Benin - Transport Sector Memorandum

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY CONFIDENTIAL Report No. 1090-DA BENIN TRANSPORT SECTOR MEMORANDUM This Memorandum was prepared by Messrs. J. Pelletey, Transport Economist and Messrs. Baird and Byl, Economists on the basis of information collected during 1975 in the course of preparation of port and highway projects. February 13, 1976 West Africa Projects Department Inis document has a restricted distribution and may be used by recipients unly IIn II perfImuc of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY CONFIDENTIAL BENIN PEOPLES REPUBLIC TRANSPORT SECTOR MEMORANDUM TABLE OF CONTENTS Page No. I. BACKGROUND ................................... . -6 T. IDA]TOADRT VCTVM 2 Hig way .. ................................... 3 TTT DAMIDM ADPAX.1T7 ATTAM~ .LL.L. LL A irpo t 0 N.. ... .. - ......................... vTT. oc-'l~ V Cvy-rrmfl AIM TvrrrTxyvC Aldn T?,7VrT?Mlr 1' A VC nPortw s ...................................... Railways ...................................... 5 Aro s Expendtures............................. 6 Parts ................................ 5 Road Expenditures .. . ... .. ......... ..... 6 Closure of Coastal Railways ................... Transport Coordination ....................... 7 Cotonou Port .............................. The Benin Route ............................. 8 VI. BANK GROUP STRATEGY ....................... o ....... 9 Bank Group Involvement in the past 9.......... 9 Future Operations Program ..................... 9 Bank Group Strategy .... ...................... 10 Work Program ............ ..............****** TABLES: 1. Road expenditures and their financing 1970 to 1975 2. Government revenues from road users, 1975 ANNEXES: 1. Description of the Benin Transport System 2. Checklist of major issues MAP: Benin Transportation system (IBRD 10029R) This document has a restricted distribution and may be used by recipients only in the performance o h tie. I may not otherwise be diclosed withut WnrlI Bank %a&thnrization. of 01 hir ouiaI UMIZ. AL- % aI3A ed5 * ,.S.l-..- BENT PEOPLES REPTTRITC TRANSPORT SFCTOR FMORANDITM I. Background 1. The population of the Peoples Republic of Benin (formerly the Republ.c of D e abl I.J.out 3.1 1 million people, of whom 87%10 live in the rural regions. Population density varies from 120 inhabitants/sq. km in coastal areas to Less than 7 inhabitants/sq. k- In t n h country. GNP per capita was about $110 in 1972 and has most probably not grown much at constant prices since then. MUUUL t0% of GPI is atutab L agriculture and almost 50% to services. Benin's economic situation, which had improved slightly during the period 1968-71, has somewhat weakened over the last four years. Since 1970, annual growth of GDP has been limited to about 6% in current prices according to the available tentat-iv estiates. 2. The new "Revolutionary Military Government" is reformulating the political structure of the country and re-orienting the economy, with primary emphasis on so-called scientific socialism. Major areas of emphasis for future policy seem to be: (i) development of large scale food programs to lessen dependence on food imports; (ii) giving priority within the industrial sector to processing agricultural products to stimulate closer links between agricul- ture and industry; and (iii) creation of new state-owned industries, especially those which could utilise so far unexploited domestic raw materials (cement, crude oil and marble). It is not clear in how far these policies will redress the balance in favor of the agricultural sector in Benin. For many years too much emphasis on urban problems, especially in Cotonou, has left the country- side in serious need of infrastructure and services. 3. Bank knowledge of the transport sector is reasonable for roads but inadequate in other sub-sectors. Both Government and Bank knowledge of the highway sector is based largely on the Dahomey Land Transport studies carried out between 1967 and 1969 by consultants LEA and Lamarre-Valois, and financed by UNDP with the Bank acting as Executing Agency. Following these, the Government commissioned studies on highway rehabilitation and maintenance problems, on which the Bank's initial highway projects were based. 4. The prime objective of these projects is to expand and improve the transportation network so as to stimulate trade between north and south Benin and increase transit traffic from land-locked neighbouring countries, es- pecially Niger. The earnings from transit traffic are an important element in Benin's balance of payments. Other objectives were improved maintenance of highways and rural feeder roads. 5. In the past, the Government and the Bank have given insufficient attention to the problems of other transport sub-sectors and their integrated development. The gaps in Bank knowledge of the port sector will be eliminated by the ongoing pre-investment studies for the first stage of the extension of the port of Cotonou. In the future, more attention should also be given to the railway, the organization of the road transport industry, and the efficient operation of all components of the Benin route for Niger. -2- II. Transport System 6. The Transport system (described in more detail in Annex 1) is simple but fairly well developed. The Benin route, including the Port of Cotonou, the railway from Cotonou to Parakou to Niger, is the backbone of the transport system and the major transit route for traffic to and from Niger. The rest of Benin's transport network radiates from Cotonou, the country's commercial and administrative center. Dominating the transport system is a 6,800 km road network (680 km are paved), which carried over 65% of all freight and 90% of all passenger traffic within the country. The remainder is carried by a 579 km railway network, including the mainline from Cotonou to Parakou (438 km) and two uneconomic secondary coastal lines from Cotonou west to Segboroue (34 km) and east to Pobe (107 km). 7. Transport demand in the coming years is expected to grow at about 5% to 6% per annum. The main components of the traffic will be: (i) local traffic, mainly agricultural products, of which two-thirds is transported by road; (ii) imports, whose composition and volume will significantly change when the envisaged industrial projects are completed at the end of the decade; (iii) exports, mainly palm products and cotton, for which a 6% to 7% growth per annum is expected; and (iv) transit traffic tp and from Niger, expected to grow at 8% to 9% per annum. A significant part of this traffic will be shipped on the Benin route. Additional traffic is also envisaged on the eastern coastal road, due to the diversion of Nigerian imports to Cotonou Port, and possibly due to the planned cement plant at Onigbolo and eventually an oil refinery at Porto Novo, although the latter projects are still in a preliminary stage and their realization in the near future is doubtful. III. Transport Organization 8. OCBN 1/, a financially autonomous agency established in 1959,jointly by Niger and Benin (then Dahomey), is responsible for the management of the Benin Railway and the organization of road transport between Parakou and Niger. Since 1967, Niger ceased to share responsibility for OCBN's financing and has restricted its interest to affairs of direct concern, such as tariffs and freight allocation between truckers from Niger and Benin. Since 1969 the railway has improved its financial position steadily, and in 1973, latest year for which we havp dntn- rPvPnuiPe (CFAF 1.6 billion) PxPPdPd Pxnpnditu1rP hy CFAF 70 million after allocation of CFAF 266 million to a renewed fund. This improvement has been achied largely by increases in triffs and in traffic, but also by reduction of operating costs, made possible by the progressive intrndition of contourisation for Niger traffic OCBN, the largest employer in Benin next to the Government, can be considered to be the de facto coor- dinator of transport policy In Benin. The Directorate of Land Transport (DLT) within the Ministry of Public Works and Transport lacks the leadership and personnel to coordinate tr.nso-rt policy and therefore is restricted to controlling vehicle registration and regulation. Two consecutive efforts by the Association to reorganize and staff DTunder the First and Second HighLWay 1/ Organisation Commune Benin-Niger des Chemins de Fer et des Transports, formerly OCDN with D standing for Dahomey. - 3 - projects have had little permanent success due to political upheaval and staff losses, but a new effort will be made under the proposed Third Highway Project. 9. Responsibility for construction and maintenance of primary and secondary roads (3,400 km) is now vpted in the Dirpctnratp of Public Works (DPW). The remaining earth and gravel roads (1100 km) and unclassified tracks connecting the m4n ,A network to the rira1 nrea of the rountry, are the responsibility of local authorities under the supervision of Minis- try of the interior. IV. Government's Sector Objectives and investment Plans 1 0. Alt U there has not been a formal development plan since 19 70 /7, s. the Government's investments in the transport sector would seem to be still based on the objectives of improving the utilization of resources, fostering integration between North and South Benin and encouraging the development of transit traffic to provide needed foreign exchange. A new draft Aevelop- ment plan is being prepared but the date of complet2'on is still uncertain. TIe preparation of this plan has been delayed due to the administrative reorganization of March 1975 which created within each Ministry new planning units, (Divisions d'Etudes et de Planification (DEP)), for undertaking plan ning studies and project evaluation. The finalization of the plan will also depend on the performance of the Central Bureau of Projects, recently created at the Directorate of Planning to centralize and review the technical assist- ance and investment proposals of the DEP. 11. According to available statistics, expenditures in the transport sector have averaged about CFAF 2 billion per annum over the last four years of which CFAF 1 billion were capital expenditures, primarily for highways. Almost 95% of capital expenditures were financed by external resources while the bulk of maintenance expenditures was covered by domestic public resources. Investments in the transport sector are tentatively estimated to represent about 20% of total investment. Almost all Government transport investments were in the highway sector. Railway investments have been limited to minor improvements while port and airport investments have been completed prior to 1972. Highways 12. The major priorities for the road sector are the completion of the rehabilitation-of-the Benin route which is now in progress, widening and strengthening of the Cotonou-Lagos coastal road, extension and rehabili- tation of the rural feeder road network, and improvement of the highway maintenance program. Pre-investment studies are available or being completed for the following projects: (a) the construction of a second bridge (possible USAID financed) and a dam at Cotonou and the rehabilitation of the existing bridge; (b) the rehabilitation of about 110 km on the Bohicon- Saa-Zoume-Savalou road. EDF (European Development Fund) assistance is expected for this project. -4- In addition, the Government intends to: (a) construct rural feeder roads and strengthEn other secon- dary roads connecting large scale agricultural development projects to the Benin route; (b) improve the Benin - Upper Volta earth road which also serves the agricultural regions of western Benin including the Pend- jari Reserve and National Park. The most urgent component of the project is the reconstruction of the bridge over the Pend- jari river which will permit an all-weather link with Upper Volta. Financing for this project has been requested from the EDF; (c) complete a new coastal link between Cotonou and Lagos via Seme Kpodji and Badagri (port extension of Lagos) for which financing is expected from Nigeria; Nigeria is apparently also planning to fund construction of some agricultural roads in the Eastern part of Benin to give this region a markpt-outlt in Nigprial; (d) try to improve the interstate transit roads, linking Togo and Upper Volta via Benin with Nigeria. Although these nrniPcts nre exnpnsive thpv mv h iiitifih1P if Rpnin were able in the long run to capture a significant portion of the imnort ePnnrt frnffir from snutheasten Upper Vnlt; and northwestern Nigeria. Railways 13. In the railway sector, the Government will continue to give priority to the imnrnxvemnt of operations on the Benin route and instead of planning to close the eastern coastal line now envisages to extend this line to Onigbolo, i s e l o c t t there me. Cuction of 6 km of new line to connect the Benin and Nigerian railways, is also under considera- tion. investments in track motive power and rolli4ng stock for which preliminar1y cost estimates exist include: (a) acquisition of five line locomotives, six shunting Locomotives aU 10V freight cars for a total cost of about $27 million of which $5 million is expected to be spent before 1980 (Railway self-finanin1g d FAC, the French foreign aid agency); (b) improvement of the <track and ballast replacement on about 150 kmw on the Cotonou-Parakou line, and exten- sion of the existing eastern coastal line for a - 5 - distance of about 22 km from the present terminal at IU tU OngboLo, the site of Lte fUUL clLLt platLL. The total cost of these projects is estimated at about USY20 mLLiLLon. HoWeVeL, ULLy USJ.U MiLLL.Lion of LaCinLgLLr has been secured from FAC for the 1975-1980 period. This will be used for reballasting of the sections in most urgent need. 14. The extension of the main railway line to Malanville (315 km) or to Dosso in Niger (438 kiM) which was recommended by SEDES and NEDECO in 1961, but advised against by LEA-Lamarre Valois in 1969, is still being considered as a long-term project by OCBN. However, the economic justification of this project is now doubtful, given that the Parakou-Malanville road is being rehabilitated under the Bank's Second Highway Project. Only if phosphate exploitation on a large scale at the Benin-Niger border would materialize would this become an issue again. I/ Airports 15. The 2,400 meter landing strip at the Cotonou international airport cannot be extended to accomodate larger aircraft. The preliminary studies, for relocating the airport at Golo-Djibe 35 km from Cotonou, have recently been completed. The final conclusions of these studies are not known as yet, but the consultants involved (OACI, Organisation de l'Aviation Civile Interna- tionale) are expected to recommend postponement of the project. Ports 16. The extension of the Port of Cotonou, for which IDA financial assistance has been requested and which is now under appraisal by Bank staff, is an important component of the improvement of the Benin route; the Government gives a very high priority to this project. Although the project appears to be on the basis of the expected growth in Benin and Niger traffic alone, additional justification is provided by the expected diversion of Nigerian imports from the port of Lagos while this part remains congested. By then sufficient new port facilities will be available in Nigeria. V. Issues 17. Historically the transport issues raised by the Association in the country have been related to the financing of road investment and recurrent expenditures, the closure of inefficient coastal railway lines, the need for better transport coordination between road and rail, the supporting port and transit infrastructure and for more efficient planning and data collection units, and the management and operation of the Cotonou port and the trans-Benin route from Cotonou via rail to Parakou and then by road to Niamey in Niger. 1/ Information on phosphate deposits obtained from BRGM, Paris. More detailed information will be available in BRGM's report which will be ready in May 1976. -6- Road Expenditures 18. The recurrent road maintenance program has been financed in the past through the Road Fund, which receives part of its revenue from the National Budget and the rest from a tax on petroleum products. The road fund was re-established as a source of funds earmarked for road maintenance in 1970 at the start of the Association's first highway project and as a result of an agreement reached with the Government during negotiation of that project. Virtually all capital expenditures are financed from external sources, includ- ing almost 50 percent from IDA in the 1971-75 period and the remainder mainly from the EDF and FAC. Some CFAF 500 million only was contributed by the Government, almost all out of the Road Fund reserves, in the 1971-1975 period (see Table 1). Total road expenditures in 1975 are expected to be about CFAF 2.1 billion. This is about the same as forecasted revenues from road users (CFAF 2 billion Table 2), but the Government is spending less than half of that amount on roads. Road user contributions therefore are supporting the general budget heavily. 19. Recurrent road maintenance expenditures have averaged about CFAF 400 million p.a. during the 1970's, or between 3 and 4 percent of total budget expenditures. This is inadequate in relation to both the size of the road network and the revenues received from road users. With a total road network of 6,800 km (including 680 km of paved roads), the maintenance expen- diture per kilometer in 1974 was approximately CFAF 70,000 (i.e. $290 and at least about $500 per km would be required on the average in the present circumstances). 1/ Actual road maintenance expenditures, have been con- sistently less than the Budget allocations. Besides being too low, Government expenditure on road maintenance seems to be misdirected, with too much empha- sis on overhead rather than operating expenses. 20. One of the major reasons for the low level of road maintenance expenditure is that the Road Fund tax on petroleum products is the only Government revenue allocated for road maintenance. The tax is a specific tax, thus, in spite of the large increase in petroleum prices since 1973, the tax has been held at 4 CFAF per liter (compared to an average of about 16 CFAF per liter in Mali in 1973). As a result of the drop in consumption due to higher prices, receipts from this tax fell from CFAF 285 million in 1972 to CFAF 223 million in 1974. 21. Raising maintenance allocation per km to an average of CFAF 100,000 per km (US$450) would be a reasonable target for the 1977-1980 period, which will he the execution nerind of our nronosed third highwqy nroject, expecially because maintenance for bituminous roads will during that period be taken care of by the nronosed hack1og hitiminous road mintenancP unift This would mean an annual Government budget maintenance target of CFAF 700 million. This level could easqilv he reched H dobihling the fuel tax per liter to CFAF 8. This would leave room for further increases in the future. 1/ In Mali recurrent expenditures were three times higher for a network of 11,500 km in easier climatic circumstances and even there maintenance needs to be improved considerably. Road maintenance expenditures there account for more than 10 percent of budget expenditures. - 7- Closure of coastal railways 22. According to the terms of Credit 215-DA (First Highway Project) the two coatAl railroad 1inPs.iere to be closed within a year of the rehabilita- tion of the parallel roadways, except for the extension which serves a palm- nil nrnresing annnft t Ahozon (halfwiv between Cotonou and Sebnrnue). When the Cotonou Segboroue road section was rehabilitated as part of the First High- way Project, the Government requested not to close the corresponding coastal line until an adequate bus service was estabiished in the area. The Associa- tinn acepted t-o nostp-ne fl1Qclsur of the line uintil Januanru 1 1Q7 on conrdi- tion that no further capital expenditures be made on that coastal line, and the rates be adjusted to eliminate deficits in the Oer-ation of the line. The Association is checking with the Government if action has been taken on . January 1,1976. If not, this will become one of the issues to be settled during appraisal and negotiation of the proposed third highway project. The Cotonou-Pobe in- running eastward along the coast and then northward to Pobe also remains in operation, because rehabilitation of the parallel roadway has not, been completed yet. TIn ad diton, the Government now intends to extend that line to the planned cement plant of Onigbolo (para. 13). Transport Coordination 23. At present, the only body which shows an interest in transport coor- ditin is GCDN. However, its purpose is more to maintain its monopolistic situation on the Benin route, than to achieve efficient competition between road and rail or even efficient integration of the transfer facilities at Cotonou and Parakou. The Ministry of Public Works and Transport is essen- tially administrative, with only a minor role in transport planning and policy. The Directorate of Land Transport (DLT) within that Ministry has no power over OCBN, the Port Authority, and OBEMAP 1/ (the state stevedoring corporation). In order to achieve more responsibility for transport coordination, the Direc- torate should be assisted to create a special unit which could centralize data and analysis of the problems, investment plans, and prospects of all elements of the transport system. This could form the basis for coordinating the various transport modes, setting tariff policies, reviewing planned invest- ments, and developing transit traffic. The Third Highway Project now being prepared, should be used as a vehicle to re-attempt better staffing and reor- ganization of the DLT. Cotonou Port 24. On the whole, the autonomous port authority (PAC) appears well managed but operates at a loss due to low tariffs. On the other hand, OBEMAP, the state enterprise which has the monopoly of stevedoring operations, which generated sizeable annual surpluses before 1974, which were channelled into the Government budget, has deteriorated over the last two years, due to over- * hiring of personnel, bad management, following the departure of expatriates, 1/ Formerly ODAMAP. -8- and inadequate and poorly maintained equipment. Waiting time has dramatically increased and as a result a 20% freight surcharge (congestion tax) is currently being applied in Cotonou. The prospects for traffic growth are favorable due to the continuing growth in Niger's imports and the diversion of ships from the congested port at Lagos. Until the Cotonou and Lagos port extensions are completed, special measures will be needed to improve OBEMAP operations if congestion problems are to be avoided to permit faster ship turn-around and cargo transfer to the railway. The Benin Route 25. The Benin route is an important compoedent of the international transport system in West Africa and must be considered within this context. Not only is it the major transit route for traffic to and from Niger, but with the construction of relatively short feeder links, it could also be- come an important means of access to southeastern Upper Volta and north- western Nigeria. The future development of the Benin route will depend on the structure and rate of agricultural and industrial growth in Benin and neighboring countries, and the costs associated with the expansion of alter- native transit routes. In particular, the competitive position of the Benin route will be seriously eroded once the Lome-Niamey road is completely paved (expected by the early 1980s). 26. One of the major problems faced by OCBN is the increasing imbalance between the upward and downward traffic of Niger. In 1974, when Niger imports on the Benin route totalled 190,000 tons, downward traffic was less than 1,000 tons. In part, this was a short run problem as the drought reduced Niger's exports and increased the imports financed from international food assistance programs. However, as Niger processes more of its own raw materials for domes- tic consumption and increases the share of its exports to Nigeria, and even- tually, if port and railway operations are not improved on the Benin route, diverts part of its traffic to alternative routes, a sustained imbalance is expected, because Niger imports are expected to continue growing rapidly (9% to 10% per annum), due in part to the development of uranium mining activities. 27. In general, users of the Benin route are dissatisfied with the hand- ling of goods at the port and on the railway. The average delay from the time shins call at Cotonou until the gnods Are delivered At Ninmev is nhouit 5 to 6 weeks. For individual small shipments, the delay can be several months. In addition, only A few shipments arrive intact in Niger. While it is not possihle at present to identify who is responsible for these problems, the major bottle- necks occur at the two transfer points - Cotonou port and Parakou. The exten- sion of the port and the program for equipment renewal and track rehabilitation on the rnilwAv hoild hel rplieve the sit-untion, The Rank and FAC hnue Alreaiv assisted the Government in improving the efficiency of OBEMAP and other railway/ nort onperation during nre-ihvestment sftudiec for tha port extension. CIDA, the Canadian International Development Agency, has also proposed, in the recent regional transportation study for the "Conseil de Enntte", to undertake a comprehensive review of the economic and coordination of the Benin route. We will have to keep close contact with CIDA during the execution of that study. - 9 - 28. OCBN, with its truck chartering servicb from Parakou to Niger, is the only organized enterprise in road freight transport. It has a monopoly on allocating Niger's transit traffic between the various private truck opera- tors. Although the operations of OCBN are generally adequate (except at the railway terminal in Parakou), many truckers and forwarding agents in Niger criticize the monopoly position of OCBN. Without the monopoly, many importers would take their goods directly from Cotonou by truck, avoiding the railway and the transfer at Parakou. However, to do this , the trucks would have to cross railway bridges which are not designed for heavy road traffic. At the moment, OCBN restricts the days on which trucks can use these bridges and charges high fees for crossing. VI. Bank Group Strategy Bank Group Involvement in the past 29. Apart from our acting as executive agency for a UNDP financed Land Transport Study the Bank's past lending to the transport sector totals $16.0 million and accounts for 52% of all Bank lending to Benin (including the feeder road component of the Zou Borgou project). This amount is expected to increase to US$25.5 because of our intention to finance 90% of the cost overrun on Credit 415 (see (c) below). To date, all transport projects have been in the road sector. (a) The First Highway Project (Credit 215, Decemeber 1970, $3.5 million) helped finance a four-year highway maintenance pro- gram, and included the provision of technical assistance to DPW and the completion of detailed engineering for the recons- truction of the Parakou-Malanville road (320 km). This proj- ect is now completed. (b) The Zou-Borgou cotton project (Credit 307, 1972, $6.1 million) provided $700,000 for the rehabilitation of about 610 km of rural roads. This part of the credit is now fully disbursed. (c) The Second Highway Project (Credit 415, 1973, $11.8 million) includes the rehabilitation of the Parakou-Malanville road (320 km of which 170 km being financed by USAID) and of two sections (totalling 20 km) of the Godomey-Bohicon road, and the provision of technical assitance and materials for the extension of the highway maintenance program. Due to delays, unforeseen problems, and inflation, the present cost of the project is estimated at $23.8 million, and the Government has requested the Association to supplement the credit agreement to provide about 90% of the cost overrun (US$9 million). Future Operations Program 30. As of January 31, 1976 the proposed Bank operations program for Benin for the period FY76 to FY81 (including standby projects) amounts to US$84 million including the following transport projects - 10 - FY Project Amount 76 Second Highway Supplement $ 9 million 77 Third Highway project $ 6 million 78 standby (Feeder Road project (RMWA) $ 8 million (- Port Project) $12 million 79 Feeder roads $ 5 million 80 None 81 Fourth Highway Project $10 million Of the proposed US$84 million lending, some 60% is in the transport sector. This high percentage is due in part to the bunching of transport projects and to the large supplementary credit required for the Second Highway Project. 31. The major component of the Third Highway Project (see Project Brief 3DAH-TH-n3) will be the repavement and partial strengthening of the remaining sections of the Godomey-Bohicon-Abomey road ($7 million). It is also proposed to traln personnel and eliminate backlog maintenance on other bituminous roads, and decentralize the existing PWD workshop at Cotonou (to Parakou and Bohicon). Thp feeder roAd progrAm, originnllv intended to h incluidpd in the Third Higrh- way Project, has been handed over to the Feeder Road Section in Abidjan for fnrthPr preparation and appraisal. It would be advisable to combine the 1978 and 1979 feeder road projects into one (1978) and eventually to move the 1981 highway project to-I 19R hcaiis nrt of the 1977 lpnding is rPfrnctriuP 32. The Government has also requested Bank Group assistance for the first phase of the Cotonou port extension (see Project Brief 3DAH-TP-01). This p-roject coild inclurde drdatgcingy for the,o exnsio,r4n of t-ho xiti-4ng hncin, construction of two additional berths and a breakwater, and the provision of, transit facilities. Considering the high cost of the project, (about $30 mil- lion including contingencies), the construction of the breakwater may be de- layed until phase two of the extension. This would free some funds to be used for purchasing handling equipment which is badly needed to relieve con- gestion at the port. The project will be appraised by Bank staff in the summer of 1976. Bank Group Strategy 33. As mentioned above, a large proportion of the proposed lending to Benin is in the transport sector. The devellopmenLt of the -transport system is desirable to facilitate measures to increase output and employment, promote social and political integration, and help generate foreig echange. To realize these benefits, Bank lending to transportation will have to be com- plemented by operations to imprOve the utili[o of available resources, especially in agriculture. This is being done in part through the feeder road and cotton projects. However, it is important that the conception of future transport projects also take into account the opportunities for integrated regional development. 34. The Bank's strategy should reflect the important regional role played by Benin's transport system. The Benin route, if well maintained and - 11 - efficiently operated, could remain the major transit route for Niger. How- ever, the prospects for transit traffic are far wider; to Nigeria along the coastal Cotonou-Lagos road, and further northto Upper Volta and Nigeria via feeder links from the existing Benin route. The Bank should be prepared to help the Government formulate a policy for the development of this traffic, taking into account the economics of these and alternative transit routes, and the political realities of the region. To this end, the Bank should give full support to the proposed comprehensive CIDA study on the organization and operation of the Benin route. Further, if the Government agrees, the Bank should provide - or encourage other agencies such as CIDA to provide techni- cal assistance to the Directorate of Land Transport to improve the handling of Benin route problems at the ministerial level, centralize the information required to coordinate rail/road competition, and control investment planning. The improvement of operations on the Benin route remains the keystone of the successful implementation of Bank Group transport policies in Benin. Work Program 35. The Bank's strategy will have to remain pragamatic until the cons- traints imposed by the limited availability of technical staff in Benin and the shortages of data can be overcome. A series of small missions could tackle subsectors one by one until an adequate basis exists for putting together an overall inland transport strategy. Until this is accomplished, the lending program will have to remain on a project by project basis, with each project providing the necessary pre-investment studies for subsequent investments. 36. An important pre-requisite for the implementation of this strategy is an improved knowledge and understanding of the organization in the tech- nical Ministries and the performance of a new planning units (DEP) and the Central Bureau of Projects. The port missions (see para 38) and the proposed CIDA study of the Benin route should provide further useful information on the operations of OCBN. 37. Within the highway sub-sector, the work program will be associated with the preparation of the Third and Fourth Highway Projects and will involve the review of the following: (a) the highway sector investment proposals in the new Development Plan, when available; (b) the organization and efficiency of OCBN chartered operations on the Parakou-Niamey road, and the status and problems of either local and foreign trucking enterprises operating in Benin; this will involve the collection of data on; (i) the recent development of the road vehicle fleet; (ii) traffic flows; (iii) transport costs and tariffs, especially on the Benin route and the coastal roads; - 12 - (c) the level and composition of road maintenance expenditures, the capacity for road maintenance and the efficiency at which programs are executed; (d) the financing of road maintenance, measures for financial appropriation and the level of Government revenues from road users; and (e) the way in which feeder road development strategy should be conceived and the establishment of a work program leading to feeder road development projects, if possible of an integrated nature. For this purpose, it has been agreed that an agricultural expert (eventually a consul- tant) and if possible a loan officer will accompany the appraisal mission for the Feeder Road Project (RMWA). 38. The port mission of November 1975 starred discussions on OCBN railway operations, especially as related to rail/ port coordination and the Summer 1976 mission will be used to continue this discussion. The November mission is now reviewing the existing traffic forecasts for the port, espe- cially the impact of the present congestion at Lagos and the planned indus- trial projects in Dahomey (oil refinery, cement plant) and Niger (uranium and phosphate mines). The information collected by this mission on the organiz- ation of the transport sector will also be followed up as appropriate, by the subsequent missions for the Third and Fourth Highway Projects. Discussions will also be continued with officials in Niger, Upper Volta and Nigeria on future development programs and the potential use of alternative routes to and from the sea. To deal with the question of railway/port coordination and to review the railway's role in the Benin route, it has been agreed that the Summer 1976 port mission should include a Bank railway engineer. This mission will be assisted by consultants to undertake a systematic review of the port system, identify major bottlenecks, and propose measures to increase the port's throughput prior to the completion of the project (scheduled for end 1978). The investigation should not be limited to the railway and OBEMAP_ but should cover all ancillary components of the port-railway system such as cus- toms operations. storage facilities, transit nrocedures. and transfer opera- tions at Parakou. ANNEX 1 Page 1 BENIN PEOPLES REPUBLIC THE TRANSPORT SYSTEM A. The Benin Route 1. The Benin route, including the port at Cotonou, the railway from Cotonou to Parakou, and the road from Parakou to Niger, is the backbone of the Benin transport system and the main transit route for traffic to and from Niger. OCBN (Organisation Commune Benin-Niger des Chemins de Fer et des Transports), a financially autonomous agency established jointly in 1959 by Niger and Dahomey (now Benin), is responsible for the management of the railway and the organization of road transport between Parakou and Niger. Since 1967, Niger has ceased to share responsibility for OCBN deficits and has restricted its interest to affairs of direct concern, such as tariffs and freight allocation between truckers from Niger and Benin. OCBN, the largest employer in Benin next to the Government, can be considered to be the de facto coordinator of transport policy in Benin. 2. Over the last few years, OCBN has been,able to improve its finan- cial position. While it operated at a considerable deficit up to 1968, OCBN now balances its accounts and is able to allocate $1 million annually to its renewal fund. This improvement has resulted from the growth of Niger transit traffic and tariff increases. According to the recent regional study on trans- portation in memb2r countries of the Conseil de l'Entente, the present freight rates on the Benin route reflect real economic costs and are close to what the truck operating costs would be - after completion of the Parakou-Malanville road - if Niger importers were free to transport their goods directly from Cotonou. The study also confirms that the Benin route still has a margin of competitiveness over the alternative Togolese road. However, this margin will be seriously eroded once the Lome-Niamey road has been completely paved (expec- ted by early 1980's) and if the 3% ad valorem transit taxes in Togo and cumula- tive 0.5% "Fonds de Garantie" tax levied at the Upper Volta-Niger border were abolished. 3. Despite the competitive level of tariffs on the Benin route, bottle- necks have forced some importers and forwarding agents to use alternative routes through Togo and Ivory Coast. The major bottlenecks occur at the trans- fer points in Cotonou, due to the poor performance of OBEMAP and the lack of coordination between cargo arrival and availability of freight cars, and in Parakou, where there is often excessive backlog and excessive damage of goods. B. The Railway 4. Benin has a 579 metric gauge railway network, including the mainline from Cotonou to Parakou (438 km) and two secondary coastal lines from Cotonou west of Segboroue (34 km) and east to Pobe (107 km). Almost all of the freight ANNEX 1 Page 2 traffic is carried on the mainline, with the coastal lines being used mainly for passenger traffic. These coastal lines are scheduled to be closed down once the parallel roads have been reconstructed except for the section Cotonou- Ahozon (halfway towards Segboroue), which serves as palm-oil processing factory. 5. Over the last four years freight traffic on the railway has increased at an average annual rate of about 5%. Total rail traffic volume in 1974 was about 300,000 tons, of which 78,000 tons were oil products, mainly for Niger. Niger traffic, which accounts for two-thirds of all traffic on the railway, is directionally imbalanced. In 1974, total Niger imports on the Benin route totalled 190,000 tons, while downward traffic was less than 1,000 tons. C. Road Transport (i) The Road Network 6. The road network in Benin totals about 6,800 km of roads and tracks, of which 680 2km are paved. The average density of the network is about 60 km per 1,000 km or 2.2 km npr 1,000 inhnhtnnts, slightlv lest than in neighboring countries. The size of the network is generally 'adequate to serve the present traffic and the expected growth in the near future. However, there is an urgent need for more maintenance, as some paved roads built 10 to 50 years ago are bren-ing up, and niny eart-h qnd craul roqds require regravelling and/or recons- truction. (ii) Road Traffic 7. About 70% of total domestic freight volume, 1.5 million tons, is carried by road. Road traffic is mainly concentrnted in thp southern third of the country. The main roads radiating out from Cotonou carry from 1,500 to 2,000 vehicles per day. North of Bohicon, the only roads which carry a significant volume of traffic are from Bohicon to Dassa Zoume (300 v.p.d.) and from Pa rakou to MaInv4lle (200 v n .), minlv int-ornnt-ionnl truck traffic). Both of these roads are on the Benin route. 8. Road traffic on the Benin route is expected to grow at 5% to 6% per annum. Truck traffic will grow even faster (8% per annum) due to improved palm yields in the south and the rapid growth of Niger imports (expected to reach 10% per annum). Traffic on the coastal road from Cotonou to Lagos is expected to increase at 10% per annum due to the strengthened economic ties with Nigeria and the overflow traffic fro LTagos in the Coonou port. Traffic growth on the Lome-Cotonou coastal road will be slower at between 4% to 5% per annum, including a 3% per annum increase in TogoNigeria transit traffic 1! and a 6% per annum increase in traffic between Togo and Benin (mainly light vehicles). 1/ Additional interstate transit traffic Tema-Lagos and Lome-Lagos is expected during the coming years in order to relieve port cUngesLio1 in NigeLia. No precise figures are available as the agreements are only now being discussed between Nigeria and Togo and Ghana. ANNEX I Pagrp 3 (iii) Roa Trarnpor 9. The motor vehicle fleet (excluding motorcycles) now totals about 20,000 vehicles, 60% of which are passenger cars. The low rate of vehicle ownership, 6.5 vehicles/1',000 inhabitants, reflects the underdeveloped state of the economy and the high level of import duties. Vehicle safety regulations are not enforced as many owners evade rn-gis4 -ratio n nd nn -mp i -- e 4 4n system has been established. The legal axle limit is 11.5 tons but this is enforced only on the road parallel. to the railway between Cotonou and Parakou. On the other roads, an axle limit of 13 tons is apparently tolerated. Two weighing stations will be installed on the Parakou-MalanVille road under the ongoing Second Highway Project. These are also regulations, which are res- pec ted , to restr ic t heavy traffic on earthl road s during the aft heavy as. Mixed (cargo-passenger) transport is prohibited on interstate runs but is authorized within BeniLl. 10. OCBN, with it truck chartering service from Parakou to iger,is the only organized road freight enterprise in Behin,4 It has a monopoly on the allocation of Niger's transit traffic among the private operators. Two thirds of general cargo traffic and all oil products, are carried by truckers from Niger. The domestic road transport industry is at an early stage of develop- ment and the standard of service is inadequate. In general, the traffic is handled by small operators lacking sufficient capital to expand. The Govern- ment has been encouraging larger transport companies by restricting entry into the trucking business. This trend could be reinforced, at least on one route, with the expected development of transit traffic between Cotonou and Lagos. 11. No study has been made of competition in the road transport industry and it is difficult to assess the impact of the present tariff regulations on the maintenance and equipment renewal policies of carriers. The freight rate set by OCBN for traffic on the Parakou-Niger road is CFAF 8.25 per ton/km (based on truck capacity rather than load carried). For domestic traffic, the rate is about CFAF 13.75 per ton/km. The carriers consider these rates too low and normally negotiate directly with the user. However, even the nego- tiated rate (usually around CFAF 20 per ton/km) leaves only a small margin over costs due to the strong competition and absence of regulation enforce- ment. Improved maintenance, of both roads and carriers' equipment, could help reduce costs and improve the financial position of the trucking industry. (iv) Road Construction and Maintenance 12. Responsibility for construction and maintenance of primary and secondary roads (3,400 km) is now vested in the Directorate of Public Works (DPW). The remaining earth and gravel roads (1100 km) and unclassified tracks connecting the main,road network to the rural areas of the country, are the responsibility of local authorities under the supervision of the Ministry of the Interior. The Directorate of Land Transport within the Ministry of Public Works and Transport handles vehicle registration and regulation. ANNEX 1 Page 4 13. The estimnted totn1 rond pnnditires in Rpnin frn 1Q7 tn 1975 summarized in Table 1. These expenditures, and the revenues from road users (Table 2)_ are described in mnrp rptnil in the main text (see paras. 19 - 21). D. The Port of Cntonnoi 14. Benin is served by a deep water sea port, inaugurated in 1965 to replace the old wharf. The port is well protected from storms and sand move- ment by an easterly dyke and westerly breakwater. The 475meter dyke is also used for dlischarging dry and liquid bulk cargo. The main port cons sts of four general cargo berths which provide 620 meters of wharf -n 45,000 - of tas js L53 0lt w, 3 UDit -11 UV UL lit LkCL.at ±LL area, including storage sheds. There is also a fishing port with one berth, dee--fz storage, and a fish. market. 15. The port is managed by an~ aU-uous PrAuhit All c arg handling is entrusted to an autonomous Government-owned agency, OBEMAP (Office Beninois des Manutentions Portuaires). On Ih wh-ole, port appears wel I managed but operates at a loss due to low tariffs. Initially OBEMAP generated sizeable annual surpluses which were channelled into the Government budget. However, over the last two years, the performance of OBEMAP has deteriorated du1thrilng of personnel, uadu management following the departure of expatriates, and inadequate and poorly maintained equipment. In addition, coordination between ship arrivals and freight car movements is unsatisfactory. 1V. Since the construction of the new port, traffic has increased at an average rate of 8.5% per annum from 369,000 tons in 1966 to 738,000 tons in 1974. The growth of general cargo imports is mainly due to the steady growth in the consumption of manufactured goods both in Niger and Benin the food assistance program for Niger, and the opening of two uranium mines in Niger since 1970. The growth,of exports is due mainly to the development of palm products and cotton in Benin. Prospects for further traffic growth are favorable due to the continuing growth in Niger's imports and the diversion of ships from the congested port at Lagos. Benin is now contemplating to accept 200,000 tons per year of Nigerian imports and the actual level could be substantially higher. Until the port extensions are completed, and unless OBEMAP operations are improved, the increased traffic will create serious congestion problems at Cotonou. The Bank and FAC have agreed to provide technical assistance to OBEMAP during the pre-investment studies for,the Port Project. E. Maritime Shipping 17. Following the examples of the Ivory Coast, the Government of Benin intends to establish a National Shipping Council to gain representation at shipping conferences and to try to limit the freight surcharges imposed on Benin (a 20% surcharge was applied since August 1975). In order to achieve this objective, the Benin Shipping Company, COBENAM (Compagnie Beninoise de Navigation Maritime) was created in July 1974 with assistance from Algeria. ANNEX 1 Page 5 COBENAM, which at nresent iust charters two ships,intends to purchase three additional vessels in the coming years, but the realization of this program will dpennd on COBENAM's financial position in the coming years- and on Benin's ability to recruit experienced maritime officers. With the recent creation of UTRF.TRAC (Union Rpninnis de Trqnsqit et de Consignation), thp Government intends to assume complete control of transit and consigning operations. This will require technical sistQncnre t the D)irectorate of Maritime Affairs, which at present has a staff of two. F. Air Transport 18. Benin holds a small participation in Air Afrique and UTA. The only international airport in the couintr, is located at Cotonouand is sered by the major air carriers operating in West Africa. Total passenger traffic iS only 70,000 per year and has been stable since 1972. Frigt-rffic is only 30,000 tons per year. The capacity seems adequate for the demand. G1round4 facilitie ar mnaedwth the assianc of ASCNWA (Agene- ou-l Securite de la Navigation Aerienne) which manages, with French financial and technical assistance, most of the international airports of francophone African countries. 19. Since the 2,400 meter landing strip at the airport is between the western fringe of the city and the sea, it canIUL be exLeUed to 3,500 meters as required for long distance aircraft. As a result, the Government intends to relocate the airport at Golo-Djibe, 35 km from Cotonou. This project has been studied by OACI, but considering its high cost ($35 million) is is not likely to materialize in the near future. 20. Domestic air transport is at an early stage of development. Benin has five small secondary airfields but none of them has ground installations. A $5 million project for modernizing the airport at Parakou, the most impor- tant of these secondary airfields (4 flights to Cotonou per week), is also envisaged by the Government. The domestic aircraft fleet consists of four DC3s, but three of these are currently out of order because of lack of spare parts and inadequate maintenance. ANNEX 2 P aga,e 1 Checklist of Major Issues The major issues raised in this Transport Sector Memorandum and requiring further review and evaluation are summarized below. 1. Transport Organization and Planning: (a) the new organization of the technical directorates (espe- c.LML_y Lle Directorate of Pub.ic WULk and the Dir e-C tUrate of Land Transport) and of the machinery for planning and puz'cy furmulation 'o buo Lte economy as a wnole ana tne transport sector; (b) the reinforcement of the capacity and role of the Direc- torate of Land Transport in transport policy and coordi- nation; (c) the overall level of expenditure in the transport sector over recent years, the allocation of this expenditure among sub-sectors, and the breakdown between Government and ex- ternal financing. 2. The Benin Route: (a) the prospects for agricultural and industrial development in Benin and neighboring countries, the costs associated with the development and operation of alternative transit routes, and the impact of these regional factors on the Benin route; (b) the organization and operation of OCBN, especially: (i) the freight tariff structure and its impact on the competitiveness of the Benin route and the finan- cial viability of OCBN; and (ii) the reported delays on the railway and at the trans- fer points in Cotonou and Parakou; (iii) the need to improve track conditions and train operations, to relieve congestion on the Cotonou-Parakou line; (iv) the coordination of rail and road transport on the coastal route to Nigeria. (c) the reasons and solutions for the directional imbalance of Niger's transit traffic on the Benin route. 3. The Railway (non-regional aspects): the expected closure of the two coastal railway lines. ANNEX 2 Page 2 4. The Road Transport Industry: (a) the basic causes of the high costs of road transport operations and measures required to improve efficiency, including revision of the tariff structure, control of the number of operators, improvement of credit avail- ability, and enforcement of traffic regulations; (b) the prospects for future development of the domestic road transport industry; (c) the importance and control of Niger and other foreign truckers operating within Benin in the context of grow- ing international traffic. 5. Road Maintenance: (a) the inadequate level of road maintenancP penpnditirp in relation to the size of the road network and the level of revenues from road uisPrs; (b) the misdirection of road maintenancxp Pendituiire, nnd the emphasis on purchasing, rather than operating equipment. 6. The Port of Cotonou and Maritime Shipping: (a) the analysis of causes of the declining productivity of OBEMAP, and of measures to relieve the present conges- tion and to improve OBEMAP's handling operations and the coordination between port enterprises and nOBN (b) the prospects for future traffic growth, especially due to the diversion of traffic from the congested port of Lagos, and the impact of this on port expansion and improvement plans at Cotonou; (c) the viability of the recently established Benin Ship- 7. Ai-r Transcnort: (a) 11e need and economic justification for relocating the international airport, due to the restrictions on the length of the landing strip at Cotonou; (b) the prospects for developing secondary airports and the domestic aircraft fleet. mABLE I BENIN EXPENDITURES FOR ROADS, 1970-1975 AND THEIR FINANCING (in millions of CFAF) 1970 1971 1972 1973 1974 1975 Expenditures including built up of reserves of Road Fund 964 1317 1073 877 1893 2088 Actual expenditures- 0 799 1131 913 766 1893 2088 - Maintenance expendituresY 1 341 423 474 402 473 550 - Capital expenditures 458 708 439 364 1420 1538 - Road Fund Reserves bilt up 16 160 111 - - 0 AA 1117 inl 877 189 2088)A - Road Fund Revenue 2210 285 249 223 239 V- I I1 1 r^3 nI 1'7 - Government budget:.= 28 49; 349 24 250 2Z7 r^ --r 1 1A ^a ra 11 '7 I 1 1 / 13 - Foreign Aid 03 5 375 340 121£ 1'46J of which: EDF (317) ( - ) ( - ) (106) (608) (827) FAC ( 00) ( - ) (119) ( 85) ( 6) ( 8) IDA ( - ) (508) (256) (149) (657) (636) - Use of Road Fund Reserves .' 55 214 64 - 1491 139. 0/ Line one minus line 5. l/ Includes administrative expenditures. Figure for 1975 is a budget estimate. 2/ Estimates based on CFAF 288 million in reserves at the end of 1973 which were run down in two years. 3/ Current and capital budget combined. (Residual - needs further checking). 4/ Almost all for capital expenditures. TABLE 2 BENIN GOVERNMENT REVENUES FROM ROAD USERS, 1975 1. The following table summarises the direct revenues estimated to be received by the Government from road users during 1975. CFAF million Paxes on gasoline and gas-oil 560 vehicles 400 tires and tubes 160 spare parts n.a. Tehicle registration fees 760 larrant of fitness, driving permit, tag charges 85 1965 2. No estimate has been made of the receipts from taxes on spare- parts. However, with these included, the total direct revenues from road users would most likely be between CFAF 2 billion and CFAF 2.5 billion. 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