Mali - Second Highway Project

CIRCULATING COPY s 110 BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1221-a-MLI REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MALI FOR A SECOND HIGHWAY PROJECT April 3, 1973 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  Currency Unit: Mali Franc (MF) us$ 1.00 = m 460 NP 1 = US$ 0.002 ' 1,000o = U$. 2.17 MF 1, 000, 000 - IJS 2,17 4 Fiscal Year 'January 1 through December 31.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF MlALI FOR A SECOND HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Mali for the equivalent of US$9.5 million on standard IDA terms to help finance a project for highway rehabil- itation. PART I: THE ECONOMY 2. The economy of Mali is dealt with in paragraphs 2-13 of the President's Report of the same date on a proposed development credit to the Republic of Mali for a Second Railway Project (Report No. P 1177a-MLI). A Country Data Sheet is attached in Annex I. PART II: BANK GROUP OPERATIONS IN MALI 3. The proposed credit would be IDA's sixth operation in Mali, bringing the total of IDA funds committed to US$43.5 million. For a review of Bank Group lending in Mali, reference is made to paragraphs 14-18 of the Presiden.t's Report of the same date on the proposed Second Railway Project. Annex II con- tains a summary statement of IDA credits as of February 28, 1973, and notes on the execution of on-going projects. PART III: THE TRANSPORT SECTOR IN MALI 4. Reference should be made to paragraphs 19-28 of the President's Report of the same date on the proposed Second Railway Project. PART IV: THE SECOND HIGHWAY PROJECT 5. A report entitled "Appraisal of a Second Highway Project" (No. 61a- MLI) is being circulated separately. A Credit and Project Summary is provided in Annex III.  -2 -- 6. Bank Group involvement in Mali's transportation sector began in 1966 with the IDA Credit (95-sfIJ) of US$9.1 million to help finance a program for rehabilitation and modernization of the railway. During appraisal of that project, the need for a broad transport survey was noted and, in 1967, the United Nations Development Programme (UNDP) agreed to finance such a survey with the Bank as executing agency. The Belgian consultants, Societe de Traction et d'Electricite (Tractionel), who were retained to carry out the survey, submitted their final report in July 1969. Their main recommendations concerning highways stressed the need to strengthen maintenance, to rehabilitate aging trunk roads and to improve feeder roads in support of ongoing agricul- tural programs. These recommendations provided a blueprint for IDA's first highway lending operation in Mali: a highway maintenance project financed by a US$7.7 million credit (197-MLI) in June 1970 which provided also for feasibilitv studies and detailed engineering for the strengthening and rehabi- litation of Mali's two main trunk roads linking Bamako with Bougouni to the South and Segou to the northeast. The feasibility studies were completed by the consultants, Kez International Ltd. of Canada (Kez). The Project 7. The proposed road project would be the second Bank Group lending for highways in Mali. It would involve: (a) the rehabilitation and strengthening of the two trunk roads studied under Credit 197-MLTI, including super- vision of construction by consultants; (b) continuation of the ongoing highway maintenance and feeder road betterment program through the provision of additional technical assistance and training; (c) purchase of highway maintenance equipment; (d) detailed engineering by consultants for the upgrading of the Bamako-Kolokani road (120 km); and (e) Studv of the trucking industry. 8. Mali's two major trunk roads would be rehabilitated under the project. The roads radiate from Bamako to the regional centers of Bougouni and Segou, with the first 7 km from Bamako to Faladie being common to both roads. The Faladie-Bougouni section (148 km) serves the cultivated region to the south and forms part of the important international link with the Ivory Coast; the Faladie-Segou section (223 km) links the capital with the cotton-producing areas around Segou and comprises part of the only all- weather link with Mopti, the gateway to the Niger River basin. The Bougouni section will also serve the new international airport under construction at  - 3 - Senou, 10 km south of Bamako. Built in the early fifties, the two project roads are Mali's oldest paved linlks and are now clearly unsuitable for present traffic volumes. Narrow pavement and alignment defects create unsafe driving conditions. On numerous sections the base and sub-base are structurally inadequate and current maintenance works consisting of patching and sealing are of limited use. 9. While the IDA-financed highway maintenance project of 1970 is now proceeding well, progress in the early stages was somewhat slower than had been envisaged when the project was appraised. Technical assistance being provided to the Directorate of Public Works (DPW) by the International Labour Office (ILO) will be extended in order to assure that the objectives of the program are realized. Funds are therefore provided under this pro- posed credit for the extension of the consultants' services. 10. The maintenance equipment which would be financed under the project represents DPW's acquisition needs for 1973 and 1974. Requirements are based on demand for renewal of items in the existing equipment fleet, adjusted to traffic levels and the desired standard of road. 11. In 1971, the DPW commissioned the joint venture of consultants, SEMA (Mali) and SCET International (France), to carry out a feasibility study for the improvement of various sections of the 300 km trunk road extending north from Bamako to the Mauritanian border. The road is paved to Kati (15 km) and gravelled for the next 160 km; the remaining section to the border is on earth track. The study, financed by the Government, was completed in November 1971. The consultants recommended upgrading the section of the road between Kati and Kolokani (105 km) around 1975. Upgrading the road to engineered gravel standard clearly seems to be justified, and its paving may even be feasible. Under the proposed highway project, detailed engineering and complementary economic studies of the proposed upgrading will be carried out. 12. Control of the transport industry by Government through ownership of transport assets and complementary regulatory policies has led to only partially satisfactory results. Although Mali has been able to satisfy its most pressing needs for internal and external communication, the industry as a whole has been unduly strained. The official rates for both public and private sector road transport have remained unchanged since 1967. The rates charged are substantially lower than those for road haulage in neighboring countries with similar economic and physical conditions. Further, indica- tions are that these low rates make it extremely difficult for even reason- ably efficient road carriers to generate funds for renewal or expansion of their vehicle fleets. In particular, the state-owned Mali Road Transport Company (CMTR), although recently reorganized, is still unable to service its debt. During negotiations, therefore, the Association sought and secured assurances from the Government that the official rates for road transport services will be reviewed. Accordingly, a study of the trucking industry will be undertaken by suitable consultants to assist the Government in its  -4- efforts to irmrove the viabilitv and efficiency of the trucking industry. The main focus of the study will be on the design of a pricing policy for the industrv which will allow carriers to cover the costs of their services. Terms of Reference for the study were also discussed and a-reed with the Government at the time of negotiations. Cost and Financing 13. The total cost of the project, including taxes, is estimated at US$20.5 million with a foreign exchange component of US$14.7 million. Ex- ternal financing in the amount of US$16.1 million would be provided by the proposed IDA Credit (US$9.5 million) and USAID (US$6.6 million); the USAID loan would be repayable over 40 years, with 10 years grace and vould bear interest at 2 percent during the grace period and 3 percent thereafter. Both the IDA credit and the AID loan would make small contributions to local cur- rency expenditures; the balance of these expenditures would be financed by a contribution from Mtali in the amount of US$4.4 million equivalent, including US$3.3 million of taxes. The cost of the project, net of taxes, would be shared as follows: TDA 55 percent, USAID 38 percent and Mali 7 percent. 14. USAID will finance the total cost, net of taxes, of improving the Bamako-Bougouni road. The IDA contribution will be used for improving the Faladie-Segou road, for the services of consultants for supervision of con- struction of both the USAID and the IDA-fincnced roads, for technical assist- ance and training, for the engineering studies, and for the study of the trucking industry. IDA and USAID will share the financing of road mainten- ance equipment in the amounts of US$850,000 and US$1.5 million respectively (before contingencies). Project Execution, Procurement and Supervision 15. The Directorate of Public Works (DPI) in the Ministry of Indlustrial Development and Public Works will be responsible for execution of the project. To acconmodate the fact that USAID's procurement conditions differ from those of the Association, the rehabilitation works are divided into two parts, as notedl. USAID assisting in the financing of the Bamako-Faladie-Bougouni road (15-, kmn) to he tendered according to USAID regulations. Further, that portion of tlh? road maintenance equipment to be financed by ISAID will be tied to pro- curement in the United States. The Faladie-Segou road (223 kmn), which is to be financed by the Association, will be constructed under a single, unit-price contract after international co.mpetitive bidding in accordance with Bank/IDA guidelines. road maintenance equipment financed by the Association will also be procured through international competitive bidding. 16. Supervision of construction will be by consultants, provided under the project, who will be employed for both the IDA- and USAID-financed sections in order to avoid duplication of staff and equipment as well as to ensure better coordination.  - 5 - PART V - LEGAL INSTRUTMLNTS AND AUTHIORITY 17. The draft Development Credit Agreement between the Association and the Republic of Mali, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the text of a resolution approving the proposed credit are being distributed to the Executive Directors separately. 18. The draft agreements conform to the normal pattern for credits for highway development projects. 19. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI - RECOI4U-ENDATION 20. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments April 3, 1973   ANNEX II Page 1 of 2 THE STATUS OF BANK GROUP OPERATIONS IN MALI A. Statement of IDA Credits as of February 28, 1973 Credit Amount (US$ million) Number Year Borrower Purpose IDA Undisbursed 95-N4LI 1966 Republic of Mali Railway 9.1 .6 197-MLI 1970 Republic of Mali Highway 7.7 1.4 Maintenance 277-MLI 1972 Republic of Mali Rice Development 6.9 6.8 321-MLI 1972 Republic of Mali Telecom- munications 3.6 3.6 Total 27.3 of which has been renaid 0.0 Total now outstanding 27.3 Total now held by IDA 27.3 Total undisbursed 12.4 B. Projects in Execution Credit 95-MLI: First Railway Project The US$9.1 million First Railway Project of 1966 (95-fL,I), the physical program of which lagged behind schedule at one time by about three years, is now almost completed in terms of physical content. The closing date, set initially for June 30, 1970, was first postponed to December 31, 1971. The Association, however, agreed that savings of $480,000 under the credit should be used for track renewal on an additional 14 km of track and therefore ex- tended the closing date to December 31, 1972. Most recently, the credit's closing date has been further postponed to June 30, 1973, because of a delav in delivery of equipment. Progress toward the financial targets of the project has also been slow. In particular, the Railway's financial situation has been precarious but is now improving. The RCFP's liquidity position has been poor due to the large volume of debt owed partly to the Government and partly to the Senegal Railway. The Government, however, has recently acted to lessen  ANNEX II Page 2 of 2 RCFM's debt burden by waiving AIF 788 million owed to it bv the Regie. Fur- ther, Government has agreed to continne waiving RCFM payments of interest and principal on the proceeds of Credit 95-MLI, relent to the Regie, and compen- sating the Regie for payments made by the latter to the Senegal Railway for equipment charges. Credit 197-MLI: First Highway Project The US$7.7 million First Highway Project of 1970 (197-MLI) is being carried out with the assistance of two teams of experts, from the International Labor Organization (ILO), which are providing technical assistance, including help to reorganize the Equipment Department of the National Directorate of Public Works (DPW). The Borrower's performance is good and the project is progressing satisfactorily after a slow start (see paragraph 9). Credit 277-MLI: Mopti Rice Project The USS6.9 million Rice Development Credit of January 1972 (277-MLI) is now making satisfactory progress after initial delays due to Government budgetary constraints and the lack of knowledge of IDA procedures by officials of the relevant Ministry. It is expected that the project's main civil works contract, awqarded recently, should be completed within two years, or one year ahead of appraisal schedule. Credit 321-MtI: Telecommunications Project The US$3.6 million Telecommunications Project of June 1972 (321-MLI) is not yet effective. The date of effectiveness, originally November 1, 1972, has been postponed several times. The new date is April 20, 1973, and the credit is expected to become effective upon receipt of a duly prepared legal opinion from Government.  ANNEX III Page 1 of 3 MALI Second Highway Project Credit and Project Summary Borrower: The Republic of Mali Amount: US$9.5 million equivalent Terms: Standard Project Description: Rehabilitation and strengthening of the Bamako- Segou and Bamako-Bougouni roads, including super- vision of construction by consultants; construction of the ongoing highway maintenance and feeder road betterment program, begun under Credit 197-MLI, through the provision of additional technical assistance and training; purchase of highway main- tenance equipment; and detailed engineering for the upgrading of the Bamako-Kolokani road. Estimated Cost: The estimated total cost of the project is US$20.5 million equivalent, including a foreign exchange component of US$14.7 million. Details are given below. Improvement of Paved Roads Foreign Local Total (US$ million) Bamako-Faladie-Bougouni Road (166 km) 3,017 1,624 4,641 Faladie-Segou Road (222 km) 4,472 2,408 6,880 Construction Supervision 730 81 811 Subtotal 8,219 4,113 12,332 Continuation of Technical Assis- tance and Training 795 83 878 Highway Maintenance Equipment 2,247 117 2,363 Preinvestment Studies 220 25 245  ANNEX III Page 2 of 3 Study of Trucking Industry 50 50 Contingencies Quantities 1,593 817 2,410 Prices 1,540 636 2,176 Subtotal 3,133 1,453 4,586 Total Cost of Project 14,663 5,791 20,454 Rounded 14,700 5,800 20,500 Financing Plan: US$ million Association 9.5 USAID 6.6 Government 4.4 Total 20.5 Rehabilitation of Paved Roads: USAID IDA - Barako-Faladie-Bougouni road 3.7 - Faladie-Segou road - 4.8 - Construction Supervision .7 Continuation of Technical Assistance and Training -.8 Highwav I'aintenance Equinment 1.5 .8 Detailed Engineering - .2 Study of Trucking Industry .05 Contingency Provisions for Increases - in quantities .7 1.0 - in prices .7 1.0 Suibtotal 1.4 2.1 TOTAL PROJECT (ROUNDED) 6.6 9.5 (32%) (46%)  ANNEX III Page 3 of 3 Estimated Disbursements: Fiscal year Cumulative Disbursements (US$ million) 1973/74 1.5 1974/75 5.5 1975/76 8.5 1976/77 9.5 Procurement Arrangements: Given the project's parallel financing arrange- ments and the fact that USAID's procurement conditions differ from those of the Associa- tion, the highway rehabilitation works are divided into two parts, USAID assisting in the financing of the Bamako-Faladie-Bougouni road (155 kn) to be tendered according to USAID regulations, i.e., the contracting firm must be either American, Malian or indigenous to a Part II country in the "free world." Further, that portion of the road maintenance equipment to be financed by USAID will be tied to pro- curement in the United States. The Faladie- Segou road (223 kmi), which is to be financed by the Association, will be constructed under a single, unit-price contract after international competitive bidding in accordance with Bank/IDA guidelines. Road maintenance equipment financed by the association will also be procured through international competitive bidding. Consultants: Consultants will be employed for construction supervision, technical assistance and train- ing, and engineering studies under terms and conditions acceptable to the Association. Rate of Return: Economic return on the project is calculated at 30 percent. Appraisal Report: Report No. 61a-MLI dated April 3, 1973.   120 80 4- To Toodeni 0. 4