Cameroon - Second and Third Highway Projects

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3934 PROJECT PERFORMANCE AUDIT REPORT CAMEROON SECOND AND THIRD HIGHWAY PROJECTS (LOAN 935-CM/CREDIT 429-CM AND LOAN 1515-CM) May 24, 1982 Operations Evaluation Department 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.  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT CAMEROON SECOND AND THIRD HIGHWAY PROJECTS (LOAN 935-CM/CREDIT 429-CM AND LOAN 1515-CM) TABLE OF CONTENTS Page No. Preface ......oo o e o os o o o oo o o o o es o o o oo o e o o i Basic Data Sheet .............................................. ii Highlights .. .. . .. .. . .. .......................... ....o ..... iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. BACKGROUND ..... -oo ....... . 1 II. CONSTRUCTION COMPONENTS AND THEIR COSTS ....... 1 III. OTHER PROJECT COMPONENTS ...... ...... .. -e-e... 2 IV. COVENANTS ................ .oooo oo* ooee e* oe 5 V. CONCLUSIONS . ... . ... .. .o. ooooooe,ooo................ 5 ATTACHMENT: PROJECT COMPLETION REPORT I. INTRODUCTION ..o.o...ooo.o............. ..e . 7 II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL .-....... 10 III. PROJECT IMPLEMENTATION AND COST -................... 14 IV. INSTITUTIONAL DEVELOPMENT .-........................... 22 V. ECONOMIC REEVALUATION o ...... . ..o.............o.... 24 VI. BANK PERFORMANCE .............. 28 VII. CONCLUSIONS -- ... o..oooooooooooooooooooosooo eoo.. .... 30 Tables 1 - 9 Mapg 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.  PROJECT PERFORMANCE AUDIT REPORT CAMEROON SECOND AND THIRD HIGHWAY PROJECTS (LOAN 935-CM/CREDIT 429-CM AND LOAN 1515-CM) PREFACE This report presents a performance audit of the Cameroon Second and Third Highway Projects which were supported by Bank Group lending aggregating US$79.5 million equivalent, comprising for the Second Project, a Bank loan and IDA credit each of US$24 million equivalent of July 3, 1973, a supplement to the IDA Credit of US$15 million of March 2, 1976, and for the Third Project, a loan of US$16.5 million of January 31, 1978. All but the last of these loans and credits are now fully disbursed; the loan of January 31, 1978 has about US$350,000 equivalent remaining with a Closing Date of June 30, 1982. Both projects have been substantially completed but some technical assistance services remain to be financed under the Third Project. This report consists of a memorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the Bank's Western Africa Regional Office. OED has reviewed the PCR against the Appraisal and President's Reports (there was no separate appraisal report for the Third Highway Pro- ject), the President's Memorandum of February 19, 1976 on the supplementary Credit, the legal documents and the transcripts of the Executive Directors' meetings which considered the projects, including the supplement to the IDA credit. Project files and documents have also been reviewed and discussions held with Bank operational staff. The draft report was sent to the Borrower for comments in the normal course; however, none were received. The audit finds that the PCR provides a generally adequate descrip- tion of the experience under these two projects. The audit memorandum pro- vides additional information on some points, particularly with regard to transport planning.  PROJECT PERFORMANCE AUDIT REPORT BASIC DATA SHEET CAMEROON SECOND AND THIRD HIGHWAY RPOJECTS (LOAN 935-CM/CREDIT 429-CM AND LOAN 1515-CM) KEY PROJECT DATA Initial Estimate Original Supplementary Additional Actual or Item Loan & Credit Credit 1/ Loan Reestimate Total Project Cost (US$ million) 70.5 129.0 21.6 2/ 150.6 Overrun (t) - - - 113.0 Loan/Credit Amount (US$ million) 24.0 & 24/0 15.0 16.8 79.5 Disbursed 24.0 62 4.0 15.0 16.1 79.1 Cancelled 0 0 0 0 Repaid ) as of JLly 1.8 & 0 0 0 1.8 Outstanding ) 31, 198 19.9 6 21.0 15.0 12.7 71.6 3/ Project Completion Date 06/77 06/77 12/78 12/82 Proportion of Time Overrun (%) - 60 138 4/ Proportion of Main Project Elements - - - 29 Finished by Original Completion Date (%) Economic Rate of Keturn (%) 20 15 20 20 5/ Cumulative Estimated and Actual Disbursements (USS Millions) Second Highway Project 6/ Third Highway Project FY74 FY75 FY76 FY77 FY78 - FY79 FY80 FY78 FY79 FY80 FY81 FY82 (1) Ebtimated 0.5 8.5 23.5 39.5 48.0 48.0 48.0 5.2 12.7 - 16.5 16.5 (ii) Actual 0 7.0 18.3 35.2 58.7 62.6 63.0 - 12.27 15.80 16.3 16.5 % of (ii) to (1) 0 83 78 90 122 130 131 0 97 100 99 100 OTHER PROJECT DATA Original Plan Actual Second Third Second Supp. Third Item Hijhway HLjhway ghway Credit Highway Eirst Mention in Files - - 11/05/71 06/20/74 06/11/76 Government's Application - - 06/12/74 - - Negotiations Date - - - 01/09/78 board Approval Date - 07/03/73 u3/02/76 01/31/78 Loan/Credit Agreement Date - - 09/26/73 06/25/76 04/03/78 Effectiveness Date - 12/20/73 10/05/76 10/17/78 Llosing Date 06/30/7b 7/ 06/30/82 12/31/79 8/ 06/30/77 06/30/82 borrower United Republic of Cameroon Executing Agency Ministry of Econ. Affairs & Planning/Min. of Equipment & Housing /Min. of Transport Fiscal Year of Borrower July 1 - June 30 Follow-on Project Name Fourth Highway Project Loan/Credit Number 1723-CM/926-CM Loan/Credit Amount 36.0 & 10.0 (US$ million) Loan/Credit Agreement Date August 23, 1979 MISSION DATA No. of No. of Date of Item Month/Year Weeks Persons Manweeks Report Second Highway Project Identification/Preparation 4/ 10/72 2 3 6 10/27/72 Appraisal 01/73 4 3 12 06/11/73 Supervision 1 10/73 3 2 6 11/15/73,02/15/74 Supervision II 05/74 1.5 2 3 07/23/74 Supervision III 11/74 0.5 1 0.5 12/10/74 Supervision IV 09/75 1.5 3 4.5 10/13/75 Supervision V 12/75 2 1 2 01/16/76 Supervision VI 06/76 2 2 4 08/17/76 Supervision VII 10/76 1 1 1 10/21/76 Supervision VIII 02/77 2 2 4 04/29/77 Supervision IX 05/77 2 2 4 06/09/77 Supervision X 04/78 2.5 2 5 05/08/78 Supervision XI 10/78 1.5 2 3 11/16/78 Supervision XII 02/79 2 2 4 04/04/79 Supervision XIII 12/79 1 1 1 01/11/79  - iii - MISSION DATA No. of No. of Date of Item Month/Year Weeks Persons Manweeks Report Third HighwayProject Identification/Preparation 1 9/ 12/75 2 1 2 01/20/76 Preparation II 10/ 05/77 2 2 4 06/09/77 Appraisal 10/77 4 2 8 11/23/77 11/ Supervision 1 10/78 2 1 2 11/16/78 Supervision II 02/79 2 2 4 04/04/79 Supervision 111 12/79 1 1 1 01/11/80 Supervision IV 03/80 1 1 1 04/24/80 Supervision V 06/80 0.5 2 1 07/11/80 COUNTRY EXCHANGE RATE Name of Currency (Abbreviation) CFA Francs (CFAF) Year: 1973 Appraisal Year Average Exchange Rate: US$1 = 230 1974 Average US$1 = 240 1975 Average US$1 = 241 1976 Average US$1 = 239 1977 Average US$1 = 246 1978 Appraisal Year Average US$1 = 245 1979 Appraisal Year Average US$1 = 212 1/ At the time this Credit was made, one section of road (Garoua-Figuil) was removed from the Second Project which later formed the main component of the Third Project. 2/ Includes only cost of Garoua-Figuil road plus some additional technical assistance. 3/ Includes US$5.8 exchange adjustment. 4/ Based on project as originally defined. 5/ For all physical project elements of original project. 6/ Estimated amounts do not include the supplementary credit for which no schedule of disbursement was presented to Board, supervision report of 08/17/76 indicates that cumulative disbursements would be US$36 million by end of FY7;, US$54 million by end of FY78 and US$63 million by middle of FY79. 7/ The original Closing Date of Credit 429 and its supplement were 06/30/77 and of Loan 935 was 06/30/78. 8/ The revised Closing Date for Credit 429 was 06/30/77. 9/ Projects were identified and prepared under previous lending operations. 10/ Preparation work was also done by supervision missions VIII and IX for the Second Highway Project. 11/ Date of Mission's report; there was no appraisal report, but President's Report was issued 01/18/78.  - iv - PROJECT PERFORMANCE AUDIT REPORT CAMEROON SECOND AND THIRD HIGHWAY PROJECTS (LOAN 935-CM/CREDIT 429-CM AND LOAN 1515-CM) HIGHLIGHTS The two projects were part of a series to improve and expand the main trunk transport routes in Cameroon. The Cameroon Second Highway Project consisted of two principal components (a) reconstruction of nearly 500 km of highways and (b) technical assistance and studies relating to transport policy, highway maintenaace and feeder roads, and forestry policy and forestry roads. Detailed design and cost estimates for the road works were prepared shortly before Board presentation in July 1973 and before the oil price rise in late 1973. Tenders and actual costs greatly exceeded cost estimates, primarily due to the oil price increase. However, underestimation of physical quantities and of unit costs also contributed to' the cost overruns, as did currency realignments. In order to meet these problems, the Government initially eliminated about 95 km of construction and increased its own contri- bution to the costs and IDA, two years later, provided supplementary financing of US$15 million equivaLent. The Third Highway Project was authorized when construction under the Second Project was virtually completed. It provided funds for reconstruction of the 95 km segment which had been dropped from the Second Project and for which the contractor on the adjoining road section under the Second Project had made a favorable offer. As this contractor was a German firm the Bank sought to obtain cofinancing from Germany but this effort failed (PCR para. 3.12). The physical works under the two projects were delayed in each case when start up was postponed to find more funds but after work began the contractors worked to schedule or were late by not more than 30%. All physical works originally included in the Second Project were finished within two years of their original target date which constitutes a delay of 50% for those elements of the project. The quality of works was satisfactory except for some localized pavement failures on one road (PCR paras. 3.15 and 3.16). Traffic which had been estimated at appraisal to grow at 7% per year for ten years and 5% thereafter in fact grew over the period at double or more the projected rates. Vehicle operating costs also rose significantly over those estimated at appraisal and there was a consequent rise in benefits derived from vehicle operating cost savings. Therefore, despite the large increases in construction costs, the rates of return as reestimated in the PCR for the three main road sections in the Second Project remained satisfactory at 20 or more percent. For one section it rose by about one fourth over the appraisal calculation (20% to 25%) and in another it fell by about the same - v - proportion (17% to 13%). In the third case it nearly doubled from 15 to 27%, primarily because the cost overrun, at 65%, was relatively less than for the other roads. The foregoing rates of return are satisfactory even if account is taken of the fact that some of the benefits on the northern road accrue to transit traffic to Chad and thus not to the Cameroon economy. At appraisal it was estimated that 25% of the freight traffic on this road related to Chad; the Region now estimates that 10% of all traffic on this road is related to Chad. The development which has taken place in the areas served by these roads confirms the original assessment of the high priority accorded these projects (PCR para. 7.03). The two projects also resulted in the completion of a road main- tenance study which formed the basis of the Cameroon Fourth Highway Project (Loan 1723-CM and Credit 926-CM of June 7, 1979). Feasibility studies of nearly 400 km of forest roads were also completed, but a feeder road better- ment program was not developed under these projects. The projects also provided technical assistance for various transport agencies but effective formulation of transport policy remained a desired but unmet objective. The Audit suggests that greater emphasis on accomplishing this objective in the Bank's dialogue with the Government might have yielded better results than the continuous use of technical assistance with relatively less emphasis on other measures (PPAM para. 10). The technical assistance to formulate a forestry policy provided under the project was never arranged but was eventually obtained bilaterally and a forestry policy remained to be formulated when the project was essentially completed in 1979. Points of particular interest include: - the generally high level of construction and vehicle operating costs in Cameroon (PPAM para. 5); - differences in the wording of general covenants of the two projects regarding road maintenance, road statistics and vehicle weight and dimension control (PPAM para. 13); - the addition during the course of the roads' construction and at the Government's own expense of bypasses around urban areas where the design approved by the Bank had indicated that the existing alignment would be used (PCR para. 3.17); - frequent changes in staff assignment which may have interrupted continuity of work during preparation and appraisal (PCR para. 6.03); and - delays caused by awarding excessive work to one contractor (PCR para. 6.05). PROJECT PERFORMANCE AUDIT MEMORANDUM CAMEROON SECOND AND THIRD HIGHWAY PROJECTS (LOAN 935-CM/CREDIT 429-CM AND LOAN 1515-CM) I. BACKGROUND 1. The projects covered by this Audit are part of a series of eleven Bank and IDA operations over more than a decade to improve Cameroon's prin- cipal trunk transport routes. The combined Bank and IDA lending for transport in Cameroon amounts to about 40% of all lending by the Bank Group in that country and all but two of these transport projects have financed the main trunk routes. These trunk routes originate in the country's principal sea port, Douala, and run in two branches (a) north and northwestward to the former British ruled part. of Cameroon and thence northwest toward Chad and (b) west toward the capital, Yaounde, and thence to the north toward Chad and to the east toward the Central African Republic. 2. The main trunk routes have been exceptionally significant in the life of Cameroon. Firstly, they link major settled portions of the country to each other, across large intervening areas of low population. Secondly, they provide a link between two parts of Cameroon which had been administered quite separately during the colonial period. Thirdly, they provide the vital access to the sea for the two neighboring landlocked countries of Chad and Central African Republic, countcies with whom Cameroon wishes to maintain cordial relations and countries which have several alternative routes to the sea. 3. Extensive parts of the trunk routes have multimodal service by rail, road and air, and over the past decade aviation services have been intensified and the rail line has been extended beyond Yaounde. Various parts of the routes have been upgraded and provided with additional capacity. The Bank Group has assisted in this effort through two projects for Douala port and a series of rail and road projects. The Second and Third Highway projects are those presently under audit. Previous audits covered the First Port Project the First, Second and Third Railway Projects and the First Highway Project.17 II. CONSTRUCTION COMPONENTS AND THEIR COSTS 4. The Second Highway Project was intended to assist finance the reconstruction of 225 km of the road leading north and northwest from Douala and of 260 km of the main road in northern Cameroon toward the Chad border. Most of the first road is paralleled by a branch of the Cameroon railway while the road in northern Cameroon runs without rail competition. The funds under the Second Project were insufficient to complete all the works included in 1/ Report No. 1605, SecM77-447 dated May 24, 1977; Report No. 1633, SecM77-507 dated June 15, 1977; Report No. 3056, SecM80-528 dated June 30, 1980 and Report No. 1574, Sec477-359 dated April 29, 1977. - 2 - that project even after a supplementary credit of US$15 million was authorized in 1976 and further financing was provided under the Third Highway Project to reconstruct the incomplete 95 km of the road in northern Cameroon. 5. The PCR provides a recital of the circumstances which led to the cost overrun and of the actions taken to cope with it. The PCR does not discuss, however, the generally high cost of the works (averaging from the equivalent of US$200,000 to $300,000 per km) as compared with similar con- struction elsewhere (see, for instance, Ivory Coast Second and Third Highway Projects, Loans 761-IVC and 837-IVC, Report No. 3665, SecM81-888 of November 6, 1981, where the costs were between US$120,000 and 140,000 per km). These construction costs are counterbalanced by generally higher vehicle operating costs and sharply increased traffic which create correspondingly higher benefits and the economic analysis therefore shows satisfactory results. Nevertheless, the high costs of construction do raise concerns about the large share of investible resources which they absorb and about possible cost reducing remedies which might be available. Already during the Board dis- cussion of the Second Project, questions were raised about the large sums being invested in the roads under the project. The lending for the project was said to amount to $8 for each person in the country. Those questions have become even more relevant as large overruns have occurred despite contingency allowances which some Executive Directors thought to be unduly generous. 6. The sharp rise in traffic above appraisal projections particularly for heavy vehicles has helped to maintain the level of economic returns of the project. For purposes of the economic analysis the useful life of the project has been assumed to be the same as at appraisal. This assumption may not, however, be entirely appropriate because the traffic particularly of heavier vehicles is so much greater than was forecast when the road was designed. The useful life of a road is partly dependent on a specified number of heavy axles passing over it and once that number of axles has been attained, the pavement normally needs to be overlaid, at a significant cost. The Audit has been unable to quantify these parameters for the project roads but believes it is likely that some reduction in the useful life of the roads will occur and consequently some reduction in the economic returns. The Region notes that the periodic maintenance which is projected in the economic analysis is adequate to cover the increased road usage and that in any event the influence of discounting factors on these future maintenance costs will be so large that the effect on the rate of return would be insignificant. III. OTHER PROJECT COMPONENTS 7. In addition to road construction, the Second Highway Project also provided for (a) technical assistance on the development of a forestry policy, (b) feasibility studies of about 400 km of forestry feeder roads, (c) a study to improve highway maintenance and to define a betterment program for feeder roads and (d) assistance to the Borrower's Ministry of Transport -3- (charged with transport planning and coordination) and the Borrower's Ministry of Equipment (which oversees the Department of Roads). The Third Highway Project had only one non-construction component, namely, strengthening the transport planning and coordination functions of the Ministry of Trans- port, including some overseas fellowships. 8. According to the PCR (paras. 3.20 to 3.29) these items of the project were substantially completed, except for the forestry policy component where no expert was ever employed under the loan to assist the Government in policy formulation; this task is being taken care of under bilateral arrange- ments. In addition, as the technical assistance for the Ministry of Transport is being provided under the Cameroon Technical Assistance Project (Credit 673), moneys available for that purpose under the Second Highway Project are being applied for similar purposes in the Ministry of Equipment. 9. The PCR does not mention that a study to define a feeder road program was not carried out. The consultant who was to have done this work was the same consultant who undertook the maintenance study, a task which was considerably delayed arid exceeded its budget. The feeder road program was, therefore, deleted from the consultant's contract. The maintenance study did provide the basis, however, for the Fourth Highway Project (Loan 1723/ Credit 926 of June 7, 1979), which was devoted primarily to improve highway maintenance. Moreover, in 1976 the Government and the Bank agreed to define a feeder roads program separately and to concentrate on selected and well- defined areas because Cameroon lacked the absorptive capacity to implement a nationwide program. With considerable assistance from the Bank and con- sultants, the Government accomplished a study on which the Feeder Roads Project (Loan 1949/Credit 749 of November 15, 1977) was based. 10. While technical assistance for forestry policy is being provided under bilateral auspices, the technical assistance component for this purpose under the Second Highway Project never eventuated over the five intervening years after the commencement of the Second Highway Project. The Audit cannot determine whether the absence of this technical assistance seriously impeded the establishment of a national forestry policy by Cameroon. It is a fact that as of 1979, there was no clear policy and that the uncertainty this created was thought to be an inhibiting factor on growth of production, according to the Appraisal Report for the Fourth Railway Project (Report No. 2353-CM of June 19, 1979). That report also noted that forestry development was critical to the justification of the Fourth Railway Project (which pro- jected a trebling of timber traffic over ten years) and that lack of transport (forestry evacuation roads) was the major reason why Cameroon forestry devel- opment failed to expand rapidly in recent years. 11. The absence of a forestry policy thus may have impeded not only the production of forest products but the design and implementation of major transport investments such as the Fourth Railway Project. The Audit cannot determine the reasons for the failure to establish a forestry policy. Accord- ing to the Appraisal Report for the Second Highway Project (Report No. 180-CM of June 11, 1973) the Government required assistance in formulating and implementing a detailed policy. The Description of the Project reflects this emphasis on technical assistance and defined the project component in terms of this assistance, not in terms of the policy which it was intended to help produce. Perhaps a clearer definition of what the Government was expected to do might have achieved better results. 12. The assistance to the Ministry of Transport and to the Ministry of Equipment, according to the Description of the Project, was to help in the formulation of transport policies and regulations, in the resolution of coordination and planning problems, and in the training of staff. In mid-1979 when the Second and Third Highway Projects were nearly complete and the Fourth Railway Project was brought before the Board, the Appraisal Report noted that the relevant government agencies lacked the capacity for transport planning and that the road program was without clearly defined construction priorities, was in excess of financial resources, with inadequate project preparation and without adequate attention to maintenance. According to that Report, Cameroon, therefore, lacked a blue print for long term transport development and there was an inappropriate concentration on high cost projects and inadequate thought to execution of projects in stages. Recent supervision reports indicate, however, that the failure of Cameroon to establish a trans- port policy go beyond technical problems and grow partly out of political dis- agreements on priorities. The emphasis on technical assistance and insti- tution building may, therefore, have not been entirely apposite and have diverted attention from the need for reaching consensus within the Government. 13. The Bank has, in fact, supported the Government's project by project approach to investment even though it has been concerned with the possibility of duplication and overinvestment. Thus, in the Second Highway Project, Section 4.08 of the Loan Agreement required the Borrower to coordinate its railway and highway investments in the two major transport corridors (includ- ing the road north and northwestward from Douala financed under the Project) and in a Supplementary Letter the Borrower undertook to consult the Bank about investmants (except track and rolling stock renewal) on the rail line parallel to that road. The Bank's fears about the prospects of the railway in the corridor north and northwestward from Douala were well founded; between 1972 and 1979 passenger km on that route dropped by 42% (to a total daily use by about 1,000 persons) and between 1973 and 1979 ton km dropped by about 13% (to a total daily tons carried of about 300). Similar restrictions on future investments appear in other Bank Group projects for the transport sector in Cameroon. Such restrictions have not always been observed; thus, for example, the decision to realign the railway between Yaounde and Otele where the Cameroon railways spent significant funds on track realignment without consulting the Bank despite a covenant providing for such consultation (see paras. 19 and 21 of PPAR for Cameroon Second and Third Railway Project, Sec M80-528, June 30, 1980). The question arises whether a more effective ap- proach by the Bank would have been to make the establishment by Cameroon of a transport plan with definite priorities the objective of the dialogue between the parties and perhaps a prerequisite for lending. - 5 - IV. COVENANTS 14. The PCR indicates that the Government has complied with all the covenants under the Second and Third Highway Projects with the exception of the reconstruction of a one-lane bridge to a two-lane standard which the Bank did not find economically justified. The PCR does not specifically mention Section 4.09 (a) and (b) of the Loan Agreement under the Second Project which related to the establishment of a new road transport policy after consultation with the Bank. The Second Project Appraisal Report had indicated that a "Syndicat des Transporteurs" was seeking to have laws passed which would cartelize the trucking industry. A study was to be made of this issue by a UNDP expert and the law would be amended only after the study had been made and the Bank had been consulted. The Audit was unable to determine from the files what action, if arty, was taken on this matter. The Region advised that the UNDP expert changed the focus of his work with the Government's concur- rence and his work formed the basis of the new highway code for Cameroon. In any event, subsequent reports on the Cameroon transport system imply that the road transport regulatory system is largely unfettered and that the Government, therefore, did not act on the request of the "Syndicat des Transporteurs". 15. The covenants include versions of the typical clauses for such projects such as on road maintenance, road statistics and road vehicle weight and dimension control. These clauses differ somewhat in the Second and Third Projects, however. In the former they speak of roads in the "national" or "public" highway system whereas the latter refers to the "classified" highway system. There is some uncertainty on the classification of roads in Cameroon and the maintenance study financed under the Second Project was to address this point. However, the generally vague obligation imposed by these standard covenants is made even more uncertain in this case by the fact that the roads to which they relate are themselves not clearly specified. It is thus quite difficult to determine the degree of compliance in relation to the covenants. V. CONCLUSIONS 16. The PCR fully relates the experience of the Cameroon Second and Third Highway Projects. The projects generally achieved their objectives, albeit with delays and with increases in costs, and their physical components yielded satisfactory returns. It is helpful, nonetheless, to set this experi- ence in the context of other Bank Group projects for transport in Cameroon. Most of these projects have been for the main trunk routes of the country, but they were unrelated to an overall plan for the transport sector and for the improvement of those trunk routes. Such a plan has not been developed despite considerable technical assistance provided to various Cameroon transport agencies by the Bank Group and others. The Audit considers that the creation of such a plan would have been more likely had the Bank agreed on this ob- jective with the Borrower and not merely provided finance for general planning help. Such a plan would have established some investment priorities which would have provided a basis for recasting or postponement of some major investments, particularly those on Cameroon's main trunk routes. Thus, while the two projects under audit achieved their immediate aims, they had only limited effects on strucituring the country's overall transport system.  CAMEROON SECOND AND THIRD HIGHWAY PROJECTS Loan 935 CM/Credit 429 CM and Loan 1515 CM PROJECT COMPLETION REPORT July 16, 1980 West Africa Region Highways Division  - 7 - CAMEROON SECOND AND THIRD HIGHWAY PROJECTS Loan 935 CM/Credit 429 CM and Loan 1515 CM PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 East Cameroon and West Cameroon gained independence in 1960 and 1961 respectively, and united to become a Federal state in October 1961. Part of the task of uni-ifying the country involved the improvement of the transport links between the important population centers of the country, and to stimulate and support the evolving integration of the national economy. A further task was to establish administrative responsibilities and strengthen the institutions responsible for transport. The objective of the Government of Cameroon through its five year development plans and of the Bank Group through its lending program has been to accomplish these tasks. Considerable progress in upgrading the transport system has been made over the past two decades since the country was formed; however, much slower progress has been made in developing its transport institutions. 1.02 Bank Group ass:istance in carrying out the above tasks has been made available to most parts of the transport sector. 1/ In 1964, the Bank provided a Technical Assistance grant of US$200,000 for feasibility studies of two key roads followed in 1968 by an Engineering Credit of US$600,000 for detailed engineering of these roads. These pre-investment studies led to the preparation of the First Highway Project in 1970 followed by the Second and Third Highway Projects in 1973 and 1978, respectively. A Fourth Highway Project was approved in 1979 and a Fifth is currently under preparation. The Bank Group has also provided funding for four railway projects and two port projects as well as one feeder road project. In all, since 1964, the Bank Group has provided a total of US$226.5 million in loans, credits and grants to Cameroon for the transport sector. 1.03 The improvement: of the 2,000 km rail/road Transcameroon route extending from the port of Douala north to the Chad border has been a high priority objective in the development of the country's transport system since the early 1960s. The route not only connects the country's main port and its capital Yaounde to the heavily populated and highly productive northern provinces but provides access to the southwestern part of Chad and serves as a secondary route to CAR. The existing railway from Douala to Yaounde and on to Belabo was extended to Ngaoundere during the early 1970s with the assistance 1/ See Cameroon Transport Sector Memorandum dated June 6, 1980 - Report No. 3030-CM - for an overall review of the sector. - 8 - of FAC, FED, USAID and EIB. The improvement of the existing road from Ngaoun- dere to Garoua was a major component in the First Highway Project and the continuation of this road from Garoua to Mora was included in the Second Highway Project and completed in mid 1979 under the Third Highway Project. The remaining section of road from Mora to Kousseri near the Chad border was completed in 1972 with the assistance of KfW. 1.04 Another high priority improvement was the completion of the road linking Douala to Victoria via Tiko and the improvement of the road between Douala and the highly productive and populous hinterland of western Cameroon. The Tiko-Victoria section was completed under the First Highway Project, while reconstruction of most parts of the road from Douala to Bafoussam and Foumban was included in the Second Highway Project. 1.05 As is usually the case, progress in the development and strengthening of transport institutions has taken place at a slower pace than the construc- tion related project elements. As noted in the Project Performance Audit Report for the First Highway Project dated April 29, 1977, the Ministry of Transport was established in 1970 to coordinate transport planning and to develop policy. Technical assistance was provided to the Ministries of Equipment and Transport under the Second and Third Highway Projects and the Technical Assistance Project. It is continuing under the Fourth Highway Project. At the time the country was formed, both East and West Cameroon had their own Public Works Departments. During the implementation of the First Highway Project, these two departments were consolidated and formed the Department of Highways, in the Ministry of Equipment and Housing. 1.06 The Second and Third Highway Projects are presented together in this report because, except for one small addition for technical assistance in the Third Highway Project, they represent the project that was originally conceived as the Second Highway Project. The Second Highway Project, which was prepared under the First Highway Project, comprised the reconstruction of three main roads totalling 485 km in length. One road, Garoua-Figuil-Mora, formed part of the Transcameroon route, while the other two were sections of the main road from Douala to western Cameroon. The project also included consulting services for supervision, feasibility studies, a study to improve highway maintenance, and technical assistance for transport planning. The project was appraised in January/ February 1973 and negotiated in May. The loan/credit documents were signed on September 26, 1973, and the Loan (935 CM) and Credit (429 CM), for US$24 million each, became effective on December 20, 1973. The Government received bids for the construction works in April 1974. The lowest evaluated bids were accepted and contracts for construction were signed on November 5, 1974. 1.07 During 1974 and 1975 substantial cost overruns took place because of world wide inflation resulting from the 1973-74 oil price increases. Esti- mated project costs, which at the time of bid evaluation already exceeded the appraisal estimate by 30%, continued to increase rapidly during project implementation, eventually leading to a cost overrun of 113%. The - 9 - project was reappraised in September 1975 which led to a proposal to raise the amount of Credit 429 CM from US$24 million to US$39 million and to delete from the project the Garoua-Figuil section of the Garoua-Mora road, on which work had not started. This proposal was approved by the Executive Directors on March 2, 1976. The Third Highway Project which consisted of the Garoua- Figuil road section which had been deleted from the Second Project and addi- tional technical assistaace was appraised in October/November 1977. The project was considered by the Executive Directors on the basis of a Presi- dent's Report; no appraisal report was prepared. The loan agreement for US$16.5 million (Loan 1515 CM) was signed on April 3, 1978. 1.08 With the additional financing, the execution of the project proceeded at a somewhat faster pace. Construction was completed in June 1979 at a total cost of slightly double the 1973 appraisal estimate. The technical assistance component has been completed with the exception of three minor items one of which is underway. As of June 30, 1980, all but US$0.7 million of the total lending of US$79.5 for the Second and Third Highway Projects, consisting of two loans and the original and supplementary credits, have been disbursed. 1.09 Despite the substantial increase in project costs, the rate of return for the combined Second and Third Highway Projects is estimated to be approximately the same as the 1973 appraisal estimate of 20%. The reason is that, despite the increased construction costs, the savings in vehicle operating costs have also increased over the appraisal projections. Further- more, on the Garoua-Mora road, traffic volume and the relative proportion of heavy vehicles increased far beyond the appraisal forecasts. 1.10 The maintenance study financed under the Second Highway Project helped establish the technical basis for the Fourth Highway Project which comprised a comprehensive program of road maintenance and rehabilitation including training and technical assistance. However, the scope of the project proposed by the consultants was reduced to suit the financial and absorptive capacity of the country. 1.11 The information for this Report was obtained from the Project Perfor- mance Audit Report on the First Highway Project, the Appraisal Report for the Second Highway Project (180 CM), the President's proposal of February 19, 1976 to the Executive Directors for the supplementary financing of the Second Highway Project, the Pre3ident's Report for the Third Highway Project P-2189 CM), the Appraisal Repori for the Fourth Highway Project (2225 CM), supervi- sion reports, and a review of Bank files. - 10 - II. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL Origin of the Project 2.01 As indicated in Chapter I, the improvement of the Transcameroon route and the road system linking Douala to western Cameroon has been regarded by the Government and the Bank as tasks of the highest priority since the country was formed. The First Highway Project financed the reconstruction of important road sections in the two systems, and the preinvestment studies of the next sections needed to prepare the second lending operation. The scope of the Second Highway Project as finally agreed was close to that originally envisaged. The main difference was the addition to the Second Highway Project of the improvement of a further 50 km section of the main road serving western Cameroon (Pont du Noun-Foumban) based on preinvestment studies which were carried out with the Government's own funds at about the same time as the Bank-financed studies under the First Highway Project. 2.02 The Issues Paper dated March 2, 1973, noted that in September 1972, the Bank's Permanent Mission in West Africa (PMWA) had identified a potential forestry evacuation road project in the southeastern region of Cameroon. The appraisal mission stated that it studied the identification report carefully but agreed with the Government not to include preinvestment studies of forest roads in the project until the planned forest taxation study for Western Africa and Cameroon was completed in the Bank and until the Government had been able to define its forest policy more closely. Technical assistance by consultants at a cost of US$100,000 was added to the project scope to assist the Government in formulating a forestry policy. Later, it was agreed to include a feasibility study for 400 km of roads. Project Preparation 2.03 The preinvestment studies of the Garoua-Mora road and Douala-Pont du N'Kam road which were financed under the First Highway Project, were carried out by the joint venture of French and Canadian consultants. The feasibility studies were started in March 1972, and were completed in September 1972. The Government and the Bank agreed on the principal consul- tants' recommendations in October 1972. Detailed engineering and bidding documents were prepared for both roads and completed in December 1973. The PPAR for the First Highway Project noted that the preinvestment studies were carried out satisfactorily, although the time taken for tendering and contract award resulted in completion of this work about 12 months behind schedule. The preinvestment studies of the Pont du Noun-Foumban road were carried out by German consultants. The feasibility studies were completed in mid 1972, and the detailed engineering in February 1973. 2.04 The preparation mission of October 1972 reached agreement with the Government on the basic recommendations contained in the feasibility studies of all three roads. It did, however, request that supplementary work be done on the economic justification of the Pont du Noun-Foumban road, and - 11 - that the Bank-financed consultants who were studying the Garoua-Mora and Douala-Pont du N'Kam road be requested to review their economic work. The consultants were also asked to review their projections, using different transport policy assumptions of the diversion of traffic on the Douala- N'Kongsamba section of the Douala-Pont du N'Kam road which paralleled a railway line. The appraisal mission later concluded that while the railway was viable because it could operate its existing obsolete equipment at low cost, no further investments were contemplated because they would not be justified. Railway service was poor and unreliable, and the volume of traffic on the road warranted its improvement. Appraisal 2.05 The appraisal mission visited Cameroon from January 10 to February 15, 1973. It followed up the various issues raised by the preparation mission and concluded in its Issues Paper that the construction components were justified on the basis of the feasibility studies. The mission agreed with the Government on the detailed description of the works to be carried out on the road construction component. As the detailed engineering, final cost estimates and bidding documents were not yet completed, the mission prepared a preliminary cost estimate which was later revised upward during the appraisal process. The mission recommended that the project include preinvestment studies of road maintenance to be carried out by consultants. It also iden- tified a number of transport coordination issues to be clarified, including the need for a transport coordination plan to identify the priority of future investments. 2.06 The appraisal mission reported that agreement had been reached with the Government on all technical aspects of the project but noted that the major question still open was the project's overall size and financing. The mission discussed with the Government the expected investment burden this and other projects would put on the Government budget, especially during the first three years of the Third Plan period (FYsl973/77), and the possibility of phasing the project or limiting the project to first priority sections. The Government was, however, fully committed to an early completion of the project and did not wish to reduce its scope. The mission concluded that preparations were too far advanced and that social and political considera- tions made a selection among the sections almost impossible; the Douala-Pont du N'Kam road supported the highest and heaviest traffic;elimination of the Garoua-Mora road would mean a postponement of the completion of the Trans- cameroon route on which the viability of the Transcameroon railway partly depended, and elimination of the Pont du Noun-Foumban road would not accomplish a substantial enough cut in project costs to make the resulting disappointment worthwhile. 2.07 Bank documents indicate that the cost estimates for the project rose rapidly during the preparation and appraisal stages. - 12 - The problems of rising costs and the consequent shortage of funds were to dog the Second Highway Project throughout its execution. In 1976, the Bank Group found it necessary to provide a supplementary credit, and at the same time the Government agreed to reduce the scope of the project. In 1978, a follow-up loan (the Third Highway Project) was made to complete the work as originally envisioned under the Second Highway Project. Loan/Credit Negotiations 2.08 The final cost estimates were not received in the Bank until just before negotiations began on May 23. It was agreed that the Bank Group would recommend to the Executive Directors a loan and a credit of US$24 million each which would finance 100% of the estimated foreign exchange component of the project, or 75% of the total cost, net of taxes. The Government would provide the remaining funds. 2.09 The Government agreed to coordinate its railway and highway invest- ments in the two major transport corridors of the Transcameroon route and the Douala-N'Kongsamba route in order to achieve the most economic allocation of traffic between the two methods of transportation. The Government also agreed to: (a) consult the Bank before enacting new legislation or amending existing legislation regulating the road transport industry; (b) establish, after consultation with the Bank, a road transport policy in line with the recommendation of the consultants to be engaged under the project for that purpose; (c) promptly after receiving the highway maintenance study to be carried out under the project, consult with the Bank on the establishment of a highway maintenance program; and (d) give prompt consideration to the recommendations of consultants engaged to formulate forestry policies. 2.10 In an effort to avoid the coordination problems that arose among the Government Ministries during the execution of the First Highway Project, the borrower agreed that its Ministry of Economic Affairs and Planning would be assisted by the executing departments and agencies. Provision for training local staff in the Ministry of Transport and Equipment was specifically provided for in the Loan Agreement. Project Description 2.11 During negotiations, the Bank Group and the Government agreed on the following scope of the project: - 13 - (a) reconstruction of about 485 km of roads to two lane paved standards: (i) Garoua-Mora (260 km); (ii) Douala-Pont du N'Kam (175 km); and (iii) Pont du Noun-Foumban (50 km). (b) consulting services for: (i) supervision of the above works; (ii) technical assistance to formulate forestry policies; (iii) a feasibility study of about 400 km of forestry feeder roads; (iv) a study to improve highway maintenance and to define a betterment program for feeder roads; and (v) technical assistance for improving transport planning and coordination, and studies of special problems in that area. The project components are listed in Tables 1 and 2 together with actual and estimated dates for project implementation, and actual and estimated project costs. The overall project was to be completed by June 30, 1977. 2.12 The existing Gacoua-Mora road was to be shortened by about 20 km by using a new, more direct alignment. Similarly, the alignments of the Douala-Pont du N'Kam and Pont du Noun-Foumban roads were to be shortened by 13 and 3 km, respectively. Pavement widths were to be 6m except for the Douala- Pont du N'Kam road where heavy traffic warranted a width of 7m. 2.13 The total cost of the project, including local taxes and duties, was US$71.0 million, of which US$48 million was foreign exchange. These estimates included an allowance of 10% for physical contingencies and 15% for price contingencies. The construction part of the project, including contingencies but excluding the design and supervision costs, amounted to US$63.3 million or approximately US$130,000 per km. Loan Signing and Effectiveness 2.14 The project was presented to the Board on July 3, 1973, and the documents signed on September 26, 1973. The loan and credit became effective on December 20, 1973. - 14 - III. PROJECT IMPLEMENTATION AND COST Road Reconstruction 3.01 To stimulate competition among contractors, the roads were divided into sections as follows: Garoua-Mora into three sections, Douala-Pont du N'Kam into two and Pont du Noun-Foumban as one. Contractors were allowed to bid on one or on any combination of sections. Contracts were to be a unit price type and awarded on the basis of international competitive bidding in accordance with Bank Guidelines. The construction period for each section was 30 months, except the Pont du Noun-Foumban section which was 20 months. 3.02 The detailed engineering of the two larger roads in the project was not completed until May 1973, and the bidding documents not until December 1973. These dates were some months later than anticipated at the time the project was appraised. Prequalification was carried out at the same time the documents were being prepared, with the closing date set at October 1, 1973. Twenty-three firms sought prequalification; the Government proposed accepting seventeen, rejecting one and accepting the other five on condition they entered a joint venture with one of the seventeen accepted firms. The list of contractors and final bidding documents were approved by the Bank. The contract documents included provision for price escalation. The last day for receiving bids was set at April 2, 1974. 3.03 Bids were opened on April 4, 1974. Ten firms including some joint ventures submitted tenders, and the consultants were requested to evaluate them. The lowest bids were approximately a third over the appraisal estimates. Bid analysis showed that competition had been open and the bid spread appeared reasonable. The supervision mission of May 1974 agreed with the Government's selection of the lowest bidders for the six sections under tender as follows: (i) Three sections of the Garoua-Mora road 1/ to a German contractor for US$25.3 million; (ii) First section of the Douala-Pont du N'Kam 2/ road to an Italian/ Cameroonian venture for US 17.9 million; (iii) Second section of the Douala-Pont du N'Kam 3/ road to a Greek joint-venture for US$13.2 million; and (iv) Pont du Noun-Foumban road to a German contractor for US$5.1 million. 1/ The three sections were Garoua-Figuil (southern), Figuil-Maroua (middle) and Maroua-Mora (northern). 2/ The Douala-Loum (southern) section. 3/ Loum-Pont du N'Kam (northern) section. - 15 - 3.04 In view of the substantial cost overrun, the Government delayed making an award and requested in letters dated June 12 and 14, 1974 to the Bank, that it finance part of the overrun. As such financing was against the Bank's general policy, and in view of the uncertainty of the amount of the overrun, the Bank replied in a cable dated June 27, that it was unable to make a prompt decision on supplementary financing and suggested that the Government award only the priority contracts within the ceiling of the financing avail- able. This the Government was reluctant to do for the reasons given in para. 2.06. The Bank also suggested that the Government explore with the bidders the possibility of their extending the validity of their bids beyond the date of July 1, 1974 required by the bidding documents, to which the contractors agreed. In August, the tour selected bidders were asked by the Government to start mobilizing, and on November 5, 1974 the contracts were signed. However, while a German contractor was awarded the contract for all three sections of the Garoua-Mora road, the contractor was only authorized to proceed with the Figuil-Maroua and Maroua--Mora sections because of the lack of funds. The contract for the Garoua-Figuil section contained a provision for its automatic termination, without penalties, should the Government elect not to issue an order to proceed by July 1, 1976. Supplementary Financing 3.05 As the reconstruction works 1/ progressed over the next 12 months, the cost overrun situation grew more serious. The supervision reports indicate the rapid increases in the cost estimates to complete the project as follows: Percent over US$ Million 2/ appraisal estimate (a) Appraisal estimate (June 1973) 70.5 -- (b) Estimate at time bids evaluated (June 1974) 92.5 30 (c) Estimate at time of November 1974 supervision 112.0 58 (d) Estimate at time of December'1975 supervision 143.5 102 3.06 While the Bank was sympathetic to the Government's request for additional lending, it concluded that costs were rising so rapidly that it was difficult to prepare a reasonably accurate cost estimate and thus determine how much additional lending was required. It also sought ways to lower the project cost, such as reducing the standards, but little option was available other than to reduce the length of roads in the project. 1/ The reconstruction works and the related construction supervision accounted for 98% of the cost of the project. 2/ All figures include local taxes and duties. - 16 - In October 1975, both the Bank and the Government started to look for addi- tional external financing but were unsuccessful in these efforts. In the meantime, the Bank reduced disbursements for the reconstruction works from 68 to 50% and later to 47% in order to be able to participate in the financing of the works until their completion. The October 1975 reappraisal mission found that total project costs were twice the appraisal estimate and proposed that the 95 km Garoua-Figuil section of the Garoua-Mora road be deleted from the project. On the basis of the field work done by Bank missions to Cameroon in September and December 1975, the Bank considered it had sufficiently firm estimates on which to base a recommendation for additional financing. 3.07 In a Proposal for Supplementary Financing dated February 19, 1976, the Bank's management recommended to the Executive Directors that the amount of Credit 429 CM be raised from US$24 million to US$39 million and that the Garoua-Figuil section be deleted from the Second Highway Project. The Proposal noted that project costs had been affected by unexpectedly high world-wide inflation which commenced after the appraisal and prevailed in the initial years of project implementation, and that the rate of increase during 1974 of the indices of price escalation formulas was as follows: bitumen 205%, steel 101%, diesel oil 82%, cement 26%, labor 25% and industrial goods 7%. As a result, contract prices had increased by over 40% during 1974. While in 1975, the above rates of increase had declined, assuming a rate of inflation of about 10% per year until project completion, unit costs of construction were expected to be on average about twice as high as the apprai- sal estimates. 3.08 While it appears probable that there was an original underestimation of project cost, the overrun is attributed mainly to price escalation during the longer than anticipated period of execution and to a lesser extent to an overrun in physical quantities. Currency realignments due to the devalua- tion of the US dollar in relation to the German Mark and the Swiss Franc were a contributing factor to the higher dollar costs. 3.09 Total project cost was estimated in the Proposal for Supplementary Financing at US$142.8 million. The reduced project was estimated to cost US$121 million of which about US$83 million was in foreign exchange. The supplementary financing of US$15 million raised the Bank Group's participation to US$63 million. In August 1976, the Bank raised its disbursement rate on construction to 60%, while it continued to finance the entire foreign exchange costs of consulting services. 3.10 The economic return of the reconstruction works was reviewed during the reappraisal in the light of rising costs and reduced from 20% to 15%. The lower rate of return was accounted for by the fact that construction costs had increased more rapidly than the savings in vehicle operating costs. The Proposal concluded that despite this reduction (which according to the latest reevaluation did not take place, see para. 5.19) all road sections remained economically justified. The Proposal was approved by the Executive Directors on March 2, 1976. - 17 - Follow-up lending 3.11 On June 1977, the German contractor satisfactorily completed work on the Figuil-Maroua and Maroua--Mora sections of the Garoua-Mora road. In October 1977, the contractor offered to build the Garoua-Figuil section previously awarded to him, at a 5% reduction on the original price plus price escalation, provided the Government would authorize the work to start immediately. The contractor's original bid made in 1974 was about 50% below that of the second lowest bidder. It was considered most likely that a new call for bids would result in substantially higher prices and would delay start of the work by another year. The Government decided to take advantage of the reduced price and the opportunity to speed up construction by using a contractor already on site; it accepted the proposal with the Bank's agreement. The reconstruction of the Garoua-Figuil secl:ion formed the basis for the Third Highway Project. 3.12 The Third Highway Project was appraised in October/November 1977. The Issues Paper pointed out that it was originally intended that the Third Project would include the road maintenance program being prepared under the Second Project. However, as the preparation of this program was still underway, and in view of the urgency of avoiding any delay in securing finan- cing for the Garoua-Figu:Ll section to take advantage of the contractor's offer, it was agreed thai: the Third Highway Project would consist primarily of 'this road section and that the road maintenance program would be deferred to the proposed Fourth Highway Project. The Bank discussed with the Federal Government of Germany the possibility of cofinancing the Third Project as much of the work would be done by a German contractor, but it was not successful in this effort. 3.13 The Third Highway Project was negotiated on January 10, 1978 in Yaounde essentially as proposed in the Issues Paper. The project was presented to the Executive Directorfil on January 31 on the basis of a President's Report (P-2189-CM); no appraisaL report was prepared. The loan was for US$16.5 million which brought total lending for the original project to US$79.5 million. In addition to the reconstruction of the 95 km Garoua-Figuil section to two-lane paved standard and the supervision of this work, the project included further technical assistance and four fellowships to continue the strengthening of the transport planning and coordination unit within the Ministry of Transport. Provision was made for retroactive financing not to exceed US$300,000 for consultant services but none for construction. The economic return of the reconstruction work was estimated at 20%. Execution of Construction 3.14 The German contracitor started first on the northern section (Maroua-Mora) of the Garoua-*-Mora road because several structures had to be built on that section., Construction of the central section (Figuil- Maroua) was started in late 1975 with a second crew. Both sections were satisfactorily completed in June 1977 within the contract time of 30 months. Work on the southern section (Garoua-Figuil) was started in April 1978 and satisfactorily completed in June 1979. The files indicate that payments to the contractor for work pe7:formed were delayed particularly during 1976. - 18 - 3.15 Contractors for the Douala-Loum and Loum-Pont du N'Kam sections were delayed by slow acquisition of right-of-way and borrow pits, and an increase in the volume of earth moving. The Government eventually extended the construction period from 30 to 42 months, and the work was completed in June 1978 within the extended time. In 1979, some localized pavement failures occurred on the Douala-Loum section. The Government has called in a French expert in pavement evaluation who recommended a deflection survey to assess the pavement strength. Following the survey, the expert may recommend a thin overlay of bituminous concrete which should be regarded as advanced periodic maintenance of the road. 3.16 Construction of the Pont du Noun-Foumban road was satisfactorily completed in February 1977 some six months after the end of the agreed-on 20 month construction period. The contractor submitted a claim for additional payments to cover price escalation on the advance payment and on increases in compaction specifications, and requested that penalties for late completion be deleted. The claim was settled amicably. 3.17 The reconstruction works were carried out essentially as planned. The supervision reports note that a number of minor changes in design and alignment were made as the works progressed and that certain small works were added by the Government at its own cost. These changes include widening of certain bridges from single to two lanes, and bypass-s around urban areas. Some were made without consultation with the Bank, b-at most were discussed with Bank supervision staff and approved by them. One change, the reconstruc- tion of an 85 m-long, one-lane bridge in good condition into a two-lane bridge, was not considered economically justified by Bank staff. Consulting Services for Supervision 3.18 While construction got underway in December 1974, and the consultants were on the job from the time work started, their contracts were not signed until the following May. The same consultants who had carried out the prein- vestment studies were given responsibility for the construction of the roads they had studied as follows: (a) Garoua-Mara: A Canadian consultant in association with a French consultant; (b) Douala-Pont du N'Kam: A French consultant in association with a Canadian consultant; (c) Pont du Noun-Foumban: a German consultant. This arrangement made sense as it provided continuity between design and super- vision which was in the best interest of the Government. The Government did make one change in the draft contracts. Originally the consultants were to provide their own soils laboratories, but with a view to cost savings and training of local staff, it arranged for the soils work to be done by the newly established Public Works Laboratory with the assistance of the French Centre d'Experimentation du Batiment et des Travaux Publics (CEBTP). This arrangement worked out well. - 19 - 3.19 The performance of the three consultants was mixed at the beginning but improved as the work progressed. One of the firms provided staff that was experienced and efficient, and the work was properly carried out. The task of the second firm was at first complicated by the poor performance of the contractor, but later performance improved. The third consultant also got off to a poor start, and it was not until after the firm replaced several of its staff members that the team's performance reached a satisfactory level. Technical Assistance to Formulate Forestry Policies 3.20 During negotiations of the Second Highway Project, the Government confirmed that it required assistance in formulating and implementing detailed policy, including new forest legislation and development of a forest service capable of efficiently implementing Government policies. The project included financing of two experts over eight months to provide this assistance. Terms of reference for the experts were agreed at negotiations, and the Government provided an assurance that it would give prompt consideration to the experts' recommendations. In a letter dated April 1, 1976, the Bank sent the Government updated terms of reference and a list of possible consultants to assist the Ministry of Agriculture in defining forestry policy. The Government finally selected an expert but took so much time to prepare his contract that he was no longer available. 3.21 The technical assistance to establish forestry policy was never used despite repeated efforts by the Bank to persuade the Government to implement this project item. However, various aspects of forestry policy have been studied over the past several years by the UNDP-FAO, by French bilateral assistance and by the first phase study of forestry roads financed under the project (see para. 3.22). In 1979, the Canadian International Development Agency (CIDA) started to implement a broad based forestry study. As a first step, CIDA provided technical assistance to strengthen the Forestry Division in the Ministry of Agriculture, and will be carrying out a country- wide inventory of forest resources. In view of this development, there is no reason to press for the execution of the forestry policy component. Feasibility Study of Forestry Roads 3.22 In order to select the forestry evacuation roads for the feasibil- ity study included in the project, the Government asked a French forestry expert to make an overall identification of major constraints in the develop- ment of timber production. In his report of late 1977, this expert confirmed that the main bottleneck was the unsatisfactory transport network which impeded evacuation of logs to the seaports notably the Abong Mbang-Yaounde (236 km) and Sangmelima-Kribi (288 km) roads. A feasibility study of these two roads was then carried out by French consultants who submitted their final report in December 1978. Both roads were found economically justified, but the former had a substantially higher rate of return than the latter, as it served a large agricultural population, yielding additional benefits which were not included In the consultants' calculations as they had focussed on forestry exploitation. Highway Maintenance Study 3.23 After a delay of about one year over the original schedule, a con- sulting firm was selected by the Government, with Bank approval, to undertake - 20 - the highway maintenance study and submitted a draft contract in July 1975. This contract, with minor changes, was approved by the Government in October 1975, and signed on January 22, 1976. The consultants issued their Prelimi- nary Report at the end of May 1976, after a one-month delay. The consultants made a slow start as it was their first operation in Cameroon and only one of the six professionals in the field spoke French. In addition, the consultants experienced some difficulty in obtaining the necessary information from Government departments, partly because of the language problem. The Bank was concerned about the language problem and specified in the consultants' terms of reference the need for French capability. The consultants under- estimated this problem and indicated in their proposal that they had the requisite language capability which, however, in the field turned out to be insufficient. 3.24 The consultants issued their First Phase Report in January 1977, after a three-month delay. It was based on insufficient field data and proposed an overly ambitious road maintenance program. An extensive revision of the report was therefore needed before the Government could, in agreement with the Bank, decide on the scope and main features of the road maintenance program. The consultants sent in a new team who revised the report between June and September 1977. Although improved, the revised report still had several deficiencies. In October 1977, a Bank mission defined with the Government the framework of a possible maintenance program. In January 1978, the consultants, again with a new team, started the Second Phase of the study consisting of a more detailed analysis of the program worked out under the First Phase. In May 1978, they issued their Final Report which again reflected insufficient field data. The highway maintenance study cost sub- stantially more than the appraisal estimate because the consultants spent considerably more time in the field than originally agreed in their contract; however, despite the Bank's reservations, the Government approved and paid for the overrun. Technical Assistance for Improving Transport Planning and Coordination 3.25 Technical assistance, of which 60 man-months were provided under the Second Project to assist the Ministry of Transport in setting up its operations, was to provide on-the-job training of local counterparts. The Government agreed to the principal objectives of the services to be provided during negotiations. 3.26 The Government was very slow in implementing this part of the Second Highway Project, and when it finally did so, the assistance was rendered to the Department of Highways, where the need was greater rather than to the Ministry of Transport. However, this was remedied under the Technical Assis- tance Project and the Third Highway Project which provided technical assis- tance and four fellowships to strengthen the transport planning unit in the Ministry of Transport. 3.27 The technical assistance to the Department of Highways included the provision of three experts for two years each (later extended): one road maintenance engineer, one transport economist, and one road engineer. The staff was provided by French consultants. The road maintenance engineer assisted the Director of Road Maintenance with the preparation of the road maintenance - 21 - program and advised him on maintenance matters. He helped supervise the maintenance study and was instrumental in helping to expedite the preparation of the Fourth Highway Project. 3.28 The transport economist advised the Director of Highways on economic matters, introduced the concept of economic justification for road projects in the Department of Higbways (DH), and organized economic seminars at the Ecole Nationale de Technologie and the Ministry of Transport. His effort was hampered by the unavailability of counterparts in spite of numerous requests. The road engineer assisted the DH in managing the road reconstruction program carried out under the Second and Third Highway Projects and other Government projects. 3.29 Technical assistance to the Ministry of Transport is now provided under the Technical Assistance Project and the Third Highway Project. The two experts included in the projects were engaged from a French consulting firm for a period of three years. One has assisted for two years the Transport Planning and Coordination Unit (TPCU) which has now become the Studies and Planning Division under the Technical Assistance Project. The second expert was to assist the TPCU in improving basic data collection and analysis under the Third Highway Project. However, the Government decided, with the Bank's concurrence, to have him carry out a country-wide origin-destination survey, and his stay was reduced to 26 months. Unfortunately, no local funds have yet been provided to finance the consultant's contract, although the field work for the survey started a!3 expected in March 1979 and should be completed in March 1980. The Bank has requested the Government to clarify the situation. The Government has not yet taken any action to award the fellowships under the project despite reminders from the Bank. Disbursements 3.30 Except for the initial delays in getting the Second Highway Project underway, the disbursements approximately followed the appraisal estimate (Table 3). However, this reasonably good performance is partly accounted for by the distortion caused by rapid cost increases; if these had not occurred, disbursements would have been at a much slower rate than estimated. No disbursement schedule was prepared for the supplementary credit. The total lending for the Second Project of US$63 million was fully disbursed by the revised Closing Date of December 31, 1979. 3.31 The disbursement schedule for the Third Project (Table 4) shows a short delay in getting disbursements underway because of a delay in effective- ness. However, disbursements soon caught up with the appraisal estimates. The small balance of US$0.7 million still undisbursed is being held for the technical assistance component now underway. The Closing Date is June 30, 1982, which provides ample time to complete the work. Loan/Credit Covenants 3.32 The Government has complied with all of the covenants in the loan and credit agreements involving the reconstruction works, except the design standards of the bridge mentioned in para. 3.17. It also complied, after some - 22 - delay, with the requirements regarding the establishment of a highway mainte- nance program which is now being implemented under the Fourth Highway Project. While the Government did not carry out the study to formulate forestry poli- cies, some policy aspects have been studied (para. 3.21). The main deficiency on the part of the Government involves the slow progress in strengthening the planning capability of the Ministry of Transport. While some progress is being made, it is unlikely that the results will match expectations. The Bank should be prepared to take a long term approach and be satisfied with less than full compliance by the time the loan under the Third Project is fully disbursed. IV. INSTITUTIONAL DEVELOPMENT 1/ 4.01 The Division of New Works in the Department of Highways (DH) of the Ministry of Equipment and Housing was assisted by consulting firms in preparing and executing the Second and Third Highway Projects. While some progress was made in strengthening this unit during project implementation, expatriate assistance is still required for any but small projects. The Division of Maintenance in the DH is being assisted under the Fourth Highway Project currently under execution. Efforts were started under the Second and Third Projects to assist the DH in establishing the basic principles of road planning. This work is being continued under the Fourth Project. 4.02 The Ministry of Transport (MOT), created in 1970, is responsible for transport sector management. However, the Ministry has neither the qualified staff nor the authority to perform its functions adequately. The Ministry of Economic Affairs and Planning (MINEP) has carried out some trans- port planning in the framework of overall development planning, but it has limited resources. These are sufficient when investment decisions consist mainly of ranking high-priority projects on the principal transport routes, but are inadequate for the more sophisticated investment choices between competing corridors and between road and rail service in the same corridor. 4.03 The Bank has had a continuing dialogue with the Government on the need for strengthening transport sector management. At first, attempts to reinforce the organization and machinery for transport planning and policy- making met with limited success. Recent developments imply some change in the Government's attitude. A Transport Planning and Coordination Unit (TPCU) was created within MOT, but it has had little impact. The TPCU was superceded by a Studies and Planning Division (SPD). The SPD was staffed by a transport economist who was recruited for three years under the Technical Assistance Project to stimulate and coordinate the work of the TPCU. The DH recently established a Road Planning Unit staffed by a Cameroonian engineer/economist who has been trained abroad. He will be assisted by an expatriate transport 1/ Sources: Staff Appraisal Report for the Fourth Highway Project, No. 2225-CM and the Transport Sector Memorandum of June 6, 1980. - 23 - economist provided under the Fourth Highway Project. Furthermore, the Govern- ment has requested Bank assistance for the carrying out of an overall trans- port study, and the Bank is considering this request in the framework of the proposed Fifth Highway Project. 4.04 So far, however, the Government has been unable to develop a systematic, long-term strategy for transport development and has taken a project-by-project approach to investment. The result has been an ambitious road construction program to the detriment of road maintenance; this is now being corrected under the Fourth Highway Project. 4.05 Overall, progress in developing transport institutions has been slow compared to the considerable progress made in upgrading the land trans- port system over the past decade. The Bank's objectives continue to be two-fold. The first objective is to develop further the transport planning capacity of the Government. In the road subsector, a dialogue has started at the road maintenance and rehabilitation level where the DH has to provide to the Bank each year under the Fourth Highway Project: (a) the proposed annual work program of the rehabilitation brigades, according to agreed economic criteria; and (b) an annual program of periodic maintenance on at least 300 km of paved roads. The next step, which is being started under the Fourth Highway Project, consists of extending the planning process to road investments, in order to allow discussions on the overall road plan and eventually prepare for sector lending. The second objective is to strengthen transport sector management, in particular to attain a more efficient utilization of existing infrastructure, develop coordination between transport modes, and improve implementation. The Bank will pursue this task mainly through training and technical assistance. A critical test will be the success with which the DH implements the road maintenance and rehabilitation program under the Fourth Highway Project. The Government recently selected a consultant to assist it in implementing this project. 4.06 The MINEP was designated in the Loan/Credit documents as the rep- resentative of the Borrower, and the channel of communications between the Bank and the Government. This arrangement has not proved fully satisfactory in practice especially regarding communications of a technical nature which need to be acted upon by the executing departments such as the DH and MOT. However, the Bank's supervision missions have worked directly with these departments so as to involve them more directly in project implementation. To further improve coordination, it was agreed during the preparation of Highways IV, that the Government would appoint a project coordinator to directly oversee the execution of the project. - 24 - V. ECONOMIC REEVALUATION The Garoua-Figuil-Mora Road Development Benefits 5.01 The reconstruction of the Garoua-Mora road under the Second and Third Highway Projects completed the paved road link from the railhead at Ngaoundere to the Chad border which was started under the First Highway Project with the reconstruction of the Ngaoundere-Garoua section. As work progressed on the Garoua-Mora road during the late 1970s, it began to stimulate economic activity in northern Cameroon which has a population of 2.5 million. The road particularly benefited the marketing of cotton. However, the main economic development benefits from the road will be felt during the 1980s as complementary investments in secondary and feeder roads extend the road's zone of influence, and as on-going and planned investments in agriculture and industry increase production, income and employment in the area. 5.02 The Bank Group has invested in integrated rural development with the Semry I and II rice projects. The proposed Northern Cameroon Rural Development Project will increase production of main cash crops, particularly, cotton, maize, sorghum and peanuts. Marketing of these crops will be facili- tated by the Garoua-Mora road and the rehabilitation of about 800 km of secondary roads. 5.03 The completion of the trunk road serving northern Cameroon also benefited local industries including cotton textile factories, breweries, oil mills and a cement plant at Figuil. In future, more industry is likely to be attracted to northern Cameroon. In addition to good transport infrastruc- ture, the new Lagdo hydro-electric plant will supply north Cameroon with sufficient electricity. This 56 MW plant is scheduled for completion by 1983. 5.04 The completion of the Transcameroon rail and road link also benefits transit trade with Chad. Most of Chad's foreign trade now goes through the port of Douala via the Transcameroon route instead of the alternate route through Bangui and river-rail transport to Pointe-Noire because it is much faster and more reliable; however, the current political difficulties in Chad have temporarily reduced the production of cotton for export. Traffic 5.05 Traffic on the Garoua-Mora road increased far beyond the appraisal estimates during the 1972-78 period. On the Garoua-Figuil section, traffic more than doubled from 1972 to 1978. In 1978, average daily traffic (ADT) was 655 vehicles compared to 305 in 1972, an increase which corresponds to an annual average growth of 13.6%. On the Figuil-Mora section, ADT increased from 127 vehicles in 1972 to 346 in 1978, implying an average growth of 18% p.a. Heavy vehicle traffic increased at a higher rate than overall traffic. In 1978, heavy vehicle traffic on the Garoua-Figuil section constituted 33% of total traffic compared to 26% in 1972. The rapid increase in truck trailers - 25 - reflects the advantage in using heavy trucks for long distance transport. Table 5 gives traffic on all project roads. The commensurate growth in vehicle registration and consumption of vehicle fuel are shown in Tables 7 and 8. 5.06 In projecting traffic for the assumed 20-year economic life of the road, an 8% traffic growth rate was assumed at reevaluation in view of the vigorous traffic growth in 1972-78 and the favorable economic outlook for the area of road influence. At appraisal, the assumed traffic growth rate was 7% for ten years and 5% for the subsequent ten years. The rate of return analysis was carried out in constant 1978 prices. Annual inflators for costs occurring in previous years are based on a construction cost index at Douala. Maintenance costs "with" and "without" the road are based on the cost estimates of the on.-going four-year maintenance program financed under the Fourth Highway Project. No salvage value of the road has been included. Vehicle operatLng costs 5.07 As a result of the increased unit savings in vehicle operating costs (VOC) during 1972-78, and the relative increase of heavy vehicles in the traffic mix, the average weighted VOC savings on the Garoua-Mora road is estimated at CFAF 48 per vehicle/km in 1978 (Table 6) compared to CFAF 22 per vehicle/km in 1972. Re-estimated Rates of Return 5.08 The overall rate of return for the Garoua-Mora road is estimated at 20% compared to 17% estimated at the 1972 appraisal. The rate of return for the Garoua-Figuil secticn is estimated at 27% compared to the estimate of 20% at the time of the appraisal of the Third Highway Project in 1977. The higher reevaluated return reflects higher traffic in the base year. The rate of return for the Figuil-Mcra section is estimated at 12.5% (Table 9). Douala-Pont du N'Kam Road and Pont du Noun-Foumban Road Development Benefits 5.09 A main function of the roads linking Douala to western Cameroon is to provide efficient transport of food to the rapidly growing industrial and commercial center of Douala. With a population of about 700,000 (1980), Douala is particularly dependent on food supplies from the rich agricultural areas around Bafoussam and Bamenda. Western Cameroon also produces export crops such as coffee, palm oil, rubber, and bananas which are mainly transpor- ted by truck to the port of Douala. The completion of the Douala-western Cameroon roads under the Second Highway Project was a factor in attracting agricultural investments and increasing agricultural products in the area of influence of the road. The Bank Group assisted the Government in increasing and diversifying agricultural production in the western highlands with a US$13 million agricultural credit (Cr. 784, April 17, 1978). This project was coordinated with a feeder road program financed under the Feeder Roads Project (Cr. 749, Ln. 1494, US$4.6 million credit, US$6.5 million loan), and with - 26 - agricultural projects financed by bilateral donors. The Bank Group also promoted rubber and palm oil exports in the area of road influence through the Second CAMDEV project (Ln. 1508, US$15 million, February 1, 1978). 5.10 The reconstruction of the Douala-Foumban road has resulted in spontaneous establishment of roadside markets for local produce where farmers can obtain much higher prices for their products than by selling to middlemen. The new road has also spurred the location of industry on the outskirts of Bonaberi. 5.11 With the planned future reconstruction of the Bamenda-Nigerian border section of the Trans-African Highway, which will link with the Douala- Foumban road at Bafoussam, regional trade between Cameroon and Nigeria will be facilitated. Moreover, the rehabilitation of the Dschang-Bafoussam road (40 km) and the Foumban-Galim-Mbouda road (100 km) to gravel standards as part of the Fourth Highway Project, will increase the zone of influence of the Douala-Foumban road. 5.12 An unforeseen, albeit temporary, benefit from the reconstruction of the Douala-Foumban road to Bafoussam has been to provide Yaounde with an alternate route via Bafia for essential imports from Douala, at such periods during the rainy season when the Douala-Yaounde road is impassable and when the railway cannot deliver cargo within the required time. This triangular routing pattern is expected to serve as an alternate route for Douala-Yaounde traffic until the proposed Douala-Yaounde highway is completed. Traffic 5.13 Traffic on the Douala-Pont du N'Kam road, grew an average 14% per year 1972-77 as the ADT increased from 1556 vehicles in 1972 to 3029 vehicles in 1977. Heavy vehicle traffic constituted 19% of the total traffic in 1972 and 23% of the total traffic in 1977. On the Pont du Noun-Foumban road, the ADT increased from 395 vehicles in 1972 to 903 vehicles in 1977, implying an average annual growth rate of 18%. Heavy vehicle traffic grew faster than light vehicle traffic; heavy vehicles composed 16% of total traffic in 1977 compared to 14% in 1972. The same assumptions made for the analysis of the Garoua-Mora road in para. 5.06 were used in analyzing the above roads. 5.14 The improvement of the Douala-Pont du N'Kam road led to a mod- erate downturn in freight traffic on the Western railway line between Douala and N'Kongsamba, from 15 million ton-km in 1972/73 to about 13 million ton-km in 1977/78. However, railway passenger traffic fell from 49 million passenger-km in 1972/73 to 22 million passenger-km in 1977/78 due to the superior service by bus and mini-bus on the highway. As the cost to the railways of carrying passengers exceeds the receipt from passenger fares, it might be more economic to phase out passenger service on the Western line and concentrate on the more lucrative freight traffic. Vehicle Operating Costs 5.15 The 1978 VOC are not directly comparable with those presented in the Appraisal Report, because of differences in the selection of representative - 27 - vehicles and different assumptions as to annual utilization. To indicate the increase in VOC in 1972-78, a pick-up truck which sold for CFAF 660,000 in 1972 had a price tag of CFAF 1,790,000 in 1978 (exclusive of taxes). Gasoline sold for CFAF 33.30/liter in 1972 compared to CFAF 56.40/liter in 1978, while diesel oil was CFAF 18.90/liter compared to CFAF 47.78/liter in 1978 (net of taxes). 5.16 Unit savings in vehicle operating costs "with the project" compared to the "without the project" scenario, increased between 1972 and 1978 reflect- ing the overall increase in vehicle operating costs. Moreover, as VOC unit savings are substantially higher for heavy vehicles than for light vehicles, the higher percentage of heavy vehicles in the traffic mix in 1978 resulted in higher average VOC savings. The weighted average unit savings on the Douala- Pont du N'Kam road increased from CFAF 7.36/vehicle km in 1972 to CFAF 16.20/ vehicle km in 1978. On the Pont du Noun-Foumban road, the weighted average unit savings increased from CFAF 13/vehicle km in 1972 to CFAF 33 in 1978. Re-estimated Rates of Return 5.17 The economic rate of return of the Douala-Pont du N'Kam road is estimated at 20% compared to 25% at appraisal. The reduction in economic return is due to the particularly high increase in construction cost of this road. In contrast, the economic rate of return of the Pont du Noun- Foumban road is re-estimated at 27% compared to 15% at appraisal. Average construction costs did not increase as much on this road as on the Douala-Pont du N'Kam road, and the more rapid rate of construction permitted earlier realization of sav.'ngs in VOC than on the latter road. 5.18 The above reevaluation applies the same methodology as used in the appraisal report which quantified savings in vehicle operating costs and savings in road maintenance costs. In evaluating a major highway like the Douala-Pont du N'Kam road, it would have been appropriate to quantify time savings for passenger traffic. No such quantification has been carried out, however, because of lack of field data. Their estimated rates of return are therefore conservative. Overall Economic Rates of Return 5.19 The overall race of return of the reduced Second Highway Project, comprising the Figuil-Mo:ra road, the Douala-N'Kam road, and the Pont du Noun-Foumban road is estimated at 18.6%. The combined rate of return of the road construction as originally conceived in the Second Highway Project is about the same as the 1973 appraisal estimate of 20% (Table 9). The road reconstruction was therefore well justified. Project risks 5.20 The reevaluation of the road construction under the Second and Third Highway Projects a3sumes that the roads will be well maintained dur- ing their economic life. The risk of neglect is minimized because of the - 28 - increased attention the Government is giving to road maintenance including the launching of a comprehensive four-year road maintenance program with financing under the Fourth Highway Project. VI. BANK PERFORMANCE 6.01 Severe world-wide inflation was by far the most serious problem to arise during the execution of the Second Highway Project. This eventually led to a doubling of the cost over the original estimate, and to long delays in the completion of the work because of the ensuing shortage of funds. The overrun necessitated first a supplementary credit and then a further lending operation, the Third Highway Project, before sufficient funds became available to complete the work. Even with these additional funds, the Government found it necessary to more than double its contribution to the project as compared to the 1973 appraisal estimate. 6.02 The Second Highway Project was appraised in January/February 1973 and presented to the Executive Directors in July 1973, a few months before the inflationary effects following the late 1973-early 1974 oil price increase took place. However, even before the oil crisis, the cost estimates had to be repeatedly adjusted upward right up to the start of negotiations. The consul- tants' preliminary estimates based on the feasibility studies were far below their final estimates based on detailed engineering. There is also some evidence that the earlier cost estimates and Bank lending allocations 1/ for the project were far too low in the light of the available cost experience on the First Highway Project which was well under execution by the end of 1972. 6.03 Frequent changes in staff assignments may have led to some lack of continuity during the critical period of 1971-73 when the Second Project was under preparation and appraisal. Six Bank engineers visited Cameroon during the period including staff from PMWA who assisted headquarters with the supervision of the First Highway Project. The reorganization of the Bank in 1972 led to major changes in staff assignments. 6.04 While it appears probable that there was an original underestimation of project cost, the largest share of the cost overrun is attributed to the rapid increase in costs which took place after appraisal and prevailed during the initial years of the project execution. A further reason for the rise in costs was the unanticipated delays in getting the work started as the Bank and the Government reviewed the implications of the bids which overran the apprai- sal estimates by about 30%. The slower than anticipated progress on construc- tion and the deferral of the start of the Garoua-Figuil section also contri- buted to the rising costs as the contracts all contained escalation clauses. 1/ The Issues Paper of March 2, 1973 noted that only US$11 million IDA was allocated for the project in the lending program. - 29 - 6.05 In retrospect, the award of the three sections of the 273 km Garoua- Mora road to one contractor may have contributed to some delay in execution and thus to the cost increase as this work took 4-1/2 years to complete. The slightly shorter 254 km Ngaoundere-Garoua road built under the First Highway Project was also divided into three sections at the time bids were called but was awarded to two contractors, and built in 3-1/2 years. However, the critical funding situation also caused delays, and some advantage accrued to the Government in being able to stagger the work on the three sections of the Garoua-Mora road, a step which was facilitated by having only one con- tractor on the job. 6.06 The delay on the part of the Bank in responding to the Government's request for additional funding is understandable in view of its policy not to finance cost overruns. While the Bank eventually did, it was prudent to wait until a firm assessment could be made of the cost situation before proceeding with supplementary financing. When this step was first considered by the Bank in August 1974, an amount of US$6.0 million seemed reasonable. This was eventually raised to US$15.0 million which still left a foreign exchange shortfall of TS$9 million to be financed by the Government in spite of the reduction in prcject scope. Once the Bank decided to proceed with the supplementary financing and the lending for the Third Project, these opera- tions were processed quickly. The Third Project was presented in a little over two months after the appraisal team reported, indicating that the Bank responded promptly to the need of the Government for additional funding. 6.07 Supervision was adequate throughout the executing period of the Second and Third Highway Projects, averaging two visits per year. In addi- tion, the Bank's officE-s in Yaounde and Abidjan were helpful in following up matters raised by the supervision missions and headquarters. The files indicate the growing concern over the slow progress in implementing the technical assistance part of the project and the efforts of Bank staff to persuade Government officials to give more attention to this aspect of the work. During 1974-75, the Government was undoubtedly preoccupied with the rising cost of the reconstruction works which formed the bulk of the project to the detriment of thE remaining components. The working relationship between the Bank and the Government was made difficult at times by the prob- lems posed by the cost overruns and the slow implementation of the technical assistance components. 6.08 There was some concern within the Bank during the preparation of the Second Highway Project as to whether the proposed study of forestry policy had been adequately discussed with the Government in the light of the UNDP studies that were already underway, and whether the feasibility studies of forestry roads were not premature in the absence of a forestry policy. While the forestry policy component of th,6 Second Project was not implemented, various aspects of policy were studied with the assistance of the Bank under the component for the forestry road feasibility study and through the assis- tance of other international agencies and donors. This work is continuing with financing from CIDA. Thus, there seems to be no reason now to press for the execution of the forestry policy component. The work done to date is expected to provide the basis of a possible future Bank wood processing project which is now under preparation by the Industrial Projects Department. - 30 - VII. CONCLUSIONS 7.01 The Second Highway Project was executed during a difficult period. Inflation created a major problem of cost overruns and delays throughout most of the executing period. There was also some overrun in the physical quantities. Currency realignments mainly due to the devaluation of the US dollar to the German Mark and the Swiss Franc were a contributing factor to the higher dollar costs. 7.02 The delay in completing the last of the reconstruction works as originally conceived has provided more than the usual time to assess the benefits of works completed earlier. The Pont du Noun-Foumban road was finished in mid 1977. The Douala-Pont du N'Kam road was completed in mid 1978, while two sections of the Garoua-Mora road were completed in mid 1977 and the third in mid 1978. As all three roads were reconstructed rather than newly constructed, traffic continued over them while they were being rebuilt. Thus, the latest traffic counts can be assumed to be reasonably reliable indicators of the demand. As the economic analysis indicated, despite the cost increase, the overall return on the reconstruction works was about as estimated at the time of appraisal. The economic benefits may well increase over time as new projects are implemented in the areas of influence of the project roads, thus leading to further traffic generation. 7.03 The economic reevaluation shows that the reconstruction works were soundly conceived, and well justified. Despite the cost overrun, the overall rate of return remained unchanged because of the corresponding rise in VOC savings and the greater than anticipated rise in traffic. The development which has taken place in the areas served by the Transcameroon route and the Douala-western Cameroon road confirms the original assessment of the high priority accorded to these two major undertakings by the Bank and the Govern- ment since the country was founded two decades ago. 7.04 At the time the project was formulated, institution building was not given the attention it is today; however, provision was included for strength- ening the agencies dealing with the transport sector. The less than hoped for progress in institution building, while a disappointment, should not be a matter of undue concern. Progress in this area must be regarded as a long term goal which will take many years to accomplish and will have to be spread over a number of lending operations. All but three small parts of the techni- cal assistance component of the project were implemented, one of which is currently underway. The forestry road studies are closely linked to the preparation of a possible future Bank forestry project (para. 6.08). 7.05 The project provided the basis for the maintenance program financed under the Fourth Highway Project, the preparation of which was financed under the Second Highway Project. While the implementation of this project, which covers the entire country, will be a demanding task, it will provide Cameroon with the capability to maintain its expanding highway system. CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN )35 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLE-ION REPORT Actual and Expected Project Implementation Percent of ------------------------------------------------------ ----------------- Dates of------------------- -------------------- Work Completed Contractor/Consultant Bid Rec.i tl/ Contract Award BeSinrlnp of Work Completion of Work by Project Components and Nationality Actual Exected Actual Expected Ac cted Actual Expected Expected Completion Date I. Reconstruction of Roade: A. Garoua-Mora i) Garoua-Figuil Germa /05/74 06/74 (1/78) 06/79 6/77 7/79) I00 i) Figuil-Mora contractor 11/05/74 06/74 06/77 6/77 B. Douala-Pont du N'Kam i) Douala-Loum Italian contractor 11/05/74 06/74 06/07/78 6/77 i1) Loum Pont du N'Kam Greek contractor 11/05/74 06/74 06/07/78 6/77 C. Pont du Noun-Foumban Second Yeman contractor 11/05/74 01/75 02/77 8/76 II. Consulting Services: A. Supervision of Construction: i) Garoua-Mora a) Garoua-Figuil French/Canadian consultant 05/13/75 06/74 06/79 6/79 b) Figuil-Mora 05/13/75 06/74 0677 6/78 ii) Douala-Pont du N'Kam 05/13/75 06/74 06/78 /77 iii) Pont du Noun-Foumban German consultant 05/19/75 06/74 02/77 12/76 Soils Work i(b), ii & iii French lahoratory 01/22/76 06/74 06/78 6/78 Soils Work i(a) 01/22/76 06/74 06/79 6/79 B. Technical Assistance to Formulate Forestry Policy French consultant C. Feasibility Study of Forestry Feeder Roads 07/14/78 12/78 10/78 D. Road Maintenance Study American consultant 01/22/76 06/78 04/77 E. Technical Assistance and French consultant 06/23/77 03/80 3/80 Transport Studies UFNDP 12/77 12/77 Fe. Strengthening of Transport Planning A. Technical Assistance French consultant end 78 nd 81 B. Fellowships md7 d7 Note. Garoua-Figuil road was included in original Second Highway Project, later deleted when sipplementary credit made and formed the main component of Third Highway Project. Dates in-- brackets were revised at time of appraisal of Third Highway Project.by l/ Hot available.- CAMERCOO SEC(ID AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CH AND LOAN 1515 CM PROJECT COMPLETION REPORT Actual and Appraisal Estimates of Project Costs 1 CFAF Millions and US$ Millions Appratsal Res praisal Actual Coat Estimate of Cost - Estimate of Cost Actual Coat as a Proportion of Total US$ Contract Amount Local Foreign Total US$ Local Foreign Total US$ Appraisal Reappraisal Contract Local Foreign quivalent CFAF US$ CFAF US$ Equivalent CFAF US$ Equivalent Estimate of Costs (M) Estimate of Costs () Aount () Project Components CFAF US$ (1) (2) (3) (4) (1)-(3)x100 (1)-(4)x00 (1):(2)x10D I. Reconstruction of Roads: A. Garoua-Mora il Garoua-Figuil 19.6 27.8 2092 8.5 22.9 it) Figuil-Mora 18.8 30.8 3823 16.6 31.8 Subtoal 38.4 58.6 25.1 18.8 28.0 54.7 209 107 234 B. Douala-Pont du N'am i) Douala-Loum 24.1 38.7 4362 18.9 39.4 ii) Loum-Pont du N'Kam 17.6 30.1 3231 14.0 30.0 Suht.t.A1 41.7 68.8 7593 32.9 20.2 30.0 69.4 229 99 209 C. Pont du Noun-Foumban 5.9 10.7 1258 5.5 4.L 6.5 10.3 165 104 86.0 138.1 43. 64.5 134.4 214 102 194 11. Consulting Services: A. Supervision of Construction ) Garoua-Mora a) Garoua-Figuil 1.2 1.8 284 1.2 1.8 100 150 b) Figuil-Mora 1.5 2.2 549 2.4 2.3 96 92 , ii) Douala-Pont du N'Kam 1.9 2.7 392 1.7 2.8 96 160 * iii) Pont du Noun-Y9mb 0.4 0.6 95 0.4 0.7 86 150 Soils Work i(b), it & i1 0.0 1.5 312 1.3 2.1 90 115 Soils Work i(a) 4 85 0.3 133 Subtotal 5.0 9.2 1717 7.3 3.5 4.6 9.7 200 95 126 B. Technical Assistance to Formulate Forestry Policy .07! 0.1 C. Feasibility Study of Forestry Feeder Roads 0.1 0.1 18 0.1 0.3 0.4 1.0 25 10 100 D. Road Maintenance Study 0.7 1.3 214 0.9 0.3 0.4 1.5 325 87 144 E. Technical Assistance and Transport Studies 1.0 1.0 200 0.9 0.37! 0.5 0.6 200 167 111 III. Strengthening of Transport Planning A. Technical Assistance 0.6 0.8 135 0.5 0.4 200 160 B. Fellowships 6/ 0.1 0.1 0.1 100 93.5 150.6 47.95 70.5 147.7 214 102 1/ Costs include local taxes. 2/ At the exchange rate of US$1 = CFAF 220 3/ At the exchange rate of US$1 = CFAF 230 4/ At the exchange rate of US$1 = CFAF 245; breakdown into foreign and local costs not available. 5/ Work deleted 6/ Work not yet carried out NOTE: Contingency allowances have been distributed over all project components for the appraisal and reapp.aisal estimates. SOURCES: Appraisal Report for Second Highway Project, Proposal for Supplementary Credit, President's Report for Third Highway Project and Supervision,Reports. - 33 - TABLE 3 CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLETION REPORT Schedule of Disbursements - Second Highway Project (February 1980) ACCUMULATED DISBURSEMENTS IBRD US$'000 EQUIVALENT FISCAL ACTUAL DISBURSEMENTS YEAR AND ACTUAL TOTAL APPRAISAL AS A PERCENTAGE OF SEMESTER DISBURSEMENTS ESTIMATE APPRAISAL 1974 1st 0 200 0 2nd 0 500 0 1975 1st ) 3,000 0 2nd 7,030 8,500 83 1976 1st 10,983 15,500 71 2nd 18,269 23,500 78 1977 1st 24,910 31,500 79 2nd 35,210 39,500 91 1978 1st 47,679 44,000 108 2nd 58,734 48,000 122 1979 1st 62,641 48,000 131 2nd - 48,000 131 1980 1st 63,000(1) 48,000 131 Closing Date: 12/31/79 (1) Including supplementary financing of US $15.0 million - 34 - Table 4 CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM P"ROJECT CONPLETION REPORT Schedule of isbursements - Third Highway Project (February 1979) Accumulated Disbursements Actual Disbursemen US$'000 Equivalent as a Percentage of Appraisal (up to IBRD Actual latest semester) Fiscal Disbursements Appraisal Estimate Year and Actual Total Appraisal through 12/79 & (for future semes- Semester Disbursements Estimate Estimates to 1982 ter) (1;2)xlO0 or (4-2)x100 1978 2nd 0 5,200 0 1979 1st 5,535 8,700 64 2nd 12,266 12,700 97 1980 1st 15,730 - 102 2nd 15,796 - - 100 1981 1st - 16,200 16,200 100 2nd - 16,500 16,300 99 1982 1st - 16,500 16,500 100 2nd - 16,500 16,500 100 Closing Date 06/30/82 06/30/82 CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLETION REPORT Traffic on Project Roads, 1972, 1977 & 1978 Average Daily Traffic Km Road Section 1972 1977 1978 Light Heavy Total Light Heavy Total Light Heavy Total Length A. Douala-Pont du N'Kam Vehicle Vehicle Vehicle Vehicle Vehicle Vehicle Vehicle Vehicle Vehicle 8.2 Douala-Bonaberl/ 3428 739 4167 1679 660 2339 10.- Bonaberi-Bekoko 1466 374 1840 - - - 78.6 Bekoko-Loum 1044 252 1296 - - - 21.1 Loum-Manjo 1028 276 1296 2865 934 3799 18.7 Manjo-Nkonrsamba 1674 351 2025 - - - 12.7 Nkongsamba-Bare 1/ 1534 305 1839 3674 628 4302 24.3 Bare-Pont du N'Kam 886 228 1114 3263 582 3845 173.6 Weighted Average Traffic 1260 296 1556 2319 710 3029 2481 767 3248-2 50.0 B. Pont du Noun-Foumban 321 67 388 761 142 903 844 298 1142 C. Garoua-Figuil 2/ 18.6 Garoua-Pitoa 562 86 648 621 279 900 668 301 969- 75.9 Pitoa-Figuil 143 76 219 242 156 398 385 192 577 94.5 Weighted Average Traffic 226 78 304 318 180 498 441 214 655 D. Figuil-Mora 97.0 Figuil-Salak 70 53 123 177 118 295 238 153 391 2/ 17.3 Salak-Maroua 187 70 257 332 149 481 355 161 516 56.0 Maroua-Mora 74 21 95 125 61 186 149 68 217 170.3 Weighted Average Traffic 83 44 127 176 102 278 220 126 346 Sources: Consultants' reports, 1972, 1977 and 1978. The Ministry of Equipment conducts traffic counts in January, April, July and October. Light vehicles comprise: private cars, minibuses, pick-up trucks; heavy vehicles comprise: trucks, buses, truck-trailers and tractor trailers. 1/ Douala-Bonaberi includes both the rehabilitation of the old alignment and the new by-ib"s, the same applies to Nkongsamba- tiare. 2! Fstimnated on 89" growth of heavy vehicle traffic and 7% growth of light vehicle traffic compared to 1977. CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLETION REPORT Vehicle Operating Costs (exclusive of taxes) as of December 1978 on Paved and Unpaved Roads According to Surface Condition CFAF per Vehicle/Km Paved Road Unpaved Road Type of Vehcile Good Fair Poor Good Fair Poor Light Vehicles Passenger cars 20 22 25 23 27 36 (Toyota Corolla) Mini Bus 47 52 57 54 64 83 (Toyota Dyna) Heavy Vehicles 13 ton Trucks 145 154 178 160 212 260 (Mercedes 1924) 30 ton Truck Trailer 275 292 340 303 410 482 (Mercedes 2624) Sources Consultant: Route, Douala-Edea-Yaounde, Etude Economique (1979) and estimates. Consultant: L'Entretien Routier (August 1977). - 37 - TABLE 7 CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLETION REPORT Annual Motor Vehicle Registrations Passenger Trucks and Special Year Cars Vans Tractor-Trailers Buses Purpose Total 1972 2,200 1,100 700 400 200 4,600 1973 5,500 1,700 700 400 200 8,500 1974 7,800 2,700 2,400 500 200 13,600 1975 8,600 2,800 1,600 900 300 14,200 1976 6,800 2,200 1,500 800 400 11,800 1977 7,300 2,400 1,800 1,000 500 13,000 1978 9,100 2,900 2,300 1,000 500 15,800 Estimated Size of Fleet (1978) Number 49,000 15,000 11,000 5,000 3,000 83,000 Source: Ministry of Transport, (1979) and mission estimate. Note: Average annual growth rate in total vehicle registration was 23% during the 1972-78 period. - 38 - TABLE 8 CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLETION REPORT Growth of Motor Vehicle Fuel Consumption in m3 Fiscal Years Gasoline Diesel Total 1971-1972 124,581 118,464 243,045 1972-1973 133,111 136,945 270,056 1973-1974 140,839 156,175 297,014 1974-1975 139,019 156,000 295,091 1975-1976 145,351 167,780 313,131 1976-1977 146,000 168,000 314,000 1977-1978 217,000 266,000 483,000 Sources: Le Groupement Professional des Petroles, Douala and Ministry of Economic Affairs and Plannine. Note: Average annual growth rate of total fuel consumption 1971/72 - 1977/78 was 12.2%. CAMEROON SECOND AND THIRD HIGHWAY PROJECTS - LOAN 935 CM/CREDIT 429 CM AND LOAN 1515 CM PROJECT COMPLETION REPORT Economic Re-evaluation Million CFAF Douala-Pont du N'Kam Pont du Noun-Foumban Figuil-Mora Garoua-Figuil (Third Highway Project) Cost of Savings in Cost of Savings in Cost of Savings in Cost of Savings in Years Constructior V.O.C. and Construction V.0.C. and Construction V.O.C. and Construction V.O.C. and and Road and Road and Road and Road MaitennceMaitennce Maintenance Maintenance maintenance Maintenance Maintenance Maintenance 1 8910 0 1559 0 3901 0 2184 0 2 2580 0 451 221 1130 0 3691 542 3 6977 1555 1221 566 60303 17 1188 4 4191 3334 9 697 1835 1032 17 1218 5 32 3633 9 752 31 1163 17 1381 6 32 3919 9 811 31 1251 17 1493 7 32 4230 9 875 31 1347 17 1892 8 32 5228 9 1101 31 1452 17 1733 9 32 4930 9 1020 31 2078 380 1868 10 32 5320 200 1100 31 1685 17 2016 11 694 5743 9 1188 681 1816 17 2175 12 32 6862 9 1282 31 1957 17 2634 13 32 6697 9 1540 31 2111 17 2532 14 32 7227 9 1494 31 2789 17 2733 15 32 7804 9 1613 31 2454 17 2950 16 32 9089 9 1741 31 2647 380 3184 17 32 9097 200 1880 31 2854 17 3723 18 694 9824 9 2186 681 3079 17 3710 19 32 10607 9 2191 31 3836 17 4003 20 32 12113 9 2365 31 3583 17 4323 21 32 12368 9 2555 31 3866 17 4666 22 32 13355 9 2758 31 4172 17 5323 23 32 14418 9 3134 31 4501 0 0 24 32 16230 0 0 31 5371 0 0 Economic rates of return: PCR Appraisal Douala-Pont du N'Kam 2.0% 25.0% Pont du Noun-Foumban 27.0% 15.0% See notes on base inputs and sources on following page. Figuil-Mora 12.5% 1/ Second Highway Project 18.6% 20.0% Garoua-Figuil 27.0% 20.0% Garoua-Mora 20.0% 17.0% Second & Third Highway 19.8% 2/ Project 1/ This section was assessed as part of the Garoua-Morona-Mora Road by this appraisal team. 2/ Not available. - 40 - Notes for Table 9 Notes: Costs: a) Construction costs are attributed annually according to the rate of disbursement. Economic costs are expressed in 1978 prices. Inflators: 1975: 1.31; 1976: 1.21; 1977: 1.11; 1978: 1.09. b) Maintenance costs: routine maintenance at CFAF 182,600/km/ year. Periodic maintenance every 7th year at CFAF 4 million/ km (double seal coat). Source: Fourth Highway Project (Report no. 2225-CM, May 18, 1979). Benefits: a) Vehicle operating costs savings are based on 1978 vehicle operating costs "with" and "without" the project, weighted according to traffic composition. Weighted average savings per vehicle/km: CFAF Douala-Pont du N'Kam road 16.20 Pont du Noun-Foumban road 33.- Figuil-Mora 48.- Garoua-Figuil 48.- Fifty percent of V.0.C. savings are estimated for the year prior to completion. Traffic is projected at 8%. b) Maintenance cost savings are based on the annual and periodic unit costs of maintaining the road in its previous state. Cost of routine maintenance of gravel roads is estimated at CFAF 169,400/km for Pont du Noun-Foumban and CFAF 286,000/km for the north (grading/compacting). Cost of regravelling and periodic maintenance every 5th year estimated at CFAF 3.3 million/km. Periodic resurfacing of paved roads (Douala- Kekem) in the "without the project" case every 3rd year based on technical analysis by consultant ("Etude Economique: Route Douala-Edea-Younde") for the similar case Douala-Edea. IBRD 10404 LLAKE CHAD JUNE 973 Mokor UNITED REPUBLIC OF CAMEROON ' SECOND HIGHWAY PROJECT FART PROJECT ROADS MAIDUGURI Foumu PROJECT ROADS TO BE RECONSTRUCTED- ROADS BEING CONSTRUCTED UNDER PREVIOUS , PROJECT 0 O EklSTING ROADS 'waz PAVED GRAVEL 1 , 5 ------ EARTH e. ROAD UNDER CONSTRUCTION (KPW AND CAMEROON FINANCEDI MAMKOL RA IROADS EXISTING ++ +++++-+++ UNDER CONSTRIJCTION (FAC, FED, E18 AND USAID qo IFNANCED) 9- Mogad e K Åelé SEASONAL RIVERS-NAVIGABLE 0 INTERNATIONAI. AIRPORTS PORTS i INTERNATIONAI BOUNDARIES GAROUAS Ya [.ige Riu ind 1B"t S00Moundo .v I0 TE E RS ) n 1. Onyo r. MorEop Nkombe - Me9gong Wum Tb.tA F R l C A N Kumbo R E P U B Li IC Mamfe\ BAMENDA "bou FG M' ont du0Noun DSCH NG o u CAMEROON Kéke M Del,g .nt du Nka d Den K GSAMBA Kiumnbo oum <b1 FABerloun YABA I Nongo bEboko BATOURI BUJEATk . ABONG MBANG Eý3ÉKA YAOUNDF Mbolmoyo k C» Lom.é0 KRIfli EBOLOWA o SANGMELIMA REPUBLIC OF . ! ot GABONCONGO EQUATORIAL GUINEA