Mozambique - Roads and Bridges Management and Maintenance Program (APL) Project

Report No. PID8624 Project Name Mozambique-Roads and Bridges Management and (@) Maintenance Program Region Africa Sector Transport-Highways Project MZPE1785 Borrowers Government of Mozambique Implementing agency Ministry of Public Works and Housing through the autonomous Administra6ao Nacional de Estradas (ANE) Address Maputo, Mozambique Contact person: Mr. Carlos Fragoso, Chairman Tel: 258-1-475157 Fax: 258-1- 475533 E-mail: Pcaane@Teledata.Mz (Carlos Fragoso) Environmental Category A (Full assessment) Date PID prepared February 27, 2000 Project Appraisal Date March 12, 2000 Projected Board Date June 21, 2001 1. Country and sector background Mozambique's road network-comprising some 28,000 kilometers of paved, earth and gravel roads (with paved roads accounting for about 5,000 kilometers of the network)-was badly damaged or neglected during the country's 17 years of civil conflict. During the conflict, the ability of the National Directorate of Roads and Bridges (DNEP) to maintain roads was severely hampered by security concerns. However, other factors also contributed to DNEP's poor performance, notably the severe shortage of funds for maintenance, lack of institutional capacity to manage the network, and inefficient operational policies and procedures. At the time the peace agreements were signed in 1992, it was estimated that less than 10 percent of the network was in good condition and more than one-third of roads were in such poor condition they were not passable on a regular basis. The feeder roads (16,000 kilometers of low traffic tertiary roads) were in particularly poor condition, with many being impassable. The poor condition of roads contributed to high vehicle operating costs, and consequently low traffic volumes, posing major constraints to the marketing of farm produce and to economic growth generally. Although management of the road network has improved since the IDA-supported Second Roads and Coastal Shipping project was appraised, institutional and policy reforms are not yet complete. The government now plans to implement institutional reforms over the next year or so. They include separating the funding and planning functions that are currently undertaken by ANE directorates; establishing the Road Fund as an autonomous legal entity, governed by a representative board of directors (including representatives  from the private sector) and managed by a professional administration; ensuring that revenues intended for road maintenance flow fully and directly into the Road Fund; and strengthening capacity of subnational governments to undertake road works. These actions will create greater transparency, improve financial management, establish a clearer allocation of responsibilities in road management, and guarantee the steady and regular flow of funds for roads maintenance. The main sector issues to be addressed in the future can be summarized as follows: - Improving the coverage and condition of the roads network - Connecting agriculturally productive areas to the rest of the country through improvements in the road network - Strengthening capacity to manage road sector activities, effectively, sustainably and transparently, at central and local levels - Ensuring the sufficient, timely and stable flow of funds for roads maintenance, and establishing policies and processes for reviewing and adjusting funding sources for road maintenance - Involving road users in setting road priorities and in monitoring and evaluation of the roads program - Decentralizing responsibilities to the regional institutions best able to bear them, and ensuring the accountability and transparency of these institutions - Fostering the development of the national road construction industry, and finding the appropriate balance between the public and private sectors in the roads sector - Improving roads safety - Reducing the spread of HIV/AIDS that is associated with improved road networks. 2. Project objectives The overall purpose of the proposed program is to stimulate economic growth and contribute to poverty reduction through improved road infrastructure, better sector policies, and enhanced roads sector management. Improved road transportation helps generate growth and reduce poverty by lowering transportation costs and stimulating development of markets. This encourages farmers to increase production and provides them with opportunities to do so by making it easier to obtain inputs and sell outputs. Improved road transportation also makes it simpler for people to go to school, visit health facilities and travel to jobs in nonagricultural sectors. In the case of Mozambique, road improvements bring about social equity and political unity by helping to integrate the poor and other vulnerable groups into the society. They also place the country in a critical strategic role as the transport provider for neighboring landlocked countries, while opening external markets for trade. The specific project objectives are to (a) improve the coverage and condition of roads and bridges; (b) strengthen the country's capacity to manage and administer the road sector effectively and transparently, with sustainable and efficient institutional arrangements; (c) establish financing mechanisms to ensure sufficient, timely, stable and secure flow of funds for roads maintenance; and (d) improve road transport safety. Secondary objectives are to improve human capabilities by incorporating HIV/AIDS prevention activities - 2-  in program activities and by increasing female employment in road sector. 3. Rationale for Bank involvement IDA has been actively involved in the transport and road sectors in Mozambique since 1992. The First and Second Roads and Coastal Shipping Projects (ROCS1 and ROCS2, approved in 1992 and 1994 respectively) were intended to be the first in a series of projects designed to rehabilitate and strengthen the country's road and shipping infrastructure. IDA currently has a highly supportive and productive working relationship with the government on these matters. Continued IDA involvement with developing a roads management and maintenance system will help guarantee a focus on reducing poverty by bringing its rich experience in this area to Mozambique. It will also help ensure institutional and financial sustainability of roads management by helping to define and implement efficient, effective and sustainable policy frameworks, institutional arrangements and financial mechanisms. IDA has considerable global experience with road safety issues, which will be used to help Mozambique to develop and implement a road safety strategy. Finally, IDA involvement is critical in coordinating donor assistance and ensuring a coherent approach to the sector. The proposed program involves some 19 other donors, and they have indicated their desire for IDA to continue as lead agency in the roads sector. IDA will also help Mozambique incorporate newer concerns in its transport sector activities, particularly gender and AIDS issues. IDA has gained considerable experience in including gender issues in roads upgrading and maintenance not only with the feeder roads programs but also in other roads activities. IDA's focus on AIDS prevention is relatively new, but IDA has launched a special program for Africa and, together with other donors including UNAIDS, is synthesizing the lessons learned and proposing relevant solutions. Under Bank guidance and support, ANE has recently established a social and environmental unit to monitor and address the impact of roads improvement on poverty reduction, gender issues, HIV/AIDS prevention and impacts on environment. The project will build on and strengthen initiatives launched under ROCS2 project regarding these issues. 4. Project description The Mozambique Roads and Bridges Management and Maintenance Project will be a nationwide program, comprising the following components: Component A: Roads and bridges works - Routine maintenance. - Periodic maintenance. - Rehabilitation of priority trunk roads and bridges. - Rural roads rehabilitation and periodic maintenance. - Emergency works for roads damaged by flooding. - Preparation of detailed engineering designs and tender documents, and supervision of works. Component B: Policy reforms and institutional strengthening for sustainable and effective road sector management - Establishment of an institutional framework for the sector, which ensures effective, transparent and accountable roads management and administration. -3 -  This will include clear separation of the financing and allocation functions (under the Road Fund) from the management of contracts and supervision of construction and maintenance, and creation of an independent Road Board responsible for overseeing and monitoring performance in the overall sector. ANE and the Road Fund will be supported and strengthened in their respective roles. - Establishment of the most appropriate financial management framework for ANE, the Road Fund and program and projects management, to ensure the sufficient, timely, stable and secure flow of funds to cover roads maintenance needs. - Establishment of a system of technical and financial auditing and performance monitoring for the Road Fund. - Preparation of a strategy for human resources development, focusing on procurement, disbursement, accounting, financial management and project management in government road and transport management institutions. - Strengthening of the program started under ROCS2 to help prevent the spread of HIV/AIDS. - Implementation of a road safety measures. Measures will include improved collection of traffic accident statistics for identification of black spots, safety audits on the major trunk roads, incorporation of additional safety features and requirements in road design, and installation and maintenance of road structures designed for safety, such as guard rails. - Promotion of local contractors through training (including on labor-based methods) and other activities. - Support of an unit in ANE responsible for addressing issues of AIDS, poverty alleviation and gender. A socioeconomic impact assessment of ROCS2 currently underway will provide the baseline data against which future progress can be measured. - Establishment of a unit responsible for monitoring and evaluation of program implementation progress and impact. Component C: Strategy formulation and preparatory activities for phases two of the roads investment program - Revisions and updating of the national integrated road sector strategy to reflect emerging priorities identified during ongoing stakeholder consultations. - Preparation of environmental impact assessment for phase two. - Preparation of social impact assessments for phase two investments. The social impact assessments will include baseline information for social monitoring, a participatory gender assessment, and assessments of the impacts of HIV/AIDS. - Preparation of socioeconomic impact assessments of roads works for phase two investments. - Detailed design for roads of phase two investment. 5. Financing (US$ million) Government budget 12.4 International Development Association (IDA) 160.2 Road Fund 190.4 -4 -  Parallel financiers 261.9 Total: 624 .9 6. Implementation Program implementation period. The program will take place over ten years, 2001-2011. The project (phase one of the program) will take place over four years, 2001-2005, completed by March 2005 and closed by September 2005. Program coordination and oversight. During phase one, the ANE Board will be responsible for policy guidance and overall program oversight, and will ensure coordination and cooperation among central, regional and local authorities, government agencies involved with program implementation, and the private sector. During phases two and three, the independent Road Board established under phase one will take over the role of program oversight and coordination. Currently, the ANE Board is chaired by the president of ANE and comprises officials of government agencies (including the ministry of finance), and representatives of the private sector and academic institutions. Executing agency. The National Roads Administration (Administra6ao Nacional de Estradas (ANE)) will execute the program. Implementation arrangements. Implementation of the program will be split between the central level and provincial and local authorities. At the central level, ANE's directorate of national roads (Dire6ao de Estradas Nacionais (DEN)) will manage operations for primary and secondary roads, and its directorate of regional roads (Dire6ao de Estradas Regionais (DER)) will manage those of urban and rural roads and of local authorities. ANE (formerly DNEP) has the capacity and capabilities to implement such a program since it has successfully implemented ROCS1 and ROCS2 projects, handling over US$100 million in procurement and disbursements for each of the past three years (excluding the routine maintenance and the periodic maintenance 100 percent financed by the Road Fund and executed by ANE). Agreements and distribution of tasks among DEN and DER and its provincial offices, provincial governments, and autonomous city councils will be specified in the new ANE's internal rules. Responsibilities for routine maintenance on both national roads (primary and secondary) and on regional roads (tertiary) will devolve to the provincial offices, while in the short and medium terms, rehabilitation will continue to be centrally planned and implemented. Planning and contract management support will be provided through DER, with financing from the Road Fund. The project will assist ANE strengthen its capacity in procurement through technical assistance based on an assessment of procurement capacity of implementing agencies at the central, provincial governments, and local levels, carried out during project pre-appraisal. Parallel financing arrangements. As with ROCS2 many development partners are interested in supporting the Mozambique Roads and Bridges Management and Maintenance Program. Preliminary commitments from development partners total about US$262 million for Phase 1. Donor contributions will be made through parallel financing, rather than cofinancing arrangements to smooth implementation. During implementation, a donor's working group will meet monthly to discuss implementation status and outstanding issues. The government, the ANE Board (the independent road board, later on), and road - 5 -  authorities will participate in the meetings at the request of the working group. Procurement arrangements. Consultant services, works and equipment to be financed under the IDA credit will be procured according to World Bank procurement guidelines. Accounting, financial reporting and auditing arrangements Accounting system. ANE through DER, DEN and the provincial and local implementing agencies will establish accounting systems tracking the cost of various goods, works and services provided under the program, including depreciation, the cost of capital and all other common costs. Financial management reports. Separate financial management systems will be established for ANE and the Road Fund. The program accounting systems will operate in accordance with the "Financial, Accounting, Reporting, and Auditing Handbook," dated January 1995 and published by the World Bank, and the World Bank "Project Financial Management Manual," dated February 1999. The program will support capacity building initiatives including training to ensure that accounts management and reporting are timely and effective. ANE will be responsible for ensuring that financial management and reporting procedures will be acceptable to the Government, the World Bank and other cooperating partners. The principal objective of the financial management systems (FMS) is to support management in their deployment of limited resources with the purpose of ensuring economy, efficiency and effectiveness in the delivery of outputs required to achieve desired outcomes, that will serve the needs of the people of Mozambique. Specifically, the FMS must be capable of producing timely, understandable, relevant and reliable financial information that will enable management to plan, implement, monitor and appraise the project's overall progress towards the achievement of its objectives. For ANE to deliver on the aforementioned objectives, its FMS are being developed in accordance with the financial management action plan. Salient features of the action plan include: the intervention of a financial management consultant to advise on the selection and installation of the project's FMS (using an integrated accounts package), to prepare the project's financial procedures manual and to train staff in the operation of the system; the establishment of a representative financial management committee; the recruitment of a project accountant and the availability of support staff; capacity building; the establishment of a fixed assets register and a contracts register; monthly bank reconciliation and quarterly reporting of financial information; cash flow management including variance analysis; and an annual external audit will be undertaken on terms of reference acceptable to IDA. While ANE is working towards putting into place a system of Project Management Report (PMR) based disbursements, in the short term it will follow existing disbursement procedures as outlined in the Bank's Disbursement Handbook, including direct payment, reimbursement and special commitments. However, the successful implementation of the project's FMS under the supervision of the project accountant should facilitate the conversion to PMR-based disbursements within 18 months of credit effectiveness. In that regard, a - 6 -  financial management review of the project will be undertaken by a World Bank financial management specialist within 12 months of credit effectiveness to assess progress. Auditing. Terms of reference for annual audits of program accounts, special accounts and statement of expenses and for the financial annual audit of the Road Fund will be agreed upon at negotiations. Auditing will be carried out by independent auditors acceptable to the Bank, and the reports of such audits will be submitted to the Bank no later than six months after the end of the Borrower's fiscal year. Separate audits will be carried out for ANE's accounts, program accounts, special accounts and statement of expenses and the Road Fund. Yearly technical and financial audits will be carried out for the Road Fund. The audits will be commissioned and financed independently to ensure complete autonomy and objectivity. Agreement have been reached on the implementation procedures for this during the pre-appraisal mission. Supervision. The Bank will devote some 30 staff weeks per year to supervise progress under the program, and a total of 300 staff weeks through fiscal 2010. During the first two to three years, supervision will focus on progress with implementing institutional and policy reforms as well as completing the agreed program of civil works. During the following years supervision will focus on quality of works; implementation of the AIDS prevention strategy; success in using local resources (including private sector local contractors, and female workers); capacity building; institutional strengthening; and decentralization of rural roads maintenance responsibilities. During all phases, particular attention will be paid to the operational and financial performance of the Road Fund. Reviews. Reviews by the Bank, together with the government and the other involved parties to assess progress in implementing the agreed program will be carried out at the midpoint of each phase of the APL, about eighteen months after the start of each phase. The reviews will consider and discuss the results of the program implementation plan (PIP) and recommendations for updating and amending the PIP for the remainder of program implementation. The reviews will specify actions that must be completed before the next phase is launched. Special attention will be paid to timeliness and level of transfers to the Road Fund, which will be tracked monthly. Annual reviews have proved very useful under ROCS1 and ROCS2. A midterm review will be carried out two years after effectiveness of phase one to assess progress under the program, achievement of overall objectives, role of the different partners and to eventually reorient the program if needed to ensure achievement of objectives. The ANE Board (Road Board later on) through ANE will contract a consultant (under program finance) to review and assess the progress of program implementation and prepare the necessary documentation for the review. The ANE Board (then Road Board) through ANE will be responsible for preparation of the necessary documentation for the reviews and planning of review meetings. The review will evaluate progress in reaching program objectives, identify measures needed to reach objectives, and revisit monitoring indicators, defining new ones where necessary. As with the annual reviews, considerable attention will be paid to performance in allocating agreed resources to the Road Fund in a timely fashion. If allocations fall below the agreed levels, consideration will be given to eventually reducing the size of the program. - 7 -  Monitoring and evaluation. Overall program monitoring is based on indicators prepared during appraisal and on the program implementation plan to be finalized by the Borrower and agreed during negotiations. The ANE Board (phase one), and the independent Road Board (phases two and three) will monitor and coordinate activities. It will, through ANE, prepare progress reports every six months, and submit them to the Bank within one month thereafter. No later than three months after completion of the program, the Borrower will prepare and provide to the Bank a report on the execution of the program, its costs, and current and future benefits to be derived from it. The implementing agencies will monitor progress and report monthly to the ANE Board (phase one) and the Road Board (phases two and three). 7. Sustainability The benefits of the program will be sustained through effective, transparent and accountable roads management, and stable, timely, sufficient and secure funding for roads maintenance. The program includes activities to strengthen management capacity at the central and local levels and to introduce mechanisms to mobilize internally the required resources and properly manage these resources. To assure sustainability of the program's impact on poverty, AIDS and gender, the program is establishing a permanent unit within ANE to address and monitor these issues. This unit will coordinate with the social units of government agencies and with nongovernmental dealing with issues, including UNAIDS. 8. Lessons learned from past operations in the country/sector Implementation problems. Significant delays occurred during implementation of ROCS1 and ROCS2 due to the imprecise definition and scheduling of works. The proposed program will build on capacity created under ROCS1 and ROCS2 and much more precisely define the planning and design of works. The integrated roads sector strategy defines priorities for roads for the ten-year program, but will be updated continuously during implementation to allow priorities to be redefined as conditions change. In addition the detailed design and tender documents for most of the roads under IDA financing will be prepared and ready prior to effectiveness, as well as prior to the start of phase 2 and phase 3. Further, procurement rules and practices will be specified in detail. Delays can also be avoided by using existing detailed designs for roads that have not yet been built. Several such detailed designs were prepared under ROCS2, and need only be updated before work begins under the proposed program. Finally, implementation can proceed more smoothly by paying more attention to supervision. Close works supervision is key , combined technical, financial and procurement audits funded under the project can help mitigate the risk. Institutional and policy framework. Experience with programs worldwide shows that having in place good policy and institutional frameworks contributes to the effectiveness and sustainability of investments. The program will assist with implementing new policies and effective and sustainable institutional arrangements, particularly those focusing on improved management, and on poverty reduction, gender equity, and AIDS prevention. It will also help build capacity through training and technical assistance and careful supervision and monitoring. The phased approach of the APL will ensure that policy and institutional reforms are implemented prior to undertaking major investments in works. -8-  Participatory approach. The national roads strategy is being prepared through extensive consultations with all stakeholders, especially road users. These consultations will ensure that priorities, according to multi-criteria approach, are defined transparently and with wide support from the public. Government is committed to the approach and will support the priorities defined through the consultations. A process is being established through this exercise to revisit and update the strategy continuously to reflect changing priorities. Sustainable financing mechanisms. An area of focus for the program is to establish financial mechanisms that will ensure the sufficient, timely, stable and secure flow of funds to cover roads maintenance needs. The program will also assist with establishing appropriate financial management systems for the Road Fund, ANE and the provinces that guarantee accountability and transparency. Procurement. Experience under the earlier ROCS projects shows capacity for procurement to be good although there is still need for additional strengthening. Under ROCS2, the tendency has mainly been to handle procurement on an emergency basis, which allows for less stringent procurement procedures. There is now a need for a more systematic approach, particularly with the systematic preparation of design and tender documents for periodic maintenance and rehabilitation of roads. The Bank will assist the government strengthen capacity for procurement through technical assistance based on an assessment of procurement capacity of implementing agencies at the central, provincial governments, and local levels, carried out during project pre- appraisal. Using local contractors. Mozambique has a small, but growing local construction industry. Lessons from ROCS2 show that the industry needs to be strengthened before it can take on full responsibilities for major road rehabilitation and upgrading. The program will assist them build capacity, and will increasingly rely on them as capacity is built. It will also continue to use international contractors where appropriate. Nearly all of routine maintenance contracts (which are fully financed under the Road Fund) are carried out by local contractors. Procurement packaging for periodic maintenance and rehabilitation works, as well as for goods and consulting services, under IDA financing, will wherever possible be structured so as to support development of local contracting and consulting industry. 9. Program of targeted intervention. No 10. Environmental aspects (including public consultation) An initial full environmental impact assessment (EIA) was completed for planned road works. This included consultations with 21 government and nongovernmental organizations, and discussions with local people and villages chiefs during field inspections. The investigation concluded that the planned road works will not have much if any impact on the environment. None of the IDA-financed subprojects are located in sensitive ecological areas. The subprojects do not require resettlement and no minorities are affected. In- migration (and associated effects) was identified as a potential effect of providing improved transportation access. Specific measures to mitigate its impact are included in the project. ANE developed and is implementing measures to prevent the spread of HIV/AIDS among workers and people living near project roads. The overall conclusion is that the subprojects proposed -9-  for IDA funding can proceed with no significant adverse environmental effects. 11. Contact point: Task Manager Abdelmoula Ghzala The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: 202-473-4450 Fax: 202 473 8326 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may no necessarily be included in the final project. This PID was processed by the InfoShop during the week ending March 9, 2001. - 10 -