Niger - Highway Maintenance Project

RESTRICTED Report No. TO-649a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A HIGHWAY MAINTENANCE PROJECT NIGER August 27, 1968 Projects Department  CURRENCY EQUIVALENTS Currency Unit - CFA Franc (CFAF) CFAF 247 = US$ 1.00 CFAF 1 = US$ 0.004 CFAF 1, 000, 000 = US$ 4, 050 Fiscal Year: October 1 to September 30 Units of Weights and Measures: Metric Metric: British/US Equivalents 1 kilometer (km) = 0. 62 miles (mi) 1 meter (m) = 3. 28 feet (ft) 1 hectare (ha) = 2.47 acres (ac) 1 liter (1) = 0. 22 gallons (Imperial) = 0. 26 gallons (US) 1 metric ton (m ton) = 2204 pounds (lbs)  NIGER APPRAISAL OF A HIGHWAY MAINTEXANCE PROJECT TABLE OF CONTENTS Page SUIIARY i 1. INTRODUCTION 1 2. BACK.GROUNTD 2 A. General 2 B. The Transport System 2 C. Transport Policy and Coordination 3 3. THE HIGHTWA+Y SECTOR 5 A. The Highway Network 5 B. Characteristics and Growth of Road Traffic 5 C. Highway Administration 6 D. Highway Financing and Planning 7 E. Highway Construction 8 F. Highway Maintenance 8 G. Equipment Division 9 4. THE PROJECT 10 A. Description 10 B. Cost Estimates and Financing 13 C. Execution 1 5. ECONOMIC JUSTIFICATION 16 6. CONCLUSION4S AND RECOM4ENDATIONS 21 This report has been prepared by Messrs. Abbate, Ludwig and Thalwitz.  Table of Contents (continued) Annex: Identification of Roads for Feasibility Studies Tables: 1. Highway Classification in 1967 2. Length and Classification of National Roads, 1967 3. Road Transport Fuel Consumption 4. Vehicle Fleet 5. Vehicle Fleet; New Registrations 6. Expenditures for Highways 1964/65 - 1966/67 7. Estimate for Consulting Engineers' Services 8. List of Maintenance Equipment to be Procured and Cost Estimate 9. Improvement of lWorkshops and Workshop Equipment to be Procured 10. Cost Estimate 11. Estimated Vehicle Operating Costs 12. Traffic, Construction Cost and Vehicle Operating Cost for Specific Roads 13. Cost Functions With and Without the Project 14. Minimum Total Future Transport Costs With and Without the Main- tenance Project Chart: Organization of the Directorate of Public Works Maps : 1. Road Network - 1967 2. Highway System Schematic Lay Out - 1964 List of Abbrew!xations Used in Report DPW: Directorate of Public Works BCEOM: Bureau Central d'Etudes pour les Equipements d'Outre-Mer SEDES: Societe d'Etudes pour le Developpement Economique et Social FAC: Fonds d'Aide et de Cooperation UNDP: United Nations Development Programme OCDN: Organisation Commune Dahomey - Niger FED: Fonds Europeen de Developpement PNIWA: Permanent Mission to West Africa SCET/COOP: Societe Centrale pour l'Equipement du Territoire/ Cooperation  NIGER APPRAISAL OF A HIGHWAY MAINTENANCE PRDJECT SUMARY . E The Government of Niger has asked the International Development Association to help finance a project consisting of: (a) a four-year program to improve highway maintenance, and (b) feasibility studies for about 300 km of roads, with subsequent detailed engineering of about 150 km found to be of highest priority. ii. In 1964, the Association made a credit of US$1.5 million (Cr. 55- NIR) to Niger for engineering and construction of about 60 km of roads which are about 75 percent complete. In 1965, the Bank made a technical assistance grant of us$85,o00 to help finance a road maintenance study which has re- sulted in the project for this credit. iii. The four-year maintenance program provides for the elimination of the backlog of deferred maintenance, the improvement of maintenance operations, the training of local personnel, the purchase of maintenance and shop equip- ment, and the extension of woukshop and stores. IDA will finance 97 percent of the foreign exchange cost of the programts capital expenditures and the French Fonds dtAide et de Cooperation (FAC) the balarnce. IDA will also finance a smaell amo=it of the local corst for consulting services. The total capital expenditures of the program are estimated at US$8.13 million, of wVrich 67 percent will be financed by IDA (US$5.49 million), 2 p.:rcent by FAC and the remainder by the Government, which will also finance all the recurrent cost during the program period. iv. The estimated benefits of the maintenance project are savings in vehicle operating costs and reduction in routine mainLenance expenditures. They yield an adequate economic return which is in excess of 10 percent. v. The pre-investment studies will be carried out by the French con- sulting firm Societe Centrale pour l'Equipement du Territoire/Cooperation (SCET/COOP). IDA will finance the foreign exchange cost of the consultants' services estimated at US$630,000 out of a total cost of US$820,000. These studies could lead to a construction project suitable for subsequent IDA financing. vi. The Directorate of Public Works (DPW) will be responsible for the project. It will be assisted in the implementation of the maintenance program by the French consulting firm Bureau Central dFEtudes pour les Equipements d'Outre-INer (BCEON). vii. The project is suitable for an IDA credit of US$6.12 million equiva- lent to the Government of Niger.  NIGER APPRAISAL OF A HIGHWAY MAINTENANCE PROJECT 1. INTRODUCTION 1.1 In 1964, an IDA credit of US$1.5 million (Cr.55-NIR) was made to the Government of Niger for the engineering and construction of two small road sections (totalling about 60 km in length), serving mainly the export of groundnuts. The mission that appraised that project concluded that maintenance of the entire road system was inadequate and that consultants should be engaged to prepare a maintenance program. In July 1965 the Bank made a technical assistance grant of US$85,000 to help finance the mainte- nance study. This was undertaken by ,the French consulting firm, Bureau Central d'Etudes pour les Equipement d'Outre-Mer (BCEOM), and completed in February 1967. In May 1967, the Government submitted a request to IDA for assistance in financing a four-year road maintenance program which was based on the BCEOM report. 1.2 This program is the subject of the proposed credit. During the appraisal, the nission was given a recent study carried out by another French consulting firm, Societe dtEtudes pour le Developpement Economique et Social (S-DES), financed by FAC, on future highway construction in Niger and the Government requested it to review the roads which the report showed had high economic priority with a view to further IDA financing. A mission from the Bank's Permanent Mission to West Africa visited Niger in March 1968 and identified about 300 km of roads for feasibility studies out of which about 150 km of high priority roads are likely to be economically jus- tified and might be suitable for subsequent detailed engineering. These pre-investment studies have been included in the project. 1.3 The project financed under Credit 55-NIR is about 75 percent com- plete. Work is on schedule and is expected to be completed in late 1968; performance is satisfactory. 1,4 This report is based on an appraisal mission consisting of Mr. Ludwig, engineer, and Messrs. Thalwitz and Abbate, economists, who visited Niger in September 1967. The mission received assistance from the Sector and Project Group and the Statistics Division of the Economics Department.  - 2 - 2. BACKGROUND A. General 2.1 Niger is a large land-locked country in the western part of Cen- tral Africa. With an area of 1,267,000 km it is about two and a half times the size of France. It neighbors are M4ali, Algeria, Chad, Nigeria, Dahomey and Upper Volta (see Map 1). 2.2 Most of Niger is a low plateau belonging to the Saharan or sub- Saharan desert. The population is estimated at 3.2 million and is growing at about 2.8 percent per annum. More than 80 percent of the population live in the extreme south along a narrow strip, ranging from 110-180 km in width, where the rainfall exceeds 350 mm per annum and the land is fertile. The vast northern desert area is inhabited by about 0.5 million people who are largely nomadic. Urban population is small. The capital, Niamey, has a population of only 80,000 people while Zinder, the second largest city, has 25,000. The growth of these small urban centers, however, is accelerating; the population of Niamey is expected to approximately double by 1975. 2.3 The economy depends mainly on agriculture consisting of livestock in the north and field cultivation in the extreme south. The major cash crop is groundnuts, with cotton and rice being of secondary importance. The few, small industrial plants in the country are engaged mainly in the pro- cessing of agricultural products and raw materials. A cement plant was re- cently built and other factories to produce such consumer goods as textiles, beer and soap, have been started or are being planned. GNP per capita, esti- mated at $70 in 1961 rose to $80 in 1966. B. The Transport System a. General 2.4 Long distances both within Niger and between the country and the nearest ocean ports which are Cotonou in Dahomey and Lagos in Nigeria in- --'valve the Niger economy in heavy transport costs. The cost of transport, for example, between the sea and Niger accounts for 35 percent of the de- livered cost of gasoline (excluding taxes) in Niamey; about 25 percent of the coastal port FOB export price for groundnuts is accounted for by the cost of transport from Niger. The improvement of transport facilities in Niger's southern neighboring countries will reduce its external transport costs. In Dahomey, a United Nations Development Programme (UNDP) financed land transport study, for which the Bank is executing agent, is underway. This may lead to investments for the improvement of the main road in Dahomey between Cotonou-Parakou-lialanville. The alternative of a railway extension from Parakou in Dahomey to Dosso in Niger, for which a satisfactory economic justification has not yet been established, is also being investigated.  - 3 - 2.5 For internal transport the motor vehicle is the only significant modern transport mode; Niger has no railway. Navigation is possible by very small boats on the Niger River, but is of very little significance (para. 2.7). As a result, no issues of transport coordination exist (para. 2.9). Road transport, however, is hampered by the generally low standards to which highways have been built and by their inadequate maintenance. In large areas of the country transport by camel is still very significant. This is especially so in the sparsely populated desert and semi-desert areas where transport requirements are extremely limited. Although the "operating cost per ton/km for camels" is perhaps 3-h times higher than that of trucking, camel transport is the most economic means where the number of users and volume of freight are too low to justify the infra-structure costs of mod- ern highways. b. Highways 2.6 The highway network consists of about 7,300 km of roads of all standards. The riding quality of the bulk of the network is generally poor, and large sections are closed to trucks after heavy rains. The system is deteriorating as a result of an increasing maintenance backlog. Further details are given in paragraphs 3.1 and 3.2. c. Waterways 2.7 Although the Niger River passes through the country for about 500 kIn, river transport is insignificant. It is navigable only for a few months of the year, and the Malanville Bridge at the Dahomey border pre- cludes passage of barges of more than 500 tons. River transport by small unpowered craft therefore serves mainly local needs. d. Aviation 2.8 Due to the high cost of road construction over long distances in a sparsely populated country, air transport is growing, but its significance is still limited since requirements for the transport of high value com- modities are small. Internal passenger transport, mainly for administrators and tourists, is frequently provided by government aircraft. The capital, Niamey, is served by a modern airport which can accommodate the larger types of jet aircraft. In addition to this international airport, there are about 20 smaller fields and airstrips in the country. C. Transport Policy and Coordination 2.9 Transport policies are primarily designed to improve the efficien- cy of road transport. For this purpose, an eight-year road construction program has been developed by the DP-1, based on the SEDES report, which among other things envisages major efforts to ensure proper maintenance of the present and future highway system. Competition has been permitted to be the main regulator of the road transport industry within the country; it determines rates and the market share of individual enterprises.  - 4 - There are no restrictive regulations with respect to routes, distances, rates or quotas for the allocation of internal traffic. The transport industry and shippers are represented on a Govemment Committee which has the right to limit additions to the total fleet capacity on an annual basis (see para. 3.8). 2.10 Exports through Dahomey are regulated in accordance with an agree- ment between Niger and Dahomey. In 1959 the Organization Commune Dahomey- Niger (OCDN) was formed, as an organization serving the interest of both countries. OCDN operates the Cotonou wharf and the Cotonou-Parakou railway, and has the exclusive right to charter road transport for the evacuation of groundnuts from Niger to Parakou. The groundnut production areas from which exports must take the Dahomey route are determined at the beginning of every crop season. Groundnuts for export from other areas are usually routed via the Nigerian Railways to Lagos. The profits or losses of OCDN are shared in a proportion of 60:40 between the Dahomey and Niger Governments. OCDN freight rates are fixed at relatively low levels, originally to make the Dahomey route competitive with the Nigeria route. Recent events in Nigeria have led to a re-routing of most of Niger's groundnut exports through Dahomey and, as a result, eliminated the OCDN deficits of earlier years.  - 5 - 3. THE HIGHWAY SECTOR A. The Highway Network (Tables 1 and 2) 3.1 In 1967 the total length of the network of national roads in Niger was about 5,000 km. In addition to the national roads, there are about 2,300 km of local roads, most of which are ungraded earth roads and in many cases mere trails. The local authorities are responsible for the maintenance of these roads. 3.2 There are about 500 km of bituminous roads (about 200 km of these were still under construction at the end of 1967) including 17 km of city streets. Only the 10 km long airport road in Niamey has sufficient width of asphalt pavement (7 m) to permit two-lane traffic; the remaining asphalt roads have a one-lane pavement in the center of the roadway. About 45 per- cent of the national roads have laterite surfacing and the greater part of these are considered all-weather roads, but many are closed temporarily to truck traffic after each heavy rain. A further 45 percent of the natioflal roads consist of earthroads, most of them ungraded. These tracks are usable during the dry season only. B. Characteristics and Growth of Road Traffic 3.3 Road transport is the dominant form of modern transport, but traffic levels are still relatively low; they rarely exceed 50-60 vehicles per day outside the immediate surroundings of the urban areas. There are no reliable data available on the exact volume and growth of traffic before 1964. However, the available information on fuel consumption (Table 3) and the vehicle fleet (Table 4) suggests that traffic has grown rapidly during the last decade. Although these data are not entirely reliable and cannot serve to quantify exactly the growth of road transport, they indicate that traffic has possibly grown by as much as 10 percent per annum. ThIs is not unusual but it is not assumed that these rates of growth can be sustained over long periods in the future. 3.4 The firm BCEOM undertook a study, financed by the Fonds Europeen de Developpement (FED), in 1964/65 which provides comprehensive information on total traffic and its distribution over specific parts of the road network for that year. These results are based on extensive traffic counts and on origin- destination surveys. Total goods traffic amounted to 75 million ton-km of which about 43 million were aocounted for by traffic on the main road between Niamey and Zinder. Four comrindities, groundnuts, cotton, fuel and cement accounted for about 50 percere4 of all goods transport by road. The BCBOM traffic studies were ccntinued and expanded in a study financed by FAC and conducted by the firm S.PZ3ES iil 1967. This study also provided traffic fore- casts for individual roads. Column 2 of Table 12 showqs the present volumes of traffic, expressed in passenger car equivalents for the most important  I-6- sections of the highway system. During negotiations assurance was obtained that traffic counts and the collection of other relevant highway data will be undertaken in the future on a periodic basis. 3.5 Taking into account the estimated growth of population and GNP, and the production and export potentialof major commodities, total traffic can be expected to grow at an average rate of 6 percent per annum for a con- siderable period ahead. However, this overall rate hides considerable differences in the expected growth of traffic for specific roads. Table 12, Column 3 shows -the estimated growth rates for specific parts of the network. These range from 3 to 10 percent per annum as a result of local effects on the pattern of' production, demand and foreign trade. 3.6 Large differences exist also in the composition of traffic by varxous types of vehicles on different sections of the road system. 1ihile on some roads the proportion of trucks is as low as 20 percent, on other roads these account for 75-80 percent of total traffic. Load factors average about 50 percent although there are significant variations on par- ticular routes. 3.7 The age composition of the vehicle fleet is satisfactory. There has been a marked shift during recent years towards larger vehicles, with gasoline-powered trucks being increasingly replaced by diesel trucks. The Government has promoted the use of larger, diesel powered vehicles by reducing taxes on diesel fuel while gasoline taxes were raised. According to the first reliable census, undertaken in 1966, the total fleet had in December 1966 a load capacity of about 4000 tons of which about 30 percent is licensed for transport on own account only. One large company, whioh. is 51 percent government-owned,accounts for 700 t6ois of capacity or some 25 p6rcent oi the capacity of for-hire trucking. About 100 small operators, organized into a Syndicat des Petits Transporteurs account for the bulk of for-hire trucking cap 3.8 Licenses for additional capacity and its distribution between new and existing operators are decided annually by a Government committee. The census undertaken in 1966 showed that an apparent overcapacity of the fleet was the result of imperfect statistics. As a result, plans to impose additional capacity restrictions were cancelled. C. Highway Administration 3.9 The Directorate of Public 'Wlorks (DPwR) in the Ministry of Public W.orks, Transports, N4ines and Urban Affairs is responsible for the con- struction and maintenance of the national road network. Its organization is given in Chart 1. 3.10 An African engineer was recently made the Director of the DPIPI; most of the senior posts are held by French engineers under a Technical Assistance Agreement between Niger and the French Aid Agency, Fonds d'Aide et de Cooperation (FAC). FAC has recently confirmed that it will continue this agreement over the next four years.  - 7 - 3.11 The executive instrument for construction and maintenance of roads within the DPW is the Central Service for Roads and New Works (Service Central des Routes et des Travaux Neufs), headed by a Chief Engineer. The country is divided into three geographical diversions, which in turn supervise seven sub-divisions; the Chief Engineer is also responsible for the Equip- ment Division. 3.12 The seven sub-divisions are the real executive units in the field for construction and maintenance of roads. However, their activities are not confined to roads only; for administrative reasons they are also res- ponsible for construction and maintenance of government buildings, hydraulic engineering works, and water, sewerage and electricity; this does not pose administrative problems. D. Highway Financing and Planning 3.13 In 1966/67 total highway expenditures were CFAF 1,680 million, of ihich CFAF 1,210 million were for construction and CFAF 300 million for maintenance (Table 6). Contributions by road users amounted to about CFAF 610 million or about 36 percent of total highway expenditures. The rest was financed by foreign aid for construction projects mainly by FED, FAC, IDA and USAID. 3.14 Taxes through which road users contribute towards highway expen- ditures include: Gasoline Diesel (i) "droit fiscal" (fiscal fee) 6.00 CFAF/1 4.00 CFAF/1 (ii) "droit de douane"/"taxe statistique" (custom duties/statistical tax) 0.70 CFAF/1 0.20 CFAF/l (iii) "Taxe specifique" (specific tax earmarked for road fund) 11.00 CFAF/1 4.00 CFAF/1 (iv) "taxe sur le chiffre dtaffaires" 9% of retail 9% of retail (sale tax) price price The revenue from these taxes amounted to about CFAF 430 million in 1966. The total tax component of the retail price of gasoline in liiamey is about 40 percent, and for diesel fuel about 28 percent. While these ratios are lower than in Europe or some other African countries, it would be difficult to raise taxes appreciably since the economy is already burdened by the high cost of transporting fuel from the coast. 3.15 Import duties on vehicles, tires and batteries vary from 50 percent to 80 percent of CIF Niger value, according to item and country of origin; imports from EEC countries enjoy preferential rates. The revenue from duties on vehiclesand parts slightly exceeded CFAF 150 million in 1966. The revenues from registration and license fees, which in 1966 amounted to CFAF 30 million, are not very significant.  -8 - 3.16 On a generous interpretation that all revenues from taxes, duties and fees deriving from the use and ownership of road vehicles could be con- sidered as road user contributions, the total would amount to CFAF 610 million or 36 percent of total highway expenditures. The fact that receipts from road users in Niger do not meet total highway expenditures should not be viewed as a serious shortcoming. Niger's highway system is at an early stage of development, and any present investment necessarily creates reserve capacities. Road user taxes at a level to recover the full financial costs of constructing, maintaining and administering Nigerts highway system would be likely to inhibit economic development and affect the competitiveness of groundnuts hiich are its principal source of foreign exchange earnings. Thus, it would be unreasonable to charge present users with the full cost of the present investment program from which future traffic, expected to grow at a fairly substantial rate, will benefit. 3.17 A highway investment plan for the years 1968/75, based on a recently completed SEDES study, has been prepared by the Ministry of Public Works. The plan envisages investments of about uS$65 million equivalent spread over 8 years on the construction and improvement of 2,300 km of roads. However, the plan has not yet been approved by the Government and, accor- ding to the mission's findings, doubts remain about the economic justification and priorities of this large program. Therefore, the economic justification of specified proposed investments needs to be confirmed by proper feasibility studie E. Highway Construction 3.18 Highway construction works costing about US$14 million equivalent are underway or contemplated to start in the near future. The principle contributors are FED, FAC, IDA and USAID. F. Highway Maintenance 3.19 As stated previously (para 3.11) maintenance of the national high- way network is carried out by the seven geographical sub-divisions of the DPW. The local authorities are responsible for the local roads. Maintenance operations are costed in detail by the DPlq; no costing is carried out by the local authorities. 3.20 IIaintenance operations consist of reshaping, regravelling, repro- filing and eliminating "wiash board" surfaces and miscellaneous works such as clearing of culverts and side ditches. As far as possible these works are carried out by mechanized units. The timing depends on climatic con- ditions; reshaping and regravelling are impossible during the rainy season (June to September.) 3.21 Iaintenance techniques are satisfactory, but maintenance equipment and workshop facilities are in poor condition. Maintenance funds allocated to the DPW are inadequate and as a result the condition of the national road system has deteriorated. The laterite or selected soil wearing courses are  - 9 - worn partially or completely away because the lack of adequate equipment, skilled personnel and budget appropriations has not allowed the DPW to handle simultaneously and effectively current and periodic maintenance operations. Thus a considerable backlog of deferred maintenance has been created. 3.22 Road maintenance expenditures (Table 6) have increased steadily over recent years by 15 percent per annum in accordance with an obligation undertaken by the Government in Credit Agreement CR 55-NIR and an amount of CFAF 303 million (US$1.25 million equivalent) was budgeted for the fiscal year 1966/67. The consultants estimate that maintenance will be ade- quate when the allocations reach a level of CFAF 420 million (US$1.7 million equivalent) per annum after the backlog in deferred maintenance has been eliminated. G. Equipment Division 3.23 The Equipment Division is in charge of the central equipment pool, the workshops and stores in Niamey and their annexes at the divisional and subdivisional headquarters, and the maintenance, repair and overhaul of the equipment of the DPli. The equipment in the field is serviced and maintained by movile crews. 3.24 The operation of the Equipment Division is not effective. BCEOM found that the equipment is obsolete and average, it lacks uniformity in types and necessitates therefore an unnecessarily wide range of spare parts. The organization of the stores is chaotic and the spare parts stock is badly managed. Maintenance installations and shop equipment are insufficient and thus hamper effective repairs. Maintenance personnel have little skill and limited ability and large scale training at all levels is required. The lack of a mechanical engineer in charge of equipment maintenance has aggravated the situation; maintenance and overhaul of ecqipment are handled and supervised by an insufficient number of expatriate technicians. 3.25 The organization of the Administration and Accounting Division is unnecessarily complicated. The procurement procedure for spare parts is cumbersome and results in delayed repairs to broken-down equipment. All of above deficiencies will be remedied under the proposed project.  - 10 - 4. THE PROJECT A. Description 4.1 The project consists of: (i) a four-year highway maintenance program providing for the elimination of the backlog of deferred maintenance, improve- ment of the efficiency of maintenance operations, the train- ing of personnel at all levels, the purchase of maintenance and shop equipment, and the extension and improvement of workshops and stores, to be implemented with the assistance of consultants; and (ii) feasibility studies for about 300 km of roads and, if the justification of construction is confirmed, the completion of detailed engineering and bidding documents for about 150 km of these roads. (1) Four-Year Maintenance Program (a) Deferred Maintenance 4.2 The present condition of the national roads maintained by DPW is generally poor. Road beds are not properly shaped, ditches and drain- age outlets are clogged, laterite or selected soil wearing courses are worn away, pot holes and ruts are common. A number of roads are impass- able during the rainy season. 4.3 The present maintenance organization of the DPW is hampered by the poor condition of its equipment, lack of adequate personnel and funds, and thus cannot cope with the requirements of effective routine and peri- odic maintenance. As a result a backlog of deferred maintenance has been built up which is estimated by BCEON to amount to CFAF 8l0 million (US$3.4 million equivalent). The proposed project provides for carrying out the necessary works by contract. 4.4 The Government is aware of the present maintenance situation and realizes that an extraordinary effort has to be made to eliminate the backlog in deferred maintenance to bring the road network back to normal standards. With the assistance of FAC, it has, therefore, started the most urgent works in the fiscal year 1967/68, and has drawn up a four- year program starting from 1968/69 amounting to CFAF 840 million of which the foreign component is included in the project. 4.5 The local cost of this program will be financed by the Govern- ment; assurances to this effect have been obtained during negotiations. 4.6 To improve the maintenance situation in Niger, EEOM recommends  - 11 - that the DPW, refrain from handling major periodic maintenance such as resealing and regravelling and that it assign that task to contractors. Thus the required renewal of the maintenance equipment and the general reorganization of the DPW will be on a simaller scale than otherwise would be required. During negotiations, it was confirmed that the DPW will carry out routine maintenance and minor periodic maintenance projects only. 4.7 The foreign exchange component for deferred maintenance to be financed by IDA, has been estimated at about 50 percent, on the assump- tion that although put out for international tender, the works will be carried out by domestic oontractors. Under the proposed Credit, IDA will therefore finance CFAF 420 million and the Government the balance of CFAF 420 million. (b) Improvement of Maintenance Operations 4.8 The structure of the Niger road maintenance administration is adequate for its task, and the hierachy of duties and responsibilities is correctly established. The Association concurs with BCEOMts findings that no major organizational changes should be carried out. But as an urgent need a technical assistance program has been prepared to provide general training facilities for local technical and administrative per- sonnel, mechanics and operators, and to set up a new accounting system. 4.9 BOBOM proposes that the DPW should be assisted in implementing the four-year program by a team of twelve foreign experts supplied by consultants. It will supervise the deferred maintenance work, routine maintenance operations, purchasing of equipment and supplies and the extension and improvement of workshops and stores. Special attention will be given to the training of local counterparts. The team should be composed of: 1 Head of Team 1 Chief Mechanical Engineer 1 Administrative and Accounting Expert 1 Equipment Inspector (Headquarters) 1 Equipment Inspector (Annexes) 1 Mechanical Foreman 4 Mechanics 2 Technical Officers (Stores) 4.10 The staffing proposal for the team is satisfactory. Since most of the key personnel in the DPW are expatriates, the consultants selected to supply the team will be required to draw up, in cooperation with the Government, a detailed training program for the Niger counterpart personnel in the Equipment Division with a view to ensuring a smooth transition from the present stage of non-African management to that of African management. This will be reflected in the contract between the DPW and the consultants. 4.11 The consultants, team will be required for an estimated four years  - 12 - at a cost of CFAF 380 million (US$1.55 million equivalent). A small USAID- financed mission consisting of four American mechanics has been training operators and mechanics since 1965. Under existing arrangements between USAID and Niger, the experts are scheduled to leave the country by Septem- ber 1968, and USAID has informed IDA that this assistance to Niger will not be extended. FAC has agreed to finance the assignment of the Chief Mechanical Engineer for the Equipment Division for at least the next two years. This expert will closely cooperate with the consultants' team. 4.12 The estimate for these experts' services is shown in Table 7 split up into the contribution of IDA., FAC and Government. The firm es- timate is based on a negotiated contract between the Government and BCEOM. A condition of the effectiveness of the credit will be the signature of the contract between the Government and the consultants. (c) Maintenance Equipment 4.13 Equipment needs for the maintenance organization have been stu- died by BCEOM?, who concluded, as previously stated, that the DPW should carry out routine maintenance only and should assign the tasks of deferred maintenance and future periodic maintenance to contractors (para. 4.6). The major existing and re-usable equipment is given in Table 8. This equip= ment is mostly of US or French origin. Based on the above conclusion, the consultants and the DPW have drawn up a list of required additional equip- ment which is also shown in Table 8. The estimated cost of CFAF 385 mil- lion (US$1.55 million equivalent) is considered realistic. 4.14 An initial stock of spare parts, amounting to about 15 percent of the value of the equipment is included in the project. Future purchases of spare parts will be made through local agents. 4.15 Provisions for enlarging and improving workshops and stores at the Equipment Division and the divisional and sub-divisional headquarters, and the procurement of shop equipment, mobile repair shops and radio equip- ment have been included in the project at a total cost of CFAF 230 million (US$0.95 million equivalent) (Table 9). (2) Feasibility Studies and Detailed Engineering 4.16 Based on the SEDES report and the findings of tle identification mission from PMWA to Niger in March 1968, a -program of about 300 Im 6f priority roads has been selected for feasibility studies (Annex A). The studies which will be carried out by consultants acceptable to IDA will include the preliminary engineering and economic evaluation of these roads, taking into consideration present and expected traffic, the agricultural potential of the area concerned and the present condition of the highways. 4.17 The roads having highest economic priority, tentatively estimated at about 150 km, will be the subject of detailed engineering by consultants under the proposed project, and will be selected by the Government in agree- ment with IDA. This arrangement has been confirmed during negotiations. The detailed engineering is expected to lead to a further IDA credit of about US$4 million for road construction in 2-3 years' time.  - 13 - B. Cost Estimates and Financing (1) Four-Year Maintenance Program 4.18 The estimated capital cost of the maintenance program is given in Table 10 and summarized below. IDA will finance 97 percent of the foreign exchange cost of the program and FAC the balance of foreign cost; IDA will also provide US$210,000 equivalent for the local subsistance allowanc: of the consultants' team. FAC will pay for the assignment of the Chief Mechanical Engineer and the Government the remaining local cost. Four-Year Highway Maintenance Program Cost Estimate (CFAF Million7 Foreign Financing Govt. IDA FAC Contrib. Total Capital Expenditures New equipment and spare parts 385 102 487 Workshop equipment 192 _ - 192 Buildings 20 - 18 38 Consultants' services 266 34 79 379 Deferred maintenance 420 - 420 840 Contingencies 76 - - 76 Total i359: =34 619 2.012 (US$ million equivalent) (5(49) 2001) (2.50 Percent (67) (2) (31) (100) The cost of the new equipment, shown in Tables 8 and 9, is based on the consultants' estimate and is considered realistic. A contingency allowance for price escalation has been added over the two-year supply period. A fur- ther contingency allowance of about 10 percent has been provided to cover miscellaneous additional equipment needs which may become apparent after the new equipment has been delivered. The Government has confirmed that it will meet the remaining local cost of the capital expenditure from its budget. 4.19 The average life of the equipment is estimated at eight years. The cost estimate (Table 10) includes allocations to provide for the timely renewal of the equipment under recurrent expenditures. The Government will finance all of the recurrent expenditures, during the program period, es- timated at CFAF 1,839 million or US$7.50 million equivalent, both in foreign exchange and local currency. During negotiations, the Government confirmed that it will meet these recurrent expenditures. (2) Pre-Investment Studies 4.20 The estimated cost of the feasibility studies and detailed en- gineering is based on a negotiated contract between the Government and  - 14 - the French consulting firm Societe Centrale pour l'Equipment du Territoire/ Cooperation (SCET/COOP). The estimate given in Table 10 is summarized below: (US$ Million Equivalent) Local Foreign Total Feasibility studies of 300 km 0.13 0.44 0.57 Detailed engineering of 150 kn 0.06 0.19 0.25 0.19 0.63 0.82 4.21 IDA will finance the foreign exchange component, which is about 80 percent of the total cost. (3) Cost SummarY 4.22 A summary of the cost estimates of the proposed project, indicat- ing IDA and FAC participations and the Government's contribution, is as follows: US$ Million Equivalent Participation Government IDA FAC Contribution Total (a) Four-year maintenance program Capital expenditures 5.49 0.14 2.50 8.13 (b) Pre-investment studies 0.63 - 0.19 0.82 6.12 0.14 2.69 8.95 4.23 Disbursements will be made on the basis of 50 percent of expenditures on the deferred maintenance program and 100 percent of the foreign exchange cost of the purchase of equipment and consulting services, including the sub- sistence allowance for the consultantst team implementing the four-year main- tenance program. If any surpluses in the credit occur they will be cancelled. On the assumption that the credit would be signed in 1968, IDA disbursements are expected to be as follows: Financial Year 1968/69 1969/70 1970/71 1971/72 Total Forecast IDA disbursements (US$ Million) 2.70 2.00 1.00 o.42 6.12 C. Execution (1) Four-Year Maintenance Program 4.24 The DPW will be responsible for the project. The consultants' team will carry out the training program of its Niger counterpart personnel, draw up in cooperation with the DPW bidding documents for the purchase of equipment and for the deferred maintenance program and assist the DPW in all matters pertaining to the program.  - 15 - 4.25 Equipment will be procured on the basis of international competi- tive bidding in accordance with the Bank/IDA Guidelines through separate con- tracts for each type or each group of similar types of equipment. The con- tracts will provide for delivery of about half of the equipment in the fiscal years 1968/69 and the remainder in 1969/70. Equipment suppliers will be required to provide an adequate servicing organization including a supply of spare parts, and the periodic inspection of important equipment operating in the field. The contracts would be awarded on the lowest evaluated bids in terms of equipment purchase price as well as spare parts prices with the advantages of standardization also being taken into account. Bidding documents will be prepared by the consultants in cooperation with the DPW and will be submitted to IDA for review to assure that they conform with its procedures. 4.26 Bidding documents for the deferred maintenance will be drawn up by the consultants. They will include roads in the same area and would be sufficient in size to attract foreign contractors. Bidding procedures will be in accordance with the Bank/IDA Guidelines and contracts will be awarded on the lowest evaluated bid. Bidding documents will be submitted to IDA for review to assure that they conform with Bank's procedures. 4.27 It would be inappropriate to request international competitive bidding for carrying out the extensions of workshops and stores because of the relatively small cost (about US$155,000 equivalent). The capacity of local contractors is sufficiellt to carry out these works; the contracts will be awarded after local competitive bidding in accordance with procedures acceptable to IDA. (2) Feasibility Studies and Detailed &Egneering, 4.28 The pre-investment studies will be carried out by SCET/COOP. The details of the 300 km of roads are shown in Annex A. After the economic justification has been established, a program, expected to comprise about 150 km, will be selected in agreement with IDA for detailed engineering consisting of those roads with the highest economic priority. A condition of the effectiveness of the credit will be that the contract between the Government and the consultants has been signedz  - 16 - 5. ECONCMIC JUSTIFICATION A. Introduction 5.1 Niger's cash economy is largely built on the export of a few agricultural commodities of which groundnuts is b y f a r the most important. The existing highway network presents few physical barriers to the transport of these products and the consumer goods required by the thinly spread population centers. The cost of road transport, however, is high and rising as a result of a growing maintenance baclcLog. Present costs per km of operating a 10-ton truck on the best gravel roads in Niger amount to CPA 84 which, assuming a load factor of 50 percent would be almost US