Ghana - Road Sector Development Program Project

Document of The World B3ank Report No: 22233-GH PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 175,300,000 (US$220.00 MILLION EQUIVALENT) TO THE GOVERNMENT OF GHANA FORA ROAD SECTOR DEVELOPMENT PROGRAM July 2, 2001 Transport Group Africa Regional Office  CURRENCY EQUIVALENTS (Exchange Rate Effective June 15, 2001) Currency Unit = Ghanaian Cedis (GHC) GHC I = US$0.000135823 US$1 = GHC 7,362.5 FISCAL YEAR January I -- December 31 ABBREVIATIONS AND ACRONYMS ADB African Development Bank ADT Average Daily Traffic AMISU Accounting and Management Information Systems Unit APL Adaptable Program Lending BADEA Arab Bank for Economic Development in Africa BOT Build Operate and Transfer BRRI Building and Road Research Institute C&AG Controller and Accountant General CAS Country Assistance Strategy CDF Country Development Framework CFAA Country Financial and Accountability Assessment CPAR Country Procurement Assessment Report CPPR Country Portfolio Performance Review DANIDA Danish International Development Agency DflD Department for International Development DFR Department of Feeder Roads DUR Department of Urban Roads DVLA Driver and Vehicle Licensing Authority ECOWAS Economic Community of West African States EIA Environmental Impact Assessment EOI Expression of Interest ERR Economic Rate of Return EMP Environmental Management Plan FAD Financial Administration Decree FAR Financial Administration Regulation FMI Financial Management Initiative GHA Ghana Highway Authority GOG Government of Ghana GPN General Procurement Notice HDM Highway Development and Management Model HSIP Highway Sector Improvement Project IAPSO Inter-Agency Procurement Services Office (United Nations Development Programme) [CB International Competitive Bidding ICR Implementation Completion Report IEC Information, Education and Communication ILO International Labor Organization IMT Intermediate Means of Transport IRI International Roughness Index JBIC Japan Bank for International Cooperation JICA Japan International Cooperation Agency Vice President: Callisto E. Madavo Country Director: Peter C. Harrold Sector Manager: Maryvonne Plessis-Fraissard Team Leader Imogene R. Jensen  KFW Kreditanstalt fir Wiederaufbau KIA Kotoka Intemational Airport KM Kilometer MDA Ministries, Departments and Agencies MMDU Metropolitan Municipality District Units MOF Ministry of Finance MRH Ministry of Roads and Highways MOTC Ministry of Transport and Communications MTEF Medium-Term Expenditure Framewor]k MTU Motor Traffic Unit NFRRMP National Feeder Roads Rehabilitation and Maintenance Project NCB National Competitive Bidding NGO Non-Govemmental Organization NMT Non-Motorized Means of Transport NPRP National Priority Roads Program NPV Net Present Value NRSC National Road Safety Council ODICT-P Organizational Development and In-Country Training OPEC Organization of Petroleum Exporting Countries PER Public Expenditure Review PIM Project Implementation Manual PMR Project Management Reports PPOG Procurement Policy Oversight Group PRA Participatory Rural Appraisal PUFMARP Public Financial Management Reform Program QCBS Quality and Cost Based Selection RFP Request for Proposal RMRP Road Maintenance and Rehabilitation Program RPDC Road Programme Donors' Coordination RSDP Roads Sector Development Program RTTP Rural Travel and Transport Program SBD Standard Bidding Documents SIL Sector Investment Lending SIP Sector Investment Program SME Small and Medium Size Enterprise SPN Specific Procurement Notice SRFP Standard Request for Proposals SSATP Sub-Saharan Africa Transport Policy P'rogram TOR Terms of Reference UNDB United Nations Development Business VOC Vehicle Operating Cost VELD Vehicle Examination and Licensing Department VPD Vehicles per Day   GHANA ROAD SECTOR DEVELOPMENT PROGRAM CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 7 C. Project Description Summary 1. Project components 8 2. Key policy and institutional reforms supported by the project 9 3. Benefits and target population 10 4. Institutional and implementation arrangements 11 D. Project Rationale 1. Project alternatives considered and reasons for rejection 12 2. Major related projects financed by the Bank and other development agencies 12 3. Lessons learned and reflected in the project design 13 4. Indications of borrower commitment and ownership 14 5. Value added of Bank support in this project 14 E. Summary Project Analysis 1. Economic 14 2. Financial 15 3. Technical 16 4. Institutional 16 5. Environmental 17 6. Social 18 7. Safeguard Policies 19 F. Sustainability and Risks 1. Sustainability 20 2. Critical risks 20  3. Possible controversial aspects 21 G. Main Conditions 1. Effectiveness Condition 21 2. Other 21 H. Readiness for Implementation 21 I. Compliance with Bank Policies 21 Annexes Annex 1: Project Design Summary 22 Annex 2: Detailed Project Description 25 Annex 3: Estimated Project Costs 3 8 Annex 4: Cost Benefit Analysis Summary 39 Annex 5: Financial Summary 45 Annex 6: Procurement and Disbursement Arrangements 49 Annex 7: Project Processing Schedule 58 Annex 8: Documents in the Project File 59 Annex 9: Statement of Loans and Credits 60 Annex 10: Country at a Glance 62 Annex 11: Environmental and Resettlement/Compensation Framework Summary 64 Annex 12: Letter of Sector Policy for Ghana's Road Sub-Sector 67 MAP(S) IBRD NO. 31121  GHANA ROAD SECTOR DEVELOPMENT PROGRAM Project Appraisal Document Africa Regional Office AFTTR. Date: July 2, 2001 Team Leader: Inogene R. Jensen Country Director: Dirk Reinernann - Actg. Program Sector Manager/Director: Maryvonne Plessis-Fraissard Coordinator for Project ID: P050623 Sector(s): TH - Highways Lending Instrument: Specific Investment Loan (SIL) Theme(s): Transport Poverty Targeted Intervention: N Program Financing Data I I Loan [X] Credit [ I Grant [I Guarantee [1 Other: For LoanslCredits/Others: Amount (US$m): 220.00 Proposed Terms (IDA): Standard Credit Grace period (years): 10 Years to maturity: 40 Commitment fee: up to 0.5% Service charge: 0.75% Financing Plan (US$m): Source Local Foreign Total BORROWER 226.04 0.00 226.04 IDA 88.00 132.00 220.00 AFRICAN DEVELOPMENT BANK 20.54 39.36 59.90 ARAB BANK FOR ECONOMIC DEVELOPMENT IN AFRICA 4.04 7.74 11.78 DANISH INTERNATIONAL DEVELOPMENT ASSISTANCE 11.66 22.34 34.00 (DANIDA) BRITISH DEPARTMENT FOR INTERNATIONAL 16.39 31.41 47.80 DEVELOPMENT EUROPEAN COMMISSION (EC) 21.25 40.71 61.96 AGENCE FRANCAISE DE DEVELOPPEMENT 10.35 19.85 30.20 GOV. OF THE NETHERLANDS (EXCEPT FOR 3.12 5.98 9.10 MOFA/MIN.OF DEV.COOP.) GERMAN TECHNICAL ASSISTANCE CORPORATION 0.00 0.50 0.50 JAPAN BANK FOR INTERNATIONAL COOPERATION 51.45 98.55 150.00 JAPAN INTERNATIONAL COOPERATION AGENCY 3.43 6.57 10.00 KREEDITANSTALT FUR WIEDERAUFBAU 18.14 34.76 52.90 OPEC FUND 2.06 3.94 6.00 OTHER FOREIGN SOURCES (UNIDENTIFIED) 152.04 109.78 261.82 WEST AFRICAN DEVELOPMENT FUND (FONDS CEDEAO) 3.09 5.91 9.00 Total: 631.60 559.40 1191.00  Borrower: GOVERNMENT OF GHANA Responsible agency: MINISTRY OF ROADS & HIGHWAYS Ghana Highway Authority, Departnent of Feeder Roads, Departrnent of Urban Roads Address: P.O. Box M. 57, Accra, Ghana Contact Person: Wr. J.L. Lamptey, Acting Chief Director Tel: 23321685611 Fax: 233216671 14 Email: Estimated disbursements ( Bank FY/US$m): FY 2002 2003 2004 2005 2006 Annual 30.00 50.00 50.00 50.00 40.00 Cumulative 30.00 80.00 130.00 180.00 220.00 Project implementation period: 4 years Expected effectiveness date: 10/01/2001 Expected closing date: 06/30/2006 OCS PAD FCI.- U. D 2 -  A. Project Development Objective 1. Project development objective: (see Annex 1) The development objective of the Ghana Roads Sector Development Program (RSDP) is to achieve sustainable improvements in the supply and performance of roads and road transport services in a regionally equitable manner. Sustainabilitv involves physical, financial, as well as environmental aspects and is closely related to the success of the institutional reformis and institutional strengthening that are part of the program. Eguitabilitv encompasses geographic disparities largely between the south and the north (the latter roughly comprising the four northern regions of Brong-Ahafo, Northern Region, Upper West, and Upper East), disparities of income, disparities between urban and rural areas, and gender inequalities. Some of the disparities clearly overlap, calling for an integrated approach based on the more fundamental objectives of poverty alleviation and economic growth. All types of roads are included: trunk roads, feeder roads, and urban roads. The road works range from routine maintenance to reconstruction. To achieve better transport services, the program extends beyond road conditions to a variety of road safety measures, improved environmental practices, better reporting and information systems, etc. The RSDP presents an integrated approach to road maintenance, construction, and management by the Ministry of Roads and Highways (MRH) and the three road agencies, the Ghana Highway Authority, the MRH Department of Urban Roads, and the MRH Department of Feeder Roads. The descriptions and analyses in the present report relate to the program as a whole. Disbursements from the proposed Credit in support of the program are intended to be made for the implementation of specific projects and actions within annual RSDP work programs, as agreed to in advance. 2. Key performance indicators: (see Annex 1) The key performance indicators that measure the achievement of the program development objective are: a. Road network condition mnix improved from 35% good, 45% fair, and 20% poor in 2000 to 70% good, 20% fair, and not more than 10% poor by 2005. b. Average travel time between district capitals reduced by at least 15%. c. Ratio of all road works (Components 1-3) carried out in the 4 northern regions over the grand total at least maintained over the 4-year period. d. Percentage of communities within 10 km of a maintainable road increased by 10%. e. The part of the feeder road network not maintained reduced by half. f. Compliance with axle load limitations increased by 20%. g. Number of vehicles inspected annually increased to 80% of total number of vehicles registered. B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 20185-GH Date of latest CAS discussion: 03/08/2000 The project is consistent with the Country Assistance Strategy (CAS) discussed by the Board in March 2000. The overarching objective of the CAS is to reduce the incidence of poverty through increased growth, largely in the agriculture sector, and to create gainful employment opportunities based on a two-pronged approach: (i) support for policies and programs aimed at more rapid and sustained growth; and (ii) ensuring social sustainability of programs. Within the investment portfolio the majority of operations focus on removing key infrastructure bottlenecks, especially in the transport, energy and water sectors. -3 -  The overall RSDP will support the CAS in two ways. First, it will increase Ghana's competitiveness in foreign trade and promote linkages in domestic markets, which are crucial factors for rapid and sustained growth. These linkages will improve the degree and decrease the cost of access by the poor, and particularly women, to social services, markets and economic opportunities, thereby contributing to social sustainability. Second, it will reduce transport costs through maintenance, rehabilitation and reconstruction of roads; it will build and utilize local capacity in the public and private sectors; and it will encourage gender equality in the development of the transport network and of transport services. 2. Main sector issues and Government strategy: Transport Sector Overview. The transport sector plays a strategic role in the economy of Ghana. It accounts for approximnately 9% of GDP and generates a significant share of the total budgetary revenues of the Government. The country has a well developed transportation system consisting of two large deep-water ports that yearly handle about 7 million tons of import and export traffic; a 944 km railway system serving the southem part of the country; a 40,000 km road network system consisting of 13,433 km of trunk roads, 24,000 km of feeder roads and over 2,200 km of urban roads; and one international airport and 8 regional airports and airstrips throughout the country. Roads are the predominant mode of transportation, currently accounting for 94% of freight and 97% of all traffic movements in the country. There are no widely available alternatives to roads other than for the movement of bulk comnodities for export, such as timber, cocoa, bauxite and manganese ore, which are suited to transport by rail from central collection centers and mining areas to the ports. The railway network has limited coverage (Accra-Kumasi-Takoradi) and presently operates at low efficiency under parastatal management. Internal water transport is limited to Lake Volta. The road transport industry, which is dominated by the private sector, has unrestricted entry and competition is prevalent, but its efficiency is constrained by the high cost poor roads impose on vehicle operation. In the past Ghana, and in particular Accra, had a relatively healthy infrastructure base. However, economic crisis and decline during the 1970s and 1980s, combined with weak institutional capacity, led to a deterioration in the infrastructure network and its operations. This left transporters and producers without the ability to expand services to a larger segment of the population and unable to compete effectively in regional markets. Since 1990 the Government has deployed, within the framework of projects supported by the Bank and a number of other donors and international financial institutions, major efforts to remedy deficiencies in the transport sector. In 1997 GOG reformed its own role and function in the sector, by merging its involvement in all transport modes into one Ministry, the Ministry of Roads and Transport. At this time Government also adopted the principle that Government's role should be that of regulating, managing and monitoring, not of executing, agent. Within this principle, widespread intensification of the involvement of the private sector has begun in areas previously dominated by Government: port operations, maritirne trade, and road maintenance. The process of concessioning operations of the railway to the private sector has also begun. In 2001, the Goverrunent again split roads and transport into two Ministries, the Ministry of Roads and Highways (MRH) and Ministry of Transport and Communications (MTC), but the envisaged role of Government remains the same. -4 -  The road network is the responsibility of three agencies, all under the oversight of MRH: The Ghana Highway Authority (GHA) is in charge of the trunk road network (13,433 kin; 5,968 km paved and 7,465 km unpaved), and roads leading through minor towns. GHA is a semi-autonomous agency, which since mid-1999 has operated under the direction of a Board with significant private sector representation; its staff are in public employ but outside the civil service. The Department of Feeder Roads (DFR) is a department of MRH. DFR is in charge of all 24,000 km of feeder roads, and is presently changing from a centralized structure to a decentralized one in response to Government's decentralization policy, which is to devolve decision-making to district councils. * The Department of Urban Roads (DUR) is a department of MRH. DUR is in charge of roads in seven main urban agglomerations: Accra, Tema, Cape Coast, Sekondi/Takoradi, Kumasi, Tamale, and Koforidua. Decentralization efforts involve partial devolution of decision-making to municipal authorities and councils. Main issues in the Road Sector Management capacity. The agencies suffer, in varying clegrees, from weak management. GHA, the largest agency, has installed adequate management systerns and tools, but their application is not satisfactory. DFR and DUR need to complete on-going development of their systems and insure that they are adapted to the decentralized configuration of the future. There is a pressing need for an effective, integrated financial management system for MRH and the three agencies, and for an overall public procurement code to be established and put to use. These are under development and will provide important tools for improved management of the sector. Government arrears. A particular issue that has its origin in the roads sector involves the substantial sums the Government owes to contractors for road works carried out in the past. Nearly all of these debts relate to contracts financed entirely by the Government and often awarded without competition. Elimination of these debts was negotiated in 1995 as a prelude to the start of the Highway Sector Investment Program (HSIP, Cr. 2858-GH), but the then agreed schedule was not adhered to and the debt burden continued to rise. By late 1997, the Government had finally halted all directly negotiated contracting, but on-going contracts combined with interest payments have made the total elimination of debt from these obligations elusive. The total obligation, including future payment obligations under these contracts for works contracted but not yet undertaken, is now about cedis 310 billion (US$42 million, or close to 6 percent of the Government's total annual revenue). Elimination of this problem is a prerequisite for proper sector management, and agreement on an acceptable solution within a realistic time limit was therefore a condition of program negotiation. Accordingly, the Government provided a Letter of Undertaking, signed by the Minister of Finance, which commits Government to the payment of US$33 million by the end of 2001. A time limit for full resolution of the arrears problem, which would permit orderly completion of the RSDP, is scheduled for the end of 2002. Road maintenance funding and management One serious issue of the recent past that has shown improvement is the stability of the funding of road maintenance. Revision of the structure and operations of the Road Fund was undertaken in 1996. The Fund's revenues now derive from a fuel levy (about 85%), and various other road related tariffs, such as license fees, road and bridge tolls. Collection and disbursement of these revenues are outside the purview of the Treasury, and under the authority of the Road Fund Board, which has a majority of private sector stakeholders. Both revenue collection and - 5 -  maintenance work programming have improved dramatically over the past three years. As a result, road condition surveys carried out in 1995, 1997, 1998 and 1999 confirm that the overall deterioration of the network was halted in 1997/98, and the condition has shown a marked improvement over the last two years. Some momentum was lost when the actual implementation of an increase in the levy on fuel sales, enacted in March 2000, was delayed to February 2001, as this caused a shortfall in Road Fund revenue of about 25% for the year 2000. Projections of Road Fund revenue have similarly been revised downward from US$220 million to US$210 million over the program period, to reflect the combined effect of the delay and the recent depreciation in the value of the cedi. While the overall performance of the Road Fund is impressive, there remains a substantial backlog of maintenance on large segments of the network. Notably, only about 60% of existing feeder roads are covered by the maintenance program. The issue remains to insure the stability of Road Fund revenues and operations, and to increase its revenues in step with the increase in maintenance requirements. Traffic Safety. On the entire road network, but especially on those parts under the responsibility of the GHA and the DUR, traffic safety is a very serious problem. Presently, the monetary value of losses due to road accidents is estimated to account for approximately 2% of GDP. Accident frequency in Ghana is about ten times the average European level, and there is growing public awareness of the need to take firm action to curb and mitigate the effects of road accidents. Government Strategy: In recent years the Government of Ghana (GOG) has initiated a wide range of new approaches to develop and improve infrastructure networks and services. Ghana has also become one of the pilot countries for implementation of the Comprehensive Development Framework (CDF). This approach is being applied by Ghana with its development partners to increase the impact of external resources on poverty reduction. As part of this effort, a Roads and Transport Strategy within the concept of the CDF was developed (May 2000) by MRH (formerly MRT). This strategy stems from the Government's Road Sector Policy Letter of February 9, 1996, and is reflected in the Letter of Sector Policy dated March 29, 2001 (Annex 12). This strategy identifies specific objectives for the transport sector and strategies for dealing with the challenges and issues in each of the sub-sectors. The main elements of the strategy with respect to roads are: (i) Develop in-country capacity for government institutions and the private sector to coordinate and manage the road network efficiently; (ii) Ensure sustainable funding for the road sub-sector program; (iii) Base road sub-sector investment decisions on sound socio-economic and environmental principles that are sustainable. (iv) Enhance the operational efficiency of the road network to promote economic growth and the delivery of social services; (v) Reduce gender, regional and socio-economic disparities in access to transport to help achieve poverty reduction, national integration, unity and stability; (vi) Integrate the road network with other modes of transport to promote the development of an efficient transport system; (vii) Develop a comprehensive road safety program to reduce road transport fatalities; and (viii) Mitigate the negative environmental and social impact of road related activities. - 6 -  With this in view, immediate challenges for the three road sector agencies are: for GHA, to assert strict managerial practices compatible with the new GHA statutes and structure; for DFR, to transform its previously centralized situcture and operations to match the decentralized local government structure and financing; for DUR, to continue to devolve its planning and operations to the municipal structures in the towns where it operates. 3. Sector issues to be addressed by the project and strategic choices: As a direct outcome of the Government's sector strategy, the key roads issues to be dealt with through the RSDP are: Decentralization: The Government's decentralization plans will have a significant impact on the roads sector, with immediate effect on feeder roads. The structure of decision-making related to roads in both urban and rural areas is expected to continue to evolve during the program period. The RSDP is designed so that MRH and its agencies can respond to and participate in this process. District and Municipal Assemblies will be increasingly involved in the selection of works and the programming of maintenance. Poverty alleviation: The roads sector is only now beginning to contribute proactively to the Government's declared goal of giving first priority to mitigating extreme poverty wherever it exists. This focus will sharpen through the RSDP period and cause greater focus on extending and maintaining the feeder road network and upgrading roads in the slum areas of towns. Given that the real impact will only come from improved transport, the agencies implementing the RSDP will work together with the Rural Travel and Transport Program (RTTP) to assist with the development of a National Rural Transport Policy, the deepening of current knowledge of rural transport issues mn Ghana, and the promotion of transport options, including intermediate means of transport. Safety: Under the HSIP an environmental and road safety department was created in GHA, but no significant progress has been made in road safety. Basic elements such as control of truck loading, driver proficiency, accident reporting and statistics, and rescue services, are all in need of significant improvement. To address these problems, a comprehensive road safety program will be developed under the RSDP. Ghana has joined the Global Road Safety Partnership, which will assist in creating the framework for a partnership between Govermnent at central and local level, and private commerce and industry. Road safety policies are now under the purview of the recently established National Road Safety Commission (NRSC), and driver proficiency and vehicle standards fall under the now restructured Driver and Vehicle Licensing Authority (DVLA). Both of these entities will be strengthened under the RSDP. Social sustainability and equity: Social assessments have been carried out within the sector on a pilot basis, but have not been systematically applied. A study focusing on the Socio-economic Impact of Trunk Road Maintenance was carried out by GHA, which analyzes social impacts more systematically. Under the RSDP, social impact assessments will be conducted to mitigate negative impacts and maximize benefits to targeted groups. The program will be designed to be sensitive to gender issues in transport and maximize gender participation in decision-making in all aspects of program development and implementation. -7 -  Environment: A methodology for environmental impact assessments (ElAs) of road investments was developed under the HSIP for GHA and the resulting EIAs are satisfactory. Similar assessments will be introduced in a systematic fashion for feeder roads and urban roads under the RSDP. The Environmental Unit in GHA will be given the lead role in extending this function to DUR and DFR and their respective networks. Sector Management and Implementation Capacity: Issues in these areas fall in two broad categories: those that need to be addressed before the start or in the initial stages of the program, and those that the program itself will address over time. The first category comprises (i) design and start of a payment plan to eliminate the arrears problem and isolate it from the RSDP until its final resolution; (ii) establishment of the expanded environmental and social assessment and mitigation system to cover DUR and DFR in addition to GHA; (iii) establishment of the reformed financial management system in MRH and its agencies by transformiing the Accounting and Management Information Systems Unit (AMISU) into a MRH accounting facility to oversee the accounting and financial management activities of the Ministry's three road agencies; (iv) agreement between the Government and the donor community on the design of a joint decision-making process relevant to the RSDP being implemented in accordance with the CDF, and (v) assignment of staff in MRH and the donor agencies of sufficient number and qualification to make this process work. The second category covers (i) establishment of the Government procurement code; (ii) consolidation of the use of existing contract management systems and related monitoring and decision-making processes; (iii) continuous development of the RSDP management aspects relevant to Government's decentralization program; and (iv) long-term but less critical issues being addressed through training programs under the RSDP for MRH, its agencies and the private sector. Sector programming and analysis: Priority must be given to the establishment of a sound basis for analysis and programming in the sector. There is a need for comprehensive, but manageable, databases on the state of roads, which will permit realistic estimates of maintenance, rehabilitation and new investment needs to be made. To this end, the program will develop a training package, with a focus on upgrading capacity in existing techniques as well as introducing integrated methods for analysis. Capability for transport sector monitoring and analysis through the use of geographic information systems (GIS) will be introduced in both GHA and DUR as appropriate, and HDM-4 will be used for the economic analysis, together with other appropriate social development criteria. Human resource development: There is a need to improve the capacity of middle and lower level technicians in the road agencies, including skills, salary levels and housing conditions. The human resources aspect of the program is being assessed through the Organizational Development and In-Country Training (ODICT-P) study and includes (i) an evaluation of training needs of both genders; (ii) an adequate training plan reflecting these needs; and (iii) proper targeting of technical assistance to include know-how transfer targets and the design of a follow-up mechanism. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): The RSDP is the national program for the entire roads sub-sector over the period 2001 to 2004, executed by MRH and its two road agencies for feeder roads and urban roads, and GHA. The program has the following six components, of which IDA would finance elements of components 2 through 6: Component 1: Routine Maintenance - patching of potholes; light grading; grass cutting; tree and bush clearing along the roadside; and cleaning of gutters, drains and culverts. It is carried out annually on an - 8 -  average of 27,250 km of all types of roads. Component 2: Periodic Maintenance, Minor Rehabilitation and Minor Upgrading - spot improvement; repair and resurfacing of short stretches of roads; repair of drains, culverts and slopes; regraveling; resealing; and mninor upgrading of gravel to bituminous roads. Component 3: Major Rehabilitation, Reconstruction and Upgrading - reconstruction of heavily degraded road sections; upgrading from one surface type to another; placing asphalt concrete overlays; and repair and construction of bridges, culverts, and other structures. Component 4: Traffic Management and Safety - strengthening the NRSC and DVLA; developing a comprehensive road safety strategy and implementation program; and setting standards for safety, reliability, and efficiency in the transport sector. Component 5: Institutional Strengthening - policy and institutional reformns (including strengthening of environmental management, decentralization, development of a national transport strategy encompassing rural and urban transport, and road safety); studies; training; technical assistance; and provision of buildings, vehicles and equipment. Component 6: Program Operation - planning, management, coordination and reporting for the 4-year road development program by the participating agencies. Indicative Bank- % of Component Setor Costs % of financing Bank- ___ __ __ __ __ __ (US$M) Total (US$M) financing Routine Maintenance 101.37 8.5 0.00 0.0 Periodic Maintenance, Minor 416.03 34.9 57.50 26.1 Rehabilitation and Minor Upgrading Major Rehabilitation, Reconstruction 559.20 47.0 119.00 54.1 and Upgrading Traffic Management and Safety 11.00 0.9 2.60 1.2 Institutional Strengthening 55.40 4.7 38.40 17.5 Program Operation 48.00 4.0 2.50 1.1 Total Project Costs 1191.00 100.0 220.00 100.0 Front-end fee 0.00 0.0 0.00 0.0 Total Financing Required 1191.00 100.0 220.00 100.0 2. Key policy and institutional reforms supported by the project: A solid platform of sector policy reforms has been designed. The focus of this program therefore will be to help institutionalize those reforms. The major institutional, reforms supported by the project will focus on improving the capacity of MRH and its agencies. Assistance will also be provided to MTC in the areas of transport policy, regulation and oversight. Key elements include: Enhancing the capacity for environmental and social mitigation analysis in GHA, and extending it to DFR and DUR. Transforming the Accounting and Management Information Systems Unit (AMISU) into an integrated MRH accounting facility to oversee the accounting and financial management activities of the Ministry's three road agencies. Assisting DFR and DUR to implement the Govenmment's mandated policy of decentralization. -9-  Working with MTC and MRH to develop a sustainable framework for rural transport. Improving the efficacy of DVLA. Strengthening NRSC. 3. Benefits and target population: Benefits: The main benefits of the RSDP will be to improve the productivity and competitiveness of the Ghanaian economy and, simultaneously, to improve access by the poor to the economy at large. This will be accomplished through: (a) improved all-weather access to markets and services (both administrative and social) for a broad cross-section of the population, providing increased opportunities for poverty reduction and economic growth; (b) better farm gate prices for farmers, lower input and consumer prices for the population at large and greater connectivity between and within regions, leading to fresher produce and more on time deliveries, making Ghana's products and services more competitive in local and regional markets; (c) reductions in vehicle operating costs (VOC) and time costs, resulting from improved surface conditions and riding comfort on the road network, improved geometry, reduced traffic interference and better safety facilities; (d) longer road network asset life and more efficient use of public resources in the road sector; (e) increased employment due to construction and maintenance operations; and indirect benefits due to access to employment centers and increased tourism; (f) strengthened management capacity of local contracting firms, and increased opportunities for local consultants to offer services for studies, auditing, and other activities; (g) marked improvement in road safety, having a quantifiable benefit in terms of the cost of avoided accidents; (h) more efficient sector administration, and improved practices in environmental and social protection; and (i) improvements in the efficiency of the use of extemal resources. Target Population: The benefits of the improved road network will be spread across all regions in the country, since the program has identified works and activities in each province. Both commercial and social road users will benefit from improved road conditions and the introduction of a more sustainable approach to maintenance of the national priority roads, feeder roads as well as urban roads. Depressed areas will be particularly targeted for both the feeder roads and urban roads programs. This will be done by specifically identifying stretches of road to be developed based on a matrix of economic and social indicators. Project selection criteria have also been designed to insure that investments respond to declared community needs. Although the benefits of the road safety program will be translated to the whole population, it is the poor, who as pedestrians in both urban and rural areas suffer disproportionately from road accidents, who will benefit most. - 1 0 -  4. Institutional and implementation arrangements: Implementing Agencies: The program will be coordinated by MRH, which will have the overall responsibility for its management. Each of the implementing road agencies (GHA, DFR, DUR) will make its own internal management arrangements and report, in formats established and agreed, to MRH in accordance with procurement and disbursement arrangements agreed to by the Bank and the GOG. All other components will be managed in line with Bank conditions. AMISU functions will be integrated into MRH's mainstream functions. In those areas where expertise is lacking or not fully developed, short-term consulting specialists (management, engineering, financial, modeling) will be employed to enhance sector performance and project implementation. Implementation will be based on an Annual Work Program and Budget prepared by each agency, and consolidated by MRH. A Project Implementation Manual (PIM), finalization of which will be a condition of Credit effectiveness, has been prepared to provide the necessary guidelines for all implementing agencies. Accounting, financial reporting and auditing arrangements: AMISU will be transformed into a MRH accounting facility to oversee all expenditures in the roads sector, including arrangements for audits, in accordance with systems and procedures acceptable to IDA. It will work in accordance with the procedures that have been prepared and put in place under the on-going HSIP. Establishment of the agreed financial management and accounting systems in MRH, GHA, DUR and DFR will be a condition of Credit effectiveness. New special accounts for the IDA Credit will be opened and maintained in a commercial Bank acceptable to IDA, managed by the relevant agencies. Independent auditors acceptable to IDA will audit the use of all IDA funds available under the credit, including the IDA special account and the statements of expenditures. Financial audit reports will be submitted to IDA no later than six months after the end of the fiscal year. The format and the frequency of periodic reporting are defined in the PIM. The financial/technical audit system, introduced under the HSIP, will be continued and enhanced under the RSDP to assess the cost/effectiveness and adherence to agreed work programs for the agencies. Monitoring and evaluation arrangements: Continuous monitoring, periodic reviews, and mid-term evaluation will be based on predetermined indicators which will measure inputs, process, outputs and outcomes. Performance and monitoring indicators are defined in Annex 1. Annual reporting by MRH and its agencies will incorporate a further set of indicators that were agreed at negotiations and reflected in the PIM. Additional baseline surveys and monitoring arrangements will be developed in the course of the project, particularly to monitor impacts in depressed areas. Donor coordination and joint monitoring will continue with monthly meetings between MRH and the donors involved in Accra, and one annual donor/Government meeting in November of each year, following the establishment of budget proposals for the following year. The overall project monitoring and evaluation system will be guided by the Project Design Summnary and the PIM. A Mid-term Review will be conducted in March/April 2003. D. Project Rationale 1. Project alternatives considered and reasons for rejection: Two options were considered for implementation of the program: (i) Sector Investment Lending (SIL), and (ii) Adaptable Program Lending (APL). Although the proposed program relates closely to the premise of - 1 1 -  an APL both in concept and duration, the SIL was clhosen because limiting financing to a relatively short, finite period will allow the major sectoral problem o:f the arrears to be eliminated before long-range flexible financing is introduced. Considering the existing and future socio-economic conditions in Ghana, the level of economic development and poverty, the volume and composition of traffic throughout the country, and the capacity of the existing infrastructure, the proposed program has been identified as the most cost-effective and appropriate method of imnproving transport while addressing issues of economic growth and poverty reduction. Technical standards have been reviewed and economic viability assessed. Feasibility studies for the GHA program and other preparation documents for both the DFR and DUR programs are available in the project files. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). st Issue f ~~~~~~~~~LatetSurvso Implementation Development Bank-financed Progress (IP) Objective (DO) Physical Rehabilitation of Trunk Roads First Transport Rehabilitation S S Project (Cr. 1858-GH) Rehabilitation of Trunk and Feeder Second Transport S S Roads; Road Fund Reform; Rehabilitation Project Introduction of Intermediate (Cr.2192 .GH) Technology; Sector Agency Reforns Feeder Road Rehabilitation; National Feeder Roads S S Institutional Strengthening Rehabilitation and Maintenance Project (Cr. 23 19-GH) Upgrading of Main Urban Roads and Urban Transport Project (Cr. S S Road Networks in Low-Income Areas; 2498-GH) Institutional Strengthening Rehabilitation of Trunk and Secondary Highway Sector Investment S S Roads; Consolidation of Road Fund; Program (Cr. 2858-GH) Institutional Development and Training Other development agencies European Union (EU) Second lTransport Infrastructure Program (TRIP-2) Cocoa Roads Rehabilitation Program (Stabex) BADEA (Co-finance) TRIP-2 Bunso Anyinam Road OECF (Co-finance) TRP-2 KfW Tema-Akosombo Road Lower Volta Bridge HSIP Dutch Aid Road Rehabilitation - 12 -  JICA Small Stream Bridge Rehabilitaion Preject Trunk Road Rehabilitation Spanish Aid Small Stream Bridge Rehabilitation Project DflD Small Stream Bridge Rehabilitation Project OPEC (Co-finance) Urban Transport Project Coface-AFD Interchange Development AFD Rehabilitation of Sekondi and Tema Municipal Roads DANIDA Takoradi- Agona Junction Road Kumasi-Konogo Road Mpraeso-Adawso Road AfDB Tetteh-Quarshie-Mamfe Road Sogakope-Aflao Road Anyinam-Kumasi Road JBIC Kumasi Anwiankwanta Road IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: The advantages of a participatory design process. Prior to the HSIP, the Bank financed transport operations in Ghana in various forms: road, urban transport and feeder roads projects; port and railway projects; and finally, rural roads components under agricultural projects. These projects all attempted, with some results, to introduce reforms in the transport sub-sectors. The more recent of these completed projects, plus the on-going HSIP, have provided an opportunity for the Bank to establish a substantive dialogue with the Government on the major issues in the transport sector. The MRH drew up an overall strategy for the sector, and developed this into strategic plans for each sub-sector. Acceptance of these plans by the public and by particular interest groups was obtained through extensive debate in Cabinet, Parliament, and parliamentary sub-committees, and through outreach activity and stakeholder consultations by MRH (formerly MRT). In this fashion, agreement has been obtained, for instance, on concessioning of the railway and on successive increases in the fuel levy for the Road Fund, without disruptive confrontations. The main lesson learned from this is that although the process is slow, it is both in accord with Ghanaian tradition, and in the end, probably more effective than a faster but less inclusive process. The need for donor coordination and consultation. Other donors have been active in the transport sector. They have participated in program design and co-financing arrangements, often based on their own sub-sector preferences. During implementation, coordination has sometimes been inadequate leading to imbalances in the sector program. The practice of regular consultations between donors and MRH, the annual GOG/donor meeting instituted under the HSIP, and the stakeholder consultations arranged by MRH, have demonstrated the advantage of continuous contact between all actors and interested parties. The need for comprehensive sector management support. The emergence of the arrears problem holds significant lessons for the future. It shows clearly the need for comprehensive road sector management and transparent reporting. Had those elements been in place, the arrears problem could not have developed. This consideration is a principal reason behind the external assistance to the roads sector now being designed on a program rather than a project basis. Meaningful sector-wide management is impossible - 13 -  without financial discipline at the national Government level. The importance of accompanying stable maintenance funding with better programming. The positive experience with the reform of the Road Fund is significant and is incorporated in the design of the program. The reformed Fund improved revenue-raising immediately. However, the lack of clear work programs caused a build-up of liquid funds, which were then diverted to other uses, sometimes the payment of arrears. The lesson is that stable raising of revenue for road maintenance does not in and of itself insure that the maintenance is done. For this to occur, proper advance work planning and programming must be present, together with implementation capacity in the private sector and managerial capacity in the executing agencies. The need for improved resource allocation criteria. The allocation of resources among sectors, and the split between new investments and maintenance and rehabilitation of existing infrastructure, especially in the road sub-sector, has not always been based on clearly defined criteria. Factors that need to be taken into account, in addition to classical economic analysis and environmental and social assessment, include provision of basic access to roads and transport for the poor as well as to high potential agriculture regions. Increased use of existing programs, systems and models, including the HDM needs to be encouraged, with an appropriate training program developed to ensure sufficient expertise is available. 4. Indications of borrower commitment and ownership: The program enjoys strong support from the borrower, witnessed by the preparation of the progran being done entirely by MRH and its agencies, in collaboration with MOF and the Road Fund. 5. Value added of Bank support in this project: Since the Bank's first involvement in the 1960's, its contributions have been regarded as positive catalysts in the sector, both through direct support of physical works programs, and by its assistance in policy reforms and institutional strengthening. The country needs continued long-term support in the sector, the Bank is well placed to provide this, and the Government wishes that the Bank do so. The roads sector is well suited for the country and its international partners to work together within the CDF, since the practice of continuous consultation and the perspective ofjoint decision-making have been in place for several years. Furthermore, the Bank's management of the Sub-Saharan Africa Transport Policy Program (SSATP), a multi-donor collaborative effort in policy reform in the transport sector, will permit the Government to avail itself of assistance in sector policy analysis and reform as well as interaction with, and benefits from, sector experiences in other countries. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): O Cost benefit NPV=US$ million; ERR = % (see Annex 4) O Cost effectiveness * Other (specify) A detailed economic analysis was conducted for all of the program's main civil works components to be implemented in the first year, as well as a part of the overall maintenance program over a 3-year program period. The rest will undergo analysis during the project period. For the Priority Trunk Road rehabilitation and maintenance program, the HDM-3 model was used for each of the homogeneous road sections defined, based on a network-wide survey of road characteristics and - 14 -  traffic. A total of 1,078 km of road were examined. For t1iose that have not been defined, criteria have been developed for acceptance under the program, including use of HDM-4 and a discount rate of 12%. For the Feeder Roads Program the HDM model was not used, and instead a model was adapted to these low volume roads, which included transport cost savings. A total of 641 km of road were assessed. For very low volume roads, a distributional or regional weight on benefits was applied to ensure certain social/basic access objectives are captured in the analysis. A study to refine the analytical approach for low volume roads is underway, and will form the basis for all further assessments of such roads. For the Urban Roads Program, methodologies similar to the Feeder Roads were employed with consideration of the income levels of the targeted beneficiaries. The total number of km in the program is 77.5, with arterial road development accounting for 19 km, rehabilitation of roads for 24 lum, access to depressed areas 22.5 km, and development of non-motorized transport (NMT) for a stretch of 12 km. Economic rates of return range from 15% to over 90% for the National Priority Route Program (GHA). The sensitivity analyses indicate that the economic rates of return are robust. Detailed ERRs and NPVs are presented in Annex 4. The ERRs for the Feeder and Urban Roads Programs are well above 20%, with most over 40%. 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) Financial Management will be done at the macro level within the framework of the MTEF, and at the project level by the agencies using their contract management systems. Fiscal Impact: The road sector has, over the last few years, seen a reduction in the dependence on direct budgetary allocations from the Consolidated Fund to a greater reliance on the Road Fund to finance the local portion of expenditures. Consolidated Fund contributions have declined from US$88.3 million in 1997 to US$28.8 million in 2000. This contribution is projected to decline further to a total of US$24.0 million over the three year budget period, and this is mainly to cover the salaries of civil and public servants of the Ministry and its agencies. This represents less than 4% of total program costs. The Road Fund's contribution is expected to grow, and the total estimated inflow of