ONPC experienced serious liquidity shortages due to outstanding revenues on port tariffs collected by customs, transferred to the Treasury, and partially from the Treasury to ONPC. A 9  substantial portion of ONPC's costs were derived from short-term bank lending to cover these dues, amounting to about 30 percent of ONPC's revenues. At the end of 1993, the Ministry of Economy and Finance agreed to let ONPC collect these revenues itself. A company profile and key financial data are presented in Schedule 9. 35. With Overseas Economic Cooperation Fund (OECF) financing approved in 1987, ONPC intends to modernize its container terminal. The project includes the provision of two ship-to-shore cranes, four yard cranes and other equipment, as well as infrastructure rehabilitation. Total investment cost, including the provision of spare parts during three years, is estimated at US$16 million. The type of management has not yet been confirmed. Operation and annual maintenance costs are estimated at US$2.2 million and would entail a significant increase, ranging from 26 percent to 38 percent, in the container tariff. The economic rate of return of the investment is below 10 percent, and would not be above this threshold until the year 2005, when Douala is expected to regain its 1985/1986 business level. ONPC's and Government's decision to proceed with the investment was the main reason the Bank closed the Third Douala Port Project and canceled its undisbursed balance of about US$1.8 million. In 1992, the Government, ONPC, OECF and the Bank agreed to the project implementation schedule and the need for improvement in dredging execution to maximize the benefits of the project. As a result, the channel depth increased from -5.4 m to -5.9 m in 1993. 36. CNIC is subsidized by using the dry-dock without amortizing it in its accounts, and not paying a lease to the State as the owner. It is reasonably well managed, but tends to seek Government's assistance and favored treatment for work orders. Its development plan is not consistent with its financial capacity to service the debt, and CNIC expects the Government to cover the financing gap. In 1994, CNIC's tariffs became more competitive because of the devaluation. The balance sheet has continually improved since the creation of the dockyard, and showed profits for FY94. A company profile and key financial data are presented in Schedule 10. 37. MATGENIE has faced a liquidity crisis for several years because of accumulating Government debts for services rendered in road construction and maintenance. In 1993, the Government's outstanding debt amounted to US$25 million. The company was overstaffed by about one third. Unpaid salaries for more than one year led to low morale and strikes. MATGENIE's management and Government did not move to improve the situation until 1994, when a new manager was appointed and a restructuring plan prepared. The plan was implemented in September 1994 with a new administrative chart and staff reduction by about 50 percent, equivalent to 40 percent of the total salary bill. Also, the management reduced salaries by 10 percent in January 1995. A company profile and key financial data are presented in Schedule 11. 38. Although LABOGENIE monopolized road laboratory works in Cameroon until recently, its financial performance has deteriorated. Arrears from the Government, which was the only client, amount to US$7 million. Due to external donor pressure, the market was opened to competition, and LABOGENIE has benefited from externally-financed contracts, reducing its dependency on Government financing. However, the volume of road construction works has severely decreased, thereby strengthening the need for restructuring the company. Although LABOGENIE's staff was reduced from 821 to 526 in 1991, the company remains overstaffed. With the Bank's assistance under the Sixth Highway Project (Loan 2584-CM), financial management and commercial orientation have improved. A company profile and key financial data are presented in Schedule 12. 39. III Conceived Investments. Sector investments were oversized and did not take recurrent costs into account. The Public Investment Program (PIP) has not reflected sector priorities or been based on 10 economiccriteria and availabilityof local funds. For example,a new airport built in Yaounde for 1.5 million passengers per year is used by less than 100,000 passengers. In Maroua, the airport's rehabilitationis incompletedue to a lack of funds. Meanwhile,the main airport in Douala, with about 400,000 passengers per year, is not maintainedand is deteriorating. In 1992-1993,the Government sought financingfor a new four-laneexpresswaybetweenYaoundeand the new airport, while it lacked the fundsto maintainthe road network. The port authority of Douala intendsto build a new container terminal equipped with expensive, sophisticated cranes, while the access channel to the port is insufficientlydredged. To improveport access, the port authority envisagesthe construction of dikes at a very high cost. In addition to these investmentsin the port of Douala, the Government is still considering the constructionof two deep-seaports, which would undercut the investments in the port of Douala. A 6 billion CFA dry-yard, purchasedin 1988, is used well below its capacitybecause the demandfor ship repair is low, and the dry-yard is locatedin shallow waters which limit its operating capacity. Finally, several investmentsin the transportsector were begun but not completedfor lack of financing, resultingin the loss of what had been executed. 40. Although subjectto lengthydiscussionsbetweenthe Bank and the Government,the PIP for the transport sector is still far from being an effective programmning tool. The economic or financial justification of projects is not provided. Data are not regularly updated and do not reflect actual executionof projects. Reformin this area is expectedto be implemented under the proposedSAC. 41. Lack of Maintenance of Existing Infrastructure. During the past ten years, priority given to investments has resulted in neglect of transport infrastructure maintenance. In addition, several weaknesseshamper maintenance: (a) Poor management. Procedures do not exist to establish consistent annual objectives and monitor the performance of maintenanceunits. This results in inefficient use of force account for routine and periodic road maintenance,and the maintenanceof the accesschannelto the port of Douala. (b) Weak institutions. The institutionalframework has never encouraged accountability within the institutions responsiblefor maintenance,nor from these institutions to the Government,nor from the Governmentto infrastructureusers. (c) Poor funding procedures. The local budget for road maintenanceis insufficient,and, with the State budget crisis, barely allows for payment of salaries to civil servants. The port does not have a specific fundingprocedure for the maintenanceof the channel and gives priority to the paymentof salaries. (d) Inadequate donor strategy. Until recently, donor assistance focused on investments rather than maintenance. 42. Although ONPC's (NationalPort Authority)dredgingcrew has technical capacity, the current institutionalframeworkin which ONPC's dredging departmentoperates, and the technical constraints of its dredger, make it impossiblefor ONPC to satisfactorilyperform such dredging. The dredging performancehas rapidly declinedsince 1988 when the contractwith foreign expertise was terminated. This contractprovided for rehabilitationand maintenance of the 22 km long accesschannel through the Wouri river, from the sea to the port of Douala. Heavy siltation of the Wouri river has reduced the depth of the channel from -7.5 m after rehabilitation,to about -5.4 m at the end of 1992. Shipping lines are forced to enter and depart with reduced loads, and to spend costly idle time at the quay or at 11  the channel entrance awaiting high tides. CAMSHIP's vessels depart with about 3,000 tons below load capacity. In 1993 and 1994, following the dredger's overhaul and donor pressure, the channel depth was increased to about -5.9 m, but is still well below the minimum of -6.5 m needed for satisfactory port performance. 43. The low productivity of road maintenance is caused by inefficient planning and management, slow budgeting and payment procedures, non performing force account teams, defective equipment and, for the past two years, a lack of financing. MINTP has insufficient knowledge of the status of the road network or the actual cost of maintenance. The 3,700 km of paved road network is mostly in fair condition because it is relatively recent and has been well maintained with German assistance until 1992, but is now beginning to deteriorate. The 22,000 km of earth road network is now mostly in poor to very poor condition. The 25,000 km of rural road network, which has not been maintained for several years because of lack of financing, is now in very poor condition, and will need to be rehabilitated or rebuilt. During FY93, only some 6,000 km of the 51,000 km road network were maintained, while maintenance almost ceased in FY94. In 1990-1991, the availability rate of equipment leased by MATGENIE to the Department of Highway Maintenance was only 56 percent. The rate has since decreased because of MATGENIE's lack of maintenance of equipment. 44. The weak fiscal situation and priority given by the Government to the payment of salaries and to the service of the external debt are the reasons for the lack of financing for road maintenance. In 1993/1994, total government revenue amounted to US$650 million against US$1,245 million of planned expenditure. Salaries and the service of the external debt accounted for US$1,000 million, 50 percent more than Government revenue. Although the Government has acknowledged that road maintenance is the second priority after salaries in the allocation of resources, it has been unable to make the necessary resources available. In 1985/1986, about US$100 million, excluding salaries of MINTP staff, were allocated from local and external resources to the road subsector for road maintenance and rehabilitation. In 1991, this allocation was reduced to about US$27 million. That year, the shortfall in the annual volume of maintenance works (i.e., the difference between road maintenance expenditure necessary to maintain the entire network of 51,000 km and the amount actually spent) was estimated at US$144 million. In 1992-1993, the actual amount spent for road maintenance was about US$10 million. Salaries amounted to about US$7 million in 1993-1994. In comparison, the fiscal revenues collected from the transport sector were estimated at US$130 million in 1993-1994, about 20% of government revenue. US$60 million (46 percent) were collected from taxes specific to the transport sector, of which US$53 million from taxation on petroleum products. Detailed data on road maintenance budget and performance are presented in Schedule 13. 45. Lack of Competitiveness. The costs caused by weak port management, protection of the national shipping line, together with the inadequate legal, fiscal, and regulatory framework, and poorly maintained infrastructure, aggravate Cameroon's lack of competitiveness in transit transport, both within the country, as well as to and from the neighboring hinterland (Chad and Central African Republic-CAR). Before devaluation, the cost of road transport was high (about four times the cost in Pakistan and twice the cost in France) and hindered the competitiveness of export products of the Central African countries. The many cumbersome customs regulations to control evasion of customs duties cause delays in transit. In spite of these regulations, about half of the customs revenues are lost because of fraud and an inefficient bureaucracy. Financial transactions associated with clearing and transiting import freight into and out of the region significantly increase the cost of transit transport. Transaction costs paid by transit and transport operators to customs and police agents to ease transit operations range between 6 percent and 29 percent of land transport for a 15-ton container in transit to CAR and Chad. According to IMF data, the cost of regional non-factor services on imports in 1992- 12 1993 was 16 percent for Cameroon, 39 percent for Chad and 31 percent for the Central African Republic. 46. The main obstacles in the transit chain are summarized below: (a) Freight-forwarders charge 1.25 percent of the shipment's value to shippers to cover posting a bond, although the actual cost of the bond charged by a bank is 0.25 percent per quarter. (b) Premiums for transport insurance must be paid to local insurance companies which have insufficient resources and competence to settle damages, and are also often paid to foreign companies. (c) The signature of customs documents by the Minister of Finance is compulsory for transit of "sensitive" goods (textiles, alcoholic beverages, goods produced in Cameroon at higher than world market prices). (d) Customs escorts are compulsory for transit transport until the border, at the cost of the importer, to ensure that goods exit Cameroon. 47. Lack of security in the port of Douala also impedes Cameroon's competitiveness for transit traffic and increases port transit costs. Port facilities and areas are openly accessible to non-authorized persons, as check points are not efficiently manned. The presence of the administrative offices of Customs in the center of the port generates uncontrolled traffic. Police do not effectively control the port area. Pilferage is common during unloading of general merchandise, and containers selected by Customs for inspection are often found vandalized thereafter. Although ONPC is legally empowered to protect the port against theft and disorder, it shifts the responsibility to the Government. The port handling companies have made their own private arrangements at additional costs for the goods. III. Transport Sector Reforn Program 48. The Government has developed an overall transport sector reform program to complete the adjustment of the sector institutions and address the financial issues in the sector. This program has been extensively discussed between the Government, IDA, and other donors. The program seeks to enable the sector to resume its contribution to development instead of being a constraint to the country's economic growth. It is a phased program, aimed at improving mobilization and allocation of resources, maintenance of transport infrastructure, and the overall efficiency of the sector. These objectives would be achieved through State divestiture from transport operations, increased competition, more focused institutions, and an improved regulatory framework. The program is described in paragraphs 49 to 69. Benefits expected from the program are described in para. 70. Program implementation and priorities are described in para. 71. Some issues still require Government decisions for their resolution. Such resolution is being pursued as part of the dialogue between the Government and IDA covering the ongoing preparation of IDA projects in the transport sector (see para. 76). 49. Civil Aviation. The Government has agreed to privatize both the domestic and international air transport operations in Cameroon. The agreed strategy consists of the winding-down of CAMAIR and the creation of a new company for the provision of air services. One of the following options, or a combination of both, would be used to transfer control and ownership of the new company to the 13  private sector: (a) capitalization of the new company by a group of private investors with full management control; or (b) management contract with deferred privatization option as a mechanism to improve the airline performance and generate private sector involvement. There is a potential for private provision of air services, both by national investors or in partnership with foreign carriers. In 1994, a national air carrier, which initially operated as subcontractor for CAMAIR, and a charter company for local services were authorized to operate in Cameroon. South African Airways has also hinted at possible cooperation. However, if the private sector were not interested in participating in the ownership of the new company, the Government would divest the aviation related assets and auction the traffic rights to domestic/regional air carriers. The detailed strategy, the timetable for the privatization of air services, and key financial data after privatization are presented in Schedule 14. Benefits resulting from this privatization are presented in Schedule 17. Bidding for the selection of the private strategic partner is expected to be launched before the end of 1995. Privatization is expected to be completed within two years after the selection of the strategic partner. 50. An outright liquidation of CAMAIR would be politically unacceptable. The Government attaches great importance to CAMAIR as the national flag carrier, not only because it services domestic routes, but also because it puts Cameroon on the map regionally and internationally. The Government also considers that Cameroon, a country with a population of 12 million, needs a domestic air service. The Government recognizes that a solution needs to be found, which would be compatible with political constraints, to stop subsidizing air services. IDA's position is that Cameroon is entitled to an air service provided that it is efficient, not subsidized, and operates on market principles, preferably with a majority of private shareholders. Following the detailed studies carried out on CAMAIR with PPF financing, the Government requested that concrete proposals be presented, which resulted in the strategy mentioned above. The following options were also considered but rejected: (a) elimination of budget support, which would be difficult to enforce because the Government is likely to find ways of continuing to subsidize the company by using off-budget accounts, such as oil revenues, or by cutting spending in vital sectors; and (b) execution of another performance contract, which was unsuccessfully attempted under the SAL (1989). 51. In order to increase the efficiency for the provision of air transport services in Cameroon, and to promote private sector participation, the regulatory framework should be revised before completion of privatization: (a) to deregulate the domestic passenger market, including the Yaound6-Douala route, to open competition between domestic carriers; (b) to open the cargo market, both in the local and international segments, through more flexibility in the use of charter flights to allow for competition and competitive rates; (c) to gradually adjust domestic fares, in line with market rates, through planned price increases with the domestic carriers; (d) to use explicit and efficiency-driven subsidies in the case of social routes; and (e) to establish a jet-fuel price policy in line with international standards. 52. Railway. The Government has agreed to separate the ownership of the infrastructure and railway operations by creating a new private company to commercially operate railway services for freight through a concession agreement. The core shareholders of the new operating company would 14 be selected following international bidding procedures. The Government has still to choose the conditions of operations for passenger services from four options: (a) include the services in the concession agreement as public service obligations; (b) contract an agreement with a private company distinct from the concessionary company for freight; (c) replace rail passenger services by bus services and contract a private company for the operation of these services; and (d) stop providing passenger services while maintaining the roads accessing the villages along the railway track. Maintenance costs are being estimated. The detailed strategy, the timetable for the privatization of railway operations, key financial data after privatization and a preliminary risk analysis for both Government and private investors are presented in Schedule 15. Benefits resulting from the privatization are presented in Schedule 17. Bidding for the selection of the private majority shareholder of the concessionary company is expected to be launched before the end of 1995. A decision on passenger services has to be taken before completing bidding documents. 53. Revision of the regulatory framework is needed to accompany the privatization of railway operations: (a) The transport component of the price structure for petroleum products should be revised to promote competition between transport modes and encourage petroleum companies to use the less expensive mode of transport. (b) The railway transit procedures should be improved. The reform will be implemented as part of the UDEAC Transport Reform Program (see paras. 58-59). 54. Urban Transport. The Government has agreed to liquidate SOTUC, the public urban bus company and liberalize urban transport. A liquidator is being appointed, whose terms of reference seek the completion of liquidation within sixth months, once the procedure has begun. On February 22, 1995, the General Assembly of shareholders officially announced SOTUC's liquidation, and services were stopped. Benefits to the Cameroonian economy resulting from the liquidation, are presented in Schedule 17. The conditions of access to the industry, related to vehicle insurance, vehicle certification, taxation of activity and vehicle safety are being revised accordingly. A consultant has been selected to prepare the revised regulation which is expected to be implemented before July 1, 1995. 55. Interurban Transport. The Government is studying simplification of the taxation system for road transport, through the creation of a road tax collected by one institution only (thus replacing several taxes collected at different stages, by several institutions), as well as a road user charge, clearly identified in the price of petroleum products, to be used to finance road maintenance through a Road Maintenance Fund (see paras. 63-64). The Ministry of Economy and Finance has not yet agreed to such a simplification, or to the implementation arrangements, but has agreed to the principle of a Road Maintenance Fund. Arrangements for the creation of the Fund are being studied in detail, and the Fund is expected to be created before the next dry season in October 1995. A presidential dccree was recently taken to remove illegal road controls by the administration (police, customs, etc.). MINT is envisaging the creation of a committee which would follow up on the compliance with the decree to prevent the reappearance of the controls. Toll roads were created in 1993, but revenues have been far lower than expected because of fraud, estimated at 50 percent. A decision on their privatization or removal will be taken as part of the simplification of the road taxation system. The existing weighing bridges on the Douala-Yaounde road are being rehabilitated. They will be used in a first phase to monitor truck overloading, and in a second phase to fine overloaded trucks. A pilot operation is being prepared by MINTP. 15  56. Maritime Transport. The Government has agreed to privatize CAMSHIP, the national shipping line, and to privatize or liquidate CAMTAINER, the national road carrier and freight forwarder. The timetable for the privatization of both companies, and key financial data after privatization are presented in Schedule 16. Benefits to the Cameroonian economy resulting from the privatization are presented in Schedule 17. Access to the maritime industry by Cameroonian shipping lines was liberalized at the end of 1994. However, the Government is still reluctant to fully liberalize maritime transport. The 1994 law suppresses CAMSHIP's monopoly, but maintains the application of the Code of Conduct and the protection of Cameroonian shipping lines. The decree defining the modalities of application of the law has still to be prepared. As an immediate step of the liberalization process, the manner in which the Code of Conduct is applied should be reviewed in order to comply with the clauses of the Code. Accordingly, the quota system would be applied to the Liner Conference traffic and no more to the entire Cameroonian maritime traffic. Terms and conditions for freight transport outside of the Liner Conference traffic, and currently contracted-out to CAMSHIP (clinker and petroleum products), should also be reviewed to decide whether or not these contracts should be abolished and retendered. Although the Government has not yet agreed to this step which reduces the protection of the Cameroonian shipping lines, its implementation is required to set up an acceptable regulatory framework in parallel to the privatization of CAMSHIP. Further steps in the liberalization process should be coordinated at the regional level, as part of the Trade and Transport component of the Sub-Saharan Africa Transport Policy Program (SSATP), which involves Sub-Saharan African countries and most of the donors involved in transport in this area. The Trade and Transport component aims at establishing a new maritime transport policy for Sub-Saharan African countries. The preparation of this new policy is still at the studies stage (Schedule 2). Studies are expected to be completed, and recommendations discussed, during a regional seminar of SSATP countries and donors in 1996. 57. To be consistent with the sector policy, the role of CNCC, the Shippers' Council, will have to be revised as part of the decree defining the application of the 1994 law on maritime transport. As a first step, CNCC should control a posteriori the application of the Code of Conduct. Financing of CNCC by a 0.3 percent surcharge on import/export by sea and waivers paid by shipping lines to transport freight toward Africa should be stopped, and CNCC should be financed from the State's budget. Further steps will be defined as part of the Trade and Transport SSATP component. The role of CNCC was discussed by CNCC, public and private shippers, CAMSHIP, and the Cameroonian Administration during a seminar, and during several meetings of a committee created to follow up on recommendations made during this seminar. However, the committee's recommendations maintain the current role of CNCC and financing means while adding the roles of economic observer of the transport sector and strengthening the services to shippers. 58. Transit Transport. Within the Union of Central African States (UDEAC) framework, the 1989 Joint EU-World Bank initiative launched a transit transport facilitation program in the Central Africa subregion. The obstacles to trade and facilitation prevalent throughout the UDEAC customs were analyzed by the UDEAC countries during preparation of the transport component of the UDEAC Regional Policy Reform Program (Report No. 11296-AFR dated April 30, 1993) in collaboration with the EU and IDA. In joint workshops held in November 1991, and in March and December 1993, the UDEAC countries agreed to a Program of Regional Reforms to improve transit conditions. National Transit Committees were created in the six UDEAC countries to draw up plans to: (a) simplify customs documents and devise a system of regional transit under customs bonds (TIPAC); (b) review the criteria for establishing bonded customs centers; (c) redefine transit requirements for intermodal transport (rail/road, rail/river) and containers; and (d) improve road transport conditions and 16 regulations (maintenance of international itineraries, trucking liabilities, vehicle inspection, and cost recovery). 59. The TIPAC mechanism is a procedure whereby goods travel duty free across the border under customs bonds, accompanied by a bill of lading, with the liability for possible loss of customs duties held by the transport operator. The Manual of Procedures for the TIPAC was adopted by the UDEAC countries in March 1993. The mechanism is similar to the transit system in Europe (TIR), where this liability is guaranteed and surveyed by the International Road Union (IRU). For the liability to be credible to customs in UDEAC countries, the bill of lading and the transporter must be covered by a regional insurance policy which would reimburse customs for lost duties should the transport operator or the importer abuse the mechanism by evading import duties. The insurance policy would be funded from the sale of vouchers attached to the bill of lading. The regional insurance policy is being designed and candidate institutions are being identified to manage the insurance policy. EU financing is available to provide assistance for the implementation of the TIPAC starting mid-1995. TIPAC implementation is expected to be completed two years after commencement of the assistance. An action plan and a timetable are provided in Schedule 18. 60. The policy measures to be implemented to complement the TIPAC system are the following: (a) streamline road transport regulations to harmonize national and UDEAC transport regulations and vehicle standards; harmonize the structure of road user charges; enforce control of truck overloading to prevent road deterioration; (b) seek legal registration of customs agents, forwarding agents, and international road transporters, and agree to and enforce criteria underlying the approval of such registration; (c) harmonize and liberalize freight insurance in UDEAC. 61. As 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 authorities to take the necessary measures. In addition to the measures to be taken at the regional level, the following measures had to be taken by Cameroon: (a) Improve its custom declaration mechanism and the computerized procedures: An audit of the computerized system was carried out in 1993, and proposed scenarios for its rehabilitation. A second audit should start soon with PPF financing which should provide elements for the decision on one of the scenarios and prepare for its implementation. A comprehensive audit of the customs services will be carried out by the French Ministry of Cooperation in March 1995, to define a plan for improving customs' performance and efficiency. (b) Remove the requirements of domiciled invoices and import licenses in Chad and the Central African Republic: The measure was taken in 1994. (c) Shorten the list of sensitive goods which require a customs clearance for transit: (on going); 17  (d) Limit road controls by the administration to those specified in the UDEAC legislation. A presidential decree was taken in 1993 to apply the measure. (e) Remove requirements for customs escorts for transit goods through Cameroon. No progress has been made. 62. The physical component of the transport component of the UDEAC reform program consists of: (a) rehabilitation and maintenance of international road itineraries to CAR and Chad, as agreed by the UDEAC Steering Committee in June 1993; improvement of the customs facilities in Douala and at border crossings with CAR and Chad; (c) rehabilitation of the computerized customs declaration system in Douala, and provision of a modern telecommunication system; and (d) provision of international trucking facilities at Douala port. The rehabilitation of the Cameroon-CAR road itinerary, which is part of component (a), and provision of a modern telecommunication system are being executed with EU financing. Detailed engineering studies are underway. 63. Road Maintenance. The Government has agreed to a new strategy for road maintenance to improve its efficiency and its sustainability: (a) To adjust the road maintenance program to management and financing capacity: A priority network of about 20,000 km has been identified based on: economic importance (traffic flows); consistency of the network and needs for links between urban centers and regions of agricultural production; communication between administrative centers; and regional equity. (b) To disengage itself from maintenance execution: Periodic maintenance and rehabilitation of all paved roads, as well as periodic maintenance of earth roads, and progressively routine maintenance of earth and paved roads would be contracted-out to private contractors, including the local construction industry, small contractors, village workers, and communities, using labor-intensive methods and local materials, where possible. (c) To improve planning and programming capacity: A pluri-annual maintenance programming system is being established using as criteria the existing level of service of the priority road network, and also climatological, geographical and geotechnical parameters. The system is being defined under an IDA-financed study for earth roads, and German-financed study for paved roads. (d) To focus MINTP's role on planning, programming and budgeting, supervising works and controlling objectives: External audits of technical and financial performance and procurement procedures would be carried out to ensure accountability. MINTP restructuring is being defined accordingly under a PPF-financed on-going study. (e) To encourage development of small and medium contractors by providing training in technical and financial management; by creating a stable market; by defining policies to eliminate present constraints to private sector participation; by revising procurement regulations; and by establishing a rapid payment system because small contractors do not have sufficient working capital to prefinance expenditures for works: The new framework and procedures are being defined with PPF financing. 18  (f) To ensure sustainability of road maintenance financing and transparency and accountability in the use of funds. A Road Maintenance Fund would be used as a mechanism to achieve these objectives. The mechanism is being defined under a PPF- financed on-going study. 64. The strategy is expected to be implemented before the 1995 dry season (period when road maintenance works are carried out). Subject to approval by the Minister of Finance, the Government intends to submit the creation of the Road Maintenance Fund to the National Assembly in June 1995, during discussions on the FY96 budget. Implementation of the new strategy is being tested under EU financing. A road maintenance program amounting to about US$26 million is being contracted out to 38 small and medium enterprises (SMEs). The bidding procedure is on going. SMEs which had been preselected, received a training on procurement and management of road works. Lessons learned form this project will be used to prepare the application of the new strategy on the entire priority network. Caisse Franraise de Developpement also intends to contract-out a rural road maintenance program to SMEs to start at the end of 1995. 65. MATGENIE. The Government has agreed to retrench on its equipment rental activity. A PPF-financed study is being revised to review the feasibility of splitting MATGENIE into four separate entities, located in four different regions. This option would make it easier to progressively privatize MATGENIE in accordance with the financial capacity of local investors. Both direct privatization through sale of public participation in the entities, or privatization of management could be considered. This option would also introduce an element of competition among the four entities. In addition, the Government agreed to liberalize entry to the activity. The initial option recommended by the study was to create a new company, the management of which would be privatized through a management contract, and transform MATGENIE into a holding company. This option is being reviewed to demonstrate its sustainability, which was unclear in the draft study. Although liquidation of MATGENIE and sale of the equipment was considered, the option was not retained as the road maintenance organization and financing still need to be sustained before local investors can be expected to invest in equipment rental, and supply the full equipment required for road maintenance. The new set-up is expected to be implemented before the 1995 dry season and the start of the execution of the road maintenance program. 66. The number of items of equipment needed for the maintenance of the priority network is estimated at 941. Depending on the capacity of private entrepreneurs to provide their own equipment, the number of items of equipment to be provided by MATGENIE in the future ranges from 130 to 190. The number of employees is estimated at 300, against 385 after the 1994 restructuring. Currently, MATGENIE owns 734 items of equipment of which 33 percent are operational, 42 percent need heavy repairs, and 25 percent should be scrapped. 67. LABOGENIE. A study is being carried out with EU financing to define the future legal statute of LABOGENIE and the potential participation of private investors in the company. The study will also review market conditions and propose a strategy to prevent the continuation of the current monopoly by either a new private or public entity. A first breach was made in the monopoly when LABOGENIE was authorized to participate in bids under EU-financed projects for the control of works in association with only one of the consulting firms per short list. 68. Port Activities. The Government is defining a new strategy for port operations. Two studies are under preparation: 19  (a) to define an efficient organization to ensure sustainable performance of dredging. In particular, the study will consider the privatization of the activity. The study is expected to be completed in June 1995, and the recommendations implemented before the end of 1995. (b) to restructure the port authority to reduce operating costs, and to revise tariffs on the basis of the analytical accounting recently implemented: The study will provide recommendations regarding contractual relationships with private port operators which need to be revised to provide investment incentives, and to encourage their commitment to the development of Cameroonian ports. Recommendations are expected to be implemented before March 1996. The two studies, and the implementation of the recommendations, are critical to improve port performance. A decision also needs to be taken as part of the restructuring process, regarding the type of management of the new container terminal built with OECF financing. IDA's strategy is that no investment should be carried out in the port sector before the decisions on the dredging organization, the port restructuring, and the management of the container terminal are implemented. 69. Institutions. As mentioned above, MINTP's role would be to program, manage and supervise road maintenance works, most of which will be contracted to private contractors. MINTP would become autonomous in procurement decisions on maintenance works below a certain amount to ensure efficient management of small and medium-size contractors for road maintenance. A PPF-financed study is being carried out to prepare MINTP's shift toward this new role. Restructuring is expected to be implemented before the end of 1995. MINT would focus on sector strategy, policy formulation and transport regulation. A French-financed study is underway to prepare MINT restructuring accordingly. The restructuring will be implemented to accompany the privatization of transport PEs. 70. Benefits Expected for the Transport Sector Reform. (a) Privatization and liquidation of priority public enterprises: After privatization, CAMAIR, REGIFERCAM, CAMSHIP and CAMTAINER are expected to generate profits due to a more autonomous and commercially-oriented management, cost-cutting, and financial restructuring resulting in greater competitiveness. Subsidies should be stopped resulting in savings for the Treasury. In addition, after privatization, the enterprises will generate fiscal revenues which they have not done for several years. Financial forecasts indicate that accumulated savings for the Treasury three years after privatization/liquidation compared to the without privatization/liquidation scenario, would amount to US$60 million, and would be equivalent to the additional cost bome by the State for the restructuring (see Schedule 17). (b) Road maintenance: Focusing MLNTP on planning, programming and budgeting, supervising works and controlling objectives, and privatizing road maintenance execution would make the road organization more efficient. Such reorganization, and revised procurement procedures, payment and financing mechanisms would improve road maintenance sustainability. The rate of return of the maintenance program for the priority network is estimated at above 200 percent on paved roads, and around 100 percent on earth roads. 20  (c) Transit: The rehabilitation of the computerized customs declaration system in Douala would improve customs revenues by reducing fraud. The new procedures to be implemented to accompany the rehabilitation would make the system more efficient, and save time in the transit of goods through the port. Implementation of the transport component of the UDEAC Program of Regional Reforms, including the TIPAC system, would make transit procedures more efficient, and reduce the cost of non-factor services on transit goods. (d) Port restructuring and rehabilitation: The objective of the restructuring is to reduce ONPC's expenditures by about 30 percent. Tariffs would be adjusted accordingly. Dredging reorganization would result in better efficiency and save waiting-time for the ships entering the channel or leaving the port. Rehabilitation and maintenance of the channel to a depth of 6.50 m would provide a 13 percent economic rate of return. (e) Regulatory framework: Progressive liberalization of maritime transport, simplification of the road taxation system, revision of the transport component of the price structure for petroleum products, as well as other measures mentioned above would result in a reduction of transport costs and greater competitivenessof the country's economy. As an example, in Cote d'Ivoire, liberalization of maritime transport for bananas cut prices of maritime transport by half 71. Implementation of the Transport Sector Reform Program. The program would be implemented through a continuous process consisting of several phases defined in accordance with priority issues and with the capacity of local resource mobilization. On the basis of the sector analysis, the order of priority for the phases would be as follows: (a) Privatize/liquidate the transport sector PEs to reduce the drain on the State Treasury caused by subsidies needed to cover their constant deficit. Priority PEs to be privatized or liquidated are the national airline, the railway company, the shipping line, and the urban bus company because of the amount of subsidies that they need and/or their inefficiency. Revise the regulatory framework for air, maritime and urban transport. Restructure MINT. (b) Improve the dredging of the access channel to the port of Douala and restructure the port authority. Improve road maintenance management and execution. Restructure MINTP. Improve the computerized customs information system and its environment. (d) Privatize MATGENIE and LABOGENIE. Implement further steps in the liberalization process of maritime transport and revise the role of the Shippers' Council. Improve transit transport facilitation. Privatize the dockyard. (e) Execute new investments. Phase (a) would eliminate subsidies to PEs and free resources for subsequent financing of infrastructure maintenance and investment. Phase (b) would reduce the cost of transport for international trade and increase Cameroon's competitiveness. Phase (c) would strengthen the sustainability of phases (a) and (b). Phase (d) would be implemented after sector restructuring is completed. An implementation schedule is proposed in Schedule 19. It defines the steps to monitor the progress in the implementation of the phases of the strategy which have been agreed by the 21 Government, in the preparation of other phases for which an agreement is still sought, and in the implementation of recommendations established during the preparation phase. IV. Lessons Learned and Strategy for IDA Assistance to the Transport Sector in Cameroon 72. Structural Adjustment. Experience in PE restructuring under the Structural Adjustment Program (SAP) underlines the importance of state divestiture from PEs in commercial sectors, and implementing a satisfactory institutional framework to ensure such divestiture. Performance contracts used to restructure PEs under the SAP failed because of a lack of commitment from both Government and PEs. Privatization and liquidation operations launched at the same time also failed for the same reason, and because of an unsatisfactory institutional framework (see paras. 12-13). 73. Projects in the Transport Sector. Over the past 20 years, the Bank Group has contributed to transport sector development in Cameroon, with 13 projects totaling US$500 million equivalent. Projects were mostly in the highway (75 percent of the amount lent), railway, and port subsectors. Ten projects were audited after completion. Five transport sector memoranda provided the sector analysis to prepare the projects. 74. Although the audit reports observed that the Bank's objectives for the sector had been "consistent, sound and transparent, improving efficiency and strengthening self-financing operations", it concluded that while, generally, all physically measurable targets were successfully met, no comparable success was registered in the areas of financial performance, maintenance activities, and institution building. The audits attributed the poor institutional and financial performance of the transport sector to the Government's lack of commitment to genuine change and, more importantly, to the lack of a coherent sector program. The audits underlined that the Bank had advocated a comprehenisive program, and that its absence had meant that individual subsector operations were neither integrated nor additive. The 1989 audit of the Feeder Roads, Highway IV, and Railway projects concluded that an overall sectoral approach was overdue, and recommended preparation of an action progranmpursuing a coherent approach of sector investment planning and PE reform, and the adoption of this program by Government and donors as a basis for integrated sector financing. 75. Transport Sector Reform Program. The lessons learned from past experience have led to IDA contributing to the preparation of a Transport Sector Reform Program, described in the chapter above, which places transport sector development and investment in a policy-based, sectorwide framework supported by Government and donors. The preparation of this program is a critical contribution to Cameroon's efforts to restore the performance of its economy and competitiveness. The Government and IDA have carried out joint economic and sector work to analyze issues in the transport sector in order to devise action plans and priorities to restore sector efficiency (Transport Sector Memorandum, dated June 30, 1993, Report No. 11430-CM). The process for sector analysis, and the preparation of the Transport Sector Reform Program, aimed at internalizing the rationale for reform and recommendations by broadly involving Government institutions and staff, private operators and donors. To marshal the necessary understanding and political commitment needed to implement the proposed reforms, a Transport Interministerial Group was created to represent all Government organizations involved in the transport sector. Several seminars were organized to discuss with the private sector the reform in the road maintenance, port, transit and maritime subsectors. The Government also called several donor meetings to discuss sector issues and proposed action plans. The outcomes of these discussions are being reflected in a draft declaration of sector policy being prepared as part of the preparation of subsequent IDA projects in the transport sector. 22 76. IDA's Assistance Strategy to the Transport Sector. According to the priorities mentioned above (para. 71), IDA would assist the Government in implementing phase (a) of the transport sector reform program through the proposed Transport Sector Adjustment Credit (TSAC), scheduled for FY96. As execution of the TSAC begins, IDA would participate with other donors in the Transport Sector Project (TSP), scheduled for FY96 to assist the Government in implementing phases (b) and (c). In addition to the support to the implementation of the elements of the transport sector reform included in these two phases, TSP would support the execution of the road maintenance program, rehabilitation of the access channel to the port of Douala, and rehabilitation of the computerized customs information system. However, the content of the project needs to be reappraised to take into account the different progress in the definition of the reform in phases (a) and (b) of the program. Reappraisal may result in splitting TSP into subprojects to be implemented at different times. V. Project Description 77. Objectives. With the assistance of the proposed project, the Government intends to: (a) launch the transport sector reform program which would result in the creation of a new private civil aviation company, private operation of rail services, liquidation of the urban bus company, sale of public shares in CAMSHIP and CAMTAINER, restructuring of MINT, and reform of the regulatory framework for air, urban, and maritime transport; and (b) continue preparation of the sunsequent phases which would result in: (i) restructuring of MINTP; execution by contract of most of the road maintenance work program; and implementation of a pluri-annual programming system and a sustainable financing mechanism for road maintenance; (ii) restructuring and down-sizing of the port authority; implementation of an efficiency-driven organization for dredging; and (iii) improved customs institutional framework, overhaul of customs computerized information system, and implementation of a new international transit system. Expected results and timing for project activities, which will be used as performance indicators for the project, are provided in Schedule 20. 78. Launching the Transport Sector Reform Program. This component would include: (a) Preliminary analysis for the privatization of the airline, railway company, shipping company and for the liquidation of the urban bus company (completed with PPF financing). (b) Railroad: Preparation of a concession agreement for the operation of rail services. The description of the main features of the concession agreement and terms of reference for the consultant, who will prepare the concession agreement and assist the Government in its implementation, are in project files. (c) Civil Aviation: Preparation of the privatization of the national airline. The privatization strategy and terms of reference of the Financial Advisor, who will prepare the privatization and assist the Government in its implementation, are in project files. (d) Maritime Transport: Provision of financial and legal advisors for privatizing or liquidating the national shipping line, and the national freight forwarder and road transport company. Terms of reference of the financial advisor are in project files. (e) Urban Transport: (i) Provision of the services of a liquidator for the urban bus company. The calendar of the liquidation, the terms of reference of the liquidator, of the committee which will monitor the liquidation, and of the assistance to the 23  committee are available in the project file; (ii) Assistance to the privatization of urban transport and review of the regulatory framework after liquidation of SOTUC, including a seminar on urban transport institutions and liberalization. Terms of reference for both activities are in project files. (f) Financial audits of enterprises to be privatized and study of legal obligations of these enterprises towards their creditors. (g) Transport Institutions: Review of the role and organization of MINT to strengthen its planning, regulatory, and policy preparation capacity. Terms of reference of the study are available in the project files. The study will be financed by Ministere Fran(ais de la Cooperation (FAC). (h) Reform of the regulatory framework for urban, air and maritime transport, including a study of regional logistic costs and seminars. (i) Strengthening of the unit in charge of overall privatization in the Ministry of Economy and Finance. 79. Preparing the Subsequent Phases of the Transport Sector Reform Program. This component would include: (a) Road Maintenance: (i) Pluri-annual programming studies for earth roads and paved roads maintenance. Terms of reference are available in the project files. The studies have started under PPF financing for earth roads, and German cooperation financing for paved roads. (ii) Preparation of a mitigation plan to address environmental issues in road maintenance including a seminar. (iii) Preparation of the progressive State retrenchment from road maintenance execution including privatization of MATGENIE and LABOGENIE. A draft study is available in the project files for MATGENIE, and is on going with EU financing for LABOGENIE. The project will provide legal and financial advisors to prepare the implementation of recommendations. (iv) Review of the role and organization of MINTP to focus on planning, programming, managing and supervising road maintenance works. The study has started under PPF financing. (v) Study of the creation of a Road Maintenance Fund. Terms of reference are available in project files. (vi) Support to the organization and financing of rural roads maintenance. (vii) Implementation of a road data bank. (viii) Monitoring of bridges' condition. (ix) Appointment of a local coordinator for road maintenance activities. Terms of reference are in the project files. (x) Training in road maintenance management (planning, budgeting, programming, procurement, works supervision). (xi) Creation of a road documentation unit. (xii) Detailed engineering studies of a priority road maintenance program (b) Port: (i) Assistance to the reorganization of operational and financial management. (ii) Study of dredging reorganization. (iii) Analysis of dredging materials. (iv) Study of the localization of the dry-dock. (v) Engineering design for the rehabilitation of the dredger. Terms of reference for these studies are available in the project files. (vi) Study to reduce transport costs at the port of Douala. 24  (c) Transit Facilitation: (i) Support to improvement of the computerized system for customs declaration and relocation of the system. (ii) Assistance in setting up a TIPAC customs duty guarantee system, including the provision of telecommunication equipment, and study related to the insurance system. Terms of reference for activities (i) are in the project files, and are being prepared for activity (ii). (d) Maritime Transport: (i) Assistance in restructuring of the Shippers' Council. Preliminary meetings were held in Cameroon to discuss the role of the Shippers' Council with shippers. (ii) Preparation of maritime transport liberalization. (e) Road Transport: (i) Study for the harmonization and simplification of the road taxation system. (ii) Plan of action for road safety. (iii) Continuation of the computerization of vehicle certification started under the Sixth Highway Project (Loan No. 2584-CM, closed on October 30, 1993). (iv) Pilot operation to monitor loads of trailers using weigh bridges rehabilitated under the Sixth Highway Project. (f) Rail transport: (i) Feasibility study of a program of railway track rehabilitation. (ii) Feasibility study of the railway telecommunication program. (iii) Study on access roads to the railway stations. (g) Local capacity building with a review of the capacity of local consultants in transport and the establishment, within the Transport Interministerial Coordination Unit, of a training program for young professionals in MINT and MINTP. (h) Project management, auditing and accounting. (i) Provision of assistance to the Transport Interministerial Coordination Unit. The unit was established in 1992. It has diligently helped the Government prepare the reform program as secretariat of the Interministerial Committee created in this respect. The assistance will include short-term missions of experts, local staff under contract, office equipment, and mission expenditures. 80. Technical Assistance, Training and Seminars. The credit would finance 495 person-months of consulting services for policy support, support to institutional development, institutional development studies, and support to project preparation and implementation (Table 2) at a cost of about US$8.7 million. Consulting services would consist of studies (286 person-months) and short-term missions (209 person-months), including services purchased for assisting the Government to privatize or liquidate PEs. 25  Table 2: Person-Months by Type of Technical Assistance and Subsector Subsector Supportto Institutional Policy Project Total Institutional Development Support Implementation Development Studies and Preparation Civil Aviation 40 13 53 Railway 23 11 34 Urban Transport 16 3 4 23 RoadTransport 1 52 53 MaritimeTransport 16 16 Road Maintenance 21 21 76 118 Ports 10 5 10 25 Transitand Facilitation 8 32 40 SectorManagement 67 3 4 59 133 Total 193 46 16 240 495 81. Terms of reference of most project activities were agreed during negotiations. When appropriate, they will be revised to indicate that transfer of know-how is expected in the core output, and evaluation of consultants by the counterparts, and of the counterparts by consultants should be made. Performance of consultants will be reviewed to determine how assignments' objectives were achieved and how well consultants were able to transfer skills and know-how to their counterparts, and to strengthen the local agencies to which they were assigned. 82. During negotiations, the Government provided an assurance that counterparts would be designated before the start of major consulting assignments, with qualifications and terms of reference acceptable to IDA, and would remain in post until the completion of the activity. These counterparts will be responsible for preparing seminars related to project activities and for presenting papers on the conclusions and recommendations of studies. Terms of reference will detail tasks to be carried out by the counterpart staff as part of their training. Consultants' proposals should include the time necessary to train counterparts during execution of studies, and the corresponding budget. This process has already started under studies financed by PPF funds. 83. The list of studies to be financed by the project was agreed at negotiations. It is provided in Schedule 21. The list would be regularly reviewed and updated, if necessary in the course of Bank supervision missions, and in light of studies' outcomes already known, and of developments in the sector. Terms of reference of consulting activities will be included in the Project Implementation Plan. 84. Two seminars would be held on environmental considerations in road maintenance and on urban transport institutions and liberalization. Training would be provided on road maintenance management (planning, budgeting, programming, procurement and supervision of road maintenance works). FAC will finance a training program to be defined on transport-related activities. EU will finance training for administrative and private users of the regional guarantee system of customs duties. Studies included in the project will define training needs to be included in the proposed TSP. The guidelines for preparing training activities were agreed during negotiations. Draft guidelines are provided in Schedule 22. 26  SECTION B: PROJECT COSTS AND ADMINISTRATION I. Project Costs 85. Total project costs, including price contingencies and taxes are estimated at US$23.9 million. The costs, net of taxes and duties, are estimated at US$20.2 million with a foreign exchange component of US$14.2 or 70 percent. The Government would bear the cost, estimated at US$3.7 million, of taxes and duties levied on consulting services and goods. The Government will also finance the salary of the four civil servants working in the Transport Interministerial Coordination Unit, estimated at US$ 16,000 per year, and provide offices for the unit. In the current budgetary situation, where the Government is barely able to finance its civil servants, service the country's external debt and allocate scarce remaining resources to priority maintenance, no other contribution to the project would be requested from the Government. Detailed project costs are provided in Schedule 23. A summary breakdown of the project costs net of taxes is given below. Table 1: Estimated Project Costs Component Total Costs (US$ million) 1. Goods 1.9 2. Consultants' Services and Studies (a) Support to Institutional Development 11.7 (b) Institutional Development Studies 1.7 (c) Policy Support 0.6 (d) Project Implementation and Preparation 5.6 3. Training and Seminars 1.8 4. Operating Costs 0.6 Total 23.9 II. Procurement Employment of Consultants 86. In order to ensure the satisfactory execution of the project, the Borrower agreed during negotiations that qualifications, experience, and terms and conditions of employment of consultants shall be satisfactory to IDA. Such consultants will be selected in accordance with principles and procedures satisfactory to IDA on the basis of the Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency, published by the Bank Group in August 1981 (the Consultant Guidelines). Procurement procedures are indicated in Schedule 21. The model letter of invitation issued by the Bank Group shall be used. For complex, time-based assignments, the Borrower will employ such consultants under contracts, using the standard form of contract for consultants' services issued by the Bank Group, with such modifications as shall have been agreed by IDA. Where no relevant standard contract documents have been issued by the Bank Group, the Borrower will use other forms agreed with IDA prior to launching the bids. 85. Following the recommendations of the Country Procurement Assessment Report issued in April 1994, which concluded that procurement practices in Cameroon were inadequate, and to enable a satisfactory procurement process, the following measures were agreed during negotiations: 27  (a) Short-lists shall be a minimum of 3 and a maximum of 6 firms with no more than two firms from the same country. (b) The practice of requesting bid and performance securities shall be discontinued. (c) Quality shall be the main criterion for the selection of consultants. of Goods Procurement 87. During negotiations, the following procedures were agreed. Goods estimated to cost the equivalent of US$80,000 or less per contract, up to an aggregate amount equivalent to US$210,000, may be procured under contracts awarded on the basis of competitive bidding, advertised locally, in accordance with procedures acceptable to IDA, including: (i) bids are opened in public in the presence of bidders or their representatives; (ii) there will be no negotiation with bidders between bid opening and contract award; (iii) bid evaluation and post-qualification criteria will be defined in precise quantitative and monetary terms; and (iv) award will be made to the lowest evaluated responsive bidder. 88. Decisions: Review by IDA of Procurement (a) With respect to each contract estimated to cost the equivalent of US$50,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines for Procurement under IBRD Loans and IDA Credits published by the Bank in May 1992 shall apply. Where payments for such contracts are to be made out of a Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract, required to be furnished to IDA pursuant to said paragraph 2 (d), shall be furnished to IDA prior to the making of the first payment out of such Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of a Special Account, said procedures shall be modified to ensure that the two conformed copies of the contract, together with the other information required to be furnished to IDA pursuant to said paragraph 3, shall be furnished to IDA as part of the evidence to be furnished showing that such payment was made exclusively for eligible expenditures. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals are to be made on the basis of statements of expenditure. 89. Modificationof Waiverof the Terms and Conditionsof Contracts. Before agreeing to any material modification or waiver of the terms and conditions of a contract that would increase its cost by more than 10 percent of the original price (10 percent would be specified for the purpose of para. 4 of Appendix 1 to the Bank Group's Guidelines), the Borrower should specify the reasons thereof and seek IDA's no objection for the proposed modification. 28 Procurement Times 90. Procurement times for project activities up to contract signing were agreed during negotiations, in particular all contracts must be signed within the original bid validity period. III. Disbursements 91. Schedule B details the amount to be disbursed from the credit per category. The percentage of expenditures to be financed is 100 percent of the cost net of taxes and duties for consultants' services, training and seminars, and operating costs, and 100 percent of the foreign expenditures and 75 percent of the local expenditures for goods. 92. To facilitate disbursements and to ensure that funds are available on time to finance the costs of services to be provided under the project, the Government will establish a Special Account in a commercial bank on terms and conditions acceptable to IDA. The Special Account will be managed by the Transport Interministerial Coordination Unit. The authorized amount of the Special Account is CFAF 130 million; requests for replenishing the account will be submitted to IDA monthly or at such intervals as IDA shall specify. 93. Disbursements will be made against standard Bank documentation, except for contracts of less than US$50,000 for consultants and goods, for which certified statements of expenditure would be used. These statements of expenditure will be subject to review by supervision missions and periodic financial audits. The minimum application size for payments directly from the credit account will be US$50,000. IV. Accounting and Auditing 94. Accounting. The Transport Interministerial Coordination Unit will maintain records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of the Project. Accounting procedures are defined in a manual prepared by the unit, to be part of the Project Implementation Plan (para. 98) and to be agreed by IDA. The project includes financing for hiring a qualified accounting firm, acceptable to IDA, to establish a computerized accounting system for the proposed TSP when required. Such system is not needed for the present project because of the small number of contracts. 95. Auditing. The signature of a three-year contract with the project auditors is a condition of credit effectiveness. During negotiations,the Borroweragreed to: (a) have the records and accounts referred to in the preceding paragraph for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to IDA; (b) furnish to IDA as soon as available, but in any case not later than six months after the end of each such year, a certified copy of the report of such audit by said auditors, of such scope and in such detail as IDA shall have reasonably requested; (c) furnish to IDA such other information concerning said records and accounts and the audit thereof as IDA shall from time to time reasonably request; and 29  (d) without any limitation to the provisions of paragraphs (a) through (c) above, have the records and accounts of the Special Account audited in accordance with paragraphs (a) through (c) above: (i) every four months during the first twelve months after the Effective Date; and (ii) every six months during the second twelve months after the Effective Date; and furnish such audits to IDA at the latest within two months following the end of the period audited. 96. For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (a) maintain or cause to be maintained, in accordance with paragraph 94, records and accounts reflecting such expenditures; (b) retain, until at least one year after IDA has received the audit report for the fiscal year in which the last withdrawal from the Credit Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (c) enable IDA's representatives to examine such records; and (d) have the records and accounts of the statements of expenditure audited in accordance with paragraph 95 above: and ensure that the report of such audits contains a separate opinion by said auditors as to whether the statements of expenditure submitted during the period preceding such audit, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. 30  SECTION C: IMPLEMENTATION AND MONITORING I. Organization and Management 97. The Ministry of Economy and Finance will be responsiblefor the privatization/liquidation componentof the project. MINT and MINTP will be responsiblein their subsectors for preparing subsequentphases of the reform program including investments,in consultationwith other interested Government agencies. The existing Transport InterministerialCoordination Unit which helped the Governmentprepare the reform program, will continueto assist MINT and MINTP, and will manage the credit under supervisionof MINEFI. 98. A Project ImplementationPlan will be prepared to help the project coordinator implement and monitor the project. The plan would include all project proceduresagreed with IDA, standard bidding documentsfor consultants,the list of consultingservicesto be procured and the type of procurement, detailedproject costs, the terms of reference of the studies and support services to be carried out, and standardforms for progress reports. An outline of the Project Implementation Plan was agreed during negotiations, and the plan should be completed as a condition of credit effectiveness. Most terms of reference for critical project activities other than PPF-financedactivities, have been agreed by the Government (i.e., financial advisors for the privatizationof REGIFERCAM,CAMAIR, CAMSHIP and CAMTAINER,liquidator of SOTUC, and port studies). Letters of invitation, includingterms of reference, and short-lists for these activitiesare being reviewedby IDA. II. Implementation Schedule 99. The implementationscheduleof the project was agreed during negotiations. It is provided in Schedule24. It was prepared on the assumptionthat the credit would become effectivein May 1995. The project would be executedover a 30-monthperiod, and the credit would be closed by June 30, 1998. III. Reporting and Monitoring 100. The content and timing of progress reports were agreed during negotiations. A standard form of progress report was prepared during appraisal and is available in project files. The final form would be included in the Project Implementation Plan. Progress reports would be prepared quarterly and in advance of each Bank supervision mission. The reports would review progress on financial executionand studies. The Borrower would submit an ImplementationCompletionReport to IDA no later than six months after the closingdate of the credit. 31  IV. SupervisionPlan 101. Bank staff input into the supervision of the project would take the following form: (a) Portfolio management. Procurement documents, terms of reference and reports (progress, final, studies, financial statements) would be reviewed at Bank headquarters. (b) Field supervision. Missions would review the progress of technical assistance and studies in the three broad project areas of policy support, institutional development, and project preparation and implementation. Missions would monitor the impact of project activities and discuss action plans for implementing study recommendations. 102. A supervision plan for the 1995-1998 Bank fiscal years is proposed in Schedule 25. V. Mid-termReview 103. Not later than November 30, 1996, the project coordinator in the Transport Interministerial Coordination Unit should prepare and hold a mid-term review of the project execution. The review would be organized in collaboration with the Administration, public enterprises, IDA's supervision mission, and representatives of donor agencies involved in the transport sector. The review process would include progress in meeting project's objectives, overall project performance against established and agreed key performance indicators, implementation of study recommendations, and performance of consultants under the Project. The mid-term review would provide the opportunity for IDA to assess the Government's continued commitment to the project's objectives and the reform in the transport sector. During negotiations, the Borrower agreed to the carrying-out of a mid-term review and to its objectives. 32  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Data Operationsand OtherMacro-Economic Schedule 1: CentralGovernment 1985 1989 1990 1991 1992 Indices1985=100 GDP (real) 100.0 96.6 89.6 84.2 79.3 GDY(real)/capita 100.0 61.5 54.9 53.8 45.4 Petroleumexportvalue(CFA) 100.0 32.2 38.6 44.4 34.8 Real EffectiveExchangeRate 100.0 142.9 154.5 151.9 162.9 Termsof Trade 100.0 42.5 40.3 44.4 38.0 In Percentof GDP Gross DomesticInvestment 24.9 16.5 14.7 12.6 10.7 Gross DomesticSavings 35.9 14.7 12.4 12.8 9.9 Government revenues 16.9 14.5 16.1 17.2 OverallBudget Deficit -3.4 -5.0 -8.6 -9.5 -6.9 Total OutstandingDebt .. (includ. .................... 29.0 41.5 46.7 51.9 arrears)......................................................................................................... ....... I................. 60.0 ..................................... .... ... . ..................... In Percentof Exports Debt ServiceDue 22.9 33.8 31.7 19.5 38.0 fiscalyear,e.g., 1985= July 1, 1984-June30, 1985. yearsreferto preceding Calendar 33  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 2: Maritime Transport Regulation and Development in sub-Saharan African Countries' Maritime Transport Regulation 1. The creation of the United Nations Conference on Trade and Development (UNCTAD) in 1964 resulted in the sensitization of developing maritime nations (DMNs) to the impact on their economic development of foreign dominance in their shipping trade. In 1974, DMNs succeeded in persuading the United Nations General Assembly to adopt the United Nations Convention on a Code of Conduct for Liner Conferences which was ratified and entered into force in 1983. 2. The shipping policies adopted by most West and Central African countries are essentially characterized by cargo reservation and flag discrimination. Typically, the policies empowered these nations to ensure that liner conference cargo was shared on a 40-40-20 basis, i.e., 40 percent being transported by national shipping lines, 40 percent by shipping lines of the partner countries, and 20 percent by outsiders. Although the Code of Conduct does not cover bulk and non-conference cargo, most African countries apply the Code to such cargoes as well. Nigeria, for example, reserves 50 percent of both liquid and dry bulk cargo and all non-conference cargo to and from the country for Nigerian shipping lines. Other "flag-discriminationpractices" include the reservation of specific commodities (e.g., cocoa, cotton, bauxite) for national carriers. Other countries have tried to exclude certain flags from their entire shipping trade. 3. Indirect controls were implemented, which were detrimental to foreign shipping lines and subsidized the operation of national carriers until such a time as they would be capable of competing with foreign shipping lines on their own. These controls included currency regulations, insistence on selling on C.I.F (Cost, Insurance, Freight) and buying on F.O.B. (Free on Board) basis, the creation of freight bureaus to enforce the cargo sharing formula, the use of slot-charter arrangements, discriminatory freight taxes, import license controls, and preshipment inspection. 4. Shippers' councils were entrusted with the enforcement of the cargo sharing regulation. They were given conflicting missions: (a) to encourage the development of national shipping lines, one instrument being tariffs' increase; and (b) to protect the interests of shippers by assisting them in their dealings with shipowners and by participating in freight rates negotiations to resist the continuous increase practiced by shipping conferences in the early 1970s. 5. These policies have failed to develop African shipping lines. Most of the companies have gone bankrupt and have disappeared, or sold their traffic rights to the foreign shipping lines, for whose replacement they were created. The profits from such sales range from between 10 to 20 percent of the freight value. The only shipping lines that continue to operate their own vessels or charter vessels are in Nigeria, C6te d'Ivoire, Ghana, Cameroon and Togo. Reasons for failure are Source:Shipping Services In WestandCentral AfricanCountries. An SSA TPWorking Paper. Okechukwu C. Iheduru, datedJune 1, 1994 34 poor productivity, high operating costs, overstaffing, weak management, and interference from the State. Recent Development 6. The structure and organization of the shipping trade in West and Central Africa are changing from near-control by maritime conferences for more than 75 years to their near disappearance, the development of independent shipping lines and the concentration of the industry in maritime consortia. Conferences started to dismantle in 1992 when two major European shipping lines withdrew membership following fines imposed on them by the European Community for allegedly engaging in price-fixing and unfair trading practices. Independent lines developed because they were able to adapt quickly to the changing technology while conference shipping lines had to rationalize their services. Following their withdrawal from conferences, shipping lines embarked in a merging program which is resulting in the creation of three major consortia operating in West and Central Africa. 7. European Union. The maritime legislation in West Africa has been the object of substantial criticism by the European Union (EU). This is because effective implementation of the Liner Code requires bilateral agreements to ensure that the shipping companies of the importing and exporting countries obtain their 40 percent share. The EU considers that such bilateral agreements result into unequal treatment between EU shipping lines. For example, a Belgian conference member would only be able to compete for 20 percent of the traffic between France and C6te d'Ivoire , which is not allowed under the Treaty of Rome. Consequently, in 1986, the EU issued a Regulation calling on Member States to annul their bilateral agreements, which were to be replaced, if at all, by agreements granting shipping lines of all Member States to compete for the 40 percent of traffic to which they each lay claim under the Liner Code of Conduct (so- called 'bommunitarisation" of traffic rights). In addition, in 1991, the EU issued heavy fines against a number of European Lines for having participated in restrictive practices in their West Africa -- Europe trade. As a result, these lines have now left the conference. 8. Sub-Saharan Africa Transport Policy Program. Maritime transport regulation and development were discussed during a Round Table organized in Cotonou (Benin) in 1992. The Round Table was attended by almost all West and Central African countries, donors and the major shipping lines. It recommended that six studies be carried out. These studies are expected to be completed in 1995 under the umbrella of the Trade and Transport component of the Sub- Saharan Africa Transport Policy Program (SSATP), coordinated by a committee of representatives of the main financing agencies, the Economic Commission for Africa (United Nations) and the World Bank: (a) New Maritime Transport Policy: This study aims at establishing a new policy to facilitate structural and technological change in maritime transport in the sub- region, taking into account the statutory obstacles to the establishment of a regional framework enabling economic operators to contribute to the development of transport services in the sub-region as a whole, and improve interstate cooperation. The study will also include an analysis of the restriction on 35  investments in the transport chain, and propose a framework to facilitate investments and joint-ventures at the regional level. (b) Audit of the Ministerial Conference of the West and Central African States on Shipping: This study will evaluate the organization and its objectives, as well as capabilities of the sub-regional agencies responsible for inter-state cooperation in the area of maritime transport and ports in West and Central Africa. (c) Comparison of the Costs of International Chains of Transport: The study will analyze the impact of the costs of the transport chains on the competitiveness of principal export products of the region. (d) Maritime Transport Data Bank/Transport Monitoring System: The objective is to develop such a bank/system at the national and sub-regional levels. (e) Redefinition of the Role of Shippers' Councils: This study will assess the missions of the shippers' councils, with a view to improving their services to users, including an analysis of constraints and options. (f) National Shipping Lines: This study will assess, within a regional framework, national shipping lines, and draft options for their viability. (g) Transport Facilitation Plans: This study will examine the status of transport facilitation and prepare plans of action in coordination with UNCTAD's sub- regional programs. (h) Human Resource Management: This study will define measures and provide training to strengthen human resource management as well as basic education to facilitate adaptation of personnel to the changing maritime environment. 9. Maritime transport in Cote d'Ivoire and Senegal. In the context of recent Bank adjustment operations, Cote d'Ivoire and Senegal have undertaken reforms of their maritime transport legislation to bring it more into line with the UNCTAD Code of Conduct of which they are signatories. In both countries, as of March 1, cargo sharing will be applied only to companies that are members of conferences in accordance with the dispositions of the Code. Hence, outsiders -- that is companies that are not conference members -- will be able to load import and export cargoes without prior authorization of shippers' councils. 10. At the same time, restrictions with respect to bulk transport are also being liberalized. Restrictive legislation has been a problem in Cote d'Ivoire where SITRAM, the state-owned shipping company, has had an exclusivity with regard to certain categories of bulk and refrigerated traffic, notably bananas, pineapples, wheat, etc. This exclusivity has now been reduced to 50 percent, as a first step towards full liberalization. 36  REPUBLIC OF CAMEROON PROJECT TRANSPORT SECTOR TECHNICAL ASSISTANCE Enterprises Schedule 3: Importance of Transport Sector Public in the Overall Public Enterprise Sector Table 1: Revenues and Subsidies (CFAF million) i90-i2 scctwWLIM1990M a ba1c alkr b*skR_ _ bsak &tfd L517 -15,699 346 -16477 7,114 -9, 5K966 -2V 7,471 -1Z805 59), -17,11 Agr iay 915 ,81 5,482 c 5,482 0 10,368 ,9203 10, o lq 1 Wifies 91,77 10,368 42,34 , 4 AO -1465 91,71 -36186 T4q= 104,594 -27,99 54,969 26,971 10Q,214 43,69 -2Q3,s s 38,719 14, 0,621 3845 34,295 -2,1 15,48 -5,6( CMR 33,5M -1Z0 -- -L o -715 17,78 -1,62 -1,6 1654 -1, L CGAP 20,044 -715 1,210 -25 -25 CWsAM P 99J 8 19 _ 1,612 o -3112 CNC 1618 -351 0 -351 -3 103 1536 62 (_ 62 (Nc 622 -202 o -2m l,Z 10 o 1L,01 -3,17 2L171 -4,343 246 -1,881 24,367 -9,56 2897 4659 ,649 -14137 PRBFBCM 246 Z4,63 4,399 __ -3,6 300 -3,9A 3,80 4,693 o3 9311C 3,817 -4,49 364 364 12,34 89 _ GNC 12,85 2,932 o 2,932 ,z4 - 18 492 -26 43' 171 LAaI E 2,304 -1,855 951 - 2,555 -55 -1,691 ° -1,&1 26S -1,73 -L793 |MIkENE 4,434 -1,740 O -L, 4234 18,653 0 18,653 6 13,CQ C 13,C RIPi0x 105,293 17,566 0 17,566 93,733 85,153 67,119 3,92 -1 9' -103 cam 12,755 -23,a4 0 -6234 107,= -18,C3 113,532 3,27 333, -343 49,551 L12 15, ITct 37Z6&5 496 6,410 18, 45ZX -49,99 of publicenterprisesand public cnterprises statements. fumancial Source:Committeefor the restructuring Table 2: Public Enterprises' Domestic Debt Total PE Debt Transport PE Debt Creditor 109.5 38.2 Governnent (general) 6.6 Govermnent (onlent loans) 118.3 27.3 2.8 Other PEs 18.3 Private suppliers 19.6 79.0 31.4 Social Security System State Debt Recovery Agency 75.3 62.4 24.4 Banks 9.6 Insurance 501.0 121.7 Total 37  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 4: CAMAIR - A Company Profile The Company I. Cameroon Airlines (CAMAIR) is a corporation (Socitet Anonyme). Its main stockholder is the Cameroon Government (75%). The remainder being owned by Air France. It has a capital of CFAF 5.250 million (US$9.5 million), although its negative net worth is around CFAF 11,000 million (US$20 million). In 1993, it was operating four aircraft (one 747-200 Combi, and three 737-200), with a staff of about 1,600 employees. It carried about 350,000 passengers, half of them on its domestic network, and generated a turnover of about CFAF 32,542 million (US$59 million). Current Situation 2. Since its inception in 1971, when Cameroon left Air Afrique, CAMAIR has continuously generated losses. Inadequate structure, along with a very thin market have been the major reasons (inadequate fleet, insufficient capital, overstaffing of up to 2,150 employees, etc.), but significant management errors and Government interference have also heavily contributed to its poor performance. A few actions have been taken but have remained insufficient to remedy the situation. The attempted restructuring of the airline in 1990 through a Performance Contract under the SAL had very limited success. In fact, in depth structural actions have not been taken while the airline still faces Government interference within its day-to-day operations. As a consequence, the airline permanently shows annual losses of about 20% of its tumover, while it is still over-staffed by 50%, and while its situation may even further deteriorate after the CFAF devaluation. Furthermore, the airline will soon have to replace its aging fleet (principally, its two 737s which are 22 years-old, the other 737 having been acquired in 1985, and the 747 in 1981). 38  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 4: CAMAIR - A Company Profile Table 1: Key Financial Data Exchange Rate: US$1 = CFAF550 (post-devaluation rate) RESULTS 1991/92 1992/93 1991/92 1992/93 (in million CFAF) (in million USS) 1. Revenues 29784 32452 54.2 59.0 of which: Passengers (million FCFA) 26 670 25 456 48.5 46.3 Long-haul 16 863 15 517 30.7 28.2 Africa 5 903 6 203 10.7 11.3 Local 3 904 3 736 7.1 6.8 2. Net Result -15 878 -6 310 (28.9) (11.5) 3. Subsidies 30 607 256 55.6 0.5 4. Net profit after subsidies 14 729 -6 054 26.8 (11.0) BALANCESHEET 1991/92 1992/93 1991/92 1992/93 (in million CFAF) (in million USS) ASSETS Fixed Assets 14 759 11 627 26.8 21.1 of whichaircraft 10348 7421 18.8 13.5 Current Assets 12 842 16 026 23.3 29.1 of which administrative debt 10 348 7 421 18.8 13.5 TotalAssets 27 601 27 653 50.2 50.3 LIABILITIES Short-term Liabilities 24 972 33 078 45.4 60.1 Long-term Debt 6 003 5 553 10.9 10.1 Total Liabilitics 30 975 38 631 56.3 70.2 Capital Stock 5 250 5 250 9.5 9.5 Rescrves & Provisions 6 854 5 315 12.5 9.7 Retained Earnings (30 207) (15 478) (54.9) (28.1) Net Profit (or loss) 14 729 (6 065) 26.8 (1 1.0) Total Net Worth (3 374) (10 978) (6.1) (20.0) 39  REPUBLICOF CAMEROON PROJECT FOR THE PREPARATION OF TRANSPORT SECTOR REFORM Schedule4: CAMAIRMain Termsof the OperatingContract Composition of the ManagingBoard 1. To be composedexclusively of companyexecutives nominatedby the Operator. Autonomyof the Managing Board 2. ManagingBoard to have full autonomyto take all decisionsto managethe companyin accordance with the policyand objectivesapprovedby the SupervisoryBoard. In particular,ManagingBoardto havethe right,in conformitywith the corporatelaw, to: (a) Dismisspersonnel; (b) Take disciplinarymeasuresand exercise all recourse of the law, includingcourt action, to sanctionacts of fraud or professional misconduct; (c) Closeflightroutes; (d) Groundairplanes. 3. Governmentto undertaketo abide strictly by the terms of the law and the companystatutes in its relationshipwith the enterprise,and to abstain from interfering,either through the SupervisoryBoard, or directlythroughmembersof the personnel,in the management or operationsof the airline. Objectivesof the OperatingContract 4. Create the conditionsto privatizethe company,possibly at the end of Year-2 of the Management Contract,or, if sucha privatizationis not possible,preparea liquidation. Presenta detailedaction plan at the end of Year I to either privatize or liquidate. Implementthe plan in order to complete privatizationor liquidation by the end of Year 2. 5. Achievethe performance criteria to be set in termsof financialresults (includingcash flow and gross marginon sales)and productivity(suchas ratio of numberof passenger-miles to numberof personnel). Remuneration of the OperatingCompany 6. To consistof a fixedpart and a variablepart which willbe basedon the achievement of the operating objectives. 40  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 5: REGIFERCAM - A Company Profile The Company 1. Institutional and Economic Framework. REGIFERCAM is a public corporation functioning under special Government regulations last modified in 1991. Rail infrastructure is owned by the State, but REGIFERCAM is responsible for maintenance and renewal. Regulations specify that REGIFERCAM operates on a commercial basis, in active competition with other modes of transport, and freely determines configuration and tariffs. Deficits caused by passenger rail services operated under a Public Service Obligation (PSO) are compensated by Government. Goods transportation accounts for 70% of REGIFERCAMs revenue, where rail transportation maintains a competitive advantage over road transportation for petroleum products, containers, cereals, and part of the traffic of land-locked Chad. Passenger rail service is not competitive with road transport, which uses more economical, high capacity intercity buses. 2. Rail Facilities and Equipment. Two railway lines exist, of which a single-track line of 913 km from Douala to Ngaounder&,which is active for both passenger and freight traffic, and a line of 160 km from Douala to Nkongsamba, which is marginal. Rolling stock is adequate, although there is a backlog of maintenance. The track is generally in good condition, but the telecommunications system is inadequate and needs updating. 3. Management. The technical and operation management of REGIFERCAM is quite satisfactory; financial management is weak. REGIFERCAM has signed a Performance Contract wvith the Government for the FY89-FY93 period. Traffic forecasts on which the contract was based did not materialize, mainly due to the depressed macroeconomic situation. Financial objectives of the contract were not reached. A staff rationalization program was includcd in the contract, and has been fully implemented. Total staff was reduced from 6350 in 1989, to 3800 at present, but the ratio of staff costs to revenue (44%) is still too high, and the staff should be brought down to about 3000, about 35% of revenue. Recommended Action 4. Restructuring. The current Performance Contract of REGIFERCAM has not resulted in the expected efficiently gains, as costs have not been controlled adequately allowing the wage bill to remain high while revenue declined. REGIFERCAM should therefore be restructured along the following lines: rail transport services would be managed and operated by a private operator, through a concession agreement. The concession agreement would allow the private operator full freedom to determine service configuration and tariffs, lower operating costs, maintain equipment and infrastructure and use its own procurement methods. REGIFERCAM would be transformed in a holding company and own all infrastructure, part of the rolling stock, which would be leased to the operating company at market rates. REGIFERCAM would charge a flat fee to the private operator for the right to operate the transport services. REGIFERCAM would continue to service existing debts and arrears, and proceed with staff reductions with the exception of those retained by the private operator. 41  Table 1: REGIFERCAM (USS million) as of June 30, 1993 (unaudited) and 1992 1993 1992 Source of Funds (22.9) (22.4) Capital and Reserves 62.3 65.6 Fixed asset Revaluation 134.7 138.9 Total net worth 174.1 182.1 Long-term debts - Donors 43.6 39.5 - Banks 18.6 18.4 Total long-term debt 62.2 57.9 Arrears on long-term debts - Donors 5.6 5.6 - Banks 8.5 10.3 Other (Social security, etc.) 11.8 13.6 Total arrears 25.9 29.5 Total Net Worth and Liabilities 262.1 269.4 Application of Funds Infrastructure and Superstructure 260.5 267.0 Other 2.3 2.8 Total Assets 262.8 269.8 Working Capital (0.7) (0.4) 5. REGIFERCAM's capital is seriously depleted, and the company relies entirely for its long term financing on borrowings, subsidies, arrears on long-term debt, banks and creditors. Working capital is in chronic deficit, and the situation is deteriorating. Currently, REGIFERCAM does not have access to new sources of capital, whether public or private. Table 2: Income Statement - June 1993 (unaudited) and 1992 Revenue 34.1 39.2 Salaries 15.2 17.7 Finance charges 3.7 3.9 Other 11.0 12.8 Total operating costs 29.9 34.4 Cash flow from operations 4.3 4.8 Depreciation 14.5 15.8 Nct loss on operations (10.2) (11.0) 6. REGIFERCAM's cash-flow for 1993 was barely sufficient to cover operational costs, but did not cover depreciation and debt servicing. In spite of an adequate regulatory frarnework, revenue has been dcclining because of competition from the road sector and the downturn of the economy in Cameroon. Production costs are high due to the high wage bill (44% of revenue), and debt servicing (1 I% of revenue). 42  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 6: SOTUC - A Company Profile The Company 1. SOTUC is a mixed ownership (Societe d'Economie Mixte) company: 55% is owned by the government, with Renault Whicules Industriels (RVI), a wholly owned subsidiary of Renault of France, (21% of the shares), and the two cities of Yaounde and Douala (12% each) being the other shareholders. The company employs 1,050 people and operates a total fleet of 190 buses in Yaounde and Douala. Current Situation 2. The company isfinancially bankrupt. 1992/93, the company made a loss of CFAF 3,962 million (US$7.2 million at post-devaluation exchange rates) on revenues of CFAF 2,296 million. At the end of FY1992/93, its negative net worth was CFAF 30,904 million (US$55.8 million) against a balance sheet total of CFAF 6,774 million. CFAF 22,363 million (US$40.7 million) of debt are in arrears, including debt to the local commercial banks and payments to CNPS, the state pension fund, which has sued the company for recovery of its claims. The personnel has not been paid since January 1993. The company has operated without any liability insurance since 1988, being unable to pay insurance premiums. 3. Its role as provider of a public service has eroded in the face of increasing competition from private taxis. The number of passengers transported has declined from 152,000 in 1986, to 44,000 in 1991. The market share of the company is now estimated at less than 5%, as 35 to 40% of the urban population walk to work. 4. Since 1989, successive restructuring plans have failed. Various measures were taken as part of those plans, including personnel reduction, tariff reforms, acquisition of new equipment, signing of performance contracts, restructuring of the debt, involvement of a technical consultant in the management. In spite of all these measures, the company has continued to generate substantial losses and to be increasingly short of cash. 5. The company has no cash to pay for the maintenance of its equipment. It is estimated that it performs only 10% of what would be required for normal maintenance. Buses that break down can not be repaired and are "cannibalized" to supply spare parts to the buses which still run. At the current rate of depletion of the bus fleet, it is estimated that the company will have to cease operations in 3 years for lack of equipment. Recommended Action 6. The immediate liquidation of the enterprise is the only viable solution. An outright privatization of the company is unrealistic as most bus routes cannot be run profitably with the type of equipment now being used. On the basis of a thorough analysis of the situation and market by Bank consultants, it is to private operatorsfor the most profitablebus routes, sell some of the to grant concessions recommended buses to them through competitive bidding, and sell the remaining buses through intemational bidding to potential private or public buyers in the region. The concession for other bus routes for which the buses are not suitableshouldbe grantedto privateoperatorswho willthen use minibuses. A traffic plan study to confirmurban transportdemandwillalso be carriedout. 43  Table 1: SOTUC - Key Financial Data 1993 Millions of currency unit CFAF US$ SOURCE OF FUNDS Capital and Reserves Capital 3,100 5.6 Accumulated losses (34,004) (61.8) Total Net Worth (30,904) (56.2) Provision for Future Losses 578 1.1 Long-Term Debt Donors 11,296 20.5 Long-Terrn Debt in Arrears 5,827 10.6 Total Long-TermnDebt 17,123 31.1 Short-Term Liabilities Bank Overdraft 4,040 7.3 CNPS 3,480 6.3 Personnel 879 1.6 Tax Arrears 4,445 8.1 Suppliers Moratorium 3,475 6.3 Other Suppliers 1,599 2.9 Other Current Liabilities 2,059 3.7 Total Short-Term Liabilities 19,977 36.3 Total Liabilities and Net Worth 6,774 12.3 APPLICATION OF FUNDS Buses 3,244 5.9 Accounts Receivable 1,991 3.6 Unpaid Capital 1,271 2.3 Other Assets 268 0.5 Total Assets 6,774 12.3 INCOME STATEMENT Revenues 2,296 4.2 Operating Expenses Personnel 1,825 3.3 Finance Charges 1,444 2.6 Other Costs 833 1.5 Total Operating Expenses 4,102 7.5 Cash-Flow from Operations Allowance for Depreciation 2,163 3.9 Reintegration of Provisions (7) 0.0 Net Loss (3,962) (7.2) 44  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 7: CAMSHIP - A Company Profile Table 1: FY92 Balance Sheet (CFAF '000) Assets Liabilities Fixed Assets 11,340 Total Equities 1,778 - Vessels 7,750 - Equity 6,136 Current Assets 11,267 - Accrued Results (4,494) Non-current Liabilities 14,765 - Long-term debt 6,885 - Arrears 6,233 Current Liabilities 6,064 Total Assets 22,607 Total Liabilities 22,607 45  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 8: CAMTAINER - A Company Profile FY94 Income Statement (CFAF million) Revenues Transportation 435 Transit 617 Other 227 Total 1,279 Expenses Materials and supplies consumed 347 Transport consumed 13 Other services consumed 336 Other charges 832 Payroll expenses 265 Taxes 28 Interest 110 Depreciation 179 Provisions 242 Total 2,352 Profit/Loss before tax (1,073) Tax 11 Net Profit/loss (1,084) 46  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 9: ONPC. A Company Profile Table 1: 1992-1993 Balance Sheet (CFAF million) Assets Liabilities CurrentAssets 6,643 CurrentLiabilities 12,148 Non-currentAssets 64,547 Non-currentLiabilities 19,832 - Long-term Debt 13,727 Total Equities 39,210 - Equipment Subsidy 19,657 Total Assets 71,190 Total Liabilities 71,190 Table 2: Income Statement (CFAF million) 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 Revenuesfromportactivities 11664 11831 12811 12731 12089 13,063 16,728 Other revenues 65 93 47 233 251 86 378 Total revenues 11 729 11 924 12 858 12 964 12340 13,149 17,106 Goods and materials 1295 1180 1 326 1 397 1 364 1,352 1,986 Transport services 139 112 116 134 103 182 339 Other services 696 402 495 546 451 822 1,155 Salaries 4 566 4 147 4 147 3 912 3 883 4,350 4,077 Taxes 45 115 115 54 55 24 21 Other expenditures 168 240 240 349 393 771 442 Operating loss/profit 4 820 6 419 6 419 6 572 6 091 5,648 9,148 Interest income + 5 + 3 + 3 + 26 + 24 165 71 Interest expenses -1 875 -1 410 -1 410 -1 510 -1 661 -987 -1,603 Non-operating loss/profit + 1 697 + 2 885 + 2 885 + 185 + 422 +330 -509 Increase in value of cession - 37 1 1 2 _3 5 -8 Cash-flow 4 611 7 898 7 898 5 280 4 873 5,161 7,069 Depreciation 3 626 3 843 3 843 4 189 4 329 4,187 5,874 Provisions 132 1 123 1 123 726 455 281 372 Net Proit/loss + 853 - 73 + 2 932 364 89 693 823 OperatingProfitAoss - 778 +336 +130 +181 -211 358 1,332 Non-operating Profit/loss + 1 668 - 505 +2 801 + 181 + 303 330 -506 Profit/loss on cession of assets +37 + 96 + 1 +2 -3 5 -3 47 I1. Depreciation accounts for 32 per cent of revenues. In 1993, salaries accounted for 33 per cent of revenues and had increased for the first time since 87/88. In 1994, salaries had decreased by 6 percent and accounted for 24 percent of revenues. 2. The financial ratios are analyzed hereafter: (a) Solvency and financial autonomy are sound. The long-term debt to equity ratio is correct in comparison of a maximum acceptable ratio of 0.5. The current ratio allows for contracting additional long-term debt. (b) The return on equity is very low, but this is not an important factor for a port. The cash-flow seems sufficient. (c) The operating profit ranges between 43 and 54 percent of revenues, which is enough because of the significantpercentage required for depreciation of assets. (d) The interest coverage ratio ranges between 3 and 3.5 and should increase. Table 3: Net Profit/Loss per Port (CFAF million) 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 ONPC + 853 - 73 + 2 932 + 364 + 89 + 693 Douala + 1 002 - 23 + 2 196 + 411 + 43 + 602 Garoua -62 -56 +87 -51 -30 -40 Kribi +25 +22 +230 -24 + 17 +79 Limbe/Tiko - 112 - 16 +419 + 28 + 59 + 52 48  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 10: CNIC - A Company Profile 1. The dockyard uses one 10,000-ton and two smaller (500 tons and 1,000 tons) dry-yards. The 10,000-ton dry-yard was purchased in 1988. The other two are much older. The 10,000 ton dry-yard is located along berth nb. 14 in the Douala port container terminal, at 3.7 km from the workshop. CNIC is owned 30 percent by foreign private investors and 70 percent by Cameroonian public enterprises: (a) ONPC, the national port authority: 20%; (b) SNI, the State holding company: 15%; (c) SNH, the national petroleum company: 10%; (d) CNCC, the shippers' council: 10%; and (e) CAMSHIP,the nationalshippingline: 10%. 2. Before devaluation, the return on the dockyard activity was estimated at about 15 percent, which is insufficient in view of the assets placed at its disposal almost free of charge. These assets include the US$11 milliondry-yard, the workshop and the use of a berth in the port of Douala for about US$50,000 per year). CNIC is seeking Government's financing for the relocation of the dock, including the construction of a new berth and dredging, and for the rehabilitation of the workshop. The cost of these investments is estimated at above US$10 million. The return after investment would drop to 10 percent. After devaluation, CNIC became more competitive and its revenues increased. Thus, the return of the activity is expected to be higher than the above estimates. CNIC competes with Abidjan, C6te d'Ivoire, and Capetown, South Africa, both at about 3,000 km from Douala. The market consists of petroleum offshore companies and local or regional shipowners. 49  Table 1: 1992-1993 Balance Sheet (CFAF '000) Assets Liabilities Current assets 805 Current liabilities 582 Accounts receivable 689 Total equities 534 Non-current assets 311 Accrued results -369 Fixed assets 288 Equity 800 Other assets 23 Others 105 Total assets 1,1161 1,116 Table 2:1992-1993 Income Statement (CFAF '000) Revenues 1149 Sales 1,103 Other revenues 46 Operatin2 Expenses 1,058 Salaries 361 . Materials and supplies consumed 410 . Services consumed 270 Taxes 7 Operatin2 income 150 . Other expenses 31 . Interest expenses 11 . Depreciation and provisions 108 Net Operatin2 Income -59 Net non-overatinE Income -34 Net income before tax -63 50  Table 3: Financial Forecast without Investment Assumptions 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Local Inflation (%) 12,50 17,70 11,70 6,25 5,75 5,25 4,75 4,25 '4,00 4,00 ForeignInflation (%) 3 3 3 3 3 3 3 3 3 3 Devaluation(%) 100 Grovth of activity (%/o) 3 3 3 3 3 3 3 3 3 3 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Overhaul PBC 57 136 20 23 28 32 35 39 42 45 48 52 56 Overhaul PBE 130 270 208 331 468 497 527 559 593 629 668 708 751 Overhaul GBC 23 955 216 250 303 349 382 416 451 487 523 560 600 Overhaul OBE 641 71 526 837 1.184 1.256 1.333 1.414 1.500 1.591 1.688 1.791 1.900 Works for the local industry 23 39 17 20 24 27 30 33 36 38 41 44 47 Transit and agency 107 34 50 58 70 81 88 96 104 113 121 130 139 Others 113 30 50 58 70 81 88 96 104 113 121 130 139 Total revenues 1.094 1.535 1.087 1.577 2.148 2.323 2.484 2.653 2.830 3.016 3.210 3.414 3.631 Salaries 329 296 382 350 424 488 534 582 631 681 731 783 839 Materials and supplies 302 526 382 567 779 839 895 954 1.016 1.082 1.151 1.223 1.300 Transport consumed 17 21 16 19 22 26 28 31 33 36 39 41 44 Other services consumed 341 331 262 319 399 452 491 533 575 619 663 709 758 Taxes 7 17 8 9 11 13 14 15 17 18 19 21 22 Others 51 64 50 35 42 48 53 58 63 68 73 78 0 Total operating expenses 1.005 1.215 1.060 1.299 1.678 1.866 2.016 2.173 2.335 2.503 2.675 2.855 3.047 Operatingincome 89 320 27 278 470 458 468 480 495 513 535 559 585 Interest expenses 0 0 0 0 0 0 0 0 0 0 0 0 Operating incomc afler interest 89 320 27 278 470 458 468 480 495 513 535 559 585 Depreciation 79 63 57 72 81 50 106 61 82 70 82 87 100 Provisions 0 196 50 50 50 50 50 50 50 50 50 50 50 Net operating income 10 61 -80 156 339 358 312 369 363 393 403 422 435 Net non-operating income 94 0 _ _ Ne income before tax 104 61 -80 156 339 358 312 369 363 393 403 422 435 PBC:small Cameroonian vessels; GBC:large Cameroonian vessels; PBE:small foreign vessels; GBE:large foreign vessels. 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Stocks (nb. ofmonths) 1,7 2 2 2 2 2 2 2 2 2 2 2 Clients(numberofdays) 135 135 100 75 45 45 45 45 45 45 45 45 Suppliers (nb.ofmonths) 4,5 4,5 3 2 2 2 2 2 2 2 2 2 Stocks (CFAF million) 74 64 94 130 140 149 159 169 180 192 204 217 Accounts receivable (CFAF million) 567 402 432 441 286 306 327 349 372 396 421 448 Accounts payable (CFAFmillion) 1330 1329 1 165 1 151 ! 200 ! 219 236 253 271 1 289 1 309 329 Short-temfmnancingneeds 311 |136 | 362 | 420 226 1 236 250 265 281 1 298 1 316 335 Annual Variation | |_ -175 225 59 |194 10 14 15 16 17 18 19 Discountratio for liquidation 20% Internalrate of retum (IRR) 14,63% |Devaluation ratio 100% _ 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Operating income 320 27 278 470 458 468 480 495 513 535 559 585 Lease due to ONPC 25 25 50 50 50 50 50 50 50 50 50 50 Investment 23 110 100 200 200 200 200 200 200 200 200 200 Variationofshort-termfinancingneeds -175 225 59 -194 10 14 1 5 16 17 18 19 Residual value 3.624 Cash-Flow(CF) 322 117 3 261 502 308 316 330 347 368 391 - Annual CFdiscountedat20% 3 181 291 149 127 IIl 97 86 76 3.940 Actual CF discounted at 20% 1.755 636 Annual CF discounted atTRR 3 199 333 178 160 145 133 123 115 Actual CF discounted at IRR 2.396 I I I I I I 1 1.006 Table prepared before the January 1994 devaluation on the basis of the preliminary 92-93 financial statements. 51  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 11: MATGENIE - A Company Profile Table 1: 1992-1993 Balance Sheet (CFAF '000) Assets Liabilities Current assets 8,383 Current liabilities 5,618 Inventories and other current assets 1,341 Non-current 5,941 Accounts receivable 7,042 liabilities 281 Non-current assets 3,457 Total equities 930 Technical Assistance 972 Equipment subsidy -9,261 Fixed Assets 2,418 Accrued results 3,313 Other Assets 67 Equity 5,299 __Others Total assets 11,840 __11,840 Table 2: 1992-1993 Income Statement (CFAF '000) Revenues 1,631 Leasing of equipment 1,316 Sale of spare parts 267 Other revenues 39 Equipment subsidy 9 ODeratin; Expenditures 2,306 Salaries 1,993 Materials and supplies consumed 30 Transport consumed 7 Other services consumed 109 Sale of stocks 162 Taxes 5 Operating income -675 . Other expenses 1,098 Interest expenses 362 . Depreciation 736 . Provisions 564 Net Overatine Income -2,336 Net non-overatin! income 1.232 Net income before tax -1,104 52  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 12: LABOGENIE - A Company Profile Table 1: 1992-1993 Balance Sheet (CFAF '000) Assets Liabilities Current assets 4,892 Current liabilities 7,291 Accounts receivable 4,847 Non-current liabilities 0 Non-current assets 1,963 Total equities -436 Fixed Assets 198 Equipment subsidy 1,935 Other Assets 1,765 Accrued results -3,223 Equity 59 Others 793 Total assets 6,855 6,855 Table 2:1992-1993 Income Statement (CFAF '000) Revenues 719 Net sales 755 Other revenues -31 Operating subsidy 5 OveratinE Expenditures 1,332 Salaries 1,133 Materials and supplies consumed 98 Transport consumed 7 Other services consumed 80 Taxes 14 Operatin2 income -613 other expenses O 336 Interest expenses 314 . Depreciation and provisions 190 Net oDerating income -1,453 Net non-operating income 975 Net income before tax -483 53  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 13: Road Maintenance Budget and Performance A. Road Maintenance Budget 89/90 Actual 90/91 Actual 91/92 Actual 92/93 Actual 93/94 Actual expend expend, expend. __cpn__ expend. expend. Operating Budget Salaries 10,020 100% 8,546 121% 8,314 117% 8,984 98% 8,439 N/A. Maintenance expenditures 5,757 100% 6,052 100% 7,492 100% 7,500 98% 10,800 N/A. . Other expenditures Sub-total 16,646 99% 15,246 112% 16,362 108% 16,876 98% 19,839 N/A. Investment Budget 4,404 96% 9,620 77% 8,343 44% 4,915 73% 4,910 N/A. Total 21,050 99% 24,866 98% 24,705 87% 21,791 92% 24,749 N/A. The percentage of actual expenditures is not yet available for the 93/94 fiscal year. B. Earth Road Maintenance Performance Regraveling (kmn) Grading (kmn) 1982/83 430 12,549 1983/84 617 28,429 1984/85 746 28,160 1985/86 696 25,596 1986/87 444 26,549 1987/88 1,392 15,819 1988/89 1,933 17,369 1989/90 788 20,400 1990/91 784 12,902 1991/92 1992/93 75 4,483 54  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 14: Strategy, Timetable and Key Financial Data for the Privatization of Air Services I. STRATEGY 1. The Government of Cameroon (GOC) is planning to restructure and privatize the national flag carrier (CAMAIR), in order to achieve the following objectives: (a) make domestic and international air transport service more efficient; (b) reduce government involvement; and (c) promote private sector participation in the aviation industry. Given the present difficulties of Camair's financial situation, together with the need for the continuation of the provision of air transport services by a national flag carrier, the GOC is considering a two-fold strategy: (i) the legal and financial restructuring of CAMAIR, and (ii) the privatization of a restructured CAMAIR. For the privatization strategy, the GOC will explore the use of innovative mechanisms for attracting foreign investors, such as the capitalization of the company, the use of a management contract (MC) with deferred privatization options (DPO), or any other mechanism that could attain the desired objectives. A. Background 4. Cameroon Airlines (CAMAIR) is a corporation under the Cameroonian civil legislation (Societe Anonyme) created by Law No. 71/LF/4 on June 4, 1971. The airline has currently the following ownership structure: (i) The GOC holds 75 %, and (ii) Air France holds the remaining shares'. The airline operates five aircrafts: (a) one B-747-200 combi (1981), (b) two B-737-200 (1972), (c) one B-737-200 (1985), and (d) one Dash - 8 (1986). Following is the distribution and structure of its traffic markets during the period 1993/94 (June 30 to July 01): Table 1: CAMAIR Trafric Markets (Passengers) 1993/94 (estimates) Traffic Markets No. passengers % of total loadfacdor Long Haul (Douala- Paris) 59,720 20.60% 51.00 % Regional(Afnca West,Central and East - 98,871 34.10% 70.00 % inc. Johannesburg) Domestic(Douala,Yaounde, 131,268 45.30 % 32.00% Ngaounderd, Maroua, Garoua) Total 289,859 100.00% 49.00 % Source:CAMAIR- Commercial Director(July 1994) 5. Since its origin in 1971, when Cameroon left Air Afrique (joint venture airline between several African countries), the company has suffered from an inadequate structure (i.e., inadequate fleet and route structure, insufficient working capital, overstaffing, etc.) that has contributed to a poor financial performance. Government interference, admninistrativemalpractices and management errors have added difficulties to successful achievements in the airline operations. Estimated debt and arrears as of June 30, 1994, were CFA 42,100 nillions (equivaleiit to approx. US$77.0 million). Of this total, approximately 70 to 75 % is related to government agencies 2 (CNPS - social security and pensions, ASECNA C - airport and air navigation I Source:Ernst & Young - FiscalAud,tApril 30. 1994 2Or hasbeenassumed by theGOC,from private creditors,underthe PerformanceContractAgreement(08/24/90) 55 authority, tax authorities, etc.). The market value of the aviation related assets3 was estimated at approximately US$50 million in 1993. The labor force consists of 1612 employees (down from 2105 in 1992), and it is estimated that with a total of 900 employees, the airline could be run as efficiently at present. Under present circumstances (status quo scenanro - no change), operating and financial losses of the airline are estimated to be between US$8.0 and 10.0 million per year. Table 2: Strengths and weaknesses of CAMAIR Strengths Weaknesses 1. Aviation related assets are fully paid. 1. Total debt and arrears are approx. US$77 million 2. Exclusive traffic rights to 38 countries. Only 15 2. Non attractive domestic market (airfares are been used at present. regulated and there is a need to service social routes - Northbound markets) 3. Relatively low cost labor force. Government 3. Overstaffing and high termination benefits willingness to help in the reduction of employees agreement under the 1990 performance contract. (1612 to 900). 4. High costs maintenance overhaul (D checks) 4. Lack of adequate Management Information have being made to the aircrafls. Next D checks Systems (i.e., accounting, inventory, yield are planned for 1999. management, treasury, etc.) 5. Attractive Regional markets (Africa) with 5. Past experience of administrative malpractices relatively weak competition. (ticket collection, free fares, etc.) 6. Possibility of developing a B-737 regional 6. Low utilization rate (operations hours/block maintenance center (provide services to other hours) of the B-747-200. airlines) _ 7. Aircraft well-maintained under ATLAS, Air 7. Poor passenger terminal facilities at Douala France standards (main commercial market in Cameroon). 8. GOC decision to solve Camair's government 8. Cameroon traffic market has not yet recovered related debt and implement restructuring from last CFA devaluation (January 1994) mechanisms that eliminates interference with day to day operations. B. The Proposed concept for the Restructuring and Privatization of CAMAIR 6.2. Conceptualframework of the restructuring/privatization proposal. Basic premise (hypothesis): Given Camair's present condition (i.e., negative net worth, lack of information systems, lack of availability to audited financial statements and relevant accounts, overstaffing, etc.), and the situation of the African airline market (i.e., region with the slowest growth potential in the ICAO/IATA forecasts), the GOC considers it unrealistic to expect the privatization of CAMAIR as it is, through a public bidding process. Therefore, a restructuring 4. process will be initially used before successful implementation of the privatization strategy Principles: Separate the issue of the settlement of past debt and arrears from the air transport operations (continuity of domestic and international services). Improve airline operations management and increase the productivity ratios of the company (ASK 5 per employee, RPK6 per employee, yicld, etc.). Reduce the operating losses, trim the labor force, 3 arefully owned (and depreciated)by CAMAIR. There are no debt or lease related obligations with Aircraft and other aviation-related equipment the aircraft. 4However, privatizing CAMAIRas it is (withoutrestructuring)will be a preferred option, ifpossible. 5ASK(averageseatkilometer) 56  open new routes in the regional markets, abandon unprofitable routes, and start generating profits in a given period (e.g., 24 months). Privatize through an international bidding process, a controlling block of shares of a restructured CAMAIR (legal and financially). Preferably, the controlling interest should be sold to a consortium representing private Cameroonian interests and a major regional and/or international carrier. 6.3 Proposed Strategy for the restructuring and privatization of CAMAIR. Complete the legal and financial restructuring of CAMAIR. Privatize the management and ownership of the restructured airline through the use of the following options (one of them or a combination of both): (a) immediate capitalization of the airline by a group of private investors with full management control of the company (management and immediate ownership); or (b) use of a management contract, with deferred privatization options as a mechanism to improve the airline's performance and generate private sector involvement(management and subsequently ownership). Phase 1: 6.4 Legal andfinancial restructuring of CAMAIR. (a) Creation of a new commercial company (e.g., CAMAIR 11)to provide air transport services to Cameroon under an operational agreement (i.e., concession or license on traffic rights, lease of office space and maintenance facilities, etc.) with CAMAIR (and/or the GOC). CAMAIR 1I will be initially incorporated with a relatively low paid-in capital (step 1), as a new company under the ownership of Ministry of Finance. Aviation related assets and traffic rights will be transferred to CAMAIR 11in order to continue the provision of air transport services to Cameroon. The transfer of aircraft-related assets wvill be done through a capital increase (i.e., capitalization of CAMAIR 11,step 2) in order to provide the new company with the necessary equity base to develop operations and access working capital finance. (b) Isolation of CAMAIR from the operational aspects of air transport services (i.e. liquidation process). A senior officer', with relevant experience (i.e., the liquidator of CAMAIR), will receive a mandate from Camnair's general assembly to negotiate, restructure, transfer or cancel existing debt and arrears. The mandate will also include the termination of redundant staff, and the divestiture of unprofitable assets. It will be executed in a given period of time (e.g., one to two years). During the restructuring period of CAMAIR (i.e., from one month to 24 months), the GOC, together with an advisory team (i.e., legal advisors and financial advisors) will prepare the privatization of the airline operations according to the following steps: (a) Transfer the aviation related assets and traffic rights to CAMAIR If and proceed with the dissolution of CAMAIR. Appropriate legal mechanisms will have to be implemented for the transfer of traffic rights, in order to minimize the consultation process with each signing country in Cameroon's bilaterals. (b) Terminate Camair's employees. Approximately 900 employees will be rehired by CAMAIR 11 (for these employees an employec stock ownership program - ESOP - will be developed based on the use of their termination benefits). The remaining 700 employees will be laid off and their termination benefits paid. The GOC intends to apply a labor restructuring process similar to the one used for the liquidation of the Airport Authority of Cameroon and the creation of a new corporation, AMroportsdu Cameroun. 6RPK (revenue passengerkilometer) Thisperson should bea relatively high ranking officerfrom the airline, the GOC or from theprivate sector, who could act and negotiateas the liquidator. 57  Table 3: Proforma Initial Balance Sheet - CAMAIR II Assets (USS millions) Liabilities (US S milions) Aircraft 47.0 IATA (airlinescompensation) 8.0 Ground HandlingEquipment 1.0 Tickets sold (not flown) 10.8 Spareparts 1.0 Debt Other Commercial 11.2 Trade Mark 1.0 Total Liabilities 30.0 Total Assets 50.0 Net Equity 20.0 purposes) (only/orillustrazions Source:Mach2000assetvaluation / CAMAIR (non statements June30,1994financial audited) (c) Establish the "fair value" of CAMAIR 11 in order to determine the price of the shares to be privatized. Equity participation to be sold to a private consortium formed by Cameroonian private investors and the strategic partner (major regional and/or intemational carrier - management contractor). Given the need of CAMAIR 11 to maintain Cameroonian nationality (5 1%), and the reduction of public sector participation, a group representing private Cameroonian interest would be needed to implementthe strategy. Table 4: CAMAIR II ownership structure under the proposed concept (after the restructuring period) Investors Group ProposedParticipation Ministryof Transport 20 - 25 % CameroonianPrivateInvestors 20 - 25 % StrategicPartner (i.e.,air carrier) 40 - 50 % ESOP 0 - 10% Total 100% 60- 75 °/) partner(approx. + Strategic Investors private =Cameroonian Consortium Phase II: 6.5 Option (a): Privatization of CAMAIR II through a capitalization strategv. Subscription of a capital increase in the equity of CAMAIR II by a group of strategic investors (i.e. the consortium). Using the illustration figures from Table 3, if the strategic group were to subscribe 50 % of CAMAIR II equity, the required amount would be US$20.0 million. This option has the following advantages: (i) it generates private sector participation immediately after the restructuring phase, (ii) if the amount subscribed by the strategic investor is 50% or more, it would automatically provide the management control to the new investors (i.e., in principle, no management contract will be needed under this scenario), (iii) prospective investors will be more willing to inject capital in a company that they will be controlling (i.e., capitalization), than a cash disbursement to the GOC through the acquisition of existing shares in CAMAIR II, and (iv) it would provide CAMAIR II with needed working capital for the improvement of operations (i.e., infornation management systems, aircraft upgrades, etc.). In order to increase the attractiveness of the transaction (i.e., capital increase) to the prospective investors, contributions other than cash could be considered for the equity subscription. Payment in kind, for the 58  subscription of capital, such as the use of airline related assets (i.e., aircraft, equipment, etc.), airline-related services (i.e., reservation systems, yield management systems, ground handling services, etc.), and the provision of management services would facilitate the flow of foreign investment. 6.6. Option (b): Privatization of CAMAIR II through the use of a Management Contract (with deferred privatization options). Development of a management contract (MC) for the air transport operation of CAMAIR II for an initial pre-determined period (e.g., 24 months). The MC would have the following features: Base management contract with performance and evaluation criteria as well as incentive mechanisms. The main objective of the MC will be to improve the productivity and profitability ratios (reduce operational losses and generate profit) of the airline operation. The MC will be targeted to select private contractors with expertise in the industry, and preferably in the Africa Region (i.e., international or regional air carriers - strategic partner). The management team will de facto have the potential to become future shareholder of CAMAIR II. Deferred privatization options. The MC will additionally include privatization options such as: (i) Purchase option for a given number of shares (i.e. see Table 4) in CAMAIR II at a pre- determined value (or price formula). This price formula would be based on a technical and accounting audit of the net assets to be transferred to CAMAIR 11 (i.e., audit by a recognized international firm). The price formula and corresponding share values will be developed by the Financial Advisor in coordination with the GOC. The option would expire at the end of the pre- determined period, but it could be exercised at any moment during such period. (ii) Use of profit sharing mechanisms against the value of a share at a future conversion date. The incentives in the MC should be linked to profit generation (loss reduction). Instead of paying cash to the management team for the profit sharing bonus, the payment could be made in kind (shares) as part of the purchase option participation. (iii)Right offirst refusal in the event of an offer to purchase a controlling interest by a third party, during the life of the MC, on the remaining shares not included in the initial purchase option. Initial subscription of capital. An initial percentage of CAMAIR II equity could be subscribed by the management contractor (i.e., management team), in order to provide working capital to the new company through an equity increase, therefore having a participation in CAMAIR II from the start of operations. This feature could also be used to develop an objective selection criteria among prospective bidders (i.e., management contractors), by allowing the amount of initial capital for a subscription to be determined by the bidder (e.g., minimum of 5% to a maximum of 50%). The highest initial capital increase offered by any given contractor will become the winning bid. The use of this mechanism will contribute to a more expeditious privatization of the restructured airline'. The use of this type of MC (MC + deferred privatization options), could provide strategic partners (air carriers) with a low-cost and low-risk altemative to explore the business opportunity of the airline operation in Cameroon. The contractor (management team) will have the opportunity to manage the airline operation (i.e., restructure routes, improve ratios, train personnel, etc.), before making an important investment commitment. The GOC will benefit from an air transport service run by an experienced management team In theory, a 50% initial subscriptionby theMC will eliminatetheneedto usedeferredprivatization options, thusprivatizing CAMAIRIIfrom the start of operations. Giventhe airline tndustry situation,and theeconomicconditions of Cameroon.this optioncould be difficult to implement in the beginning.but will, nevertheless,bepreferable to any deferredoption. 59 (that has the additionalincentiveof future ownership),and by concentrating its efforts on the settlementof debtand arrears,the reductionof laborforce,and divestiture of unprofitableassets in CAMAIR. Table5 illustrates a samplerestructuringplanfor the airlineoperationsin Cameroon,whichcouldbe used as an indicationfor the development of the Base management contract. Table 5: Base ManagementContract Performance Criteria (for illustration purpose) Criteria Unit BusinessPlan Marketing: Loadfactorlonghaulmarket (passenger andcargo) % capacity 60 % (p) Loadfactor market regional (passenger andcargo) % capacity 75 % (p) Yield market regional (passenger) CFAIseat 125,000 volumetotal system(passenger) Revenue RPK 50.0 MM Fmance: profitRegional Operating routes % revenues 15% Crew hour costperoperational CFA/hour 90,000 Technical Punctualityindex % 88 % ratio of aircraftutilization - B 747-200 % oper./block 65 % Privatization Process. strategy 6.7. Option(a):Capitalization The award of the equityincreasesubscription in CAMAIRII will be done through an international bidding processwith public announcements. The bidding criteria will be developedby a Financial Advisor in coordination with the GOC. Criteriasuch as the followingcouldbe used for the award process:(i) highest bid for the capitalsubscription (e.g., base price+ premium),(ii) bid with the highest% of cash contribution, etc. Theconsortium (para. 6.3.b)shouldbe structuredpreviousto the award of the equitysubscription. Contract+ DPO 6.8 Option(b): Management The awardof the MC + deferredprivatization options willbe done through an international biddingprocess withpublicannouncements.The biddingcriteria will be developedby a FinancialAdvisorin coordination with the GOC. Criteriasuch as the following could be used for the award process: (i) premiumto be paid over the recommended base price (priceformula),(ii) levelof economicincentives proposedin the MC, (iii) initialequityincreasesubscription throughthe contributionin kindto the equityof CAMAIR11(i.e., aviation relatedassets and/orservices). De facto, the award of the MC + deferredprivatizationoption will be an advancesaleof a controlling participationin CAMAIR11. The consortium(para. 6.3.b) couldbe structured previousto the awardof the MCand/orduringthe restructuring period9. Conversionof the purchaseoption (in the MC) into ownershipduring the pre-deterninedperiod by the selectedmanagement contractor(and/orconsortium). In case the purchaseoption is not exercisedby the contractor,the GOC would then proceedto privatizethrough open biddingfor a restructuredCAMAIR (CAMAIR II). 9To bedetermfned bytheFnancialAdvisor in coordination wfth theGOCprior to theawardprocess. 60  have to be In the event that no bidders are interested in CAMAIR II, other divestiture strategies will traffic rights, developed and implemented (i.e., liquidation of the company, auctioning of the international sale of the aircraft related assets, and spin-off of the domestic operations). Advisor as a Note: The use of a "privatization trust concept" or similar would be explored by the Financial (i.e., future shareholders in mechanism to increase the comfort of the prospective management contractors CAMAIR II) in the future actions of the GOC with respect to their shares in CAMAIR II. C. Legal framework and process of the "proposed concept" 10 of the 7. A preliminary legal assessment of the "proposed concept" has been done for the preparation "proposed concept". The major legal procedures could be summarizedas follows: (a) Incorporation of CAMAIR II as a separate legal entity under the law of Cameroon. CAMAIR II will be a limited liability company (i.e., societe anonyme) and the majority of its capital will be held by Cameroonian shareholders (i.e., 51%). The right to use or the ownership of the key airline related assets (i.e traffic rights, aviation related assets, building and offices, contracts, name) will be transferred from CAMAIR to CAMAIR II. (b) Transfer of the selected employees to CAMAIR II, either by continuing the current labor agreements or by terminating them and initiating new labor agreements (rehiring process). du A selection procedure similar to the one used for the privatization of ADC (i.e. Aeroports Cameroun) could also be applied. (c) Capitalization of CAMAIR 11 and/or development of the Management Contract, including the performance criteria, evaluation criteria, and management incentives. (d) Documentation of the Purchase Option (deferred privatization options) on CAMAIR II shares. This could be granted by the agreement between the management contractor and the shareholder of CAMAIR II (i.e., the GOC) of a unilateral promise of sale. It could be provided in the promise of sale that the number of shares covered by the option and the option itself would not be subject to negotiation. to (e) Development of the "privatization trust concept" for the shares to be sold at a later date the management contractor and other private investors (i.e., Cameroonian investors). applies to both option(a) and (bJ, with the exemptionthat in option (a) there might not be a needfor a 10This preliminary legal assessment contract (i.e.. if equity subscribed management investoris equalor above.5O%). by theconsortium-strategic 61  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 14: Strategy, Timetable andKey Financial Data for the Privatization of Air Services II. TIMETABLE _______________ 1994 1 995 1996 Actio Rrsatwaauendu NO FT7 TI T-T A-- SO- 0NF01-- TFM ' M J AS- O)N 0D Rev- par Itlooenen des tenor de refernc dii cosilrfinan-e Accod ia.aa'D Noa-ohjeca de 'IDA ifeaarnde a. loeC Pr e 1etit raesea - - d ioi o Al'I'ir d'offrnr oae-srrne i-D Non-objecn- de fiDA SoPoe pa I .ere t P,oneoreierti- d.rteond Pluw~an CAMA financiere tWAinN de IR iiI d.1 f 7- I)eliuio- don proganan de - ripanori~ deeemployeea Drode dr I Pron de aie e itnrnd ritLa gnion- e vipio de I poon. de pmwansnsw- lrpara- run i dre-ur d apel lirolet de dosser1_ dioffirs iaasi A 'IDA I S Ic d rafororanon- ~ HD Aippd dMofic Analyse,desoilie Proposiuon dulintoon tone on deCANIAR IISignastae do con"u finfe Ieacfs a AMAM Ii- D-rianage de I eapioralin- amie l.uod ,nrd CAMAIR--r par i Gooe--ennide - -7 17; { 1- - - - pers-ne de Ia CA-MAIR Accad isusere 'IDA - d-txi- ANniDA 1 ccnd 'D i- c pirearno deJ irAniioaroooiine elsPije a 'oiuDA de feitnem T toIasrrrs1 I- __.. P --- 111~ Appeyl offic U -o rsoargespni - - - - N-e-ob ecrioe de 'IIDA i- 7 1 E-1.w- du p- P, ns offic OOeusei Auuurlvrr Pioposirron d'astrrborcon  III. KEY FINANCIAL DATA Income Statements for the New Company After Devaluation(CFAF million) 1994.1995 1995-1996 ......................................................................................................................................................................................... 1996-1997 Revenues 43,236 44,297 39,194 Passengers 35,499 36,320 30,841 Royalties 390 390 390 Otherrevenues 2,850 2,850 2,850 Handling 2,880 2,950 3,026 Salesaboard 475 494 494 Interestincome 990 990 990 Additionalrevenues 152 303 603 Oneratine Expenses 27,580 26,400 23,633 Fuel 7,480 7,140 6,113 Lodgingof crew 440 400 400 Maintenance 7,800 7,000 6,600 Airport taxes 4,050 4,050 3,600 Servicesto passengers 3,060 3,060 2,550 Handling 4,750 4,750 4,370 Depreciation 3,000 1,700 0 Leasing 200 200 210 Insurance 900 800 700 Cost of sales 4,000 4,000 2,880 Administrativeoverheads 2,760 2,530 1,840 Interestexpenses 327 242 242 Other depreciation 500 500 500 Salaries 8,250 6710 6,270 Provisionfor investment 500 500 250 Total expenses 48,022 43,582 36,525 Net income (4,786) 715 2,669 % of6revenues -11,07% 1,61% 6,81% 63  REPUBLIC OF CAMEROON PROJECT FOR THE PREPARATION OF THE TRANSPORT SECTOR REFORM Schedule 15: Strategy, Timetable and Key Financial Data for the Privatization of Rail Services I. STRATEGY 1. Le Gouvernementde la Republiquedu Cameroun a decid6, dans le cadre de la politique de restructurationet de privatisation des entreprises publiques du secteur des transports, de conceder l'exploitation du chemin de fer camerounais A une societe concessionnaireprivee. Le present document presente: (a) les caracteristiques generales retenues pour la concession d'exploitation ferroviaire; et (b) les principalesmodalites de mise en oeuvre de la concession (structuration de la societe concessionnaire, procedure de choix de l'actionnairede reference, calendrierpr6visionnelde la mise en concession). A. Caracteristiques generales de la concessiond'exploitation ferroviaire 3. Les conditionsde l'exercice de lactivite ferroviaire par le concessionnaireet les relations entre l'Etat et le concessionnaireseront definies par une conventionde concessionsignee entre l'Etat et le concessionnairedont les caracteristiquesgenerales sont present6esci-apres. Au titre de la concession le concessionnaire assurera: (a) 1'exploitationtechnique et commerciale de services de transport ferroviaire; (b) ['exploitation, la maintenance,le renouvellementet lamenagement des infrastructures ferroviaires existantes; et (c) la gestion domaniale courante du domaine public ferroviaire. Le concessionnaire exercera son activite sur une base commerciale,Ases frais et risques et perils. 4. Services de transport ferroviaire. Le concessionnaireexploitera des services de transport ferroviaire de marchandises et de voyageurs dits commerciaux, et, eventuellement, A la demande explicite de l'Etat, d'autres servicesde transport ferroviaire de voyageursdits services exploites Atitre d'obligationde service public. La nature, la configuration,l'organisationtechniqueet commerciale des servicesdits commerciauxseront librementarretees par le concessionnaire,en reference Ases objectifs de rentabilite. Les eventuels services voyageurs exploites A titre d'obligation de service public - notamnment les servicesde desserte localeomnibus- feront l'objet de conventionssign6esentre l'Etat et le concessionnaire qui en definiront la configurationet la tarificationet qui prevoiront le versementpar l'Etat au concessionnaire d'une contributionpour obligationde service public permettantde couvrir le deficit engendre par lesdits services. Dans une formule variante, qui est brievement decrite au paragraphe 13 ci-dessous, 1'exploitation de la totalite des servicesferroviaires voyageurs serait assur6e par une societe specialisee,distincte du concessionnaire et les seuls servicesde transport exploites par le concessionnaireseraient les services marchandises; le Gouvernementarretera prochainement sa decisionen ce qui concernele choixeventuelde cette variante. 5. Utilisation des infrastructures ferroviaires par d'autres operateurs de transport ferroviaire. L'utilisationdes infrastructuresferroviairesexploiteespar le concessionnaire sera ouverte, sur d6cision de l'Etat, a d'autres operateurs de transports ferroviaires apres une periode initiale d'exclusivit6 accordee au concessionnaire pour une duree d'environ cinq ans. L'utilisation des infrastructuress'effectueraitdans le cadre de conventionsparticulieres signees entre le concessionnaire et l'op6rateur et l'operateur verserait au concessionnaireun peaged'utilisation des infrastructures. 64 6. Infrastructures ferroviaires. Les infrastructuresferroviaires existantes, qui sont et resteront propriet6 de l'Etat, seront mises A la disposition du concessionnaire.Le concessionnaireorganisera l'utilisation et assurera l'exploitation et la maintenancedes infrastructures ferroviaires et supportera directement les charges correspondantes. Le concessionnaire assurera la maitrise d'ouvrage (par delegationde l'Etat) et la maitrise d'oeuvre des operations de renouvellementet d'amenagementde infrastructuresferroviaires existanteset en assurera le financement(I'Etat pouvant donner sa garantie financiere pour certains financements). Les operations de renouvellement et d'amenagement d'infrastructuresseront soumisesAlagrement de l'Etat; en fin de concession,la partie non amortiedes investissements sera remboursee au concessionnairepar I'Etat. Les infrastructures nouvelles de d6veloppement(creationde lignes nouvelles)seront decid6spar l'Etat qui en fixera les conditions de r6alisation; leur eventuelle integration A la concessions'effectuerait par avenant A la convention de concession. 7. Materiels ferroviaires. En debut de concession, le concessionnaires6lectionneraparmi les materiels existants de la REGIFERCAMles materiels necessairesA son exploitation 1; ces materiels seront pris en locationpar le concessionnaire aupres de l'Etat dans le cadre de contrats de location A caractere commercial.Les materielssupplementairesdont le concessionnaireaura besoin en cours de concession- soit au titre du renouvellement du mat6rielexistant, soit pour faire face au d6veloppement du trafic - seront acquis ou loues librement par le concessionnaire,sans intervention ni garantie financierede l'Etat; toutefois, l'Etat beneficierad'un droit de pr6emptionsur les ventes de mat6riels par le concessionnaire (afin notammentde garantir, en fin de concession,la p6rennit6de l'exploitation ferroviaire). 8. Personnel. Le personneldu concessionnairesera r6gi par les dispositions du code du travail applicablesaux salaries du secteur priv6. En debut de concessionle concessionnaires6lectionnerales personnelsqu'il reprendraparmi les personnelsexistantsde la REGIFERCAM. 9. Redevancede concession. Le concessionnaire versera Al'Etat une redevancede concessionen contrepartiede la mise A dispositiondes infrastructuresferroviaires existantes et du droit d'exploiter les services. Les modalitesde d6terminationde la redevance (montant forfaitaire annuel, pourcentage du chiffre d'affaires du concessionnaire,..)auront Aetre arretees. 10. Duree de la concession.La concessionsera de type "glissant", avec une duree initiale de 20 ans (duree approximatived'amortissement des materiels ferroviaires) et possibilite de prolongation, d'accord parties, pour des p6riodes successivesde cinq annees, a decider A l'issue de chaque periode quinquennale. La convention de concession fixera par ailleurs les conditions de reprise de l'exploitation ferroviairepar l'Etat en cours de concessionet de d6cheancedu concessionnaireen cas de manquement grave. 11. Dispositionsfiscales. La societe concessionnaire sera soumise aux dispositionsfiscalesde droit commun. Toutefois, les carburantsutilis6sdans les locomotiveset autres engins sur rail seront acquis en franchisedes taxes et droits perguspar l'Etat en contrepartiedes couts d'utilisation, de maintenance et de renouvellementdes infrastructuresroutieres. 12. Suivi d'execution de la concession et reglement des litiges. Le suivi d'execution de la concessions'effectuera par un Comitede suivi associantrepresentantsde l'Etat (Minist&escharg6s des en la matiere sera pr6sent6e dans le projet de Plan dentreprise . La pertinence des choix du concessionnaire preparepar les candidats(voirparagraphe16 ci-dessous). 65  Finances et des Transports) et representantsdu concessionnaire.Le concessionnaire fournira Atitre de compte rendu d'activite divers documentsA identifier dans la convention de concession. Un auditeur independantdesigne par le comite de suivi effectuera un audit annuel de la concession(examen des comptes du concessionnaire,opinion sur le respect par les parties des clauses de la concession).Les differends et litiges seront tranches par une commissionarbitrale selon les regles de conciliationet d'arbitrage de la Chambrede commerceinternationale. 13. Varianted'organisationde l'activite voyageurs.Ainsi qu'indique au paragraphe le Gouvernementarretera prochainementune decisionen matiere d'organisation 3 ci-dessus, de l'activite ferroviaire voyageurs. En variante de l'organisation dans laquelle les services ferroviaires voyageurs sont exploites par le concessionnaire,I'Etat pourrait decider de confier l'exploitation desdits services Aune societe specialisee,distincte du concessionnaire.Dans cette variante - qui serait notammentjustifi6e par le fait que lactivite voyageurs rev& pour l'essentiel le caractere de service public (par opposition au caractereexclusivementcommercialde I'activit6 marchandises)- les services ferroviaires voyageurs seraient exploitespar une societe distinctedans le cadre d'un contrat d'affermage. Dans ce schema, et compte tenu du fait qu'une organisationde la tractiondes trains voyageurs par un parc de locomotives distinct du parc des locomotivesaffecte Ala tractiondes trains marchandises ne serait actuellementpas economique,le r6le du concessionnaireen matiere de services voyageurs consisterait A(i) mettre les infrastructuresferroviaires A la disposition de la societe specialiseepour l'exploitation des services voyageurs et assurer le dispatchingdes trains voyageurs;et (ii) assurer la traction des trains voyageurs (autres que ceux realisees en rames automotrices). La societe d'exploitation des services voyageurs verserait alors au concessionnaire un peagepour l'utilisation des infrastructures(calcule sur la base des charges suppl6mentairessupportees par le concessionnaireen raison du trafic voyageurs) et, d'autre part, une redevance pour la traction des trains voyageurs (calculee sur la base des kilometres x locomotivesparcourus). B. Modalites de mise en oeuvre de la concession Structuration de la societe concessionnaire 14. La societe concessionnairesera une societe anonyme par actions, de droit camerounais,avec siege social ADouala. Un actionnaire de reference possederaau minimum 51% du capital de la societe (actions A) et s'engagera Aconserverce pourcentageminimaldu capital pendant une duree d'au moins sept ans apres le debut de la concession;pour la moiti6au moins, les actions A devront etre detenues par des personnes physiques de nationalite camerounaiseou des societes de droit camerounais; la participation de fournisseurs de materiels ferroviaires ou d'entreprises de travaux ferroviaires dans l'actionnariat de reference sera interdite. L'actionnairede reference disposera de la majorit6des sieges au Conseil d'Administration . La partie du capital de la societe concessionnaire autre que celle poss6deepar l'actionnaire de reference (actions B) sera destinee A etre souscrite par des personnes physiques ou morales de nationalitecamerounaise.Au sein de cette partie, cinq % au minimumdu capital de la societe concessionnairesera reservee pour le personnel actuel de la REGIFERCAM. L'Etat s'engage A ne pas detenir, directement ou par l'intermediaire de societ6s publiques, un pourcentagedu capital total de la societe excedant 15%. Dans une p6riode interimaire,une partie des actions B pourrait, dans l'attente de leur placement aupres de personnes physiques ou morales de nationalit6camerounaise,faire l'objet d'un portage, dans des conditionsrestant Adeterminer. 66  de referencede la societeconcessionnaire Procedurede choix de I'actionnaire 15. L'actionnaire de reference sera choisi par appel A la concurrence internationale selon une procedure en trois etapes, telle qu'esquiss6e ci-dessous. L'ensemble de la procedure sera plac6e sous la responsabilit6 de la structure de pilotage. 16. Prospection et preselection de candidatures. Les actionnaires de r6ference potentiels feront l'objet d'une prospection intense. Un avis d'appel de candidatures sera publie dans la presse nationale et dans la presse internationale specialisee; des reunions de presentation seront organisees au Cameroun et une mission de prospection se rendra dans divers pays etrangers (Europe occidentale, Am6rique du Nord, Afrique du Sud). Les criteres techniques, commerciaux et financiers de qualification seront communiques aux candidats qui seront invites A presenter leur dossier de demande de qualification. L'ensemble des candidats repondant aux criteres de qualification seront preselectionnes. 17. Etape intermediaire de selection. Un dossier de consultation sera transmis A 1'ensemble des candidats preselectionnes. Le dossier comportera (i) des elements Acaractere informatif sur le contexte economique general et l'activite ferroviaire au Cameroun; (ii) les elements de d6finition du cadre contractuel et reglementaire de lactivite future de la societe concessionnaire (et en particulier le projet de convention de concession); et (iii) la definition du contenu et des modalites de presentation des offres. Les offres pr6sent6es A cette etape par les candidats comporteront pour l1essentiel: (a) un plan d'entreprise pr6visionnel de la societe concessionnaire pour une periode de cinq ans (perspectives d'activite et politique commerciale, programme d'investissements, politique du personnel, projections financieres); et (b) leurs commentaires et suggestions sur le projet de convention de concession. Les offres seront discutees avec chacun des candidats qui pourront, A l'issue de ces discussions, reviser leurs propositions. Les candidats ayant presente un plan d'entreprise juge - le cas echeant apres revision - acceptable seront alors invit6s Apresenter leur offre pour l'etape final de selection. 18. Etape finale de selection. A l'issue de l'tape intermediaire de selection, le Gouvernement arretera la redaction definitive de la convention de concession (en tenant compte, le cas echeant, des suggestions pr6sentees anterieurement par les candidats) et demandera aux candidats ayant franchi l'etape intermediaire de selection de presenter leurs propositions financieres en matiere de redevance de concession. Les offres seront ouvertes publiquement et le candidat ayant propose la redevance de concession la plus elevee sera definitivement designe comme actionnaire de reference de la societe concessionnaire. II. TIMETABLE 19. La duree totale du processus de mise en concession, est estime Aenviron 23 mois A partir de sa mise en route se decomposant en: trois mois pour le recrutement du consultant charge de fournir un appui A la structure de pilotage de la mise en concession; 16 mois pour le processus proprement dit de choix de l'actionnaire de reference de la societe concessionnaire; et quatre mois pour la preparation de la reprise effective de ['exploitation par le concessionnaire. 67  Un chronogrammeprevisionneldes principalesetapes est presente et brievement commente ci-dessous. 21. Choixde lactionnaire de referencede la societt concessionnaire.Le processusde choix de l'actionnairede r6ferencede la soci6teconcessionnaire proprement dit prendrait environ 16 mois, soit sept mois et demi pour la phase de prospectionet preselectiondes candidatures; sept mois et demi pour l'etape intermediairede selection;et un mois pour 1'etapefinale de selection. 22. Preparationde la reprisede Ilexploitationpar le concessionnaire.Cette periode, d'environ quatre mois, correspond a la creation effective de la societ6 concessionnaire, a la selection du personnela reprendrepar le concessionnaire,a la mobilisationpar la societe des financementsinitiaux necessairesau d6marragede 1'exploitationet a la preparationtechniquede la reprise d'exploitation. 68 -~ - 1 1 - ~- t - tX -0~ E , 0; t- t XX<g]XR 16 0 1 ~~~~- - . #. Xti 0 jiX 0- I L III* O~ -=l1 BI11 --- -1- <11 -- ----. ---- - -tX j X---- ]x§R T=--TITTT- ILI~~~~~~~~~~~~~~~~~~~~~~~  III. KEY FINANCIAL DATA Two options for the privatization of rail services are presented in the operating accounts and the Financing plans here-below: - Option (a): freight and passenger transport are run separately by two different operators, by the freight operator contracted-out to operate passenger transport through a separate entity. - Option (b): one single private operator owns and maintains equipment for both freight and passenger transport. This would generate economies of scale, but would introduce the risk of penalizing the freight sector because of debt dues by the Government for unpaid subsidies to the passenger sector. The financing plan of the private operator assumes low financial charges, based on loans with a 2% interest rate. Higher financial charges would deter any private investor. Passenger transport would require grants for new investments, if any. Consequently, no financial costs and depreciation were considered in the passenger transport operating accounts. Pnrvatizingrailways being a new experience in Africa, the potential private investors will analyze the risks of such an operation. In order to attract enough investors to stimulate competition, and thus, to obtain the best conditions for the concession of rail services operation to private investors, public owner needs to mitigate the risks of the concession. These risks are both commercial (declining market, resulting in lower revenues than expected) and political (inflation, devaluation of the currency, political instability). An analysis of the commercial risks of the concession is carried out here-below, to measure the potential impact of these risks for the concessionary company, as well as for the State. It demonstrates the need for a careful design of the concession agreement to mitigate these risks, and thus enhance the chances for the success of the privatization. (1) OPERATING ACCOUNTS ANDFINANCING PLANOFTHECONCESSIONNAIRE. - Option (a): Freight Transport and Passenger Transport Completely Separated. TOM :.*Wt . ... 21300 23110 24266 24945 25669 26439 27232 28049 28891 29757 r - . 710 710 710 710 710 710 710 710 710 710 30 32.6 34.2 35.1 36.15 37.2 38.4 39.5 40.7 41.9 Tota~.x 6 ?r- 12418 13475 14154 14553 14978 15625 16106 16595 17092 17617 _ 7787 8450 8878 9129 9397 9877 10185 10496 10810 11147 .. ;...iEeXit.......Z,4631 5025 5276 5423 5581 5748 5921 6098 6281 6470 0 - *t3 t n 8882 9636 10112 10393 10691 10814 11126 11455 11799 12140 FM""'~004M"M 391 563 723 803 803 803 803 803 803 803 Do r loi&-...... 1009 1629 2669 3462 3562 3662 3762 3862 3962 4062 _nlQm~ 7482 7244 6521 5928 6127 6150 6362 6590 6835 7076 sourcc: EDS-Eurexcel Feasibility study (December 1994) 70  ~t .it. Orti AccunW_X*P 4720 51211 5377 5527 5688 5859 6035 6216 6402 6594 ~~~~~~~~~~~~~~~~20 ~ tWt~ 6427 6971 7323 7525 7743 8032 8276 8525 8780 9046 . E3110 3372 3541 3640 3745 3915 4035 4157 4280 4412 _ 3317 3599 3782 3885 3998 4117 4241 4368 4500 4634 4 _ ~~ 0 0 ~~~0 0 0 0 0 0 0 0 __ ~~0 0 0 0. 0, 0 0 0 0 0. . . . -1707 -1850 -1946 -1998 -2055 -2173 -2241 -2309 -2378 -2452 source: EDS-EurexcelFeasibilitystudy (December 1994) - Option (b): Freight Operator to Manage the Equipment and its leasing for Passenger Transport. O .mt_ Ac~In _1 IhTA"A AM, "CAUM*v 21300 23110 24266 24945 25669 26439 27232 710 28049 710 28891 710 29757 710 710 710 710 710 710 710 TK~i~ _Pr 30 32.6 34.2 35.1 36.15 37.2 38.4 39.5 40.7 41.9 - 14707 15958 16761 17233 17736 18473 19040 19617 20205 20824 0 tTh_ 9013 9469 9736 10022 10528 10856 11188 11523 11881 _~ . 8306 6401 6945 7293 7497 7714 7945 8184 8429 8682 8943 55g... 6592 7353 7705 7913 8133 8165 8392 8633 8885 9133 - ~ 391 563 723 803 803 803 803 803 803 803 1009 1629 2669 3462 3562 3662 3762 3862 3962 4062 5192 4961 4114 3448 3569 3501 3628 3768 3921 4069 Net Opuia~ng~~ 2290 2283 2407 2480 2558 2649 2734 2822 2914 3007 ~ees1mP~issiz source: EDS-Eurexcel Feasibilitystudy (December 1994) '~4720 5121 5377 5527 5688 5859 6035 6216 6402 6594 fl*6%V~4138 4488 4712 4844 4985, 5184 5342 5502 56671 5839 i2591 2809 2950 3033 3120 3264 3364 3465 2098 - 3678 1547 1679 1762 1811 186-5 1920 1978 2037 3569 2161 F~~na~dst~44 0 0 0 0 0 0 0 0 0 0 Oerec~~s~a~ii~ 0 0 0 0. 0 0. 0 0. 0 0. Net~.i~e.mti '~ 582 633 665 683 703 6751 693 714 735 755 P ~Th- ~6$* 2290 22831 2407 2480 2558 26491 2734 2822 2914 3007 71  Financing Plan for the Private Operator The financing plan of the private investor is based on the hypothesis of a medium level of traffic, with an operating fee adjusted to obtain a Rate of Return after 10 years of 20%. TABLEAU DE FINANCEMENT - CONCESSIONNAIRE MARCHANDISES N1 .... X I Frais financiers 391 563 723 803 803 803 803 803 803 803 Investssements 9732 8430 14620 10100 2000 2000 2000 2000 2000 2000 .___ Achat dactifs 8744 . =___Redevance 2140 2408 2604 2765 2925 3086 3264 3424 3603 3781 BFR 6375 542 346 363 214 227 242 249 257 264 Total 27382 11943 18293 14031 5942 6116 6309 6476 6663 6848 URCEM a s _ i 'ixii \ '\ i ......... "egi i-<i iii .i E.B.E t' 8882 9636 10112 10393 10691 10814 11126 11455 11799 12140 Fonds Drowres 10000 Emprunts 9625 3465 6000 4000 Total 28507 13101 16112 14393 10691 10814 11126 11455 11799 12140 Solde 1125 1158 -2181 362 4749 4698 4817 4979 5136 5292 Solde cumul r 1125 2283 102 464 5213 9911 14728 19707 24843 30135 CASH Position -8875 1158 -2181 362 4749 4698 4817 4979 5136 5292 CASH cumuli -8875 -7717 -9898 -9536 -4787 -89 4728 9707 14843 20135 source:EDS-Eurexcel Feasibilitystudy(December1994) (2) RISK ANALYSIS AND EVALUATION OF THE OPERATING FEE. The financing plan of the pnrvateoperator was established using the most probable value scenario for costs and benefits. The main factor of risk for the private operator is related to the level of traffic that is expected, which directly affects the Rate of Return on his investment. The feasibility study evaluated the average traffic for the next ten years at 710 MTK, with a possible variation of +/- 160 MTK (23% of the average traffic). Consequently, the risk for the private operator is substantial, and needs to be shared with the public authority. This is to be achieved by the careful determination of an appropriate operating fee, paid by the private investor to the Government for operating the railway freight services. In order to determine the most incentive fee for both the private investor and the Government, a risk analysis using Monte-Carlo techniques is presented below, using simple hypothesis (operating costs slightly correlated to the level of traffic as most of them are fixed ; levels of traffic for each year correlated one to another ; the working capital requirements are correlated to the level of traffic...). The level of traffic, and consequently the Operating Surplus, (ExcedentBrut d 'Exploitationin the Financing plan above), follows a normal probability distribution, between 550 MTK and 870 MTK. The impact of the risk has been measured on: - the Rate of Return of the private operator and - the level of the operating fee. Three scenarios have been considered: 72  1. The fee is fixed by the contract at a certain level (see Financing plan). 2. The fee is adjusted each year, as a function of traffic, to guarantee a Rate of Retum of 20% after 10 years for the private contractor. 3. The fee is related to the level of traffic, so that any variation on the traffic level will be passed half on the Fee and, consequently, half on the surplus of the private operator. First Scenario: The fee is fixed. The simulation showed that the Rate of Return could vary from 6% to 34%, with a 30% probability of being under 15%. As a result, the risk for the private operator is too important and is likely to deter any investor from getting involved in the concession. The probability of having a rate of return greater than 15% needs to be at least 90% (especially in Africa), to attract the private sector. Second Scenario: The Fee is adjusted to a Rate of Return of 20%. The level of Fee varies between CFA 900 million and CFA 3,360 million. The risk is transferred to the Government, who could perceive a very low fee. More, this option doesn't reward the private operator for achieving a performant management and commercial policy, as he would get the same rate of return independently from its return. With no incentive, the former public monopoly would then become a private monopoly. Forecasts Rate of Return 1,916 Trials Shown .03 -59 .023 .... .... ................... . 44.2 .m .01 ------------------ Is . t 2 . 29.5 5 I .008 .14 7 .000 -~ 0 10% 1 %21% 2% 33% Certainty Range Is from 15%to 27% Third Scenario: The fee is a linear function of the traffic. T'heprobability of having a rate of return greater than 15% is now more 95%. 73  Forecast: Operating Fee Frequency Chart 1,914 Trials Shown .034 66 .026 -4 ...................... 5 . Z% ~~~~~~~~~~~~~~. -q -0 .017 - - - - - - - - -. . . . . . . . . .. 33 0~~~~~~~~~~~~ .0og ............ ................ .5 .5 .000 ,,,,p0 2750 ' -Fi 0 1250 2250 3250 Certainty Range is from 1590to 2750 This scenario is a compromise between the previous ones, as each variation on the traffic is equally shared by the operating fee and by the Operating surplus (i.e the Rate of Return). This will: - mitigate the risks for both the private operator and the Government (see diagrams), - thus, lower the risk reward expected by the private operator for making the initial investrnent, - keep the incentive for him to serious management and dynamic comnnercialpolicy. This method can help both parties determining the appropriate operating Fee, in accordance with their expectations in terms of risks. 74  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 16: Key Financial Data and Timetable for the Privatization of CAMSHIP and CAMTAINER Table 1: CAMSHIP. Cargo share: 35%. Devaluation on January 12, 1994. I 196 1997 1 ns 1999 2000 2001 20(H2 21103 2004 199 192 1993 1"994 99 419042 407937 404 062 407092 417471 435216 456977 477541 496642 Totalrmp.ooC(WAC(tors) 628314 532481 513844 479 160 436275 35,0'(1 35,00% 35,0096 35.00% 35,100% 35.00% 3500% 0 35,001 3 5,0-0% ° CAMSIIIP 5% 20,2 29,06,I% 26,315 35.00% 35,00%6 32988 33482 33985 34494 35012 75.537 36f07( 36611 37 160 37718 Freighl Rale (CFAF) 29599 32899 35800 32 988 462 317 481 734 501 967 523 050 545 018 567 908 590 62s 6131069 636 365 I'olalexpor COWAC (ton) 484 854 482 950 460 262 451 517 450 162 35,00%; 35,00%o 35,00% 35,00% 35,00% 15,00%. 35,00% 35,00%. 35,00%o 150,0(% %CANISHIIP 32,47%N, 26,62% 23,25% 35,00% 23.345 23f695 24051 24411 24778 25 149 255226 259(19 26.298 26.692 Feight (CFAF) 22.393 22689 22600 23.000 48 48 48 48 48 48 48 48 48 48 Nb. of inertrips 45 39 37 48 li1 120 122 124 126 128 130 131 131 Costpertrip (CFAFmillion) 125 128 128 115 117 2 2 2 2 2 2 2 2 2 2 Nbof vessclsIos.od (sccno Il) 2 2 2 2 0 0 0 0 0 0 o (scerio 2) 2 2 2 2 2 2 2 Nb of vessels ossed 867 880 893 906 673 781 781 793 805 817 829 841 854 Cost perowed vessel (CFAF million) 838 2 2 2 2 2 2 2 2 2 2 2 Nb of vess chanered(scenarin 1) 2 I I 4 4 4 4 1 1 2 2 2 2 4 4 4 Nb of vessels chanueed (cenario2 2 823 836 706 720 720 731 742 753 764 776 787 799 811 Cost er vesselcharteted(CFAF million) 569 66988 64342 62.637 62.042 62507 64 101 66825 70.166 73324 76f257 TotAl impotSIEWAC (tons) 210.837 81760 78.898 73.572 45,00% 45,00% 45,00% 4500% 4500 45,00% 45,00%6 45,00%e 45.0000 °oCAMSIIIP 15,27% 35,86% 45,4510. 45,00%o 45,00-6 28954 2818 6 27919 28 12 28845 30071 31 575 32996 14316 liner traffic(lons) 15260 17 554 24 152 33 108 30144 0 0 0 0 0 0 0 0 0 o) SIMt,raflic (Ions) 16.936 11 769 11 708 0 6906 7009 7 114 7221 7329 7439 7551 7 664 7779 Slot freight rate (CFAY) 6631 6631 6703 6703 6804 46690 47.390 48.101 4s823 49555 50298 51.053 51.819 52s596 53.385 Liner frcight ratc(CFAF) 44550 46.514 46.000 46000 406.170 423.229 441.005 459 527 47R6.27 498 93s 518.896 538614 559 081 Total cportNMEWAC(loons) 400347 423 702 404 365 396682 395 492 35,006 3,00' 6 . 35,OOOo 35,0006 35,0(1% 5,11006 35,00- °oCAMSI IIP 28,55% 27,76f% 25,14%6 35,00%o 35.00%6 35.000 35.00-6 57.462 57700 57670 57892 57875 1(10630 1017668 114654 121 559 128718 Lincetraalic (ion.s) 13481 14622 14441 57879 17 50( 21 5(1( 29 5(10 16000 () 0 () 0 0 Slot teaffic(to..) 31 590 22393 20288 14 000 14.000 66.961 6696 66 960 66 961 66960 66 961 66 961 66 960 66960 66 96(0 Tlmberrflwc(lons) 69 244 80 684 66960 66960 6 804 6906 70119 7114 7221 7129 7 419 7 551 7 664 7 779 Slut freight rte(CFAI) 6 611 6 631 6 703 6 703 27 507 27 92(1 28118 28 761 29 195 29 633 30077 029 30 10 986 I ,moerFreight role(CFAV) 27 452 22.190 21.530 26 700 27 101 23.180 23528 23881 24239 2461(2 243972 253-16 25726 26 112 littcr reightr.tc (CFAI) 33.000 35.190 32500 225110 22838 36 36 36 36 36 54 54 54 54 54 Nh of lietr ips 13 17 19 36 45 45 46 47 47 48 49 50 5( 5I Cst ofl,.e trip (CFAF million) 55 5I 51 44 50 70 90 113 l) 0 0 0 0 Cost of slo trip (CFAF) 64 8s 69 38 39 879 892 906 919 933 947 961 976 990 1005 Cost oftimhertrip(CFAF) 778 931 883 866 2 2 2 2 2 3 3 3 1 3 Nb. of charfed vessels for lintr andslot I I 1 2 457 464 471 478 485 492 499 507 515 522 tnaffic 321 447 450 450 I I I I I I I I I Costofchareeed vesel (CFAF) I I I I 747 758 769 781 793 805 817 829 841 Nb of chotered vessels fr timber 557 765 765 725 736 vessel (CFAF) _- ___ = =_ _ __ _ . Cost ofchaticred 75  Fiscalyearclosed on June30 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Siot Faf "st + JK (CFAFmillion) 185 257 161 154 149 ISO 154 159 165 173 18 194 205 217 Petroleusmproducts(CFAF) 4,054 3.673 4.605 4.700 4.771 4.842 4.915 4.988 5.063 5.139 5.216 5.295 5.374 5.455 Clinsker (CFAF) 1,148 979 790 900 979 994 1.009 1.024 1.039 1055 1.070 1.087 1.103 1.119 Othserrevensucs (CFAF) 531 337 275 220 259 289 307 325 342 358 374 388 404 416 Nb of vesselsowred for slot 0 0 0 0 0 I I I I I I Cost per vessel owned (CFAF million) 0 0 0 0 0 0 774 786 797 809 821 834 846 859 Nb of vesselscharteredfor petrolecum 2 2 2 2 2 1 1 1I I I I Costofcharteredvessel (CFAEmillion) 2631 2296 2600 2600 2639 2200 976 991 1005 1021 1036 1051 1067 1083 Nb of vesselscharteTed for clinker 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Costof chartercdvcsscl(CFAF million) 45 43 28 26 25 25 26 27 28 29 31 33 3 37 Annuaolgrowthof import (%) -6,75 -.95 -3,95 -2,65 -095 0,75 2,55 4,25 5,00 4,50 Aninualgrowthof export 4( (% 19 0,0 2,70 4,20 4,20 4,220 4,0 4,0 4,00 3,80 3,8 Table 2: CAMSHIP. Income Statement- Scenario I: Renewal of owned vessels (IFAF million) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20 2004 Revensues 18.045 16 595 16.459 19.766 19.502 19.693 20039 20.516 21 117 22.597 23,620 _24 732 25,847 26.976 O3perating costsotLer than vessels(7,789)(7401) (7442) for (8 769) (8 900) (9~044) (9 198) (9.356) (9,519) (1(1571) (10 571) (1(1731) (10.893) (11,058) Opcrating costs for chsartcrcd vessels (5.434)(4.811) (5135) (6.359) (5 976) (5.582) (5.666) 5.751) (6 329) (6 424) (6 521) (6,619) (6 718) (6265) Operating costs for self-owned vesscls (I1345) (I 676) (1 562) (I55 (1.562) (1,609) -(L658) (I1658) (1.683) (1.708) (1 734) (.760) (L.786) (83 Overhecad espenses (2 135) (2.031) (2 294) (I 933) (I 962) (I1991) (2 021) (2.1052) (2 0182) (2.114) (2 145) (2 178) (2.210) (2.243) Simar ...(112~) (112) (132)..jj)(147) (157) (166) (174) (183) (190) (9) jj) (2006) (212) Operatingincome 1.230 563 9870 1.125 564 _925 1.447 1.618 1.907 1.849 2.555 3.345 4.133 4.932 tntercst expenses (747) (713) (265) (192) (3(06) (264) (222) (182) (141) (101) (61) (20) (10) (10) OtAherexpenses and revenucs 195 169 175 (150) (ISO) (300) (300) (300) (300) (30(0) (300) (300) 0 0 Foreigncxchange loss (256) (198) 0 0 0 0 0 0 0 0 0 00 0 1)epreciationof foreign exchange loss (ISO) (151) (147) 0 0 0 D)epreciationofvcsscls (958) (955) (8.43) (589) (589) (589) (589) (869) (1.149) (1.149) (560) (560) (560) (560) Depreciation of containers (337) (333) (278) (27) (ISO) (250) (330) (410) (410) (260) (160) (80) (ISO) Otherdepreciation (395) (220) (181) (201) (230) (221) (252) (185) (205) (225) (245) (265) (265) (265) SurplusAlmak and depreciation 375 (15(1) (ISO) (75) Othernon-operating revenues 1(200)] 2791 2 779 1 171 181 181 19 19 I 420 1 201 221 221 251 251 Table3: CAMSIIIP.IncomeStatement-Scenario 2: Self owned vessels non renewed (tFAF million) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Revenues 18045 16 595 16459 19766 19.502 19693 20.039 20.51621.117 22,597 23620 24.732 25 847 26.976 Opcrating costsoilier lirani Ijr vessels (7 789) (7 40)1) (7.442) (8 769) (8 9(8) (9 114) (9 198) ('9 356) (9519) (1(571) (11(571) (11)731) (1(1893) (11 o58) Opeating costsfor chartered vessels (5 434) (4.811) (5.135) (6.265) (6.359) (5 976) (5 582) (7 195)(73(12) (7.904) (81)23) (8 143) (8 265) (8 389) Olratiigrcosisfor self-ownedvessels (I 345) (I676) (1.562) (L562) (1.585) (1.6019) (I 9( II6I 0 0 0 Overlhead expenses (2 135) (2.031) (2.294) (I1933) (1 962) (1.991) (2 021) (2 052)(2(182) (2 114) (2 145) (2.178) (2,210) (2 243) Simar (112). •112Lf(112) (112) (132) (147) (157k (166) (174) (183) (1j0 (198) (206) (212) Operatingincome 1.230 563 9870 1.125 564 925 1.447 1.748 2.038 1.989 2.690 3.482 4.272 5.073 Intlerest expesses (747) (713) (265) (192) (31)6) (264) (222) (182) (141) (lOt) (61) (2(0) (I))) (10) Othier expenses and revenses 195 169 175 (ISO) (ISO) (31)0) (300) (3(X)) (3(X)) (300) (300) (30)) 00 Foreign exchangeloss (256) (198) 0 0 0 0 0 0 0 0 0 00 0 D)epreciationi of foreignexchange loss (ISO) (151) (147) 0 0 D)epreciationofvessels (958) (955) (843) (589) (589) (589) (589) (589) (589) (589) (589) 0 0 D)epreciationofcontainers (337) (333) (278) (27) (ISO) (250) (330) (410) (410) (260) (160) (80) (ISO) Otherdepreciation __395) (220) (11 (201) (230) (221) (252) (185) (205) (225) (245) (265) (265) (265) Surplus Almak and depreciation ___ ___ ___ ______ 375 (ISO) (150) (75) ___________ ____ Other non-operating revciiurs (200) 279 2,779 17 18 18 19 19 1 ~420 20 22 22 25 25- (CFAFmillion) 9-91J 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 IMPACT OF VIlE RATE 1 865 I ~2551.479 1 146 1.180 2.702 1.361 2.099 2873 3.642 4.307 D3EVALUJATION 100% ___ __ __ ____ __ __ __ __ ______ NH; INCOME BEFORE I-AX (I1.617) (I 559) 1.153 I 847 562 I 273 849 I 211 4 441 I 7.38 3945 5632 7.584- 8981 l.as 192 184 181 217 215 2171327 4661I710 669 1.519 2.16812.920 3458 NEt INCOME_ AFFERTAX (1.809 (I 743) 972 1.630 348 1.057 52 75 2.731 1.069 2.426 3.464 4.664 5.523 76 (CFAF million) 1991 1992 199"3 1994 1995 199"6 1997 1993 1999 2000 2001 2002 2003 2004- IMPACT OF THE RATE 1.265 1.255 1.479 L.146 789 2.029 685 1.421 2.193 2.960 3.623 DEVALUATION 100% _________I __ __ __ __ NET INCOMEHBEFORETAX (1.617) (1.559) 1.15 1.847 562 1.273 I 49 410 3.076 369 2.572 4.255 6.202 7.594 Tax 192 184 181 217 215 217~ 327 226 1.184 249 990 1.638 2.388 2.924 NET INCOME AFTER TAX ,(1.809), (173 7 1.630 348 1.057 -522 185 1.892 121 1.582 2.617 _3.814 4.670 STATEMENT OF CASH-FLOWS INTERNAL RA TE OF RE TURN 7,35% 4rjFAFmallhon) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Net income after tax 972 1.630 348 1.057 522 185 1 892 121 1.582 2.617 3.814 4.670 Decpreciationand SIMAR 1.561 929 819 819 1.241 1.534 1.839 1.784 1.065 985 905 975 Provisions 232 (71) 159 159 41 (71) 159 60 41 (71) 159 60 Interestexpenses 265 192 306 306 222 182 141 101 61 20 10 10 Investment (ISO) (150) (150) (900) (650) (5.150) (1.150) (250) (250) (250) (250) (1.000) Variation of short-termfuiancing 752 752 605 (117) (86) (117) (179) (224) (246) (246) (249) needs Residualvalue 10.975 Dueto Statefrom 1993convention (3.032) __________ ____ IMACT OF DEVALUATION ____ (1.169) 650 (528) (206) (4,368) (3.880) 792 634 441 545 9.732 CASH-FLOW beforedebt service (152) 561 2.884 1.142 1.054 (7.775) (5.117) 2.428 2.908 3.496 4.937 25.173 Debt service (Interest +Capital) (318) (1042) (1L319) (993) (950) (910) (868) (828) (788) (442) (120) (120) CASI -FLOW after debt serice (470) (481) 1.565 149 104 (8.685) (5.985) 1.600 2.120 3.054 4.817 25 053 Short-termnfinanicingneeds 3.381 7.399 16.021 494 5.8 5.307 5.1528 5.905 6 339 .1 7.295 7.780 STATEMENT OF CASH-FLOWS INIJFRNALRA IF, OF RETURN 13,70%/ tITbAlFmillion) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Net income aftertax 972 1.630 348 1.057 522 745 l.892 121 1.582 2.617 3.814 4.670 D)epreciation andSlNAR 1.561 929 819 819 1.241 1.254 1.839 1.784 1.065 985 905 975 P'rovisions 232 (71) 159 159 4l (71) 159 60 4l1 (71) 159 60 expenses Interest 265 192 306 306 222 182 141 101 61 20 10 lO Investment (ISO) (ISO) (ISO) (900) (650) (650) (I.1I50)(250) (250) (250) (250) (1.000) Variation ofshort-term financing 752 752 605 (117) (104) (117) (179) (224) (246) (246) (249) needs Residuial value 10.975 Due toState from1993convention(3.032) IMPACT OF DEVALUATION ___ (1.169) 650 (528) (206) (161) 59 232 74 (19 (5 3.827 CASII-FL1OW before debtservice (152) 561 2.884 1.142 1.054 1.195 3.602 2.256 2.632 3.223 4.667 14.219 Dcbt serice (Interest +Capital) (318) (1042) (1.319) (993) (950) (910) (868) (828) (788) (442) (120) (120) CASI I-FLOW afler debt service (470) (481) 1.565 149 104 285 2.734 1.428 1.844 2.78l 4.547 14.099 Short-termnfinancingnceds I3.381 7.399 6.021 4.941 5.148 5.338 5.559 5.936 6.371 6.849 7.328 7.813 77  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 16: Key Financial Data and Timetable for Privatization of CAMSHIP and CAMTAINER II. CAMTAINER.Key FinancialData With Conversion of Arrears Cash-flow stiatmnt Ju_ 93 1993/94 194195 1995/96 1996/97 1997/91 199/99 1999/00 2000/01 2001102 2002/03 JuIL 03 Cah-Flow beforedebt 42 334 132 87 181 -221 303 531 266 29B 315 1888 Own resources 0 iterest expenta 0 .31 -16 -8 -2 0 0 0 0 0 0 Anean DEGOIFU (93-94) 290 0 Debt service -293 -234 -347 -77 49 0 0 0 0 0 0 Netaslh-flow 39 69 -181 2 130 -221 303 531 266 298 315 1888 Balace Shed Ju 93 1993/94 194/95 1995/6 1996/97 1997/ 199I / 1999/00 2000t01 2001/02 2002/03 Fixedas_s 541 338 431 602 737 1254 1210 948 979 994 1027 Acouintsreceivabk and 1299 1332 1770 1939 2059 2174 2284 2390 2492 2587 2685 inventories Minimum cash 150 152 199 228 243 253 262 274 287 298 312 Cuh in excess 39 291 297 305 434 213 517 1048 1314 1611 1927 TolaueLs/Iiabilities: 2029 2163 2697 3074 3473 3895 4273 4661 5072 5490 5951 Equities 777 946 1138 1462 1819 2151 2445 2751 3085 3430 3815 Mid-teFM debt 183 119 126 49 0 0 0 0 0 0 0 Accounts payable 1072 1097 1433 1563 1655 1744 1828 1910 1987 3060 2136 Net incoe/equity I 81% 1 89% 90% 97% 100% 100% 100% 100% 1000/o 100% 100% 78  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 17: Benefits Resulting from the Privatization of Transport Public Enterprises Impact of Restructuring on the Treasury CFAF US$ :__:__::___-__-__:::__i__:__-:___: (millions) (million) _ _ 1994-1995 Impact on Treasury of 94,352 171.5 Restructuring (a) Impact on Treasury wvithout 62,492 113.6 restructuring (b) Nct "Investment" in 31,860 57.9 restructuring (c) = (a) - (b) 1996-1998 Impact on Treasury of 27,297 49.6 Restructuring (d) Impact on Treasury without 60,369 109.7 restructuring (e) Net payback on investment 33,072 60..1 during 1996-98 (f) = (e) - (d) 1994-1998 Net payback as % of investment 103.7 (g) = (Of: (c) Impact on Treasury without 122.861 223.3 restructuring during 1994-98 79  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Impact of State Treasury of Restructuring Vs. Not Restructuring (Post Devaluation) US$ Million 1994 1995 Total 1996 1997 1998 Total Total 1994195 1996/98 1994/96 OR ALL TRANSPORT SECTOR PE. COMBINED ith Restructuring (93.6) (78.0) (171.5) (22.0) (17.3) (10.4) (49.6) (221.2) ithout Restructuring (79.9) (33.7) (113.7) (63.4) (25.9) (20.5) (109.8) (223.4) et Impacton State Treasury (13.7) (44.3) (57.9) 41.4 8.6 10.1 60.1 Yr. Paybackas a % of InitialNet Restructuring 103.8% Cost OR EACHOF THE FOUR LARGESTPEs OF THESECTOR AMA[R ith Restructuring(High Case) (25.1) (38.1) (63.3) (3.5) (2.0) (2.0) (7.5) (70.8) ithout Restructuring (20.5) (9.3) (29.8) (9.9) (10.7) (12.0) (32.6) (62.4) et Impacton State Treasury (4.6) (28.8) (33.5) 6.4 8.7 10.0 25.1 Yr. Paybackas a % of InitialNet Restructuring 75.0% Cost OTUC ith Restructuring (High Case) (11.3) (19.4) (30.8) (3.1) (2.7) (2.6) (8.5) (39.2) ithout Restructuring (2.6) (9.4) (12.0) (38.8) (2.7) (2.6) (44.1) (56.1) et Inpact on State Treasury (8.7) (10.1) (18.8) 35.7 0.0 0 35.7 Yr. IPayback as a % of InitialNet Restructuring 190.1% Cost EGIFERCAM itihRestructuring(High Case) (33.3) (24.3) (57.6) (10.1) (7.7) 4.4) (22.1) (79.7) ithout Restructuring (32.0) (20.5) (52.5) (11.8) (9.9) (6.9) (28.6) (81.1) et Impacton State Treasury (1.3) (3.9) (5.1) 1.7 2.2 2.5 6.5 Yr. l aybackas a % of Initial Nct Restructuring 126.0%% Cost AMSHIP/SIMAR AMSH1P ct Impactof Restructuring Iready Initiated by Govt. (21.3) 7.7 (13.6) (1.0) (0.8) 1.5 (0.2) (13.8) IMAR (Note I) ct Impact of SIMAR Restructuring 0.0 (2.2) (2.2) (2.2) (2.1) (2.1) (6.4) (8.6) Note 1: SIMAR, a 27% real estate subsidiary of CAMSHP, is insolvent; CAMSHIP is liable for its pro rata share of SIMAR debt. 80  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Impact of State Treasury of RestructuringVs. Not Restructuring (Post Devaluation) CFAF Million 1994 1995 Total 1996 1997 1998 Total Total 1994/95 1996/98 1994/96 OR ALL TRANSPORTSECTORPEsCOMBINED ith Restructuring (51,460) (42,892) (94,352) (12,075) (9,498) (5,724) (27,297) (121,649) ithoutRestructuring (43,948) (18,544) (62,492) (34,851) (14,224) (11,294) (60,369) (122,861) et Impacton State Treasury (7,512) (24,348) (31,860) 22,776 4,726 5,570 33,072 Yr. Paybackas a % of Initial Net Restructuring 103.8% Cost OR EACHOF THE FOUR LARGEST PEs OF THESECTOR AMAIR ith Restructuring(i-igh Case) (13,832) (20,958) (34,790) (1,910) (1,110) (1,111) (4,131) (38,921) ithoutRestructuring (11,290) (5,098) (16,388) (5,434) (5,887) (6,609) (17,930) (34,318) et Impacton State 1Treasury (2,542) (15,860) (18,402) 3,524 4,777 5,498 13,799 Yr. Paybackas a % of InitialNct Restructuring 75.0% Cost OTUC ith Restructuring(ligh Case) (6,221) (10,697) (16,918) (1,713) (1,484) (1,452) (4,649) (21,567) ithout Restructuring (1,442) (5,152) (6,594) (21,343) 91,484) (1,452) (24,279) (30,873) et Impacton State Treasury (4,779) (5,545) (10,324) 19,630 0 0 19,630 Yr. Paybackas a % of InitialNct Rcstructuring 190.1% Cost EGIFERCAM ith Restructuring(Iigh Case) (18,321) (13,384) (31,705) (5,538) (4,218) (2,396) (12,152) (43,857) ithoutRestricturing (17,619( (11,255) (28,874) (6,485) (5,452) (3,782) (15,719) (44,593) et Impacton State Treasury (702) (2,129) (2,831) 947 1,234 1,386 3,567 Yr. Paybackas a % of InitialNet Restructuring 126.0% Cost AMSHIP/SIMAR AMSHIP et Impactof Restructuring lreadyliiitiatedbyGovt. (11,716) 4,217 (11,716) (548) (413) 845 (116) (11,832) [MAR(Note 1) et Impactof SIMARRestructuring 0 (1,202) (1,202) (1,187) (1,177) (1,168) (3,532) (4,734) Note 1:SIMAR,a 27% real estate subsidiary IIP,is insolvent;CAMSHIP of CAMSI is liable for its pro rata share of SIMARdebt. 81  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedtile 18: Action Plan and Timetable for the Transit Component of the UDEAC Transport Reform Program To be implemented from a date to be determined Ist quarter 2nd quarter 3rd quartcr 4th quartcr Meeting of the Rcgional Starting technical assistancc Mecting of the Regional Committee Committee provided to the National Committees Choice of one or twvopilot intenational .Agreement on intemnational itinieraries to implement the TI'PAC itineraries system on the basis of the outcomiiesof Assessment of Nationlal Analysis of proposals tasks carried out during the thiird quarter Committees Choice of the typc of logbook .Distribution of Manual of and guarantee documents. Procedures for TIPAC, training and discussion Analysis of proposals made by specialized consultants and Missions of specialized I. Facilitation: TIPAC logbook technical assistants consultants 2. Telecommunication 2 I Definition of messages .Adjustment of national 2 2 Choice of tectnical regulatory frameworks alternative 2.3 Procedures 3. Preparation of the guarantee system. Ilrofessionals aspects. 4. Implementation of the guarantee system. Customs aspects 5. Technical agreement of vehicles 6. Hamtonization of transport regulatory framework 7. Road user charge._________________________________ 5th quarter 6th quartcr 7th quarter 8th quarter Meeting of the Regional Meeting of the Regional Committee Committcc . Assessmentfor the Progrcssivccxtensionto . Assessmentfor the implemcntationof the customs the cntire UDEAC implcmcntationof the duty guarantcc systcm customs duty guarantee systcm .Timetablefor further steps .Analysisof the need for complemcntarymeasures .Studyof arrangementsto be included in the UDEAC legal documcnts 82  REPUBLIC OF CAMEROON TRANSPORT SECTORTECHNICAL ASSISTANCE PROJECT Schedule 19: Implementation Schedule of Transport Sector Reform Program 1994 ins 1996 19 N D I M AlMI A SO1 INID I F IM A IM IJ J A I S ] N7 ID J F MA PA J J AM INID SOTITC CMUICAMFTAINER of rtha Apporo ,tei fiosocrl mdvso-- f. Prrd.4p-rar,o ddo dosoooso ,,: tir osoofsre + Drof rosatmot tosoageoPes= 4-....-. pi.o fortoooro DraBf f .e.odt sta! ~Ygif C-___ lb, I--'1 1 D,osolcoo fo seplr. ofdebts sd tre PTertos-to f rdrdeostt 1rosuor p-de o costfl for .- f Usyoy- Tre1sterof. motors bs~ flprtoemo ofeicoes o to~sotoper- sroor [sriseth-drroO pI of debs mod oosmo P-dsl~rs or ,g- ggd CRqreto otbaiddipdcoie I,;,ttt poouroIIrteetoofrtooosrorrowmt Htsal P s o s- rtroo etsmdsorr S,ptd~stoealofc'eeso iecrsro ~et To-o-oosti ofrrsodor h ot -I f.-__h _ .d PAotsIENtE (R. L._t7__ irestmfre* Read-,vhMtfdy FropSTRLotofrirjrirtiap doSojeooI ~ Itiritiog_procedure~ ~ ~ ~ ~ ~~~8  REPUBLIC OF CAMIEROON TRANSPORT SECTOR TECBNICAL ASSISTANCE PROJECT Schedule 19: Implementation Schedule of Transport Sector RefbormProgram 11994 1 1995 199 17 ID IJ IF IM |A |M I IJ | |S 1° |N ID J IF |M A |M IJ IJ |A 15 1° IN |D J IF IM |A IM |J IJ|A IS |O IN ID RESTRUrRiNGOFMINISTRY OFRANSFORT 1|rT1rrTTr : TrLIr_ r11 nPOeRTc rnJr ********== =___ Si_e ql*U f tr s_____ _______ ___X_C HDtridr* p-d.d. toin- _--_- d .i& .- .. . .w L.X 1'_S 17_ -"|--:a - - --- = t TASOT FRAMEWORKC REUtATORY = t|_===== t |llwyibn oir l nils1 _____ ___ ll _ll_ R4-1<=<=== IVc I 1.,y ~k_I Pr-. ~ ~ .. = t f=III- 1== o,b Slldynl dl IIn =w===X=_ # Rao- d rrb Pirg ofU i, u d-m r 19941 - rI II II I I I R.- of_cX[ d- 11 _k _d 1 _-__' _ -tt,, f. ft I I ivi~~~~8  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 20: Expected Results and Timing for Key Projects Activities Government Scctor Expected Results Tiniing Targets Responsibic Objectives Agency Implementation of CAMAIR Creation of a new civil aviation company. Privatization of December 1996 Ministry of the first phase of this company through: a management contract with dcferrcd Finance and MINT the Transport privatization option or option. Sector Reform Selection of the management tcam l'rogram: P'rivatization or REGIFERCAM Privatization of railway services for the concession April 1997 Ministry of liquidation of agreement. Selection of the concessionary company. Financc and MINT priority transport sector SOTUC Company liquidated. October 1995 Ministry of public enterprises. . Finanec and MINT CAMSHIP Saleof public participation in the equity or liquidation. November 1995 Ministry of Financeand MINT CAMTAINER Saleof public participation in the equity or liquidation. October 1995 Ministry of Adoption of restructuring plan. November 1995 Finance and MINT MINT Adoption of restructuring plan. Novcmber 1995 Ministry of Civil MINT restructuredto focus on planning, regulation and lune 1996 Serviec and MINT policv. IPreparationof Road Adoption of restructuring plan. November 1995 Ministry of Civil following phascsof Maintenance MINTP restructured by shifting road maintenance execution June 1996 Service and the Transport from force accountto private contractors. MINTP Sector Reform Bids launched for exccutionof the road maintenancework November 1995 MINTP Plrogram program. Pluri-annual road maintenanceprogramming system Septembcr 1995 idem implementedin MINT P. Sustainabiefinancing mechanismfor road maintenanec. July 1995 idem Plort Decisionon organization for dredging. December1995 MINT and ONI'C Operationaland financial restructuring of the management of June 1996 idem the Port Authority. Implementationof an efficiency-drivenorganization for July 1995 idem dredginit. 1Transit Customscomputerizedinformation systemrclocatcd in a February 1996 Ministry of facilitation safeccnvironment. Financc Bids launchedfor systemrewriting/purchase. January 1996 idcm MATGENIE Company rcstructuredand preparedfor privatization. Junc 1996 Ministry of Financc and MINTP LABOGENIE Companyrcstructured and preparedfor privatization. June 1996 Ministry of Financc and MINTP Maritimc Legal documcntsapprovcd for the rcstructuring of the Deccmber 1995 MINT transport Shippers'Council. Lcgal documcnts approvedfor the liberalization of maritime June 1995 MINT transport. Urban Legal documcnts approvedfor the liberalization. Junc 1995 MINT transport Air transport Legal documcnts approvedfor the liberalization. Junc 1995 MINT Road and rail Lcgal documcntsapproved for the liberalization. JIune 1995 MIN T transport PlIP Plromulgationof the Loi de Financcs"including a lPublic Scptember 1995 Ministry of Investmcnt Program for public works and transport. Scptember 1996 Financc, MINTand Scptember 1997 MINTIP 85  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 21: List of Project Activities and Procurement Procedures Activity Cost Donor Procurement US$'000 Method Support to Institutional Development Mh Strengthening of the unit in charge of privatization in MINEFI 212 IDA* SS Strengthening of the unit in charge of privatization in MINEFI 215 IDA* SL Financial advisor for the privatization of CAMAIR 913 IDA SL Financial advisor for the privatization of CAMSHIP and CAMTAINER 266 IDA SL Financial advisor for the privatization of REGIFERCAM 589 IDA SL Liquidator of SOTUC 187 IDA* SL Assistance to the monitoring committee for the liquidation of SOTUC 65 IDA* SS Financial and operational management of ONPC 267 IDA SL Restructuring of MATGENIE 129 IDA SL Restructuring of LABOGENIE 129 IDA SL Support to the coordination of road maintenance activities 26 IDA SS Support to the organization and financing of rural road maintenance 71 IDA SL Support to the restructuring of CNCC 43 IDA SL Short-term assistance to the TICU 137 IDA SS Assistance to MINT 815 FAC Support to implementation of TIPAC 1,671 EU Assistance to regional committees 308 EU Assistance to national committees 3,493 EU Support to the coordination of road maintenance activities 177 EU Restructuring of MATGENIE 214 EU_ _ Restructuring of LABOGENIE 1 | 146 EU Sub-total 10,073 l Institutional Development Studies Restructuring of MINTP 399 IDA SL Organization of dredging 90 IDA SL Creation of a Road Fund 57 IDA' SL Simplification and harmonization of the road tax system 143 IDA* SL Capability of local transport consultants 13 IDA SS Operational and financial management audit of CAMAIR 270 IDA* SS Institutional study of urban transport 66 IDA* SL Plan of action for road safety 35 IDA SL Restructuring of MINT 251 FAC Reduction of Douala port costs 143 FAC Sub-total 1,467 Policy Support I Support to urban transport privatization and liberalization 84 IDA* SS Regional logistic costs study 155 IDA SL Transport sector review 87 IDA* SS Legal adviser for the liberalization of air transport 58 FAG Legal adviser for the liberalization of maritime transport 96 FAC Sub-total 480 86  Activity Cost Donor Procurement US$,000 | Method Project Preparation Support to the irrprovement of the custors conputerized information system j 159 IDA Relocationof the customs computerizedinformation system 319 IDA SL Study of insurancesystem and organizationof the TIPAC 159 IDA SL Establishmentof a prograrnimngsystem for earth road maintenance 583 IDA* SL Mitigation plan for environmental issues in road maintenance j 20 IDA Sl Engineering studies of a priority earth road maintenanceprogram 298 IDA SL Engineering studies of a priority paved road maintenanceprogram 638 IDA SL Feasibilitystudies of the program of rehabilitationof he railway track | 60 IDA SL Feasibilitystudies of the railway telecorrnunication program ! 1521 IDA SL Continuation of computerization of vehicle certification 652 IDA Pilot operation for monitoring loads of trucks 187 IDA Engineeringstudy for the rehabilitation of ONPC's dredger 53 IDA SL Study for the relocation of the dry-yard ! 126 IDA SL Analysis of dredging materials 42 IDA Sl Audit of transport public enterprises 441 IDA SL Establishrnentof project accounting j 68 IDA SL Project audits 114 IDA* SL Project accountant in the Transport Interninisterial CoordinationUnit 11 IDA Ss Monitoring of bridges' condition 102 FAC Creation of a road data base I 75 FAC Establishmentof a programrningsystem for paved road maintenance 523 BMZ _ Sub-total 4,782 I Training and seminars _ Roadmaintenance initiative 7 IDA^ SS Supervision of roadmaintenanceworks 1 288 IDAj SL Procurerrent for roadmnaintenance 18 5| IDA| SL Transport lnterrrinisterial CoordinationUnit 93i IDAI Environmental issues in road maintenance 96F IDA! SL Young professionals program 163 IDA Ss Training for the civil aviation sector 62 FAC Training for the maritime sector 1 94 FAC Training for the meteo sector 19 FAC Othertraining 471 FAC Semnar on the liberalizationof urban transport 96 FAC Serrinarof MINTrestructuring 57 FAC Irrplermentation of TIPAC 370 EU Sub-total 1,577 Goods E Vehicles 111 IDA LCB Corrputers 101 IDA LCB Creationof a road documentation center 90 FAC Shopping Office supplies 103 FAC Teleconrnunicationequipmrent 899 EU Sub-total 1,304 OperatingCosts Road-show for the privatization 81 IDA Ss Supportstaff in CoordinationUnrt 54 IDA SS Operatingcostsof TICUunderPPF 99 IDA* Shopping Operatingcostsof TICUafterprojectlaunch 207 IDA Shopping Supportstaff in TICU , 80 FAC Sub-total 5211 TOTAL 1 20,2031 l Costs include physical and price contingencies _ SL: Short-list; SS: Direct contracting; LCB: Local corrpetitive biddingF IDA*: Activities completed or or-going under PPFfinancing. I 87  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 22: Guidelines for Preparing Training Activities 1. Participation of Local Counterparts in Studies. Training activities should aim at making trained staff capable of using in their position the experience gained through participation in studies. This objective will be included in the terms of reference of consultants. Training will be carried out either through the execution of specific tasks by the local counterparts according to terms of reference, or through more formal training carried out by the consultants to explain the methodology and tasks carried out under the study. A report will be prepared by the counterparts for tasks executed by them. Consultants' proposals should include the time necessary to train counterparts during execution of studies, and the corresponding budget. Training efficiency will be assessed during the discussions and seminars held during project execution, where counterparts will have to present conclusions and recommendations of studies. Counterparts will also have to prepare summaries of studies. The project coordinator will monitor resources allocated to training. 2. Preparation of Training Activities. During project execution, training activities should aim at increased staff productivity and ability to deliver services. Training will be defined after identifying tasks and responsibilitiesthat ministry staff or group of staff are not able to execute or fulfill because of lack of competencies. The training program should be designed to respond to: (a) Individual staff needs. Such training activities should be limited because of their cost and the difficultyof clearly identifying training requirements and priorities. (b) Group needs. This maximizes the productivity of resources invested in the program, and should be the priority. 3. Training sites should be first in the country of the Borrower, either on the work site, or in local training centers. When training requirements cannot be achieved in the country, training should be considered in a regional training center, and, as a last resort, in another continent. In the latter case, it should be clearly demonstrated that the training is in accordance with project objectives, and does not interfere with work execution and responsibilitiesof trained staff during project execution. 4. Training plans will be prepared for one year, and submitted to the Bank as well as their cost, for no-objection at least one month before they start. Per diem will be paid on the basis of UNDP tariffs. The Government will bear the balance in excess with actual expenditures. 88  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 23: Detailed Project Costs 1. Base Costs CFA million US$'000 Project Component Local Foreign Taxes Total Local Foreign Taxes Total 1. Goods 113 482 251 845 219 936 487 1,642 2. Consultant Services and Studies (a) Support to 1,250 3,728 821 5,798 2,427 7,238 1,595 11,259 Institutional Development (b) Institutional 180 546 119 845 349 1,060 232 1,641 Development Studies (c) Policy Support 47 189 39 275 92 367 76 535 (d) Project 889 1,423 382 2,693 1,726 2,763 741 5,230 Implementation and Preparation 3. Training and Seminars 221 564 130 915 430 1,095 252 1,777 4. Operating Costs 129 128 47 304 250 248 92 590 Total 2,829 7,059 1,790 11,678 5,493 13,707 3,475 22,675 2. Costs Including Contingencies CFA million US$'000 Project Component Local Foreign Taxes Total Local Foreign Taxes Total 1. Goods 134 538 283 955 260 1,045 549 1,854 2. Consultant Services and Studies (a) Support to 1,354 3,833 856 6,043 2,630 7,442 1,662 11,734 Institutional Development (b) Institutional 192 564 125 881 373 1,095 242 1,710 Development Studies (c) Policy Support 51 196 41 287 99 380 79 558 (d) Project 978 1,485 406 2,869 1,899 2,883 789 5,571 Implementation and Preparation 3. Training and Seminars 238 573 134 946 463 1,113 260 1,836 4. Operating Costs 138 131 50 319 268 254 98 619 Total 3,086 7,319 1,895 12,299 5,992 14,211 3,679 23,882 89  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 24: Implementation Schedule Activity Start of Activity * End of Activity Support to Institutional Development Strengthening of the unit in charge of privatization in MINEFI April 1995 April 1996 Financial advisor for the privatization of air services January 1995 December 1996 Financial advisor for the privatization of railway services January 1995 April 1997 Financial advisor for the privatization of CAMSHIP/CAMTAINER January 1995 November 1995 Liquidator of SOTUC December 1994 October 1995 Assistance to the liquidation monitoring committce January 1995 January 1996 Reorganization of operational and financial management of ONPC April 1995 September 1996 Restructuring of MATGENIE April 1995 June 1997 Restructuring of LABOGENIE April 1995 June 1996 Support to coordination of road maintenance activities April 1995 April 1996 Institutional Development Studies Financial and operational evaluation of CAMAIR December 1993 July 1994 Restructuring of MINTP June 1994 September 1995 Restructuring of MINT March 1995 September 1995 Studv of dredging reorganization March 1995 November 1995 Study of a Road Fund Fcbruary 1995 June 1995 Support to organization and financing of rural road maintenance April 1995 December 1995 Study of the Road taxation system June 1994 December 1994 Studv of road safety March 1994 September 1994 Institutional study of urban transport October 1993 March 1994 Capability of local consultants April 1995 June 1995 Reduction of transport costs at Douala port June 1995 December 1995 Policy Support Assistance to the liberalization of urban transport February 1995 July 1995 Studv of the costs of the international chain of transport March 1995 January 1996 Scninars on the restructuring of CNCC January 1993 December 1994 T'ransport sector review and short-tcrm missions of experts March 1991 June 1994 Project Implementation and Preparation Audit of the computerized customs information system June 1995 February 1996 Relocation of the computerized customs information system July 1995 February 1996 Study of the insurance system April 1995 December 1995 Earth road maintenancc programming study June 1994 September 1995 Paved road maintcnancc programming study January 1995 June 1995 Environmental considerations in road maintenance w,vorks April 1995 September 1995 Detailed engineering studies of a road maintenance priority program June 1995 November 1995 Analysis of dredging materials March 1995 October 1995 Study of the relocation of the dry-dock March 1995 December 1995 Study of the port dredger's rehabilitation March 1995 October 1995 Continuation of computerization of vehicle certification March 1995 June 1996 Pilot operation to monitor loads of trucks June 1995 October 1995 Projcct accountant in TICU April 1995 March 1997 Audit of public cnterprises April 1995 December 1995 Project audits April 1995 June 1998 Establishment of projcct accountings September 1995 December 1995 * includes procurement 90  REPUBLIC OF CAMEROON TRANSPORT SECTOR TECHNICAL ASSISTANCE PROJECT Schedule 25: Supervision Plan Activity Skill Staff- Weeks Headquarters Mission 1995 Procurement Privatization specialist 0.5 Semester I Review of Port specialist 0.5 1.0 activities' progress Road maintenance specialist 0.5 1.0 Civil aviation specialist 0.5 Railway specialist 0.5 Transit transport specialist 0.5 Project management 5.0 1.0 1995 Procurement Privatization specialist 0.5 Semester 2 Review of Port specialist 0.5 activities' progress Road maintenance specialist 0.5 Civil aviation specialist 0.5 1.0 Railwav specialist 0.5 1.0 Transit transport specialist 0.5 Project management 5.0 1.0 1996 Procurement Privatization spccialist 0.5 Scmcster I Review of Port specialist 0.5 1.0 activities' progress Road maintenance specialist 0.5 1.0 Civil aviation specialist 0.5 Railway specialist 0.5 Transit transport specialist 0.5 Project management 5.0 1.0 1996 Revicw of Privatization spccialist 0.5 Scmester 2 activities' progress Port specialist 0.5 Road maintenance specialist 0.5 Civil aviation specialist 0.5 1.0 Railway specialist 0.5 1.0 Transit transport specialist 0.5 Project management 3.0 1.0 1997 Review of Project managcment 3.0 1.0 Semester I activities' progress TOTAL 33.0 13.0 91  UDEAC REGIONALPOLICYREFORM PROGRAM TRANSPORT COMPONENT FACILITATION Infrastructure Communication Links )ORDCHAD C NJ (s Ewf ~CENR C r oO5v C ULIC \+t~~~~RICA bo) ;.nde \ i ^ ER. NE M 1992 LibrevilltN 7 FortC CNGO o ABON o,\Bterazzaville/r MAJOR ROADS () NATIONAL CAPITALS - -.... RAILROADS INTERNATIONAL BOUNDARIES RIVERS =s MAJOR PORTS November1 992  RMALI LakeChad BURK A ' HAD II,,, ea a,,, PASO .,P- pE- beT Wd'pd Ba. , WE. NIGERIA 7 I,.a - td le., ,-f CENTRAL AFRICAN -- wape,pl, -lh .. I \ CHAD GOINOTOAL - ON G ZAIRE AT..AT.IC OCEWAN GSNJ~,IN O a CAMEROON . MoLol Aag.o PRIORITY ROADNETWORK )- PAVED ROADS> al PAVEDROADS SELECTED TOWNS /1 - PRIORITY I 0~~~~~~PROVINCE CAPITALS - PRIOR TY 2* NATIONAL CAPITAL) - PR,ORITT 2 UNPAVED ROADS Pal, ~ ~ M, ~,DI,erdloaE - RAILROADS ole PRYNCR BOUNDARIESI -.- INTERNATIONAL BOTINDAR ES (9Mage E'I- / IpOEP, *,S ~~NGOAUNDERT E__ aTJO-be 8-*Pap M.yoaba aoa NIlGERIA W ED"-Tba I Np D~~3,oPa6 ~- AFRICAN - -- RARO~~~usSA -REPUBLIC ~~fI~ \ NkAoasoneaa opN-9. Narga eloboB.fi b ~~~~~~~ ~~~~~~~~~~~Aban.NeIg \G-ey..I. DOULALA /SCNEpMa EQUATORIAL GUINEA y bkaa - ,- ob - TOEDWA 0 EB~~~Ep aaeoa - - 5,o ATLANTIC OCEAN M.1 -. ... EQUATORIALl;AO GUINEA GABO  MALI - - F L,,L,e Ch,od NrOEB ~~~~~SUDAN PURI7rNA ' / /CHAD T h, .,p ,ssLw1prsMe ""5' 0i' eey r LNBttFVeI 'lo rI NIGERIA K ,, ,4y - n p,,roIo, \GpAIlry o /U ~ 2 CENTRAL AFRICAN w REPUBLIC . ,,I hI, ALAF Il, * )CAMEROON / -- r * ROLLR{ (ThAF) EQIUATORARE JL GUrNLA /CONGO ZAIRE . . GABON O CAMEROON PRIORITY ROAD NETWORK ong EARTH ROADS , _e EARTHROADS SELECTED TOWNS \f RO,rA |EPRIOR Tr I ®3 PROVINCE CAPITALS PRIORITY 2 NATIONAl CAPITAL PR,ORITY 3 EARTH ROADS OUTOf PRIORITY NETWORK j PAVED ROADS LV RAILROADS RIVERS PRCOSNCE BOUNDARIES EKo-Ic1 Th.oANO INTERNATIONAL BOUNDARIES / , . 9."g.~7 . / WJT ~~~~~~~~~. / 1SoFy oIcbA Aose,SoAI . Nben\g NA_ >s hoen DU2g >S, I RACO, YCENITA.L Pol,bor Nd ,o,n,2>. / Ng ,A .' JT RAFOUSSAM NAoROuA ( AF{ RICANl tX 1 ,. / /f) !0' - Nd ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~AA Ng 11 [ogneh( OLEAN r_________________\ __,.,.____ _ _ / ______ ~ __ Ebay * ~ ~ _ r - - X-.h,,, ,EQUATORIA!L7 U EQUATORIALLJTOFIA ,E GUNEA \ Fj ~ nou (:2 ( ~~~~~~~~~~~~~~~~~~~~~~~~. I BO I Or 0 . -