Malawi - Fifth Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY 'n- Report No. 4603-MAI STAFF APPRAISAL REPORT MALAWI FIFTH HIGHWAY PROJECT November 14, 1983 Eastern Africa Regional Office Transportation II Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency lJnits Malawi Kwacha (MK) and Tambala US$1.00 MK 1.25 MK 1.00 100 taimbalas SDR 1.00 MK 1.32105 WEIGHIS AND MEASIJRES 1 foot (ft) 0.305 meters (m) 1 mile (mi) 1.609 kilometers (km) 1 square mile (mi2) 2.590 square kilometers (km2) 1 ton (t) 0.907 rnetric tons (m ton) GLOSSARY OF ABBREVIATIONS AfDB (AfDF) African Development Bank (Fund) DBST = Double Bitumen Surface Treatment DRIMP District Roads Improvement and Maintenance Program EDF European Development Fund EEC European Economic Community EPD = Econom--c Planning DiLvision (Off]ce of the President and Cabinet) HDM = Highway Design and Maintenance Standards Model KfW Kreditanstalt fur Wiederaufbau Mi = Ministry of Iransport and Communications MWS Ministry of Works and Suppl.ies NRSC = National Road Safety' Council ODA Overseas Development-. Administration OPC = Office of the President and Cabinet PVHO Plant and Vehicle lILLre Organization SBST Single Bitumen Surface Treatment TANZAM lanzani a-Zambia Highway IAZARA = Tanzania-Zambia RailLway TPU Iranspcirt Planning UJnit of OPC IRRL = Transportation and Road Research Laboratory UNCDF United Nations Capital Development Fund UNDP = United Nations Deve:Lopment Programme USAID = United States Agency for International Development voc = vehicle operat ing cost vpd = vehicles per day GOVERNMENT OF MAL-AWI FISCAL YEAR April 1 - March 31  FOR OFFICIAL USE ONLY MALAWI FIFTH HIGHWAY PROJECT STAFF APPRAISAL REPORT Table of Contents I. THE TRANSPORT SECTOR Page No. A. Effects on Geography and Economic Structure on Transport .....1 B. The Transport System ......................................... 2 C. Transport Policy and Coordination ............................ 4 D. Previous Bank Group Involvement in the Sector ................ 6 II. THE HIGHWAY SUBSECTOR A. The Network ............................. 9 B. Road Use ............................. 10 C. Administration and Training ................................. 16 D. PLanning and Financing ...................................... 18 E. Engineering ................................................. 20 F. Construction ................................................ 20 G. Maintenance ................................................. 21 III. THE PROJECT A. Objectives .................................................. 24 B. Project Scope ............................................... 24 C. Detailed Project Description ................................ 25 D. Financing ................................................... 31 E. Implementation and Procurement .............................. 34 F. Disbursements ............................................... 35 G. Accounting, Auditing and Reporting Requirements ............. 38 H. Environmental Impact ...................... 38 IV. ECONOMIC EVALUATION A. Economic EvaLuation of Project Components ................... 39 B. Risks ..... 46 V. AGREEMENTS REACHED AND RECOMMENDATION . . 48 Annexes 1. Transport-related IDA Projects in Malawi . . 50 2. Road Design Standards Adopted by the MWS . . 56 This report is based on the findings of two Bank missions which visited Malawi in February-March and June-July 1983, comprising Messrs. K. Clare (Economist), S. Sigfusson (Engineer) and F. Sharratt (Consultant Engineer) on the first mission and Mr. P. Jensen (Engineer) on the second mission. 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.  -il.1- Annexes Cont'd Pages 3. Terms of Reference for the Economic Analysis and Selection Criteria for Improvement of District Roads under DRIMP ........ 57 4. Economic Evaluation of Luwawa Turnoff-Charnphoyo Road ............. 61 5. Traffic and Traffic Growth Rates for Paved Roads ................. 62 6. Average Traffic Levels for Unpaved Roads . . 63 7. Vehicle Operattng Costs ........................................... 64 8. Related Documents and Data Available in Project File ............. 65 Charts 1. Organization of the Ministry of Works and Supplies .............. 66 2. Project Implementation Scheciule ................................. 67 Maps IBRD 17177 Project Roads ...................... 68 IBRD 17178 Transportation Network ............................... 69  MALAWI FIFTH HIGHWAY PROJECT STAFF APPRAISAL REPORT I. THE TRANSPORI SECTOR A. Effects of Geography and Economic Structure on Transport 1.01 Malawi is a long, narrow, landlocked country situated in the Great African Rift Valley, with a land area of about 94,300 km2 and a lake area of 24,200 km2 (see Map IBRD 17178). A major escarpment runs the length of the country, separating the Lake Malawi plain from the plateau to the west; altitudes range from about 60 m above sea level in the Shire Valley in the south to over 2,500 m in the northern plateau. Rainfall averages between 750 mm and 1,600 mm, but is much heavier in the high plateau areas of Mulanje, Zomba, Viphya and Nyika (4%' of land area). The high rainfall and long rainy season in the mountainous areas, combined with steep slopes and scarcity of naturally available gravels for road construction and maintenance, render gravel roads uneconomic in those areas. 1.02 Gross domestic product increased in real terms at the relatively rapid rate of 5.5%O per year over the period 1964-82. Even so, per capita GNP is an estimated US$210, and Malawi is classified by the United Nations as one of the least developed countries in the world. 1.03 With a population of about 6.0 million, growing at an average rate of 2.9%O p.a., Malawi has one of the highest population densities per sq km of agricultural land (140 per km2) in Africa. However, development in the country's three administrative regions has been unbalanced. Until independence in 1964, most development was concentrated in the Southern Region, which had the only rail link, most of the all-weather roads, the administrative capital of Zomba and the main commercial center of Blantyre. This fundamental imbalance, aggravated by the still inadequate road access to the north, has caused the Northern Region to remain isolated and undeveloped, and it is still sparsely populated. At present, almost three quarters of the total population lives in the southern half of the country, and one of Government's main socioeconomic objectives, as set out in the Statement of Development Policies (1971), is the promotion of more balanced regional development. To this end, it has moved the administrative capital some 250 km north from Zomba to Lilongwe, and has initiated several agricultural development projects in the northern half of the country, including major projects at Lilongwe, Salima, Karonga and Viphya, and smaller projects around Kasungu and Mzimba. The road network is also gradually being upgraded in the Central and Northern Regions, and further development in these areas is underway and planned under the National Rural Development Program.  - 2 - 1.04 Sin-e almost 90% of the population lives in rural areas, and agrxculture colitributes over 90% of Malawi's exports, rural development is a primary economic and social objective. In addition to raising agricultural productivity, it is seen as an effective vehicle for the Government's policy of redistributing incomes in favor of the rural poor. Although the most rapid growth in agricultural output in the past has been achieved by private estates and discrete regional projects, since the start of its National Rural Development Program irn the mid-1970s, Government has increasingly supported agricultural development through minimum package rural development projects with rather wide geographic coverage. The Bank Group has given considerable support to this Program, and is currently preparing for its fourth phase. 1.05 About 50% of Malawi's total land area is classified as forest land, about 20%0 of which consists of forest reserves, administered by the Ministry of Forestry and Natural Resources as protected government land. Malawi's Forestry sector produces a limited number of forestry products: sawn timber, veneer, plywood, poles and fuelwood. Annual production of industrial roundwood from both state and private forests is about 85,000 m3. The wood is locally processed and largely absorbed by the domestic market, as exports of forest products are negligible and some 20% of the softwood requirements are imported. The Government is expanding the wood processing industry and exploring the potential export market for wood products in southern Africa. B. The Transport System 1.06 Malawi's transport system consists of about 13,280 km of roads, 678 km of railways, 4 lake harbors and a number of landing points served by a lake service, and 4 airfields served by domestic services. The principal features of this system are: a main road network of about 2,900 k6, which is fairly well developed south of Lilongwe but less developed in the northern half of the country; the rail system which lies entirely in the southern half of the country and is primarily used for Malawi's exports and imports and a small amount of Zambian transit traffic; lake transport which mainly serves the north and compensates to some extent for the limited land transport links; and air transport which handles mainly passenger traffic. Roads dominate internal transport while the railway carries most export-import freight. The main outlet to the sea for Malawi's external trade historically has been by two railway lines through Mozambique to the ports of Beira and Nacala on the Indian Ocean. In the past two years, however, problems on the Mozambique lines have led to considerable diversion, at significantly increased cost, of export/import traffic to alternative routes, particularly through Zambia, Zimbabwe and the Republic of South Africa. Highways 1.07 The highway network is discussed in Chapter II. Railways 1.08 The main railway line extends from the southern border northward through Blantyre to Lake Malawi and then westward through Lilongwe to the Zambian border. At the southern border this line is linked to the  - 3 - Mozambique rail line serving the port of Beira. An extension of the Malawi Railway to the eastern border connects with the Mozambique rail line serving the port of Nacala. Rehabilitation of the southern part of the line within Malawi has been underway during the last several years with British aid and is expected to be completed by 1985. The extension westward in recent years from Salima to the Zambian border (210 km), financed by a grant from the Canadian Government, will soon be extended to Chipata in Zambia (about 25 km). The Malawi Government would like to see this line linked to the main railway line of Zambia but the construction of such a costly 390 km link is unlikely in the foreseeable future. 1.09 Traffic carried on the railway in 1982 amounted to about 890,000 tons of freight or about 182 million ton-km. Traffic in terms of ton-km has been declining by 7% p.a. since 1975 because of the slowdown in imports since 1975 and exports since 1977, decreasing Zambian transit traffic, and declining capabilities of the Mozambique rail lines. The Malawi railway is operated more efficiently than many African railways and until 1982 earned a modest net operating surplus. The number of passengers carried on the railway increased to 1.5 million in 1982, the highest level ever attained. Recently, however, it has experienced operating losses as overall traffic has declined. Lake Transport 1.10 Freight and passenger transport on Lake Malawi is provided by a subsidiary of Malawi Railways, Lake Services Limited, which principally serves the remote northern areas of the country. Twenty-one ports or landings are served by the Lake Service fleet which consists of five cargo/passenger vessels, six barges and oil pontoons, five tugs and one timber pontoon. Traffic volumes are relatively light, amounting to about 37,000 tons of freight and some 111,000 passengers in 1978. The main products transported by lake are petroleum products, rice and fertilizers. At present, nearly 70%O of the traffic moves northbound from Chipoka, the only port served by the railway; this pattern may change in the future as a result of ongoing rural development projects in the north. In most years, the Lake Service has incurred operating losses. Air Transport 1.11 Air transport within Malawi accounts for far less traffic than other modes, and only four airports (Blantyre, Lilongwe, Mzuzu and Karonga) have scheduled services. Even air traffic over long distances between the north and the south is quite low, despite the poor quality of road connections and slowness of lake transport. Until recently, Chileka airport near Blantyre was the only airport that could accommodate medium size, long-range jet aircraft. Chileka accounted for nearly 60%a of Malawi's 355,000 recorded passenger movements in 1978 and 80%o of passenger movements at Chileka were international. In 1982 the Government completed construction of a second international airport at Lilongwe. Full international operation there was scheduled to begin in November 1983. Air Malawi, a Government-owned airline, provides international services and all scheduled domestic services. Several foreign airlines also provide international services, and one local company and Air Malawi provide unscheduled domestic services.  - 4 - 1.12 Air Malawi's passenger traffic of about seven millton passenger kilometers in 1981 was about the same as in 1978. Air freight traffic, on the other hand, has increased during the past few years because of congested ports and poor rail service in Mozambique, and difficulty of using other modes to transport goods between South Africa and Malawi. C. Transport Policy and Coordination 1.13 A transport crisis arose in 1982-83 when Mozambique rail lines lost their ability to handle the normal level of transit traffic for land-locked Malawi. As a result, the Malawi Government has faced a major problem of facilitating the movement of export/import traffic over alternative routes. The high cost of transport by these alternative routes has had far-reaching economic consequences and therefore the Government appointed in 1983 a transport specialist in the Ministry of Transport and Communications to monitor internalional transport concerning Malawi's external trade and to take appropriate steps to expedite movement of the goods. He is also to make recommendations for achieving, over the longer term, improved means of transport, such as developing a more economical route between Malawi and Indian Ocean ports (para 1.16). Included in the project are funds to finance a continuation of this specialist for a two year period beyond an initial year- financed by UNDP and, possibly, USAID. 1.14 Since the beginning of the seventies, Malawi's transport policy has had three broad aims: (a) to improve the administrative, social and economic integration of the country by linking all three regions with reliable all-weather connections; (b) to support rural development by improving access to rural areas; and (c) to provide efficient links with transport routes to the Indian Ocean seaports for exports and imports. Substantial progress has been made on all of these objectives. In the case of (c), however, as noted above great difficulties have been experienced on transit services through Mozambique, problems beyond the control of the Malawi Government. Within Malawi, Government ]Ls undertaking an extensive transport development program; a number of transport studies have been carried out or are in progress, and investments are either planned or underway in all transport modes. 1.15 Government's overall sector priorities are given in its "Statement of Development Policies 1971-1980," and are determined in more detail in a 3-year rolling public sector investment program which is revised annually during budget preparation. Investment in the transport sector has been high during the last four years, representing an average of 34%/O of total Government capital expenditure. Pk large part of this investment is represented by the railway extensions and development of the Lilongwe International Airport. Although the Elank expressed reservations about these projects, they were undertaken by Government, with the assistance of external donors. 1.16 The Government has been deeply concerned about the vulnerability of its principal route of access to the sea through Mozambique, particularly in view of recent events which halted or substantially reduced transit traffic. The same concern has prompted Government to request financing under the present project for upgrading a portion of the North-South road which links Malawi to Tanzania (para. 3.06). The European Development Fund (EDF) recently financed a study of the international transport routes available to Malawi; the study examined the transport constraints to the development of the country as well as future changes in fho rnmnnqifinn snnri rirprfinn nf -rnd' :: nnl mnrp rgonmmrondld-innc nn  improved transport routes in northern Malawi. Ihe need for Malawi to have more reliable access routes to the sea has been shown by a UNDP/UNCTAD regional study1/ of transit transport in eight southern African countries, including Malawi. The project includes funds for a transport system study of a northern access route, which will include a new road link between northern Malawi and the TAZARA/TANZAM2/ corridor (para. 3.09). The planning and construction of such a link and the efficient use of the international route will require cooperation between the Malawi and Tanzania Governments. The study will, inter alia, evaluate the viability of the split between transport modes in both countries, for example, of using lake services for international traffic between the northern lake port of Chilumba and other ports to the south, especially Chipoka. The study will also consider other aspects of transport on the route, such as customs procedures, and facilities in Dar es Salaam and at/or near the Malawi-Tanzania border. Availability of truck and railway capacity will also be studied. The Malawi Government has prepared an action program on steps to be taken to open up the proposed route. As one of the first key steps in the program, the Malawi Government has already in August 1983 reached agreement with the Tanzania Government on the proposed terms of reference for the study. During negotiations, the Government and the Bank reached agreement on the terms of reference and the action program (Item III. J in Annex 8). 1.17 The Government's 3-year plan for FY1979-81 allocated 40%O of total planned capital expenditures to the transport sector (Table 1.1), mainly for the railway extension from Lilongwe to the Zambian border, the Lilongwe International Airport, and main road construction. Although various donors assisted with most of the new projects under the plan, some of these projects were delayed or scaled down during the 3-year period due to Government's inability to provide the required local funds (only 63%0' of the Table 1.1: Public Investment in the Transport Sector 1977-1983 (M million) Financial Year 1977 1978 1979 1980 1981 1982 1983 Transport 21.0 31.4 58.2 41.2 66.6 48.0 35.3 Roads 12.3 14.9 21.1 17.4 22.0 27.1 27.3 Total Investment 55.9 76.6 113.5 127.9 174.9 124.0 142.8 , of Total Investment Represented by Transport 38 41 51 32 38 39 25 A of Transport Invest. Represented by Roads 59 47 36 42 33 56 77 Source: Malawi Statistical Yearbook 1980; Econonic Report 1981 and 1982; and the Roads Departmnt March 1983. 1/ Transit Transport Improvements in the Landlocked Southern African Sub-Region, UNDP/UNCTAD Project RAF/77/017. Countries included are: Zambia, Malawi, Tanzania, Mozambique, Botswana, Lesotho, Swaziland and Zimbabwe. 2/ TAZARA: Tanzania-Zambia Railway. TANZAM: Tanzania-Zamhia Hinhwav  -6- amount planned for 1979/80 was actually allocated) and the Lack of completed feasibility studies for some of the proposed projects. The percentage of total public investment represented by transport has declined sharply from 51% in 1979 to about: 25% in 1983. This decrease was attributable mainly to the completion of the railway and airport projects. At negotiations, the Government and the Bank reviewed the proposed 1984-86 pubLic investment program, which was found to be reasonable in terms of overall level of financing (around 30% of the development budget for the transportation sector) and subsectoral allocations (roads about 80% of expenditures followed by rail ancl aviation wi;:h about 10% each). 1.18 Coordination of transpcirt investmenl: plans is the responsibility of the Transport Planning Unit (TPU) of the Economic Planning Division (EPD) of the Office of the Presiclent and Cabinet which reviews proposals put forward by the Ministry of Works and SupplLies (MWS) for roads and by the Ministry of Transport and Communications (:MTC) for all other modes. In practice, however, such coordination has not been satisfactory because of EPD's Limited staffing (TPU is presently staffed by two professionals only), and as a result the development of each mode has proceeded almost independently of the others. This is becomingI a problem since road transport increasingly competes with the railways and lake transport. In 1980, Government therefore requested assistance in strengthening its transport planning and coordination capability, and accordingly the Fourth Highway Project provided EPD with technical assistance (one expert) for transport planning as well as overseas training for local staff. The technical assistance is helping Government, inter alia, to define and establish an adequate system of transport planning and provide on-the-job training for Malawian professional staff. Uncler the project, further technical assistance will be provided to the 1ransport Planning Unit and for various purposes including preparation of a future highway project (para 3.09). The loan agreement for the proposed project contains a covenant requiring that, prior to the adoption of the annual budget during the project period, Government will discuss with the Bank the transport investment program (para. 5.01(a). D. Previous Bank Group Involvement in the Sector 1.19 The Bank Group has been involved in Malawi's transport sector since 1966 when Credit S-2-MAI was approved tc help finance detailed engineering of the Zomba-Lilongwe road (290 kmi). This was followed by the First Highway Project (Credit 112-MAI, 1968, UIS$11.5 million) comprising the reconstruction and bituminous paving of that road, the refinancing of Credit S-2-MAI, and a consultants' study of road transport licensing regulations and road-rail coordination. A Performance Audit of the Project (No. 946, December 15, 1975) concluded that all of the project's objectives were achieved. Construction costs were within appraisal estimates, although the road was completed about one year behind schedule3/. Traffic was greater than projected at appraisal, and the rate of return was conservatively re-evaluated at l3%, compared with the appraisal estimate of 12%. The consultants' study recommended deregulating road transport, raising axle load limits to 9 tons, improving transport statistics, and relating rail tariffs more closely to economic factors, all of which have been implemented, although there is scope for further refinement of rail tariffs. The study expressed misgivings about planned rail projects, but 3/ The first contractor selected for the Zomba-Lilongwe road section was unsatisfactory and had to be replaced, leading to the delay in  Government did not share IDA's reservations and proceeded with these investments. Both the consultants' study and the Audit Report agreed that the country might soon have an oversupply of transport services in the Blantyre-Lilongwe-Zambian border corridor. The major recommendations of the Audit called for closer project supervision by Bank staff and rectifying the neglect of lower class roads--although the Audit did not question the composition of the First Highway Project, noting that the "Zomba-Lilongwe road . . . is undoubtedly the most important highway in Malawi." Both of the recommendations made in the Audit Report are being addressed under the Second, Third, Fourth and the present Fifth Highway Projects and in the agricultural projects financed by the Bank Group. 1.20 The Second Highway Project (Credit 523-MAI, 1974, US$10 million) originally comprised construction of the Lilongwe-Kasungu road (113 km) and a pilot scheme for the improvement and maintenance of district roads serving rural development in the Kasungu District. Both components have been completed, the construction in March 1978, a few months behind schedule, and the pilot scheme in September 1978. Substantial cost savings were made on the construction component which were used to finance completion of the pilot scheme in Kasungu district and extension of the scheme to three other districts, following the recommendations of a consultants' study which evaluated the results of the pilot program. Ihe four districts made up the first phase of a District Roads Improvement and Maintenance Program (DRIMP) planned to cover all of Malawi's 24 districts in three phases. This first phase was completed in September 1981. According to the Project Completion Report, the economic rate of return is now estimated at 23 percent compared with 14 percent at appraisal. 1.21 The Third Highway Project (Credit 758-MAI, 1977, US$10.5 million) comprised construction of the Kasungu-Jenda road (85 km) and a feasibility study and detailed engineering of the Jenda-Mzuzu road. The road construction was completed in October 1980, a few months behind schedule, and the detailed engineering in September 1980. The Project Completion Report indicates that the quality of the physical components was satisfactory, but due to the general deterioration in Malawi's economy in recent years, the economic rate of return is now estimated at 8 percent compared with 14 percent at appraisal. However, with the increased traffic generated by linking Malawi to the TANZAM corridor, the traffic flows and rate of return are expected to improve significantly. 1.22 The Fourth Highway Project (Credit 1099-MAI, 1981, SDR 25.9 million or about US$33.0 million equivalent) comprises construction of the Jenda-Luwawa Turnoff road (32 km), the Mbowe-Mzuzu-Ekwendeni road (32km) and spot improvements on the Luwawa Turnoff-Mbowe road (about 100 km), the second phase of DRIMP extending the scheme to 10 additional districts, a comprehensive study of Malawi's road maintenance needs, provision of minor road maintenance equipment, construction of a new training facility for road personnel, technical assistance in transport planning for the Economic Planning Division (EPD) of the Office of the President and Cabinet, and overseas training of two of EPD's transport economists. The maintenance study is complete and implementation of all of the other improvements is well underway. 1.23 Finally, transport components have been included in IDA projects in other sectors (Annex 1). Credit 5-17-MAI, 1974, provided US$2 million  - 8 - for planning and engineering of infrastructure for the proposed Viphya timber exploitation scheme. In addition, agricultural projects in the Lower Shire Valley (Credits 114, :563 and 823-MAI), the Lilongwe (Credits 113, 244 and 550-MAI) and the Karonga (Credit 282 and Loan 1286-MAI) areas, as well as the more widespread National Rural Development Project (Credits 857-MAI) have included improvement and construction of about 4,000 km of feeder and crop extraction roads, while the Karonga Rural Development Project also included port improvements at Chilumba and Chipoka on Lake Malawi as well as procurement of a self-propelled barge for the lake service. 1.24 The strategy for highway subsector development followed by the Ministry of Works and Supplies over the past several years has been aimed mainly at (i) construction of a basic road network with particular focus on development of a main north-south road; (ii) irnprovement and maintenance of district roads; and (iii) strengthening of maintenance of the main and secondary road system. The Bank'S Highway Projects I through IV have accomplished much with regard to items (i) and (ii). The present project will contribute significantly to the realization of all three objectives (para. 3.01).  -9- - II. THE HIGHWAY SUBSECTOR A. The Network 2.01 The classified road network totals about 13,280 km (Table 2.1) of which some 2,520 km (about 19%) are paved, and 390 km are of engineered gravel standard; the rest are earth roads and tracks. In addition, there are about 2,000 km of as yet unclassified feeder and crop extraction roads constructed to minimum all-weather standard under agricultural development projects and an undetermined length of unclassified earth roads and tracks, including about 800 km within forestry plantations and reserves and about 800 km within the national parks. Road density is about 141 km per 1,000 sq km or 2.2 km per 1,000 inhabitants, which is above average for East African countries. The coverage of the network is adequate for the country's present needs, but its standards and conditions are not satisfactory. Although some improvement has been made, principally by upgrading roads to paved standard (Table 2.2), low standard roads prevail, resulting in high transport costs. About 85%o of the paved and improved roads are located in the southern half of the country, reflecting the general pattern of regional imbalance. Table 2.1: Highway Network by Administrative Classification and Surface Type - 1982 (km) Main Secondary District Other a/ All 0I Roads Roads Roads Roads Roads