Liberia - Fifth Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY lFILE OOPY Report No. P-3734-LBR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 10.9 MILLION TO THE REPUBLIC OF LIBERIA FOR A FIFTH HIGHWAY PROJECT February 24, 1984 T'his 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 The official monetary unit is the Liberian dollar with a par value equal to the U.S. dollar. The U.S. dollar is legal tender in Liberia. FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS ADB African Development Bank MCIT Ministry of Commerce, Industry and Transport MPEA Ministry of Planning and Economic Affairs MPW Ministry of Public Works NPA National Port Authority USAID United States Agency for International Development  FOR OFFICIAL USE ONLY LIBERIA Fifth Highway Project Credit and Project Swmmary Borrower: The Republic of Liberia Amount: SDR 10.9 million (US$11.4 million equivalent) Terms: Standard Project Description: The project seeks to improve Liberia's public road network by strengthening the Ministry of Public Works' (MPW) capacity to carry out road maintenance. It provides for: (i) technical assistance and training to improve MPW's financial and administrative management and help plan and execute the maintenance program; (ii) a three-year routine maintenance program covering the entire public road network of about 4,725 miles; and (iii) periodic maintenance on about 450 miles of priority primary and secondary roads through rehabilitation or regravelling. Liberia's population would benefit from reduced transportation and vehicle operating costs; rural areas that are now difficult to reach due to the poor state of the road network would have improved access to markets. The main risks of the project are that planned improvements in "W's management performance would not be fully realized and that the Government would be unable to provide sufficient funding, reducing maintenance output. The project would minimize these risks by providing technical assistance and gradually phasing in the Government's contribution to incremental recurrent maintenance costs. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Worid Bank authorization.  Estimated Cost: ----- (US$ million) ----- Local Foreign Total Equipment and Workshop Rehabilitation 0.5 1.9 2.4 Periodic Maintenance - Gravel Roads 1.7 5.6 7.3 Materials for Routine Maintenance 0.7 3.5 4.2 Consultant Services & Training 0.4 2.3 2.7 PPF 0.1 0.3 0.4. Base Cost 3.4 13.6 17.0 Physical Contingencies 0.1 0.3 0.4 Price Contingencies 0.4 1.6 2.0 TOTAL 3.9 15.5 19.4 Financing Plan: Local Foreign Total IDA Credit 0.5 10.9 11.4 USAID Grant 0.7 2.4 3.1 Government 2.7 2.2 4.9 3.9 15.5 19.4 Estimated Disbursements: -------------- (US$ million) -------------- FY84 FY85 FY86 FY87 FY88 Annual 1.4 4.0 2.9 2.1 1.0 Cumulative 1.4 5.4 8.3 10.4 11.4 Economic Rate of Return: Over 100 percent Staff Appraisal Report: 4393-LBR dated February 21, 1984 Map: IBRD 16873  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF LIBERIA FOR A FIFTH HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed Credit to the Republic of Liberia for the equivalent of SDR 10.9 million (US$11.4 million equivalent) on standard IDA terms to help finance a Fifth Highway Project. The United States Agency for International Development (USAID) would cofinance the project by contributing a development assistance grant of' US$3.1 million. PART I - THE ECONOMY 1/ 2. An economic report, entitled "Liberia: Recent Economic Developments and Medium-Term Prospects" (No. 4178-LBR), was distributed to the Executive Directors on.December 30, 1982. An economic mission visited Liberia in October 1983 to review the current economic situation; its principal findings are included in the following paragraphs. Country data are shown in Annex I. Basic Economic Characteristics 3. Liberia has a dual economy. A foreign controlled enclave sector, endowed with advanced technologies and skills, co-exists with a traditional agricultural economy which uses rudimentary technologies. The wholly export oriented enclave or "concession" sector includes iron ore mining, rubber production and forestry, provides about 90 percent of the export earnings and generates about one quarter of the GDP. The links between the concession sector with the rest of the economy are, on the whole, weak. However, stronger links exist in the case of the rubber industry; these take the form of demand for labor services (about 7 percent of the labor force is employed by rubber concessions) and material inputs. Contributions by the concessions to Government revenues in the form of profit sharing and royalties provided the strongest linkage with the rest of the economy until 1976/77. Because of low iron ore profits since the late seventies, contributions to revenues now mainly take the form of income tax levied on employees and, to a limited extent, indirectly in the form of duties on imported inputs which are not exempt under the Concession Agreements. These revenues have historically accounted for about one half of total Government income. 4. Outside the enclave sector, Liberia is not unlike other less developed African nations; about 66 percent of the population live in rural areas and depend for their livelihood on agriculture; the bulk of them are 1/ This section is substantially unchanged from the President's Report for the Second Bong County Agricultural Development Project (P-3727-LBR) of February 21, 1984.  - 2 - traditional farmers producing mainly rice and cassava for subsistence. Rubber, coffee and cocoa are the country's major cash crops; yet they contribute less than 10 percent of GDP and only 18 percent of export earn- ings. Almost all rubber is processed and exported by foreign companies. Non- agricultural productive activities outside the enclave sector are very limited; the largest of these, manufacturing, contributes about 5 percent of GDP. This structural imbalance in the economy between the modern, largely enclave sector, and the traditional agricultural sector is reflected in a sharply skewed income distribution. With a population of about 1.9 million, average per capita GNP in 1982 was estimated at about US$510. However, 80 percent of Liberia's households received less than 30 percent of total income. 5. The effectiveness of Liberia's public institutions is severely handi- capped by a scarcity of trained manpower at all levels. Though Liberia has competent managers in public office, they are insufficient in number and their effectiveness is handicapped by a shortage of trained people for middle man- agement positions. Organizational weaknesses furthermore result in poor communications within the Government and its agencies and in duplication of effort. These inadequacies of public institutions are not only a bottleneck to the effectiveness of day-to-day government but to the public sector's development effort as a whole, since the large number of unproductive workers on the public payroll swell the Government's current expenditures and prevent the accumulation of savings for an adequate investment effort. 6. With a crude birth rate of 49.7 and a crude death rate of 14.2 per 1,000 population, Liberia's annual rate of population increase of 3.4 percent is among the highest in Sub-Saharan Africa. The rate has risen from 3.1 percent during the 1960s and is expected to accelerate to 3.7 percent by the year 2000. Consequently, on the basis of past trends in birth and death rates, the current population of about 1.9 million is projected to double by the year 2000. The high population growth rate has put pressure on social services, infrastructure, etc. and, in the light of a declining economy, unemployment has risen, especially in Monrovia where migration from rural areas accentuates the problem. 7. About 58 percent of Liberia's domestic energy needs are met by local fuelwood and charcoal, another 35 percent from imported petroleum and its products, and 7 percent from domestic hydroelectric power. Petroleum imports cost Liberia $129.6 million in 1981, or 24 percent of export earnings, as compared to $12 million or 5 percent of export earnings a decade earlier. Although the reduction of world oil prices in late 1982 and early 1983 pro- vided some relief, reducing the ratio of oil imports to total export earnings to 20 percent, problems of paying for oil imports continue to mount and it is clear that Liberia should seek adjustments in its use of imported oil by substituting domestic hydropower to the extent possible and by conserving energy so as to alleviate its balance of payments and fiscal problems. 8. The country has poorly developed economic and social infrastructure outside the enclave areas. An incomplete and inadequate road system is poorly maintained. Only 20 percent of the non-enclave population has access to dependable water supply, while education and training have been inequitably  - 3 - distributed and are of inadequate quality. The health status of the majority of Liberians remains poor--life expectancy at birth is estimated at 54 years, and morbidity and mortality are high. The infant mortality rate is 152 per thousand live births (1981). The existing health care system is inadequate and unsuited to the country's health problems. Poor health and malnutrition continue to plague vulnerable segments of the population, especially pregnant and lactating women as well as young children. Recent Economic Performance 9. The military Government which took power in April 1980 inherited a sluggish and strained economy in which GDP growth had averaged less than 1.0 percent per annum between 1974 and 1979. The economy was suffering from the effects of a heavy oil import bill and a stiff debt burden at a time when the external demand for Liberia's products was depressed. The commodity concen- tration of Liberia's exports aggravated the impact of the international reces- sion. In addition, doubling of the public sector minimum wage in 1980 exacerbated the fiscal crisis. Capital flight and a severe shortage of public funds for investment also hurt the economy. The depletion of the banking sector deposit base, restricted external credit lines and a general liquidity crisis made management of the economy particularly difficult during the present administration's first two years of office and still continue to plague economic management. To meet its foreign currency obligations, the Government relies on offshore tax revenues paid by concessions and on dis- bursements of external loans and grants. Because of decreased prices for export commodities and low export earnings of concessionaires, their contribu- tion to the Government's offshore revenue has decreased drastically in recent years. Thus, the public sector balance of payments has accordingly deterio- rated and the National Bank of Liberia continues to have difficulty in obtaining foreign resources to meet the cost of oil imports, service debt and public sector import payments. 10. There has been a decline in GDP each year since 1980. Between 1980 and 1982, real GDP declined by about 15 percent and real consumption by over 22 percent. The decline in the economy is mainly attributable to the con- tinuing weak performance of exports. Exports account for a high share of GDP (62 percent in 1981). During 1982, export earnings fell by 9.8 percent (from $540.7 million in 1981 to $487.4 million in 1982) due to decreased earnings from iron ore, rubber, logs, cocoa and sawn timber. This deterioration in export earnings continued in 1983, with revenue for the period January to June showing a 10 percent decline over the corresponding period in 1982. Because of the dominance of iron ore whose market prospects still look grim, prospects for export earnings in the short run are not promising but the recent upsurge in world rubber prices have made prospects look better, especially in the medium term, as the recession in the OECD countries ends. However, in order to respond to stronger demand in the medium-term, substantial investments need to be undertaken, especially in the iron ore sector. 11. After deteriorating considerably in 1980 following the doubling of the minimum wage, fiscal performance improved as a result of expenditure restraints under successive stabilization programs supported by the IMF. Total expenditures declined from $385.4 million in FY82 to $343.5 million in  - 4 - FY83. While expenditure restraint has been successful, revenue performance has been disappointing in part due to the deterioration in the economy but also due to poor tax administration. Revenue and grants totalled $256.3 million in FY83 compared with $279.3 million in FY82 and $283.0 million in the budget estimates. As a result, a large deficit developed in the last quarter of FY83 resulting in borrowings from the banking system of $77.5 million, com- pared to $32.0 in the budget. Creditworthiness 12. Liberia's external public debt outstanding and disbursed was US$635.7 million at end December 1981 and grew by less than one percent to $641.2 million at end 1982. The Bank Group share of the public debt outstanding and disbursed was 19.7 percent in 1982 and is expected to increase to about 23.2 percent by end 1984. As a proportion of external public debt servicing liability, the Bank Group's share was estimated at about 26.1 percent in 1982 but is projected to decline to about 16.9 percent in 1984. Debt service payments as a proportion of exports of goods and non-factor services were estimated at about 7.0 percent in 1982 but would have been higher had it not been for the debt relief provided under the Paris Club in 1980 and 1981 as explained below. Public debt service payments as a percentage of Government revenues (a more meaningful indicator for Liberia which uses the US dollar as a medium of exchange) reached 22 percent in 1980. This upsurge in the debt service ratio occurred primarily as a result of short-maturity loans contracted by Liberia in the late seventies to finance OAU-related expendi- tures and to meet growing budgetary deficits. The increase in debt servicing obligations created severe pressures on Liberia's public finances. The Government therefore sought and obtained the assistance of the Paris Club in rescheduling its external public sector debt of US$32 million maturing during the period July 1980 to December 1981; the rescheduled debt is to be repaid over 9 years, including four years of grace. Debt service problems, however, persisted. In December 1981 further relief was requested and Liberia obtained an 18-month extension, from October 1, 1982 to June 30, 1983 subject to renewal of the standby agreement with the IMF when it expired in September 1982. This condition was satisfied as explained below. 13. Liberia has maintained a standby arrangement with the IMF since mid- 1980 except during the fourth quarter of FY83 when the unresolved issue of US$26 million arrears to the oil facility banks and a shortfall in revenue made Liberia ineligible to draw SDR 20 million. The current program covering FY84 with new revenue measures was approved by the IMF Board on September 14, 1983 and according to the review undertaken in December 1983, Liberia satis- fied the quantitative performance criteria for end-November. In addition, an agreement with the London Club to refinance a private bank syndicated loan of about US$27 million was signed in December 1982 and became effective early 1983. These measures temporarily ameliorated the debt service burden. As a result, debt service as a proportion of Government revenue declined to about 14 percent in 1982. However, Liberia continued to face severe debt service problems, and in 1983 requested further debt relief from the Paris and London Clubs. The Paris Club considered Liberia's third request on December 22, 1983 and offered relief for one year on official loans and insured export credits  - 5 - contracted before January 1, 1983. Eligible maturities covered by the agree- ment are estimated at US$23.6 million. Of this amount, 90 percent (US$21.2 million) will be consolidated and repaid over 8-1/2 years, including four years of grace. The 10 percent non-consolidated portion is to be repaid in four equal annual payments beginning on the last date of the consolidation period (June 30, 1984). Negotiations for further debt relief from the London Club, including settlement of the US$26 million arrears under the oil facility, are expected to be concluded soon. 14. Although the movement in world prices of Liberia's main export com- modities in 1981 and 1982 was not favorable, the growth in export earnings is projected to be higher in subsequent years as a result of the likely strength- ening in demand for rubber and timber and, to a lesser extent, iron ore. Forecasts for natural rubber and log prices indicate a consistently upward movement. Other ongoing agriculture projects (particularly for coffee, cocoa and palm oil), and exploration of other mining resources, including oil, gold and barite, may help diversify the economy and could result in an acceleration in the rate of growth of exports during the next three to four years. Public revenues would benefit from these increased export earnings. Assuming that exports grow at a possible average of 4.5 percent per annum between 1983 and 1986, and the Government continues to implement stabilization and reform policies, Government revenues could grow at an average of about 9.0 percent per annum increasing from US$238.0 million in 1982 to US$328.3 million in 1986. On the expenditure side, performance in FY83 has demonstrated the Government's ability to reduce expenditures. If this effort continues, growth of recurrent expenditures could be kept to about 1 percent per annum in real terms in the short to medium term. Thus, prospects are clearly contingent upon the resumption of growth in the industrialized countries to which Liberia supplies primary goods and upon the successful implementation of a number of policy measures over the next few years, e.g., a continued reduction in the size of the Government budget deficit, further restraint on new commercial borrowings and public sector credit expansion, increased mobilization of public savings, maintenance of the traditional openness of the economy, appropriate pricing and tariff policies, revival of investor confidence, inflow of new private investment and further improvement in the coordination of overall economic management. 15. Even with the improved performance assumed above and the debt relief already provided or anticipated in the near future, the debt burden is likely to remain strenuous in the short-to-medium term. Debt service (interest and amortization) on public and public guaranteed debt, as a percentage of budget revenues, is projected at 32 percent in 1984 after taking account of all the debt relief to be provided by the Paris and London Clubs. This debt service ratio could not be reduced further because the remaining debt to multilateral institutions and previously rescheduled loans is not subject to rescheduling. Before 1981 Liberia's debt service burden was not as severe as it has become in recent years. Bank group lending to Liberia was therefore a blend of IDA credits and Bank loans. In view of the country's relatively low per capita income and high public debt service liability, continued IDA assistance is justified.  - 6 - PART II - BANK GROUP OPERATIONS IN LIBERIA 1/ 16. As of November 30, 1983 the Bank had approved 22 loans (including one Tlhird Window loan) for projects in Liberia totalling US$155.22 million; there have been 13 IDA credits totalling US$88.76 million, and one technical assis- tance grant of US$200,000 for development planning. IFC has made two equity investments totalling US$555,000 in the share capital of the Liberian Bank for Development and Investment (LBDI) and a further investment was approved by the Executive Directors on August 30, 1983. The Bank Group assistance has finan- ced roads, agricultural development, power, education, water supply, industry and mining, small enterprises, and petroleum pre-exploration. Annex II con- tains a summary statement of Bank loans, IDA credits, and IFC investments as of November 30, 1983. 17. Bank Group disbursements for projects in Liberia increased steadily from FY78 to FY81 when disbursements were equivalent to 26 percent of credits and loans outstanding at the beginning of that fiscal year. This performance was made possible by close coordination with the budgetary authorities which consistently earmarked sufficient counterpart resources to Bank Group supported projects in Liberia. More recently, the Government has experienced considerable difficulty in providing counterpart resources because of the sharp deterioration in public finances discussed in Part I of this report. Close monitoring of project implementation and continued coordination with the budgetary authorities should avoid excessive delays in implementation due to lack of counterpart resources. However, the Government's present resource position is being taken into account in structuring new projects: their scope :Ls being limited to essentials and as much foreign financing as possible is being provided so as to reduce the need for Government contributions. -18. The objective of Bank Group operations is to obtain the adoption by -the Government of policies which would be more conducive to renewed economic growth. In its lending operations the Bank Group is giving priority to: (a) strengthening institutions and policies in the public sector in order to improve its efficiency, including improvement in the quality of the public investment program; (b) consolidating development programs in sectors critical to the country's development, with special emphasis on policies and programs to improve the balance of payments; (c) maintenance and rehabilitation programs that help to preserve exist- ing capital; and (d) improving the country's manpower resources. 1/ This section is substantially unchanged from the President's Report for the Second Bong County Agricultural Development Project (P-3727-LBR) of February 21, 1984.  -7- 19. In support of the objectives of increasing production as well as improving income distribution, Bank Group lending has emphasized agriculture and rural development. The Bank Group is financing two integrated agricul- tural development projects: the first phase Bong County and the second phase Lofa County integrated agricultural development projects. These projects are designed to (a) assist subsistence farmers expand their production base and income by increasing their productivity through support services and infra- structure, and (b) help diversify the country's export and revenue base. A rubber development project, co-financed with the Commonwealth Development Corporation (CDC), is designed to increase exports and improve the producti- vity and incomes of smallholder farmers. A forestry development project; which the Bank is co-financing with the African Development Bank (ADB) and the German Agency for Technical Cooperation (GTZ), seeks to strengthen the Govern- ment's forest service, initiate an industrial plantation program, and help Liberia better manage and exploit its forestry resources. An oil palm project, co-financed by the ADB and the CDC, is helping expand and diversify the country's export and revenue base, provide employment, increase the incomes of rural families, and strengthen the institutional capability to develop oil palm. 20. In addition to its support for agriculture, the Bank Group is also assisting the Government develop the manufacturing sector. A credit for a small and medium scale enterprises project approved in November 1980, seeks to stimulate economic activity and employment by providing credit and technical assistance. While reinforcing the Government's efforts to become less dependent on mining, the Bank has granted loans for a project to rehabilitate a mine operated by the National Iron Ore Company. A petroleum exploration promotion project, for which a loan was approved in October 1980, is to develop Liberia's hydrocarbon potential by attracting oil companies to take oil exploration permits in Liberia. The Bank Group has played a prominent role in financing power and urban service facilities. Through four projects in the power sector, the Bank has helped expand the Liberia Electricity Corporation's (LEC) thermal generating facilities to meet current demand, strengthened LEC's management, and extended connections to poor urban house- holds in Monrovia. A water supply project for which a credit was granted in 1978 helped rehabilitate and expand the Monrovia water supply system, extend water distribution to lower income groups in metropolitan areas, and strengthen the Liberia Water and Sewer Corporation (LWSC). An urban develop- ment project, for which a credit was approved in April 1982, seeks to improve the living conditions of Monrovia's urban poor by (a) upgrading infrastructure and providing essential services in three of its most needy neighborhoods, and (b) strengthening key institutions to provide more effective management and establish a solid revenue base in the municipality. 21. The proposed project would be an integral part of the Bank Group's strategy for assisting Liberia. In helping the Ministry of Public Works make more effective use of financial and human resources at its disposal, an example would be set for the rest of the public sector, many parts of which require management improvements. By helping upgrade the Ministry of Public Works' capacity to carry out road maintenance, the project would also help Liberia preserve capital already invested in its road infrastructure, preventing its rapid deterioration under weather conditions which are not  - 8 - favorable to road maintenance. The project would also support the agricul- tural sector, which employs about 70 percent of the labor force and accounts for a significant proportion of production and exports. If road links between the interior part of the country and the domestic markets and export points in the coastal region should be interrupted, production and exports would be seriously affected and employment in rural regions would be reduced. Given that agricultural and forestry production in the interior of Liberia is mostly accounted for by smallholders, the indirect income distribution effects of the project would also be considerable. 22. For the future, the Bank Group is helping the Government develop a program of economic structural adjustment to deal with the country's severe resource constraint and decline in export earnings. Preparation of this pro- gram is in the initial stages, and discussions with the authorities have so far met with an encouraging response. Further support for the agricultural sector is also planned for the medium term, primarily to help relieve constraints on increased production of export crops such as natural rubber, which could yield quick return to the economy. A second oil exploration project would also be appraised in the coming months; it would aim at assisting the Government determine Liberia's hydrocarbon potential in collaboration with international oil companies, one of which has already agreed to initiate explorations in the country. PART III - THE TRANSPORT SECTOR Sector Characteristics 23. Liberia's transport system reflects the economy's dependence on enclave iron ore mines, rubber plantations and forestry concessions. The transport network consists of: about 6,200 miles of roads; three railways operated and owned by the mining companies with about 300 miles of lines; four seaports; two international airports and several domestic airports open to commercial traffic. The system is generally adequate for the enclave opera- tions, but the need to intensify the country's agricultural development effort outside the enclaves calls for an improvement in the transport system, parti- cularly roads. Many potentially productive agricultural areas have only poor or circuitous connections to ports and the main domestic market center, Monrovia. 24. The railways are almost exclusively used to transport between 10 and 20 million tons of iron ore annually to the ports of Monrovia and Buchanan. The ports of Greenville and Harper are mainly used for the shipment of timber. Domestic air transport carries few passengers while coastal shipping is under- developed. Road transport, the predominant mode for passengers and goods other than iron ore, is concentrated around Monrovia and along the Monrovia- Ganta axis (see Map 16873).  -9- Sector Management 25. Various ministries and agencies are responsible for formulating and implementing sector policies and strategies. Overall management responsibi- lity is vested in the Ministry of Commerce, Industry and Transport (MCIT). Road development planning, construction and maintenance is the responsibility of the Ministry of Public Works (MPW); the National Port Authority (NPA) is charged with the development and administration of ports while the MCIT regu- lates the road transport industry and determines air and maritime transport policy. The railways are outside the Government's direct control. Transport investment proposals are reviewed by the Ministry of Planning and Economic Affairs (MPEA), which coordinates the Government's overall investment program and foreign financing when required. 26. Due to a shortage of qualified staff and poor coordination among the various transport agencies, past sector development was largely based on ad hoc decisions and not according to integrated transport plans. Efforts are being made under the Feeder Roads Project (Loan 1664-LBR) to establish a centralized planning capability within the Government to coordinate transport development better and relate it to an overall development strategy. 27. Liberia's Second Development Plan (FY82-FY85) has limited development targets given the prevailing resource constraint. In the roads subsector, a strategy of postponing most new highway investments while increasing emphasis on feeder road development in support of agriculture has been adopted. Total planned public expenditure for transport development during the Second Plan period is set at US$159.3 million, of which the roads sector accounts for 68 percent (US$109.0 million), civil aviation 1 percent (US$1.5 million) and ports 31 percent (US$48.8 million). This investment program is in accord with the needs of the sector, except that the proposed expansion of Monrovia Port appears larger than required. However, since more than two years of the Four Year Plan period have already lapsed with very little investment due -to the Government's budgetary difficulties, the Plan's investment targets wiLl not be met. The Highway Transport System 28. Liberia's road network consists of about 4,725 miles of public roads and almost 1,500 miles of private roads built and maintained by the conces- sions and partly open to public use. The public network is inadequate both in extent and quality given present traffic levels and development needs. Only 366 miles of the public network are paved, while about 400 miles out of 2,100 miles of the all-weather laterite network are estimated to carry more than 300 vehicles per day and their paving would probably be justified. However, given the shortage of resources the Government is experiencing, this is not fea- sible; the priority needs are to maintain the existing network which, with a few exceptions, is generally in a state of serious disrepair, and to construct more feeder roads and tracks in support of agricultural development. 29. The road transport industry is relatively open, with a sizeable number of small private enterprises providing adequate goods and passenger transport services. Regulations govern only vehicle registration, licensing  - 10 - and inspection, tariff limits for inter-city taxi and trucking services and vehicle weight, dimensions and axle load limits. Control of axle-load legal limits is not enforced though five weighbridges were procured by MPW in 1976. One weighbridge was assembled and installed but the access ramps have not been built; enough parts of the other weighbridges are available to assemble two more bridges. The Government has agreed to install the remaining weighbridges and provide sufficient funds for their operation and maintenance (Section 3.09 of the draft Development Credit Agreement). 30. Vehicle registration records indicate that the vehicle fleet has stagnated in recent years, fluctuating around a total of 18,000 units. About 63 percent are private cars and taxis, 29 percent trucks and 8 percent buses. Enforcement of vehicle registration has been lax especially since the military coup in 1980 and as a consequence the actual number of vehicles in use may be somewhat higher. Highway Administration 31. MPW has responsibility for the planning, design, construction and maintenance of all public roads and buildings, but various other ministries and governmental agencies have independently become involved in feeder road development. Coordination has been poor; at times feeder roads of low quality have been constructed and considerable uncertainty exists about the responsi- bility for their future maintenance. The transport planning and coordination unit supported under the Feeder Roads Project (para. 26) is expected to address this issue. After a period of satisfactory performance during the second half of the seventies when MPW received sizeable budgets for new road construction and reasonable funding levels for road maintenance, MPW's ability to execute its tasks effectively began to deteriorate as a result of progres- sively declining budget appropriations, a weakened management, and increa- singly lax administrative and accounting controls. 32. The proposed project would attempt to reverse this decline by providing technical assistance to strengthen MPW's technical and financial management in key areas and by ensuring that minimum road maintenance funding is provided. The Government has agreed to install by July 1, 1984 an improved accounting system for road maintenance and from fiscal year 1985 introduce a new functional recurrent budget satisfactory to the Association (Section 3.06 of the draft Development Credit Agreement). The Government has also agreed to allocate specified minimum amounts for materials, fuel, spare parts and other supplies for road maintenance from the second half of FY 1984 to the first half of FY 1987 (Section 3.06 of the draft Development Credit Agreement). 33. MPW employs a staff of 3,200 of which about 2,200 are in the Operations Bureau and are assigned to road maintenance. The professional staff of MPW includes 45 engineers, 8 architects, 1 transport economist and 2 accountants. Management is entirely Liberian with only a few expatriates on local contracts remaining in technical positions. Senior staff is generally well qualified, many having studied abroad. However, a large number of experienced professionals left MPW after 1980 and as a consequence there is a scarcity of good middle-level engineers and managers. MPW's non-professional staff receives basic training at its Road Maintenance Training Center which  - 11 - was established with assistance from the Federal Republic of Germany. At present, the Center is being reinforced by instructors and teaching aids provided under a Japanese loan. Further on-the-job training of MPW staff would be undertaken by consultants to be engaged under the proposed project. Road Construction and Maintenance 34. Major road construction is normally executed by foreign contractors but MPW's Bureau of Construction has developed the capability to undertake force account construction works, particularly of secondary and feeder roads. However, the efficiency and quality of these force account works has, al times, been less than satisfactory and MPW is, partly as a result, expressing renewed interest in helping develop the domestic contracting industry. While domestic contractors do not have the capacity to construct paved roads, they have periodically constructed rural secondary roads, private roads for con- cessionaires and have been sub-contractors to foreign contractors. The few active domestic contractors have fair engineering competence but are generally under-equipped, lack adequate managerial expertise, have insufficient working capital and have been hampered by lack of job continuity due to the decline in road construction activity in recent years. To further the development of domestic contractors, the Feeder Roads Project is providing technical assist- ance to train and assist domestic contractors in work planning, job cost estimation, bid preparation, etc., and includes US$4.0 million for feeder roads construction by domestic contractors. Bids for the first tranche of roads to be constructed are expected to be invited soon. In addition, under the proposed project funds would be earmarked for regravelling works on the primary network to be carried out by local contractors, thereby providing them with continuous work that would enable them to improve their capabilities. 35. While road user taxes (mainly fuel taxes and import duties on vehi- cles and spare parts) are more than adequate to meet maintenance funding needs, the severe financial constraint experienced by the Government over the last few years has resulted in insufficient budgetary allocations to MPW for recurrent maintenance expenditures. Furthermore, actual expenditures increas- ingly went to meet MPW's payroll, leaving progressively smaller amounts for essential maintenance inputs, such as fuel and spare parts to maintain and operate existing equipment. Consequently, routine maintenance of the network has been only partial and periodic maintenance negligible, creating a substan- tial maintenance backlog. Although the Government is taking steps to address some of the managerial weaknesses in MPW and making an effort to restructure MPW's maintenance budget by increasing funding for material inputs, external assistance for operating costs and expert services are needed to reestablish MPW's maintenance capability. Past Bank Group Assistance 36. Bank Group assistance for Liberia's highway sector totals US$63.7 million for five projects, of which three have been completed; besides these road projects, some of the agricultural development projects supported by the Bank Group also included rural road components. The First Highway Project (Loan 368-LBR, US$4.25 million, 1964), which was completed in 1969, financed  - 12 - reconstruction of two primary roads and provided equipment for road mainte- nance. One of the roads, the Paynesville-Robertsfield road (28 miles), suffered rapid pavement failures due to pervious bituminous surfacing and has needed continuous repairs and eventually was reconstructed under the Fourth Highway Project. The experience, a frequent one in the early days of bitumi- nous road construction in all African countries, provided a useful lesson on the care needed in selecting materials and on the importance of carefully supervising the construction of such roads. The Second Highway Project (Loan 907/Credit 395-LBR, US$5.6 million, 1973) financed the construction of the Monrovia Bypass, provided additional road maintenance equipment and technical assistance for road maintenance and included preinvestment studies. The project was completed successfully at the beginning of 1978. The Third Highway Project (Loan 1156-LBR, US$27.5 million, 1975) included the construc- tion of a road and river crossing in Monrovia, construction of the Totota- Ganta section of the principal trunk road into the interior, equipment and operating funds for a feeder road construction brigade in support of the Lofa County Agricultural Development Project, and technical assistance for road transport planning and studies. The project was completed in 1981, more than two years behind schedule but within the original cost estimate. The Project Completion Report issued on December 30, 1982 concluded that, in retrospect, it might perhaps have been better to split the Totota-Ganta road works into two contracts. 37. The Fourth Highway Project (Loan 1573-LBR, 1978, US$13.8 million) included rehabilitation of the Paynesville-Totota and Paynesville-Robertsfield roads, technical assistance for the organization and execution of road mainte- nance, and technical assistance for road transport planning and studies. All project components have been completed, except for the Paynesville-Totota road and a feasibility study which was deferred. The Paynesville-Totota road reha- bilitation suffered a substantial cost overrun due to a one-year delay in contract award, a substantial increase in the scope of works due to faster deterioration of the existing pavement than anticipated during the design stage, and additional delays caused by the civil disturbance of 1980 and subsequent contractor claims. Consequently, part of the road and a bridge were left uncompleted. A supplemental credit (Credit 1311-LBR, 1982, US$1.8 million) was approved by the Executive Directors to help reconstruct the bridge and update the engineering of the remaining roadworks. These activi- ties were sucessfully completed by the end of 1983. The African Development Bank (ADB) has agreed in principle to finance the remaining road works as a separate project in 1984. As for the technical assistance for road maintenance, satisfactory progress was made in the planning of road mainte- nance but the improvement of actual maintenance operations was hampered by insufficient operating funds, frequent changes in Government personnel and the inability of the consultants to organize the field work effectively. The Feeder Roads Project (Loan 1664-LBR, 1979, US$10.7 million) continues and expands the feeder road activities started under the Third Highway Project. It originally consisted of the construction or improvement of some 700 miles of feeder roads, mostly in support of agricultural projects, related con- sultant services, technical assistance for the development of the domestic contracting industry, and technical assistance to strengthen the transport coordinating role of the Ministry of Commerce, Industry and Transport (MCIT). From the onset the project suffered from inadequate local funding, poor  - 13 - management and procurement problems and has suffered substantial delays. At the request of the Government, the Bank approved a loan amendment in September 1982 reducing the project's scope, increasing disbursement rates and setting up a revolving fund to ensure timely availability of operating funds for the project. Simultaneously, the Government took steps to strengthen project management and, as a result, feeder road construction was resumed in late 1982 and is showing increasing progress. PART IV - THE PROJECT 38. As originally conceived, the proposed project was to continue up- grading the primary network by paving road sections identified and prepared under earlier projects and to continue improving road maintenance. However, in view of the Government's limited ability to provide counterpart funds for new road construction, the deterioration in MPW's management capability and the inadequacy of present maintenance operations, it was agreed with the Government that the proposed project should focus on strengthening MPW's management and on improving road maintenance. The project was prepared by the Government with the assistance of consultants under the Fourth Highway Project. It was appraised in September/October 1982 and negotiations were held in Washington in December, 1983. The Liberian delegation was headed by the Honorable James Burphy, Minister of Public Works. The U.S. Agency for International Development was represented by Messrs. Julius Cole and David Walsh. Annex III contains supplementary project data. The Staff Appraisal Report No. 4393-LBR of February 21, 1984, is being circulated separately to the Executive Directors. Project Description 39. The proposed project includes: (i) technical assistance and training to improve MPW's financial and administrative management and help execute maintenance activities; (ii) a three-year routine maintenance program covering the entire public road network of about 4,725 miles; and (iii) periodic maintenance on about 450 miles of gravel roads by both force account and contractors. 40. The proposed technical assistance would strengthen MPW's financial and administrative management and assist to plan and execute the maintenance program. Under a Project Preparation Facility advance of $340,000 granted in May 1983, funding for about 30 man-months of consultant services was provided to start these activities, which would continue under the project with an additional 174 man-months of consultant services. Furthermore, about 10 man- months in short-term consultant services would be included to help the technical assistance team prepare a follow-up maintenance program. Consultant services would also be included in the project to verify the propriety of project expenditures periodically. Under the overseas training program, a number of mechanics that have received basic training in MPW's Road Mainte- nance Training Center would be sent abroad to receive complementary vocational training so as to upgrade their skills in heavy equipment repair and workshop management. This would prepare them for eventual assignment to supervisory  - 14 - positions in MPW's workshop organization. Some scholarships would also be provided to train MPW staff in accounting and business administration to strengthen MPW's management capability. 41. The routine maintenance program would initially cover the all-weather road network of 2,450 miles and would gradually be expanded to include the 2,280 miles of dry weather roads. In the face of budgetary constraints, routine maintenance operations have been set at minimum standards compatible with the type of road and level of traffic, and would give priority to the most urgent needs. Spot and emergency repairs would be carried out where required to ensure road serviceability. Maintenance operations, such as grading, compacting and anti-corrugation brushing, would mainly be carried out with mechanical equipment; pothole filling, patching, emergency repairs, and shoulder and structure clearing would mostly be done by manual labor. Given the high wage rates prevailing in Liberia (about US$10 per working day) more labor-intensive maintenance does not seem justified. MPW's road maintenance equipment fleet is adequate in number and basic condition but a few additional items of equipment would be procured to balance the equipment available to work brigades. The Government has agreed to use all existing road maintenance equipment exclusively for the purpose of carrying out the project and that it would maintain the equipment adequately thereafter (Sections 3.03(b) and 3.10 of the draft Development Credit Agreement). Some of the workshops would also be upgraded and equipped under the project with the necessary machine and hand tools. 42. As part of a longer term effort to restructure the maintenance budget, the Government intends to carry out a phased program of payroll reductions by gradually eliminating maintenance staff surpluses and by hiring workers for the dry season only, during which they can do road maintenance work, rather than all year round as has been the practice up to now. These policy changes would make it possible to redress the imbalance that has existed up to now between wage and materials allocations in the road maintenance budget. 43. Between 1980 and 1982 the Operations Bureau set up three regravelling brigades with equipment obtained under a Japanese equipment loan, but the brigades were only able to function intermittently for lack of operating funds, thus creating a substantial regravelling backlog. The project would help to reduce the periodic maintenance backlog. Road upgrading works would be limited to an absolute minimum with a view to maximizing regravelling mileage. The Government has agreed to (i) limit upgrading earthworks to no more than 10 percent of total regravelling volume; and (ii) starting December 1, 1984 review with the Association once every six months the physical progress of work done by MPW's regravelling brigades (Section 3.07 of the draft Development Credit Agreement). The works would be carried out by the existing force account brigades but, in addition, part would be let to contractors to further the development of the local contracting industry and speed up project execution. The Government would furnish IDA, no later than May 15 of each year of project implementation and for five years thereafter, for its review and comment, the maintenance budget and work program proposed for the following fiscal year, and has agreed not to undertake any activities in the sector which would impair the efficient carrying out of the project (Sections 3.11 and 3.12 of the draft Development. Credit Agreement).  15 - Project Execution 44. MPW would be responsible, through its technical services and field units, for all aspects of project execution. Bidding documents for goods and civil works would be prepared by the Government with the assistance of consul- tants. Project implementation is expected to take three years. Under the PPF advance, the technical assistance component was started in September 1983. Project Cost and Financing 45. The total cost of the project, net of taxes and duties, is estimated at US$19.4 million, of which US$14.5 million are capital costs and US$4.9 million incremental recurrent costs. Non-waived taxes and duties amount to US$0.7 million. The foreign exchange cost is US$11.5 million for capital costs and US$4.0 million for incremental recurrent costs. Local costs net of taxes and duties amount to US$3.8 million. Project costs are based on November 1983 prices, and a summary breakdown is given in the Credit and Project Summary. The cost estimates are based on data and experience in Liberia and neighboring countries. The cost per man-month of expatriate consultant services is estimated to average US$13,000, including fees, international travel and local subsistence, which is in accord with the Region's experience. Physical contingencies have only been applied to consulting services and equipment since the periodic and routine maintenance elements are based on flexible programs. Price contingencies have been calcu- lated using the following expected inflation rates: 8 percent in 1983; 7.5 percent in 1984; 7 percent in 1985 and 6 percent in 1986. 46. IDA and USAID would finance 75 percent of project costs net of taxes. The IDA Credit of $11.4 million equivalent would cover 66 percent of project capital costs and 38 percent of incremental recurrent costs of materials on a declining basis (Schedule 1 of the draft Development Credit Agreement). USAID has agreed to provide a development assistance grant of US$3.1 million to finance maintenance works done by contractors and training costs. The Govern- ment would contribute US$4.9 million, or 25 percent of project costs. To ensure that MPW has sufficient working capital to meet those expenses not financed under the Credit, the Government would open a Project Account to be used exclusively for payment of goods and services required for the project. An initial deposit of $400,000 would be made a condition of effectiveness of the Credit and a further deposit of $200,000 would be made by December 1, 1984 (Sections 3.01(b) and 6.01 of the draft Development Credit Agreement). Procurement 47. Contract periodic maintenance (US$2.9 million) and fellowships US$0.2 million are co-financed by USAID and would follow USAID procedures. Highway maintenance equipment (US$0.7 million), and non-proprietary spare parts and road building materials (US$3.0 million) would be grouped whenever possible into contracts valued at US$60,000 or more and would be procured through ICB. A margin of preference equal to 15 percent of the cif bid price of imported goods or the actual customs duties and import taxes, whichever is less, would be allowed for domestic manufacturers. Contracts for miscellaneous equipment, tools, spare parts and materials valued at less than US$60,000  - 16 - would be purchased through LCB, up to an aggregate limit of US$1.5 million. Minor items of essential and urgently needed spare parts and materials costing less than US$10,000 per purchase and aggregating not more than US$500,000 may be procured by local shopping or by direct purchase in the case of a single local supplier. Equipment overhaul by contract (up to US$0.6 million) would be carried out by authorized dealers and proprietary spare parts (US$3.9 million) would be procured from the original manufacturers, under directly negotiated contracts satisfactory to the Association. Fuel (US$6.6 million) would be procured through LCB from local distribution companies. Consultants would be selected in accordance with IDA guidelines. All IDA-financed works contracts, and goods contracts over US$60,000 each, would be subject to prior review by the Association, which would cover about 80 percent of the total value of such contracts. Other contracts would be subject to selective post- award reviews. Disbursements 48. Disbursement of the IDA Credit would be on the basis of 100 percent of foreign costs and 90 percent of total expenditures procured locally for equipment, tools, spare parts for equipment overhaul and contract equipment overhaul; 80 percent of materials costs for force account regravelling; and 100 percent of foreign costs of consultant services. For materials for routine maintenance, IDA would disburse 30 percent of total expenditures made before 1985, 24 percent in 1985 and 15 percent made after 1985. The balance outstanding of the Project Preparation Facility would be refinanced out of the IDA Credit. 49. As discussed in Part I of this report, the Government faces severe financial constraints which make it difficult for it to provide the working capital required to execute the project. In view of this, it is recommended that SDR 575,000 (US$600,000 equivalent) from the IDA Credit be advanced to a Special Account which the GovernmXent would open in the National Bank of Liberia (Section 2.02(c) and Schedule 4 of the draft Development Credit Agreement). Opening of the Special Account would be a condition of Credit effectiveness (Section 6.01(a) of the draft Development Credit Agreement). The account would be replenished by the Association on receipt of disbursement requests supported by appropriate documentation. 50. Disbursements for equipment, tools, spare parts for equipment overhaul, contract equipment overhaul by authorized dealers and consultant services would be made against full documentation submitted to IDA. Withdrawal applications for materials costs of routine and periodic mainte- nance by force account would be supported by certificates of expenditure which would be checked in the course of project supervision. Audit 51. The Government would have all project-related accounts audited yearly by a firm of independent auditors acceptable to IDA. The audit reports would be in a form acceptable to IDA and would include a separate opinion on the Special Account and on the records in support of statements of expenditure.  - 17 - Benefits and Risks 52. The main expected benefits of the project are that it would strengthen MPW's managerial and financial accountability and improve the coverage and efficiency of road maintenance, thereby preventing further deterioration of capital invested in roads and equipment. This would reduce transportation costs for both the urban and rural population. 53. The economic justification of the project is based on an assessment of economic costs and benefits with and without the project. Benefits include a significant reduction in vehicle operating costs, savings from postponed road reconstruction, improved access to markets and areas that are now diffi- cult to reach due to the poor state of the road network, and enhancement of the institutional capacity of the executing agency to carry out road mainte- nance programs efficiently. The costs taken into account in the economic evaluation include the incremental cost of routine maintenance, regravelling and technical assistance; these represent 95 percent of total project costs. The economic rate of return is well over 100 percent, which is not uncommon for this type of project where relatively small outlays permit the realization of sizeable benefits from past investments. 54. The main risks of the project are that anticipated improvements in MPW's management performance would not fully materialize and that the Govern- ment would be unable to provide sufficient funding, reducing maintenance output. As structured, the project attempts to minimize these risks by providing technical assistance and gradually phasing in the Government's contribution to incremental recurrent maintenance costs. PART V - LEGAL INSTRUMENTS AND AUTHORITY 55. The draft Development Credit Agreement between the Republic of Liberia and IDA as well as the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement are being distributed to the Executive Directors separately. 56. In addition to the features of the Development Credit Agreement which are referred to in the text and listed in Section III of Annex III, special conditions of Credit effectiveness would be: (a) that the Project Account and the Special Account have been opened (paras. 46 and 49); (b) that an initial deposit of $400,000 in the Project Account has been made (para. 46); and (c) that arrangements satisfactory to the Association have been made for obtaining the USAID grant (para. 46). 57. I am satisfied that the proposed Credit would comply with the Articles of Agreement of the Association.  - 18 - PART VI - RECOMMENDATION 58. I recommend that the Executive Directors of the Association approve the proposed Credit. A. W. Clausen President Attachments Washington, D.C. February 24, 1984  ANNEX I - 19- Page 1 T A B L E 3A LIBERIA - SOCIAL INDICATORS DATA SHEET LIBERIA REFERENCE GROUPS (WEIGHTED AVERAGES) la MOST (MOST RECENT ESTIMATE) /b RECENT MIDDLE INCOME MIDDLE INCOME 1960-'-b 1970/ ESTIMATE-B AFRICA S. OF SARARA N. AFRICA & MID EAST AREA (THOUSAND SQ. EH) TOTAL 111.4 111.4 111.4 AGRICULTURAL 6.1 6.1 6.1 GNP PER CAPITA (USs) 170.0 270.0 520.0 1147.9 1340.0 ENERGY CONSUlMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 96.0 600.0 502.0 724.2 810.4 POPULATION AND VITAS STATISTICS POPULATION,MID-YEAR (THOUSANDS) 978.0 1335.0 1941.0 URBAN POPULATION (X OF TOTAL) 20.5 26.2 33.7 28.5 47.4 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 3.7 STATIONARY POPULATION (MILL) 12.6 YEAR STATIONARY POP. REACHED 2130 POPULATION DENSITY PER SQ. EM. 8.8 12.0 16.8 56.5 36.0 PER SQ. KM. AGRI. LAND 160.3 220.3 306.5 131.8 449.0 POPULATION AGE STRUCTURE (1) 0-14 YRS 45.4 46.8 46.3 45.9 43.9 15-64 YRS 52.0 50.8 51.1 51.2 52.8 65 AND ABOVE 2.6 2.5 2.5 2.8 3.3 POPULATION GROWTH RATE (1) TOTAL 2.8 3.1 3.4 2.8 2.9 URBAN 5.4 5.6 5.7 5.3 4.6 CRUDE BIRTH RATE (PER THOUS) 50.1 48.8 49.7 47.6 42.5 CRUDE DEATH RATE (PER THOUS) 20.6 16.5 14.2 15.2 12.0 GROSS REPRODUCTION RATE 3.4 3.4 3.4 3.2 3.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUS) USERS (X OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PROD. PER CAPITA (1969-71=100) 96.0 101.0 91.0 95.7 97.5 PER CAPITA SUPPLY OF CALORIES (X OF REQUIREMENTS) 114.0 100.0 114.0 97.1 102.3 PROTEINS (GRAMS PER DAY) 46.0 43.0 51.0 56.0 72.0 OF WHICH ANIMAL AND PULSE 11.0 12.0 13.0/c 17.2 17.8 CHILD (AGES 1-4) DEATH RATE 45.5 39.6 33.1 23.6 15.2 HEALTB LIFE EXPECT. AT BIRTH (YEARS) 44.1 49.1 53.5 51.9 57.2 INFANT MORT. RATE (PER THOUS) 194.0 173.8 151.5 117.6 104.2 ACCESS TO SAFE WATER (%POP) TOTAL .. .. 20.0/d 25.4 59.3 URBAN .. .. 64.07/ 70.5 84.9 RURAL .. .. 6.07T 12.3 37.5 ACCESS TO EXCRETA DISPOSAL (X OF POPULATION) TOTAL .. .. 11.0/d URBAN .. .. 35.0/d. RURAL .. .. 6. 0T/Ad POPULATION PER PHYSICIAN 12600.0 11750.0 9610.0/e 12181.6 3536.0 POP. PER NURSING PERSON 1410.0/f 2670.0 1420.7Te 2292.0 1820.7 POP. PER HOSPITAL BED TOTAL 710.0 590.0 700.0/e 1075.4 643.3 URBAN 180.0 190.0 .. 402.3 545.0 RURAL .. .. .. 3926.7 2462.0 ADMISSIONS PER HOSPITAL BED .. 27.7 .. .. 26.4 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. URBAN 3.91 .. RURAL .. .. AVERAGE NO. OF PERSONS/ROOM TOTAL .. .. URBAN 1.7/ .. .. RURAL .. .. ACCESS TO ELECT. (X OF DWELLINGS) TOTAL .. .. .. .. 46.2 URBAN .. .. .. .. 77.6 RURAL .. . . 16.1  20- ANNEX I Page 2 T A B L E 3A LIBERIA - SOCIAL INDICATORS DATA SHEET LIBERIA REFERENCE GROUPS (WEIGHTED AVERAGES) /11 MOST (MOST RECENT ESTIMATE) /b /b_ lb RECENT MIDDLE INCOME MIDDLE INCOME 1S60 1970- ESTIMATE- AFRICA S. OF SAHARA N. AFRICA & MID EAST MDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 31.0 50.0 66.0 97.2 89.6 MALE 45.0 67.0 82.0 103.1 104.8 FEMALE 18.0 33.0 50.0 88.5 72.4 SECONDARY: TOTAL 2.0 9.0 20.0 17.2 41.7 MALE 3.0 13.0 29.0 23.5 52.8 FEMALE 1.0 4.0 11.0 14.2 31.2 VOCATIONAL (X OF SECONDARY) 11.7 5.3 4.3 5.2 10.3 PUPIL-TEACHER RATIO PRIMARY 32.0 36.0 25.0 42.9 31.9 SECONDARY 14.0 17.0 17.0 23.7 23.3 ADULT LITERACY RATE (X) 8.9/h 15.0/i 25.4 37.1 43.3 CONSUMPTION PASSENGER CARS/THOUSAND POP 1.0 11.1 5.5/e 18.8 18.0 RADIO RECEIVERS/THOUSAND POP 102.2 116.1 170.8 97.8 138.1 TV RECEIVERS/THOUSAND POP 1.5 5.2 11.2 18.6 45.6 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 0.8 5.2 6.1 18.2 31.0 CINEMA ANNUAL ATTENDANCE/CAPITA 0.8 0.7 0.8 0.6 1.7 LABOR FORCE TOTAL LABOR FORCE (THOUS) 380.0 482.0 665.0 FEMALE (PERCENT) 33.9 32.5 31.4 36.1 10.7 AGRICULTURE (PERCENT) 80.0 75.0 70.0 56.8 42.5 INDUSTRY (PERCENT) 10.0 12.0 14.0 17.5 27.8 PARTICIPATION RATE (PERCENT) TOTAL 38.9 36.1 34.3 37.0 25.6 MALE 51.9 49.0 47.0 47.1 45.4 FEMALE 26.1 23.3 21.5 27.0 5.6 ECONOMIC DEPENDENCY RATIO 1.2 1.4 1.4 1.3 1.8 INCGfE DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5% OF HOUSEHOLDS .. 61.7/ .. HIGHEST 20% OF HOUSEHOLDS .. 72.67. LOWEST 20% OF HOUSEHOLDS .. 5. 37 LOWEST 40% OF HOUSEHOLDS .. 10.97. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. .. 534.2 276.1 RURAL .. .. 75.0/c 255.9 177.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN ' ' ' 137.0/k 491.5 400.0 RURAL .. .. 125.0/c 188.1 283.3 ESTIMATED POP. BELOW ABSOLUTE POVERTY INCOME LEVEL (%) URBAN .. .. 23.0/c * 22.0 RURAL .. .. .. ,. 30.8 NOT AVAILABLE NOT APPLICABLE N 0 T E S /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, "Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" between 1969 and 1971; and data for "Most Recent Estimate" between 1979 and 1981. /c 1977; /d 1974; /e 1978; /f 1964; /g 1956, city of Monravia only; /h 1962; /i 1973; /j Population, higher income calculated as residual; includes expatriates; /k 1975. Miay 1983  - 21 - AN'NEX II Page 3 tEFtnnTONfl Pr nonIut ItnICaTORi Notes: Although the d.ts are dranfol ore.enrtyjde h 0s nhr-ta and elibleaisshoII aln he noted that they. may not he nts 1rtoo coparable ber.nse nf the hank nf stodordized detfnriwo an nnpone ydfeetcatnni nlningomdn.Tedt r,nntees sflt The reerenc geoam areII) te sam nnanry grup nIthe sbjentonanty andIll a ountr geno uittsneemac hiherIaIragaincom showthe nonctygroupof ti genopl ca9sa a ha a oso.stn h Iafrg ath nounriem y amongth iniatr depande on. fthe -l aa hoilcyh of otan ix hno t haefa canionl aomtp Ithe 1911 sad 1980 data. Porulonlon incS If DfluraIne- Peso h- Papu ltio di,ided y n,taue of pactin.Ing 1971 and 1981 date. Ponalanlan par toecatal aed - total. nrban. and rural - Population (innafll.Win lhe V IrVcaad url diied ptercmatt atio h.eialbd 19all191,- .and Ifl at.b at laamni ogIna p..hys -l.d Inian debio idmen by cratdon If ricpahty nanodi 1970 ..d 1980 d.l.. 1960, f,caeat rtInloe. url opial,hoenr,ictdeheli i 'EhithtSttlltPi. CAia-Anu paehfoeatt tnmaia sadin-dni nannena I nan' panmneohyimidi d by a phmiha Ib f by -meica and -a-hrna aefotlkyl in bu llohoan ofSalli enIcee per fallna; rr_di iitdrnsa adclfclnis o tnshnlrro a9d,190 and199 dono. urbang b -ipinulsincueOIarniplgoolhaitl .i ua dita. from hmpitule diviodaby nba nohar at bade irbon"'Ipuhnh.n. ..can atltndohI tonIa'ae Phun to tanskpafuhohaan Pnralatan Pojactona - hlnoboldaonsist-of agroupof iadotdoal int sare InIng nartd Popsiyinaii year li g- faret apiu Io pajennaaebsda 91adiair-main etal.ifd barderu ihada a rsytah nlddi totat 1 papllata byae n ,enan thir -atln gand fetiiyhe-ale too atcaia puratm.I y ranee170,. Projn98opaaeier franiyatm epria ofthra Peanaahsraf. carson rsfoi-1ianalu Pa.anroaaaenbr capita Moone Yea, md fanie lif eIpectaly atslii9 gat 7. dPel i.irtd haipectinly.I iloellIngan .da nn-pa tettrcormt de1e70,The paymenern for.fertilty-rote whitbhut thra.ilena...noccupied parts asaaing acine i fetiliy acordng o inatelene an pai tuu7 Acem to tlartlcldnyd by recen nfb. do fita -b oalerdo.adrua castinsh-alient at60 1ori 7ta td fe19iycrna1 o poedat opoe. ttoa, ran admaNdIatgtepetney mioc th birh rte i sqal ateduhrt,adme h age 98fPtiutlot'i..a -I i onIenad onll y utte firti t ae ADjuIood tanll.en nanl:'Amb.I. ,J, y yI, _Ie popolatiniOwe ta aatisoed on ni bash n the yrnented caoocaer-prinary chool-ae papuhatona; nroahiy icihdei hoidren gedpb-i haInafte'plta nteyar I--Ilt,an "le, ri f doIln tyushn jaa u ifrn lantao rsryeuatn o -etiiyaiet .rpta -nen Ithne nanarebothoiaoelddatoa...atayncelprna tsr taiti y arlatr i eahd..Te.ao halsaevneyliaasoe uri aedelenoabraceltentlscoo ae Per n. -h. oglnolu iailan -Compute ow aJ-- for aalnaledural flanyeeal nldd on ISPly;16,17 tnt ipso dais Eoota a -ennllmo InreT ifannd.r rctaalisoun P,plta e turuaIrreo Chluan (0-i auen .a unohog-ug 115- tald ahia, o til rahe rgamelb trt aeed ropaolat 1990 190lna 1t a. Pnrtl-cacterrnn I - 10iay n d tl,anary-ftltdeteraedI year poolatlo for 111-hI,l980-7heant 70-8CATIandnghna pouan f Got,h gate- aroo - h ah -deraitrh t runca iof urba Adlieayrc ecn)-hnraaaot at ora i rtle purlaIon for~la i0-AI, lIt-OG and 1971il. 0 dorcelaageIofdtato adult.popu-m Innae Tyar o rr irittrilnh hIt 1::ally i-Awnul hrd brthsplr-hunnnd 6 rid yerpplatiat; 1960I 1900, and 981 daaaifn-fint,h.y poulta-;inl. 90 n l bdot. cat55 n ao-hnegtproa; I fnfho iaIgblacs,hare " looms isrodunnio tait-aeraennbro duiaroneolllerI ni. lary aIolltal. j- fnIiityatlra;o Iuol PIdarm triaadn i ai 91 o r BIDtnha geeral ublin--o tfuean at Pupulatto e uetat un di. iiernad recalcarnin reaurnoIms 'andi ens einahno ml at biri-nactal deinet adaraupinta at.a bo-nI tail p 1nnad 9ontimaalaedDIenig pragran. gn aeeinar .rrhaadaautt-laeor ...rad.i onse o960 197-e0igag 1-4 erh a hIII-cn19h80clencl:c.nntrearu- n yar Yhortlwireriuuf Oh wns oa Ine ffn routu a aIt Ih-JIhh-Idoo o capIta pob'luarlun-Oontnd cDI nuoala to hr-utta Iaarll ro. th'iaI incalde Pam1d an notional197acagIprndunerdprina weights 19th-tO, 1970,-atd 198 tots. h9.701ilOt plant' `M1lae-Ilddb aielI ah energe~uin1attat oa t-w supp0 homanahbe nnutr2e n iape ona n urpaolhtrYlln -aehe T,. ttudens,et. a canIedInD Cactiitywo health -l onieigeornenlaneaaebapagtafaitanpret8ofttlthrfr;19,1bSnd1981 data. netespl a fndpeoda, easupl oflad t efne so dbnn. Idrtiloolntna rrat otl ue ndfel-anulatn oil,nncalot lgrata tta potinpedopndlraeta alood peIalae otnt,.lno..a.p.u.ttaftlg-rspntrry pua rcbn ialhIIgasso h ewio-pAea,,ea1t,hOt n 91iuo hs athtdo 10' ancbaioac Pe aplilta roatei -uroly frol- nt n paa rcIn nup-pautfon nba ta-a labur iarc. .- detdIa aiaasd 555i gre-ta pare Iday; i 199-b, 1970, and S1977 f Iaa itOf-EITIiTi at-r'I ht.171ad18 data minldiha b.int hpetd Lnlthjcnnaiderabls un inn. -e.. psraM g e tuno itui 96,17 n 91daaInaurpnrt"caeinli than -anoot IIoe hams, Tb ... a in 'MDMl NTo of sapl -tnn, rit,ad urllwil etaoiaaconomfafnrata saner- dspy(nldstetdsraanto tsasrdhtttnrdchtr Porer..Incom henr (~I arfia - urw In oa u"Itaatae natr no usthn12n prncs hrt7n,uoo andcarl rludnarufrt-InathonIar-idatrrneprnn les.Irua raeadtabenato.ipyttnettsfn rrrl rnatnyphtolraadoa lltio-ar e"aa- cn the day In fenohing the Isaisy' -5cl dnaladnIIord .... Itends.-- rrlta adnt ole(natah,aba... rr.. oardbecr s.ay tIidetelly"to addipel Ii r ibanteamni,t Icanol n uilI1aDnio reinSt and sathar nniota" iInsfl9ay-S9b3  - 22 - ANNEX I Page4 ECONOMIC INDICATORS - LIBERIA ANNUAL RATE OF GROWTH GROSS NATIONAL PRODUCT IN 1982 1/ (% 1971 CONSTANT PRICES) US$ Million % 1978-81 1982 GNP at Market Prices 930.7 100.0 -0.9 -4.3 (Jross Domestic Investment 233.5 25.1 -6.6 12.9 Gross National Saving 93.5 10.0 18.4 -0.6 Current Account Balance -44.6 -4.8 - - Exports of Goods, NFS 487.4 52.4 -2.7 -9.9 Imports of Goods, NFS 513.5 55.2 -10.3 -7.9 OUTPUT, EMPLOYMENT AND PRODUCTIVITY IN 1982 Value Added Employment 2/ V. A. Per Worker US$ Mln. % 000 % US$ % Agriculture 345.0 36.3 515.0 79.3 669.9 45.8 Industry 197.8 20.8 40.0 6.2 4945.0 338.1 'ervices 407.1 42.9 94.5 14.5 4307.9 294.6 Total/Average 949.9 100.0 649.5 100.0 1462.5 100.0 GOVERNMENT FINANCE Central Government 1981/2 4/ 1982/83 4/ US$ Million % of GDP US$ Million % of GDP Current Receipts 237.9 21.2 223.3 19.6 Current Expenditure 289.0 25.8 252.6 22.2 Current Surplus -51.1 -4.6 -29.3 -2.6 rCapital Expenditures 96.4 8.6 90.9 8.0 External Assistance (Net) 41.4 3.7 33.0 2.9 MONEY, CREDIT AND PRICES 1978 1979 1980 1981 1982 _ Millions Liberian $ Outstanding, End of Period7_ Bank Credit to Public Sector 61.7 92.4 152.1 192.1 255.3 Bank Credit to Private Sector 143.8 184.6 132.9 130.9 123.7 (Annual Percentage Changes) Consumer Price Index 3/ 7.4 11.5 13.8 8.2 6.2 Bank Credit to Public Sector 315.8 49.1 64.6 26.3 32.9 Bank Credit to Private Sector 27.6 28.4 -28.0 -1.5 -5.5 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. 1/ Preliminary estimates 2/ Employment data subject to further verification 37r September - November 1964 = 100 4/ From data collected by IMF in August 1983 December 21, 1983  - 23 - ANNEX I Page 5 TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1980-82) 1980 1981 1982 1/ (Millions US$) US$ Million % Exports of Goods, NFS 613.5 540.7 487.4 Iron Ore 315.6 58.9 Imports of Goods, NFS 614.1 560.9 513.5 Rubber 80.8 15.1 Resource Gap (deficit =-) -0.4 -20.2 -26.1 Diamonds 27.7 5.2 Logs or Lumber 47.3 8.8 Interest Payments (Net) -23.9 -20.2 -28.0 Coffee 25.1 4.7 Workers' Remittances -32.0 -33.0 -35.0 Palm Products 4.2 0.8 Other Factor Payments (Net) -83.7 -72.0 -64.0 Cocoa 11.0 2.1 Net Transfers 35.7 68.1 108.5 All other Commodities 24.0 4.5 Balance on Current Account -104.5 -77.3 -44.6 Total 535.7 100.0 Direct Foreign Investment 2/ -10.7 -42.9 -45.0 Net MLT Borrowing 3/ 62.5 62.2 40.7 Disbursements 78.1 71.6 59.4 Amortization 15.6 9.4 18.7 EXTERNAL DEBT. DECEMBER 31, 1982 3/ Subtotal 51.8 19.3 -4.3 Public Debt, incl. guaranteed 641.2 Non-Guaranteed Private Debt Increase in Reserves (+) -61.8 -49.3 -57.5 Total Outstanding & Disbursed 641.2 Gross Reserves (end year) -101.2 -150.5 -208.0 DEBT SERVICE RATIO FOR 1982 4/ Net Reserves (end year) Public Debt, incl. guaranteed 33.2 Non-Guaranteed Private Debt Total Outstanding & Disbursed 33.2 Fuel and Related Materials Imports 152.1 129.6 115.1 Debt Service as % of Government Revenue 14.4 RATE OF EXCHANGE: US$1 = Liberian Dollar 1 IBRD/IDA LENDING (DECEMBER 31, 1982) (MILLION US$): IBRD IDA Outstanding & Disbursed 90.7 36.4 Undisbursed 46.0 49.4 Outstanding Including Undisbursed 136.7 85.8 1/ Preliminary 2T Data provided by Liberian authorities V IBRD Debtor Reporting System 4/ Debt Service as percent of Exports of Goods and NFS not available not applicable December 21, 1983  - 24 - ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN LIBERIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of November 30, 1983) Loan or Amount (US$ Million) Credit less cancellation Number Year Borrower Purpose Bank IDA 1/ Undisbursed Fourteen loans and five credits fully disbursed 87.22 24.96 - 1323 1976 Liberian Bank for Third Development Dev. & Investment Finance 7.0 - 1.86 1417 1977 Rep. of Liberia Education III 6.3 - 0.08 3/ 700 1977 Rep. of Liberia Bong Agriculture - 7.0 0.12 3/ 786 1978 Rep. of Liberia Rubber Development - 6.0 2.76 839 1978 Rep. of Liberia Forestry - 6.0 3.07 Development 1544 1978 Rep. of Liberia Rubber Development 7.0 - 7.00 1664 1979 Rep. of Liberia Feeder Roads 10.7 - 7.11 1765 1979 Rep. of Liberia Decoris Oil Palm 12.0 - 10.26 1907 1980 Rep. of Liberia Petroleum Explo. 5.0 - 0.24 1076 1981 Rep. of Liberia Small & Med. Scale Enterprises - 4.0 2/ 3.07 4/ 2080/81 1982 Rep. of Liberia/NIOC Mining 20.0 - 11.73 1223 1982 Rep. of Liberia Urban Development - 10.0 2/ 7.96 4/ 1242 1982 Rep. of Liberia Lofa II - 15.5 2/ 11.56 4/ 1306 1983 Rep. of Liberia Education IV - 13.5 2! 10.27 4/ 1311 1983 Rep. of Liberia Highway IV (Supplement) - 1.8 2/ 0.38 3/4/ Total 155.22 88.76 77.47 of which has been repaid 23.08 0.14 Total now outstanding 132.14 88.62 Amounts sold 0.41 of which has been repaid 0.41 0.0 Total held by Bank and IDA 132.14 88.62 Total undisbursed 38.28 39.19 77.47 1/ Prior to exchange adjustments. 2/ Calculated at rate of exchange in effect at approval date. 3/ Closing date is December 31, 1983. 4/ Calculated at rate of exchange at November 30, 1983 of SDR 1 = $1.05058. Note: The status of projects listed in Part A is described in a separate report on all Bank/IDA financial projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31.  - 25 - ANNEX II Page 2 B. STATEMENT OF IFC INVESTMENTS (as of November 30, 1983) Fiscal Year Obligator Type of Business Loan Equity Total 1966 Liberian Bank for Development Development and Finance Company Investment 0.250 0.250 1977 Liberian Bank for Development Development and Finance Company Investment 0.306 0.306 0.556 0.556 Less Sold 0.001 0.001 Now held by IFC 0.555 0.555  - 26 - ANNEX III Page 1 LIBERIA FIFTH HIGHWAYS PROJECT SUPPLEMENTARY PROJECT DATA Section I: Timetable of Key Events (a) Time taken to prepare project: 9 months (b) Agency which prepared project: Ministry of Public Works (c) Date of first presentation to the Bank, and date of first Bank mission to con- sider the project: June 1981/November 1981 (d) Date of departure of Appraisal Mission: September 20, 1982 (e) Date of Completion of Negotiations: December 9, 1988 (f) Planned Date of Effectiveness: July 1984 Section II: Special IDA Implementation Action IDA to advance SDR 575,000 from the Credit to a special account to be used for working capital for project execution (para. 49). Section III: Special Conditions (a) Government to install weighbridges and provide sufficient funds for their operation and maintenance (para. 29); (b) Government to (i) install an improved accounting system for road maintenance and introduce a new functional recurrent budget, and (ii) allocate specified minimum amounts to road maintenance (para. 32); (c) All existing maintenance equipment to be used exclusively for the project and maintained adequately thereafter (para. 41); (d) Upgrading works to be limited to no more than 10 percent of total regravelling volume and, starting December 1, 1984, progress of work done by MPW regravelling brigades to be reviewed every six months (para. 43); and  - 27 - ANNEX III Page 2 (e) Government to submit to IDA annually for review its road maintenance budget and program and ensure that no sector activities would be undertaken which would impair the efficient carrying out of the project (para. 43).   IBRD 16873 ' 1 019 L I BER I A MARCHl 1983 C, ~~TRANSPORTATION NETWORK AND 'r ' Bakerno, ~ROAD MAINTENANCE FACILITIES 1 ~~~~~~~~~~~~~~~~Road Maitenance. Training Center A Regionl nlcadgortor L cE I Dissnist Workshops 9 - Pored Highways C O)UN V-All Weather Roads Obongo0 Dry Weather Roads~ \ (I Coontr Cop too P0~~~~ehoe ~ ~ ~ ~ / No Ce.p/ I o st.sgI r -', I, OBEt R T htY RO bIMNOt CyoN2