Togo - Third Highway Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4904 PROJECT COMPLETION REPORT TOGO THIRD HIGHWAY PROJECT CREDIT 693-TO January 23, 1984 Western Africa Regional Of fice rThis documnent has a restricted distribution and may he used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   FOR OFFICIAL USE ONLY TOGO THIRD HIGHWAY PROJECT, Cr. 693-TO PROJECT COMPLETION REPORT Table of Contents Page Preface .................................................. i Basic Data Sheets ..... a.................... ................... ii Highlights ................................................. iv I. INTRODUCTION ................................. ....... * * . 1 II. THE SECTOR ......................... ......... so .... 1 III. PROJECT FORMULATION ....... ..................... 2 IV. PROJECT IMPLEMENTATION ............ . ................ . 6 V. ECONOMIC RE-EVALUATION ................................ 11 VI. INSTITUTIONAL DEVELOPMENT .......................... 13 VII. BORROWER AND BANK PERFORMANCE ...................... 13 VIII. IMPACT OF PROJECT ............ ........... -..... 13 IX. CONCLUSIONS ................. ......... .... * * * * * * * * * * * 14 Tables 1. Contract Awards 2. Forecasts and Actual Costs 3. Forecasts and Actual Disbursements 4. Economic Re-Evaluation Annex Borrower Comments 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.   TOGO THIRD HIGHWAY PROJECT, Cr. 693-TO PROJECT COMPLETION REPORT Preface 1. This Project Completion Report reviews the performance of the Third Highway Project for which Credit 693-TO, in the amount of US$10 million was made effective in September 1977. 2. This report, prepared by the West Africa Region, is based on review of the project files, correspondence with the Borrower and exami- nation of the transcripts of discussions concerning negotiations and Board Presentation. 3. In accordance with the revised procedures for project performance audit reporting, this Project Completion Report was read by the Operations Evaluation Department (OED) but the project was not audited by OED staff. The draft report was sent to the Borrower for comments; their reply is shown as an Annex.   - ii - TOGO THIRD HIGHWAY PROJECT - CREDIT 693-TO PROJECT COMPLETION REPORT Basic Data Sheet Key Project Data Original Actual Project Costs (US$ million) 12.9 14.3 Overrun (%) 11 Credit Amount (US$ million l 10.0 -- Disbursed -- 9.6_./ Cancelled Repaid -- Outstanding -- 9.6 Date physical components completed 09/79 07/80 Economic Rates of Return % 22 17 Institutional Performance Satisfactory Cumulative Disbursements (Uss milli-on) FY78 FY79 FY80 FY81 FY82 Appraisal estimate 2.1 8.1 9.7 10.0 10.0 Actual 2.4 4.9 7.8 9.2 9. d Actual as % of Estimate 114 60 80 92 96 Other Project Data Original Actual or Plan Revisions Estimated Actual Conception in Bank 03/75 Negotiations 12/76 Board Approval 03/77 Credit Agreement Date 04/77 Effectiveness Date 09/77 Closing Date 06/81 12/82 Borrower Republic of Togo Fiscal Year of Borrower January 1 - December 31 Follow on project Fourth Highway Project Credit Number Cr. 1139TO Amount (US$ millions) US$20 million Credit Agreement Date October 25, 1981 1/ Does not include EEC Special Action Credit of US$2 million administered by IDA. 2/ As of May 31, 1982.   - iii - TOGO PROJECT COMPLETION REPORT THIRD HIGHWAY PROJECT Mission Data No. of No. of Report Item Date Persons Man/weeks Date Appraisal 03/76 3 6 03/17/77 Supervision I 05/77 1 1 06/27/77 Supervision II 12/77 2 2 1/2 01/03/78 Supervision III 05/78 1 1 06/15/78 Supervision IV 12/78 1 1 01/26/79 Supervision V 03/79 2 3 05/25/79 Supervision VI 10/79 1 1 1/2 11/15/79 Supervision VII 02/80 2 2 1/2 03/13/80 Supervision VIII 05/81 1 1 1/2 06/22/81 Note: Completion Report was prepared without Field Mission. CURRENCY EXCHANGE RATE Name of Currency (abbreviation) CFA Franc (CFAF) Exchange Rate: Appraisal Year Average (1977) US$1 = CFAF 245 Intervening Years (1978-1980) US$1 = CFAF 220 Completion Year (1981) US$1 = CFAF 245 Average for Project Period US$1 = CFAF 225   - iv - TOGO THIRD HIGHWAY PROJECT, Cr. 693-TO PROJECT COMPLETION REPORT Highlights 1. The project provided a total of US$10 million to: (a) finance reconstruction of two roads: Aneho-Tabligbo (45 km) on paved standard and Agou-Notse (51 km) on gravel standard; (b) purchase road maintenance and workshop equipment; (c) execute feasibility studies for a possible feeder roads project, reconstruction of the Bassar-Mango road (137 km) and for improvement of the Railway National Company's operations; and (d) assist the Ministries of Public Works and of Commerce and Transport in developing the capacity in planning and management. 2. The project was successful. The economic rate of return, of 17% is 5% less than estimated at appraisal. This is mainly due to: (a) the use of lower savings from paved road improvements than at appraisal; and (b) the lack of relevant data to compute any value added by increased agricultural production as was done during appraisal. 3. The following points may be of particular interest: (a) award of contract for construction of the Agou-Notse road three years after bids opening (paras. 3.14 and 4.02); (b) financial difficulties of the Government who was unable to pay the contractors its counterpart of 43% for civil works, delaying for almost one year the excution of the works (paras. 4.05 - 4.06); (c) Special Action Credit of US$2 million from the Special Action Account contributed by the EEC in order to enable the Government to pay his arrears (para. 4.07); (d) amendment of the civil works contracts to put them on a net-of-tax basis and parallel increase from 57% to 78% of the expenditures to be financed by the credit (para. 4.07); and (e) lack of funding for road maintenance budget (para. 4.23).  I  TOGO Third Highway Project, Cr.-693 Project Completion Report I. INTRODUCTION 1.01 The project was the third Bank Group operation in the transport sector in Togo. The First Highway Project (Credit 131-TO, US$3.7 million, 1968) consisted of a four-year highway maintenance program and pre-investment studies, including the Agou-Notse road which was included in the Third Highway Project. The Second Highway Project (Credit 450-TO, US$8.7 million, 1973) comprised construction of one section of the main south-north road axis linking Lome with the Upper Volta border and two secondary roads, technical assistance for highway maintenance, highway transport organization, and preinvestment studies, including the Aneho - Tabligbo road, also part of the Third Highway Project. II. THE SECTOR The Highway Sector 2.01 Togo is a small country, with a 50 km coastline on the Gulf of Benin, which forms a narrow 600 km corridor between Ghana and Benin with Upper Volta to the north. Togo's terrain is for the most part flat and presents no major topographical obstacles to transport. 2.02 Togo's transport system is relatively simple and consisted of about 7,400 km of roads and of 436 km of railways linking the then new deepwater port of Lome, the nation's capital and economic center, with the rest of the country. Road transport is predotlinant with the network densest in the south. The 700 km, south-north road, running the length of the country from Lome to the border with Upper Volta, forms the back- bone of the national highway network, complemented by the east-west coastal road linking Lome with Accra and Cotonou. 2.03 One of the main problems in the highway sector was the imbalance in expenditures for road construction and maintenance between the primary and secondary road network and the feeder road network. A second problem was the weakness in overall transport planning and coordination which existed, although coordination between transport modes had been studied in the 1960s before major investments in the sector were made by international and bilateral agencies. 2.04 Togo's transport infrastructure grew rapidly in the decade ending in 1975 as a result of heavy investment in the sector, financed mainly by FED, KfW, FAC, and IDA, amounting to about 25 percent of total  -2- public investment or US$12 million a year in 1971-75, of which about 55 percent was spent in the highway sub-sector. 2.05 The Roads Division (RD) of the Public Works Department (PWD) of the Ministry of Equipment and Postal Service (MEPS) was responsible for construction and maintenance of the primary and secondary road network but was handicapped by a lack of experienced personnel. The Ministry of the Interior, with assistance from PWD, was responsible for the mainte- nance and improvement of feeder roads. Certain regional and agricultural development agencies also undertook limited feeder road construction and maintenance, but under the limitation that no adequate overall planning, financial or administrative structure exLsted for feeder roads programs. 2.06 Road transport in Togo was mainly in private hands except for the railway authority and the then newly created national transport orga- nization, Togo-Route, concerned with the transport of goods through the port of Lome to Mali, Upper Volta, Niger and Nigeria. Earlier, in 1969, the Government had created a Road Transport Service (RTS) to oversee road transport, including transport licensing,the study of transport costs and the preparation of transport legislation, which however, was hampered by lack of qualified personnel. 2.07 The Government had pursued a conservative highway sector finan- cing policy, with road user charges covering more than 100 percent of highway expenditures. To ensure the means to continue this financial policy, the Government doubled road user taxes in early 1976. III. PROJECT FORMULATION Project Description 3.01 The Third Highway Project was logical and well timed in the context of the ongoing program of Bank group assistance to the highway sector. It had its origin in the two preceeding projects under which feasibility studies for the two main infrastructure components had been carried out, and in the need to further strengthen the agencies within the sector and make institutional improvements. 3.02 The project had, as its principal objectives, the improvement of two important roads serving mainly agricultural areas and the preparation of future projects through pre-investment studies. It also provided for technical assistance to institute reforms in the transport sector by strengthening the Government's overall transport planning and coordina- ting capacity through the creation of a specialized unit in the Ministry of Commerce and Transport (MCT), and for continuation of the efforts begun under the two previous highway projects to build an efficient Public Works Department within MEPS by providing technical assistance and highway maintenance and workshop equipment.  -3- 3.03 The project consisted of the following parts: (a) reconstruction of the Aneho-Tabligbo road (45 km) to paved standards; (b) construction of the Agou-Notse road (51 km) to gravel standards; (c) purchase of road maintenance and workshop equipment; (d) provision of fellowships and technical assistance to PWD for road maintenance and for strengthening the road planning and design unit of AR (Arrondissement Routes of PWD); (e) establishment within MCT (Ministere du Commerce et des Transports) of a transport planning and coordination unit; (f) preinvestment studies of the Bassar-Mango road (137 km); (g) study for the improvement of the operations of the Reseau des Chemins de Fer du Togo (CFT); and (h) study for organizing the construction and maintenance of the Borrower's feeder road network. The project was expected to be completed by December 31, 1980. 3.04 The Aneho-Tabligbo road crosses the densely populated Maritime Region, ending at Tabligbo, close to the site of the CIMAO clinker plant. It had been paved between 1957 and 1963 as a low-standard, one- lane road. However, several sections which were subject to frequent flooding had deteriorated and, under the project, the road was to be reconstructed as a two-lane paved road. 3.05 The Agou-Notse road was to have been cGnstructed under the Second Highway project, but work was postponed for lack of funds result- ing from cost overruns. The planned two-lane, 8 m wide gravel road was, on completion, to link two agricultural marketing centers and help open up an isolated, sparsely populated area to migration and agricultural development. 3.06 Under the First Highway Project, the Roads Division of MEPS was supplied with new maintenance equipment. The project provided for the procurement of 23 additional trucks, as well as equipment for the Equip- ment Division workshop in Sokode. 3.07 Technical assistance to the Roads Division was to consist of the provision of about: (i) 77 man-months of expert services to complete the training of road maintenance and central workshop staff and to fill orga- nizational gaps which had continued to hamper productivity; and (ii) 20 man-months for the services of an engineer/economist to the Road Planning  -4- and Design Unit. There was also provision to strengthen the soil-testing road laboratory by closely associating it with the supervision of cons- truction of the two project roads. 3.08 Technical assistance to MCT provided for about 72 man-months of consulting services to the Transport Planning and Coordination Unit (TPCU). TPCU was to assist the Government inter-alia in solving the main issues in the transport sector and by formulating a national transport policy. It was also to supervise execution of the studies for improving CFT's operations and for organizing feeder road construction and mainte- nance. The study to improve CFT's operation was directed at the reduction of the railway's losses by reducing operating costs, improving staff training and productivity and increasing tariffs. The study for organizing feeder road construction and maintenance was intended to define the most appropriate organizational framework, and ascertain the needs and means to construct and maintain feeder roads. The project also provided for fellowships for four DPW engineers to receive two years of supplementary education in Mali. 3.09 The preinvestment study of the Bassar-Mango road in the northern part of the country was to be done in anticipation of the development of the area to be served, which was underpopulated but had considerable agricultural potential. The study was to be completed by December 31, 1979. Project Cost 3.10 The total cost of the project, excluding taxes, was estimated at US$12.9 million, of which foreign exchange US$11.0 million, corresponding to 85 percent of the total, and US$1.9 million local cost. 3.11 The cost of reconstructing the Aneho-Tabligbo road had been estimated on the basis of unit prices and quantities from the detailed engineering, to which 10 percent for physical contingencies had been added. Construction costs for the Agou-Notse road were based on the lowest bid received in Noyember 1974, when the road was orignially sche- duled for construction. Due to the generally poor soil conditions found in the area, physical contingencies of 15 percent of the total amount of works had been added. Costs for the road maintenance and workshop equipment were based on consultants' estimates. All project base cost estimates had been updated to January 1977 prices. Price inflatiop contingencies reflecting Bank guidelines were provided as follows: Equipment Civil Works and Consulting Services 1976 9% 13% 1977 8% 12% 1978 7% 11% Consulting services were estimated to cost an average of $6,900 per man- month.  -5- 3.12 The IDA credit of US$10.0 million was intended to finance 78 percent of the total project cost (net of taxes), and the Government was to finance the remaining 22 percent, US$1.0 million foreign and US$1.9 million local costs. Taxes were estimated at US$2.4 million. Execution 3.13 The MEPS, through the DPW, was to be responsible for project implementation, except for the activities of the TPCU and the studies for improving CFT's operations, and the organizing of the construction and maintenance of feeder roads, which were the responsibility of the MCT. Procurement and Disbursement 3.14 Contracts for reconstruction of the Aneho-Tabligbo road and for road maintenance equipment were to be awarded on the basis of inter- national competitive bidding in accordance with Bank Guidelines. Bids for the construction of the Agou-Notse road were obtained in 1974 following ICB under the previous highway credit. The Association had advised the Government that it had no objection to the award of contract to the bidder who had submitted at that time the lowest evaluated bid, increased in cost to reflect inflation to 1977. 3.15 The credit was to be disbursed to cover 57 percent of the total cost (including taxes) of the road construction works and 100 percent of the foreign exchange cost of equipment and consultants' services. Negotiations, Board and Effectiveness 3.16 Negotiations were held in December 1976. No outstanding issues arose, but, the occasion was taken to clarify the situation and reach a new understanding concerning the East-West branch railroad (para. 3.17). The project was approved by the Board on March 31, 1977 and became effective September 13, 1977. Important Covenants 3.17 The main covenants were: (a) an undertaking to make a study of the operations of the railroad (CFT), and following-Association review, imple- ment the recommendations by December 31, 1979. The provi- sion in previous credits that the Blitta line would not be extended without satisfactory economic justification, and that before any new major investment in CFT was made the Association would be consulted, were reincorporated in the Credit agreement; (b) the establishment of a Transport Planning and Coordination Unit (TPCU) within MCT by March 31,1978; and  -6- (c) the establishment of facilities to systematically collect data needed to assess the technical, economic and finan- cial aspects of road transport and the highway system. IV. PROJECT IMPLEMlENTATION 4.01 The project was generally successful. The infrastructure compo- nents were completed with about a 10% cost overrun and with some delay. The technical assistance elements were implemented satisfactorily, with some exceptions. Procurement 4.02 Procurement proceeded for the most part on schedule and in accordance with Bank Guidelines. The contract for the reconstruction of the Aneho-Tabligbo road was awarded to Colas-Fourgerolle-Christophe (France) - Clarence - Olympio (Togo) following international competitive bidding. The consultants who had carried out detailed engineering were engaged for supervision of construction. The Societe Francaise de Travaux Publiques Fougerolle was selected by Government, with Association agreement, for construction of the Agou - Notse road, the contractor having agreed to extend the validity of the bid he made for this road in 1974 (which had been evaluated lowest), increased to reflect price inflation (para. 3.13). The new base price was within the appraisal estimate. The consultants who had done the detailed engineering were hired to supervise construction. 4.03 Highway maintenance and workshop equipment orders were placed following ICB. All equipment was received by December 1978. Other con- sultants were selected to carry out the study of feeder roads and the preinvestment study of the Bassar-Mango Road. 4.04 While the project had provided for a study of the railroad, CFT, in fact, the Government in October 1977 entered into an agreement with the African Development Bank to finance a similar study of CFT. Conse- quently, this component of the project was cancelled, without objection by the Association. In any case the project had only provided US$75,000 for the study, which was to cost several times this amount. The Asso- ciation arranged with ADB to receive the consultants' reports and to advise ADB of any comments. However, the Association was disappointed by the final report - Modernization of Togo Railways - and in September 1980 wrote Government recommending a reassessment of traffic and of the rail- road's future investment program. To assist Government in this, the Fourth Highway Project includes four man-years of technical assistance to CFT.  -7- Construction Aneho-Tabligo Road (45 km) 4.05 The reconstruction of the road was started in February 1978 and completed satisfactorily in July 1980. However, construction took 29 months instead of the 18 provided for in the contract. This delay was due primarily to the complete interruption of works for a six month period in January-July 1979 when the Government was unable to pay the contractor the local currency costs. Also contributing to the delay was the exceptionnaly heavy rainy season starting in July 1978. In actuality work on the road was temporarily suspended at the start of the rains but did not resume until July 1979, the job being shut down formally in January 1979 because of non-payment. The arrears in Government payments to civil works contractors had reached US$1.6 million, including the Agou-Notse road arrears (para. 4.06). Agou-Notse Road (51 km) 4.06 The construction of the road began in September 1977 and was completed satisfactorily in April 1980. The delays were due to the same reasons as mentioned above for the Aneho-Tabligo road reconstruction. 4.07 To assist the Government the Association took the initiative in mobilizing the necessary additional financing to enable construction to be resumed. A US$2 million Special Action Credit was made to Togo from the Special Action Account contributed by the European Economic Community and administered by IDA. It became effective on November 14, 1979. This increased the funds available for the project from the US$10 million in the IDA Credit to a total of US$12 million. To expedite matters and simplify arrangements, at the Association's suggestion, the construction contracts were amended to put them on a net-of-tax basis and a schedule of payments to meet the arrears negotiated with the contractors. The amount of expenditures to be financed under the civil works contract was increased from 57% to 78%, effectively providing for full financing of all construction costs including local costs, net-of-taxes. The contractors resumed work in July 1979 when it became evident that payment of arrears was assured. 4.08 The Togolese evidently could meet little of the local costs from -the outset of constructions in September 1977 and February 1978 respecti- vely. At appraisal and negotiations, there had been no resistance on the part of Government to finance US$2.9 million of the cost, and no hesitation on the part of the Association concerning this financial arrangement. Subsequently, because of rapidly rising debt service obligations, a severe financial squeeze emerged in 1978 and public finances have since been under considerable pressure. 4.09 While the problem of arrears arose in the first half of 1978 it does not seem to have come to the Association's attention until about November 1978, when formal suspension of road construction appeared ine- vitable. The Association seemed to have been caught by surprise when the  jobs shut down, unexpected in a country with Togo's record, not withstanding that the deterioration of Government finances and its failure to pay some contractors was flagged in May 1978, and again in November 1978 by supervision missions. Studies and Technical Assistance Feeder Road Study 4.10 The study (para. 3.03 - (viii)) was started in January 1978 and completed satisfactorily in April 1978.. The Feeder Roads Project, Cr. 810-TO, US$5.8 million, approved April 23, 1978, had been appraised in the last half of 1977..The study made it possible to expedite the implementation of the Feeder Road Project by preparing contract documents and establishing other procedures. Preinvestment study - Bassar-Miango Road 4.11 The study of the road (para 3.10) was started in March 1978 and after substantial changes to the draft report reflecting the comments the Association had submitted to the Government, was completed satisfactorily in final form in May 1979. The conclusion reached was that construction of a paved road appeared premature and, therefore, the Government and the Association agreed that the road should not be considered for inclusion in the proposed Fourth Highway Project, but that consideration should be given to including the roads' southern section in an agriculture project. Transport Planning and Coordination Unit (TPCU) 4.12 This unit (para. 3.09) was to have been established by March 31, 1978, that is, within a year of Credit approval. In fact, it was created in June 1980, two years late, designated as a directorate, which gave it direct access to the minister, and called the General Directorate of Transport (GDT). The delay was attributed to the frequent change of the ministers responsible for MCT, in which GDT became loca- ted. By June, 1981, a Togolese Deputy Director, transport engineer and economist, had been assigned to GDT, and the appointment of an Expatriate Director General and second transport engineer, followed soon after, com- pleting the GDT team. 4.13 The project provided for 72 man-months of technical assistance to GDT, for which consultants were selected. The team leader, together with a transport engineer and a transport economist, commenced the assignment in October 1979. Inasmuch as the project was completed in 1981, the expatriate team contract was extended on its expiration in June 1981, financed by the Fourth Highway Project (CR 1139 TO). 4.14 The GDT, assisted by the consultants, spent 1980-81 on studies of the evaluation of transport costs, organization of the urban and inter-urban transport industries, preparation of transport regulation plans for coordination of transport modes and a preparation of the trans- port sector investment plan. The consultants services were satisfactory.  -9- Technical Assistance to PWD 4.15 The First and Second Highway Projects provided very substantial technical assistance to the Roads Division (RD) and the Equipment Division of PWD to train operating staff, reorganize maintenance operations and improve the maintenance of road equipment. The main difficulty encountered was the lack of qualified counterparts - professionals and sub-professionals - who could be trained. As a consequence, subtantial gaps in trained staff remained on completion of these projects. The project therefore provided 77 man-months: (i) to train the chief of the maintenance unit and advise RD on maintenance, advise the maintenance inspector and field subdivision heads in the execution of maintenance works and train Road Sector Chiefs, advise the betterment brigades and train their staffs and advise the chief of the equipment divisions and complete training of the Central Workshop staff. 4.16 The consultants who provided the technical assistance for the maintenance component of the first two highways projects, continued to provide it for the Third Highway Project. Their work was completed satisfactorily in April 1981, and routine and periodic maintenance operations improved. However, the maintenance operations continue to suffer from the drain of newly trained PWD personnel .to the private sector, and the shortage of road maintenance funds: in fact, deterioration of road maintenance had started in 1977, after years of what was regarded as generally adequate road maintenance, when recurrent funds for maintenance financed from the general budget started to decrease and their supply became erratic. The Fourth Highway Project provides for a program of integration and promotion of technicians within PWD; in addition, Government agreement to a special annual budget and funds for road maintenance was obtained. 4.17 The project also provided for a road engineer/economist to assist the RD to reorganize the Planning and Design Unit and train its staff with the objective of having ii place adequate local managerial staff to run the unit by Mtay 1, 1978. In addition, provision was included in the project for four fellowships for DPW engineers. The con- sultants carried out the training and completed the first phase of the reorganization of the Planning and Design Unit in May 1981, including 13 technicians who undertook training and were incorporated in the unit. The unit subsequently undertook feasibility studies for strengthening certain roads in conjunction with the preparation of the Fourth Highway Project, in the process receiving some assistance in design and economic evaluation from the consultants. Under the second phase, the consultants were to train some of the unit personnel in highway construction supervi- sion. Three Togolese received advanced engineering training in the Ecole Polytechnique de Montreal in Canada under the fellowships and, on their completion at the end of 1979, joined PWD. 4.18 With regard to the provision concerning the soil-testing labora- tory (para. 3.08) the Technical Agency CEBTP, France, (Centre Experimental de Recherches et d'Etudes du Batiment et des Travaux  - 10 - Publics), provided on-the-job training to a Togolese engineer and fifteen technicians satisfactorily, and produced soil and pavement data for the feasibility studies (para. 4.16) related to the Fourth Highway Project. Project Costs 4.19 As evident from the Table 2, project costs of construction appeared to exceed estimates, the Agou - Notse road construction exceeded estimates by 29%, and the Aneho - Tabligbo road cost was just about the amount estimated. The entire project cost was about 11% more than appraisal estimate expressed in dollars. However, nearly all goods, services and other costs were procured in France or locally and paid in French francs or CFAF. Taking this into account, and adjusting for the fact that the appraisal cost estimate was at the exchange rate of 245 CFAF to US$1.00 and the average exchange rate during implementation was about 220 CFAF, the estimated and actual project costs in CFAF are very close. On this same basis, the overrun on the Agou-Notse road would be about 18%. 4.20 The cost of road construction could have been expected to increase substantially because of inflation, as well as the continuing overhead costs sustained, during the period the job was idle. However, subsequent to its start the road work was substantially redesigned and standards of construction changed, at the suggestion of the Association reducing use of some materials - laterite, sand, cement, etc., which achieved significant economies. They were however not sufficient to entirely offset the increase in the cost of the Agou-Notse road Project Execution 4.21 No difficulties were experienced in procurement, and the provi- sions in the Credit Agreement concerning procurement were followed. No special problems occured in the construction activities, other than the major one - stoppage due to non-payment. Disbursements kept pace with the appraisal astimate until the work suspension, when they fell more than a year behind, reflecting the delay in, and payment for the work carried out after the suspension was lifted. As of May 30, 1982, US$0.40 million remained to be disbursed by the Closing Date, December 31, 1982, which had been extended from the original one, June 30, 1981, although all funds had been committed. The Special Action Credit of US$2 million was fully disbursed by June 30, 1980, reflecting the completion of construction work. Consultants' Performance 4.22 The various consultants engaged in supervision of the two road projects, the preparation of feasibility studies and in providing techni- cal assistance carried out their work satisfactorily. No difficulties occurred and no criticism or complaints were voiced.  - 11 - Covenant Experience 4.23 Covenants were generally met with, however, exceptions: (i) The creation of the Transport Planning and Coordi- nation Unit was delayed two years, and conse- quently the amount of technical assistance provi- ded under the project for this unit, was limited (although it will be continued under the Fourth Highway Project); (ii) The funds available for road maintenance were insufficient and were not allocated in the most timely way, due to the Government's unexpectedly poor financial position. V. ECONOMIC RE-EVALUTATION 5.01 During appraisal the Third Highway Project was justified on the basis of quantifiable benefits arising from: *(a) Savings in transportation costs on the substantially improved road between Aneho (on the coast) and Tabligbo, the center of an important agricultural region, following the road's reconstruction and paving; and (b) Savings in transportation costs from improved access following the reconstruction of the Agou-Notse gravel road plus part of the attributed net value added from additional agricultural activity, in as much as the road links agricultural marketing centers and areas . Additional but unquantified benefits included savings in journey times, increased riding comfort and others such as reductions in the numbers of road accidents. 5.02 The overall economic rate of return (ERR) estimated during appraisal was 22%. For the Aneho-Tabligbo road, sensitivity tests showed that the ERR varied from a low of 11% under highly pessimistic assumptions to a probable high of 26%. Eighteen percent was the estimated ERR for this road with over one half of the total benefits attributed to value added by increased agricultural production resulting from the access provided by the road. 5.03 On project completion, based on final construction costs and traffic counted in the years the reconstructed roads have been opened to circulation, reevaluation of the economic benefits (Table 4) shows an overall ERR of 17%, some 5% less than estimated at appraisal.  - 12 - (a) Aneho-Tabligbo Road: the re-estimated ERR is a satisfactory 19% and lies in the appraisal range of 18% to 26% ERR; (b) Agou-Notse Road: the benefits based on reduced vehicle operating costs yield an ERR of 14% which is also satisfactory but lower than the appraisal estimate of 18% which, however, also included value added benefits. 5.04 The lower ERRs are only partly due to the modest increases in the costs of civil works (paras. 4.19-4.20). The main reasons for them are (i) the use of lower savings from paved road improvements, on the basis of recent estimates of vehicle operating costs (VOC) in Togo made in conjunction with the Fourth Highway Project; and (ii) the lack of relevant data to compute any value added by increased agricultural production in the area of influence of the Agou-Notse Road as was done during appraisal of the project. 5.05 A comparison of VOC's used during appraisal with those used in the economic re-evaluation indicates that although VOC's have increased for all vehicle types, the savings from improving a paved road from "poor" to a "good" condition are smaller in absolute terms, due to increasing fleet utilization and the large percentage of newer and more fuel efficient vehicles. This is also indicated by MCT's statistics on new vehicle registrations, and average vehicle age. Thus, despite the overall increase in traffic, especially trucks, on the Aneho-Tabligbo road, smaller benefits from road improvements diminish the ERR. 5.06 The impact of the re-estimated VOC's on the unpaved Agou-Notse road is different. Although in relative terms the differentials from improving an earth track from "poor" to "good" condition are smaller than on paved roads for similar vehicle types, in absolute terms, they are larger because of the higher reference index. This is reasonable in that the scope for greater vehicle utilization is limited on unpaved roads and the advantages of younger and more fuel efficient vehicles are offset by the higher fixed costs which must be amortized over the shorter life and smaller lifetime mileage vis-a-vis the typically higher life-time mileages on paved roads. These larger VOC savings from upgrading the Agou-Notse road and a two-fold increase in traffic over appraisal estimate (108 vehicles in 1980 as compared with an appraisal estimate of 45) partly offset the fact that the appraisal also included value added benefits while computing the ERR. 5.07 The reliability of the traffic data was questioned in the appraisal report for the Third Highway Project. Although the quality of traffic data is improving as result of the technical assistance under the Third and Fourth Highway Projects, caution is needed in accepting the MCT counts because regular traffic counts, done only since 1978, vary in depth and coverage and systematic procedures for weeding out source inaccuracies are not fully implemented: the Fourth Highway Project provides for this.  - 13 - VI. INSTITUTIONAL DEVELOPMENT 6.01 The institutional development components of the project were satisfactory. In particular, the continuing effort to improve mainte- nance advanced the capability of the maintenance establishment, including personnel, to the point where it was approaching self-sufficiency. As noted (para. 4.16), this was in at least one respect a mixed blessing, as fully trained technicians and managers continue to be attracted to the private sector. As a result, the Government is seeking to make the jobs more attractive under the Fourth Highway Project. 6.02 The creation of the TCPU, even if late in the project, was also a solid accomplishment. On the basis of its composition, and the work it has been doing in conjunction with the consultants providing technical assistance, there is a reasonable prospect that it will take hold and become a force in sector planning. VII. BORROWER AND BANK PERFORMANCE 7.01 The Borrower's performance was quite adequate. The implementa- tion of the project was successful due in considerable measure to the support and cooperation of the Borrower. Most important was the worsening liquidity shortage of the Government, which lead to its inability to pay the local costs of the civil works contractors, and consequent serious delay in construction. However, this situation reflected the financial weakness in the macro-economic situation and does not imply any lack of Government committment to the project. In this respect, the Government helped expedite the processing of the Special Action Credit, which made additional funds available to proceed with construction. An instance of inefficiency on Government's part was its delay in establishing GDT, which appears to have been the product of intra-ministry politics. 7.02 The Association's performance was good. Project formulation was sound, in particular the composition of technical assistance was appro- priate to the highway sector's state of institutional development. Implementation proceeded well and when the Government's shortage of funds arose and construction was on the verge of suspension, the Association responded quickly in mounting the Special Action Credit. Parenthe- tically, it was fortunate that at that juncture there was available a relatively open-ended fund - the EEC's Special Action Fund - which, with a minimum of bureaucratic activity, could be utilized. VIII. IMPACT OF PROJECT 8.01 The project in its entirety made a sound impact on the sector. The road construction components were part of a continuing program and were timely, and fully justified as indicated by the economic rate of return (para. 9.01). As noted (paras. 6.01, 6.02) the institutional development component had a valuable and probably lasting effect on  -14 - sector institutions and capabilities. To the extent that some of the initiatives in this respect could not be addressed fully under the proj- ect, the Fourth Highway Project is to continue the process. IX. CONCLUSIONS 9.01 The project was on the whole successful. The reconstruction of the Aneho-Tabligbo road was completed satisfactorily, as was the construction of the Agou-Notse road. However, their completion was delayed about one year because of the suspension of construction by the contractors in the face of Government's inability to pay the large arrears which had accumulated- The situation was resolved by the provision of a US$2.0 million Special Action Credit to Government from the EEC's Special Action Fund, with the Association acting as Executing Agency. 9.02 The economic re-evaluation of the road components indicates that their reconstruction was fully justified , with an overall Economic Rate of Return of 17% , with individual ERR's of 19% and 14%. 9.03 The institutional development initiatives in the project, and the technical assistance provided by it for the purpose, were also suc- cessful. In particular, maintenance institutions and capabilities were bolstered, and a transport planning coordination Unit,TCPU was created, although with two years delay. The unit appears to be well established, and, with continuing technical assistance under the Fourth Highway Project, should be able to assume an important role in sector planning. 9.04 The Government supported the project and cooperated in its im- plementation, and its performance was adequate. The project was well formulated and the Bank supervised the project competently. 9.05 As the third in a series of projects in Togo aimed at building- up and maintaining road infrastructure and improving road sector institu- tions and capabilities, the project met objectives and paved the way for continuing Bank group assistance, under the Fourth Highway Project, now underway.  TOGO PROJECT COMPLETION REPORT THIRD HIGHWAY PROJECT - CR. 693-TO Contract Awards Completion 1)ate Project Item Executed by Contract Signed Contract Actual A. Construction of Aneho- Tabligbo Road Joint Venture 1. Construction COLAS 02/22/78 09/22/79 07/80 2. Supervision Gendron Lefebre 04/05/78 09/79 05/80 B. Construction of Agou- Notse Road 1. Construction Fourgerolle 08/12/77 01/24/79 04/80 2. Supervision DIWI 09/01/77 02/17/79 04/80 C. Equipment 1. Road Maintenance Miscellaneous Suppliers 03/23/78 10/03/78 03/78 2. Workshop 07/17/78 12/17/78 12/78 D. Technical Assistance 1. Soils Laboratory under A&B 07/26/78 - 12/81 2. Maintenance Program 10/25/77 11/25/79 04/81 3. Road Design and Planning Unit Consultants 09/04/79 10/01/80 05/81 4. Transport Planning and Coordination 07/31/79 12/31/82 06/82 E. Railway Studies Deleted F. Feeder Road Studies 02/22/78 03/07/78 04/79 G. Study of Bansar-Mango Road Consultants 03/02/78 08/79 08/79 TOTAL  PKO, lj | *:). _OPLE I ION E PORtI T1111() HIWIM45M 'iDdi (hT - Cit. . 9 3-TO Forec:ast nid /A tOua Costs 3/ 5/ (I;St vsi 1 livon) AL Appraisal/ ~Cost Fsittuatnes At Apjlra i SslI)i!/ In: c il g Act ua .Acut1 vs Contract Amolot CooWill ient i .