Niger - Third Highway Project

Report No. 889a-NIR FILE COPY Appraisal of a Third Highway Project Niger February 3, 1976 Western Africa Projects Department Highways Division FOR OFFICIAL USE ONLY International Bank for Reconstruction and Development International Development Association This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Currency Equivalents Currency Unit = CFA franc (CFAF) US$1.00 = CFAF 225 CFAF 1 million = US$14,4i. Fiscal Year: July 1 - June 30 System of Weights and Measures: Metric Metric British/US Equivalents 1 meter (m) = 3.28 feet ( t) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km ) = 0.386 square mile (sq mi) 1 metric ton (m ton) = 2,204 pounds (lb) Abbreviations and Acronyms ADF - African Development Fund BADEA - Banque Arabe pour le Developpement Economique en Afrique DPW - Directorate of Pablic Works and Urban Arrairs FAC - Fonds d'Aide et de Cooperation FED - Fonds Europeen de Dgveloppement MPWT - Ministry of Public Works, Transport, and Urban Affairs SNGTN - Soci4t' Nationale des Grands Travaux du Niger SNTN - Soci6te Nationale des Transporteurs Nige4riens SNTP - Societe' Nationale des Transports Fleuviaux  FOR OFFICIAL USE ONLY NIGER APPRAISAL OF A THIRD HIGHWAY PROJECT Table of Contents Page No. SUMMARY ............................................. - iii 1. INTRODUCTION ............ .* 1 2. THE TRANSPORT SECTOR . . ........................... 2 A. Economic Setting ...2 B. The Transport System . ................. 3 C. Transport Planning, Policy, and Coordination 4 3. HIGHWAYS .. 5 A. The Network .................................... 5 B. Characteristics and Growth of Road Traffic 6 C. The Road Transport Industry ..................... 6 D. Administration. 7 E. Planning ............. . . . 7 F. Financing ......8...... ,. 8 G. Engineering and Construction. 8 H. Maintenance. 9 4. THE PROJECT ............... 10 A. Description ..10 - Maintenance Program . .10 - Construction of Zinder-Nigerian Border Road 10 - Construction of Maradi-Nigerian Border (Djibiya) Road....... 1 1 - Survey of the Domestic Construction Industry. 12 B. Cost Estimates ................................. 12 C. Execution ..14 D. Financing and Disbursements . . 16 This report has been prepared by Messrs. E. Staffini (Engineer) and D. Jovanovic (Economist) following an appraisal mission in November/December 1974. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABLE OF CONTENTS (Continued) Page No. 5. ECONOMIC EVALUATION ............................. 18 A. General ......................................... 18 B. Maintenance Program ............ .. ............. 18 C. Construction of Zinder-Nigerian Border Road ... 20 D. Construction of Maradi-Nigerian Border Road ... 20 6. AGREEMENTS REACHED AND RECOMMENDATION .... .......... 21 TABLES 1. Development of the Highway Network, 1968-74 2. Freight Transport Volumes 3. Investments in the Transport Sector, 1970-74 4. Growth of the Vehicle Fleet, 1969-73 5. Consumption of Petroleum Products, 1968-73 6. Highway Expenditures, 1970-74 7. Estimates of Government Revenues from Road Users, 1970-74 8. Design Standards for Road Construction Items 9. Project Cost Estimates 10. Description and Cost of Equipment to be Procured 11. Estimated 1976-79 Budgets for Highway Maintenance 12. Project Financing Plan 13. Estimated Schedule of Disbursements 14. Estimates of Vehicle Operating Costs 15. Estimated Economic Returns of Project Components ANNEX Details of Economic Analysis MAPS Road Network - IBRD 11522 Project Roads - IBRD 11523  NIGER APPRAISAL OF A THIRD HIGHWAY PROJECT SUMMARY i. The Republic of Niger is one of the largest landlocked countries in Africa, but only about 10% of its land area has moderately fertile soils and sufficient rainfall to allow crop cultivation. Agriculture provides about half of Gross National Product (GNP), and groundnut production alone contri- butes about 35% of total export earnings. ii. The flows of Niger's external trade are very sensitive to transport costs because of the long distances between important production centers and to ocean ports, and the fact that scarce natural resources causes heavy dependence on imports. Over the past decade, therefore, Government policy in the transport sector has been to upgrade major trunk roads and to ensure adequate maintenance of the entire highway system. The paved road network has increased from about 150 km in 1965 to about 1,300 km in 1974, and further upgrading of trunk roads is planned; also, the maintenance organization is now competent to carry out routine operations on more than half of the classified road system, and plans are underway for further development of maintenance capacity. Additionally, the Government started in 1974 a program for improve- ment of about 1,400 km of feeder roads. iii. Bank Group operations to date for highway development have been directed to upgrading trunk roads, reviewing and reorganizing routine main- tenance procedures, and some training of staff of the Directorate of Public Works and Urban Affairs (DPW). The projects have all been satisfactorily executed, and the most recent one is now virtually complete. The Associa- tion is also helping finance one other project in the transport sector for strengthening and improvement of the runway and facilities at Niamey Inter- national Airport; construction works are underway. iv. The principal aims of the proposed Third Highway Project are to consolidate and expand the maintenance efforts started under Credit 128-NIR, as well as to improve major trunk roads in the south which support agricul- tural development, and to provide better transport connections for export/import traffic flows via Nigeria. The project consists of: (a) a four-year program of periodic road maintenance, including procurement of equipment and training of specialized DPW staff at all levels, to be implemented with the assistance of consultants; (b) construction and improvement of the roads Zinder-Nigerian border (about 113 km), and Maradi-Nigerian border (Djibiya) (about 49 km); and (c) a survey of the domestic construction industry to determine its present state, and to recommend measures for fostering its development. v. The total capital cost of the project, net of taxes and duties, is estimated at US$28.7 million equivalent, with foreign costs of about US$24.7 million (86%). Taxes and duties are estimated at US$9.8 million equivalent. The project will be financed by the Association, the Arab Bank for Economic  - ii - Development in Africa (Banque Arabe pour le Developpement Economique en Afrique, BADEA), the African Development Fund (ADF), and by the Government, under separate agreements for each lending agency. The proposed financing plan, with the corresponding proportion of total project costs net of taxes to be provided by each entity, is as follows: IDA Credit, US$15.6 million (54.3%); BADEA, US$7 million (24.4%); ADF, US$3.6 million 1/ (12.5%); Government, US$2.5 million (8.8%). Disbursements from the proposed Credit will be as follows: (i) 51% of total expenditures for technical assistance and training, and other con- sulting services; (ii) 53% of totaL expenditures for equipment purchase; and (iii) 44% of total expenditures for road construction. vi. In addition to its contribution to the capital costs of the project, the Government will also meet recurrent expenditures for road maintenance operations to be carried out. Preliminary estimates of DPW road maintenance budgets for 1976-79 have been prepared, and the Government will use these estimates as the basis for preparing its maintenance budgets (with appro- priate adjustments for price variations), and has agreed to review each proposed annual budget in consultation with the Association, before May 31 of each year. vii. Execution of the project -will be the responsibility of DPW, assisted by consultants for technical assistance to implement the periodic maintenance program, supervision of construction, and the survey of the domestic construc- tion industry. The Government is planning to employ consultants BCEOM (France) for the technical assistance because of its experience with local con- ditions and problems acquired during its reorganization of routine maintenance operations in the country; the Association accepts this arrangement. Consult- ants for the other project items abovementioned will be selected in agreement with, and on terms and conditions satisfactory to the Association. viii. Periodic maintenance will be carried out by force account with equipment to be procured under the project. Four DPW regravelling units to be established will be expected ultimately to maintain annually about 320 km of gravel roads, a rate sufficient to keep the gravel network in satisfactory condition. During the three-year period required for the units to become fully functional, some of the regravelling works may also provide suitable training for newly-established domestic road contractors, and the Government has agreed that, based on the findings and recommendations of the construction industry survey to be carried out, it will examine with the Association the possibility of having some participation by domestic contractors in the execution of re- gravelling works. ix. The proposed project also provides for about 160 man-months of technical assistance to help reorganize DPW's activities to handle its in- creased maintenance responsibilities, and to train specialized local personnel at all levels. Training will be done essentially on the job, complemented by theoretical courses. The Government will prepare, with the assistance of consultants, a detailed program with quantitative targets for the training 1/ ADF loan will be in ADF Units of Account 3.24 million, presently equivalent to US$3.6 million.  - iii - of DPW engineers, unit chiefs, and workshop and field personnel, and will submit it to the Association, within four months of the date of effectiveness of the proposed Credit, for review and approval. x. Equipment will be procured on the basis of international competi- tive bidding in accordance with Bank Group guidelines. However, for items or groups of items expected to cost the equivalent of US$10,000 or less, up to an aggregate amount not exceeding the equivalent of US$300,000, procurement may be on the basis of local bidding procedures acceptable to the Association. The Government was planning to have consultants prepare bidding documents for equipment purchase prior to Board consideration of the proposed project, and requested that the Association consider retroactive financing of expenditures incurred for this purpose. The Association has approved the Government's request for an amount not exceeding US$40,000. xi. Detailed engineering and bidding documents for the road construction works have been prepared by consultants Louis Berger (US) under Credit 231-NIR, and submitted to the Association for review and approval; these documents provide for a preference in bid evaluation to domestic contractors in accord- ance with Bank Group guidelines. Construction will be carried out under unit price contract to be awarded on the basis of international competitive bidding in accordance with Bank Group guidelines. Construction works are expected to start in mid-1976, and to last about two years for the Zinder-Nigerian border road (113 km), and about one year for the Maradi-Nigerian border road. xii. In order to ensure that the interdependent aspects of the project items are adequately taken into account by the co-lenders, the Association will enter into understandings with BADEA and ADF, according to which they would agree to coordinate their actions and to keep each other informed of the status of project implementation. xiii. The maintenance and construction works under the proposed project are expected to result in reduced vehicle operating costs and increased effi- ciency of the road transport industry. There would also be Government savings in future road rehabilitation costs. The best estimate of economic return for the maintenance program is about 28%; for construction of the Zinder-Nigerian border road, about 13%; and for construction of the Maradi-Nigerian border road, about 16%. The weighted average economic return for the project is estimated to be over 17%. xiv. The proposed project is suitable for a Credit of US$15.6 million to the Government of the Republic of Niger on standard IDA terms.   NIGER APPRAISAL OF A THIRD HIGHWAY PROJECT 1. INTRODUCTION 1.01 Over recent years, Government policy in Niger's transport sector has been to upgrade major trunk roads in the south of the country, and to en- sure adequate maintenance of the entire highway system. This strategy is ap- propriate to the vital aeed for improved facilities which would promote agri- cultural development and provide better connections for export/import traffic flows, as well as the assurance of greater transport reliability particularly during the rainy season. In support of its policy abovementioned, the Gov- ernment is planning to implement a Third Highway Project, and has requested Bank Group assistance in financing it (para 1.05). 1.02 To date, Bank Group operations in Niger's transport sector have been for highway development and for airport infrastructure. The (First) Highway Project (Credit 55-NIR, US$1.5 million, 1964) consisted of engineering and construction of about 60 km of roads serving groundnut traffic. In 1965, the Bank made a US$85,000 grant for a road maintenance study which was carried out by consultants BCEOM (France). The main conclusions of the study were that local personnel needed extensive training, and that highway equipment was inadequate and in many cases obsolete. The consultants recommended phased reorganization of maintenance, with the first phase limited to routine operations. Work on eliminating the backlog of periodic maintenance would be assigned to contractors in the first instance, and the reorganization of DPW's own activities in periodic maintenance would constitute a second phase of the proposed program. As a result of the above recommendations, a highway main- tenance project (Credit 128-NIR, US$6.47 million, 1968) provided for the reorganization of routine maintenance operations, and elimination of the backlog of deferred maintenance. The project also included feasibility studies for about 300 km of roads, with detailed engineering for about 140 km of the highest priority sections, carried out by consultants SCET-COOP (France). 1.03 A subsequent highway project (Credit 231-NIR, US$6.55 million, 1971) provided for construction of the 140 km of roads abovementioned, and prein- vestment studies for about 170 km of roads serving agricultural areas. The studies carried out by consultants Louis Berger (US) showed that feasibility of the Zinder-Bande road (73 km) was contingent on reconstruction of the connecting Babura-Kunya road in Nigeria; when sufficient assurances were received from the Government of Nigeria that this road would be improved, the study was extended to cover the route through Magaria and Tinkim to the Nigerian border, a distance of about 113 km. Construction of the other project road studied (Niamey-Baleyara, 97 km) was found premature, and at the Govern- ment's request, detailed engineering of the road was dropped and replaced by that for reconstruction of Maradi-Nigerian Border (49 km), proposed for fin- ancing under the present project.  -2- 1.04 The Association is also helping finance a project (Credit 473-NIR, US$5.0 million, 1974) for modern:lzation and expansion of the facilities at Niamey International Airport to assure its continued use by international transit traffic, as well as to provide for future traffic growth and to facil- itate development generally. The project consists essentially of lengthening and rehabilitation of the existinig runway and taxiway to accommodate wide- bodied aircraft, and procurement of various items of airport safety equipment. Construction works are underway. 1.05 The Third Highway Project now proposed consists of: (a) a four-year program of periodic highway maintenance, representing a second phase of implementation of the BCEOM recommendations (para 1.02), and covering expansion of the existing DPW organization, equipment purchase, and appropriate training of specialized DPW staff at all levels, to be implemented with the assistance of consultants; (b) construction of the road from Zinder to the Nigerian border (113 kIn), and of the Maradi-Nigerian border road (49 km); and (c) a survey of the domestic construction industry to determine its present state and to recommend appropriate measures for fostering its development. The total capital cost of the project: (net of taxes and duties) is estimated at US$28.7 million equivalent, with foreign costs of about US$24.7 million (86%), and local costs of about US$4.0 million equivalent (14%). The project will be jointly financed by the Association (US$15.6 million) and the Arab Bank for Economic Development in Africa (US$7.0 million), and on a parallel basis by the African Development Fund (US$3.6 million), under separate agreements for each agency. The Government is expected to provide US$12.3 million equivalent, of which US$9.8 million equivalent represents the entire component for taxes and duties, and the balance of US$2.5 million equivalent in other local costs. 1.06 This report is based on studies by consultants BCEOM and Louis Berger, on information provided by DPW, and on the findings of an appraisal mission comprising Messrs. E. Staffini (Engineer) and D. Jovanovic (Economist) which visited Niger in November/December 1974. 2. THE TRANSPORT SECTOR A. Economic Setting 2.01 Niger is one of the largest landlocked countries in Africa, covering about 1.3 million km2. However, about 90% of this area lies in the desert regions of the Sahara, and only in the extreme south of the country is the land moderately fertile and the rainfall sufficient for cultivation of some food crops (millet, groundnuts, sorghum, and cotton). The most important economic and administrative centers are therefore located in this southern region, as is most of the population of about 4.3 million. 2.02 Per capita Gross National Product (GNP) was estimated in 1972 at about US$90, a level which has remained stagnant over the past several years  -3- due partly to the effects of the recent drought, and partly to the high rate of population growth (about 2.2% p.a.). About half of GNP is provided by agriculture, with groundnuts, the main export product, contributing about 35% of total export earnings. The industrial sector now provides only about 15% of GNP, but earnings from uranium exploitation at the Arlit mines are growing, and in 1973 reached about 40% of total export value. B. The Transport System 2.03 The domestic transport system is a simple one based on about 7,000 km of classified roads of generally low design standards (Table 1). About 1,300 km of the network are paved roads, mostly on the east-west route which runs from the Mali border to Lake Chad, and which is the main axis connecting important economic centers (see Map 11522). Details on the road system and on the characteristics of road transport are given in Chapter 3. 2.04 The flows of Niger's external trade are very sensitive to transport costs because of the long distances between important production centers and to ocean ports, and the fact that scarce natural resources causes heavy dependence on imports. The major sections of the routes to the sea lie outside the country, and Niger has little control over the high costs of transit. There are three main export/import outlets: (i) the Nigeria route (about 1,300 km from Zinder to the sea) which connects the central and eastern regions by road to Kano, and thence by rail to the port of Lagos; (ii) the Dahomey route (about 1,100 km from Niamey to the sea) which connects Gaya by road to Parakou, and thence by rail to Cotonou; and (iii) the Ivory Coast route (about 1,650 km from Niamey) which connects the capital by road to Ouagadougou (Upper Volta), and thence by rail to Abidjan. At present, the Nigerian route carries about 50% of total import/export freight traffic, the Dahomey route about 45%, and the Ivory Coast route the remainder. 2.05 Efforts to establish commercial transport on the Niger River have so far not been successful, but the Government created in 1972 a Societe Nationale des Tranaports Fleuviaux (SNTF) which is working towards using the river as an alternative outlet to the sea. The Canadian International Develop- ment Agency (CIDA) financed the initial purchases of SNTF's fleet, as well as the cost of trials from Gaya to the port of Warri (Nigeria), a distance of about 1,400 km. The first trial took place in 1973, but activities are still con- ducted on an experimental basis and the final result remains uncertain. The Government is understandably anxious that the trials should be successful, since river services could substantially reduce transport costs for the western regions during the annual 6-7 month period when navigation is possiole. However, commercial river transport will not be feasible until several techni- cal and financial problems concerning both Niger and Nigeria are solved;  -4- these problems include river regulation, installation of signalling systems, provision of terminal storage facilities, etc. 2.06 The international airport at Niamey is the closest to Europe among the West African countries, and is therefore an important transit stop; as such, it can stimulate the economy and generate significant revenues from aircraft landing charges. In view of the importance to the economy of re- taining transit traffic for Niamey airport, the Association is helping finance a project for its improvement (para. 1.04). 2.07 The domestic airline Air Niger, a company in which the Government is majority shareholder, provides scheduled services to five airfields; there are also about 14 airstrips in outlying regions of the country. The volume of air freight traffic increased over 1969-73 by about 12.5% p.a., with Niamey airport handling about 95% of the total (Table 2). Domestic freight traffic is negligible, totalling not more than about 300 tons p.a. The potential role of domestic air transport in Niger could be quite substantial, but no analysis in this respect has yet been made (paras. 2.12-2.13). C. Transport Planning, Policy, and Coordination 2.08 Decisions on transport investments are made by the Planning Division of the Ministry of Development, which also coordinates the necessary external financing; all decisions are subject to final approval by the recently estab- lished National Council for Development. The Ministry is however unable to play an adequate role in transport. planning and development, partly because of the cumbersome procedures involved in decision-making, and also because of a shortage of qualified staff. 2.09 Formal responsibility for transport policy and coordination is assigned to the Ministry of Public Works, Transport, and Urban Affairs (MPWT), which discharges this task through its Directorate of Transport. However, the Directorate is also short of qualified staff, and is generally too weak for meaningful participation in policy-making and investment planning. Highway administration, design, construction, and maintenance, is the responsibility of MPWT's Directorate of Public Works and Urban Affairs (DPW) which is better organized and staffed (paras. 3.07 - 3.08). 2.10 The development of transport infrastructure has been slow and un- balanced. Emphasis has been placed on improving the trunk road network, and over 1970-74, paving of the main east-west road, together with improvement of the international airport at Niamey, were allocated a major part of capital investments in the sector (about US$50 million equivalent, mostly through foreign aid) (Table 3). Although about 90% of total investments were devoted to highways, improvement of secondary and feeder roads was only negligible; this neglect has naturally hindered the development of many segments of the rural population, and caused problems in the distribution of food supplies during the recent drought. The new Government which took office in 1974 now attaches priority to the need for an improved network of secondary and feeder roads, and a program of work on about 1,400 km of these roads has been launched as part of drought relief measures and within agricultural development proj- ects; financing for the program is being provided by the Fonds Europeen de  -5- Developpement (FED), Kreditanstalt fur Wiederaufbau (KFW, Germany), and the United States Agency for International Development (USAID). The maintenance component of the proposed project will complement these efforts. 2.11 Capital investments in transport over the five-year period 1970-74 were estimated at about 25% of total capital expenditures, a level which appears inadequate considering the importance of and requirements in the sector. The country's increasing reliance on imports can be expected to increase the sensitivity of its landlocked economy to the quality and cost of transport services both within the country and on its external access routes to the sea. The need is therefore for a continuing increase in transport infrastructure investments, and these are expected to be covered mostly by foreign aid, the source of well over 90% of investments in the sector in 1970- 74 (Table 3). 2.12 Inter-modal coordination is not a problem, because road transport is so clearly dominant and there is little Government intervention in the mode (para. 3.06). However, development of air transport could have important potential, and appears to be the most suitable alternative for the flow of selected goods and services to remote regions in the north and east where low traffic volumes do not justify substantial road investments. This issue deserves careful attention and analysis, and will be investigated in the near future (para. 2.13). 2.13 In order to fill the gap in the current planning organization and to provide the basis for determining investment priorities in the transport sec- tor, especially in the absence of a detailed economic development plan for the country, the French Fonds d'Aide et de Cooperation (FAC) is planning to finance a study of transport development to be executed over 1976/77. The proposed study, which will be a follow-up to one carried out in 1967 (para. 3.09), wi'll investigate particularly the planned upgrading of the road sys- tem, and in this context will also consider the viability of developing air services as an alternative mode of transit to certain areas. 3. HIGHWAYS A. The Network 3.01 There are about 7,000 km of classified roads, of which about 1,300 km are paved; the remainder are gravel or earth roads and tracks which are of generally low design standards, and some of which are periodically closed to traffic during the rainy season (Table 1). There are also about 4,000 km of unclassified earth tracks connecting areas of agricultural activity. The network distribution is concentrated in the south where most centers of pop- ulation and of economic activity are located; the vast uninhabited areas in the rest of the country are only sparsely served (Map 11522). The topography of the country is for the most part quite flat, and presents no major physical barriers to land transport.  -6- B. Characteristics and Growth of Road Traffic 3.02 Traffic density patterns follow the location of economic activity in the south and southwest. Transport demand is seasonal because of the pre- dominance of agriculture. There is no regular collection of traffic data; the most recent country-wide counts carried out in 1969 by DPW with BCEOM assistance, showed that most of the trunk roads carried an average of less than 60 vehicles per day (vpd). DPW was planning to carry out a two-week traffic count during 1975 on the most important roads in the country. Also, new country-wide traffic counts are expected to be carried out during 1976/77 under the proposed FAC-financed transport study (para. 2.13). 3.03 The motor vehicle fleet has been increasing over recent years at about 11% p.a., and in 1973 totalled about 17,000 units, of which more than 75% were light vehicles (Table 4). The existing truck fleet is considered more than adequate to serve present requirements (paras. 3.04-3.05). The consumption of gasoline and diesel oil increased over 1968-73 at an average of 7% p.a. and 11% p.a. respectively (Table 5). As a result of this trend, as well as the recent growth rate of export and import volumes of 7% and 10% p.a. and the 5% p.a. increase in agricultural production over 1968-72, it is not unreasonable to assume that road traffic on the entire network will increase at an average of about 7% p.a. over the short term. C. The Road Transport Industry 3.04 Public freight transport is handled by well over 250 transporters, about half of them located in the capital city Niamey. The largest of these is the Societe Nationale des Transporteurs Nigeriens (SNTN), a company with mixed capital (Government 49%; foreign, mainly French, 47%; and Niger private, 4%). The company owns a fleet of about 260 units, and when necessary, rents trucks. It handles about 75% of fuel transport, and about 30% of all general freight carried; it has the monopoly for transport of uranium ore from the mines at Arlit through Niamey to Parakou (Dahomey). 3.05 There is little direct Government intervention in road transport operations. There is no monopoly in road transport (except SNTN's for uranium ore), and no official tariffs. These latter are negotiatble, and are deter- mined on a case-by-case basis; in 1974, actual tariffs ranged between CFAF 16-24 (USe 7-11) per ton-km, only slightly higher than in the coastal coun- tries of West Africa. The prevailing competition among truckers and the lack of tariff regulations or "middle man" mean that much of the decrease in vehicle operating costs resulting from road improvements will most probably be trans- ferred to producers and consumers. Unlike freight haulage, passenger transport is poorly organized, and demand is higher than the present capacity. 3.06 Vehicles used for public road transport must have licenses issued by MPWT; however, because the existing trucking capacity is far higher than demand, it is not easy to obtain these licenses. MPWT also requires that vehicles for freight transport undergo a technical inspection twice a year, and those for passenger transport, four times a year; enforcement of this  -7- regulation is however quite loose. Maximum loads are specified by law at 13 tons per axle, but this is also not strictly enforced. D. Administration 3.07 DPW has overall responsibility for the administration, design, con- struction, and maintenance of the road system; it also has charge of govern- ment buildings, and of hydraulic and electrical engineering works. For high- ways, the Road Study Office is in charge of design, and the Central Office for Roads and New Works (Central Road Office, CRO) handles construction and main- tenance works, including management of DPW's equipment pool. CRO's field organization consists of three regional divisions and ten subdivisions. A National Public Works Laboratory in Niamey is competent to perform some soil tests necessary for road design and construction; laboratory equipment was financed under Credit 128-NIR. 3.08 DPW's staffing situation is quite adequate, especially the Equipment Division which was satisfactorily reorganized under Credit 128-NIR; however, specialized personnel require additional training to carry out effective periodic maintenance operations, and this will be provided under the proposed project (para. 4.15). Management personnel are almost all non-Nigeriens, mostly French engineers under a long-standing FAC technical assistance program; some lower-level French officers also serve under this program. The Ministry of Development has prepared a plan for Nigerien staff to take over respon- sibilities now held by foreigners in all Ministries; implementation of this plan within DPW is however quite difficult, as only a few local counterparts are available, mostly at middle-level positions, and they need more work experience to become sufficiently qualified to replace expatriate staff. Clearly, a realistic and well-defined training program is needed for high- level DPW staff, and the Government has agreed to establish such a program in consultation with the Association. The Government provided assur- ances that it will: (i) review and update, in agreement with the Asso- ciation, its replacement plan for DPW management personnel before Tecemrbr 31. 1976; (ii) review annually with the Association progress made in implementing the plan; and (iii) take all necessary actions, in consultation with the Association, to prepare and carry out an appropriate training program for the relevant personnel. E. Planning 3.09 Under a FAC-financed transport study carried out in 1967, consultants SEDES (France) developed an eight-year plan (1968-75) which focussed on two main requirements: upgrading the important east-west trunk road (about 1,800 km), and improving import-export routes. Highway investments over the period have been based on this plan. The Bank Group has participated through Credit 231-NIR which helped finance paving of the Niamey-Tillabery section (115 km) of the east-west road; construction of import/export routes from Zinder and Maradi to the Nigerian border is proposed under the present project. 3.10 Since transport demand is generally low, major new investment in expaL- sion of the present road system is not economically justified. The appropriate  - 8 - strategy for coping with the critical problem of high domestic transport costs is to preserve the existing network from deterioration, and to plan for progressive improvements. Government policy in highway planning is in line with this strategy; its main objectives are: (i) to widen and strengthen about 400 km of roads built during the 1960's to one-lane paved standards; and (ii) to upgrade the roads Tahoua-Agades (405 km) and Agades-Arlit (245 km) which would serve mining development in the northwest. Improvement of secondary roads is also envisaged. Detailed planning of this large program, which will require a long period for execution and substantial external aid, will be done under the proposed FAC-financed transport survey (para. 2.13). For highways, the consultants will be expected to determine what elements of the program are clearly justified, and to establish an investment plan according to well- defined priority rankings and in the light of financing possibilities. F. Financing 3.11 Highway expenditures are financed from three sources: the National Budget provides funds for administration and routine maintenance of national roads; the National Investment Fund (para. 3.12 below) finances minor road improvements and periodic maintenance works; foreign aid financing (princi- pally from FAC, FED, USAID, and the Bank Group) is spent mostly on new con- struction. Road expenditures over 1970-74 totalled about CFAF 16.1 billion (US$68.5 million equivalent), of which CFAF 11.2 billion (US$46 million) or 70% for investment, and the rest for maintenance (Tables 3 and 6). 3.12 Road users contribute to the National Budget through taxes levied on fuels (CFAF 16/liter on gasoline, CFAF 6/liter on diesel oil), taxes and duties on imports of vehicles and spare parts, and taxes for vehicle regis- tration and licensing. Additional taxes on fuels (CFAF 6/liter on gasoline, CFAF 4/liter on diesel oil) are earmarked for road expenditures in the National Investment Fund, established in 1970 to replace the Road Fund. Total revenues from all the above sources amounted over 1970-74 to about CFAF 7 billion (US$28.4 million equivalent) (Table 7); Government expenditures for highway maintenance over the same period totalled about CFAF 5 billion (US$20 million). G. Engineering and Construction 3.13 DPW's Road Study Office has design capacity for minor improvement works; road design for major projects is done by foreign consultants. 3.14 The domestic construction industry is at an early stage of develop- ment. In building construction, there are several contractors who can compete with foreign firms. For road works, however, there are only two domestic firms, and the activities of one of them are limited to transporting construction materials; the other, the Societe Nationale des Grands Travaux du Niger (SNGTN) 1/ has staff and equipment to handle fairly large road works, as well as a variety 1/ A limited company whose capital is now entirely Nigerien (Government and Niger Development Bank).  -9- of building construction jobs. Its financial situation is nonetheless precarious, with a deficit in 1974 of about CFAF 40 million. Fortunately, this deficit is expected to be partially offset by anticipated profits of about CFAF 30 mil- lion from SNGTN's first international joint venture in road construction, a contract with SATOM (France) for reconstruction of the Tsernaoua-Tahoua road (122 km) being carried out with FAC financing. The International Labor Office (ILO) carried out a study of SNGTN's operations, and concluded that the com- pany would need an annual minimum turnover of CFAF 1 billion (about US$4.4 million) in 1974 costs and prices to break even, a volume not likely to be achieved on projects in Niger alone. Therefore, unless SNGTN can break into foreign markets, it appears unlikely to become a profitable operation. 3.15 In an attempt to promote the domestic industry, the Government in- tends to grant a 7-1/2% nominal preference in Bank Group-financed civil works to contractors suitably prequalified as bona fide domestic firms. In order to provide further stimulus to development of the industry, the Government has agreed to have consultants carry out a brief survey of the industry to determine appropriate policy to be followed and requirements in technical and financial assistance. The proposed project provides financing for the neces- sary consulting services (para. 4.09). H. Maintenance 3.16 Road maintenance is carried out by DPW's regional divisions and their subdivisions. Routine maintenance techniques and output have improved substantially as a result of the iHighway Maintenance Project (Credit 128-NIR). Highway equipment is in satisfactory condition, mainly because of the progress made in reorganization of DPW's Equipment Division. The establishment of an analytical accounting system has made it possible to determine the costs of routine maintenance operations, and this will allow adequate planning of operations and budgets. As regards periodic maintenance operations, the Highway Maintenance Project achieved its aim of elirninating the heavy back- log by regravelling about 750 km of roads by contract. Once this was done, periodic maintenance continued to be carried out mostly by contract, but at a slower and inadequate rate because of a shortage of Government funds. Since there is only one domestic road contractor, the works have been executed almost entirely by foreign contractors at a -ost considerably higher than by force account. One of the objectives of the proposed Third Highway Project is to enable DPW to progressively assume responsibility for carrying out periodic maintenance with its own forces (para. 4.02). 3.17 The Government provided assurances under Credit 231-NIR that it would make adequate budget allocations to ensure proper maintenance of the road network. Accordingly, expenditures for maintenance (including adminis- tration) have increased from about CFAF 756 million in 1970 to about CFAF 1.1 billion in 1974 (Table 6), and have even exceeded the amounts forecast during appraisal of the abovementioned project. For 1975, however, the maintenance allocation dropped below the previous year's level. In order to avert the serious road deterioration that could result from the shortage of funds, DPW has had to request an extraordinary allocation of CFAF 200 million which is to be provided out of budget reserves. Estimates have been  - 10 - prepared of road maintenance expenditures over the implementation period of the proposed project, and these will serve as the basis for Government budget allocations (para. 4.20). 4. THE PROJECT A. Description 4.01 The proposed project consists of: (a) implementation of a four-year program of periodic maintenance, including procurement of equipment and training of specialized DPW staff at all levels; (b) construction and improvement of the roads Zinder-Nigerian border (about 113 km), and Maradi-Nigerian border (Djibiya) (about 49 km); and (c) consulting services for: (i) technical assistance required under item (a) above; (ii) supervision of road construction; and (iii) a survey of the domestic construction industry. Maintenance Program 4.02 Under the Highway Maintenance Project, BCEOM analyzed during 1974 the future maintenance requirements of the road network; the consultants paid particular attention to periodic operations as a follow-up of their 1967 maintenance study (para. 1.02). One conclusion of the analysis was that periodic maintenance should be applied to about 320 km of gravel roads an- nually in order to keep the network in satisfactory condition; however, at present only about 150 km of these roads are regravelled annually, and unless appropriate action is taken to increase this, a backlog of deferred main- tenance will again build up and the results achieved under the maintenance project will be lost (para. 3.16). The most effective procedure for executing periodic maintenance is to have DPW's own forces carry out the required operations: its administrative structure is adequate for the task, its field organization is already in place, and the costs of force account operations have been estimated in the BCEOM analysis to be about 30% lower than by con- tract. The proposed project therefore provides for execution of a four-year periodic maintenance program over 1976-79, including technical assistance required to organize the new DPW activities and to train specialized personnel at all levels, as well as procurement of necessary highway equipment (paras. 4.13-4.17). Construction of the Zinder-Nigerian Border Road (113 km) 4.03 The existing section Zinder-Bande (73 km) is a poorly aligned road whose gravel surface is almost entirely worn out; since its roadway is for the  - 1 1 - most part below the surrounding terrain, the road is either covered with wind- blown sand, or flooded during the rainy season. The section Bande-Magaria (21.5 km) was built to gravel standards with FED financing in 1967, but the surface is now in very poor condition, partly because of the heavy traffic carried during construction in 1974 of the following section Magaria-Tinkim (about 13.5 km) under Credit 231-NIR. The last section from Tinkim to the Nigerian border (about 5.5 km) is an earth track passable only during the dry season, and then only by four-wheel drive vehicles. 4.04 Under the proposed project, the entire road from Zinder to the Nigerian border will be constructed to two-lane paved standard. The pavement will be 6 m wide on a total roadway width of 8 m; a design speed of 100 km/h has been adopted, and an axle-load of 13 t will be possible (Table 8). These design standards are consistent with projected traffic requirements, terrain in the area, and general soil conditions. The sections Zinder-Bande and Tinkim-Nigerian border will have to be completely reconstructed; the Bande- Magaria section will be upgraded and realigned as necessary; the recently constructed Magaria-Tinkim section will require only paving. 4.05 Justification for the above works depends on construction of the connecting Babura-Kunya road (96 km) in Nigeria. Official assurances have been received from the Niger-Nigeria Joint Commission that Nigeria's Third National Development Plan (1975-80) lists the Babura-Kunyia road as a federal road, and that it will be reconstructed. These assurances have been reconfirmed during Credit negotiations, and are considered adpquate. In any event, should the situation change with regard to the Nigeria Government's decisions before the start of construction of the project road, then *he Association will review its position on the proposed works. Construction of the Maradi-Nigerian BordL- (Ljibiya) R3ad (49 km) 4.06 The exisrLing road was built in i958-59 with FED financing to one- lane paved staxudarus (81 l roadway width, 3.5 m pavement). Traffic levels on the road have now become too heavy (about 280 vpd, of which about 20% trucks) for the design standard, and the surface treatment is consequently severely cracked and deteriorated; it is completely destroyed over one 10 km section where traffic runs on the gravel base course which is also almost worn out. 4,07 The road is now the most heavily trafficked in the country; besides, it is one of the main connecting routes with Nigeria, and the shortest link from Niamey to Kano, the railhead for the route to the ocean. Because of the existing traffic situation and the projected increase, the Nigerian Government has recently built a two-lane paved road from Kano to the border. The proposed project provides for the Maradi-Nigerian border road in Niger to be widened to standards fairly close to those of the Nigerian road; consultants have pro- posed a 10 m roadway with a 7 m bituminous paveTnent designed for a 13 t axle load; the design speed adopted is 100 km/h. (Table 8). The existing hori- zontal alignment is appropriate to the design speed, and no changes are re- quired; the vertical alignment will require improvement at a few points.  - 12 - Survey of the Domestic Construction Industry 4.08 The proposed project provides for about eight man-months of con- sulting services to prepare a brief survey of the domestic construction indus- try. The consultants would be expected to review the present status of the industry and its potential for development, taking into account work pos- sibilities in the public and the private sectors. They would also attempt to identify factors hindering the growth of the industry, and propose possible solutions. Additionally, they would be expected to review: (i) current bidding and contracting documentation and procedures; (ii) the availability of facilities to provide capital and other financial services; and (iii) the specific needs of domestic contractors and Government officials for technical advice and assistance. Outline terms of reference have been discussed and agreed with the Government. B. Cost Estimates 4.09 The total capital cost of the project, net of taxes and duties, is estimated at US$28.7 million equivalent, with foreign costs of about US$24.7 million (86%); taxes and duties total about US$9.8 million equivalent, and other local costs about US$4.0 million equivalent. Estimates reflect prices at end-1975. Details of cost estimates are given in Table 9 and summarized below:  - 13 - - CFAF Million ---- ---- US$'000 ------ Foreign as % Local Foreign Total Local Foreign Total of Total A. Maintenance Program (i) Technical Assistance and Training 134 277 411 595 1,230 1,825 67 (ii) Equipment 255 785 1,040 1,135 3,485 4,620 75 389 1,062 1,451 1,730 4,715 6,445 73 B. Construction (i) Zinder-Nigerian border road (113 km) 1,126 1,794 2,920 5,005 7,975 12,980 61 (ii) Maradi- Nigerian border road (49 km) 640 1,020 1,660 2,845 4,535 7,380 61 (iii) Supervision 127 237 364 565 1,055 1,620 65 1,893 3,051 4,944 8,415 13,565 21,980 62 C. Survey of Domestic Construction Industry 5 9 14 20 40 60 66 Subtotal A-C 2,287 4,122 6,409 10,1b5 18,320 28,485 64 D. Contingencies (i) Quantities (about 9%) 209 360 569 929 1,600 2,529 63 (ii) Prices (about 26%) 621 1,069 1,690 2,761 4,750 7,511 63 Subtotal D 830 1,429 2,259 3,690 6,350 10,040 63 TOTAL 3,117 5,551 8,668 13,855 24,670 38,525 64 (Rounded) (13,800) (24.700)(38.500)  - 14 - 4.10 Costs for road construction are based on consultants' detailed engineering estimates. Costs of equipment and technical assistance for the maintenance program are based on studies by BCEOM. Estimates for consulting services are based on average costs prevailing in West African countries. Quantity contingencies have been allowed as a percentage of total cost for each project item as follows: 5% on supervision of works and equipment procurement; 10% on road construction, technical assistance, and the construc- tion industry survey. Price variations have been determined as follows: 1976 1977 1978/79 Road construction /1 16.5% 14.5% 13.5% Services 14% 12% 12% Equipment 10% 8% 8% /1 A higher than average price increase has been assumed for local costs to cover the expected effect of recent substantial raises in wages and salaries. C. Execution 4.11 Execution of the project will be the responsibility of DPW, assist- ed by consultants for technical assistance to implement the periodic mainte- nance program, construction supervision, and the survey of the domestic construction industry. The Government is planning to employ BCEOM for the technical assistance because of the consultants' experience with local conditions and problems acquired during its reorganization of routine main- tenance operations in the country; the Association accepts this arrangement. Consultants for other project items abovementioned will be selected in agree- ment with, and on terms and conditions satisfactory to the Association. Project implementation is expected to start in early 1976, and to take four years to complete. Maintenance Program 4.12 Periodic maintenance will be carried out by force account with equipment to be procured under the project; a list of equipment and cost estimates is given in Table 10. Four regravelling units will be formed in two stages over a three-year period. These units will ultimately be able to maintain annually about 320 km of gravel roads, a rate sufficient to keep the network in satisfactory condition. The regravelling units will also improve routine maintenance by stockpiling selected soil along the roads for use in these operations. Equipment will be delivered in two lots corresponding to the phased establishment ofthe regravelling units. Delivery schedules will be determined by the technical assistance team on the basis of availability of personnel to run the equipment, time requirements for training, and estimated delivery dates proposed by bidders. 4.13 During the three years required for the abovementioned units to be established and become fully functional, regravelling works will continue to  - 15 - be executed by contractors with Government financing, but this practice will be gradually phased out (see Table 11, item 4B). Over the period, however, some of the works may provide suitable training for newly-established domestic road contractors, especially those now involved only in building construction who may be~ expected to diversify into road works. The Government there- fore, based on the findings and recommendations of the construction industry survey to be implemented under the project, will examine with the Association the possibility of having some participation-by domestic con- tractors in the execution of regravelling works. 4.14 The reorganization of DPW activities to handle its new maintenance tasks will require technical assistance aad training of specialized personnel at all levels. BCEOM's highway maintenance study estimates that about 160 man-months of technical assistance will be needed. The proposed team will include one highway engineer, three mechanical experts, two chiefs for the regravelling units, and one expert in routine maintenance of paved roads; each of the experts will be expected to train a local counterpart to take over his duties before the end of his assignment. Since this training of local staff is considered one of the most important objectives of the main- tenance component of the proposed project, the Government has agreed that qualified personnel will be appointed to serve as counterparts to the consul- tant team according to the following schedule: (i) for the highway engineer and two mechanics, not later than October 1, 1976; and (ii) for the other consultant personnel, not later than October 1, 1977. 4.15 Training will be done essentially on-the-job, and will be comple- mented by theoretical courses illustrated with didactic material. DPW en- gineers, unit chiefs, workshop and field personnel will be trained partic- ularly to carry out periodic maintenance of gravel roads, including repair and maintenance of equipment; personnel in charge of routine maintenance will be given additional training as required. The Government, with the assistance of the consultants, will prepare a detailed program with quantitative targets for implementation of the training as specified above, and will submit it to the Association within four months of the date of effectiveness of the proposed Credit, for review and approval. These arrangements, as well as outline terms of reference for technical assistance and the training program, have been discussed and agreed with the Government. Road Construction 4.16 Detailed engineering and bidding documents for the road construc- tion works have been prepared by consultant Louis Berger (US) under Credit 231-NIR, and submitted to the Association for review and approval. Construction works are expected to start in mid-1976, and to last about two years for the Zinder-Nigerian border road (113.3 km), and about one year for the Maradi-Nigerian border road (49 km).  -- 16 - Procurement 4.17 Road construction works will be carried out under unit price contract to be awarded following international competitive bidding in accordance with Bank Group guidelines. At the Government's request, domestic contractors will receive a preference in bid evaluation in accord- ance with the above guidelines. Equipment will be procured on the basis of international competitive bidding in accordance with Bank Group guidelines. However, for items or groups of items expected to cost the equivalent of US$10,000 or less, up to an aggregate amount not exceeding the equivalent of US$300,000, procurement may be oln the basis of local bidding procedures acceptable to the Association. D. Financing and Disbursements 4.18 Financing of the proposed project will be covered by the IDA Credit of US$15.6 million, a BADEA loan of US$7 million, a loan from ADF of US$3.6 million equivalent, and a Government contribution of about US$2.5 million equivalent. ADF wilL finance 100% of the construction cost (net of taxes) of about 28 km of the Zinder-Nigerian border road; financing will be on a parallel basis, and under a single contract for the entire road. The Association and BADEA will jointly finance 90% of the total cost of the remainder of the road (85 km), and of all remaining project components. The proposed financing plan is shown in Table 12 and summarized below: (in US$'000) IDA BADEA ADF Govt. Total Maintenance Program 4,230 1,895 -- 680 6,805 Zinder-Nigerian border road 6,590 2,965 3,600 1,060 14,215 Maradi-Nigerian border road 4,745 2,120 -- 770 7,635 Construction Industry Survey 35 20 -- 5 60 Total 15,600 7,000 3,600 2,515 28,715 Percentage of Total Project Cost 54.3% 24.4% 12.5% 8.8% 100.0%  - 17 - Details of the above arrangements have been agreed with the Government and the co-financers. 4.19 The proposed IDA Credit of US$15.6 million will finance part of each project component as a percentage of total expenditures, corresponding to joint- financing with BADEA of 90% of total cost net of taxes. Details of the arrange- ments are shown in Table 12. Credit proceeds will be disbursed on the following basis: (i) 51% of total expenditures for technical assistance and training, and other consulting services; (ii) 53% of total expenditures for equipment purchase; and (iii) 44% of total expenditures for road construction. Table 13 shows the estimated schedule of disbursements from the IDA Credit Account. 4.20 In order to ensure that the interdependent aspects of the project items are adequately taken into account by the co-lenders, the Association will enter into understandings with BADEA and ADF, according to which they would agree to coordinate their actions and to keep each other informed of the status of project implementation. 4.21 In addition to its contribution to the capital costs of the project, the Government has agreed to meet recurrent expenditures for the routine and periodic road maintenance operations to be carried out. Preliminary estimates of DPF road maintenance budgets for 1976-79 have been prepared on the basis of expenditures determined in the BCEOM maintenance study; Table 11 shows these estimates, in prices at mid-1974. The Government will use these estimates as the basis for preparing its maintenance budgets (with appropriate adjust- ments for price variations), and has agreed to review each proposed annual budget, in consultation with the Association, before May 31 of each year. 4.22 The Government was planning to have consultants prepare the bidding documents for equipment purchase prior to Board consideration of the proposed project, and has requested that the Association consider retroactive financing of expenditures incurred for this purpose. Early procurement of equipment would reduce the expected inflationary cost increases, and allow a prompt start on execution of the periodic maintenance program. The Association has therefore approved the Government's request for retroactive financing for an amount not exceeding US$40,000.  - 18 - 5. ECONOMIC EVALUATION A. General 5.01 The principal aims of the proposed project are to consolidate and expand the efforts started under the Hlighway MIaintenance Project (Credit 128-NIR), as well as to improve major trunk roads in the south which support agricultural development, and providie better transport connections for export/ import traffic flows via Nigeria. More specifically, the planned periodic maintenance of gravel roads will ensure greater transport reliability during the rainy season, thereby extending the seasonal use of this network, and also reducing year-round transport costs. 5.02 Overall, the maintenance and construction works under the proposed project are expected to result in reduced vehicle operating costs (Table 14), and increased efficiency of the roa(d transport industry; these benefits will accrue to the economy as a whole, and will be passed on to different segments of the population in varying degrees. Reduced vehicle operating costs will directly benefit the owners of private cars and commercial vehicles; since transport prices in Niger are deterriined in a competitive framework, part of this benefit should be passed on to producers and consumers. There would also be Government savings in future roacl rehabilitation costs. 5.03 The economic analysis shows the proposed four-year road maintenance and construction program to be well justified. The best estimate of economic return for the maintenance program is about 28%; for construction of the Zinder-Nigerian border road, about 13%; and for construction of the Maradi- Nigerian border road, about 16% (Table 15). The weighted average return for the project is estimated to be over 17%. Details of the economic analysis are given in the Annex. B. Four-Year Maintenance Program 5.04 Since elimination of the heavy maintenance backlog as discussed in para. 3.16, periodic maintenance operations have not been performed systema- tically because DPW has neither the trained personnel nor the equipment re- quired. The works were threfore carried out mostly by contract, and the annulal output was about 150 km; this was substantially lower than considered necessary, as proven by consultants who calculated that about 320 km of annual periodic maintenance are required to maintairt the network at normal standards, and to avoid the build-up of a backlog of deferred maintenace. Execution of the proposed maintenance program is expected to ensure that the country's develop- ment is not hampered by inadequate transport infrastructure, and to produce long-term benefits arising from strengthening the organization and training of a permanent body to expand its operations to include periodic maintenance. The program is expected to lead to the following direct benefits: (i) reduc- tion in vehicle operating costs; (ii) reduction of the per kilometer cost of  - 19 - regravelling operations; and (iii) increase in seasonal use of roads which play a vital role in the country's econounic development. The first two groups of benefits were quantified. The economic analysis evaluated two alter- natives -- with and without the proposed project. A comparison was made between investment outlays, incremental recurrent maintenance expenditures, and vehicle operating costs when the program is implemented, and the alter- native of perpetuating the present situation, which would lead to gradual deterioration of the network. Based on projected traffic, the analysis determined the level of resources and the extent of the network which was economically justified for inclusion in the proposed periodic maintenance program. 5.05 Once the program is fully operational, it will cover about 2,300 km of gravel roads and about 600 km of selected earth roads, located primarily in the south. Traffic levels on these roads are generally low. About 1,250 km carry traffic volumes ranging between 80-400 passenger-car units (pcu) 1/ per day; about 1,400 km carry traffic of 30-80 pcu; and the remaining 250 km of the network has daily traffic of less than 30 pcu. The structure of traf- fic, according to 1974 data, was about 45% heavy trucks (mostly 8-12 t) and the remainder light vehicles (passenger cars and pick-ups). Traffic growth on the most heavily travelled gravel and earth roads is estimated at 7% p.a. over the seven-year economic life of the project (para. 3.03). 5.06 As regards actual execution of the program, maintenance units are expected to be in place at end-1978, and full benefits of the operation are expected to accrue in 1980 (about 95% in 1979, the last year of the proposed project). Implementation of the planned maintenance is expected to produce a combined average reduction of about 25% in vehicle operating costs. 5.07 Costs for this project item consist of outlays for investments and technical assistance, as well as incremental expenditures for recurrent main- tenance; the stream of costs and benefits of the program is shown in the Annex. The estimated economic life of the project reflects the weighted aver- age economic life of the interdependent elements which comprise the program. 2/ Assuming a 7% annual traffic growth, the economic return of the maintenance item exceeds 27%, with a benefit/cost ratio of 1.63 discounted by 10%. This estimated return relies on a number of inputs which have been quantified with varying degrees of certainty. An analysis of the sensitivity of the return to alternative assumptions regarding increased project costs of 15% shows a drop to about 22%; assuming a decrease in benefits of 15%, the return drops to about 21%. The analysis also shows that with a combination of unfavorable assumptions (a 15% increase in costs and a 15% decrease in benefits), the rate of return would still exceed 16% (Table 15). 1/ For the purpose of this analysis, all traffic data were converted into pcu: 1 light vehicle = 1 pcu; 1 truck = 3 pcu. 2/ Various types of equipment, institution-building by the training program, and the regravelling cycle.  - 20 - C. Construction of the Zinder-Nigerian Border Road (113 km) 5.08 This road crosses an important and well-populated agricultural area, linking Zinder, the third largest city, and Magaria, an economic and admin- istrative center, with the main east-west trunk route. The road zone is one of thc most agriculturally productive regions in the country, with output in a normal year totalling about 250,000) tons, mainly millet, sorghum, and ground- nuts. Plans exist to increase productivity over an extensive area, and in particular, FED is presently implemeniting a three-year project (1973-76), at a cost of about CFAF 520 million, colering about 1,500 ha; a second phase of this project is expected to be implemented over 1977-81. 5.09 In 1973, about 85,000 tons of trade traffic with Nigeria (mainly fuel and groundnuts) originated from the zone Zinder-Bande-Magaria. About 60% of the long-distance traffic take the north detour route (via Takieta and Matameye), while most of the groundnuts are transported from the northern area to the oil mill at Magaria. To reach Kunyia (Nigeria), the external trade commod- ities presently use a long detour road via Zinder and Takieta, or via Zango and Daura, a distance of about 260 kn and 190 respectively (see Map 11523). With the proposed construction, this route would be shortened to about 209 km and 115 km respectively, and the road would become the most important outlet to Nigeria for the southeastern regions. In 1974, traffic levels on different sections of the road ranged between 100-120 vpd, of which about 40% trucks. In the first ten years of the road's economic life, average traffic growth is estimated at about 6% p.a., tapering off thereafter at about 5.5%. 5.10 The direct benefits of the proposed road construction will derive from distance savings of the two detour routes abovementioned, reduced vehicle operating costs, and savings in maintenance costs. In addition to the benefits from diverted and local traffic, the analysis also includes generated traffic, but only of light vehicles. Though estimated differently for different road sections, this averages about 15% of the normal traffic of light vehicles. Based on the above benefits alone, the estimated economic return over an assumed 20-year life of the project is 13%. A sensitivity analysis carried out using a combination of unfavorable assumptions shows that the return still remains over 10%. However, there will also be other benefits, such as those from time savings, and from possible cost savings resulting from fewer acci- dents. D. Construction of 'Maradi-Nigerian Border Road (49 km) 5.11 The city of Maradi (population about 40,000) is the second largest in the country, and a center of one c,f the most productive agricultural re- gions. In a normal year, agricultural production in the road zone amounts to about 90,000 tons, mostly millet, sorghum, and groundnuts. The road is the shortest link from the main east-west highway to routes in Nigeria, and is an important outlet for exports (mainly groundnuts) and imports (mainly fuel). In 1973, about 92,000 tons of export/import traffic were transported  - 21 - on this route. The Association has recently appraised an agricultural project covering about 400,000 ha in the road zone. The principal aim of the project is to increase the production of cereals and groundnuts, which would benefit over 50,000 families. Project implementation is expected to start during 1976. 5.12 In 1974, average daily traffic on the major section, Maradi-Dan- Issa (40 km), was estimated at a relatively high 280 vpd, of which about 20% trucks; the 9 km section nearer the border carried about 220 vpd. Average traffic growth is estimated at about 6.5% p.a. over the first ten years of the road's expected economic life, and at 5.5% p.a. thereafter. Benefits applied in the analysis have been quantified and expressed in road user savings and savings in future maintenance costs. Since the road has been serving as a major trunk route in the area, no generated traffic has been assumed following reconstruction. Assuming a 20-year economic life, the proposed works are expected to yield an economic return of about 16%. Applying unfavorable assumptions in the sensitivity test, the economic return is estimated at 13% (Table 15). 6. AGREEMENTS REACHED AND RECOMMENDATION 6.01 During negotiations on the proposed Credit, the following principal items were discussed and agreed with the Government: C!) details of arrangements for reviewing and updating the replacement plan for DPW management personnel, making an annual assessment of progress in plan implementation, and preparing and carrying out an appropriate training program for such personnel (para. 3.08); (ii) schedule for appointment of qualified local personnel to serve as counterparts to the maintenance consultants (para. 4.14); (iii) arrangements for preparation of a detailed program for training or personnel required to implement the maintenance component of the project; this program is to be submitted to the Association for review and approval within four months of the date of effectiveness of the proposed Credit (para. 4.15); (iv) details of proposed arrangements for financing of the project (paras. 4.18 and 4.19);  22 - (v) in addition to its contribution to the capital costs of the project, the Government will also meet recurrent expenditures for the routine and periodic maintenance operations to be carried out; in this regard, it will examine each proposed annual budget, in consultation with the Association, be:.ore May 31 of each year of project imple- mentation (para. 4.21). 6.o2 In order to ensure that :he interdependent aspects of the project items are adequately taken into account by the co-lenders, the Association will enter into understandings with BADEA and ADF, according to which they would agree to coordinate their actions and to keep each other informed of the status of project implementation (para. 4.20). 6.03 The proposed project is suitable for a Credit of US$15.6 million to the Government of the Republic of N4iger on standard IDA terms. Fe;bru.ary 3) 1976  N I G E R THIRD HIGIHAY PROJECT 1968 1262 1970 1971 1972 12973 1974 A. Classified Network"/ Paved Roads 400 488 488 605 683 933 1,313 Gravel Roads 2,836 2,875 2,979 2,930 2,908 2,637 2,550 Earth Roads 1,148 1,051 996 996 996 1,186 662 Tracks 2.341 2.333 2.481 2.586 2,564 2.715 2.418 Total TOTAL 6,725 6,747 6,9944 7,117 7,151 7,471 6,943 B, Unclassified Network Tracks ------ 3,000 to 4,000 -------- 1/ Road network under responsibility of DPW Source: Ministry of Public Works, Transport and Urban. Affairs. December 1974  TABLE 2 N I a B 11 THID HIGHWAY PROJECT Freight Transport Volumes A. Estimates of Public Road Transport in 1972/73 1. Number of public transporters:213 (of which in Niamey 104) 2. Capacity of Road Transport Fleet (a) number of registered vehicles: 860 units (of which SNTN owns 260 unilts ) (b) loading capacitr 6,560 tons 3. Estimates of tonnages transported: Total: 750,000 - 800,000 tons Volume of Excprts: about 215,000 tons Volume of Imports mbout 420,000 tons B. Air Freight Transport 196_297 (in tons) 1969 1970 1971 1972 1M2I Niamey 4,014 3,947 4,261 4,783 6,574 Agadez 73 66 87 105 124 Zinder 99 84 95 104 84 Maradi 77 58 48 44 40 TOTAL 4,263 4,155 4,49 5,036 6,822 Growth rate: 12.5% p.a. Source: Ministry of Development, Directorate of Transport, and mission estimates,, November 1974. February 1975.  NIGER THIRD HIGHWAY PROJECT Invest_ents in Transport Sector 1970-1974 (in CFAF millions) 1970 1971 L972 jZ71 1974 TOTAL A B A B A B A B A B A B Government (FNI) 134.0 27.0 177.0 - 130.0 48.o 114.0 48.7 172.0 50.0* 727.0 173.7 Foreign 1,161.2 J88v 1,081.9 132. 1,957.8 71j5 2,927.9 306.1 3,380.0* n.a. 10,508.8 898.6 TOTAL 1,295.2 415.5 1,258.9 132,5 2,087.8 119.5 3,041.9 354.8 3,552.0 50.0 11,235.8 1,072.3 (US$ equivalent) $50 million FNI - National Investment Fund. (A) Investments in road infrastructure. (B) Investments in air transport infrastructure. (*) Estimated. Source: Ministry of Development and Cooperation, mission estimates. November 1974  NIGER THIRD HIGHWAY PROJECT Growth of the Vehicle Fleet, 1969-73=' (units) Average Annual Percentage Rate of Growth of Total over Period 1969 1970 1971 1972 1973 in 1973 1969-1973 Passenger cars 4,742 5,577 6,267 7,012 7,756 45.7% 13.0% Pick-ups 3,744 3,975 4,481 4,897 5,382 31.7% 9.5% Trucks - less than 5 t 386 415 449 - more than 5 t 1,425 1,550 1,624 1,811 1,965 2,073 2,241 2,456 14.5% 7.9% Trailer Assemblies - trailers (20 to 25 t) 370 417 438 476 535 3.1% 9.7% - tractors 351 420 457 506 590 3.5% 13.9% Buses 107 140 167 200 249 1.5X 23.5X TOTAL 11,125 12 494 13,883 15.332 16,968 100.0% 11.1% 1/ Figures at the end of the year. Source: Directorate of Transport March 1975. t  NIGER THIRD HIGHWAY PROJECT Consumption of Petroleum Products 1968-73 (in m---) Aircraft Automobiles Jet Prop. Gasoline Diesel Oil Kerosene 1968 9,500 2,296 18,190 15,063 4,057 1969 11,051 3,057 19,031 16,303 3,669 1970 11,986 2,807 19,,469 18,086 8,222 1971 11,038 2,315 21,212 16,979 2,886 1972 10,169 2,913 22,860 21,654 2,950 1973 15,151 4.,o59 25,690 25,434 3j,423 Average annual growth rate: 7.1% 11.0% Source: Directorate of Transport, December 1974. March 1975.  NIGER THIRD HIGHWAY PROJECT Highway Expenditures 1970-1974 (CFAF million) 1970 1971 1972 1973 1974 TOTAL A. Government 1. National Budget (i) Administration 192 155 122 120 134 723 (ii) Routine Maintenance 304 515 545 580 615 2,559 Subtotal A. 1. 496 670 667 700 749 3,282 2. FNI" (i) Betterment Works 63 158 130 114 172 637 (ii) Periodic Maintenance 126 163 199 238 193 919 (iii) Equipment 71 19 --- --- --- -90 Subtotal A. 2. 260 340 329 352 365 1,646 Subtotal A. 756 1,010 996 1,052 1,114 4,928 US$ Million Equivalent 2.7 3.9 4.0 4.4 4.8 19.8 B. ~~2/ B. Foreign-/ 1. FAC 372 136 87 535 6002/ 1,730 2. FED 272 591 840 1,754 2,5003/ 5,957 3. USAID 240 20 4 5 203/ 289 4. IDA 277 290 1,027 634 260 2,488 5. CEA --- 10 --- --- --- 10 6. Other --- 35 --- --- --- 35 Subtotal B. 1,161 1,082 1,958 2,928 3,380 10,509 US$ Million Equivalent 4.2 4.2 7.8 12.2 14.7 43.1 TOTAL A. + B. 1,917 2,092 2,954 3,980 4,494 15,437 US$ Million Equivalent 6.9 8.1 11.8 16.6 19.5 62.9 1/ National Investment Fund. 2/ Does not include "Unity Road" (Goure-N'Guigmi, 421 km) financed by Canadian aid (CIDA). 3/ Estimated. SOURCE: Ministry of Public Works, Transport and Urban Affairs; mission estimates. March 1975.  N I G E R THIRD HIGHWAY PROJECT Estimates of Government Revenue from Road Users 1970-1974 (CFAF millions) Taxes levied on Fuels Other Taxes On Imports of Vehicle A B Vehic_les Spareparts Licensing Registration Total 1970 448.1 167.8 4z8.o 72.6 20.6 25.3 1,162.4 1971 429.9 15o.8 516.4 92.4 21.0 24.9 1,235.4 1972 461.3 182.0 *4?4.7 93.9 27.2 23.4 1,212.5 1973 512.8 214.8 649.9 160.8 34.8 51.8 1,624.9 1974 556.O 210.8 744.02/ 196.ci / 35. i / 58.4 1,800.21/ TOTAL 2,.408.1 926.2 2,763.0 615.7 138.6 183.8 7035-.4 I/Estimated (A) Revenues directed to general budget. Taxes: on gasoline OFAF 16/L; on diesel fuel CFAF 64f; on kerosene CFAF 84L. (B) Revenues directed to National Investnent Fund. Revenues based on surtaxes: on gasoline CFAF 6/L; on diesel fuel CFAF 4/L. Source: Ministry of Public Works, Transport and Urban Affairs, Ministry of Developnent and mission estimates. December 1974. M March 1975. -  TABLE 8 NIGER THIRD HIGHWAY PROJECT Design Standards for the Zinder-Nigerian Border and Maradi-Djibiya Roads Design Speed 100 km/h Maximum Grade: normal 5% exceptional 7% Minimum Radius of normal 665 m Horizontal Curvature: exceptional 425 m Pavement Width: Zinder.-Nigerian Border 6 m Maradi-Djibiya 7 m Shoulder Width: Zinder--Nigerian Border 1.00 m Maradi--Djibiya 1Q50 m Design Axle Load for pavement 13 t Source: MPWT and consultants Louis Berger, December 1974. May 1975.  TABLE 9 NIGER THIRD HIGHWAY PROJECT Project Cost Estimates --CFAF Million --------- -----------US$'000---------- Foreign as Local Foreign Total Local Foreign Total 7. of Total A. Maintenance Program (i) Technical Assistance and Training 133.9 276.7 410.6 595 1,230 1,825 67 (ii) Equipment 255.4 784.1 1,039.5 1.135 3.485 4.620 75 Subtotal A 389.3 1,060.8 1,450.1 1,730 4,715 6,445 73 B. Construction (i) Zinder-Nigerian border road (113 km) a. Construction 1,126.1 1,794.4 2,920.5 5,005 7,975 12,980 61 b. Supervision 81.0 150.7 231.7 360 670 1.030 65 Subtotal B (i) 1,207.1 1,945.1 3,152.2 5,365 8,645 14,010 62 (ii) Maradi-Nigerian border road (49 km) a. Construction 640.1 1,020.4 1,660.5 2,845 4,535 7,380 61 b. Supervision 46.1 86.6 132.7 205 385 590 65 Subtotal B (ii) 686.2 1,107.0 1,793.2 3,050 4,920 7,970 62 C. Survey of Construction Industry 4.5 9.0 13.5 20 40 60 66 Subtotal A-C 2,287.1 4,121.9 6,409.0 10,165 18,320 28,485 64 D. Contingencies (i) Quantity variation a. 10% on A. (i) 13.5 27.7 41.2 60 123 183 67 b. 5% on A. (ii) 12.8 39.2 52.0 57 174 231 75 c. 10% on B. (i) a. 112.1 178.4 290.5 498 793 1,291 61 d. 5% on B. (i) b. 4.0 7.7 11.7 18 34 52 65 e. 10% on B. (ii) a. 63.9 102.1 166.0 284 454 738 61 f. 5% on B. (ii) b. 2.2 4.3 6.5 10 19 29 65 g. 10% on C. 0.5 0.6 1.1 2 3 5 66 Subtotal (i) 209.0 360.0 569.0 929 1,600 2,529 63 (ii) Price escalation a. on A. (i) 36.7 77.2 113.9 163 343 506 68 b. on A. (ii) 40.0 116.8 156.8 178 519 697 74 c. on B. (i) a. 360.0 573.5 933.5 1,600 2,549 4,149 61 d. on B. (i) b. 20.7 38.5 59.2 92 171 263 65 e. on B. (ii) a. 154.3 245.5 399.8 686 1,091 1,777 61 f. on B. (ii) b. 9.0 16.6 25.6 40 74 114 65 g. on C. 0.5 0.7 1.2 2 3 5 60 Subtotal (ii) 621.2 1,068.8 1,690.0 2,761 4,750 7,511 63 Subtotal D. 830.2 1,428.8 2,259.0 3,690 6,350 10,040 63 TOTAL 3,117.3 5,550.7 8,668.0 13.855 24,670 38,525 64 Source: DPW, consultants and mission estimates. Basic costs as expected at time of negotiations: end-1975. January 1976  TABLE 10 NIGER rHIRD HIGHWAY PROJECT Description aad cost of Equipment to be Procured (US$S 000) Unit Total Total Cost Breakdown No. Cost Coat Local Foreign I. FIRST LOT A. Equipment for Two Regravelling Units 1. Bulldozers (160/180 hp) 2 149.0 298.0 77.2 220.8 2. Front loaders (100/120 hp) 2 67.2 134.4 35.2 99.2 3. Motor graders (120/130 hp) 2 84.8 169.6 41.9 127.7 4. Dump trucks (6/7 m3) 16 35.3 565.0 88.3 476.7 5. Water Tanker (10,000 1) 2 52.9 105.8 36.3 69.5 6. Rubber-tired compactor (20/22 t) 2 60.3 120.6 28.6 92.0 7. Towed campers 2 23.5 47.0 11.0 36.0 8. Fuel tanker trucks with service trailers 2 106.3 212.6 66.1 146.5 9. Service vehicles 2 10.4 20.4 6.6 13.8 10. Repair tool sets 2 17.8 34.8 19.8 15.0 11. Two-way radios 2 7.8 15.6 4.4 11.2 Subtotal A 1,723.8 415.4 1,308.4 B. Equipment in Pool 1. Water Tanker (10,000 1) 2 52.9 105.8 36.3 69.5 2. Towed water pump (80 m31h) 1 15.0 15.0 4.4 10.6 3. Low-bed trailer (20 t) 1 78.7 78.7 14.3 64.4 Subtotal B 199.5 55.0 144.5 Subtotal A-B 1,923.3 470.4 1,452.9 C. Reserve Items 1. Bulldozer (160/180 hp) 1 149.0 149.0 38.6 110.4 2. Front loaders (100/120 hp) 2 67.2 134.4 35.2 99.2 3. Rubber-tired compactor (20/22 t) 1 60.3 60.3 14.3 46.0 Subtotal C 343.7 88.1 255.6 Subtotal A-C 2,267.0 558.5 1,708.5 D. Spare Parts (10%) 226.7 55.8 170.9 Subtotal 1 2,493.7 614.3 1,879.4 II. SECOND LOT A. Equipment for Two Regravelling Units Cost as per I. A 1,723.8 415.4 1,308.4 B. Equipment in Pool Cost as per I. B 199.5 55.0 144.5 Subtotal A-B 1,923.3 470.4 1,452.9 C. Spare Parts (10%) 192.3 47.0 145.3 Subtotal II 2,115.6 517.4 1,598.2 TOTAL I II 4,609.3 1,131.7 3,477.6 GRAND TOTAL (Rounded) 4,600 1,100 3,500 TOTAL LOCAL FOREIGN Percent of Total 100 24.6 75.4 25 75 Source: BCEOM, Mission estimates. Costs as exr,ected at end-1975- September 1975  NIGER TABLE 11 THIRD HIGHWAY PROJECT ESTIMATED 1976-1979 BUDGETS# FOR HIGHWAY MAINTNANCE* (1974-1975 Budgets shown for Reference) (CFAF Million - Constant Prices, Mid-1974) 1974 1975 1976 1977 1978 1979 1, PERSONNEL 73.0 72.0 91.8-/ 96.3 101.2 106.2 2. DIVISIONS OPERATION 61.0 62.0 79.32/ 79.3 79.3 79.3 3/ 3, ROUTINE MAINTENANCE- A. Paved two-lane roads n.a. n.a. 97.2 121.4 145.7 169.9 B. Paved one-lane roads n.a. n.a. 101.2 98.8 96.5 94.1 C. Gravel roads n.a. n.a. 441.8 425.7 409.5 393.4 D. Earth roads n.a. n.a. 53.5 52.5 51.4 50.4 Subtotal 3 615.0 626.5 693.7 698.4 703.1 707.8 4. PERIODIC MAINTENANCE A. Paved roads --- --- --- --- 5/ 116.07/ 116.0 4 -213.4- -109.6- B. Gravel and earth roads n.a. n.a. 306.0-/ -13.1 -4239.88- 342.6 C. Incremental Equipment 9g 10 6 Division expenditures --- --- ... 20.3- 43.0- 61.4 D. Incremental Subdivision 91/ expenditures --- --- 2.6- 5.6-